<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
[ ] 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 1-13153
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Galileo International, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-4156005
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
9700 West Higgins Road, Suite 400, Rosemont, Illinois 60018
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(847) 518-4000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) had 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 period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ ] No [X]
At August 26, 1997, there were 104,799,700 shares of Common Stock, par
value $.01 per share, of the Registrant outstanding.
<PAGE> 2
GALILEO INTERNATIONAL, INC.
QUARTER ENDED JUNE 30, 1997
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements of Galileo International
Partnership
Condensed Consolidated Balance Sheets as of June 30, 3
1997 (unaudited) and December 31, 1996
Consolidated Statements of Income for the 4
quarter and six months ended June 30, 1997
and 1996 (unaudited)
Consolidated Statements of Cash Flows for the 5
six months ended June 30, 1997 and 1996 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information - Galileo International, Inc. 14
Pro Forma Condensed Combined Financial Information
Pro Forma Condensed Combined Balance Sheet 15
as of June 30, 1997
Pro Forma Condensed Combined Statements of 16
Income for the quarter and six months ended
June 30, 1997 and 1996
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Following are financial statements of Galileo International Partnership.
See "Part II - Other Information, Item 5. Other Information" for the pro
forma financial statements of Galileo International, Inc.
GALILEO INTERNATIONAL PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 107,390 $ 78,196
Accounts receivable, net 197,912 146,279
Other current assets 18,060 16,324
--------- ---------
Total current assets 323,362 240,799
Property and equipment, at cost:
Land 5,070 5,070
Buildings and improvements 67,548 63,710
Equipment 241,703 235,983
--------- ---------
314,321 304,763
Less accumulated depreciation 203,242 198,565
--------- ---------
Net property and equipment 111,079 106,198
Computer software, net 237,948 248,021
Other noncurrent assets 4,557 4,880
--------- ---------
$ 676,946 $ 599,898
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 19,730 $ 26,149
Accrued commissions 80,467 58,586
Other accrued liabilities 60,746 52,491
Income taxes payable 6,353 5,811
Capital lease obligations, current portion 8,411 6,600
Long-term debt, current portion - 50,000
--------- ---------
Total current liabilities 175,707 199,637
Pension and postretirement benefits 22,378 19,012
Capital lease obligations, less current portion 31,849 34,539
Data center consolidation reserve, less
current portion 19,373 21,335
Long-term debt, less current portion 70,000 70,000
Partners' capital, including cumulative
translation losses 357,639 255,375
--------- ---------
$ 676,946 $ 599,898
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
GALILEO INTERNATIONAL PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Electronic global distribution
services $ 298,038 $ 268,457 $ 595,384 $ 537,593
Information services 9,162 9,511 19,462 19,552
--------- --------- --------- ---------
307,200 277,968 614,846 557,145
Costs and expenses:
Cost of operations 57,438 60,498 118,703 123,375
Commissions, selling and
administrative 196,196 167,548 376,266 331,826
--------- --------- --------- ---------
253,634 228,046 494,969 455,201
--------- --------- --------- ---------
Operating income 53,566 49,922 119,877 101,944
Other income (expense):
Interest income (expense), net (136) (2,859) (1,910) (5,194)
Other, net 546 111 1,916 395
--------- --------- --------- ---------
410 (2,748) 6 (4,799)
--------- --------- --------- ---------
Income before income taxes 53,976 47,174 119,883 97,145
Income taxes 875 481 1,290 962
--------- --------- --------- ---------
Net income $ 53,101 $ 46,693 $ 118,593 $ 96,183
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
GALILEO INTERNATIONAL PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net income $ 118,593 $ 96,183
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,097 39,687
Gain on disposal of property and equipment (45) (240)
Decrease in noncurrent assets 302 1,561
Increase in noncurrent liabilites 739 3,841
Changes in operating assets and liabilities:
Increase in accounts receivable, net (51,833) (49,921)
(Increase) decrease in other current assets (2,325) 1,286
Increase in accounts payable and commissions 17,497 8,472
Increase (decrease) in other accrued liabilities 9,068 (19,340)
Increase in income taxes payable 691 521
---------- ---------
Net cash provided by operating activities 134,784 82,050
Investing activities:
Purchase of property and equipment (24,633) (12,805)
Purchase and capitalization of computer software (14,645) (16,159)
Proceeds on disposal of property and equipment 88 286
Decrease in lease deposit -- 40,461
---------- ---------
Net cash (used in) provided by investing activities (39,190) 11,783
Financing activities:
Distributions to partners (16,383) (13,989)
Increase in (payment of) capital lease obligations 56 (3,946)
Repayments under credit agreement (50,000) (43,372)
---------- ---------
Net cash used in financing activities (66,327) (61,307)
Effect of exchange rate changes on cash (73) 36
---------- ---------
Increase in cash and cash equivalents 29,194 32,562
Cash and cash equivalents at beginning of period 78,196 8,367
---------- ---------
Cash and cash equivalents at end of period $ 107,390 $ 40,929
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements
of Galileo International Partnership have been prepared pursuant to the rules
of the Securities and Exchange Commission for quarterly reports on Form 10-Q
and do not include all of the information and note disclosures required by
generally accepted accounting principles. The information furnished herein
includes all adjustments, consisting of normal recurring adjustments, which
are, in the opinion of management, necessary for a fair presentation of results
for these interim periods.
The results of operations for the quarter ended June 30, 1997 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1997.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1996,
included in the Registration Statement (No. 333-27495) on Form S-1 filed by
Galileo International, Inc. with the Securities and Exchange Commission on May
20, 1997, as amended.
NOTE 2 - SUBSEQUENT EVENT
Effective July 30, 1997, Galileo International Partnership merged into a wholly
owned limited liability company subsidiary of Galileo International, Inc.
Unless otherwise indicated, references to the "Company" mean, at all times
prior to the time of the merger, Galileo International Partnership and its
consolidated subsidiaries and, at all times thereafter, Galileo International,
Inc. and its consolidated subsidiaries. In connection with the merger, the
Company (i) effected an initial public offering (the "Offering") of its common
stock at an initial public offering price of $24.50 per share resulting in net
proceeds to the Company, after exercise of the underwriters' over-allotment
option, of $390.0 million after deducting underwriting discounts and
commissions; (ii) incurred $328.7 million of indebtedness under the 364-Day
Credit Agreement and the Five-Year Credit Agreement (collectively, the "Credit
Agreements"); (iii) acquired Apollo Travel Services Partnership ("ATS") at a
purchase price of $700.0 million and Traviswiss AG ("Traviswiss") at a purchase
price of $8.5 million; and (iv) terminated certain revenue sharing obligations
in exchange for the agreement to pay SAirGroup $22.4 million in four annual
installments.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GALILEO INTERNATIONAL PARTNERSHIP
SUMMARY
Prior to the consummation of the Offering, the Company conducted its business
through Galileo International Partnership. Immediately prior to the
consummation of the Offering, Galileo International Partnership was merged
into a wholly owned limited liability company subsidiary of Galileo
International, Inc. As a result of this merger, (i) the Company became
subject to U.S. federal and state income taxes that were previously borne by
the partners of Galileo International Partnership and (ii) the Company
incurred a nonrecurring charge to income tax expense to reflect the
establishment of deferred tax assets and liabilities arising at the time of
the merger. Upon the merger, the airline stockolders' partnership interests
were replaced with common stock of the Company in the same proportion as that
of their respective partnership interests in Galileo International Partnership.
The Company generates its revenue from the provision of electronic global
distribution services and information services. The following table
summarizes revenues by affiliation and geographic location as a percentage of
total revenues for each of the periods indicated:
<TABLE>
<CAPTION>
Quarter Six Months
Ended June 30, Ended June 30,
--------------- ---------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Affiliated customers (1) 36.5% 36.4% 36.0% 36.3%
Non-affiliated customers 63.5 63.6 64.0 63.7
------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0%
====================================
United States (2) 47.3% 48.6% 47.6% 49.3%
Rest of world (2) 52.7 51.4 52.4 50.7
------------------------------------
Total revenues 100.0% 100.0% 100.0% 100.0%
====================================
</TABLE>
(1) Customers that are affiliated with one or more of the Company's airline
stockholders.
(2) The location of the travel agent making the booking determines the
geographic region credited with the related revenues.
The Company's operating income as a percentage of revenue increased to 19.5%
for the six months ended June 30, 1997 from 18.3% for the six months ended June
30, 1996.
7
<PAGE> 8
SECOND QUARTER 1997 COMPARED TO SECOND QUARTER 1996
REVENUES. Revenues increased $29.2 million, or 10.5%, from $278.0 million for
the quarter ended June 30, 1996 to $307.2 million for the quarter ended June
30, 1997.
Electronic global distribution services revenues related to airline bookings
increased 10.2% during the quarter ended June 30, 1997 as compared to the
quarter ended June 30, 1996. Electronic global distribution services revenues
related to bookings of car rentals and hotel reservations increased 10.8% and
26.4%, respectively, over the same period. This revenue growth resulted
principally from increased booking volumes worldwide and, to a lesser extent,
from an increase in the price per airline booking charged to travel vendors.
This price increase became effective on March 1, 1997.
OPERATING EXPENSES. Operating expenses increased $25.6 million, or 11.2%, from
$228.0 million for the quarter ended June 30, 1996 to $253.6 million for the
quarter ended June 30, 1997. Commissions to national distribution companies
("NDCs") and subscriber incentive payments increased $18.7 million, or 13.2%,
from $141.5 million for the quarter ended June 30, 1996 to $160.2 million for
the quarter ended June 30, 1997, reflecting the increase in electronic global
distribution services revenues and increased subscriber incentive payments.
Although a relatively small portion of total operating expenses, subscriber
incentive payments represent costs associated with maintaining and expanding
the Company's travel agency base. NDC commissions are generally based on a
percentage of booking revenues and have, therefore, grown at a rate consistent
with the growth in booking fees by country. The Company does not pay
commissions to Company-owned NDCs. Remaining operating expenses increased $6.9
million, or 8.0%, from $86.5 million to $93.4 million over the same periods.
OTHER EXPENSES, NET. Other expenses, net include interest expense, net of
interest income, and foreign exchange gains or losses. Other expenses, net
decreased $3.2 million, from $2.8 million expense, net for the quarter ended
June 30, 1996 to $.4 million income, net for the quarter ended June 30, 1997.
This decrease was primarily the result of lower interest expense arising from
lower debt levels and higher interest income arising from higher average levels
of cash and cash equivalents over the periods.
INCOME TAXES. No provision for U.S. federal and state income taxes is recorded
as such liability is the responsibility of the partners rather than of the
Company. Certain of the Company's non-U.S. subsidiaries are subject to income
taxes.
NET INCOME. Net income increased $6.4 million, or 13.7%, from $46.7 million
for the quarter ended June 30, 1996 to $53.1 million for the quarter ended June
30, 1997. Net income as a percentage of revenues increased to 17.3% from 16.8%
over the same period.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
REVENUES. Revenues increased $57.7 million, or 10.4%, from $557.1 million for
the six months ended June 30, 1996 to $614.8 million for the six months ended
June 30, 1997.
8
<PAGE> 9
Electronic global distribution services revenues related to airline bookings
increased 10.4% during the six months ended June 30, 1997 as compared to the
six months ended June 30, 1996. Electronic global distribution services
revenues related to bookings of car rentals and hotel reservations increased
9.4% and 23.1%, respectively, over the same period. This revenue growth
resulted principally from increased booking volumes worldwide and, to a lesser
extent, from an increase in the price per airline booking charged to
travel vendors. This price increase became effective on March 1, 1997.
OPERATING EXPENSES. Operating expenses increased $39.8 million, or 8.7%, from
$455.2 million for the six months ended June 30, 1996 to $495.0 million for the
six months ended June 30, 1997, while revenues increased 10.4%, resulting in an
improved operating margin and a decrease in operating expenses as a percentage
of revenues to 80.5% for the six months ended June 30, 1997 from 81.7% for the
six months ended June 30, 1996. This improvement in operating margin reflects
the Company's continued focus on expense management, including lower increases
in aggregate wages and benefits resulting from increased productivity along
with the negotiation of favorable supplier contracts, especially in the
categories of equipment maintenance, communications, travel and facilities.
NDC commissions and subscriber incentive payments increased $29.5 million, or
10.4%, from $283.0 million for the six months ended June 30, 1996 to $312.5
million for the six months ended June 30, 1997, reflecting the increase in
electronic global distribution services revenues and increased subscriber
incentive payments. NDC commissions are generally based on a percentage of
booking revenues and have, therefore, grown at a rate consistent with the
growth in booking fees by country. Remaining operating expenses increased
$10.3 million, or 6.0%, from $172.2 million to $182.5 million over the same
periods.
OTHER EXPENSES, NET. Other expenses, net include interest expense, net of
interest income, and foreign exchange gains or losses. Other expenses, net
decreased $4.8 million, from $4.8 million expense, net for the six months ended
June 30, 1996 to $0.0 million for the six months ended June 30, 1997. This
decrease was primarily the result of lower interest expense arising from lower
debt levels and higher interest income arising from higher average levels of
cash and cash equivalents over the periods.
INCOME TAXES. No provision for U.S. federal and state income taxes is recorded
as such liability is the responsibility of the partners rather than of the
Company. Certain of the Company's non-U.S. subsidiaries are subject to income
taxes.
NET INCOME. Net income increased $22.4 million, or 23.3%, from $96.2 million
for the six months ended June 30, 1996 to $118.6 million for the six months
ended June 30, 1997. Net income as a percentage of revenues increased from
17.3% to 19.3% over the same period.
9
<PAGE> 10
PRO FORMA RESULTS OF OPERATIONS
GALILEO INTERNATIONAL, INC.
The discussion of pro forma results of operations is based on the pro forma
condensed combined financial information presented in "Part II - Other
Information, Item 5. Other Information."
PRO FORMA SECOND QUARTER 1997 COMPARED TO PRO FORMA SECOND QUARTER 1996
REVENUES. Pro forma revenues increased $32.7 million, or 10.4%, from $315.6
million for the quarter ended June 30, 1996 to $348.3 million for the quarter
ended June 30, 1997.
This revenue growth resulted principally from increased booking volumes
worldwide and, to a lesser extent, from an increase in the price per airline
booking charged to travel vendors. This price increase became effective on
March 1, 1997.
OPERATING EXPENSES. Pro forma operating expenses increased $21.0 million, or
8.4%, from $249.7 million for the quarter ended June 30, 1996 to $270.7 million
for the quarter ended June 30, 1997, while pro forma revenues increased 10.4%.
This resulted in an improved pro forma operating margin and a decrease in pro
forma operating expenses as a percentage of pro forma revenues to 77.7% for
the quarter ended June 30, 1997 from 79.1% for the quarter ended June 30, 1996.
This improvement in pro forma operating margin reflects the Company's continued
focus on expense management, including lower increases in aggregate wages and
benefits resulting from increased productivity along with the negotiation of
favorable supplier contracts, especially in the categories of equipment
maintenance, communications, travel and facilities.
Pro forma NDC commissions and subscriber incentive payments increased $14.0
million, or 17.7%, from $78.9 million for the quarter ended June 30, 1996 to
$92.9 million for the quarter ended June 30, 1997, reflecting the increase in
electronic global distribution services revenues and increased subscriber
incentive payments. Although a relatively small portion of total operating
expenses, subscriber incentive payments represent costs associated with
maintaining and expanding the Company's travel agency base. NDC commissions
are generally based on a percentage of booking revenues and have, therefore,
grown at a rate consistent with the growth in booking fees by country.
The company does not pay commissions to Company-owned NDCs, but incurs the
costs of operating these NDCs. Pro forma operating expenses reflect the
elimination of commissions formerly paid to ATS, Traviswiss and Galileo
Nederland and the incurrence of the costs of operating these NDCs. Remaining
pro forma operating expenses increased $7.0 million, or 4.1%, from
$170.8 million to $177.8 million over the same periods.
OTHER EXPENSES, NET. Pro forma other expenses, net include interest expense,
net of interest income, and foreign exchange gains or losses. Pro forma other
expenses, net decreased $2.4 million, or 35.3%, from $6.8 million for the
quarter ended June 30, 1996 to $4.4 million for the quarter ended June 30,
1997. This decrease was primarily the result of lower interest expense
arising from lower debt levels and higher interest income arising from higher
average levels of cash and cash equivalents over the periods.
10
<PAGE> 11
INCOME TAXES. Pro forma income taxes increased $5.1 million, or 21.2%, from
$24.0 million for the quarter ended June 30, 1996 to $29.1 million for the
quarter ended June 30, 1997. The increase was principally due to higher pro
forma income before income taxes. Pro forma income taxes reflect the merger
of Galileo International Partnership into a wholly owned limited liability
company subsidiary of Galileo International, Inc.
NET INCOME. Pro forma net income increased $9.2 million, or 26.3%, from $35.0
million for the quarter ended June 30, 1996 to $44.2 million for the quarter
ended June 30, 1997. Pro forma net income as a percentage of pro forma
revenues increased to 12.7% from 11.1% over the same period.
PRO FORMA SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO PRO FORMA SIX MONTHS ENDED
JUNE 30, 1996
REVENUES. Pro forma revenues increased $64.4 million, or 10.2%, from $630.8
million for the six months ended June 30, 1996 to $695.2 million for the six
months ended June 30, 1997.
This revenue growth resulted principally from increased booking volumes
worldwide and, to a lesser extent, from an increase in the price per airline
booking charged to travel vendors. This price increase became effective on
March 1, 1997.
OPERATING EXPENSES. Pro forma operating expenses increased $35.7 million, or
7.2%, from $492.4 million for the six months ended June 30, 1996 to $528.1
million for the six months ended June 30, 1997, while pro forma revenues
increased 10.2%. This resulted in an improved pro forma operating margin and a
decrease in pro forma operating expenses as a percentage of pro forma revenues
to 76.0% for the six months ended June 30, 1997 from 78.1% for the six months
ended June 30, 1996. This improvement in pro forma operating margin reflects
the Company's continued focus on expense management, including lower increases
in aggregate wages and benefits resulting from increased productivity along
with the negotiation of favorable supplier contracts, especially in the
categories of equipment maintenance, communications, travel and facilities.
Pro forma NDC commissions and subscriber incentive payments increased $23.8
million, or 15.4%, from $154.7 million for the six months ended June 30, 1996
to $178.5 million for the six months ended June 30, 1997, reflecting the
increase in electronic global distribution services revenues and increased
subscriber incentive payments. NDC commissions are generally based on a
percentage of booking revenues and have, therefore, grown at a rate consistent
with the growth in booking fees by country.
Remaining pro forma operating expenses increased $11.9 million, or 3.5%, from
$337.7 million to $349.6 million over the same periods. The company does not
pay commissions to Company-owned NDCs, but incurs the costs of operating these
NDCs. Pro forma operating expenses reflect the elimination of commissions
formerly paid to ATS, Traviswiss and Galileo Nederland and the incurrence of
the costs of operating these NDCs.
11
<PAGE> 12
OTHER EXPENSES, NET. Pro forma other expenses, net include interest expense,
net of interest income, and foreign exchange gains or losses. Pro forma other
expenses, net decreased $2.4 million, or 19.7%, from $12.2 million for the six
months ended June 30, 1996 to $9.8 million for the six months ended June 30,
1997. This decrease was primarily the result of lower interest expense
arising from lower debt levels and higher interest income arising from higher
average levels of cash and cash equivalents over the periods.
INCOME TAXES. Pro forma income taxes increased $11.1 million, or 21.6%, from
$51.4 million for the six months ended June 30, 1996 to $62.5 million for the
six months ended June 30, 1997. The increase was principally due to higher
pro forma income before income taxes. Pro forma income taxes reflect the
merger of Galileo International Partnership into a wholly owned limited
liability company subsidiary of Galileo International, Inc.
NET INCOME. Pro forma net income increased $20.0 million, or 26.7%, from $74.8
million for the six months ended June 30, 1996 to $94.8 million for the six
months ended June 30, 1997. Pro forma net income as a percentage of pro forma
revenues increased from 11.9% to 13.6% over the same period.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $107.4 million and working capital totaled
$147.7 million at June 30, 1997. At December 31, 1996, cash and cash
equivalents totaled $78.2 million and working capital totaled $41.2 million.
The increase in working capital from December 31, 1996 to June 30, 1997
resulted from strong operating results during the six months ended June 30,
1997. Cash and cash equivalents increased significantly despite the repayment
of $50.0 million of indebtedness.
Cash flow used in investing activities principally relates to purchases of
mainframe data processing and network equipment and purchases of computer
equipment provided to the Company's travel agency subscribers by Company-owned
NDCs. Capital expenditures, excluding the capitalization of internally
developed software, were $26.9 million for the six months ended June 30, 1997
compared to $16.3 million for the six months ended June 30, 1996.
Cash flow used in financing activities includes the payment of distributions to
the partners of Galileo International Partnership. In July 1997, prior to the
merger of Galileo International Partnership into a wholly owned limited
liability company subsidiary of Galileo International, Inc., final partner
distributions were paid. Total cash used for partner distributions in 1997
through the date of the merger was $112.1 million.
The Company was a party to a credit agreement with an international group of
banks (the "Old Credit Agreement") which provided for a $200 million revolving
credit facility that matured in July 2001. No principal payments were
required until the maturity date. As of June 30, 1997, $70.0 million was
outstanding under the Old Credit Agreement.
12
<PAGE> 13
On July 30, 1997, the Old Credit Agreement was terminated and replaced by the
Credit Agreements with credit facilities totaling $600 million. The net
proceeds to the Company from the Offering of $390.0 million, together with
$328.7 million of borrowings under the Credit Agreements, were used by the
Company to fund the acquisition of ATS at a purchase price of $700.0 million,
and to fund a portion of the acquisition of Traviswiss at a purchase price of
$8.5 million, to fund the initial payment of $2.6 million to SAirGroup in
connection with the termination of certain revenue sharing obligations and
to pay certain expenses related to the Offering. The borrowings under the
Credit Agreements will also be used to fund the expected acquisition of
Galileo Nederland at a purchase price of $2.0 million and the initial payment
to KLM Royal Dutch Airlines of $2.8 million in connection with the termination
of certain revenue sharing obligations.
OTHER
On July 30, 1997, the Company effected an initial public offering of 31,998,000
shares of common stock. Of such shares, 12,000,000 were issued and sold by
the Company, resulting in $278.6 million of net proceeds to the Company.
Stockholders of the Company selling 19,998,000 shares in the Offering received
net proceeds of $464.3 million, after deducting underwriting discounts and
commissions. On July 31, 1997, the U.S. underwriters of the Offering exercised
their over-allotment option to purchase an additional 4,799,700 shares of
common stock from the Company, resulting in the Company receiving additional
net proceeds of $111.4 million on August 1, 1997.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material legal proceedings involving the Company were commenced in the
quarter ended June 30, 1997.
ITEM 2. CHANGES IN SECURITIES
In connection with the Offering, on July 30, 1997, the Certificate of
Incorporation of the Company was restated (the "Restated Certificate of
Incorporation") to provide for authorized capital stock of (i) 250,000,000
shares of Common Stock, par value $.01 per share; (ii) 7 shares of Special
Voting Preferred Stock, par value $.01 per share; and (iii) 25,000,000 shares
of Preferred Stock, par value $.01 per share. The Company issued 16,799,700
shares of Common Stock, including 4,799,700 shares issued upon the exercise of
the U.S. underwriters' over-allotment option.
In connection with the merger of Galileo International Partnership into a
wholly owned limited liability company subsidiary of Galileo International,
Inc., an aggregate of 88,000,000 shares of Common Stock and 7 shares of Special
Voting Preferred Stock were issued to the partners of Galileo International
Partnership. Such issuances were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 24, 1997, Galileo International Partnership, as sole stockholder of the
Company, consented to a number of matters in connection with the Offering,
including, the approval of the Restated Certificate of Incorporation, the
approval of the Company's 1997 Stock Incentive Plan and the approval of the
Company's 1997 Non-Employee Director Stock Plan.
ITEM 5. OTHER INFORMATION
The accompanying pro forma condensed combined financial statements are based
upon the historical financial statements of Galileo International Partnership,
ATS, Traviswiss and Galileo Nederland. The pro forma condensed combined
financial statements give pro forma effect to (i) the merger of Galileo
International Partnership into a wholly owned limited liability company
subsidiary of Galileo International, Inc.; (ii) the Offering; (iii) the
incurrence of $328.7 million of indebtedness under the Credit Agreements; (iv)
the acquisitions of ATS and Traviswiss, and the expected acquisition of Galileo
Nederland; and (v) the termination of certain revenue sharing obligations.
Such transactions were assumed to have been consummated on June 30, 1997, with
respect to the pro forma condensed combined balance sheet, and on January 1,
1996, with respect to the pro forma condensed combined statements of income.
The accompanying pro forma condensed combined financial statements do not
purport to represent what the Company's financial position actually would have
been had the transactions noted above occurred on the dates indicated or to
project the Company's financial position at any future date, nor do they
purport to represent what the Company's operating results would have been had
such transactions occurred on the dates indicated or to project the Company's
operating results for any future period. The pro forma adjustments are based
upon available information and certain assumptions that the Company believes
are reasonable.
The pro forma condensed combined financial statements should be read in
conjunction with the consolidated financial statements of Galileo International
Partnership included elsewhere herein as well as the Financial Statements and
Pro Forma Condensed Combined Financial Information included in the Registration
Statement. (No. 333-27495) on Form S-1 filed by Galileo International, Inc.
with the Securities and Exchange Commission on May 20, 1997, as amended.
14
<PAGE> 15
GALILEO INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 153,090
Accounts receivable, net 222,944
Other current assets 37,707
----------
Total current assets 413,741
Property and equipment, at cost:
Land 7,500
Buildings and improvements 71,050
Equipment 329,723
Equipment held for lease 340,346
----------
748,619
Less accumulated depreciation 546,270
----------
Net property and equipment 202,349
Computer software, net 237,948
Intangible assets 612,905
Other noncurrent assets 92,575
----------
$1,559,518
==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 55,619
Accrued commissions 47,813
Distributions payable 76,262
Other accrued liabilities 149,962
Long-term debt, current portion -
----------
Total current liabilities 329,656
Other accrued liabilities 177,661
Long-term debt, less current portion 398,695
Common Stock 1,048
Additional paid-in capital 667,334
Accumulated deficit (14,876)
-----------
$1,559,518
==========
</TABLE>
15
<PAGE> 16
GALILEO INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Quarter Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Electronic global distribution
services $ 316,341 $ 284,016 $ 629,363 $ 567,923
Information services 31,978 31,564 65,831 62,832
--------- --------- --------- ---------
348,319 315,580 695,194 630,755
Costs and expenses:
Cost of operations 124,807 127,724 251,808 256,199
Commissions, selling and
administrative 145,876 122,016 276,244 236,217
--------- --------- --------- ---------
270,683 249,740 528,052 492,416
--------- --------- --------- ---------
Operating income 77,636 65,840 167,142 138,339
Other income (expense):
Interest income (expense), net (4,954) (6,895) (11,921) (12,983)
Other, net 600 53 2,084 786
--------- --------- --------- ---------
(4,354) (6,842) (9,837) (12,197)
--------- --------- --------- ---------
Income before income taxes 73,282 58,998 157,305 126,142
Income taxes 29,112 24,017 62,533 51,350
--------- --------- --------- ---------
Net income $ 44,170 $ 34,981 $ 94,772 $ 74,792
========= ========= ========= =========
Pro forma weighted average number
of shares outstanding 104,799,700 104,799,700
=========== ===========
Pro forma earnings per share $0.42 $0.90
=========== ===========
</TABLE>
16
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C>
2.1 General Partnership Interest Purchase Agreement among United Air Lines,
Inc., Covia LLC, U.S. Airways, Inc., USAM Corp., Air Canada, Resnet
Holdings, Inc., Apollo Travel Services Partnership and Galileo International
Partnership .......................................................................................
2.2 Share Purchase Agreement between SAirGroup (LTD.) and Galileo International
Partnership .......................................................................................
2.4 Merger Agreement among Galileo International Partnership, Galileo International,
L.L.C. and Galileo International, Inc. ...........................................................
3.1 Restated Certificate of Incorporation of Galileo International, Inc. ..............................
3.2 Restated By-Laws of Galileo International, Inc. ...................................................
4.1 Registration Rights Agreement among Galileo International, Inc., Covia LLC,
USAM Corp., RESNET Holdings Inc., Distribution Systems Inc., Roscor A.G.,
Travel Industry Systems B.V., Retford Limited, Racom Teledata S.p.A., Travidata Inc.,
Olynet Inc. and Coporga, Inc. .....................................................................
10.1 Stockholders' Agreement among Galileo International, Inc., certain of its STOCKHOLDERS
and certain RELATED PARTIES OF SUCH STOCKHOLDERS. .................................................
10.2 Services Agreement among Galileo International, L.L.C., United Air Lines, Inc., US
Airways, Inc. and Air Canada ......................................................................
10.3 Services Agreement between Galileo International, L.L.C. and SwissAir Swiss Air
Transport Ltd. ....................................................................................
10.5 Amended and Restated Non-Competition Agreement among Galileo International, Inc.,
Galileo International, L.L.C., and United Air Lines, Inc., UAL Corporation, Covia LLC,
Air Wisconsin, Inc. and Air Wis Services, Inc. together with Schedule 1 indicating
other substantially similar agreements(*) ........................................................
10.6 Marketing Cooperation and Sales Representation Agreement between
US Airways, Inc. and Galileo International, L.L.C.(*) ............................................
10.7 Marketing Cooperation and Sales Representation Agreement between United
Air Lines, Inc. and Galileo International, L.L.C.(*) ............................................
10.8 Rights Waiver Agreement between SAirGroup and Galileo International
Partnership .......................................................................................
10.10 Credit Agreements: ................................................................................
(a) $200,000,000 364-Day Credit Agreement .......................................................
(b) $400,000,000 Five-Year Credit Agreement .....................................................
10.41 Galileo International, Inc. 1997 Stock Incentive Plan .............................................
</TABLE>
(*) Portions of these Exhibits have been omitted pursuant to a request for
confidential treatment. The omitted material has been filed separately
with the Securities and Exchange Commission.
(b) Reports on Form 8-K - No current reports on Form 8-K were filed for the
quarter ended June 30, 1997.
17
<PAGE> 18
SIGNATURES
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.
Galileo International, Inc.
Date: September 3, 1997 By: /s/ Paul H. Bristow
---------------------------
Paul H. Bristow
Director, Senior Vice
President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
18
<PAGE> 19
GALILEO INTERNATIONAL, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C>
2.1 General Partnership Interest Purchase Agreement among United Air Lines,
Inc., Covia LLC, U.S. Airways, Inc., USAM Corp., Air Canada, Resnet
Holdings, Inc., Apollo Travel Services Partnership and Galileo International
Partnership .......................................................................................
2.2 Share Purchase Agreement between SAirGroup (LTD.) and Galileo International
Partnership .......................................................................................
2.4 Merger Agreement among Galileo International Partnership, Galileo International,
L.L.C. and Galileo International, Inc. ...........................................................
3.1 Restated Certificate of Incorporation of Galileo International, Inc. ..............................
3.2 Restated By-Laws of Galileo International, Inc. ...................................................
4.1 Registration Rights Agreement among Galileo International, Inc., Covia LLC,
USAM Corp., RESNET Holdings Inc., Distribution Systems Inc., Roscor A.G.,
Travel Industry Systems B.V., Retford Limited, Racom Teledata S.p.A., Travidata Inc.,
Olynet Inc. and Coporga, Inc. .....................................................................
10.1 Stockholders' Agreement among Galileo International, Inc., certain of its STOCKHOLDERS
and certain RELATED PARTIES OF SUCH STOCKHOLDERS. .................................................
10.2 Services Agreement among Galileo International, L.L.C., United Air Lines, Inc., US
Airways, Inc. and Air Canada ......................................................................
10.3 Services Agreement between Galileo International, L.L.C. and SwissAir Swiss Air
Transport Ltd. ....................................................................................
10.5 Amended and Restated Non-Competition Agreement among Galileo International, Inc.,
Galileo International, L.L.C., and United Air Lines, Inc., UAL Corporation, Covia LLC,
Air Wisconsin, Inc. and Air Wis Services, Inc. together with Schedule 1 indicating
other substantially similar agreements(*) ........................................................
10.6 Marketing Cooperation and Sales Representation Agreement between
US Airways, Inc. and Galileo International, L.L.C.(*) ............................................
10.7 Marketing Cooperation and Sales Representation Agreement between United
Air Lines, Inc. and Galileo International, L.L.C.(*) ............................................
10.8 Rights Waiver Agreement between SAirGroup and Galileo International
Partnership .......................................................................................
10.10 Credit Agreements: ................................................................................
(a) $200,000,000 364-Day Credit Agreement .......................................................
(b) $400,000,000 Five-Year Credit Agreement .....................................................
10.41 Galileo International, Inc. 1997 Stock Incentive Plan .............................................
</TABLE>
(*) Portions of these Exhibits have been omitted pursuant to a request for
confidential treatment. The omitted material has been filed separately
with the Securities and Exchange Commission.
19
<PAGE> 1
EXHIBIT 2.1
CONFORMED COPY
===============================================================================
-----------------------------------------------
GENERAL PARTNERSHIP INTEREST PURCHASE AGREEMENT
-----------------------------------------------
Among
UNITED AIR LINES, INC.,
COVIA LLC,
US AIRWAYS, INC.,
USAM CORP.,
AIR CANADA,
RESNET HOLDINGS, INC.,
APOLLO TRAVEL SERVICES PARTNERSHIP
and
GALILEO INTERNATIONAL PARTNERSHIP
Dated as of July 30, 1997
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.01. Certain Defined Terms............................................. 2
1.02. Other Defined Terms............................................... 6
ARTICLE II
PURCHASE AND SALE
2.01. Purchase and Sale of the Partnership Interests.................... 8
2.02. Purchase Price.................................................... 8
2.03. Closing........................................................... 8
2.04. Cash Mechanism.................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
ENTITIES AND SELLERS
3.01. Organization, Authority and Qualification of the Parent
Entities and the Sellers........................................ 12
3.02. Organization, Authority and Qualification of the Partnership
and the Subsidiaries............................................ 13
3.03. Partnership Interests............................................. 14
3.04. No Conflict....................................................... 16
3.05. Governmental Consents and Approvals............................... 17
3.06. Financial Information and Books and Records....................... 17
3.07. No Undisclosed Liabilities........................................ 18
3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions........................................... 18
3.09. Litigation........................................................ 21
3.10. Compliance with Laws.............................................. 21
3.11. Environmental and Other Permits and Licenses; Related Matters..... 21
3.12. Material Contracts................................................ 22
3.13. Intellectual Property............................................. 23
3.14. Real Property and Leases.......................................... 24
3.15. Assets............................................................ 25
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
3.16. Employee Benefit Matters.......................................... 26
3.17. Labor Matters..................................................... 28
3.18. Taxes............................................................. 28
3.19. Insurance......................................................... 30
3.20. Brokers........................................................... 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.01. Organization, Authority and Qualification of the Purchaser........ 31
4.02. No Conflict....................................................... 32
4.03. Governmental Consents and Approvals............................... 32
4.04. Investment Purpose................................................ 32
4.05. Brokers........................................................... 33
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Conduct of Business Prior to the Closing.......................... 33
5.02. Access to Information............................................. 34
5.03. Confidentiality................................................... 35
5.04. Regulatory and Other Authorizations; Notices and Consents......... 36
5.05. Notice of Developments............................................ 37
5.06. No Solicitation of Employees...................................... 37
5.07. Use of Intellectual Property...................................... 37
5.08. Monthly Financial Statements...................................... 38
5.09. Premier Travel Services, L.L.C.................................... 38
5.10. Pre-Closing Balance Sheet......................................... 38
5.11. Environmental Audit............................................... 39
5.12. Employees and Employee Benefits................................... 39
5.13. Further Action.................................................... 40
ARTICLE VI
TAX MATTERS
6.01. Tax Indemnity..................................................... 40
6.02. Apportionment of Taxes............................................ 41
6.03. Returns and Payments.............................................. 41
6.04. Contests.......................................................... 43
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
6.05. Survival of Obligations........................................... 44
6.06. Section 754 Elections............................................. 44
6.07. Conveyance Taxes.................................................. 44
6.08. Tax Refunds, Credits and Other Payments........................... 45
ARTICLE VII
CONDITIONS TO CLOSING
7.01. Conditions to Obligations of the Parent
Entities, the Sellers and the Partnership........................ 46
7.02. Conditions to Obligations of the Purchaser........................ 47
ARTICLE VIII
INDEMNIFICATION
8.01. Survival of Representations and Warranties........................ 49
8.02. Indemnification by the Parent Entities and the Sellers............ 51
8.03. Tax Matters....................................................... 52
8.04. Indemnification by the Purchaser.................................. 53
8.05. Indemnification Procedures........................................ 53
ARTICLE IX
TERMINATION AND WAIVER
9.01. Termination....................................................... 54
9.02. Effect of Termination............................................. 55
9.03. Waiver............................................................ 56
ARTICLE X
GENERAL PROVISIONS
10.01. Expenses......................................................... 56
10.02. Notices.......................................................... 56
10.03. Public Announcements............................................. 59
10.04. Headings......................................................... 59
10.05. Severability..................................................... 59
10.06. Entire Agreement................................................. 59
10.07. Assignment....................................................... 60
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
10.08. No Third Party Beneficiaries..................................... 60
10.09. Amendment........................................................ 60
10.10. Arbitration...................................................... 60
10.11. Sellers' Disclosure Schedule..................................... 63
10.12. Governing Law.................................................... 63
10.13. Counterparts..................................................... 63
10.14. Specific Performance............................................. 63
</TABLE>
-iv-
<PAGE> 6
GENERAL PARTNERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement"), dated
as of July 30, 1997, among UNITED AIR LINES, INC., a Delaware corporation
("United"), COVIA LLC, a Delaware limited liability company ("Covia"), US
AIRWAYS, INC., a Delaware corporation ("USAW"), USAM CORP., a Delaware
corporation and a wholly owned subsidiary of USAW ("USAM"), AIR CANADA, a
corporation organized under the laws of Alberta ("Air Canada"), RESNET
HOLDINGS, INC., a Delaware corporation and a wholly owned subsidiary of Air
Canada ("Resnet"), APOLLO TRAVEL SERVICES PARTNERSHIP, a Delaware general
partnership (the "Partnership"), and GALILEO INTERNATIONAL PARTNERSHIP, a
Delaware general partnership, and any successor in interest thereto, including,
without limitation, the corporation or limited liability company formed in
connection with the IPO (the "Purchaser"). Covia, USAM and Resnet (or their
respective successors, as the case may be) are each referred to herein as a
"Seller" and as a group they are referred to herein as the "Sellers". United,
USAW and Air Canada are each referred to herein as a "Parent Entity" and as a
group they are referred to herein as the "Parent Entities".
WHEREAS, the Sellers collectively own one hundred percent (100%) of the
interests in the Partnership;
WHEREAS, Covia wishes, and United wishes to cause Covia, to sell to the
Purchaser, and the Purchaser wishes to purchase from Covia, Covia's 77% general
partnership interest in the Partnership (the "Covia Partnership Interest"),
upon the terms and subject to the conditions set forth herein;
WHEREAS, USAM wishes, and USAW wishes to cause USAM, to sell to the
Purchaser, and the Purchaser wishes to purchase from USAM, USAM's 21.08%
general partnership interest in the Partnership (the "USAM Partnership
Interest"), upon the terms and subject to the conditions set forth herein; and
WHEREAS, Resnet wishes, and Air Canada wishes to cause Resnet, to sell to
the Purchaser, and the Purchaser wishes to purchase from Resnet, Resnet's 1.92%
general partnership interest in the Partnership (the "Resnet Partnership
Interest"), upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser, the Parent Entities and the
Sellers hereby agree as follows:
<PAGE> 7
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"After-Tax Basis" means, (i) with respect to any Loss that is required to
be indemnified pursuant to Article VI or Article VIII on an After-Tax Basis,
that the indemnification payment will be calculated so as to take into account
both the deductibility or creditability by the indemnitee for Tax purposes of
the Loss being indemnified and the taxability to the indemnitee of the
indemnifying payment (including taxability of any payments made to gross up for
the taxability of the indemnifying payment), and (ii) with respect to any
refund or credit that is required to be paid on an After-Tax Basis pursuant to
Section 6.08, that the refund or credit will be calculated so as to take into
account both the deductibility by the Purchaser for Tax purposes of the payment
of such refund or credit to the Sellers and the taxability to the Purchaser of
the receipt of the refund or credit.
"Agreement" or "this Agreement" means this General Partnership Interest
Purchase Agreement, dated as of July 30, 1997, among the parties listed in the
preamble (including the Exhibits hereto and the Sellers' Disclosure Schedule)
and all amendments hereto made in accordance with the provisions of Section
10.09.
"Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in The City of
New York.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
<PAGE> 8
3
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of
such Person.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and Tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, surface water sediment,
soil, subsurface strata and ambient air.
"Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders
or consent agreements relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Material or arising from any alleged
injury or threat of injury to health, safety or the Environment.
"Environmental Law" means any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the Environment, health or safety or to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required to operate the respective businesses of
the Partnership or any Subsidiary or the Real Property under any applicable
Environmental Law.
"Governmental Authority" means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority, other than any rules and regulations (whether promulgated by order
or otherwise) which apply generally to the computer reservations system
industry.
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant
or waste under any applicable Environmental Law.
<PAGE> 9
4
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Independent Accounting Firm" means any one of the "big six" accounting
firms other than the Purchaser's Accountants and Arthur Andersen LLP.
"IRS" means the Internal Revenue Service of the United States.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Material Adverse Effect" means any change in or effect on the business of
the Partnership that, when taken individually or together with all other
adverse changes and effects, is or is reasonably likely to be materially
adverse to the business, operations, properties, condition (financial or
otherwise), assets or Liabilities of the Partnership and the Subsidiaries,
taken as a whole, or prevents consummation of the transactions contemplated
hereby.
"Net Asset Test Reference Balance Sheet" means the audited consolidated
balance sheet (including the related notes and schedules thereto) of the
Partnership, dated as of March 31, 1997, excluding (i) any indebtedness for
borrowed money of the Partnership and the Subsidiaries, (ii) any Cash other
than cash in the amount of any checks outstanding, and (iii) the assets and
liabilities of Premier, a copy of which is set forth in Section 3.06(a) of the
Sellers' Disclosure Schedule.
"Net Assets" means the excess of total consolidated assets over total
consolidated liabilities of the Partnership and the Subsidiaries shown on the
Pre-Closing Balance Sheet or the Seasonally Adjusted Net Asset Test Reference
Balance Sheet, as applicable.
"Ordinary Course Taxes" means Taxes relating to periods (or portions
thereof) prior to the Closing Date and paid by the Partnership or the
Subsidiaries after the Closing Date in the ordinary course of business and not
as a result of an audit or examination by a government or Tax authority or an
administrative or judicial proceeding or a settlement or compromise thereof in
connection with a Tax previously paid or a Return previously filed.
<PAGE> 10
5
"Other Tax Audit Reserve" means a non-specific reserve for sales and use
tax audit settlements of $400,000.
"Partnership Intellectual Property" means all trademarks, trademark
rights, trade names, trade name rights, patents, patent rights, industrial
models, inventions, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the
Partnership and the Subsidiaries as currently conducted or as currently
contemplated (by existing Partnership management) to be conducted, together
with all applications currently pending for any of the foregoing.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for Taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations;
(c) pledges or deposits to secure obligations under workers' compensation laws
or similar legislation or to secure public or statutory obligations; and (d)
minor survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in connection
with any indebtedness for borrowed money of the Partnership, (ii) do not render
title to the property encumbered thereby unmarketable and (iii) do not,
individually or in the aggregate, materially adversely affect the value or use
of such property for its current and anticipated purposes.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Purchaser's Accountants" means KPMG Peat Marwick LLP, independent
accountants of the Purchaser.
"Real Property" means the real property leased or owned by the Partnership
or any Subsidiary.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Return" means any return, report or form relating to a Tax or Taxes.
<PAGE> 11
6
"Seasonally Adjusted Net Asset Test Reference Balance Sheet" means the Net
Asset Test Reference Balance Sheet adjusted to multiply current assets
reflected thereon by the appropriate seasonal adjustment factors set forth on
Schedule 1.01(a) hereto and current liabilities by the appropriate seasonal
adjustment factors set forth on Schedule 1.01(b) hereto.
"Subsidiaries" means any and all corporations, partnerships, limited
liability companies, joint ventures, associations and other similar entities
controlled by the Partnership directly or indirectly through one or more
intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other similar charges (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority (whether federal, state,
local, foreign or otherwise), including, without limitation: taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation, or net
worth; taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
"Tax Benefit" means the value, when actually received, of any deduction,
loss, credit or refund to the Purchaser, any Affiliate of the Purchaser, or the
Seller, as the case may be.
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently
throughout the periods involved.
SECTION 1.02. Other Defined Terms. Each of the following terms is
defined in the Section set forth opposite such term:
<TABLE>
<CAPTION>
Terms Section
----- -------
<S> <C>
Agreement.......................................... Preamble
Air Canada......................................... Preamble
Arbitration Request................................... 10.10
Assets.............................................. 3.15(a)
Association........................................... 10.10
ATS Names........................................... 5.07(a)
Average Cash Amount................................. 2.04(b)
Award........................................... 10.10(a)(v)
Cash................................................ 2.04(b)
</TABLE>
<PAGE> 12
7
<TABLE>
<S> <C>
Cash Payment Amount................................. 2.04(b)
Closing................................................ 2.03
Closing Cash Amount................................. 2.04(e)
Closing Date........................................... 2.03
Commencement Date............................... 10.10(a)(i)
Covia.............................................. Preamble
Covia Partnership Interest......................... Recitals
Dispute Notice..................................... 10.10(a)
Environmental Audit................................... 5.11
ERISA............................................... 3.16(a)
Escrow Agent..................................... 2.04(f)(i)
Financial Statements................................ 3.06(a)
Indemnified Party...................................... 6.01
Independent Firm.................................... 6.03(b)
Interim Financial Statements........................ 3.06(a)
IPO.................................................... 2.03
Loss................................................... 8.02
Material Contracts.................................. 3.12(a)
Measuring Period.................................... 2.04(b)
Non-Disclosure Agreement............................ 5.03(a)
Parent Entity...................................... Preamble
Parent Entities.................................... Preamble
Partnership........................................ Recitals
Partnership Agreement............................... 3.02(a)
Partnership Interests............................... 3.03(a)
Partnership Licenses................................... 3.13
Petitioner......................................... 10.10(a)
Plans............................................... 3.16(a)
Pre-Closing Balance Sheet.............................. 5.10
Premier................................................ 5.09
Purchase Price......................................... 2.02
Purchase Price Allocation Schedule.................. 6.03(c)
Purchaser.......................................... Preamble
Purchaser Indemnified Party......................... 8.02(a)
Resnet............................................. Preamble
Resnet Partnership Interest........................ Recitals
Respondent......................................... 10.10(a)
Response....................................... 10.10(a)(ii)
Returnable Refund or Credit......................... 6.08(a)
Sales Tax Audit Reserve............................. 6.01(a)
SEC................................................. 5.03(a)
Seller............................................. Preamble
</TABLE>
<PAGE> 13
8
<TABLE>
<S> <C>
Sellers............................................ Preamble
Sellers' Disclosure Schedule........................... 3.05
Seller Indemnified Party............................ 8.04(a)
Statement.......................................... 10.10(a)
Third Party Claim...................................... 8.05
Transaction Agreement............................... 7.01(g)
United............................................. Preamble
USAW............................................... Preamble
USAM............................................... Preamble
USAM Partnership Interest.......................... Recitals
WARN................................................ 3.16(g)
</TABLE>
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Partnership Interests. Upon the
terms and subject to the conditions of this Agreement, at the Closing, (i)
United shall cause Covia to sell, and Covia shall sell to the Purchaser, and
the Purchaser shall purchase from Covia, the Covia Partnership Interest, (ii)
USAW shall cause USAM to sell, and USAM shall sell to the Purchaser, and the
Purchaser shall purchase from USAM, the USAM Partnership Interest, and (iii)
Air Canada shall cause Resnet to sell, and Resnet shall sell to the Purchaser,
and the Purchaser shall purchase from Resnet, the Resnet Partnership Interest.
SECTION 2.02. Purchase Price. The purchase price for the Covia
Partnership Interest, the USAM Partnership Interest and the Resnet Partnership
Interest shall be $700 million in the aggregate (the "Purchase Price") to be
paid in cash pro rata to Covia, USAM and Resnet in accordance with their
respective Partnership Interests in the Partnership.
SECTION 2.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the sale and purchase of the Partnership Interests contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
the offices of Shearman & Sterling, 599 Lexington Avenue, New York, New York at
10:00 A.M. New York time on the day of the consummation of the proposed initial
public offering by the Purchaser (the "IPO"), or at such other place or at such
other time or on such other date as the Sellers and the Purchaser may mutually
agree upon in writing (the day on which the Closing takes place being the
"Closing Date").
SECTION 2.04. Cash Mechanism. (a) Subject to the provisions of this
Section 2.04, at or immediately following the Closing, the Partnership will pay
to each of the
<PAGE> 14
9
Sellers its pro rata share (determined in accordance with its Partnership
Interest) of the Cash Payment Amount, less, in the case of Covia, $50 million.
(b) For purposes of this Section 2.04, (i) the "Average Cash Amount"
means, subject to adjustment as set forth in Section 2.04(c), the amount of
cash that is equal to the simple average daily balance of cash, time deposits,
certificates of deposit, marketable securities and other short term investments
and cash equivalents ("Cash") of the Partnership and the Subsidiaries at the
close of business on each Business Day during the Measuring Period, (ii)
"Measuring Period" means the period commencing at 12:01 a.m. EDT on the date of
the month immediately preceding the month in which the Closing Date occurs that
is the same date of the month as the Closing Date (or if such date is not a
calendar date, the date that corresponds most closely to the date that is the
Closing Date) and ending at 11:59 p.m. EDT on the day immediately preceding the
Closing Date, and (iii) "Cash Payment Amount" means the Average Cash Amount
less the checks issued by the Partnership and the Subsidiaries that have not
cleared on the Closing Date.
(c) The Average Cash Amount will be adjusted in the event the Partnership
makes (i) any Cash distribution (in respect of their respective Partnership
Interests) to any of the Sellers, or (ii) any payment to one or more brokers
pursuant to Section 3.20 hereof, in either case during the Measuring Period, by
subtracting the amount of any such distribution or payment, as the case may be,
from the daily amount of Cash in each of the days during the Measuring Period
immediately preceding the date of such distribution or payment.
(d) During the Measuring Period, each of the Purchaser and the Partnership
will make all payments that are to be made to each other under existing
contractual arrangements or agreements in the ordinary course of business
consistent with past practice. In addition, during the Measuring Period, the
Partnership will conduct its business in the ordinary course consistent with
past practice, including, without limitation, not shortening or lengthening the
customary payment time for any of its payables or receivables and continuing
its purchasing and capital purchasing practices in accordance with past
practice. To facilitate the foregoing, (i) Covia shall circulate to the
relevant personnel of the Partnership at least thirty days prior to the
expected commencement of the Measuring Period written instructions to such
effect, (ii) the Partnership will provide representatives of the Purchaser with
access, at reasonable times, to all offices, personnel, books and records of
the Partnership and the Subsidiaries that the Purchaser may reasonably request
for purposes of monitoring the compliance by the Partnership with this Section
2.04(d) and the calculation by the Partnership of the Average Cash Amount, the
Cash Payment Amount and the Closing Cash Amount in accordance with this Section
2.04, and (iii) the parties will agree on mutually agreeable procedures for
implementing the cash transfers described in Section 2.04(e). During the
period from 11:59 p.m. EDT on the day immediately preceding the Closing Date
through the Closing, the Partnership will make no payments of cash except
pursuant to normal banking transactions, including check clearing or deposits,
that are not
<PAGE> 15
10
under the control of the Partnership, or pursuant to contractual obligations
with third parties that were previously disclosed to the Purchaser or that
were entered into in the ordinary course of business consistent with past
practice.
(e) On the Closing Date, the Partnership will inform each of the Parent
Entities and the Purchaser of the (i) Average Cash Amount, as well as the
calculations resulting therein, (ii) the aggregate amount with respect to
which checks of the Partnership and the Subsidiaries have been issued but not
cleared on the Closing Date, and (iii) the amount of Cash of the Partnership
and the Subsidiaries as of 12:01 a.m. EDT on the Closing Date (the "Closing
Cash Amount"). If the Closing Cash Amount is less than the Cash Payment Amount,
then the Purchaser will make available to the Partnership such difference and,
subject to the provisions of Section 2.04(f), the Cash Payment Amount will be
paid to the Sellers as set forth in Section 2.04(a). If the Closing Cash
Amount is greater than the Cash Payment Amount, then, subject to the provisions
of Section 2.04(f), the Cash Payment Amount will be paid to the Sellers as set
forth in Section 2.04(a), and the difference between the Closing Cash Amount
and the Cash Payment Amount will be retained by the Partnership.
(f) (i) Prior to the Closing, the Purchaser and the Parent Entities shall
enter into an Escrow Agreement, in substantially the form attached hereto as
Exhibit 2.04(f), with a third party selected by the Purchaser and reasonably
acceptable to the Parent Entities (the "Escrow Agent"). In accordance with the
terms of the Escrow Agreement, the Partnership or the Sellers (pro rata in
accordance with their respective Partnership Interests) will, on the Closing
Date, deposit the sum of $3 million with the Escrow Agent, which will hold such
amount in an interest bearing account until the day that is 90 days following
the Closing Date, to be managed and paid out in accordance with the Escrow
Agreement and this Section 2.04.
(ii) In the event the Purchaser determines, within 90 days following the
Closing Date, that the agreements of the Partnership contained in Section
2.04(d) were not complied with and, as a result of such non-compliance, the
Average Cash Amount was either greater or lesser than the average amount of
Cash that the Partnership would have had during the Measuring Period had such
provisions been complied with, the Purchaser will provide written notice to the
Parent Entities to such effect, specifying the amount of the difference and its
reasons for such determination. In the absence of any written notice of
dispute delivered by any of the Parent Entities to the Purchaser and the Escrow
Agent within 10 days after receipt of the Purchaser's written notice as to such
determination and the amount of such difference, (x) in the event the Average
Cash Amount is greater than it would have been, the Purchaser will receive from
the Escrow Agent and the Parent Entities (on a several basis in proportion to
their respective Partnership Interests), if appropriate, a cash payment equal
to the amount of such difference, together with interest thereon, as set forth
in clause (iii) below, and (y) in the event the Average Cash Amount is less
than it would have been, the Sellers will receive (pro rata in proportion to
their respective Partnership Interests)
<PAGE> 16
11
from the Partnership or the Purchaser a cash payment equal to the amount of
such difference, together with interest thereon, as set forth in clause (iii)
below. In the event any of the Parent Entities deliver such a written notice
disputing such determination or the amount of such difference, such dispute
will be submitted for resolution to the Independent Accounting Firm, which will
resolve such dispute within 30 days of the date of such submission and whose
decision will be final and binding on the Parent Entities and the Purchaser.
The fees and expenses of the Independent Accounting Firm will be allocated
between the Purchaser, on the one hand, and the Parent Entities (pro rata in
accordance with their respective Partnership Interests), on the other hand, in
the same proportion that the aggregate amount of the difference so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by the Parent
Entities, on the one hand, or the Purchasers, on the other hand, bears to the
total amount of the difference so submitted.
(iii) In the event any payment is to be made to the Purchaser pursuant to
clause (ii) above, the Escrow Agent will pay such amount to the Purchaser,
together with the appropriate amount of interest thereon, and if such payment
is less than the amount of such difference, the Purchaser will recover such
excess amount from the Parent Entities (on a several basis in proportion to
their respective Partnership Interests), together with interest thereon from
the Closing Date to and including the date of payment by the Parent Entities to
the Purchaser at the Interest Rate (as such term is defined in the Escrow
Agreement), pursuant to the provisions of Section 8.02 (except that the
provisions of Section 8.02(b)(i) and (ii) will not apply). In the event any
payment is to be made to the Sellers pursuant to clause (ii) above, the
Partnership or the Purchaser will pay such amount to the Sellers (pro rata in
accordance with their respective Partnership Interests), together with interest
thereon from the Closing Date to and including the date of payment by the
Partnership or Purchaser to the Sellers at the Interest Rate, pursuant to the
provisions of Section 8.04. In the event any amount remains in the Escrow Fund
(as such term is defined in the Escrow Agreement) on the 90th day following the
Closing Date, all amounts held by the Escrow Agent on such day, after giving
effect to any payments to be made to the Purchaser hereunder, will be paid to
the Sellers pro rata in accordance with their Partnership Interests, including
all interest accrued on the remaining principal amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT
ENTITIES AND SELLERS
As an inducement to the Purchaser to enter into this Agreement, the Parent
Entities and the Sellers hereby represent and warrant to the Purchaser as
follows: United and Covia jointly and severally represent and warrant as to the
representations and warranties in Sections 3.01(a), 3.03(a), 3.04(a) and
3.05(a); USAW and USAM jointly and severally
<PAGE> 17
12
represent and warrant as to the representations and warranties in Sections
3.01(b), 3.03(b), 3.04(b) and 3.05(b); Air Canada and Resnet jointly and
severally represent and warrant as to the representations and warranties in
Sections 3.01(c), 3.03(c), 3.04(c) and 3.05(c); and the Parent Entities and the
Sellers severally represent and warrant as to the representations and
warranties in Sections 3.02, 3.03(d), 3.06, 3.07, 3.08, 3.09, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19 and 3.20.
SECTION 3.01. Organization, Authority and Qualification of the Parent
Entities and the Sellers. (a) Each of United and Covia is a corporation (and,
in the case of Covia, on or prior to the Closing will be either a corporation
or a limited liability company) duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement, to carry out its respective
obligations hereunder and to consummate the transactions contemplated hereby.
Each of United and Covia is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the properties owned or leased by
each of them or the operation of each of their businesses make such licensing
or qualification necessary, except to the extent that the failure to be so
licensed or qualified would not adversely affect the ability of either United
or Covia to carry out its respective obligations under, and to consummate the
transactions contemplated by, this Agreement. The execution and delivery of
this Agreement by United and Covia, the performance by United and Covia of
their respective obligations hereunder and the consummation by United and
Covia of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of United and Covia. This Agreement has been duly
executed and delivered by United and Covia, and (assuming due authorization,
execution and delivery by the other Sellers and Parent Entities and the
Purchaser) this Agreement constitutes a legal, valid and binding obligation of
each of United and Covia enforceable against each of them in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity.
(b) Each of USAW and USAM is a corporation (and, in the case of USAM, on
or prior to the Closing will be either a corporation or a limited liability
company) duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary power and authority to enter
into this Agreement, to carry out its respective obligations hereunder and to
consummate the transactions contemplated hereby. Each of USAW and USAM is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by each of them or the
operation of each of their businesses make such licensing or qualification
necessary, except to the extent that the failure to be so licensed or qualified
would not adversely affect the ability of either USAW or USAM to carry out its
respective obligations under, and to consummate the transactions contemplated
by, this Agreement. The execution and delivery of this Agreement by USAW and
USAM, the performance by USAW and USAM of their respective obligations
hereunder and the consummation by USAW and USAM of the
<PAGE> 18
13
transactions contemplated hereby have been duly authorized by all requisite
action on the part of USAW and USAM. This Agreement has been duly executed and
delivered by USAW and USAM, and (assuming due authorization, execution and
delivery by the other Sellers and Parent Entities and the Purchaser) this
Agreement constitutes a legal, valid and binding obligation of each of USAW and
USAM enforceable against each of them in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or by general principles of equity.
(c) Each of Air Canada and Resnet is a corporation duly organized, validly
existing and in good standing under the laws of Alberta and the State of
Delaware, respectively, and has all necessary power and authority to enter into
this Agreement, to carry out its respective obligations hereunder and to
consummate the transactions contemplated hereby. Each of Air Canada and Resnet
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by each of them or the
operation of each of their businesses make such licensing or qualification
necessary, except to the extent that the failure to be so licensed or qualified
would not adversely affect the ability of either Air Canada and Resnet to carry
out its respective obligations under, and to consummate the transactions
contemplated by, this Agreement. The execution and delivery of this Agreement
by Air Canada and Resnet, the performance by Air Canada and Resnet of their
respective obligations hereunder and the consummation by Air Canada and Resnet
of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of Air Canada and Resnet. This Agreement has been
duly executed and delivered by Air Canada and Resnet, and (assuming due
authorization, execution and delivery by the other Sellers and Parent Entities
and the Purchaser) this Agreement constitutes a legal, valid and binding
obligation of each of Air Canada and Resnet enforceable against each of them in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights generally
or by general principles of equity.
SECTION 3.02. Organization, Authority and Qualification of the
Partnership and the Subsidiaries. (a) The Partnership is a general
partnership duly organized and validly existing under the laws of the State of
Delaware and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business or the respective businesses of the Subsidiaries
makes such licensing or qualification necessary (and all such jurisdictions are
set forth in Section 3.02(a) of the Sellers' Disclosure Schedule). The
Partnership has all the necessary power and authority to own, operate or lease
the properties and assets owned, operated, or leased by the Partnership and to
carry on its business and the respective businesses of the Subsidiaries as they
have been and are currently conducted by the Partnership and the Subsidiaries.
All material actions taken by the Partnership have been duly authorized, and
the Partnership has not taken any material action that in any respect conflicts
with or results in a violation of any provision of its partnership agreement
(the "Partnership Agreement").
<PAGE> 19
14
A true and correct copy of the Partnership Agreement, as in effect on the
date hereof, has been delivered by the Sellers to the Purchaser. The execution
and delivery of this Agreement by the Partnership, the performance by the
Partnership of its obligations hereunder and the consummation by the
Partnership of the transactions contemplated hereby have been duly authorized
by all requisite action on the part of the Partnership. This Agreement has
been duly executed and delivered by the Partnership, and (assuming due
authorization, execution and delivery by the Sellers, the Parent Entities and
the Purchaser) this Agreement constitutes a legal, valid and binding obligation
of the Partnership enforceable against the Partnership in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity.
(b) Section 3.02(b) of the Sellers' Disclosure Schedule sets forth a true
and complete list of all Subsidiaries, listing for each Subsidiary its name,
type of entity, the jurisdiction and date of its incorporation or organization,
its authorized capital stock, partnership capital or equivalent, and the
current ownership of such capital stock, partnership interests or similar
ownership interests.
(c) Other than the Subsidiaries, there are no other corporations,
partnerships or limited liability companies in which the Partnership owns, of
record or beneficially, any direct or other interest or any right (contingent
or otherwise) to acquire the same. The Partnership is not, directly or
indirectly, a participant in any joint venture.
(d) Each Subsidiary: (i) is a corporation or partnership duly organized
and validly existing under the laws of its jurisdiction of organization, (ii)
has all necessary power and authority to own, operate or lease the properties
and assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary and (iii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary (and all such
jurisdictions are set forth in Section 3.02(d) of the Sellers' Disclosure
Schedule). True and complete copies of the charter and bylaws (or similar
organizational documents), in each case as in effect on the date hereof, of
each Subsidiary have been delivered by the Sellers to the Purchaser.
(e) No Subsidiary is a member of (nor is any part of its business
conducted through) any partnership, other than the Partnership.
SECTION 3.03. Partnership Interests. (a) As of the date hereof, 77% of
the outstanding interests in the Partnership ("Partnership Interests") are
owned, beneficially and of record, by Covia, free and clear of all
Encumbrances. There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating
United, Covia or any Affiliate thereof to issue or sell any Partnership
<PAGE> 20
15
Interests or any other interest in the Partnership. Neither United, Covia nor
any Affiliate thereof is party to any voting trusts, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Partnership Interests. Upon consummation of the transactions
contemplated by Article II, the Purchaser will acquire from Covia 77% of the
Partnership Interests free and clear of all Encumbrances (other than
Encumbrances created by the Purchaser).
(b) As of the date hereof, 21.08% of the outstanding Partnership Interests
are owned, beneficially and of record, by USAM, free and clear of all
Encumbrances. There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating
USAW, USAM or any Affiliate thereof to issue or sell any Partnership Interests
or any other interest in the Partnership. Neither USAW, USAM nor any Affiliate
thereof is party to any voting trusts, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
Partnership Interests. Upon consummation of the transactions contemplated by
Article II, the Purchaser will acquire from USAM 21.08% of the Partnership
Interests free and clear of all Encumbrances (other than Encumbrances created
by the Purchaser).
(c) As of the date hereof, 1.92% of the outstanding Partnership Interests
in are owned, beneficially and of record, by Resnet, free and clear of all
Encumbrances. There are no options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating Air
Canada, Resnet or any Affiliate thereof to issue or sell any Partnership
Interests or any other interest in the Partnership. Neither Air Canada, Resnet
nor any Affiliate thereof is party to any voting trusts, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Partnership Interests. Upon consummation of the transactions
contemplated by Article II, the Purchaser will acquire from Resnet 1.92% of
the Partnership Interests free and clear of all Encumbrances (other than
Encumbrances created by the Purchaser).
(d) None of the outstanding Partnership Interests was issued in violation
of any preemptive rights. There are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the Partnership Interests or obligating the Partnership
to issue or sell any Partnership Interests or any other interest in the
Partnership. There are no outstanding contractual obligations of the
Partnership to repurchase, redeem or otherwise acquire any equity interests of
or to provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any other Person. The Partnership Interests
constitute all the issued and outstanding equity interests in the Partnership.
The Partnership is not a party to any voting trusts, proxies or other
agreements or understandings in effect with respect to the voting or transfer
of any of the Partnership Interests.
<PAGE> 21
16
SECTION 3.04. No Conflict. (a) Except as disclosed in Section 3.04 of
the Sellers' Disclosure Schedule, the execution, delivery and performance of
this Agreement by United, Covia and the Partnership do not and will not (i)
violate, conflict with or result in the breach of any provision of the charter,
bylaws, limited liability company agreement or partnership agreement (or
similar organizational documents) of United, Covia, the Partnership or any
Subsidiary, (ii) conflict with or violate (or cause an event which could have a
Material Adverse Effect as a result of) any Law or Governmental Order
applicable to United, Covia, the Partnership or any Subsidiary, or any of their
respective assets, properties or businesses, or (iii) conflict with, result in
any breach of, constitute a default (or event which with the giving of notice
or lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the Partnership Interests held by Covia or on any of the
assets or properties of United, Covia, the Partnership or any Subsidiary
pursuant to, any note, bond, mortgage or indenture, or material contract,
agreement, lease, sublease, license, sublicense, permit, franchise or other
instrument or arrangement to which United, Covia, the Partnership or any
Subsidiary is a party or by which any of the Partnership Interests held by
Covia or any of such assets or properties is bound or affected.
(b) Except as disclosed in Section 3.04 of the Sellers' Disclosure
Schedule, the execution, delivery and performance of this Agreement by USAW,
USAM and the Partnership do not and will not (i) violate, conflict with or
result in the breach of any provision of the charter, bylaws, limited liability
company agreement or partnership agreement (or similar organizational
documents) of USAW, USAM, the Partnership or any Subsidiary, (ii) conflict with
or violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to USAW, USAM, the
Partnership or any Subsidiary, or any of their respective assets, properties or
businesses, or (iii) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any Encumbrance on any of the
Partnership Interests held by USAM or on any of the assets or properties of
USAW, USAM, the Partnership or any Subsidiary pursuant to, any note, bond,
mortgage or indenture, or material contract, agreement, lease, sublease,
license, sublicense, permit, franchise or other instrument or arrangement to
which USAW, USAM, the Partnership or any Subsidiary is a party or by which any
of the Partnership Interests held by USAM or any of such assets or properties
is bound or affected.
(c) Except as disclosed in Section 3.04 of the Sellers' Disclosure
Schedule, the execution, delivery and performance of this Agreement by Air
Canada, Resnet and the Partnership do not and will not (i) violate, conflict
with or result in the breach of any provision of the charter, bylaws, limited
liability company agreement or partnership
<PAGE> 22
17
agreement (or similar organizational documents) of Air Canada, Resnet, the
Partnership or any Subsidiary, (ii) conflict with or violate (or cause an
event which could have a Material Adverse Effect as a result of) any Law or
Governmental Order applicable to Air Canada, Resnet, the Partnership or any
Subsidiary, or any of their respective assets, properties or businesses, or
(iii) conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance on any of the Partnership
Interests held by Resnet or on any of the assets or properties of Air Canada,
Resnet, the Partnership or any Subsidiary pursuant to, any note, bond, mortgage
or indenture, or material contract, agreement, lease, sublease, license,
sublicense, permit, franchise or other instrument or arrangement to which Air
Canada, Resnet, the Partnership or any Subsidiary is a party or by which any of
the Partnership Interests held by Resnet or any of such assets or properties is
bound or affected.
SECTION 3.05. Governmental Consents and Approvals. (a) The execution,
delivery and performance of this Agreement by United, Covia and the Partnership
do not and will not require any consent, approval, authorization or other order
of, action by, filing with or notification to any Governmental Authority or any
other Person, except for (i) the notification requirements of the HSR Act and
(ii) the consents, approvals and authorizations set forth in Section 3.05 of
the disclosure schedule which has been delivered by the Sellers to the
Purchaser prior to the date hereof and which is attached hereto (the "Sellers'
Disclosure Schedule").
(b) The execution, delivery and performance of this Agreement by USAW,
USAM and the Partnership do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
Governmental Authority or any other Person, except for (i) the notification
requirements of the HSR Act and (ii) the consents, approvals and authorizations
set forth in Section 3.05 of the Sellers' Disclosure Schedule.
(c) The execution, delivery and performance of this Agreement by Air
Canada, Resnet and the Partnership do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other Person, except for (i)
the notification requirements of the HSR Act and (ii) the consents, approvals
and authorizations set forth in Section 3.05 of the Sellers' Disclosure
Schedule.
SECTION 3.06. Financial Information and Books and Records. (a) True and
complete copies of (i) the audited consolidated balance sheet of the
Partnership and the Subsidiaries for each of the three fiscal years ended as of
December 31, 1994, December 31, 1995 and December 31, 1996, and the related
audited consolidated statements of income,
<PAGE> 23
18
together with all related notes and schedules thereto, accompanied by the
reports thereon of the Sellers' Accountants (collectively referred to herein as
the "Financial Statements") and (ii) the unaudited consolidated balance sheet
of the Partnership and the Subsidiaries for the quarter ending March 31, 1997,
and the related consolidated statements of income of the Company, together with
all related notes and schedules thereto (collectively referred to herein as the
"Interim Financial Statements") have been delivered by the Sellers to the
Purchaser. The Financial Statements, the Interim Financial Statements and the
Net Asset Test Reference Balance Sheet (i) were prepared in accordance with the
books of account and other financial records of the Partnership, (ii) present
fairly the consolidated financial condition and results of operations of the
Partnership and the Subsidiaries as of the dates thereof or for the periods
covered thereby, (iii) have been prepared in accordance with U.S. GAAP and (iv)
include all adjustments (consisting only of normal accruals) that are necessary
for a fair presentation of the consolidated financial condition of the
Partnership and the Subsidiaries and the results of the operations of the
Partnership and the Subsidiaries as of the dates thereof or for the periods
covered thereby, except in the case of the Net Asset Test Reference Balance
Sheet (a copy of which is set forth in Section 3.06(a) of the Sellers'
Disclosure Schedule), which excludes (i) any indebtedness for borrowed money of
the Partnership and the Subsidiaries, (ii) any cash or cash equivalents other
than cash in the amount of any checks outstanding, and (iii) the assets and
liabilities of Premier.
(b) The books of account and other financial records of the Partnership
and the Subsidiaries: (i) reflect all items of income and expense and all
assets and Liabilities required to be reflected therein in accordance with U.S.
GAAP and (ii) are in all material respects complete and correct, and do not
contain or reflect any material inaccuracies or discrepancies.
(c) The minute books of the Partnership and the Subsidiaries contain
accurate records of all meetings and accurately reflect all other actions taken
by the Partners or Stockholders thereof. Complete and accurate copies of all
such minute books have been provided to the Purchaser.
SECTION 3.07. No Undisclosed Liabilities. There are no Liabilities of
the Partnership or any Subsidiary, other than Liabilities (i) reflected or
reserved against on the Net Asset Test Reference Balance Sheet, (ii) incurred
since March 31, 1997 in the ordinary course of the business, consistent with
the past practice, or (iii) disclosed in this Agreement or in the Sellers'
Disclosure Schedule, of the Partnership and the Subsidiaries and which do not
and could not have a Material Adverse Effect.
SECTION 3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Except as disclosed in Section 3.08 of the Sellers'
Disclosure Schedule, since March 31, 1997, the business of the Partnership and
the Subsidiaries has been conducted in the ordinary course and consistent with
past practice.
<PAGE> 24
19
As amplification and not limitation of the foregoing, since March 31, 1997,
except as disclosed in Section 3.08 of the Sellers' Disclosure Schedule,
neither the Partnership nor any Subsidiary has:
(i) permitted or allowed any of the assets or properties (whether
tangible or intangible) of the Partnership or any Subsidiary to be
subjected to any Encumbrance, other than Permitted Encumbrances;
(ii) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance
or paid or otherwise discharged any Liability, other than current
liabilities reflected on the Net Asset Test Reference Balance Sheet and
current liabilities incurred in the ordinary course of business
consistent with past practice since March 31, 1997;
(iii) made any loan to, guaranteed any indebtedness of or otherwise
incurred any indebtedness on behalf of any Person;
(iv) redeemed any of the Partnership Interests;
(v) except as specifically requested by the Purchaser or as required
to accommodate changes in the Purchaser's business practices, made any
material changes in the customary methods of operations of the
Partnership or any Subsidiary, including, without limitation, practices
and policies relating to marketing, selling and pricing;
(vi) merged with, entered into a consolidation with or acquired any
interest in any Person or acquired a substantial portion of the assets
or business of any Person or any division or line of business thereof, or
otherwise acquired any material assets;
(vii) made any capital expenditure or commitment for any capital
expenditure in excess of the capital expenditures contemplated by the
planned budget, a true and complete copy of which has been provided to
the Purchaser;
(viii) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, leasehold interests and intangible assets) with an
individual value in excess of $50,000;
(ix) issued or sold any Partnership Interests, or other equity
securities, or any option, warrant or other right to acquire the same,
of, or any other interest in, the Partnership or any Subsidiary, except
as contemplated by this Agreement;
<PAGE> 25
20
(x) except for agreements, arrangements or transactions with the
Purchaser or having an individual value of less than $5,000, entered into
any agreement, arrangement or transaction with any of its directors,
officers, employees or partners (or with any relative, beneficiary,
spouse or Affiliate of such Person);
(xi) (A) granted any increase, or announced any increase, in the
wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Partnership or any Subsidiary to any of its
employees, including, without limitation, any increase or change pursuant
to any Plan, or (B) established or increased or promised to increase any
benefits under any Plan, in either case except for ordinary increases
consistent with the past practices of the Partnership or such Subsidiary;
(xii) revalued any assets of the Partnership or any Subsidiary other
than in accordance with U.S. GAAP;
(xiii) amended, terminated, cancelled or compromised any material
claims of the Partnership or any Subsidiary or waived any other rights of
material value to the Partnership or any Subsidiary;
(xiv) made any material change in any method of accounting or
accounting practice or policy used by the Partnership or any Subsidiary;
(xv) amended or restated the Partnership Agreement or the
organizational documents of any Subsidiary;
(xvi) made any express or deemed election or settled or compromised
any liability that is the subject of a dispute with any government or
taxing authority, with respect to (A) Taxes of the Partnership or any
Subsidiary or (B) Taxes, insofar as Partnership items or any Subsidiary
items are involved, of the partners of the Partnership or of any
Subsidiary;
(xvii) suffered any casualty loss or damage with respect to any of
the Assets which individually has a replacement cost of more than
$50,000, which loss or damage shall not have been covered by insurance;
(xviii) suffered any Material Adverse Effect; or
(xix) agreed, whether in writing or otherwise, to take any of the
actions specified in this Section 3.08 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights or commitments with respect to any of the actions
specified in this Section 3.08.
<PAGE> 26
21
SECTION 3.09. Litigation. Except as set forth in Section 3.09 of the
Sellers' Disclosure Schedule, there are no Actions by or against the
Partnership or any Subsidiary (or by or against the Sellers or any Affiliate
thereof and relating to the Partnership or any Subsidiary or their respective
businesses), or affecting any of the Assets, pending or threatened before any
Governmental Authority. None of the Partnership, the Subsidiaries or any of
the Assets nor the Sellers is subject to any Governmental Order, nor are there
any such Governmental Orders threatened to be imposed by any Governmental
Authority, which has a Material Adverse Effect.
SECTION 3.10. Compliance with Laws. (a) Except as disclosed in Section
3.10(a) of the Sellers' Disclosure Schedule, the Partnership and the
Subsidiaries have conducted and continue to conduct their respective
businesses in accordance with all Laws and Governmental Orders applicable to
the Partnership, any Subsidiary or any of the Assets or such businesses, and
neither the Partnership nor any Subsidiary is in violation of any such Law or
Governmental Order.
(b) Section 3.10(b) of the Sellers' Disclosure Schedule sets forth a brief
description of each Governmental Order applicable to the Partnership or any
Subsidiary or any of the Assets or the Partnership's or the Subsidiaries'
respective businesses, and no such Governmental Order has or could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.11. Environmental and Other Permits and Licenses; Related
Matters. (a) Except as disclosed in Section 3.11(a) of the Sellers'
Disclosure Schedule, (i) neither the Partnership nor any Subsidiary has
received notice of any violation of any Environmental Laws; (ii) the
Partnership and the Subsidiaries have obtained all Environmental Permits and
are and have been in material compliance with their requirements; (iii) except
as permitted by or as would not result in any material liability under
applicable Environmental Laws, there are no underground or aboveground storage
tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in
which Hazardous Materials are being or have been treated, stored or disposed on
any of the owned or leased properties or, with respect to the period of the
Partnership's or any Subsidiary's ownership, tenancy or operation of such
property, on any real property formerly owned, leased or occupied by the
Partnership or any Subsidiary; (iv) there is no asbestos or asbestos-containing
material on any of the owned or leased properties, except as permitted by or as
would not result in any material liability under applicable Environmental Laws;
(v) neither the Partnership nor any Subsidiary has released, discharged or
disposed of an amount of Hazardous Materials on any of the owned or leased
properties or on any real property formerly owned, leased or occupied by the
Partnership or any Subsidiary in a manner or quantity which would have a
material effect on the Partnership; (vi) neither the Partnership nor any
Subsidiary is undertaking, has completed, nor is required to conduct, any
investigation or assessment or remedial or response action relating to any
release, discharge or disposal of or contamination with an amount of Hazardous
Materials at any site, location
<PAGE> 27
22
or operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law which would have a
material effect on the Partnership; and (vii) there are no past, pending or
threatened in writing Environmental Claims against the Partnership, any
Subsidiary or any of their properties, and there are no facts which can form
the basis of any such Environmental Claim.
(b) Except as disclosed in Section 3.11(b) of the Sellers' Disclosure
Schedule, there are no environmental audit reports, studies or analyses in the
possession of the Parent Entities, the Sellers or the Partnership or under
their control relating to the owned or leased properties or the operations of
the Partnership and the Subsidiaries.
SECTION 3.12. Material Contracts. (a) Section 3.12(a) of the
Sellers' Disclosure Schedule lists each of the following contracts and
agreements (including, without limitation, oral contracts and agreements) of
the Partnership and each Subsidiary (such contracts and agreements being
"Material Contracts"):
(i) all broker, distributor, dealer, manufacturer's representative,
franchise, agency, sales promotion, market research, marketing consulting
and advertising contracts and agreements to which the Partnership or any
Subsidiary is a party under which the Partnership can be reasonably
expected to pay or be paid at least $50,000 during the course of the
twelve months following the date hereof;
(ii) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Partnership or any Subsidiary is a party, which are not cancelable
without penalty or further payment and without more than 30 days' notice,
and under which the Partnership can be reasonably expected to pay or be
paid at least $50,000 during the course of the twelve months following
the date hereof;
(iii) all contracts and agreements relating to Indebtedness of the
Partnership or any Subsidiary;
(iv) any agreements that are material to the business of the
Partnership and that are currently in effect with subscribers that have
generated annual booking fees of $1.0 million or more per annum over the
course of any of the last three fiscal years;
(v) all contracts and agreements with any Governmental Authority to
which the Partnership or any Subsidiary is a party and under which the
Partnership can be reasonably expected to pay or be paid at least $50,000
during the course of the twelve months following the date hereof;
<PAGE> 28
23
(vi) all contracts and agreements that limit or purport to limit the
ability of the Partnership or any Subsidiary to compete in any line of
business or with any Person or in any geographic area or during any
period of time;
(vii) all contracts and agreements between or among the Partnership
or any Subsidiary and the Sellers or any Affiliate of the Sellers; and
(viii) all other contracts and agreements whether or not made in the
ordinary course of business, which are material to the Partnership, any
Subsidiary or the conduct of their respective businesses or the absence
of which would have a Material Adverse Effect.
(b) Each Material Contract: (i) is valid and binding on the
respective parties thereto and is in full force and effect and (ii) upon
consummation of the transactions contemplated by this Agreement, except to the
extent that any consents set forth in Section 3.05 of the Sellers' Disclosure
Schedule are not obtained, shall continue in full force and effect without
penalty or other adverse consequence, except as disclosed in Section 3.12(a)
of the Sellers' Disclosure Schedule. Neither the Partnership nor any
Subsidiary is in breach of, or default under, any Material Contract. The
Sellers have furnished the Purchaser with true and complete copies of all
Material Contracts.
(c) To the best knowledge of the Parent Entities, the Sellers and the
Partnership, no other party to any Material Contract is in breach thereof or
default thereunder, except as disclosed in Section 3.12(c) of the Sellers'
Disclosure Schedule.
(d) There is no contract, agreement or other arrangement granting any
Person any preferential right to purchase, other than in the ordinary course of
business consistent with past practice, any of the properties or assets of the
Partnership or any Subsidiary.
SECTION 3.13. Intellectual Property. The Partnership owns or
possesses adequate licenses or other valid rights to use all of the Partnership
Intellectual Property which is material to the conduct of the business of the
Partnership, and there is no assertion or claim challenging the validity of any
such Partnership Intellectual Property. Except as disclosed in Section 3.13(i)
of the Sellers' Disclosure Schedule, there are no infringements of any
Partnership Intellectual Property. Notwithstanding anything to the contrary
herein, the representations and warranties contained in the two preceding
sentences shall not be deemed to have been breached with respect to any
Partnership Intellectual Property that has been provided to the Partnership or
any of the Subsidiaries by the Purchaser unless the breach results from any
modification by the Partnership or any of its Subsidiaries to any such
Partnership Intellectual Property. There are no pending or threatened
interferences, reexaminations, oppositions or nullities involving any patents,
patent rights or applications
<PAGE> 29
24
therefor of the Partnership which is material to the conduct of the
business of the Partnership. Section 3.13(ii) of the Sellers' Disclosure
Schedule lists each material license or other agreement pursuant to which the
Partnership has the right to use Partnership Intellectual Property utilized in
connection with any services provided by the Partnership (the "Partnership
Licenses"). There is no breach or violation of any Partnership License by the
Partnership or by any third party or threatened or actual loss of rights
accruing to the Partnership under any Partnership License. Each Partnership
License is a legal, valid and binding agreement of the Partnership and each
Partnership License is a legal, valid and binding agreement of the other
parties thereto. Except as disclosed in Section 3.13(ii) of the Sellers'
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not result in the termination of, or any modification to, any
Partnership License, except where the foregoing would not have a material
effect on the conduct of the business of the Partnership. The Partnership has
taken reasonable measures to maintain the confidentiality of the know-how of
the Partnership, the value of which to the Partnership is dependent upon the
maintenance of the confidentiality thereof. The Partnership has not licensed or
otherwise permitted the use by any third party of any proprietary information
on terms or in a manner that is reasonably likely to have a Material Adverse
Effect. The conduct of the business of the Partnership as currently conducted
or as currently contemplated (by existing Partnership management) to be
conducted does not and will not infringe upon or conflict with, in any way, any
license, trademark, trademark right, trade name, trade name right, patent,
patent right, industrial model, invention, service mark or copyright of any
third party that is reasonably likely to be material to the Partnership's
operations.
SECTION 3.14. Real Property and Leases. (a) Set forth on Section
3.14(a) of the Sellers' Disclosure Schedule is a list of all Real Property.
(b) Except as disclosed in Section 3.14(a) of the Sellers' Disclosure
Schedule, the Partnership and the Subsidiaries have sufficient title or
leasehold interests to all their Real Property to conduct their respective
businesses as currently conducted or as currently contemplated (by existing
Partnership management) to be conducted.
(c) All leases of real property leased for the use or benefit of the
Partnership or any Subsidiary to which the Partnership or any Subsidiary is a
party which are material, individually or in the aggregate, to the business of
the Partnership and the Subsidiaries taken as a whole, and all amendments and
modifications thereto are in full force and effect and have not been modified
or amended, and there exists no default under any such lease by the Partnership
or any Subsidiary, nor any event which with notice or lapse of time or both
would constitute a default thereunder by the Partnership or any Subsidiary,
which would permit any such lease to be terminated by the other party thereto.
<PAGE> 30
25
SECTION 3.15. Assets. (a) Either the Partnership or a Subsidiary, as
the case may be, owns, leases or has the legal right to use all material
properties and assets, including, without limitation, the Partnership
Intellectual Property, used or intended to be used in the conduct of its
business or otherwise owned, leased or used by the Partnership or any
Subsidiary and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all material contracts, agreements and other
arrangements used or intended to be used by the Partnership or any Subsidiary
or in or relating to the conduct of their respective businesses (all such
properties, assets and contract rights being the "Assets"). Set forth on
Section 3.15(a) of the Sellers' Disclosure Schedule is a list of all of the
Assets as of the date hereof. Except as disclosed in Section 3.14(a) of the
Sellers' Disclosure Schedule, either the Partnership or a Subsidiary, as the
case may be, has good and marketable title to, or, in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the Assets,
free and clear of all Encumbrances, except for Permitted Encumbrances.
(b) The Assets constitute all the material properties, assets and rights
forming a part of, used, held or intended to be used in, and all such
properties, assets and rights as are necessary in the conduct of, the
businesses (as currently conducted by existing Partnership management) of the
Partnership and the Subsidiaries. At all times since December 31, 1996, the
Partnership has caused the Assets to be maintained in accordance with good
business practice, and the Assets are generally in good operating condition and
repair and are suitable for the purposes for which they are used and intended,
except for ordinary wear commensurate with the age and depreciated value of
such Assets.
(c) Except as disclosed in Section 3.14(a) of the Sellers' Disclosure
Schedule, following the consummation of the transactions contemplated by this
Agreement, either the Partnership or a Subsidiary, as the case may be, will
continue to own, pursuant to good and marketable title, or lease, under valid
and subsisting leases, or otherwise retain its respective interest in the
Assets without incurring any penalty or other adverse consequence, including,
without limitation, any increase in rentals, royalties, or licenses or other
fees imposed as a result of, or arising from, the consummation of the
transactions contemplated by this Agreement (except, with respect to
contractual arrangements to the extent that any consents set forth in Section
3.05 of the Sellers' Disclosure Schedule are not obtained). Immediately
following the Closing, (i) in the case of books and records other than
Tax-related books and records, either the Partnership or a Subsidiary, as the
case may be, shall own or possess all documents, books, records, agreements
and financial data of any sort used by the Partnership or such Subsidiary which
is material to the conduct of its business, and (ii) in the case of Tax-related
books and records (including all information (including copies of Returns,
original work papers, and source documents (or copies thereof)) relating to any
and all Tax filings of the Partnership or any Subsidiary), the Partnership
shall own or possess all of such books and records or the Purchaser shall have
access to such records pursuant to Section 5.02(c)).
<PAGE> 31
26
SECTION 3.16. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.16(a) of the Sellers' Disclosure Schedule lists (i) all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, pension,
retiree medical or life insurance, supplemental retirement, severance or other
benefit plans, programs or arrangements, and all employment, termination,
severance or other contracts or agreements, to which the Partnership or any
Subsidiary is a party, with respect to which the Partnership or any Subsidiary
has any obligation or which are maintained, contributed to or sponsored by the
Partnership or any Subsidiary for the benefit of any current or former
employee, officer or director of the Partnership or any Subsidiary, (ii) each
employee benefit plan for which the Partnership or any Subsidiary could incur
liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated, (iii) any plan in respect of which the Partnership or any
Subsidiary could incur liability under Section 4212(c) of ERISA and (iv) any
contracts, arrangements or understandings between the Sellers or any of its
Affiliates and any employee of the Partnership or of any Subsidiary, including,
without limitation, any contracts, arrangements or understandings relating to
the sale of the Partnership (collectively, the "Plans"). Except as disclosed
in Section 3.16(a) of the Sellers' Disclosure Schedule, each Plan is in writing
and the Parent Entities and the Sellers have furnished the Purchaser with a
complete and accurate copy of each Plan and a complete and accurate copy of
each material document prepared in connection with each such Plan including,
without limitation, (i) a copy of each trust or other funding arrangement, (ii)
each summary plan description and summary of material modifications, (iii) the
most recently filed IRS Form 5500, (iv) the most recently received IRS
determination letter for each such Plan, and (v) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
(b) Absence of Certain Types of Plans. None of the Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA)
or a single employer pension plan (within the meaning of Section 4001(a)(15) of
ERISA) for which the Partnership or any Subsidiary could incur liability under
Section 4063 or 4064 of ERISA. Except as disclosed in Section 3.16(b) of the
Sellers' Disclosure Schedule, none of the Plans provides for the payment of
separation, severance, termination or similar-type benefits to any Person or
obligates the Partnership or any Subsidiary to pay separation, severance,
termination or similar-type benefits solely as a result of any transaction
contemplated by this Agreement or as a result of a "change in control",
within the meaning of such term under Section 280G of the Code. Except as
disclosed in Section 3.16(b) of the Sellers' Disclosure Schedule, none of the
Plans provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the
Partnership or any Subsidiary. Except as disclosed in Section 3.16(b) of the
Sellers' Disclosure Schedule, each of the Plans is subject only to the laws of
the United States or a political subdivision thereof.
<PAGE> 32
27
(c) Compliance with Applicable Law. Except as disclosed in Section
3.16(c) of the Sellers' Disclosure Schedule, each Plan is in compliance with
all material requirements of all applicable Law, including, without limitation,
ERISA and the Code, and all persons who participate in the operation of such
Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA)
have always acted in accordance with the provisions of all applicable Law,
including, without limitation, ERISA and the Code. The Partnership and each
Subsidiary has performed all obligations required to be performed by it under,
is not in any respect in default under or in violation of, and has no knowledge
of any default or violation by any party to, any Plan. Except as disclosed in
Section 3.16(c) of the Sellers' Disclosure Schedule, no legal action, suit or
claim is pending or threatened with respect to any Plan (other than claims for
benefits in the ordinary course) and no fact or event exists that could
reasonably be expected to give rise to any such action, suit or claim.
(d) Qualification of Certain Plans. Except as disclosed in Section
3.16(d) of the Sellers' Disclosure Schedule, each Plan which is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and no fact
or event has occurred since the date of such determination letter from the IRS
to adversely affect the qualified status of any such Plan or the exempt status
of any such trust.
(e) Absence of Certain Liabilities and Events. There has been no
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan which could reasonably be expected
to give rise to a material liability of the Partnership or any Subsidiary.
Except as disclosed in Section 3.16(e) of the Sellers' Disclosure Schedule,
neither the Partnership nor any Subsidiary has incurred any liability for any
penalty or tax arising under Section 4971, 4972, 4980, 4980B or 6652 of the
Code or any liability under Section 502 of ERISA which, in the case of any such
penalty, tax or liability, has not been satisfied in full, and no fact or event
exists which could give rise to any such liability. Neither the Partnership
nor any Subsidiary has incurred any liability under, arising out of or by
operation of Title IV of ERISA (other than liability for premiums to the
Pension Benefit Guaranty Corporation arising in the ordinary course) which has
not been satisfied in full. Except as disclosed in Section 3.16(e) of the
Sellers' Disclosure Schedule, no reportable event (within the meaning of
Section 4043 of ERISA) has occurred or is expected to occur with respect to any
Plan subject to Title IV of ERISA. No Plan had an accumulated funding
deficiency (within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, as of the most recently ended plan year of such
Plan. None of the assets of the Partnership or any Subsidiary is the subject
of any lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code; neither the Partnership nor any Subsidiary has been required to post any
security under Section 307 of ERISA or
<PAGE> 33
28
Section 401(a)(29) of the Code; and no fact or event exists which could give
rise to any such lien or requirement to post any such security.
(f) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on or
before their due dates. All such contributions are deductible for income tax
purposes. Except as disclosed in Section 3.16(f) of the Sellers' Disclosure
Schedule, as of the Closing Date, no Plan which is subject to Title IV of ERISA
will have an "unfunded benefit liability" (within the meaning of Section
4001(a)(18) of ERISA).
(g) WARN Act. The Partnership and the Subsidiaries are in compliance with
the requirements of the Workers Adjustment and Retraining Notification Act
("WARN") and have no liabilities pursuant to WARN.
SECTION 3.17. Labor Matters. Except as set forth in Section 3.17 of the
Sellers' Disclosure Schedule, (a) neither the Partnership nor any Subsidiary is
a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Partnership or any Subsidiary and
currently there are no organizational campaigns, petitions or other
unionization activities seeking recognition of a collective bargaining unit
which could affect the Partnership or any Subsidiary; (b) there are no material
controversies, strikes, slowdowns or work stoppages pending or threatened
between the Partnership or any Subsidiary and any of their respective
employees, and neither the Partnership nor any Subsidiary has experienced any
such material controversy, strike, slowdown or work stoppage within the past
three years; (c) there are no unfair labor practice complaints pending against
the Partnership or any Subsidiary before the National Labor Relations Board or
any other Governmental Authority or any current union representation questions
involving employees of the Partnership or any Subsidiary which could have a
Material Adverse Effect; and (d) the Partnership and each Subsidiary is
currently in material compliance with all applicable Laws relating to the
employment of labor, including those related to wages, hours, collective
bargaining and the payment and withholding of taxes and other sums as required
by the appropriate Governmental Authority and has withheld and paid to the
appropriate Governmental Authority or is holding for payment not yet due to
such Governmental Authority all amounts required to be withheld from employees
of the Partnership or any Subsidiary and is not liable for any material arrears
of wages, taxes, penalties or other sums for failure to comply with any of the
foregoing.
SECTION 3.18. Taxes. Except as set forth in Section 3.18(a) of the
Sellers' Disclosure Schedule, (a) (i) All returns and reports in respect of
Taxes required to be filed with respect to the Partnership or any Subsidiary
with respect to Taxes of the Partnership or any Subsidiary for all periods
ending on or before the Closing Date (including without limitation Internal
Revenue Service Form 1065 (or successor form) and any comparable state and
local returns) have been timely filed (or will be timely filed by the
Partnership); (ii) all
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Taxes required to be shown on such returns and reports or otherwise due have
been timely paid; (iii) all returns and reports relating to Taxes on or with
respect to income (including without limitation Internal Revenue Service Form
1065 (or successor form) and any comparable state and local returns) are true,
correct and complete and all returns and reports of the Partnership or any
Subsidiary relating to Taxes other than Taxes on or with respect to income are
true, correct and complete in all material respects; (iv) no adjustment
relating to such returns has been proposed in writing formally or informally by
any Tax authority and no basis exists for any such adjustment; (v) there are no
pending or, to the best knowledge of the Parent Entities and the Sellers after
due inquiry, threatened actions or proceedings for the assessment or collection
of Taxes against the Partnership or any Subsidiary; (vi) there are no Tax liens
on any assets of the Partnership or any Subsidiary except liens for Taxes not
yet due and payable; (vii) neither the Partnership nor any Subsidiary is a
party to any agreement or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code; (viii) other than with respect to any interest in
any Subsidiary, the Partnership has not been at any time a member of any
partnership or joint venture or the holder of a beneficial interest in any
trust for any period for which the statute of limitations for any Tax has not
expired; (ix) the Partnership and each Subsidiary qualify (and have since the
date of each such entity's respective date of formation qualified) to be
treated as a partnership for Federal income tax purposes and for state and
local tax purposes in all state and local jurisdictions in which such treatment
is relevant and none of the Partnership, the Sellers, any Subsidiary, or any
Tax authority has taken a position inconsistent with such treatment; (x) the
Partnership has in effect a valid election pursuant to Section 754 of the Code;
(xi) there are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which the Partnership or
any Subsidiary may be subject; (xii) the Partnership (or its partners) does not
have any income reportable for a period ending after the Closing Date but
attributable to the sale of property or the provision of services (e.g., an
installment sale) occurring in or a change in accounting method made for a
period ending on or prior to the Closing Date which resulted in a deferred
reporting of income from which economically accrued in a period ending on or
before the Closing Date from such transaction or from such change in accounting
method; (xiii) there are no requests by any Tax authority for information
currently outstanding with respect to the Taxes of the Partnership (or any
Subsidiary) (or of its partners with respect to Partnership or Subsidiary
items); (xiv) there are no proposed reassessments of any property owned by the
Partnership (or any Subsidiary) or other taxpayer specific proposals that could
increase the amount of any Tax to which the Partnership (or any Subsidiary)
would be subject and (xv) no power of attorney that is currently in force has
been granted with respect to any matter relating to Taxes of the Partnership or
a Subsidiary.
(b) For purposes of the Parent Entities' and the Sellers' indemnification
of the Purchaser pursuant to Section 6.01, the representations in Section
3.18(a) shall be
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deemed to have been made with no exception for items disclosed in
Section 3.18(a) of the Disclosure Schedule or otherwise.
(c) (i) Section 3.18(c) of the Sellers' Disclosure Schedule lists all
Returns (federal, state, local and foreign) filed by each of the Partnership
and the Subsidiaries for taxable periods ended on or after September 16, 1993,
indicates for which jurisdictions Returns have been filed on the basis of a
unitary group, indicates the most recent Return for each relevant jurisdiction
and type of Tax for which an audit has been completed or the statute of
limitations has lapsed and indicates all Returns that currently are the
subject of audit; (ii) the Sellers and the Parent Entities have made available
to the Purchaser correct and complete copies of all federal, state, local and
foreign Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Partnership or any Subsidiary since September 16,
1993; and (iii) the Sellers and the Parent Entities have delivered to the
Purchaser a true and complete copy of any tax-sharing or allocation agreement
or arrangement to which the Partnership or any Subsidiary is a party and a
true and complete description of any such unwritten or informal agreement or
arrangement.
SECTION 3.19. Insurance. (a) Section 3.19(a) of the Sellers' Disclosure
Schedule sets forth a complete list of all material policies of insurance
(including, without limitation, errors and omissions insurance) that the
Partnership or any Subsidiary has in effect.
(b) With respect to each such insurance policy: (i) the policy is legal,
valid, binding and enforceable in accordance with its terms and, except for
policies that have expired under their terms in the ordinary course, is in full
force and effect; (ii) neither the Partnership nor any Subsidiary is in breach
or default (including any breach or default with respect to the payment of
premiums or the giving of notice), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default or permit
termination or modification, under the policy; (iii) no party to the policy has
repudiated, or given notice of an intent to repudiate, any provision thereof;
and (iv) to the best knowledge of the Partnership, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation or currently has a rating of "B+" or below from A.M. Best & Co. or
a claims paying ability rating of "BBB" or below from Standard & Poor's, Inc.
(c) Section 3.19(c) of the Sellers' Disclosure Schedule sets forth a
general description of all risks of a nature generally insured against which
the Partnership or any Subsidiary is self-insured or which are covered under
any risk retention program in which the Partnership or any Subsidiary
participates.
(d) All material assets, properties and risks of the Partnership and each
Subsidiary are covered by valid and, except for policies that have expired
under their terms
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31
in the ordinary course, currently effective insurance policies or binders of
insurance (including, without limitation, general liability insurance, property
insurance and workers' compensation insurance) issued in favor of the
Partnership or a Subsidiary, as the case may be, in each case with responsible
insurance companies, in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Partnership or such
Subsidiary, as the case may be.
(e) Except as disclosed in Section 3.19(e) of the Sellers' Disclosure
Schedule, no insurance policy listed in Section 3.19(a) of the Sellers'
Disclosure Schedule will cease to be legal, valid, binding, enforceable in
accordance with its terms and in full force and effect on terms identical to
those in effect as of the date hereof as a result of the consummation of the
transactions contemplated by this Agreement.
SECTION 3.20. Brokers. Except for Lehman Brothers, the fees and
expenses of which will be paid by the Partnership prior to Closing, or by the
Sellers or the Parent Entities pro rata in proportion to their respective
Partnership Interests, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Sellers. Any amounts owing for services provided to the
Partnership by Lehman Brothers or any other Person in connection with the
transactions contemplated by this Agreement or any other transaction involving
the Partnership (including, without limitation, any other sale of the
Partnership or public offering of the Partnership) will be settled by the
Partnership prior to the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Parent Entities, the Sellers and the Partnership
to enter into this Agreement, the Purchaser hereby represents and warrants to
the Parent Entities, Sellers and the Partnership as follows:
SECTION 4.01. Organization, Authority and Qualification of the Purchaser.
The Purchaser is a general partnership, and on or prior to the Closing will be
a limited liability company, duly organized and validly existing under the laws
of the State of Delaware and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the properties owned or
leased by it or the operation of its business makes such licensing or
qualification necessary, except to the extent that the failure to be so
licensed or qualified would not adversely affect the ability of the Purchaser
to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement.
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The Purchaser has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Purchaser, the performance by the Purchaser of its obligations hereunder
and the consummation by the Purchaser of the transactions contemplated hereby
have been duly authorized by all requisite action on its part. This Agreement
has been duly executed and delivered by the Purchaser and (assuming due
authorization, execution and delivery by the Parent Entities and the Sellers)
this Agreement constitutes a legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency
or similar laws affecting creditors' rights generally or by general principles
of equity.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred
to in Section 4.03, except as may result from any facts or circumstances
relating solely to the Sellers, the execution, delivery and performance of this
Agreement by the Purchaser do not and will not (a) violate, conflict with or
result in the breach of any provision of, in the case of the Purchaser's
Partnership Agreement (b) conflict with or violate any Law or Agreement,
dated as of July 3, 1996, among the Purchaser, the banks parties thereto, the
letter of credit issuing banks named therein and Morgan Guaranty Trust Company
of New York, as agent, conflict with, or result in any breach of, constitute a
default (or event which with the giving of notice or lapse or time, or both,
would become a default) under, require any consent under, or give to others
any rights of termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Encumbrance on any of the
assets or properties of the Purchaser pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party or by which
any of such assets or properties are bound or affected which would have a
material adverse effect on the ability of the Purchaser to consummate the
transactions contemplated by this Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser do not and will not
require any consent, approval, authorization or other order of, action by,
filing with, or notification to, any Governmental Authority, except (a) as
described in a writing given to the Sellers by the Purchaser on or prior to the
date of this Agreement and (b) the notification requirements of the HSR Act.
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the
Partnership Interests solely for the purpose of investment and not with a view
to, or for offer or sale in connection with, any distribution thereof.
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SECTION 4.05. Brokers. Except for J.P. Morgan, the fees and expenses of
which will be paid for by the Purchaser, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) Except as
described in Section 5.01(a) of the Sellers' Disclosure Schedule, between the
date hereof and the time of the Closing, the Partnership shall, and shall cause
each Subsidiary to, conduct its business in the ordinary course and consistent
with the Partnership's and such Subsidiary's prior practice. Without limiting
the generality of the foregoing, except as described in Section 5.01(a) of the
Sellers' Disclosure Schedule, as requested by the Purchaser, or as required to
accommodate changes in the Purchaser's business practices, the Partnership and
each Subsidiary shall (i) continue their advertising and promotional
activities, and pricing and purchasing policies, including capital purchasing,
in accordance with past practice; (ii) not shorten or lengthen the customary
payment cycles for any of their payables or receivables; (iii) use all
reasonable efforts to (A) preserve intact their business organizations, (B)
keep available to the Purchaser the services of the employees of the
Partnership and each Subsidiary, (C) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Partnership, each Subsidiary and their respective
businesses and (D) preserve their current relationships with their customers,
suppliers and other persons with which they have significant business relations
hips; (iv) exercise, but only after notice to the Purchaser and receipt of the
Purchaser's prior written approval, any rights of renewal pursuant to the terms
of any of the material leases or subleases which by their terms would
otherwise expire; and (v) not engage in any practice, take any action, fail to
take any action or enter into any transaction which could cause any
representation or warranty of the Parent Entities or the Sellers to be untrue
or result in a breach of any covenant made by the Parent Entities, the Sellers
or the Partnership in this Agreement.
(b) Without limiting the generality of the foregoing, the Partnership
covenants and agrees that between the date hereof and the Closing Date, (i) the
Partnership will not, without the prior written consent of the Purchaser, enter
into any contract (other than with regard to the Partnership's July 1997 trade
show) with Premier relating to the provision by Premier to the Partnership, or
by the Partnership to Premier, of any services after the Closing Date, and (ii)
at least five Business Days prior to entering into any contract pursuant to
which the Partnership will be a provider or purchaser of services relating to
the
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Partnership's help desk or network outsourcing businesses, the Partnership
will provide reasonably detailed information concerning such proposed contract
to the Purchaser and will consult with the Purchaser and discuss in good faith
alternatives to entering into any such contract with the Purchaser to the
extent the Purchaser objects to such proposed contract.
(c) Except as described in Section 5.01(c) of the Sellers' Disclosure
Schedule, the Partnership covenants and agrees that, prior to the Closing,
without the prior written consent of the Purchaser, neither the Partnership nor
any Subsidiary will take any of the actions enumerated in the second sentence
of Section 3.08 (including, without limitation, clauses (i) through (xix)
thereof); provided, however, that if the Partnership or any Subsidiary desires
to take any of the actions enumerated in Section 3.08(v) in response to general
industry conditions, the Partnership shall provide written notice of the
proposed actions to the Purchaser and the Purchaser shall respond to such
written notice not more than two Business Days after the receipt thereof.
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Partnership shall, and the Partnership
shall cause each of the Subsidiaries and each of the Partnership's and the
Subsidiaries' officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the officers, employees and authorized
agents, accountants, counsel, underwriters, financing sources and
representatives of the Purchaser reasonable access, during normal business
hours, to the offices, properties, plants, other facilities, books and records
of the Partnership and each Subsidiary (including access to the Partnership's
1996 financial audit work papers) and to those officers, directors, employees,
agents, accountants and counsel of the Partnership and of each Subsidiary who
have any knowledge relating to the Partnership, any Subsidiary or their
respective businesses and (ii) furnish to the officers, employees and
authorized agents, accountants, counsel, underwriters, financing sources and
representatives of the Purchaser such additional financial and operating data
and other information regarding the assets, properties and goodwill of the
Partnership (excluding any Returns or other Tax information of the Parent
Entities or the Sellers), the Subsidiaries and their respective businesses (or
legible copies thereof) as the Purchaser may from time to time reasonably
request, including, without limitation, any financial information or other
information that will be required in connection with the IPO.
(b) In order to facilitate the resolution of any claims made against or
incurred by the Sellers prior to the Closing, for a period of seven years after
the Closing, the Purchaser shall (i) retain the books and records of the
Partnership and the Subsidiaries relating to periods prior to the Closing in a
manner reasonably consistent with the prior practice of the Partnership and the
Subsidiaries; provided, however, that any Tax-related books and records shall
be maintained for a period of ten years after the Closing Date, and prior to
disposal thereof the Purchaser shall contact the Parent Entities and offer to
provide them with copies of any such books and records subject to reimbursement
of reasonable
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expenses; and (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of the Sellers reasonable access
(including the right to make, at the Sellers' expense, photocopies), during
normal business hours, to such books and records.
(c) In order to facilitate the resolution of any claims made by or against
or incurred by the Purchaser, the Partnership or any Subsidiary after the
Closing or for any other reasonable purpose, for a period of seven years
following the Closing, the Parent Entities and the Sellers shall (i) retain the
books and records of the Sellers which relate to the Partnership and the
Subsidiaries and their operations for periods prior to the Closing and which
shall not otherwise have been delivered to the Purchaser, the Partnership or
any Subsidiary; provided, however, that any Tax-related books and records shall
be maintained for a period of ten years after the Closing Date, and prior to
disposal thereof the Parent Entities or the Sellers, as the case may be, shall
contact the Purchaser and offer to provide it with copies of any such books and
records subject to reimbursement of reasonable expenses; and (ii) upon
reasonable notice, afford the officers, employees and authorized agents and
representatives of the Purchaser, the Partnership or any Subsidiary reasonable
access (including the right to make photocopies, at the expense of the
Purchaser, the Partnership or such Subsidiary), during normal business hours,
to such books and records.
SECTION 5.03. Confidentiality. (a) Except to the extent of any
disclosure required (after consultation with the Parent Entities and after
seeking appropriate confidential treatment) to be made in the Purchaser's
registration statement on Form S-1 (including in any exhibits thereto) filed
with the Securities and Exchange Commission (the "SEC") in connection with the
IPO or in any future filings made with the SEC or other regulatory authorities,
and except as reasonably required by the underwriters in connection with the
IPO, the parties shall comply with, and shall cause their respective
representatives and agents to comply with all of their respective obligations
under the Non-Disclosure Agreement, dated as of May 1, 1996, between the
Partnership and the Purchaser (the "Non-Disclosure Agreement"), until the
Closing, at which time such Non-Disclosure Agreement and the obligations of the
Purchaser and the Partnership thereunder shall terminate. If this Agreement
is, for any reason, terminated prior to the Closing, the Non-Disclosure
Agreement shall continue in full force and effect.
(b) Subject to the qualifications contained in Section 5.03(b) of the
Sellers' Disclosure Schedule, each of the Sellers, the Parent Entities and the
Partnership separately agrees for itself to, and shall cause its agents,
representatives and Affiliates to: (i) treat, hold as confidential and (in the
case of the Sellers and the Parent Entities) not exploit for its benefit or the
benefit of other relationships with any of its customers (and not disclose or
provide access to any Person to) all information relating to the Partnership's
or the Subsidiaries' products, customers, assets, plans, business, finances and
technological developments and programs, (ii) in the event that the Sellers,
the Parent Entities or the Partnership or any such agent, representative or
Affiliate becomes legally compelled to
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disclose any such information, provide the Purchaser with prompt written
notice of such requirement so that the Purchaser or the Partnership may seek a
protective order or other remedy or waive compliance with this Section 5.03(b),
and (iii) in the event that such protective order or other remedy is not
obtained, or the Purchaser waives compliance with this Section 5.03(b), furnish
only that portion of such confidential information which is legally required to
be provided and exercise their best efforts to obtain assurances that
confidential treatment will be accorded such information; provided, however,
that this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Sellers, the Parent Entities, the Partnership, their agents,
representatives or Affiliates; provided further that, with respect to
Partnership Intellectual Property, specific information shall not be deemed to
be within the foregoing exception merely because it is embraced in general
disclosures in the public domain.
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) Each party shall for itself use all reasonable efforts to obtain (or, in
the case of each of the Parent Entities and the Sellers separately, cause the
Partnership and the Subsidiaries to obtain) all authorizations, consents,
orders and approvals of all Governmental Authorities and officials that may be
or become necessary for their execution and delivery of, and the performance of
their obligations pursuant to, this Agreement and will cooperate fully promptly
seeking to obtain all such authorizations, consents, orders and approvals.
Each party hereto agrees for itself to supply as promptly as practicable to the
appropriate Governmental Authorities any additional information and documentary
material that may be requested pursuant to the HSR Act. Without limiting the
generality of the foregoing, each party hereto will (i) use all reasonable
efforts to prevent the entry in a judicial or administrative proceeding brought
under any antitrust law of any preliminary injunction or other order that would
make consummation of the transactions contemplated hereby unlawful or would
prevent or delay such consummation; and (ii) take promptly, in the event that
such an injunction or order has been issued in such a proceeding, all steps
necessary to prosecute an appeal of such an injunction or order, and diligently
prosecute such appeal.
(b) The Parent Entities and the Sellers shall or shall cause the
Partnership and the Subsidiaries to give promptly such notices to third parties
and use all reasonable efforts to obtain such third party consents and estoppel
certificates as the Purchaser may deem necessary or desirable in connection
with the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to assist
the Partnership in giving such notices and obtaining such consents and estoppel
certificates; provided, however, that neither the Purchaser nor the Parent
Entities or Sellers shall have any obligation to give any guarantee or other
consideration of any nature in connection with any such notice, consent or
estoppel certificate or to consent to any change in the terms of
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any agreement or arrangement which the Purchaser may deem adverse to the
interests of the Purchaser, the Partnership, any Subsidiary or their respective
businesses.
(d) None of the Purchaser, the Parent Entities or the Sellers knows of any
reason why all the consents, approvals and authorizations necessary for the
consummation of the transactions contemplated hereby will not be received.
SECTION 5.05. Notice of Developments. (a) Prior to the Closing, the
Partnership and each Parent Entity and Seller shall promptly notify the
Purchaser in writing of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could result in any
breach of a representation or warranty or covenant of such Parent Entity or
Seller in this Agreement, or could result in any breach of a covenant of the
Partnership in this Agreement, or which could have the effect of making any
representation or warranty of such Parent Entity or Seller in this Agreement
untrue or incorrect in any material respect.
(b) Prior to the Closing, the Purchaser shall promptly notify the Parent
Entities and the Sellers in writing of all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could result
in any breach of a representation or warranty or covenant of the Purchaser in
this Agreement or which could have the effect of making any representation or
warranty of the Purchaser untrue or incorrect in any material respect.
SECTION 5.06. No Solicitation of Employees. (a) Each Parent Entity and
Seller severally agrees for itself that it shall not, and each shall cause each
of its Affiliates not to, during the period from the date hereof until Closing
and, if the Closing occurs, for a period of two years from the Closing, without
the prior written consent of the Purchaser, directly or indirectly, solicit on
a specific or targeted basis for employment or employ any person who is an
employee of the Partnership or any Subsidiary, provided that this Section
5.06(a) shall not prohibit any form of employment advertising or prevent the
hiring of any individual who contacts the Parent Entity or Seller or any of
their Affiliates.
(b) The Purchaser agrees that it shall not, during the period from the
date hereof until Closing and, if the Closing occurs, for a period of two years
from the Closing, without the prior written consent of United, directly or
indirectly, solicit on a specific or targeted basis for employment or employ
any person who is an employee of United's information systems division,
provided that this Section 5.06(b) shall not prohibit any form of employment
advertising or prevent the hiring of any individual who contacts the Purchaser.
SECTION 5.07. Use of Intellectual Property. (a) The Sellers acknowledge
that from and after the Closing the name "Apollo Travel Services" and all
similar or related
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names, marks and logos (all of such names, marks and logos being the "ATS
Names") shall be owned by the Partnership or a Subsidiary, that (except as
provided in Section 5.07(b)) neither the Sellers nor any of their Affiliates
shall have any rights in the ATS Names, and that none of the Sellers nor any of
their Affiliates will contest the ownership or validity of any rights of the
Purchaser, the Partnership or any Subsidiary in or to the ATS Names.
(b) Except as expressly agreed in writing by the Purchaser or pursuant to
any agreements and licenses between the Purchaser and the Sellers, or the
Partnership and the Purchaser or any of its Affiliates, from and after the
Closing, neither the Sellers nor any of their Affiliates shall use any of the
Partnership Intellectual Property.
SECTION 5.08. Monthly Financial Statements. Between the date hereof and
the Closing, promptly following the end of each calendar month, but in no event
later than 15 days following the end of each calendar month, the Partnership
will prepare, or cause to be prepared, and will promptly provide to the
Purchaser, a consolidated balance sheet of the Partnership and the Subsidiaries
as of the end of the preceding calendar month and statements of consolidated
income of the Partnership and the Subsidiaries for the preceding calendar
month. Such monthly financial statements shall be prepared in accordance with
past practice.
SECTION 5.09. Premier Travel Services, L.L.C.. Attached as Exhibit 5.09
hereto is a complete and correct list of the assets and liabilities of Premier
Travel Services, L.L.C. or any business of the Partnership related thereto
("Premier") and of the employees of the Partnership who will be transferred
with Premier on or prior to the Closing Date. On or prior to the Closing Date,
all of the equity interests in Premier shall be transferred by the Partnership
to two or more Persons other than the Partnership or any Subsidiary thereof.
SECTION 5.10. Pre-Closing Balance Sheet. No fewer than five Business
Days prior to the Closing Date, the Partnership shall prepare an unaudited
consolidated balance sheet of the Partnership and the Subsidiaries in
accordance with this Section 5.10 (the "Pre-Closing Balance Sheet"). In the
event that the Closing is scheduled to occur after the fifteenth day of any
particular calendar month, the Pre-Closing Balance Sheet shall be prepared as
of the last day of the immediately preceding calendar month. If the Closing is
scheduled to occur on or prior to the fifteenth day of any particular calendar
month, the Pre-Closing Balance Sheet shall be prepared as of the last day of
the second preceding calendar month. The Pre-Closing Balance Sheet shall be
prepared in accordance with U.S. GAAP applied on a basis consistent with the
preparation of the Net Asset Test Reference Balance Sheet and shall exclude (i)
any indebtedness for borrowed money of the Partnership and the Subsidiaries,
(ii) any cash or cash equivalents, other than cash in the amount of any checks
outstanding, and (iii) the assets and liabilities of Premier. During the
preparation of the Pre-Closing Balance Sheet and during the period of any
review by the Purchaser and its representatives of the Pre-Closing Balance
Sheet, the Partnership shall provide, and the Parent Entities and the Sellers
shall cause the Partnership and the Subsidiaries and their
<PAGE> 44
39
respective officers, employees and agents to provide, full access to the books,
records, facilities and employees of the Partnership and the Subsidiaries, in
each case to the extent required by the Purchaser and its representatives in
order to monitor the preparation of, and review, the Pre-Closing Balance Sheet.
SECTION 5.11. Environmental Audit. Prior to the Closing Date, the
Purchaser and the Partnership shall conduct, or cause to be conducted, an
investigation of the underground storage tank located on the Partnership's
premises in Atlanta, Georgia (the "Environmental Audit"). The costs and
expenses of the Environmental Audit shall be borne equally by the Purchaser, on
the one hand, and the Sellers (pro rata in proportion to their respective
Partnership Interests), on the other. During the preparation of the
Environmental Audit, the Partnership shall provide, and the Parent Entities and
the Sellers shall cause the Partnership and the Subsidiaries and their
respective officers, employees and agents to provide, full access to the books,
records, facilities and employees of the Partnership and the Subsidiaries, in
each case to the extent required by the Purchaser and the Persons conducting
the Environmental Audit in order to prepare the Environmental Audit.
SECTION 5.12. Employees and Employee Benefits. From and after the
Closing Date, the Purchaser shall grant all employees of the Partnership and
the Subsidiaries credit for all service (to the same extent as service with the
Purchaser or any subsidiary of the Purchaser is taken into account with respect
to similarly situated employees of the Purchaser and the subsidiaries of the
Purchaser) with the Partnership and any Subsidiary and their respective
predecessors (including, without limitation, United and Covia Partnership)
prior to the Closing Date for all purposes as if such service with the
Partnership or any Subsidiary or predecessor was service with the Purchaser or
any subsidiary of the Purchaser (provided, however, that no such past service
credit shall be granted to the extent it would result in duplicative accrual of
benefits for the same period of service), and, with respect to any medical or
dental benefit plan, the Purchaser shall waive any pre-existing condition
exclusions and actively-at-work requirements (provided, however, that no such
waiver shall apply to a pre-existing condition of any employee of the
Partnership or any Subsidiary who was, as of the Closing Date, excluded from
participation in a Plan by virtue of such pre-existing condition) and provide
that any covered expenses incurred on or before the Closing Date by an employee
or an employee's covered dependent shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Closing Date to the same extent as such expenses are taken
into account for the benefit of similarly situated employees of the Purchaser
and subsidiaries of the Purchaser. The Purchaser shall provide or shall cause
the Partnership and each Subsidiary to provide benefits to any employee of the
Partnership and each Subsidiary which are not less favorable in the aggregate
than the benefits provided to similarly situated employees of the Purchaser and
subsidiaries of the Purchaser, excluding flight benefits; provided, however,
that nothing in this Section 5.12 shall require the Purchaser to provide
benefits to any such
<PAGE> 45
40
employee that are more favorable than the benefits provided or proposed to
be provided to such employee by the Partnership or any Subsidiary immediately
prior to the Closing Date.
SECTION 5.13. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
ARTICLE VI
TAX MATTERS
SECTION 6.01. Tax Indemnity. (a) Except to the extent of Ordinary
Course Taxes with respect to sales and use tax audit settlements, the Other Tax
Audit Reserve and, with respect to the open sales tax audits as of April 30,
1997 for which specific reserves of $1.8 million have been established (the
"Sales Tax Audit Reserve"), the Sales Tax Audit Reserve, the Partnership and
the Purchaser and its Affiliates, officers, directors, employees, agents,
successors and assigns (each an "Indemnified Party") shall be indemnified and
held harmless by the Parent Entities and Sellers, on a several basis, for any
and all Losses arising out of or resulting from:
(i) the breach of any representation or warranty made in Section
3.18; or
(ii) Liabilities of the Partnership or any Subsidiary for Taxes with
respect to the period before the Closing Date; provided, however, that
such indemnity shall be reduced by any Tax Benefit to the Purchaser or
any Affiliate of the Purchaser with respect to such Losses or Liabilities
or the items or adjustments resulting in such Losses or Liabilities;
provided, further, that amounts under clause (i) and clause (ii) shall be
without duplication of the amount provided for under the other clause.
To the extent that any of the Parent Entities and the Sellers' undertakings set
forth in this Section 6.01 may be unenforceable, each of the Parent Entities
and the Sellers shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Losses
incurred by the Indemnified Parties.
(b) The Sellers and the Purchaser agree to treat all payments made
under this Article VI and all indemnification payments made under Article VIII
of this Agreement as adjustments to the Purchase Price for Tax purposes except
to the extent that the laws of a particular jurisdiction provide otherwise.
<PAGE> 46
41
(c) The obligation of each Parent Entity and its Affiliate Seller
with respect to any indemnification payment under this Section 6.01 shall be
limited to such Affiliate Seller's pro rata share (in accordance with its
Partnership Interest in the Partnership) of the amount of such indemnification
payment under this Section 6.01.
SECTION 6.02. Apportionment of Taxes. (a) For purposes of
Section 6.01, Taxes with respect to the period before the Closing Date shall
mean: (i) Taxes imposed on the Partnership or any Subsidiary with respect to
taxable periods of such person ending on or before the Closing Date; and (ii)
with respect to taxable periods beginning before the Closing Date and ending
after the Closing Date, Taxes imposed on the Partnership or any Subsidiary
which are allocable, pursuant to Section 6.02(b), to the portion of such
period ending on the Closing Date.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending
on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or related
to income or receipts, or (y) imposed in connection with any sale or
other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement, which are
governed by Section 6.07), deemed equal to the amount which would be
payable if the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with respect
to the assets of the Partnership, or otherwise measured by the level of
any item, deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period) multiplied by a
fraction the numerator of which is the number of calendar days in the
period ending on the Closing Date and the denominator of which is the
number of calendar days in the entire period.
SECTION 6.03. Returns and Payments. (a) From the date of this
Agreement through and after the Closing Date, the Sellers shall prepare and
file or otherwise furnish in proper form to the appropriate Tax Authority (or
cause to be prepared and filed or so furnished) in a timely manner all Returns
relating to the Partnership and the Subsidiaries that are due on or before the
Closing Date. The Sellers shall pay or cause the Partnership to pay Taxes
prior to the Closing Date in such amounts and at such times as are consistent
with past practices employed with respect to the Partnership and the
Subsidiaries. In the event that the Closing Date does not occur prior to the
due date (including any extension thereof) for the filing of the Federal,
state or local Partnership income tax returns for the Partnership's 1996
taxable year, the Sellers will provide the Purchaser and its authorized
representative a copy of such completed returns at least 10 Business Days
prior to the earlier of the due date
<PAGE> 47
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(including any extension thereof) for the filing of such returns or the
date of filing. The Purchaser shall prepare and file or otherwise furnish in
proper form to the appropriate Tax authority (or cause to be prepared and filed
or so furnished) in a timely manner all Returns relating to the Partnership and
the Subsidiaries that are due after the Closing Date. With respect to Returns
filed by the Purchaser for any period ending on or before the Closing Date, the
Purchaser shall pay the Taxes shown as due and owing on such Returns. Returns
of the Partnership and the Subsidiaries prepared by the Sellers and not yet
filed for any taxable period that ends on or before the Closing Date shall be
prepared in a manner consistent with past practices employed with respect to
the Partnership and the Subsidiaries (except to the extent counsel for the
Sellers renders a legal opinion that there is no reasonable basis in law
therefore or determines that a Return cannot be so prepared and filed without
being subject to penalties).
(b) With respect to Returns filed by the Purchaser for any period
beginning before and ending after the Closing Date, the Purchaser shall pay the
Taxes shown as due and owing on such Returns. The Purchaser will notify the
Sellers of any position it will take on a Return which would be inconsistent
with that taken by the Sellers on prior Returns. If the Purchaser and the
Sellers disagree on the position taken and the position would in any way alter
the balance of Taxes owing or Tax refunds or credits obtainable with respect to
(i) any Tax period of the Partnership or the Subsidiaries ending on or prior to
the Closing Date or (ii) in the case of Tax refunds or credits, any period up
to and including the Closing Date which is part of a Tax period of the
Partnership or the Subsidiaries beginning prior to and ending after the Closing
Date, then the parties shall submit the matter to a mutually selected
independent nationally recognized accounting firm, other than KPMG Peat Marwick
and its affiliates and Arthur Andersen and its affiliates (the "Independent
Firm"), and the Independent Firm shall resolve the issue based on a standard of
maximal fairness to both the Purchaser and the Sellers.
(c) With respect to any Return required to be filed by the Purchaser
with respect to the Partnership and the Subsidiaries and as to which an amount
of Tax is allocable to the Sellers under Section 6.02(b), the Purchaser shall
provide the Sellers and their authorized representatives with a copy of such
completed Return and a statement certifying the amount of Tax shown on such
Return that is allocable to the Sellers pursuant to Section 6.02(b), together
with appropriate supporting information and schedules at least 10 Business Days
prior to the due date (including any extension thereof) for the filing of such
Return, in the case of Taxes other than payroll and sales and use Taxes, or
five (5) days prior to the date on which such Return is required to be filed
(taking into account any extensions) in the case of payroll and sales and use
Taxes, and the Sellers and their authorized representatives shall have the
right to review and comment on such Return and statement prior to the filing of
such Return.
<PAGE> 48
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(d) The sum of the Purchase Price and any Partnership Liabilities
that are part of the Purchaser's Federal income tax basis for its partnership
interest shall be allocated among the assets as of the Closing Date in
accordance with a schedule to be mutually agreed upon by the Purchaser and the
Sellers within 90 days following the Closing Date (the "Purchase Price
Allocation Schedule"). If the Purchaser and the Sellers cannot agree on the
Purchase Price Allocation Schedule, then the parties shall submit the matter to
the Independent Firm, and the Independent Firm shall resolve the issue based on
a standard of maximal fairness to both the Purchaser and the Sellers. Any
subsequent adjustments to the sum of the Purchase Price and such Partnership
Liabilities shall be reflected in the allocation in a manner consistent with
Treas. Reg. 1.1060-1T(f). For all Tax purposes (including, without limitation,
the Purchaser's statement filed pursuant to Treas. Reg. 1.743-1(b)(3)), the
Purchaser and the Seller agree to report the transactions contemplated in this
Agreement in a manner consistent with the Purchase Price Allocation Schedule
and agree that none of them will take any position inconsistent therewith in
any Tax return, in any refund claim, in any litigation, or otherwise.
SECTION 6.04. Contests. (a) After the Closing, the Purchaser shall
promptly notify the Sellers in writing of any written notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding of the
Purchaser or of any of the Partnership and the Subsidiaries which, if
determined adversely to the taxpayer, would be grounds for indemnification
under this Article VI or could otherwise result in any Tax cost to any of the
Sellers; provided, however, that a failure to give such notice will not affect
the Purchaser's right to indemnification under this Article VI except to the
extent such failure on the part of the Purchaser or any Affiliate of the
Purchaser prejudices the Sellers by preventing the avoidance of all or a
portion of the Tax liability in question.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, provided that the
Sellers acknowledge in writing their indemnification obligation liability under
Article VI of this Agreement with respect to the potential liability of the
Purchaser, the Partnership or any Subsidiary as a result of such audit or
administrative or judicial proceeding, the Sellers (or the Parent Entities, as
the case may be) shall have the right, at their expense, to participate in and
control the conduct of such audit or proceeding; the Purchaser may also
participate in any such audit or proceeding but only if such audit or
proceeding relates to non-income Taxes and, if the Sellers do not assume the
defense of any such audit or proceeding, the Purchaser, at its expense, may
defend the same in such manner as it may deem appropriate, including, but not
limited to, settling such audit or proceeding after giving five days' prior
written notice to the Sellers setting forth the terms and conditions of
settlement. In the event that issues relating to a potential adjustment for
which the Sellers have acknowledged their indemnification obligation are
required to be dealt with in the same proceeding as separate issues relating to
a potential adjustment for which the Purchaser would be liable, the Purchaser
shall have the right, at its expense, to control the audit or proceeding with
respect
<PAGE> 49
44
to the latter issues, provided that the Purchaser provides the Sellers
with a written acknowledgement of the Purchaser's liability.
(c) Notwithstanding Section 6.04(b), neither the Purchaser nor the
Sellers shall enter into any compromise or agree to settle any claim pursuant
to any Tax audit or proceeding, including without limitation a Federal, state
or local income Tax audit or proceeding to the extent it involves Partnership
items, which would adversely affect the other party for such year or any prior
or subsequent year without the written consent of the other party which consent
may not be unreasonably withheld. If the Purchaser or the Sellers refuse to
provide the respective other party with written consent to settle any such
claim, then the parties shall submit the matter to an Independent Firm and the
Independent Firm shall resolve the issue based on a standard of maximal
fairness to both the Purchaser and the Sellers.
(d) The Purchaser and the Sellers (or the Parent Entities, as the
case may be) shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with (i) the filing of Returns pursuant to
Section 6.03 (including such amended Returns for periods (or portions thereof)
ending on or prior to the Closing Date that the Sellers or the Parent Entities
may reasonably request the Purchaser to file; provided, however, that if in the
Purchaser's reasonable judgment the filing of the amended return would be
disadvantageous to the Purchaser, the Purchaser may deny the Sellers' or the
Parent Entities' request and the parties shall submit the matter to an
Independent Firm and the Independent Firm shall resolve the issue based on a
standard of maximal fairness to both the Purchaser and the Sellers or the
Parent Entities, as the case may be]) and (ii) any audit, litigation or other
proceeding with respect to Taxes.
SECTION 6.05. Survival of Obligations. Notwithstanding any
provision in this Agreement to the contrary, obligations of the Parent Entities
and the Sellers to indemnify and hold harmless the Indemnified Parties pursuant
to this Article VI, and the representations and warranties contained in Section
3.18, shall terminate at the close of business on the 180th day following the
expiration of the applicable statute of limitations with respect to the Tax
liabilities in question (giving effect to any waiver, mitigation or extension
thereof).
SECTION 6.06. Section 754 Elections. If and only if requested by
Purchaser, the Sellers and the Parent Entities shall cause any Subsidiary
(other than Premier) which is the subject of such request to make the election
described in Section 754 of the Code for such Subsidiary's taxable year which
ends on or includes the Closing Date.
SECTION 6.07. Conveyance Taxes. The Sellers and the Parent
Entities on the one hand and the Purchaser on the other hand shall share
equally any liability for any real property transfer or gains, sales, use,
transfer, value added, stock transfer, and stamp taxes, any transfer,
recording, registration, and other fees, and any similar Taxes (but
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45
specifically not including Taxes on or with respect to income) that become
payable in connection with the transactions contemplated by this Agreement.
The Partnership shall prepare in a timely manner for the review and approval of
the parties and file such applications and documents as shall permit any such
Tax to be assessed and paid on or prior to the Closing Date in accordance with
any available presale filing procedure. The parties shall execute and
deliver all instruments and certificates necessary to enable the Partnership to
comply with the foregoing.
SECTION 6.08. Tax Refunds, Credits and Other Payments. (a) The
Purchaser shall, within 10 days of receipt of any Tax refund or credit actually
received by or on behalf of the Purchaser or any Affiliate or successor thereto
(other than a refund or credit with respect to Taxes paid by the Purchaser or
any Affiliate or successor thereto on or after the Closing Date and not
previously indemnified by the Parent Entities or the Sellers pursuant to
Section 6.01(a)) (A) for or attributable to any Tax period of the Partnership
or any Subsidiary ending at or prior to the Closing Date or (B) for or
attributable to any period up to and including the Closing Date which is part
of a Tax period of the Partnership or any Subsidiaries beginning prior to and
ending after the Closing Date, pay such Tax refund or credit (a "Returnable
Refund or Credit") on an After-Tax Basis and net of amounts payable under
Section 6.08(c) hereof to the Sellers (including any interest or addition
actually received thereon). If the amount of any Returnable Refund or Credit
is applied against any other liability of any of the Purchaser or any Affiliate
or successor thereto for Taxes for any Tax period after the Closing Date, the
Purchaser shall, within 10 days of the date of such application, pay to the
Sellers an amount equal to the Returnable Refund or Credit on an After-Tax
Basis and net of amounts payable under Section 6.08(c) hereof (including any
interest or addition actually received thereon). The Purchaser shall deliver
with payment to the Sellers a copy of any written explanation of the facts
surrounding the Returnable Refund or Credit and a copy of any related notice or
statement received from any Tax authority.
(b) To the extent that the Purchaser or any Affiliate or successor
thereto receives a Tax Benefit that is attributable to an adjustment of any
income, gain, loss, deduction, credit, refund or other Tax item made with
respect to any Tax period of the Partnership or any Subsidiary ending on or
prior to the Closing Date or any period beginning before and ending on the
Closing Date which is part of a Tax period of the Partnership or any Subsidiary
beginning before and ending after the Closing Date and in connection therewith
the Sellers or the Parent Entities or any Affiliate or successor thereto suffer
a Loss, the Purchaser will, within 10 days of the receipt of such Tax Benefit
by the Purchaser, or any Affiliate or successor thereto, pay to the Sellers
their respective share, in proportion to their respective Partnership
interests, of an amount equal to the lesser of the amount of the Tax Benefit or
the Loss.
(c) Without duplication of any amounts paid to the Purchaser
pursuant to Section 6.01, to the extent that the Seller receives a Tax Benefit
that is attributable to an
<PAGE> 51
46
adjustment of any income, gain, loss, deduction, credit, refund or other Tax
item made with respect to any Tax period of the Partnership or any Subsidiary
ending on or before the Closing Date or any period ending on or before the
Closing Date which is part of a Tax period of the Partnership or any Subsidiary
beginning before and ending after the Closing Date and in connection therewith
the Purchaser or any Affiliate or successor thereto suffers a Loss, the Seller
will, within 10 days of the receipt of such Tax Benefit by the Seller, pay to
the Purchaser an amount equal to the lesser of the amount of the Tax Benefit or
the Loss.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Parent Entities, the
Sellers and the Partnership. The obligations of the Parent Entities, the
Sellers and the Partnership to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to the Closing, of
each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Closing, with the same force and effect as if
made as of the Closing Date, other than such representations and warranties as
are made as of another date, which shall be true and correct in all material
respects as of such date (provided, however, if any portion of any
representation or warranty is already qualified by materiality, for purposes of
determining whether this Section 7.01(a) has been satisfied with respect to
such portion of such representation or warranty, such portion of such
representation or warranty as so qualified must be true and correct in all
respects), and the covenants and agreements contained in this Agreement to be
complied with by the Purchaser on or before the Closing shall have been
complied with in all material respects, and the Sellers shall have received a
certificate from the Purchaser to such effect signed by a duly authorized
officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Partnership Interests
contemplated hereby shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against any of the Parent
Entities, the Sellers, the Partnership or the Purchaser, seeking to restrain or
prevent the consummation of the transactions contemplated by this Agreement;
provided, however, that the provisions of this Section 7.01(c) shall not apply
if the Parent Entities, the Sellers, the Partnership or any Affiliate thereof
have directly or indirectly solicited or encouraged any such Action;
<PAGE> 52
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(d) Resolutions. The Sellers shall have received a true and complete
copy, certified by the Secretary of the Purchaser, of the resolutions of the
Purchaser's Supervisory Board evidencing its authorization of the consummation
of the transactions contemplated hereby;
(e) Incumbency Certificate. The Sellers shall have received a
certificate of the Secretary of the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to sign this Agreement
and the other documents to be delivered hereunder;
(f) Escrow Agreement. The Purchaser shall have duly executed and
delivered the Escrow Agreement in substantially the form of Exhibit 2.04(f)
hereto;
(g) Consummation of Transactions Contemplated by Transaction
Agreement. The transactions contemplated by the Transaction Agreement, a form
of which is attached as Exhibit 7.01(g) hereto (the "Transaction Agreement"),
shall have been consummated; and
(h) Completion of the IPO. The IPO shall have been consummated.
SECTION 7.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Parent Entities and the Sellers contained in this
Agreement shall have been true and correct in all material respects when made
and shall be true and correct in all material respects as of the Closing with
the same force and effect as if made as of the Closing, other than such
representations and warranties as are made as of another date, which shall be
true and correct in all material respects as of such date (provided, however,
that the representations and warranties contained in Section 3.03 will be true
and correct in all respects and that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 7.02(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects), and the
covenants and agreements contained in this Agreement to be complied with by the
Parent Entities, the Sellers and the Partnership on or before the Closing shall
have been complied with in all material respects, and the Purchaser shall have
received certificates from each of the Parent Entities and Sellers and from the
Partnership to such effect (relating solely to such Persons) signed by a duly
authorized officer thereof;
<PAGE> 53
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(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Partnership Interests
contemplated hereby shall have expired or shall have been terminated;
(c) No Proceeding or Litigation. No Action shall have been
commenced or threatened by or before any Governmental Authority against any of
the Parent Entities, the Sellers, the Partnership or the Purchaser, seeking to
restrain or prevent the consummation of the transactions contemplated hereby;
provided, however, that the provisions of this Section 7.02(c) shall not
apply if the Purchaser has solicited or encouraged any such Action;
(d) Resolutions of the Sellers, the Parent Entities and the
Partnership. The Purchaser shall have received a true and complete copy,
certified by the Secretary or an Assistant Secretary of each of the Sellers,
the Parent Entities and the Partnership, of the resolutions duly and validly
adopted by the Board of Directors of each of the Sellers and the Parent
Entities and the Supervisory Board of the Partnership evidencing their
authorization of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(e) Incumbency Certificate of the Sellers, the Partnership and the
Parent Entities. The Purchaser shall have received certificates of the
Secretary or an Assistant Secretary of each of the Parent Entities, the Sellers
and the Partnership certifying the names and signatures of the officers of each
of the Parent Entities, the Sellers and the Partnership authorized to sign
this Agreement and the other documents to be delivered hereunder;
(f) Consents and Approvals. The Purchaser and the Sellers shall have
received, each in form and substance satisfactory to the Purchaser, all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials and all third party consents and estoppel certificates set forth
on Schedule 7.02(f);
(g) Good Standing; Qualification to Do Business. The Purchaser
shall have received good standing certificates for each Subsidiary from the
secretary of state of the jurisdiction in which each such entity is organized
dated as of a date not earlier than five Business Days prior to the Closing
Date;
(h) Financing. The Purchaser shall have obtained financing on terms
acceptable to it sufficient to enable it to consummate the transactions
contemplated by this Agreement;
(i) Completion of the IPO. The IPO shall have been consummated;
<PAGE> 54
49
(j) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which have, or are reasonably
likely to have, a Material Adverse Effect;
(k) No Debt. The Partnership shall have no indebtedness for borrowed
money as of the Closing Date;
(l) United Network Services Agreement. All necessary actions shall
have been taken by the Partnership to ensure that the Network Services
Agreement, dated as of September 16, 1993, between the Partnership and United
will remain in full force and effect after the Closing;
(m) Net Asset Test. The Net Assets reflected on the Seasonally
Adjusted Net Asset Test Reference Balance Sheet shall not exceed the Net Assets
reflected on the Pre-Closing Balance Sheet by $5 million or more;
(n) Environmental Audit. The results of the Environmental Audit
shall be satisfactory to the Purchaser;
(o) Non-Neutral Travel Provider Issuer. The Purchaser and United
shall have entered into an agreement with respect to the settlement of the
Non-Neutral Travel Provider Issuer as set forth in paragraph (c) of the letter
dated February 21, 1997 from the Purchaser to the Partnership's Supervisory
Board;
(p) Transfer of Premier. Premier shall have been transferred as
set forth in Section 5.09;
(q) Transfer of Interest in Apollo Communications Services L.L.C..
The Sellers shall have transferred their respective equity interests in Apollo
Communications Services L.L.C. to the Partnership or one of the wholly-owned
Subsidiaries; and
(r) Consummation of Transactions Contemplated by the Transaction
Agreement. The transactions contemplated by the Transaction Agreement shall
have been consummated.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. The
representations and warranties of the parties contained in Sections 3.06, 3.11,
3.14, 3.15, 3.16, 3.17 and 3.19, and Article IV (other than Section 4.05), and
the covenants of the
<PAGE> 55
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parties set forth in Article V (other than Sections 5.02(b) and (c), 5.03,
5.06, 5.07, 5.12 and 5.13) shall terminate at Closing. The representations and
warranties of the parties contained in Sections 3.01, 3.02, 3.03, 3.04, 3.05,
3.07, 3.09, 3.10, 3.12, 3.13 and 3.20 and Section 4.05 shall survive the
Closing until the second anniversary of the Closing Date. The representations
and warranties dealing with Tax matters shall survive as provided in Article
VI, and the representations and warranties set forth in Section 3.08 shall
survive the Closing until the first anniversary of the Closing Date. The
covenants of the parties set forth in Sections 5.02(b) and (c), 5.03, 5.06,
5.07 and 5.12 shall survive the Closing, and the other covenants set forth in
this Agreement that expressly survive the Closing shall survive the Closing in
accordance with their respective terms. Notwithstanding the foregoing or
anything to the contrary in this Article VIII, in the event that the Purchaser
has actual knowledge prior to the Closing Date that any of the representations
and warranties of the Sellers or the Parent Entities to survive the Closing in
accordance with this Section 8.01 were not true and correct as of the date
hereof or are not true and correct as of the Closing Date or that the
agreements of the Parent Entities and the Sellers contained in Section 5.03(b)
have not been complied with, the sole and exclusive remedy of the Purchaser
with respect to such breaches will be to not consummate the transactions
contemplated by this Agreement if any such breach results in the
nonsatisfaction of the condition contained in Section 7.02(a). For purposes of
the foregoing sentence, the term "actual knowledge" means the actual knowledge
of an officer of the Purchaser, including, without limitation, as a result of
(A) the delivery to the Purchaser by the Parent Entities, the Sellers or the
Partnership not fewer than three Business Days prior to the Closing (other than
in a case in which an event occurs within such three Business Day period which
could not have been anticipated, in which case written notice of such event
must be provided to the Purchaser promptly after the Parent Entities, the
Sellers or the Partnership become aware of it) of a written notice specifically
identifying in detail the nature of the breach and the provisions of this
Agreement that have been breached, or (B), without duty of any other due or
specific inquiry, a written survey of (i) employees of the Purchaser who are
reasonably likely, because of their substantive and significant contacts with
the Partnership, to have knowledge as to the truth and correctness of the
representations and warranties of the Parent Entities and the Sellers to
survive the Closing or whether the Parent Entities and the Sellers have
complied with Section 5.03(b), (ii) the accountants at KPMG Peat Marwick LLP,
(iii) the investment bankers at JP Morgan and (iv) the attorneys at Shearman &
Sterling and Davis Polk & Wardwell, who, in the case of (ii), (iii) and (iv),
actually participated in the Purchaser's due diligence investigation of the
Partnership. Subject to the foregoing, neither the period of survival nor the
liability of the parties hereto with respect to their representations and
warranties and covenants shall be reduced by any investigation made at any time
by or on behalf of any such party. If written notice of a claim has been given
prior to the expiration of the applicable representations and warranties and
covenants by the parties hereto, then the relevant representations and
warranties and covenants shall survive as to such claim until such claim has
been finally resolved.
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51
SECTION 8.02. Indemnification by the Parent Entities and the
Sellers. (a) The Purchaser, its Affiliates, including the Partnership and the
Subsidiaries, and their successors and assigns, and the officers, directors,
employees and agents of the Purchaser, its Affiliates and their successors and
assigns (each a "Purchaser Indemnified Party") shall be indemnified and held
harmless, as and to the extent set forth in this Section 8.02, by the Parent
Entities and the Sellers, severally and not jointly, for any and all
Liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, attorneys' and
consultants' fees and expenses) actually suffered or incurred by them
(including, without limitation, any Action brought or otherwise initiated by
any of them) on an After-Tax Basis (hereinafter a "Loss"), arising out of or
resulting from:
(i) the breach of any representation or warranty made by the Parent
Entities or the Sellers contained in any of Sections 3.01, 3.02, 3.03,
3.04, 3.05, 3.07, 3.09, 3.10, 3.12, 3.13, 3.18 or 3.20 of this Agreement;
or
(ii) the breach of any covenant or agreement by the Parent Entities
or the Sellers contained in Section 5.03(b) of this Agreement; or
(iii) any shortfall in the Cash of the Partnership that is not
covered by the amount held by the Escrow Agent, together with interest
thereon, as determined by the parties in accordance with Section
2.04(f)(iii); or
(iv) Liabilities arising from or related to Premier.
(b) The obligation of a Parent Entity and its Affiliate Seller, as
between themselves, to indemnify a Purchaser Indemnified Party shall be joint
and several and subject to the limitation set forth in the fifth sentence of
Section 8.01 and to the following limitations: (i) no indemnification by any
Parent Entity and Seller (other than an indemnification pursuant to Section
8.02(a)(iii)) shall be made unless the aggregate amount of Losses relating to
breaches or otherwise subject to indemnification hereunder exceeds $5 million,
and then indemnification shall be made solely in the amount of such excess;
(ii) in no event shall the aggregate obligation of all Parent Entities and
Sellers to indemnify the Purchaser Indemnified Parties (other than an
indemnification pursuant to Section 8.02(a)(iii)) exceed $175 million, except
for a breach of the representations and warranties contained in Section 3.03 in
which case the obligation to indemnify the Purchaser Indemnified Parties shall
not exceed $700 million; (iii) the aggregate obligation of each Parent Entity
and its Affiliate Seller and the obligation of each Parent Entity and its
Affiliate Seller with respect to any individual indemnifiable Loss,
respectively, shall be limited to such Affiliate Seller's pro rata share (in
accordance with its Partnership Interests in the Partnership) of the aggregate
amount set forth in clause (ii) or such individual indemnifiable Loss,
respectively, except to the extent such Parent Entity or Affiliate Seller is in
breach of its representations and warranties under any of Section 3.01, 3.03,
3.04 or 3.05, or is in breach of the covenants
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52
contained in 5.03, in which event the aggregate obligations of such Parent
Entity or Affiliate Seller and the obligation of such Parent Entity or
Affiliate Seller with respect to any individual indemnifiable Loss,
respectively, shall not be subject to the limitation set forth in this clause
(iii); (iv) any recovery of a Loss due to breach of one representation will
preclude recovery of such Loss due to breach of any other representation, and
all indemnification shall be without duplication of any other recovery; (v) a
Purchaser Indemnified Party shall not be entitled to be indemnified for breach
of the representations and warranties set forth in Section 3.08 or Section 3.12
unless it establishes that (A) a reasonably prudent business person would have
concluded, based on the information available to such person at the time of
taking the action that caused such breach or, in the case of Section 3.12, at
the time of entering into the contract that caused such breach, that the Losses
associated with such action or such contract, as the case may be, would exceed
the benefits associated therewith, and (B) in the case of Sections 3.12(a)(vi)
and (a)(viii) only, that such breach has had a materially negative
effect on the Partnership or the Subsidiaries; (vi) a Purchaser Indemnified
Party shall not be entitled to be indemnified for any breach of the
representations and warranties set forth in Section 3.10 if and to the extent
such breach also constitutes a breach of any of the representations and
warranties set forth in Sections 3.11, 3.16 or 3.17; and (vii) for purposes of
determining whether a Purchaser Indemnified Party is entitled to be indemnified
for any breach of the representations and warranties contained in Section 3.12,
the term "Material Contracts" shall be deemed to refer solely to (A) any
contracts or agreements under which the Partnership can be reasonably expected
to pay or be paid at least $1,000,000 over any five year period during the life
of the contract following the Closing Date, (B) any contracts or agreements
that limit or purport to limit the ability of the Partnership or any Subsidiary
to compete in any line of business or with any Person or in any geographic area
or during any period of time, or (C) any contracts the presence or absence of
which would have a Material Adverse Effect.
(c) Each Purchaser Indemnified Party shall use its reasonable
efforts to mitigate any Losses for which it seeks indemnification hereunder.
(d) To the extent that the Parent Entities' and the Sellers'
undertakings set forth in this Section 8.02 may be unenforceable, the Parent
Entities and the Sellers shall contribute (in the same proportion as they would
otherwise have indemnified the Purchaser Indemnified Party in accordance with
Section 8.02(b)(iii)) the maximum amount that they are permitted to contribute
under applicable law to the payment and satisfaction of all Losses incurred
by the Purchaser, the Partnership and the Subsidiaries.
SECTION 8.03. Tax Matters. Anything in this Article VIII to the
contrary notwithstanding, the rights and obligations of the parties with
respect to indemnification for any and all Tax matters shall be governed solely
by Article VI.
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53
SECTION 8.04. Indemnification by the Purchaser. (a) The Parent
Entities, its Affiliates and their successors and assigns, and the officers,
directors, employees and agents of the Parent Entities, their Affiliates and
their successors and assigns (each a "Seller Indemnified Party") shall be
indemnified and held harmless, as and to the extent set forth in this Section
8.04, by the Purchaser for any and all Losses on an After-Tax Basis arising out
of or resulting from:
(i) the breach of any representation or warranty made by the
Purchaser contained in Section 4.05 of this Agreement;
(ii) Liabilities of the Partnership or any Subsidiary, other than
any Liabilities for which the Purchaser is entitled to be indemnified
pursuant to Section 8.02;
(iii) any Cash that the Purchaser is required to pay to the Parent
Entities, together with interest thereon, as determined by the parties in
accordance with Section 2.04(f)(iii).
(b) Each Seller Indemnified Party shall use its reasonable efforts to
mitigate any Losses for which it seeks indemnification hereunder.
(c) To the extent that the Purchaser's undertakings set forth in this
Section 8.04 may be unenforceable, the Purchaser shall contribute the maximum
amount that it is permitted to contribute under applicable law to the payment
and satisfaction of all Losses incurred by the Parent Entities.
SECTION 8.05. Indemnification Procedures. A Purchaser Indemnified
Party or a Seller Indemnified Party, as the case may be (in each case, the
"Indemnified Party"), shall give the Parent Entities and the Sellers, or the
Purchaser, as the case may be (in each case, the "Indemnifying Party"), notice
of any matter which an Indemnified Party has determined has given or could give
rise to a right of indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and Liabilities of an Indemnifying Party under this
Article VIII with respect to Losses arising from claims of any third party
which are subject to the indemnification provided for in this Article VIII (a
"Third Party Claim") shall be governed by and contingent upon the following
additional terms and conditions: if an Indemnified Party shall receive notice
of any Third Party Claim, the Indemnified Party shall give the Indemnifying
Party notice of such Third Party Claim within 30 days of the receipt by the
Indemnified Party of such notice; provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its
obligations under this Article VIII except to the extent the Indemnifying Party
is
<PAGE> 59
54
materially prejudiced by such failure and shall not relieve the Indemnifying
Party from any other obligation or Liability that it may have to any
Indemnified Party otherwise than under this Article VIII. If the Indemnifying
Party acknowledges in writing its obligations to indemnify the Indemnified
Party hereunder against any Losses (subject to the limitations set forth in
Section 8.02(b)) that may result from such Third Party Claim, then such
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its expense and through counsel of its choice if it gives
notice of its intention to do so to the Indemnified Party within five Business
Days of the receipt of such notice from the Indemnified Party; provided,
however, that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
Indemnified Party for the same counsel to represent both the Indemnified Party
and the Indemnifying Party, then the Indemnified Party shall be entitled to
retain its own counsel, in each jurisdiction for which the Indemnified Party
determines counsel is required to participate in such defense, at the expense
of the Indemnifying Party. In the event the Indemnifying Party exercises the
right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnified Party shall cooperate with the Indemnifying
Party in such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as is reasonably required by the Indemnifying
Party, subject to reimbursement of reasonable out-of-pocket expenses.
Similarly, in the event the Indemnified Party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnifying
Party shall cooperate with the Indemnified Party in such defense and make
available to the Indemnified Party all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by the Indemnified
Party, subject to reimbursement of reasonable out-of-pocket expenses. No such
Third Party Claim may be settled by the Indemnifying Party without the prior
written consent of the Indemnified Party.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the Sellers and the Purchaser;
(b) by either the Sellers or the Purchaser if the Closing shall not
have occurred by December 31, 1997;
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55
(c) by either the Purchaser or the Sellers in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(d) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) there shall have been a breach of any material
representation or warranty of the Parent Entities and the Sellers contained in
this Agreement; (ii) a Seller, a Parent Entity or the Partnership shall not
have complied with any material covenant or agreement to be complied with by
them and contained in this Agreement; or (iii) the Parent Entities, the
Sellers, the Partnership or any Subsidiary makes a general assignment for the
benefit of creditors, or any proceeding shall be instituted by or against the
Parent Entities, the Sellers, the Partnership or any Subsidiary seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation, winding
up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization.
(e) by the Sellers and the Parent Entities if, between the date
hereof and the time scheduled for the Closing: (i) there shall have been a
breach of any material representation or warranty of the Purchaser contained in
this Agreement; (ii) the Purchaser shall not have complied with any material
covenant or agreement to be complied with by them and contained in this
Agreement; or (iii) the Purchaser makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the Purchaser
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of its debts under any Law relating to bankruptcy, insolvency or
reorganization.
SECTION 9.02. Effect of Termination. (a) In the event of
termination of this Agreement as provided in Section 9.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except that the provisions of Sections 5.03(a), 9.02(b), 10.01, 10.02,
10.03, 10.06, 10.08, 10.10, 10.11 and 10.13 shall survive any such termination.
(b) Notwithstanding the foregoing, if the Closing does not occur
because of a breach by a party, such party will reimburse the other parties (as
their sole and exclusive remedy hereunder) for their out-of-pocket costs and
expenses, including, without limitation, fees and disbursements of counsel,
financing sources (other than bank commitment fees paid by the Purchaser prior
to June 15, 1997 or paid by the Purchaser after June 15, 1997 without
consulting the Parent Entities) and accountants, and disbursements (but not
fees) of financial advisors, incurred in connection with the preparation,
negotiation and performance of this Agreement and the transactions contemplated
hereby.
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SECTION 9.03. Waiver. A party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties of
the other parties contained herein or in any document delivered by the other
parties pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other parties contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by cable, by telecopy, by telegram, by telex or
by registered or certified mail (postage prepaid, return receipt requested) to
the parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):
(a) if to United or Covia:
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Telecopy: (847) 700-4412
Attention: Frederic F. "Jake" Brace, III
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57
with a copy to:
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Telecopy: (847) 700-4683
Attention: Steve Rasher, Esq.
and a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-3637
Attention: Thomas H. Kennedy, Esq.
(b) if to USAW or USAM:
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Telecopy: (703) 872-7987
Attention: Alan Abner
with a copy to:
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Telecopy: (703) 872-5252
Attention: Monica Roye, Esq.
and a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-3637
Attention: Thomas H. Kennedy, Esq.
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(c) if to Air Canada or Resnet:
Air Canada
C.P. 14,000/P.O. Box 14,000
Station Airport
Dorval, Quebec
Canada H4Y 1H4
Telecopy: (514) 422-5729
Attention: Pat Iaconi, Esq.
with a copy to:
Osler, Hoskin, & Harcourt
1 First Canadian Place
West 61st Floor
Toronto, Ontario
Canada M5X 3B8
Telecopy: (416) 862-6666
Attention: Terrence Burgoyne, Esq.
(d) if to the Sellers: copies to Covia, USAM and Resnet as set
forth above
(e) if to the Parent Entities: copies to United, USAW and Air
Canada as set forth above
(f) if to the Partnership:
Apollo Travel Services Partnership
2550 W. Golf Road, Suite 900
Rolling Meadows, Illinois 60008
Telecopy: (847) 427-7152
Attention: Audrey Rubin, Esq.
with copies to:
United, Covia, USAW, USAM, Air Canada and Resnet, as set forth
above
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(g) if to the Purchaser:
Galileo International Partnership
5350 S. Valentia Way
Englewood, Colorado 80111
Telecopy: (303) 397-5020
Attention: Babetta R. Gray, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
Attention: Clare O'Brien, Esq.
SECTION 10.03. Public Announcements. Except as may be required by
Law, no party to this Agreement shall make, or cause to be made, any press
release or public announcement in respect of this Agreement or the transactions
contemplated hereby or the existence of discussion or negotiations between the
parties or otherwise communicate with any news media without the prior consent
of the other parties, and the parties shall cooperate as to the form, timing
and contents of any such press release or public announcement.
SECTION 10.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
SECTION 10.06. Entire Agreement. This Agreement (including the
Exhibits and the Sellers' Disclosure Schedule which are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein)
and the Non-Disclosure Agreement
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60
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Parent Entities, the Sellers,
the Partnership and the Purchaser with respect to the subject matter hereof and
thereof.
SECTION 10.07. Assignment. This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
Sellers and the Purchaser (which consent may be granted or withheld by the
Sellers or the Purchaser); provided, however, that the Purchaser may assign all
or any portion of its rights and obligations under this Agreement to one or
more Affiliates of the Purchaser without the consent of the Sellers; provided
further that in the event of such assignment, Purchaser will remain liable for
any obligations hereunder not performed by such assignee or assignees.
SECTION 10.08. No Third Party Beneficiaries. This Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and its
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Parent Entities, the Sellers, the Partnership and the Purchaser or (b) by a
waiver in accordance with Section 9.03.
SECTION 10.10. Arbitration. (a) Subject to the final sentence of
this Section 10.10, any dispute arising between or among the parties hereto or
any of them involving the subject matters covered by this Agreement shall be
submitted to arbitration under this Section 10.10. Any party asserting a
breach of this Agreement by any other party or parties shall notify all other
parties of such alleged breach (a "Dispute Notice") and the parties shall
attempt to resolve such dispute amicably and if they shall fail to resolve it
within thirty (30) days of the date of the Dispute Notice, any party may notify
any of the other parties that it wishes to commence an arbitration proceeding
under this Section 10.10 (an "Arbitration Request"). In any arbitration
proceeding the party or parties commencing the arbitration (alone or together,
if more than one, the "Petitioner") shall include in the Arbitration Request
(a) a statement of the facts constituting the alleged breach or dispute, (b) a
written statement of position ("Statement") regarding the dispute and (c) the
name of an elector designated by it. The Statement shall state the facts and
arguments in support of the position taken by the party submitting such
Statement and shall detail that party's proposed solution and relief sought (if
any). Copies of any Arbitration Request shall be furnished at the same time to
the other parties hereto. The party or parties with whom the Petitioner has
its dispute (alone or together, if more than one, the "Respondent") shall
within five (5) Business Days after the date of the Arbitration Request
designate a second elector by notice
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61
to the Petitioner (copies of which shall be furnished to the other parties),
but if it or they shall fail to do so within such period the Petitioner may
designate an elector on Respondent's behalf. The electors chosen by the
Petitioner and the Respondent shall attempt to agree upon an arbitrator (the
"Arbitrator"), but if they are unable to do so within twenty (20) Business Days
after the designation of the second elector, then either elector thereafter may
apply to the American Arbitration Association (the "Association") for the
selection of the Arbitrator in accordance with the Commercial Arbitration Rules
of such Association. The Arbitrator so selected shall have full power to
decide any dispute referred to in this Section 10.10. The arbitration
proceedings shall be conducted in the English language, and the place of
arbitration and the making of the Award (as defined below) shall be the
City of New York. The UNCITRAL rules of commercial arbitration shall apply to
any arbitration commenced pursuant to this Section 10.10, as modified by the
following procedure:
(i) Within five (5) Business Days of the selection of the Arbitrator
(the "Commencement Date"), the Respondent shall deliver its Statement
regarding the dispute to the Arbitrator and to the Petitioner.
(ii) Within fifteen (15) Business Days from the Commencement Date,
each of the Petitioner and Respondent shall deliver to the Arbitrator and
to the other party, a response ("Response") to the other party's
Statement setting forth opposing facts and arguments and limited in
length to ten (10) typed, single spaced pages (excluding any evidentiary
exhibits included therein).
(iii) Within twenty (20) Business Days from the Commencement Date,
each of the Petitioner and the Respondent may deliver to the Arbitrator
and to the other party, a reply to the Response limited to setting forth
facts and arguments in rebuttal to the Statement and Response of the
other party and limited in length to five (5) typed, single spaced pages
(excluding any evidentiary exhibits included therein).
(iv) Within twenty-five (25) Business Days from the Commencement
Date, each of the Petitioner and Respondent shall present an oral
summation of its position to the Arbitrator in the presence of the other
party in accordance with such rules of procedure including, without
limitation, length of presentation and right of cross-examination, as the
Arbitrator shall determine in writing and deliver to the parties not less
than three (3) Business Days prior to such hearing; provided, however,
that such hearing shall not exceed eight (8) hours in total and may not
be adjourned except for extraordinary circumstances beyond the control of
the parties.
(v) The Arbitrator shall either issue his decision and award
("Award") or request a further meeting of the parties within fifteen (15)
days of the hearing.
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62
(vi) Any such further meeting of the parties shall take place within
five (5) Business Days of the request therefor and shall be conducted as
determined by the Arbitrator. The Arbitrator shall issue his Award no
later than fifteen (15) days after any such further meeting of the
parties.
(vii) The Award shall be in writing and shall be limited to a
decision either completely in favor of Petitioner's request for relief or
completely in favor of Respondent's request for relief. The Award shall
be final and binding upon the parties hereto and judgment may be entered
thereon in any court of competent jurisdiction and the costs and expenses
of such arbitration (and of enforcing any Award) shall be borne by the
party losing such arbitration.
(viii) In the event that the Arbitrator fails to render his Award
within the time limits contained in Sections 10.10(a)(v) or (vi), the
Arbitrator shall, nonetheless, retain jurisdiction over the dispute for a
reasonable period of time.
(b) This Section 10.10 shall in no way affect the right of any party
to seek such interim relief, and only such relief, as may be required to
maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
(c) In order to facilitate the resolution of any claim for
indemnification brought by a Purchaser Indemnified Party pursuant to Section
8.02 and the enforcement of any Award resulting therefrom, the Parent Entities
and the Sellers agree to be joined as parties to any arbitration relating to a
Purchaser Indemnified Party's claim for indemnification pursuant to Section
8.02. In addition, in order to facilitate the enforcement of any Award
resulting from a claim for indemnification brought by a Purchaser Indemnified
Party pursuant to Section 8.02 or a Seller Indemnified Party pursuant to
Section 8.04, the Parent Entities, the Sellers and the Purchaser (i) submit to
the jurisdiction of any New York State or Federal court sitting in the Borough
of Manhattan, The City of New York with respect to any actions relating to the
enforcement of any Award providing for indemnification of a Purchaser
Indemnified Party pursuant to Section 8.02 or a Seller Indemnified Party's
claim for indemnification pursuant to Section 8.02, as the case may be; (ii)
agree that all claims with respect to such actions shall be heard and
determined in the United States District Court for the Southern District of New
York, or if that court does not have subject matter jurisdiction, in any state
court located in the Borough of Manhattan, The City of New York, and the Parent
Entities, the Sellers and the Purchaser agree to submit to the jurisdiction of
and venue in, such courts; (iii) irrevocably waive, to the fullest extent
permitted by law, any objection that they may have to the laying of venue of
any such suit, action or proceeding brought in such a court and any claim that
any such suit, action or proceeding brought in such a court has been brought in
an inconvenient forum; (iv) consent to the service of process upon them by
mailing or delivering such service to their agent for service of process and
represent and warrant that United has irrevocably appointed Prentice
<PAGE> 68
63
Hall, New York, New York, and each of the other Parent Entities, each Seller
and the Purchaser has irrevocably appointed CT Corporation, New York, New York,
as its agent to accept and acknowledge on its behalf service of any and all
process that may be served in any such suit, action or proceeding in any court
sitting in New York City; and (v) agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
SECTION 10.11. Sellers' Disclosure Schedule. From time to time
after the date hereof and not later than three Business Days (other than in a
case in which an event occurs within such three Business Day period which could
not have been anticipated, in which case written notice of such event must be
provided to the Purchaser promptly after the Parent Entities, the Sellers or
the Partnership become aware of it) prior to the Closing Date, each of the
Parent Entities and the Sellers may amend or supplement the Sellers' Disclosure
Schedule in writing in accordance with Section 10.02 with respect to any matter
coming to its attention or arising which, if known by it or existing prior to
the date of this Agreement would have been required to be set forth or
described in the Sellers' Disclosure Schedule or which is necessary or
desirable to complete or correct any information in the Sellers' Disclosure
Schedule or in any representation or warranty of such Parent Entity or Seller
which has been rendered inaccurate thereby. For purposes of determining the
satisfaction of the Purchaser's condition to close as set forth in Section
7.02(a), the Sellers' Disclosure Schedule shall be deemed not to have been
amended or supplemented from that attached hereto on the date hereof.
SECTION 10.12. Governing Law. This Agreement shall be governed by
the laws of the State of New York, excluding (to the greatest extent
permissible by law) any rule of law that would cause the application of the
laws of any jurisdiction other than the State of New York.
SECTION 10.13. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.14. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
<PAGE> 69
64
IN WITNESS WHEREOF, the Parent Entities, the Sellers, the Partnership and
the Purchaser have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly authorized.
UNITED AIR LINES, INC.
By: /s/ Frederic F. Brace
------------------------------------------
Name: Frederic F. Brace
Title: Vice President
Financial Analysis and Controller
COVIA LLC
By United Airlines, Inc.,
By: /s/ Authorized Signatory
------------------------------------------
Name:
Title:
US AIRWAYS, INC.
By: /s/ John W. Harper
------------------------------------------
Name: John W. Harper
Title: Senior Vice President, Finance
and CFO
USAM CORP.
By: /s/ John W. Harper
------------------------------------------
Name: John W. Harper
Title: Director & Treasurer
<PAGE> 70
AIR CANADA
By: /s/ R. Peterson
------------------------------------------
Name: R. Peterson
Title: Senior Vice President, Finance
and Chief Financial Officer
RESNET HOLDINGS, INC.
By: /s/ R. Peterson
------------------------------------------
Name: R. Peterson
Title: President
APOLLO TRAVEL SERVICES PARTNERSHIP
By: /s/ Audrey Rubin
------------------------------------------
Name: Audrey Rubin
Title: Vice President, General Counsel
GALILEO INTERNATIONAL PARTNERSHIP
By: /s/ Paul H. Bristow
------------------------------------------
Name: Paul H. Bristow
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 71
SELLERS' DISCLOSURE SCHEDULE
This Sellers' Disclosure Schedule has been prepared and delivered in
accordance with the General Partnership Interest Purchase Agreement (the
"Agreement"), dated as of July 30, 1997, among United Air Lines, Inc., a
Delaware corporation ("United"), Covia LLC, a Delaware limited liability
company and wholly owned subsidiary of United, US Airways, Inc., a Delaware
corporation ("USAW"), USAM Corp., a Delaware corporation and a wholly owned
subsidiary of USAW, Air Canada, a corporation organized under the laws of
Alberta ("Air Canada"), Resnet Holdings, Inc., a Delaware corporation and a
wholly owned subsidiary of Air Canada, Apollo Travel Services Partnership, a
Delaware general partnership, and Galileo International Partnership, a Delaware
general partnership, or any successor in interest thereto. Capitalized terms
used but not defined in this Sellers' Disclosure Schedule shall have the
meanings assigned to such terms in the Agreement, unless the context otherwise
requires.
<PAGE> 1
EXHIBIT 2.2
CONFORMED COPY
SHARE PURCHASE AGREEMENT
between
SAIRGROUP (LTD.), a Swiss corporation having its registered domicile in Zurich,
Switzerland
(hereinafter the "SELLER"),
and
GALILEO INTERNATIONAL PARTNERSHIP, a Delaware general partnership whose
principal place of business is in Rosemont, Illinois, and any successor in
interest thereto, including, without limitation, the corporation or limited
liability company formed in connection with the IPO (as such term is defined
below)
(hereinafter the "PURCHASER";
each of the Purchaser and the Seller
is referred to herein
as a "PARTY", and the Purchaser and the Seller are referred
to herein collectively as the "PARTIES")
regarding the purchase of the entire share capital of
Traviswiss AG, a Swiss company having its
registered domicile in Kloten, Switzerland
(hereinafter the "Company")
<PAGE> 2
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
SECTION 1.01. Certain Defined Terms........................................ 1
SECTION 1.02. Other Defined Terms.......................................... 5
</TABLE>
ARTICLE II
PURCHASE AND SALE
<TABLE>
<S> <C> <C>
SECTION 2.01. Purchase and Sale of the Shares.............................. 7
SECTION 2.02. Purchase Price............................................... 7
SECTION 2.03. Closing...................................................... 7
SECTION 2.04. Closing Deliveries........................................... 7
SECTION 2.05. Cash Mechanism............................................... 7
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
<TABLE>
<S> <C> <C>
SECTION 3.01. Organization, Authority and Qualification of the Seller...... 10
SECTION 3.02. Organization, Authority and Qualification of the Company..... 11
SECTION 3.03. Company Interests............................................ 11
SECTION 3.04. No Conflict.................................................. 12
SECTION 3.05. Consents and Approvals....................................... 12
SECTION 3.06. Financial Information and Books and Records.................. 12
SECTION 3.07. No Undisclosed Liabilities................................... 13
SECTION 3.08. Conduct in the Ordinary Course, Absence of Certain Changes,
Events and Conditions................................ 13
SECTION 3.09. Litigation................................................... 15
SECTION 3.10. Compliance with Laws......................................... 16
SECTION 3.11. Environmental and Other Permits and Licenses; Related
Matters.............................................. 16
SECTION 3.12. Material Contracts........................................... 16
SECTION 3.13. Intellectual Property........................................ 18
SECTION 3.14. Real Property and Leases..................................... 19
SECTION 3.15. Assets....................................................... 19
SECTION 3.16. Employee Benefit Matters..................................... 20
SECTION 3.17. Labor Matters................................................ 21
SECTION 3.18. Taxes........................................................ 21
SECTION 3.19. Insurance.................................................... 23
SECTION 3.20. Brokers...................................................... 23
SECTION 3.21. Year 2000 Compliance......................................... 24
</TABLE>
i
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
<TABLE>
<S> <C>
SECTION 4.01. Organization, Authority and Qualification of the Purchaser... 24
SECTION 4.02. No Conflict.................................................. 25
SECTION 4.03. Governmental Consents and Approvals.......................... 25
SECTION 4.04. Investment Purpose........................................... 25
SECTION 4.05. Brokers...................................................... 25
</TABLE>
ARTICLE V
ADDITIONAL AGREEMENTS
<TABLE>
<S> <C>
SECTION 5.01. Conduct of Business Prior to the Closing..................... 25
SECTION 5.02. Access to Information........................................ 26
SECTION 5.03. Confidentiality.............................................. 27
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.... 28
SECTION 5.05. Notice of Developments....................................... 29
SECTION 5.06. No Solicitation of Employees................................. 29
SECTION 5.07. Use of Intellectual Property................................. 29
SECTION 5.08. Monthly Financial Statements................................. 30
SECTION 5.09. Pre-Closing Balance Sheet.................................... 30
SECTION 5.10. Company Pension Fund......................................... 31
SECTION 5.11. Insurance Coverage by the Seller............................. 32
SECTION 5.12. Certain Services............................................. 32
SECTION 5.13. Certain Intercompany Payments................................ 34
SECTION 5.14. Intercompany Loan............................................ 35
SECTION 5.15. Right of First Refusal....................................... 35
SECTION 5.16. Transfer of Certain Company Intellectual Property............ 36
SECTION 5.17. Austrian Airlines............................................ 36
SECTION 5.18. Further Action............................................... 36
</TABLE>
ARTICLE VI
TAX MATTERS
<TABLE>
<S> <C>
SECTION 6.01. Tax Indemnity................................................ 37
SECTION 6.02. Apportionment of Taxes....................................... 37
SECTION 6.03. Returns and Payments......................................... 38
SECTION 6.04. Contests..................................................... 40
SECTION 6.05. Survival of Obligations...................................... 41
SECTION 6.06. Conveyance Taxes............................................. 41
SECTION 6.07. Tax Refunds, Credits and Other Payments...................... 42
</TABLE>
ii
<PAGE> 4
ARTICLE VII
CONDITIONS TO CLOSING
<TABLE>
<S> <C> <C>
SECTION 7.01. Conditions to Obligations of the Seller...................... 42
SECTION 7.02. Conditions to Obligations of the Purchaser................... 43
</TABLE>
ARTICLE VIII
INDEMNIFICATION
<TABLE>
<S> <C> <C>
SECTION 8.01. Survival of Representations and Warranties................... 45
SECTION 8.02. Indemnification by the Seller................................ 47
SECTION 8.03. Tax Matters.................................................. 48
SECTION 8.04. Indemnification by the Purchaser............................. 48
SECTION 8.05. Indemnification Procedures................................... 49
</TABLE>
ARTICLE IX
TERMINATION AND WAIVER
<TABLE>
<S> <C> <C>
SECTION 9.01. Termination.................................................. 50
SECTION 9.02. Effect of Termination........................................ 51
SECTION 9.03. Waiver....................................................... 51
</TABLE>
ARTICLE X
GENERAL PROVISIONS
<TABLE>
<S> <C> <C>
SECTION 10.01. Expenses.................................................... 52
SECTION 10.02. Notices..................................................... 52
SECTION 10.03. Public Announcements........................................ 53
SECTION 10.04. Headings.................................................... 53
SECTION 10.05. Severability................................................ 53
SECTION 10.06. Entire Agreement............................................ 53
SECTION 10.07. Assignment.................................................. 54
SECTION 10.08. No Third Party Beneficiaries................................ 54
SECTION 10.09. Amendment................................................... 54
SECTION 10.10. Arbitration................................................. 54
SECTION 10.11. Seller's Disclosure Schedule................................ 56
SECTION 10.12. Governing Law............................................... 56
SECTION 10.13. Counterparts................................................ 56
SECTION 10.14. Specific Performance........................................ 57
</TABLE>
iii
<PAGE> 5
WHEREAS, the Seller owns 200 registered shares of the Company's capital
stock, nominal value CHF 10,000 per share (the "Shares"), which constitute one
hundred percent (100%) of the outstanding share capital of the Company; and
WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, the Shares upon the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Accounting Principles" means the rules set out in art. 662a et seq. of
the Swiss Code of Obligations as applied by members of the Swiss Accountants'
Organization ("Schweizerische Treuhand und Revisionskammer").
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"After-Tax Basis" means, (i) with respect to any Loss that is required to
be indemnified pursuant to Article VI or Article VIII on an After-Tax Basis,
that the indemnification payment will be calculated so as to take into account
both the deductibility or creditability by the indemnitee or the Company for
Tax purposes of the Loss being indemnified and the taxability to the indemnitee
of the indemnifying payment (including taxability of any payments made to gross
up for the taxability of the indemnifying payment), and (ii) with respect to
any refund or credit that is required to be paid on an After-Tax Basis pursuant
to Section 6.07, that the refund or credit payable by the Purchaser to the
Seller will be calculated so as to take into account both the deductibility by
the Company for Tax purposes of the payment of such refund or credit to the
Seller and (a) the taxability to the Company of the receipt of the refund or
credit and (b) any tax to the Company or the Purchaser (or any Affiliate
thereof) in connection with any distribution of the credit or refund (or any
portion thereof) to the Purchaser (or any Affiliate thereof).
<PAGE> 6
2
"Agreement" or "this Agreement" means this Share Purchase Agreement,
dated as of July 30, 1997, between the Seller and the Purchaser (including the
Exhibits hereto and the Seller's Disclosure Schedule) and all amendments hereto
made in accordance with the provisions of Section 10.09.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in the City
of Zurich, Switzerland.
"Company Intellectual Property" means all trademarks, trademark rights,
trade names, trade name rights, patents, patent rights, industrial models,
inventions, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the Company
as currently conducted or as contemplated (by existing Company management) to
be conducted, together with all applications currently pending for any of the
foregoing.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of
such Person.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including without limitation, environmental and Tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environment" means surface waters, groundwaters, surface water sediment,
soil, subsurface strata and ambient air.
"Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, notices of
liability or potential liability, investigations, proceedings, consent orders
or consent agreements relating in any way to any Environmental Law, any
Environmental Permit or any Hazardous Material or arising from any alleged
injury or threat of injury to health, safety or the Environment.
"Environmental Law" means any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the
<PAGE> 7
3
Environment, health or safety or to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required to operate the business of the Company
under any applicable Environmental Law.
"Governmental Authority" means any Swiss or foreign federal, state or
local government, governmental, regulatory or administrative authority, agency
or commission or any court, tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority, other than any rules and regulations (whether promulgated by order
or otherwise) which apply generally to the computer reservations system
industry.
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as pollutant, contaminant or
waste under any applicable Environmental Law.
"Income Taxes" means Taxes based on or measured by net income.
"Independent Accounting Firm" means any one of the "big six" accounting
firms other than the Purchaser's Accountants, the Seller's accountants and the
Company's accountants.
"Law" means any Swiss or foreign federal, state or local statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Material Adverse Effect" means any change in or effect on the business
of the Company that, when taken individually or together with all other adverse
changes and effects, is or is reasonably likely to be materially adverse to the
business, operations, properties, condition (financial or otherwise), assets or
Liabilities of the Company or prevents consummation of the transactions
contemplated hereby.
<PAGE> 8
4
"Net Asset Test Reference Balance Sheet" means the audited balance sheet
(including the related notes and schedules thereto) of the Company, dated as of
31 December 1996, excluding (i) any indebtedness for borrowed money of the
Company and (ii) any Cash other than cash in the amount of any checks
outstanding, a copy of which is set forth in Section 3.06(a) of the Seller's
Disclosure Schedule.
"Net Assets" means the excess of total assets over total liabilities of
the Company shown on the Pre-Closing Balance Sheet or the Seasonally Adjusted
Net Asset Test Reference Balance Sheet, as applicable.
"Ordinary Course Taxes" means Taxes, other than Income Taxes, capital
Taxes or VAT, relating to operations, activities or ownership during periods
(or portions thereof) prior to the Closing Date and paid by the Company after
the Closing Date in the ordinary course of business and not as a result of an
audit or examination by a government or Tax authority or an administrative or
judicial proceeding or a settlement or compromise thereof in connection with a
Tax previously paid or a Return previously filed.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for Taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business securing obligations;
(c) pledges or deposits to secure obligations under workers' compensation laws
or similar legislation or to secure public or statutory obligations; and (d)
minor survey exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not incurred in
connection with any indebtedness for borrowed money of the Company, (ii) do
not render title to the property encumbered thereby unmarketable and (iii) do
not, individually or in the aggregate, materially adversely affect the value or
use of such property for its current and anticipated purposes.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group.
"Purchaser's Accountants" means KPMG Peat Marwick LLP, independent
accountants of the Purchaser.
"Real Property" means the real property leased or owned by the Company.
"Return" means any return, report or form relating to a Tax or Taxes.
"Seasonally Adjusted Net Asset Test Reference Balance Sheet" means the
Net Asset Test Reference Balance Sheet adjusted to multiply current assets
reflected thereon by
<PAGE> 9
5
the appropriate seasonal adjustment factors set forth on Schedule 1.01(a)
hereto and current liabilities by the appropriate seasonal adjustment factors
set forth on Schedule 1.01(b) hereto.
"Tax" or "Taxes" means any and all taxes, contributions, fees, levies,
duties, tariffs, imposts, and other similar charges (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority (whether
federal, state, local, cantonal, municipal, foreign or otherwise), including,
without limitation: Income Taxes, VAT, any other taxes or other charges on or
with respect to income, franchises, windfall or other profits, gross receipts,
property, capital, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration and documentation
fees; and customs duties, tariffs, and similar charges.
"Tax Benefit" means the value, when actually received, of any deduction,
loss, credit or refund to the Purchaser, the Company or the Seller, as the case
may be.
"VAT" means Value Added Tax as defined in the Swiss VAT ordinance of the
22nd of June, 1994, a Tax imposed on turnover of goods and services, including
imports of goods and services.
SECTION 1.02. Other Defined Terms. Each of the following terms is
defined in the Section set forth opposite such term:
<TABLE>
<CAPTION>
Terms Section
----- -------
<S> <C>
Agreement.....................................................Preamble
Arbitration Request...........................................10.10(a)
Arbitrator....................................................10.10(a)
Assets.........................................................3.15(a)
Association...................................................10.10(a)
atraxis........................................................5.12(a)
Average Cash Amount............................................2.05(b)
aviReal........................................................5.12(a)
Award......................................................10.10(a)(v)
Cash...........................................................2.05(b)
Closing...........................................................2.03
Closing Date......................................................2.03
Commencement Date..........................................10.10(a)(i)
Company.....................................................Cover Page
Company Charter Documents.........................................3.02
Company Interest..................................................5.15
Company Licenses..................................................3.13
</TABLE>
<PAGE> 10
<TABLE>
6
<S> <C>
Company Names..................................................5.07(a)
Company Post-Closing License...................................5.16(b)
Dispute Notice................................................10.10(a)
Dollar Equivalent..............................................2.05(b)
Escrow Agent...................................................2.05(f)(i)
Escrow Amount..................................................2.05(f)(i)
Financial Statements...........................................3.06
First Refusal Price............................................5.15
Indemnified Party..............................................6.01, 8.05
Indemnifying Party.............................................8.05
Independent Firm...............................................6.03(b)
Intercompany Loan..............................................5.14
IPO............................................................2.03
Loss...........................................................8.02
Material Contracts.............................................3.12(a)
Measuring Period...............................................2.05(b)
New Company Fund...............................................5.10(b)(i)
Non-Disclosure Agreement.......................................5.03(a)
Notice of Exercise.............................................5.15(b)
Notice of Intention............................................5.15
Option Period..................................................5.15(b)
Parties........................................................Cover Page
Party..........................................................Cover Page
Pension Transfer Agreement.....................................5.10(b)(ii)
Petitioner....................................................10.10(a)
Plan...........................................................3.16(a)
Pre-Closing Balance Sheet......................................5.09
Prospective Buyer..............................................5.15
Prospective Seller.............................................5.15
Purchase Price.................................................2.02
Purchase Price Adjustment Amount...............................2.05(b)
Purchaser......................................................Cover Page
Purchaser Indemnified Party....................................8.02(a)
Returnable Refund or Credit....................................6.07
Respondent....................................................10.10(a)
Response......................................................10.10(a)(ii)
Returnable Refund or Credit....................................6.07
Seller.........................................................Cover Page
Seller Indemnified Party.......................................8.04(a)
Seller Post-Closing License....................................5.16(a)
Seller's Disclosure Schedule...................................3.02
Seller's Pension Funds.........................................5.10(a)
Shares.........................................................Recitals
</TABLE>
<PAGE> 11
7
<TABLE>
<S> <C>
Statement......................................................10.10(a)
Third Party Claim..................................................8.05
Transaction Agreement...........................................7.01(f)
Transferred Intellectual Property...............................5.16(a)
Transition Period..................................................5.11
</TABLE>
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller will
transfer to the Purchaser the Shares and the Purchaser shall accept such
transfer.
SECTION 2.02. Purchase Price. Subject to adjustment as provided in
Section 2.05, the purchase price for the Shares shall be the sum of (i)
US$8,000,000 plus (ii) the Purchase Price Adjustment Amount, payable in cash
(the "Purchase Price").
SECTION 2.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the sale and purchase of the Shares shall take place at a
closing (the "Closing") to be held at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York at 10:00 a.m. New York time on the day of
the consummation of the proposed initial public offering by the Purchaser (the
"IPO"), or at such other place or at such other time or on such other date as
the Seller and the Purchaser may mutually agree upon in writing (the day on
which the Closing takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries. (a) At the Closing and upon
confirmation of payment of the Purchase Price, the Seller shall deliver to the
Purchaser (i) one or more stock certificates evidencing the Shares duly endorsed
in blank, or accompanied by stock powers duly executed in blank, in form
satisfactory to the Purchaser, and (ii) any documents required to be
delivered by the Seller pursuant to Section 7.02.
(b) At the Closing and upon receipt of the documents described in
Section 2.04(a), the Purchaser or its assignee shall deliver to the Seller (i)
any documents required to be delivered by the Purchaser pursuant to Section
7.01, and (ii) a banker's check in the amount of the Purchase Price less the
Escrow Amount.
SECTION 2.05. Cash Mechanism. (a) Subject to the provisions of this
Section 2.05, the Purchase Price Adjustment Amount will be calculated in
accordance with Section 2.05(b).
<PAGE> 12
8
(b) For purposes of this Section 2.05, (i) "Average Cash Amount" means,
subject to adjustment as set forth in Section 2.05(c), the amount of cash that
is equal to the simple average daily balance of cash, time deposits,
certificates of deposit, marketable securities and other short term investments
and cash equivalents ("Cash") of the Company at the close of business on each
Business Day during the Measuring Period, (ii) "Measuring Period" means the
period commencing at 12:01 a.m. on the date of the month immediately preceding
the month in which the Closing Date occurs that is the same date of the month as
the Closing Date (or if such date is not a calendar date, the date that
corresponds most closely to the date that is the Closing Date) and ending at
11:59 p.m. on the day immediately preceding the Closing Date, (iii) "Purchase
Price Adjustment Amount" means the Dollar Equivalent of (A) the Average Cash
Amount less (B) the checks issued by the Company that have not cleared on the
Closing Date less (C) CHF 133,851, representing employee bonus payments under
the Company's bonus plan for the portion of fiscal year 1997 commencing January
1, 1997 and ending on the Closing Date, and (iv) "Dollar Equivalent" means, with
respect to an amount expressed in any currency other than United States dollars,
the dollar equivalent of such amount as determined by reference to the noon
buying rate in The City of New York (as of the Business Day immediately
preceding the Closing Date) for cable transfers in such currency as certified
for customs purposes by (or if not so certified, as otherwise determined by) the
Federal Reserve Bank of New York.
(c) The Average Cash Amount will be adjusted in the event the Company
makes (i) any Cash distribution (in respect of the Shares) to the Seller or an
Affiliate of the Seller, (ii) any broker payments pursuant to Section 3.20,
(iii) any payment to the Seller or an Affiliate of the Seller with respect to
the Intercompany Loan, (iv) any employee bonus payments under the Company's
bonus plan for fiscal year 1996 or (v) any payment to the Seller or an Affiliate
of the Seller with respect to management charges, in each case during the
Measuring Period by subtracting the amount of any such distribution or payment
from the daily amount of Cash in each of the days during the Measuring Period
immediately preceding the date of such distribution or payment.
(d) During the Measuring Period, the Purchaser shall, and the Seller
shall cause the Company to, make all payments that are to be made to the Company
or the Purchaser, as applicable, under existing contractual arrangements or
agreements in the ordinary course of business consistent with past practice. In
addition, during the Measuring Period, the Seller shall cause the Company to
conduct its business in the ordinary course consistent with past practice,
including, without limitation, not shortening or lengthening the customary
payment time for any of its payables or receivables and continuing its
purchasing and capital purchasing practices in accordance with past practice;
provided, however, that the Seller shall cause the Company to pay management
charges to the Seller in amounts customary with past
<PAGE> 13
9
practice for the period commencing January 1, 1997 and ending May 31, 1997. To
facilitate the foregoing, (i) the Seller shall circulate to the relevant
personnel of the Company at least thirty days prior to the expected commencement
of the Measuring Period written instructions to such effect and (ii) the Seller
shall cause the Company to provide representatives of the Purchaser with access,
at reasonable times, to all offices, personnel, books and records of the Company
that the Purchaser may reasonably request for purposes of monitoring the
compliance by the Company with this Section 2.05(d) and the calculation by the
Company of the Average Cash Amount and the Purchase Price Adjustment Amount in
accordance with this Section 2.05. During the period from 11:59 p.m. on the day
immediately preceding the Closing Date through the Closing, the Seller shall
cause the Company not to make any payments of cash except pursuant to normal
banking transactions, including check clearing or deposits, that are not under
the control of the Company, or pursuant to contractual obligations with third
parties that were previously disclosed to the Purchaser or that were entered
into in the ordinary course of business consistent with past practice.
(e) On the Closing Date, the Seller shall cause the Company to inform
each of the Seller and the Purchaser of the (i) Average Cash Amount, as well
as the calculations resulting therein, and (ii) the aggregate amount with
respect to which checks of the Company have been issued but not cleared on the
Closing Date.
(f) (i) Prior to the Closing, the Purchaser and the Seller shall enter
into an Escrow Agreement, in substantially the form attached hereto as Exhibit
2.05(f), with a third party selected by the Purchaser and reasonably acceptable
to the Seller (the "Escrow Agent"). In accordance with the terms of the Escrow
Agreement, the Purchaser will, on the Closing Date, deposit the sum of
US$250,000 (the "Escrow Amount") (to be deducted from the Purchase Price in
accordance with Section 2.04(b)) with the Escrow Agent, which will hold such
amount in an interest bearing account until the later of (A) the 90th day
following the Closing Date or (B) the date on which any dispute pursuant to
Section 2.05(f)(ii) has been resolved, to be managed and paid out in accordance
with the Escrow Agreement and this Section 2.05.
(ii) In the event the Purchaser determines, within 90 days following the
Closing Date, that the agreements of the Seller to cause the Company to comply
with the requirements contained in Section 2.05(d) were not complied with and,
as a result of such non-compliance, the Average Cash Amount was either greater
or lesser than the average amount of Cash that the Company would have had during
the Measuring Period had such provisions been complied with, the Purchaser will
provide written notice to the Seller (with a copy to the Escrow Agent) to such
effect, specifying the amount of the difference and its reasons for such
determination. In the absence of any written notice of dispute delivered by the
Seller to the Purchaser and the Escrow Agent within 10 days after receipt of the
Purchaser's written notice as to such determination and the amount of such
difference, (x) in the event the Average
<PAGE> 14
10
Cash Amount is greater than it would have been, the Purchaser will receive from
the Escrow Agent and the Seller, if appropriate, a cash payment equal to the
amount of such difference, together with interest thereon, as set forth in
clause (iii) below, and (y) in the event the Average Cash Amount is less than it
would have been, the Seller will receive from the Purchaser a cash payment equal
to the amount of such difference, together with interest thereon, as set forth
in clause (iii) below. In the event the Seller delivers such a written notice
disputing such determination or the amount of such difference, such dispute will
be submitted for resolution to the Independent Accounting Firm, which will
resolve such dispute within 30 days of the date of such submission and whose
decision will be final and binding on the Seller and the Purchaser. The fees
and expenses of the Independent Accounting Firm will be allocated between the
Purchaser, on the one hand, and the Seller, on the other hand, in the same
proportion that the aggregate amount of the difference so submitted to the
Independent Accounting Firm that is unsuccessfully disputed by the Seller, on
the one hand, or the Purchaser, on the other hand, bears to the total amount of
the difference so submitted.
(iii) In the event any payment is to be made to the Purchaser pursuant
to clause (ii) above, the Escrow Agent will pay such amount to the Purchaser,
together with the appropriate amount of interest thereon, and if such payment is
less than the amount of such difference, the Purchaser will recover such excess
amount from the Seller, together with interest thereon from the Closing Date to
and including the date of payment by the Seller to the Purchaser at the Interest
Rate (as such term is defined in the Escrow Agreement), pursuant to the
provisions of Section 8.02 (except that the provisions of Section 8.02(b)(i) and
(ii) will not apply). In the event any payment is to be made to the Seller
pursuant to clause (ii) above, the Purchaser will pay such amount to the Seller,
together with interest thereon from the Closing Date to and including the date
of payment by the Purchaser to the Seller at the Interest Rate, pursuant to the
provisions of Section 8.04. In the event any amount remains in the Escrow Fund
(as such term is defined in the Escrow Agreement) on the later of (A) the 90th
day following the Closing Date or (B) the date on which any dispute pursuant to
Section 2.05(f)(ii) has been resolved, all amounts held by the Escrow Agent on
such day, after giving effect to any payments to be made to the Purchaser
hereunder, will be paid to the Seller, including all interest accrued on the
remaining principal amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the
Seller represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the Seller.
The Seller is a corporation duly organized, validly existing and in good
standing under
<PAGE> 15
11
the laws of Switzerland and has all necessary power and authority to enter into
this Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The Seller is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business make such licensing or
qualification necessary, except to the extent that the failure to be so licensed
or qualified would not adversely affect the ability of the Seller to carry out
its obligations under, and to consummate the transactions contemplated by, this
Agreement. The execution and delivery of this Agreement by the Seller, the
performance by the Seller of its obligations hereunder and the consummation by
the Seller of the transactions contemplated hereby have been duly authorized by
all requisite action on the part of the Seller. This Agreement has been duly
executed and delivered by the Seller and (assuming due authorization, execution
and delivery by the Purchaser) this Agreement constitutes a legal, valid and
binding obligation of Seller enforceable against it in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally or by general
principles of equity.
SECTION 3.02. Organization, Authority and Qualification of the
Company. (a) The Company is an organization duly organized, validly
existing and in good standing under the laws of Switzerland and is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing and qualification necessary (except in those
jurisdictions set forth in Section 3.02(a) of the disclosure schedule which has
been delivered by the Seller to the Purchaser prior to the date hereof and
which is attached hereto (the "Seller's Disclosure Schedule"). The Company has
all the necessary power and authority to own, operate or lease the properties
and assets owned, operated or leased by it and to carry on its business as it
has been and is currently conducted by the Company. All material actions taken
by the Company have been duly authorized, and the Company has not taken any
material action that in any respect conflicts with or results in a violation of
any provision of the Company's organizational documents (the "Company Charter
Documents"). A true and correct copy of the Company Charter Documents, as in
effect on the date hereof, has been delivered by the Seller to the Purchaser.
(b) There are no corporations, partnerships, limited liability companies
or other legal entities in which the Company owns any direct or other interests
or any right (contingent or otherwise) to acquire the same. The Company is
not, directly or indirectly, a participant in any joint venture.
SECTION 3.03. Company Interests. As of the date hereof, the Shares are
owned, beneficially and of record, by the Seller, free and clear of all
Encumbrances. None of the outstanding equity interests in the Company was
issued in violation of any preemptive rights. There are no options, warrants,
convertible
<PAGE> 16
12
securities or other rights, agreements, arrangements or commitments of any
character relating to the Shares or obligating the Seller or the Company to
issue or sell any equity-related interest in the Company. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any equity interests of or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
other Person. The Shares constitute all the issued outstanding equity interests
in the Company and are owned of record and beneficially solely by the Seller,
free and clear of all Encumbrances. Upon consummation of the transactions
contemplated by Article II, the Purchaser will fully own the Shares, free and
clear of any Encumbrances (other than Encumbrances created by the Purchaser).
There are no voting trusts, proxies or other agreements or understandings in
effect with respect to the voting or transfer of any of the Shares.
SECTION 3.04. No Conflict. The execution, delivery and performance of
this Agreement by the Seller do not and will not (a) violate, conflict with or
result in the breach of any provision of the articles of association (or
similar organizational documents) of the Seller or the Company, (b) conflict
with or violate (or cause an event which could have a Material Adverse Effect
as a result of) any Law or Governmental Order applicable to the Seller or the
Company, or any of their respective assets, properties or businesses, or (c)
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any of the Shares or on any of the assets
or properties of the Seller or the Company pursuant to, any note, bond,
mortgage or indenture, or material contract, agreement, lease, sublease,
license, sublicense, permit, franchise or other instrument or arrangement to
which the Seller or the Company is a party or by which any of the Shares or any
of the Company's assets or properties is bound or affected.
SECTION 3.05. Consents and Approvals. The execution, delivery and
performance of this Agreement by the Seller do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to any Governmental Authority or any other Person, except for the
consents, approvals and authorizations set forth in Section 3.05 of the Seller's
Disclosure Schedule.
SECTION 3.06. Financial Information and Books and Records. (a) True
and complete copies of the audited balance sheet of the Company for each of the
three fiscal years ended as of 31 December 1994, 31 December 1995 and 31
December 1996, and the related audited statements of income, together with all
related notes and schedules thereto, accompanied by the reports thereon of the
Company's accountants (collectively referred to herein as the "Financial
Statements") have been delivered by the Seller to the Purchaser. The Financial
Statements and the Net Asset
<PAGE> 17
13
Test Reference Balance Sheet (i) were prepared in accordance with the
books of account and other financial records of the Company, (ii) present
fairly the financial condition and results of operations of the Company as of
the dates thereof or for the periods covered thereby, (iii) have been prepared
in accordance with the Accounting Principles and (iv) include all adjustments
(consisting only of normal adjustments) that are necessary for a fair
presentation of the financial condition of the Company and the results of the
operations of the Company as of the dates thereof or for the periods covered
thereby, except in the case of the Net Asset Test Reference Balance Sheet (a
copy of which is set forth in Section 3.06(a) of the Seller's Disclosure
Schedule), which excludes (x) any indebtedness for borrowed money of the
Company and (y) any Cash other than cash in the amount of any checks
outstanding.
(b) The books of account and other financial records of the Company: (i)
reflect all items of income and expense and all assets and Liabilities required
to be reflected therein in accordance with the Accounting Principles and (ii)
are in all material respects complete and correct, and do not contain or
reflect any material inaccuracies or discrepancies.
(c) The minute books of the Company contain accurate records of all
meetings and accurately reflect all other actions taken by the Company or by
the Seller as sole stockholder thereof. Complete and accurate copies of all
such minute books have been provided to the Purchaser.
SECTION 3.07. No Undisclosed Liabilities. There are no Liabilities of
the Company, other than Liabilities (i) reflected or reserved against on the
Net Asset Test Reference Balance Sheet, (ii) incurred since 31 December 1996
in the ordinary course of the business, consistent with the past practice, of
the Company or (iii) disclosed in this Agreement or in Section 3.07 of the
Seller's Disclosure Schedule and which do not and could not have a Material
Adverse Effect.
SECTION 3.08. Conduct in the Ordinary Course, Absence of Certain
Changes, Events and Conditions. Except as disclosed in Section 3.08 of the
Seller's Disclosure Schedule, since 31 December 1996, the business of the
Company has been conducted in the ordinary course and consistent with past
practice. As amplification and not limitation of the foregoing, since 31
December 1996, except as disclosed in Section 3.08 of the Seller's Disclosure
Schedule, the Company has not:
(i) permitted or allowed any of its assets or properties
(whether tangible or intangible) to be subjected to any
Encumbrance, other than Permitted Encumbrances;
(ii) except in the ordinary course of business consistent with
past practice, discharged or otherwise obtained the release of any
Encumbrance or
<PAGE> 18
14
paid or otherwise discharged any Liability, other than current
liabilities reflected on the Net Asset Test Reference Balance
Sheet and current liabilities incurred in the ordinary course
of business consistent with past practice since 31 December 1996;
(iii) made any loan to, guaranteed any indebtedness of or
otherwise incurred any indebtedness on behalf of any Person;
(iv) redeemed any of the Shares;
(v) except as specifically requested by the Purchaser or as
required to accommodate changes in the Purchaser's business
practices, made any material changes in the customary methods of
operations of the Company including, without limitation, practices
and policies relating to marketing, selling and pricing;
(vi) merged with, entered into a consolidation with or
acquired any interest in any Person or acquired a substantial
portion of the assets or business of any Person or any division or
line of business thereof, or otherwise acquired any material
assets;
(vii) made any capital expenditure or commitment for any
capital expenditure in excess of the capital expenditures
contemplated by the planned budget, a true and complete copy of
which has been provided to the Purchaser;
(viii) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real, personal or
mixed (including, without limitation, leasehold interests and
intangible assets) with an individual value in excess of CHF
25,000;
(ix) issued or sold any Shares or other equity interest or any
option, warrant or other right to acquire the same of, or any other
interest in, the Company, except as contemplated by this Agreement;
(x) except for agreements, arrangements or transactions with
the Purchaser or having an individual value of less than CHF
25,000, entered into any agreement, arrangement or transaction with
any of its directors, officers, employees or stockholders (or with
any relative, beneficiary, spouse or Affiliate of such Person):
(xi) (A) granted any increase, or announced any increase, in
the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by the Company to any of its employees,
including, without limitation
<PAGE> 19
15
any increase or change pursuant to any Plan, or (B) established
or increased or promised to increase any benefits under any Plan,
in either case except for ordinary increases consistent with the
past practices of the Company:
(xii) revalued any assets of the Company other than in
accordance with Applicable Accounting Principles;
(xiii) amended, terminated, canceled or compromised any
material claims of the Company or waived any other rights of
material value to the Company;
(xiv) made any material change in any method of accounting or
accounting practice or policy used by the Company;
(xv) amended or restated the organizational documents of the
Company;
(xvi) made any express or deemed election or settled or
compromised any liability that is the subject of a dispute with any
government or taxing authority, with respect to (A) Taxes of the
Company or (B) Taxes, insofar as Company items are involved, of the
Seller;
(xvii) suffered any casualty loss or damage with respect to
any of the Assets which individually has a replacement cost of more
than CHF 25,000, which loss or damage shall not have been covered
by insurance;
(xviii) suffered any Material Adverse Effect; or
(xix) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 3.08 or granted any options
to purchase, rights of first refusal, rights of first offer or any
other similar rights or commitments with respect to any of the
actions specified in this Section 3.08.
SECTION 3.09. Litigation. Except as set forth in Section 3.09 of the
Seller's Disclosure Schedule, there are no Actions by or against the Company
(or by or against the Seller or any Affiliate thereof and relating to the
Company or its business) or affecting any of the Assets, pending or threatened
before any Governmental Authority. Neither the Company nor any of the Assets
nor the Seller is subject to any Governmental Order, nor are there any such
Governmental Orders threatened to be imposed by any Governmental Authority
which has or could reasonably be expected to have a Material Adverse Effect.
<PAGE> 20
16
SECTION 3.10. Compliance with Laws. (a) The Company has conducted and
continues to conduct its business in accordance with all Laws and
Governmental Orders applicable to the Company or any of the Assets or such
business, and the Company is not in violation of any such Law or
Governmental Order.
(b) Except as set forth in Section 3.10(b) of the Seller's
Disclosure Schedule, no Governmental Order applicable to the Company or
any of the Assets or its business has or could reasonably be expected to
have a Material Adverse Effect.
SECTION 3.11. Environmental and Other Permits and Licenses; Related
Matters. (a) (i) Neither the Seller nor the Company has received notice
of any violation of any Environmental Laws; (ii) the Company has obtained
all Environmental Permits and is and has been in material compliance with
their requirements; (iii) except as disclosed in Section 3.11(a)(iii) of
the Seller's Disclosure Schedule, or as permitted by or as would not
result in any material liability under applicable Environmental Laws,
there are no underground or aboveground storage tanks or any surface
impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being or have been treated, stored or disposed on any of
the owned, or leased properties or, with respect to the period of the
Company's ownership, tenancy or operation of such property, on any real
property formerly owned, leased or occupied by the Company; (iv) there is
no asbestos or asbestos-containing material on any of the owned or leased
properties, except as permitted by or as would not result in any material
liability under applicable Environmental Laws; (v) the Company has not
released, discharged or disposed of an amount of Hazardous Materials on
any of the owned or leased properties or on any real property formerly
owned, leased or occupied by the Company in any manner or quantity which
would have a material effect on the Company; (vi) the Company is not
undertaking, has not completed, and is not required to conduct, any
investigation or assessment or remedial or response action relating to
any release, discharge or disposal of or contamination with an amount of
Hazardous Materials at any site, location or operation, either
voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law which would have a material effect
on the Company; and (vii) there are no past, pending or threatened in
writing Environmental Claims against the Company, or any of its
properties, and there are no facts which can form the basis of any such
Environmental Claim.
(b) Except as disclosed in Section 3.11(b) of the Seller's
Disclosure Schedule, there are no environmental audit reports, studies or
analyses in the possession of the Seller or the Company or under their
control relating to the owned or leased properties or the operations of
the Company.
SECTION 3.12. Material Contracts. (a) Section 3.12(a) of the Seller's
Disclosure Schedule lists each of the following contracts and agreements
(including,
<PAGE> 21
17
without limitation, oral contracts and agreements) of the Company (such
contracts and agreements being "Material Contracts"):
(i) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and
agreements to which the Company is a party under which the Company
can reasonably be expected to pay or be paid at least CHF 40,000
during the course of the twelve months following the date hereof;
(ii) all management contracts and contracts with independent
contractors or consultants (or similar arrangements) to which the
Company is a party, which are not cancelable without penalty or
further payment and without more than 30 days' notice, and under
which the Company can be reasonably expected to pay or be paid at
least CHF 25,000 during the course of the twelve months following
the date hereof;
(iii) all contracts and agreements relating to indebtedness of
the Company;
(iv) any agreements that are material to the business of the
Company and that are currently in effect with subscribers that have
generated annual Galileo air booking fees of US$350,000 or more per
annum over the course of any of the last three fiscal years;
(v) all contracts and agreements with any Governmental
Authority to which the Company is a party, and under which the
Company can be reasonably expected to pay or be paid at least CHF
25,000 during the course of the twelve months following the date
hereof;
(vi) all contracts and agreements that limit or purport to
limit the ability of the Company to compete in any line of business
or with any Person or in any geographic area or during any period
of time;
(vii) all contracts and agreements between or among the
Company and the Seller or an Affiliate of the Seller; and
(viii) all other contracts and agreements whether or not made
in the ordinary course of business, which are material to the
Company or the conduct of its businesses or the absence of which
would have a Material Adverse Effect.
(b) Each Material Contract: (i) is valid and binding on the respective
parties thereto and is in full force and effect and (ii) upon consummation of
the transactions contemplated by this Agreement, except to the extent that any
consents
<PAGE> 22
18
set forth in Section 3.05 of the Seller's Disclosure Schedule are not
obtained, shall continue in full force and effect without penalty or other
adverse consequence. The Company is not in breach of, or default under, any
Material Contract. The Seller has furnished the Purchaser with true and
complete copies of all Material Contracts.
(c) To the best knowledge of the Seller and the Company, no other
party to any Material Contract is in breach thereof or default thereunder
(d) There is no contract, agreement or other arrangement granting
any Person any preferential right to purchase, other than in the ordinary
course of business consistent with past practice, any of the properties
or assets of the Company.
SECTION 3.13. Intellectual Property. The Company owns or possesses
adequate licenses or other valid rights to use all of the Company
Intellectual Property which is material to the conduct of the business of the
Company, and there is no assertion or claim challenging the validity of such
Company Intellectual Property. On the Closing Date, the Company will own the
Transferred Intellectual Property, free and clear of any Encumbrances. There
are no infringements of any Company Intellectual Property. There are no
pending or threatened interferences, reexaminations, oppositions or nullities
involving any patents, patent rights or applications therefor of the Company
which are material to the conduct of the business of the Company. Section
3.13 of the Seller's Disclosure Schedule lists each material license or other
agreement pursuant to which the Company has the right to use Company
Intellectual Property utilized in connection with any services provided by
the Company (the "Company Licenses"). There is no breach or violation of any
Company License by the Company or by any third party or threatened or actual
loss of rights accruing to the Company under any Company License. Each
Company License is a legal, valid and binding agreement of the Company and
each Company License is a legal, valid and binding agreement of the other
parties thereto. The consummation of the transactions contemplated by this
Agreement will not result in the termination of, or any modification to, any
Company License, except where the foregoing would not have a material effect
on the conduct of the business of the Company. The Company has taken
reasonable measures to maintain the confidentiality of the know-how of the
Company, the value of which to the Company is dependent upon the maintenance
of the confidentiality thereof. The Company has not licensed or otherwise
permitted the use by any third party of any proprietary information on terms
or in a manner that is reasonably likely to have a Material Adverse Effect.
The conduct of the business of the Company as currently conducted or as
currently contemplated (by existing Company management) to be conducted does
not and will not infringe upon or conflict with, in any way, any license,
trademark, trademark right, trade name, trade name right, patent, patent
right, industrial model, invention, service mark or copyright of any third
party that is reasonably likely to be material to the Company's operations.
<PAGE> 23
19
SECTION 3.14. Real Property and Leases. (a) The Company owns no real
property.
(b) All leases of real property leased for the use or benefit of the
Company to which the Company is a party which are material, individually
or in the aggregate, to the business of the Company, and all amendments
and modifications thereto are in full force and effect and have not been
modified or amended, and there exists no default under any such lease by
the Company, nor any event which with notice or lapse of time or both
would constitute a default thereunder by the Company which would permit
any such lease to be terminated by the other party thereto.
SECTION 3.15. Assets. (a) The Company owns,leases or has the legal
right to use all material properties and assets, including, without
limitation, the Company Intellectual Property, used or intended to be used in
the conduct of its business or otherwise owned, leased or used by the Company
and, with respect to contract rights, is a party to and enjoys the right to
the benefits of all material contracts, agreements and other arrangements
used or intended to be used by the Company or in, or relating to the conduct
of its business (all such properties, assets and contract rights being the
"Assets"). Set forth on Section 3.15(a) of the Seller's Disclosure Schedule
is a list of all of the tangible Assets as of the date hereof. The Company
has good and marketable title to, or, in the case of leased or subleased
Assets, valid and subsisting leasehold interests in, all the Assets, free and
clear of all Encumbrances, except for Permitted Encumbrances.
(b) The Assets constitute all the material properties, assets and
rights forming a part of, used, held or intended to be used in, and all
such properties, assets and rights as are necessary in the conduct of,
the business (as currently conducted by existing Company management) of
the Company. At all times since 31 December 1996, the Company has caused
the Assets to be maintained in accordance with good business practice,
and the Assets are generally in good operating condition and repair and
are suitable for the purposes for which they are used and intended,
except for ordinary wear commensurate with the age and depreciated value
of such Assets.
(c) Following the consummation of the transactions contemplated by
this Agreement, either the Company will continue to own, pursuant to good
and marketable title, or lease, under valid and subsisting leases, or
otherwise retain its interest in the Assets without incurring any penalty
or other adverse consequence, including, without limitation, any increase
in rentals, royalties, or licenses or other fees imposed as a result of,
or arising from, the consummation of the transactions contemplated by
this Agreement (except, with respect to contractual arrangements to the
extent that any consents set forth in Section 3.05 of the Seller's
Disclosure Schedule are not obtained). Immediately following the
Closing, (i) in the case of books and records other than Tax-related
books and records, the Company shall own
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20
or possess all documents, books, records, agreements and financial data of
any sort used by the Company which is material to the conduct of its
business, and (ii) in the case of Tax-related books and records (including
all information (including copies of Returns, original work papers,
correspondence with authorities, and source documents (or copies thereof))
relating to any and all Tax filings of the Company), the Company shall own
or possess all of such books and records.
SECTION 3.16. Employee Benefit Matters. (a) Plans and Material
Documents. Section 3.16(a) of the Seller's Disclosure Schedule lists (i) all
employee benefit plans and all bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, pension, retiree medical
or life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance or other
contracts or agreements, to which the Company is a party, with respect to
which the Company has any obligation or which are maintained, contributed to
or sponsored by the Company for the benefit of any current or former
employee, officer or director of the Company, (ii) each employee benefit plan
for which the Company could incur liability in the event such plan has been
or were to be terminated, (iii) any contracts, arrangements or understandings
between the Seller or any of its Affiliates and any employee of the Company,
including, without limitation, any contracts, arrangements or understandings
relating to the sale of the Company (collectively, the "Plans"). Except as
disclosed in the Seller's Disclosure Schedule, each Plan is in writing and
the Seller has furnished the Purchaser with a complete and accurate copy of
each Plan and a complete and accurate copy of each material document prepared
in connection with each such Plan including, without limitation, (x) a copy
of each trust or other funding arrangement, (y) each summary plan description
and a summary of material modifications, and (z) the most recently prepared
actuarial report and financial statement in connection with each such Plan.
(b) Compliance with Applicable Law. Each Plan is in compliance with
all material requirements of all applicable Law, and all Persons who
participate in the operation of such Plans have always acted in
accordance with the provisions of all applicable Laws. The Company has
performed all obligations required to be performed by it under, is not in
any respect in default under or in violation of, and has no knowledge of
any default or violation by any party to, any Plan. Except as disclosed
in the Seller's Disclosure Schedule, no legal action, suit or claim is
pending or threatened with respect to any Plan (other than claims for
benefits in the ordinary course) and no fact or event exists that could
reasonably be expected to give rise to any such action, suit or claim.
(c) Plan Contributions and Funding. All contributions, premiums or
payments required to be made with respect to any Plan have been made on
or before their due dates. All such contributions are deductible for
income tax purposes. Except
<PAGE> 25
21
as disclosed in the Seller's Disclosure Schedule, as of the Closing Date,
no Plan will have an unfunded benefit liability.
(d) Bonus Payments. All employee bonus payments under the Company's
bonus plan for fiscal year 1996 have been paid, or shall be paid prior to
the Closing Date.
(e) Severance or Redundancy Payments. All employee severance or
redundancy payments that have been made since 31 December 1995 were made
in compliance with applicable Law and any relevant Plans and there are no
legal actions, suits or claims pending or threatened with respect to any
such severance or redundancy payments and no fact or event exists that
could reasonably be expected to give rise to any such action, suit or
claim.
SECTION 3.17. Labor Matters. Except as set forth in Section 3.17 of
the Seller's Disclosure Schedule, (a) the Company is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company and currently there are no organizational
campaigns, petitions or other unionization activities seeking recognition of
a collective bargaining unit which could affect the Company; (b) there are no
material controversies, strikes, slowdowns or work stoppages pending or
threatened between the Company and any of its employees and the Company has
not experienced any such material controversy, strike, slowdown or work
stoppage within the past three years; (c) the Company has not breached or
otherwise failed to comply with the provisions of any collective bargaining
or union contract and there are no grievances outstanding against the Company
under any such agreement or contract which could have a Material Adverse
Effect; (d) there are no unfair labor practice complaints pending against the
Company before any Governmental Authority or any current union representation
questions involving employees of the Company which could have a Material
Adverse Effect; and (e) the Company is currently in compliance with all
applicable Laws relating to the employment of labor, including those related
to wages, hours, collective bargaining and the payment and withholding of
taxes and other sums as required by the appropriate Governmental Authority
and has withheld and paid to the appropriate Governmental Authority or is
holding for payment not yet due to such Governmental Authority all amounts
required to be withheld from employees of the Company and is not liable for
any material arrears of wages, taxes, penalties or other sums for failure to
comply with any of the foregoing.
SECTION 3.18. Taxes. Except as set forth in Section 3.18 of the
Seller's Disclosure Schedule, (a) (i) All returns and reports in respect of
Taxes required to be filed with respect to the Company for all periods ending
on or before the Closing Date have been timely filed (or will be timely filed
by the Company); (ii) all Taxes required to be shown on such returns and
reports or otherwise due or
<PAGE> 26
22
assessed have been timely paid; (iii) all returns and reports relating to
Income Taxes are true, correct and complete and all returns and reports of
the Company relating to Taxes other than Income Taxes are true, correct and
complete in all material respects; (iv) no adjustment relating to such
returns has been proposed in writing formally or informally by any Tax
authority and no basis exists for any such adjustment; (v) there are no
pending or, to the best knowledge of the Seller after due inquiry, threatened
actions or proceedings for the assessment or collection of Taxes against the
Company; (vi) there are no Tax liens on any assets of the Company except
liens for Taxes not yet due and payable; (vii) the Company has not been at
any time a member of any partnership or joint venture or the holder of a
beneficial interest in any trust for any period for which the statute of
limitations for any Tax has not expired; (viii) there are no outstanding
waivers or agreements extending the statute of limitations for any period
with respect to any Tax to which the Company may be subject; (ix) the Company
does not have any income reportable for a period ending after the Closing
Date but attributable to the sale of property or the provision of services
(e.g., an installment sale) occurring in or a change in accounting method
made for a period ending on or prior to the Closing Date which resulted in a
deferred reporting of income which economically accrued in a period ending on
or before the Closing Date from such transaction or from such change in
accounting method; (x) there are no requests by any Tax authority for
information currently outstanding with respect to the Taxes of the Company;
(xi) there are no proposed reassessments of any property owned by the Company
or other taxpayer specific proposals that could increase the amount of any
Tax to which the Company would be subject, (xii) no power of attorney that is
currently in force has been granted with respect to any matter relating to
Taxes of the Company, (xiii) the Company is not doing business or engaged in
a trade or business in any jurisdiction in which it has not filed all
required income or franchise tax Returns and (xiv) no returns have been or
will be filed by or on behalf of the Company on a consolidated, combined or
unitary basis.
(b) For purposes of the Seller's indemnification of the Purchaser
pursuant to Section 6.01, the representations in Section 3.18(a) shall be
deemed to have been made with no exception for items disclosed in Section
3.18 of the Seller's Disclosure Schedule or otherwise.
(c) (i) Section 3.18 of the Seller's Disclosure Schedule lists all
Returns filed by the Company for taxable periods ended on or after 28
September 1993, indicates the most recent Return for each relevant
jurisdiction and type of Tax for which an audit has been completed or the
statute of limitations has lapsed and indicates all Returns that
currently are the subject of audit; (ii) the Seller has made available to
the Purchaser correct and complete copies of all Returns, examination
reports, Tax assessments or proposals of assessment, Tax audit reports,
agreements with tax authorities and statements of deficiencies assessed
against or agreed to by the Company since 28 September 1993; and (iii)
the Seller has delivered to the Purchaser
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a true and complete copy of any tax-sharing or allocation agreement or
arrangement to which the Company is a party and a true and complete
description of any such unwritten or informal agreement or arrangement.
SECTION 3.19. Insurance. (a) Section 3.19(a) of the Seller's
Disclosure Schedule sets forth a complete list of all material policies of
insurance (including without limitation, errors and omissions insurance) that
the Company has in effect.
(b) With respect to each such insurance policy: (i) the policy is
legal, valid, binding and enforceable in accordance with its terms and,
except for policies that have expired under their terms in the ordinary
course, is in full force and effect; (ii) the Company is not in breach or
default (including any breach or default with respect to the payment of
premiums or the giving of notice), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default or
permit termination or modification, under the policy; (iii) no party to
the policy has repudiated or given notice of an intent to repudiate, any
provision thereof; and (iv) to the best knowledge of the Seller and the
Company after due inquiry, no insurer on the policy has been declared
insolvent or placed in receivership, conservatorship or liquidation.
(c) Section 3.19(c) of the Seller's Disclosure Schedule sets forth a
general description of all risks of a nature generally insured against
which the Company is self-insured or which are covered under any risk
retention program in which the Company participates.
(d) All material assets, properties and risks of the Company are
covered by valid and, except for policies that have expired under their
terms in the ordinary course, currently effective insurance policies or
binders of insurance (including, without limitation, general liability
insurance, property insurance and workers' compensation insurance) issued
in favor of the Company, in each case with responsible insurance
companies, in such types and amounts and covering such risks as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of the Company.
(e) No insurance policy listed in Section 3.19(a) of the Seller's
Disclosure Schedule will cease to be legal, valid, binding or enforceable
in accordance with its terms and in full force and effect on terms
identical to those in effect as of the date hereof as a result of the
consummation of the transactions contemplated by this Agreement.
SECTION 3.20. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the
<PAGE> 28
24
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Seller or the Company. Any amounts owing for services
provided to the Company or the Seller by any Person in connection with the
transactions contemplated by this Agreement or any other transaction
involving the Company (including, without limitation, any other sale of the
Company or public offering of the Company) will be settled by the Company
prior to the Closing Date or by the Seller.
SECTION 3.21. Year 2000 Compliance. All software licensed by the
Company pursuant to a Company License (other than any software licensed from
the Purchaser), and all other products used by the Company in connection with
its business (other than any product obtained from the Purchaser), is Year
2000 compliant, or will be Year 2000 compliant, in either case, with respect
to software owned by the Company or licensed to the Company by the Seller or
one of its Affiliates, at the expense of the Seller, in sufficient time to
avoid any disruption to the Company's business. For purposes of this Section
3.21, such software and such other products shall be deemed to be Year 2000
compliant to the extent they can manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization, Authority and Qualification of the
Purchaser. The Purchaser is a general partnership, and on or prior to
the Closing will be a corporation or a limited liability company, duly
organized and validly existing under the laws of the State of Delaware
and is duly licensed or qualified to do business and is in good standing
in each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification
necessary, except to the extent that the failure to be so licensed or
qualified would not adversely affect the ability of the Purchaser to
carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement. The Purchaser has all necessary power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Purchaser, the
performance by the Purchaser of its obligations hereunder and the
consummation by the Purchaser of the transactions contemplated hereby
have been duly authorized by all requisite action on its part. This
Agreement has been duly executed and delivered by the Purchaser and
(assuming due authorization, execution and delivery by the Seller) this
Agreement constitutes a legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in
<PAGE> 29
25
accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by general principles of equity.
SECTION 4.02. No Conflict. Except as may result from any facts or
circumstances relating solely to the Seller or the Company, the execution,
delivery and performance of this Agreement by the Purchaser do not and will
not (a) violate, conflict with or result in the breach of any provision of
the Purchaser's Partnership Agreement, (b) conflict with or violate any Law or
Governmental Order applicable to the Purchaser or (c) conflict with or
result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any Encumbrance on any of
the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the
Purchaser is a party or by which any of such assets or properties are
bound or affected which would have a material adverse effect on the
ability of the Purchaser to consummate the transactions contemplated by
this Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by the Purchaser do not and will
not require any consent, approval, authorization or other order of, action
by, filing with, or notification to, any Governmental Authority, except as
described in a writing given to the Seller by the Purchaser on or prior to
the date of this Agreement.
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the
Shares solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof.
SECTION 4.05. Brokers. Except for J.P. Morgan, the fees and expenses
of which will be paid for by the Purchaser, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) The
Seller covenants and agrees that, except as described in Section 5.01(a) of
the Seller's Disclosure Schedule, between the date hereof and the time of the
Closing, it shall
<PAGE> 30
26
cause the Company to conduct its business in the ordinary course and
consistent with the Company's prior practice. Without limiting the
generality of the foregoing, except as described in Section 5.01(a) of the
Seller's Disclosure Schedule, as requested by the Purchaser, or as required
to accommodate changes in the Purchaser's business practices, the Seller
shall cause the Company to (i) continue its advertising and promotional
activities, and pricing and purchasing policies, including capital
purchasing, in accordance with past practice; (ii) not shorten or lengthen
the customary payment cycles for any of its payables or receivables; (iii)
use all reasonable efforts to (A) preserve intact its business organization,
(B) keep available to the Purchaser the services of the employees of the
Company, (C) continue in full force and effect without material modification
all existing policies or binders of insurance currently maintained in respect
of the Company and its business and (D) preserve its current relationships
with its customers, suppliers and other persons with which it has significant
business relationships; (iv) exercise, but only after notice to the Purchaser
and receipt of the Purchaser's prior written approval, any rights of renewal
pursuant to the terms of any of the material leases or subleases which by
their terms would otherwise expire: and (v) not engage in any practice, take
any action, fail to take any action or enter into any transaction which could
cause any representation or warranty of the Seller to be untrue or result in
a breach of any covenant made by the Seller in this Agreement.
(b) Except as described in Section 5.01(b) of the Seller's
Disclosure Schedule, the Seller covenants and agrees that, prior to the
Closing, the Seller shall cause the Company not to do any of the things
enumerated in the second sentence of Section 3.08 (including, without
limitation, clauses (i) through (xix) thereof) without the prior written
consent of the Purchaser; provided, however, that if the Company desires
to take any of the actions enumerated in Section 3.08(v) in response to
general industry conditions, the Seller shall provide written notice of
the proposed actions to the Purchaser and the Purchaser shall respond to
such written notice not more than two Business Days after the receipt
thereof.
SECTION 5.02. Access to Information. (a) From the date hereof until
the Closing, upon reasonable notice, the Seller shall cause the Company to,
and shall cause each of the Company's officers, directors, employees, agents,
representatives, accountants and counsel to: (i) afford the officers,
employees and authorized agents, accountants, counsel, underwriters,
financing sources and representatives of the Purchaser reasonable access,
during normal business hours, to the offices, properties, plants, other
facilities, books and records of the Company (including access to the
Company's 1996 financial audit work papers) and to those officers, directors,
employees, agents, accountants and counsel of the Company who have any
knowledge relating to the Company or its business and (ii) furnish to the
officers, employees and authorized agents, accountants, counsel,
underwriters, financing sources and representatives of the Purchaser such
additional financial and operating data and other
<PAGE> 31
27
information regarding the assets, properties and goodwill of the Company
(excluding any Returns or other Tax information of the Seller) and its
business (or legible copies thereof) as the Purchaser may from time to time
reasonably request, including, without limitation, any financial information
or other information that will be required in connection with the IPO.
(b) In order to facilitate the resolution of any claims made against
or incurred by the Seller prior to the Closing, for a period of ten years
after the Closing, the Purchaser shall cause the Company to (i) retain
the books and records of the Company relating to periods prior to the
Closing in a manner reasonably consistent with the prior practice of the
Company, and prior to disposal thereof the Purchaser shall cause the
Company to contact the Seller and offer to provide it with copies of any
such books and records subject to reimbursement of reasonable expenses;
and (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of the Seller reasonable access
(including the right to make, at the Seller's expense, photocopies),
during normal business hours, to such books and records.
(c) In order to facilitate the resolution of any claims made by or
against or incurred by the Purchaser or the Company after the Closing or
for any other reasonable purpose, for a period of ten years following the
Closing, the Seller shall (i) retain the books and records of the Seller
which relate to the Company and its operations for periods prior to the
Closing and which shall not otherwise have been delivered to the Purchaser or
the Company; (ii) upon reasonable notice, afford the officers, employees and
authorized agents and representatives of the Purchaser or the Company
reasonable access (including the right to make photocopies, at the expense of
the Purchaser or the Company) during normal business hours, to such books and
records.
SECTION 5.03. Confidentiality. (a) Except to the extent of any
disclosure required (after consultation with the Seller and after seeking
appropriate confidential treatment) to be made in the Purchaser's
registration statement on Form S-1 (including in any exhibits thereto) filed
with the Securities and Exchange Commission (the "SEC") in connection with
the IPO or in any future filings made with the SEC or other regulatory
authorities, and except as reasonably required by the underwriters in
connection with the IPO, the Parties shall comply with, and shall cause their
respective Affiliates, representatives and agents to comply with all of their
respective obligations under, the Non-Disclosure Agreement, dated as of 18
June 1996, between the Seller, the Company and the Purchaser (the
"Non-Disclosure Agreement"), until the Closing, at which time such
Non-Disclosure Agreement and the obligations of the Purchaser and the Company
thereunder shall terminate. If this Agreement is, for any reason terminated
prior to the Closing, the Non-Disclosure Agreement shall continue in full
force and effect.
<PAGE> 32
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(b) The Seller agrees to, and shall cause its agents,
representatives and Affiliates to: (i) treat, hold as confidential and
not exploit for its benefit or the benefit of other relationships with
any of its customers (and not disclose or provide access to any Person
to) all information relating to the Company's products, customers,
assets, plans, business, finances and technological developments and
programs, (ii) in the event that the Seller or any such agent,
representative or Affiliate becomes legally compelled to disclose any
such information, provide the Purchaser with prompt written notice of
such requirement so that the Purchaser or the Company may seek a
protective order or other remedy or waive compliance with this Section
5.03(b), and (iii) in the event that such protective order or other
remedy is not obtained, or the Purchaser waives compliance with this
Section 5.03(b), furnish only that portion of such confidential
information which is legally required to be provided and exercise its
best efforts to obtain assurances that confidential treatment will be
accorded such information; provided, however, that this sentence shall
not apply to any information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement by
the Seller, its agents, representatives or Affiliates; provided further
that, with respect to Company Intellectual Property, specific information
shall not be deemed to be within the foregoing exception merely because
it is embraced in general disclosures in the public domain.
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents. (a) Each party shall for itself use all reasonable efforts to
obtain (or, in the case of the Seller, cause the Company to obtain) all
authorizations, consents, orders and approvals of all Governmental
Authorities and officials that may be or become necessary for its execution
and delivery of, and the performance of its obligations pursuant to, this
Agreement and will cooperate fully in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto agrees for
itself to supply as promptly as practicable to the appropriate Governmental
Authorities any additional information and documentary material that may be
requested pursuant to any applicable Law. Without limiting the generality of
the foregoing, each party hereto will (i) use all reasonable efforts to
prevent the entry in a judicial or administrative proceeding brought under
any antitrust law of any preliminary injunction or other order that would
make consummation of the transactions contemplated hereby unlawful or would
prevent or delay such consummation; and (ii) take promptly, in the event that
such an injunction or order has been issued in such a proceeding, all steps
necessary to prosecute an appeal of such an injunction or order, and
diligently prosecute such appeal.
(b) The Seller shall or shall cause the Company to give promptly
such notices to third parties and use all reasonable efforts to obtain
such third party consents and estoppel certificates as the Purchaser may
deem necessary or desirable in connection with the transactions
contemplated by this Agreement.
<PAGE> 33
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(c) The Purchaser shall cooperate and use all reasonable efforts to
assist the Seller in giving such notices and obtaining such consents and
estoppel certificates; provided, however, that neither the Purchaser nor
the Seller shall have any obligation to give any guarantee or other
consideration of any nature in connection with any such notice, consent
or estoppel certificate or to consent to any change in the terms of any
agreement or arrangement which the Purchaser may deem adverse to the
interests of the Purchaser or the Company or their respective businesses.
(d) Neither the Purchaser nor the Seller knows of any reason why all
the consents, approvals and authorizations necessary for the consummation
of the transactions contemplated hereby will not be received.
SECTION 5.05. Notice of Developments. (a) Prior to the Closing, the
Seller shall, and the Seller shall cause the Company to, promptly notify the
Purchaser in writing of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could result in any
breach of a representation or warranty or covenant of the Seller in this
Agreement, or could result in any breach of a covenant of the Seller in this
Agreement, or which could have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any material
respect.
(b) Prior to the Closing, the Purchaser shall promptly notify the
Seller in writing of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could result in
any breach of a representation or warranty or covenant of the Purchaser
in this Agreement or which could have the effect of making any
representation or warranty of the Purchaser untrue or incorrect in any
material respect.
SECTION 5.06. No Solicitation of Employees. The Seller agrees that it
shall not, and shall cause each of its Affiliates not to, during the period
from the date hereof until Closing and, if the Closing occurs, for a period
of two years from the Closing, without the prior written consent of the
Purchaser, directly or indirectly, solicit on a specific or targeted basis
for employment any person who is an employee of the Company, provided that
this Section 5.06 shall not prohibit any form of employment advertising or
prevent the hiring of any individual who contacts the Seller or any of its
Affiliates.
SECTION 5.07. Use of Intellectual Property. (a) The Seller
acknowledges that from and after the Closing the names "Traviswiss",
"Travitel", "OPAL", "Tourbo", "Travi Dynamic", "Travi Access", "Travi
Remote", "Travi to Win", "Travipit", "Traviprinting", "TraviIntern",
"Intravinet", "Extravinet", "Travi-Rainbow", "Travi", "Travidata" and
"Travioffice", and all related names, marks and logos and product names,
marks and logos (all of such names, marks and logos being
<PAGE> 34
30
the "Company Names") shall be owned by the Company, that (except as provided
in Section 5.07(b)) neither the Seller nor any of its Affiliates shall have
any rights in the Company Names, and that neither of the Seller nor any of
its Affiliates will contest the ownership or validity of any rights of the
Purchaser or the Company in or to the Company Names.
(b) Except as expressly agreed in writing by the Purchaser or
pursuant to any agreements and licenses between the Purchaser and the
Seller, or the Company and the Purchaser or any of its Affiliates, and
except for the names set forth on Exhibit 5.07(b), to which the parties
identified thereon shall continue to have the rights specified on such
Exhibit, from and after the Closing, neither the Seller nor any of its
Affiliates shall use any of the Company Intellectual Property.
(c) To the extent any of the Company Intellectual Property is
obtained from the Seller or one of its Affiliates pursuant to a Company
License or otherwise, effective on the Closing Date, the Seller or such
Affiliate hereby grants to the Company a perpetual, nonexclusive,
royalty-free license to use such Company Intellectual Property for so
long as, in the sole discretion of the Purchaser and the Company, the
Company requires such Company Intellectual Property in the conduct of its
business.
SECTION 5.08. Monthly Financial Statements. The Seller agrees that,
between the date hereof and the Closing, promptly following the end of each
calendar month, but in no event later than 15 days following the end of each
calendar month, it will prepare or cause to be prepared, and will promptly
provide to the Purchaser, a balance sheet of the Company as of the end of the
preceding calendar month and statements of income of the Company for the
preceding calendar month. Such monthly financial statements shall be
prepared in accordance with past practice.
SECTION 5.09. Pre-Closing Balance Sheet. No fewer than five Business
Days prior to the Closing Date, the Seller shall cause the Company to prepare
an unaudited balance sheet of the Company in accordance with this Section
5.09 (the "Pre-Closing Balance Sheet"). In the event that the Closing is
scheduled to occur after the fifteenth day of any particular calendar month,
the Pre-Closing Balance Sheet shall be prepared as of the last day of the
immediately preceding calendar month. If the Closing is scheduled to occur
on or prior to the fifteenth day of any particular calendar month, the
Pre-Closing Balance Sheet shall be prepared as of the last day of the second
preceding calendar month. The Pre-Closing Balance Sheet shall be prepared in
accordance with Accounting Principles applied on a basis consistent with the
preparation of the Net Asset Test Reference Balance Sheet and shall exclude
(i) any indebtedness for borrowed money of the Company, and (ii) any cash or
cash equivalents, other than cash in the amount of any checks outstanding.
During the preparation of the Pre-Closing Balance Sheet and during the period
of any review by
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the Purchaser and its representatives of the Pre-Closing Balance Sheet,the
Seller shall cause the Company to provide, and shall cause the Company
and its officers, employees and agents to provide, full access to the books,
records, facilities and employees of the Company, in each case to the extent
required by the Purchaser and its representatives in order to monitor the
preparation of, and review, the Pre-Closing Balance Sheet.
SECTION 5.10. Company Pension Fund. (a) Until such time as the
Purchaser decides to establish its own pension arrangements for the employees
of the Company pursuant to Section 5.10(b), the Seller shall use reasonable
efforts to cause the "Allgemeine Pensionskasse der Swissair (APK)" and the
"Kaderversicherueng der Swissair" (together, the "Seller's Pension Funds") to
provide for pension cover for the active and retired employees of the Company
at substantially the same cover as is provided as of the Closing Date. During
such time, the Purchaser shall cause the Company to pay or make arrangements
for payment of all contributions required under the regulations applicable to
the Seller's Pension Funds.
(b) In the event the Purchaser decides at any time after the Closing
Date to establish its own pension arrangements for the employees of the
Company, the following principles shall apply:
(i) The Purchaser will cause the Company to establish a new
pension fund (or pension funds) or to designate an
existing pension fund, as the case may be (the "New
Company Fund"), which shall cover the then active
employees of the Company.
(ii) The main principles of the transfer of assets
and liabilities from the Seller's Pension Funds to the New
Company Fund shall be set out in an agreement between such
funds (the "Pension Transfer Agreement") which shall
provide for (A) the transfer of all liabilities relating
to then active Company employees and (B) a transfer of an
adequate and fair portion of the reserves of the Seller's
Pension Funds which shall be proportional to the
liabilities (calculated on an accrued benefit obligation
basis) that the Seller's Pension Funds have with respect
to the employees whose liabilities are transferred under
such Pension Transfer Agreement and all other employees
covered under the Seller's Pension Funds. Such Pension
Transfer Agreement shall moreover provide that the amount
transferred is at least equal to the actuarial valuation
of accrued liabilities calculated on the same actuarial
principles as those used in the past.
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(iii) The Pension Transfer Agreement shall thereafter be
submitted for approval to the competent supervising
authorities.
(c) The Seller agrees to use reasonable efforts to cause the
Seller's Pension Funds to apply the principles set forth in Sections
5.10(b)(ii) and (iii).
SECTION 5.11. Insurance Coverage by the Seller. The Seller shall
continue, at the Company's request, to provide insurance coverage to the
Company as currently provided to the Company until 31 December 1997. The
Purchaser will cause the Company to pay the insurance premium for such
coverage at the rates in effect on the Closing Date.
SECTION 5.12. Certain Services. (a) The Seller shall, or shall cause
atraxis AG, a wholly-owned subsidiary of the Seller ("atraxis"), or aviReal
AG, a wholly-owned subsidiary of the Seller ("aviReal"), to, as the case may
be, continue to provide to the Company the following services, upon the
terms, and at the prices, set forth on Exhibit 5.12(a) hereto, for a period
of not less than nine months following the Closing Date, provided that (x)
the Company may cease to receive any such services upon not less than 90
days' prior written notice to the Seller or atraxis, as the case may be, and
(y) the Seller (or atraxis or aviReal, as the case may be) may cease to
provide any such services upon not less than 90 days' prior written notice to
the Purchaser, but in no event shall the Seller's notice of termination (or
atraxis' or aviReal's notice of termination, as the case may be) be effective
sooner than the date that is nine months after the Closing Date:
(i) human resources administration (service
provider: the Seller);
(ii) payroll services (service provider: the Seller);
(iii) administration of health insurance
(service provider: the Seller);
(iv) mail distribution (service provider: aviReal);
(v) mail service (service provider: aviReal);
(vi) administration of seasonal tickets for public
transportation (service provider: aviReal);
(vii) administration for parking lot access
(service provider: aviReal);
(viii) administration and issuance of company identification
cards (service provider: aviReal);
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(ix) medical services (service provider: the Seller);
(x) EDP system services for office material
orders (service provider: Swissair); and
(xi) "IMS APPLICATIONS" Product - SAP accounting system
(service provider: atraxis); provided, however, that in no event
shall atraxis' notice of termination with regard to the
services described in this Section 5.12(a)(xi) be effective
sooner than the first anniversary of the Closing Date.
(b) The Seller shall cause atraxis to continue to provide to the
Company the following services, upon the terms, and at the prices, set
forth on Exhibit 5.12(b) hereto, for a period of not less than one year
following the Closing Date, provided that the Company may cease to
receive, and atraxis may cease to provide, any such services upon not
less than six months' prior written notice to the other party, but in no
event shall the Company cease to receive, or atraxis cease to provide,
any such services sooner than the first anniversary of the Closing Date:
(i) "STAFF SERVICES" Product - development/consultancy;
(ii) "REMIS" Product - remote equipment maintenance and
installation services;
(iii) "TRAVITEL" Product; and
(iv) "MVS HOST SYSTEM" Product - host services profs,
problem/configuration management, tso, Roscoe, or
any replacement system or application for any of the
foregoing.
(c) The Seller shall cause atraxis to continue to provide to the
Company the following services, upon the terms, and at the prices, set
forth on Exhibit 5.12(c) hereto, provided that the Company may cease to
receive, and atraxis may cease to provide, any such services upon not
less than six months' prior written notice to the other party:
(i) "RENTAL/USE OF PREMISES" Product - room
rental storage.
(d) The Seller shall cause atraxis to continue to provide to the
Company the following services, upon the terms, and at the prices, set
forth on Exhibit 5.12(d) hereto, provided that the Company may cease to
receive, and atraxis may cease to provide, any such services upon not
less than twelve months' prior
<PAGE> 38
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written notice to the other party, but in no event shall the Company cease
to receive, or atraxis cease to provide, any such services sooner than
October 21, 1998:
(i) "TELECOMMUNICATION" Product - network support.
(e) The Seller shall cause atraxis to continue to provide to the
Company the following services, upon the terms, and at the prices, set
forth on Exhibit 5.12(e) hereto, provided that (i) the Company may cease
to receive any such services upon not less than twelve months' prior
written notice to atraxis, but in no event shall the Company cease to
receive any such services sooner than December 31, 1999, unless the
Company shall have demonstrated (by providing reasonably detailed
supporting documentation to atraxis including, but not limited to,
documentation regarding the cost of the alternative) that there is a less
costly alternative for the provision of such services, including having
the Company provide such services to itself, and atraxis shall have
failed to match such less costly alternative, and (ii) atraxis may cease
to provide any such services upon not less than twelve months' prior written
notice to the Company, but in no event shall atraxis' notice of termination
with regard to OPAL services be effective sooner than December 31, 2001, and
in no event shall atraxis' notice of termination with regard to Tourbo
services be effective sooner than December 31, 2002:
(i) "TRAVISWISS" Product - national vendor systems, including OPAL
and Tourbo.
(f) So long as the Company is receiving any of the services described
in Sections 5.12(b)(ii) or (iii), Section 5.12(d)(i) or Section 5.12(e)(i),
the Seller shall cause atraxis not to cease to provide any of the services
described in Sections 5.12(b)(i) or (iv).
(g) After the Closing Date, the Company shall have no obligation to
purchase any services from the Seller or its Affiliates other than the
services described in Sections 5.12(a), (b), (c), (d) and (e).
SECTION 5.13. Certain Intercompany Payments. (a) The parties agree
that the payment by the Company to the Seller of management charges shall
cease on or prior to the Closing Date.
(b) All amounts owed by the Seller or any of its Affiliates to the
Company prior to the Closing Date shall be paid by the Seller or such
Affiliate to the Company on or prior to the Closing Date.
(c) The Seller shall cause the Company to repay all amounts owed by
the Company to the Purchaser or the Seller, other than amounts due in the
ordinary
<PAGE> 39
35
course of business consistent with past practice, to the Purchaser or the
Seller, as the case may be, prior to the first day of the Measuring Period.
SECTION 5.14. Intercompany Loan. The Seller shall use reasonable
efforts to cause the Company to repay prior to the Closing Date the loan
payable to the Seller that is classified on the Company's balance sheet as
"DARLEHEN" (the "Intercompany Loan"). To the extent any amount of principal
with regard to the Intercompany Loan remains unpaid at Closing, the Seller
shall assign all rights to such principal to the Purchaser pursuant to an
instrument in writing that is reasonably satisfactory to the Purchaser. As
of the Closing Date, no interest shall be due or payable to the Seller with
respect to the Intercompany Loan.
SECTION 5.15. Right of First Refusal. (a) If, at any time between the
Closing Date and the tenth anniversary thereof, the Purchaser or any
Affiliate thereof (the "Prospective Seller") shall have agreed with a Person
other than the Seller or one of its Affiliates (the "Prospective Buyer") to
sell or otherwise transfer the Shares (or all or substantially all of the
assets of the Company) (the "Company Interest") to the Prospective Buyer, the
Prospective Seller shall deliver a written notice of its intention to sell
the Company Interest (the "Notice of Intention") to the Seller, setting forth
the Prospective Seller's intention to effect such a sale or transfer, the
price at which the Prospective Seller proposes to sell the Company Interest
to the Prospective Buyer (the "First Refusal Price"), and the other material
terms of the Prospective Buyer's offer. A notice of Intention, once given,
shall be irrevocable. The Notice of Intention shall be dated the date it is
delivered by the Prospective Seller to the Seller.
(b) Upon receipt of the Notice of Intention, the Seller shall have
the right to purchase the Company Interest at the First Refusal Price,
and otherwise on the same terms set forth in the Notice of Intention.
The right of the Seller to purchase the Company Interest pursuant to this
Section 5.15(b) shall be exercisable by written notice to the Prospective
Seller (the "Notice of Exercise") within 10 Business Days from the date
of the Notice of Intention (the "Option Period"). The right of the
Seller pursuant to this Section 5.15(b) to give notice of its intention
to purchase the Company Interest shall terminate if it is not exercised
within 10 Business Days of the date of the Notice of Intention. A Notice
of Exercise, once given, shall be irrevocable.
(c) If the Seller does not deliver a Notice of Exercise during the
Option Period, or if the sale by the Prospective Seller of the Company
Interest to the Seller is not consummated within 30 Business Days after
the delivery by the Seller to the Prospective Buyer of a Notice of
Exercise, then the Prospective Seller may sell the Company Interest to
the Prospective Buyer at a price no lower than the First Refusal Price
and on terms no more favorable to the Prospective Buyer than those set
forth in the Notice of Intention.
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SECTION 5.16. Transfer of Certain Company Intellectual Property. (a)
On or prior to the Closing Date, the Seller will transfer to the Company
title to the following items of Company Intellectual Property (the
"Transferred Intellectual Property"), free and clear of any Encumbrances:
(i) OPAL; (ii) Tourbo; (iii) Interface Suivi/SAP R2; and (iv) Travi
Printing for WIN 3.11 and WIN 95/NT. On the Closing Date, the Company
and the Seller shall enter into a license agreement substantially in the
form of Exhibit 5.16(a) (the "Seller Post-Closing License") pursuant to
which the Company will grant to the Seller a perpetual, nonexclusive,
no-cost license (x) to use the Transferred Intellectual Property in
conjunction with hosting services provided to any airline Affiliate of
the Seller or any airline customer of the Seller (or any Affiliate
thereof), (y) to sublicense OPAL and Tourbo to any of the parties
described in clause (x) of this sentence, so long as such product is used
for internal airline purposes only and (z) to sublicense the "Guided
Booking Application" and "Frequent Flyer Information/Data Base"
components of the Customer File Administration software listed in
Attachment A to Exhibit 5.16(a) hereto to any airline customer in
conjunction with such airline customer's licensing of the Seller's
reservation system, provided that any revenue earned from such sublicense
shall be paid to the Company, and provided further that the price charged
to such airline customer for such sublicense shall be consistent with
past practice or commercially reasonable.
(b) On the Closing Date, the Company and the Seller shall enter into a
license agreement substantially in the form of Exhibit 5.16(b) (the "Company
Post-Closing License") pursuant to which the Seller will grant to the Company
a perpetual, nonexclusive, no-cost license, with the right to sublicense to
the Purchaser, any of its Affiliates or any of its distributors (in either
case, other than to an airline for its internal purposes), the following
items of Company Intellectual Property: (i) SNA File Transfer; (ii) Host to
Host; (iii) ATB Printing; (iv) SAS/Mona Configurator; (v) SAS/Mona Problem
Management Reporting; and (vi) TPF Terminal File Interface to Mona
Configurator.
SECTION 5.17. Austrian Airlines. The Seller shall cause atraxis to
transfer to the Company on the Closing Date its contractual relationship with
Austrian Airlines and its Affiliates relating to the right to use OPAL and
Tourbo software products, and the Company shall be entitled to receive any
revenue from Austrian Airlines and its Affiliates relating thereto from and
after the Closing Date, other than with respect to transaction processing
services provided by atraxis.
SECTION 5.18. Further Action. Each of the Parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers as
may be required to carry out the provisions of this Agreement and consummate
and make effective the transactions contemplated by this Agreement.
<PAGE> 41
37
ARTICLE VI
TAX MATTERS
SECTION 6.01. Tax Indemnity. (a) Except to the extent of Ordinary
Course Taxes, the Purchaser and its Affiliates, officers, directors,
employees, agents, successors and assigns (each for purposes of this Article
VI an "Indemnified Party") shall be indemnified and held harmless by the
Seller for any and all Losses arising out of or resulting from:
(i) the breach of any representation or warranty made in
Section 3.18; or
(ii) Liabilities of the Company for Taxes with respect to the
period before the Closing Date; provided, however, that such
indemnity shall be reduced by any Tax Benefit to the Company with
respect to such Losses or Liabilities or the items or adjustments
resulting in such Losses or Liabilities; provided, further, that
amounts under clause (i) and clause (ii) shall be without
duplication of the amount provided for under the other clause.
To the extent that any of the Seller's undertakings set forth in this
Section 6.01 may be unenforceable, the Seller shall contribute the
maximum amount that it is permitted to contribute under applicable law to
the payment and satisfaction of all Losses and Liabilities incurred by
the Indemnified Parties. For purposes of this Article VI, the Liability
of the Company for Taxes either (y) arising out of or resulting from a
breach of any representation or warranty made in Section 3.18 or (z)
described in Section 6.01(a)(ii) shall constitute a Loss to the
Purchaser.
(b) The Seller and the Purchaser agree to treat all payments made
under this Article VI and all indemnification payments made under Article
VIII of this Agreement as adjustments to the Purchase Price for Tax
purposes except to the extent that the laws of a particular jurisdiction
provide otherwise.
SECTION 6.02. Apportionment of Taxes (a) For purposes of Section
6.01, Taxes with respect to the period before the Closing Date shall mean:
(i) Taxes imposed on the Company with respect to taxable periods of such
person ending on or before the Closing Date; and (ii) with respect to taxable
periods beginning before the Closing Date and ending after the Closing Date,
Taxes imposed on the Company which are allocable, pursuant to Section
6.02(b), to the portion of such period ending on the Closing Date.
(b) In the case of Taxes that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing
Date, the portion
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38
of any such Tax that is allocable to the portion of the period ending on the
Closing Date shall be:
(i) in the case of Taxes that are either (x) based upon or
related to income or receipts, or (y) imposed in connection with
any sale or other transfer or assignment of property (real or
personal, tangible or intangible) (other than conveyances pursuant
to this Agreement, which are governed by Section 6.06) or on the
supply of services, deemed equal to the amount which would be
payable if the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic basis with
respect to the assets of the Company, or otherwise measured by the
level of any item, deemed to be the amount of such Taxes for the
entire period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately
preceding period) multiplied by a fraction the numerator of which
is the number of calendar days in the period ending on the Closing
Date and the denominator of which is the number of calendar days in
the entire period.
SECTION 6.03. Returns and Payments. (a) From the date of this
Agreement through the Closing Date, the Seller shall cause the Company
to prepare and file in proper form with the appropriate Tax Authority in a
timely manner all Returns relating to the Company that are due on or before
the Closing Date. The Seller shall cause the Company to pay Taxes prior to
the Closing Date in such amounts and at such times as are consistent with
past practices employed with respect to the Company. In the event that the
Closing Date does not occur prior to the due date (including any extension
thereof) for the filing of Returns in respect of Income Taxes and capital
Taxes for the Company's 1996 taxable year, the Seller will cause the Company
to provide the Purchaser and its authorized representative a copy of such
completed Returns at least 10 Business Days prior to the earlier of the due
date (including any extension thereof) for the filing of such Returns or the
date of filing. The Purchaser shall cause the Company to prepare and file in
proper form with the appropriate Tax authority in a timely manner all Returns
relating to the Company that are due after the Closing Date. With respect to
Returns, other than Returns in respect of Income Taxes, capital Taxes and
VAT, caused to be filed by the Purchaser for any period ending on or before
the Closing Date, the Purchaser shall cause the Company to pay the Taxes
shown as due and owing on such Returns. With respect to Income Taxes and
capital Taxes with respect to Returns caused to be filed by the Purchaser for
any period ending on or before the Closing Date, the Purchaser shall cause
the Company to pay the Taxes shown as due and owing on such Returns, and the
Seller shall reimburse the Purchaser on the due date for such Taxes. In the
event that the Seller fails to reimburse the Purchaser on the due date,
the Purchaser shall be entitled to interest on the amount caused to be paid
by the Purchaser but in no event shall such failure affect Purchaser's
obligation to cause the Company to timely file any Return.
<PAGE> 43
39
Returns of the Company not yet filed for any taxable period that ends on or
before the Closing Date shall be prepared in a manner consistent with past
practices employed with respect to the Company (except to the extent counsel
for the party preparing the return renders a legal opinion that there is no
reasonable basis in law therefore or determines that a Return cannot be so
prepared and filed without being subject to penalties).
(b) With respect to Returns, other than Returns in respect of Income
Taxes and capital Taxes or VAT, caused to be filed by the Purchaser for
any period beginning before and ending after the Closing Date, the
Purchaser shall cause the Company to pay the Taxes shown as due and owing
on such Returns. With respect to Income Taxes and capital Taxes, with
respect to Returns caused to be filed by the Purchaser for any period
beginning before and ending after the Closing Date, the Purchaser shall
cause the Company to pay the Taxes shown as due and owing on such Returns
and the Seller shall reimburse the Purchaser on the due date for such
Taxes for the amount of such Taxes determined to be properly apportioned
under Section 6.02(b) to the portion of such period ending on the Closing
Date. To the extent that the Seller has caused the Company to pay such
Taxes in an amount greater than that apportioned under Section 6.02(b),
the Purchaser shall reimburse the Seller for the amount of such excess.
In the event that the Seller fails to reimburse the Purchaser on the due
date, the Purchaser shall be entitled to interest on the amount caused to
be paid by the Purchaser but in no event shall such failure affect the
Purchaser's obligation to cause the Company to timely file any Return.
The Purchaser will notify or cause the Company to notify the Seller of
any position the Company will take on a Return which would be
inconsistent with that taken by the Seller or the Company on prior
Returns. If the Purchaser and the Seller disagree on the position taken
and the position would in any way alter the balance of Taxes owing or Tax
refunds or credits obtainable with respect to (i) any Tax period of the
Company ending on or prior to the Closing Date or (ii) in the case of Tax
refunds or credits, any period up to and including the Closing Date which
is part of a Tax period of the Company beginning prior to and ending
after the Closing Date, then the parties shall submit the matter to a
mutually selected independent nationally recognized accounting firm,
other than KPMG Peat Marwick and its affiliates and Coopers & Lybrand and
its affiliates (the "Independent Firm"), and the Independent Firm shall
resolve the issue based on a standard of maximal fairness to both the
Purchaser and the Seller.
(c) With respect to any Return required to be caused to be filed by
the Purchaser with respect to the Company and as to which an amount of
Tax is allocable to the Seller under Section 6.02(b), the Purchaser shall
cause the Company to provide the Seller and its authorized
representatives with a copy of such completed Return and a statement
certifying the amount of Tax shown on such Return that is allocable to
the Seller pursuant to Section 6.02(b), together with appropriate
supporting information and schedules at least 10 Business Days prior to
the due date (including
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40
any extension thereof) for the filing of such Return, in the case of Taxes
other than payroll, sales and use and Social Security Taxes, or five (5)
days prior to the date on which such Return is required to be filed (taking
into account any extensions) in the case of payroll, sales and use and Social
Security Taxes, and the Seller and its authorized representatives shall have
the right to review and comment on such Return and statement prior to the
filing of such Return.
(d) With respect to (y) Returns relating to VAT filed by the Company
after the Closing Date for any period ending before the Closing Date and
(z) Returns relating to VAT filed by the Company after the Closing Date
for any period beginning before and ending after the Closing Date (but as
to (z), only for amounts of VAT apportioned pursuant to Section
6.02(b)(i) to the portion of such period ending on the Closing Date), the
Seller shall reimburse the Purchaser for any amount of VAT shown on such
Return and not refunded, including any amount that is both (i) in respect
of self-supplies, as per Article 8 of the Swiss VAT Ordinance and (ii) a
cost factor in the Company's profit and loss account.
SECTION 6.04. Contests. (a) After the Closing, the Purchaser shall
promptly notify or cause the Company to notify the Seller in writing of any
written notice of a proposed assessment or claim in an audit or
administrative or judicial proceeding of the Purchaser or of the Company
which, if determined adversely to the taxpayer, would be grounds for
indemnification under this Article VI or could otherwise result in any Tax
cost to the Seller; provided, however, that a failure to give such notice
will not affect the Purchaser's right to indemnification under this Article
VI except to the extent such failure on the part of the Purchaser or the
Company prejudices the Seller by preventing the avoidance of all or a portion
of the Tax liability in question.
(b) In the case of an audit or administrative or judicial proceeding
that relates to periods ending on or before the Closing Date, provided
that the Seller acknowledge in writing its indemnification obligation
liability under Article VI of this Agreement with respect to the
potential liability of the Company as a result of such audit or
administrative or judicial proceeding, the Seller shall have the right,
at its expense, to participate in and control the conduct of such audit
or proceeding; the Purchaser may also participate in any such audit or
proceeding and, if the Seller does not assume the defense of any such
audit or proceeding, the Purchaser, at its expense, may defend the same
in such manner as it may deem appropriate, including, but not limited to,
settling such audit or proceeding after giving five days' prior written
notice to the Seller setting forth the terms and conditions of
settlement. In the event that issues relating to a potential adjustment
for which the Seller has acknowledged its indemnification obligation are
required to be dealt with in the same proceeding as separate issues
relating to a potential adjustment for which the Purchaser would be
liable, the Purchaser shall have the right, at its expense, to control
the audit or
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41
proceeding with respect to the latter issues, provided that the Purchaser
provides the Seller with a written acknowledgement of the Purchaser's
liability.
(c) Notwithstanding Section 6.04(b), neither the Purchaser nor the
Seller shall enter into or cause the Company to enter into any compromise
or agree to settle or cause the Company to agree to settle any claim
pursuant to any Tax audit or proceeding which would adversely affect the
other party for such year or any prior or subsequent year without the
written consent of the other party which consent may not be unreasonably
withheld. If the Purchaser or the Seller refuses to provide the
respective other party with written consent to settle any such claim,
then the parties shall submit the matter to an Independent Firm and the
Independent Firm shall resolve the issue based on a standard of maximal
fairness to both the Purchaser and the Seller.
(d) The Purchaser and the Seller shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with
(i) the filing of Returns pursuant to Section 6.03 (including such
amended Returns for periods (or portions thereof) ending on or prior to
the Closing Date that the Seller may reasonably request the Purchaser to
file or cause the Company to file; provided, however, that if in the
Purchaser's reasonable judgment the filing of the amended return would be
disadvantageous to the Purchaser, the Purchaser may deny the Seller's
request and the parties shall submit the matter to an Independent Firm
and the Independent Firm shall resolve the issue based on a standard of
maximal fairness to both the Purchaser and the Seller and (ii) any audit,
litigation or other proceeding with respect to Taxes.
SECTION 6.05. Survival of Obligations. Notwithstanding any provision
in this Agreement to the contrary, obligations of the Seller to indemnify and
hold harmless the Indemnified Parties pursuant to this Article VI, and the
representations and warranties contained in Section 3.18, shall terminate at
the close of business on the 180th day following the expiration of the
applicable statute of limitations with respect to the Tax liabilities in
question (giving effect to any waiver, mitigation or extension thereof).
SECTION 6.06. Conveyance Taxes. The Seller shall pay (or, if the
Purchaser pays, shall reimburse the Purchaser for) any real property transfer
or gains, sales, use, transfer, stock transfer, and stamp taxes, any
transfer, recording, registration, and other fees, and any similar Taxes (but
specifically not including Taxes on or with respect to income) that become
payable in connection with the transactions contemplated by this Agreement.
The Company shall prepare in a timely manner for the review and approval of
the parties and file such applications and documents as shall permit any such
Tax to be assessed and paid on or prior to the Closing Date in accordance
with any available presale filing procedure. The parties shall execute and
deliver all instruments and certificates necessary to enable the Company to
comply with the foregoing.
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SECTION 6.07. Tax Refunds, Credits and Other Payments. The Purchaser
shall, within 30 days of receipt of any Tax refund or credit actually
received by or on behalf of the Company or successor thereto (other than a
refund or credit with respect to Taxes paid by the Company or successor
thereto on or after the Closing Date and not previously indemnified by the
Seller pursuant to Section 6.01(a)) (A) for or attributable to any Tax period
of the Company ending at or prior to the Closing Date or (B) for or
attributable to any period up to and including the Closing Date which is part
of a Tax period of the Company beginning prior to and ending after the
Closing Date, pay such Tax refund or credit (a "Returnable Refund or Credit")
to the Seller on an After-Tax Basis (including any interest or addition
actually received thereon). If the amount of any Returnable Refund or Credit
is applied against any other liability of any of the Company or successor
thereto for Taxes for any Tax period after the Closing Date, the Purchaser
shall, within 30 days of the date of such application, pay to the Seller an
amount equal to the Returnable Refund or Credit on an After-Tax Basis
(including any interest or addition actually received thereon). The
Purchaser shall deliver with payment to the Seller a copy of any written
explanation of the Facts surrounding the Returnable Refund or Credit and a
copy of any related notice or statement received from any Tax authority.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. Conditions to Obligations of the Seller. The obligations
of the Seller to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of
the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained in this Agreement shall have
been true and correct in all material respects when made and shall be
true and correct in all material respects as of the Closing, with the
same force and effect as if made as of the Closing Date, other than such
representations and warranties as are made as of another date, which
shall be true and correct in all material respects as of such date
(provided, however, if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether
this Section 7.01(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects), and
the covenants and agreements contained in this Agreement to be complied
with by the Purchaser on or before the Closing shall have been complied
with in all material respects, and the Seller shall have received a
certificate from the Purchaser to such effect signed by a duly authorized
officer thereof;
<PAGE> 47
43
(b) No Proceeding or Litigation. No Action shall have been commenced
by or before any Governmental Authority against the Seller, the Company or
the Purchaser, seeking to restrain or prevent the consummation of the
transactions contemplated by this Agreement; provided, however, that the
provisions of this Section 7.01(b) shall not apply if the Seller, the Company
or any Affiliate thereof have directly or indirectly solicited or encouraged
any such Action;
(c) Resolutions. The Seller shall have received a true and complete
copy, certified by the Secretary of the Purchaser, of the resolutions of
the Purchaser's Supervisory Board evidencing its authorization of the
consummation of the transactions contemplated hereby;
(d) Incumbency Certificate. The Seller shall have received a
certificate of the Secretary of the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to sign this
Agreement and the other documents to be delivered hereunder;
(e) Escrow Agreement. The Purchaser shall have duly executed and
delivered the Escrow Agreement in substantially the form of Exhibit
2.05(f) hereto;
(f) Consummation of Transactions Contemplated by Transaction
Agreement. The transactions contemplated by the Transaction Agreement, a
form of which is attached as Exhibit 7.01(f) hereto (the "Transaction
Agreement"), shall have been consummated;
(g) Completion of the IPO. The IPO shall have been consummated; and
(h) Seller Post-Closing License. The Company shall have executed
and delivered the Seller Post-Closing License.
SECTION 7.02. Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the
Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Seller contained in this Agreement shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects as of the Closing with the same force
and effect as if made as of the Closing, other than such representations
and warranties as are made as of another date, which shall be true and
correct in all material respects as of such date (provided, however, that
the representations and warranties contained in Section 3.03 will be true
and
<PAGE> 48
44
correct in all respects and that if any portion of any representation or
warranty is already qualified by materiality, for purposes of determining
whether this Section 7.02(a) has been satisfied with respect to such portion
of such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects), and the
covenants and agreements contained in this Agreement to be complied with by
Seller on or before the Closing shall have been complied with in all material
respects, and the Purchaser shall have received a certificate from the Seller
to such effect signed by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against the Seller, the
Company or the Purchaser, seeking to restrain or prevent the consummation
of the transactions contemplated by this Agreement; provided, however,
that the provisions of this Section 7.02(b) shall not apply if the
Purchaser has solicited or encouraged any such Action;
(c) Resolutions of the Seller. The Purchaser shall have received a
true and complete copy, certified by the Secretary or an Assistant
Secretary of the Seller, of the resolutions duly and validly adopted by
the Board of Directors of the Seller evidencing their authorization of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(d) Consents and Approvals. The Purchaser, the Seller and the
Company shall have received, each in form and substance satisfactory to
the Purchaser all authorizations, consents, orders and approvals of all
Governmental Authorities and officials and all third party consents and
estoppel certificates set forth on Schedule 7.02(d);
(e) Commercial Register Extract. The Purchaser shall have received
an extract from the Commercial Register issued not more than three
Business Days prior to the Closing Date evidencing that the persons
signing this Agreement on behalf of Seller are authorized to sign on the
Seller's behalf;
(f) Financing. The Purchaser shall have obtained financing on terms
acceptable to it, sufficient to enable it to consummate the transactions
contemplated by this Agreement;
(g) Completion of the IPO. The IPO shall have been consummated;
(h) No Material Adverse Effect. No event or events shall have
occurred, or be reasonably likely to occur, which have, or are reasonably
likely to have, a Material Adverse Effect;
<PAGE> 49
45
(i) No Debt. The Company shall have no indebtedness for borrowed
money as of the Closing Date, other than any amounts owing with respect
to the Intercompany Loan;
(j) Net Asset Test. The Net Assets reflected on the Seasonally
Adjusted Net Asset Test Reference Balance Sheet shall not exceed the Net
Assets reflected on the Pre-Closing Balance Sheet by CHF 150,000 or more;
(k) Consummation of Transactions Contemplated by the Transaction
Agreement. The transactions contemplated by the Transaction Agreement
shall have been consummated.
(l) Certain Resolutions. The Purchaser shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of
the Company, of a resolution of the board of directors of the Company
evidencing that the Purchaser will be registered as the owner of all the
Shares together with a copy of the shareholders' register evidencing the
Purchaser as the new owner of all the Shares;
(m) Resignation Letters. The Purchaser shall have received a
resignation letter from each of the Company's directors;
(n) Assignment of Intercompany Loan. To the extent any amount of
principal with regard to the Intercompany Loan remains unpaid at Closing,
the Purchaser shall have received from the Seller an instrument in writing
that is reasonably satisfactory to the Purchaser pursuant to which the
Seller assigns all rights to such principal to the Purchaser; and
(o) Transferred Intellectual Property; Company Post-Closing License.
The Purchaser shall have received evidence reasonably satisfactory to it
that the Company owns the Transferred Intellectual Property, free and
clear of any Encumbrances, and the Seller shall have executed and
delivered the Company Post-Closing License.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. The
representations and warranties of the parties contained in Sections 3.06,
3.11, 3.14, 3.15, 3.16, 3.17 and 3.19, and Article IV (other than Section
4.05), and the covenants of the parties set forth in Article V (other than
Sections 5.02(b) and (c), 5.03, 5.06, 5.07, 5.10, 5.11, 5.12, 5.13, 5.14,
5.15 and 5.16) shall terminate at Closing. The representations and
warranties of the parties contained in Sections 3.01, 3.02, 3.03, 3.04, 3.05,
3.07,
<PAGE> 50
46
3.09, 3.10, 3.12, 3.13, 3.20 and 3.21 and Section 4.05 shall survive the
Closing until the second anniversary of the Closing Date. The
representations and warranties dealing with Tax matters shall survive as
provided in Article VI, and the representations and warranties set forth in
Section 3.08 shall survive the Closing until the first anniversary of the
Closing Date. The covenants of the parties set forth in Sections 5.02(b) and
(c), 5.03, 5.06, 5.07, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15 and 5.16 shall
survive the Closing, and the other covenants set forth in this Agreement that
expressly survive the Closing shall survive the Closing in accordance with
their respective terms. Notwithstanding the foregoing or anything to the
contrary in this Article VIII, in the event that the Purchaser has actual
knowledge prior to the Closing Date that any of the representations and
warranties of the Seller to survive the Closing in accordance with this
Section 8.01 were not true and correct as of the date hereof or are not true
and correct as of the Closing Date or that the agreements of the Seller
contained in Section 5.03(b) have not been complied with, the sole and
exclusive remedy of the Purchaser with respect to such breaches will be to
not consummate the transactions contemplated by this Agreement if any such
breach results in the nonsatisfaction of the condition contained in Section
7.02(a). For purposes of the foregoing sentence, the term "actual knowledge"
means the actual knowledge of an officer of the Purchaser, including, without
limitation, as a result of (A) the delivery to the Purchaser by the Seller
not fewer than three Business Days prior to the Closing (other than in a case
in which an event occurs within such three Business Day period which could
not have been anticipated, in which case written notice of such event must be
provided to the Purchaser promptly after the Seller becomes aware of it) of a
written notice specifically identifying in detail the nature of the breach
and the provisions of this Agreement that have been breached, or (B), without
duty of any other due or specific inquiry, a written survey of (i) employees
of the Purchaser who are reasonably likely, because of their substantive and
significant contacts with the Company, to have knowledge as to the truth and
correctness of the representations and warranties of the Seller to survive
the Closing or whether the Seller has complied with Section 5.03(b), (ii) the
accountants at KPMG Peat Marwick LLP, (iii) the investment bankers at JP
Morgan and (iv) the attorneys at Shearman & Sterling, Davis Polk & Wardwell
and Bar & Karrer, who, in the case of (ii), (iii) and (iv), actually
participated in the Purchaser's due diligence investigation of the Company.
Subject to the foregoing, neither the period of survival nor the liability of
the parties hereto with respect to their representations and warranties and
covenants shall be reduced by any investigation made at any time by or on
behalf of any such party. If written notice of a claim has been given prior
to the expiration of the applicable representations and warranties and
covenants by the parties hereto, then the relevant representations and
warranties and covenants shall survive as to such claim until such claim has
been finally resolved. The applicability of (i) Article 201 of the Swiss
Code of Obligations with respect to the Purchaser's obligation of immediate
investigation and immediate notification and (ii) Article 210 of the Swiss
Code of Obligations with respect to the Purchaser's duty to commence
proceedings during the survival period of representations and warranties is
hereby waived.
<PAGE> 51
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SECTION 8.02. Indemnification by the Seller. (a) The Purchaser, its
Affiliates, including the Company, and their successors and assigns, and the
officers, directors, employees and agents of the Purchaser, its Affiliates
and their successors and assigns (each a "Purchaser Indemnified Party") shall
be indemnified and held harmless, as and to the extent set forth in this
Section 8.02, by the Seller for any and all Liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, attorneys' and consultants' fees and
expenses) actually suffered or incurred by them (including, without
limitation, any Action brought or otherwise initiated by any of them) on an
After-Tax Basis (hereinafter a "Loss"), arising out of or resulting from:
(i) the breach of any representation or warranty made by the
Seller contained in any of Sections 3.01, 3.02, 3.03, 3.04, 3.05,
3.07, 3.09, 3.10, 3.12, 3.13, 3.18, 3.20 or 3.21 of this Agreement;
or
(ii) the breach of any covenant or agreement by the Seller
contained in Section 5.03(b) of this Agreement; or
(iii) any shortfall in the Cash of the Company that is not
covered by the amount held by the Escrow Agent, together with
interest thereon, as determined by the parties in accordance with
Section 2.05(f)(iii).
(b) The obligation of the Seller to indemnify a Purchaser Indemnified
Party shall be subject to the limitation set forth in the fifth sentence
of Section 8.01 and to the following limitations: (i) no indemnification
by the Seller (other than an indemnification pursuant to Section
8.02(a)(iii)) shall be made unless the aggregate amount of Losses relating
to breaches or otherwise subject to indemnification hereunder exceeds
US$150,000, and then indemnification shall be made solely in the amount of
such excess; (ii) in no event shall the aggregate obligation of the Seller
to indemnify the Purchaser Indemnified Parties (other than an
indemnification pursuant to Section 8.02(a)(iii)) exceed US$4,000,000,
except for a breach of the representations and warranties contained in
Section 3.03 in which case the obligation to indemnify the Purchaser
Indemnified Parties shall not exceed an amount equal to US$8,000,000 plus
the Purchase Price Adjustment Amount; (iii) any recovery of a Loss due to
breach of one representation will preclude recovery of such Loss due to
breach of any other representation, and all indemnification shall be
without duplication of any other recovery; (iv) a Purchaser Indemnified
Party shall not be entitled to be indemnified for breach of the
representations and warranties set forth in Section 3.08 or Section 3.12
unless it establishes that (A) a reasonably prudent business person would
have concluded, based on the information available to such person at the
time of taking the action that caused such breach or, in the case of
Section 3.12, at the time of entering into the contract that caused such
breach, that the Losses associated with such action or such contract, as
the case may be, would exceed the benefits associated therewith, and
<PAGE> 52
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(B) in the case of Sections 3.12(a)(vi) and (a)(viii) only, that such breach
has had a materially negative effect on the Company; (v) a Purchaser
Indemnified Party shall not be entitled to be indemnified for any breach of
the representations and warranties set forth in Section 3.10 if and to the
extent such breach also constitutes a breach of any of the representations
and warranties set forth in Sections 3.11, 3.16 or 3.17; and (vi) for
purposes of determining whether a Purchaser Indemnified Party is entitled to
be indemnified for any breach of the representations and warranties contained
in Section 3.12, the term "Material Contracts" shall be deemed to refer
solely to (A) any contracts or agreements under which the Company can be
reasonably expected to pay or be paid at least CHF 250,000 over any five year
period during the life of the contract following the Closing Date, (B) any
contracts or agreements that limit or purport to limit the ability of the
Company to compete in any line of business or with any Person or in any
geographic area or during any period of time, or (C) any contracts the
presence or absence of which would have a Material Adverse Effect.
(c) Each Purchaser Indemnified Party shall use its reasonable efforts
to mitigate any Losses for which it seeks indemnification hereunder.
(d) To the extent that the Seller's undertakings set forth in this
Section 8.02 may be unenforceable, the Seller shall contribute (in the
same proportion as it would otherwise have indemnified the Purchaser
Indemnified Party in accordance with Section 8.02(b)(iii)) the maximum
amount that it is permitted to contribute under applicable law to the
payment and satisfaction of all Losses incurred by the Purchaser and the
Company.
SECTION 8.03. Tax Matters. Anything in this Article VIII to the
contrary notwithstanding, the rights and obligations of the parties with
respect to indemnification for any and all Tax matters shall be governed
solely by Article VI.
SECTION 8.04. Indemnification by the Purchaser. (a) The Seller, its
Affiliates and their successors and assigns, and the officers, directors,
employees and agents of the Seller, their Affiliates and their successors and
assigns (each a "Seller Indemnified Party") shall be indemnified and held
harmless, as and to the extent set forth in this Section 8.04, by the
Purchaser for any and all Losses on an After-Tax Basis arising out of or
resulting from:
(i) the breach of any representation or warranty made by the
Purchaser contained in Section 4.05 of this Agreement;
(ii) Liabilities of the Company, other than any Liabilities for
which the Purchaser is entitled to be indemnified pursuant to
Section 8.02; or
<PAGE> 53
49
(iii) any Cash that the Purchaser is required to pay to the
Seller, together with interest thereon, as determined by the parties
in accordance with Section 2.05(f)(iii).
(b) Each Seller Indemnified Party shall use its reasonable efforts to
mitigate any Losses for which it seeks indemnification hereunder.
(c) To the extent that the Purchaser's undertakings set forth in this
Section 8.04 may be unenforceable, the Purchaser shall contribute the
maximum amount that it is permitted to contribute under applicable law to
the payment and satisfaction of all Losses incurred by the Seller.
SECTION 8.05. Indemnification Procedures. A Purchaser Indemnified
Party or a Seller Indemnified Party, as the case may be (in each case, for
purposes of this Article VIII, the "Indemnified Party"), shall give the
Seller, or the Purchaser, as the case may be (in each case, the
"Indemnifying Party"), notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of indemnification under
this Agreement, within 60 days of such determination, stating the amount of
the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right
of indemnification is claimed or arises. The obligations and Liabilities of
an Indemnifying Party under this Article VIII with respect to Losses arising
from claims of any third party which are subject to the indemnification
provided for in this Article VIII (a "Third Party Claim") shall be governed
by and contingent upon the following additional terms and conditions: if an
Indemnified Party shall receive notice of any Third Party Claim, the
Indemnified Party shall give the Indemnifying Party notice of such Third
Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this Article
VIII except to the extent the Indemnifying Party is materially prejudiced by
such failure and shall not relieve the Indemnifying Party from any other
obligation or Liability that it may have to any Indemnified Party otherwise
than under this Article VIII. If the Indemnifying Party acknowledges in
writing its obligations to indemnify the Indemnified Party hereunder against
any Losses (subject to the limitations set forth in Section 8.02(b)) that may
result from such Third Party Claim, then such Indemnifying Party shall be
entitled to assume and control the defense of such Third Party Claim at its
expense and through counsel of its choice if it gives notice of its intention
to do so to the Indemnified Party within five Business Days of the receipt of
such notice from the Indemnified Party; provided, however, that if there
exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the Indemnified Party for
the same counsel to represent both the Indemnified Party and the Indemnifying
Party, then the Indemnified Party shall be entitled to retain its own
counsel, in each jurisdiction for which the Indemnified Party determines
counsel is required to participate in such defense, at the
<PAGE> 54
50
expense of the Indemnifying Party. In the event the Indemnifying Party
exercises the right to undertake any such defense against any such Third
Party Claim as provided above, the Indemnified Party shall cooperate with the
Indemnifying Party in such defense and make available to the Indemnifying
Party, at the Indemnifying Party's expense, all witnesses, pertinent records,
materials and information in the Indemnified Party's possession or under the
Indemnified Party's control relating thereto as is reasonably required by the
Indemnifying Party, subject to reimbursement of reasonable out-of-pocket
expenses. Similarly, in the event the Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Indemnifying Party shall cooperate with the Indemnified Party in such defense
and make available to the Indemnified Party all such witnesses, records,
materials and information in the Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is reasonably required by
the Indemnified Party, subject to reimbursement of reasonable out-of-pocket
expenses. No such Third Party Claim may be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the Seller and the Purchaser;
(b) by either the Seller or the Purchaser if the Closing shall not
have occurred by 31 December 1997;
(c) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable;
(d) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) there shall have been a breach of any
material representation or warranty of the Seller contained in this
Agreement; (ii) the Seller shall not have complied with any material
covenant or agreement to be complied with by it and contained in this
Agreement; or (iii) the Seller or the Company make a general assignment
for the benefit of creditors, or any proceeding shall be instituted by or
against the Seller or the Company seeking to adjudicate either of them
bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment,
<PAGE> 55
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protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization; or
(e) by the Seller if, between the date hereof and the time scheduled
for the Closing: (i) there shall have been a breach of any material
representation or warranty of the Purchaser contained in this Agreement;
(ii) the Purchaser shall not have complied with any material covenant or
agreement to be complied with by it and contained in this Agreement; or
(iii) the Purchaser makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against the
Purchaser seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization.
SECTION 9.02. Effect of Termination. (a) In the event of termination
of this Agreement as provided in Section 9.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except that the provisions of Sections 5.03(a), 9.02(a), 9.02(b), 10.01,
10.02, 10.03, 10.06, 10.08, 10.10, 10.12 and 10.14 shall survive any such
termination.
(b) Notwithstanding the foregoing, if the Closing does not occur because
of a breach by a party, such party will reimburse the other parties (as their
sole and exclusive remedy hereunder) for their out-of-pocket costs and
expenses, including, without limitation, fees and disbursements of counsel,
financing sources (other than bank commitment fees paid by the Purchaser
prior to 15 June 1997 or paid by the Purchaser after 15 June 1997 without
consulting the Seller) and accountants, and disbursements (but not fees) of
financial advisors, incurred in connection with the preparation, negotiation
and performance of this Agreement and the transactions contemplated hereby.
SECTION 9.03. Waiver. Either party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of the
other party, (b) waive any inaccuracies in the representations and warranties
of the other party contained herein or in any document delivered by the other
party pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
<PAGE> 56
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram,
by telex or by registered or certified mail (postage prepaid. return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance
with this Section 10.02):
(a) If to the Purchaser:
Galileo International Partnership
9700 West Higgins Road
Rosemont, Illinois 60018, USA
Attention: General Counsel
Telecopy: (847) 518-4915
with a copy to:
Bar & Karrer
Seefeldstrasse 19
8024 Zurich
Switzerland
Attention: Dr. Rolf Watter, Esq.
Telecopy: 01 251 30 25
and to:
The Galileo Company
Galileo Centre Europe
Windmill Hill
Swindon
Wilts SN5 6PH, United Kingdom
Attention: Company Secretary
Telecopy: 44 (0) 1793 886190
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53
and to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022, USA
Attention: Clare O'Brien, Esq.
Facsimile: (212) 848-7179
(b) If to the Seller:
SAirGroup (Ltd.)
CH-8058
Zurich Airport
Switzerland
Attention: Corporate Finance, DF
SECTION 10.03. Public Announcements. Except as may be required by Law,
neither party to this Agreement shall make, or cause to be made any press
release or public announcement in respect of this Agreement or the
transactions contemplated hereby or the existence of discussion or
negotiations between the parties or otherwise communicate with any news media
without the prior consent of the other party, and the parties shall cooperate
as to the form, timing and contents of any such press release or public
announcement.
SECTION 10.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the Parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 10.06. Entire Agreement. This Agreement (including the
Exhibits and the Seller's Disclosure Schedule which are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein)
and the Non-Disclosure
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54
Agreement constitute the entire agreement of the parties hereto with respect
to the subject matter hereof and thereof and supersede all prior agreements
and undertakings, both written and oral, between the Seller and the Purchaser
with respect to the subject matter hereof and thereof.
SECTION 10.07. Assignment.This Agreement may not be assigned by
operation of law or otherwise without the express written consent of the
Seller and the Purchaser (which consent may be granted or withheld by the
Seller or the Purchaser); provided, however, that the Purchaser may assign
all or any portion of its rights and obligations under this Agreement to one
or more Affiliates of the Purchaser without the consent of the Seller;
provided further that in the event of such assignment, Purchaser will remain
liable for any obligations hereunder not performed by such assignee or
assignees.
SECTION 10.08. No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.09. Amendment. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of,
the Seller and the Purchaser or (b) by a waiver in accordance with Section
9.03.
SECTION 10.10. Arbitration. (a) Subject to the final sentence of
this Section 10.10, any dispute arising between the Parties hereto involving
the subject matters covered by this Agreement shall be submitted to
arbitration under this Section 10.10. A Party asserting a breach of this
Agreement by the other Party shall notify the other Party of such alleged
breach (a "Dispute Notice") and the Parties shall attempt to resolve such
dispute amicably and if they shall fail to resolve it within thirty (30) days
of the date of the Dispute Notice, either Party may notify the other Party
that it wishes to commence an arbitration proceeding under this Section 10.10
(an "Arbitration Request"). In any arbitration proceeding the Party
commencing the arbitration (the "Petitioner") shall include in the
Arbitration Request (a) a statement of the facts constituting the alleged
breach or dispute, (b) a written statement of position ("Statement")
regarding the dispute and (c) the name of an elector designated by it. The
Statement shall state the facts and arguments in support of the position
taken by the Party submitting such Statement and shall detail that Party's
proposed solution and relief sought (if any). Copies of any Arbitration
Request shall be furnished at the same time to the other Party hereto.
The Party with whom the Petitioner has its dispute (the "Respondent")
shall within five (5) Business Days after the date of the Arbitration
Request designate a second elector by notice to the Petitioner (copies
of which shall be furnished to the other Party), but if it shall fail
to do so within such period the Petitioner
<PAGE> 59
55
may designate an elector on Respondent's behalf. The electors chosen by the
Petitioner and the Respondent shall attempt to agree upon an arbitrator (the
"Arbitrator"), but if they are unable to do so within twenty (20) Business
Days after the designation of the second elector, then either elector
thereafter may apply to the American Arbitration Association (the
"Association") for the selection of the Arbitrator in accordance with the
Commercial Arbitration Rules of such Association. The Arbitrator so selected
shall have full power to decide any dispute referred to in this Section
10.10. The arbitration proceedings shall be conducted in the English
language, and the place of arbitration and the making of the Award (as
defined below) shall be Paris, France. The UNCITRAL rules of commercial
arbitration shall apply to any arbitration commenced pursuant to this Section
10.10, as modified by the following procedure:
(i) Within five (5) Business Days of the selection of the
Arbitrator (the "Commencement Date"), the Respondent shall deliver
its Statement regarding the dispute to the Arbitrator and to the
Petitioner.
(ii) Within fifteen (15) Business Days from the Commencement
Date, each of the Petitioner and Respondent shall deliver to the
Arbitrator and to the other Party, a response ("Response") to the
other Party's Statement setting forth opposing facts and arguments
and limited in length to ten (10) typed, single spaced pages
(excluding any evidentiary exhibits included therein).
(iii) Within twenty (20) Business Days from the Commencement
Date, each of the Petitioner and the Respondent may deliver to the
Arbitrator and to the other Party, a reply to the Response limited
to setting forth facts and arguments in rebuttal to the Statement
and Response of the other Party and limited in length to five (5)
typed, single spaced pages (excluding any evidentiary exhibits
included therein).
(iv) Within twenty-five (25) Business Days from the
Commencement Date, each of the Petitioner and Respondent shall
present an oral summation of its position to the Arbitrator in the
presence of the other Party in accordance with such rules of
procedure including, without limitation, length of presentation and
right of cross-examination, as the Arbitrator shall determine in
writing and deliver to the Parties not less than three (3) Business
Days prior to such hearing; provided, however, that such hearing
shall not exceed eight (8) hours in total and may not be adjourned
except for extraordinary circumstances beyond the control of the
Parties.
(v) The Arbitrator shall either issue his or her decision and
award ("Award") or request a further meeting of the Parties within
fifteen (15) days of the hearing.
<PAGE> 60
56
(vi) Any such further meeting of the Parties shall take place
within five (5) Business Days of the request therefor and shall be
conducted a determined by the Arbitrator. The Arbitrator shall issue
his or her Award no later than fifteen (15) days after any such further
meeting of the Parties.
(vii) The Award shall be in writing and shall be limited to a
decision either completely in favor of Petitioner's request for relief
or completely in favor of Respondent's. The Award shall be final and
binding upon the Parties hereto and judgment may be entered thereon in
any court of competent jurisdiction and the costs and expenses of such
arbitration (and of enforcing any Award), including attorneys' fees,
shall be borne by the Party losing such arbitration.
(viii) In the event that the Arbitrator fails to render his Award
within the time limits contained in Sections 10.10(a)(v) or (vi), the
Arbitrator shall, nonetheless retain jurisdiction over the dispute for
a reasonable period of time.
(b) This Section 10.10 shall in no way affect the right of any Party to
seek such interim relief, and only such relief, as may be required to
maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
SECTION 10.11. Seller's Disclosure Schedule. From time to time after
the date hereof and not later than three Business Days (other than in a case
in which an event occurs within such three Business Day period which could
not have been anticipated, in which case written notice of such event must be
provided to the Purchaser promptly after the Seller becomes aware of it)
prior to the Closing Date, the Seller may amend or supplement the Seller's
Disclosure Schedule in writing in accordance with Section 10.02 with respect
to any matter coming to its attention or arising which, if known by it or
existing prior to the date of this Agreement would have been required to be
set forth or described in the Seller's Disclosure Schedule or which is
necessary or desirable to complete or correct any information in the Seller's
Disclosure Schedule or in any representation or warranty of the Seller which
has been rendered inaccurate thereby. For purposes of determining the
satisfaction of the Purchaser's condition to close as set forth in Section
7.02(a), the Seller's Disclosure Schedule shall be deemed not to have been
amended or supplemented from that attached hereto on the date hereof.
SECTION 10.12. Governing Law. This Agreement shall be governed by the
laws of Switzerland (disregarding conflict of law rules and the Vienna
(United Nations) Convention on the International Sale of Goods).
SECTION 10.13. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different Parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
<PAGE> 61
57
SECTION 10.14. Specific Performance. The Parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the Parties
shall be entitled to specific performance of the terms hereof in addition to
any other remedy at Law or equity.
<PAGE> 62
IN WITNESS WHEREOF, the Purchaser and the Seller have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GALILEO INTERNATIONAL
PARTNERSHIP
By: /s/ Paul H. Bristow
-----------------------------------------
Name: Paul H. Bristow
Title: Senior Vice President and
Chief Financial Officer
SAIRGROUP (LTD.)
By: /s/ Georges Schorderet
-----------------------------------------
Name: Georges Schorderet
Title: Executive VP,
Chief Financial Officer
By: /s/ Urs Vida
-----------------------------------------
Name: Urs Vida
Title: Manager
<PAGE> 63
EXHIBIT 5.07(b)
NAME
Travitel
OPAL
Tourbo
<PAGE> 64
SCHEDULE 1.01(a)
<TABLE>
<CAPTION>
Seasonal Adjustment Factors
- ------------------------------------------------------
June July August September
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Trade Debtors - Net 1.02 0.91 1.02 0.96
Other Receivables 2.27 1.90 1.16 1.68
</TABLE>
<PAGE> 65
SCHEDULE 1.01(b)
<TABLE>
<CAPTION>
Seasonal Adjustment Factors
- -------------------------------------------------------------------
June July August September
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Accounts Payable 0.55 0.64 0.66 0.76
Accrued Liabilities 0.25 0.10 0.08 0.11
Provisions 1.25 1.41 1.30 1.26
Swissair/atraxis Current Account 1.09 0.79 0.83 0.77
</TABLE>
<PAGE> 66
SCHEDULE 7.02 (d)
The execution, delivery and performance of the Agreement do not require any
authorizations, consents, orders or approvals of any Governmental Authorities
or officials or any third party.
<PAGE> 1
EXHIBIT 2.4
CONFORMED COPY
MERGER AGREEMENT
dated as of July 30, 1997
among
GALILEO INTERNATIONAL PARTNERSHIP,
GALILEO INTERNATIONAL, L.L.C.
and
GALILEO INTERNATIONAL, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
THE MERGER
SECTION 1.01. The Merger............................................ 1
SECTION 1.02. Effective Time; Closing............................... 1
SECTION 1.03. Effect of the Merger.................................. 2
SECTION 1.04. Managing Member; Officers............................. 2
ARTICLE II
CONVERSION OF PARTNERSHIP INTERESTS IN MERGER
SECTION 2.01. Cancellation of Shares of Common Stock Held By Galileo
General Partnership................................. 2
SECTION 2.02. Conversion of General Partnership Interests in Galileo
General Partnership................................. 2
SECTION 2.03. Delivery of Certificates; Cash; Legend................ 3
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Further Action........................................ 3
SECTION 3.02. Representations....................................... 3
SECTION 3.03. Specific Performance.................................. 4
SECTION 3.04. Benefit; Successors and Assigns....................... 4
SECTION 3.05. Miscellaneous......................................... 4
</TABLE>
<PAGE> 3
MERGER AGREEMENT
MERGER AGREEMENT, dated as of July 30, 1997 (this "Agreement"),
among GALILEO INTERNATIONAL PARTNERSHIP, a Delaware general partnership
("Galileo General Partnership"), GALILEO INTERNATIONAL, L.L.C., a Delaware
limited liability company ("Galileo LLC"), and GALILEO INTERNATIONAL, INC., a
Delaware corporation ("Galileo, Inc.").
WHEREAS, the general partners of Galileo General Partnership listed
on Schedule A hereto (the "Galileo Partners") own the respective general
partnership interests in Galileo General Partnership listed on Schedule B
hereto;
WHEREAS, Galileo General Partnership owns all of the issued and
outstanding shares of common stock, par value $.01 per share, of Galileo, Inc.
("Galileo, Inc. Common Stock");
WHEREAS, Galileo, Inc. is the sole member of Galileo LLC; and
WHEREAS, the parties hereto desire to, upon the terms and subject to
the conditions of this Agreement and in accordance with the Delaware Limited
Liability Company Act (the "Limited Liability Company Law"), effect the merger
of Galileo General Partnership with and into Galileo LLC (the "Merger");
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained and intending to be legally bound
hereby, the parties to this Agreement hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. In accordance with Section 18-209 of the
Limited Liability Company Law, at the Effective Time (as defined below), Galileo
General Partnership shall be merged with and into Galileo LLC. As a result of
the Merger, the separate existence of Galileo General Partnership shall cease,
and Galileo LLC shall be the surviving entity of the Merger (the "Surviving
Entity").
SECTION 1.02. Effective Time; Closing. As promptly as practicable
after the execution of this Agreement, the parties hereto shall cause the Merger
to be
<PAGE> 4
2
consummated by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as is required by,
and executed in accordance with, Section 18-209(c) of the Limited Liability
Company Law. The term "Effective Time" means the date and time of the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
(or such later time as may be agreed by the parties hereto and specified in the
Certificate of Merger). Immediately prior to the filing of the Certificate of
Merger, a closing will be held at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York (or such other place as the parties may
agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable provisions of the
Limited Liability Company Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Galileo General Partnership and Galileo LLC
shall vest in the Surviving Entity, and all debts, liabilities, obligations,
restrictions, disabilities and duties of each of Galileo General Partnership and
Galileo LLC shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Entity.
SECTION 1.04. Managing Member; Officers. Galileo, Inc. shall
continue to be the managing member of Galileo LLC after the Merger. The officers
of Galileo General Partnership immediately prior to the Effective Time shall be
the officers of the Surviving Entity, in each case until their respective
successors are duly appointed and qualified.
ARTICLE II
CONVERSION OF PARTNERSHIP INTERESTS IN MERGER
SECTION 2.01. Cancellation of Shares of Common Stock Held By Galileo
General Partnership. As of the Effective Time, by virtue of the Merger and
without any action on the part of the Galileo Partners, Galileo General
Partnership, Galileo LLC or Galileo, Inc., the shares of Galileo, Inc. Common
Stock held immediately prior to the Effective Time by Galileo General
Partnership shall be cancelled and retired automatically and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
SECTION 2.02. Conversion of General Partnership Interests in Galileo
General Partnership. As of the Effective Time, by virtue of the Merger and
without any action on the part of the Galileo Partners, Galileo General
Partnership, Galileo LLC or Galileo, Inc., the general partnership interests in
Galileo General Partnership outstanding immediately prior to the Effective Time
shall be converted into and become (i) the right to receive the respective
number of shares of Galileo, Inc. Common Stock listed in Schedule C hereto, (ii)
in the case of certain Galileo Partners, the right to receive the respective
number
<PAGE> 5
3
of shares of Special Voting Preferred Stock, par value $.01 per share, of
Galileo, Inc. (the "Galileo, Inc. Preferred Stock") listed on Schedule D hereto,
in the respective series described on such Schedule and (iii) the right to
receive, pro rata in accordance with the general partnership interests listed on
Schedule B hereto, $100,000 in cash.
SECTION 2.03. Delivery of Certificates; Cash; Legend. (a) As
promptly as practicable after the Effective Time, Galileo, Inc. shall deliver to
each of the Galileo Partners (i) certificates evidencing such number of shares
of Galileo, Inc. Common Stock as are issuable to such Galileo Partners pursuant
to Section 2.02 hereof, (ii) in the case of certain Galileo Partners,
certificates evidencing the number of shares of Galileo, Inc. Preferred Stock as
are issuable to such Galileo Partners pursuant to Section 2.02 hereof, issuable
in the respective series described on Schedule D hereto and (iii) checks in the
amount of such Galileo Partner's pro rata share of $100,000, calculated in
accordance with the general partnership interests listed on Schedule B hereto.
(b) The shares of Common Stock and Preferred Stock that are issued
to the Galileo Partners pursuant to Sections 2.02 and 2.03 shall contain the
legends contemplated by Section 3.02 of the Stockholders' Agreement, dated as of
July 30, 1997, among the Company, certain of its stockholders and certain
related parties of such stockholders.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Further Action. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things necessary, proper or advisable under applicable
law, and execute and deliver such documents and other papers, as may be required
to carry out the provisions of this Agreement and consummate and make effective
the transactions contemplated by this Agreement.
SECTION 3.02. Representations. (a) Each of the parties hereto
represents that this Agreement has been duly authorized, executed and delivered
by such party and constitutes a legal, valid and binding obligation of such
party, enforceable against it in accordance with the terms of this Agreement.
(b) Galileo, Inc. represents and warrants that the shares of Common
Stock and Galileo, Inc. Preferred Stock to be issued to the Galileo Partners in
connection with the Merger will be duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
<PAGE> 6
4
SECTION 3.03. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 3.04. Benefit; Successors and Assigns. Except as otherwise
provided herein, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement either express or implied is intended to
confer on any person, other than the parties hereto, the Galileo Partners and
their respective successors and permitted assigns, any rights, remedies or
obligations under or by reason of this Agreement.
SECTION 3.05. Miscellaneous. This Agreement sets forth the entire
agreement and understanding among the parties hereto, and supersedes all prior
agreements and understandings, relating to the subject matter hereof. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, regardless of any investigation made by any party
hereto or on such party's behalf. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware. The headings in
this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one instrument.
<PAGE> 7
5
IN WITNESS WHEREOF, the parties hereto have duly caused this
Agreement to be executed as of the date first above written above by their
respective officers thereunto duly authorized.
GALILEO INTERNATIONAL
PARTNERSHIP
By /s/ JAMES E. BARLETT
-------------------------------------
Name: James E. Barlett
Title: President and
Chief Executive Officer
GALILEO INTERNATIONAL, L.L.C.
By /s/ JAMES E. BARLETT
-------------------------------------
Name: James E. Barlett
Title: President and
Chief Executive Officer
GALILEO INTERNATIONAL, INC.
By /s/ JAMES E. BARLETT
-------------------------------------
Name: James E. Barlett
Title: President and
Chief Executive Officer
<PAGE> 8
SCHEDULE A
Covia Corp., a Delaware corporation and a wholly owned subsidiary of United Air
Lines, Inc. ("Covia").
Distribution Systems Inc., a Delaware corporation and an indirect wholly owned
subsidiary of British Airways PLC ("DSI").
Roscor A.G., a corporation organized under the laws of Switzerland and a wholly
owned subsidiary of Swissair Swiss Air Transport Company Ltd ("Roscor").
Travel Industry Systems B.V., a corporation organized under the laws of the
Netherlands and a wholly owned subsidiary of KLM Royal Dutch Airlines ("TIS").
USAM Corp., a Delaware corporation and a wholly owned subsidiary of US Airways,
Inc. ("USAM").
Racom Teledata S&A, a corporation organized under the laws of Italy and a wholly
owned subsidiary of Alitalia-Linee Aeree Italiane S.p.A. ("Racom").
Olynet Inc., a Delaware corporation and wholly owned subsidiary of Olympic
Airways S.A. ("Olynet").
Resnet Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of
Air Canada ("Resnet").
Coporga, Inc., a Delaware corporation and wholly owned subsidiary of Transportes
Aereos Portugueses S.A. ("Coporga").
Retford Limited, a corporation organized under the laws of Ireland and a wholly
owned subsidiary of Aer Lingus PLC ("Retford").
Travidata Inc., a New York corporation and a wholly owned subsidiary of Austrian
Airlines Oesterreichische Luftverkehrs Aktiengesellschaft ("Travidata").
<PAGE> 9
SCHEDULE B
<TABLE>
<CAPTION>
Galileo Partner: General Partnership Interests in Galileo International Partnership:
- ---------------- -------------------------------------------------------------------
<S> <C>
Covia 38.0%
DSI 14.7%
Roscor 13.2%
TIS 12.1%
USAM 11.0%
Racom 8.7%
Olynet 1.0%
Resnet 1.0%
Coporga 0.1%
Retford 0.1%
Travidata 0.1%
</TABLE>
<PAGE> 10
SCHEDULE C
<TABLE>
<CAPTION>
Shares of Galileo, Inc.
Galileo Partner: Common Stock:
- ---------------- -----------------------
<S> <C>
Covia 33,440,000
DSI 12,892,000
Roscor 11,633,600
TIS 10,639,200
USAM 9,680,000
Racom 7,664,800
Olynet 906,400
Resnet 880,000
Coporga 88,000
Retford 88,000
Travidata 88,000
</TABLE>
<PAGE> 11
SCHEDULE D
<TABLE>
<CAPTION>
Galileo Partner: Series of Galileo, Inc. Preferred Stock: Number of Shares:
- ---------------- ---------------------------------------- -----------------
<S> <C> <C>
Covia Series A One
Series B One
Series C One
DSI Series D One
Roscor Series E One
TIS Series F One
USAM Series G One
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CONFORMED COPY
RESTATED
CERTIFICATE OF INCORPORATION
OF
GALILEO INTERNATIONAL, INC.
------------------------------------------------------
GALILEO INTERNATIONAL, INC., a Delaware corporation, hereby
certifies as follows:
1. The name of the Corporation is Galileo International, Inc. (the
"Corporation"). The date of filing of its original Certificate of Incorporation
with the Secretary of State of the State of Delaware was May 13, 1997.
2. This Restated Certificate of Incorporation amends and restates
the provisions of the Certificate of Incorporation of the Corporation and was
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware (the "DGCL").
3. The text of the Certificate of Incorporation is hereby amended
and restated in its entirety to read as follows:
"ARTICLE I
Name
SECTION 1.1. Name. The name of the Corporation is GALILEO
INTERNATIONAL, INC.
ARTICLE II
Registered Office and Registered Agent
SECTION 2.1. Office and Agent. The address of the registered office
of the Corporation in the State of Delaware is Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle. The name of the
registered agent of the Corporation at such address is The Corporation Trust
Company.
<PAGE> 2
2
ARTICLE III
Corporate Purposes
SECTION 3.1. Purpose. The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be organized under the
DGCL.
ARTICLE IV
Capitalization
SECTION 4.1. Authorized Capital. Shares. The total number of shares
of all classes of capital stock that the Corporation shall have authority to
issue is 275,000,007 shares, of which (i) 250,000,000 shares shall be common
stock, par value $.01 per share (the "Common Stock"); (ii) 7 shares shall be
special voting preferred stock, par value $.01 per share, of which (A) 1 share
has been designated Series A Special Voting Preferred Stock, par value $.01 per
share (the "Series A Special Voting Preferred Stock"), (B) 1 share has been
designated Series B Special Voting Preferred Stock, par value $.01 per share
(the "Series B Special Voting Preferred Stock"), (C) 1 share has been designated
Series C Special Voting Preferred Stock, par value $.01 per share (the "Series C
Special Voting Preferred Stock"), (D) 1 share has been designated Series D
Special Voting Preferred Stock, par value $.01 per share (the "Series D Special
Voting Preferred Stock"), (E) 1 share has been designated Series E Special
Voting Preferred Stock, par value $.01 per share (the "Series E Special Voting
Preferred Stock"), (F) 1 share has been designated Series F Special Voting
Preferred Stock, par value $.01 per share (the "Series F Special Voting
Preferred Stock"), and (G) 1 share has been designated Series G Special Voting
Preferred Stock, par value $.01 per share (the "Series G Special Voting
Preferred Stock"); and (iii) 25,000,000 shares shall be ordinary preferred
stock, par value $.01 per share (the "Ordinary Preferred Stock"; and,
collectively, with the Special Voting Preferred Stock, the "Preferred Stock").
SECTION 4.2. Common Stock. (a) Voting Rights. Each holder of Common
Stock shall have one vote on each matter submitted to a vote at a meeting of
stockholders for each share of Common Stock held of record by such holder as of
the record date for such meeting.
(b) Dividends and Distributions. Subject to any rights of holders of
any class or series of Preferred Stock, when, as and if dividends or
distributions are declared on outstanding shares of Common Stock, whether
payable in cash, in property or in securities of the Corporation, each holder of
outstanding shares of Common Stock shall be entitled to
<PAGE> 3
3
share ratably in such dividends and distributions in proportion to the number of
shares of Common Stock held by such holder.
(c) Liquidation. Subject to any rights of holders of any class or
series of Preferred Stock, upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, each holder of outstanding
shares of Common Stock shall be entitled to share ratably in the assets of the
Corporation to be distributed among the holders of shares of Common Stock in
proportion to the number of shares of Common Stock held by such holder.
SECTION 4.3. Special Voting Preferred Stock. The designation and the
powers, preferences and rights of each of the series of the Special Voting
Preferred Stock are as follows:
(a) Rank. Each series of the Special Voting Preferred Stock shall,
with respect to rights on any liquidation, winding up or dissolution of the
Corporation, rank senior to the Common Stock and, unless otherwise provided, on
a parity with any other series of Preferred Stock. All equity securities of the
Corporation to which each series of the Special Voting Preferred Stock may rank
prior upon liquidation, dissolution, winding up or otherwise, including the
Common Stock, are collectively referred to herein as the "Junior Securities";
and all equity securities of the Corporation with which each series of the
Special Voting Preferred Stock may rank on a parity as to liquidation,
dissolution or winding up and does not rank senior as to any of the same are
collectively referred to herein as the "Parity Securities".
(b) Dividends. The holders of the shares of Special Voting Preferred
Stock shall not be entitled to receive dividends on such shares.
(c) Liquidation Preference. (1) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holder of shares of Special Voting Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to $100
for each such share outstanding before any assets shall be distributed to the
holders of any of the Junior Securities. Except as provided in the preceding
sentence, the holders of the Special Voting Preferred Stock shall not be
entitled to any distribution in the event of liquidation, dissolution or winding
up of the affairs of the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the holders of
outstanding shares of the Special Voting Preferred Stock and any Parity
Securities, then the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount which would be payable on
such distribution if the amounts to which the holders of the outstanding shares
of Special Voting
<PAGE> 4
4
Preferred Stock and the holders of outstanding shares of such Parity Securities
are entitled were paid in full.
(2) For the purposes of this subsection 4.3(c), neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the property or
assets of the Corporation nor the consolidation or merger of the Corporation
with one or more other Corporations shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
(d) Voting Rights. (1) (A) Subject to the provisions of subsection
4.3(f)(2), the Special Voting Preferred Stock shall have the voting rights set
forth in this subsection 4.3(d).
(B) Subject to subsections 4.3(d)(1)(C) and (D) and subsections
4.3(d)(2) and (3), each series of Special Voting Preferred Stock, voting
separately as a single series, shall be entitled to elect one director to
the Board of Directors of the Corporation (the "Board of Directors") so
long as the number of shares of Common Stock that are Shares (as defined
in the Stockholders' Agreement (as the same may be amended from time to
time, the "Stockholders' Agreement"), dated as of July 30, 1997, among the
Corporation, certain of its stockholders and certain related parties of
such stockholders) (the "Relevant Shares") that are held by the holder of
the share of such series of Special Voting Preferred Stock and its
Affiliates represents at least 5% of the total number of shares of Common
Stock outstanding.
(C) Notwithstanding anything to the contrary in subsection
4.3(d)(1)(B), if the holder of any series of Special Voting Preferred
Stock and its Affiliates hold, in the aggregate, two such series of
Special Voting Preferred Stock, then each of such two series of Special
Voting Preferred Stock shall be entitled, voting separately as a single
class, to elect one director to the Board of Directors so long as the
number of Relevant Shares that are held by such holder and its Affiliates
represents at least 15% of the total number of shares of Common Stock
outstanding. In the event the number of Relevant Shares that are held by
such holder and its Affiliates represents less than 15% but at least 5% of
the total number of shares of Common Stock outstanding, then the series of
Special Voting Preferred Stock held by such holder or one of its
Affiliates with the lowest letter in alphabetical order shall be entitled
to elect one director to the Board of Directors and the series of Special
Voting Stock held by such holder or one of its Affiliates with the highest
letter in alphabetical order shall cease immediately to be entitled to
elect a director and the share of such series shall be redeemed by the
Corporation pursuant to subsection 4.3(f).
(D) Notwithstanding anything to the contrary in subsection
4.3(d)(1)(B), if the holder of any series of Special Voting Preferred
Stock and its Affiliates hold, in
<PAGE> 5
5
the aggregate, three or more series of Special Voting Preferred Stock,
then each of three of such series of Special Voting Preferred Stock shall
be entitled, voting separately as a single class, to elect one director to
the Board of Directors so long as the number of Relevant Shares that are
held by such holder and its Affiliates represents at least 25% of the
total number of shares of Common Stock outstanding. In the event the
number of Relevant Shares that are held by such holder and its Affiliates
represents at least 15% but less than 25% of the total number of shares of
Common Stock outstanding, then each of the two of such series of Special
Voting Preferred Stock held by such holder or one of its Affiliates with
the lowest letters in alphabetical order shall be entitled, voting
separately as a single class, to elect one director to the Board of
Directors and the series of Special Voting Stock held by such holder or
one of its Affiliates with the highest letter in alphabetical order shall
cease immediately to be entitled to elect a director and the share of such
series shall be redeemed by the Corporation pursuant to subsection 4.3(f),
and in the event the number of Relevant Shares that are held by such
holder and its Affiliates represents at least 5% but less than 15% of the
total number of shares of Common Stock outstanding, then the series of
Special Voting Preferred Stock held by such holder or one of its
Affiliates with the lowest letter in alphabetical order shall be entitled
to elect one director to the Board of Directors and the series of Special
Voting Stock held by such holder or one of its Affiliates with the highest
letters in alphabetical order shall cease immediately to be entitled to
elect a director and the share of such series shall be redeemed by the
Corporation pursuant to subsection 4.3(f).
(2) If (i) a holder of any series of Special Voting Preferred Stock
and its Affiliates, in the aggregate, held, immediately following the closing of
the initial public offering of the Common Stock pursuant to the Corporation's
registration statement on Form S-1 (File No. 333-27495) (the "IPO") (not taking
into account any shares of Common Stock purchased by the underwriters in the IPO
pursuant to the exercise of an over-allotment option ("Over-Allotment Shares")),
Relevant Shares representing 7% or more of the outstanding shares of Common
Stock and (ii) at any time the Corporation issues additional shares of Common
Stock and, as a result of such issuance, such holder and its Affiliates, in the
aggregate, hold less than 5% of the outstanding shares of Common Stock, then the
series of Special Voting Preferred Stock held by such holder or one of its
Affiliates shall continue to be entitled to elect one director to the Board of
Directors so long as such holder and its Affiliates hold a number of Relevant
Shares that represents at least 3% of the outstanding shares of Common Stock;
provided, however, that if, immediately prior to such issuance, such holder or
one its Affiliates held more than one series of Special Voting Preferred Stock,
then, immediately following such issuance, the series of Special Voting
Preferred Stock held by such holder or one of its Affiliates with the lowest
letter in alphabetical order shall be entitled to elect one director to the
Board of Directors and the remaining series of Special Voting Stock held by such
holder or one of its Affiliates shall cease immediately to be
<PAGE> 6
6
entitled to elect a director and the share of such series shall be redeemed by
the Corporation pursuant to subsection 4.3(f).
(3) If (i) a holder of any series of Special Voting Preferred Stock
and its Affiliates, in the aggregate, held, immediately following the closing of
the IPO (not taking into account any Over-Allotment Shares), Relevant Shares
representing at least 5% but less than 7% of the outstanding shares of Common
Stock and (ii) at any time the Corporation issues additional shares of Common
Stock and, as a result of such issuance, such holder and its Affiliates, in the
aggregate, hold Relevant Shares that represent less than 5% of the outstanding
shares of Common Stock, then the series of Special Voting Preferred Stock held
by such holder or one of its Affiliates shall continue to be entitled to elect
one director to the Board of Directors so long as such holder and its Affiliates
hold a number of Relevant Shares that represents at least 4% of the outstanding
shares of Common Stock; provided, however, that if, immediately prior to such
issuance, such holder or one of its Affiliates held more than one series of
Special Voting Preferred Stock, then, immediately following such issuance, the
series of Special Voting Preferred Stock held by such holder or one of its
Affiliates with the lowest letter in alphabetical order shall be entitled to
elect one director to the Board of Directors and the remaining series of Special
Voting Stock held by such holder or one of its Affiliates shall cease
immediately to be entitled to elect a director and the share of such series
shall be redeemed by the Corporation pursuant to subsection 4.3(f).
(4) If (i) a holder of any series of Special Voting Preferred Stock
and its Affiliates, in the aggregate, held, immediately following the closing of
the IPO (not taking into account any Over-Allotment Shares), Relevant Shares
representing 7% or more of the outstanding shares of Common Stock and (ii) at
any time the Corporation issues additional shares of Common Stock and, as a
result of such issuance, such holder and its Affiliates, in the aggregate, hold
Relevant Shares that represent less than 3% of the outstanding shares of Common
Stock, then, if such holder or its Affiliates shall not have purchased
additional shares of Common Stock in the public market or otherwise in order to
increase its and its Affiliates' holdings of Relevant Shares to at least 3%
within 90 days after such holdings fall below 3%, then the series of Special
Voting Preferred Stock held by such holder and its Affiliates shall cease
immediately to be entitled to elect a director and the share of such series
shall be redeemed by the Corporation pursuant to subsection 4.3(f) upon the
expiration of such 90 day period; provided that such period shall be tolled for
any period in which there is a suspension in the trading of the Common Stock on
the New York Stock Exchange.
(5) If (i) a holder of any series of Special Voting Preferred Stock
and its Affiliates, in the aggregate, held, immediately following the closing of
the IPO (not taking into account any Over-Allotment Shares), Relevant Shares
representing at least 5% but less than 7% of the outstanding shares of Common
Stock and (ii) at any time the Corporation issues additional shares of Common
Stock and, as a result of such issuance, such holder and its Affiliates, in the
aggregate, hold Relevant Shares that represent less than 4% of the
<PAGE> 7
7
outstanding shares of Common Stock, then, if such holder or its Affiliates shall
not have purchased additional shares of Common Stock in the public market or
otherwise in order to increase its and its Affiliates' holdings of Relevant
Shares to at least 4% within 90 days after such holdings fall below 4%, then the
series of Special Voting Preferred Stock held by such holder and its Affiliates
shall cease immediately to be entitled to elect a director and the share of such
series shall be redeemed by the Corporation pursuant to subsection 4.3(f) upon
the expiration of such 90 day period; provided that such period shall be tolled
for any period in which there is a suspension in the trading of the Common Stock
on the New York Stock Exchange.
(6) If at any time the Corporation issues additional shares of
Common Stock and, as a result of such issuance, a holder of any series of
Special Voting Preferred Stock that is a Permitted Preferred Stock Transferee
(as such term is defined in the Stockholders' Agreement) holds Relevant Shares
that represent less than 5% of the outstanding shares of Common Stock, then, if
such holder or its Affiliates shall not have purchased additional shares of
Common Stock in the public market or otherwise in order to increase its and its
Affiliates' holdings of Relevant Shares to at least 5% within 90 days after such
holdings fall below 5%, then the series of Special Voting Preferred Stock held
by such holder and its Affiliates shall cease immediately to be entitled to
elect a director and the share of such series shall be redeemed by the
Corporation pursuant to subsection 4.3(f) upon the expiration of such 90 day
period; provided that such period shall be tolled for any period in which there
is a suspension in the trading of the Common Stock on the New York Stock
Exchange.
(7) If (i) a holder of any series of Special Voting Preferred Stock
and its Affiliates, in the aggregate, holds either (x) Relevant Shares
representing at least 25% of the outstanding shares of Common Stock and three or
more series of Special Voting Preferred Stock, or (y) Relevant Shares
representing at least 15% but less than 25% of the outstanding shares of Common
Stock and two or more series of Special Voting Preferred Stock, and (ii) at any
time the Corporation issues additional shares of Common Stock in connection with
a Significant Transaction (as such term is defined in the Stockholders'
Agreement) which results in an increase in the size of the Board, then the
shares of Common Stock issued by the Corporation in connection with such
Significant Transaction shall not be taken into account for purposes of
determining whether any series of Special Voting Preferred Stock held by such
holder are entitled to elect any directors pursuant to Section 4.3(d)(1)(B), (C)
and (D) hereof.
(8) The director elected by any series of Special Voting Preferred
Stock may be removed, at any time, by the holder of the share of such series in
its sole discretion, and such holder may elect another individual to serve in
the stead of such removed director, and in the event of the death, disability or
resignation of any such director, such holder may elect another individual to
serve in the stead of such director.
<PAGE> 8
8
(9) For purposes of this Restated Certificate of Incorporation, (i)
the term "Affiliate" shall mean, with respect to any specified Person, any other
Person, other than the Corporation or any subsidiary of the Corporation, that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person, (ii)
"control" (including the terms "controlled by" and "under common control with"),
with respect to the relationship between or among two or more Persons, shall
mean the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person, and (iii)
"Person" shall mean any individual, partnership, firm, corporation, association,
trust, estate, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
(e) Restrictions on Transfer. (1) The holder of any share of a
series of Special Voting Preferred Stock may transfer such share only if (i)
such transfer is made in connection with a simultaneous transfer of Relevant
Shares to the transferee, (ii) the transferee is either an Original Owner (as
defined below), an Affiliate thereof or a third party that is or becomes a party
to the Stockholders' Agreement and a non-competition agreement in the form
attached as Exhibit A to the Stockholders' Agreement, as such agreement may be
amended from time to time in accordance with Section 5.08 of the Stockholders'
Agreement (as so amended, a "Non-Competition Agreement"), and (iii) such
transferee and its Affiliates, in the aggregate, would, after giving effect to
such transfer (or within 90 days after such transfer, in the circumstances
described in Section 3.07(a)(iii)(A)(y) of the Stockholders' Agreement), hold
Relevant Shares representing at least 5% of the then outstanding shares of
Common Stock.
(2) Subject to the provisions of subsection 4.3(d) relating to the
redemption of series of Special Voting Preferred in certain circumstances, any
share of Special Voting Preferred Stock transferred in accordance with this
subsection 4.3(e) shall continue to have the special voting rights set forth in
subsection 4.3(d).
(3) For purposes of this subsection 4.3(e) and subsection 4.3(f)
below, "Original Owner" means United Airlines, British Airways, Swissair, KLM,
US Airways, Alitalia, Olympic Airways, Air Canada, TAP Air Portugal, Austrian
Airlines, Aer Lingus or any Affiliate of the foregoing.
(f) Redemption. (1) If, at any time, a series of Special Voting
Preferred Stock is not entitled to elect a director to the Board of Directors
pursuant to subsection 4.3(d) above, then the Corporation shall redeem
automatically and immediately (to the extent the
<PAGE> 9
9
Corporation shall have funds legally available for such payment) the share of
such series of Special Voting Preferred Stock at a redemption price of $100 per
share.
(2) If the share of a series of Special Voting Preferred Stock is
transferred to a party that is neither an Original Owner nor a third party that
is or becomes a party to the Stockholders' Agreement and a Non-Competition
Agreement, the series of Special Voting Preferred Stock so transferred shall
cease immediately to be entitled to elect a director pursuant to subsection
4.3(d) and the share of such series shall be redeemed automatically and
immediately by the Corporation (to the extent the Corporation shall have funds
legally available for such payment) at a redemption price of $100 per share.
(3) If, at any time, the share of any series of Special Voting
Preferred Stock is held by a Person that is no longer subject to the terms of a
Non-Competition Agreement, or by a Person that has given the Corporation notice
of its intention to terminate its Non-Competition Agreement, then such series of
Preferred Stock shall cease immediately to be entitled to elect a director and
the Corporation shall redeem automatically and immediately (to the extent the
Corporation shall have funds legally available for such payment) the share of
such series of Special Voting Preferred Stock at a redemption price of $100 per
share.
(4) In the event the Corporation redeems the share of one or more
series of Special Voting Preferred Stock from a holder that, immediately prior
to such redemption, held more than one series of Special Voting Preferred Stock,
the Corporation shall redeem the share of the series of Special Voting Preferred
Stock held by such holder beginning with the series with the highest letter in
alphabetical order and in descending alphabetical order thereafter.
(5) Shares of Special Voting Preferred Stock which have been issued
and reacquired in any manner, including shares purchased, redeemed or exchanged,
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) be retired and shall not thereafter be reissued as part of any
series of the Preferred Stock.
(g) No Fractional Shares. No fractional shares of any series of
Special Voting Preferred Stock may be issued by the Corporation.
SECTION 4.4. Preferred Stock. Shares of Ordinary Preferred Stock of
the Corporation may be issued from time to time in one or more classes or
series, each of which class or series shall have such distinctive designation or
title as shall be fixed by the affirmative vote of a majority of the whole Board
of Directors prior to the issuance of any shares thereof. Each such class or
series of Preferred Stock shall have such voting powers, full or limited, or no
voting powers, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions,
<PAGE> 10
10
including the dividend rate, redemption price and liquidation preference, and
may be convertible into, or exchangeable for, at the option of either the holder
or the Corporation or upon the happening of a specified event, shares of any
other class or classes or any other series of the same or any other class or
classes of capital stock, or any debt securities, of the Corporation at such
price or prices or at such rate or rates of exchange and with such adjustments
as shall be stated and expressed in this Restated Certificate of Incorporation
or in any amendment hereto or in such resolution or resolutions providing for
the issuance of such class or series of Ordinary Preferred Stock as may be
adopted from time to time by the affirmative vote of a majority of the whole
Board of Directors prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it, all in accordance with the DGCL;
provided, however, that so long as any share of Special Voting Preferred Stock
is outstanding, no shares of Ordinary Preferred Stock issued by the Corporation
shall have the right to elect directors to the Board of Directors, except to the
extent provided by Section 303 of the New York Stock Exchange Rules, pursuant to
which holders of Preferred Stock, voting as a class, have the right to elect at
least two directors upon default by the Corporation in the payment of the
equivalent of six quarterly dividends. The authority of the Board of Directors
with respect to each series shall also include, but not be limited to, the
determination of restrictions, if any, on the issue or reissue of any additional
shares of Ordinary Preferred Stock.
ARTICLE V
Indemnification
SECTION 5.1. Indemnification. (a) General. The Corporation (i) shall
indemnify any person who was or is a party or is threatened to be made a party
to, or is involved in any manner in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he or she is or was a director or an
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or an officer of another corporation, partnership,
joint venture, trust or other enterprise; and (ii) may indemnify, if the Board
of Directors determines such indemnification is appropriate, any person who was
or is a party or is threatened to be made a party to, or is involved in any
manner in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he or she is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in each
case, to the fullest extent authorized or permitted by law, as now or hereafter
in effect.
(b) Proceedings Initiated by any Person. Notwithstanding anything to
the contrary contained in subsection (a) above, except for proceedings to
enforce rights to
<PAGE> 11
11
indemnification, the Corporation shall not be obligated to indemnify any person
in connection with a proceeding (or part thereof) initiated by such person
unless such proceeding (or part thereof) was authorized in advance, or
unanimously consented to, by the Board of Directors.
(c) Advancement of Expenses. The rights to indemnification conferred
in this Article V also include, to the fullest extent permitted by applicable
law, the right to be paid the expenses (including attorneys' fees) incurred in
connection with any such civil, criminal, administrative or investigative
action, suit or proceeding in advance of its final disposition.
(d) Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of applicable
law.
(e) Repeal or Modification. Any repeal or modification of this
Article V by the stockholders of the Corporation shall not adversely affect any
rights to indemnification and to advancement of expenses that any person may
have at the time of such repeal or modification with respect to any acts or
omissions occurring prior to such repeal or modification.
ARTICLE VI
Liability of a Director
SECTION 6.1. Director Liability. (a) A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived any improper personal benefit.
(b) If the DGCL is amended hereafter to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
authorized by the DGCL, as so amended, without further action by either the
Board of Directors or the stockholders of the Corporation.
<PAGE> 12
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(c) Any repeal or modification of this Article VI shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to or at
the time of such repeal or modification.
ARTICLE VII
Corporate Opportunities
SECTION 7.1. Conduct of Certain Affairs of the Corporation. (a) In
anticipation that the Corporation will cease to be wholly-owned by the Original
Owners, but that the Original Owners will remain, for some period of time,
substantial stockholders of the Corporation, and in anticipation that the
Corporation and the Original Owners may, except as otherwise agreed in writing
by the Original Owners, engage in the same or similar activities or lines of
business and have an interest in the same areas of corporate opportunities, and
in recognition of the benefits to be derived by the Corporation through its
continued contractual, corporate and business relations with the Original Owners
(including possible service of officers and directors of the Original Owners as
officers and directors of the Corporation), the provisions of this Article VII
are set forth to regulate and define the conduct of certain affairs of the
Corporation as they may involve the Original Owners and their respective
officers and directors, and the powers, rights, duties and liabilities of the
Corporation and its officers, directors and stockholders in connection
therewith.
(b) Except as the Original Owners may otherwise agree in writing,
the Original Owners shall have no duty to refrain from engaging in the same or
similar activities or lines of business as the Corporation, and no Original
Owner nor any officer or director thereof (except as provided in paragraph (c)
below) shall be liable to the Corporation or its stockholders for breach of any
fiduciary duty by reason of any such activities of such Original Owner. In the
event that any Original Owner acquires knowledge of a potential transaction or
matter which may be a corporate opportunity for both such Original Owner and the
Corporation, such Original Owner shall have no duty to communicate or offer such
corporate opportunity to the Corporation and shall not be liable to the
Corporation or its stockholders for breach of any fiduciary duty as a
stockholder of the Corporation by reason of the fact that such Original Owner
pursues or acquires such corporate opportunity for itself, directs such
corporate opportunity to another person, or does not communicate information
regarding such corporate opportunity to the Corporation.
(c) In the event that a director or officer of the Corporation who
is also a director or officer of an Original Owner acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both
the Corporation and such Original Owner, such director or officer of the
Corporation shall have fully satisfied and fulfilled the fiduciary duty of such
director or officer to the Corporation and its stockholders with respect
<PAGE> 13
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to such corporate opportunity, if such director or officer acts in a manner
consistent with the following policy:
(i) A corporate opportunity offered to any person who is an officer
of the Corporation, and who is also a director but not an officer of such
Original Owner, shall belong to the Corporation; (ii) a corporate
opportunity offered to any person who is a director but not an officer of
the Corporation, and who is also a director, officer or employee of such
Original Owner shall belong to the Corporation if such opportunity is
expressly offered to such person primarily in his or her capacity as a
director of the Corporation, and otherwise shall belong to such Original
Owner; and (iii) a corporate opportunity offered to any person who is an
officer of both the Corporation and such Original Owner shall belong to
the Corporation if such opportunity is expressly offered to such person
primarily in his or her capacity as an officer of the Corporation, and
otherwise shall belong to such Original Owner.
(d) Any person purchasing or otherwise acquiring any interest in
shares of the capital stock of the Corporation shall be deemed to have notice of
and to have consented to the provisions of this Article VII.
(e) For purposes of this Article VII only:
(1) A director of the Corporation who is Chairman of the Board of
Directors of the Corporation or of a committee thereof shall not be deemed
to be an officer of the Corporation by reason of holding such position
(without regard to whether such position is deemed an office of the
Corporation under the By-Laws of the Corporation), unless such person is a
full-time employee of the Corporation;
(2) The term "Corporation" shall mean the Corporation and its
Affiliates (other than any Original Owner); and
(3) The term "Original Owners" shall mean the former general
partners of Galileo International Partnership, a Delaware general
partnership, together with their respective Affiliates (other than the
Corporation).
(f) Notwithstanding anything in this Restated Certificate of
Incorporation to the contrary, in addition to any vote of the stockholders
required pursuant to this Restated Certificate of Incorporation, until the time
that the Original Owners cease to own beneficially, in the aggregate, Common
Stock representing at least 20% of the total voting power of all classes of
outstanding Common Stock of the Corporation, the affirmative vote of the holders
of more than 80% of the total voting power of all classes of outstanding Common
Stock of the Corporation shall be required to alter, amend or repeal in a manner
adverse to the interests of the Original Owners, or adopt any provisions adverse
to the interests of the
<PAGE> 14
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Original Owners and inconsistent with, any provision of this Article VII.
Neither the alteration, amendment or repeal of this Article VII nor the adoption
of any provision of this Restated Certificate of Incorporation inconsistent with
this Article VII shall eliminate or reduce the effect of this Article VII in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article VII, would accrue or arise prior to such alteration, amendment,
repeal or adoption.
ARTICLE VIII
Management of the Affairs of the Corporation
SECTION 8.1. Management of the Affairs of the Corporation. (a) The
business and affairs of the Corporation shall be managed by the Board of
Directors, which may exercise all the powers of the Corporation and do all such
lawful acts and things that are not conferred upon or reserved to the
stockholders by law, by this Restated Certificate of Incorporation or by the
restated by-laws of the Corporation (the "By-Laws").
(b) Election of directors of the Corporation need not be by written
ballot, unless required by the By-Laws.
(c) The following provisions are inserted for the limitation and
regulation of the powers of the Corporation and of its directors and
stockholders:
(1) The By-Laws, or any of them, may be altered, amended or
repealed, or new by-laws may be made, but only to the extent any such
alteration, amendment, repeal or new by-law is not inconsistent with any
provision of the Restated Certificate of Incorporation, either by a
majority of the whole Board of Directors or by the stockholders of the
Corporation upon the affirmative vote of the holders of at least 662/3% of
the outstanding capital stock entitled to vote thereon, voting together as
a single class.
(2) The Board of Directors of the Corporation shall consist of such
number of directors as shall be fixed in the By-Laws, which number shall
be in accordance with the Stockholders' Agreement. The directors shall be
divided into three classes, designated Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of one-third of
the total number of directors constituting the entire Board of Directors.
The term of the initial Class I directors shall terminate on the date of
the 1998 annual meeting of stockholders; the term of the initial Class II
directors shall terminate on the date of the 1999 annual meeting of
stockholders; and the term of the initial Class III directors shall
terminate on the date of the 2000 annual meeting of stockholders. At each
annual meeting of stockholders, beginning with the 1998 annual meeting of
stockholders, successors to the class of directors whose term
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15
expires at that annual meeting shall be elected for a three-year term. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, but in no case will a decrease in
the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which
his or her term expires and until his or her successor shall be elected
and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. The term of a
director elected by stockholders to fill a newly created directorship or
other vacancy shall expire at the same time as the terms of the other
directors of the class for which the new directorship is created or in
which the vacancy occurred. Subject to the provisions of the Stockholders'
Agreement, and except as otherwise provided in this Restated Certificate
of Incorporation, any vacancy on the Board of Directors that results from
an increase in the number of directors and any other vacancy occurring on
the Board of Directors, howsoever resulting, may be filled only by a
majority of the directors then in office, even if less than a quorum, or
by a sole remaining director. Any director so elected by the Board of
Directors to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
(3) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation,
except as may be otherwise provided in this Restated Certificate of
Incorporation with respect to the right of holders of Preferred Stock of
the Corporation to nominate and elect a specified number of directors in
certain circumstances. Nomination of persons for election to the Board of
Directors may be made at any annual meeting of stockholders, or at any
special meeting of stockholders called for the purpose of electing
directors, (a) by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving
of the notice provided for in this subsection 8.1(c)(3) and on the record
date for the determination of stockholders entitled to vote at such
meeting and (ii) who complies with the notice procedures set forth in this
subsection 8.1(c)(3). In addition to any other applicable requirements,
for a nomination to be made by a stockholder, such stockholder must have
given timely notice thereof in proper written form to the Secretary of the
Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of
the Corporation (a) in the case of an annual meeting, not less than 60
days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however,
that in the event that the annual meeting is called for a date that is not
within 30 days before or after such anniversary date, notice by the
stockholder, in order to be timely, must be so received not later than the
close of business on the
<PAGE> 16
16
tenth day following the day on which such notice of the date of the annual
meeting is mailed or such public disclosure of the date of the annual
meeting is made, whichever first occurs, or (b) in the case of a special
meeting of stockholders called for the purpose of electing directors, not
later than the close of business on the tenth day following the day on
which notice of the date of the special meeting is mailed or public
disclosure of the date of the special meeting is made, whichever first
occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder
proposes to nominate for election as a director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by the person and (iv) any other information
relating to the person that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice, (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of record by such
stockholder, together with evidence reasonably satisfactory to the
Secretary of such beneficial ownership, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant
to which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the persons named in its notice and (v)
any other information relating to such stockholder that would be required
to be disclosed in a proxy statement or other filings required to be made
in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve
as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the provisions of Section
4.3 or the procedures set forth in this subsection 8.1(c)(3). If the
chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the chairman of the meeting
shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
(4) Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time by the stockholders of
the Corporation, but only for cause and only
<PAGE> 17
17
by the affirmative vote of the holders of a majority of the outstanding
shares of the Corporation then entitled to vote generally in the election
of directors, considered for purposes of this paragraph as one class.
(5) Upon the redemption by the Corporation of the share of any
series of Special Voting Preferred Stock, the director elected by such
series of Special Voting Preferred Stock shall be deemed to have resigned
automatically and immediately upon the occurrence of such redemption, and
the vacancy resulting from such resignation shall be filled with an
"independent director", as such term is used in Rule 303 of the Rules of
the New York Stock Exchange as in existence on the date hereof or as
amended from time to time hereafter, chosen by a majority of the whole
Board. Any director so elected by the Board of Directors to fill a vacancy
shall hold office for a term that shall coincide with the term of the
class to which such director shall have been elected.
(6) Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken only upon the vote of the
stockholders at an annual or special meeting duly announced and called, as
provided in the By-Laws, and may not be taken by a written consent of the
stockholders pursuant to the DGCL.
(7) Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by a majority of the members
of the Board of Directors, the Chairman of the Board of Directors or the
Chief Executive Officer of the Corporation. Special meetings of the
stockholders of the Corporation may not be called by any other person or
persons.
ARTICLE IX
Private Property
SECTION 9.1. Private Property. The private property of the
stockholders of the Corporation shall not be subject to the payment of corporate
debts to any extent whatsoever.
ARTICLE X
Amendments
SECTION 10.1. Amendments. Notwithstanding anything contained in this
Restated Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least 662/3% of the outstanding shares of capital stock of the
Corporation entitled to vote
<PAGE> 18
18
thereon, voting as a single class, shall be required to amend, repeal, or adopt
any provision to (i) reclassify the Board of Directors, (ii) permit stockholder
action by written consent, (iii) permit the calling of special meetings by
stockholders or (iv) approve amendments to the by-laws of the Corporation, in
each case, in a manner inconsistent with subsection 8.1(c) or this Article X of
this Restated Certificate of Incorporation."
<PAGE> 19
IN WITNESS WHEREOF, GALILEO INTERNATIONAL, INC. has caused this
Certificate to be signed by Babetta R. Gray, its Senior Vice President, Legal
and General Counsel, this 30th day of July, l997.
GALILEO INTERNATIONAL, INC.
By: /s/ Babetta R. Gray
-----------------------------------
Name: Babetta R. Gray
Title: Senior Vice President,
Legal and General Counsel
<PAGE> 1
EXHIBIT 3.2
RESTATED
BY-LAWS
OF
GALILEO INTERNATIONAL, INC.
ARTICLE I
OFFICES
SECTION 1. Registered Office in Delaware. The address of the
registered office of Galileo International, Inc. (hereinafter called the
"Corporation") in the State of Delaware shall be Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, and the
registered agent in charge thereof shall be The Corporation Trust Company.
SECTION 2. Other Offices. The Corporation may have an office or
offices at any other place or places within or without the State of Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Annual Meeting. The annual meeting of stockholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at such place within or without
the State of Delaware, and at such date and hour, as shall be designated by the
Board of Directors of the Corporation (the "Board") and set forth in the notice
or in a duly executed waiver of notice thereof.
SECTION 2. Special Meetings. A special meeting of the stockholders
for any purpose or purposes may be called at any time by the Chairman of the
Board, by the Chief Executive Officer of the Corporation or by a majority of the
Board. A special meeting of stockholders of the Corporation may not be called by
any other person or persons. Any such meeting shall be held at such place within
or without the State of Delaware, and at such date and hour, as shall be
designated in the notice or in a duly executed waiver of notice of such meeting.
<PAGE> 2
2
Only such business as is stated in the written notice of a special
meeting may be acted upon thereat.
SECTION 3. Notice of Meetings. Except as otherwise provided by law,
written notice of each annual or special meeting of stockholders stating the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is to be held, shall be given
personally or by first class mail to each stockholder entitled to vote at such
meeting, not less than 10 nor more than 60 calendar days before the date of the
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation. If, prior
to the time of mailing, the Secretary shall have received from any stockholder
entitled to vote a written request that notices intended for such stockholder
are to be mailed to an address other than the address that appears on the
records of the Corporation, notices intended for such stockholder shall be
mailed to the address designated in such request.
Notice of a special meeting may be given by the person or persons
calling the meeting, or, upon the written request of such person or persons, by
the Secretary of the Corporation on behalf of such person or persons. If the
person or persons calling a special meeting of stockholders give notice thereof,
such person or persons shall forward a copy thereof to the Secretary. Every
request to the Secretary for the giving of notice of a special meeting of
stockholders shall state the purpose or purposes of such meeting.
SECTION 4. Waiver of Notice. Notice of any annual or special meeting
of stockholders need not be given to any stockholder entitled to vote at such
meeting who files a written waiver of notice with the Secretary, duly executed
by the person entitled to notice, whether before or after the meeting. Neither
the business to be transacted at, nor the purpose of, any meeting of
stockholders need be specified in any written waiver of notice. Attendance of a
stockholder at a meeting, in person or by proxy, shall constitute a waiver of
notice of such meeting, except as provided by law.
SECTION 5. Adjournments. When a meeting is adjourned to another
date, hour or place, notice need not be given of the adjourned meeting if the
date, hour and place thereof are announced at the meeting at which the
adjournment is taken. If the adjournment is for more than 30 calendar days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting. At the adjourned meeting any business
may be transacted which might have been transacted at the original meeting.
When any meeting is convened the presiding officer, if directed by
the Board, may adjourn the meeting if (a) no quorum is present for the
transaction of business, or (b) the Board determines that adjournment is
necessary or appropriate to enable the stockholders
<PAGE> 3
3
(i) to consider fully information which the Board determines has not been made
sufficiently or timely available to stockholders or (ii) otherwise to exercise
effectively their voting rights.
SECTION 6. Quorum. Except as otherwise provided by law or the
Restated Certificate of Incorporation of the Corporation (the "Restated
Certificate of Incorporation"), whenever a class of stock of the Corporation is
entitled to vote as a separate class, or whenever classes of stock of the
Corporation are entitled to vote together as a single class, on any matter
brought before any meeting of the stockholders, whether annual or special,
holders of shares entitled to cast a majority of the votes entitled to be cast
by all the holders of the shares of stock of such class voting as a separate
class, or classes voting together as a single class, as the case may be,
outstanding and entitled to vote thereat, present in person or by proxy, shall
constitute a quorum at any such meeting of the stockholders. If, however, such
quorum shall not be present or represented at any such meeting of the
stockholders, the stockholders entitled to vote thereat may adjourn the meeting
from time to time in accordance with Section 5 of this Article II until a quorum
shall be present or represented.
SECTION 7. Voting. Unless otherwise provided in the Restated
Certificate of Incorporation, each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of capital stock
entitled to vote thereat held by such stockholder. Except as otherwise provided
by law or the Restated Certificate of Incorporation or these Restated By-Laws,
when a quorum is present with respect to any matter brought before any meeting
of the stockholders, the vote of the holders of shares entitled to cast a
majority of the votes entitled to be cast by all the holders of the shares
constituting such quorum shall decide any such matter. Votes need not be by
written ballot, unless the Board, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in such officer's
discretion, requires any vote or votes cast at such meeting to be cast by
written ballot.
SECTION 8. Proxies. Each stockholder entitled to vote at a meeting
of stockholders may authorize another person or persons to act for such
stockholder by proxy. Such proxy shall be filed with the Secretary before such
meeting of stockholders at such time as the Board may require. No proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period.
SECTION 9. Advance Notice of Business to Be Transacted at Annual
Meetings. To be properly brought before the annual meeting of stockholders,
business must be either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board (or any duly
authorized committee thereof), (b) otherwise properly brought before the meeting
by or at the direction of the Board (or any duly authorized committee thereof)
or (c) otherwise properly brought before the meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of stockholders
<PAGE> 4
4
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 9. In addition to any other applicable
requirements, including but not limited to the requirements of Rule 14a-8
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting is mailed or such public disclosure of the date of
the annual meeting is made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (b) the name and record address of such stockholder, (c) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, together with evidence reasonably
satisfactory to the Secretary of such beneficial ownership, (d) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (e) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
Notwithstanding anything in these Restated By-Laws to the contrary,
no business shall be conducted at the annual meeting of stockholders except
business brought before such meeting in accordance with the procedures set forth
in this Section 9; provided, however, that, once business has been properly
brought before such meeting in accordance with such procedures, nothing in this
Section 9 shall be deemed to preclude discussion by any stockholder of any such
business. If the chairman of such meeting determines that business was not
properly brought before the meeting in accordance with the foregoing procedures,
the chairman shall declare to the meeting that the business was not properly
brought before the meeting and such business shall not be transacted.
<PAGE> 5
5
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. General Powers. The property, business and affairs of the
Corporation shall be managed by the Board, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law or by
the Restated Certificate of Incorporation directed or required to be exercised
or done by the stockholders.
SECTION 2. Number and Term of Directors Holding Office. Subject to
the rights, if any, of holders of preferred stock of the Corporation, the Board
shall consist of thirteen (13) members (including such directors as shall be
elected by any series of special voting preferred stock of the Corporation) or
such other number as shall be fixed from time to time by the Board in accordance
with the provisions of the Stockholders' Agreement, dated as of July 30, 1997,
among the Corporation and certain of its stockholders (as the same may be
amended from time to time, the "Stockholders' Agreement"). The directors shall
be divided into three classes, designated Class I, Class II and Class III. The
Board shall, by resolution passed by a majority of the Board, designate the
directors to serve as initial Class I, Class II and Class III directors upon
filing of the Restated Certificate of Incorporation with the Secretary of State
of the State of Delaware. Except as provided in Section 5 of this Article III,
and except as provided in the Restated Certificate of Incorporation, directors
shall be elected by a plurality of the votes cast at annual meetings of
stockholders, and each director so elected shall hold office as provided by
Article VIII of the Restated Certificate of Incorporation. None of the directors
need be stockholders of the Corporation.
SECTION 3. Nomination of Directors and Advance Notice Thereof. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation, except as may be
otherwise provided in the Restated Certificate of Incorporation with respect to
the right of holders of preferred stock of the Corporation to nominate and elect
a specified number of directors in certain circumstances. Nominations of persons
for election to the Board may be made at any annual meeting of stockholders, or
at any special meeting of stockholders called for the purpose of electing
directors, (a) by or at the direction of the Board (or any duly authorized
committee thereof) or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 3 and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in this Section 3. In addition to any other applicable
requirements, for a nomination to be made by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an
<PAGE> 6
6
annual meeting, not less than 60 days nor more than 90 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting is mailed or such public disclosure of the date of
the annual meeting is made, whichever first occurs, or (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the special meeting is mailed or public disclosure of the
date of the special meeting is made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice, (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, together with evidence reasonably satisfactory to
the Secretary of such beneficial ownership, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section l4 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3, except as may be otherwise provided in the Restated Certificate of
Incorporation with respect to the right of holders of preferred stock of the
Corporation to nominate and elect a specified number of directors in certain
circumstances. If the chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the chairman of the
<PAGE> 7
7
meeting shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
SECTION 4. Resignation. Any director may resign at any time by
giving written notice to the Board, the Chief Executive Officer or the Secretary
of the Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, then it shall take effect when accepted by action of the Board. Except
as aforesaid, acceptance of such resignation shall not be necessary to make it
effective.
SECTION 5. Vacancies. Subject to the rights of the holders of any
series of preferred stock or any other class of capital stock of the Corporation
(other than the Common Stock) then outstanding, any vacancy in the Board,
arising from death, resignation, removal, an increase in the number of directors
or any other cause, may be filled either by a majority vote of the remaining
directors, although less than a quorum, or by the sole remaining director. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the term of the class to which such director shall have been
elected.
SECTION 6. Meetings. (a) Annual Meetings. As soon as practicable
after each annual election of directors, the Board shall meet for the purpose of
organization and the transaction of other business, unless it shall have
transacted all such business by written consent pursuant to Section 7 of this
Article III.
(b) Other Meetings. Other meetings of the Board shall be held at
such times as the Board shall from time to time determine or upon call by the
Chairman of the Board, the Chief Executive Officer of the Corporation or any
four directors.
(c) Notice of Meetings. Regular meetings of the Board may be held
without notice. The Secretary of the Corporation shall give notice to each
director of each special meeting, including the time and place of such special
meeting. Notice of each such meeting shall be given to each director by
telephone, telegram, facsimile, telex or cable not later than four Business Days
before the day on which such meeting is to be held or on such shorter notice
(but in no event fewer than two Business Days' notice) as the Chairman of the
Board may deem necessary or appropriate in the circumstances. Notice of any
meeting shall not be required to be given to any director who shall attend such
meeting. A waiver of notice by the person entitled thereto, whether before or
after the time of any such meeting, shall be deemed equivalent to adequate
notice. For purposes of this Section 6(c), a "Business Day" means any day except
a Saturday, Sunday, or other day on which commercial banks in New York, New York
are authorized by law to close.
(d) Place of Meetings. The Board may hold its meetings at such place
or places within or without the State of Delaware as the Board may from time to
time by
<PAGE> 8
8
resolution determine or as shall be designated in the respective notices or
waivers of notice thereof.
(e) Quorum and Manner of Acting. Except as otherwise provided by
law, the Restated Certificate of Incorporation or these Restated By-Laws, a
majority of the total number of directors then in office shall be necessary at
any meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and the affirmative vote of a majority of those
directors present at any such meeting at which a quorum is present shall be
necessary for the passage of any resolution or act of the Board. In the absence
of a quorum for any such meeting, a majority of the directors present thereat
may adjourn such meeting from time to time until a quorum shall be present
thereat. Notice of any adjourned meeting need not be given.
(f) Organization and Order of Business. The Chairman of the Board
shall act as chairman of each meeting of the Board and preside thereat or, in
the absence of the Chairman of the Board at any meeting of the Board, any other
director chosen by a majority of the directors present thereat shall act as
chairman of the meeting and preside thereat. The Secretary of the Corporation
or, in the case of the Secretary's absence, any person whom the chairman of the
meeting shall appoint, shall act as secretary of such meeting and keep the
minutes thereof.
SECTION 7. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or such committee, as the case may be, and such written consent or
consents are filed with the minutes of the proceedings of the Board or such
committee.
SECTION 8. Meetings by Conference Telephone, etc. At the request of
any one or more members of the Board, or of any committee thereof, any meeting
of the Board or such committee shall provide for the ability of any director to
participate in a meeting of the Board, or of such committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
SECTION 9. Compensation. Unless otherwise restricted by the Restated
Certificate of Incorporation or these By-Laws, the Board or the Compensation
Committee may determine the compensation of directors. Each director who is
independent within the meaning of Rule 303 of the Rules of the New York Stock
Exchange, as amended from time to time hereafter, in consideration for his or
her serving as such, shall receive from the Corporation compensation in an
amount and form customary for comparable public companies. Directors who are
managers of the Corporation shall not receive compensation
<PAGE> 9
9
for serving as directors. Any other director may be compensated as determined by
the Board or the Compensation Committee. The Corporation shall reimburse each
director or member of a committee for any out-of-pocket expenses incurred by him
or her on account of his or her attendance at any meeting of the Board or such
committee. Nothing contained in this Section 9 shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV
COMMITTEES
SECTION 1. Audit Committee. The Board may designate an Audit
Committee to be composed of two or more directors, all of whom shall be
independent within the meaning of Rule 303 of the Rules of the New York Stock
Exchange as in existence on the date hereof, or as amended from time to time
hereafter. A majority of the members of the Audit Committee shall constitute a
quorum. The Audit Committee shall from time to time review and make
recommendations to the Board with respect to the selection of independent
auditors, the fees paid to such auditors, the adequacy of the audit and
accounting procedures of the Corporation and such other matters as may be
specifically delegated to the Audit Committee by the Board. In this connection
the Audit Committee shall, at its request, meet with representatives of the
independent auditors and with the financial officers of the Corporation
separately or jointly.
SECTION 2. Compensation Committee. The Board may designate a
Compensation Committee to be composed of two or more directors in accordance
with the provisions of the Stockholders' Agreement. A majority of the members of
the Compensation Committee shall constitute a quorum. The Compensation Committee
shall from time to time review and make recommendations to the Board with
respect to the management remuneration policies of the Corporation, including
salary rates and benefits of appointed officers, other remuneration plans such
as incentive compensation, deferred compensation and stock option plans,
directors' compensation and benefits and such other matters as may be
specifically delegated to the Compensation Committee by the Board.
SECTION 3. Nominating Committee. The Board may designate a
Nominating Committee to be composed of two or more directors in accordance with
the provisions of the Stockholders' Agreement. A majority of the members of the
Nominating Committee shall constitute a quorum. The Nominating Committee shall
from time to time review, report and make recommendations to the Board on the
following matters: (i) nominees for directors who may be elected from time to
time by the holders of the Common Stock of the Corporation, selection criteria
for directors, and removal of Directors if deemed
<PAGE> 10
10
appropriate; (ii) evaluation and performance of the Board and individual
Directors; and (iii) such other matters as the Board may from time to time
prescribe.
SECTION 4. Board Designated Committees. The Board may, by resolution
passed by a majority of the whole Board, designate one or more committees
("Special Committees"), each Special Committee to consist of one or more
directors.
SECTION 5. Committee Procedure, Seal. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of such committee; provided, however, that
alternate members of the Audit Committee must satisfy the criteria set forth in
Section 1 above and alternate members of the Compensation Committee must satisfy
the criteria set forth in Section 2 above. In the absence or disqualification of
a member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another director to act at the
meeting in the place of any such absent or disqualified member; provided,
however, that appointees to the Audit Committee must satisfy the criteria set
forth in Section 1 above and appointees to the Compensation Committee must
satisfy the criteria set forth in Section 2 above. Any committee of the Board,
to the extent provided in the resolution of the Board designating such
committee, shall have and may exercise all the powers and authority of the Board
in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; provided, however, that no such committee shall have such power or
authority in reference to the following matters: (i) approving or adopting or
recommending to the stockholders of the Corporation, any action or matter
expressly required by the Delaware General Corporation Law (the "DGCL") to be
submitted to stockholders for approval or (ii) adopting, amending or repealing
any by-law of the Corporation
ARTICLE V
OFFICERS
SECTION 1. Executive Officers. The officers of the Corporation shall
include a Chairman of the Board, a President and Chief Executive Officer, a
Chief Financial Officer, a General Counsel, a Treasurer and a Secretary. The
officers of the Corporation may also include a Chief Operating Officer, one or
more Senior Vice Presidents, one or more Executive Vice Presidents, one or more
Vice Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries. Each such officer shall be elected by the Board at its annual
meeting and shall hold office for such term as may be determined by the Board.
Each such officer shall hold office until the next succeeding annual meeting of
the Board and until his or her successor is elected or until his or her earlier
death or resignation
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or removal in the manner hereinafter provided. Any two or more offices may be
held by the same person.
The Board may elect, and the Chief Executive Officer may appoint,
such other officers of the Corporation as the Board or the Chief Executive
Officer deems necessary who shall have such authority and shall perform such
duties as the Board or the Chief Executive Officer may prescribe. If additional
officers are elected or appointed, each of them shall hold office until his or
her successor is elected or appointed or until his or her earlier death or
resignation or removal in the manner hereinafter provided.
SECTION 2. Authority and Duties. All officers, as between themselves
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these Restated By-Laws or,
to the extent not so provided, by resolution of the Board.
SECTION 3. Resignation and Removal. (a) Any officer may resign at
any time by giving written notice to the Board, the Chief Executive Officer or
the Secretary of the Corporation, and such resignation shall take effect at the
time specified therein or, if the time when it shall become effective shall not
be specified therein, when accepted by action of the Board. Except as aforesaid,
the acceptance of such resignation shall not be necessary to make it effective.
(b) All officers elected, and all agents appointed, by the Board
shall be subject to removal at any time by the Board and all officers and agents
appointed by the Chief Executive Officer shall be subject to removal at any time
by the Chief Executive Officer or the Board, in each case, with or without
cause.
SECTION 4. Vacancies. Any vacancy in any office may be filled for
the unexpired portion of the term in the same manner as provided for election
and appointment to such office.
SECTION 5. Chairman of the Board. The initial Chief Executive
Officer shall be the Chairman of the Board of the Corporation. Thereafter, the
Chairman of the Board shall be selected by the Board. The Chairman of the Board
shall preside at all meetings of the Board and at all meetings of the
stockholders and shall have and exercise such further powers and duties as may
from time to time be conferred upon or assigned to him or her by the Board.
SECTION 6. President and Chief Executive Officer. The President and
Chief Executive Officer of the Corporation, subject to the direction of the
Board, shall have general charge of the business and affairs of the Corporation,
shall have the direction of all other officers, agents and employees of the
Corporation and may assign such duties to the
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other officers of the Corporation as he or she deems appropriate. In case of the
absence or inability to act of the President and Chief Executive Officer, the
Board may designate such other person as it deems appropriate to assume the
duties of the President and Chief Executive Officer and, when so acting, but
subject to the foregoing, such person shall have all of the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer.
SECTION 7. Chief Operating Officer. The Chief Operating Officer of
the Corporation, subject to the direction of the President and Chief Executive
Officer, shall have charge of the day-to-day operations of the Corporation,
shall assist the President and Chief Executive Officer in carrying out the
orders and resolutions of the Board and shall perform such other duties as the
Chief Executive Officer or the Board of Directors shall from time to time
assign. At the request of the President and Chief Executive Officer, the Chief
Operating Officer, until otherwise determined, and subject to any limitations
imposed by the Board, shall assume the duties of the President and Chief
Executive Officer and, when so acting, but subject to the foregoing, shall have
all of the powers of, and be subject to all the restrictions upon, the Chief
Executive Officer.
SECTION 8. Chief Financial Officer. The Chief Financial Officer,
subject to the direction of the President and Chief Executive Officer, shall
have overall charge of all of the financial affairs of the Corporation and shall
perform such other duties as the Chief Executive Officer or the Board of
Directors shall from time to time assign.
SECTION 9. General Counsel. The General Counsel, subject to the
direction of the President and the Chief Executive Officer, shall have overall
charge of all of the legal affairs of the Corporation and shall perform such
other duties as the Chief Executive Officer or the Board of Directors shall from
time to time assign.
SECTION 10. Senior Vice Presidents, Executive Vice Presidents and
Vice Presidents. Each Senior Vice President, Executive Vice President and Vice
President of the Corporation shall have such powers and perform such duties as
the President and Chief Executive Officer or the Board may from time to time
prescribe and shall perform such other duties as may be prescribed by these
Restated By-Laws.
SECTION 11. Treasurer. The Treasurer of the Corporation shall have
charge and custody of and be responsible for all funds and securities of the
Corporation.
SECTION 12. Assistant Treasurers. The Assistant Treasurers of the
Corporation, if any, in order or their seniority or in any other order
determined by the Board, shall generally assist the Treasurer and perform such
other duties as the Board or the Treasurer shall prescribe, and, in the absence
or disability of the Treasurer, shall perform the duties and exercise the powers
of the Treasurer.
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SECTION 13. Secretary. The Secretary of the Corporation shall keep
the records of all meetings of the stockholders and the Board. He or she shall
affix the seal of the Corporation to all deeds, contracts, bonds or other
instruments requiring the corporate seal when the same shall have been signed on
behalf of the Corporation by a duly authorized officer and shall be the
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Corporation and of its other corporate records.
SECTION 14. Assistant Secretary. The Assistant Secretaries, if any,
in order of their seniority or in any other order determined by the Board, shall
generally assist the Secretary and perform such other duties as the Board or the
Secretary shall prescribe, and, in the absence or disability of the Secretary,
shall perform the duties and exercise the powers of the Secretary.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Execution of Documents. Any officer, employee or agent of
the Corporation designated by the Board (or any duly authorized committee of the
Board to the extent permitted by law) shall have power to execute and deliver
deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders
for the payment of money and other documents for and in the name of the
Corporation, and the Board (or such a committee) may authorize any such officer,
employee or agent to delegate such power (including authority to redelegate) by
written instrument to other officers, employees or agents of the Corporation.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or the Chief Executive Officer or any other officer of
the Corporation to whom power in that respect shall have been delegated by the
Board shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations. The Board or the Chief Executive Officer shall designate the
officers of the Corporation who shall have authority from time to time to
appoint an agent or agents of the Corporation to exercise in the name and on
behalf of the Corporation the powers and rights that the Corporation may have as
the holder of stock or other securities in any other corporation, and to vote or
consent in respect of such stock or securities. Such designated officers may
instruct the person or persons so appointed as to the manner of exercising such
powers and rights, and such designated officers may execute or cause to be
executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, such
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written proxies, powers of attorney or other instruments as they may deem
necessary or proper in order that the Corporation may exercise such powers and
rights.
ARTICLE VII
SHARES AND TRANSFER OF SHARES
SECTION 1. Certificates of Stock. Every owner of shares of stock of
the Corporation shall be entitled to have a certificate evidencing the number of
shares of stock of the Corporation owned by such owner and designating the class
of stock to which such shares belong, which shall otherwise be in such form as
the Board shall prescribe. Each such certificate shall bear the signature (or a
facsimile thereof) of the President and Chief Executive Officer, the Chief
Operating Officer or the Chief Financial Officer and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation.
SECTION 2. Record. A record shall be kept of the name of the person,
firm or corporation owning the stock represented by each certificate evidencing
stock of the Corporation issued, the number of shares represented by each such
certificate, and the date thereof, and, in the case of cancellation, the date of
cancellation. Except as otherwise expressly required by law, the person in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
SECTION 3. Transfer of Stock. (a) The transfer of shares of stock
and the certificates evidencing such shares of stock of the Corporation shall be
governed by Article 8 of Subtitle I of Title 6 of the Delaware Code (the Uniform
Commercial Code), as amended from time to time.
(b) Registration of transfers of shares of stock of the Corporation
shall be made only on the books of the Corporation upon request of the
registered holder thereof, or of such holder's attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and upon the surrender of the certificate or certificates evidencing such shares
properly endorsed or accompanied by a stock power duly executed.
SECTION 4. Addresses of Stockholders. Each stockholder shall
designate to the Secretary of the Corporation an address at which notices of
meetings and all other corporate notices may be served or mailed to such
stockholder, and, if any stockholder shall fail to so designate such an address,
corporate notices may be served upon such stockholder by mail directed to such
stockholder at such stockholder's post office address, if any, as the
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same appears on the share record books of the Corporation or at such
stockholder's last known post office address.
SECTION 5. Lost, Destroyed or Mutilated Certificates. A holder of
any shares of stock of the Corporation shall promptly notify the Corporation of
any loss, destruction or mutilation of any certificate or certificates
evidencing all or any such shares of stock. The Board may, in its discretion,
cause the Corporation to issue a new certificate in place of any certificate
theretofore issued by it and alleged to have been mutilated, lost, stolen or
destroyed, upon the surrender of the mutilated certificate or, in the case of
loss, theft or destruction of the certificate, upon satisfactory proof of such
loss, theft or destruction, and the Board may, in its discretion, require the
owner of the lost, stolen or destroyed certificate or such owner's legal
representative to give the Corporation a bond sufficient to indemnify the
Corporation against any claim made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
SECTION 6. Facsimile Signatures. Any or all of the signatures on a
certificate evidencing shares of stock of the Corporation may be facsimiles.
SECTION 7. Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with the Restated
Certificate of Incorporation or these Restated By-Laws, concerning the issue,
transfer and registration of certificates evidencing stock of the Corporation.
It may appoint, or authorize any principal officer or officers to appoint, one
or more transfer agents and one or more registrars, and may require all
certificates of stock to bear the signature or signatures (or a facsimile or
facsimiles thereof) of any of them. The Board may at any time terminate the
employment of any transfer agent or any registrar of transfers. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall cease to be such officer, transfer
agent or registrar, whether because of death, resignation, removal or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as though the person or persons who
signed or whose facsimile signature has been placed upon such certificate or
certificates had not ceased to be such officer, transfer agent or registrar.
SECTION 8. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other such
action. A
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determination of stockholders entitled to notice of, or to vote at, any meeting
of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board may fix a new record date for the adjourned meeting.
SECTION 9. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its records
as the owner of shares of stock to receive dividends and to vote as such owner,
shall be entitled to hold liable for calls and assessments a person registered
on its records as the owner of shares of stock, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares of
stock on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
SECTION 10. Stockholder Agreements. Shares of stock of the
Corporation may be subject to one or more agreements abridging, limiting or
restricting the rights of any one or more stockholders to sell, assign,
transfer, mortgage, pledge or hypothecate any or all of the stock of the
Corporation held by them, or providing for preemptive rights, or may be subject
to one or more agreements providing a purchase option with respect to any shares
of stock of the Corporation. If such agreements exist, all certificates
evidencing shares of stock subject to such abridgements, limitations,
restrictions or options shall have reference thereto endorsed on such
certificate and such stock shall not thereafter be transferred on the books of
the Corporation except in accordance with the terms and conditions of such
agreement or agreements. Copies of such agreement or agreements shall be
maintained at the offices of the Corporation.
ARTICLE VIII
BOOKS AND RECORDS
The books and records of the Corporation may be kept at such place
or places within or without the State of Delaware as the Board may from time to
time determine.
ARTICLE IX
SEAL
The Board shall provide a corporate seal which shall bear the full
name of the Corporation.
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ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be
subject to change from time to time, by the Board.
ARTICLE XI
INDEMNIFICATION
SECTION 1. General. The Corporation (i) shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he or she is or was a director or an
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or an officer of another corporation, partnership,
joint venture, trust or other enterprise, to the full extent authorized or
permitted by law, as now or hereafter in effect, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful, and (ii) may indemnify, if the Board of
Directors determines such indemnification is appropriate, any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, to the full extent authorized or permitted by law, as now or
hereafter in effect, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
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SECTION 2. Derivative Actions. The Corporation (i) shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director or an officer of the Corporation, or is or was serving
at the request of the Corporation as a director or an officer of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent authorized or permitted by law, as now or hereafter in effect, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the Corporation, and (ii) may indemnify,
if the Board of Directors determines such indemnification is appropriate, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was an employee or an agent of the Corporation, or is or was serving
at the request of the Corporation as an employee or an agent of another
corporation, partnership, joint venture, trust or other enterprise, to the full
extent authorized or permitted by law, as now or hereafter in effect, against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the Corporation; provided, however, that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. Successful Defense. To the extent that (i) a director or
an officer of the Corporation or (ii) any other employee or agent of the
Corporation who the Board of Directors has authorized the Corporation to
indemnify, has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in sections 1 and 2 above, or in defense
of any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
SECTION 4. Proceedings Initiated by any Person. Notwithstanding
anything to the contrary contained in sections 1 or 2 above, except for
proceedings to enforce rights to indemnification, the Corporation shall not be
obligated to indemnify any person in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof) was
authorized in advance, or unanimously consented to, by the Board of Directors.
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SECTION 5. Procedure. Any indemnification under sections 1 and 2
above (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in sections 1 and 2
above. Such determination shall be made (i) by a majority vote of the directors
who are not parties to such action, suit or proceeding even though less than a
quorum, or (ii) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (iii) by the stockholders.
SECTION 6. Advancement of Expenses. Expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation pursuant to this
Article XI or as otherwise authorized by law. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
SECTION 7. Rights Not Exclusive. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of this
Article XI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office.
SECTION 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the power
to indemnify him or her against such liability under the provisions of the DGCL.
SECTION 9. Definition of "Corporation". For purposes of this Article
XI, references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer,
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employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Article XI with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
SECTION 10. Certain Other Definitions. For purposes of this Article
XI, references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves service by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation",
as referred to in this Article XI.
SECTION 11. Continuation of Rights. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article XI
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 12. Repeal or Modification. Any repeal or modification of
this Article XI by the stockholders of the Corporation shall not adversely
affect any rights to indemnification and to advancement of expenses that any
person may have at the time of such repeal or modification with respect to any
acts or omissions occurring prior to such repeal or modification.
SECTION 13 Amendments to DGCL. If the DGCL is amended hereafter to
broaden the rights of those seeking indemnification or advancement of expenses,
then such rights shall be extended to such persons to the fullest extent
authorized by the DGCL, as so amended, without further action by either the
Board of Directors or the stockholders of the Corporation.
ARTICLE XII
AMENDMENTS
These Restated By-Laws, or any of them, may be altered, amended or
repealed, or new by-laws may be made, but only to the extent any such
alteration, amendment, repeal or new by-law is not inconsistent with any
provision of the Restated
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Certificate of Incorporation, either by a majority of the whole Board or by the
stockholders of the Corporation upon the affirmative vote of the holders of
662/3% or more of the outstanding shares of capital stock of the Corporation
entitled to vote thereon, voting as a single class; provided, however, that no
alteration, amendment or repeal of Section 8 of Article III of these Restated
By-Laws may be made by the Board without the consent of all of the directors.
<PAGE> 1
EXHIBIT 4.1
CONFORMED COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of the 30th
day of July, 1997, among Galileo International, Inc., a Delaware corporation
(the "Company"), and Covia LLC, USAM Corp., RESNET Holdings Inc., Distribution
Systems Inc., Roscor A.G., Travel Industry Systems B.V., Retford Limited, Racom
Teledata S.p.A., Travidata Inc., Olynet Inc. and Coporga, Inc. (the "Original
Stockholders").
R E C I T A L S
WHEREAS, on the date hereof, after giving effect to the initial public
offering (the "IPO") of shares of the Company's Common Stock, par value $.01
per share (the "Common Stock"), the Original Stockholders are the owners of the
number of shares of Common Stock set forth on Schedule A hereto;
WHEREAS, the Original Stockholders have approved various actions in
connection with the IPO, including the approval of a Restated Certificate of
Incorporation;
WHEREAS, the parties hereto desire to provide for the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of the shares of
Registrable Stock (as defined herein) held by Holders (as defined herein), on
the terms and conditions set forth herein; and
WHEREAS, the Board of Directors of the Company has authorized the officers
of the Company to execute and deliver this Agreement in the name of and on
behalf of the Company.
NOW, THEREFORE, in consideration of the mutual covenants, promises,
representations, warranties and conditions set forth in this Agreement, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
For purposes of this Agreement, in addition to the definitions set forth
above and elsewhere herein, the following terms shall have the following
respective meanings:
"affiliate" shall have the meaning given in Rule 405 under the Securities
Act;
"Commission" shall mean the United States Securities and Exchange Commission;
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended;
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"Holder" shall mean each Original Stockholder or any transferee or assignee
to whom the rights under this Agreement are transferred or assigned in
accordance with the provisions of Section 9 hereof;
"Registrable Stock" shall mean: (i) the Common Stock beneficially owned by
each Original Stockholder immediately after the IPO; (ii) any Common Stock
acquired in the public market or otherwise by a Holder of Registrable Stock
to increase its holdings in order to maintain such Holder's right to elect a
director of the Company pursuant to the terms of any series of the Company's
Special Voting Preferred Stock, par value $.01 per share (the "Special Voting
Preferred Stock"), then held by such Holder (but only to the extent required
to maintain such right); (iii) any other Common Stock acquired in the public
market or otherwise by a Holder of Registrable Stock; (iv) any Common Stock
issued as (or issuable upon the conversion or exercise of any warrant, right,
option or other convertible security which is issued as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
Common Stock referred to in clauses (i), (ii) or (iii) above or in clause (v)
below; and (v) any Common Stock issued by way of a stock split of the Common
Stock referred to in clauses (i), (ii), (iii) or (iv) above. For purposes of
this Agreement, any Registrable Stock shall cease to be Registrable Stock
when (x) a registration statement covering such Registrable Stock has been
declared effective and such Registrable Stock has been disposed of pursuant
to such effective registration statement or (y) such Registrable Stock is
sold or distributed pursuant to Rule 144 (or any similar or successor
provision (but not Rule 144A)) under the Securities Act; and
"Rule 144" shall mean Rule 144, as from time to time amended, of the
Commission promulgated under the Securities Act, or any rule of the
Commission promulgated as a successor thereto.
2. Demand Registration.
(a) At any time 180 days after the date of this Agreement and (i) for the
period terminating on the first anniversary of the date of this Agreement,
Holders holding at least 5% of the then outstanding Common Stock which is
Registrable Stock and (ii) thereafter Holders holding at least 2% of the
outstanding Common Stock which is Registrable Stock (or Holders holding less
than 2% of the outstanding Common Stock which is Registrable Stock who, using
their reasonable efforts, during the six month period following notice by
them to the Company of their desire to register shares of such Stock held by
them, have been unable to increase such shares to be registered to 2%, in the
aggregate) (the "Requesting Holders") may request, in a written notice to the
Company, that the Company file a registration statement under the Securities
Act covering the registration of such percentage of shares (at least 5%, 2%
or less, as the case may be) of the Common Stock which is Registrable Stock
<PAGE> 3
3
then outstanding in the manner (e.g, underwritten) specified in such notice
(a "Demand Notice"); provided, however, that shares of Registrable Stock
referred to in clause (iii) of the definition thereof, together with shares
issued with respect thereto pursuant to clauses (iv) and (v) of the
definition thereof, shall not be counted for purposes of determining if a
Holder has satisfied the applicable threshold for making a Demand Notice. A
registration effected pursuant to this Section 2 is referred to herein as a
"Demand Registration". Following receipt of any Demand Notice under this
Section 2, the Company shall (i) give, within 10 business days of receipt of
such Demand Notice, each other Holder written notice that it will be filing a
registration statement and advise such Holders that they may participate in
such registration by promptly so notifying the Company and (ii) file as
promptly as practicable (but in any event within 60 days after receiving such
Demand Notice) a registration statement and use its best efforts to cause to
be declared effective as soon as reasonably practicable (but in any event
within 120 days of receiving such Demand Notice) a registration statement
providing for the offer and sale of the Registrable Stock that the Requesting
Holders and the other Holders have requested be registered in accordance with
the manner of disposition specified in the Demand Notice of the Requesting
Holders; provided, however, that the participation of a Holder (other than a
Requesting Holder) in a Demand Registration pursuant to clause (i) of this
sentence shall not be deemed to be a Demand Registration of such
participating Holder.
(b) If the Requesting Holders intend to have the Registrable Stock
distributed by means of an underwritten offering, the underwriter or
underwriters shall be selected by Requesting Holders holding a majority of
the shares of Registrable Stock to be sold by such Requesting Holders after
consultation with all Requesting Holders, subject to approval by the Company,
which approval shall not be unreasonably withheld.
(c) Notwithstanding any provision of this Agreement to the contrary,
(i) the Company shall not be required to effect a Demand Registration if
the Demand Notice related thereto is delivered during the period
commencing 45 days prior to the estimated date of filing by the Company of
a registration statement pertaining to a public offering of equity
securities of the Company (a "Company Registration Statement") which are
the same as or similar to, or convertible into or exchangeable for, Common
Stock of the Company (other than a registration statement on Form S-8 or
successor form) and ending on the date of the effectiveness of such
Company Registration Statement; provided, however, that in no event shall
the Company be required to file a registration statement pertaining to a
Demand Registration at any
<PAGE> 4
4
time prior to 90 days after the date of the effectiveness of any Company
Registration Statement;
(ii) the Company shall not be required to effect more than one Demand
Registration in any six-month period; and
(iii) if the Company shall furnish to the Requesting Holders a
certificate signed by the chief executive officer of the Company stating
that in the good faith opinion of a majority of the board of directors of
the Company such registration would require the Company to disclose a
material financing, acquisition or other corporate development and that
such disclosure at such time is not in the best interests of the Company
and its stockholders, then the Company may postpone the filing or
effectiveness of a registration statement for such period (the "Delay
Period") as the board of directors shall approve; provided, however, that
(i) no single Delay Period may exceed 90 consecutive days; (ii) the Delay
Periods in any twelve consecutive months may not exceed, in the aggregate,
180 days; and (iii) no Delay Period may commence fewer than 60 days
following the end of a prior Delay Period.
(d) Each Original Stockholder will be entitled to two Demand Registrations
with respect to the Registrable Stock held by such Original Stockholder; upon
transfer or assignment of any or all of such Registrable Stock in accordance
with Section 9 hereof, the Original Stockholder shall notify the Company, in
accordance with Section 9, as to whether or not the Original Stockholder is
assigning Demand Registration rights under this Agreement. As a result, the
Company shall not be obligated to effect more than two Demand Registrations
in respect of the Registrable Stock of each Original Stockholder (including
for this purpose any Demand Registration rights in respect of such
Registrable Stock which have been assigned in accordance with the provisions
of Section 9 hereof); provided, however, that a Demand Registration shall not
be deemed to have been effected for a particular Holder for purposes of this
Section 2(d) unless (i) the Registration Statement filed in connection with
such Demand Registration shall have been declared effective by the
Commission; (ii) such Registration Statement shall have remained effective
for the period set forth in Section 4; and (iii) the offering of Registrable
Stock pursuant to such registration shall not be subject to any stop order,
injunction or other order or requirement of the Commission that is not lifted
or released (other than any such stop order, injunction or other requirement
of the Commission prompted by any act or omission of a Requesting Holder).
(e) If the Registrable Stock registered pursuant to a Demand Registration
is to be sold in one or more firm commitment underwritten offerings, and the
sole or
<PAGE> 5
5
managing underwriter, as the case may be, of such underwritten offering
advises the Holders of such securities that, in its opinion, the total amount
of Registrable Stock requested to be included in such registration will
exceed the maximum amount (the "Maximum Demand Offering Size") of the
Company's securities that can be marketed (1) at a price reasonably related
to the then current market value of such securities or (2) without otherwise
materially and adversely affecting the entire offering, then the Company
shall include in such registration, in the following priority up to the
Maximum Demand Offering Size: (x) first, all of the Registrable Stock
requested to be included in such registration by the Requesting Holders
pursuant to this Section 2, allocated, if necessary, for such offering not to
exceed the Maximum Demand Offering Size, pro rata among the Requesting
Holders on the basis of the relative number of shares of Registrable Stock
each such Requesting Holder has requested to be included in such
registration; and (y) second, all of the Registrable Stock requested to be
included in such registration by Holders other than the Requesting Holders
pursuant to this Section 2, allocated, if necessary, for such offering not to
exceed the Maximum Demand Offering Size, pro rata among such non-Requesting
Holders on the basis of the relative number of shares of Registrable Stock
each such Holder has requested to be included in such registration.
(f) The Company agrees not to effect any public or private sale,
distribution or purchase of any of its equity securities which are the same
as or similar to, or convertible into or exchangeable or exercisable for,
Common Stock of the Company during the 30-day period prior to, and the 90-day
period beginning on, the effective date of any registration statement filed
pursuant to a Demand Registration. The foregoing sentence shall not apply
to: (x) any such equity securities registered pursuant to a registration
statement on Form S-4 (or successor form) in respect of a business
combination, acquisition or similar transaction; (y) any shares of Common
Stock issued by the Company upon the exercise of an option or the conversion
of a security outstanding on the filing date of any registration statement;
and (z) any shares of Common Stock issued or options to purchase Common Stock
granted pursuant to employee benefit plans of the Company, including, without
limitation, the Company's 1997 Stock Incentive Plan and the Company's 1997
Non-Employee Director Stock Plan.
3. Incidental Registration.
(a) Subject to Section 7 and the other terms and conditions set forth in
this Section 3, if at any time 180 days after this Agreement the Company
determines that it shall file a registration statement under the Securities
Act (other than a registration statement on Form S-4 or S-8 (or successor
forms thereto) or filed in connection with an exchange offer or an offering
of securities solely to the Company's existing stockholders) for the sale of
shares of Common Stock for its own account or for the
<PAGE> 6
6
account of any third party (a "Selling Securityholder"), the Company shall
each such time promptly give each Holder written notice of such determination
setting forth the date on which the Company proposes to file such
registration statement, which date shall be no earlier than 30 days from the
date of such notice, and advising such Holders of their right to have any
Registrable Stock beneficially owned by them included in such registration.
Upon the written request of any Holder received by the Company no later than
15 business days after the date of the Company's notice, the Company shall
use its best efforts to cause to be registered under the Securities Act all
of the Registrable Stock that each such Holder has so requested to be
registered. The Company, in its sole discretion shall appoint the
underwriters, if any, for any registration covered by this Section 3 in the
case of a sale by the Company of shares of Common Stock for its own account.
(b) The Company's obligation to include Registrable Stock in a
registration statement pursuant to Section 3(a) above is subject to the
following limitations:
(i) If, at any time after giving written notice of its determination to
register shares of Common Stock for its own account or for the account of
a Selling Securityholder and prior to the effective date of any
registration statement filed in connection with such registration, the
Company or such Selling Securityholder shall determine for any reason not
to register such securities, the Company may, at its election, give
written notice of such determination to the Holders and thereupon the
Company shall be relieved of its obligation to use any efforts to register
any Registrable Stock in connection with such aborted registration.
(ii) If the Registrable Stock registered in accordance with this Section 3
is to be sold in one or more firm commitment underwritten offerings, and
the sole or managing underwriter, as the case may be, of such underwritten
offering advises the Company, the Selling Securityholder and the Holders
of Registrable Stock to be included in such registration that, in its
opinion, the total amount of such securities to be so registered,
including such Registrable Stock, will exceed the maximum amount (the
"Maximum Offering Size") of the Company's securities that can be marketed
(1) at a price reasonably related to the then current market value of such
securities or (2) without otherwise materially and adversely affecting the
entire offering, then the Company shall include in such registration, in
the following priority up to the Maximum Offering Size: (x) first, all of
the securities proposed to be registered for offer and sale by the Company
or the Selling Securityholder, as the case may be, and (y) second, all of
the Registrable Stock requested to be included in such registration by the
<PAGE> 7
7
Holders pursuant to this Section 3, allocated, if necessary, for such
offering not to exceed the Maximum Offering Size, pro rata among the
Holders requesting registration of such Registrable Stock on the basis of
the relative number of shares of Registrable Stock each such Holder has
requested to be included in such registration.
(c) In connection with any registration of the Company's Common Stock,
under Section 2 or 3 hereof, and upon the written request of the underwriters
managing any underwritten offering of the Common Stock, each Holder agrees
not to effect any sale, disposition or distribution of any Common Stock
(other than that included in any such registration or other than a private
sale to another Original Owner or, subject to Section 9 of this Agreement, a
third party in a transaction that involves the transfer of one or more shares
of Special Voting Preferred Stock) or securities exercisable for or
convertible or exchangeable into Common Stock without the prior written
consent of such underwriters during the 30-day period prior to, and the
90-day period beginning on, the effective date of any registration statement
to which Section 2(a) or 3(a) applies.
4. Registration Procedures. Whenever required under Section 2 or Section 3
of this Agreement to use its best efforts to effect the registration of any
Registrable Stock, the Company shall, as soon as reasonably practicable:
(a) prepare and file with the Commission a registration statement on Form
S-1 or such other form available for the sale of the Registrable Stock by the
Holders thereof in accordance with the intended method of distribution
thereof and use its best efforts to cause such registration statement to
become and remain effective for the period of distribution as provided
herein; provided, however, that before filing any registration statement or
prospectus or any amendments or supplements thereto (not including documents
that would be incorporated or deemed to be incorporated therein by
reference), the Company shall afford the Holders of the Registrable Stock
covered by such registration statement, their counsel and the managing or
sole underwriter, if any, an opportunity to review copies of all such
documents proposed to be filed;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act, the Exchange Act and the rules and regulations promulgated thereunder
applicable to it with respect to the disposition of all Registrable Stock
covered by such registration statement;
(c) furnish to each Holder such numbers of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus
<PAGE> 8
8
and any amendments or supplements thereto) as such Holder may reasonably
request in writing and, in the case of Demand Registration, furnish each
Requesting Holder with copies of any and all correspondence with the
Commission or any other governmental entity relating to the registration
statement and the prospectus included therein;
(d) use its best efforts to register or qualify the Registrable Stock
covered by such registration statement under the securities or blue sky laws
of such jurisdictions within the United States and its possessions and
territories as shall be reasonably appropriate for the distribution of the
Registrable Stock covered by the registration statement; provided, however,
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business in or to file a general consent
to service of process in any jurisdiction wherein it would not but for the
requirements of this paragraph (d) be obligated to do so;
(e) promptly (but in any event within 5 business days) notify each Holder
for whom such Registrable Stock is covered by such registration statement and
confirm such notice in writing, (i) when a registration statement, prospectus
or any prospectus supplement or post-effective amendment has been filed, and,
with respect to a registration statement or any post-effective amendment,
when the same has become effective, (ii) of the issuance of any order
suspending the effectiveness of a registration statement or of any order
preventing or suspending the use of any prospectus or the initiation of any
proceedings for that purpose, (iii) of the happening of any event that makes
any statement made in such registration statement or related prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in
such registration statement, prospectus or documents so that, in the case of
such registration statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that
in the case of the prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and at the written
request of any such Holder promptly prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made;
(f) furnish, at the written request of any Holder requesting registration
pursuant to Section 2, if the method of distribution is by means of an
underwriting,
<PAGE> 9
9
on the date that the shares of Registrable Stock are delivered to the
underwriters for sale pursuant to such registration, or if such Registrable
Stock is not being sold through underwriters, on the date that the
registration statement with respect to such shares of Registrable Stock
becomes effective: (i) a signed opinion, dated such date, of the legal
counsel for the Company for the purpose of such registration, addressed to
the underwriters, if any, and if such Registrable Stock is not being sold
through underwriters, then to the Holders making such request, as to such
matters as such underwriters or the Holders holding a majority of the
Registrable Stock included in such registration, as the case may be, may
reasonably request and as would be customary in such a transaction and (ii)
letters dated such date and the date the offering is priced from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and if such Registrable Stock is not being sold through
underwriters, then to the Holders making such request (1) stating that they
are independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements and other financial data of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and (2) covering such other
financial matters (including information as to the period ending not more
than 5 business days prior to the date of such letters) as such underwriters
or the Holders holding a majority of the Registrable Stock included in such
registration, as the case may be, may reasonably request and as would be
customary in such a transaction;
(g) provide reasonable cooperation to the selling Holders of Registrable
Stock and the managing or sole underwriter, if any, to facilitate the timely
preparation and delivery of certificates representing shares of Registrable
Stock to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Stock to be in such denominations and
registered in such names as the managing or sole underwriter, if any, or
Holders may reasonably request in writing at least two business days prior to
any sale of Registrable Stock in a firm commitment underwritten public
offering, or at least ten business days prior to any other such sale;
(h) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form and containing customary provisions regarding indemnification
of the underwriters by the Holders joining in such registration), in
conformity with Section 6, and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the
Registrable Stock to be so included in the registration statement, including,
without limitation, in the case of an underwritten Demand Registration,
providing the underwriters and their counsel reasonable access to the
Company's
<PAGE> 10
10
records and officers for purposes of customary due diligence examinations and
participating in good faith in meetings with potential investors or security
analysts (including "road shows"); provided, however, that in no event will
the Company be required to participate in more than one series of meetings or
road show in respect of all shares of Registrable Stock of all Holders in any
12 calendar months;
(i) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission; and
(j) use its best efforts to list the Registrable Stock covered by such
registration statement with any securities exchange on which the Common Stock
of the Company is then listed.
For purposes of this Section 4, the period of distribution of Registrable Stock
covered by any registration statement shall be deemed to extend until the
earlier of (i) the sale of all such Registrable Stock or, in the case of an
underwritten public offering, until each underwriter has completed the
distribution of all Registrable Stock included in such offering; and (ii) three
months after the effective date of such registration statement.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the Holders shall furnish to the Company such information regarding themselves,
the Registrable Stock held by them, and the intended method of disposition of
the Registrable Stock as the Company shall reasonably request and as shall be
required in connection with any action to be taken by the Company; provided,
however, that such information shall only be used in connection with such
registration.
6. Expenses of Registration. All reasonable expenses incurred in
connection with each registration pursuant to Section 2 or 3 of this Agreement,
including without limitation all registration, filing and qualification fees,
word processing, duplicating, printers' and accounting fees (including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance), fees of the National Association
of Securities Dealers, Inc. or listing fees, messenger and delivery expenses,
all fees and expenses of complying with state securities or blue sky laws and
fees and disbursements of counsel for the Company shall be paid by the Company.
Notwithstanding the foregoing, (i) the selling Holders shall bear and pay or be
responsible for the underwriters' discounts and commissions, and fees and
disbursements of counsel for the selling Holders, applicable to securities
offered for their account in connection with any such registrations, filings
and qualifications made pursuant to Section 2 or 3 of this Agreement; and (ii)
in no event shall the Company pay or be responsible for the fees and
disbursements of counsel for the underwriters in connection with any such
registrations, filings and qualifications.
<PAGE> 11
11
7. Underwriting Requirements. In connection with any underwritten offering
pursuant to Section 3, the Company shall not be required to include shares of
Registrable Stock in such underwritten offering unless the Holders of such
Registrable Stock accept the terms of the underwriting of such offering that
have been reasonably agreed upon between the Company and the Selling
Securityholder, on the one hand, and the underwriters selected by the Company
or the Selling Securityholder, on the other hand.
8. Indemnification. In the event any Registrable Stock is included in a
registration statement under this Agreement:
(a) The Company shall indemnify and hold harmless each Holder and its
directors, officers, agents and employees, each person who participates in
the offering of such Registrable Stock, including underwriters (as defined in
the Securities Act), each person, if any, who controls such Holder or
participating person within the meaning of the Securities Act and the
directors, officers, agents and employees of each such controlling person
(each, an "Indemnified Party"), against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based on any untrue or alleged untrue statement
of any material fact contained in such registration statement on the
effective date thereof (including any prospectus filed under Rule 424 under
the Securities Act or any amendments or supplements thereto) or arise out of
or are based upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse on a quarterly basis each such Indemnified
Party for any reasonable legal or other reasonable expenses incurred by them
(but not in excess of expenses incurred in respect of one counsel (plus one
local counsel) for all of them unless there is an actual conflict of interest
between any Indemnified Parties, which Indemnified Parties may be represented
by separate counsel) in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the written consent of the Company;
provided, further, that the Company shall not be liable to any Indemnified
Party in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in reliance upon and
in conformity with written information furnished expressly for use in
connection with such registration by any such Indemnified Party. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any such Indemnified Party, and shall
survive the transfer of such securities by the applicable Holder.
<PAGE> 12
12
(b) Each Holder requesting or joining in a registration severally and not
jointly shall indemnify and hold harmless the Company, each other Holder
joining in such registration, each of the Company's and such other Holders'
respective directors, officers, agents and employees, each person, if any,
who controls the Company and each other Holder within the meaning of the
Securities Act and the directors, officers, agents and employees of each such
controlling person (each, an "Indemnified Party") against any losses, claims,
damages or liabilities, joint or several, to which the Company or any such
Indemnified Party may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in such registration statement on the effective date thereof
(including any prospectus filed under Rule 424 under the Securities Act or
any amendments or supplements thereto) or arise out of or are based upon any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished by or on behalf of such
Holder expressly for use in connection with such registration; and each such
Holder shall reimburse on a quarterly basis any reasonable legal or other
reasonable expenses incurred by each such Indemnified Party (but not in
excess of expenses incurred in respect of one counsel (plus one local
counsel) for all of them unless there is an actual conflict of interest
between any Indemnified Parties, which Indemnified Parties may be represented
by separate counsel) in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 8(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if
such settlement is effected without the written consent of such Holder, and
provided, further, that the liability of any Holder hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or
expense which is equal to the proportion that the net proceeds from the sale
of the Registrable Stock sold by such Holder under such registration
statement bears to the total net proceeds from the sale of all securities
sold thereunder, but not in any event to exceed the net proceeds received by
such Holder from the sale of Registrable Stock covered by such registration
statement.
(c) Promptly after receipt by an Indemnified Party (as defined in Section
8(a) or 8(b), as the case may be) under this Section 8 of notice of the
commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in and
assume the defense thereof with counsel selected by the
<PAGE> 13
13
indemnifying party and reasonably satisfactory to the Indemnified Party;
provided, however, that an Indemnified Party shall have the right to retain
its own counsel, with all fees and expenses thereof to be paid by such
Indemnified Party, and to be apprised of all progress in any proceeding the
defense of which has been assumed by the indemnifying party. The failure to
notify an indemnifying party promptly of the commencement of any such action
shall not relieve such indemnifying party of any liability to the Indemnified
Party under this Section 8, except to the extent that such indemnifying party
was or is actually prejudiced thereby, and in no event shall such failure
relieve the indemnifying party of any other liability that it may have to any
Indemnified Party otherwise than under this Section 8. If such indemnifying
party so assumes the defense thereof, it may not agree to any settlement of
any such action as the result of which any material remedy or relief, other
than monetary damages for which such indemnifying party shall be responsible
hereunder, shall be applied to or against such Indemnified Party, without the
prior written consent of such Indemnified Party. An indemnifying party may
not assume or jointly assume the defense of an action if in the reasonable
judgment of counsel for the Indemnified Party a conflict of interest may
exist between such indemnifying party and such Indemnified Party with respect
to such action. An indemnifying party who is precluded from assuming or
jointly assuming the defense of an action pursuant to the immediately
preceding sentence, or who elects not to, or who has not appointed counsel
reasonably satisfactory to the Indemnified Party within a reasonable time to,
assume the defense of an action shall be obligated to pay the fees and
expenses of one counsel (plus one local counsel) for all Indemnified Parties,
as selected by a majority in interest of the Indemnified Parties. If the
indemnifying party does not assume the defense of an action, such
indemnifying party shall be bound by any settlement to which the Indemnified
Party agrees and to which such indemnifying party consents.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the Indemnifying Party, in lieu of or in
addition to indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and Indemnified Party in
connection with the actions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and Indemnified Party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or Indemnified
Party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by
a party as a result of the losses, claims, damages or liabilities referred to
above shall be deemed to include any reasonable
<PAGE> 14
14
legal or other reasonable fees or reasonable expenses incurred by such party
in connection with any investigation or proceeding. Notwithstanding the
provisions of this Section 8(d), no Holder shall be required to contribute
any amount in excess of the amount by which the net proceeds from the sale of
the Registrable Stock sold by such Holder exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
9. Termination; Transfer of Registration Rights; Successors and Assigns.
The registration rights of (i) any Original Stockholder will terminate at any
time two years (or such shorter "holding period" as may from time to time be
prescribed by Rule 144(k)) or more after the date hereof if at such time such
Original Stockholder is not an affiliate of the Company and has not been an
affiliate of the Company for at least three months, (ii) any such Original
Stockholder who is not an affiliate of the Company and who beneficially owns
less than 1% (or such greater percentage as may from time to time be prescribed
by Rule 144(e)) of the Company's Common Stock will terminate one year (or such
shorter "holding period" as may from time to time be prescribed by Rule
144(d)(1)) after the date hereof and (iii) any transferee of an Original
Stockholder will terminate (x) one year (or such shorter "holding period" as
may from time to time be prescribed by Rule 144(d)(1)) after such transferee
acquires Registrable Stock if such transferee beneficially owns less than 1%
(or such greater percentage as may from time to time be prescribed by Rule
144(e)) of the Company's Common Stock or (y) so long as such transferee
beneficially owns more than 1% (or such greater percentage as may from time to
time be prescribed by Rule 144(d)) of the Company's Common Stock, at any time
as is two years (or such shorter period as may from time to time be prescribed
by Rule 144(k)) or more after such transferee acquires Registrable Stock if at
such time such transferee (or subsequent transferee) is not an affiliate of the
Company and has not been an affiliate of the Company for at least 3 months;
provided, however, that, in the case of any such Original Stockholder who, at
the time it would otherwise lose its registration rights pursuant to this
Section 9, (A) beneficially owns at least 2% of the Company's Common Stock and
(B) would otherwise continue to have the right to cause the Company to effect a
Demand Registration pursuant to Section 2, such Original Stockholder or
transferee shall, for a period of eighteen months after such time, retain the
right to cause the Company to effect one Demand Registration in respect of such
Common
<PAGE> 15
15
Stock pursuant to Section 2 and to participate in a Demand Registration
pursuant to clause (ii) of the last sentence of Section 2(a) or any other
registration pursuant to Section 3.
The registration rights of any Holder under this Agreement with respect to
any Registrable Stock (other than the right to cause the Company to effect one
Demand Registration pursuant to the proviso in the immediately preceding
paragraph) may be transferred, subject to Section 2(d) hereof, provided that:
(i) the transferring Holder shall give the Company written notice at or prior
to the time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this
Agreement are being transferred and (ii) such transferee shall agree in
writing, in form and substance reasonably satisfactory to the Company, to be
bound as a Holder by the provisions of this Agreement. Except as provided in
this Section 9, the registration rights of any Holder under this Agreement may
not be transferred.
Subject to the foregoing, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto. Except as expressly provided in this Agreement,
nothing in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
10. Rule 144. The Company shall file, in a timely manner, the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder.
11. Arbitration. Subject to the final sentence of this Section 11, any
dispute arising between or among the parties hereto or any of them involving
the subject matters covered by this Agreement shall be submitted to arbitration
under this Section 11. Any party asserting a breach of this Agreement by any
other party or parties shall notify all other parties of such alleged breach (a
"Dispute Notice") and the parties shall attempt to resolve such dispute
amicably and if they shall fail to resolve it within thirty (30) days of the
date of the Dispute Notice, any party may notify any of the other parties that
it wishes to commence an arbitration proceeding under this Section 10 (an
"Arbitration Request"). In any arbitration proceeding the party or parties
commencing the arbitration (alone or together, if more than one, the
"Petitioner") shall include in the Arbitration Request (a) a statement of the
facts constituting the alleged breach or dispute, (b) a written statement of
position ("Statement") regarding the dispute and (c) the name of an elector
designated by it. The Statement shall state the facts and arguments in support
of the position taken by the party submitting such Statement and shall detail
that party's proposed solution and relief sought (if any). Copies of any
Arbitration Request shall be furnished at the same time to the other parties
hereto. The party or parties with whom the Petitioner has its dispute (alone
or together, if more than one, the "Respondent") shall within five (5) business
days after the
<PAGE> 16
16
date of the Arbitration Request designate a second elector by notice to the
Petitioner (copies of which shall be furnished to the other parties), but if it
or they shall fail to do so within such period the Petitioner may designate an
elector on Respondent's behalf. The electors chosen by the Petitioner and the
Respondent shall attempt to agree upon an arbitrator (the "Arbitrator"), but if
they are unable to do so within twenty (20) business days after the designation
of the second elector, then either elector thereafter may apply to the American
Arbitration Association (the "Association") for the selection of the Arbitrator
in accordance with the Commercial Arbitration Rules of such Association. The
Arbitrator so selected shall have full power to decide any dispute referred to
in this Section 11. The arbitration proceedings shall be conducted in the
English language, and the place of arbitration and the making of the Award (as
defined below) shall be the City of New York. The UNCITRAL rules of commercial
arbitration shall apply to any arbitration commenced pursuant to this Section
11, as modified by the following procedure:
(i) Within five (5) business days of the selection of the Arbitrator (the
"Commencement Date"), the Respondent shall deliver its Statement regarding
the dispute to the Arbitrator and to the Petitioner.
(ii) Within fifteen (15) business days from the Commencement Date, each of
the Petitioner and the Respondent shall deliver to the Arbitrator and to the
other party, a response ("Response") to the other party's Statement setting
forth opposing facts and arguments and limited in length to ten (10) typed,
single spaced pages (excluding evidentiary exhibits included therein).
(iii) Within twenty (20) business days from the Commencement Date, each of
the Petitioner and the Respondent may deliver to the Arbitrator and to the
other party, a reply to the Response limited to setting forth facts and
arguments in rebuttal to the Statement and Response of the other party and
limited in length to five (5) typed, single spaced pages (excluding
evidentiary exhibits included therein).
(iv) Within twenty-five (25) business days from the Commencement Date, each
of the Petitioner and Respondent shall present an oral summation of its
position to the Arbitrator in the presence of the other party in accordance
with such rules of procedure including, without limitation, length of
presentation and right of cross-examination, as the Arbitrator shall
determine in writing and deliver to the parties not less than three (3)
business days prior to such hearing; provided, however, that such hearing
shall not exceed eight (8) hours in total and may not be adjourned except for
extraordinary circumstances beyond the control of the parties.
(v) The Arbitrator shall either issue his decision and award ("Award") or
request a further meeting of the parties within fifteen (15) days of the
hearing.
<PAGE> 17
17
(vi) Any such further meeting of the parties shall take place within five
(5) business days of the request therefor and shall be conducted as
determined by the Arbitrator. The Arbitrator shall issue his Award no later
than fifteen (15) days after any such further meeting of the parties.
(vii) The Award shall be in writing and shall be limited to a decision
either completely in favor of Petitioner's request for relief or completely
in favor of Respondent's request for relief. The Award shall be final and
binding upon the parties hereto and judgment may be entered thereon in any
court of competent jurisdiction and the costs and expenses of such
arbitration shall be borne by the party losing such arbitration.
(viii) In the event that the Arbitrator fails to render his Award within the
time limits contained in Sections 11(v) or (vi), the Arbitrator shall,
nonetheless, retain jurisdiction over the dispute for a reasonable period of
time.
This Section 11 shall in no way affect the right of any party to seek such
interim relief, and only such relief, as may be required to maintain the status
quo in aid of the arbitration in any court of competent jurisdiction. In
addition, to the extent there is an existing litigation to which any party
hereto is a party, this Section 11 shall not preclude such party from
participating in such litigation.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
13. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which together shall constitute
one and the same instrument.
14. Titles. The titles of the Sections of this Agreement are used for
convenience only and are not to be considered in construing or interpreting
this Agreement.
15. Notices. Any notice required or permitted under this Agreement shall
be in writing and shall be delivered in person or mailed by certified or
registered mail, return receipt requested, or faxed to (a) the Company at the
address set forth below its signature hereof, (b) to the Original Stockholders
at the address set forth below each of their signatures hereof or (c) to a
Holder at the address therefor as set forth in the Company's records or, in any
such case, at such other address or addresses as shall have been furnished in
writing by such party to the others. The giving of any notice required
hereunder may be waived in writing by the parties hereto. Every notice or
other communication hereunder shall be deemed to have been duly given or served
on the date on which personally delivered, or on the date actually received, if
sent by mail or fax, with receipt acknowledged.
<PAGE> 18
18
16. Amendments and Waivers. This Agreement may be amended or waived only
upon the written consent of the Company and each of the holders of Registrable
Stock; provided, however, that if a holder of Registrable Stock shall have
ceased to have any registration rights hereunder, the consent of such holder
shall not be required.
17. Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provisions shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with
its terms.
18. Entire Agreement. All prior agreements of the parties concerning the
subject matter of this Agreement are expressly superseded by this Agreement.
This Agreement contains the entire Agreement of the parties concerning the
subject matter hereof. Any oral representations or modifications of this
Agreement shall be of no effect.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to be
executed as of the date first above written above by their respective officers
thereunto duly authorized.
GALILEO INTERNATIONAL, INC.
By /s/ James E. Barlett
------------------------------------
Name: James E. Barlett
Title: President and
Chief Executive Officer
COVIA LLC,
By United Air Lines, Inc.,
By /s/ Authorized Signatory
-------------------------------------
Name:
Title:
USAM CORP.
By /s/ John W. Harper
-------------------------------------
Name: John W. Harper
Title: Director & Treasurer
RESNET HOLDINGS, INC.
By /s/ Rob Peterson
-------------------------------------
Name: Rob Peterson
Title: President
DISTRIBUTION SYSTEMS, INC.
By /s/ Barbara E. Cohen
------------------------------------
Name: Barbara E. Cohen
Title: Treasurer
<PAGE> 20
ROSCOR A.G.
By /s/ Armin Daume
------------------------------------
Name: Armin Daume
Title: Chairman of the Board
By /s/ Ignaz Tschirky
------------------------------------
Name: Ignaz Tschirky
Title: General Manager
TRAVEL INDUSTRY SYSTEMS B.V.
By /s/ R.J. Van der Burg
------------------------------------
Name: R.V. Van der Burg
Title: Senior V.P., Finance
By /s/ Authorized Signatory
------------------------------------
Name:
Title: Senior V.P.
Corporate Development &
Foreign Relations
RETFORD LIMITED
By /s/ Victor Garland
------------------------------------
Name: Victor Garland
Title: GM, MS
RACOM TELEDATA S.p.A.
By /s/ Pierluigi Alemanni
------------------------------------
Name: Pierluigi Alemmani
Title: President and CEO
<PAGE> 21
21
TRAVIDATA INC.
By /s/ Rainer Walther
------------------------------------
Name: Dr. Rainer Walther
Title: Vice President Passenger
System
OLYNET, INC.
By /s/ Catherine Tsagarakis
------------------------------------
Name: Catherine Tsagarakis
Title: Chief Financial
Group Director
By /s/ Konstantinos Mandroukas
------------------------------------
Name: Konstantinos Mandroukas
Title: Director
Marketing
COPORGA, INC.
By /s/ Eduardo Branco
-----------------------------------
Name: Eduardo Branco
Title: Authorized Representative
<PAGE> 22
SCHEDULE A
Original Stockholder Number of Shares
Covia LLC 33,440,000
USAM Corp. 7,000,400
RESNET Holdings Inc. 152,240
Distribution Systems Inc. 7,000,400
Roscor A.G. 7,000,400
Travel Industry Systems B.V. 10,639,200
Retford Limited 88,000
Racom Teledata S.p.A. 1,598,960
Travidata Inc. 88,000
Olynet Inc. 906,400
Coporga, Inc. 88,000
<PAGE> 1
EXHIBIT 10.1
CONFORMED COPY
================================================================================
--------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
--------------------------------------------------------------------
Among
GALILEO INTERNATIONAL, INC.
certain of its
STOCKHOLDERS
and certain
RELATED PARTIES OF SUCH STOCKHOLDERS
Dated as of July 30, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Other Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
BOARD REPRESENTATION; COMMITTEES
2.01. Size of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.02. Nomination of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.03. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.04. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.05. Classification of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.06. Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.07. Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.08. Air Vendor Consultation Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III
RESTRICTIONS ON TRANSFER
3.01. General Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.02. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.03. Restrictions on Certain Transfers of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.04. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.05. Affiliate Transferees to Execute Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.06. Sale to a Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.07. Restrictions on Certain Transfers of Shares of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . 16
3.08. Improper Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.09. Limitation on Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE IV
CERTAIN AGREEMENTS
4.01. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.02. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.03. Issuances of Shares of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V
MISCELLANEOUS
5.01. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.02. Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.03. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.04. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.06. Benefit; Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.07. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.08. Changes to Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.09. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.11. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.12. Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
<PAGE> 4
STOCKHOLDERS' AGREEMENT, dated as of July 30, 1997, among
GALILEO INTERNATIONAL, INC., a Delaware corporation (the "Company"), each of
the stockholders of the Company listed on Schedule A hereto and, with respect
to Articles IV and V only, each of the Persons listed on Schedule B hereto.
WHEREAS, the Original Owners (as defined below) immediately
prior to the consummation of the IPO (as defined below) collectively own 100%
of the shares of common stock, par value $0.01 per share, of the Company (the
"Common Stock");
WHEREAS, upon the consummation of the IPO, the Original Owners
will collectively own shares of Common Stock representing at least 66.6% of the
outstanding shares of Common Stock;
WHEREAS, certain Original Owners own shares of Special Voting
Preferred Stock, par value $0.01 per share, of the Company, in Series A through
G (the "Preferred Stock"), which series of Preferred Stock are entitled to
elect a certain number of Original Owner Directors on the terms and conditions
set forth in the Restated Certificate of Incorporation (as such terms are
defined below);
WHEREAS, the parties hereto desire to set forth in writing
their understanding and agreement for the voting of shares of Common Stock held
by the Original Owners on certain matters, and for certain other courses of
conduct; and
WHEREAS, it is a condition precedent to the consummation of
the IPO that the parties enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings:
"Affiliate" means, with respect to any specified Person, any
other Person, other than the Company or any subsidiary of the Company, that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such specified Person. Without
limiting the foregoing, the parties acknowledge that the respective Persons
listed on Schedule B hereto are Affiliates of the respective Persons they are
identified as having a controlling interest in on Schedule A hereto.
<PAGE> 5
2
"Affiliated Person" means, with respect to any specified
Person, such Person's Affiliates, such Person's officers, directors and
employees, and the officers, directors and employees of such Affiliates.
"Agreement" or "this Agreement" means this Stockholders'
Agreement, dated as of July 30, 1997, among the Company and each of the other
parties signatory hereto, and all amendments hereto made in accordance with the
provisions of Section 5.04.
"beneficial owner" or "beneficially own" has the meaning given
such term in Rule 13d-3 under the Exchange Act.
"Board" means the Board of Directors of the Company.
"Commission" means the Securities and Exchange Commission, and
any successor commission or agency having similar powers.
"control" (including the terms "controlled by" and "under
common control with"), with respect to the relationship between or among two or
more Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs of
such Person.
"Director" means a director of the Company
"Distributor" means a Person which has entered into, or enters
into, a Distributor Agreement with the Company.
"Distributor Agreement" means any distributor agreement
entered into between the Company and any Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Interest" means (i) with respect to an Original Owner that
owned, prior to the IPO, more than 2% of the Partnership's outstanding general
partnership interests, 1% or more of the outstanding shares of Common Stock,
and (ii) with respect to an Original Owner that owned, prior to the IPO, 2% or
less of the Partnership's outstanding general partnership interests, the number
of shares of Common Stock owned by such Original Owner on the closing of the
IPO, provided that such amount is at least 0.005% of the Common Stock
outstanding immediately following the IPO; provided, however, that if, at any
time after the IPO, the Company issues additional shares of Common Stock and,
as a result of such
<PAGE> 6
3
issuance, the number of shares of Common Stock owned by an Original Owner falls
below the percentage interest required by clause (i) or clause (ii) above, such
issuance shall be excluded from the determination of the Interest of such
Original Owner.
"IPO" means the underwritten initial public offering of shares
of Common Stock of the Company pursuant to an effective Registration Statement
on Form S-1 (File No. 333-27495) under the Securities Act.
"Merger" means the transaction or transactions whereby Galileo
International Partnership, a Delaware partnership, has merged with and into a
wholly-owned limited liability company subsidiary of the Company.
"Nonaffiliated Person" means, with respect to any specified
Person, any Person other than an Affiliated Person.
"Non-Competition Agreement" means a non-competition agreement
with the Company in the form attached hereto as Exhibit A, as such agreement
may be amended from time to time in accordance with its terms and pursuant to
Section 5.08 of this Agreement.
"Original Owners" means (i) the stockholders listed on
Schedule A hereto, (ii) any Affiliate of an Original Owner that is deemed to be
an Original Owner pursuant to Section 3.05 and (iii) any Permitted Preferred
Stock Transferee that is deemed to be an Original Owner pursuant to Section
3.06.
"Original Owner Director" means any Director elected pursuant
to the Restated Certificate of Incorporation by an Original Owner that owns one
or more shares of Preferred Stock.
"Parent Entities" means the Persons listed on Schedule B
hereto.
"Person" means any individual, partnership, firm, corporation,
association, trust, estate, unincorporated organization or other entity, as
well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.
"Pro Rata Number" means, with respect to a First Refusal
Original Owner or Prospective Buyer, as the case may be, a number of Shares
equal to the product of (a) the number of the Offered Shares and (b) a fraction
the numerator of which shall be the total number of the Shares owned
(immediately prior to the Sale of the Offered Shares) by such First Refusal
Original Owner or Prospective Buyer, as the case may be, and the denominator of
which shall be the total number of the Shares owned (immediately prior to the
Sale of the Offered Shares) by the First Refusal Original Owners and
Prospective Buyer.
<PAGE> 7
4
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 30, 1997 (as the same may be amended from time to
time), among the Company and each of the stockholders of the Company listed on
Schedule A hereto.
"Restated Certificate of Incorporation" means the Restated
Certificate of Incorporation of the Company, as amended from time to time.
"Restricted Shares" means all Shares other than (a) Shares
that have been registered under a registration statement pursuant to the
Securities Act, (b) Shares with respect to which a Sale has been made in
reliance on and in accordance with Rule 144 or (c) Shares with respect to which
the holder thereof shall have delivered to the Company either (i) an opinion,
in form and substance satisfactory to the Company, of counsel, who shall be
satisfactory to the Company, or (ii) a "no action" letter from the staff of the
Commission, to the effect that subsequent transfers of such Shares may be
effected without registration under the Securities Act.
"Sale" means any sale, assignment, transfer, distribution or
other disposition of Shares or of shares of Preferred Stock, as applicable, or
of a participation therein, whether voluntarily or by operation of law.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Share" means any share of Common Stock (i) beneficially owned
by an Original Owner immediately after the consummation of the IPO (excluding
any shares of Common Stock acquired in the IPO), (ii) acquired by an Original
Owner from any other Original Owner in accordance with Section 3.04, (iii)
acquired by a Prospective Affiliate Transferee in accordance with Section 3.05;
(iv) acquired by a Permitted Preferred Stock Transferee in accordance with the
first sentence of Section 3.06, or as contemplated by clause (y) of Section
3.07, or held by a Permitted Preferred Stock Transferee at the time of the
transfer to such Person of Shares in accordance with clause (x) of Section
3.07, provided that, to the extent the shares of Common Stock held by such
Permitted Preferred Stock Transferee at the time of such transfer, when added
to the Shares transferred to such Person in accordance with clause (x) of
Section 3.07, represent more than 5% of the then outstanding shares of Common
Stock, then only such number of shares of Common Stock held by such Person at
the time of such transfer which, when added to the Shares transferred to such
Person in accordance with clause (x) of Section 3.07, represent 5% of the then
outstanding shares of Common Stock shall constitute "Shares"; (v) acquired by
an Original Owner that owns one or more shares of Preferred Stock for the
purpose of preserving its ability to elect one or more Original Owner Directors
pursuant to the terms of Section 4.3(d) of the Restated Certificate of
Incorporation; (vi) issued by way of a stock split of the Common Stock; or
(vii) issued as (or issuable upon the conversion or exercise of any warrant,
rights, option or other convertible security which is issued as) a dividend or
other
<PAGE> 8
5
distribution with respect to, or in exchange for, or in replacement of, the
Common Stock referred to in clauses (i) through (vi) above.
"Third Party" means, with respect to any Original Owner, any
non-Affiliated Person (other than the Company or another Original Owner or any
Affiliate thereof), and "Third Parties" shall have a correlative meaning.
"Voting Securities" means, at any time, shares of any class
of capital stock of the Company that are then entitled to vote generally in the
election of Directors (other than shares of Preferred Stock); provided that for
purposes of this definition any securities which at such time are convertible
or exchangeable into or exercisable for shares of Common Stock shall be deemed
to have been so converted, exchanged or exercised.
SECTION 1.02. Other Defined Terms. The following terms shall
have the meanings defined for such terms in the sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquiring Owner 4.01(b)
Aer Lingus Schedule B
Air Canada Schedule B
Air Vendor Consultation Group 2.07
Alitalia Schedule B
Arbitration Request 5.07
Arbitrator 5.07
Association 5.07
Austrian Airlines Schedule B
Award 5.07
British Airways Schedule B
Code 2.06(c)
Commencement Date 5.07(i)
Common Stock Recitals
Company Preamble
Coporga Schedule A
Covia Schedule A
Dispute Notice 5.07
DSI Schedule A
elector 5.07
First Refusal Original Owners 3.04
First Refusal Price 3.04
Independent Director 2.02(iii)
Investment Bank 4.01(b)
KLM Schedule B
</TABLE>
<PAGE> 9
6
<TABLE>
<S> <C>
Management Directors 2.02(ii)
Notice of Exercise 3.04(b)
Notice of Intention 3.04(a)
Offer 4.01(b)
Offered Shares 3.04(a)
Olympic Schedule B
Olynet Schedule A
Option Period 3.04(b)
Partnership 5.11
Permitted Preferred Stock Transferee 3.07
Petitioner 5.07
Proposal 4.01(b)
Prospective Affiliate Transferee 3.05
Prospective Buyer 3.04(a)
Racom Schedule A
Replacement Original Owner Director 2.03(a)
Resnet Schedule A
Respondent 5.07
Response 5.07(ii)
Retford Schedule A
Roscor Schedule A
Selling Original Owner 3.04
Significant Transaction 2.01
Statement 5.07
SAirGroup Schedule B
TAP Schedule B
Third Party Transferee 3.06
TIS Schedule A
Travidata Schedule A
United Schedule B
USAM Schedule A
USAW Schedule B
</TABLE>
ARTICLE II
BOARD REPRESENTATION; COMMITTEES
SECTION 2.01. Size of the Board. The Company shall take such
actions as are necessary, and each of the Original Owners shall vote its Shares
and shall take such other actions as are necessary, to cause the Board at all
times from and after the consummation of the IPO until the tenth anniversary of
the date hereof to consist of 13 members unless the
<PAGE> 10
7
Company and the Original Owners then party to this Agreement who hold shares of
one or more series of Preferred Stock entitled to elect directors to the Board
pursuant to the terms of the Restated Certificate of Incorporation unanimously
agree otherwise; provided, however, that in connection with a Significant
Transaction, the size of the Board may be increased by majority vote of the
whole Board to the extent such increase in the size of the Board is
proportional (rounded to the nearest whole number) to the increase in the
number of shares of Common Stock outstanding as a result of the issuance of
shares of Common Stock in connection with such Significant Transaction. For
purposes of this Agreement, a "Significant Transaction" means an acquisition,
merger, or issuance of securities to a single Person or group of Persons (other
than an underwriter or group of underwriters) in which shares of Common Stock
constituting at least a percentage of the then outstanding shares of Common
Stock (on a fully diluted basis) equal to the number expressed as a percentage
obtained by dividing one by the then number of Board seats are issued; provided
that, in no event will any transaction involving the issuance of shares
constituting less than 5% of the then outstanding shares of Common Stock (on a
fully diluted basis) constitute a Significant Transaction.
SECTION 2.02. Nomination of Directors. The Company shall
take such actions as are necessary, and each of the Original Owners shall vote
its Shares and shall take, and shall cause any Director elected by it pursuant
to the terms of any series of Preferred Stock held by it to take, such other
actions as are necessary, to cause the Board, at all times from and after the
consummation of the IPO until the tenth anniversary of the date hereof, to
include the following Directors elected or nominated as follows:
(i) Original Owner Directors. Each Original Owner owning
Shares and shares of one or more series of Preferred Stock shall be
entitled to elect such number of individuals to serve as Original
Owner Directors as such series of Preferred Stock shall be entitled to
elect pursuant to the Restated Certificate of Incorporation.
(ii) Management Directors. The Chief Executive Officer,
the Chief Operating Officer and the Chief Financial Officer of the
Company shall be nominated by the Board to be elected as Directors
(the "Management Directors"); provided, however, that until the
Company shall have a Chief Operating Officer, the General Counsel of
the Company shall be nominated to be elected as a Management Director.
The initial Chief Executive Officer shall serve as the Chairman of the
Board. Thereafter, the Board will determine which Director will be
the Chairman of the Board.
(iii) Independent Directors. Three individuals shall be
nominated by the Board to be elected as Directors, each of whom shall
be an "independent director", as such term is used in Rule 303 of the
Rules of the New York Stock Exchange as in existence on the date
hereof or as amended from time to time thereafter (an " Independent
Director").
<PAGE> 11
8
(iv) Replacement Original Owner Directors. In the event
that the share of any series of Preferred Stock is redeemed by the
Company, the vacancy resulting from such event shall be filled by the
Board with an Independent Director, as more fully set forth in Section
2.03.
SECTION 2.03. Vacancies. (a) In the event an Original
Owner that owns shares of one or more series of Preferred Stock ceases to own
Shares constituting the applicable percentage of the outstanding Common Stock
entitling the series of Preferred Stock held by such Original Owner to elect
any one or more Original Owner Directors, or the share of such series of
Preferred Stock is redeemed for any other reason pursuant to Section 4.3(f) of
the Restated Certificate of Incorporation, then the Original Owner Director who
was previously elected by the holder of such series of Preferred Stock shall be
deemed to have resigned effective immediately upon the occurrence of such
event, and such Original Owner and the Company shall take all actions necessary
to give effect to such resignation; provided, however, that if an Original
Owner's share or shares of Preferred Stock has or have been redeemed pursuant
to Section 4.3(f)(3) of the Restated Certificate of Incorporation due to the
fact that such Original Owner has given the Company notice of its intention to
terminate its Non-Competition Agreement, then the Company shall provide to such
Original Owner during the period between the date on which such share or shares
of Preferred Stock is or are redeemed and the date on which such Original
Owner's Non-Competition Agreement terminates the same financial information as
the Company provides to the Board, except to the extent the Independent
Directors determine that it would be inappropriate for such Original Owner to
receive any particular portion of such financial information in light of the
fact that such Original Owner has delivered to the Company a notice of its
intention to terminate its Non-Competition Agreement. Any vacancy resulting
from any such resignation shall be filled with an Independent Director chosen
by a majority of the whole Board (such individual, a "Replacement Original
Owner Director"); provided that if any such vacancy results from the transfer
by such Original Owner of Shares and the share of any series of Preferred Stock
to (i) a Permitted Preferred Stock Transferee and the holder of such series of
Preferred Stock continues to be entitled to elect an individual to the Board
pursuant to the Restated Certificate of Incorporation, or (ii) another Original
Owner as a result of which the holder of the share of such series of Preferred
Stock continues to be entitled to elect an individual to the Board pursuant to
the Restated Certificate of Incorporation, any such vacancy shall be filled in
accordance with the relevant provisions of the Restated Certificate of
Incorporation; and provided further that no Original Owner may transfer the
share of a series of Preferred Stock other than in accordance with this
Agreement and the Restated Certificate of Incorporation.
(b) In the event a vacancy on the Board occurs as a
result of the death, disability, resignation, removal or otherwise of a
Director (other than the resignation of an Original Owner Director as set forth
in Section 2.03(a)), such vacancy shall be filled as follows:
<PAGE> 12
9
(i) In the event such vacancy results from the death,
disability, resignation, removal or otherwise of an
Independent Director, such vacancy shall be filled
with another Independent Director chosen by a
majority of the whole Board.
(ii) In the event such vacancy results from the death,
disability, resignation, removal or otherwise of a
Management Director, such vacancy shall be filled by
the Board with the successor Chief Executive Officer,
Chief Financial Officer or Chief Operating Officer
(or General Counsel in the absence of such Chief
Operating Officer), as the case may be, or any other
officer acting in such capacity at the direction of
the Board or the Chief Executive Officer.
(iii) In the event such vacancy results from the death,
disability, resignation, removal or otherwise of an
Original Owner Director, such vacancy shall be filled
by the Original Owner that holds the share of the
series of Preferred Stock that was entitled to elect
the Original Owner Director so ceasing to be a
Director in accordance with the provisions of the
Restated Certificate of Incorporation.
(iv) In the event such vacancy results from the death,
disability, resignation, removal or otherwise of a
Replacement Original Owner Director, such vacancy
shall be filled with an Independent Director chosen
by a majority of the whole Board.
(c) The Directors chosen under subsections (a) and (b) of
this Section 2.03 shall hold office until the next election of the class for
which such Directors were chosen and until their successors shall have been
elected and qualified.
SECTION 2.04. Removal. As provided in the Restated
Certificate of Incorporation, any Original Owner that holds the share of a
series of Preferred Stock may, at any time in its sole discretion, remove the
Original Owner Director elected by such series of Preferred Stock, and elect
another individual to serve in the stead of such removed Original Owner
Director; provided that such removal and election be pursuant to a written
notice to the Company complying with Section 5.05 and identifying the
individual to serve in the stead of such removed Director. The Company shall
promptly inform the other Original Owners of such removal and election. The
vacancy resulting from such removal shall be filled in accordance with Section
2.03(b)(iii).
SECTION 2.05. Classification of Directors. The Company shall
take such actions as are necessary, and each of the Original Owners shall vote
its Shares, elect its Original Owner Directors and take such other actions as
are necessary, to cause the classes
<PAGE> 13
10
of Directors to consist of the following Management Directors, Original Owner
Directors and Independent Directors:
(a) The Directors whose terms will expire at the first
annual meeting of the stockholders of the Company following the
consummation of the IPO shall consist of the General Counsel of the
Company, one Original Owner Director elected by Covia, one Original
Owner Director elected in accordance with Section 2.05(d) by an
Original Owner whose Parent Entity is based in Europe, and one
Independent Director;
(b) The Directors whose terms will expire at the second
annual meeting of the stockholders of the Company following the
consummation of the IPO shall consist of the Chief Financial Officer
of the Company, one Original Owner Director elected by Covia, one
Original Owner Director elected in accordance with Section 2.05(d) by
an Original Owner whose Parent Entity is based in Europe, and one
Independent Director;
(c) The Directors whose terms will expire at the third
annual meeting of the stockholders of the Company following the
consummation of the IPO shall consist of the Chief Executive Officer
of the Company, one Original Owner Director elected by Covia, one
Original Owner Director elected by USAM, one Original Owner Director
elected in accordance with Section 2.05(d) by an Original Owner whose
Parent Entity is based in Europe, and one Independent Director;
(d) The Original Owners that hold the shares of any
series of Preferred Stock and whose Parent Entities are based in
Europe shall determine among themselves which of them shall be
entitled to elect an Original Owner Director to each of the classes
described in Sections 2.05(a), (b) and (c).
SECTION 2.06. Committees. (a) The Company and each of the
Original Owners shall take such actions as are necessary to cause the Board at
all times to designate annually the following committees of the Board:
(i) A Nominating Committee, which shall review, report
and make recommendations to the Board on the following matters: other
than with respect to Original Owner Directors, and consistent with the
terms of this Agreement, nominees for Directors, selection criteria
for Directors, and removal of Directors if deemed appropriate;
evaluation and performance of the Board and individual Directors; and
such other matters as the Board may from time to time prescribe.
(ii) An Audit Committee, which shall review, report and
make recommendations to the Board on the following matters: the
selection of independent auditors; the fees to be paid to such
auditors; the adequacy of the audit and
<PAGE> 14
11
accounting procedures of the Company; and such other matters as the
Board may from time to time prescribe.
(iii) A Compensation Committee, which shall review, report
and make recommendations to the Board on the following matters: the
management remuneration policies of the Company, including salary
rates and fringe benefits of appointed officers; other remuneration
plans such as incentive compensation, deferred compensation and stock
option plans; directors' compensation and benefits; and such other
matters as the Board may from time to time prescribe.
(b) The Nominating Committee shall include (i) at least
one Original Owner Director elected by an Original Owner whose Parent Entity is
based in Europe and (ii) at least one Original Owner Director elected by an
Original Owner whose Parent Entity is based in North America. In addition, the
Nominating Committee shall include at least one Management Director and may
include one Independent Director. The initial Chief Executive Officer of the
Company shall be the initial Management Director on the Nominating Committee.
(c) The Compensation Committee shall include (i) at least
one Original Owner Director elected by an Original Owner whose Parent Entity is
based in Europe and (ii) at least one Original Owner Director elected by an
Original Owner whose Parent Entity is based in North America. In addition, the
Compensation Committee shall include at least one Independent Director and may
include one Management Director (and if a Management Director does serve on the
Compensation Committee, the initial Chief Executive Officer shall be the
initial Management Director thereon). Notwithstanding the foregoing, the
membership of the Compensation Committee shall be adjusted to the extent
necessary so that (i) it is comprised of two or more "non-employee directors"
within the meaning of Rule 16b-3(b)(3)(i) promulgated under the Exchange Act
and (ii) it is comprised of two or more "outside directors" within the meaning
of Treas. Reg. Section 1.162-27(e)(3) promulgated under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), except to the extent
that the Company may continue to rely on the transition relief provided
pursuant to the Treas. Reg. Section 1.162-27(f) promulgated under Section
162(m) of the Code.
SECTION 2.07. Compensation of Directors. Unless otherwise
restricted by the Restated Certificate of Incorporation or By-Laws of the
Company, each Independent Director, in consideration for his or her serving as
such, shall receive from the Company compensation in an amount and form
customary for public companies comparable to the Company. Management Directors
shall not receive compensation for serving as Directors. Original Owner
Directors will receive the same compensation as received by Independent
Directors; provided that all cash compensation payable to an Original Owner
Director who is an employee or officer of the Original Owner (or an Affiliate
thereof) electing such Director shall be paid by the Company either to such
Original Owner or such Affiliate, and, in the case of non-cash compensation (in
the form of stock options or otherwise), such non-cash
<PAGE> 15
12
compensation will be converted into a cash amount equal to the fair market
value of such non-cash compensation, as calculated by the Company (based, in
the case of stock options, on the Black-Scholes Option Pricing Model), and such
amount will be paid by the Company either to such Original Owner or such
Affiliate. The Company shall reimburse each Director or member of a committee
for any out-of-pocket expenses incurred by him or her on account of his or her
attendance at any meeting of the Board or such committee; provided that all
such expenses payable to an Original Owner Director who is an officer or
employee of an Original Owner (or an Affiliate thereof) will be paid by the
Company either to such Original Owner or such Affiliate.
SECTION 2.08. Air Vendor Consultation Group. As promptly as
practicable after the date hereof, the Company shall establish an air vendor
consultation group (the "Air Vendor Consultation Group"). The airline
Affiliate or airline Affiliates of each Distributor shall be entitled to
appoint one representative in the aggregate, and the airline Affiliate or
airline Affiliates of each Original Owner that does not have an Affiliate that
is a Distributor shall be entitled to appoint one representative in the
aggregate, to the Air Vendor Consultation Group, provided that no such airline
Affiliate shall be represented on the Air Vendor Consultation Group if the
Original Owner (including, without limitation, any Person that shall have
become an Original Owner pursuant to Section 3.05) of which it is an Affiliate
no longer holds an Interest in the Company. The Air Vendor Consultation Group
shall meet from time to time with the Company's management to discuss
distribution-related issues in accordance with appropriate guidelines
(including applicable law).
ARTICLE III
RESTRICTIONS ON TRANSFER
SECTION 3.01. General Restriction. No Original Owner shall,
directly or indirectly, make or solicit any Sale with respect to any Share, or
any share of Preferred Stock, except in compliance with the Securities Act and
this Agreement.
SECTION 3.02. Legends. (a) The Company shall affix to each
certificate evidencing Shares or shares of Preferred Stock a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER UNLESS SUCH TRANSFER IS MADE IN
CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR
<PAGE> 16
13
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH ACT DOES NOT APPLY."
(b) In the event that any Shares shall cease to be
Restricted Shares, the Company shall, upon the written request of the holder
thereof, issue to such holder a new certificate evidencing such Shares without
the legend required by Section 3.02(a) endorsed thereon; provided; however,
that such holder shall furnish the Company or its transfer agent such
certificates, legal opinions or other information as the Company or its
transfer agent may reasonably require to confirm that the legend is not
required on such certificate.
(c) The Company shall affix to each certificate
evidencing Shares or shares of Preferred Stock a legend in substantially the
following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A
STOCKHOLDERS' AGREEMENT, DATED AS OF JULY 30, 1997, AS IT MAY
BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OF TRANSFER OF SUCH SECURITIES WILL BE MADE ON
THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS
SHALL HAVE BEEN COMPLIED WITH."
(d) In the event that any Shares or any shares of
Preferred Stock shall cease to be subject to the restrictions on transfer set
forth in this Agreement and in the Restated Certificate of Incorporation, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such Shares or such shares of Preferred
Stock, as the case may be, without the legend required by Section 3.02(c).
SECTION 3.03. Restrictions on Certain Transfers of Shares.
No Original Owner shall, directly or indirectly, make or solicit any Sale of
any Share beneficially owned by it other than (a) any Sale to a Third Party or
Third Parties (including in connection with a Sale effected through an offering
made pursuant to the Registration Rights Agreement), (b) any Sale to one of its
Affiliates that is made in compliance with the procedures, and subject to the
limitations, set forth in Section 3.05 and (c) any Sale to another Original
Owner or any of its Affiliates that is made in compliance with the procedures,
and subject to the limitations, set forth in Section 3.04. Notwithstanding the
foregoing, except as otherwise expressly provided in this Agreement, all Sales
permitted by the foregoing clauses (a) through (c) shall be subject to, and
shall not be made other than in compliance with, the provisions of Sections
3.01 and 3.09.
SECTION 3.04. Right of First Refusal. (a) If, at any time,
any Original Owner (the "Selling Original Owner") shall have agreed with
another Original Owner or an Affiliate thereof (a "Prospective Buyer") to sell
or otherwise transfer, whether directly or
<PAGE> 17
14
indirectly, in a bona fide transaction, any or all of the Shares (the "Offered
Shares") held by such Selling Original Owner (other than pursuant to an Offer
(as defined in Section 4.01(b)) or a public offering effected in accordance
with the Registration Rights Agreement or otherwise) to the Prospective Buyer,
such Selling Original Owner shall deliver a written notice of its intention to
sell the Offered Shares (a "Notice of Intention"), to each of the other
Original Owners (other than the Prospective Buyer) (the "First Refusal Original
Owners"), as well as to the Company and the Prospective Buyer, setting forth
such Selling Original Owner's intention to make such Sale (which shall be for
cash only), the number of Offered Shares, the cash price at which such Selling
Original Owner proposes to sell the Offered Shares to the Prospective Buyer
(the "First Refusal Price"), and the other material terms of the Prospective
Buyer's offer. A Notice of Intention, once given, shall be irrevocable. The
Notice of Intention shall be dated the date it is delivered by the Selling
Original Owner to the First Refusal Original Owners and the Company.
(b) Upon receipt of the Notice of Intention, each First
Refusal Original Owner and the Prospective Buyer shall have the right to
purchase at the First Refusal Price, and otherwise on the same terms set forth
in the Notice of Intention, such number of Offered Shares up to the Pro Rata
Number for such Original Owner or Prospective Buyer; provided, however, that
any of such Persons may indicate in its Notice of Exercise (as defined below)
that it wishes to purchase more than its Pro Rata Number. The right of the
First Refusal Original Owners and the Prospective Buyer to purchase Offered
Shares pursuant to this Section 3.04(b) shall be exercisable by written notice
to the Selling Original Owner (the "Notice of Exercise"), which notice shall
state the maximum number of Offered Shares such Person is willing to buy, with
copies to each of the other First Refusal Original Owners, the Prospective
Buyer and the Company, within 30 days from the date of the Notice of Intention
(the "Option Period"). The right of any First Refusal Original Owner pursuant
to this Section 3.04(b) shall terminate if it is not exercised within 30 days
of the date of the Notice of Intention. A Notice of Exercise, once given,
shall be irrevocable.
(c) Upon receipt of the Notices of Exercise, the Selling
Original Owner shall promptly calculate the number of Offered Shares which the
Prospective Buyer and each First Refusal Original Owner is entitled to purchase
hereunder. If the Notices of Exercise indicate that the Prospective Buyer and
each First Refusal Original Owner wishes to purchase at least its Pro Rata
Number of Offered Shares, the First Refusal Original Owners and the Prospective
Buyer shall each be allocated a number of Offered Shares equal to its
respective Pro Rata Number. If the Notices of Exercise indicate that the
Prospective Buyer or one or more First Refusal Original Owners do not wish to
purchase their Pro Rata Number of Offered Shares, the Prospective Buyer and the
First Refusal Original Owners who have indicated in their respective Notices of
Exercise that they wish to purchase more than their Pro Rata Number of Offered
Shares shall each be given an opportunity to acquire a number of the Offered
Shares that are not so taken up equal to the Pro Rata Number (which shall be
calculated, for purposes of the foregoing allocation only, by taking into
account only the Shares of the Prospective Buyer and the First Refusal Original
Owners who shall have
<PAGE> 18
15
indicated that they wish to purchase more than their Pro Rata Number of Offered
Shares), and the foregoing procedure shall be repeated until all of the Offered
Shares have been taken up; provided, however, that (i) no such First Refusal
Original Owner shall be obligated to purchase more Offered Shares than such
First Refusal Original Owner shall have indicated it is willing to purchase in
its Notice of Exercise, and (ii) in the event that fewer than all of the
Offered Shares have been taken up within 20 days from the date of delivery of
the last Notice of Exercise received by the Selling Original Owner, the Selling
Original Owner shall not be obligated to sell any of the Offered Shares
pursuant to this Section 3.04.
(d) Subject to clause (ii) of the proviso to Section
3.04(c), the Selling Original Owner shall sell the Offered Shares to such First
Refusal Original Owners and the Prospective Buyer within 45 days from the date
of delivery of the last Notice of Exercise received by the Selling Original
Owner.
(e) Notwithstanding the provisions of Sections 3.04(b)
and (c), the Prospective Buyer shall have the right, upon written notice to the
Selling Original Owner (with copies to each of the First Refusal Original
Owners and the Company) within 10 days from the date of the Notice of
Intention, to elect not to purchase any of the Offered Shares pursuant to the
procedures set forth in Sections 3.04(b) and (c). If the Selling Original
Owner does not sell any of the Offered Shares to the First Refusal Original
Owners pursuant to this Section 3.04, then the Selling Original Owner may sell
the Offered Shares to the Prospective Buyer within 45 days from the date of
delivery of the last Notice of Exercise at a price no lower than the First
Refusal Price and on terms no more favorable to the Prospective Buyer than
those set forth in the Notice of Intention.
(f) Upon the consummation of any purchase and Sale
pursuant to this Section 3.04, the Selling Original Owner shall deliver
certificates evidencing the Offered Shares sold duly endorsed, or accompanied
by written instruments of transfer, in form and substance satisfactory to the
purchaser thereof, duly executed by the Selling Original Owner, free and clear
of any encumbrance, against delivery of the purchase price for such shares
payable in immediately available funds by wire transfer. The Selling Original
Owner shall be responsible for and pay any stamp taxes or other similar
conveyance fees incurred as a result of the Sale of the Offered Shares.
SECTION 3.05. Affiliate Transferees to Execute Agreement.
Each Original Owner agrees that it will not, directly or indirectly, make any
Sale of any Shares held by such Original Owner to any of its Affiliates,
unless, prior to the consummation of any such Sale, the Affiliate to whom such
Sale is proposed to be made (a "Prospective Affiliate Transferee") (i) executes
and delivers to the Company a counterpart of this Agreement as it may have been
amended as of such time and (ii) represents and warrants in writing to the
Company that such Agreement has been duly authorized, executed and delivered by
such Prospective Affiliate Transferee and is a legal, valid and binding
obligation of such Prospective Affiliate Transferee enforceable against it in
accordance with its terms. Upon
<PAGE> 19
16
the execution and delivery by such Prospective Affiliate Transferee of the
documents referred to in the preceding sentence, such Prospective Affiliate
Transferee shall be deemed an "Original Owner" for the purposes of this
Agreement, and shall have the rights and be subject to the obligations of an
Original Owner hereunder with respect to the Shares held by such Prospective
Affiliate Transferee. Notwithstanding anything to the contrary set forth
herein, if any Shares are transferred from an Original Owner to one of its
Affiliates as a result of a merger between an Original Owner and an Affiliate
of such Original Owner, and pursuant to such merger such Affiliate assumes such
Original Owner's obligations under this Agreement (whether by operation of law
or otherwise), such Affiliate shall not be required to comply with the
provisions of clauses (i) and (ii) of this Section 3.05.
SECTION 3.06. Sale to a Third Party. If a Sale of Shares is
made in connection with a simultaneous Sale of shares of Preferred Stock to a
Permitted Preferred Stock Transferee that complies with all of the requirements
set forth in Section 3.07, such Shares shall be deemed "Shares" and such
Permitted Preferred Stock Transferee shall be deemed an "Original Owner" for
all purposes of this Agreement. If a Sale of Shares is made to a Third Party
(a "Third Party Transferee") that is not a Permitted Preferred Stock Transferee
that complies with all of the requirements set forth in Section 3.07, such
Shares shall immediately cease to be the subject of this Agreement and such
Third Party Transferee will not become an Original Owner for purposes of this
Agreement. If a Sale of Shares results in the selling Original Owner ceasing
to own any Shares, such selling Original Owner shall cease to be an Original
Owner for purposes of this Agreement.
SECTION 3.07. Restrictions on Certain Transfers of Shares of
Preferred Stock. (a) No Original Owner shall, directly or indirectly, make or
solicit any sale of any share of Preferred Stock beneficially owned by it
unless such Sale is in connection with a simultaneous Sale of Shares to (i)
another Original Owner, (ii) one of such Original Owner's Affiliates, or (iii)
a Third Party (each of (i), (ii) and (iii), a "Permitted Preferred Stock
Transferee"), and in each such case, (A) such Permitted Preferred Stock
Transferee would, after giving effect to such transfer, hold Shares
representing at least 5% of the then outstanding shares of Common Stock,
provided, that if the Original Owner transferring such shares of Preferred
Stock holds Shares representing less than 5% of the then outstanding shares of
Common Stock but the series of Preferred Stock held by such Original Owner
continues to be entitled to elect a Director due to the operation of Sections
4.3(d)(2), (3), (4) or (5) of the Restated Certificate of Incorporation, then
the foregoing clause (A) shall be deemed to be satisfied if (x) such Permitted
Preferred Stock Transferee would, after giving effect to such transfer, hold
shares of Common Stock representing at least 5% of the then outstanding shares
of Common Stock, or (y) such Permitted Preferred Stock Transferee shall have
purchased additional shares of Common Stock in the public market or otherwise
in order to increase its holdings of shares of Common Stock to at least 5%
within 90 days after such transfer (and unless and until such Permitted
Preferred Stock Transferee shall have increased its holdings of shares of
Common Stock to at least 5% within such 90 day period, it shall not be entitled
to elect any Directors to the Board pursuant to the terms of the
<PAGE> 20
17
Preferred Stock that is or are proposed to be transferred to it), and (B) if
the Permitted Preferred Stock Transferee is not already a party to this
Agreement and a Non-Competition Agreement, such Permitted Preferred Stock
Transferee executes and delivers to the Company (x) a counterpart of this
Agreement, together with (y) a Non-Competition Agreement, and represents and
warrants in writing to the Company that such agreements have been duly
authorized, executed and delivered by such Permitted Preferred Stock Transferee
and are legal, valid and binding obligations of such Permitted Preferred Stock
Transferee enforceable against it in accordance with their respective terms.
(b) In no event shall any fraction of a share of
Preferred Stock, or any partial interest therein, be transferred to any other
Person.
SECTION 3.08. Improper Sale. Any attempt not in compliance
with this Agreement to make any Sale of any Shares or any shares of Preferred
Stock shall be null and void and the Company shall not give any effect in the
Company's stock records to such attempted Sale.
SECTION 3.09. Limitation on Dispositions. As of the date
hereof and again as of the date of the IPO, and except (i) with respect to the
number of Shares in the secondary offering listed opposite the name of such
Parent Entity or the Parent Entity with respect to such stockholder in the
column "Number of Shares of Common Stock Being Offered" in the section entitled
"Principal and Selling Stockholders" in the Form S-1 filed in connection with
the IPO, or (ii) for transfers permitted by Section 351(c) of the Code, each of
the stockholders listed in Schedule A represents that it, and each of the
Parent Entities represents that its respective Affiliate listed in Schedule A,
(x) has not entered into any binding commitment, obligation or contract to
sell, transfer or dispose of Shares or shares of Preferred Stock received by
such stockholder in connection with the formation of the Company, (y) has no
plan, arrangement or understanding with any Nonaffiliated Person (including,
but not limited to, investment banks or brokers), and is not under any economic
compulsion, to sell, transfer or dispose of Shares or shares of Preferred Stock
received by such stockholder in connection with the formation of the Company to
any Person and (z) has no plan, arrangement or understanding, and is not under
any economic compulsion, to sell, transfer or dispose of Shares or shares of
Preferred Stock received by such stockholder in connection with the formation
of the Company to any Affiliated Person. Notwithstanding any other provision
of this Agreement, except with respect to the number of Shares in the secondary
offering listed opposite the name of such Parent Entity or the Parent Entity
with respect to such stockholder in the column "Number of Shares of Common
Stock Being Offered" in the section entitled "Principal and Selling
Stockholders" in the Form S-1 filed in connection with the IPO, each of the
stockholders listed in Schedule A, and each of the Parent Entities agrees that
its respective Affiliate listed in Schedule A, will not sell, transfer or
dispose of any of the Shares or shares of Preferred Stock received by such
stockholder in connection with the formation of the Company prior to the
expiration of six months following the IPO unless such stockholder and its
respective Parent Entity has delivered a
<PAGE> 21
18
written opinion of a nationally recognized U.S. tax counsel to the Company,
which opinion provides that such sale, transfer or disposition will not cause
the formation of the Company to fail to qualify under Section 351 of the Code.
In connection with the rendering by such counsel of such opinion, the Company
will provide to such counsel such information in the Company's possession, and
will make reasonable efforts to obtain such relevant information, as counsel
may reasonably request. The Company shall provide a copy of any opinion
received by it pursuant to the second preceding sentence or pursuant to Section
5.12 hereof to each Parent Entity and nothing herein shall be construed to
prohibit any Parent Entity from submitting a copy of any such opinion to the
United States Internal Revenue Service or to any state or local taxing
authority in the course of an examination or audit of such Parent Entity or any
Affiliate thereof.
ARTICLE IV
CERTAIN AGREEMENTS
SECTION 4.01. Certain Agreements. (a) Except as expressly
contemplated by this Agreement, each of the Parent Entities and the Original
Owners and their respective Affiliates shall not:
(i) acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, (x) any Voting
Securities that would increase or would have the effect of increasing
such Parent Entity's or Original Owner's (A) level of beneficial
ownership in the Company to more than 50% of the then outstanding
Voting Securities or (B) voting power to more than 50% of the voting
power of the then outstanding Voting Securities, or (y) any direct or
indirect rights to acquire any Voting Securities that would increase
or would have the effect of increasing such Parent Entity's or
Original Owner's (A) level of beneficial ownership in the Company to
more than 50% of the then outstanding Voting Securities or (B) voting
power to more than 50% of the voting power of the then outstanding
Voting Securities if such rights were exercised.
(ii) make any public announcement with respect to, or
submit a proposal for, any transaction involving a Parent Entity,
Original Owner or of any Affiliate thereof that would increase or
would have the effect of increasing such Parent Entity's or Original
Owner's (A) level of beneficial ownership in the Company to more than
50% of the then outstanding Voting Securities or (B) voting power to
more than 50% of the voting power of the then outstanding Voting
Securities;
(iii) form, join or in any way participate in a "group" as
such term is defined for purposes of Section 13(d)(3) of the
Securities Exchange Act, in connection with any of the foregoing; or
<PAGE> 22
19
(iv) request the Company, directly or indirectly, to amend
or waive any provision of this Section 4.01(a).
(b) Notwithstanding the provisions of Section 4.01(a), a
Parent Entity, Original Owner or any Affiliate thereof, acting individually or
acting in concert as a "group" as such term is defined for purposes of Section
13(d)(3) of the Securities Exchange Act (an "Acquiring Owner"), may offer to
acquire all of the outstanding Voting Securities (the "Offer"); provided,
however, that (i) (A) the Acquiring Owner submits a written proposal (the
"Proposal") to the Independent Directors setting forth a brief description of
the Offer, the price and other material terms of such Offer and any other
information that the Independent Directors may request and (B) the price and
other material terms of the Offer are approved by the Independent Directors or
(ii) in the event that the Independent Directors cannot reach agreement with
the Acquiring Owner with respect to the price of the Offer within 45 days
following the receipt of the Proposal, a nationally recognized investment
banking firm selected by the Independent Directors, after consultation with the
Acquiring Owner, independent of the Company and the Acquiring Owner and
knowledgeable with respect to the business of the Company (the "Investment
Bank") will determine a price that is fair from a financial point of view to
the stockholders of the Company (other than the Acquiring Owner). The fees,
costs and expenses of the Investment Bank shall be borne by the Acquiring
Owner. The Independent Directors shall notify the Acquiring Owner within 2
business days of the delivery of such determination by the Investment Bank.
Notwithstanding anything to the contrary in this Section 4.01, the Independent
Directors shall not be obligated to consider any Offer made by an Acquiring
Owner unless such Offer is a bona fide offer for all of the Voting Securities
of the Company.
SECTION 4.02. No Solicitation. Except as expressly
contemplated by this Agreement, none of the Parent Entities, Original Owners or
any of their respective Affiliates shall make, or in any way participate,
directly or indirectly in, nor shall they form, join or in any way participate
in a "group", as such term is defined for purposes of Section 13(d)(3) of the
Securities Exchange Act, in connection with, any "solicitation" of "proxies" to
vote (as such terms are used in the rules of the Commission) in opposition to
any proxy solicitation being conducted by the Company; provided, however, that
the foregoing shall not prohibit any communication not amounting to a
solicitation of proxies.
SECTION 4.03. Issuances of Shares of Capital Stock. The
Company shall not, at any time during the term of this Agreement, issue any
shares of capital stock unless such issuance is approved by a majority of the
whole Board.
<PAGE> 23
20
ARTICLE V
MISCELLANEOUS
SECTION 5.01. Further Action. Each of the parties hereto
shall use all reasonable efforts to take, or cause to be taken, all appropriate
action, do or cause to be done all things necessary, proper or advisable under
applicable law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
SECTION 5.02. Representations. Each of the parties hereto
represents that this Agreement has been duly authorized, executed and delivered
by such party and constitutes a legal, valid and binding obligation of such
party, enforceable against it in accordance with the terms of this Agreement.
SECTION 5.03. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity.
SECTION 5.04. Amendments and Waivers. Any term in this
Agreement may be amended or waived upon the written consent of the holders of
more than 66 2/3% of the Shares then held by the Original Owners; provided,
however, that (i) any amendment or waiver that adversely affects any Parent
Entity or Original Owner shall require the consent in writing of such Parent
Entity or Original Owner (whether or not such amendment or waiver affects any
one or more of the other Original Owners), (ii) any amendment to the provisions
of Article II shall require the consent in writing of the Company and the
Original Owners then party to this Agreement that hold series of Preferred
Stock that are entitled to elect one or more directors to the Board pursuant to
the terms of the Preferred Stock, and (iii) any amendment to any of the
provisions of Section 4.01 or 4.02 shall require the consent in writing of each
of the parties hereto, including the Company. Except where consent is required
pursuant to this Section 5.04, each of the Parent Entities and the Original
Owners shall be bound by any amendment or waiver authorized by this Section
5.04. Each party hereto, including the Company, agrees that it shall not take
or cause to be taken any action to adopt, amend or repeal any provision of the
Restated Certificate of Incorporation or the Restated By-laws of the Company so
as to make them inconsistent in any manner with this Agreement or the
Registration Rights Agreement.
SECTION 5.05. Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service, by cable, by telecopy, by
telegram, by telex or by registered or certified mail
<PAGE> 24
21
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 5.05):
(a) if to United or Covia:
United Air Lines, Inc.
Post Office Box 66100
Chicago, IL 60666
Telecopy: (847) 700-4412
Attention: Frederic F. Brace
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
Attention: Thomas H. Kennedy, Esq.
(b) if to USAW or USAM:
US Airways, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, VA 22227
Telecopy: (703) 872-7987
Attention: Alan D. Abner
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
Attention: Thomas H. Kennedy, Esq.
<PAGE> 25
22
(c) if to Air Canada or Resnet:
Air Canada Inc.
130 Bloor Street West (ZIP 450)
5th Floor, Toronto, Ontario
M5S 1P5, Canada
Telecopy: (416) 323-5376
Attention: Marc Rosenberg
with a copy to:
Osler, Hoskin & Harcourt
1 First Canadian Place
100 King Street West, 61st Floor
Toronto, Ontario
Canada M5X 1B8
Telecopy: (416) 862-6666
Attention: Terrence R. Burgoyne
(d)(i) if to British Airways:
British Airways plc
Speedbird House
PO Box 10
Heathrow Airport (London)
Hounslow, Middlesex
England TW6 2JA
Telecopy: 011 44 181 562 3233
Attention: Derek Stevens
with a copy to:
Distribution Systems, Inc.
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington
Delaware 19899
Attention: Paul Jasinski, Secretary
Telecopy: c/o Beckwith Scolnick & Wolf
(201) 567-5222
<PAGE> 26
23
(d)(ii) if to DSI:
Distribution Systems, Inc.
1105 North Market Street
Suite 1300
P.O. Box 8985
Wilmington
Delaware 19899
Attention: Paul Jasinski, Secretary
Telecopy: c/o Beckwith Scolnick & Wolf
(201) 567-5222
with a copy to:
British Airways plc
Speedbird House
PO Box 10
Heathrow Airport (London)
Hounslow, Middlesex
England TW6 2JA
Telecopy: 011 44 181 562 3233
Attention: Derek Stevens
(e) if to SAirGroup or Roscor:
SAirGroup (Ltd.)
CH-8058
Zurich Airport
Switzerland
Telecopy: 011 41 1 812 9178
Attention: Georges P. Schorderet
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telecopy: (212) 474-3700
Attention: Daniel P. Cunningham, Esq.
<PAGE> 27
24
(f) if to KLM or TIS:
KLM Royal Dutch Airlines
AMS/MA
P.O. Box 7700, 1117 ZL Schipol
Amsterdamseweg 55
1182 GP Amstelveen
The Netherlands
Telecopy: 011 31 20 6 49 1852
Attention: Frank H. Rovekamp
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telecopy: (212) 474-3700
Attention: Daniel P. Cunningham, Esq.
(g) if to Aer Lingus or Retford:
Aer Lingus plc
Head Office Block
Dublin Airport
Dublin, Ireland
Telecopy: 011 3531 705 3833
Attention: Victor Garland
(h) if to Alitalia or Racom:
Alitalia - Linee Aeree Italiane S.p.A.
Centro Direzionale Alitalia
Viale Alessandro Marchetti III
00148 Roma
Italy
Telecopy: 011 39 6 6562 4368
Attention: Dr. Pierluigi Alemanni
<PAGE> 28
25
with a copy to:
Studio Legale Vassalli
Via Visconti di Modrone, 21
20122 Milan
Italy
Telecopy: 011 39 2 7602 1260
Attention: Roberto Cornetto
(i) if to Austrian Airlines or Travidata:
Austrian Airlines
Fontanastrasse 1
A-1107 Vienna
Austria
Telecopy: 011 431 689 8521
Attention: Dr. Rainer Walther
(j) if to Olympic or Olynet:
Olympic Airways
96, Syngrou Ave.
Athens
Greece
Telecopy: 011 301 9267 166
Attention: Konstantinos Mandroukas
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2505
Telecopy: (202) 639-7003
Attention: Richard Steinwurtzel, Esq.
<PAGE> 29
26
(k) if to TAP or Coporga:
TAP Air Portugal
Edificio 27, 10. andar
Aeroporto de Lisboa
1700 Lisboa Codex
Portugal
Telecopy: 011 3511 841 5772
Attention: Eduardo Branco
with a copy to:
(l) if to the Company:
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Il 60018
Telecopy: (847) 518-4085
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: 212-848-7179
Attention: Clare O'Brien, Esq.
SECTION 5.06. Benefit; Successors and Assigns. Except as
otherwise provided herein, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns; provided however that this Agreement shall not inure to the
benefit of any Prospective Affiliate Transferee unless such Prospective
Affiliate Transferee shall have complied with the terms of Section 3.05 in all
respects; provided, further, that this Agreement shall not inure to the benefit
of any Permitted Preferred Stock Transferee unless such Permitted Preferred
Stock Transferee shall have complied with the terms of Section 3.07 in all
respects; and provided further that this Agreement shall not inure with respect
to additional Shares acquired by a Prospective Buyer unless such Prospective
Buyer and Selling Original Owner shall have complied with Section 3.04 in all
respects. Nothing in this Agreement either express or implied is intended to
confer on any person, other than the parties hereto and their respective
successors and permitted assigns, any rights, remedies or obligations under or
by reason of this Agreement.
<PAGE> 30
27
SECTION 5.07. Arbitration. Subject to the final sentence of
this Section 5.07, any dispute arising between or among the parties hereto or
any of them involving the subject matters covered by this Agreement shall be
submitted to arbitration under this Section 5.07. Any party asserting a breach
of this Agreement by any other party or parties shall notify all other parties
of such alleged breach (a "Dispute Notice") and the parties shall attempt to
resolve such dispute amicably and if they shall fail to resolve it within
thirty (30) days of the date of the Dispute Notice, any party may notify the
other parties that it wishes to commence an arbitration proceeding under this
Section 5.07 (an "Arbitration Request"). In any arbitration proceeding the
party or parties commencing the arbitration (alone or together, if more than
one, the "Petitioner") shall include in the Arbitration Request (a) a statement
of the facts constituting the alleged breach or dispute, (b) a written
statement of position ("Statement") regarding the dispute and (c) the name of
an individual designated by it to appoint an Arbitrator (an "elector"). The
Statement shall state the facts and arguments in support of the position taken
by the party submitting such Statement and shall detail that party's proposed
solution and relief sought (if any). Copies of any Arbitration Request shall
be furnished at the same time to the other parties hereto. The party or
parties with whom the Petitioner has its dispute (alone or together, if more
than one, the "Respondent") shall within fifteen (15) business days after the
date of the Arbitration Request designate a second elector by notice to the
Petitioner (copies of which shall be furnished to the other parties), but if it
or they shall fail to do so within such period the Petitioner may designate an
elector on Respondent's behalf. The electors chosen by the Petitioner and the
Respondent shall attempt to agree upon an arbitrator (the "Arbitrator"), but if
they are unable to do so within twenty (20) business days after the designation
of the second elector, then either elector thereafter may apply to the American
Arbitration Association (the "Association") for the selection of the Arbitrator
in accordance with the Commercial Arbitration Rules of such Association. The
Arbitrator so selected shall have full power to decide any dispute referred to
in this Section 5.07. The arbitration proceedings shall be conducted in the
English language, and the place of arbitration and the making of the Award (as
defined below) shall be the City of New York. The UNCITRAL rules of commercial
arbitration shall apply to any arbitration commenced pursuant to this Section
5.07, as modified by the following procedure:
(i) Within ten (10) business days of the selection of the
Arbitrator (the "Commencement Date"), the Respondent shall deliver its
Statement regarding the dispute to the Arbitrator and to the
Petitioner.
(ii) Within twenty (20) business days from the
Commencement Date, each of the Petitioner and Respondent shall deliver
to the Arbitrator and to the other party, a response ("Response") to
the other party's Statement setting forth opposing facts and
arguments and limited in length to ten (10) typed, single spaced
pages (excluding any evidentiary exhibits included therein).
<PAGE> 31
28
(iii) Within thirty (30) business days from the
Commencement Date, each of the Petitioner and the Respondent may
deliver to the Arbitrator and to the other party, a reply to the
Response limited to setting forth facts and arguments in rebuttal to
the Statement and Response of the other party and limited in length to
five (5) typed, single spaced pages (excluding any evidentiary
exhibits included therein).
(iv) Within forty (40) business days from the Commencement
Date, each of the Petitioner and Respondent shall present an oral
summation of its position to the Arbitrator in the presence of the
other party in accordance with such rules of procedure including,
without limitation, length of presentation and right of
cross-examination, as the Arbitrator shall determine in writing and
deliver to the parties not less than five (5) business days prior to
such hearing; provided, however, that such hearing shall not exceed
eight (8) hours in total and may not be adjourned except for
extraordinary circumstances beyond the control of the parties.
(v) The Arbitrator shall either issue his decision and
award ("Award") or request a further meeting of the parties within
fifteen (15) days of the hearing.
(vi) Any such further meeting of the parties shall take
place within fifteen (15) business days of the request therefor and
shall be conducted as determined by the Arbitrator. The Arbitrator
shall issue his Award no later than fifteen (15) days after any such
further meeting of the parties.
(vii) The Award shall be in writing and shall be limited to
a decision either completely in favor of Petitioner's request for
relief or completely in favor of Respondent's request for relief. The
Award shall be final and binding upon the parties hereto and judgment
may be entered thereon in any court of competent jurisdiction and the
costs and expenses of such arbitration shall be borne by the party
losing such arbitration.
(viii) In the event that the Arbitrator fails to render his
Award within the time limits contained in Sections 5.07(v) or (vi),
the Aribitrator shall, nonetheless, retain jurisdiction over the
dispute for a reasonable period of time.
This Section 5.07 shall in no way affect the right of any
party to seek such interim relief, and only such relief, as may be required to
maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
SECTION 5.08. Changes to Non-Competition Agreement. The
Company shall not amend the provisions of any Non-Competition Agreement unless
such amendment is offered to each of the other Persons that are then parties to
a Non-Competition Agreement with the Company. The Company shall not enter into
a non-competition agreement after the
<PAGE> 32
29
date hereof that differs in any material respect from the terms of the form
attached hereto as Exhibit A (as such form may be amended in accordance with
this Section 5.08) unless (i) the terms of such proposed non-competition
agreement are offered to each of the other Persons that are then parties to a
Non-Competition Agreement with the Company, or (ii) such action is approved by
at least four Original Owners; provided, however, that for purposes of this
clause (ii), the approval of an Original Owner and any Affiliate of such
Original Owner shall be deemed to constitute the approval of only one Original
Owner.
SECTION 5.09. Termination. Except for this Article V, this
Agreement shall terminate and be of no further force and effect, automatically
and without any required actions of the parties hereto, on the tenth
anniversary of the date hereof.
SECTION 5.10. Miscellaneous. This Agreement, the
Registration Rights Agreement and the Restated Certificate of Incorporation of
the Company set forth the entire agreement and understanding among the parties
hereto, and supersede all prior agreements and understandings, relating to the
subject matter hereof. All representations and warranties contained herein
shall survive the execution and delivery of this Agreement, regardless of any
investigation made by any party hereto or on such party's behalf. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one instrument.
SECTION 5.11. Tax Treatment. For U.S. federal, state and
local income tax purposes, the parties agree to treat the Merger and
consummation of the IPO as a transfer described in Section 351(a) of the Code.
For U.S. federal, state and local income tax purposes, the parties agree to
report the formation of the Company in a manner that is consistent with such
treatment described in the previous sentence and shall not take any position or
action contrary thereto unless required to do so by applicable tax laws
pursuant to a final determination under Section 1313(a) of the Code (or a
similar provision of state or local laws, as the case may be).
SECTION 5.12. Tax Opinion. Prior to the consummation of the
IPO, the Company shall have received a written opinion of a nationally
recognized U.S. tax counsel substantially to the effect that, based on
appropriate representations and assumptions, the Merger and consummation of the
IPO will constitute a transfer described in Section 351(a) of the Code, and as
such will not result in the recognition of gain or loss by the partners or the
Company.
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have duly caused this
Agreement to be executed as of the date first above written above by their
respective officers thereunto duly authorized.
GALILEO INTERNATIONAL, INC.
By /s/ James E. Barlett
--------------------------------------------
Name: James E. Barlett
Title: President &
Chief Executive Officer
UNITED AIR LINES, INC.
By /s/ Frederic F. Brace
--------------------------------------------
Name: Frederic F. Brace
Title: Vice President
Financial Analysis and Controller
COVIA LLC
By United Airlines, Inc.
By /s/ Authorized Signatory
----------------------------------------
Name:
Title:
AER LINGUS PLC
By /s/ Victor Garland
--------------------------------------------
Name: Victor Garland
Title: GM, MS
<PAGE> 34
RETFORD LIMITED
By /s/ Victor Garland
-------------------------------------
Name: Victor Garland
Title: GM, MS
US AIRWAYS, INC.
By /s/ John W. Harper
-------------------------------------
Name: John W. Harper
Title: Senior Vice President,
Finance and CFO
USAM CORPORATION
By /s/ John W. Harper
-------------------------------------
Name: John W. Harper
Title: Director & Treasurer
AIR CANADA
By /s/ Rob Peterson
-------------------------------------
Name: Rob Peterson
Title: Senior Vice President,
Finance & Chief Financial
Officer
RESNET HOLDINGS, INC.
By /s/ Rob Peterson
-------------------------------------
Name: Rob Peterson
Title: President
<PAGE> 35
BRITISH AIRWAYS PLC
By /s/ Paul Henry Jarvis
-------------------------------------
Name: Paul Henry Jarvis
Title: Assistant Company Secretary
DISTRIBUTION SYSTEM, INC.
By /s/ Barbara E. Cohen
-------------------------------------
Name: Barbara E. Cohen
Title: Treasurer
SAIRGROUP LTD.
By /s/ Armin Daume
-------------------------------------
Name: Armin Daume
Title: Vice President Finance
By /s/ Georges Schorderet
-------------------------------------
Name: Georges Schorderet
Title: Executive VP
Chief Financial Officer
<PAGE> 36
ROSCOR A.G.
By /s/ Armin Daume
-------------------------------------
Name: Armin Daume
Title: Chairman of the Board
By /s/ Ignaz Tschirky
-------------------------------------
Name: Ignaz Tschirky
Title: General Manager
KONINKLIJKE LUCHTVAART
MAATSCHAPPIJ N.V.
KLM ROYAL DUTCH AIRLINES
By /s/ R.J. Van der Burg
-------------------------------------
Name: R.J. Van der Burg
Title: Senior V.P., Finance
By /s/ Authorized Signatory
-------------------------------------
Name:
Title: Senior V.P., Corporate
Development & Foreign
Relations
TRAVEL INDUSTRY SYSTEMS B.V.
By /s/ R.J. Van der Burg
-------------------------------------
Name: R.J. Van der Burg
Title: Senior V.P., Finance
By /s/ Authorized Signatory
-------------------------------------
Name:
Title: Senior V.P., Corporate
Development & Foreign
Relations
<PAGE> 37
ALITALIA-LINEE AEREE
ITALIANE S.P.A.
By /s/ Vittorino Edoardo Capobianco
--------------------------------------
Name: Vittorino Edoardo Capobianco
Title: Special Attorney-in-Fact
RACOM TELEDATA S.p.A.
By /s/ Pierluigi Alemanni
--------------------------------------
Name: Pierluigi Alemanni
Title: President and CEO
AUSTRIAN AIRLINES
OESTERREICHISCHE
LUFTVERKEHRS
AKTIENGESELLSCHAFT
By /s/ Ferdinand Schmidt
--------------------------------------
Name: Ferdinand Schmidt
Title: Executive Vice President
Network Management
TRAVIDATA INC.
By /s/ Rainer Walther
--------------------------------------
Name: Dr. Rainer Walther
Title: Vice President Passenger
System
<PAGE> 38
OLYMPIC AIRWAYS S.A.
By /s/ Catherine Tsagarakis
--------------------------------------
Name: Catherine Tsagarakis
Title: Chief Financial Group
Director
OLYNET, INC
By /s/ Catherine Tsagarakis
--------------------------------------
Name: Catherine Tsagarakis
Title: Chief Financial Group
Director
TRANSPORTES AEREOS
PORTUGUESES S.A.
By /s/ Eduardo Branco
--------------------------------------
Name: Eduardo Branco
Title: General Commercial Director
COPORGA, INC
By /s/ Eduardo Branco
--------------------------------------
Name: Eduardo Branco
Title: Authorized Representative
<PAGE> 39
SCHEDULE A
Covia LLC, a Delaware limited liability company of which United Air Lines, Inc.
is the sole member ("Covia").
USAM Corp., a Delaware corporation and a wholly owned subsidiary of US Airways
("USAM").
Resnet Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of
Air Canada ("Resnet").
Distribution Systems Inc., a Delaware corporation and an indirect wholly owned
subsidiary of British Airways ("DSI").
Roscor A.G., a corporation organized under the laws of Switzerland and a wholly
owned subsidiary of SAirGroup ("Roscor").
Travel Industry Systems B.V., a corporation organized under the laws of the
Netherlands and a wholly owned subsidiary of KLM ("TIS").
Retford Limited, a corporation organized under the laws of Ireland and a wholly
owned subsidiary of Aer Lingus ("Retford").
Racom Teledata S&A, a corporation organized under the laws of Italy and a
majority owned subsidiary of Alitalia ("Racom").
Travidata Inc., a New York corporation and a wholly owned subsidiary of
Austrian Airlines ("Travidata").
Olynet Inc., a Delaware corporation and wholly owned subsidiary of Olympic
("Olynet").
Coporga, Inc., a Delaware corporation and wholly owned subsidiary of TAP
("Coporga").
<PAGE> 40
SCHEDULE B
United Air Lines, Inc., a Delaware corporation ("United").
US Airways, Inc., a Delaware corporation ("USAW").
Air Canada, a corporation organized under the laws of Canada ("Air Canada").
British Airways PLC, a corporation organized under the laws of England and
Wales ("British Airways").
SAirGroup, a corporation organized under the laws of Switzerland ("SAirGroup").
KLM Royal Dutch Airlines, a corporation organized under the laws of the
Netherlands ("KLM").
Aer Lingus PLC, a corporation organized under the laws of Ireland ("Aer
Lingus").
Alitalia-Linee Aeree Italiane S.p.A., a corporation organized under the laws of
Italy ("Alitalia").
Austrian Airlines Oesterreichische Luftverkehrs Aktiengesellschaft, a
corporation organized under the laws of Austria ("Austrian Airlines").
Olympic Airways S.A., a corporation organized under the laws of Greece
("Olympic").
Transportes Aereos Portugueses S.A., a corporation organized under the laws of
Portugal ("TAP").
<PAGE> 1
EXHIBIT 10.2
CONFORMED COPY
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement"), dated as of July 30, 1997, among
Galileo International, L.L.C., a Delaware limited liability company
("Galileo"), United Airlines, Inc., a Delaware corporation ("United"), US
Airways, Inc., a Delaware corporation ("USAW"), and Air Canada, a corporation
incorporated under the laws of Alberta ("Air Canada" and, together with United
and USAW, the "Service Providers").
WHEREAS, the Service Providers have a significant number of sales personnel
and sales offices in the ATS Territory (as hereafter defined), and are very
knowledgeable about the airline distribution business;
WHEREAS, as a result of the Service Providers' significant number of sales
personnel and sales offices in the ATS Territory and their knowledge concerning
the airline distribution business, Galileo desires to enlist the Service
Providers' assistance with certain marketing and other services designed to
assist Galileo in growing the business operations of Apollo Travel Services
("ATS");
WHEREAS, the Service Providers desire to provide such marketing and other
services designed to assist Galileo in growing the business operations of ATS;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"ATS Territory" means (i) the United States of America, including its
overseas territories, commonwealths, trust territories and protectorates, (ii)
Anguilla, Antigua and Barbuda, Bahamas, Barbados, Cayman Islands, Cuba,
Dominica, Dominican Republic, Grenada, Guadeloupe, Haiti, Jamaica, Martinique,
Montserrat, St. Kitts-Nevis, Saint Lucia, St. Vincent and the Grenadines,
Trinidad and Tobago and Turks and Caicos Islands, and (iii) the Republic of
Mexico.
<PAGE> 2
2
"Cost of Carry Factor" means the number resulting from the following
formula: (1 + Cost of Carry Rate)n, where n is the number of years between the
date hereof and the date of any applicable payment made hereunder (adjusted pro
rata for any fraction of a year).
"Cost of Carry Rate" means 8.625%.
"Segments" means net air segments, as determined by Galileo's billing system
in accordance with current practices, in respect of transactions made in the
Galileo System within the ATS Territory by (i) Neutral Travel Providers and
Other Customers that have entered into subscriber agreements with ATS for
Reservations Services (or, following the date hereof, by Neutral Travel
Providers and Other Customers within the ATS Territory that have entered into
subscriber agreements with Galileo for Reservations Services) from which
Booking Fee Revenue is generated which is split between Galileo and ATS, with
respect to NTP Revenue, in accordance with the DSSA between Galileo and ATS, or
which is split between Galileo and ATS, with respect to Other Customer Revenue,
in accordance with the first clause of Section 8.8(a) of the Galileo
International Partnership Agreement (or, following the date hereof, would have
been split between Galileo and ATS, with respect to NTP Revenue, in accordance
with the DSSA between Galileo and ATS or which would have been split between
Galileo and ATS, with respect to Other Customer Revenue, in accordance with the
first Clause of Section 8.8(a) of the Galileo International Partnership
Agreement, had that agreement and that provision, respectively, continued to
have been in effect) and (ii) Other Customers (corporate only) of United, USAW,
or Air Canada utilizing a Customized Product from which Booking Fee Revenue is
generated which is split in accordance with the first clause of Section 8.8(c)
of the Galileo International Partnership Agreement (or, following the date
hereof, which would have been split in accordance with the first Section 8.8(c)
of the Galileo International Partnership Agreement, had that provision
continued to have been in effect). The calculation of net air segments to be
credited to ATS hereunder excludes net air segments in respect of transactions
made in the Galileo System by Other Customers of United, USAW, or Air Canada
utilizing Partner Developed Products. All capitalized terms used in this
definition of the term "Segments" shall be as defined in the Galileo
International Partnership Agreement or the Distributor Sales and Service
Agreement between Galileo and ATS as in effect immediately prior to the date
hereof.
"Transaction Category" means any transaction category, as determined in
accordance with Galileo's customary practices, including, without limitation,
the following transaction categories (together with any transaction categories
that replace the following transaction categories or are substantially similar
thereto): an active confirmed segment input, a passive segment input, an other
segment input, an active confirmed segment cancel, a passive segment cancel, an
other segment cancel, an interactive display transaction, an interactive sell
transaction, an inside availability transaction, a positive acknowledgement
transaction, and a marriage logic transaction.
<PAGE> 3
3
"Transaction Category Weighted Average Price" means, with respect to any
applicable Transaction Category during the course of any applicable year, the
weighted average of the published prices for such Transaction Category during
the course of such year, as determined by (i) multiplying each published list
price recorded for such Transaction Category during the course of such year by
a fraction, the numerator of which is the number of days for which such
published price was in effect for such Transaction Category during the course
of such year, and the denominator of which is 365, and (ii) taking the sum of
the resulting numbers.
ARTICLE II
PROVISION OF SERVICES
SECTION 2.01. Provision of Services. Subject to the requirements of
applicable law, each of the Service Providers hereby agrees to use its
expertise with respect to the airline distribution business and its significant
number of sales personnel and sales offices in the ATS Territory to increase
Galileo's competitiveness in the marketplace and generate additional segments
and revenue for Galileo through, but not limited to, the provision, subject to
the reasonable written request of Galileo, of the following services to
Galileo:
(a) Representatives from the marketing divisions of each of Galileo and
such Service Provider shall meet to discuss, coordinate and implement future
marketing strategies related to, but not limited to, the direction of
distribution in the marketplace and the emergence of alternative distribution
channels and technologies (i.e., the internet and other direct access
products).
(b) Representatives of such Service Provider shall assist Galileo by
conducting or participating in meetings and discussions with vendors, including
car, hotel, leisure or marketing or code share air carriers, that participate
or may participate in the Galileo system to strengthen and bolster such
relationships.
(c) Such Service Provider's sales staff shall conduct sales calls
(including joint sales calls with the appropriate Galileo account executive) to
users of the Galileo system throughout the ATS Territory, as mutually agreed
between the parties.
(d) Upon reasonable notice, such Service Provider's marketing personnel
shall participate in Galileo's vendor workshops to be held at various times
throughout the year.
<PAGE> 4
4
(e) Certain of such Service Provider's key staff, including sales staff,
shall within the first six (6) months hereof, and annually thereafter, attend a
local one-day overview session regarding the Galileo system.
(f) Such Service Provider and Galileo shall cooperate in exchanging
noteworthy information for inclusion in newsletters produced for and
distributed to travel agencies.
(g) Representatives of such Service Provider shall participate in
Galileo's future global automation conferences to enhance Galileo's global
market presence.
(h) Representative of such Service Provider shall meet with Galileo as
they mutually agree to (i) review the progress of such Service Provider's
performance under this Agreement, (ii) adopt a schedule of meetings and (iii)
consult regarding the appropriate staffing of Service Provider personnel to
perform the Service Provider's obligations under this Agreement.
SECTION 2.02. Designation of United Representative. United hereby
designates Judy Bishop as its initial representative for purposes of performing
its obligations under Section 2.01.
ARTICLE III
CONTINGENT PAYMENT FOR SERVICES
SECTION 3.01. Contingent Payment for Services. (a) The payment, if any,
that Galileo shall make to the Service Providers in consideration for the
services described in Section 2.01 shall be based upon an improvement in
Galileo's air booking fee revenue, as measured over a five year period
commencing as of the date hereof, and as calculated below. The revenue
improvement shall be measured utilizing two factors, weighted average annual
air segment growth rate ("Weighted Air Segment Growth Rate") and weighted
average annual price increase rate ("Weighted Air Price Increase Rate").
(b) The Service Providers and Galileo will share in the economic benefit
to Galileo of revenue increases which are (i) above the minimum weighted
average annual air segment growth rate ("Minimum Weighted Air Segment Growth
Rate") and at or below the targeted weighted average annual air segment growth
rate ("Targeted Weighted Air Segment Growth Rate") and revenue increases which
are (ii) above the minimum weighted average annual price increase rate
("Minimum Weighted Air Price Increase Rate") and at or below the targeted
weighted average annual price increase rate ("Targeted Weighted Air Price
Increase Rate"). The Minimum Weighted Air Segment Growth Rate and the Targeted
Weighted Air Segment Growth Rate are 3.4% and 5.4%, respectively. The Minimum
<PAGE> 5
5
Weighted Air Price Increase Rate and the Targeted Weighted Air Price Increase
Rate are 2.0% and 4.0%, respectively.
(c) The Service Providers shall receive payments, calculated and paid in
accordance with Sections 3.02 through 3.06 below, which reflect the approximate
economic value of the achievement of the first fifty percent of the range
between (i) the Minimum Weighted Air Segment Growth Rate and the Targeted
Weighted Air Segment Growth Rate and (ii) the Minimum Weighted Air Price
Increase Rate and the Targeted Weighted Air Price Increase Rate, respectively.
Galileo shall retain the approximate economic value of the achievement of the
second fifty percent of such ranges as well as any economic value from the
achievement of a Weighted Air Segment Growth Rate or a Weighted Air Price
Increase Rate which is in excess of such ranges.
SECTION 3.02. Calculation of Segment Growth Payment. (a) The "Segment
Growth Payment" shall be calculated in accordance with the provisions of this
Section 3.02:
(i) Within 60 days of the fifth anniversary hereof (or, in the event
Section 3.04(c) is applicable, within 60 days of the date that is six
months after the fifth anniversary hereof), Galileo shall calculate in
accordance with its customary practices (A) the total number of
Segments recorded in the ATS Territory for the period of twelve months
ending on the date hereof (the "Pre-Closing Year") and for the period
of twelve months ending on each of the first, second, third, fourth
and fifth anniversaries of the date hereof (the "Post- Closing
Years"), and (B) the percentage increase or decrease in the total
number of such Segments for each of the Post-Closing Years in
comparison to the immediately preceding Pre-Closing Year or
Post-Closing Year, as applicable.
(ii) Following the calculations described in clause (i) above, Galileo
shall then weight such percentage increases or decreases by
multiplying such percentage increases or decreases by the
corresponding Weighting Factors set forth on Exhibit 1 hereto. The
sum of the resulting percentages shall constitute the Weighted Air
Segment Growth Rate.
(b) If the Weighted Air Segment Growth Rate is less than or equal to 3.4%,
no Segment Growth Payment shall be made.
(c) If the Weighted Air Segment Growth Rate is greater than or equal to
4.4%, the Segment Growth Payment shall be $100,000,000.
(d) If the Weighted Air Segment Growth Rate is greater than 3.4% but less
than 4.4%, the Segment Growth Payment shall be an amount equal to (i)
$100,000,000
<PAGE> 6
6
multiplied by (ii) a fraction, the numerator of which shall be (A) the Weighted
Air Segment Growth Rate minus (B) 3.4%, and the denominator of which shall be
0.01.
SECTION 3.03. Calculation of Air Booking Price Increases. (a) Within 60
days of the fifth anniversary hereof (or, in the event Section 3.04(c) is
applicable, within 60 days of the date that is six months after the fifth
anniversary hereof), Galileo shall calculate the "Price Increase Payment" in
accordance with the provisions of this Section 3.03:
(i) Galileo shall calculate the total number of transactions, by
Transaction Category, associated with the total number of Segments
recorded in the ATS Territory for the Pre-Closing Year.
(ii) Galileo shall then calculate the aggregate revenue in the ATS
Territory for the Pre-Closing Year by multiplying the Transaction
Category Weighted Average Price for each Transaction Category for the
Pre-Closing Year by the total number of transactions, by Transaction
Category, recorded in the ATS Territory in the Pre-Closing Year.
(iii) Galileo shall then determine what the total revenue in the ATS
Territory would have been in each of the Post-Closing Years on a
comparative basis to the Pre-Closing Year by multiplying the
Transaction Category Weighted Average Price for each Transaction
Category for such Post-Closing Year by the total number of
transactions, by Transaction Category, recorded in the ATS Territory
in the Pre-Closing Year.
(iv) Galileo shall then calculate the percentage increase or decrease in
the aggregate revenue in the ATS Territory in each of the Post-
Closing Years by taking the results of the calculations described in
clause (iii) above for each of the Post-Closing Years and dividing
them by the results of the calculations described in clauses (ii) and
(iii) above, as applicable, with respect to the immediately preceding
years, and then subtracting one from the resulting numbers to derive a
percentage increase or decrease.
(v) Galileo shall weight the percentage price increases or decreases
calculated in accordance with clause (iv) by multiplying such
percentage increases or decreases by the corresponding Weighting
Factors set forth on Exhibit 1 hereto. The sum of the resulting
percentages shall constitute the Weighted Air Price Increase Rate.
(b) If the Weighted Air Price Increase Rate is less than or equal to 2.0%,
there shall be no Price Increase Payment.
<PAGE> 7
7
(c) If the Weighted Air Price Increase Rate is greater than or equal to
3.0%, the Price Increase Payment shall be $100,000,000;
(d) If the Weighted Air Price Increase Rate is greater than 2.0% but less
than 3.0%, the Price Increase Payment shall be an amount equal to (i)
$100,000,000 multiplied by (ii) a fraction, the numerator of which shall be (A)
the Weighted Air Price Increase Rate minus (B) 2.0%, and the denominator of
which shall be 0.01.
SECTION 3.04. Grace Period for Certain Price Increases. (a) The
provisions of this Section 3.04 shall apply if the published price for any
Transaction Category in the ATS Territory does not increase during the course
of the first six months of the fifth Post-Closing Year.
(b) With regard to any Transaction Category whose published price in the
ATS Territory does not increase during the course of the first six months of
the fifth Post-Closing Year, but whose published price does increase on or
after the first day of the seventh month of the fifth Post-Closing Year but
prior to the first day of the first month of the sixth Post-Closing Year, then
for purposes of Section 3.03(a)(iii) and the definition of the term Transaction
Category Weighted Average Price, such price increase shall be deemed to have
occurred with regard to such Transaction Category on the first day of the
seventh month of the fifth Post-Closing Year.
(c) If the published price for any Transaction Category does not increase
in the ATS Territory during the course of the fifth Post-Closing Year, then the
calculations set forth in Sections 3.02, 3.03, 3.05 and 3.06 shall not be
completed until 60 days (or, in the case of Section 3.06, 65 days) after the
date that is six months after the fifth anniversary hereof. If there is such a
price increase as to such Transaction Category in the ATS Territory during the
six month period following the fifth anniversary hereof, then for purposes of
Section 3.03(a)(iii) and the definition of the term Transaction Category
Weighted Average Price, such price increase shall be deemed to have occurred
with regard to such Transaction Category on the date that is six months prior
to the date on which such price increase actually occurred.
(d) All other calculations set forth in this Agreement with regard to
Transaction Categories whose published prices in the ATS Territory do increase
during the first six months of the fifth Post-Closing Year shall be unaffected
by the provisions of this Section 3.04.
SECTION 3.05. Calculation of Adjusted Services Payment. The sum of (i) the
Segment Growth Payment calculated in accordance with Section 3.02 and (ii) the
Price Increase Payment calculated in accordance with Sections 3.03 and 3.04
shall constitute the "Total Services Payment". The Total Services Payment
shall be multiplied by the Cost of
<PAGE> 8
8
Carry Factor, and the product of such calculation shall constitute the
"Adjusted Services Payment".
SECTION 3.06. Interim Statements; Adjusted Services Payment Statement;
Disputes; Payment of Adjusted Services Payment. (a) Within 60 days of each of
the first four anniversaries hereof, Galileo shall calculate, and shall deliver
to the Service Providers (for informational purposes only), a written statement
(each such statement, an "Interim Statement") setting forth Galileo's
preliminary calculation of the Weighted Air Segment Growth Rate for the
preceding year and the Weighted Air Price Increase Rate as of the end of the
preceding year. In no event shall any Service Provider be entitled to dispute
any of the calculations set forth on an Interim Statement.
(b) Within 65 days of the fifth anniversary hereof (or, in the event
Section 3.04(c) is applicable, within 65 days of the date that is six months
after the fifth anniversary hereof), Galileo shall deliver to the Service
Providers a written statement (the "Adjusted Services Payment Statement")
setting forth Galileo's calculation of the Adjusted Services Payment.
(c) Disputes. (i) Subject to clause (ii) of this Section 3.06(c), the
Adjusted Services Payment Statement delivered by Galileo to the Service
Providers shall be deemed to be and shall be final, binding and conclusive on
the parties hereto.
(ii) The Service Providers may dispute any amounts reflected on the
Adjusted Services Payment Statement to the extent such disputed amounts
affect the calculation of the Adjusted Services Payment; provided, however,
that the Service Providers shall have notified Galileo in writing of each
disputed item, specifying the amount thereof in dispute and setting forth, in
reasonable detail, the basis for such dispute, within 15 business days of
Galileo's delivery of the Adjusted Services Payment Statement to the Service
Providers. Galileo and the Service Providers shall attempt in good faith to
resolve the matter in dispute. If Galileo and the Service Providers,
notwithstanding such good faith effort, shall have failed to resolve the
matter or matters in dispute within 15 business days after receipt by Galileo
of the Service Providers' written notice of dispute, Galileo and the Service
Providers shall submit the items remaining in dispute for resolution to an
independent accounting firm of international reputation mutually acceptable
to, and independent of, Galileo and the Service Providers (such accounting
firm being referred to herein as the "Independent Accounting Firm"), which
shall, within 45 business days after such submission, determine and report
to, and independent of, Galileo and the Service Providers upon such remaining
disputed items, and such report shall be final, binding and conclusive on the
parties hereto. The fees and disbursements of the Independent Accounting
Firm shall be allocated among Galileo and the Service Providers in the same
proportion that the aggregate amount of such disputed items so submitted to
the Independent Accounting Firm that is unsuccessfully disputed by Galileo,
on the one
<PAGE> 9
9
hand, or the Service Providers, on the other hand (as finally determined by
the Independent Accounting Firm), bears to the total amount of disputed items
so submitted.
(iii) In acting under this Agreement, the Independent Accounting Firm shall
be entitled to the privileges and immunities of an arbitrator.
(d) Cooperation. For purposes of complying with the terms set forth
herein, each party shall (i) cooperate with and promptly make available to the
other parties and their respective auditors and representatives, all
information, records, data, auditors' working papers, and access to its
personnel, (ii) permit access to its facilities and (iii) permit the other
party and its auditors and representatives to make copies of all information,
records, data and auditor's working papers, in each case as may be reasonably
required in connection with the analysis of the Adjusted Services Payment
Statement, the calculation of the Adjusted Services Payment and the resolution
of any dispute(s) thereunder.
(e) Adjusted Services Payment. Within 5 business days of the earliest of
(i) the date that is 15 business days after the delivery of the Adjusted
Services Payment Statement pursuant to the provisions set forth in Section
3.06(b) hereof if such Adjusted Services Payment Statement is not disputed by
the Service Providers, (ii) the resolution of all disagreements with respect to
the Adjusted Services Payment Statement directly by Galileo and the Service
Providers and (iii) the issuance of the report of the Independent Accounting
Firm, Galileo shall pay to each of the Service Providers in immediately
available funds to accounts designated in writing by the Service Providers not
later than two business days prior to the date of such payment a pro rata
portion of the Adjusted Services Payment, if any, in proportion to their
respective former percentage interests in ATS immediately prior to the date
hereof. For purposes of any such payment, the Adjusted Services Payment shall
be recalculated to give effect to the Cost of Carry Factor for the period
between the delivery of the Adjusted Services Payment Statement and the actual
date of payment.
SECTION 3.07. Change in Galileo Pricing Methodology. In the event that,
between the date hereof and the fifth anniversary hereof, there is a
fundamental change in Galileo's pricing methodology such that the provisions of
this Article III cannot be implemented in the manner currently intended by the
parties hereto, they shall negotiate in good faith with a view to amending the
provisions of this Article III in order to reflect such fundamental change. In
the absence of any agreement among the parties with regard to any such
amendments, the provisions of this Article III shall be applied in a manner
designed to effectuate, to the greatest possible extent, the parties' original
intentions.
<PAGE> 10
10
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Representations and Warranties. Each of the parties hereto
represents and warrants that this Agreement has been duly authorized, executed
and delivered by such party and constitutes a legal, valid and binding
obligation of such party, enforceable against it in accordance with the terms
of this Agreement.
SECTION 4.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
facsimile, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) or by a nationally recognized overnight
courier service to the respective parties at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 4.02):
(i) if to Galileo:
Galileo International, L.L.C.
5350 S. Valentia Way
Englewood, Colorado 80111
Telecopy: (303) 397-5020
Attention: Babetta R. Gray, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile: (212) 848-7179
Attention: Clare O'Brien, Esq.
(ii) if to United:
United Air Lines, Inc.
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Telecopy: (847) 700-4412
Attention: Frederick F. "Jake" Brace, III
<PAGE> 11
11
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-3637
Attention: Thomas H. Kennedy, Esq.
(iii) if to USAW:
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Telecopy: (703) 872-7987
Attention: Alan Abner
with a copy to:
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Telecopy: (703) 872-5252
Attention: Monica Roye, Esq.
(iv) if to Air Canada:
Air Canada
C.P. 14,000/P.O. Box 14,000
Station Airport
Dorval, Quebec
Canada H4Y 1H4
Facsimile: (514) 422-5729
Attention: Pat Iaconi, Esq.
with a copy to:
Osler, Hoskin & Harcourt
1 First Canadian Place
100 King Street West 61st Floor
Toronto, Ontario
Canada M5X 3B8
Facsimile: (416) 862-6666
Attention: Terrence Burgoyne
<PAGE> 12
12
SECTION 4.03. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Agreement are not
affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 4.04. Term of Agreement. The provisions of this Agreement (other
than Articles I and IV) shall terminate and be of no further force and effect,
automatically and without any required actions of the parties hereto, on the
fifth anniversary of the date hereof; provided, however, that (i) the
provisions of Article II hereof shall terminate on the date on which Galileo
ceases to be a party to a marketing cooperation and sales representation
agreement with each of United and USAW, but in no event earlier than the third
anniversary hereof, (ii) the provisions of Article III shall terminate on the
date that all payments to be made thereunder are made (or the date on which the
parties agree that no such payment is required to be made), and (iii) the
parties may extend the provisions of any other provision of this Agreement
beyond the fifth anniversary hereof pursuant to an instrument in writing signed
by all of the parties hereto.
SECTION 4.05. Default; Cure Period; Remedies. (a) Upon a breach of any of
the covenants set forth in this Agreement by any of the Service Providers, such
Service Provider shall use its reasonable efforts to cure such breach within 30
days of receipt of written notice of such breach from Galileo.
(b) Upon a breach of any of the covenants set forth in this Agreement by
Galileo, Galileo shall use its reasonable efforts to cure such breach within 30
days of receipt of written notice of such breach from any of the Service
Providers.
(c) Galileo acknowledges that its sole and exclusive remedy for the breach
by any Service Provider of its obligations pursuant to Article II (other than a
breach resulting from the wilful misconduct or gross negligence of any Service
Provider) shall be specific performance.
(d) Notwithstanding anything to the contrary in this Section 4.05, no
Service Provider will be deemed to be in breach of its obligations under this
Agreement so long as any Service Provider is performing its obligations
hereunder.
SECTION 4.06. Confidentiality. Each of the parties hereto shall keep
confidential any information with respect to any of the parties hereto provided
in connection
<PAGE> 13
13
with this Agreement that is not otherwise generally available to the public,
except as may be required by applicable law.
SECTION 4.07. Entire Agreement; Assignment. This Agreement (including the
Exhibits, which are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein) constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof; provided, however, that to
the extent there is a conflict between any provision of this Agreement as it
relates to United and the terms of the Marketing Cooperation and Sales
Representation Agreement, dated as of July 30, 1997, between Galileo and United
(the "United Sales Representation Agreement"), the terms of the United Sales
Representation Agreement shall govern. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 4.08. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 4.09. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts executed in and to be performed in that state.
SECTION 4.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 4.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first written above by their respective officers thereunto duly
authorized.
GALILEO INTERNATIONAL, L.L.C.
By: /s/ Babetta R. Gray
--------------------------------------
Name: Babetta R. Gray
Title: Senior Vice President,
Legal and General Counsel
UNITED AIR LINES, INC.
By: /s/ Frederic F. Brace
--------------------------------------
Name: Frederic F. Brace
Title: Vice President
Financial Analysis and Controller
US AIRWAYS, INC.
By: /s/ John W. Harper
----------------------------------------
Name: John W. Harper
Title: Senior Vice President,
Finance & CFO
AIR CANADA
By: /s/ Rob Peterson
----------------------------------------
Name: Rob Peterson
Title: Senior Vice President, Finance
and Chief Financial Officer
<PAGE> 15
EXHIBIT 1
Weighting Factors
Post-Closing Year Weighting
1 24%
2 22%
3 20%
4 18%
5 16%
<PAGE> 1
EXHIBIT 10.3
CONFORMED COPY
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement"), dated as of July 30,
1997, between GALILEO INTERNATIONAL, L.L.C., a Delaware limited liability
company ("Galileo"), and SWISSAIR SWISS AIR TRANSPORT LTD. (the "Service
Provider").
WHEREAS, the Service Provider has a significant number of
sales personnel and sales offices in the Traviswiss Territory (as hereinafter
defined), and is very knowledgeable about the airline distribution business;
WHEREAS, as a result of the Service Provider's significant
number of sales personnel and sales offices in the Traviswiss Territory and its
knowledge concerning the airline distribution business, Galileo desires to
enlist the Service Provider's assistance with certain marketing and other
services designed to assist Galileo in growing the business operations of
Traviswiss AG ("Traviswiss");
WHEREAS, the Service Provider desires to provide such
marketing and other services designed to assist Galileo in growing the business
operations of Traviswiss;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained and intending to be legally
bound hereby, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
"Business Day" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
The City of New York.
"Cost of Carry Factor" means the number resulting from the
following formula: (1 + Cost of Carry Rate)n, where n is the number of years
between the date hereof and the date of any applicable payment made hereunder
(adjusted pro rata for any fraction of a year).
"Cost of Carry Rate" means 8.625%.
<PAGE> 2
2
"Segments" means net air segments, as determined by Galileo's
billing system in accordance with current practices, in respect of transactions
made in the Galileo System within the Traviswiss Territory by (i) Neutral
Travel Providers (and their customers) and Other Customers that have entered
into subscriber agreements with Traviswiss for Reservations Services (or,
following the date hereof, by Neutral Travel Providers and Other Customers
within the Traviswiss Territory that have entered into subscriber agreements
with Galileo for Reservations Services) from which Booking Fee Revenue is
generated which is split between Galileo and Traviswiss, with respect to NTP
Revenue, in accordance with the DSSA between Galileo and Traviswiss, or which
is split between Galileo and Traviswiss, with respect to Other Customer
Revenue, in accordance with the first clause of Section 8.8(a) of the Galileo
International Partnership Agreement (or, following the date hereof, would have
been split between Galileo and Traviswiss, with respect to NTP Revenue, in
accordance with the DSSA between Galileo and Traviswiss or which would have
been split between Galileo and Traviswiss, with respect to Other Customer
Revenue, in accordance with the first Clause of Section 8.8(a) of the Galileo
International Partnership Agreement, had that agreement and that provision,
respectively, continued to have been in effect) and (ii) Other Customers
(corporate only) of the Service Provider utilizing a Customized Product from
which Booking Fee Revenue is generated which is split in accordance with the
first clause of Section 8.8(c) of the Galileo International Partnership
Agreement (or, following the date hereof, which would have been split in
accordance with the first Section 8.8(c) of the Galileo International
Partnership Agreement, had that provision continued to have been in effect).
The calculation of net air segments to be credited to Traviswiss hereunder
excludes net air segments in respect of transactions made in the Galileo System
by Other Customers of the Service Provider utilizing Partner Developed
Products. All capitalized terms used in this definition of the term "Segments"
shall be as defined in the Galileo International Partnership Agreement or the
Distributor Sales and Service Agreement between Galileo and Traviswiss as in
effect immediately prior to the date hereof.
"Transaction Category" means any transaction category, as
determined in accordance with Galileo's customary practices, including, without
limitation, the following transaction categories (together with any transaction
categories that replace the following transaction categories or are
substantially similar thereto): an active confirmed segment input, a passive
segment input, an other segment input, an active confirmed segment cancel, a
passive segment cancel, an other segment cancel, an interactive display
transaction, an interactive sell transaction, an inside availability
transaction, a positive acknowledgement transaction, and a marriage logic
transaction.
"Transaction Category Weighted Average Price" means, with
respect to any applicable Transaction Category during the course of any
applicable year, the weighted average of the published prices for such
Transaction Category during the course of such year, as determined by (i)
multiplying each published list price recorded for such Transaction Category
during the course of such year by a fraction, the numerator of which is the
number
<PAGE> 3
3
of days for which such published price was in effect for such Transaction
Category during the course of such year, and the denominator of which is 365,
and (ii) taking the sum of the resulting numbers.
"Traviswiss Territory" means Switzerland and Liechtenstein.
ARTICLE II
PROVISION OF SERVICES
SECTION 2.01. Provision of Services. Subject to the
requirements of applicable law, the Service Provider hereby agrees to use its
expertise with respect to the airline distribution business and its significant
number of sales personnel and sales offices in the Traviswiss Territory to
increase Galileo's competitiveness in the marketplace and generate additional
segments and revenue for Galileo through, but not limited to, the provision,
subject to the reasonable written request of Galileo, of the following services
to Galileo:
(a) Representatives from the marketing divisions of each
of Galileo and the Service Provider shall meet to discuss, co-ordinate and
implement future marketing strategies related to, but not limited to, the
direction of distribution in the marketplace and the emergence of alternative
distribution channels and technologies (i.e., the Internet and other direct
access products).
(b) Representatives of the Service Provider shall assist
Galileo by conducting or participating in meetings and discussions with
vendors, including car, hotel, leisure or marketing or code share air carriers,
that participate or may participate in the Galileo system to strengthen and
bolster such relationships.
(c) The Service Provider's sales staff shall conduct
sales calls (including joint sales calls with the appropriate Galileo account
executives) to users of the Galileo system throughout the Traviswiss Territory,
as mutually agreed between the parties.
(d) Upon reasonable notice, the Service Provider's
marketing personnel shall participate in Galileo's vendor workshops to be held
at various times throughout the year.
(e) Certain of the Service Provider's key staff,
including sales staff, shall within the first six (6) months hereof, and
annually thereafter, attend a local one-day overview session regarding the
Galileo system.
<PAGE> 4
4
(f) The Service Provider and Galileo shall co-operate in
exchanging noteworthy information for inclusion in newsletters produced for and
distributed to travel agencies.
(g) Representatives of the Service Provider shall
participate in Galileo's future global automation conferences to enhance
Galileo's global market presence.
(h) Representatives of the Service Provider shall meet
with Galileo as they mutually agree to (i) review the progress of the Service
Provider's performance under this Agreement, (ii) adopt a schedule of meetings
and (iii) consult regarding the appropriate staffing of Service Provider
personnel to perform the Service Provider's obligations under this Agreement.
ARTICLE III
CONTINGENT PAYMENT FOR SERVICES
SECTION 3.01. Contingent Payment for Services. (a) The
payment, if any, that Galileo shall make to the Service Provider in
consideration for the services described in Section 2.01 shall be based upon an
improvement in Galileo's air booking fee revenue, as measured over a five year
period commencing as of the date hereof, and as calculated below. The revenue
improvement shall be measured utilizing two factors, weighted average annual
air segment growth rate ("Weighted Air Segment Growth Rate") and weighted
average annual price increase rate ("Weighted Air Price Increase Rate").
(b) The Service Provider and Galileo will share in the
economic benefit to Galileo of revenue increases which are (i) above the
minimum weighted average annual air segment growth rate ("Minimum Weighted Air
Segment Growth Rate") and at or below the targeted weighted average annual air
segment growth rate ("Targeted Weighted Air Segment Growth Rate") and revenue
increases which are (ii) above the minimum weighted average annual price
increase rate ("Minimum Weighted Air Price Increase Rate") and at or below the
targeted weighted average annual price increase rate ("Targeted Weighted Air
Price Increase Rate"). The Minimum Weighted Air Segment Growth Rate and the
Targeted Weighted Air Segment Growth Rate are 4.1% and 6.1%, respectively. The
Minimum Weighted Air Price Increase Rate and the Targeted Weighted Air Price
Increase Rate are 2.0% and 4.0%, respectively.
(c) The Service Provider shall receive payments,
calculated and paid in accordance with Sections 3.02 through 3.06 below, which
reflect the approximate economic value of the achievement of the first fifty
percent of the range between (i) the Minimum Weighted Air Segment Growth Rate
and the Targeted Weighted Air Segment Growth Rate
<PAGE> 5
5
and (ii) the Minimum Weighted Air Price Increase Rate and the Targeted Weighted
Air Price Increase Rate, respectively. Galileo shall retain the approximate
economic value of the achievement of the second fifty percent of such ranges as
well as any economic value from the achievement of a Weighted Air Segment
Growth Rate or a Weighted Air Price Increase Rate which is in excess of such
ranges.
SECTION 3.02. Calculation of Segment Growth Payment. (a)
The "Segment Growth Payment" shall be calculated in accordance with the
provisions of this Section 3.02:
(i) Within 60 days of the fifth anniversary hereof (or, in the
event Section 3.04(c) is applicable, within 60 days of the
date that is six months after the fifth anniversary hereof),
Galileo shall calculate in accordance with its customary
practices (A) the total number of Segments recorded in the
Traviswiss Territory for the period of twelve months ending on
the date hereof (the "Pre-Closing Year") and for the period of
twelve months ending on each of the first, second, third,
fourth and fifth anniversaries of the date hereof (the
"Post-Closing Years"), and (B) the percentage increase or
decrease in the total number of such Segments for each of the
Post-Closing Years in comparison to the immediately preceding
Pre-Closing Year or Post-Closing Year, as applicable.
(ii) Following the calculations described in clause (i) above,
Galileo shall then weight such percentage increases or
decreases by multiplying such percentage increases or
decreases by the corresponding Weighting Factors set forth on
Exhibit 1 hereto. The sum of the resulting percentages shall
constitute the Weighted Air Segment Growth Rate.
(b) If the Weighted Air Segment Growth Rate is less than or equal
to 4.1%, no Segment Growth Payment shall be made.
(c) If the Weighted Air Segment Growth Rate is greater than or
equal to 5.1%, the Segment Growth Payment shall be $1,300,000.
(d) If the Weighted Air Segment Growth Rate is greater than 4.1%
but less than 5.1%, the Segment Growth Payment shall be an amount equal to
(i) $1,300,000 multiplied by (ii) a fraction, the numerator of which shall
be (A) the Weighted Air Segment Growth Rate minus (B) 4.1%, and the
denominator of which shall be 0.01.
<PAGE> 6
6
SECTION 3.03. Calculation of Air Booking Price Increases.
(a) Within 60 days of the fifth anniversary hereof (or, in the event Section
3.04(c) is applicable, within 60 days of the date that is six months after the
fifth anniversary hereof), Galileo shall calculate the "Price Increase Payment"
in accordance with the provisions of this Section 3.03:
(i) Galileo shall calculate the total number of
transactions, by Transaction Category, associated
with the total number of Segments recorded in the
Traviswiss Territory for the Pre-Closing Year.
(ii) Galileo shall then calculate the aggregate revenue in
the Traviswiss Territory for the Pre-Closing Year by
multiplying the Transaction Category Weighted Average
Price for each Transaction Category for the
Pre-Closing Year by the total number of transactions,
by Transaction Category, recorded in the Traviswiss
Territory in the Pre-Closing Year.
(iii) Galileo shall then determine what the total revenue
in the Traviswiss Territory would have been in each
of the Post-Closing Years on a comparative basis to
the Pre-Closing Year by multiplying the Transaction
Category Weighted Average Price for each Transaction
Category for such Post-Closing Year by the total
number of transactions, by Transaction Category,
recorded in the Traviswiss Territory in the
Pre-Closing Year.
(iv) Galileo shall then calculate the percentage increase
or decrease in the aggregate revenue in the
Traviswiss Territory in each of the Post-Closing
Years by taking the results of the calculations
described in clause (iii) above for each of the
Post-Closing Years and dividing them by the results
of the calculations described in clauses (ii) and
(iii) above, as applicable, with respect to the
immediately preceding years, and then subtracting one
from the resulting numbers to derive a percentage
increase or decrease.
(v) Galileo shall weight the percentage price increases
or decreases calculated in accordance with clause
(iv) by multiplying such percentage increases or
decreases by the corresponding Weighting Factors set
forth on Exhibit 1 hereto. The sum of
<PAGE> 7
7
the resulting percentages shall constitute the
Weighted Air Price Increase Rate.
(b) If the Weighted Air Price Increase Rate is less than
or equal to 2.0%, there shall be no Price Increase Payment.
(c) If the Weighted Air Price Increase Rate is greater
than or equal to 3.0%, the Price Increase Payment shall be $5,500,000;
(d) If the Weighted Air Price Increase Rate is greater
than 2.0% but less than 3.0%, the Price Increase Payment shall be an amount
equal to (i) $5,500,000 multiplied by (ii) a fraction, the numerator of which
shall be (A) the Weighted Air Price Increase Rate minus (B) 2.0%, and the
denominator of which shall be 0.01.
SECTION 3.04. Grace Period for Certain Price Increases. (a)
The provisions of this Section 3.04 shall apply if the published price for any
Transaction Category in the Traviswiss Territory does not increase during the
course of the first six months of the fifth Post-Closing Year.
(b) With regard to any Transaction Category whose
published price in the Traviswiss Territory does not increase during the course
of the first six months of the fifth Post-Closing Year, but whose published
price does increase on or after the first day of the seventh month of the fifth
Post-Closing Year but prior to the first day of the first month of the sixth
Post-Closing Year, then for purposes of Section 3.03(a)(iii) and the definition
of the term Transaction Category Weighted Average Price, such price increase
shall be deemed to have occurred with regard to such Transaction Category on
the first day of the seventh month of the fifth Post-Closing Year.
(c) If the published price for any Transaction Category
does not increase in the Traviswiss Territory during the course of the fifth
Post-Closing Year, then the calculations set forth in Sections 3.02, 3.03, 3.05
and 3.06 shall not be completed until 60 days (or, in the case of Section 3.06,
65 days) after the date that is six months after the fifth anniversary hereof.
If there is such a price increase as to such Transaction Category in the
Traviswiss Territory during the six month period following the fifth
anniversary hereof, then for purposes of Section 3.03(a)(iii) and the
definition of the term Transaction Category Weighted Average Price, such price
increase shall be deemed to have occurred with regard to such Transaction
Category on the date that is six months prior to the date on which such price
increase actually occurred.
<PAGE> 8
8
(d) All other calculations set forth in this Agreement
with regard to Transaction Categories whose published prices in the Traviswiss
Territory do increase during the first six months of the fifth Post-Closing
Year shall be unaffected by the provisions of this Section 3.04.
SECTION 3.05. Calculation of Adjusted Services Payment. The
sum of (i) the Segment Growth Payment calculated in accordance with Section
3.02 and (ii) the Price Increase Payment calculated in accordance with Sections
3.03 and 3.04 shall constitute the "Total Services Payment". The Total
Services Payment shall be multiplied by the Cost of Carry Factor, and the
product of such calculation shall constitute the "Adjusted Services Payment".
SECTION 3.06. Interim Statements; Adjusted Services Payment
Statement; Disputes; Payment of Adjusted Services Payment. (a) Within 60 days
of each of the first four anniversaries hereof, Galileo shall calculate, and
shall deliver to the Service Provider (for informational purposes only), a
written statement (each such statement, an "Interim Statement") setting forth
Galileo's preliminary calculation of the Weighted Air Segment Growth Rate for
the preceding year and the Weighted Air Price Increase Rate as of the end of
the preceding year. In no event shall the Service Provider be entitled to
dispute any of the calculations set forth on an Interim Statement.
(b) Within 65 days of the fifth anniversary hereof (or,
in the event Section 3.04(c) is applicable, within 65 days of the date that is
six months after the fifth anniversary hereof), Galileo shall deliver to the
Service Provider a written statement (the "Adjusted Services Payment
Statement") setting forth Galileo's calculation of the Adjusted Services
Payment.
(c) Disputes. (i) Subject to clause (ii) of this
Section 3.06(c), the Adjusted Services Payment Statement delivered by Galileo
to the Service Provider shall be deemed to be and shall be final, binding and
conclusive on the parties hereto.
(ii) The Service Provider may dispute any amounts
reflected on the Adjusted Services Payment Statement to the extent
such disputed amounts affect the calculation of the Adjusted Services
Payment; provided, however, that the Service Provider shall have
notified Galileo in writing of each disputed item, specifying the
amount thereof in dispute and setting forth, in reasonable detail, the
basis for such dispute, within 15 business days of Galileo's delivery
of the Adjusted Services Payment Statement to the Service Provider.
Galileo and the Service Provider shall attempt in good faith to
resolve the matter in dispute. If Galileo and the Service Provider,
notwithstanding such good faith effort, shall have failed to resolve
the matter or matters in dispute within 15
<PAGE> 9
9
business days after receipt by Galileo of the Service Provider's
written notice of dispute, Galileo and the Service Provider shall
submit the items remaining in dispute for resolution to an independent
accounting firm of international reputation mutually acceptable to,
and independent of, Galileo and the Service Provider (such accounting
firm being referred to herein as the "Independent Accounting Firm "),
which shall, within 45 business days after such submission, determine
and report to Galileo and the Service Provider upon such remaining
disputed items, and such report shall be final, binding and conclusive
on the parties hereto. The fees and disbursements of the Independent
Accounting Firm shall be allocated among Galileo and the Service
Provider in the same proportion that the aggregate amount of such
disputed items so submitted to the Independent Accounting Firm that is
unsuccessfully disputed by Galileo, on the one hand, or the Service
Provider, on the other hand (as finally determined by the Independent
Accounting Firm), bears to the total amount of disputed items so
submitted.
(iii) In acting under this Agreement, the Independent
Accounting Firm shall be entitled to the privileges and immunities of
an arbitrator.
(d) Cooperation. For purposes of complying with the
terms set forth herein, each party shall within the limits of possible
obligations to maintain secrecy according to the requirements of applicable
corporate or other law (i) co-operate with and promptly make available to the
other party and their respective auditors and representatives, all information,
records, data, auditors' working papers, and access to its personnel, (ii)
permit access to its facilities and (iii) permit the other party and its
auditors and representatives to make copies of all information, records, data
and auditor's working papers, in each case as may be reasonably required in
connection with the analysis of the Adjusted Services Payment Statement, the
calculation of the Adjusted Services Payment and the resolution of any
dispute(s) thereunder.
(e) Adjusted Services Payment. Within 5 business days of
the earliest of (i) the date that is 15 business days after the delivery of the
Adjusted Services Payment Statement pursuant to the provisions set forth in
Section 3.06(b) hereof if such Adjusted Services Payment Statement is not
disputed by the Service Provider, (ii) the resolution of all disagreements with
respect to the Adjusted Services Payment Statement directly by Galileo and the
Service Provider and (iii) the issuance of the report of the Independent
Accounting Firm, Galileo shall pay to the Service Provider in immediately
available funds to an account designated in writing by the Service Provider not
later than two business days prior to the date of such payment the Adjusted
Services Payment, if any. For purposes of such payment, the Adjusted Services
Payment shall be recalculated to give effect to the Cost of Carry Factor for
<PAGE> 10
10
the period between the delivery of the Adjusted Services Payment Statement and
the actual date of payment.
SECTION 3.07. Change in Galileo Pricing Methodology. In the
event that, between the date hereof and the fifth anniversary hereof, there is
a fundamental change in Galileo's pricing methodology such that the provisions
of this Article III cannot be implemented in the manner currently intended by
the parties hereto, they shall negotiate in good faith with a view to amending
the provisions of this Article III in order to reflect such fundamental change.
In the absence of any agreement among the parties with regard to such
amendments, the provisions of this Article III shall be applied in a manner
designed to effectuate, to the greatest possible extent, the parties' original
intentions.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Representations and Warranties. Each of the
parties hereto represents and warrants that this Agreement has been duly
authorized, executed and delivered by such party and constitutes a legal, valid
and binding obligation of such party, enforceable against it in accordance with
the terms of this Agreement.
SECTION 4.02. Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given (and shall be deemed to have been duly given upon receipt) by delivery in
person, by cable, facsimile, telegram or telex or by registered or certified
mail (postage prepaid, return receipt requested) or by a nationally recognized
overnight courier service to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given
in accordance with this Section 4.02):
(i) if to Galileo:
Galileo International, L.L.C.
9700 West Higgins Road
Rosemont, Illinois 60018, USA
Facsimile: (847) 518-4915
Attention: General Counsel
<PAGE> 11
11
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile: (212) 848-7179
Attention: Clare O'Brien, Esq.
(ii) if to Service Provider:
Swissair Swiss Air Transport Ltd.
CH-8058
Zurich Airport
Switzerland
Facsimile: 41-1-812-9178
Attention: Corporate Finance, DF
SECTION 4.03. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated by this Agreement
are not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
fullest extent possible.
SECTION 4.04. Term of Agreement. The provisions of this
Agreement (other than Articles I and IV) shall terminate and be of no further
force and effect, automatically and without any required actions of the parties
hereto, on the fifth anniversary of the date hereof; provided, however, that
(i) the provisions of Article III shall terminate on the date that all payments
to be made thereunder are made (or the date on which the parties agree that no
such payment is required to be made), and (ii) the parties may extend the
provisions of any other provision of this Agreement beyond the fifth
anniversary hereof pursuant to an instrument in writing signed by all of the
parties hereto.
SECTION 4.05. Default; Cure Period; Remedies. (a) Upon a
breach of any of the covenants set forth in this Agreement by the Service
Provider, the
<PAGE> 12
12
Service Provider shall use its reasonable efforts to cure such breach within 30
days of receipt of written notice of such breach from Galileo.
(b) Upon a breach of any of the covenants set forth in
this Agreement by Galileo, Galileo shall use its reasonable efforts to cure
such breach within 30 days of receipt of written notice of such breach from the
Service Provider.
(c) Galileo acknowledges that its sole and exclusive
remedy for the breach by the Service Provider of its obligations pursuant to
Article II (other than a breach resulting from the wilful misconduct or gross
negligence of the Service Provider) shall be specific performance.
SECTION 4.06. Confidentiality. Each of the parties hereto
shall keep confidential any information with respect to any of the parties
hereto provided in connection with this Agreement that is not otherwise
generally available to the public, except as may be required by applicable law.
SECTION 4.07. Entire Agreement; Assignment. This Agreement
(including the Exhibits, which are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein) constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise.
SECTION 4.08. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
SECTION 4.09. Governing Law. This Agreement shall be
governed by the laws of the State of New York, excluding (to the greatest
extent permissible by law) any rule of law that would cause the application of
the laws of any jurisdiction other than the State of New York.
SECTION 4.10. Arbitration. (a) Subject to Section 4.10(b),
any dispute arising between the parties hereto involving the subject matters
covered by this Agreement shall be submitted to arbitration under this Section
4.10. Any party asserting a breach of this Agreement by the other party shall
notify the other party of such alleged breach (a "Dispute Notice") and the
parties shall attempt to resolve such dispute amicably and if they shall fail
to resolve it within thirty (30) days of the date
<PAGE> 13
13
of the Dispute Notice, either party may notify the other party that it wishes
to commence an arbitration proceeding under this Section 4.10 (an "Arbitration
Request"). In any arbitration proceeding the party commencing the arbitration
(the "Petitioner") shall include in the Arbitration Request (a) a statement of
the facts constituting the alleged breach or dispute, (b) a written statement
of position ("Statement") regarding the dispute and (c) the name of an elector
designated by it. The Statement shall state the facts and arguments in support
of the position taken by the party submitting such Statement and shall detail
that party's proposed solution and relief sought (if any). Copies of any
Arbitration Request shall be furnished at the same time to the other party
hereto. The party with whom the Petitioner has its dispute (the "Respondent")
shall within five (5) Business Days after the date of the Arbitration Request
designate a second elector by notice to the Petitioner (copies of which shall
be furnished to the other party), but if it shall fail to do so within such
period the Petitioner may designate an elector on Respondent's behalf. The
electors chosen by the Petitioner and the Respondent shall attempt to agree
upon an arbitrator (the "Arbitrator"), but if they are unable to do so within
twenty (20) Business Days after the designation of the second elector, then
either elector thereafter may apply to the American Arbitration Association
(the "Association") for the selection of the Arbitrator in accordance with the
Commercial Arbitration Rules of such Association. The Arbitrator so selected
shall have full power to decide any dispute referred to in this Section 4.10.
The arbitration proceedings shall be conducted in the English language, and the
place of arbitration and the making of the Award (as defined below) shall be
the City of New York. The UNCITRAL rules of commercial arbitration shall apply
to any arbitration commenced pursuant to this Section 4.10, as modified by the
following procedure:
(i) Within five (5) Business Days of the selection of the
Arbitrator (the "Commencement Date"), the Respondent shall deliver its
Statement regarding the dispute to the Arbitrator and to the
Petitioner.
(ii) Within fifteen (15) Business Days from the
Commencement Date, each of the Petitioner and Respondent shall deliver
to the Arbitrator and to the other party, a response (" Response") to
the other party's Statement setting forth opposing facts and arguments
and limited in length to ten (10) typed, single spaced pages
(excluding any evidentiary exhibits included therein).
(iii) Within twenty (20) Business Days from the
Commencement Date, each of the Petitioner and the Respondent may
deliver to the Arbitrator and to the other party, a reply to the
Response limited to setting forth facts and arguments in rebuttal to
the Statement and Response of the other party and
<PAGE> 14
14
limited in length to five (5) typed, single spaced pages (excluding
any evidentiary exhibits included therein).
(iv) Within twenty-five (25) Business Days from the
Commencement Date, each of the Petitioner and Respondent shall present
an oral summation of its position to the Arbitrator in the presence of
the other party in accordance with such rules of procedure including,
without limitation, length of presentation and right of
cross-examination, as the Arbitrator shall determine in writing and
deliver to the parties not less than three (3) Business Days prior to
such hearing; provided, however, that such hearing shall not exceed
eight (8) hours in total and may not be adjourned except for
extraordinary circumstances beyond the control of the parties.
(v) The Arbitrator shall either issue his decision and
award ("Award") or request a further meeting of the parties within
fifteen (15) days of the hearing.
(vi) Any such further meeting of the parties shall take
place within five (5) Business Days of the request therefor and shall
be conducted as determined by the Arbitrator. The Arbitrator shall
issue his Award no later than fifteen (15) days after any such further
meeting of the parties.
(vii) The Award shall be in writing and shall be limited to
a decision either completely in favor of Petitioner's request for
relief or completely in favor of Respondent's request for relief. The
Award shall be final and binding upon the parties hereto and judgment
may be entered thereon in any court of competent jurisdiction and the
costs and expenses of such arbitration (and of enforcing any Award),
including attorneys' fees, shall be borne by the party losing such
arbitration.
(viii) In the event that the Arbitrator fails to render his
Award within the time limits contained in Sections 4.10(a)(v) or (vi),
the Arbitrator shall, nonetheless, retain jurisdiction over the
dispute for a reasonable period of time.
(b) This Section 4.10 shall in no way affect the right of
any party to seek such interim relief, and only such relief, as may be required
to maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
SECTION 4.11. Value Added Tax. To the extent any payments to
be made by Galileo to the Service Provider hereunder are subject to value added
tax
<PAGE> 15
15
("VAT"), (i) such payments shall be deemed to be inclusive of the applicable
VAT, and (ii) Galileo shall use its reasonable efforts to obtain a refund of
such VAT in accordance with applicable law and hereby assigns its right to any
such refund to the Service Provider.
SECTION 4.12. Headings. The descriptive headings contained
in this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 4.13. Counterparts. This Agreement may be executed
and delivered (including by facsimile transmission) in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed and delivered shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE> 16
16
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
GALILEO INTERNATIONAL, L.L.C.
By: /s/ Babetta R. Gray
---------------------------------
Name: Babetta R. Gray
Title: Senior Vice President,
Legal and General Counsel
SWISSAIR SWISS AIR TRANSPORT LTD.
By: /s/ Philippe Bruggisser
---------------------------------
Name: Philippe Bruggisser
Title: President and CEO
<PAGE> 17
EXHIBIT 1
<TABLE>
<CAPTION>
Weighting Factors
-----------------
Post-Closing Year Weighting
----------------- ---------
<S> <C>
1 24%
2 22%
3 20%
4 18%
5 16%
</TABLE>
<PAGE> 1
EXHIBIT 10.5
CONFORMED COPY
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE SYMBOL "[*]" HAS BEEN INSERTED
IN PLACE OF THE PORTIONS SO OMITTED.
AMENDED AND RESTATED NON-COMPETITION AGREEMENT
dated as of July 30, 1997
among
GALILEO INTERNATIONAL, INC.,
GALILEO INTERNATIONAL, L.L.C.,
and
UNITED AIR LINES, INC.,
UAL CORPORATION,
COVIA LLC,
AIR WISCONSIN, INC.
and
AIR WIS SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3. Additional Permitted Marketing and Distribution of Owner-
Developed Products and Customized Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4. Ethical Wall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6. Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7. Airline Affiliate Review Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 8. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 9. Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10. Rights and Remedies Upon Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 11. Severability of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 12. Blue-Penciling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 13. Attorneys' Fees and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 14. Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 15. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 17. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 18. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 19. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 20. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 21. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 3
AMENDED AND RESTATED
NON-COMPETITION AGREEMENT
AMENDED AND RESTATED NON-COMPETITION AGREEMENT (the
"Agreement"), dated as of July 30, 1997, by and among Galileo International,
Inc., a Delaware corporation ("Galileo, Inc."), Galileo International, L.L.C.,
a Delaware limited liability company ("Galileo, L.L.C.", and, together with
Galileo, Inc., "Galileo"), Covia LLC, a Delaware limited liability company of
which United Air Lines, Inc. is the sole member ("Covia" and the "Group
Member-Owner"), UAL Corporation, a Delaware corporation ("UAL" and the
"Ultimate Parent Entity"), United Air Lines, Inc., a Delaware corporation
("United" and an "Air Carrier Affiliate"), Air Wisconsin, Inc., a Delaware
corporation ("Air Wisconsin" and an "Air Carrier Affiliate") and Air Wis
Services, Inc., a Delaware corporation ("Air Wis" and an "Air Carrier
Affiliate").
WHEREAS, the Group and each Group Member acknowledges
that the scope of the Core Business of Galileo and its subsidiaries is as
defined in Section 1 hereof;
WHEREAS, certain Group Members may have access to the
trade secrets of, and confidential information concerning, the Core Business
which are not available to the public;
WHEREAS, the agreements and covenants contained in
this Agreement are essential to protect the value of the Core Business of
Galileo;
WHEREAS, some or all of the Group Members were
previously parties to a Non-Competition Agreement, dated as of September 16,
1993 (the "Original Non-Competition Agreement"), among some or all of the Group
Members and Galileo International Partnership, a Delaware general partnership
(the "Partnership");
WHEREAS, Galileo, L.L.C., a wholly owned subsidiary
of Galileo, Inc., is the successor in interest by merger (the "Merger") to all
of the Partnership's rights and obligations under the Original Non-Competition
Agreement;
WHEREAS, as a result of the Merger, the Group
Member-Owner's former partnership interest in the Partnership has been
converted into its Galileo Interest;
WHEREAS, the Group Members and Galileo wish to amend
and restate the terms of the Original Non-Competition Agreement as set forth
herein;
<PAGE> 4
2
WHEREAS, the Group Member-Owner acknowledges that its
agreements and covenants set forth herein are an integral part of the
arrangements between itself and its Affiliates, on the one hand, and Galileo
and its Affiliates, on the other hand, and that but for such agreements and
covenants, Galileo would not enter into the arrangements relating to the Group
Member-Owner's Galileo Interest;
NOW, THEREFORE, in consideration of the mutual
covenants and undertakings contained herein, and subject to and on the terms
and conditions herein set forth, the parties agree as follows:
SECTION 1. Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, with respect to any entity at any
time, a Person (i) that at such time owns or controls, directly or indirectly,
50% or more of the capital stock (or other ownership interest, if not a
corporation) of such entity ordinarily having voting rights, (ii) 50% or more
of whose capital stock (or other ownership interest, if not a corporation)
ordinarily having voting rights at such time is owned or controlled, directly
or indirectly, by such entity or (iii) 50% or more of whose capital stock (or
other ownership interest, if not a corporation) ordinarily having voting rights
at such time is owned or controlled, directly or indirectly, by another Person
that at such time owns or controls, directly or indirectly, 50% or more of the
capital stock (or other ownership interest, if not a corporation) of such
entity ordinarily having voting rights; provided, however, that Galileo shall
be deemed not to be an "Affiliate" of any Owner or any Affiliate thereof; and
provided, further, that (i) no Owner shall be deemed to be an "Affiliate" of
any other Owner or any Affiliate thereof solely by virtue of its Galileo
Interest; and (ii) Instituto Per La Riconstruzione Industriale S.p.A., the
Government of the Republic of Ireland and any ministry thereof, the Republic of
Austria and its agencies, the Republic of Greece and its agencies, the Republic
of Portugal and its agencies, and the Government of The Netherlands or any
political subdivision or instrumentality thereof shall not be deemed to be an
"Affiliate" of any Person.
"Air Carrier" means a Person that directly or
indirectly or by lease provides commercial passenger air transportation.
"Air Carrier Competitor" means, with respect to the
Group Member-Owner's Principal Air Carrier Affiliate, an Air Carrier that such
Group Member-Owner's Principal Air Carrier Affiliate reasonably believes is a
significant competitor thereof either overall or in a particular market
segment, provided that in seeking relief pursuant to Section 7 with respect to
such Air Carrier Competitor the petitioner shall specify whether they are
seeking specific market relief or general relief and notwithstanding such
request, the AARB, if finding in favor of the petitioner, may grant either
specific market or general relief as it deems appropriate.
<PAGE> 5
3
"Board" means the Board of Directors of Galileo, Inc.
"Business Day" means any day except a Saturday,
Sunday, or other day on which commercial banks in Chicago, Illinois or London,
England are authorized by law to close.
"Computer Services Agreement" means the Amended and
Restated Computer Services Agreement, dated as of July 30, 1997 entered into
between Galileo, L.L.C. and United.
"Core Business" means the provision of Reservations
Services (excluding Cargo Services) to Neutral Travel Providers.
"CRS Company" means any of SABRE, Amadeus/System One,
Abacus, Axxess, Infini, Worldspan, or any successor in interest thereto, or any
other Person other than Galileo that has earned at least 50% of its revenues in
any of its preceding three fiscal years, or such shorter time that it has been
in business, from the Core Business.
"CRS Owner" means any Person, other than a Group
Member with respect to its direct or indirect ownership interest in Galileo,
that is not a CRS Company and either, (a) beneficially owns, directly or
indirectly, an interest in a CRS Company, or (b) has earned more than 5% but
less than 50% of its revenues in any of its preceding three fiscal years, or
such shorter time that it has been in business, from the Core Business.
"Director" means a director of Galileo, Inc.
"Distributor" means a Person which has entered into,
or enters into, a Distributor Agreement with Galileo.
"Distributor Agreement" means any distributor
agreement entered into between Galileo and any Person.
"Effective Date" means the effective date of the IPO.
"Galileo Interest" means an Owner's ownership
interest in the capital stock of Galileo.
"Group" means the Group Member-Owner signatory
hereto, the Group Member-Owner Distributor signatory hereto, the Ultimate
Parent Entity of such Group Member-Owner, the Principal Air Carrier Affiliate,
and any other Air Carrier Affiliate of any of the foregoing and the Affiliates
of any of them (each individually a "Group Member").
<PAGE> 6
4
"Internal Reservations System" means the central
processing hardware utilized by a Group Member-Owner's Air Carrier Affiliate
(including hardware operated on behalf of such Air Carrier Affiliate by a third
party) to provide its Internal Reservations Services.
"National Distributor Coordinating Committee" means
the committee comprised of one individual from each Group Member- Owner
Distributor, if any, which is a party to a Distribution Sales and Service
Agreement with Galileo, which individual shall be appointed by such Group
Member-Owner Distributor.
"National Product" means a Reservations Service,
Accounting Service, or Commercial Service (i) that is not otherwise available
from Galileo and (ii) that is developed or licensed at a Group Member's cost.
National Products will include products not otherwise available from Galileo
that are developed as "National Products" by Galileo in accordance with the
terms of the applicable Distributor Agreement between Galileo and the Group
Member-Owner Distributor.
"Owner" means any signatory hereto or to any other
Non-Competition Agreement with Galileo that holds any shares of capital stock
of Galileo.
"Preferred Stock" means the Preferred Stock, par
value $0.01 per share, of Galileo, Inc., in Series A through G.
"Principal Air Carrier Affiliate" means United;
provided, however, that for purposes of Section 7(c) only, "Principal Air
Carrier Affiliate" means United, Air Wisconsin and Air Wis.
"Sales Representation Agreement" means any sales
representation agreement entered into between Galileo, L.L.C. and any Group
Member.
"Significant Competitor" means (i) any entity that,
within the immediately preceding six-month period, accounted for more than 10%
of direct access product bookings or ticketing within any of the billing
territories established by the Galileo International Global Airline
Distribution Agreement, as substantiated on the basis of independent data
provided by ARC or BSPs or marketing or billing information provided by other
Persons, Galileo to provide any such information which is in its possession and
it is legally permitted to provide, or (ii) if the measure of an entity's
market share cannot be established after consultation with Galileo and exchange
between Group Member and Galileo of information regarding the entity's market
share, any entity that a Group Member Owner's Principal Air Carrier Affiliate
reasonably believes is a Significant Competitor of Galileo.
Other capitalized terms used in this Agreement and
not defined in this Section 1 shall have the meanings ascribed to them
elsewhere in this Agreement or in Annex I
<PAGE> 7
5
hereto; provided, however, that in the event of any conflict in the definitions
of such terms, the definitions in this Section 1 and elsewhere in this
Agreement shall control.
SECTION 2. Non-Competition. (a) Except through the
Group Member-Owner's Galileo Interest, or as otherwise provided in this
Agreement or pursuant to a Distributor Agreement or a Sales Representation
Agreement, until this Agreement is terminated, neither the Group nor any Group
Member shall engage in the Core Business, own an interest in a CRS Company, be
a CRS Owner or own an interest in a CRS Owner.
(b) A Group Member may acquire and own an
interest that represents no more than 5% of the voting interests in a CRS Owner
or a CRS Owner may acquire and own an interest that represents no more than 5%
of the voting interests in a Group Member (either a "De Minimis Interest");
provided, that in either case the Person acquiring such De Minimis Interest
does not have a representative on the board of directors (or similar governing
body, if not a corporation) of the CRS Owner or Group Member, as the case may
be.
(c) A Group Member may acquire and own an
interest that represents no more than 25% of the voting interests in a CRS
Owner or a CRS Owner may acquire and own an interest that represents no more
than 25% of the voting interests in a Group Member (either, a "Minor Interest")
so long as the Group complies with the provisions of Section 4 below, except
with respect to a De Minimis Interest, for which compliance with Section 4 is
not required. A Group Member shall be permitted to acquire and own an interest
that represents more than 25% of the voting interests in a CRS Owner and a CRS
Owner shall be permitted to acquire and own an interest that represents more
than 25% of the voting interests in a Group Member (either, a "Major Interest")
so long as the Group Member complies with the provisions of Section 5 below.
(d) Notwithstanding the foregoing, nothing herein
shall prohibit a Group Member from:
(i) providing Internal Airline Services or
Internal Reservations Services for itself or for another
Air Carrier; to the extent that a Group Member provides
Internal Reservations Services to an Air Carrier that is
not a Group Member, use of the Internal Reservations
Services by such Air Carrier shall not be restricted by
this Agreement and the Group and the Group Member providing
such services shall be deemed not to have violated this
Agreement as a result of such use; provided, however, the
Group and the Group Member providing such services shall be
deemed to have violated this Agreement if the Group
Member's conduct is such that the probable result thereof
would be material competition with the Core Business;
(ii) providing Cargo Services to any Person;
<PAGE> 8
6
(iii) providing Reservations Services to Other
Customers, either through its Internal Reservations System
or, at its direction, through the Computer System and
marketing such services directly to Other Customers;
provided, that such Group Member shall take all reasonable
steps necessary to ensure that such services are not used
by Neutral Travel Providers, other than for their
Non-Neutral Travel Business (the "Ancillary Use
Restrictions");
(iv) providing services (including Reservations
Services) to Other Customers using Direct Access Products,
either through its Internal Reservations System, a Direct
Access Distribution Channel or, at its direction, through
the Computer System, or otherwise, and marketing such
Direct Access Products directly to Other Customers;
provided, that, such Group Member shall take all reasonable
steps necessary to ensure that the Ancillary Use
Restrictions are complied with;
(v) providing Owner-Developed Products to any of
its Other Customers;
(vi) competing with Galileo or any other Person
outside the Core Business;
(vii) participating, as a Vendor, in competing
computer reservations systems owned or operated by one or
more Vendors or Vendor Affiliates ("Competing CRS Systems")
or in such systems owned or operated by Persons not Vendors
or Vendor Affiliates, such as Prodigy, Istel, Videotel,
Minitel, Smart Phone, Microsoft Network and Compuserve,
that are not otherwise Competing CRS Systems ("Other
Systems"); provided that, except as provided in subsections
(iv), (viii) or (xiii) of this Section 2(d), no Group
Member may assist in the marketing of a Competing CRS
System to any Person or in the marketing of an Other System
to Persons other than individuals;
(viii) promoting its airline products and services
distributed through any distribution channel (including a
Competing CRS System), so long as any such promotion does
not, in the view of a reasonable person, refer negatively
to Galileo or its products, either implicitly or
explicitly; provided that the mere participation of such
Group Member in any such distribution channel shall not be
deemed in and of itself to refer negatively to Galileo or
its products; provided further that in the event the
promotion in accordance with this clause (viii) involves
the promotion of the product of a Competing CRS System and
Galileo offers a comparable product in such distribution
channel (in functional, financial and commercial terms and
with due regard to prevailing market conditions) to the
product which a Group Member is promoting through such
distribution channel, then such Group Member shall promote
Galileo's product in a manner similar to, and to the same
extent that, such Group Member promotes the distribution of
such comparable product through any such distribution
channel, except to the extent that promotion of Galileo's
product would be commercially unreasonable or not
proportionate to the breadth and depth of Galileo's
<PAGE> 9
7
product; provided further that, for the purposes of this
subsection (viii), a Galileo product which cannot be biased
in favor of the promoting Group Member's Principal Air
Carrier Affiliate shall not be deemed to be comparable to a
product of a Galileo competitor which may be biased in such
manner, it being understood that no Group Member will be
required to promote a Galileo product that is biased
exclusively in favor of one or more non-Group Member Air
Carriers.
(ix) providing National Products to Neutral Travel
Providers either through its Internal Reservations System
or, at its direction, through the Computer System, but only
until such time as Galileo develops a "Replacement Product"
as defined in the Distributor Agreement;
(x) in the case of the Group Member-Owner
Distributor executing this Agreement, providing
Distribution Services or other products or services that
such Group Member-Owner Distributor determines are required
by its National Territory and that Galileo, after
consultation with such Group Member-Owner Distributor, has
elected not to provide, so long as the functionality
provided is compatible with and does not conflict with
Galileo's Distribution Services;
(xi) holding an interest in SITA or any other air
transportation industry cooperative organization that is
not a CRS Company or a CRS Owner, or having a
representative on the board of directors of any such
organization;
(xii) providing such services to such Persons as
may be mandated, from time to time, under applicable CRS
Rules; or
(xiii) marketing and distributing Owner-Developed
Products and Customized Products in accordance with the
provisions of Section 3 below.
(e) No Group Member shall refer to any Person
other than Galileo any business opportunity within the scope of the Core
Business.
SECTION 3. Additional Permitted Marketing and
Distribution of Owner-Developed Products and Customized Products. (a) A Group
Member may develop, market and distribute Owner-Developed Products and
Customized Products directly to any of its Other Customers other than through
Neutral Travel Providers, provided that the non-competition obligations of the
Group Members under Sections 2(a), (b) and (c) of this Agreement shall remain
in full force and effect. No Group Member, other than a Group Member providing
customer support and service to such Other Customers pursuant to paragraph 4 of
Appendix I of this Agreement, shall receive a booking fee split or any other
revenues from Galileo for any Owner-Developed Product or Customized Product
bookings, or any other direct access product bookings.
<PAGE> 10
8
(b) In addition to a Group Member's rights under
Section 3(a), nothing herein shall prohibit a Group Member from developing,
marketing and distributing Customized Products to corporate and consumer Other
Customers through Neutral Travel Providers and permitting Neutral Travel
Providers to support the use of such Customized Products by such Other
Customers, subject to Appendix I of this Agreement and the following:
(i) such Customized Products run only against a
System used by Galileo to provide Reservations Services to
Neutral Travel Providers and result in the payment of
applicable booking fees to Galileo;
(ii) all customization, when performed by or on
behalf of Galileo, and display services in respect of such
Customized Products are consistent with the provisions of
the Computer Services Agreement, or with such other terms
as Galileo and the Group Member agree upon; and
(iii) such Customized Products are distributed by
the Group Member in coordination with Galileo and the
distributor or Sales Representative, if any, for the
territory in which such Customized Products are used by, or
distributed through, a Neutral Travel Provider, whether any
such distributor is Galileo itself, a wholly owned
subsidiary of Galileo or a Person acting as a Distributor
pursuant to a Distributor Agreement, provided that nothing
herein will require such Group Member to use the services
of any of the aforementioned entities.
(c) In addition to a Group Member's rights under
Section 3(a), in the event that Galileo cannot or, for any reason, does not,
produce any Customized Products on commercially reasonable third party terms,
then a Group Member may develop, market and distribute Owner-Developed Products
to corporate and consumer Other Customers through Neutral Travel Providers in
lieu of Customized Products pursuant to Section 3(b) above, subject to the
applicable provisions of Appendix I hereof, and may permit Neutral Travel
Providers to support the use of those Owner-Developed Products by such Other
Customers, provided that the Group Member shall not develop, market or
distribute any such Owner-Developed Product unless it has given Galileo
reasonable prior written notice of the Group Member's intention to develop,
market and distribute such product.
(d) As required by applicable law and regulation,
Galileo may provide its direct access products and related services (which will
not be deemed to include Owner-Developed Products or Owner-purchased
customization features) to all participating carriers on non-discriminatory
terms.
<PAGE> 11
9
SECTION 4. Ethical Wall. (a) A Group Member or a
CRS Owner may acquire and own a Minor Interest so long as the Group is in
compliance with each of the following:
(i) No Group Member shall disclose any
Confidential Information to the CRS Owner, the CRS Company
owned by the CRS Owner (or their respective Affiliates) or
to any Group Member that might make such Confidential
Information available to the CRS Owner or the CRS Company
owned by the CRS Owner (or their respective Affiliates).
(ii) The Group shall have established and shall
strictly enforce internal administrative procedures (an
"Ethical Wall") to (x) maintain a complete segregation of
the operations and personnel of Galileo, on the one hand,
and the CRS Owner or the CRS Company owned by the CRS Owner
(or their respective Affiliates), on the other, and (y)
restrict the flow of Confidential Information from the
Group to the CRS Owner, the CRS Company owned by the CRS
Owner (or their respective Affiliates) or to any Group
Member that might make such Confidential Information
available to the CRS Owner or the CRS Company owned by the
CRS Owner (or their respective Affiliates).
(iii) Within 15 days of the date on which a Group
Member or CRS Owner has acquired a Minor Interest, and
annually thereafter, the Group shall deliver to Galileo a
valid, binding and irrevocable undertaking, reasonably
satisfactory in form and substance to Galileo, stating that
each Group Member will comply with the terms of this
Section 4 and setting forth the procedures to be utilized
by the various parties thereto.
(b) The procedures comprising an Ethical Wall
shall include, without limitation, the following: (i) preparation of a
detailed confidentiality memorandum approved by Galileo which shall be signed
periodically by each recipient of Confidential Information; (ii)
confidentiality legends on correspondence and memoranda; (iii) use of code
names to avoid disclosure of competitively sensitive information relating to
customers, supplier and vendors; (iv) telephone communications confidentiality
procedures; (v) restriction of internal communications to those persons
acknowledged by Galileo to have a demonstrated "need to know"; (vi) channeling
of Confidential Information through a designated individual approved in advance
by Galileo; (vii) prohibition against responding to outside inquiries
concerning the commercial aspects of the Core Business, which inquiries shall
be referred to Galileo; (viii) internal document control, including file
maintenance and document destruction; (ix) word processing and expense record
controls to assure confidentiality; and (x) appropriate acknowledgment and
periodic compliance certification procedures.
<PAGE> 12
10
(c) In the event that it is alleged by a majority
of the whole Board (excluding for purposes of determining the size of the Board
and the vote required to obtain a majority of the whole Board any Director or
Directors elected by any Group Member) that the Group or any Group Member has
not (x) established an adequate Ethical Wall or (y) strictly enforced such
Ethical Wall at any time (either, an "Ethical Wall Breach"), and the Group
Member-Owner disputes such allegation, such dispute shall be submitted to
arbitration pursuant to Section 9 hereof to determine whether such an Ethical
Wall Breach has occurred. If (i) the Group Member-Owner does not dispute such
allegation or (ii) the Arbitrator determines that the Group or any Group Member
has committed an Ethical Wall Breach, the Group shall comply with the
provisions of Section 5 below.
SECTION 5. Restrictions. (a) If a Group Member
shall be a CRS Owner, or any Group Member shall acquire or own a Major Interest
or shall have a Major Interest in itself held by a CRS Owner or shall have
committed an Ethical Wall Breach, Galileo and all other Owners will not provide
to the Group any Confidential Information and no Director elected by any Group
Member shall be permitted to attend any meeting of Galileo (including, without
limitation, meetings of the Board or any committee thereof) or to vote on any
matters before the Board or any committee thereof, and, in the case of the
Group Member-Owner Distributor, no representative of such Group Member-Owner
Distributor shall be permitted to attend any meeting of the National
Distributor Coordinating Committee, or any other committee or organization
formed by or for Distributors, for a period of 20 Business Days (the "Freeze
Period") commencing on the date of the event that triggered this Section 5 (the
"Trigger Date") and the Parties shall comply with the following procedures:
(i) within six (6) Business Days of the Trigger
Date, the Group Member-Owner shall submit a written plan
(the "Group's Plan") to Galileo detailing the procedures to
be taken by the Group and Galileo to ensure that the CRS
Owner and the CRS Company owned by the CRS Owner, and their
respective Affiliates, will not have access to any
Confidential Information or to any individual who has
access to any Confidential Information;
(ii) within six (6) Business Days of the receipt
of the Group's Plan, the Board shall meet (such meeting may
be held telephonically) to consider the Group's Plan, a
majority of the whole Board (excluding for purposes of
determining the size of the Board and the vote required to
obtain a majority of the whole Board any Director or
Directors elected by any Group Member) may accept the
Group's Plan or propose its own plan ("Galileo's Plan")
detailing the procedures to be taken by the Group and
Galileo to ensure that the CRS Owner and the CRS Company
owned by the CRS Owner, and their respective Affiliates,
will not have access to any Confidential Information or to
any individual who has access to any Confidential
Information; and
<PAGE> 13
11
(iii) if the Group's Plan is not approved pursuant
to subclause (ii) above, then within three (3) Business
Days of the approval of Galileo's Plan, the Group
Member-Owner shall notify Galileo whether it will accept
Galileo's Plan or whether it will submit the matter to
arbitration pursuant to Section 9 hereof; provided, that if
the Group Member-Owner elects to submit the matter to
arbitration the Freeze Period shall be extended until the
completion of the arbitration process.
(b) In formulating Galileo's Plan, the Board
shall consider, among others, the following factors: (i) the nature of the
relationship between the Group and the CRS Owner; (ii) the extent to which the
CRS Owner and the CRS Company compete with Galileo in the Core Business; (iii)
the independence of the Group's management from the management of the CRS Owner
and the CRS Company; (iv) the adequacy of the Ethical Wall to prevent
communication of the Confidential Information among commonly controlled
Persons; (v) the burden that Galileo's Plan will place on the Group; and (vi)
the costs and risks the Group's Plan will impose on Galileo.
(c) If a Group Member shall be a CRS Owner or if
the Major Interest purchased by or invested in a Group Member exceeds 50%,
Galileo's Plan may require divestiture, at such Group Member's option, of (A)
the Group Member's interest in the CRS Owner, (B) the CRS Owner's interest in
the Group Member, or (C) the Group Member's interest in Galileo. In the event
the Group Member elects not to divest its interest in the CRS Owner or elects
not to cause the divestiture of the CRS Owner's interest in the Group Member,
then promptly after the earlier of (i) the approval of Galileo's Plan or (ii)
the rendering of an Award confirming Galileo's Plan, any Director or Directors
elected by any of the Group Members shall immediately resign from the Board and
the Group Member shall begin an orderly divestiture of its shares of Galileo,
Inc. capital stock in a reasonable manner approved by the Board of Galileo,
Inc.
SECTION 6. Consent. Any Group Member, either alone
or in combination with any other Person, without violating any provision of
this Agreement or any duty of the Group to Galileo or any other Owner or any
Affiliate thereof and without incurring any obligation or liability to Galileo
or any other Owner or any Affiliate thereof, may engage in activities that
would otherwise be prohibited pursuant to Section 2 hereof if: (i) such Group
Member has given written notice to each member of the Board specifying the
nature of such activities, (ii) the Board, by a majority vote of those
Directors (excluding any director elected by any Group Member), specifically
authorizes such Group Member to engage in such activities, and (iii) the Group
Member actively begins to pursue such activities within 90 days of such
authorization.
SECTION 7. Airline Affiliate Review Board. (a) If
an Air Carrier Competitor of a Group Member-Owner's Principal Air Carrier
Affiliate engages in an activity that such Principal Air Carrier Affiliate is
prohibited from engaging in pursuant to
<PAGE> 14
12
Section 2 (other than any activity that is the subject of Sections 2(b) or (c)
or any activity permitted pursuant to Section 6) and such Principal Air Carrier
Affiliate (i) reasonably believes that it will be materially disadvantaged by
not being able to engage in such activity and (ii) either (A) is unlikely in
the reasonable judgment of such Principal Air Carrier Affiliate to receive
Board approval to engage in the activity pursuant to Section 6 because of the
activity's probable effect on the business of Galileo or (B) has sought and
failed to receive Board approval pursuant to Section 6, then such Principal Air
Carrier Affiliate (an "AARB Petitioner") may seek approval to engage in the
activity from Galileo's Airline Affiliate Review Board ("AARB") in accordance
with the provisions of this Section 7. Neither the Principal Air Carrier
Affiliate nor any of its Affiliates shall engage in such activity, whether
directly or indirectly, until the later of (x) ten Business Days after the date
on which the AARB reaches a decision permitting such activity or (y) in the
event Galileo appeals a decision by the AARB permitting such activity pursuant
to Section 7(l), the date on which an Award is rendered permitting such
activity.
(b) An AARB Petitioner may initiate a review by
the AARB of its requested activity by submitting a written petition (an "AARB
Petition") to Galileo. The AARB Petition shall specify the nature of the
activity to be engaged in, the nature of the relief sought, the likely impact
upon the Principal Air Carrier Affiliate of the denial of such relief, the
likely impact upon Galileo, in the view of the AARB Petitioner, of the granting
of such relief, and suggested terms for the granting of such relief. The AARB
Petitioner may set forth several alternative proposals for relief. Such
petition shall be limited in length to ten (10) typed, single spaced pages
(excluding any evidentiary exhibits included therein).
(c) The AARB shall be composed of one senior
executive from each Principal Air Carrier Affiliate whose Group Member-Owner is
entitled to elect one or more Directors as a result of its ownership of one or
more shares of Preferred Stock, provided that (i) the AARB shall not include
any representative of the AARB Petitioner or its Affiliates, (ii) no Board
member shall be a member of the AARB and (iii) the AARB shall not include any
representative of any Group Member that has terminated or is not in compliance
with its Non- Competition Agreement.
(d) Not later than 20 days after the receipt by
Galileo of an AARB Petition, each Owner entitled to appoint a representative to
the AARB pursuant to the provisions of Section 7(c) shall deliver to all
members of the Board written notice of the identity of the individual nominated
by such Owner to serve as its AARB representative (an "AARB Member").
(e) In the event the AARB would consist of an
even number of members and such number is greater than two, then the AARB shall
exclude the representative of the Owner selected in accordance with the lottery
procedures set forth in Exhibit A hereto. In the event that the AARB would
consist of only one member, or in the event that no AARB
<PAGE> 15
13
may be constituted in accordance with the foregoing procedures, the AARB
Petition shall be resolved in accordance with the appeal provisions set forth
in Section 7(l).
(f) Not later than 30 days after the receipt by
Galileo of an AARB Petition, Galileo may submit to the AARB Petitioner and to
each of the AARB Members a written reply to the AARB Petition (limited in
length to ten (10) typed, single spaced pages (excluding any evidentiary
exhibits included therein)), stating Galileo's position regarding the requested
relief (the "Galileo Response"). Any such Galileo Response shall specify
Galileo's views on the likely result of granting the requested relief, and
suggested terms, if any, for conditioning the granting of relief on certain
actions by the AARB Petitioner. The Galileo Response may propose that the
requested relief be denied and may also set forth several alternative
conditions to the granting of relief.
(g) Not later than 40 days after the receipt by
Galileo of an AARB Petition, the AARB shall convene, either in person or by
telephone or video conference. The AARB Petitioner and, in the event Galileo
submits a Galileo Response, a representative of Galileo shall each be permitted
to present its views in person to the AARB. The AARB shall reach a decision
within 40 days after the receipt of the Galileo Response.
(h) In reaching its determination, the AARB shall
consider, without limitation, in addition to the damage likely to result to the
Principal Air Carrier Affiliate, on the one hand, and Galileo, on the other
hand, whether allowance of such activity would be inconsistent with the
arrangements between such Principal Air Carrier Affiliate and Galileo,
including without limitation such Principal Air Carrier Affiliate's affiliation
with a Distributor, and its employment as a sales representative of Galileo.
The AARB shall not consider any information other than the information provided
in the AARB Petition and the AARB Petitioner's oral presentation, if any, and
in the Galileo Response and Galileo's oral presentation, if any.
(i) The AARB shall permit the requested activity
upon a Principal Air Carrier Affiliate's demonstration to the AARB's
satisfaction that the damage to such Principal Air Carrier Affiliate from
continued prohibition of such activity would be greater than the damage which
would be suffered by Galileo if such activity were allowed. Each of the AARB
Petitioner and Galileo shall be able to present its respective case for whether
damages should be measured based on revenues, contribution margin, profits or
cash flows (the "Financial Factor(s)") along with its position on the relevance
of such Financial Factor(s). Such damages will be calculated, in the case of
the Principal Air Carrier Affiliate, as the relevant Person's Financial Factor
loss by continued prohibition of the activity as a percentage of such Person's
annual Financial Factor and in the case of Galileo as the Financial Factor loss
by allowance of the activity as a percentage of Galileo's annual Financial
Factor. The AARB will choose and specify a single Financial Factor in
calculating
<PAGE> 16
14
the damages associated with the AARB Petitioner and Galileo giving due
consideration to each of the Financial Factor(s).
(j) The AARB shall have the right to condition
its allowance of any requested activity upon divestiture of the Group
Member-Owner's Galileo Interest, or of the termination of its right, if any, to
sell or otherwise distribute the products and services of Galileo, or upon the
modification or termination of any of the Group's other arrangements with
Galileo. The AARB may also condition its allowance of any requested activity
upon payment of compensation to Galileo. Upon acceptance of any such allowance
of an activity by the AARB, each Group Member shall be deemed to accept any
associated conditions imposed by the AARB and shall be deemed to waive any
right to appeal, delay, or otherwise contest the associated conditions while
pursuing the requested activity; provided, however, that upon rejection of any
such allowance of an activity by the AARB, nothing in this Section 7(j) will
prevent a Group Member from appealing any decision of the AARB.
(k) The AARB shall make its determination in
accordance with the vote of a majority of its members, or in the event the AARB
is composed of only two members, by a unanimous vote. The AARB shall issue a
written statement (the "AARB Determination") finding entirely in favor of one
of the proposals set forth in the AARB Petition or entirely in favor of one of
the proposals set forth in the Galileo Response, provided that if there is no
Galileo Response, the AARB Determination shall either be entirely in favor of
one of the proposals set forth in the AARB Petition or shall condition
acceptance of the request for relief on any conditions the AARB deems
appropriate.
(l) Not later than ten days after the earlier of
(i) the date on which the parties determine that an AARB comprised of two or
more members cannot be constituted in accordance with this Section 7, (ii) in
the event there are only two AARB members, the date on which one or both of
such AARB members report to the AARB Petitioner and Galileo that they cannot
reach a unanimous decision with regard to the AARB Petition, or (iii) the
rendering of the AARB Determination, either the AARB Petitioner or Galileo may,
in the case of clauses (i) and (ii) of this Section 7(l), submit the AARB
Petition for arbitration, or, in the case of clause (iii) of this Section 7(l),
appeal the AARB Determination, in each case pursuant to the arbitration
provisions of Section 9. In the event any such arbitration proceeding is
commenced, (A) neither the AARB Petitioner nor Galileo shall be entitled to act
on any aspect of the proposed activity that is the subject of such AARB
Petition or an AARB Determination until any such appeal, if any, has been
exhausted, and (B) the Arbitrator shall make a determination regarding the
allowance or the prohibition of the activity that is the subject of the AARB
Petition on the basis of the standards set forth in this Section 7.
(m) Notwithstanding anything to the contrary
herein, subsequent to the rendering of the AARB Determination or the issuance
of an Award there occurs a significant
<PAGE> 17
15
change in circumstances that was not anticipated by either Galileo or the AARB
Petitioner, nothing shall prohibit Galileo or the AARB Petitioner from:
(i) seeking a reconsideration of the AARB
Determination or the Award in light of the change in
circumstances, in which case any such reconsideration shall
be conducted in accordance with the procedures established
by this Section 7 (substituting, if and as appropriate,
Galileo for the AARB Petitioner, and vice versa), and in
connection therewith the AARB shall take into consideration
any newly developed evidence of the results of allowance or
prohibition of the requested activity; or
(ii) seeking to have the compensation to Galileo
reduced or increased in accordance with the procedures
described in Section 7(m)(i); and
(iii) the reasonable out of pocket costs of the
AARB Petitioner, the AARB and Galileo related to such
reconsideration will be borne by the party requesting
such reconsideration.
(n) Notwithstanding anything to the contrary
herein, an AARB Petitioner may not seek approval to engage in the same or a
similar activity pursuant to this Section 7 more than once in any twelve-month
period.
SECTION 8. Confidential Information. Each Group
Member shall, and shall cause its officers, directors, employees and agents
(including, without limitation, any Director elected by any Group Member)
(collectively, "Representatives") to, keep secret and retain in strictest
confidence all Confidential Information, and shall not disclose such
Confidential Information and shall cause its Representatives not to disclose
such Confidential Information to anyone outside such Group Member or Galileo
and its agents; nor may a Group Member or any of its Representatives exploit
such Confidential Information for its benefit or the benefit of other
relationships with customers of any Group Member; provided, however, nothing in
this Section 8 is meant to affect any rights or obligations of the Parties
under any license agreements granted by Galileo. The obligations under this
Section 8 shall survive for a period of five (5) years commencing on the
termination of this Agreement.
SECTION 9. Disputes. Subject to the final sentence
of Section 9, any dispute arising between the parties to this Agreement
involving the subject matters covered by this Agreement shall be submitted to
arbitration under this Section 9. Any party asserting a breach of this
Agreement shall notify the other party of such alleged breach (a "Dispute
Notice") and the parties shall attempt to resolve such dispute amicably. An
individual will be appointed by each party to such dispute and such individuals
shall meet and attempt to negotiate, in good faith, a resolution of the
dispute. If such individuals shall fail to resolve the dispute within fourteen
(14) Business Days of the date of the Dispute Notice, either party
<PAGE> 18
16
to the dispute may notify the other party that it wishes to commence an
arbitration proceeding under this paragraph (an "Arbitration Request"). The
party commencing the arbitration (the "Petitioner") shall include in the
Arbitration Request (a) a statement of the facts constituting the alleged
breach or dispute, (b) a written statement of position ("Statement") regarding
the dispute, and (c) the name of an individual designated by it to appoint an
Arbitrator (an "elector"). The Statement shall state the facts and arguments
in support of the position taken by the party submitting such Statement and
shall detail that party's proposed solution and relief sought (if any). The
party with whom the Petitioner has its dispute (the "Respondent") shall within
five (5) Business Days after the date of the Arbitration Request designate a
second elector by notice to the Petitioner, but if the Respondent shall fail to
do so within such period the Petitioner may designate an elector on
Respondent's behalf. The electors chosen by the Petitioner and the Respondent
shall attempt to agree upon an arbitrator (the "Arbitrator"), but if they are
unable to do so within (20) Business Days after the designation of the second
elector, then either elector thereafter may apply to the American Arbitration
Association (the "Association") for the selection of the Arbitrator in
accordance with the Commercial Arbitration Rules of such Association. The
Arbitrator so selected shall have full power to decide any dispute referred to
in this paragraph. The arbitration proceedings shall be conducted in the
English language, and the place of arbitration and the making of the Award (as
defined below) shall be the City of New York. The United Nations Commission on
International Trade Law ("UNCITRAL") rules of commercial arbitration shall
apply to any arbitration commenced pursuant to this paragraph, as modified by
the following procedure:
(a) Within five (5) Business Days of the
selection of the Arbitrator (the "Commencement Date"), the
Respondent shall deliver its Statement regarding the
dispute to the Arbitrator and the Petitioner.
(b) Within fifteen (15) Business Days from the
Commencement Date, each of the Petitioner and Respondent
shall deliver to the Arbitrator and to the other party, a
response ("Response") to the other party's Statement
setting forth opposing facts and arguments and limited in
length to ten (10) typed, single spaced pages (excluding
any evidentiary exhibits included therein).
(c) Within twenty (20) Business Days from the
Commencement Date each of the Petitioner and the Respondent
may deliver to the Arbitrator and to the other party, a
reply to the Response limited to setting forth facts and
arguments in rebuttal to the Statement and Response of the
other party and limited in length to five (5) typed, single
spaced pages (excluding any evidentiary exhibits included
therein).
(d) Within twenty-five (25) Business Days from
the Commencement Date each of the Petitioner and the
Respondent shall present an oral summation of its position
to the Arbitrator in the presence of the other party in
accordance with such
<PAGE> 19
17
rules of procedure including, without limitation, length of
presentation and right of cross-examination, as the
Arbitrator shall determine in writing and deliver to the
parties not less than three (3) Business Days prior to such
hearing; provided, however, that such hearing shall not
exceed eight (8) hours in total and may not be adjourned
except for extraordinary circumstances beyond the control
of the parties.
(e) The Arbitrator shall either issue his
decision and award ("Award") or request a further meeting
of the parties within fifteen (15) days of the hearing.
(f) Any such further meeting of the parties shall
take place within five (5) Business Days of the request
therefor and shall be conducted as determined by the
Arbitrator. The Arbitrator shall issue his Award no later
than fifteen (15) days after any such further meeting of
the parties.
(g) The Award shall be in writing and shall be
limited to a decision either completely in favor of
Petitioner's request for relief or completely in favor of
Respondent's request for relief. The Award shall be final
and binding upon the parties and judgment may be entered
thereon in any court of competent jurisdiction and the
costs and expenses of such arbitration shall be borne by
the party losing such arbitration.
(h) In the event that the Arbitrator fails to
render his Award within the time limits contained in
Sections 9(e) or (f), the Arbitrator shall, nonetheless,
retain jurisdiction over the dispute for a reasonable
period of time.
This section shall in no way affect the right of any
party to seek such interim relief, and only such relief, as may be required to
maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
SECTION 10. Rights and Remedies Upon Breach. (a)
Notwithstanding anything in Section 9 hereof, if a Group Member breaches, or
threatens to commit a breach of, any of the provisions of Section 2 or Section
8 hereof (the "Group Member Restrictive Covenants"), Galileo shall have the
right and remedy to have the Group Member Restrictive Covenants specifically
enforced by any court having jurisdiction, it being acknowledged and agreed
that any such breach or threatened breach will cause irreparable injury to
Galileo and that money damages will not provide an adequate remedy to Galileo.
Nothing in this Section 10 shall be construed to limit the right of Galileo to
collect money damages in the event of a breach of the Group Member Restrictive
Covenants.
(b) Notwithstanding anything in Section 9 hereof,
if Galileo breaches, or threatens to commit a breach of, any of the provisions
of Section 7 hereof (the "Galileo Restrictive Covenants"), each Group Member
shall have the right and remedy to have the
<PAGE> 20
18
Galileo Restrictive Covenants specifically enforced by any court having
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Group and that money
damages will not provide an adequate remedy to the Group. Nothing in this
Section 10 shall be construed to limit the right of any Group Member to collect
money damages in the event of a breach of the Galileo Restrictive Covenants.
SECTION 11. Severability of Covenants. If any court
determines that any of the Restrictive Covenants, or any part thereof, is
invalid, illegal or unenforceable, the remainder of the Restrictive Covenants
shall, to the extent enforceable under applicable law, not thereby be affected
and shall be given full effect, without regard to the portions which have been
declared invalid, illegal or unenforceable, provided that if the economic or
legal substance of the principles and transactions contemplated in this
Agreement is affected in a manner materially adverse to any party as a result
of the determination that a provision hereof is invalid, illegal or
unenforceable, the parties hereto agree to negotiate in good faith to modify
this Agreement so as to effect the original interest of parties as closely as
possible in an acceptable manner to the end that the principles and
transactions contemplated hereby are fulfilled to the closest extent possible,
provided further that each Group and Group Member shall enter into the same
modification with respect to its non-competition agreement with Galileo.
SECTION 12. Blue-Penciling. If any court determines
that any of the Restrictive Covenants, or any part thereof, is unenforceable
because of the duration or geographic scope of such provision, it is the
intention of the parties that such court shall have the power to modify any
such provision, to the extent necessary to render the provision enforceable,
and such provision as so modified shall be enforced.
SECTION 13. Attorneys' Fees and Costs. In the event
of any dispute arising out of the subject matter of this Agreement, the
prevailing party shall recover, in addition to any other damages assessed, its
reasonable attorneys' fees and court costs incurred in litigating or otherwise
settling or resolving such dispute. In construing this Agreement, none of the
parties shall have any term or provision construed against such party solely by
reason of such party having drafted the same.
SECTION 14. Cumulative Remedies. Each of the
several rights and remedies provided in this Agreement, or by law or in equity,
shall be cumulative, and no one of them shall be exclusive of any other right
or remedy, and the exercise of anyone of such rights or remedies shall not be
deemed a waiver of, or an election to exercise, any other such right or remedy.
No waiver of any term or condition of this Agreement shall be construed as a
waiver of any other term or condition; nor shall any waiver of any default
hereunder be construed as a waiver of any other default hereunder.
<PAGE> 21
19
SECTION 15. Amendments. This Agreement may not be
amended except by an instrument in writing signed by the Parties.
SECTION 16. Governing Law. This Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
applicable to contracts made and to be performed in such State.
SECTION 17. Notice. All notices, requests, claims,
demands and other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service, by cable, by telecopy, by
telegram, by telex or by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified in a notice given in accordance with
this Section 17):
(a) if to Galileo:
Galileo International, Inc.
5350 S. Valentia Way
Englewood, Colorado 80111
Telecopy: (303) 397-5020
Attention: Babetta R. Gray, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: 212-848-7179
Attention: Clare O'Brien, Esq.
(b) if to United or Covia
United Air Lines, Inc.
Post Office Box 66100
Chicago, IL 60666
Telecopy: (847) 700-4412
Attention: Frederic F. Brace
<PAGE> 22
20
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telecopy: (212) 735-2000
Attention: Thomas H. Kennedy, Esq.
(c) If to UAL:
UAL Corporation
c/o United Air Lines, Inc.
1200 Algonquin Road
Elk Grove Township, IL 60007
Attention: Vice President Financial
Planning and Analysis
(d) If to Air Wisconsin:
Air Wisconsin, Inc.
c/o United Air Lines, Inc.
1200 Algonquin Road
Elk Grove Township, IL 60007
Attention: Vice President Financial
Planning and Analysis
(e) If to Air Wis:
Air Wis Services, Inc.
c/o United Air Lines, Inc.
1200 Algonquin Road
Elk Grove Township, IL 60007
Attention: Vice President Financial
Planning and Analysis
SECTION 18. Assignability. This Agreement and the
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, successors
and assigns. This Agreement may not be assigned by any party without the prior
written consent of the other parties and any attempt to assign this Agreement
without such consent shall be void and of no effect.
SECTION 19. Headings. The captions and other
headings contained in this Agreement are for reference purposes only and shall
not be considered a part of or affect the construction and interpretation of
any provision of this Agreement.
<PAGE> 23
21
SECTION 20. Termination. Subject to the provisions
of Section 8 hereof, this Agreement shall terminate in its entirety as provided
below.
(a) This Agreement shall automatically terminate
in its entirety at such time as no Group Member owns any interest in Galileo
Inc.'s common stock, provided that subject to section 20(b) below, if at such
time a Distributor is a Group Member, this Agreement shall remain in effect
with respect to such Distributor until the Distributor Agreement to which such
Distributor is a party is terminated. This Agreement shall automatically
terminate with respect to any Group Member at the time such Group Member ceases
to be an Affiliate of the Group Member-Owner.
(b) If a Distributor remains subject to this
Agreement pursuant to the proviso to section 20(a), this Agreement shall only
apply to such Distributor and to the Affiliates of such Distributor in which
such Distributor owns or controls 50% or more of the capital stock (or other
ownership interest, if not a corporation) ordinarily having voting rights, and
not to any other Affiliates of such Distributor.
(c) If the Group Member-Owner continues to own an
interest in Galileo Inc.'s capital stock, this Agreement will be terminable at
the option of the Group Member-Owner on at least 12 months' prior written
notice to Galileo, which notice may be given at any time after the second
anniversary of the Effective Date; provided that (i) following the third
anniversary of the Effective Date, this Agreement may be terminated at the
option of the Group Member-Owner on at least 6 months prior written notice and
(ii) in any case, no notice may be given as long as a Group Member controls a
Distributor. Upon such notice, (i) any Distributor formerly controlled by a
Group Member shall lose all exclusive distribution and most favored nation
rights under its Distributor Agreement, and (ii) Galileo, at its option, may
terminate such Distributor Agreement, subject to the wind-down and transition
provisions of Section 22 of such Distributor Agreement.
(d) Upon the termination of this Agreement
pursuant to Section 20(a) or upon Galileo's receipt of notice of termination
pursuant to Section 20(c), Galileo, at its option, may terminate any Sales
Representation Agreement with any Group Member.
SECTION 21. Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall be considered one and the same instrument.
<PAGE> 24
GALILEO INTERNATIONAL, INC.
By /s/ Babetta R. Gray
----------------------------------
Name: Babetta R. Gray
Title: Senior Vice President,
Legal and General Counsel
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
GALILEO INTERNATIONAL, L.L.C.
By /s/ James E. Barlett
------------------------------
Name: James E. Barlett
Title: President and
Chief Executive Officer
COVIA LLC
By UNITED AIR LINES, INC.
Member-Manager
By /s/ Frederic F. Brace
------------------------------
Name: Frederic F. Brace
Title:
UAL CORPORATION
By /s/ Authorized Signatory
------------------------------
Name:
Title:
UNITED AIR LINES, INC.
By /s/ Frederic F. Brace
------------------------------
Name: Frederic F. Brace
Title: Financial Analysis and
Controller
<PAGE> 26
AIR WISCONSIN, INC.
By /s/ Authorized Signatory
------------------------------
Name:
Title:
AIR WIS SERVICES, INC.
By /s/ Authorized Signatory
------------------------------
Name:
Title:
<PAGE> 27
APPENDIX I
1. Where a Group Member markets and distributes
a Customized Product to other Customers through Neutral Travel
Providers pursuant to Section 3(b) of this Agreement, the following
shall apply. Subject to the provisions of paragraph 3 below, Galileo
will be entitled to set terms, including price, and receive resulting
revenue from Neutral Travel Providers for such Neutral Travel
Providers' use of Customized Products, provided that such terms shall
be commercially reasonable. The Group Member may conclude its own
arrangements with such Neutral Travel Providers to the extent that
such arrangements are not inconsistent with Galileo's terms, and
Galileo will regularly make available to the Group Member information
regarding its range of prices and terms. For the purposes of this
paragraph 1, financial arrangements between a Group Member and a
Neutral Travel Provider regarding the use of Customized Products which
do not diminish the amount of revenue otherwise payable to Galileo for
the use of such products will not be considered to be inconsistent
with Galileo's price terms for such products.
2. In setting terms and conditions with respect
to Owner-Developed Products pursuant to Section 3(c) of this
Agreement, (a) Galileo may establish terms and conditions for such
Owner-Developed Products that protect Galileo's legitimate business
interests (including, without limitation, relationships with suppliers
and resource utilization); and (b) [*].
3. Notwithstanding anything to the contrary
herein, if (a) after the provisions of paragraphs 1 and 2 above and
Section 3(c) of this Agreement have been satisfied, Galileo's fees and
charges for such Customized Products or Owner-Developed Products (with
booking fees and other charges to the Group Member weighted to reflect
activity) are higher than the fees and charges of any Significant
Competitor in the area of direct access products by [*] or more for
comparable products and services based on functionality and delivery
channel; (b) the Group Member provides Galileo with written
notification of the foregoing, including the facts establishing that
such Significant Competitor is a Significant Competitor (Galileo to
provide such data in its possession as it is legally permitted to
provide and as may be reasonably required by a Group Member to
establish such facts) and a list of such Significant Competitor's
comparable products and services and prices related thereto (Galileo
to provide such data in its possession as it is legally permitted to
provide and as may be reasonably required by a Group Member to
establish such facts); and (c) Galileo's fees and charges for such
products and services are higher than the fees and charges of such
Significant Competitor by [*] or more [*] after Galileo's receipt of
such notification, then the Group Member may, following an additional
written notification to Galileo, connect such Customized Product or
Owner-Developed Product to such Significant Competitor, provided that,
if such product is a
<PAGE> 28
2
Customized Product, then the Group Member shall license such product
from Galileo on terms and conditions that are the most favorable to
the Group Member of (a) Galileo's then prevailing terms and
conditions, (b) the terms that are commercially reasonable, having due
regard to cost, and (c) the terms provided by Significant Competitors
for substantially the same services. Galileo shall have no obligation
to provide any customer support or service for Customized Products,
Owner-Developed Products, or any other direct access products that are
not requested by a Group Member or do not run against a Computer
System used by Galileo to provide Reservations Services to Neutral
Travel Providers and which do not generate booking fees payable to
Galileo.
4. (a) Galileo will pay the relevant Distributor
or other provider of support services, if any, a booking fee split
pursuant to the applicable Distributor Agreement between Galileo and
such Distributor or similar agreement between Galileo and the support
provider, if any, for bookings made through either Customized Products
or Owner-Developed Products, both of which run against a System used
by Galileo to provide Reservation Services to Neutral Travel Providers
and which result in payment of applicable booking fees to Galileo, in
exchange for such provision of customer support and service for such
Customized Products or Owner-Developed Products if requested by a
Group Member, as the case may be, on terms agreeable to Galileo; (b)
subject to clause (c) below, if requested by a Group Member, Galileo
will provide standard customer support and service for such Customized
Products or Owner-Developed Products, as the case may be, in
territories in which the distributor is owned by Galileo, in
territories in which there is no distributor, and in territories in
which the distributor does not provide such customer support and
service; and (c) in any territory in which Galileo has acquired the
relevant Distributor, whether in connection with the IPO or
thereafter, if requested by a Group Member, Galileo will provide, at
no additional cost to the Group Member, no less than the customer
support and service for such Customized Products or Owner-Developed
Products as was provided by such Distributor as of February 28, 1997
(which customer support and service are set forth on Exhibit B hereto)
for such Customized Products or Owner-Developed Products which result
in the payment of full booking fees to Galileo, provided that if no
such services are being provided at that date, Galileo shall, if
requested by a Group Member, provide standard customer support and
service for such Customized Products and Owner-Developed Products as
specified in clause (b) of this paragraph. Upon request, Galileo will
provide to a Group Member information regarding the standard customer
support and service levels to be provided pursuant to clause (b) of
this paragraph. In providing such service and in setting the terms
and conditions (including price) for such service, Galileo shall give
reasonable consideration to: (i) the services provided by Significant
Competitors commensurate with prevailing market conditions in the
market in which the Customer uses the product in question and the
terms and conditions (including
<PAGE> 29
3
price) applied by such Significant Competitors for such services, (ii)
each Group Member's reasonable commercial requirements, and (iii)
Galileo's reasonable commercial requirements. The quantity, quality
and service levels of the customer support and service provided
without charge to any Group Member pursuant to clause (c) of this
paragraph shall be no less than that provided without charge by
Galileo to any other person, provided that the booking volumes
generated by the Group Member's products and the costs of providing
support to Group Member products are not materially different from the
volumes and costs applicable to such other person.
<PAGE> 30
EXHIBIT A
AARB EXCLUSION PROCESS
In the event that the Airline Affiliate Review Board ("AARB")
constituted pursuant to Section 7 of this Agreement shall consist of an even
number of members which is greater than two, a Group Member-Owner's Air Carrier
Affiliate's designee who would otherwise be entitled to participate in the AARB
process shall be excluded from that process as provided herein.
<TABLE>
<CAPTION>
GROUP MEMBER-OWNER'S
--------------------
AIR CARRIER AFFILIATE ASSIGNED NUMBER
--------------------- ---------------
<S> <C>
British Airways 1
KLM 2
Swissair 3
United 4
US Airways 5
</TABLE>
In the event that any owner of Galileo not associated with an
Assigned Number as designated above shall become entitled to appoint an AARB
member, each such owner shall receive an Assigned Number which follows, in
ascending numerical order, the highest previously designated Assigned Number.
The Group Member representative excluded from the AARB shall
be the representative of the Group whose Assigned Number appears as the units
digit of the closing Dow Jones Industrial Average on the first Monday following
the date on which the relief request notice issued pursuant to Section 7 is
received by the Chairman of the Board (e.g., 7234.22: excluded Group is
United), the Monday so chosen to be referred to hereinafter as the "Exclusion
Day." If the number appearing as the units digit is not the Assigned Number of
a Group which would be entitled to participate in the AARB process, the
excluded Group Member representative shall be determined by the appearance of
an otherwise participating Group Member's Assigned Number in the locations
listed hereinafter, with such locations to be examined in the sequences listed,
and with the process concluding upon the first appearance of an excludable
Group's Assigned Number in a location:
(1) Closing Dow Jones Industrial Average on Exclusion
Day, tenth-point digit (e.g., 7237.22: excludable Group is KLM);
<PAGE> 31
2
(2) Exclusion Day Dow Jones Industrial High, units digit;
(3) Exclusion Day Dow Jones Industrial High, tenth-point
digit;
(4) Exclusion Day Dow Jones Industrial Low, units digit;
(5) Exclusion Day Dow Jones Industrial Low, tenth-point
digit;
In the event that the foregoing process does not produce a
Group Member for exclusion from the AARB, or in the absence of a Dow Jones
Industrial Average on the designated Exclusion Day, the excluded Group Member
shall be chosen by the application of the foregoing process to the Dow Jones
Industrial Average results produced on the next Business Day following the
Exclusion Day. Such process shall be applied to each subsequent Business Day
until a Group Member has been selected for exclusion from the AARB.
At any time after the selection of an excludable Group Member
pursuant to the foregoing process and before the convening of the AARB, the
Group Member seeking AARB review shall notify Galileo and each member of the
Board of the Group Member excluded from the AARB. Any party (including
Galileo) may object to such notice on the grounds that the excludable Group
Member was improperly selected, and upon any failure to resolve such dispute,
any party may seek resolution of the dispute via the arbitration provisions of
this Agreement. A dispute regarding the composition of the AARB shall, for its
duration, toll the running of any of the time periods established for AARB
review by Section 7 of this Agreement.
<PAGE> 32
EXHIBIT B
NONE
<PAGE> 33
ANNEX I
TECHNICAL DEFINITIONS
"Accounting Services" means the computerized recording or
accounting of the services or transactions of Neutral Travel Providers or Other
Customers by those Persons, including the generation or preparation of
financial reports or records of Neutral Travel Providers or Other Customers by
those Persons.
"Affiliate" means, with respect to any entity at any time, a
Person (i) that at such time owns or controls, directly or indirectly, 50% or
more of the capital stock (or other ownership interest, if not a corporation)
of such entity ordinarily having voting rights, (ii) 50% or more of whose
capital stock (or other ownership interest, if not a corporation) ordinarily
having voting rights at such time is owned or controlled, directly or
indirectly, by such entity or (iii) 50% or more of whose capital stock (or
other ownership interest, if not a corporation) ordinarily having voting rights
at such time is owned or controlled, directly or indirectly, by another Person
that at such time owns or controls, directly or indirectly, 50% or more of the
capital stock (or other ownership interest, if not a corporation) of such
entity ordinarily having voting rights; provided, however, that Galileo shall
be deemed not to be an "Affiliate" of any Owner or any Affiliate thereof; and
provided, further, that (i) no Owner shall be deemed to be an "Affiliate" of
any other Owner or any Affiliate thereof solely by virtue of its Galileo
Interest; and (ii) Instituto Per La Riconstruzione Industriale S.p.A., the
Government of the Republic of Ireland and any ministry thereof, the Republic of
Austria and its agencies, the Republic of Greece and its agencies, the Republic
of Portugal and its agencies, and the Government of The Netherlands or any
political subdivision or instrumentality thereof shall not be deemed to be an
"Affiliate" of any Person.
"Airline Information" means information and data (including
PNR, TCN, and SIR data) generated from the provision of Internal Reservations
Services, Cargo Services, Commercial Services, Other Customer Reservations
Services or Internal Airline Services by Galileo to, or on behalf of, such
airline and its Coordinated Associates and Marketing Associates, or generated
from computer systems operations associated therewith. Airline Information
will include, for a particular airline, its specific frequent flier
information, the identification numbers of its Internal Reservations Services
booking/ticketing agents, and its proprietary inventory management categories
and revenue per fare categories.
"Airline Information Database" means the computer data files
of Airline Information of Customer and Customer's Coordinated Associates.
Annex I - 1
<PAGE> 34
"Airline Office" means a retail sales outlet of an airline
that is not a Neutral Travel Provider and that (i) is open and available to the
public generally, (ii) is managed and, if staffed, is staffed by Airline Staff
at the airline's cost, and (iii) primarily engages in the sale of products and
services of, and servicing the customers of, that airline and, ancillary
thereto, sells the products and services of other Vendors. "Airline Office"
will include retail sales facilities shared by two or more airlines but will
exclude locations that, immediately prior to being managed and staffed at the
airline's cost, were going concern Neutral Travel Providers.
"Airline Staff" means an individual who is not otherwise
engaged in the provision of Distribution Services on behalf of a Neutral Travel
Provider and who is either (i) a regular full-time or part-time employee of an
airline or group of airlines; or (ii) an independent contractor or employee
thereof retained by an airline to deal with the public solely as a
representative of that airline.
"Air Vendor" means a Vendor that is an airline.
"Application Software" means computer programs that execute on
System Software to provide an isolatable business functionality or output to an
end user.
"ARINC" means Aeronautical Radio, Inc.
"Business Day" means any day except a Saturday, Sunday, or
other day on which commercial banks in Chicago, Illinois are authorized by law
to close.
"Cargo Services" means the provision of computerized services
in relation to freight, goods, and mail.
"Commercial Services" means the computerized distribution of
information, services, or products, other than Reservations Services, to end
users thereof, including economic, financial, commodities, and other market
information and data direct marketing, electronic mail, electronic data
interchange, and intra-company distribution services.
"Common Stock" means the common stock, par value $0.01 per
share, of Galileo.
"Communications Facilities Management" means (i) the design
and configuration of a Network, (ii) the provisioning of Network components
including installation of circuits, (iii) the operation, repair, and
maintenance of Network components including resolution of circuit problems,
(iv) negotiation of rates with third-party telecommunications providers, and
(v) the establishment of interconnections that enable the routing of voice
traffic over data circuits.
Annex I - 2
<PAGE> 35
"Communications Services" means the transmission of data or
voice messages by means of a Network.
"Computer Services Agreement" means any of the Amended and
Restated Computer Services Agreements entered into between Galileo and each of
United, British Airways, Galileo Japan, Olympic, Alitalia, Aer Lingus,
Swissair, TAP, KLM, Austrian Airlines and US Airways individually.
"Computer System" or "System" means (i) the Galileo computer
hardware, including central processing hardware, separate functional
processors, routers and link processors, test systems, and storage devices, and
(ii) all other Galileo agreements, facilities, equipment, software, other
assets, or personnel which Galileo uses or maintains for the generation of
Reservations Services.
"Confidential Information" means any and all confidential
matters relating to the Business, including, without limitation, financial,
marketing, technical and commercial information, which are (i) not otherwise in
the public domain, (ii) not otherwise in the rightful possession of a Group
Member from third parties having no obligation of confidentiality to an Owner
or Galileo or (iii) not required under compulsion of law to be disclosed by any
Group Member or its representatives (through oral question, interrogatory,
subpoena, civil investigative demands or similar process).
"Coordinated Associate" means any carrier that uses Customer's
designator code in the Display of certain designated flights and, with respect
to such flights, does not use its own designator code.
"Core CRS" means the programs and logic within a CRS that
manage displays and traveler data. It specifically excludes functions
performed on Separate Functional Processors such as fares, cars, and hotel
sub-systems.
"Cost" means Cost as defined in Exhibit A hereto.
"CPE" means Customer Premises Equipment.
"CRS" means computer reservations system, including a Core CRS
and any Separate Functional Processors that are required to provide
Reservations Services.
"CRS Rules" means all rules and regulations, issued by any
governmental authority having jurisdiction with respect to such issuance,
applicable to the Business or the provision of computerized reservations
services generally.
Annex I - 3
<PAGE> 36
"Customer" means any Person that contracts for or receives
services under a Computer Services Agreement.
"Customer Premises Equipment" or "CPE" means equipment such as
gateways, local area networks (LANs), printers, file servers, computer
terminals, workstations, cardreaders, bar code readers, information displays
(FIDS, BIDS, CIDS, and other information displays), and similar equipment.
"Customer Software" means software (a) (i) owned by Customer,
(ii) licensed by Customer from third parties or Galileo, or (iii) provided to
Galileo through Customer by a Coordinated Associate, and (b) used by Galileo in
the Computer System, pursuant to the terms of licensing agreements between
Customer and Galileo.
"Customized Products" means, to the extent that an Owner or
any of its Affiliates develops, markets or distributes any Direct Access
Product, such product (i) customized by such Owner itself or at its direction
or (ii) customized by Galileo on behalf of such Owner or any of its Affiliates
pursuant to a Programmer Support Agreement or a Computer Services Agreement.
"Database" means (i) all data and databases resident in the
Computer System and maintained by Galileo for the provision of Reservations
Services to Neutral Travel Providers, and (ii) Marketing Information provided
to Customer pursuant to the terms of the Participation Agreement and the
Airline Information of Customer and its Coordinated Associates and Marketing
Associates, but in each of (i) and (ii) above, excluding (x) Airline
Information of other airlines and (y) all information or data generated from
the provision of Reservations Services to Neutral Travel Providers or other
Marketing Information that Customer is not otherwise entitled to receive under
the Participation Agreement or the Transaction Agreement.
"Data Network" means a controlled and managed system of
hardware and software that is (a) used to transmit messages between (i) a CPE
and one or more Host Systems, (ii) two Host Systems (except when they are
channel attached or high speed channel connected through local computer
networks), or (iii) two end-user devices in point-to-point mode, and (b)
includes links or interfaces to other networks, third-party data transmission
or processing services, and international data transmission services
(including, but not limited to, SITA and ARINC). A Data Network includes, but
is not limited to, communications processors, concentrators, routers, modems,
multiplexors, analog or digital circuits, and related agreements, assets, and
personnel. A Data Network does not include CPEs.
"Direct Access Distribution Channel" shall mean and include
any Third Party Distributor and any Third Party Network.
Annex I - 4
<PAGE> 37
"Direct Access Products" means any Galileo product that
incorporates a user-friendly or intuitive interface and is designed primarily
for use by Other Customers although such products may be used by Neutral Travel
Providers in their neutral capacity; such products include, without limitation,
Personal Apollo, Corporate Apollo, Personal Galileo and Corporate Galileo.
"Display" means the display or displays of airline schedules,
fares, fare rules, fare footnotes and seat availability generated by the
Computer System in accordance with algorithms constructed on the basis of
Display Rules.
"Display Rules" means anything that affects the ordering of
flights or presentation of fares within any Display generated by the Computer
System. Without limiting the generality of the foregoing, examples of Display
Rules include, but are not limited to, for each Display, (i) the geographic
territory for which the Computer System may generate that Display, (ii) whether
that Display is the primary Display for that territory, (iii) which Displays
may be generated as secondary Displays for that territory, (iv) the mechanism
by which Subscribers choose or modify their choice of the primary Display in
that territory, (v) the operation of the playpen (if applicable) for that
Display, (vi) the specification of itinerary sequencing and sorting criteria
for that Display, and (vii) the specification of defaults for that Display,
including, but not limited to, minimum connect times and penalties.
"Distribution Services" means Reservations Services and
Accounting Services, but excluding Internal Reservations Services, Cargo
Services, Commercial Services, Internal Airline Services and Non-Air Vendor
Internal Services.
"Galileo" means Galileo International, Inc., a Delaware
corporation.
"Galileo Software" means software (i) owned by Galileo, or
(ii) licensed from third parties by Galileo and in each case (i) and (ii) that
operates on the Computer System.
"Gateway Router" means the hardware and software used to
connect the Computer System to a National System.
"General Sales Agent" means a general sales agent of an
airline as defined in Exhibit B hereto.
"Group" means Customer, Customer's Owner Affiliate, any
Distributor owned, in whole or in part, by such Owner or its Affiliate, the
Ultimate Parent Entity of such Owner, any airline Affiliate of any of the
foregoing, and the Affiliates of any of them (each individually a "Group
Member").
Annex I - 5
<PAGE> 38
"Group Products" means the services and products (including
air/non-air travel packages which may include ancillary air segments on
non-Group Member airlines) of a single Group Member, its Affiliates and its
code-sharing partners, as Vendors.
"Host System" means a large-scale system of hardware and
software, including but not limited to, central processing devices, storage
devices, routers and link processors, and high-speed channel-connected local
computer networks, which system is used by multiple users located in premises
broadly distributed over a large geographic area and concurrently processes
multiple end-user applications.
"Interest" means (i) with respect to an Owner who owned, prior
to the IPO, more than 2% of Galileo International Partnership, 1% or more of
Galileo, and (ii) with respect to an Owner who owned, prior to the IPO, 2% or
less of Galileo International Partnership, the amount of Galileo owned by such
Owner on the closing of the IPO, provided that such amount is at least 0.005%
of the Common Stock outstanding immediately prior to the IPO, provided that if,
at any time after the IPO, Galileo issues additional shares of Common Stock
and, as a result of such issuance, an Owner falls below the percentage interest
required by clause (i) or clause (ii) above, such issuance shall be excluded
from the determination of the Interest of such Owner.
"Internal Airline Services" means (i) the following services,
and (ii) any other airline operational, competitive, or maintenance services
for which Customer, if acting in a commercially reasonable manner, would
require access to or use of the Computer System and Galileo Software in order
to obtain such services. "Internal Airline Services' shall not include
Internal Reservations Services.
(1) Operational Services: airline seat inventory or seat
assignment control, waitlist processing, departure control, concierge
or frequent flier services, food services, passenger or baggage
check-in or handling, aircraft or gate scheduling or operations;
(2) Fares and Availability Display Services: fares and
availability display services to (i) airport facilities, (ii)
reservations centers, (iii) Airline Offices, or (iv) other facilities,
in each case (i) through (iv) operated by Customer or its Coordinated
Associates or Marketing Associates, (v) hosted customers of Customer,
and (vi) General Sales Agents;
(3) Non-Air Vendor Services: Reservations Services with
respect to the services and products of Non-Air Vendors to (i) airport
facilities, (ii) reservations centers, (iii) Airline Offices, or (iv)
other facilities, in each case (i) through (iv) operated by Customer
or its Coordinated Associates or Marketing Associates, and (v) General
Sales Agents;
Annex I - 6
<PAGE> 39
(4) Competitive Services: inventory management or
control, yield management, group marketing, and competitive airline
distribution analyses, forecasts, sorts, and reports;
(5) Maintenance Services: updating, maintenance, and
support of (i) aircraft schedule change and passenger and seat re-
accommodation; (ii) domestic, international, and group marketing
databases of Customer, (iii) airline fares, fare rules, and fare
footnotes, (iv) historical pricing and fares databases, and (v)
pricing and proration functions used for revenue accounting purposes;
(6) Software Operation: operation on the Computer System
by Galileo of software owned or licensed by Customer and provided at
no cost to Galileo by Customer and the receipt of services therefrom,
provided that such software shall be compatible with the Computer
System operating system software;
(7) Database: access by Customer to the Database in
accordance with the PSA and the provision to Customer by Galileo of
any information from the Database in any format or any extract,
compilation, arrangement, or manipulation thereof; and
(8) Access Services: access by Customer to the Computer
System and Galileo Software to perform or receive any of the above.
"Internal Reservations Services" means the provision of
Reservations Services to (i) airport facilities, (ii) reservations centers,
(iii) Airline Offices or (iv) other facilities, in each case (i) through (iv)
operated by Customer (including services operated on behalf of Customer by a
third party) or its Coordinated Associates or Marketing Associates, and (v)
General Sales Agents.
"IPO" means the underwritten initial public offering of shares
of Common Stock of Galileo pursuant to an effective Registration Statement on
Form S-1 under the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
"Limited Air Charter" means an air charter service Vendor
(other than "seat only" air charters) that is receiving Distribution Services
through a National Product and for which Galileo does not offer a comparable
International Product.
"Marketing Associate" means any carrier that uses Customer's
designator code in the Display of certain designated flights and, with respect
to such flights, also uses its own designator code.
"Marketing Information" means all domestic and international
marketing, booking, or sales data (including all MIDT, PNR, TCN, and SIR data
but excluding Airline
Annex I - 7
<PAGE> 40
Information) generated by Galileo from the provision of Reservations Services
to Neutral Travel Providers.
"MIDT" means Marketing Information Data Tape.
"Network" means either a Data Network or a Voice Network, or
both, depending upon the context in which the term is used.
"Neutral Travel Provider" means any Person, other than a
Vendor, that sells the products and services of Vendors and holds itself out as
a neutral source of information regarding Vendors and their services or
products or is otherwise deemed to be a Neutral Travel Provider pursuant to CRS
Rules.
"Non-Air Vendor" means a Vendor that is not an airline (other
than Limited Air Charters).
"Non-Air Vendor Internal Services" means in relation to
Non-Air Vendors, all services that are similar in function to those services
described in relation to Air Vendors as being Internal Airlines Services.
"Non-Neutral Travel Business" means with respect to an Owner's
Group, that portion of the business of a Neutral Travel Provider that
constitutes its activities as a wholesaler, consolidator, tour operator,
package travel provider, or cruise line, that is limited solely to the sale and
ticketing of Group Products.
"Other Customer" means any Person other than (i) an air
Vendor, or (ii) a Neutral Travel Provider, except that, with respect solely to
the provision of Group Products, Other Customer will include a Neutral Travel
Provider that limits use of such Group Products strictly to its Non-Neutral
Travel Business.
"Other Customer Reservations Services" means the provision of
Reservations Services to Other Customers.
"Owner" means a stockholder of Galileo that was (or whose
Affiliate was) previously a partner of Galileo International Partnership.
"Owner-Developed Product" means a direct access or similar
product that is developed by an Owner or any other party, including without
limitation, Galileo, on behalf of such Owner or its Affiliates, in each case,
at such Owner's or such Affiliate's own cost and with such Owner's or such
Affiliate's own specifications; provided, however, that Owner-Developed
Products shall not include Customized Products.
Annex I - 8
<PAGE> 41
"Parity Principles" means the assurance that all CRS neutral
functions and features related to the provision of CRS services to Neutral
Travel Providers are equivalent for all Owners, whether hosted or non-hosted
within the CRS, regardless of which Core CRS is used or the territory in which
the CRS is deployed.
"Participating Airline" means an air carrier that has executed
and is in good standing under a Participation Agreement.
"Participation Agreement" means an air carrier participation
agreement, between a Customer and Galileo, as it may be amended or restated
from time to time.
"Person" means any individual, corporation, partnership, firm,
joint venture, association, joint-stock company, trust, estate, unincorporated
organization, governmental or regulatory body or other entity.
"PNR" means passenger name record.
"PSA" means a Programmer Support Agreement between a Customer
and Galileo.
"Reservations Services" means (i) the computerized display of
Vendor schedules and Vendor service or product availability including the price
thereof, (ii) the reservation, sale, or ticketing of the services or products
of Vendors, and (iii) the display of any other information provided by Vendors
describing a Vendor's products or services.
"Separate Functional Processing" means hardware and software
used to deliver one or more functions shared between the Apollo and Galileo
CRSs.
"SIR" means sales interface record.
"SITA" means Societe Internationale de Telecommunications
Aeronautiques.
"Software" means, collectively, Application Software, System
Software, and Utility Software.
"Subscribers" means Neutral Travel Providers and Other
Customers that have subscribed for Reservations Services.
"System Software" means computer programs that, in conjunction
with the control features and facilities of the computer hardware itself,
manage the internal resources of a computer system (such as processing cycles
and memory), control the function of a computer system's peripheral devices,
allow one physical or logical device to communicate
Annex I - 9
<PAGE> 42
with another physical or logical device, and provide the basic services of the
computer system to Utility Software and Application Software.
"TCN" means ticket control number.
"Third Party Distributor" shall mean any third party that
distributes or markets direct access products, including, without limitation,
any electronic information service provider, such as Prodigy, CompuServe,
Genie, OnLine America, Microsoft Network or Minitel, and any other distributor
using any delivery technology or system, including, but not limited to, a smart
or display telephone, a cable or interactive television system, personal
digital assistant, personal digital communicator or a wireless communications
network.
"Third Party Network" shall mean any Network provided by a
third party that is used to provide the connection between the Galileo System
and any potential direct access product user.
"Ultimate Parent Entity" means, with respect to any Person,
that Person or such Affiliate of such Person that is a Person not controlled by
any other Person. For purposes of this definition the term "control" means:
(a) either (i) holding more than fifty percent (50%) of the outstanding voting
securities of a Person; or (ii) in the case of a Person that has no outstanding
voting securities, having the right to more than fifty percent (50%) of the
profits of such Person, or having the right in the event of a dissolution to
more than fifty percent (50%) of the assets of such Person; or (b) having the
contractual power presently to designate more than fifty percent (50%) of the
directors of a corporation, or in the case of unincorporated entities, of the
individuals exercising similar functions; provided, that, Instituto Per La
Riconstruzione Industriale S.p.A., the Government of the Republic of Ireland
and any ministry thereof, the Republic of Austria and its agencies, the
Republic of Greece and its agencies, the Republic of Portugal and its agencies,
and the government of The Netherlands or any political subdivision or
instrumentality thereof shall not be deemed to be the "Ultimate Parent Entity"
of any Person.
"Utility Software" means computer programs that execute on
System Software to provide generic services to Application Software, or to end
users. Utility Software includes, but is not limited to, computer language
compilers, linkage editors, file sorts and merges, source code editors, file
copy programs, database management programs, and report generators.
"Vendor" means a vendor of travel-related services, such as an
airline, rail company, ferry operator, hotel, rental car company, tour,
package, or cruise operator, or travel insurance company, that participates in
Reservations Services.
Annex I - 10
<PAGE> 43
"Voice Network" means switched telecommunications services,
including all 800 and 888 services, outbound Wide Area Telephone Services
(WATS), toll service, central office service, credit card service, local
telephone service, director service, local switching and long distance network
access services, tie-line service, foreign exchange (FX) service, international
voice telecommunication services, remote call forwarding service, voice mail
services, and all other voice telecommunications services relating to pagers,
mobile telephone, interfaces to public address services, and conference
bridging.
Annex I - 11
<PAGE> 44
ANNEX I--EXHIBIT A
DEFINITION OF COST
This Exhibit A defines "Cost" for the purpose of Annex I.
PART I. INTRODUCTION
1. Definitions. Unless otherwise defined in this paragraph 1, all
capitalized terms used in this Exhibit shall have the meaning ascribed
to them elsewhere in this Exhibit, or, if not otherwise defined
herein, in Annex I. As used in this Exhibit, the terms listed in this
paragraph 1 shall have the meaning provided for each:
"Allocation" means a rule or process by which an Expense is
apportioned to more than one Service Unit. Such a rule or process
shall result in the apportionment of one-hundred percent (but not more
than one-hundred percent) of an Expense to Expense Categories, Service
Unit Categories, or Service Units, as the case may be.
"Amortized Cost" means the Expense of an intangible asset that (i) is
determined pursuant to GAAP, and (ii) is not recognized fully on the
income statement of Service Provider in a single Accounting Period but
which is amortized over more than one Accounting period. For the
purposes of the Method, amortization shall be as recorded on Service
Provider's financial statements pursuant to GAAP.
"Cost of Capital" means the result of the calculation described in
paragraph 3.B. below.
"Depreciated Cost" means the Expense (including capital lease
expenses) of a tangible asset that (i) is determined pursuant to GAAP,
and (ii) is not recognized fully on the income statement of Service
Provider in a single Accounting Period but which is depreciated over
more than one Accounting Period. For the purposes of the Method,
depreciation shall be recorded on Service Provider's financial
statements pursuant to GAAP.
"Direct Cost" means an Expense that can be (i) specifically identified
with the production of a Service Unit, (ii) is variable with the
production of such a Service Unit, and (iii) is proportional (though
not necessarily on a one-on-one basis) to the production of such a
Service Unit.
Annex I - 12
<PAGE> 45
"Effective Date" means the date upon which the Services Agreement
becomes effective as provided in the Services Agreement.
"Expense" means costs incurred in the conduct of a business that,
pursuant to GAAP, are reported on the income statement of that
business. Expenses shall include actual payments or accruals,
whichever is appropriate pursuant to GAAP, for a particular cost.
"Expense Category" means that grouping of Expenses related to the
major lines of business of Service Provider. An Expense category may
not overlap with another Expense Category. Expense Categories are
hierarchically superior to Service Unit Categories. The initial
Expense Categories for the Services Agreement shall be detailed in the
Services Agreement.
"Fully Allocated Cost" means, for each Service Unit provided to
Customer by Service Provider pursuant to the Services Agreement,
Service Provider's actual Direct Costs, Indirect Costs, General
Overhead Costs, Depreciated Costs plus Cost of Capital, and Amortized
Costs plus Cost of Capital that Service Provider incurs to provide
that Service Unit to Customer. Other than as provided in paragraph 4,
below, Fully Allocated Costs are not predicted, planned, budgeted, or
forecast Expenses.
"Funds Rate" means the following quantity divided by 12: the average
of the prevailing dollar-denominated 60 day London Interbank Offered
Rate (LIBOR), as reported in the Wall Street Journal for the last
Business Day of each calendar month of each Half Year plus 200 basis
points.
"GAAP" means Generally Accepted Accounting Principles as defined by
the Financial Accounting Standards Board and applied within the United
States.
"General Overhead Cost" means all Expenses that (i) are not variable
with the production of a Service Unit, (ii) are neither Direct Costs
nor Indirect Costs, and (iii) are of a type such that such Expenses
would continue to be incurred, though not necessarily at the same
dollar level, regardless of the volume or level of Service Provider's
operations. General Overhead Costs may include Amortized Costs and
Depreciated Costs. As used in the Method, General Overhead Costs
shall be an Expense Category separate and distinct from other Expense
Categories.
"Half Year" means a period during which the Services Agreement is
effective (i) either from January 1 through June 30, inclusive, of a
single calendar year, or (ii) from July 1 through December 31,
inclusive, of a single calendar year. The period from the Effective
Date until the next June 30 or December 31, whichever date shall occur
first after the Effective Date, shall be considered a Half Year.
Annex I - 13
<PAGE> 46
"Incentive Costs" means Service Provider's Expense for profit sharing,
incentive compensation, long-term incentive programs or other similar
programs or benefits.
"Indirect Costs" means an Expense that (i) is related to but cannot be
specifically identified with the production of a Service Unit, (ii) is
neither a Direct Cost nor a General Overhead Cost, (iii) may include
Amortized Costs, and Depreciated Costs, and (iv) may or may not be
variable with the production of such Service Unit.
"Permitted Costs" means Service Provider's Expenses but not including
Incentive Costs.
"Price" means a dollar amount calculated following the Method.
"Price List" means a list of all Prices for Service Units provided by
Service Provider to Customer under the terms of the Services
Agreement.
"Services Agreement" means an agreement between Customer and Service
Provider for the provision to Customer of the products or services of
Service Provider.
"Service Unit" means a measurement of the quantity of services
provided (i) solely to Customer and pursuant to the terms of the
Services Agreement, or (ii) to other customers of Service Provider but
not to Customer, or (iii) to other customers of Service Provider and
also to Customer. The initial Service Units provided under the
Services Agreement shall be detailed in the Services Agreement.
"Service Unit Category" means those Expenses related to the production
of a type of service. Service Unit Categories are hierarchically
inferior to Expense Categories and hierarchically superior to Service
Units. A Service Unit Category may not overlap with another Service
Unit Category. The initial Service Unit Categories provided under the
Services Agreement shall be detailed in the Services Agreement.
PART II: METHOD
2. General Principles. Prices shall be calculated following the
principles and procedures in paragraphs 2 through 5, inclusive. Such
procedures and principles shall collectively be referred to as the
"Method."
A. Assignment Rules. The total Expenses (other than Incentive
Costs) of Service Provider shall be assigned in a step-wise,
hierarchical manner (i) first to all Expense Categories with
the result that the sum of Expenses (other than Incentive
Costs) assigned to such Expense Categories shall equal Service
Annex I - 14
<PAGE> 47
Provider's total Expenses (other than Incentive Costs) for the
Half Year for which the assignment is made, (ii) second,
within individual Expense Categories other than the General
Overhead Cost Expense Category and following the assignment of
the General Overhead Cost Expense Category as provided in
paragraph 3.E. below, to the Service Unit Categories within
each individual Expense Category with the result that the sum
of such Service Unit Categories shall equal Service Provider's
total Expenses for such Expense Category for the Half Year for
which the assignment is made.
B. Minimal Allocation Rule. With the objectives of avoiding
disputes and clarifying the operation of the Method, the use
of Allocations shall be minimized and whole dollar assignments
of Expenses shall be made in the Method insofar as possible.
C. Service Unit Prices. Prices for Services shall be determined
by calculating individual Prices for individual Service Units,
expressed as dollars per unit of Service Unit volume
measurement.
D. Fully Allocated Costs. Prices for Service Units shall be
calculated using Fully Allocated Costs.
E. No Markup. No markup, profit margin, rate of return, or any
other such number, factor, or rate shall be applied by Service
Provider in any manner in any calculation performed pursuant
to the Method. This principle shall not pertain to Cost of
Capital.
F. Use of GAAP. GAAP shall be used to govern all accounting
policies related to the Method.
G. No Double Charges. Each Price shall be calculated so as to
ensure that such Price shall not result in Service Provider
charging Customer more than once for the same Expense dollars.
Service Provider shall ensure that the principle expressed in
this paragraph is applied.
H. Information and Adjustments to Calculations. Service Provider
shall provide to Customer any information that Customer
reasonably requests, and that is in Service Provider's
possession, related to any of the Allocations or other
calculations undertaken by Service Provider as a result of the
provisions of this Exhibit. Service Provider shall make any
adjustments to calculations that are necessary to conform to
the Method.
Annex I - 15
<PAGE> 48
3. Procedure. The Method shall follow this procedure:
A. Specification of Services List. A list of Expense Categories,
Service Unit Categories, Service Units, and Service Unit
volume measurements for which Prices are to be calculated is
defined ("Services List"). The initial Services List
effective upon the Effective Date for the Services Agreement
shall be detailed in the Services Agreement.
B. Calculation of Cost of Capital. The Cost of Capital is
calculated using the following formula:
Cost of Capital shall equal:
(i) 60 divided by x
(ii) where x equals the result of
1 - (1 + Funds Rate) - 60
--------------------------
Funds Rate
C. Calculation of Services Volumes. For each Service Unit
Category detailed on the Services List, Service Provider shall
calculate the actual total volume that Service Provider
produced of Service Units (of all types) within such Service
Unit Category during the previous Half Year (for Service
Provider and all customers of Service Provider). The volume
calculated for each Service Unit type within such Service Unit
Category shall be called the "Service Unit Volume" for such
Service Unit type.
D. Assignment of Expenses to Expense Categories. Individually
for each Expense Category, the Permitted Costs shall be
assigned to Expense Categories. Subject to the Minimal
Allocation Rule, in the case of Indirect Costs, Amortized
Costs, or Depreciated Costs, an Allocation may be used to
divide such Indirect Costs, Amortized Costs, or Depreciated
Costs among more than one Expense Category.
E. Assignment of the General Overhead Costs Expense Category.
Following the assignment detailed in paragraph 3.D., the
General Overhead Cost Expense Category shall be assigned to
each other Expense Category by adding to each such Expense
Category the result of multiplying (x) the ratio of (i) the
dollar amount of such Expense Category divided by (ii) the
total dollar amount of all
Annex I - 16
<PAGE> 49
Expense Categories other than the General Overhead Cost
Expense Category, by (y) the dollar amount of the General
Overhead Cost Expense Category.
F. Assignment of Expense Categories to Service Unit Categories.
Individually for each Service Unit Category within an Expense
Category, the total of the Permitted Costs assigned to such
Expense Category, as provided in paragraphs 3.D. and 3.E.,
shall be assigned to such Service Unit Categories within such
Expense Category with the result that the sum of all Service
Unit Categories for such Expense Category equals the total of
the Permitted Costs assigned to such Expense Category.
G. Calculation of Prices. For each Service Unit Category, the
Price for each Service Unit within such Service Unit Category
shall be calculated following these steps:
STEP 1. Calculation of Direct, Indirect, and General Overhead Cost
Pool.
Individually for each Service Unit type within such Service Unit
Category, the Permitted Costs that are either Direct Costs, Indirect
Costs, or General Overhead Costs related to the provision of Service
Units within that Service Unit Category by Service Provider shall be
summed. The result of this calculation shall be called the "Direct,
Indirect, and General Overhead Cost Pool" for such Service Unit type.
In the case of Indirect Costs or General Overhead Costs, an Allocation
may be used to divide such Indirect Costs or General Overhead Costs
among more than one Service Unit type within that Service Unit
Category.
STEP 2. Calculation of Amortized Cost Pool.
Individually for each Service Unit type within such Service Unit
Category, the Permitted Costs that are Amortized Costs related to the
provision of Service Units within that Service Unit Category by
Service Provider shall be (x) summed, and (y) the sum (x) shall be
multiplied by the Cost of Capital. The result (y) of this calculation
shall be called the "Amortized Cost Pool" for such Service Unit type
within that Service Unit Category. In the case of Amortized Costs,
an Allocation may be used to divide such Amortized Costs among more
than one Service Unit type within that Service Unit Category.
STEP 3. Calculation of Depreciated Cost Pool.
Individually for each Service Unit type within such Service Unit
Category, the Permitted Costs that are Depreciated Costs related to
the provision of such Service Unit type within that Service Unit
Category by Service Provider shall be (x) summed,
Annex I - 17
<PAGE> 50
and (y) the sum (x) shall be multiplied by the Cost of Capital. The
result (y) of this calculation shall be called the " Depreciated
Cost Pool" for such Service Unit type within that Service Unit
Category. In the case of Depreciated Costs, an Allocation may be used
to divide such Depreciated Costs among more than one Service Unit type
within that Service Unit Category.
STEP 4. Calculation of a Service Unit's Total Cost Pool.
Individually, for each Service Unit type within such Service Unit
Category, the Direct, Indirect, and General Overhead Cost Pool for
such Service Unit type within that Service Unit Category, the
Amortized Cost Pool for such Service Unit type within that Service
Unit Category, and the Depreciated Cost Pool for such Service Unit
type within that Service Unit Category shall be summed. The result of
this calculation shall be termed the "Total Cost Pool" for such
Service Unit type within that Service Unit Category.
STEP 5. Calculation of a Service Unit's Price.
Individually, for each Service Unit type within such Service Unit
Category, the Total Cost Pool for such Service Unit type within that
Service Unit Category shall be divided by the Service Unit Volume for
such Service Unit type within that Service Unit Category. The result
of this calculation shall be the Price for such Service Unit type
within that Service Unit Category.
4. Revision of Service Units. Service Provider may add to or otherwise
revise the list of Service Units for the Services Agreement and the
corresponding Price for Service Units at any time, provided, however,
that Service Provider may not unbundle or reorganize prices or cost
pools for the purpose of increasing charges to Customer. In the event
that a revision to the list of Service Units is necessitated by the
addition of a Service Unit for which (i) a Price was not previously
calculated, and (ii) no Direct Costs have been incurred by Service
Provider, then Service Provider may calculate a Price for such
additional Service Unit using a projection of Expenses related to the
provision of such Service Unit.
5. Effective Price List. For each Half Year, a Price List shall be used
by Service Provider to invoice Customer for Services provided under
the terms of the Services Agreement.
A. Initial Prices. Upon the Effective Date of the Services
Agreement the initial Price List ("Initial Price List") for
Services provided by Service Provider under the terms of the
Services Agreement shall be the Prices detailed in an exhibit
to the Services Agreement. Such Initial Price List shall be
used
Annex I - 18
<PAGE> 51
through the last day of the Half Year that follows the
Effective Date of the Services Agreement. The worksheets and
other materials used to calculate the Initial Price List,
pursuant to the Method, shall be attached to the Services
Agreement.
B. Price List Recomputation. At the conclusion of each Half Year
Service Provider shall undertake a Price List recomputation
("Price List Recomputation"). For the Half Year ending each
June 30, the Price List Recomputation shall be provided to
Customer by August 15. For the Half Year ending each December
31, the Price List Recomputation shall be provided to Customer
by February 15. The Price List Recomputation shall be
undertaken following these steps:
1. Prices ("Step One Prices") for each Service Unit shall be
calculated using (i) the Method, (ii) actual Expenses for
the immediately preceding Half Year, and (iii) actual
volumes for Service Units produced by Service Provider for
the immediately preceding Half Year. The Step One Prices
shall become the Effective Prices for the then-current
Half Year.
2. The difference, if any, between the Step One Price for a
Service Unit and the corresponding Price for such Service
Unit on the effective Price List for the immediately
preceding Half Year shall be multiplied by the sum of (x)
one plus (y) the product of the Funds Rate and six. This
result is the "Price Adjustment Factor." The Price
Adjustment Factor for each Service Unit shall be
multiplied by the volume invoiced by Service Provider to
Customer for such Service Unit during the preceding Half
Year ("Adjusted Charge"). The sum of the Adjusted Charges
for all Service Units shall be divided by six ("Net
Adjustment"). If the Net Adjustment is greater than zero,
then Service Provider shall invoice Customer each month
during the then-current Half Year an amount equal to the
Net Adjustment. If the Net Adjustment is less than zero,
then Service Provider shall give a credit to Customer each
month during the then-current Half Year an amount equal to
the Net Adjustment.
Annex I - 19
<PAGE> 52
ANNEX I -- EXHIBIT B
Annex I - 20
<PAGE> 53
THE FOLLOWING SCHEDULE HAS BEEN PREPARED PURSUANT TO RULE 12b-31 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
SCHEDULE I TO EXHIBIT 10.5
DOCUMENTS THAT HAVE NOT BEEN FILED AS EXHIBITS
BECAUSE THEY DO NOT CONTAIN ANY MATERIAL DIFFERENCES
FROM EXHIBIT 10.5
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., Air Canada, Resnet
Holdings, Inc., Air Alliance, Inc., Air BC Limited, Air Nova and Air Ontario.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., US Airways Group,
Inc., US Airways, Inc. USAM Corp., Jetstream International Airlines, Inc.,
Pennsylvania Commuter Airlines, Inc. and Piedmont Airlines, Inc.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., Alitalia Aeree
Italiane S.p.A. and Sigma Travel Systems S.p.A.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., Retford Limited,
Timas Limited, Aer Lingus plc, Compania Hispano Irlandesa D'Avacion S.A. and
Aer Lingus Commuter Limited.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., Olympic Airways
S.A., Olynet, Inc., Galileo Hellas S.A., Olympic Aviation S.A. and Macedonian
Airlines S.A.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., Coporga, Inc. and
Transportes Aeros Portugueses S.A.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., SAir Group Ltd.,
Swissair Swiss Air Transport Company Limited, Roscor A.G., Crossair Ltd. Co.
and Balair - CTA Ltd.
Amended and Restated Non-Competition Agreement dated as of July 30, 1997 among
Galileo International, Inc., Galileo International, L.L.C., Austrian Airlines,
Oesterreichische Luftverkehrs Aktiengesellschaft, Travidata, Inc., Traviaustria
Datenservice Fuer Reise Und Touristik GmbH and Austrian Airtransport,
Oesterreichische Flugbetriebs GmbH.
<PAGE> 1
EXHIBIT 10.6
CONFORMED COPY
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE SYMBOL "[*]" HAS BEEN INSERTED
IN PLACE OF THE PORTIONS SO OMITTED.
MARKETING COOPERATION
AND SALES REPRESENTATION AGREEMENT
between
US AIRWAYS, INC.
and
GALILEO INTERNATIONAL, L.L.C.
Dated as of July 30, 1997
<PAGE> 2
MARKETING COOPERATION
AND SALES REPRESENTATION AGREEMENT
Table of Headings
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1 Definitions......................................................... 1
2 Sales Agency and Territories........................................ 2
2.1 Sales to NTP Subscribers................................... 2
2.1.1 Sales Agency Appointment.......................... 2
2.1.2 Designated Subscribers............................ 2
2.1.3 Multinational Accounts............................ 2
2.2 Sales to CTMS Customers.................................... 2
2.3 Other Sales Agents......................................... 3
2.4 Territorial Reassignment................................... 3
2.5 Trade Names................................................ 3
3 The Administration of this Agreement................................ 4
3.1 GILLC...................................................... 4
3.2 US Airways................................................. 5
3.3 Meetings and Coordination.................................. 6
4 Responsibilities of US Airways...................................... 6
4.1 NTP Sales Services......................................... 6
4.2 CTMS Sales Services........................................ 7
4.3 Support Services........................................... 8
4.4 Responsibilities With Respect to Excluded
Subscribers................................................ 8
4.5 Sales Planning............................................. 8
4.6 Staffing................................................... 9
4.6.1 Staffing Commitment............................... 9
4.6.2 Review of Staffing Levels......................... 9
4.6.3 Employee Proficiency and Training................. 9
4.6.3.1 Introductory Training.................... 9
4.6.3.2 Employee Proficiency..................... 9
4.6.3.3 Training and Test Materials.............. 10
5 GILLC Responsibilities.............................................. 10
5.1 Marketplace Competitiveness................................ 10
5.2 GILLC Support of Sales Services and Support
Services................................................... 10
5.3 Services of GILLC.......................................... 11
5.4 New Services............................................... 11
5.5 CTMS Products.............................................. 11
5.5.1 Base Products..................................... 11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.5.2 Demonstrations.................................... 11
5.6 Technical Support.......................................... 12
5.7 Technical Assistance Offices............................... 12
5.8 Help Desk.................................................. 12
6 Reporting........................................................... 12
7 Other Marketing Rights.............................................. 12
7.1 GILLC...................................................... 12
7.2 US Airways................................................. 12
8 Terms of Payment.................................................... 13
9 Currency............................................................ 13
10 Term................................................................ 14
11 Confidentiality..................................................... 14
11.1 Confidential Information................................... 14
11.2 Service.................................................... 14
12 Service Marks, Patents, Third Party Data............................ 14
12.1 Use of Service Marks.......................................... 15
12.1.1 GILLC Marks....................................... 15
12.1.2 US Airways Marks.................................. 15
12.2 Patent Indemnity........................................... 15
12.2.1 Actions........................................... 15
12.2.2 Limitation........................................ 15
12.3 Third Party Data........................................... 16
13 Taxes............................................................... 16
13.1 GILLC Responsibilities..................................... 16
13.2 Claims..................................................... 16
14 Limitation of Liability............................................. 16
15 Consequential Damages............................................... 16
16 Termination for Breach.............................................. 17
17 Force Majeure, Delay................................................ 17
18 Indemnification..................................................... 17
19 Guarantee of Performance............................................ 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
20 Third Party Rights.................................................. 18
21 Assignment.......................................................... 18
22 Relationship of the Parties......................................... 18
23 Severability........................................................ 18
24 Survival............................................................ 18
25 Governing........................................................... 19
26 Notices............................................................. 19
27 Headings............................................................ 19
28 Entirety of Agreement............................................... 19
29 Counterparts........................................................ 20
</TABLE>
iii
<PAGE> 5
Table of Attachments
<TABLE>
<S> <C>
Appendix I.........................................................Certain Terms
Appendix II.............................................Budgets and Compensation
Attachment A.......................................................Defined Terms
Attachment B........................................Dispute Resolution Procedure
Exhibit A...................................Area of Primary Sales Responsibility
Exhibit B...........................................List of Excluded Subscribers
Exhibit C.................................................Designated Subscribers
Exhibit D...........................................Sales Representative Reports
Exhibit E....................................................Certain Territories
Schedule 1..................................Certain Information Relating to 1997
</TABLE>
iv
<PAGE> 6
MARKETING COOPERATION AND SALES REPRESENTATION AGREEMENT
US AIRWAYS, INC. AND GALILEO INTERNATIONAL, L.L.C.
This Marketing Cooperation and Sales Representation Agreement
(this "Agreement") effective as of the 30th day of July, 1997 (the "Effective
Date"), by and between GALILEO INTERNATIONAL, L.L.C., a Delaware corporation
("GILLC") with offices at Suite 400, 9700 West Higgins Road, Rosemont, Illinois,
60018, and US AIRWAYS, INC., a Delaware corporation ("US Airways") with offices
at 2345 Crystal Drive, Arlington, Virginia 22227.
RECITALS
WHEREAS US Airways and Apollo Travel Services Partnership, a
Delaware general partnership ("Apollo Partnership"), are parties to a Sales
Representative Agreement, dated as of January 1, 1994 (the "Original
Agreement"); and
WHEREAS GILLC generates computerized reservations services
through GILLC's computer reservation system and distributes such services
worldwide for use by travel-related business entities, by CTMS Customers, and by
individual consumers; and
WHEREAS GILLC desires to appoint Sales Representatives that
will be responsible for the sale of GILLC's reservations services to such
persons and for the provision of ongoing support services to certain of such
persons; and
WHEREAS The parties hereto agree that, because of the
competitiveness of the products and services of GILLC vis-a-vis like products
and services of all other companies within the CRS Industry, US Airways is
desirous of entering into this Agreement; and
WHEREAS The parties hereto agree that, because of US Airways'
knowledge of and contact with a substantial portion of the community of travel
agents within the Territory, GILLC is desirous of entering into this Agreement;
and
WHEREAS US Airways and Apollo Partnership intend to terminate
the Original Agreement and US Airways desires to be a Sales Representative for
GILLC under the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set
forth in this Agreement, GILLC and US Airways hereby agree as follows:
1 Definitions.
<PAGE> 7
2
Capitalized terms used as defined terms in this Agreement have, unless
otherwise defined elsewhere in this Agreement, the meanings provided for each in
Attachment A hereto.
2 Sales Agency and Territories.
2.1 Sales to NTP Subscribers.
2.1.1 Sales Agency Appointment.
With respect to the Assigned Subscribers, GILLC
hereby appoints US Airways as the exclusive limited agent of
GILLC to obtain commitments from the Assigned Subscribers to
subscribe for and lease Galileo Services. US Airways will act
as the sales agent of GILLC only for the limited purposes of
negotiating and obtaining written commitments from NTP
Subscribers on terms and in a form prepared and approved in
advance by GILLC.
2.1.2 Designated Subscribers.
Exhibit C hereto lists the NTP Subscribers with
locations in the sales territories of more than one sales
representative for whom US Airways is the designated provider
of Sales Services and Support Services. US Airways is the
exclusive provider of Sales Services and Support Services for
all locations of such NTP Subscribers in the Territory. GILLC
may add or delete NTP Subscribers from such Exhibit C only
with US Airways' consent. All NTP Subscribers listed on
Exhibit C are "Excluded Subscribers" for all other sales
representatives of GILLC, including for GILLC itself.
2.1.3 Multinational Accounts.
An NTP Subscriber whose Headquarters is in the
Territory and that has outlets (whether owned, licensed, or
otherwise) for its business in both the Territory and outside
the Territory is, for the purposes of this Agreement, a
"Multinational Account". Subsequent to the Effective Date,
during the term of this Agreement, if any Assigned Subscriber
becomes a Multinational Account, whether by growth, merger,
business combination or otherwise, then GILLC and US Airways
will meet to determine the most appropriate process for
account management for such account.
2.2 Sales to CTMS Customers.
With respect to CTMS Customers and CTMS Agents, GILLC hereby
appoints US Airways as its non-exclusive limited agent to obtain
commitments from CTMS Customers and CTMS Agents to purchase, license,
or lease CTMS Services. Pursuant to Section 4.2 below, and except in
those territories where GILLC has granted exclusive distribution rights
to third parties with respect to Galileo Services
<PAGE> 8
3
and CTMS Services, as listed in Exhibit E hereto, US Airways may act as
the sales agent of GILLC worldwide for the limited purposes of
negotiating and obtaining written commitments from CTMS Customers and
CTMS Agents on terms and in a form prepared and approved in advance by
GILLC.
2.3 Other Sales Agents.
Subject to this Section 2 and to Section 3 below, GILLC may at
its discretion appoint other persons as sales agents of GILLC and GILLC
may act on its own behalf as sales agent. GILLC will treat each of its
sales agents in a fair and nondiscriminatory manner and as appropriate
in a manner proportionate to US Airways' responsibilities hereunder
with respect to the terms and conditions of its appointment as a sales
representative, including, but not limited to, the provision of Sales
Services, Support Services, training, the criteria for approvals of
Form Agreements, the compensation arrangements provided by GILLC, and
in all associated support functions that are GILLC's responsibility
hereunder.
2.4 Territorial Reassignment.
A "Territorial Reassignment" shall occur in the event of (i) a
reassignment by GILLC among its sales representatives of territories
outside of the APR but within the Territory, or (ii) the termination of
any arrangement regarding sales agency between GILLC and another sales
representative of GILLC who is performing as a sales agent within the
Territory but not within the APR (an "Other Agent"). In the event of a
Territorial Reassignment, GILLC will offer to US Airways the right of
first refusal to assume sales agent responsibility within such
reassigned territory or within the territory of such terminated Other
Agent. Before such territories are assigned to US Airways, GILLC and US
Airways will negotiate in good faith to adjust the performance
objectives and the compensation therefor as provided in Appendix II. If
US Airways and GILLC are unable within ninety days (90 days) from the
commencement of such negotiations to agree on the terms of adjustment
for the performance objectives and the compensation then GILLC shall be
free to make the Territorial Reassignment to any other agent or GILLC
may perform such sales function for itself.
2.5 Trade Names.
During the term of this Agreement and except as otherwise
provided in this Agreement, with respect to the APR, GILLC will market,
and US Airways will sell, the Reservations Services and CTMS Services
of GILLC under the "Apollo" trade name. Notwithstanding the foregoing,
if, as a result of US Airways' efforts under this Agreement, a customer
of GILLC commits to purchase GILLC products or services outside of the
Territory then GILLC will determine the trade name for such products or
services outside of the Territory. For the purposes of this Agreement
it is
<PAGE> 9
4
assumed, without obligation on GILLC's part, that such trade name
outside of the Territory is "Galileo".
3 The Administration of this Agreement.
US Airways and GILLC agree that the proper and efficient administration
of each party's obligations under this Agreement is essential to meeting the
objectives of the parties hereunder. To this purpose, the parties agree to
dedicate appropriate staff and resources at an executive level, and otherwise,
as follows:
3.1 GILLC.
At all times during the term of this Agreement GILLC will
employ an individual who shall have primary responsibility for meeting
GILLC's obligations under this Agreement, which person shall be a duly
appointed officer of GILLC (the "GILLC Executive"). The GILLC Executive
shall report directly to the President and Chief Executive Officer of
GILLC. The GILLC Executive shall be a person who has experience and
background commensurate with his or her responsibilities. The GILLC
Executive will maintain an office in the Chicago metropolitan region.
The GILLC Executive shall have full authority to bind GILLC in
all matters regarding this Agreement that may arise during the term of
this Agreement, subject to the provisions of the limited liability
company agreement and commitment authorities of GILLC as approved by
GILLC's Managing Member or CEO, including, without limitation:
(i) matters regarding Financial Assistance;
(ii) the approval of agreements with current and potential
customers of GILLC that are negotiated by US Airways
on GILLC's behalf pursuant to this Agreement;
(iii) the negotiation with US Airways of goals and targets
related to GILLC's and US Airways' performance under
this Agreement;
(iv) the compensation owed US Airways by GILLC under this
Agreement, including the negotiation and payment
thereof;
(v) the quantity, quality of performance and training of
personnel provided by GILLC pursuant to its
obligations under this Agreement;
(vi) the coordination of GILLC's role in negotiations with
any third party where such negotiations involve the
participation of parties other than GILLC, US
Airways, and that third party; and
(vii) the coordination and resolution of any issues arising
under this Agreement that, in US Airways' or GILLC's
estimation, are affected by actions that have been or
may be taken by other sales agents of GILLC or by
GILLC.
<PAGE> 10
5
The GILLC Executive may delegate to employees of GILLC or to
persons under the control of GILLC such matters that are his or her
responsibility hereunder and as may be, in the GILLC Executive's
discretion, appropriate for delegation provided that, if US Airways
reasonably objects that such delegation will result in a diminishment
of GILLC's performance hereunder or in a detriment to US Airways'
ability to perform its obligations hereunder, or both, then GILLC will
review the proposed delegation and inform US Airways as to how GILLC
will address US Airways' reasonable concerns.
3.2 US Airways.
At all times during the term of this Agreement US Airways will
employ an individual to have primary responsibility for meeting US
Airways' obligations under this Agreement, which person shall be a duly
appointed officer of US Airways (the "US Airways Executive"). The US
Airways Executive shall be a person who has experience and background
commensurate with his or her responsibilities. The US Airways Executive
will maintain an office in the Washington, D.C. metropolitan region.
The US Airways Executive shall have full authority to bind US Airways
in all matters regarding this Agreement that may arise during the term
of this Agreement, subject to the provisions of the corporate by-laws
and commitment authorities of US Airways, Inc., as approved by US
Airways, Inc.'s Board of Directors or CEO, including, without
limitation:
(i) the conduct of US Airways' negotiations with current
and potential customers of GILLC on GILLC's behalf
pursuant to this Agreement;
(ii) the negotiation with GILLC of goals and targets
related to GILLC's and US Airways' performance under
this Agreement;
(iii) the compensation owed US Airways by GILLC under this
agreement, including the negotiation and payment
thereof;
(iv) the quantity, quality of performance and training of
personnel provided by US Airways pursuant to its
obligations under this Agreement;
(v) the coordination of US Airways' role in negotiations
with any third party where such negotiations involve
the participation of parties other than GILLC, US
Airways, and that third party; and
(vi) the coordination and resolution of any issues arising
under this Agreement that, in US Airways' or GILLC's
estimation, are affected by actions that have been or
may be taken by other sales agents of GILLC or by
GILLC.
The US Airways Executive may delegate to employees of US
Airways or to persons under the control of US Airways such matters that
are his or her responsibility hereunder and as may be, in the US
Airways Executive's estimation, appropriate for delegation, provided
that, if GILLC reasonably objects that such
<PAGE> 11
6
delegation will result in a diminishment of US Airways' performance
hereunder or in a detriment to GILLC's ability to perform its
obligations hereunder, or both, then US Airways will review the
proposed delegation and inform GILLC as to how US Airways will address
GILLC's reasonable concerns.
3.3 Meetings and Coordination.
The GILLC Executive and the US Airways Executive shall meet
from time to time, whether telephonically or in person and on a
schedule to which they mutually agree, to review the progress of each
party's performance under this Agreement as well as general economic
and travel industry market conditions or factors that may potentially
affect one or the other party performance hereunder.
4 Responsibilities of US Airways.
4.1 NTP Sales Services.
Primarily using US Airways' General Sales Personnel, US
Airways will actively engage in the sale, marketing, and promotion of
Galileo Services to the Assigned Subscribers. To this end, US Airways
will perform the following services for GILLC pursuant to this
Agreement (such services are, collectively, "NTP Sales Services"):
(i) Scope. US Airways will engage in NTP Sales Services regarding
only those Galileo Services as directed or authorized in
advance by GILLC.
(ii) Contact. US Airways will maintain current and establish new
personal and telephone contact and sales relationships,
including, where appropriate, in person or telephone sales
calls. At GILLC's expense, US Airways may, on approval of
GILLC, undertake direct mail solicitations, promotions, and
other sales efforts, with NTP Subscribers within the APR.
GILLC may disapprove any sales promotion or solicitation with
respect to the Galileo Services that GILLC in its reasonable
discretion determines to be contrary to the objectives or
policies of GILLC.
(iii) Commitment Review Procedure. US Airways shall follow the
Commitment Review Procedure described in Appendix I below.
(iv) Support Services. Subject to the NTP Form Agreement and within
the Negotiation Range, US Airways shall offer to NTP
Subscribers within the APR such NTP Support Services as are
approved in advance by GILLC.
(v) Discontinued Services. Upon receipt of a Discontinued Service
Notice, as such term is defined in Section 5.1 below, US
Airways will cease Sales Services regarding such Galileo
Service or feature.
(vi) Changes to US Airways Organization. US Airways will give GILLC
prompt written notice regarding any significant re-
organization, redeployment or change of responsibilities of
its General Sales Personnel (an "Organization
<PAGE> 12
7
Change"). If such Organization Change is likely to result in
an inability of US Airways to perform NTP Sales Services in a
metropolitan area in the APR that provides a significant
portion of Total Revenue then US Airways will notify GILLC as
to whether
(a) US Airways chooses to continue providing services
under this Agreement in such area, in which case US
Airways will propose to GILLC how US Airways will
staff the necessary Sales Force coverage for such
area, and GILLC will review US Airways' proposal in
good faith and determine whether it accepts the
proposal; or
(b) US Airways chooses not to continue providing services
under this Agreement in such area.
In the event of (b), above, or of GILLC's rejection of US
Airways' proposal in (a), above, then GILLC may reassign sales
responsibility in such area to another person, including to
GILLC itself.
4.2 CTMS Sales Services.
US Airways will actively engage in the sale, marketing, and
promotion of CTMS Services to CTMS Customers and CTMS Agents. To this
end, US Airways will perform the following services for GILLC pursuant
to this Agreement (such services are, collectively, "CTMS Sales
Services"):
(i) Scope. US Airways will engage in CTMS Sales Services regarding
only those CTMS Services as directed or authorized in advance
by GILLC.
(ii) Product Licensing. As GILLC's non-exclusive sales agent for
the licensing of CTMS Services, subject to Section 2.2 above,
US Airways may market and license CTMS Services to CTMS
Customers and to CTMS Agents. The parties will work together
to develop marketing plans for CTMS Services, including the
name or names of products.
(iii) Contact. US Airways will maintain current and establish new
personal and telephone contact and sales relationships,
including, where appropriate, in person or telephone sales
calls with CTMS Customers and CTMS Agents. At GILLC's expense,
US Airways may, on approval of GILLC, undertake direct mail
solicitations, promotions, and other sales efforts, with CTMS
Customers and CTMS Agents. GILLC may disapprove any sales
promotion or solicitation with respect to the CTMS Services
that GILLC in its reasonable discretion determines to be
contrary to the objectives or policies of GILLC.
(iv) Commitment Review Procedure. US Airways shall follow the
Commitment Review Procedure described in Appendix I below.
(v) CTMS Support Services. Subject to the CTMS Form Agreement and
within the Negotiation Range, US Airways shall offer to CTMS
Customers or CTMS
<PAGE> 13
8
Agents, or both, as the case may be, such CTMS Support
Services as are approved in advance by GILLC.
(vi) Discontinued Services. Upon receipt of a Discontinued Service
Notice, as such term is defined in Section 5.1 below, US
Airways will cease CTMS Sales Services regarding such CTMS
Service.
4.3 Support Services.
In addition to the Sales Services, US Airways will perform the
following services for GILLC pursuant to this Agreement for those NTP
Subscribers with annual HOL Flow in excess of $5 million (such services
are, collectively, "Support Services").
(i) Support Services Calls. Responses to inquiries from, and
regular premises visits and assistance to, NTP Subscribers in
order to establish and maintain good relations and to improve
relations between NTP Subscribers and GILLC, and to aid in
familiarization with and use of Galileo Services and CTMS
Services.
(ii) Technical Questions Received. US Airways will relay promptly
to GILLC any technical questions received by US Airways from
customers of GILLC and, as requested by GILLC, will coordinate
responses thereto.
(iii) Area of Support. US Airways will be responsible for Support
Services for locations of NTP Subscribers within the APR, and
as designated by GILLC outside of the APR (although associated
revenue from non-APR Subscribers designated for support will
be included in Total Revenue).
4.4 Responsibilities With Respect to Excluded Subscribers.
US Airways will not enter into sales negotiations with
Excluded Subscribers except with the prior written approval of GILLC.
GILLC may add or delete NTP Subscribers as Excluded Subscribers on
Exhibit B hereto after consulting with and receiving the consent of all
affected sales representatives, including US Airways. Revenues from all
Assigned Subscribers who become Excluded Subscribers will continue to
be counted for that year in the Total Revenue. US Airways may negotiate
with NTP Subscribers regarding sales commitments outside of the APR (i)
after prior notice to GILLC, (ii) after a reasonable period of time in
which GILLC has had the opportunity to coordinate such sales calls with
its own sales force and with GILLC's other sales representatives, and
(iii) after consent of GILLC. Only those sales outside of the APR
approved in advance by GILLC will be included in Total Revenue totals.
4.5 Sales Planning.
Subject to Appendix II, and in no event later than February 28
of each year, GILLC and US Airways jointly will develop a sales plan
for such year, which sales
<PAGE> 14
9
plan will be designed to increase business opportunities, procure
profitable NTP Subscriber accounts for GILLC and attain or exceed the
Revenue Goal.
4.6 Staffing.
4.6.1 Staffing Commitment.
As described in Appendix I, US Airways will staff a
Sales Force who will provide Sales Services to GILLC under
this Agreement.
4.6.2 Review of Staffing Levels.
US Airways will consult with GILLC from time to time
as requested by either party to review the job descriptions,
minimum qualifications, career paths, and other matters in
connection with the Sales Force. US Airways will consult with
GILLC regarding the staffing of Dedicated Personnel and
Administrative Support Personnel positions to be provided
under this Agreement. Such consultations will include review
of job descriptions and necessary qualifications,
consideration of possible applicants from GILLC and US Airways
as well as third parties, and full consultation and review of
proposed training schedules for each Dedicated Personnel and
Administrative Support Personnel.
4.6.3 Employee Proficiency and Training.
4.6.3.1 Introductory Training.
Prior to commencing any Sales Services on
behalf of GILLC hereunder, all Sales Force personnel
of US Airways must attend a five-day introductory
training course and, thereafter, a two-day refresher
training course at least once annually, at a location
or locations to be mutually agreed between US Airways
and GILLC. As new GILLC products or services are
released by GILLC for Sales Services hereunder, GILLC
will provide training with respect thereto to the
Sales Force at a location or locations as agreed by
the parties. GILLC will bear its own expenses in
providing the training and US Airways will bear its
own expenses of the Sales Force in attending such
training.
4.6.3.2 Employee Proficiency.
US Airways will take all reasonable steps to
ensure that all of the Sales Force who are authorized
to sell or support the products and services of GILLC
hereunder have been trained appropriately and are
proficient to provide Sales Services in accordance
with the terms of this Agreement. GILLC shall have
the right to test the proficiency of individual Sales
Force personnel at the time of their refresher
training
<PAGE> 15
10
and to require additional training for such
individuals as do not demonstrate minimum
proficiency. GILLC will provide all course materials,
test materials, and training facilities necessary to
provide such additional training, and US Airways and
GILLC will mutually establish a reasonable schedule
for the administration of such additional training.
Sales Force personnel who have completed such
additional training will be again tested and those
who again demonstrate an inability to achieve the
minimum level of proficiency will not be counted
toward the required staffing levels prescribed in
this Section 4.6.
4.6.3.3 Training and Test Materials.
GILLC will provide to US Airways in advance
of their use copies of all introductory training
materials, refresher training materials, and
proficiency test vehicles to he used pursuant to this
Section 4.6.3 (collectively, the "Training
Materials"). The Training Materials will always be
constructed according to the best practices for
Training Materials then employed by U.S. industry and
shall be related solely to the reasonable skills
required of a person engaged in the sales of products
and services such as those of GILLC. US Airways may,
at its request, review such Training Materials in
advance of their use hereunder and GILLC will make
all reasonable changes requested by US Airways to the
Training Materials.
5 GILLC Responsibilities.
5.1 Marketplace Competitiveness.
GILLC will at all times during the term of this Agreement use
its best efforts to ensure that Galileo Services maintain a superior
level of competitiveness in the CRS Industry. GILLC will give US
Airways as much notice as is reasonably practicable if GILLC
discontinues general distribution or provision of any particular
Galileo Service or CTMS Service or major feature thereof (a
"Discontinued Service Notice")
5.2 GILLC Support of Sales Services and Support Services.
With the objective of ensuring the proper level of GILLC
support for Sales Services and for Support Services provided by US
Airways under this Agreement, GILLC will provide the following support
to US Airways (collectively, the "GILLC Support"):
(i) Copies. GILLC will ensure that US Airways at all times has a
current copy of each version of the Form Agreements together
with such commentary or
<PAGE> 16
11
explanation of the Form Agreements as may be reasonably
required by US Airways for the comprehension and understanding
of the Form Agreements.
(ii) Changes to Form Agreements. GILLC will provide US Airways with
no less than 30 days written notice in the event that GILLC
modifies or discontinues the use of any of the Form
Agreements.
5.3 Services of GILLC.
GILLC will provide Galileo Services, CTMS Services and New
Services to NTP Subscribers, CTMS Customers and CTMS Agents, subject to
the terms of the Form Agreements as negotiated by US Airways and
approved by GILLC pursuant to this Agreement.
5.4 New Services.
GILLC will not distribute any Galileo Service (but excluding
enhancements or replacements of any Galileo Service) that did not exist
as of the Effective Date (a "New Service") through any sales
representative in the Territory, and including GILLC itself, without
first offering US Airways the right of first refusal to become the
exclusive sales agent for such New Service for the APR. GILLC and US
Airways shall negotiate on the reasonable terms of such agency,
including the performance objectives and the compensation therefor as
provided in Appendix II. Failing agreement with US Airways within
ninety days (90 days) of the inception of such negotiations, GILLC may,
upon giving notice to US Airways pursuant to Section 26, below, make
the other sales representative arrangements for the New Service within
the Territory.
5.5 CTMS Products.
5.5.1 Base Products.
GILLC has the ultimate role in determining product
specifications and features of any CTMS Service, and GILLC
will ensure that such specifications and product
implementations of such specifications meet prevailing market
needs. To that end, the GILLC Executive shall consult
regularly with the US Airways Executive as to information that
US Airways may gather in the course of its business that US
Airways believes is relevant to ensuring that the CTMS Service
is competitive with like services and products provided by
other service providers.
5.5.2 Demonstrations.
Upon US Airways' request, subject to GILLC's
agreement, GILLC, at its expense, will provide demonstrations
of CTMS Services to CTMS Customers and/or CTMS Agents. GILLC
will coordinate the content and scheduling of such
demonstrations with US Airways.
<PAGE> 17
12
5.6 Technical Support.
GILLC will provide in a good and workmanlike manner all
installation, connection, and testing of all Galileo Services, CTMS
Services and any field or technical support or field maintenance
required by NTP Subscribers, CTMS Customers, or CTMS Agents. GILLC will
maintain ongoing and appropriate contact with NTP Subscribers, CTMS
Customers and CTMS Agents to facilitate user operation of the Galileo
Services and CTMS Services. Technical sales consulting support will
also be provided by GILLC to the Sales Force.
5.7 Technical Assistance Offices.
GILLC will maintain regional Tech Offices for the use of its
sales representatives that will be staffed by knowledgeable employees
capable of providing technical assistance regarding Galileo Services
and CTMS Services. Such assistance will be available to US Airways
during normal GILLC business hours.
5.8 Help Desk.
GILLC, at its expense, will maintain a telephone call center
or centers for use by the Sales Force, NTP Subscribers, CTMS Customers,
and CTMS Agents during normal business hours for each of those persons
in their places of business. The call centers will be staffed by
knowledgeable persons under the control of GILLC who are capable of
providing prompt, thorough, courteous, and professional technical
assistance regarding the products and services of GILLC.
6 Reporting.
US Airways will furnish, at no cost to GILLC, the reports and documents
set forth in Exhibit D hereto.
7 Other Marketing Rights.
7.1 GILLC.
GILLC reserves the right to market and to support services in
the Sales APR. During the term of this Agreement, and except as
otherwise provided in this Agreement, GILLC will not designate the
Sales APR of US Airways as the area of primary sales responsibility of
any other sales agent of GILLC, including GILLC itself.
7.2 US Airways.
Subject to the provisions of the Non-Competition Agreement,
while US Airways is the sales agent of GILLC under the terms of this
Agreement, US Airways will not act as a sales agent for the
reservations or accounting services of another
<PAGE> 18
13
entity in the CRS Industry in the APR without the prior consent of
GILLC, provided, however, that nothing in this Agreement will prevent
US Airways from:
(i) having US Airways Group Products and Services displayed or
listed in any person's computer reservation system, schedule,
other electronic or paper communications medium, or otherwise;
(ii) providing to any person any technological or computerized
means of delivering information and automation functionality;
(iii) authorizing any person to use US Airways' trademarks and trade
names in connection with advertising US Airways' participation
in such person's computer information or reservation system,
or otherwise;
(iv) endorsing the products or services of another member of the
CRS Industry, provided, however, that US Airways may not
endorse such products or services of such other member of the
CRS Industry as being preferred to those of GILLC, provided,
however, (a) if GILLC does not itself provide such products or
services, or (b) GILLC provides such products or services but
they do not meet US Airways' needs, then, subject to the
provisions of the Non- Competition Agreement, US Airways may
endorse such products or services of such other member of the
CRS Industry in any manner.
8 Terms of Payment.
GILLC will pay US Airways quarterly in arrears, upon receipt and
acceptance by GILLC of US Airways' reports pursuant to Section 6 above for the
preceding quarter and of its invoice therefor, an amount equal to one quarter of
the Base Compensation. Invoices will be prepared and mailed on the first work
day of April, July, October and January of each year. After the end of each
calendar year, following receipt and acceptance by GILLC of US Airways' report
pursuant to Section 6 above with results for the year as a whole, adjustments
will be made as required by Appendix II, and GILLC or US Airways, as
appropriate, will make payment to the other in an amount determined in
accordance with the application of such Section. All payments hereunder will be
made within 30 days of date of invoice by wire transfer, banking instructions to
be given by the recipient thereof in advance of each such transfer. All amounts
due and payable hereunder and not paid within 30 days of date of invoice shall
be subject to late payment interest subject to the following: (i) the Interest
Rate shall be fixed as of the due date of the invoice, and (ii) interest shall
be calculated, on the basis of a 360-day year, from the due date.
9 Currency.
For the purposes of this Agreement all currency calculations shall be
in US Dollars and, to the extent paid in a currency other than US Dollars,
revenue received by GILLC or
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14
expenses incurred by GILLC will be converted to US Dollars at the exchange rate
in effect at the date of the receipt of such revenue or payment of such expense,
as the case may be.
10 Term.
This Agreement is effective as of the Effective Date, and will continue
until the termination of the Non-Competition Agreement. GILLC may issue, no
earlier than July 1 of each year a conditional notice of termination if GILLC
has reasonably determined that US Airways may, as a result of its own failure to
perform and not as a result of a Material Change, not meet its then current
Revenue Goal; if, as of 120 days after such conditional notice, GILLC reasonably
determines that US Airways will not meet such Revenue Goal and so notifies US
Airways, this Agreement will terminate 90 days after such determination (with no
sales exclusivity during the last 30 days of the 90 day period) and US Airways
will be paid for sales services during the last 30 days only at direct labor
cost (adjusted to reflect time devoted to GILLC) and associated expenses.
11 Confidentiality.
11.1 Confidential Information.
Confidential information, including, without limitation,
source code, object code, manufacturing, financial and marketing data,
orders, forecasts, plans, designs, drawings and specifications of
either US Airways or GILLC, which is contained in tangible records
designated as "CONFIDENTIAL", "TRADE SECRET" or "PROPRIETARY", or which
is otherwise communicated on the express basis that the information is
confidential, and which is provided to the other party during the
performance of this Agreement (hereafter "Confidential Information"),
will be treated as confidential and not further disclosed to any third
party without the prior written consent of the providing party, except
as provided under the terms of this Agreement, for five years from the
date such Confidential Information was first received, unless such
Confidential Information was already in the possession of the other
party, is placed in the public domain through no fault of the party
receiving such information, or becomes rightfully available to the
other party through other sources without restriction on disclosure.
11.2 Service.
If either party is served with a subpoena or other legal
process requiring the production or disclosure of any Confidential
Information or US Airways Information, then that party will immediately
notify the owner thereof, and will in good faith attempt to permit the
owner at the owner's expense to intervene and contest such disclosure
or production.
<PAGE> 20
15
12 Service Marks, Patents, Third Party Data.
12.1 Use of Service Marks.
12.1.1 GILLC Marks.
US Airways will use and display the GILLC trade and
service marks in the form specified by GILLC. US Airways will
market the Galileo Services and CTMS Services under product
names established by GILLC and must identify all such Galileo
Services and CTMS Services as the products or services of
GILLC. US Airways may include its name and identifying marks
in association with the name "Galileo" or "Galileo
International". GILLC reserves the right to disapprove any use
of the trade and service marks and other proprietary rights of
GILLC if GILLC determines in its reasonable discretion that
such use is contrary to the objectives or policies of GILLC.
12.1.2 US Airways Marks.
GILLC will not use the trade or service marks of US
Airways without US Airways' prior written consent. US Airways
reserves the right to disapprove any use of the trade and
service marks and other proprietary rights of US Airways if US
Airways determines in its reasonable discretion that such use
is contrary to the objectives or policies of US Airways.
12.2 Patent Indemnity.
12.2.1 Actions.
GILLC will defend at its expense any suit or
proceeding against US Airways based on a claim that any
product or service of GILLC ("GILLC Product") constitutes an
infringement of the patent, trademark, or copyright laws of
the United States, provided that GILLC is notified promptly in
writing and given full and complete authority, information,
and assistance for the defense of such suit or proceeding. If
the foregoing provision is complied with, GILLC will pay
damages and costs awarded against US Airways, but GILLC will
not be responsible for any compromise or settlement made
without its prior written consent. If any GILLC Product is
held to constitute infringement of such patent, trademark, or
copyright and its use is enjoined, GILLC will, at its election
and expense, either obtain for US Airways the right to
continue using such GILLC Product, modify such GILLC Product
so that it is not infringing, or remove such GILLC Product.
12.2.2 Limitation.
GILLC will not be liable to US Airways with respect
to any claim of infringement which is based upon (a)
combination or utilization of a GILLC Product with products or
services not supplied by GILLC; (b) the unauthorized
modification by US Airways or a person other than GILLC or its
designated
<PAGE> 21
16
representatives of any GILLC Product or (c) the use of any
GILLC Product not in accordance with GILLC's specifications or
recommendations.
12.3 Third Party Data.
GILLC makes no representation or warranty regarding the
accuracy or reliability of any schedule, fare, quote, or other
information provided to GILLC by airlines or by hotels, car rental
companies or other vendors of travel related services. GILLC will not
be responsible for, and US Airways hereby releases and waives any
claims against GILLC conceding, the accuracy or reliability of any such
information provided by such third parties.
13 Taxes.
13.1 GILLC Responsibilities.
GILLC will pay any sales, use, or personal property taxes
(except for any tax levied upon or measured by US Airways' gross
receipts) imposed by any taxing authority and required to be paid by
GILLC or US Airways as a result of services provided to GILLC under
this Agreement. GILLC will not be liable for any tax levied upon or
measured by the income of US Airways.
13.2 Claims.
If a claim is made against US Airways for any taxes that are
to be paid by GILLC, US Airways will timely notify GILLC. If GILLC so
requests in writing, US Airways will, at GILLC's expense, take such
action as GILLC may reasonably direct with respect to such taxes,
including payment of such taxes under protest. If the tax has been
paid, and if requested by GILLC, US Airways will, at GILLC's expense,
take such action as GILLC may reasonably direct, including allowing
GILLC to file a claim or commence legal action in US Airways' name, to
recover such tax payment. In the event of refund or recovery of any
tax, or part thereof, US Airways will pay to GILLC promptly that
portion of the tax paid by GILLC, including any interest received
thereon.
14 Limitation of Liability.
Except as provided under Section 18 below ("Indemnification."), each
party's total liability regarding any claim by the other party for breach of
this Agreement is limited to the amount of compensation earned by US Airways for
the year in which the claim arises or, if based on obligations of a continuing
nature and arising after termination, then the final year of this Agreement, and
each party hereby releases and waives any claims against the other party for
such breach in excess of such amount.
<PAGE> 22
17
15 Consequential Damages.
NEITHER PARTY WILL BE LIABLE FOR, AND EACH PARTY WAIVES AND RELEASES
ANY CLAIMS AGAINST THE OTHER PARTY FOR, ANY SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES, INCLUDING DAMAGE TO OR DESTRUCTION OF PROPERTY, LOST
REVENUES, LOST PROFIT, OR LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE, RESULTING FROM
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT.
16 Termination for Breach.
If either party (the "Defaulting Party") breaches any of its duties or
obligations under this Agreement, and such breach continues for thirty days (ten
days regarding failure to pay amounts due) after written notice of such default
from the other party, then the other party may terminate this Agreement at any
time thereafter, effective immediately upon written notice of termination to the
Defaulting Party, without prejudice to any other rights or remedies the
non-defaulting party may have. Upon notice of such termination, the Defaulting
Party will return immediately to the non-defaulting party any and all
confidential or proprietary information, programs, materials, or other data, and
any copies thereof, in the possession or control of the Defaulting Party.
17 Force Majeure, Delay.
Neither party will be responsible for delays in performance caused by
acts of God or governmental authority, strikes or labor disputes, fires or other
loss of manufacturing facilities, breach by suppliers of supply agreements, or
any other cause beyond the reasonable control of that party.
18 Indemnification.
Each party (the "Indemnitor") will indemnify the other party, its
officers, employees, and agents (collectively "Indemnitees") against and hold
each Indemnitee harmless from all claims, suits, judgments, losses, damages,
fines or costs (including reasonable legal fees and expenses) resulting from any
claim, suit, or demand by any third party for injuries to or deaths of persons
or loss of or damage to property arising out of the Indemnitor's performance or
willful misconduct of the Indemnitor, its employees, officers, or agents in
connection with the Indemnitor's performance of this Agreement, except to the
extent caused by the negligence of any Indemnitee. The Indemnitor's obligations
under this paragraph will survive the termination of this Agreement.
19 Guarantee of Performance.
If either party (the "Insolvent Party") becomes insolvent; if the other
party (the "Insecure Party") has evidence that the Insolvent Party is not paying
its bills when due
<PAGE> 23
18
without just cause; if a receiver of the Insolvent Party's assets is appointed;
if the Insolvent Party takes any step leading to its cessation as a going
concern; or if the Insolvent Party either ceases or suspends operations for
reasons other than a strike, then immediately upon receipt of written notice
from the Insecure Party the Insolvent Party will provide adequate assurance,
satisfactory to the Insecure Party, of the future performance of this Agreement.
If bankruptcy proceedings are commenced with respect to the Insolvent Party,
then the Insecure Party may suspend all further performance of this Agreement
until the Insolvent Party assumes or rejects this Agreement pursuant to section
365 of the Bankruptcy Code or any similar or successor provision. Any such
suspension of further performance by the Insecure Party pending the Insolvent
Party's assumption or rejection will not be a breach of this Agreement and will
not affect the Insecure Party's right to pursue or enforce any of its rights
under this Agreement or otherwise
20 Third Party Rights.
Nothing contained in this Agreement establishes or creates, or is
intended or will be construed to establish or create, any right in or any duty
or obligation to any third party.
21 Assignment.
US Airways may assign or transfer this Agreement or any rights granted
or provided for hereunder, in whole or in part, to any person or entity that is
controlled by US Airways, otherwise US Airways may not assign or transfer this
Agreement or any rights granted or provided for hereunder, in whole or in part,
without the written Agreement of GILLC. GILLC may assign or transfer this
Agreement or any rights granted or provided for hereunder, in whole or in part,
to any person or entity that is controlled by GILLC, otherwise GILLC may not
assign or transfer this Agreement or any rights granted or provided for
hereunder, in whole or in part, without the written Agreement of US Airways.
22 Relationship of the Parties.
The relationship of the parties is that of principal and limited agent.
US Airways may bind GILLC only as specifically provided in this Agreement.
23 Severability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect, then the Agreement shall he construed to exclude
such provision and to be enforceable in all other respects, unless to do so
would prejudice the rights of either party or result in such a material change
as to cause performance by either party to be unreasonable.
<PAGE> 24
19
24 Survival.
All provisions of this Agreement which by their terms survive
termination thereof will continue thereafter in full force and effect.
25 Governing Law.
This Agreement, and any dispute arising under or in connection with
this Agreement, including any action in tort, will be governed by the internal
laws of the State of Illinois. Any action brought to (i) preserve the status quo
pending arbitration or (ii) enforce an arbitration proceeding or decision shall
be brought in courts located within Cook County, Illinois, the parties hereby
consenting to personal jurisdiction and venue therein.
26 Notices.
All notices to either party under this Agreement must be in writing and
sent to the following addressee and at the following address:
for GILLC:
Galileo International, L.L.C.
Suite 400
9700 West Higgins Road
Rosemont, Illinois 60018
Attn: President
for US Airways:
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Attn:
Notices will be deemed effective on the date received. Notices by
certified or registered mail (return receipt requested) will be deemed received
on the date shown on the return receipt. Notices sent by telex or facsimile will
be deemed received on the date transmitted if transmitted before 3:30 p.m. time
of recipient, otherwise on the next business day following transmission.
27 Headings.
The section headings and captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
will not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement will be enforced and
construed as if no heading or caption had been used in this Agreement.
<PAGE> 25
20
28 Entirety of Agreement.
This Agreement including any Exhibits or attachments, supersedes all
prior oral or written representations or communications between the parties and
constitutes the entire understanding of the parties regarding the subject matter
of this Agreement. This Agreement supersedes the Sales Representation Agreement
between Apollo Travel Services and US Airways, and the parties hereto agree that
all obligations under that agreement are terminated. This Agreement may be
modified only in a writing signed by both parties.
29 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall be considered one and
the same instrument.
<PAGE> 26
IN WITNESS WHEREOF, the parties have agreed to and executed this
Agreement by their authorized representatives as of the Effective Date first set
forth above.
GALILEO INTERNATIONAL, L.L.C. US AIRWAYS, INC.
By: /s/ James E. Barlett By: /s/ John W. Harper
- -------------------------------- --------------------------------
Name: James E. Barlett Name: John W. Harper
Title: President and Title: Senior Vice President,
Chief Executive Officer Finance and CEO
<PAGE> 27
APPENDIX I
Certain Terms
1. NTP Sales Services.
(i) Quotation. Except as provided in paragraph 1(iii) below, using
the NTP Form Agreement US Airways will quote NTP Subscribers
those terms of the NTP Form Agreement as are appropriately
related to that NTP Subscriber's business.
(ii) Negotiation. On the basis of the NTP Form Agreement US Airways
shall negotiate with NTP Subscribers and attempt to obtain
commitments from NTP Subscribers to purchase Galileo Services
from GILLC.
(iii) [*]
2. CTMS Sales Services.
(i) Quotation. Except as provided in paragraph 2(iii) below, using
the Form Agreements for CTMS Services, US Airways will quote
CTMS Customers or CTMS Agents, or both, as the case may be,
those terms of the CTMS Form Agreement as are appropriately
related to that CTMS Customer's or CTMS Agent's business.
(ii) Negotiation. On the basis of the CTMS Form Agreement US
Airways shall negotiate and attempt to obtain commitments from
CTMS Customers or CTMS Agents, or both, as the case may be, to
purchase, lease or license CTMS Services from GILLC.
(iii) [*]
3. Staffing Commitment.
(i) Dedicated Personnel. US Airways will provide [*] Dedicated
Personnel who will be dedicated [*] percent of their time to
Sales Services; and
(ii) Administrative Support Personnel. US Airways will provide [*]
administrative Support Personnel who will be dedicated [*]
percent ([*]%) of their time to Sales Services.
(APPENDIX I-1)
<PAGE> 28
4. GILLC Support of Sales Services and Support Services.
(i) Form Agreements. GILLC shall prepare all form agreements and
terms including, as applicable and without limitation: the
duration of the form agreements; the quantity and quality of
computer and network equipment to be provided, installed and
maintained by GILLC; list prices ("rack rates") such as lease
fees, license fees, penalties and other charges; productivity
credits and other discounts from list prices, related software
licenses or sublicenses, as the case may be; and other terms
as may be determined by GILLC from time to time (the "Form
Agreements"). With respect to CTMS Services, GILLC will
provide the following Form Agreements: (a) a form of product
license as between GILLC and the CTMS Customer, and (b) a form
of product license as between GILLC and a CTMS Agent pursuant
to which the CTMS Agent is permitted to use CTMS Services on
the behalf of the CTMS Customer.
(ii) [*]
(iii) [*]
(APPENDIX I-2)
<PAGE> 29
Appendix II
Budgets and Compensation
1 General Statement of Method.
With respect to those commitments of customers of GILLC to purchase
products and services from GILLC that, pursuant to this Agreement, US Airways is
instrumental in securing there shall be, by mutual agreement of US Airways and
GILLC, annual revenue plans and annual plans for Financial Assistance spending.
In the course of each year of this Agreement, GILLC will measure and report to
US Airways, at least monthly, actual Total Revenue and Financial Assistance
spending. US Airways shall receive a minimum, guaranteed compensation.
Additionally, US Airways shall receive incentive compensation that is based, for
the year in question, on Total Revenue versus the Revenue Plan and on Financial
Assistance spending versus the FA Budget. Notwithstanding the generality of this
Section 1, the procedure for determining US Airways' compensation under this
Agreement is as described in this Appendix II.
2 Goals.
Subject to Sections 4.5 of this Agreement and Section 3 below, in no
event later than February 28 of each year, US Airways and GILLC will complete
negotiations with respect to the goal for Total Revenue for that year and the
budget for Financial Assistance for that year (respectively, the "Revenue Goal"
and the "FA Budget"). Modifications to the Revenue Goal and the FA Budget are
subject to the provisions of this Agreement. For 1997, the Revenue Goal and the
FA Budget are as shown on Schedule 1 of this Agreement.
3 Financial Assistance.
3.1 FA Budget.
FA Budgets will be determined concurrently with Revenue Goals for
each year during the term of this Agreement and in accordance with the
provisions of Section 2 above. The FA Budget for each year will (i)
include contractual commitments for the payment of Financial Assistance
for that year and for which GILLC is obligated, (ii) include reasonable
estimates and projections as to additional Financial Assistance that
may be required to gain new business or retain existing customers, and
(iii) be commensurate with the Revenue Goal for that year. Subject to
Section 3.2 below, at no time will US Airways be required or requested
to provide Financial Assistance to any person either directly or
through adjustments to, or inclusions in, the FA Budget, the Revenue
Goal, the Base Compensation, the Guaranteed Compensation, the
Performance Compensation, or otherwise.
3.2 Adjustments With Respect to Financial Assistance.
US Airways will not exceed the FA Budget during any year of this
Agreement; [*] percent of all Financial Assistance expenditures by US
Airways in excess of the FA
(APPENDIX II-1)
<PAGE> 30
Budget will be deducted from Total Revenue counted toward the Revenue
Goal for that year. If GILLC's Financial Assistance expenditures with
respect to the Total Revenue are under the FA Budget for that year then
the difference between such expenditures and the FA Budget will be
added to Total Revenue counted toward the Revenue Goal for that year.
4 Failure to Agree.
4.1 Dispute Resolution Procedure.
Failing agreement on the Revenue Goal or the FA Budget, or both, the
negotiators will submit their positions to the Dispute Resolution
Procedure as described in Attachment B hereto.
4.2 Carryover Plan.
Until such time as the Dispute Resolution Procedure is completed the
parties shall operate under this Agreement on the basis of a "Carryover
Plan" that shall include, with respect to the calendar year in
question:
(i) a "Carryover Revenue Goal" for that calendar year that will
function for the purposes of this Agreement in lieu of the
Revenue Goal for that year and that equals the Revenue Goal
for the immediately preceding calendar year increased or
decreased, as the case may be, by the FAA Factor;
(ii) a "Carryover FA Budget" for that calendar year that will
function for the purposes of this Agreement in lieu of the FA
Budget for that year and that equals the FA Budget for the
immediately preceding calendar year increased or decreased, as
the case may be, by the FAA Factor; and
(iii) a "Carryover Base Compensation" for that calendar year that
will function for the purposes of this Agreement in lieu of
the Base Compensation for that year and that equals the Base
Compensation for the immediately preceding calendar year
increased by [*].
5 Material Changes.
If a change occurs in the structure of the air transportation industry
or of the CRS Industry, including without limitation changes in the number or
types of competitors, customers, products, or services of either industry, which
change is likely to cause either or both of the following cases (i) a material
change to the flows of revenue through ARC, or (ii) a requirement that entails
the provision of substantial additional Sales Services in the APR (in either
case a "Material Change"), then, as the case may be, (a) either GILLC or US
Airways may request that the parties renegotiate the Revenue Goal or the FA
Budget, or both, for that year, and (b) US Airways will have the right of first
refusal, exercisable within ten business days of written notice from GILLC, to
elect to provide such additional Sales Services in the APR. Failing agreement on
adjustments to the Revenue Goal or the FA Budget, or both, such adjustments to
the Revenue Goal or the FA Budget, or both, will be determined as provided in
Section 4.1 above.
(APPENDIX II-2)
<PAGE> 31
6 Base Compensation.
"Base Compensation" shall be the prior year's Base Compensation
increased by an amount equal to [*] of such prior year's Base Compensation
prorated, for increases [*], as the percentage of the prior year's Revenue Goal
attained by US Airways increases from [*]. Base Compensation for 1997 is as
provided on Schedule 1 of this Agreement.
7 Guaranteed Compensation.
US Airways will be paid [*] of Base Compensation ("Guaranteed
Compensation") if US Airways meets the staffing levels as provided in Section 6
above. US Airways will be paid [*] percent of Base Compensation in any event if
US Airways meets its Revenue Goal. [*] of Base Compensation will be at risk
based on the Revenue Goal performance (the "Performance Compensation").
8 [*]
9 Advance Credit.
Notwithstanding anything to the contrary contained in this Appendix II,
in the event US Airways attains [*] of the Revenue Goal for a year then US
Airways may, at its option, be credited, for purposes of determining its
compensation under this Appendix II, with the amount (the "Advance Credit")
necessary to achieve [*] of its Revenue Goal for such year. US Airways shall
exercise its option hereunder to take an Advance Credit by written notice to
GILLC received no later than the fifth business day of the next succeeding year.
The amount of the Advance Credit shall be deducted from Total Revenue otherwise
attributable to US Airways for any purpose under this Agreement during January
of such succeeding year. No such Advance Credit shall be taken into account in
setting the Revenue Goal. US Airways may not exercise the option under this
Section 9 in two successive years.
10 Penalties: US Airways.
If US Airways meets the staffing minimums provided in Section 4.7 of
this Agreement, US Airways will receive its Guaranteed Compensation as set forth
in this Appendix II. If US Airways fails to meet such staffing minimums and
fails to meet its Revenue Goal, then
[*]
Notwithstanding the foregoing, so long as US Airways meets its Revenue
Goal for the year, US Airways will receive its Base Compensation for such year
regardless of staffing goals attained.
(APPENDIX II-3)
<PAGE> 32
Attachment A
Defined Terms
As used in this Agreement, including the Attachments, Exhibits and Schedules
hereto, the terms listed in this Attachment A have the meanings ascribed to
them. The use of a term in the singular that is defined herein in the plural is
understood in this Agreement to signify a single instance of such defined
matter.
"Accounting Services" means those travel agency accounting services that are
provided by GILLC to customersof GILLC.
"Administrative Support Personnel" means those General Sales Personnel who
perform primarily administrative or management functions in the provision of
Sales Services pursuant to this Agreement.
"Advance Credit" has the meaning ascribed to that term in Section 9 of Appendix
II.
"APR" means "Area of Primary Sales Responsibility" as defined herein.
"ARC" means Airlines Reporting Corporation.
"Area of Primary Sales Responsibility" means the exclusive geographic area of
primary sales responsibility assigned to US Airways as described in Exhibit A
hereto and as such geographic area may be amended from time to time in
accordance with the provisions of this Agreement.
"Assigned Subscribers" means (i) all NTP Subscribers within the APR and (ii) the
Designated Subscribers, but excluding the Excluded Subscribers.
"Base Compensation" has the meaning ascribed to that term in Section 6 of
Appendix II and, in the event that there is a Carryover Base Compensation, means
such Carryover Base Compensation.
"BSP" means an entity, including, without limitation, IATA, that performs
accreditation, revenue reporting and clearing functions such as those performed
by ARC.
"Cancelled Deal" has the meaning ascribed to that term in Section 5.2 above.
"Carryover Base Compensation" has the meaning ascribed to that term in Section
4.2 of Appendix II.
(ATTACHMENT A-1)
<PAGE> 33
"Carryover FA Budget" has the meaning ascribed to that term in Section 4.2 of
Appendix II.
"Carryover Plan" has the meaning ascribed to that term in Section 4.2 of
Appendix II.
"Carryover Revenue Goal" has the meaning ascribed to that term in Section 4.2 of
Appendix II.
"Commitment Review Procedure" has the meaning ascribed to that term in Section
5.2 above.
"Corporate Direct System" means a computerized travel reservations system that
is integrated with desktop travel management software including, for example,
travel policy enforcement, expense management, and management reporting
functionality and is (i) selected by a CTMS Customer for use by its employees,
or (ii) selected for use by a CTMS Agent retained by a CTMS Customer to service
the travel planning and management requirements of such CTMS Customer.
"CRS Industry" means the group of business entities who provide products and
services alike to the products and services of GILLC.
"CTMS Agent" means a Travel Agent, NTP Subscriber, service bureau, or other
person with whom a CTMS Customer has an agreement pursuant to which the CTMS
Agent performs services related to the use of a CTMS and other aspects of that
CTMS Customer's travel planning and travel management requirements.
"CTMS Customer" means a corporation, partnership, or other person who is an
existing or a potential purchaser of CTMS Services from GILLC.
"CTMS Form Agreement" means a Form Agreement that relates to CTMS Services.
"CTMS Sales Services" has the meaning ascribed to that term in Section 4.3
above.
"CTMS Services" means any portion of a Corporate Direct System provided by
GILLC, whether itself, or through an arrangement or arrangements between GILLC
and a third party or third parties.
"CTMS" means a CTMS Service.
"Designated Subscribers" means those NTP Subscribers listed on Exhibit C hereto
and as amended pursuant to this Agreement.
(ATTACHMENT A-2)
<PAGE> 34
"Dedicated Personnel" means General Sales Personnel of at least Account
Executive level who will be dedicated full-time (100 percent of work time) to
the provision of Sales Services pursuant to this Agreement.
"Discontinued Multinational Account" has the meaning ascribed to that term in
Section 2.1.3 above.
"Discontinued Service Notice" has the meaning ascribed to that term in Section
5.1 above.
"Dispute" means any dispute, disagreement, claim, or controversy arising in
connection with or relating to this Agreement, or the validity, interpretation,
performance, breach, or termination of this Agreement, including any claim of
breach of representation or warranty or of non-performance.
"Dispute Resolution Procedure" means the procedure described in Attachment B
hereto.
"Dispute Summary" means, with respect to a Dispute and with respect to the party
to the Dispute who shall prepare a Dispute Summary, a written declaration
presenting (i) a statement expressing the issue(s) in Dispute, (ii) facts
relevant to the understanding of the issue(s) in Dispute, and (iii) a statement
expressing the resolution of the Dispute that is sought by the party who
prepares the Dispute Summary.
"Excluded Subscribers" means those NTP Subscribers listed on Exhibit B pursuant
to this Agreement.
"FAA Factor" means, with respect to the Carryover Plan year in question, the
change, expressed as a percentage, in forecast domestic revenue passenger
enplanements for that Carryover Plan year versus the immediately preceding year,
where "forecast domestic revenue passenger enplanements" shall be as provided in
the then-current (as of the time the Carryover Plan is created) "FAA Aviation
Forecasts" issued by the U.S. Department of Transportation, Federal Aviation
Administration, Office of Aviation Policy and Plans.
"Financial Assistance" means the provision by GILLC, and at GILLC's expense, to
any one or more of (i) the Assigned Subscribers, (ii) CTMS Customers, and (iii)
CTMS Agents, of any one or more of: (a) cash payments; (b) indemnification
payments; (c) revenue sharing; (d) booking fee rebates; (e) lease fee waivers;
(f) license fee waivers; (g) productivity or efficiency fee waivers; (h) airline
tickets or other airline, car or hotel perquisites; (i) computer or other
hardware; and (j) other benefits.
(ATTACHMENT A-3)
<PAGE> 35
"FA Budget" means the amount of Financial Assistance established in accordance
with the provisions of Section 3 of Appendix II and, in the event that there is
a Carryover FA Budget, means such Carryover FA Budget.
"Form Agreements" has the meaning ascribed to that term in Section 5.2 above.
"Galileo Board" means the Board of Directors of GILLC.
"Galileo Services" means, collectively, Reservations Services and Accounting
Services, as provided by GILLC in the APR, excluding CTMS Services.
"General Sales Personnel" means regular, full-time employees of US Airways who
either are in training for or are actively engaged in the sale of air
transportation on US Airways, or other persons as may be agreed by GILLC and US
Airways, including Administrative Support Personnel as provided above, but
excluding employees of US Airways engaged primarily in administrative or
management positions that supervise sale planning or implementation policies or
processes of US Airways.
"GI Corp Executive" has the meaning ascribed to that term in Section 3.1 above.
"GILLC Lead" has the meaning ascribed to that term in Section 4.2 above.
"GILLC Support" has the meaning ascribed to that term in Section 5.2 above.
"Guaranteed Compensation" has the meaning ascribed to that term in Section 7 of
Appendix II.
"Headquarters" means, with respect to the corporation or partnership in
question, the city or place in which that corporation or partnership maintains
its principal offices.
"HOL Flow" means, with respect to an individual NTP Subscriber, the annual sales
of air transportation revenue, as measured by ARC and BSPS, for all locations of
that NTP Subscriber.
"IATA" means the International Air Transport Association.
"Independent Directors" means the members of the Galileo Board who are neither
nominated by an airline owner of GILLC or are members of the executive
management of GILLC.
(ATTACHMENT A-4)
<PAGE> 36
"Interest Rate" means the mathematical average of the prevailing
dollar-denominated 30 day and 90 day London Interbank Offered Rates (LIBOR), as
reported in the Wall Street Journal for a specified business day, plus 200 basis
points.
"Level One Bonus" has the meaning ascribed to that term in Section 8 of Appendix
II.
"Level Two Bonus" has the meaning ascribed to that term in Section 8 of Appendix
II.
"Managing Member" means the member of GILLC who shall manage GILLC in accordance
with the limited liability company agreement of GILLC, which member is Galileo
International, Inc., a Delaware corporation.
"Material Change" has the meaning ascribed to that term in Section 5 of Appendix
II.
"Negotiation Range" has the meaning ascribed to that term in Section 5.2 above.
"Neutral Travel Provider" means any Travel Agent that sells the products and
services of Vendors and holds itself out as a neutral source of information
regarding Vendors and their services or products.
"New Service" has the meaning ascribed to such term in Section 5.2 above.
"Non-Competition Agreement" means the Amended and Restated Non- Competition
Agreement among GILLC, US Airways and USAM Corp. dated as of July 30, 1997.
"Non-Vendor Revenue" means all revenue received by GILLC from NTP Subscribers,
CTMS Customers, CTMS Agents, and other persons and including, without
limitation, lease and license payments, install/deinstall charges, variable
charges (including but not limited to charges for tickets, itineraries and
invoice documents), and backroom lease and license fees, net of discounts, but
not including Vendor Revenue.
"NTP" means Neutral Travel Provider, as defined herein.
"NTP Form Agreement" means a Form Agreement that relates to Galileo Services,
but excluding CTMS Services.
"NTP Sales Services" has the meaning ascribed to that term in Section 4.1 above.
"NTP Subscriber" means a Neutral Travel Provider who is an existing or a
potential purchaser of Galileo Services from GILLC.
(ATTACHMENT A-5)
<PAGE> 37
"Other Agent" has the meaning ascribed to that term in Section 2.4 above.
"Performance Compensation" has the meaning ascribed to that term in Section 7 of
Appendix II.
"Reporting Number" means an account number issued by the Airline Reporting
Corporation or by the International Air Transport Association, or both, to an
individual or entity for the purpose of authorizing such individual or entity to
operate as a travel agency.
"Reservations Services" means the computerized display, reservation, ticketing,
or sale of the services or products of Vendors including the availability and
price thereof, as generated by GILLC to any person other than Vendors.
"Revenue Goal" has the meaning ascribed to that term in Section 2 of Appendix
II.
"Sales Services" means, collectively, NTP Sales Services, and CTMS Sales
Services.
"Sales Force" means, collectively, the Administrative Support Personnel and
Dedicated Support Personnel.
"Senior Review Committee" means a committee consisting of GILLC's President and
US Airways' Senior Vice President - North America.
"Support Services" has the meaning ascribed to that term in Section 4.4 above.
"Tech Office" means a technical support center (at times referred to
colloquially as a "TN" office) operated and staffed by GILLC with personnel
proficient in all technical aspects of the use by end-users of GILLC products
and services.
"Territorial Reassignment" has the meaning ascribed to that term in Section 2.4
above.
"Territory" means, collectively, the United States of America together with its
territories and protectorates, and the Republic of Mexico.
"Total Revenue" means the sum of Non-Vendor Revenue and Vendor Revenue, with
respect to the APR plus such revenue generated from Designated Subscribers less
such revenue generated from Excluded Subscribers, provided that any such revenue
generated from the location of an Excluded Subscriber in the calendar year in
which such location commences purchasing Galileo Services shall be included in
the Total Revenue only for the sales representative who was responsible for such
sale of Galileo Services.
(ATTACHMENT A-6)
<PAGE> 38
"Training Materials" has the meaning ascribed to that term in Section 4.7.3.3
above.
"Travel Agent" means an individual or entity, that has been assigned a Reporting
Number.
"US Airways Executive" has the meaning ascribed to that term in Section 3.2
above.
"US Airways Group Products and Services" means with respect to US Airways and
any carrier that uses US Airways' airline designator code in the display of
certain designated flights (collectively, the "group carriers") the schedule,
seat availability, and price thereof of the group carriers, including, without
limitation, air and/or non-air travel packages that may include ancillary air
segments on non-group-carrier airlines.
"US Dollar" means the lawful currency of the United States of America.
"Vendor" means a vendor of travel-related services, such as an airline, hotel,
or rental car company, tour package, cruise operator, or travel insurance
company, that has purchased or subscribed for Reservations Services.
"Vendor Revenue" means all revenue received by GILLC from Vendors with respect
to booking fees and other service charges or fees as a result of bookings and
other transactions for which GILLC charges a fee to Vendors, which such bookings
and other transactions are generated by NTP Subscribers, CTMS Customers, CTMS
Agents, and other persons.
(ATTACHMENT A-7)
<PAGE> 39
Attachment B
Dispute Resolution Procedure
1. General Procedure.
Except as otherwise stated in the Agreement, the parties hereto shall
resolve all Disputes in accordance with this procedure:
(a) Each party shall instruct its appropriate representative to promptly
negotiate in good faith with the other party's appropriate
representative to resolve the Dispute. The GILLC Executive shall be the
representative of GILLC. The US Airways Executive shall be the
representative of US Airways.
(b) If the representatives do not resolve the Dispute within ten business
days (or such longer period as the Representatives may agree) after the
date of referral of the Dispute to them, the representative of each
party will prepare a Dispute Summary with respect to that party's
position in the Dispute. The Dispute shall be referred (by either or
both of the representatives) to the Senior Review Committee for
resolution on the basis of the Dispute Summaries prepared by each
party.
(c) If the Senior Review Committee does not resolve the Dispute within ten
business days (or such longer period as that Committee may agree) from
the date of referral to it, either party may submit the Dispute to
binding arbitration in accordance with Section 2 of this Attachment.
2. Arbitration Procedure
The Arbitration Procedure shall be the "baseball" arbitration procedure provided
in Section 5.04 of the Amended and Restated Computer Services Agreement between
US Airways and GILLC, modified as necessary with respect to defined terms in
this Agreement.
(ATTACHMENT B-1)
<PAGE> 40
Exhibit A
AREAS OF PRIMARY RESPONSIBILITY
[*]
[TWO PAGES OMITTED]
(EXHIBIT A-1)
<PAGE> 41
Exhibit B
List of Excluded Subscribers
[*]
[ONE PAGE OMITTED]
(EXHIBIT B-1)
<PAGE> 42
Exhibit C
Designated Subscribers
[*]
[ONE PAGE OMITTED]
(EXHIBIT C-1)
<PAGE> 43
Exhibit D
Sales Representative Reports
1) Staffing Report. A quarterly written advice of staffing levels.
2) Account Activity Reports setting forth: Gains (signed contracts/OA's);
Losses, Renewals; Changes/Updates to target lists - due on last day of
each month.
3) Redistricting Reports and Administrative Files. On GILLC's request,
contains account alignments and assignments.
(EXHIBIT D-1)
<PAGE> 44
Exhibit E
Certain Territories
PARTNER HOME NATIONAL TERRITORIES
Austria
Canada
Greece
Ireland
Italy
Japan
Portugal
The Netherlands
United Kingdom
ASSOCIATE DISTRIBUTOR TERRITORIES
1. ARABI
Algeria
Bahrain
Djibouti
Egypt
Iraq
Jordan
Kuwait
Lebanon
Libya
Mauritania
Morocco
Oman
Qatar
Saudi Arabia
Somalia
Sudan
Syria
Tunisia
United Arab Emirates
Yemen
(EXHIBIT E-1)
<PAGE> 45
2. SOUTHERN CROSS
Australia
New Zealand
Papua New Guinea
Islands in the South Pacific Ocean (other than dependencies of
the USA)
3. GALILEO DANMARK
Denmark
4. GALILEO NORDISKA
Finland
Norway
Sweden
5. MALEV
Hungary
6. SAA
South Africa
Independent Homelands
Namibia
Botswana
Lesotho
Swaziland
7. AVENSA
Venezuela
8. THY
Turkey
9. INTERGLOBE
India
(EXHIBIT E-2)
<PAGE> 46
10. PHATARAPRASIT
Thailand
11. RELIANCE
Malaysia
12. MERCATOR (Signed but not yet effective)
Pakistan
13. GETS
Cambodia
Vietnam
Malawi
Mauritania
Papua New Guinea
Tanzania
Croatia
Ukraine
Netherlands Antilles
Aruba
Guyana
Nigeria
Ethiopia
Benin
Burundi
Eritrea
Zaire
Djibouti
Ghana
Gambia
Kenya
Mozambique
Sudan
Cape Verde
Uganda
(EXHIBIT E-3)
<PAGE> 47
Schedule 1
Certain Information Relating to 1997
<TABLE>
<CAPTION>
UNITED STATES APR
-----------------
<S> <C>
1997 REVENUE GOAL $[*]
1997 BASE COMPENSATION $[*]
1997 FA BUDGET $[*]
</TABLE>
(Schedule 1-1)
<PAGE> 1
EXHIBIT 10.7
CONFORMED COPY
CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN
OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE SYMBOL "[*]" HAS BEEN INSERTED
IN PLACE OF THE PORTIONS SO OMITTED.
MARKETING COOPERATION
AND SALES REPRESENTATION AGREEMENT
between
UNITED AIR LINES, INC.
and
GALILEO INTERNATIONAL, L.L.C.
Dated as of July 30, 1997
<PAGE> 2
MARKETING COOPERATION
AND SALES REPRESENTATION AGREEMENT
Table of Headings
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1 Definitions......................................................... 1
2 Sales Agency and Territories........................................ 2
2.1 Sales to NTP Subscribers................................... 2
2.1.1 Sales Agency Appointment.......................... 2
2.1.2 Designated Subscribers............................ 2
2.1.3 Multinational Accounts............................ 2
2.2 Sales to CTMS Customers.................................... 3
2.3 Other Sales Agents......................................... 3
2.4 Territorial Reassignment................................... 3
2.5 Trade Names................................................ 4
3 The Administration of this Agreement................................ 4
3.1 GILLC...................................................... 4
3.2 United..................................................... 5
3.3 Meetings and Coordination.................................. 6
4 Responsibilities of United.......................................... 6
4.1 NTP Sales Services......................................... 6
4.2 Multinational Sales Services............................... 7
4.3 CTMS Sales Services........................................ 9
4.4 Support Services........................................... 9
4.5 Responsibilities With Respect to Excluded Subscribers...... 10
4.6 Sales Planning............................................. 10
4.7 Staffing................................................... 10
4.7.1 Staffing Commitment............................... 10
4.7.2 Review of Staffing Levels......................... 10
4.7.3 Employee Proficiency and Training................. 11
4.7.3.1 Introductory Training.................... 11
4.7.3.2 Employee Proficiency..................... 11
4.7.3.3 Training and Test Materials.............. 11
5 GILLC Responsibilities.............................................. 12
5.1 Marketplace Competitiveness................................ 12
5.2 GILLC Support of Sales Services and Support Services....... 12
5.3 Services of GILLC.......................................... 12
5.4 New Services............................................... 12
5.5 CTMS Products.............................................. 13
5.5.1 Base Products..................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.5.2 Demonstrations.................................... 13
5.6 Technical Support.......................................... 13
5.7 Technical Assistance Offices............................... 13
5.8 Help Desk.................................................. 13
6 Reporting........................................................... 14
7 Other Marketing Rights.............................................. 14
7.1 GILLC...................................................... 14
7.2 United..................................................... 14
8 Terms of Payment.................................................... 15
9 Currency............................................................ 15
10 Term................................................................ 15
11 Confidentiality..................................................... 16
11.1 Confidential Information................................... 16
11.2 Service.................................................... 16
12 Service Marks, Patents, Third Party Data............................ 16
12.1 Use of Service Marks.......................................... 16
12.1.1 GILLC Marks....................................... 16
12.1.2 United Marks...................................... 17
12.2 Patent Indemnity........................................... 17
12.2.1 Actions........................................... 17
12.2.2 Limitation........................................ 17
12.3 Third Party Data........................................... 17
13 Taxes............................................................... 18
13.1 GILLC Responsibilities..................................... 18
13.2 Claims..................................................... 18
14 Limitation of Liability............................................. 18
15 Consequential Damages............................................... 18
16 Termination for Breach.............................................. 18
17 Force Majeure, Delay................................................ 19
18 Indemnification..................................................... 19
19 Guarantee of Performance............................................ 19
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
20 Third Party Rights.................................................. 20
21 Assignment.......................................................... 20
22 Relationship of the Parties......................................... 20
23 Severability........................................................ 20
24 Survival............................................................ 20
25 Governing........................................................... 20
26 Notices............................................................. 21
27 Headings............................................................ 21
28 Entirety of Agreement............................................... 21
29 Counterparts........................................................ 21
</TABLE>
iii
<PAGE> 5
Table of Attachments
<TABLE>
<S> <C>
Appendix I.........................................................Certain Terms
Appendix II.............................................Budgets and Compensation
Attachment A.......................................................Defined Terms
Attachment B........................................Dispute Resolution Procedure
Exhibit A...................................Area of Primary Sales Responsibility
Exhibit B...........................................List of Excluded Subscribers
Exhibit C.................................................Designated Subscribers
Exhibit D...........................................Sales Representative Reports
Exhibit E....................................................Certain Territories
Schedule 1..................................Certain Information Relating to 1997
</TABLE>
iv
<PAGE> 6
MARKETING COOPERATION AND SALES REPRESENTATION AGREEMENT
UNITED AIR LINES, INC. AND GALILEO INTERNATIONAL, L.L.C.
This Marketing Cooperation and Sales Representation Agreement
(this "Agreement") effective as of the 30th day of July, 1997 (the "Effective
Date"), by and between GALILEO INTERNATIONAL, L.L.C., a Delaware limited
liability company ("GILLC") with offices at Suite 400, 9700 West Higgins Road,
Rosemont, Illinois, 60018, and UNITED AIR LINES, INC., a Delaware corporation
("United") with offices at 1200 E. Algonquin Road, Elk Grove Township, Illinois
60007.
RECITALS
WHEREAS United and Apollo Travel Services Partnership, a
Delaware general partnership ("Apollo Partnership"), are parties to a Sales
Representative Agreement, dated as of January 1, 1994 (the "Original
Agreement"); and
WHEREAS GILLC generates computerized reservations services
through GILLC's computer reservation system and distributes such services
worldwide for use by travel-related business entities, by CTMS Customers, and by
individual consumers; and
WHEREAS GILLC desires to appoint Sales Representatives that
will be responsible for the sale of GILLC's reservations services to such
persons and for the provision of ongoing support services to certain of such
persons; and
WHEREAS The parties hereto agree that, because of the
competitiveness of the products and services of GILLC vis-a-vis like products
and services of all other companies within the CRS Industry, United is desirous
of entering into this Agreement; and
WHEREAS The parties hereto agree that, because of United's
knowledge of and contact with a substantial portion of the community of travel
agents within the Territory, GILLC is desirous of entering into this Agreement;
and
WHEREAS United and Apollo Partnership intend to terminate the
Original Agreement and United desires to be a Sales Representative for GILLC
under the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set
forth in this Agreement, GILLC and United hereby agree as follows:
1 Definitions.
Capitalized terms used as defined terms in this Agreement have, unless
otherwise defined elsewhere in this Agreement, the meanings provided for each in
Attachment A hereto.
<PAGE> 7
2
2 Sales Agency and Territories.
2.1 Sales to NTP Subscribers.
2.1.1 Sales Agency Appointment.
With respect to the Assigned Subscribers, GILLC
hereby appoints United as the exclusive limited agent of GILLC
to obtain commitments from the Assigned Subscribers to
subscribe for and lease Galileo Services. Except as provided
in Section 4.2 below, United will act as the sales agent of
GILLC only for the limited purposes of negotiating and
obtaining written commitments from NTP Subscribers on terms
and in a form prepared and approved in advance by GILLC.
2.1.2 Designated Subscribers.
Exhibit C hereto lists the NTP Subscribers with
locations in the sales territories of more than one sales
representative for whom United is the designated provider of
Sales Services and Support Services. United is the exclusive
provider of Sales Services and Support Services for all
locations of such NTP Subscribers in the Territory. GILLC may
add or delete NTP Subscribers from such Exhibit C only with
United's consent. All NTP Subscribers listed on Exhibit C are
"Excluded Subscribers" for all other sales representatives of
GILLC, including for GILLC itself.
2.1.3 Multinational Accounts.
An NTP Subscriber whose Headquarters is in the
Territory and that has outlets (whether owned, licensed, or
otherwise) for its business in both the Territory and outside
of the Territory is, for the purposes of this Agreement, a
"Multinational Account". GILLC has overall responsibility with
respect to Multinational Accounts, including the provision of
services to and all payments of Financial Assistance to such
Multinational Accounts, provided, however, that United has
responsibility for the negotiations with Multinational
Accounts with respect to the products and services of GILLC,
and United and GILLC agree that United together with GILLC
shall undertake all such negotiations pursuant to this
Agreement, including, without limitation, the Multinational
Procedure as described in Section 4.2 below. Exhibit C to this
Agreement lists the Multinational Accounts as of the Effective
Date. Subsequent to the Effective Date, United shall assume
the responsibilities described in this Section 2.1.3 with
respect to any National Account that, during the term of this
Agreement, becomes a Multinational Account, whether by growth,
merger, business combination, or otherwise. In the event that
any Multinational Account ceases to be a Multinational Account
during the term of this Agreement (a "Discontinued
Multinational Account"), then such
<PAGE> 8
3
Discontinued Multinational Account shall no longer be deemed
to be a Multinational Account but shall be deemed to be a
Designated Subscriber. Subsequent to the Effective Date,
during the term of this Agreement, if any Assigned Subscriber
other than an existing Multinational Account or a National
Account becomes a Multinational Account, whether by growth,
merger, business combination, or otherwise, then GILLC and
United will meet to determine the most appropriate process for
account management for such account.
2.2 Sales to CTMS Customers.
With respect to CTMS Customers and CTMS Agents, GILLC hereby
appoints United as its non-exclusive limited agent to obtain
commitments from CTMS Customers and CTMS Agents to purchase, license,
or lease CTMS Services. Pursuant to Section 4.3 below, and except in
those territories where GILLC has granted exclusive distribution rights
to third parties with respect to Galileo Services and CTMS Services, as
listed in Exhibit E hereto, United may act as the sales agent of GILLC
worldwide for the limited purposes of negotiating and obtaining written
commitments from CTMS Customers and CTMS Agents on terms and in a form
prepared and approved in advance by GILLC.
2.3 Other Sales Agents.
Subject to this Section 2 and to Section 3 below, GILLC may at
its discretion appoint other persons as sales agents of GILLC and GILLC
may act on its own behalf as sales agent. GILLC will treat each of its
sales agents in a fair and nondiscriminatory manner and as appropriate
in a manner proportionate to United's responsibilities hereunder with
respect to the terms and conditions of its appointment as a sales
representative, including, but not limited to, the provision of Sales
Services, Support Services, training, the criteria for approvals of
Form Agreements, the compensation arrangements provided by GILLC, and
in all associated support functions that are GILLC's responsibility
hereunder.
2.4 Territorial Reassignment.
A "Territorial Reassignment" shall occur in the event of (i) a
reassignment by GILLC among its sales representatives of territories
outside of the APR but within the Territory, or (ii) the termination of
any arrangement regarding sales agency between GILLC and another sales
representative of GILLC who is performing as a sales agent within the
Territory but not within the APR (an "Other Agent"). In the event of a
Territorial Reassignment, GILLC will offer to United the right of first
refusal to assume sales agent responsibility within such reassigned
territory or within the territory of such terminated Other Agent.
Before such territories are assigned to United, GILLC and United will
negotiate in good faith to adjust the performance objectives and the
compensation therefor as provided in Appendix II. If United and
<PAGE> 9
4
GILLC are unable within ninety days (90 days) from the commencement of
such negotiations to agree on the terms of adjustment for the
performance objectives and the compensation then GILLC shall be free to
make the Territorial Reassignment to any other agent or GILLC may
perform such sales function for itself.
2.5 Trade Names.
During the term of this Agreement and except as otherwise
provided in this Agreement, with respect to the APR, GILLC will market,
and United will sell, the Reservations Services and CTMS Services of
GILLC under the "Apollo" trade name. Notwithstanding the foregoing, if,
as a result of United's efforts under this Agreement, a customer of
GILLC commits to purchase GILLC products or services outside of the
Territory then GILLC will determine the trade name for such products or
services outside of the Territory. For the purposes of this Agreement
it is assumed, without obligation on GILLC's part, that such trade name
outside the Territory is "Galileo".
3 The Administration of this Agreement.
United and GILLC agree that the proper and efficient administration of
each party's obligations under this Agreement is essential to meeting the
objectives of the parties hereunder. To this purpose, the parties agree to
dedicate appropriate staff and resources at an executive level, and otherwise,
as follows:
3.1 GILLC.
At all times during the term of this Agreement GILLC will
employ an individual who shall have primary responsibility for meeting
GILLC's obligations under this Agreement, which person shall be a duly
appointed officer of GILLC (the "GILLC Executive"). The GILLC Executive
shall report directly to the President and Chief Executive Officer of
GILLC. The GILLC Executive shall be a person who has experience and
background commensurate with his or her responsibilities. The GILLC
Executive will maintain an office in the Chicago metropolitan region.
The GILLC Executive shall have full authority to bind GILLC in
all matters regarding this Agreement that may arise during the term of
this Agreement, subject to the provisions of the limited liability
company agreement and commitment authorities of GILLC as approved by
GILLC's Managing Member or CEO, including, without limitation:
(i) matters regarding Financial Assistance;
(ii) the approval of agreements with current and potential
customers of GILLC that are negotiated by United on
GILLC's behalf pursuant to this Agreement;
<PAGE> 10
5
(iii) the negotiation with United of goals and targets
related to GILLC's and United's performance under
this Agreement;
(iv) the compensation owed United by GILLC under this
Agreement, including the negotiation and payment
thereof;
(v) the quantity, quality of performance and training of
personnel provided by GILLC pursuant to its
obligations under this Agreement;
(vi) the coordination of GILLC's role in negotiations with
any third party where such negotiations involve the
participation of parties other than GILLC, United,
and that third party; and
(vii) the coordination and resolution of any issues arising
under this Agreement that, in United's or GILLC's
estimation, are affected by actions that have been or
may be taken by other sales agents of GILLC or by
GILLC.
The GILLC Executive may delegate to employees of GILLC or to
persons under the control of GILLC such matters that are his or her
responsibility hereunder and as may be, in the GILLC Executive's
discretion, appropriate for delegation provided that, if United
reasonably objects that such delegation will result in a diminishment
of GILLC's performance hereunder or in a detriment to United's ability
to perform its obligations hereunder, or both, then GILLC will review
the proposed delegation and inform United as to how GILLC will address
United's reasonable concerns.
3.2 United.
At all times during the term of this Agreement United will
employ an individual to have primary responsibility for meeting
United's obligations under this Agreement, which person shall be a duly
appointed officer of United (the "United Executive"). The United
Executive shall be a person who has experience and background
commensurate with his or her responsibilities. The United Executive
will maintain an office in the Chicago metropolitan region. The United
Executive shall have full authority to bind United in all matters
regarding this Agreement that may arise during the term of this
Agreement, subject to the provisions of the corporate by-laws and
commitment authorities of United Air Lines, Inc., as approved by United
Air Lines, Inc.'s Board of Directors or CEO, including, without
limitation:
(i) the conduct of United's negotiations with current and
potential customers of GILLC on GILLC's behalf
pursuant to this Agreement;
(ii) the negotiation with GILLC of goals and targets
related to GILLC's and United's performance under
this Agreement;
(iii) the compensation owed United by GILLC under this
agreement, including the negotiation and payment
thereof;
<PAGE> 11
6
(iv) the quantity, quality of performance and training of
personnel provided by United pursuant to its
obligations under this Agreement;
(v) the coordination of United's role in negotiations
with any third party where such negotiations involve
the participation of parties other than GILLC,
United, and that third party; and
(vi) the coordination and resolution of any issues arising
under this Agreement that, in United's or GILLC's
estimation, are affected by actions that have been or
may be taken by other sales agents of GILLC or by
GILLC.
The United Executive may delegate to employees of United or to
persons under the control of United such matters that are his or her
responsibility hereunder and as may be, in the United Executive's
estimation, appropriate for delegation, provided that, if GILLC
reasonably objects that such delegation will result in a diminishment
of United's performance hereunder or in a detriment to GILLC's ability
to perform its obligations hereunder, or both, then United will review
the proposed delegation and inform GILLC as to how United will address
GILLC's reasonable concerns.
3.3 Meetings and Coordination.
The GILLC Executive and the United Executive shall meet from
time to time, whether telephonically or in person and on a schedule to
which they mutually agree, to review the progress of each party's
performance under this Agreement as well as general economic and travel
industry market conditions or factors that may potentially affect one
or the other party performance hereunder.
4 Responsibilities of United.
4.1 NTP Sales Services.
Primarily using United's General Sales Personnel, United will
actively engage in the sale, marketing, and promotion of Galileo
Services to the Assigned Subscribers. To this end, United will perform
the following services for GILLC pursuant to this Agreement (such
services are, collectively, "NTP Sales Services"):
(i) Scope. United will engage in NTP Sales Services regarding only
those Galileo Services as directed or authorized in advance by
GILLC.
(ii) Contact. United will maintain current and establish new
personal and telephone contact and sales relationships,
including, where appropriate, in person or telephone sales
calls. At GILLC's expense, United may, on approval of GILLC,
undertake direct mail solicitations, promotions, and other
sales efforts, with NTP Subscribers within the APR. GILLC may
disapprove any sales promotion or solicitation with respect to
the Galileo Services that
<PAGE> 12
7
GILLC in its reasonable discretion determines to be contrary
to the objectives or policies of GILLC.
(iii) Commitment Review Procedure. United shall follow the
Commitment Review Procedure described in Appendix I below.
(iv) Support Services. Subject to the NTP Form Agreement and within
the Negotiation Range, United shall offer to NTP Subscribers
within the APR such NTP Support Services as are approved in
advance by GILLC.
(v) Discontinued Services. Upon receipt of a Discontinued Service
Notice, as such term is defined in Section 5.1 below, United
will cease Sales Services regarding such Galileo Service or
feature.
(vi) Changes to United Organization. United will give GILLC prompt
written notice regarding any significant re-organization,
redeployment or change of responsibilities of its General
Sales Personnel (an "Organization Change"). If such
Organization Change is likely to result in an inability of
United to perform NTP Sales Services in a metropolitan area in
the APR that provides a significant portion of Total Revenue
then United will notify GILLC as to whether
(a) United chooses to continue providing services under
this Agreement in such area, in which case United
will propose to GILLC how United will staff the
necessary Sales Force coverage for such area, and
GILLC will review United's proposal in good faith and
determine whether it accepts the proposal; or
(b) United chooses not to continue providing services
under this Agreement in such area.
In the event of (b), above, or of GILLC's rejection of
United's proposal in (a), above, then GILLC may reassign sales
responsibility in such area to another person, including to
GILLC itself.
4.2 Multinational Sales Services.
United will actively engage in the sale, marketing, and
promotion of Galileo Services to Multinationals. To this end, and
notwithstanding the provisions of Section 4.1 above, United will
perform the following services for GILLC pursuant to this Agreement
(such services are, collectively, "Multinational Sales Services"):
(i) Scope. United will engage in Multinational Sales Services
regarding only those Galileo Services as directed or
authorized in advance by GILLC.
(ii) Multinational Procedure; GILLC Lead; United Lead. With respect
to the management of the account of each Multinational, the
GILLC Executive shall appoint an individual (the "GILLC Lead")
and the United Executive shall appoint an individual (the
"United Lead") who shall have joint responsibility
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for the preparation and conduct of negotiations with that
Multinational. The following procedure (the "Multinational
Procedure") shall apply to the preparation and conduct of such
negotiations:
(a) US Deal. The United Lead shall be the lead negotiator
in negotiations with a Multinational that apply to
Galileo Services that are to be provided by GILLC in
at least the United States of America (a "US Deal").
(b) Sales Calls. All sales calls related to a US Deal and
made in person with the Multinational shall be made
jointly by the United Lead and the GILLC Lead. The
GILLC Lead and the United Lead shall jointly
coordinate contacts and meetings, whether in person
or telephonic or via some other electronic means,
with the Multinational. In the event that the
Multinational initiates contact with one Lead outside
of the presence of the other Lead, then the contacted
Lead will promptly provide the other Lead with
information about such contact insofar as it relates
to the subject matter of this Agreement. In no case
will any GILLC employee or agent discuss any element
of United's business with the Multinational without
United's prior knowledge and consent.
(c) Account Leads - Non-US Deals. In the case of
negotiations with a Multinational that are not
related to a US Deal, this Agreement does not apply,
provided that, GILLC will regularly provide United
with any information related to such non-United
States of America negotiations or services that may
reasonably be understood to be related either to the
conduct and maintenance of United's good relations
with such Multinational or to United's effective
performance under this Agreement, or both. GILLC will
endeavor to provide to United in advance of the
presentation of proposals with respect to non-US
Deals to Multinationals, a summary of the terms of
such proposals. If United provides GILLC with
United's reasonable objections to such terms to the
effect that such terms will, in United estimate, have
a negative effect on United ability to negotiate
acceptable US Deals in the future, with respect to
Financial Assistance or otherwise, then GILLC will
take United's objections into account. If GILLC
negotiates a non-US Deal that includes a level of
Financial Assistance for a Multinational that is
greater than the level of Financial Assistance then
currently agreed with that Multinational under a US
Deal then GILLC will not thereafter attempt to
increase the Revenue Goal or reduce the FA Budget to
offset such increased Financial Assistance.
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4.3 CTMS Sales Services.
United will actively engage in the sale, marketing, and
promotion of CTMS Services to CTMS Customers and CTMS Agents. To this
end, United will perform the following services for GILLC pursuant to
this Agreement (such services are, collectively, "CTMS Sales
Services"):
(i) Scope. United will engage in CTMS Sales Services regarding
only those CTMS Services as directed or authorized in advance
by GILLC.
(ii) Product Licensing. As GILLC's non-exclusive sales agent for
the licensing of CTMS Services, subject to Section 2.2 above,
United may market and license CTMS Services to CTMS Customers
and to CTMS Agents. The parties will work together to develop
marketing plans for CTMS Services, including the name or names
of products.
(iii) Contact. United will maintain current and establish new
personal and telephone contact and sales relationships,
including, where appropriate, in person or telephone sales
calls with CTMS Customers and CTMS Agents. At GILLC's expense,
United may, on approval of GILLC, undertake direct mail
solicitations, promotions, and other sales efforts, with CTMS
Customers and CTMS Agents. GILLC may disapprove any sales
promotion or solicitation with respect to the CTMS Services
that GILLC in its reasonable discretion determines to be
contrary to the objectives or policies of GILLC.
(iv) Commitment Review Procedure. United shall follow the
Commitment Review Procedure described in Appendix I below.
(v) CTMS Support Services. Subject to the CTMS Form Agreement and
within the Negotiation Range, United shall offer to CTMS
Customers or CTMS Agents, or both, as the case may be, such
CTMS Support Services as are approved in advance by GILLC.
(vi) Discontinued Services. Upon receipt of a Discontinued Service
Notice, as such term is defined in 5.1 below, United will
cease CTMS Sales Services regarding such CTMS Service.
4.4 Support Services.
In addition to the Sales Services, United will perform the
following services for GILLC pursuant to this Agreement for those NTP
Subscribers with annual HOL Flow in excess of $5 million (such services
are, collectively, "Support Services").
(i) Support Services Calls. Responses to inquiries from, and
regular premises visits and assistance to, NTP Subscribers in
order to establish and maintain good relations and to improve
relations between NTP Subscribers and GILLC, and to aid in
familiarization with and use of Galileo Services and CTMS
Services.
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(ii) Technical Questions Received. United will relay promptly to
GILLC any technical questions received by United from
customers of GILLC and, as requested by GILLC, will coordinate
responses thereto.
(iii) Area of Support. United will be responsible for Support
Services for locations of NTP Subscribers within the APR, and
as designated by GILLC outside of the APR (although associated
revenue from non-APR Subscribers designated for support will
be included in Total Revenue).
4.5 Responsibilities With Respect to Excluded Subscribers.
United will not enter into sales negotiations with Excluded
Subscribers except with the prior written approval of GILLC. GILLC may
add or delete NTP Subscribers as Excluded Subscribers on Exhibit B
hereto after consulting with and receiving the consent of all affected
sales representatives, including United. Revenues from all Assigned
Subscribers who become Excluded Subscribers will continue to be counted
for that year in the Total Revenue. United may negotiate with NTP
Subscribers regarding sales commitments outside of the APR (i) after
prior notice to GILLC, (ii) after a reasonable period of time in which
GILLC has had the opportunity to coordinate such sales calls with its
own sales force and with GILLC's other sales representatives, and (iii)
after consent of GILLC. Only those sales outside of the APR approved in
advance by GILLC will be included in Total Revenue totals.
4.6 Sales Planning.
Subject to Appendix II, and in no event later than February 28
of each year, GILLC and United jointly will develop a sales plan for
such year, which sales plan will be designed to increase business
opportunities, procure profitable NTP Subscriber accounts for GILLC and
attain or exceed the Revenue Goal.
4.7 Staffing.
4.7.1 Staffing Commitment.
As described in Appendix I, United will staff a Sales
Force who will provide Sales Services to GILLC under this
Agreement.
4.7.2 Review of Staffing Levels.
United will consult with GILLC from time to time as
requested by either party to review the job descriptions,
minimum qualifications, career paths, and other matters in
connection with the Sales Force. United will consult with
GILLC regarding the staffing of Dedicated Personnel and Active
Support Personnel positions to be provided under this
Agreement. Such consultations will include review of job
descriptions and necessary qualifications, consideration of
possible applicants from GILLC and United as
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well as third parties, and full consultation and review of
proposed training schedules for each Dedicated Personnel and
Active Support Personnel.
4.7.3 Employee Proficiency and Training.
4.7.3.1 Introductory Training.
Prior to commencing any Sales Services on
behalf of GILLC hereunder, all Sales Force personnel
of United must attend a five-day introductory
training course and, thereafter, a two-day refresher
training course at least once annually, at a location
or locations to be mutually agreed between United and
GILLC. As new GILLC products or services are released
by GILLC for Sales Services hereunder, GILLC will
provide training with respect thereto to the Sales
Force at a location or locations as agreed by the
parties. GILLC will bear its own expenses in
providing the training and United will bear its own
expenses of the Sales Force in attending such
training.
4.7.3.2 Employee Proficiency.
United will take all reasonable steps to
ensure that all of the Sales Force who are authorized
to sell or support the products and services of GILLC
hereunder have been trained appropriately and are
proficient to provide Sales Services in accordance
with the terms of this Agreement. GILLC shall have
the right to test the proficiency of individual Sales
Force personnel at the time of their refresher
training and to require additional training for such
individuals as do not demonstrate minimum
proficiency. GILLC will provide all course materials,
test materials, and training facilities necessary to
provide such additional training, and United and
GILLC will mutually establish a reasonable schedule
for the administration of such additional training.
Sales Force personnel who have completed such
additional training will be again tested and those
who again demonstrate an inability to achieve the
minimum level of proficiency will not be counted
toward the required staffing levels prescribed in
this Section 4.7.
4.7.3.3 Training and Test Materials.
GILLC will provide to United in advance of
their use copies of all introductory training
materials, refresher training materials, and
proficiency test vehicles to he used pursuant to this
Section 4.7.3 (collectively, the "Training
Materials"). The Training Materials will always be
constructed according to the best practices for
Training Materials then employed by U.S. industry and
shall be related solely to the reasonable skills
required of a person engaged in the sales of
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products and services such as those of GILLC. United
may, at its request, review such Training Materials
in advance of their use hereunder and GILLC will make
all reasonable changes requested by United to the
Training Materials.
5 GILLC Responsibilities.
5.1 Marketplace Competitiveness.
GILLC will at all times during the term of this Agreement use
its best efforts to ensure that Galileo Services maintain a superior
level of competitiveness in the CRS Industry. GILLC will give United as
much notice as is reasonably practicable if GILLC discontinues general
distribution or provision of any particular Galileo Service or CTMS
Service or major feature thereof (a "Discontinued Service Notice")
5.2 GILLC Support of Sales Services and Support Services.
With the objective of ensuring the proper level of GILLC
support for Sales Services and for Support Services provided by United
under this Agreement, GILLC will provide the following support to
United (collectively, the "GILLC Support"):
(i) Copies. GILLC will ensure that United at all times has a
current copy of each version of the Form Agreements together
with such commentary or explanation of the Form Agreements as
may be reasonably required by United for the comprehension and
understanding of the Form Agreements.
(ii) Changes to Form Agreements. GILLC will provide United with no
less than 30 days written notice in the event that GILLC
modifies or discontinues the use of any of the Form
Agreements.
5.3 Services of GILLC.
GILLC will provide Galileo Services, CTMS Services and New
Services to NTP Subscribers, CTMS Customers and CTMS Agents, subject to
the terms of the Form Agreements as negotiated by Untied and approved
by GILLC pursuant to this Agreement.
5.4 New Services.
GILLC will not distribute any Galileo Service (but excluding
enhancements or replacements of any Galileo Service) that did not exist
as of the Effective Date (a "New Service") through any sales
representative in the Territory, and including GILLC itself, without
first offering United the right of first refusal to become the
exclusive sales agent for such New Service for the APR. GILLC and
United shall negotiate on the reasonable terms of such agency,
including the performance objectives and the compensation therefor as
provided in Appendix II. Failing agreement with United within ninety
days (90 days) of the inception of such
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negotiations, GILLC may, upon giving notice to United pursuant to
Section 26, below, make the other sales representative arrangements for
the New Service within the Territory.
5.5 CTMS Products.
5.5.1 Base Products.
GILLC has the ultimate role in determining product
specifications and features of any CTMS Service, and GILLC
will ensure that such specifications and product
implementations of such specifications meet prevailing market
needs. To that end, the GILLC Executive shall consult
regularly with the United Executive as to information that
United may gather in the course of its business that United
believes is relevant to ensuring that the CTMS Service is
competitive with like services and products provided by other
service providers.
5.5.2 Demonstrations.
Upon United's request, subject to GILLC's agreement,
GILLC, at its expense, will provide demonstrations of CTMS
Services to CTMS Customers and/or CTMS Agents. GILLC will
coordinate the content and scheduling of such demonstrations
with United.
5.6 Technical Support.
GILLC will provide in a good and workmanlike manner all
installation, connection, and testing of all Galileo Services, CTMS
Services and any field or technical support or field maintenance
required by NTP Subscribers, CTMS Customers, or CTMS Agents. GILLC will
maintain ongoing and appropriate contact with NTP Subscribers, CTMS
Customers and CTMS Agents to facilitate user operation of the Galileo
Services and CTMS Services. Technical sales consulting support will
also be provided by GILLC to the Sales Force.
5.7 Technical Assistance Offices.
GILLC will maintain regional Tech Offices for the use of its
sales representatives that will be staffed by knowledgeable employees
capable of providing technical assistance regarding Galileo Services
and CTMS Services. Such assistance will be available to United during
normal GILLC business hours.
5.8 Help Desk.
GILLC, at its expense, will maintain a telephone call center
or centers for use by the Sales Force, NTP Subscribers, CTMS Customers,
and CTMS Agents during normal business hours for each of those persons
in their places of business. The call centers will be staffed by
knowledgeable persons under the control of GILLC who are
<PAGE> 19
14
capable of providing prompt, thorough, courteous, and professional
technical assistance regarding the products and services of GILLC.
6 Reporting.
United will furnish, at no cost to GILLC, the reports and documents set
forth in Exhibit D hereto.
7 Other Marketing Rights.
7.1 GILLC.
GILLC reserves the right to market and to support services in
the Sales APR. During the term of this Agreement, and except as
otherwise provided in this Agreement, GILLC will not designate the
Sales APR of United as the area of primary sales responsibility of any
other sales agent of GILLC, including GILLC itself.
7.2 United.
Subject to the provisions of the Non-Competition Agreement,
while United is the sales agent of GILLC under the terms of this
Agreement, United will not act as a sales agent for the reservations or
accounting services of another entity in the CRS Industry in the APR
without the prior consent of GILLC, provided, however, that nothing in
this Agreement will prevent United from:
(i) having United Group Products and Services displayed or listed
in any person's computer reservation system, schedule, other
electronic or paper communications medium, or otherwise;
(ii) providing to any person any technological or computerized
means of delivering information and automation functionality;
(iii) authorizing any person to use United's trademarks and trade
names in connection with advertising United's participation in
such person's computer information or reservation system, or
otherwise;
(iv) endorsing the products or services of another member of the
CRS Industry, provided, however, that United may not endorse
such products or services of such other member of the CRS
Industry as being preferred to those of GILLC, provided,
however, (a) if GILLC does not itself provide such products or
services, or (b) GILLC provides such products or services but
they do not meet United's needs, then, subject to the
provisions of the Non-Competition Agreement, United may
endorse such products or services of such other member of the
CRS Industry in any manner.
<PAGE> 20
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8 Terms of Payment.
GILLC will pay United quarterly in arrears, upon receipt and acceptance
by GILLC of United's reports pursuant to Section 6 above for the preceding
quarter and of its invoice therefor, an amount equal to one quarter of the Base
Compensation. Invoices will be prepared and mailed on the first work day of
April, July, October and January of each year. After the end of each calendar
year, following receipt and acceptance by GILLC of United's report pursuant to
Section 6 above with results for the year as a whole, adjustments will be made
as required by Appendix II, and GILLC or United, as appropriate, will make
payment to the other in an amount determined in accordance with the application
of such Section. All payments hereunder will be made within 30 days of date of
invoice by wire transfer, banking instructions to be given by the recipient
thereof in advance of each such transfer. All amounts due and payable hereunder
and not paid within 30 days of date of invoice shall be subject to late payment
interest subject to the following: (i) the Interest Rate shall be fixed as of
the due date of the invoice, and (ii) interest shall be calculated, on the basis
of a 360-day year, from the due date.
9 Currency.
For the purposes of this Agreement all currency calculations shall be
in US Dollars and, to the extent paid in a currency other than US Dollars,
revenue received by GILLC or expenses incurred by GILLC will be converted to US
Dollars at the exchange rate in effect at the date of the receipt of such
revenue or payment of such expense, as the case may be.
10 Term.
This Agreement is effective as of the Effective Date, and will continue
until the termination of the Non-Competition Agreement. GILLC may issue, no
earlier than July 1 of each year a conditional notice of termination if GILLC
has reasonably determined that United may, as a result of its own failure to
perform and not as a result of a Material Change, not meet its then current
Revenue Goal; if, as of 120 days after such conditional notice, GILLC reasonably
determines that United will not meet such Revenue Goal and so notifies United,
this Agreement will terminate 90 days after such determination (with no sales
exclusivity during the last 30 days of the 90 day period) and United will be
paid for sales services during the last 30 days only at direct labor cost
(adjusted to reflect time devoted to GILLC) and associated expenses.
<PAGE> 21
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11 Confidentiality.
11.1 Confidential Information.
Confidential information, including, without limitation,
source code, object code, manufacturing, financial and marketing data,
orders, forecasts, plans, designs, drawings and specifications of
either United or GILLC, which is contained in tangible records
designated as "CONFIDENTIAL", "TRADE SECRET" or "PROPRIETARY", or which
is otherwise communicated on the express basis that the information is
confidential, and which is provided to the other party during the
performance of this Agreement (hereafter "Confidential Information"),
will be treated as confidential and not further disclosed to any third
party without the prior written consent of the providing party, except
as provided under the terms of this Agreement, for five years from the
date such Confidential Information was first received, unless such
Confidential Information was already in the possession of the other
party, is placed in the public domain through no fault of the party
receiving such information, or becomes rightfully available to the
other party through other sources without restriction on disclosure.
11.2 Service.
If either party is served with a subpoena or other legal
process requiring the production or disclosure of any Confidential
Information or United Information, then that party will immediately
notify the owner thereof, and will in good faith attempt to permit the
owner at the owner's expense to intervene and contest such disclosure
or production.
12 Service Marks, Patents, Third Party Data.
12.1 Use of Service Marks.
12.1.1 GILLC Marks.
United will use and display the GILLC trade and
service marks in the form specified by GILLC. United will
market the Galileo Services and CTMS Services under product
names established by GILLC and must identify all such Galileo
Services and CTMS Services as the products or services of
GILLC. United may include its name and identifying marks in
association with the names "Galileo" or "Galileo
International". GILLC reserves the right to disapprove any use
of the trade and service marks and other proprietary rights of
GILLC if GILLC determines in its reasonable discretion that
such use is contrary to the objectives or policies of GILLC.
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12.1.2 United Marks.
GILLC will not use the trade or service marks of
United without United's prior written consent. United reserves
the right to disapprove any use of the trade and service marks
and other proprietary rights of United if United determines in
its reasonable discretion that such use is contrary to the
objectives or policies of United.
12.2 Patent Indemnity.
12.2.1 Actions.
GILLC will defend at its expense any suit or
proceeding against United based on a claim that any product or
service of GILLC ("GILLC Product") constitutes an infringement
of the patent, trademark, or copyright laws of the United
States, provided that GILLC is notified promptly in writing
and given full and complete authority, information, and
assistance for the defense of such suit or proceeding. If the
foregoing provision is complied with, GILLC will pay damages
and costs awarded against United, but GILLC will not be
responsible for any compromise or settlement made without its
prior written consent. If any GILLC Product is held to
constitute infringement of such patent, trademark, or
copyright and its use is enjoined, GILLC will, at its election
and expense, either obtain for United the right to continue
using such GILLC Product, modify such GILLC Product so that it
is not infringing, or remove such GILLC Product.
12.2.2 Limitation.
GILLC will not be liable to United with respect to
any claim of infringement which is based upon (a) combination
or utilization of a GILLC Product with products or services
not supplied by GILLC; (b) the unauthorized modification by
United or a person other than GILLC or its designated
representatives of any GILLC Product or (c) the use of any
GILLC Product not in accordance with GILLC's specifications or
recommendations.
12.3 Third Party Data.
GILLC makes no representation or warranty regarding the
accuracy or reliability of any schedule, fare, quote, or other
information provided to GILLC by airlines or by hotels, car rental
companies or other vendors of travel related services. GILLC will not
be responsible for, and United hereby releases and waives any claims
against GILLC conceding, the accuracy or reliability of any such
information provided by such third parties.
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13 Taxes.
13.1 GILLC Responsibilities.
GILLC will pay any sales, use, or personal property taxes
(except for any tax levied upon or measured by United's gross receipts)
imposed by any taxing authority and required to be paid by GILLC or
United as a result of services provided to GILLC under this Agreement.
GILLC will not be liable for any tax levied upon or measured by the
income of United.
13.2 Claims.
If a claim is made against United for any taxes that are to be
paid by GILLC, United will timely notify GILLC. If GILLC so requests in
writing, United will, at GILLC's expense, take such action as GILLC may
reasonably direct with respect to such taxes, including payment of such
taxes under protest. If the tax has been paid, and if requested by
GILLC, United will, at GILLC's expense, take such action as GILLC may
reasonably direct, including allowing GILLC to file a claim or commence
legal action in United's name, to recover such tax payment. In the
event of refund or recovery of any tax, or part thereof, United will
pay to GILLC promptly that portion of the tax paid by GILLC, including
any interest received thereon.
14 Limitation of Liability.
Except as provided under Section 18 below ("Indemnification"), each
party's total liability regarding any claim by the other party for breach of
this Agreement is limited to the amount of compensation earned by United for the
year in which the claim arises or, if based on obligations of a continuing
nature and arising after termination, then the final year of this Agreement, and
each party hereby releases and waives any claims against the other party for
such breach in excess of such amount.
15 Consequential Damages.
NEITHER PARTY WILL BE LIABLE FOR, AND EACH PARTY WAIVES AND RELEASES
ANY CLAIMS AGAINST THE OTHER PARTY FOR, ANY SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES, INCLUDING DAMAGE TO OR DESTRUCTION OF PROPERTY, LOST
REVENUES, LOST PROFIT, OR LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE, RESULTING FROM
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT.
16 Termination for Breach.
If either party (the "Defaulting Party") breaches any of its duties or
obligations under this Agreement, and such breach continues for thirty days (ten
days regarding failure to pay
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19
amounts due) after written notice of such default from the other party, then the
other party may terminate this Agreement at any time thereafter, effective
immediately upon written notice of termination to the Defaulting Party, without
prejudice to any other rights or remedies the non-defaulting party may have.
Upon notice of such termination, the Defaulting Party will return immediately to
the non-defaulting party any and all confidential or proprietary information,
programs, materials, or other data, and any copies thereof, in the possession or
control of the Defaulting Party.
17 Force Majeure, Delay.
Neither party will be responsible for delays in performance caused by
acts of God or governmental authority, strikes or labor disputes, fires or other
loss of manufacturing facilities, breach by suppliers of supply agreements, or
any other cause beyond the reasonable control of that party.
18 Indemnification.
Each party (the "Indemnitor") will indemnify the other party, its
officers, employees, and agents (collectively "Indemnitees") against and hold
each Indemnitee harmless from all claims, suits, judgments, losses, damages,
fines or costs (including reasonable legal fees and expenses) resulting from any
claim, suit, or demand by any third party for injuries to or deaths of persons
or loss of or damage to property arising out of the Indemnitor's performance or
willful misconduct of the Indemnitor, its employees, officers, or agents in
connection with the Indemnitor's performance of this Agreement, except to the
extent caused by the negligence of any Indemnitee. The Indemnitor's obligations
under this paragraph will survive the termination of this Agreement.
19 Guarantee of Performance.
If either party (the "Insolvent Party") becomes insolvent; if the other
party (the "Insecure Party") has evidence that the Insolvent Party is not paying
its bills when due without just cause; if a receiver of the Insolvent Party's
assets is appointed; if the Insolvent Party takes any step leading to its
cessation as a going concern; or if the Insolvent Party either ceases or
suspends operations for reasons other than a strike, then immediately upon
receipt of written notice from the Insecure Party the Insolvent Party will
provide adequate assurance, satisfactory to the Insecure Party, of the future
performance of this Agreement. If bankruptcy proceedings are commenced with
respect to the Insolvent Party, then the Insecure Party may suspend all further
performance of this Agreement until the Insolvent Party assumes or rejects this
Agreement pursuant to section 365 of the Bankruptcy Code or any similar or
successor provision. Any such suspension of further performance by the Insecure
Party pending the Insolvent Party's assumption or rejection will not be a breach
of this
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Agreement and will not affect the Insecure Party's right to pursue or enforce
any of its rights under this Agreement or otherwise.
20 Third Party Rights.
Nothing contained in this Agreement establishes or creates, or is
intended or will be construed to establish or create, any right in or any duty
or obligation to any third party.
21 Assignment.
United may assign or transfer this Agreement or any rights granted or
provided for hereunder, in whole or in part, to any person or entity that is
controlled by United, otherwise United may not assign or transfer this Agreement
or any rights granted or provided for hereunder, in whole or in part, without
the written Agreement of GILLC. GILLC may assign or transfer this Agreement or
any rights granted or provided for hereunder, in whole or in part, to any person
or entity that is controlled by GILLC, otherwise GILLC may not assign or
transfer this Agreement or any rights granted or provided for hereunder, in
whole or in part, without the written Agreement of United.
22 Relationship of the Parties.
The relationship of the parties is that of principal and limited agent.
United may bind GILLC only as specifically provided in this Agreement.
23 Severability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect, then the Agreement shall he construed to exclude
such provision and to be enforceable in all other respects, unless to do so
would prejudice the rights of either party or result in such a material change
as to cause performance by either party to be unreasonable.
24 Survival.
All provisions of this Agreement which by their terms survive
termination thereof will continue thereafter in full force and effect.
25 Governing Law.
This Agreement, and any dispute arising under or in connection with
this Agreement, including any action in tort, will be governed by the internal
laws of the State of Illinois. Any action brought to (i) preserve the status quo
pending arbitration or (ii) enforce an arbitration proceeding or decision shall
be brought in courts located within Cook County, Illinois, the parties hereby
consenting to personal jurisdiction and venue therein.
<PAGE> 26
21
26 Notices.
All notices to either party under this Agreement must be in writing and
sent to the following addressee and at the following address:
for GILLC:
Galileo International, L.L.C.
Suite 400
9700 West Higgins Road
Rosemont, Illinois 60018
Attn: President
for United:
United Airlines Department WHQSS
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Attn: Vice President and General Sales Manager
Notices will be deemed effective on the date received. Notices by
certified or registered mail (return receipt requested) will be deemed received
on the date shown on the return receipt. Notices sent by telex or facsimile will
be deemed received on the date transmitted if transmitted before 3:30 p.m. time
of recipient, otherwise on the next business day following transmission.
27 Headings.
The section headings and captions used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
will not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement will be enforced and
construed as if no heading or caption had been used in this Agreement.
28 Entirety of Agreement.
This Agreement including any Exhibits or attachments, supersedes all
prior oral or written representations or communications between the parties and
constitutes the entire understanding of the parties regarding the subject matter
of this Agreement. This Agreement supersedes the Sales Representation Agreement
between Apollo Travel Services and United, and the parties hereto agree that all
obligations under that agreement are terminated.This Agreement may be modified
only in a writing signed by both parties.
29 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall be considered one and
the same instrument.
<PAGE> 27
IN WITNESS WHEREOF, the parties have agreed to and executed this
Agreement by their authorized representatives as of the Effective Date first set
forth above.
GALILEO INTERNATIONAL, L.L.C. UNITED AIR LINES, INC.
By: /s/ James E. Barlett By: /s/ Frederic F. Brace
- -------------------------------- --------------------------------
Name: James E. Barlett Name: Frederic F. Brace
Title: President and Title:
Chief Executive Officer -----------------------------
<PAGE> 28
Appendix I
Certain Terms
1. NTP Sales Services.
(i) Quotation. Except as provided in paragraph 1(iii) below, using
the NTP Form Agreement United will quote NTP Subscribers those
terms of the NTP Form Agreement as are appropriately related
to that NTP Subscriber's business.
(ii) Negotiation. On the basis of the NTP Form Agreement United
shall negotiate with NTP Subscribers and attempt to obtain
commitments from NTP Subscribers to purchase Galileo Services
from GILLC.
(iii) [*]
2. Multinational Sales Services.
(i) Terms: US Deals. With respect to US Deals, the GILLC Lead
shall have responsibility for preparing terms, whether
financial terms or otherwise, related to the provision of
GILLC services to the Multinational. The GILLC Lead will
consult with the United Lead on such terms and will take into
account United's reasonable business judgment regarding such
terms. Such terms shall be the subject of the negotiations
relating to a US Deal described in this Multinational
Procedure.
(ii) US Deal Approvals. United and GILLC shall jointly approve any
final agreement negotiated with the Multinational with respect
to a US Deal.
(iii) Resolution of Differences. In the event United and GILLC
cannot reach agreement on any matter relating to a US Deal,
including without limitation the terms thereof, then such
disagreement shall be resolved (a) by the Independent
Directors, in the case of a US Deal that applies solely to the
United States of America, or (b) the Galileo Board, in the
case of a US Deal that applies both to the United States of
America and elsewhere.
3. CTMS Services.
(i) Quotation. Except as provided in paragraph 3(iii) below, using
the Form Agreements for CTMS Services, United will quote CTMS
Customers or CTMS Agents, or both, as the case may be, those
terms of the CTMS Form Agreement as are appropriately related
to that CTMS Customer's or CTMS Agent's business.
(APPENDIX I-1)
<PAGE> 29
(ii) Negotiation. On the basis of the CTMS Form Agreement United
shall negotiate and attempt to obtain commitments from CTMS
Customers or CTMS Agents, or both, as the case may be, to
purchase, lease or license CTMS Services from GILLC.
(iii) [*]
4. Staffing.
(i) Dedicated Personnel. United will provide [*] Dedicated
Personnel (minimum [*] PMEs on average per year as measured by
OPS) who will be dedicated [*] of their time to Sales
Services;
(ii) Active Support Personnel. With respect to the Territory,
excluding Mexico, United will provide [*] Active Support
Personnel comprised of [*] account executives ("AE") and [*]
automation sales representatives ("ASR") (totaling a minimum
[*] PMEs on average per year, as measured by OPS) who will be
dedicated [*] of their time to Sales Services; with respect to
Mexico, United will provide [*] PMEs who will be dedicated [*]
of their time to Sales Services; and
(iii) General Sales Personnel. United will provide [*] General Sales
Personnel (minimum [*] PMEs on average per year as measured by
OPS) who will spend a minimum of [*] of their time on Sales
Services on behalf of GILLC.
5. GILLC Support of Sales Services and Support Services.
(i) Form Agreements. GILLC shall prepare all form agreements and
terms including, as applicable and without limitation: the
duration of the form agreements; the quantity and quality of
computer and network equipment to be provided, installed and
maintained by GILLC; list prices such as lease fees, license
fees, penalties and other charges; productivity credits and
other discounts from list prices, related software licenses or
sublicenses, as the case may be; and other terms as may be
determined by GILLC from time to time (the "Form Agreements").
With respect to CTMS Services, GILLC will provide the
following Form Agreements: (a) a form of product license as
between GILLC and the CTMS Customer, and (b) a form of product
license as between GILLC and a CTMS Agent pursuant to which
the CTMS Agent is permitted to use CTMS Services on the behalf
of the CTMS Customer.
(ii) [*]
(iii) [*]
(APPENDIX I-2)
<PAGE> 30
Appendix II
Budgets and Compensation
1. General Statement of Method.
With respect to those commitments of customers of GILLC to purchase
products and services from GILLC that, pursuant to this Agreement,
United is instrumental in securing there shall be, by mutual agreement
of United and GILLC, annual revenue plans and annual plans for
Financial Assistance spending. In the course of each year of this
Agreement, GILLC will measure and report to United, at least monthly,
actual Total Revenue and Financial Assistance spending. United shall
receive a minimum, guaranteed compensation. Additionally, United shall
receive incentive compensation that is based, for the year in question,
on Total Revenue versus the Revenue Plan and on Financial Assistance
spending versus the FA Budget. Notwithstanding the generality of this
Section 1, the procedure for determining United's compensation under
this Agreement is as described in this Appendix II.
2. Goals.
Subject to Section 4.6 of this Agreement and Section 3 below, in no
event later than February 28 of each year, United and GILLC will
complete negotiations with respect to the goal for Total Revenue for
that year and the budget for Financial Assistance for that year
(respectively, the "Revenue Goal" and the "FA Budget"). Modifications
to the Revenue Goal and the FA Budget are subject to the provisions of
this Agreement. For 1997, the Revenue Goal and the FA Budget are as
shown on Schedule 1 hereto.
3. Financial Assistance.
3.1 FA Budget.
FA Budgets will be determined concurrently with Revenue Goals
for each year during the term of this Agreement and in
accordance with the provisions of Section 2 above. The FA
Budget for each year will (i) include contractual commitments
for the payment of Financial Assistance for that year and for
which GILLC is obligated, (ii) include reasonable estimates
and projections as to additional Financial Assistance that may
be required to gain new business or retain existing customers,
and (iii) be commensurate with the Revenue Goal for that year.
Subject to Section 3.2 below, at no time will United be
required or requested to provide Financial Assistance to any
person either directly or through adjustments to, or
inclusions in, the FA Budget, the Revenue Goal, the Base
Compensation, the Guaranteed Compensation, the Performance
Compensation, or otherwise.
3.2 Adjustments With Respect to Financial Assistance.
(APPENDIX II-1)
<PAGE> 31
United will not exceed the FA Budget during any year of this
Agreement; [*] percent of all Financial Assistance
expenditures by United in excess of the FA Budget will be
deducted from Total Revenue counted toward the Revenue Goal
for that year. If GILLC's Financial Assistance expenditures
with respect to the Total Revenue are under the FA Budget for
that year then the difference between such expenditures and
the FA Budget will be added to Total Revenue counted toward
the Revenue Goal for that year.
4 Failure to Agree.
4.1 Dispute Resolution Procedure.
Failing agreement on the Revenue Goal or the FA Budget, or
both, the negotiators will submit their positions to the
Dispute Resolution Procedure as described in Attachment B
hereto.
4.2 Carryover Plan.
Until such time as the Dispute Resolution Procedure is
completed the parties shall operate under this Agreement on
the basis of a "Carryover Plan" that shall include, with
respect to the calendar year in question:
(i) a "Carryover Revenue Goal" for that calendar year
that will function for the purposes of this Agreement
in lieu of the Revenue Goal for that year and that
equals the Revenue Goal for the immediately preceding
calendar year increased or decreased, as the case may
be, by the FAA Factor;
(ii) a "Carryover FA Budget" for that calendar year that
will function for the purposes of this Agreement in
lieu of the FA Budget for that year and that equals
the FA Budget for the immediately preceding calendar
year increased or decreased, as the case may be, by
the FAA Factor; and
(iii) a "Carryover Base Compensation" for that calendar
year that will function for the purposes of this
Agreement in lieu of the Base Compensation for that
year and that equals the Base Compensation for the
immediately preceding calendar year increased by [*]
percent ([*]%).
5. Material Changes.
If a change occurs in the structure of the air transportation industry
or of the CRS Industry, including without limitation changes in the
number or types of competitors, customers, products, or services of
either industry, which change is likely to cause either or both of the
following cases (i) a material change to the flows of revenue through
ARC or the BSP for Mexico, as applicable, or (ii) a requirement that
entails the provision of substantial additional Sales Services in the
APR (in either case a
(APPENDIX II-2)
<PAGE> 32
"Material Change"), then, as the case may be, (a) either GILLC or
United may request that the parties renegotiate the Revenue Goal or the
FA Budget, or both, for that year, and (b) United will have the right
of first refusal, exercisable within ten business days of written
notice from GILLC, to elect to provide such additional Sales Services
in the APR. Failing agreement on adjustments to the Revenue Goal or the
FA Budget, or both, such adjustments to the Revenue Goal or the FA
Budget, or both, will be determined as provided in Section 4.1 above.
6. Base Compensation.
"Base Compensation" shall be the prior year's Base Compensation
increased by an amount equal to [*] of such prior year's Base
Compensation prorated, for increases [*], as the percentage of the
prior year's Revenue Goal attained by United increases from [*]. Base
Compensation for 1997 is as provided on Schedule 1.
7. Guaranteed Compensation.
United will be paid [*] of Base Compensation ("Guaranteed
Compensation") if United meets the staffing levels as provided in
Section 4.7 of this Agreement. United will be paid [*] percent of Base
Compensation in any event if United meets its Revenue Goal. [*] of Base
Compensation will be at risk based on the Revenue Goal performance (the
"Performance Compensation").
8. [*]
9. Advance Credit.
Notwithstanding anything to the contrary contained in this Appendix II,
in the event United attains [*] of the Revenue Goal for a year then
United may, at its option, be credited, for purposes of determining its
compensation under this Appendix II, with the amount (the "Advance
Credit") necessary to achieve [*] of its Revenue Goal for such year.
United shall exercise its option hereunder to take an Advance Credit by
written notice to GILLC received no later than the fifth business day
of the next succeeding year. The amount of the Advance Credit shall be
deducted from Total Revenue otherwise attributable to United for any
purpose under this Agreement during January of such succeeding year. No
such Advance Credit shall be taken into account in setting the Revenue
Goal. United may not exercise the option under this Section 9 in two
successive years.
10. Penalties: United.
If United meets the staffing minimums provided in Section 4.7 of this
Agreement, United will receive its Guaranteed Compensation as set forth
in this Appendix II. If United fails to meet such staffing minimums and
fails to meet its Revenue Goal, then
[*]
(APPENDIX II-3)
<PAGE> 33
Notwithstanding the foregoing, so long as United meets its Revenue Goal
for the year, United will receive its Base Compensation for such year
regardless of staffing goals attained.
(APPENDIX II-4)
<PAGE> 34
Attachment A
Defined Terms
As used in this Agreement, including the Attachments, Exhibits and Schedules
hereto, the terms listed in this Attachment A have the meanings ascribed to
them. The use of a term in the singular that is defined herein in the plural is
understood in this Agreement to signify a single instance of such defined
matter.
"Accounting Services" means those travel agency accounting services that are
provided by GILLC to customers of GILLC.
"Active Support Personnel" means General Sales Personnel who will be dedicated
primarily (80 percent of work time) to providing Sales Services pursuant to this
Agreement.
"Administrative Support Personnel" means those General Sales Personnel who
perform primarily administrative or management functions in the provision of
Sales Services pursuant to this Agreement.
"Advance Credit" has the meaning ascribed to that term in Section 9 of Appendix
II.
"APR" means "Area of Primary Sales Responsibility" as defined herein.
"ARC" means Airlines Reporting Corporation.
"Area of Primary Sales Responsibility" means the exclusive geographic area of
primary sales responsibility assigned to United as described in Exhibit A hereto
and as such geographic area may be amended from time to time in accordance with
the provisions of this Agreement.
"Assigned Subscribers" means (i) all NTP Subscribers within the APR and (ii) the
Designated Subscribers, but excluding the Excluded Subscribers.
"Base Compensation" has the meaning ascribed to that term in Section 6 of
Appendix II and, in the event that there is a Carryover Base Compensation, means
such Carryover Base Compensation.
"BSP" means an entity, including, without limitation, IATA, that performs
accreditation, revenue reporting and clearing functions such as those performed
by ARC.
"Cancelled Deal" has the meaning ascribed to that term in Section 5.2 above.
"Carryover Base Compensation" has the meaning ascribed to that term in Section
4.2 of Appendix II.
"Carryover FA Budget" has the meaning ascribed to that term in Section 4.2 of
Appendix II.
(ATTACHMENT A-1)
<PAGE> 35
"Carryover Plan" has the meaning ascribed to that term in Section 4.2 of
Appendix II.
"Carryover Revenue Goal" has the meaning ascribed to that term in Section 4.2 of
Appendix II.
"Commitment Review Procedure" has the meaning ascribed to that term in Section
5.2 above.
"Corporate Direct System" means a computerized travel reservations system that
is integrated with desktop travel management software including, for example,
travel policy enforcement, expense management, and management reporting
functionality and is (i) selected by a CTMS Customer for use by its employees,
or (ii) selected for use by a CTMS Agent retained by a CTMS Customer to service
the travel planning and management requirements of such CTMS Customer.
"CRS Industry" means the group of business entities who provide products and
services alike to the products and services of GILLC.
"CTMS Agent" means a Travel Agent, NTP Subscriber, service bureau, or other
person with whom a CTMS Customer has an agreement pursuant to which the CTMS
Agent performs services related to the use of a CTMS and other aspects of that
CTMS Customer's travel planning and travel management requirements.
"CTMS Customer" means a corporation, partnership, or other person who is an
existing or a potential purchaser of CTMS Services from GILLC.
"CTMS Form Agreement" means a Form Agreement that relates to CTMS Services.
"CTMS Sales Services" has the meaning ascribed to that term in Section 4.3
above.
"CTMS Services" means any portion of a Corporate Direct System provided by
GILLC, whether itself, or through an arrangement or arrangements between GILLC
and a third party or third parties.
"CTMS" means a CTMS Service.
"Designated Subscribers" means those NTP Subscribers listed on Exhibit C hereto
and as amended pursuant to this Agreement.
"Dedicated Personnel" means General Sales Personnel of at least Account
Executive level who will be dedicated full-time (100 percent of work time) to
the provision of Sales Services pursuant to this Agreement.
"Discontinued Multinational Account" has the meaning ascribed to that term in
Section 2.1.3 above.
(ATTACHMENT A-2)
<PAGE> 36
"Discontinued Service Notice" has the meaning ascribed to that term in Section
5.1 above.
"Dispute" means any dispute, disagreement, claim, or controversy arising in
connection with or relating to this Agreement, or the validity, interpretation,
performance, breach, or termination of this Agreement, including any claim of
breach of representation or warranty or of non-performance.
"Dispute Resolution Procedure" means the procedure described in Attachment B
hereto.
"Dispute Summary" means, with respect to a Dispute and with respect to the party
to the Dispute who shall prepare a Dispute Summary, a written declaration
presenting (i) a statement expressing the issue(s) in Dispute, (ii) facts
relevant to the understanding of the issue(s) in Dispute, and (iii) a statement
expressing the resolution of the Dispute that is sought by the party who
prepares the Dispute Summary.
"Excluded Subscribers" means those NTP Subscribers listed on Exhibit B pursuant
to this Agreement.
"FAA Factor" means, with respect to the Carryover Plan year in question, the
change, expressed as a percentage, in forecast domestic revenue passenger
enplanements for that Carryover Plan year versus the immediately preceding year,
where "forecast domestic revenue passenger enplanements" shall be as provided in
the then-current (as of the time the Carryover Plan is created) "FAA Aviation
Forecasts" issued by the U.S. Department of Transportation, Federal Aviation
Administration, Office of Aviation Policy and Plans.
"Financial Assistance" means the provision by GILLC, and at GILLC's expense, to
any one or more of (i) the Assigned Subscribers, (ii) CTMS Customers, and (iii)
CTMS Agents, of any one or more of: (a) cash payments; (b) indemnification
payments; (c) revenue sharing; (d) booking fee rebates; (e) lease fee waivers;
(f) license fee waivers; (g) productivity or efficiency fee waivers; (h) airline
tickets or other airline, car or hotel perquisites; (i) computer or other
hardware; and (j) other benefits.
"FA Budget" means the amount of Financial Assistance established in accordance
with the provisions of Section 3 of Appendix II and, in the event that there is
a Carryover FA Budget, means such Carryover FA Budget.
"Form Agreements" has the meaning ascribed to that term in Section 5.2 above.
"Galileo Board" means the Board of Directors of GILLC.
"Galileo Services" means, collectively, Reservations Services and Accounting
Services, as provided by GILLC in the APR, excluding CTMS Services.
"General Sales Personnel" means regular, full-time employees of United who
either are in training for or are actively engaged in the sale of air
transportation on United, or other persons as may be agreed by GILLC and United,
including Administrative Support Personnel
(ATTACHMENT A-3)
<PAGE> 37
as provided above, but excluding employees of United engaged primarily in
administrative or management positions that supervise sale planning or
implementation policies or processes of United.
"GILLC Executive" has the meaning ascribed to that term in Section 3.1 above.
"GILLC Lead" has the meaning ascribed to that term in Section 4.2 above.
"GILLC Support" has the meaning ascribed to that term in Section 5.2 above.
"Guaranteed Compensation" has the meaning ascribed to that term in Section 7 of
Appendix II.
"Headquarters" means, with respect to the corporation or partnership in
question, the city or place in which that corporation or partnership maintains
its principal offices.
"HOL Flow" means, with respect to an individual NTP Subscriber, the annual sales
of air transportation revenue, as measured by ARC and BSPS, for all locations of
that NTP Subscriber.
"IATA" means the International Air Transport Association.
"Independent Directors" means the members of the Galileo Board who are neither
nominated by an airline owner of GILLC or are members of the executive
management of GILLC.
"Interest Rate" means the mathematical average of the prevailing
dollar-denominated 30 day and 90 day London Interbank Offered Rates (LIBOR), as
reported in the Wall Street Journal for a specified business day, plus 200 basis
points.
"Level One Bonus" has the meaning ascribed to that term in Section 8 of Appendix
II.
"Level Two Bonus" has the meaning ascribed to that term in Section 8 of Appendix
II.
"Managing Member" means the member of GILLC who shall manage GILLC in accordance
with the limited liability company agreement of GILLC, which member is Galileo
International, Inc., a Delaware corporation.
"Material Change" has the meaning ascribed to that term in Section 5 of Appendix
II.
"Multinational Accounts" means (i) those Designated Subscribers listed under
"(A) Multinational Accounts" on Exhibit C hereto, and (ii) any other NTP
Subscriber who may become a "Multinational Account" as provided in Section 2.1.3
above.
"Multinational Procedure" has the meaning ascribed to that term in Section 4.2
above.
"Multinational Sales Services" has the meaning ascribed to that term in Section
4.2 above.
(ATTACHMENT A-4)
<PAGE> 38
"National Accounts" means those Designated Subscribers listed under "(B)
National Accounts" on Exhibit C hereto.
"Negotiation Range" has the meaning ascribed to that term in Section 5.2 above.
"Neutral Travel Provider" means any Travel Agent that sells the products and
services of Vendors and holds itself out as a neutral source of information
regarding Vendors and their services or products.
"New Service" has the meaning ascribed to such term in Section 5.4 above.
"Non-Competition Agreement" means the Amended and Restated Non-Competition
Agreement, dated as of July 30, 1997, among GILLC, United Air Lines, Inc., UAL
Corporation and Covia L.L.C.
"Non-Vendor Revenue" means all revenue received by GILLC from NTP Subscribers,
CTMS Customers, CTMS Agents, and other persons and including, without
limitation, lease and license payments, install/deinstall charges, variable
charges (including but not limited to charges for tickets, itineraries and
invoice documents), and backroom lease and license fees, net of discounts, but
not including Vendor Revenue.
"NTP" means Neutral Travel Provider, as defined herein.
"NTP Form Agreement" means a Form Agreement that relates to Galileo Services,
but excluding CTMS Services.
"NTP Sales Services" has the meaning ascribed to that term in Section 4.1 above.
"NTP Subscriber" means a Neutral Travel Provider who is an existing or a
potential purchaser of Galileo Services from GILLC.
"OPS" means United's Organizational Pay Summary system or any replacement system
that United may use, in United's sole discretion, and which is a proprietary
system that tracks United PMEs.
"Other Agent" has the meaning ascribed to that term in Section 2.4 above.
"Performance Compensation" has the meaning ascribed to that term in Section 7 of
Appendix II.
"PME" means Paid Manpower Equivalent, which is commonly used in United's
business practices as a measure of average employee headcount for the period of
time in question.
"Reporting Number" means an account number issued by the Airline Reporting
Corporation or by the International Air Transport Association, or both, to an
individual or entity for the purpose of authorizing such individual or entity to
operate as a travel agency.
(ATTACHMENT A-5)
<PAGE> 39
"Reservations Services" means the computerized display, reservation, ticketing,
or sale of the services or products of Vendors including the availability and
price thereof, as generated by GILLC to any person other than Vendors.
"Revenue Goal" has the meaning ascribed to that term in Section 2 of Appendix
II.
"Sales Services" means, collectively, NTP Sales Services, Multinational Sales
Services, and CTMS Sales Services.
"Sales Force" means, collectively, the Active Support Personnel, Dedicated
Support Personnel and General Sales Personnel.
"Senior Review Committee" means a committee consisting of GILLC's President and
United's Senior Vice President - North America.
"Support Services" has the meaning ascribed to that term in Section 4.4 above.
"Tech Office" means a technical support center (at times referred to
colloquially as a "TN" office) operated and staffed by GILLC with personnel
proficient in all technical aspects of the use by end-users of GILLC products
and services.
"Territorial Reassignment" has the meaning ascribed to that term in Section 2.4
above.
"Territory" means, collectively, the United States of America together with its
territories and protectorates, and the Republic of Mexico.
"Total Revenue" means the sum of Non-Vendor Revenue and Vendor Revenue, with
respect to the APR plus such revenue generated from Designated Subscribers less
such revenue generated from Excluded Subscribers, provided that any such revenue
generated from the location of an Excluded Subscriber in the calendar year in
which such location commences purchasing Galileo Services shall be included in
the Total Revenue only for the sales representative who was responsible for such
sale of Galileo Services.
"Training Materials" has the meaning ascribed to that term in Section 4.7.3.3
above.
"Travel Agent" means an individual or entity, that has been assigned a Reporting
Number.
"United Executive" has the meaning ascribed to that term in Section 3.2 above.
"United Group Products and Services" means with respect to United and any
carrier that uses United's airline designator code in the display of certain
designated flights (collectively, the "group carriers") the schedule, seat
availability, and price thereof of the group carriers, including, without
limitation, air and/or non-air travel packages that may include ancillary air
segments on non-group-carrier airlines.
"United Lead" has the meaning ascribed to that term in Section 4.2 above.
(ATTACHMENT A-6)
<PAGE> 40
"US Deal" has the meaning ascribed to that term in Section 4.2 above.
"US Dollar" means the lawful currency of the United States of America.
"Vendor" means a vendor of travel-related services, such as an airline, hotel,
or rental car company, tour package, cruise operator, or travel insurance
company, that has purchased or subscribed for Reservations Services.
"Vendor Revenue" means all revenue received by GILLC from Vendors with respect
to booking fees and other service charges or fees as a result of bookings and
other transactions for which GILLC charges a fee to Vendors, which such bookings
and other transactions are generated by NTP Subscribers, CTMS Customers, CTMS
Agents, and other persons.
(ATTACHMENT A-7)
<PAGE> 41
Attachment B
Dispute Resolution Procedure
1. General Procedure.
Except as otherwise stated in the Agreement, the parties hereto shall
resolve all Disputes in accordance with this procedure:
(a) Each party shall instruct its appropriate representative to promptly
negotiate in good faith with the other party's appropriate
representative to resolve the Dispute. The GILLC Executive shall be the
representative of GILLC. The United Executive shall be the
representative of United.
(b) If the representatives do not resolve the Dispute within ten business
days (or such longer period as the Representatives may agree) after the
date of referral of the Dispute to them, the representative of each
party will prepare a Dispute Summary with respect to that party's
position in the Dispute. The Dispute shall be referred (by either or
both of the representatives) to the Senior Review Committee for
resolution on the basis of the Dispute Summaries prepared by each
party.
(c) If the Senior Review Committee does not resolve the Dispute within ten
business days (or such longer period as that Committee may agree) from
the date of referral to it, either party may submit the Dispute to
binding arbitration in accordance with Section 2 of this Attachment.
2. Arbitration Procedure
The Arbitration Procedure shall be the "baseball" arbitration procedure provided
in Section 5.04 of the Amended and Restated Computer Services Agreement between
United and GILLC, modified as necessary with respect to defined terms in this
Agreement.
(ATTACHMENT B-1)
<PAGE> 42
Exhibit A
Area of Primary Sales Responsibility
[*]
[ONE PAGE OMITTED]
(EXHIBIT A-1)
<PAGE> 43
Exhibit B
List of Excluded Subscribers
[*]
[ONE PAGE OMITTED]
(EXHIBIT B-1)
<PAGE> 44
Exhibit C
Designated Subscribers
[*]
[ONE PAGE OMITTED]
(EXHIBIT C-1)
<PAGE> 45
Exhibit D
Sales Representative Reports
1) Staffing Report. A quarterly written advice of staffing levels.
2) Account Activity Reports setting forth: Gains (signed contracts/OA's);
Losses, Renewals; Changes/Updates to target lists - due on last day of
each month.
3) Redistricting Reports and Administrative Files. On GILLC's request,
contains account alignments and assignments.
(EXHIBIT D-1)
<PAGE> 46
Exhibit E
Certain Territories
PARTNER HOME NATIONAL TERRITORIES
Austria
Canada
Greece
Ireland
Italy
Japan
Portugal
The Netherlands
United Kingdom
ASSOCIATE DISTRIBUTOR TERRITORIES
1. ARABI
Algeria
Bahrain
Djibouti
Egypt
Iraq
Jordan
Kuwait
Lebanon
Libya
Mauritania
Morocco
Oman
Qatar
Saudi Arabia
Somalia
Sudan
Syria
Tunisia
United Arab Emirates
Yemen
2. SOUTHERN CROSS
Australia
New Zealand
Papua New Guinea
(EXHIBIT E-1)
<PAGE> 47
Islands in the South Pacific Ocean (other than dependencies of
the USA)
3. GALILEO DANMARK
Denmark
4. GALILEO NORDISKA
Finland
Norway
Sweden
5. MALEV
Hungary
6. SAA
South Africa
Independent Homelands
Namibia
Botswana
Lesotho
Swaziland
7. AVENSA
Venezuela
8. THY
Turkey
9. INTERGLOBE
India
10. PHATARAPRASIT
Thailand
11. RELIANCE
Malaysia
12. MERCATOR
(EXHIBIT E-2)
<PAGE> 48
Pakistan
13. GETS
Cambodia
Vietnam
Malawi
Mauritania
Papua New Guinea
Tanzania
Croatia
Ukraine
Netherlands Antilles
Aruba
Guyana
Nigeria
Ethiopia
Benin
Burundi
Eritrea
Zaire
Djibouti
Ghana
Gambia
Kenya
Mozambique
Sudan
Cape Verde
Uganda
(EXHIBIT E-3)
<PAGE> 49
Schedule 1
Certain Information Relating to 1997
<TABLE>
<CAPTION>
UNITED STATES APR MEXICO APR
----------------- ----------
<S> <C> <C>
1997 REVENUE GOAL $[*] $[*]
1997 BASE COMPENSATION $[*] $[*]
1997 FA BUDGET $[*] $[*]
</TABLE>
[*]
(Schedule 1-1)
<PAGE> 1
EXHIBIT 10.8
CONFORMED COPY
RIGHTS WAIVER AGREEMENT
dated as of
July 30, 1997
(this "Agreement")
between
SAIRGROUP, a Swiss corporation having its registered domicile in Zurich,
Switzerland ("SAIRGROUP")
and
GALILEO INTERNATIONAL PARTNERSHIP, a Delaware general partnership whose
principal place of business is in Rosemont, Illinois, or any successor in
interest thereto, including, without limitation, the corporation or limited
liability company formed in connection with its initial public offering
(hereinafter "GALILEO";
each of Galileo and SAirGroup
are referred to herein
as a "PARTY", and Galileo and
SAirGroup are referred to
herein collectively as the "PARTIES")
regarding the waiver of certain rights under the Galileo International Amended
and Restated Partnership Agreement dated September 16, 1993, in consideration
for certain payments hereunder
<PAGE> 2
2
WHEREAS, pursuant to Section 7.10 of the Galileo International
Amended and Restated Partnership Agreement, dated as of September 16, 1993 (the
"Partnership Agreement"), it was agreed that certain Vendor Revenue, as defined
in the Partnership Agreement, would be split in accordance with Exhibit 7.10 to
the Partnership Agreement;
WHEREAS, in consideration for the Initial Payment and the
Anniversary Payments (as such terms are defined below), SAirGroup wishes to
waive, on behalf of itself and of all of its affiliates, all future rights to
receive Vendor Revenue under Section 7.10 of the Partnership Agreement (the
"Revenue Receipt Rights") upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants hereinafter set forth, the Parties hereby agree
as follows:
ARTICLE I
WAIVER OF REVENUE RECEIPT RIGHTS
SECTION 1.01. Waiver of Revenue Receipt Rights. In
consideration of the Initial Payment and the Anniversary Payments, SAirGroup
hereby, on behalf of itself and of all of its affiliates, waives all future
rights to the Revenue Receipt Rights.
ARTICLE II
CONSIDERATION
SECTION 2.01. Initial Payment. The initial consideration for
SAirGroup's waiver of the Revenue Receipt Rights shall be US$2,600,000 (the
"Initial Payment") which is payable (at SAirGroup's election) either to
SAirGroup or to one of its Affiliates upon execution of this Agreement by the
Parties.
SECTION 2.02. Anniversary Payments. As additional
consideration for the waiver of the Revenue Receipt Rights, on each of the first
three anniversaries hereof, Galileo shall pay to SAirGroup (or to one of its
Affiliates, at SAirGroup's election) the sum of US$6,600,000 (collectively, the
"Anniversary Payments").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
As an inducement to the Parties to enter into this Agreement,
SAirGroup and Galileo represent and warrant to each other as follows;
<PAGE> 3
3
SECTION 3.01. Authority. The execution and delivery of this
Agreement by each of SAirGroup and Galileo, the performance by each of them of
its respective obligations hereunder and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement has been duly executed and delivered by each of
SAirGroup and Galileo and (assuming due authorization, execution and delivery by
the other Party) this Agreement constitutes a legal, valid and binding
obligation of each Party enforceable against it in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally or by general principles of
equity.
SECTION 3.02. Governmental Consents and Approvals. The
execution, delivery and performance of this Agreement by the Parties do not and
will not require any consent, approval, authorization or other order of, action
by, filing with or notification to any governmental authority or any other
person.
ARTICLE IV
UNDERTAKING OF SAIRGROUP
SECTION 4.01. Further Action. SAirGroup hereby undertakes to
take all necessary steps and to execute all agreements and documentation
necessary to give effect to the waiver of the Revenue Receipt Rights.
ARTICLE V
VALUE ADDED TAX
SECTION 5.01. Value Added Tax. To the extent any payments to
be made by Galileo to SAirGroup hereunder are subject to value added tax
("VAT"), (i) such payments shall be deemed to be inclusive of the applicable
VAT, and (ii) Galileo shall use its reasonable efforts to obtain a refund of
such VAT in accordance with applicable law and hereby assigns its right to any
such refund to SAirGroup.
ARTICLE VI
ARBITRATION
SECTION 6.01. Arbitration. (a) Subject to Section 6.01(b), any
dispute arising between the parties hereto involving the subject matters covered
by this Agreement shall be submitted to arbitration under this Section 6.01. Any
party asserting a breach of this Agreement by the other party shall notify the
other party of such alleged breach (a "Dispute Notice") and the parties shall
attempt to resolve such dispute amicably and if they shall fail to resolve it
within thirty (30) days of the date of the Dispute Notice, either party may
notify the other party that it wishes to commence an arbitration proceeding
under this Section 6.01 (an
<PAGE> 4
4
"Arbitration Request"). In any arbitration proceeding the party commencing the
arbitration (the "Petitioner") shall include in the Arbitration Request (a) a
statement of the facts constituting the alleged breach or dispute, (b) a written
statement of position ("Statement") regarding the dispute and (c) the name of an
elector designated by it. The Statement shall state the facts and arguments in
support of the position taken by the party submitting such Statement and shall
detail that party's proposed solution and relief sought (if any). Copies of any
Arbitration Request shall be furnished at the same time to the other party
hereto. The party with whom the Petitioner has its dispute (the "Respondent")
shall within five (5) Business Days after the date of the Arbitration Request
designate a second elector by notice to the Petitioner (copies of which shall be
furnished to the other party), but if it shall fail to do so within such period
the Petitioner may designate an elector on Respondent's behalf. The electors
chosen by the Petitioner and the Respondent shall attempt to agree upon an
arbitrator (the "Arbitrator"), but if they are unable to do so within twenty
(20) Business Days after the designation of the second elector, then either
elector thereafter may apply to the American Arbitration Association (the
"Association") for the selection of the Arbitrator in accordance with the
Commercial Arbitration Rules of such Association. The Arbitrator so selected
shall have full power to decide any dispute referred to in this Section 6.01.
The arbitration proceedings shall be conducted in the English language, and the
place of arbitration and the making of the Award (as defined below) shall be
Paris, France. The UNCITRAL rules of commercial arbitration shall apply to any
arbitration commenced pursuant to this Section 6.01, as modified by the
following procedure:
(i) Within five (5) Business Days of the selection of the
Arbitrator (the "Commencement Date"), the Respondent shall deliver its
Statement regarding the dispute to the Arbitrator and to the
Petitioner.
(ii) Within fifteen (15) Business Days from the
Commencement Date, each of the Petitioner and Respondent shall deliver
to the Arbitrator and to the other party, a response ("Response") to
the other party's Statement setting forth opposing facts and arguments
and limited in length to ten (10) typed, single spaced pages (excluding
any evidentiary exhibits included therein).
(iii) Within twenty (20) Business Days from the
Commencement Date, each of the Petitioner and the Respondent may
deliver to the Arbitrator and to the other party, a reply to the
Response limited to setting forth facts and arguments in rebuttal to
the Statement and Response of the other party and limited in length to
five (5) typed, single spaced pages (excluding any evidentiary exhibits
included therein).
(iv) Within twenty-five (25) Business Days from the
Commencement Date, each of the Petitioner and Respondent shall present
an oral summation of its position to the Arbitrator in the presence of
the other party in accordance with such rules of procedure including,
without limitation, length of presentation and right of cross-
<PAGE> 5
5
examination, as the Arbitrator shall determine in writing and deliver
to the parties not less than three (3) Business Days prior to such
hearing; provided, however, that such hearing shall not exceed eight
(8) hours in total and may not be adjourned except for extraordinary
circumstances beyond the control of the parties.
(v) The Arbitrator shall either issue his decision and
award ("Award") or request a further meeting of the parties within
fifteen (15) days of the hearing.
(vi) Any such further meeting of the parties shall take
place within five (5) Business Days of the request therefor and shall
be conducted as determined by the Arbitrator. The Arbitrator shall
issue his Award no later than fifteen (15) days after any such further
meeting of the parties.
(vii) The Award shall be in writing and shall be limited to
a decision either completely in favor of Petitioner's request for
relief or completely in favor of Respondent's request for relief. The
Award shall be final and binding upon the parties hereto and judgment
may be entered thereon in any court of competent jurisdiction and the
costs and expenses of such arbitration (and of enforcing any Award),
including attorneys' fees, shall be borne by the party losing such
arbitration.
(viii) In the event that the Arbitrator fails to render his
Award within the time limits contained in Sections 6.01(a)(v) or (vi),
the Arbitrator shall, nonetheless, retain jurisdiction over the dispute
for a reasonable period of time.
(b) This Section 6.01 shall in no way affect the right of any
party to seek such interim relief, and only such relief, as may be required to
maintain the status quo in aid of the arbitration in any court of competent
jurisdiction.
(c) For purposes of this Section 6.01, the term "Business Day"
means any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by law to be closed in Zurich, Switzerland.
ARTICLE VII
GOVERNING LAW
SECTION 7.01. Governing Law. This Agreement shall be governed
by the laws of Switzerland (disregarding conflict of law rules and the Vienna
(United Nations) Convention on the International Sale of Goods).
<PAGE> 6
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
GALILEO INTERNATIONAL PARTNERSHIP
By: /s/ Paul H. Bristow
--------------------------------------------
Name: Paul H. Bristow
Title: Senior Vice President and
Chief Financial Officer
SAIRGROUP (LTD.)
By: /s/ Georges Schorderet
--------------------------------------------
Name: Georges Schorderet
Title: Executive VP, Chief Financial Officer
By: /s/ Urs Vida
--------------------------------------------
Name: Urs Vida
Title: Manager
<PAGE> 1
Exhibit 10.10(a)
$200,000,000
364-DAY
CREDIT AGREEMENT
dated as of
July 23, 1997
among
Galileo International, Inc.,
The Banks Parties Hereto,
The Letter of Credit Issuing Banks Named Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
------------------------
J.P. Morgan Securities Inc.,
Arranger
Bank of America National Trust and Savings Association
and
Bank of Montreal,
Co-Arrangers
<PAGE> 2
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
Page
ARTICLE 1
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Definitions......................................................................1
SECTION 1.02. Accounting Terms and Determinations.............................................17
SECTION 1.03. Types of Borrowings.............................................................17
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend.............................................................18
SECTION 2.02. Increased Commitments; Additional Banks.........................................18
SECTION 2.03. Notice of Committed Borrowing...................................................19
SECTION 2.04. Money Market Borrowings.........................................................20
SECTION 2.05. Notice to Banks; Funding of Loans...............................................24
SECTION 2.06. Notes...........................................................................25
SECTION 2.07. Maturity of Loans...............................................................25
SECTION 2.08. Interest Rates..................................................................26
SECTION 2.09. Fees............................................................................29
SECTION 2.10. Optional Termination or Reduction of Commitments................................30
SECTION 2.11. Method of Electing Interest Rates...............................................30
SECTION 2.12. Mandatory Termination of Commitments............................................32
SECTION 2.13. Optional Prepayments............................................................32
SECTION 2.14. General Provisions as to Payments...............................................32
SECTION 2.15. Funding Losses..................................................................33
SECTION 2.16. Computation of Interest and Fees................................................34
SECTION 2.17. Regulation D Compensation.......................................................34
SECTION 2.18. Currency Translations...........................................................34
SECTION 2.19. Judgment Currency...............................................................34
SECTION 2.20. Letters of Credit...............................................................35
ARTICLE 3
CONDITIONS
SECTION 3.01. First Borrowing or Issuance.....................................................39
SECTION 3.02. Each Borrowing and Issuance.....................................................40
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
<S> <C> <C>
SECTION 4.01. Corporate Existence and Power...................................................41
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention.........................................................................41
SECTION 4.03. Binding Effect..................................................................41
SECTION 4.04. Financial Information...........................................................41
SECTION 4.05. Litigation......................................................................42
SECTION 4.06. Compliance with ERISA...........................................................42
SECTION 4.07. Compliance with Laws............................................................43
SECTION 4.08. Environmental Matters...........................................................43
SECTION 4.09. Taxes...........................................................................43
SECTION 4.10. Subsidiaries....................................................................43
SECTION 4.11. Regulatory Restrictions on Borrowing............................................44
SECTION 4.12. Full Disclosure.................................................................44
ARTICLE 5
COVENANTS
SECTION 5.01. Information.....................................................................44
SECTION 5.02. Payment of Obligations..........................................................46
SECTION 5.03. Maintenance of Property; Insurance..............................................47
SECTION 5.04. Conduct of Business and Maintenance of Existence................................47
SECTION 5.05. Compliance with Laws............................................................47
SECTION 5.06. Inspection of Property, Books and Records.......................................48
SECTION 5.07. Mergers and Sales of Assets.....................................................48
SECTION 5.08. Use of Proceeds.................................................................48
SECTION 5.09. Negative Pledge.................................................................48
SECTION 5.10. Interest Coverage Ratio.........................................................49
SECTION 5.11. Restricted Payments.............................................................49
SECTION 5.12. Transactions with Affiliates....................................................50
SECTION 5.13. Debt of Subsidiaries............................................................50
SECTION 5.14. Cash Flow Ratio.................................................................50
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default...............................................................50
SECTION 6.02. Notice of Default...............................................................52
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 6.03. Cash Cover......................................................................52
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization...................................................53
SECTION 7.02. Agent and Affiliates............................................................53
SECTION 7.03. Action by Agent.................................................................53
SECTION 7.04. Consultation with Experts.......................................................53
SECTION 7.05. Liability of Agent..............................................................54
SECTION 7.06. Indemnification.................................................................54
SECTION 7.07. Credit Decision.................................................................54
SECTION 7.08. Successor Agent.................................................................55
SECTION 7.09. Agent's Fee; Arranger Fee.......................................................55
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................55
SECTION 8.02. Illegality......................................................................56
SECTION 8.03. Increased Cost and Reduced Return...............................................57
SECTION 8.04. Taxes...........................................................................58
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................60
SECTION 8.06. Substitution of Bank............................................................61
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices.........................................................................61
SECTION 9.02. No Waivers......................................................................61
SECTION 9.03. Expenses; Indemnification.......................................................62
SECTION 9.04. Sharing of Set-offs.............................................................62
SECTION 9.05. Amendments and Waivers .........................................................63
SECTION 9.06. Successors and Assigns..........................................................63
SECTION 9.07. Collateral......................................................................65
SECTION 9.08. Governing Law; Submission to Jurisdiction.......................................65
SECTION 9.09. Counterparts; Integration; Effectiveness........................................65
SECTION 9.10. WAIVER OF JURY TRIAL............................................................66
SECTION 9.11. Confidentiality.................................................................66
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
PRICING SCHEDULE A
PRICING SCHEDULE B
SCHEDULE I - Existing Capital Leases
SCHEDULE II- Existing Ownership Group
SCHEDULE III - Transaction Documents
EXHIBIT A - Note
EXHIBIT B - Money Market Quote Request
EXHIBIT C - Invitation for Money Market Quotes
EXHIBIT D - Money Market Quote
EXHIBIT E - Opinion of Counsel for the Borrower
EXHIBIT F - Opinion of Special Counsel for the Agent
EXHIBIT G - Assignment and Assumption Agreement
</TABLE>
iv
<PAGE> 6
364-DAY
CREDIT AGREEMENT
364-DAY CREDIT AGREEMENT dated as of July 23, 1997 among GALILEO
INTERNATIONAL, INC., the BANKS from time to time parties hereto, the LETTER OF
CREDIT ISSUING BANKS from time to time parties hereto and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.04.
"ADDITIONAL BANK" has the meaning set forth in Section 2.02(b).
"ADJUSTED CD RATE" has the meaning set forth in Section 2.08(b).
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"AFFILIATE" means, at any time, (i) any Person that at such time
beneficially owns, directly or indirectly, 25% or more of the Ordinary Voting
Stock, (ii) any Person that, at such time, directly, or indirectly through one
or more intermediaries, controls the Borrower or (iii) any Person (other than
the Borrower or a Subsidiary) which is controlled by or is under common control
with a Person described in clause (i) or (ii).
"AGENT" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"ALTERNATIVE CURRENCY" means any freely available currency other than
Dollars which is freely transferable and convertible into Dollars.
<PAGE> 7
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.08(b).
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank listed on the signature pages hereof, each
Additional Bank which becomes a Bank pursuant to Section 2.02, each Assignee
which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"BASE RATE LOAN" means (i) a Committed Loan which bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or the provisions of Article 8 or (ii) an
overdue amount which was a Base Rate Loan immediately before it became overdue.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"BORROWER" means Galileo International, Inc., a Delaware corporation,
and its successors.
"BORROWING" has the meaning set forth in Section 1.03.
"CASH FLOW RATIO" means at any date the ratio of (i) Consolidated Debt
at such date to (ii) Consolidated EBITDA for the four consecutive fiscal
quarters of the Borrower and its Consolidated Subsidiaries ending on such date.
"CD BASE RATE" has the meaning set forth in Section 2.08(b).
"CD LOAN" means (i) a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of
2
<PAGE> 8
Interest Rate Election or (ii) an overdue amount which was a CD Loan
immediately before it became overdue.
"CD MARGIN" means a rate per annum determined in accordance with the
Pricing Schedule.
"CD RATE" means a rate of interest determined pursuant to Section
2.08(b) on the basis of an Adjusted CD Rate.
"CD REFERENCE BANKS" means Bank of Montreal, Bank of America
National Trust and Savings Association and Morgan Guaranty Trust Company of
New York.
"CHANGE IN OWNERSHIP OR CONTROL" shall be deemed to have occurred if,
without the prior written consent of the Required Banks, at any time on or
after the Effective Date: (i) any Person or group (within the meaning of Rule
13d-5 under the Securities Exchange Act of 1934, as amended) other than one or
more members of the Existing Ownership Group shall beneficially own, directly
or indirectly, a percentage of the Ordinary Voting Stock that is at such time
in excess of the percentage of the Ordinary Voting Stock beneficially owned,
directly or indirectly, at such time by all members of the Existing Ownership
Group taken as a whole; (ii) any Person or group (within the meaning of Rule
13d-5 under the Securities Exchange Act of 1934, as amended) other than one or
more members of the Existing Ownership Group shall beneficially own, directly
or indirectly, a percentage of the Ordinary Voting Stock that is at such time
in excess of 25% of the Ordinary Voting Stock outstanding at such time; or
(iii) the Continuing Directors shall fail to constitute a majority of the Board
of Directors of the Borrower at such time.
"CLOSING DATE" means the date on or after the Effective Date on which
the initial Borrowing or issuance of a Letter of Credit under this Agreement
occurs.
"COMMITMENT" means (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite its name on the signature
pages hereof and (ii) with respect to each Additional Bank or Assignee which
becomes a Bank pursuant to Section 2.02 or 9.06(c), the amount of the
Commitment thereby assumed by it, in each case as such amount may be reduced
from time to time pursuant to Sections 2.10 and 9.06(c) or increased from time
to time pursuant to Sections 2.02 and 9.06(c).
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01,
provided that, if any such loan or loans (or portions thereof) are combined or
3
<PAGE> 9
subdivided pursuant to a Notice of Interest Rate Election, the term "COMMITTED
LOAN" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED EBIT" means, for any fiscal period, Consolidated Net
Income (exclusive of the effect of any extraordinary gain (or loss)) for such
period plus, to the extent deducted in determining Consolidated Net Income for
such period, the aggregate amount of (i) Consolidated Interest Expense and (ii)
income tax expense.
"CONSOLIDATED EBITDA" means, for any fiscal period, Consolidated EBIT
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of depreciation, amortization and
other similar non-cash charges.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis for such period.
"CONSOLIDATED NET INCOME" means, for any fiscal period, the net income
of the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period. Notwithstanding the foregoing, for purposes of
calculating Consolidated Net Income for any fiscal period ending on or prior to
June 30, 1998, there shall be added to the amount determined in accordance with
the immediately preceding sentence the amount of net income attributable during
such fiscal period to the assets acquired in the NDC Acquisitions (such amount
of net income to be determined in good faith by the Borrower in a manner
consistent with the preparation of the pro forma financial statements included
in the Registration Statement).
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower
in its consolidated financial statements if such statements were prepared as of
such date.
"CONSOLIDATED TANGIBLE NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. For
purposes of
4
<PAGE> 10
this definition, the term "INTANGIBLE ASSETS" means the amount (to the extent
reflected in determining such consolidated stockholders' equity) of (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within twelve
months after the acquisition of such business) subsequent to December 31, 1996
in the book value of any asset owned by the Borrower or a Consolidated
Subsidiary, (ii) all investments in unconsolidated Subsidiaries and all equity
investments in Persons which are not Subsidiaries and (iii) all unamortized
debt discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, anticipated future benefit of tax loss
carry-forwards, copyrights, organization or developmental expenses and other
intangible assets.
"CONTINUING DIRECTOR" means, at any date, an individual (i) who is a
member of the Board of Directors of the Borrower on the Effective Date, (ii)
who has been nominated to be a member of such Board of Directors, directly or
indirectly, by one or more members of the Existing Ownership Group or (iii) who
has been nominated to be a member of such Board of Directors by a majority of
the other Continuing Directors then in office.
"CONTROL" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations (and, for purposes of Section 5.09 and the
definitions of the terms "MATERIAL DEBT" and "MATERIAL FINANCIAL OBLIGATIONS",
all contingent obligations) of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person and (vii)
all Debt of others Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
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<PAGE> 11
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"DOLLARS" and the symbol "$" mean lawful money of the United States of
America.
"DOLLAR AMOUNT" means (i) with respect to any Loan denominated in
Dollars, the outstanding principal amount thereof and (ii) with respect to any
Loan denominated in an Alternative Currency, the Dollar Equivalent of the
outstanding principal amount thereof most recently determined by the Agent
pursuant to Section 2.18.
"DOLLAR EQUIVALENT" means, with respect to any amount of an
Alternative Currency at any date of determination thereof, the equivalent of
such amount in Dollars, calculated on the basis of the arithmetical mean of the
buy and sell spot rates of exchange of the Agent for such Alternative Currency
at 10:30 A.M. (New York City time) on such date of determination (or at such
other time as the Agent may determine to be appropriate for such Alternative
Currency).
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent, provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"DOMESTIC LOANS" means CD Loans or Base Rate Loans or both.
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<PAGE> 12
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.08(b).
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 9.09.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 (b) or (c) of
the Internal Revenue Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, are treated as a single employer under Section 414 of
the Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London and, if funds are to be transferred in an
Alternative Currency on such date, in the jurisdiction of the Payment Office.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"EURO-DOLLAR LOAN" means (i) a Committed Loan which bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
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<PAGE> 13
Notice of Interest Rate Election or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.08(c) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of
Bank of Montreal, Bank of America National Trust and Savings Association and
Morgan Guaranty Trust Company of New York.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CAPITAL LEASES" means the capital leases described on
Schedule I hereto.
"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated as of
July 3, 1996, among the Predecessor, the lenders named therein and Morgan
Guaranty Trust Company of New York, as agent.
"EXISTING OWNERSHIP GROUP" means (i) the Persons listed on Schedule II
hereto, (ii) any Person that directly, or indirectly through one or more
intermediaries, controls any Person listed on Schedule II hereto and (iii) any
Person (other than the Borrower or a Subsidiary) which is controlled by or is
under common control with a Person listed on Schedule II hereto.
"FACILITY FEE RATE" means a rate per annum determined in accordance
with the Pricing Schedule.
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<PAGE> 14
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"FIXED RATE LOANS" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01) or any combination of the foregoing.
"GROUP OF LOANS" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time, (ii) all
Euro-Dollar Loans having the same Interest Period at such time or (iii) all CD
Loans having the same Interest Period at such time, provided that, if a
Committed Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Article 8, such Loan shall be included in the same Group or
Groups of Loans from time to time as it would have been in if it had not been
so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term "GUARANTEE" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "GUARANTEE" used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products
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<PAGE> 15
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"INCREASED COMMITMENTS" has the meaning set forth in Section 2.02(a).
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST COVERAGE RATIO" means at any date the ratio of (i)
Consolidated EBIT for the four consecutive fiscal quarters of the Borrower and
its Consolidated Subsidiaries ending on such date to (ii) Consolidated Interest
Expense for such period.
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan,
the period commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice, provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall, subject to clause (c) below,
be extended to the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in
which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, the period commencing on the date
of borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice,
provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which
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<PAGE> 16
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such whole number of months thereafter as the Borrower may
elect in accordance with Section 2.04, provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 30 days)
as the Borrower may elect in accordance with Section 2.04, provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
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<PAGE> 17
"ISSUING BANK" means Morgan Guaranty Trust Company of New York or any
other Bank that may agree to issue letters of credit hereunder, in each case as
issuer of letters of credit hereunder.
"LETTER OF CREDIT" means a standby letter of credit to be issued
hereunder by an Issuing Bank.
"LETTER OF CREDIT FEE RATE" means a rate per annum determined in
accordance with the Pricing Schedule.
"LETTER OF CREDIT LIABILITIES" means, for any Bank and at any time,
the sum of (i) the amounts then owing to such Bank (including in its capacity
as an Issuing Bank) by the Borrower to reimburse it in respect of amounts drawn
under Letters of Credit and (ii) such Bank's ratable participation in the
aggregate amount then available for drawing under all Letters of Credit.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.04.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN" means a Domestic Loan, a Euro-Dollar Loan or a Money Market
Loan and "LOANS" means Domestic Loans, Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.08(c).
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
business, financial condition or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole, (ii) the ability of the
Borrower to perform its obligations under the terms of this Agreement and the
Notes or (iii) the rights and obligations of the Agent and the Banks under this
Agreement and the Notes.
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<PAGE> 18
"MATERIAL DEBT" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$10,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$25,000,000. For purposes of determining Material Financial Obligations at any
time, the "principal or face amount" of the obligations of the Borrower or any
Subsidiary in respect of any Derivative Obligations at such time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Derivative
Obligations were terminated at such time.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.04(d).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent, provided that any Bank may from time to time by notice
to the Borrower and the Agent designate separate Money Market Lending Offices
for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, or for its Money Market Loans in any
particular currency, in which case all references herein to the Money Market
Lending Office of such Bank shall be deemed to refer to any or all of such
offices, as the context may require.
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
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<PAGE> 19
"MONEY MARKET MARGIN" has the meaning set forth in Section
2.04(d)(ii)(C).
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.04.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"NDC ACQUISITIONS" means the acquisitions by the Borrower and its
Subsidiaries of the assets of the NDCs.
"NDCS" means collectively Apollo Travel Services Partnership,
Traviswiss AG and Galileo Nederland B.V.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as
defined in Section 2.03) or a Notice of Money Market Borrowing (as defined in
Section 2.04(f)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in
Section 2.11.
"NOTICE OF ISSUANCE" has the meaning set forth in Section 2.20(b).
"ORDINARY VOTING STOCK" means common stock or other voting securities
of the Borrower (other than the Special Voting Preferred Stock).
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
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<PAGE> 20
"PAYMENT OFFICE" means the office or account of the Agent at or to
which payments hereunder are to be made, which shall be, in the case of
payments in Dollars, the office of the Agent referred to in Section 9.01 and,
in the case of payments in an Alternative Currency, such office or account as
the Agent may specify for such purpose by notice to the Borrower and the Banks.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"PREDECESSOR" means Galileo International Partnership, a Delaware
general partnership.
"PRICING SCHEDULE" means (i) Pricing Schedule A attached hereto,
unless and until the Borrower shall have elected that Pricing Schedule B
attached hereto be the Pricing Schedule, such election to be effected by the
giving by the Borrower of not less than five Domestic Business Days' notice to
the Agent of the effective date of such election, and (ii) on and after the
effective date of such election, Pricing Schedule B attached hereto. Such
election, if made, shall be irrevocable.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"QUARTERLY DATE" means each March 31, June 30, September 30 and
December 31.
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<PAGE> 21
"REFERENCE BANKS" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "REFERENCE BANK" means any one
of such Reference Banks.
"REGISTRATION STATEMENT" means the Borrower's Registration Statement
on Form S-1, filed on May 20, 1997, with the Securities and Exchange Commission
under the Securities Act of 1933, as such Registration Statement may be amended
prior to the Effective Date.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing more than 50% of the aggregate unpaid
principal amount of the Loans.
"RESTRICTED PAYMENT" means (a) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock or rights to receive shares of its capital stock)
or (b) any payment on account of the purchase, redemption, retirement or
acquisition of (i) any shares of the Borrower's capital stock or (ii) any
option, warrant or other right to acquire shares of the Borrower's capital
stock (but not including payments of principal, premium (if any) or interest
made pursuant to the terms of convertible debt securities prior to conversion).
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Rating Services.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, the term "SUBSIDIARY" means a Subsidiary of the
Borrower.
"TERMINATION DATE" means July 22, 1998, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"TRANSACTION DOCUMENTS" means the documents listed on Schedule III
hereto.
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<PAGE> 22
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks, provided that, if the Borrower notifies
the Agent that the Borrower wishes to amend any covenant in Article 5 to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article 5 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks. Calculations with respect
to periods commencing prior to the Closing Date shall be made as if the
Predecessor were the Borrower.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article 2 on the same date, all of which Loans are of the same type (subject
to Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period. Borrowings are classified for purposes of this Agreement
either by reference to the pricing of Loans comprising such Borrowing (e.g., a
"FIXED RATE BORROWING" is a Euro-Dollar Borrowing, a CD Borrowing or a Money
Market Borrowing (excluding any such Borrowing consisting of Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to Section 8.01), and a
"EURO-
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<PAGE> 23
DOLLAR BORROWING" is a Borrowing comprised of Euro-Dollar Loans) or by
reference to the provisions of Article 2 under which participation therein is
determined (i.e., a "COMMITTED BORROWING" is a Borrowing under Section 2.01 in
which all Banks participate in proportion to their Commitments, while a "MONEY
MARKET BORROWING" is a Borrowing under Section 2.04 in which the Bank
participants are determined on the basis of their bids in accordance
therewith).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit Period,
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank and Letter of Credit Liabilities of such Bank at any one time
outstanding shall not exceed the amount of its Commitment. Each Borrowing under
this Section shall be in Dollars and be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.02) and shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may borrow
under this Section, prepay Loans to the extent permitted by Section 2.13 and
reborrow at any time during the Revolving Credit Period under this Section.
SECTION 2.02. Increased Commitments; Additional Banks. (a) Subsequent
to the Effective Date, the Borrower may, upon at least 30 days' notice to the
Agent (which shall promptly provide a copy of such notice to the Banks),
propose to increase the aggregate amount of the Commitments to an amount not to
exceed $300,000,000 (the amount of any such increase, the "INCREASED
COMMITMENTS"). Each Bank party to this Agreement at such time shall have the
right (but no obligation), for a period of 15 days following receipt of such
notice, to elect by notice to the Borrower and the Agent to increase its
Commitment by a principal amount which bears the same ratio to the Increased
Commitments as its then Commitment bears to the aggregate Commitments then
existing, provided that no increase in the aggregate amount of the Commitments
shall be effective unless Banks having more than 50% of in the aggregate amount
of the Commitments in effect at the time any such increase is requested shall
have elected so to increase their Commitments.
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<PAGE> 24
(b) If any Bank party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may
designate another bank or other banks (which may be, but need not be, one or
more of the existing Banks) which at the time agree to (i) in the case of any
such bank that is an existing Bank, increase its Commitment and (ii) in the
case of any other such bank (an "ADDITIONAL BANK"), become a party to this
Agreement. The sum of the increases in the Commitments of the existing Banks
pursuant to this subsection (b) plus the Commitments of the Additional Banks
shall not in the aggregate exceed the unsubscribed amount of the Increased
Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant
to this Section 2.02 shall become effective upon the receipt by the Agent of an
agreement in form and substance satisfactory to the Agent signed by the
Borrower, by each Additional Bank and by each other Bank whose Commitment is to
be increased, setting forth the new Commitments of such Banks and setting forth
the agreement of each Additional Bank to become a party to this Agreement and
to be bound by all the terms and provisions hereof, together with such evidence
of appropriate corporate authorization on the part of the Borrower with respect
to the Increased Commitments and such opinions of counsel for the Borrower with
respect to the Increased Commitments as the Agent may reasonably request.
SECTION 2.03. Notice of Committed Borrowing. The Borrower shall give
the Agent notice (a "NOTICE OF COMMITTED BORROWING") not later than 10:30 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the
second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate; and
(d) in the case of a Fixed Rate Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
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<PAGE> 25
SECTION 2.04. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as
set forth in this Section, request the Banks during the Revolving Credit Period
to make offers to make Money Market Loans to the Borrower in Dollars or in an
Alternative Currency. The Banks may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no obligation to, accept any such
offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received not later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000 (or, in the case of a
Borrowing to be denominated in an Alternative Currency, a comparable
amount of such Alternative Currency as determined by the Agent),
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of the term "INTEREST
PERIOD",
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate, and
(v) if the related Money Market Loans are to be denominated in an
Alternative Currency, such Alternative Currency. Money Market Loans
denominated in an Alternative Currency shall be made available in such
currency and repaid, together with interest thereon, in such currency.
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<PAGE> 26
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance
with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction, or (y) 9:30 A.M. (New York City
time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Borrower and the
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), provided that
Money Market Quotes submitted by the Agent (or any affiliate of the Agent) in
the capacity of a Bank may be submitted, and may only be submitted, if the
Agent or such affiliate notifies the Borrower of the terms of the offer or
offers contained therein not later than (x) one hour prior to the deadline for
the other Banks, in the case of a LIBOR Auction or (y) 15 minutes prior to the
deadline for the other Banks, in the case of an Absolute Rate Auction. Subject
to Articles 3 and 6, any Money Market Quote so made shall be irrevocable except
with the written consent of the Agent given on the instructions of the
Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing;
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<PAGE> 27
(B) the principal amount of the Money Market
Loan for which each such offer is being made, which principal
amount (w) may be greater than or less than the Commitment of
the quoting Bank, (x) must be $5,000,000 or a larger multiple
of $1,000,000 (or, in the case of a Borrowing to be
denominated in an Alternative Currency, a comparable amount
of such Alternative Currency as determined by the Agent), (y)
may not exceed the principal amount of Money Market Loans for
which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Money
Market Loans for which offers being made by such quoting Bank
may be accepted;
(C) in the case of a LIBOR Auction, the margin
above or below the applicable London Interbank Offered Rate
(the "MONEY MARKET MARGIN") offered for each such Money
Market Loan, expressed as a percentage (specified to the
nearest 1/10,000th of 1%) to be added to or subtracted from
such base rate;
(D) in the case of an Absolute Rate Auction,
the rate of interest per annum (specified to the nearest
1/10,000th of 1%) (the "MONEY MARKET ABSOLUTE RATE")
offered for each such Money Market Loan; and
(E) the identity of the quoting Bank
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the
related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with
Exhibit D hereto or does not specify all of the information
required by subsection 2.04(d)(ii) above;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money Market
Quotes; or
(D) arrives after the time set forth in
subsection 2.04(d)(i).
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<PAGE> 28
(e) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection 2.04(d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The Agent's notice to the
Borrower shall specify (A) the aggregate principal amount of Money Market Loans
for which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money Market Quote may be
accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection 2.04(e). In the case of acceptance, such notice (a "NOTICE OF MONEY
MARKET BORROWING") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part, provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request;
(ii) the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $1,000,000 (or in the case of a
Borrowing to be denominated in an Alternative Currency, a comparable
amount of such Alternative Currency as determined by the Agent);
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be; and
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<PAGE> 29
(iv) the Borrower may not accept any offer that is described in
subsection 2.04(d)(iii) or that otherwise fails to comply in any
material respect with the requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as possible (in multiples
of $1,000,000 (or, in the case of a Borrowing to be denominated in an
Alternative Currency, a comparable amount of such Alternative Currency as
determined by the Agent), as the Agent may deem appropriate) in proportion to
the aggregate principal amounts of such offers. Determinations by the Agent of
the amounts of Money Market Loans shall be conclusive in the absence of
manifest error.
SECTION 2.05. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing (or, in the case of payments in an Alternative Currency, such
other time as the Agent may determine to be customary for payments in such
Alternative Currency), each Bank participating therein shall make available its
share of such Borrowing, (i) in the case of payments in Dollars, in Federal or
other funds immediately available in New York City, and (ii) in the case of
payments in an Alternative Currency, in such funds as are at the time customary
for the international settlement of payments in such currency, to the Agent at
the Payment Office. Unless the Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Agent will make the funds so
received from the Banks available to the Borrower at the Payment Office.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsection 2.05(b) of this Section and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Borrower severally
agree to repay to the
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<PAGE> 30
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at the Federal
Funds Rate (or, in the case of Money Market Loans denominated in an Alternative
Currency, a comparable overnight rate for such Alternative Currency as
determined by the Agent). If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
included in such Borrowing for purposes of this Agreement.
SECTION 2.06. Notes. (a) The Loans of each Bank shall be evidenced by
a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type or in a particular currency be evidenced by
a separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type or in the relevant currency. Each reference
in this Agreement to the "NOTE" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount, currency and type of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may,
if such Bank so elects in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding, provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Note and to attach to and make a part of its Note a continuation
of any such schedule as and when required.
SECTION 2.07. Maturity of Loans. (a) Each Committed Loan shall
mature, and the principal amount thereof shall be due and payable, together
with accrued interest thereon, on the Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together
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<PAGE> 31
with accrued interest thereon, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.08. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Loan is made to but excluding the date on which such
Loan becomes due, at a rate per annum equal to the Base Rate for such day. Such
interest shall be payable quarterly in arrears on each Quarterly Date and, with
respect to the principal amount of any Base Rate Loan converted to a CD Loan or
a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue
principal of or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the rate otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period, provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of the term
"INTEREST PERIOD", have an Interest Period of less than 30 days, such CD Loan
shall bear interest during such Interest Period at the rate applicable to Base
Rate Loans during such period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than 90
days, at intervals of 90 days after the first day thereof. Any overdue
principal of or interest on any CD Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of 2% plus the
higher of (i) the rate applicable to Base Rate Loans for such day and (ii) the
sum of the CD Margin plus the Adjusted CD Rate applicable to such Loan at the
date such payment was due.
The "ADJUSTED CD RATE" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
<TABLE>
<S> <C> <C>
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
</TABLE>
- ----------
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<PAGE> 32
*The amount in brackets being rounded upward, if necessary, to
the next higher 1/100 of 1%
The "CD BASE RATE" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"DOMESTIC RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"ASSESSMENT RATE" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss.327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.
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<PAGE> 33
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in Dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for
such day plus the quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar Business
Days, then for such other period of time not longer than three months as the
Agent may select) deposits in Dollars in an amount approximately equal to such
overdue payment due to each of the Euro-Dollar Reference Banks are offered to
such Euro-Dollar Reference Bank in the London interbank market for the
applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in clause
8.01(a) or 8.01(b) shall exist, at a rate per annum equal to the sum of 2% plus
the rate applicable to Base Rate Loans for such day) and (ii) the sum of 2%
plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan at the date such payment was due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.08(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing and, in the case of a Borrowing in an Alternative
Currency, based on the comparable quotations for such Alternative Currency
rather than for Dollars) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.04. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.04. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three
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<PAGE> 34
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid (i) in the case of Money Market Loans
denominated in Dollars, at a rate per annum equal to the sum of 2% plus the
Base Rate for such day and (ii) in the case of Money Market Loans denominated
in an Alternative Currency, at a rate per annum determined in accordance with
Section 2.08(d) as if such Money Market Loans were Euro-Dollar Loans, but based
on comparable quotations for such Alternative Currency rather than for Dollars.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available
on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.09. Fees. (a) The Borrower shall pay to the Agent for the
account of the Banks ratably a facility fee at the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility fee
shall accrue (i) from and including the Effective Date to but excluding the
date of termination of the Commitments in their entirety, on the daily
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including such date of termination to but excluding the date the Loans and
Letter of Credit Liabilities shall be repaid in their entirety, on the daily
aggregate outstanding principal amount of the Loans and Letter of Credit
Liabilities.
(b) The Borrower shall pay to the Agent (i) for the account of the
Banks ratably a letter of credit fee accruing daily on the aggregate amount
then available for drawing under all Letters of Credit at the Letter of Credit
Fee Rate (determined daily in accordance with the Pricing Schedule) and (ii)
for the account of each Issuing Bank a letter of credit fronting fee accruing
daily on the aggregate amount then available for drawing under all Letters of
Credit issued by such Issuing Bank at a rate per annum mutually agreed from
time to time by the Borrower and such Issuing Bank.
(c) Accrued fees under this Section shall be payable quarterly in
arrears on each Quarterly Date and on the date of termination of the
Commitments in
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<PAGE> 35
their entirety (and, if later, the date the Loans and Letter of Credit
Liabilities shall be repaid in their entirety).
SECTION 2.10. Optional Termination or Reduction of Commitments. During
the Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Agent, (i) terminate the Commitments at any time,
if no Loans or Letter of Credit Liabilities are outstanding at such time or
(ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or
a larger multiple of $1,000,000, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amount of the Loans and Letter of
Credit Liabilities.
SECTION 2.11. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Committed
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in
each case to the provisions of Article 8 and the last sentence of this
subsection (a)), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.15 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or CD Loans or elect to continue
such Loans as Euro-Dollar Loans for an additional Interest Period,
subject to Section 2.15 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Agent not later than 10:30 A.M. (New York City time) on
the third Euro-Dollar Business Day before the conversion or continuation
selected in such notice is to be effective (unless the relevant Loans are to be
converted to Domestic Loans of the other type or are CD Rate Loans to be
continued as CD
30
<PAGE> 36
Rate Loans for an additional Interest Period, in which case such notice shall
be delivered to the Agent not later than 10:30 A.M. (New York City time) on the
second Domestic Business Day before such conversion or continuation is to be
effective). A Notice of Interest Rate Election may, if it so specifies, apply
to only a portion of the aggregate principal amount of the relevant Group of
Loans, provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and
the remaining portion to which it does not apply, are each $5,000,000 or any
larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of subsection 2.11(a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans being converted are to be
Fixed Rate Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of the term "INTEREST PERIOD".
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection 2.11(a) above, the Agent shall promptly notify
each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower. If no Notice of Interest Rate Election is timely
received prior to the end of an Interest Period for any Group of Loans, the
Borrower shall be deemed to have elected that such Group of Loans be converted
to Base Rate Loans as of the last day of such Interest Period.
(d) An election by the Borrower to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section shall not
constitute a "BORROWING" subject to the provisions of Section 3.02.
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SECTION 2.12. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
SECTION 2.13. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Loan to Section 2.15, the Borrower may, upon at least one Domestic
Business Day's notice to the Agent, prepay any Group of Domestic Loans (or any
Money Market Borrowing bearing interest at the Base Rate pursuant to Section
8.01) or upon at least three Euro-Dollar Business Days' notice to the Agent,
prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or
from time to time in part in amounts aggregating $10,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Group (or Borrowing).
(b) Except as provided in subsection 2.13(a) above the Borrower may
not prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.14. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) (or, in the case of
payments in an Alternative Currency, such other time as the Agent may determine
to be customary for payments in such Alternative Currency) on the date when
due, (i) in the case of payments in Dollars, in Federal or other funds
immediately available in New York City and (ii) in the case of payments in an
Alternative Currency, in such funds as are at the time customary for the
international settlement of payments in such currency, to the Agent at the
Payment Office. The Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Agent for the account of the Banks.
Whenever any payment of principal of, or interest on, the Domestic Loans or of
fees shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a
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day which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the
date for payment thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the Money Market Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of law
or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate (or, in the case of Money Market Loans
denominated in an Alternative Currency, a comparable overnight rate for such
Alternative Currency as determined by the Agent).
SECTION 2.15. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than
the last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.08(d), or if the Borrower fails
to borrow, prepay, convert or continue any Fixed Rate Loans after notice has
been given to any Bank in accordance with Section 2.05(a), 2.13(c) or 2.11(c),
the Borrower shall reimburse each Bank within 15 Domestic Business Days after
demand for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation)
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that
such Bank shall have delivered to the Borrower and the Agent a certificate as
to the amount of such loss or expense, which certificate shall set forth the
method of determining such loss or expense in reasonable detail and shall be
conclusive in the absence of manifest error.
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SECTION 2.16. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.17. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after the giving of
such notice and (y) shall notify the Borrower at least five Euro-Dollar
Business Days prior to each date on which interest is payable on the
Euro-Dollar Loans of the amount then due it under this Section.
SECTION 2.18. Currency Translations. The Dollar Amount of each Money
Market Loan denominated in an Alternative Currency shall be determined by the
Agent (i) on the date of borrowing, as to each such Loan borrowed on such date,
and (ii) on each Quarterly Date, as to each such Loan outstanding on such date.
If after giving effect to any such determination pursuant to clause (ii), the
sum of the aggregate Dollar Amount of the Loans and the aggregate Letter of
Credit Liabilities exceeds the aggregate amount of the Commitments, the
Borrower shall prepay such principal amount (together with accrued interest
thereon) of the outstanding Committed Loans, if any Committed Loans are then
outstanding, as may be necessary to eliminate such excess. Such prepayment
shall be made (x) on the next succeeding Domestic Business Day, with respect to
any Base Rate Loans then outstanding and (y) at the end of the then current
Interest Period applicable thereto, with respect to any Euro-Dollar Loans or CD
Loans then outstanding.
SECTION 2.19. Judgment Currency. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from the Borrower
hereunder or under any of the Notes in the currency expressed to be payable
herein or under the Notes (the "SPECIFIED CURRENCY") into another currency, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the
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rate of exchange used shall be that at which in accordance with normal banking
procedures the Agent could purchase the specified currency with such other
currency at the Agent's New York office on the Euro-Dollar Business Day
preceding that on which final judgment is given. The obligations of the
Borrower in respect of any sum due to any Bank or the Agent hereunder or under
any Note shall, notwithstanding any judgment in a currency other than the
specified currency, be discharged only to the extent that on the Euro-Dollar
Business Day following receipt by such Bank or the Agent (as the case may be)
of any sum adjudged to be so due in such other currency such Bank or the Agent
(as the case may be) may in accordance with normal banking procedures purchase
the specified currency with such other currency; if the amount of the specified
currency so purchased is less than the sum originally due to such Bank or the
Agent, as the case may be, in the specified currency, the Borrower agrees, to
the fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of the specified currency so
purchased exceeds (a) the sum originally due to any Bank or the Agent, as the
case may be, in the specified currency and (b) any amounts shared with other
Banks as a result of allocations of such excess as a disproportionate payment
to such Bank under Section 9.04, such Bank or the Agent, as the case may be,
agrees to remit such excess to the Borrower.
SECTION 2.20. Letters of Credit. (a) Subject to the terms and
conditions hereof, each Issuing Bank agrees to issue standby letters of credit
hereunder denominated in Dollars from time to time before the fifth Domestic
Business Day prior to the Termination Date upon the request of the Borrower
(the "LETTERS OF CREDIT"), provided that, immediately after each Letter of
Credit is issued, (i) the aggregate amount of the Letter of Credit Liabilities
shall not exceed $50,000,000 and (ii) the aggregate amount of the Letter of
Credit Liabilities plus the aggregate outstanding amount of all Loans shall not
exceed the aggregate amount of the Commitments. Upon the date of issuance by an
Issuing Bank of a Letter of Credit, the Issuing Bank shall be deemed, without
further action by any party hereto, to have sold to each Bank, and each Bank
shall be deemed, without further action by any party hereto, to have purchased
from the Issuing Bank, a participation in such Letter of Credit and the related
Letter of Credit Liabilities in the proportion their respective Commitments
bear to the aggregate Commitments.
(b) The Borrower shall give the Issuing Bank notice at least three
Domestic Business Days prior to the requested issuance of a Letter of Credit
(or such lesser notice period as shall be acceptable to the Issuing Bank)
specifying the date such Letter of Credit is to be issued, and describing the
terms of such Letter of Credit and the nature of the transactions to be
supported thereby (such notice,
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including any such notice given in connection with the extension of a Letter of
Credit, a "NOTICE OF ISSUANCE"). Upon receipt of a Notice of Issuance, the
Issuing Bank shall promptly notify the Agent, and the Agent shall promptly
notify each Bank of the contents thereof and of the amount of such Bank's
participation in such Letter of Credit. The issuance by the Issuing Bank of
each Letter of Credit shall, in addition to the conditions precedent set forth
in Article III, be subject to the conditions precedent that such Letter of
Credit shall be in such form and contain such terms as shall be reasonably
satisfactory to the Issuing Bank and that the Borrower shall have executed and
delivered such other instruments and agreements relating to such Letter of
Credit as the Issuing Bank shall have reasonably requested. The Borrower shall
also pay to the Issuing Bank for its own account issuance, drawing, amendment
and extension charges in the amounts and at the times as agreed between the
Borrower and the Issuing Bank. The extension or renewal of any Letter of Credit
shall be deemed to be an issuance of such Letter of Credit, and if any Letter
of Credit contains a provision pursuant to which it is deemed to be extended
unless notice of termination is given by the Issuing Bank, the Issuing Bank
shall timely give such notice of termination unless it has theretofore timely
received a Notice of Issuance and the other conditions to issuance of a Letter
of Credit have also theretofore been met with respect to such extension. No
Letter of Credit shall have a term of more than two years, provided that a
Letter of Credit may contain a provision pursuant to which it is deemed to be
extended on an annual basis unless notice of termination is given by the
Issuing Bank, and provided further that no Letter of Credit shall have a term
extending or be so extendible beyond the date which is five Domestic Business
Days prior to the Termination Date.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the Issuing Bank shall notify
the Agent and the Agent shall promptly notify the Borrower and each other Bank
as to the amount to be paid as a result of such demand or drawing and the
payment date. The Borrower shall be irrevocably and unconditionally obligated
within three Domestic Business Days to reimburse the Issuing Bank for any
amounts paid by the Issuing Bank upon any drawing under any Letter of Credit,
without presentment, demand, protest or other formalities of any kind. All such
amounts paid by the Issuing Bank and remaining unpaid by the Borrower shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the rate applicable to Base Rate Loans for such day plus, for each
such day more than three Domestic Business Days after the related date of
drawing, 2% per annum. In addition, each Bank will pay to the Agent, for the
account of the Issuing Bank, immediately upon the Issuing Bank's demand at any
time during the period commencing after such drawing until reimbursement
therefor in full by the Borrower, an amount equal to such Bank's ratable share
of such drawing (in
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proportion to its participation therein), together with interest on such amount
for each day from the date of the Issuing Bank's demand for such payment (or,
if such demand is made after 12:00 Noon (New York City time) on such date, from
the next succeeding Domestic Business Day) to the date of payment by such Bank
of such amount at the Federal Funds Rate. The Issuing Bank will pay to each
Bank ratably all amounts received from the Borrower for application in payment
of its reimbursement obligations in respect of any Letter of Credit, but only
to the extent such Bank has made payment to the Issuing Bank in respect of such
Letter of Credit pursuant hereto.
(d) The obligations of the Borrower and each Bank under subsection
2.20(c) above shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of this Agreement or any Letter of
Credit or any document related hereto or thereto;
(iii) the use which may be made of the Letter of Credit by, or
any acts or omission of, a beneficiary of a Letter of Credit (or any
Person for whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a
beneficiary of a Letter of Credit (or any Person for whom the
beneficiary may be acting), the Banks (including the Issuing Bank) or
any other Person, whether in connection with this Agreement or any
Letter of Credit or any document related hereto or thereto or any
unrelated transaction;
(v) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
(vi) payment under a Letter of Credit against presentation to
the Issuing Bank of a draft or certificate that does not comply with
the terms of the Letter of Credit; or
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(vii) any other act or omission to act or delay of any kind by
any Bank (including the Issuing Bank), the Agent or any other Person
or any other event or circumstance whatsoever that might, but for the
provisions of this subsection (vii), constitute a legal or equitable
discharge of the Borrower's or the Bank's obligations hereunder.
(e) The Borrower hereby indemnifies and holds harmless each Bank
(including each Issuing Bank) and the Agent from and against any and all
claims, damages, losses, liabilities, costs or expenses which such Bank or the
Agent may incur (including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the Issuing Bank may incur by reason of or
in connection with the failure of any other Bank to fulfill or comply with its
obligations to such Issuing Bank hereunder (but nothing herein contained shall
affect any rights the Borrower may have against such defaulting Bank)), and
none of the Banks (including an Issuing Bank) nor the Agent nor any of their
officers or directors or employees or agents shall be liable or responsible, by
reason of or in connection with the execution and delivery or transfer of or
payment or failure to pay under any Letter of Credit, including, without
limitation, any of the circumstances enumerated in subsection 2.20(d) above, as
well as (i) any error, omission, interruption or delay in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, (ii)
any error in interpretation of technical terms, (iii) any loss or delay in the
transmission of any document required in order to make a drawing under a Letter
of Credit, (iv) any consequences arising from causes beyond the control of the
Issuing Bank, including, without limitation, any government acts, or any other
circumstances whatsoever in making or failing to make payment under such Letter
of Credit, provided that the Borrower shall not be required to indemnify the
Issuing Bank for any claims, damages, losses, liabilities, costs or expenses,
and the Borrower shall have a claim for direct (but not consequential) damages,
losses, liabilities, costs and expenses suffered by it, to the extent found by
a court of competent jurisdiction to have been caused by (x) the willful
misconduct or gross negligence of the Issuing Bank in determining whether a
request presented under any Letter of Credit complied on its face with the
terms of such Letter of Credit or (y) the Issuing Bank's failure to pay under
any Letter of Credit after the presentation to it of a request strictly
complying with the terms and conditions of the Letter of Credit. Nothing in
this subsection (e) is intended to limit the obligations of the Borrower under
any other provision of this Agreement. To the extent the Borrower does not
indemnify an Issuing Bank as required by this subsection, the Banks agree to do
so ratably in accordance with their Commitments.
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ARTICLE 3
CONDITIONS
The obligation of any Bank to make a Loan on the occasion of any
Borrowing or of an Issuing Bank to issue a Letter of Credit upon request
therefor is subject to the satisfaction of the following conditions:
SECTION 3.01. First Borrowing or Issuance. In the case of the first
Borrowing or issuance of a Letter of Credit, receipt by the Agent of the
following documents, each dated the Closing Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or
before the Closing Date complying with the provisions of Section 2.06;
(b) an opinion of Babetta R. Gray, Senior Vice President and General
Counsel of the Borrower, substantially in the form of Exhibit E hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) evidence satisfactory to the Agent that (i) the Predecessor shall
have merged with and into a wholly-owned Subsidiary of the Borrower and (ii)
the NDC Acquisitions have been consummated (or are being consummated
substantially simultaneously with such Borrowing) as described in the
Registration Statement;
(e) evidence satisfactory to the Agent that the Existing Credit
Agreement has been terminated, that any letter of credit issued thereunder
shall have expired undrawn or been canceled and that all principal and interest
on any loans outstanding thereunder and all other amounts payable thereunder
have been paid, or simultaneously with such Borrowing will be paid, in full;
(f) evidence satisfactory to the Agent that Borrower has consummated
an initial public offering of its common stock for net proceeds of not less
than $200,000,000; and
(g) all documents the Agent may reasonably request relating to the
existence of the Borrower, the authority for and the validity of this
Agreement and
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the Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Agent.
The Banks (which comprise the "Required Banks" as defined in the Existing
Credit Agreement) hereby agree that the commitments under the Existing Credit
Agreement may be terminated by the Predecessor by notice given on the Closing
Date effective immediately, and that any loans outstanding under the Existing
Credit Agreement may be prepaid without prior notice on the Closing Date
(subject to Section 2.15 of the Existing Credit Agreement).
SECTION 3.02. Each Borrowing and Issuance. In the case of each
Borrowing or issuance of a Letter of Credit (including the first such event):
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.03 or 2.04 or of a Notice of Issuance as required by Section 2.20, as
the case may be;
(b) the fact that, immediately after such Borrowing, the sum of the
aggregate Dollar Amount of the Loans and the aggregate Letter of Credit
Liabilities will not exceed the aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, the aggregate
Dollar Amount of Money Market Loans to be denominated in an Alternative
Currency will not exceed $50,000,000;
(d) the fact that, immediately before and after such Borrowing or
issuance, no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement (except Section 4.04(d)) shall be true and correct
on and as of the date of such Borrowing or issuance.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed to
be a representation and warranty by the Borrower on the date thereof as to the
facts specified in clauses 3.02(b), 3.02(c), 3.02(d)and 3.02(e) of this
Section.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms except
as the same may be limited by bankruptcy, insolvency, fraudulent transfer or
similar laws affecting creditors' rights generally and by general principles of
equity.
SECTION 4.04. Financial Information. (a) The consolidated balance
sheet of the Predecessor and its Consolidated Subsidiaries as of December 31,
1996 and the related consolidated statements of income and cash flows for the
fiscal year then ended, reported on by KPMG Peat Marwick LLP, copies of which
have been delivered to each of the Banks, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial position
of the Predecessor and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Predecessor and
its Consolidated Subsidiaries as of March 31, 1997 and the related unaudited
consolidated statements of income and cash flows for the three months then
ended, copies of which have been delivered to each of the Banks, fairly present
in
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all material respects, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements referred
to in subsection (a) of this Section, the consolidated financial position of
the Predecessor and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such three month period
(subject to normal year-end adjustments).
(c) The unaudited pro forma consolidated balance sheet of the
Borrower as of March 31, 1997 and the related unaudited consolidated statements
of income for the year ended December 31, 1996 and the three months ended March
31, 1997, set forth in the Registration Statement, a copy of which has been
delivered to each of the Banks, have been prepared on the basis described
therein and otherwise in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements referred
to in subsection (a) of this Section and show the consolidated financial
position and results of operations of the Borrower as if the transactions
contemplated by Section 3.01(d) had occurred, in the case of the consolidated
balance sheet, on March 31, 1997 and in the case of the consolidated statements
of income, as of January 1, 1996.
(d) Since March 31, 1997 there has been no material adverse change in
the business, financial position or results of operations of the Predecessor,
the Borrower and their respective Consolidated Subsidiaries, considered as a
whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could reasonably be
expected to result in a Material Adverse Effect or which in any manner draws
into question the validity or enforceability of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan, except where such failure to
fulfill its obligations or be in compliance could not reasonably be expected to
result in a Material Adverse Effect. No member of the ERISA Group has (i)
sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
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which has resulted or could reasonably be expected to result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the
Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA
other than a liability to the PBGC for premiums under Section 4007 of ERISA,
except where such failures to make contributions or payments, such impositions
of Liens, such postings of bonds or such incurrence of liability, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 4.07. Compliance with Laws. The Borrower and its Subsidiaries
are in compliance with all applicable statutes, ordinances, rules and
regulations, except where a lack of compliance therewith could not reasonably
be expected to result in a Material Adverse Effect.
SECTION 4.08. Environmental Matters. On the basis of its knowledge of
the Environmental Laws and the applicability of the Environmental Laws to the
business, operations and properties of the Borrower and its Subsidiaries,
including, without limitation, (i) any requirement under the Environmental Laws
that the Borrower and its Subsidiaries obtain operational permits, (ii) the
possibility of liability in connection with the off-site disposal of wastes or
Hazardous Substances and (iii) any liability to third parties, including
employees, arising from the use, generation, treatment, storage or disposal of
Hazardous Substances by the Borrower or its Subsidiaries, the Borrower has
reasonably concluded that any liabilities and costs that the Borrower and its
Subsidiaries are reasonably likely to incur in connection with any applicable
Environmental Laws are unlikely to result in a Material Adverse Effect.
SECTION 4.09. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.10. Subsidiaries. Each of the Borrower's Subsidiaries is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
lack of such requisite powers, licenses, authorizations, consents or approvals,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
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SECTION 4.11. Regulatory Restrictions on Borrowing. The Borrower is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended, a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
SECTION 4.12. Full Disclosure. All information (other than any
estimates and projections) heretofore furnished by the Borrower to the Agent or
any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Agent or any Bank will be, when taken as a
whole, true and accurate in all material respects on the date as of which such
information is stated or certified. All estimates and projections heretofore
furnished by the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby were, and
all such estimates and projections hereafter furnished by the Borrower to the
Agent or any Bank will be, prepared by the Borrower in good faith utilizing the
best information available to the Borrower at the time of preparation thereof.
The Borrower has disclosed to the Banks in writing any and all facts which
materially and adversely affect or may affect (to the extent the Borrower can
now reasonably foresee) the business, operations or financial condition of the
Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of
the Borrower to perform its obligations under this Agreement.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note or any Letter of Credit
Liability remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) within 90 days after the end of each fiscal year of the Borrower,
a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
as of the end of such fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on
(without a "going concern" or like qualification or exception and without any
qualification or exception as to the
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scope of such audit) by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) within 45 days after the end of each of the first three quarters
of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such quarter and
the related consolidated statements of income and cash flows for such quarter
and for the portion of the Borrower's fiscal year ended at the end of such
quarter, setting forth in the case of such statements of income and cash flows,
in comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation in all
material respects, generally accepted accounting principles and consistency by
the chief financial officer or the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish (x) whether
the Borrower was in compliance with the requirements of Sections 5.10 and 5.14
on the date of such financial statements and (y) for so long as Pricing
Schedule A is the Pricing Schedule, the Applicable Cash Flow Ratio (as such
term is defined in Pricing Schedule A) derived from such financial statements
and (ii) stating whether any Default exists on the date of such certificate
and, if any Default then exists, setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements as to whether
anything has come to their attention to cause them to believe that any Default
existed on the date of such statements (which certificate may be limited to the
extent required by accounting rules or guidelines);
(e) within five Domestic Business Days after any officer of the
Borrower obtains knowledge of any Default, if such Default is then continuing,
a certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
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(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Material Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows that
the plan administrator of any Material Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose material liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv) applies for a
waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Material Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such
notice; or (vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity (after giving effect to any applicable grace period), all their
respective material obligations and liabilities (including, without limitation,
tax liabilities
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and claims of materialmen, warehousemen and the like which if unpaid might by
law give rise to a Lien), except where the same may be contested in good faith
by appropriate proceedings, and will maintain, and will cause each Subsidiary
to maintain, in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower
will keep, and will cause each Subsidiary to keep, all property and equipment
useful and necessary in its business in good working order and condition to the
extent required by sound business practices, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
its respective properties and equipment in at least such amounts, against at
least such risks and with such risk retention as are usually maintained,
insured against or retained, as the case may be, in the same general area by
companies of established repute engaged in the same or a similar business; and
will furnish to the Banks, upon request from the Agent, information presented
in reasonable detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will preserve, renew and keep in full force and effect, and will cause
each Subsidiary to preserve, renew and keep in full force and effect its
respective existence and its respective rights, privileges and franchises
material to the normal conduct of business, provided that nothing in this
Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or
the merger or consolidation of a Subsidiary with or into another Person if the
entity surviving such consolidation or merger is a Subsidiary and if, in each
case, after giving effect thereto, no Default shall have occurred and be
continuing, (ii) any transaction not prohibited by Section 5.07 or (iii) the
termination of the existence of any Subsidiary if the Borrower in good faith
determines that such termination is not materially disadvantageous to the
Banks.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and
the rules and regulations thereunder) except where either the necessity of
compliance therewith is contested in good faith by appropriate proceedings or
any failure to so comply, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
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SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of its respective properties, to
examine and make abstracts from any of its respective books and records and to
discuss its respective affairs, finances and accounts with its respective
officers, employees and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
SECTION 5.07. Mergers and Sales of Assets. The Borrower will not (i)
consolidate or merge with or into any other Person, (ii) sell, lease or
otherwise transfer, directly or indirectly (including any such transfer by way
of merger or consolidation), all or substantially all the assets of the
Borrower and its Subsidiaries, taken as a whole, to any other Person or
Persons, provided that the Borrower may merge with another Person if (x) the
Borrower is the corporation surviving such merger and (y) after giving effect
to such merger, no Default shall have occurred and be continuing.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans made under
this Agreement and any Letters of Credit issued under this Agreement will be
used by the Borrower (i) to pay the purchase price for, and fees and expenses
relating to, the NDC Acquisitions; (ii) to refinance certain existing
indebtedness of the Predecessor; and (iii) for general corporate purposes,
including acquisitions. None of such proceeds will be used, directly or
indirectly, for any purpose, whether immediate, incidental or ultimate, that
entails a violation of the provisions of Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the Closing Date securing (i) Debt in
connection with the Existing Capital Leases and (ii) other Debt outstanding on
the Closing Date in an aggregate principal or face amount not exceeding
$10,000,000;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
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(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary and
not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any obligation
in an amount exceeding $10,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in
the operation of its business;
(h) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $10,000,000; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount not exceeding,
on the date of incurrence of any portion of such Debt, an aggregate of 10% of
Consolidated Tangible Net Worth at such date.
SECTION 5.10. Interest Coverage Ratio. As of the last day of each
fiscal quarter of the Borrower, the Interest Coverage Ratio at such last day
will not be less than 2.5 to 1.
SECTION 5.11. Restricted Payments. Neither the Borrower nor any
Subsidiary will make any Restricted Payment, provided that the foregoing shall
not prohibit or restrict Restricted Payments from time to time with respect to
any year in an aggregate amount not to exceed an amount equal to 50% of
Consolidated Net Income for such year.
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SECTION 5.12. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary than could have been obtained from a third
party who was not an Affiliate, provided that the foregoing provisions of this
Section shall not prohibit (i) the Borrower and each Subsidiary from performing
their respective obligations under the Transaction Documents or (ii) any such
Person from declaring or paying any lawful dividend or other payment ratably in
respect of all of its capital stock of the relevant class so long as, after
giving effect thereto, no Default shall have occurred and be continuing.
SECTION 5.13. Debt of Subsidiaries. Total Debt of all Subsidiaries
(excluding Debt of a Subsidiary to the Borrower or to a wholly owned
Subsidiary) will not, on the date of incurrence of any portion of such Debt,
exceed the greater of (x) $50,000,000 or (y) 10% of Consolidated Tangible Net
Worth at such date.
SECTION 5.14. Cash Flow Ratio. As of the last day of each fiscal
quarter of the Borrower, the Cash Flow Ratio at such last day will not be
greater than 2.0 to 1.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall (i) fail to pay when due any principal of any
Loan or to reimburse when due any drawing under any Letter of Credit or (ii)
fail to pay any interest on any Loan or any fees or any other amount payable
hereunder within five Domestic Business Days of the date when due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Article 5, other than those contained in Sections 5.01 through
5.06;
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(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
6.01(a) or 6.01(b) above) for 30 days after notice thereof has been given to
the Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the
federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $10,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to terminate
a
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Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in excess of
$10,000,000 in respect of, or to cause a trustee to be appointed to administer
any Material Plan; or a condition shall exist by reason of which the PBGC would
reasonably be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause one or more members of
the ERISA Group to incur a current payment obligation in excess of $10,000,000;
(j) judgments or orders for the payment of money in excess of
$10,000,000 in the aggregate shall be rendered against the Borrower or any
Subsidiary and such judgments or orders shall continue unsatisfied and unstayed
for a period of 10 days;
(k) the Borrower shall be dissolved or terminated; or
(l) a Change in Ownership or Control shall have occurred;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding more than 50% of the aggregate principal amount of
the Loans, by notice to the Borrower declare the Loans (together with accrued
interest thereon) to be, and the Loans shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower, provided that in the case of
any of the Events of Default specified in clause 6.01(g) or 6.01(h) above with
respect to the Borrower, without any notice to the Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
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continuance of any Event of Default, it shall, if requested by the Agent upon
the instruction of the Banks having more than 50% in aggregate amount of the
Commitments (or, if the Commitments shall have been terminated, holding more
than 50% of the Letter of Credit Liabilities), pay to the Agent an amount in
immediately available funds (which funds shall be held as collateral pursuant
to arrangements satisfactory to the Agent) equal to the aggregate amount
available for drawing under all Letters of Credit then outstanding at such
time, provided that, upon the occurrence of any Event of Default specified in
Section 6.01(g) or 6.01(h) with respect to the Borrower, the Borrower shall pay
such amount forthwith without any notice or demand or any other act by the
Agent or the Banks.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the Notes as are delegated
to the Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any
other Bank and may exercise or refrain from exercising the same as though it
were not the Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Agent.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
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SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or, when expressly
required hereby, all the Banks or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article 3, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Without limiting the generality of the foregoing, the use of the term "agent"
in this Agreement with reference to the Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any reasonable and customary out-of-pocket costs or expenses
(including counsel fees and disbursements), or any other claim, demand, action,
loss or liability (except such as result from such indemnitees' gross
negligence or willful misconduct) that such indemnitees may suffer or incur in
connection with this Agreement or any action taken or omitted by such
indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
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SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
SECTION 7.09. Agent's Fee; Arranger Fee. The Borrower shall pay to
the Agent for its own account and to J.P. Morgan Securities Inc. ("JPMSI"), in
its capacity as arranger, for its own account, fees in the amounts and at the
times previously agreed upon between the Borrower and the Agent and JPMSI,
respectively.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in the
relevant currency (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise the Agent
that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may
be, as determined by the Agent will not adequately and fairly reflect the cost
to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
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the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or
convert outstanding Loans as or into CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar
Loan, as the case may be, shall be converted into a Base Rate Loan on the last
day of the then-current Interest Period applicable thereto. At any time when
the circumstances giving rise to the above-described suspension are in effect,
unless the Borrower notifies the Agent at least two Domestic Business Days
before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money
Market LIBOR Borrowing, then (x) if such Borrowing is to be denominated in
Dollars, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day and (y) if such Borrowing is to be denominated in an Alternative Currency,
such Borrowing shall not be made.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans,
shall be suspended. Before giving any notice to the Agent pursuant to this
Section, such Bank shall designate a different Euro-Dollar Lending Office if
such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately
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if such Bank shall determine that it may not lawfully continue to maintain and
fund such Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or Letter of Credit (or
participation therein) or any obligation to make Committed Loans or to issue or
participate in Letters of Credit or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency
shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement with respect to which such
Bank is entitled to compensation during the relevant Interest Period under
Section 2.17), special deposit, insurance assessment (excluding, with respect
to any CD Loan, any such requirement reflected in an applicable Assessment
Rate) or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its Applicable Lending Office)
or shall impose on any Bank (or its Applicable Lending Office) or on the United
States market for certificates of deposit or the London interbank market any
other condition affecting its Fixed Rate Loans, its Note or its participation
in any Letter of Credit or its obligation to make Fixed Rate Loans or to issue
or participate in Letters of Credit and the result of any of the foregoing is
to increase the cost to such Bank (or its Applicable Lending Office) of making
or maintaining any Fixed Rate Loan or Letter of Credit (or participation
therein), or to reduce the amount of any sum received or receivable by such
Bank (or its Applicable Lending Office) under this Agreement or under its Note
with respect thereto, by an amount deemed by such Bank to be material, then,
within 15 days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or
57
<PAGE> 63
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency
(including any determination by any such authority, central bank or comparable
agency that, for purposes of capital adequacy requirements, the Commitments
hereunder do not constitute commitments with an original maturity of one year
or less, which shall be deemed a change in the interpretation and
administration of such requirements), has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent) as a consequence of
such Bank's obligations hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within 15
days after demand by such Bank (with a copy to the Agent), the Borrower shall
pay to such Bank such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment
of such Bank, be otherwise disadvantageous to such Bank. A certificate of any
Bank claiming compensation under this Section shall set forth the additional
amount or amounts to be paid to it hereunder, shall set forth the method of
determining such additional amount or amounts in reasonable detail and shall be
conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section 8.04, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as the case may
be) is organized or in which its principal executive office is located or, in
the case of each Bank, in which its Applicable Lending Office is located and
(ii) in the case of each Bank, any United States withholding tax imposed on
such payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
58
<PAGE> 64
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note or Letter of Credit.
(b) Any and all payments by the Borrower to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes, provided that, if the Borrower shall be required
by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the
Agent, at its address referred to in Section 9.01, the original or a certified
copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes
or Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be paid within 15 days after
such Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower and the Agent with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Bank or certifying that the income receivable pursuant
to this Agreement is effectively connected with the conduct of a trade or
business in the United States.
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<PAGE> 65
(e) For any period with respect to which a Bank has failed to provide
the Borrower or the Agent with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(b) or 8.04(c) with respect to Taxes imposed by the United States, provided
that if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will change
the jurisdiction of its Applicable Lending Office if, in the judgment of such
Bank, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or convert outstanding Loans
to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04 with respect to its
CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through the Agent, have
elected that the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the circumstances giving
rise to such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may
be, shall instead be Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks); and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first
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<PAGE> 66
day of the next succeeding Interest Period applicable to the related CD Loans
or Euro-Dollar Loans of the other Banks.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank
to make Euro-Dollar Loans or to convert or continue outstanding Loans into
Euro-Dollar Loans shall be suspended pursuant to Section 8.02 or (ii) any Bank
shall demand compensation pursuant to Section 8.03 or 8.04, the Borrower shall
have the right, with the assistance of the Agent and the Issuing Banks, to seek
a mutually satisfactory bank or banks (which may be one or more of the Banks)
to purchase the outstanding Loans of such Bank and to assume the Commitment and
Letter of Credit Liabilities of such Bank.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party:
(a) in the case of the Borrower or the Agent, at its address, facsimile number
or telex number set forth on the signature pages hereof, (b) in the case of any
Bank (including any Issuing Bank), at its address, facsimile number or telex
number set forth in its Administrative Questionnaire or (c) in the case of any
party, such other address, facsimile number or telex number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this
Section and confirmation of receipt is received, (iii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by any other means,
when delivered at the address specified in this Section, provided that notices
to the Agent or any Issuing Bank under Article 2 or Article 8 and notices to
the Borrower under Section 9.06(c) shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude
61
<PAGE> 67
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all reasonable and customary out-of-pocket expenses of the Agent, including
fees and disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all reasonable and customary
out-of-pocket expenses incurred by the Agent and each Bank, including (without
duplication) the fees and disbursements of outside counsel and the allocated
cost of inside counsel, in connection with any collection, bankruptcy,
insolvency and other enforcement proceedings resulting from such Event of
Default.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder, provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount then due and payable with
respect to the Loans and Letter of Credit Liabilities held by it which is
greater than the proportion received by any other Bank in respect of the
aggregate amount then due and payable with respect to the Loans and Letter of
Credit Liabilities held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Loans
and Letter of Credit Liabilities held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments with
respect to the Loans and Letter of Credit Liabilities held by the Banks shall
be shared by the Banks pro rata, provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or counterclaim
it may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness hereunder.
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<PAGE> 68
The Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Loan or Letter of
Credit Liability, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers . Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent or an Issuing Bank are affected thereby, by it),
provided that no such amendment or waiver shall (i) increase or decrease the
Commitment of any Bank (except (x) as contemplated by Section 2.02 or (y) for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation without the written consent of each Bank, (ii) reduce the
principal of or rate of interest on any Loan or the amount to be reimbursed in
respect of any Letter of Credit or any interest thereon or any fees hereunder
without the written consent of each Bank affected thereby, (iii) postpone the
date fixed for any payment of principal of or interest on any Loan or the
amount to be reimbursed in respect of any Letter of Credit or interest thereon
or any fees hereunder or for any scheduled reduction or termination of any
Commitment without the written consent of each Bank or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required for the Banks or any
of them to take any action under this Section or any other provision of this
Agreement without the written consent of each Bank.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of the Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment
or any or all of its Loans and Letter of Credit participations. In the event of
any such grant by a Bank of a participating interest to a Participant, whether
or not upon notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrower,
the Issuing Banks and the Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest
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<PAGE> 69
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement, provided that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in clause (i), (ii), or (iii) of Section 9.05 that
affects the Participant. The Borrower agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled to the benefits
of Section 2.17 and Article 8 with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent
of a participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to
an initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement, the Notes and Letters of Credit, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit G hereto executed
by such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower (which shall not be unreasonably withheld so long as
(i) the Assignee is a commercial bank and (ii) the transferor Bank has given
the Agent and the Borrower not less than three Domestic Business Days' prior
written notice of such proposed assignment and the identity of the proposed
Assignee), the Agent and the Issuing Banks, provided that if an Assignee is an
affiliate of such transferor Bank or was a Bank immediately prior to such
assignment, no such consent of the Borrower, the Agent or any Issuing Bank
shall be required, provided further that in the event of an assignment by a
Bank of a proportionate part of its rights and obligations under this
Agreement, the Notes and the Letters of Credit, the part retained by such
transferor Bank shall be equivalent to an initial Commitment of not less than
$10,000,000, and provided further that such assignment may, but need not,
include rights of the transferor Bank in respect of outstanding Money Market
Loans. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price
agreed between such transferor Bank and such Assignee, such Assignee shall be a
Bank party to this Agreement and shall have all the rights and obligations of a
Bank with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to
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<PAGE> 70
the Assignee. In connection with any such assignment, the transferor Bank shall
pay to the Agent an administrative fee for processing such assignment in the
amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the Borrower
and the Agent certification as to exemption from deduction or withholding of
any United States federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower and each of the Banks hereby
submit to the nonexclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State court sitting in
New York City for purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. The Borrower and
each of the Banks irrevocably waive, to the fullest extent permitted by law,
any objection which they may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This
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<PAGE> 71
Agreement shall become effective upon receipt by the Agent of counterparts
hereof signed by each of the parties hereto (or, in the case of any party as to
which an executed counterpart shall not have been received, receipt by the
Agent in form satisfactory to it of telegraphic, telex, facsimile or other
written confirmation from such party of execution of a counterpart hereof by
such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. The Agent and each Bank agree to keep
any information delivered or made available by the Borrower pursuant to this
Agreement confidential from anyone other than persons employed or retained by
such Bank and its affiliates, provided that nothing herein shall prevent the
Agent or any Bank from disclosing such information (i) to any other Bank or to
the Agent, (ii) to such Bank's or Agent's legal counsel and independent
auditors, (iii) upon the order of any court or administrative agency, (iv) upon
the request or demand of any regulatory agency or authority, (v) which had been
publicly disclosed other than as a result of a disclosure by the Agent or any
Bank prohibited by this Agreement, (vi) in connection with any litigation to
which the Agent, any Bank or its subsidiaries or Parent may be a party, (vii)
to the extent necessary in connection with the exercise of any remedy
hereunder, (viii) subject to provisions substantially similar to those
contained in this Section, to any other Person if reasonably incidental to the
administration of the credit facility contemplated hereby and (ix) subject to
provisions substantially similar to those contained in this Section, to any
actual or proposed Participant or Assignee.
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<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
GALILEO INTERNATIONAL, INC.
By: /s/Paul H. Bristow
-----------------------------
Title: Senior Vice President & CFO
Address: 9700 West Higgins Road,
Suite 400
Rosemont, IL 60018
Attn: Chief Financial Officer
Facsimile: (847) 518-4201
COMMITMENT
- ----------
AGENT
$20,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ James E. Condon
---------------------------------
Title: Vice President
CO-ARRANGERS
BANK OF AMERICA NATIONAL
$20,000,000 TRUST AND SAVINGS ASSOCIATION
By: /s/ Carolyn D. Simmons
--------------------------------
Title: Vice President
<PAGE> 73
$20,000,000 BANK OF MONTREAL
By: /s/ Cecily M. Mistarz
----------------------------------
Title: Managing Director
CO-AGENTS
$16,666,667 ABN AMRO BANK N.V.
By: /s/ Willem van Beek
----------------------------------
Title: Vice President
By: /s/ John L. Church
---------------------------------
Title: Vice President
$16,666,667 THE BANK OF TOKYO-MITSUBISHI,
LTD.
By: /s/ Hajime Watanabe
----------------------------------
Title: Deputy General Manager
$16,666,667 MIDLAND BANK PLC
By: /s/ Christopher M. Samms
---------------------------------
Title: Corporate Banking Manager
$16,666,667 THE SUMITOMO BANK, LIMITED
CHICAGO BRANCH
By: /s/ Hiroyuki Iwami
-------------------------------
Title: Joint General Manager
<PAGE> 74
PARTICIPANTS
$10,000,000 CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Bertrand Cousin
-----------------------------
Title: Vice President
$10,000,000 ROYAL BANK OF CANADA
By: /s/ D. G. Calancie
-------------------------------
Title: Industry Manager
$10,000,000 SOCIETE GENERALE
CHICAGO BRANCH
By: /s/ Jose A. Moreno
-----------------------------
Title: Vice President & Team Leader
$10,000,000 SWISS BANK CORPORATION,
NEW YORK BRANCH
By: /s/ Thomas Eggenschwiler
--------------------------------
Title: Executive Director Credit
Risk Management
By: /s/ Dorothy L. McKinley
---------------------------------
Title: Associate Director Banking
Finance Support, N. A.
<PAGE> 75
$10,000,000 THE NORTHERN TRUST COMPANY
By: /s/ James F. T. Monhart
-------------------------------
Title: Vice President
$10,000,000 THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Gordon R. Holtby
-------------------------------
Title: Vice President & Manager
$8,333,332 WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Salvatore Battinelli
--------------------------------
Title: Vice President
By: /s/ Lisa Walker
--------------------------------
Title: Associate
$5,000,000 THE LONG-TERM CREDIT BANK OF
JAPAN, LTD. CHICAGO CORPORATE
BANKING OFFICE
By: /s/ Armund J. Schoen, Jr
-------------------------------
Title: Senior Vice President
====================
TOTAL COMMITMENTS
====================
$200,000,000
<PAGE> 76
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: /s/ James E. Condon
-----------------------------------
Title: Vice President
Address: 60 Wall Street
NY, NY 10260
Telex: 177 615 MGT UT
Facsimile: 212-648-5018
<PAGE> 77
PRICING SCHEDULE A
Each of the terms "EURO-DOLLAR MARGIN", "CD MARGIN", "FACILITY FEE
RATE" and "LETTER OF CREDIT FEE RATE" means, for any date, the per annum rates
set forth below in the row opposite such term and in the column corresponding
to the "PRICING LEVEL" that applies at such date:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CD Margin 0.320% 0.355% 0.395% 0.450% 0.725%
- -------------------------------------------------------------------------------
Euro-Dollar 0.195% 0.230% 0.270% 0.325% 0.600%
Margin
- -------------------------------------------------------------------------------
Facility Fee 0.055% 0.070% 0.080% 0.100% 0.150%
Rate
- -------------------------------------------------------------------------------
Letter of Credit 0.195% 0.230% 0.270% 0.325% 0.60%
Fee Rate
- -------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"APPLICABLE CASH FLOW RATIO" means, on any day, the Cash Flow Ratio on
the last day of the most recently ended fiscal quarter of the Borrower for
which the Borrower has delivered financial statements pursuant to Section
5.01(a) or 5.01(b), as the case may be, provided that at any time a Default
exists under Section 5.01(a), 5.01(b) or 5.01(c), the Applicable Cash Flow
Ratio shall be deemed to be greater than or equal to 2.0 to 1.
"LEVEL I PRICING" applies at any date if, at such date, the Applicable
Cash Flow Ratio is less than .25 to 1.
"LEVEL II PRICING" applies at any date if, at such date, the
Applicable Cash Flow Ratio is greater than or equal to .25 to 1 but less than
.50 to 1.
"LEVEL III PRICING" applies at any date if, at such date, the
Applicable Cash Flow Ratio is greater than or equal to .50 to 1 but less than
1.0 to 1.
"LEVEL IV PRICING" applies at any date if, at such date, the
Applicable Cash Flow Ratio is greater than or equal to 1.0 to 1 but less than
2.0 to 1.
"LEVEL V PRICING" applies at any date if, at such date, no other
Pricing Level applies.
<PAGE> 78
"PRICING LEVEL" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V
Pricing applies at any date.
<PAGE> 79
PRICING SCHEDULE B
Each of the terms "EURO-DOLLAR MARGIN", "CD MARGIN", "FACILITY FEE
RATE" and "LETTER OF CREDIT FEE RATE" means, for any date, the per annum rates
set forth below in the row opposite such term and in the column corresponding
to the "PRICING LEVEL" that applies at such date:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CD Margin 0.320% 0.355% 0.395% 0.450% 0.725%
- -------------------------------------------------------------------------------
Euro-Dollar 0.195% 0.230% 0.270% 0.325% 0.600%
Margin
- -------------------------------------------------------------------------------
Facility Fee 0.055% 0.070% 0.080% 0.100% 0.150%
Rate
- -------------------------------------------------------------------------------
Letter of 0.195% 0.230% 0.270% 0.325% 0.600%
Credit Fee
Rate
- -------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings, subject to the concluding paragraph of this Schedule:
"LEVEL I PRICING" applies at any date if, at such date, the Borrower's
long-term debt is rated A- or higher by S&P or A3 or higher by Moody's.
"LEVEL II PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by
Moody's and (ii) Level I Pricing does not apply.
"LEVEL III PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by
Moody's and (ii) neither Level I Pricing nor Level II Pricing applies.
"LEVEL IV PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB- or higher by S&P and Baa3 or higher by
Moody's and (ii) none of Level I Pricing, Level II Pricing and Level III
Pricing applies.
"LEVEL V PRICING" applies at any date if, at such date, no other
Pricing Level applies.
<PAGE> 80
"PRICING LEVEL" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V
Pricing applies at any date.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement, and any rating assigned to any
other debt security of the Borrower shall be disregarded. The ratings in effect
for any day are those in effect at the close of business on such day. In the
case of split ratings from S&P and Moody's, so long as the Borrower's long-term
debt is rated at least BBB by S&P and at least Baa2 by Moody's, the rating to
be used to determine the applicable Pricing Level is the higher of the two
(e.g., BBB+/A3 results in Level I Pricing).
<PAGE> 81
SCHEDULE I
EXISTING CAPITAL LEASES
The Galileo Company Ltd. Letter of Credit
Collateralized Capital Leases
<TABLE>
<CAPTION>
Balance Sheet
Obligation/Amount
Available Maximum Outstanding
Description Currency Available at June 30, 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
MCC (No.15) Ltd GBP 26,000,000.00 18,744,196.00
Lease Schd Nos.
52/5050/ 4933-3 25,518,137.80
52/5050/ 4437-4 Drawn
===================== ============= ================== =================
</TABLE>
<PAGE> 82
SCHEDULE II
EXISTING OWNERSHIP GROUP
Covia Corporation
Distribution Systems, Inc.
Roscor, A.G.
Travel Industry Systems B.V.
USAM Corp.
<PAGE> 83
SCHEDULE III
TRANSACTION DOCUMENTS
Transaction Agreement
NDC Acquisition Agreements
Sales Representation Agreements
Registration Rights Agreement
Stockholders' Agreement
Services Agreements
Computer Services Agreements
Combination Agreement
ATS Partnership Agreement
Data Access Agreement
Trademark License Agreements
Programmer Support Agreements
Software License Agreements
Functionality Access Agreement
Omnibus Network Agreement
Distributor Sales and Services Agreement
Non-Competition Agreements
All other agreements or instruments entered into or to be entered into
pursuant to any of the foregoing at or prior to the time of the
initial public offering of the Borrower's common stock
<PAGE> 84
EXHIBIT A - NOTE
NOTE
New York, New York
___________ __, 199_
For value received, Galileo International, Inc., a Delaware
corporation (the "BORROWER"), promises to pay to the order of
______________________ (the "BANK"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below on the maturity
date provided for in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of each such Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such payments of
principal and interest shall be made in the manner and at the place provided
for in the Credit Agreement.
All Loans made by the Bank, the respective types and currencies
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof, provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the 364-Day Credit
Agreement dated as of July 23, 1997 among Galileo International, Inc., the
Banks parties thereto, the Letter of Credit Issuing Banks parties thereto and
Morgan Guaranty Trust Company of New York, as Agent (as the same may be amended
from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
Agreement are
<PAGE> 85
used herein with the same meanings. Reference is made to the Credit Agreement
for provisions for the prepayment hereof and the acceleration of the maturity
hereof.
GALILEO INTERNATIONAL, INC.
By: -----------------------------------
Name:
Title:
<PAGE> 86
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount Currency Type Amount of
of of of Principal Notation
Date Loan Loan Loan Repaid Made By
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 87
EXHIBIT B - MONEY MARKET QUOTE REQUEST
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York (the "AGENT")
From: Galileo International, Inc.
Re: 364-Day Credit Agreement (as the same may be amended from
time to time, the "CREDIT AGREEMENT") dated as of July 23, 1997
among Galileo International, Inc., the Banks parties thereto, the
Letter of Credit Issuing Banks parties thereto and the Agent
We hereby give notice pursuant to Section 2.04 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: ____________________
<TABLE>
<CAPTION>
Principal Amount* [Alternative Currency] Interest Period**
- --------------------- --------------------- ------------------
<S> <C> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
- --------
* Amount must be $5,000,000 or a larger multiple of $1,000,000 (or, in
the case of a Borrowing to be denominated in an Alternative Currency, a
comparable amount of such Alternative Currency as determined by the Agent).
** Not less than one month (LIBOR Auction) or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
<PAGE> 88
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Galileo International, Inc.
By: --------------------------------
Name:
Title:
<PAGE> 89
EXHIBIT C - INVITATION FOR MONEY MARKET QUOTES
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Galileo International, Inc.
(the "BORROWER")
Pursuant to Section 2.04 of the 364-Day Credit Agreement dated as of
July 23, 1997 among Galileo International, Inc., the Banks parties thereto, the
Letter of Credit Issuing Banks parties thereto and the undersigned, as Agent,
we are pleased on behalf of the Borrower to invite you to submit Money Market
Quotes to the Borrower for the following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount [Alternative Currency] Interest Period
- ---------------- ---------------------- ---------------
<S> <C> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: ------------------------------
Authorized Officer
<PAGE> 90
EXHIBIT D - MONEY MARKET QUOTE
FORM OF MONEY MARKET QUOTE
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to Galileo International, Inc. (the "BORROWER")
In response to your invitation on behalf of the Borrower dated
_____________, ____, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
-----------------------------
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market [Absolute
Amount** Period*** [Margin****] Rate*****]
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
- ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify currency if an Alternative Currency. Specify
aggregate limitation if the sum of the individual offers exceeds the
amount the Bank is willing to lend. Bids must be made for $5,000,000
or a larger multiple of $1,000,000 (or, in the case of a Borrowing to
be denominated in an Alternative Currency, a comparable amount of such
Alternative Currency as determined by the Agent).
*** Not less than one month or not less than 30 days, as specified in the
related Invitation. No more than five bids are permitted for each
Interest Period.
<PAGE> 91
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
<PAGE> 92
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the 364-Day Credit
Agreement dated as of July 23, 1997 among Galileo International, Inc., the
Banks parties thereto, the Letter of Credit Issuing Banks parties thereto and
yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s)
for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: ------------------------- By: ---------------------------------
Authorized Officer:
<PAGE> 93
EXHIBIT E - OPINION OF COUNSEL FOR THE BORROWER
OPINION OF
COUNSEL FOR THE BORROWER
July , 1997
To the Banks, the Issuing Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of Galileo
International, Inc. (the "BORROWER") and have acted as counsel for the Borrower
in connection with the 364-Day Credit Agreement (the "CREDIT AGREEMENT") dated
as of July 23, 1997 among the Borrower, the Banks parties thereto, the Letter
of Credit Issuing Banks parties thereto and Morgan Guaranty Trust Company of
New York, as Agent. Terms defined in the Credit Agreement are used herein as
therein defined. This opinion is being rendered to you at the request of the
Borrower pursuant to Section 3.01(b) of the Credit Agreement.
In connection with this opinion, I have investigated such questions of
law, received such information from officers and representatives of the
Borrower and its Subsidiaries and examined such certificates of public
officials, and corporate documents and records of the Borrower and its
Subsidiaries and other documents as I have deemed necessary or appropriate for
purposes of this opinion.
In rendering my opinion I have assumed (a) the due authorization,
execution and delivery of the Credit Agreement by each of the parties thereto
(other than the Borrower), (b) the authenticity of all documents submitted to
me as originals and (c) the conformity to original documents of all documents
submitted to me as copies.
Upon the basis of the foregoing, I am of the opinion that:
<PAGE> 94
1. The Borrower is a corporation duly organized and validly existing
under the laws of the State of Delaware and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are (a) within the corporate powers of the
Borrower, (b) have been duly authorized by all necessary corporate action, (c)
require no action by or in respect of, or filing with, any governmental body,
agency or official and (d) do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of the Borrower or of any indenture or other agreement
or instrument evidencing Debt of the Borrower or of any other material
agreement, judgment, injunction, order, decree or other instrument known to me
and binding upon the Borrower or any of its Subsidiaries or result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms except, (i) as
the same may be limited by bankruptcy, insolvency, fraudulent transfer or
similar laws affecting creditors' rights generally and by general principles of
equity, (ii) insofar as provisions contained in the Credit Agreement provide
for indemnification, the enforcement thereof may be limited by public policy
considerations, (iii) I express no opinion as to Section 9.04 of the Credit
Agreement insofar as it provides that any Bank purchasing a participation from
another Bank pursuant thereto may exercise set-off or similar rights with
respect to such participation and (iv) I express no opinion as to the effect of
the law of any jurisdiction (other than the States of New York and Colorado)
wherein any Bank may be located or wherein enforcement of the Credit Agreement
or the Notes issued thereunder may be sought which limits the rates of interest
legally chargeable or collectible. For purposes of my opinion in this paragraph
3, I have assumed that the laws of the State of New York are similar to the
laws of the State of Colorado.
4. There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Borrower or any of
its Subsidiaries before any court or arbitrator or any governmental body,
agency or official, in which there is a reasonable possibility of an adverse
decision which could reasonably be expected to materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Borrower and its Consolidated Subsidiaries, considered as a whole, or
which in
<PAGE> 95
any manner draws into question the validity or enforceability of the Credit
Agreement or the Notes.
I am admitted to practice in the State of Colorado and express no
opinion as to matters governed by the laws of any jurisdiction other than the
laws of the State of Colorado, the General Corporation Law of the State of
Delaware, and the Federal laws of the United States of America.
This opinion may be relied upon by each of you and any permitted
successor or assignee of each of you and any representative of each of you and
may not be relied upon by or disclosed to any other person (except to the
extent information is permitted to be disclosed pursuant to Section 9.11 of the
Credit Agreement) without my prior written consent.
Very truly yours,
Babetta R. Gray
<PAGE> 96
EXHIBIT F - OPINION OF SPECIAL COUNSEL FOR THE AGENT
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
________________, 1997
To the Banks, the Issuing Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the 364-Day Credit
Agreement (the "CREDIT AGREEMENT") dated as of July 23, 1997 among Galileo
International, Inc., a Delaware corporation (the "BORROWER"), the Banks parties
thereto, the Letter of Credit Issuing Banks parties thereto and Morgan Guaranty
Trust Company of New York, as Agent, and have acted as special counsel for the
Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of the Borrower and each
Note constitutes a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms except as the same may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally
and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws of
the
<PAGE> 97
United States of America. In giving the foregoing opinion, (i) we express no
opinion as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect and (ii) we have assumed that
under the applicable law of the State of Delaware, the execution, delivery and
performance by the Borrower of the Credit Agreement and the Notes are within
the Borrower's corporate powers and have been duly authorized by all necessary
corporate action.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
<PAGE> 98
EXHIBIT G - ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ____ among NAME OF ASSIGNOR (the
"ASSIGNOR"), NAME OF ASSIGNEE (the "ASSIGNEE"), GALILEO INTERNATIONAL, INC.
(the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"AGENT").
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the 364-Day Credit Agreement dated as of July 23, 1997 among the
Borrower, the Assignor and the other Banks parties thereto, as Banks, the
Letter of Credit Issuing Banks parties thereto and the Agent (as amended from
time to time, the "CREDIT AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower and participate in Letters of Credit
in an aggregate principal amount at any time outstanding not to exceed
$----------;
[WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof;]
[WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof;] and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of
its Commitment thereunder in an amount equal to $__________ (the "ASSIGNED
AMOUNT"), together with a corresponding portion of its outstanding Committed
Loans and Letter of Credit Liabilities, and the Assignee proposes to accept
assignment of such rights and assume the corresponding obligations from the
Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
<PAGE> 99
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans and Letter of Credit Liabilities made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by the
Assignor, the Assignee, [the Borrower, the Agent] and the Issuing Banks and the
payment of the amounts specified in Section 3 required to be paid on the date
hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and
be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.*** It
is understood that facility fees and/or letter of credit fees accrued to the
date hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the extent of
such other party's interest therein and shall promptly pay the same to such
other party.
SECTION 4. Consent of the Borrower, the Agent and the Issuing Banks.
This Agreement is conditioned upon the consent of the Borrower, the Agent and
the Issuing Banks pursuant to Section 9.06(c) of the Credit Agreement. The
execution of this Agreement by the Borrower, the Agent and the Issuing Banks is
evidence of this consent. Pursuant to Section 9.06(c), the Borrower agrees to
- --------
*** Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion
of any upfront fee to be paid by the Assignor to the Assignee. It may be
preferable in an appropriate case to specify these amounts generically or by
formula rather than as a fixed sum.
<PAGE> 100
execute and deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note or Letter of Credit. The
Assignee acknowledges that it has, independently and without reliance on the
Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
NAME OF ASSIGNOR
By: ----------------------------------
Name:
Title:
NAME OF ASSIGNEE
By:-----------------------------------
Name:
Title:
<PAGE> 101
[CONSENTED TO:
GALILEO INTERNATIONAL, INC.
By: ---------------------------------
Name:
Title:
CONSENTED TO:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: --------------------------------
Name:
Title:
CONSENTED TO:
NAME OF ISSUING BANK,
as Issuing Bank
By: ---------------------------------
Name:
Title:
<PAGE> 102
Exhibit 10.10(b)
CONFORMED COPY
$400,000,000
FIVE-YEAR
CREDIT AGREEMENT
dated as of
July 23, 1997
among
Galileo International, Inc.,
The Banks Parties Hereto,
The Letter of Credit Issuing Banks Named Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
------------------------
J.P. Morgan Securities Inc.,
Arranger
Bank of America National Trust and Savings Association
and
Bank of Montreal,
Co-Arrangers
<PAGE> 103
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions......................................................................1
SECTION 1.02. Accounting Terms and Determinations.............................................17
SECTION 1.03. Types of Borrowings.............................................................17
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend.............................................................18
SECTION 2.02. Increased Commitments; Additional Banks.........................................18
SECTION 2.03. Notice of Committed Borrowing...................................................19
SECTION 2.04. Money Market Borrowings.........................................................20
SECTION 2.05. Notice to Banks; Funding of Loans...............................................24
SECTION 2.06. Notes...........................................................................25
SECTION 2.07. Maturity of Loans...............................................................25
SECTION 2.08. Interest Rates..................................................................26
SECTION 2.09. Fees............................................................................29
SECTION 2.10. Optional Termination or Reduction of Commitments................................30
SECTION 2.11. Method of Electing Interest Rates...............................................30
SECTION 2.12. Mandatory Termination of Commitments............................................32
SECTION 2.13. Optional Prepayments............................................................32
SECTION 2.14. General Provisions as to Payments...............................................32
SECTION 2.15. Funding Losses..................................................................33
SECTION 2.16. Computation of Interest and Fees................................................34
SECTION 2.17. Regulation D Compensation.......................................................34
SECTION 2.18. Currency Translations...........................................................34
SECTION 2.19. Judgment Currency...............................................................34
SECTION 2.20. Letters of Credit...............................................................35
ARTICLE 3
CONDITIONS
SECTION 3.01. First Borrowing or Issuance.....................................................39
SECTION 3.02. Each Borrowing and Issuance.....................................................40
</TABLE>
i
<PAGE> 104
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power...................................................41
SECTION 4.02. Corporate and Governmental Authorization; No Contravention......................41
SECTION 4.03. Binding Effect..................................................................41
SECTION 4.04. Financial Information...........................................................41
SECTION 4.05. Litigation......................................................................42
SECTION 4.06. Compliance with ERISA...........................................................42
SECTION 4.07. Compliance with Laws............................................................43
SECTION 4.08. Environmental Matters...........................................................43
SECTION 4.09. Taxes...........................................................................43
SECTION 4.10. Subsidiaries....................................................................43
SECTION 4.11. Regulatory Restrictions on Borrowing............................................44
SECTION 4.12. Full Disclosure.................................................................44
ARTICLE 5
COVENANTS
SECTION 5.01. Information.....................................................................44
SECTION 5.02. Payment of Obligations..........................................................46
SECTION 5.03. Maintenance of Property; Insurance..............................................47
SECTION 5.04. Conduct of Business and Maintenance of Existence................................47
SECTION 5.05. Compliance with Laws............................................................47
SECTION 5.06. Inspection of Property, Books and Records.......................................48
SECTION 5.07. Mergers and Sales of Assets.....................................................48
SECTION 5.08. Use of Proceeds.................................................................48
SECTION 5.09. Negative Pledge.................................................................48
SECTION 5.10. Interest Coverage Ratio.........................................................49
SECTION 5.11. Restricted Payments.............................................................49
SECTION 5.12. Transactions with Affiliates....................................................50
SECTION 5.13. Debt of Subsidiaries............................................................50
SECTION 5.14. Cash Flow Ratio.................................................................50
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default...............................................................50
SECTION 6.02. Notice of Default...............................................................52
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
SECTION 6.03. Cash Cover......................................................................52
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization...................................................53
SECTION 7.02. Agent and Affiliates............................................................53
SECTION 7.03. Action by Agent.................................................................53
SECTION 7.04. Consultation with Experts.......................................................53
SECTION 7.05. Liability of Agent..............................................................54
SECTION 7.06. Indemnification.................................................................54
SECTION 7.07. Credit Decision.................................................................54
SECTION 7.08. Successor Agent.................................................................55
SECTION 7.09. Agent's Fee; Arranger Fee.......................................................55
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair........................55
SECTION 8.02. Illegality......................................................................56
SECTION 8.03. Increased Cost and Reduced Return...............................................57
SECTION 8.04. Taxes...........................................................................58
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.......................60
SECTION 8.06. Substitution of Bank............................................................61
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices.........................................................................61
SECTION 9.02. No Waivers......................................................................61
SECTION 9.03. Expenses; Indemnification.......................................................62
SECTION 9.04. Sharing of Set-offs.............................................................62
SECTION 9.05. Amendments and Waivers .........................................................63
SECTION 9.06. Successors and Assigns..........................................................63
SECTION 9.07. Collateral......................................................................65
SECTION 9.08. Governing Law; Submission to Jurisdiction.......................................65
SECTION 9.09. Counterparts; Integration; Effectiveness........................................65
SECTION 9.10. WAIVER OF JURY TRIAL............................................................66
SECTION 9.11. Confidentiality.................................................................66
</TABLE>
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PAGE
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PRICING SCHEDULE A
PRICING SCHEDULE B
SCHEDULE I - Existing Capital Leases
SCHEDULE II- Existing Ownership Group
SCHEDULE III - Transaction Documents
EXHIBIT A - Note
EXHIBIT B - Money Market Quote Request
EXHIBIT C - Invitation for Money Market Quotes
EXHIBIT D - Money Market Quote
EXHIBIT E - Opinion of Counsel for the Borrower
EXHIBIT F - Opinion of Special Counsel for the Agent
EXHIBIT G - Assignment and Assumption Agreement
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FIVE-YEAR
CREDIT AGREEMENT
FIVE-YEAR CREDIT AGREEMENT dated as of July 23, 1997 among GALILEO
INTERNATIONAL, INC., the BANKS from time to time parties hereto, the LETTER OF
CREDIT ISSUING BANKS from time to time parties hereto and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.04.
"ADDITIONAL BANK" has the meaning set forth in Section 2.02(b).
"ADJUSTED CD RATE" has the meaning set forth in Section 2.08(b).
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"AFFILIATE" means, at any time, (i) any Person that at such time
beneficially owns, directly or indirectly, 25% or more of the Ordinary Voting
Stock, (ii) any Person that, at such time, directly, or indirectly through one
or more intermediaries, controls the Borrower or (iii) any Person (other than
the Borrower or a Subsidiary) which is controlled by or is under common control
with a Person described in clause (i) or (ii).
"AGENT" means Morgan Guaranty Trust Company of New York in its capacity
as agent for the Banks hereunder, and its successors in such capacity.
"ALTERNATIVE CURRENCY" means any freely available currency other than
Dollars which is freely transferable and convertible into Dollars.
<PAGE> 108
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"ASSESSMENT RATE" has the meaning set forth in Section 2.08(b).
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each bank listed on the signature pages hereof, each
Additional Bank which becomes a Bank pursuant to Section 2.02, each Assignee
which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"BASE RATE LOAN" means (i) a Committed Loan which bears interest at the
Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount
which was a Base Rate Loan immediately before it became overdue.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BORROWER" means Galileo International, Inc., a Delaware corporation,
and its successors.
"BORROWING" has the meaning set forth in Section 1.03.
"CASH FLOW RATIO" means at any date the ratio of (i) Consolidated Debt
at such date to (ii) Consolidated EBITDA for the four consecutive fiscal
quarters of the Borrower and its Consolidated Subsidiaries ending on such date.
"CD BASE RATE" has the meaning set forth in Section 2.08(b).
"CD LOAN" means (i) a Committed Loan which bears interest at a CD Rate
pursuant to the applicable Notice of Committed Borrowing or Notice of
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<PAGE> 109
Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately
before it became overdue.
"CD MARGIN" means a rate per annum determined in accordance with the
Pricing Schedule.
"CD RATE" means a rate of interest determined pursuant to Section
2.08(b) on the basis of an Adjusted CD Rate.
"CD REFERENCE BANKS" means Bank of Montreal, Bank of America
National Trust and Savings Association and Morgan Guaranty Trust Company of
New York.
"CHANGE IN OWNERSHIP OR CONTROL" shall be deemed to have occurred if,
without the prior written consent of the Required Banks, at any time on or after
the Effective Date: (i) any Person or group (within the meaning of Rule 13d-5
under the Securities Exchange Act of 1934, as amended) other than one or more
members of the Existing Ownership Group shall beneficially own, directly or
indirectly, a percentage of the Ordinary Voting Stock that is at such time in
excess of the percentage of the Ordinary Voting Stock beneficially owned,
directly or indirectly, at such time by all members of the Existing Ownership
Group taken as a whole; (ii) any Person or group (within the meaning of Rule
13d-5 under the Securities Exchange Act of 1934, as amended) other than one or
more members of the Existing Ownership Group shall beneficially own, directly or
indirectly, a percentage of the Ordinary Voting Stock that is at such time in
excess of 25% of the Ordinary Voting Stock outstanding at such time; or (iii)
the Continuing Directors shall fail to constitute a majority of the Board of
Directors of the Borrower at such time.
"CLOSING DATE" means the date on or after the Effective Date on which
the initial Borrowing or issuance of a Letter of Credit under this Agreement
occurs.
"COMMITMENT" means (i) with respect to each Bank listed on the
signature pages hereof, the amount set forth opposite its name on the signature
pages hereof and (ii) with respect to each Additional Bank or Assignee which
becomes a Bank pursuant to Section 2.02 or 9.06(c), the amount of the Commitment
thereby assumed by it, in each case as such amount may be reduced from time to
time pursuant to Sections 2.10 and 9.06(c) or increased from time to time
pursuant to Sections 2.02 and 9.06(c).
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01,
provided that, if any such loan or loans (or portions thereof) are combined or
3
<PAGE> 110
subdivided pursuant to a Notice of Interest Rate Election, the term "COMMITTED
LOAN" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from such
subdivision, as the case may be.
"CONSOLIDATED DEBT" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED EBIT" means, for any fiscal period, Consolidated Net
Income (exclusive of the effect of any extraordinary gain (or loss)) for such
period plus, to the extent deducted in determining Consolidated Net Income for
such period, the aggregate amount of (i) Consolidated Interest Expense and (ii)
income tax expense.
"CONSOLIDATED EBITDA" means, for any fiscal period, Consolidated EBIT
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of depreciation, amortization and
other similar non-cash charges.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis for such period.
"CONSOLIDATED NET INCOME" means, for any fiscal period, the net income
of the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period. Notwithstanding the foregoing, for purposes of
calculating Consolidated Net Income for any fiscal period ending on or prior to
June 30, 1998, there shall be added to the amount determined in accordance with
the immediately preceding sentence the amount of net income attributable during
such fiscal period to the assets acquired in the NDC Acquisitions (such amount
of net income to be determined in good faith by the Borrower in a manner
consistent with the preparation of the pro forma financial statements included
in the Registration Statement).
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"CONSOLIDATED TANGIBLE NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. For
purposes of
4
<PAGE> 111
this definition, the term "INTANGIBLE ASSETS" means the amount (to the extent
reflected in determining such consolidated stockholders' equity) of (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within twelve
months after the acquisition of such business) subsequent to December 31, 1996
in the book value of any asset owned by the Borrower or a Consolidated
Subsidiary, (ii) all investments in unconsolidated Subsidiaries and all equity
investments in Persons which are not Subsidiaries and (iii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, anticipated future benefit of tax loss
carry-forwards, copyrights, organization or developmental expenses and other
intangible assets.
"CONTINUING DIRECTOR" means, at any date, an individual (i) who is a
member of the Board of Directors of the Borrower on the Effective Date, (ii) who
has been nominated to be a member of such Board of Directors, directly or
indirectly, by one or more members of the Existing Ownership Group or (iii) who
has been nominated to be a member of such Board of Directors by a majority of
the other Continuing Directors then in office.
"CONTROL" means possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all non-contingent
obligations (and, for purposes of Section 5.09 and the definitions of the terms
"MATERIAL DEBT" and "MATERIAL FINANCIAL OBLIGATIONS", all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person and (vii) all Debt of others Guaranteed
by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
5
<PAGE> 112
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DOLLARS" and the symbol "$" mean lawful money of the United States of
America.
"DOLLAR AMOUNT" means (i) with respect to any Loan denominated in
Dollars, the outstanding principal amount thereof and (ii) with respect to any
Loan denominated in an Alternative Currency, the Dollar Equivalent of the
outstanding principal amount thereof most recently determined by the Agent
pursuant to Section 2.18.
"DOLLAR EQUIVALENT" means, with respect to any amount of an Alternative
Currency at any date of determination thereof, the equivalent of such amount in
Dollars, calculated on the basis of the arithmetical mean of the buy and sell
spot rates of exchange of the Agent for such Alternative Currency at 10:30 A.M.
(New York City time) on such date of determination (or at such other time as the
Agent may determine to be appropriate for such Alternative Currency).
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent, provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"DOMESTIC LOANS" means CD Loans or Base Rate Loans or both.
6
<PAGE> 113
"DOMESTIC RESERVE PERCENTAGE" has the meaning set forth in Section
2.08(b).
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 9.09.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 (b) or (c) of the
Internal Revenue Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, are treated as a single employer under Section 414 of
the Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London and, if funds are to be transferred in an Alternative
Currency on such date, in the jurisdiction of the Payment Office.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"EURO-DOLLAR LOAN" means (i) a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
7
<PAGE> 114
Notice of Interest Rate Election or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"EURO-DOLLAR MARGIN" means a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.08(c) on the basis of a London Interbank Offered Rate.
"EURO-DOLLAR REFERENCE BANKS" means the principal London offices of
Bank of Montreal, Bank of America National Trust and Savings Association and
Morgan Guaranty Trust Company of New York.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro- Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CAPITAL LEASES" means the capital leases described on
Schedule I hereto.
"EXISTING CREDIT AGREEMENT" means the Credit Agreement dated as of July
3, 1996, among the Predecessor, the lenders named therein and Morgan Guaranty
Trust Company of New York, as agent.
"EXISTING OWNERSHIP GROUP" means (i) the Persons listed on Schedule II
hereto, (ii) any Person that directly, or indirectly through one or more
intermediaries, controls any Person listed on Schedule II hereto and (iii) any
Person (other than the Borrower or a Subsidiary) which is controlled by or is
under common control with a Person listed on Schedule II hereto.
"FACILITY FEE RATE" means a rate per annum determined in accordance
with the Pricing Schedule.
8
<PAGE> 115
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"FIXED RATE LOANS" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01) or any combination of the foregoing.
"GROUP OF LOANS" means at any time a group of Loans consisting of (i)
all Committed Loans which are Base Rate Loans at such time, (ii) all Euro-Dollar
Loans having the same Interest Period at such time or (iii) all CD Loans having
the same Interest Period at such time, provided that, if a Committed Loan of any
particular Bank is converted to or made as a Base Rate Loan pursuant to Article
8, such Loan shall be included in the same Group or Groups of Loans from time to
time as it would have been in if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the holder of such Debt of the
payment thereof or to protect such holder against loss in respect thereof (in
whole or in part), provided that the term "GUARANTEE" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "GUARANTEE" used as a verb has a corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
9
<PAGE> 116
and other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
"INCREASED COMMITMENTS" has the meaning set forth in Section 2.02(a).
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST COVERAGE RATIO" means at any date the ratio of (i)
Consolidated EBIT for the four consecutive fiscal quarters of the Borrower and
its Consolidated Subsidiaries ending on such date to (ii) Consolidated Interest
Expense for such period.
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable notice, provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall, subject to clause (c)
below, be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Loan, the period commencing on the date of
borrowing specified in the applicable Notice of Borrowing or on the date
specified in the applicable Notice of Interest Rate Election and ending 30, 60,
90 or 180 days thereafter, as the Borrower may elect in the applicable notice,
provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise end on a
day which
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<PAGE> 117
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Money Market LIBOR Loan, the period commencing
on the date of borrowing specified in the applicable Notice of Borrowing and
ending such whole number of months thereafter as the Borrower may elect in
accordance with Section 2.04, provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall, subject to clause (c)
below, be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing and ending such number of days thereafter (but not less than 30 days)
as the Borrower may elect in accordance with Section 2.04, provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall, subject to clause (b)
below, be extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
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"ISSUING BANK" means Morgan Guaranty Trust Company of New York or any
other Bank that may agree to issue letters of credit hereunder, in each case as
issuer of letters of credit hereunder.
"LETTER OF CREDIT" means a standby letter of credit to be issued
hereunder by an Issuing Bank.
"LETTER OF CREDIT FEE RATE" means a rate per annum determined in
accordance with the Pricing Schedule.
"LETTER OF CREDIT LIABILITIES" means, for any Bank and at any time, the
sum of (i) the amounts then owing to such Bank (including in its capacity as an
Issuing Bank) by the Borrower to reimburse it in respect of amounts drawn under
Letters of Credit and (ii) such Bank's ratable participation in the aggregate
amount then available for drawing under all Letters of Credit.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.04.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN" means a Domestic Loan, a Euro-Dollar Loan or a Money Market
Loan and "LOANS" means Domestic Loans, Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.08(c).
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
business, financial condition or results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole, (ii) the ability of the
Borrower to perform its obligations under the terms of this Agreement and the
Notes or (iii) the rights and obligations of the Agent and the Banks under this
Agreement and the Notes.
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"MATERIAL DEBT" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$10,000,000.
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$25,000,000. For purposes of determining Material Financial Obligations at any
time, the "principal or face amount" of the obligations of the Borrower or any
Subsidiary in respect of any Derivative Obligations at such time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Derivative
Obligations were terminated at such time.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section
2.04(d).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Borrower
and the Agent, provided that any Bank may from time to time by notice to the
Borrower and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, or for its Money Market Loans in any particular
currency, in which case all references herein to the Money Market Lending Office
of such Bank shall be deemed to refer to any or all of such offices, as the
context may require.
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Bank pursuant to
a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
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"MONEY MARKET MARGIN" has the meaning set forth in Section
2.04(d)(ii)(C).
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.04.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"NDC ACQUISITIONS" means the acquisitions by the Borrower and its
Subsidiaries of the assets of the NDCs.
"NDCS" means collectively Apollo Travel Services Partnership,
Traviswiss AG and Galileo Nederland B.V.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "NOTE" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined
in Section 2.03) or a Notice of Money Market Borrowing (as defined in Section
2.04(f)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.11.
"NOTICE OF ISSUANCE" has the meaning set forth in Section 2.20(b).
"ORDINARY VOTING STOCK" means common stock or other voting securities
of the Borrower (other than the Special Voting Preferred Stock).
"PARENT" means, with respect to any Bank, any Person controlling such
Bank.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
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"PAYMENT OFFICE" means the office or account of the Agent at or to
which payments hereunder are to be made, which shall be, in the case of payments
in Dollars, the office of the Agent referred to in Section 9.01 and, in the case
of payments in an Alternative Currency, such office or account as the Agent may
specify for such purpose by notice to the Borrower and the Banks.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PREDECESSOR" means Galileo International Partnership, a Delaware
general partnership.
"PRICING SCHEDULE" means (i) Pricing Schedule A attached hereto, unless
and until the Borrower shall have elected that Pricing Schedule B attached
hereto be the Pricing Schedule, such election to be effected by the giving by
the Borrower of not less than five Domestic Business Days' notice to the Agent
of the effective date of such election, and (ii) on and after the effective date
of such election, Pricing Schedule B attached hereto. Such election, if made,
shall be irrevocable.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"QUARTERLY DATE" means each March 31, June 30, September 30 and
December 31.
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"REFERENCE BANKS" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "REFERENCE BANK" means any one
of such Reference Banks.
"REGISTRATION STATEMENT" means the Borrower's Registration Statement on
Form S-1, filed on May 20, 1997, with the Securities and Exchange Commission
under the Securities Act of 1933, as such Registration Statement may be amended
prior to the Effective Date.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing more than 50% of the aggregate unpaid
principal amount of the Loans.
"RESTRICTED PAYMENT" means (a) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock or rights to receive shares of its capital stock) or
(b) any payment on account of the purchase, redemption, retirement or
acquisition of (i) any shares of the Borrower's capital stock or (ii) any
option, warrant or other right to acquire shares of the Borrower's capital stock
(but not including payments of principal, premium (if any) or interest made
pursuant to the terms of convertible debt securities prior to conversion).
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" means Standard & Poor's Rating Services.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, the term "SUBSIDIARY" means a Subsidiary of the Borrower.
"TERMINATION DATE" means July 23, 2002, or, if such day is not a Euro-
Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month in which case the
Termination Date shall be the next preceding Euro-Dollar Business Day.
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"TRANSACTION DOCUMENTS" means the documents listed on Schedule III
hereto.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks, provided that, if the Borrower notifies the Agent that the
Borrower wishes to amend any covenant in Article 5 to eliminate the effect of
any change in generally accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Borrower that the Required Banks wish to
amend Article 5 for such purpose), then the Borrower's compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to the Borrower
and the Required Banks. Calculations with respect to periods commencing prior to
the Closing Date shall be made as if the Predecessor were the Borrower.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article 2 on the same date, all of which Loans are of the same type (subject to
Article 8) and, except in the case of Base Rate Loans, have the same initial
Interest Period. Borrowings are classified for purposes of this Agreement either
by reference to the pricing of Loans comprising such Borrowing (e.g., a "FIXED
RATE
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BORROWING" is a Euro-Dollar Borrowing, a CD Borrowing or a Money Market
Borrowing (excluding any such Borrowing consisting of Money Market LIBOR Loans
bearing interest at the Base Rate pursuant to Section 8.01), and a "EURO-DOLLAR
BORROWING" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the
provisions of Article 2 under which participation therein is determined (i.e., a
"COMMITTED BORROWING" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "MONEY MARKET BORROWING"
is a Borrowing under Section 2.04 in which the Bank participants are determined
on the basis of their bids in accordance therewith).
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit Period,
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank and Letter of Credit Liabilities of such Bank at any one time
outstanding shall not exceed the amount of its Commitment. Each Borrowing under
this Section shall be in Dollars and be in an aggregate principal amount of
$10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing
may be in the aggregate amount available in accordance with Section 3.02) and
shall be made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, prepay Loans to the extent permitted by Section 2.13 and reborrow at
any time during the Revolving Credit Period under this Section.
SECTION 2.02. Increased Commitments; Additional Banks. (a) Subsequent
to the Effective Date, the Borrower may, upon at least 30 days' notice to the
Agent (which shall promptly provide a copy of such notice to the Banks), propose
to increase the aggregate amount of the Commitments to an amount not to exceed
$500,000,000 (the amount of any such increase, the "INCREASED COMMITMENTS").
Each Bank party to this Agreement at such time shall have the right (but no
obligation), for a period of 15 days following receipt of such notice, to elect
by notice to the Borrower and the Agent to increase its Commitment by a
principal amount which bears the same ratio to the Increased Commitments as its
then Commitment bears to the aggregate Commitments then existing, provided that
no increase in the aggregate amount of the Commitments shall be effective unless
Banks having more than 50% of in the aggregate amount of the
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Commitments in effect at the time any such increase is requested shall have
elected so to increase their Commitments.
(b) If any Bank party to this Agreement shall not elect to increase
its Commitment pursuant to subsection (a) of this Section, the Borrower may
designate another bank or other banks (which may be, but need not be, one or
more of the existing Banks) which at the time agree to (i) in the case of any
such bank that is an existing Bank, increase its Commitment and (ii) in the case
of any other such bank (an "ADDITIONAL BANK"), become a party to this Agreement.
The sum of the increases in the Commitments of the existing Banks pursuant to
this subsection (b) plus the Commitments of the Additional Banks shall not in
the aggregate exceed the unsubscribed amount of the Increased Commitments.
(c) An increase in the aggregate amount of the Commitments pursuant to
this Section 2.02 shall become effective upon the receipt by the Agent of an
agreement in form and substance satisfactory to the Agent signed by the
Borrower, by each Additional Bank and by each other Bank whose Commitment is to
be increased, setting forth the new Commitments of such Banks and setting forth
the agreement of each Additional Bank to become a party to this Agreement and to
be bound by all the terms and provisions hereof, together with such evidence of
appropriate corporate authorization on the part of the Borrower with respect to
the Increased Commitments and such opinions of counsel for the Borrower with
respect to the Increased Commitments as the Agent may reasonably request.
SECTION 2.03. Notice of Committed Borrowing. The Borrower shall give
the Agent notice (a "NOTICE OF COMMITTED BORROWING") not later than 10:30 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the second
Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing;
(b) the aggregate amount of such Borrowing;
(c) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate, a CD Rate or a Euro-Dollar Rate; and
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(d) in the case of a Fixed Rate Borrowing, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the definition
of Interest Period.
SECTION 2.04. Money Market Borrowings. (a) The Money Market Option. In
addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as
set forth in this Section, request the Banks during the Revolving Credit Period
to make offers to make Money Market Loans to the Borrower in Dollars or in an
Alternative Currency. The Banks may, but shall have no obligation to, make such
offers and the Borrower may, but shall have no obligation to, accept any such
offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received not later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such other
time or date as the Borrower and the Agent shall have mutually agreed and shall
have notified to the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic
Business Day in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$10,000,000 or a larger multiple of $1,000,000 (or, in the case of a
Borrowing to be denominated in an Alternative Currency, a comparable
amount of such Alternative Currency as determined by the Agent),
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of the term "INTEREST
PERIOD",
(iv) whether the Money Market Quotes requested are to set
forth a Money Market Margin or a Money Market Absolute Rate, and
(v) if the related Money Market Loans are to be denominated in
an Alternative Currency, such Alternative Currency. Money Market Loans
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denominated in an Alternative Currency shall be made available in such
currency and repaid, together with interest thereon, in such currency.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York
City time) on the fourth Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction, or (y) 9:30 A.M. (New York City time)
on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or,
in either case, such other time or date as the Borrower and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Money Market Quote Request for the first LIBOR Auction or Absolute Rate
Auction for which such change is to be effective), provided that Money Market
Quotes submitted by the Agent (or any affiliate of the Agent) in the capacity of
a Bank may be submitted, and may only be submitted, if the Agent or such
affiliate notifies the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for the other Banks,
in the case of a LIBOR Auction or (y) 15 minutes prior to the deadline for the
other Banks, in the case of an Absolute Rate Auction. Subject to Articles 3 and
6, any Money Market Quote so made shall be irrevocable except with the written
consent of the Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the
form of Exhibit D hereto and shall in any case specify:
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(A) the proposed date of Borrowing;
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount
(w) may be greater than or less than the Commitment of the
quoting Bank, (x) must be $5,000,000 or a larger multiple of
$1,000,000 (or, in the case of a Borrowing to be denominated
in an Alternative Currency, a comparable amount of such
Alternative Currency as determined by the Agent), (y) may not
exceed the principal amount of Money Market Loans for which
offers were requested and (z) may be subject to an aggregate
limitation as to the principal amount of Money Market Loans
for which offers being made by such quoting Bank may be
accepted;
(C) in the case of a LIBOR Auction, the margin above or
below the applicable London Interbank Offered Rate (the "MONEY
MARKET MARGIN") offered for each such Money Market Loan,
expressed as a percentage (specified to the nearest 1/10,000th
of 1%) to be added to or subtracted from such base rate;
(D) in the case of an Absolute Rate Auction, the rate of
interest per annum (specified to the nearest 1/10,000th of 1%)
(the "MONEY MARKET ABSOLUTE RATE") offered for each such Money
Market Loan; and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required by
subsection 2.04(d)(ii) above;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market
Quotes; or
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(D) arrives after the time set forth in subsection
2.04(d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection 2.04(d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted solely to correct a manifest error in
such former Money Market Quote. The Agent's notice to the Borrower shall specify
(A) the aggregate principal amount of Money Market Loans for which offers have
been received for each Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and Money Market Margins or
Money Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money Market Loans
for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it pursuant to
subsection 2.04(e). In the case of acceptance, such notice (a "NOTICE OF MONEY
MARKET BORROWING") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part, provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the principal amount of each Money Market Borrowing must
be $10,000,000 or a larger multiple of $1,000,000 (or in the case of a
Borrowing to be denominated in an Alternative Currency, a comparable
amount of such Alternative Currency as determined by the Agent);
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(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be; and
(iv) the Borrower may not accept any offer that is described
in subsection 2.04(d)(iii) or that otherwise fails to comply in any
material respect with the requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Agent among such Banks as nearly as possible (in multiples of
$1,000,000 (or, in the case of a Borrowing to be denominated in an Alternative
Currency, a comparable amount of such Alternative Currency as determined by the
Agent), as the Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the Agent of the amounts of
Money Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.05. Notice to Banks; Funding of Loans. (a) Upon receipt of a
Notice of Borrowing, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing (or, in the case of payments in an Alternative Currency, such other
time as the Agent may determine to be customary for payments in such Alternative
Currency), each Bank participating therein shall make available its share of
such Borrowing, (i) in the case of payments in Dollars, in Federal or other
funds immediately available in New York City, and (ii) in the case of payments
in an Alternative Currency, in such funds as are at the time customary for the
international settlement of payments in such currency, to the Agent at the
Payment Office. Unless the Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Agent will make the funds so
received from the Banks available to the Borrower at the Payment Office.
(c) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsection 2.05(b) of this Section and the Agent may, in
reliance upon such
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assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Bank shall not have so made such share available
to the Agent, such Bank and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at the Federal Funds Rate (or, in
the case of Money Market Loans denominated in an Alternative Currency, a
comparable overnight rate for such Alternative Currency as determined by the
Agent). If such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Loan included in such Borrowing
for purposes of this Agreement.
SECTION 2.06. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type or in a particular currency be evidenced by
a separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type or in the relevant currency. Each reference in
this Agreement to the "NOTE" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount, currency and type of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may, if
such Bank so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding,
provided that the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to
endorse its Note and to attach to and make a part of its Note a continuation of
any such schedule as and when required.
SECTION 2.07. Maturity of Loans. (a) Each Committed Loan shall mature,
and the principal amount thereof shall be due and payable, together with accrued
interest thereon, on the Termination Date.
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(b) Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together with accrued interest thereon, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.08. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Loan is made to but excluding the date on which such
Loan becomes due, at a rate per annum equal to the Base Rate for such day. Such
interest shall be payable quarterly in arrears on each Quarterly Date and, with
respect to the principal amount of any Base Rate Loan converted to a CD Loan or
a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue
principal of or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 2% plus
the rate otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period, provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of the term "INTEREST
PERIOD", have an Interest Period of less than 30 days, such CD Loan shall bear
interest during such Interest Period at the rate applicable to Base Rate Loans
during such period. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the
rate applicable to Base Rate Loans for such day and (ii) the sum of the CD
Margin plus the Adjusted CD Rate applicable to such Loan at the date such
payment was due.
The "ADJUSTED CD RATE" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
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- ----------
*The amount in brackets being rounded upward, if necessary, to
the next higher 1/100 of 1%
The "CD BASE RATE" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"DOMESTIC RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"ASSESSMENT RATE" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
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The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in Dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which one day (or,
if such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than three months as the Agent may
select) deposits in Dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause 8.01(a) or 8.01(b)
shall exist, at a rate per annum equal to the sum of 2% plus the rate applicable
to Base Rate Loans for such day) and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus the London Interbank Offered Rate applicable to such
Loan at the date such payment was due.
(e) Subject to Section 8.01, each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.08(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing and, in the case of a Borrowing in an Alternative
Currency, based on the comparable quotations for such Alternative Currency
rather than for Dollars) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.04. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.04. Such interest shall be payable for each Interest
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Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid (i) in the case of Money Market Loans
denominated in Dollars, at a rate per annum equal to the sum of 2% plus the Base
Rate for such day and (ii) in the case of Money Market Loans denominated in an
Alternative Currency, at a rate per annum determined in accordance with Section
2.08(d) as if such Money Market Loans were Euro-Dollar Loans, but based on
comparable quotations for such Alternative Currency rather than for Dollars.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.09. Fees. (a) The Borrower shall pay to the Agent for the
account of the Banks ratably a facility fee at the Facility Fee Rate (determined
daily in accordance with the Pricing Schedule). Such facility fee shall accrue
(i) from and including the Effective Date to but excluding the date of
termination of the Commitments in their entirety, on the daily aggregate amount
of the Commitments (whether used or unused) and (ii) from and including such
date of termination to but excluding the date the Loans and Letter of Credit
Liabilities shall be repaid in their entirety, on the daily aggregate
outstanding principal amount of the Loans and Letter of Credit Liabilities.
(b) The Borrower shall pay to the Agent (i) for the account of the
Banks ratably a letter of credit fee accruing daily on the aggregate amount then
available for drawing under all Letters of Credit at the Letter of Credit Fee
Rate (determined daily in accordance with the Pricing Schedule) and (ii) for the
account of each Issuing Bank a letter of credit fronting fee accruing daily on
the aggregate amount then available for drawing under all Letters of Credit
issued by such Issuing Bank at a rate per annum mutually agreed from time to
time by the Borrower and such Issuing Bank.
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(c) Accrued fees under this Section shall be payable quarterly in
arrears on each Quarterly Date and on the date of termination of the Commitments
in their entirety (and, if later, the date the Loans and Letter of Credit
Liabilities shall be repaid in their entirety).
SECTION 2.10. Optional Termination or Reduction of Commitments. During
the Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Agent, (i) terminate the Commitments at any time,
if no Loans or Letter of Credit Liabilities are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $10,000,000 or a
larger multiple of $1,000,000, the aggregate amount of the Commitments in excess
of the aggregate outstanding principal amount of the Loans and Letter of Credit
Liabilities.
SECTION 2.11. Method of Electing Interest Rates. (a) The Loans included
in each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of Article 8 and the last sentence of this subsection (a)), as
follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to CD Loans as of any Domestic Business Day or to
Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are CD Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to
continue such Loans as CD Loans for an additional Interest Period,
subject to Section 2.15 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans; and
(iii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or CD Loans or elect to
continue such Loans as Euro-Dollar Loans for an additional Interest
Period, subject to Section 2.15 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Agent not later than 10:30 A.M. (New York City time) on
the third Euro-Dollar Business Day before the conversion or continuation
selected
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in such notice is to be effective (unless the relevant Loans are to be converted
to Domestic Loans of the other type or are CD Rate Loans to be continued as CD
Rate Loans for an additional Interest Period, in which case such notice shall be
delivered to the Agent not later than 10:30 A.M. (New York City time) on the
second Domestic Business Day before such conversion or continuation is to be
effective). A Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate principal amount of the relevant Group of Loans,
provided that (i) such portion is allocated ratably among the Loans comprising
such Group and (ii) the portion to which such Notice applies, and the remaining
portion to which it does not apply, are each $5,000,000 or any larger multiple
of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of subsection 2.11(a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans being converted are to be Fixed
Rate Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as CD Loans or
Euro-Dollar Loans for an additional Interest Period, the duration of
such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of the term "INTEREST PERIOD".
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection 2.11(a) above, the Agent shall promptly notify
each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Borrower. If no Notice of Interest Rate Election is timely
received prior to the end of an Interest Period for any Group of Loans, the
Borrower shall be deemed to have elected that such Group of Loans be converted
to Base Rate Loans as of the last day of such Interest Period.
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(d) An election by the Borrower to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section shall not
constitute a "BORROWING" subject to the provisions of Section 3.02.
SECTION 2.12. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
SECTION 2.13. Optional Prepayments. (a) Subject in the case of any
Fixed Rate Loan to Section 2.15, the Borrower may, upon at least one Domestic
Business Day's notice to the Agent, prepay any Group of Domestic Loans (or any
Money Market Borrowing bearing interest at the Base Rate pursuant to Section
8.01) or upon at least three Euro-Dollar Business Days' notice to the Agent,
prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or
from time to time in part in amounts aggregating $10,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Group (or Borrowing).
(b) Except as provided in subsection 2.13(a) above the Borrower may
not prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.14. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) (or, in the case of
payments in an Alternative Currency, such other time as the Agent may determine
to be customary for payments in such Alternative Currency) on the date when due,
(i) in the case of payments in Dollars, in Federal or other funds immediately
available in New York City and (ii) in the case of payments in an Alternative
Currency, in such funds as are at the time customary for the international
settlement of payments in such currency, to the Agent at the Payment Office. The
Agent will promptly distribute to each Bank its ratable share of each such
payment received by the Agent for the account of the Banks. Whenever any payment
of principal of, or interest on, the Domestic Loans or of fees shall be due
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on a day which is not a Domestic Business Day, the date for payment thereof
shall be extended to the next succeeding Domestic Business Day. Whenever any
payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for payment thereof shall
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the Money Market Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day. If the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate (or, in the case of Money Market Loans
denominated in an Alternative Currency, a comparable overnight rate for such
Alternative Currency as determined by the Agent).
SECTION 2.15. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.08(d), or if the Borrower fails to
borrow, prepay, convert or continue any Fixed Rate Loans after notice has been
given to any Bank in accordance with Section 2.05(a), 2.13(c) or 2.11(c), the
Borrower shall reimburse each Bank within 15 Domestic Business Days after demand
for any resulting loss or expense incurred by it (or by an existing or
prospective Participant in the related Loan), including (without limitation) any
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that such
Bank shall have delivered to the Borrower and the Agent a certificate as to the
amount of such loss or expense, which certificate shall set forth the method of
determining such loss or
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expense in reasonable detail and shall be conclusive in the absence of manifest
error.
SECTION 2.16. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.17. Regulation D Compensation. Each Bank may require the
Borrower to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such
Bank at a rate per annum determined by such Bank up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London
Interbank Offered Rate. Any Bank wishing to require payment of such additional
interest (x) shall so notify the Borrower and the Agent, in which case such
additional interest on the Euro-Dollar Loans of such Bank shall be payable to
such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after the giving of
such notice and (y) shall notify the Borrower at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar Loans of
the amount then due it under this Section.
SECTION 2.18. Currency Translations. The Dollar Amount of each Money
Market Loan denominated in an Alternative Currency shall be determined by the
Agent (i) on the date of borrowing, as to each such Loan borrowed on such date,
and (ii) on each Quarterly Date, as to each such Loan outstanding on such date.
If after giving effect to any such determination pursuant to clause (ii), the
sum of the aggregate Dollar Amount of the Loans and the aggregate Letter of
Credit Liabilities exceeds the aggregate amount of the Commitments, the Borrower
shall prepay such principal amount (together with accrued interest thereon) of
the outstanding Committed Loans, if any Committed Loans are then outstanding, as
may be necessary to eliminate such excess. Such prepayment shall be made (x) on
the next succeeding Domestic Business Day, with respect to any Base Rate Loans
then outstanding and (y) at the end of the then current Interest Period
applicable thereto, with respect to any Euro-Dollar Loans or CD Loans then
outstanding.
SECTION 2.19. Judgment Currency. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from the Borrower
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hereunder or under any of the Notes in the currency expressed to be payable
herein or under the Notes (the "SPECIFIED CURRENCY") into another currency, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase the specified currency with such
other currency at the Agent's New York office on the Euro-Dollar Business Day
preceding that on which final judgment is given. The obligations of the Borrower
in respect of any sum due to any Bank or the Agent hereunder or under any Note
shall, notwithstanding any judgment in a currency other than the specified
currency, be discharged only to the extent that on the Euro-Dollar Business Day
following receipt by such Bank or the Agent (as the case may be) of any sum
adjudged to be so due in such other currency such Bank or the Agent (as the case
may be) may in accordance with normal banking procedures purchase the specified
currency with such other currency; if the amount of the specified currency so
purchased is less than the sum originally due to such Bank or the Agent, as the
case may be, in the specified currency, the Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of the specified currency so
purchased exceeds (a) the sum originally due to any Bank or the Agent, as the
case may be, in the specified currency and (b) any amounts shared with other
Banks as a result of allocations of such excess as a disproportionate payment to
such Bank under Section 9.04, such Bank or the Agent, as the case may be, agrees
to remit such excess to the Borrower.
SECTION 2.20. Letters of Credit. (a) Subject to the terms and
conditions hereof, each Issuing Bank agrees to issue standby letters of credit
hereunder denominated in Dollars from time to time before the fifth Domestic
Business Day prior to the Termination Date upon the request of the Borrower (the
"LETTERS OF CREDIT"), provided that, immediately after each Letter of Credit is
issued, (i) the aggregate amount of the Letter of Credit Liabilities shall not
exceed $100,000,000 and (ii) the aggregate amount of the Letter of Credit
Liabilities plus the aggregate outstanding amount of all Loans shall not exceed
the aggregate amount of the Commitments. Upon the date of issuance by an Issuing
Bank of a Letter of Credit, the Issuing Bank shall be deemed, without further
action by any party hereto, to have sold to each Bank, and each Bank shall be
deemed, without further action by any party hereto, to have purchased from the
Issuing Bank, a participation in such Letter of Credit and the related Letter of
Credit Liabilities in the proportion their respective Commitments bear to the
aggregate Commitments.
(b) The Borrower shall give the Issuing Bank notice at least three
Domestic Business Days prior to the requested issuance of a Letter of Credit (or
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such lesser notice period as shall be acceptable to the Issuing Bank) specifying
the date such Letter of Credit is to be issued, and describing the terms of such
Letter of Credit and the nature of the transactions to be supported thereby
(such notice, including any such notice given in connection with the extension
of a Letter of Credit, a "NOTICE OF ISSUANCE"). Upon receipt of a Notice of
Issuance, the Issuing Bank shall promptly notify the Agent, and the Agent shall
promptly notify each Bank of the contents thereof and of the amount of such
Bank's participation in such Letter of Credit. The issuance by the Issuing Bank
of each Letter of Credit shall, in addition to the conditions precedent set
forth in Article III, be subject to the conditions precedent that such Letter of
Credit shall be in such form and contain such terms as shall be reasonably
satisfactory to the Issuing Bank and that the Borrower shall have executed and
delivered such other instruments and agreements relating to such Letter of
Credit as the Issuing Bank shall have reasonably requested. The Borrower shall
also pay to the Issuing Bank for its own account issuance, drawing, amendment
and extension charges in the amounts and at the times as agreed between the
Borrower and the Issuing Bank. The extension or renewal of any Letter of Credit
shall be deemed to be an issuance of such Letter of Credit, and if any Letter of
Credit contains a provision pursuant to which it is deemed to be extended unless
notice of termination is given by the Issuing Bank, the Issuing Bank shall
timely give such notice of termination unless it has theretofore timely received
a Notice of Issuance and the other conditions to issuance of a Letter of Credit
have also theretofore been met with respect to such extension. No Letter of
Credit shall have a term of more than two years, provided that a Letter of
Credit may contain a provision pursuant to which it is deemed to be extended on
an annual basis unless notice of termination is given by the Issuing Bank, and
provided further that no Letter of Credit shall have a term extending or be so
extendible beyond the date which is five Domestic Business Days prior to the
Termination Date.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the Issuing Bank shall notify
the Agent and the Agent shall promptly notify the Borrower and each other Bank
as to the amount to be paid as a result of such demand or drawing and the
payment date. The Borrower shall be irrevocably and unconditionally obligated
within three Domestic Business Days to reimburse the Issuing Bank for any
amounts paid by the Issuing Bank upon any drawing under any Letter of Credit,
without presentment, demand, protest or other formalities of any kind. All such
amounts paid by the Issuing Bank and remaining unpaid by the Borrower shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the rate applicable to Base Rate Loans for such day plus, for each such day
more than three Domestic Business Days after the related date of drawing, 2% per
annum. In addition, each Bank will pay to the Agent, for the account of the
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Issuing Bank, immediately upon the Issuing Bank's demand at any time during the
period commencing after such drawing until reimbursement therefor in full by the
Borrower, an amount equal to such Bank's ratable share of such drawing (in
proportion to its participation therein), together with interest on such amount
for each day from the date of the Issuing Bank's demand for such payment (or, if
such demand is made after 12:00 Noon (New York City time) on such date, from the
next succeeding Domestic Business Day) to the date of payment by such Bank of
such amount at the Federal Funds Rate. The Issuing Bank will pay to each Bank
ratably all amounts received from the Borrower for application in payment of its
reimbursement obligations in respect of any Letter of Credit, but only to the
extent such Bank has made payment to the Issuing Bank in respect of such Letter
of Credit pursuant hereto.
(d) The obligations of the Borrower and each Bank under subsection
2.20(c) above shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of this Agreement or any Letter of
Credit or any document related hereto or thereto;
(iii) the use which may be made of the Letter of Credit by, or
any acts or omission of, a beneficiary of a Letter of Credit (or any
Person for whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a beneficiary of
a Letter of Credit (or any Person for whom the beneficiary may be
acting), the Banks (including the Issuing Bank) or any other Person,
whether in connection with this Agreement or any Letter of Credit or
any document related hereto or thereto or any unrelated transaction;
(v) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect whatsoever;
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(vi) payment under a Letter of Credit against presentation to
the Issuing Bank of a draft or certificate that does not comply with
the terms of the Letter of Credit; or
(vii) any other act or omission to act or delay of any kind by
any Bank (including the Issuing Bank), the Agent or any other Person or
any other event or circumstance whatsoever that might, but for the
provisions of this subsection (vii), constitute a legal or equitable
discharge of the Borrower's or the Bank's obligations hereunder.
(e) The Borrower hereby indemnifies and holds harmless each Bank
(including each Issuing Bank) and the Agent from and against any and all claims,
damages, losses, liabilities, costs or expenses which such Bank or the Agent may
incur (including, without limitation, any claims, damages, losses, liabilities,
costs or expenses which the Issuing Bank may incur by reason of or in connection
with the failure of any other Bank to fulfill or comply with its obligations to
such Issuing Bank hereunder (but nothing herein contained shall affect any
rights the Borrower may have against such defaulting Bank)), and none of the
Banks (including an Issuing Bank) nor the Agent nor any of their officers or
directors or employees or agents shall be liable or responsible, by reason of or
in connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit, including, without limitation, any of
the circumstances enumerated in subsection 2.20(d) above, as well as (i) any
error, omission, interruption or delay in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, (ii) any error in
interpretation of technical terms, (iii) any loss or delay in the transmission
of any document required in order to make a drawing under a Letter of Credit,
(iv) any consequences arising from causes beyond the control of the Issuing
Bank, including, without limitation, any government acts, or any other
circumstances whatsoever in making or failing to make payment under such Letter
of Credit, provided that the Borrower shall not be required to indemnify the
Issuing Bank for any claims, damages, losses, liabilities, costs or expenses,
and the Borrower shall have a claim for direct (but not consequential) damages,
losses, liabilities, costs and expenses suffered by it, to the extent found by a
court of competent jurisdiction to have been caused by (x) the willful
misconduct or gross negligence of the Issuing Bank in determining whether a
request presented under any Letter of Credit complied on its face with the terms
of such Letter of Credit or (y) the Issuing Bank's failure to pay under any
Letter of Credit after the presentation to it of a request strictly complying
with the terms and conditions of the Letter of Credit. Nothing in this
subsection (e) is intended to limit the obligations of the Borrower under any
other provision of this Agreement. To the extent the Borrower does not indemnify
an Issuing Bank as
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required by this subsection, the Banks agree to do so ratably in accordance with
their Commitments.
ARTICLE 3
CONDITIONS
The obligation of any Bank to make a Loan on the occasion of any
Borrowing or of an Issuing Bank to issue a Letter of Credit upon request
therefor is subject to the satisfaction of the following conditions:
SECTION 3.01. First Borrowing or Issuance. In the case of the first
Borrowing or issuance of a Letter of Credit, receipt by the Agent of the
following documents, each dated the Closing Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or
before the Closing Date complying with the provisions of Section 2.06;
(b) an opinion of Babetta R. Gray, Senior Vice President and General
Counsel of the Borrower, substantially in the form of Exhibit E hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) evidence satisfactory to the Agent that (i) the Predecessor shall
have merged with and into a wholly-owned Subsidiary of the Borrower and (ii) the
NDC Acquisitions have been consummated (or are being consummated substantially
simultaneously with such Borrowing) as described in the Registration Statement;
(e) evidence satisfactory to the Agent that the Existing Credit
Agreement has been terminated, that any letter of credit issued thereunder shall
have expired undrawn or been canceled and that all principal and interest on any
loans outstanding thereunder and all other amounts payable thereunder have been
paid, or simultaneously with such Borrowing will be paid, in full;
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(f) evidence satisfactory to the Agent that Borrower has consummated
an initial public offering of its common stock for net proceeds of not less than
$200,000,000; and
(g) all documents the Agent may reasonably request relating to the
existence of the Borrower, the authority for and the validity of this Agreement
and the Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Agent.
The Banks (which comprise the "Required Banks" as defined in the Existing Credit
Agreement) hereby agree that the commitments under the Existing Credit Agreement
may be terminated by the Predecessor by notice given on the Closing Date
effective immediately, and that any loans outstanding under the Existing Credit
Agreement may be prepaid without prior notice on the Closing Date (subject to
Section 2.15 of the Existing Credit Agreement).
SECTION 3.02. Each Borrowing and Issuance. In the case of each
Borrowing or issuance of a Letter of Credit (including the first such event):
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.03 or 2.04 or of a Notice of Issuance as required by Section 2.20, as
the case may be;
(b) the fact that, immediately after such Borrowing, the sum of the
aggregate Dollar Amount of the Loans and the aggregate Letter of Credit
Liabilities will not exceed the aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, the aggregate
Dollar Amount of Money Market Loans to be denominated in an Alternative Currency
will not exceed $100,000,000;
(d) the fact that, immediately before and after such Borrowing or
issuance, no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement (except Section 4.04(d)) shall be true and correct
on and as of the date of such Borrowing or issuance.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed to
be a representation and warranty by the Borrower on the date thereof as to the
facts specified in clauses 3.02(b), 3.02(c), 3.02(d)and 3.02(e) of this Section.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries or result in the creation
or imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms except as
the same may be limited by bankruptcy, insolvency, fraudulent transfer or
similar laws affecting creditors' rights generally and by general principles of
equity.
SECTION 4.04. Financial Information. (a) The consolidated balance sheet
of the Predecessor and its Consolidated Subsidiaries as of December 31, 1996 and
the related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by KPMG Peat Marwick LLP, copies of which have been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Predecessor and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Predecessor and
its Consolidated Subsidiaries as of March 31, 1997 and the related unaudited
consolidated statements of income and cash flows for the three months then
ended, copies of which have been delivered to each of the Banks, fairly present
in
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all material respects, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial statements referred
to in subsection (a) of this Section, the consolidated financial position of the
Predecessor and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such three month period
(subject to normal year-end adjustments).
(c) The unaudited pro forma consolidated balance sheet of the Borrower
as of March 31, 1997 and the related unaudited consolidated statements of income
for the year ended December 31, 1996 and the three months ended March 31, 1997,
set forth in the Registration Statement, a copy of which has been delivered to
each of the Banks, have been prepared on the basis described therein and
otherwise in conformity with generally accepted accounting principles applied on
a basis consistent with the financial statements referred to in subsection (a)
of this Section and show the consolidated financial position and results of
operations of the Borrower as if the transactions contemplated by Section
3.01(d) had occurred, in the case of the consolidated balance sheet, on March
31, 1997 and in the case of the consolidated statements of income, as of January
1, 1996.
(d) Since March 31, 1997 there has been no material adverse change in
the business, financial position or results of operations of the Predecessor,
the Borrower and their respective Consolidated Subsidiaries, considered as a
whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could reasonably be expected
to result in a Material Adverse Effect or which in any manner draws into
question the validity or enforceability of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan, except where such failure to
fulfill its obligations or be in compliance could not reasonably be expected to
result in a Material Adverse Effect. No member of the ERISA Group has (i) sought
a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code in respect of any Plan, (ii) failed to make any contribution or
payment to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement, or made any amendment to any Plan or Benefit Arrangement,
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which has resulted or could reasonably be expected to result in the imposition
of a Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA, except where
such failures to make contributions or payments, such impositions of Liens, such
postings of bonds or such incurrence of liability, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 4.07. Compliance with Laws. The Borrower and its Subsidiaries
are in compliance with all applicable statutes, ordinances, rules and
regulations, except where a lack of compliance therewith could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.08. Environmental Matters. On the basis of its knowledge of
the Environmental Laws and the applicability of the Environmental Laws to the
business, operations and properties of the Borrower and its Subsidiaries,
including, without limitation, (i) any requirement under the Environmental Laws
that the Borrower and its Subsidiaries obtain operational permits, (ii) the
possibility of liability in connection with the off-site disposal of wastes or
Hazardous Substances and (iii) any liability to third parties, including
employees, arising from the use, generation, treatment, storage or disposal of
Hazardous Substances by the Borrower or its Subsidiaries, the Borrower has
reasonably concluded that any liabilities and costs that the Borrower and its
Subsidiaries are reasonably likely to incur in connection with any applicable
Environmental Laws are unlikely to result in a Material Adverse Effect.
SECTION 4.09. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.10. Subsidiaries. Each of the Borrower's Subsidiaries is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and has all
requisite powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
lack of such requisite powers, licenses, authorizations, consents or approvals,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
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SECTION 4.11. Regulatory Restrictions on Borrowing. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
SECTION 4.12. Full Disclosure. All information (other than any
estimates and projections) heretofore furnished by the Borrower to the Agent or
any Bank for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Borrower to the Agent or any Bank will be, when taken as a whole, true and
accurate in all material respects on the date as of which such information is
stated or certified. All estimates and projections heretofore furnished by the
Borrower to the Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby were, and all such estimates
and projections hereafter furnished by the Borrower to the Agent or any Bank
will be, prepared by the Borrower in good faith utilizing the best information
available to the Borrower at the time of preparation thereof. The Borrower has
disclosed to the Banks in writing any and all facts which materially and
adversely affect or may affect (to the extent the Borrower can now reasonably
foresee) the business, operations or financial condition of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations under this Agreement.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note or any Letter of Credit Liability
remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) within 90 days after the end of each fiscal year of the Borrower,
a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
as of the end of such fiscal year and the related consolidated statements of
income and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on
(without a "going concern" or like qualification or exception and without any
qualification or exception as to the
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scope of such audit) by KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing;
(b) within 45 days after the end of each of the first three quarters
of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such quarter and the
related consolidated statements of income and cash flows for such quarter and
for the portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in the case of such statements of income and cash flows, in
comparative form the figures for the corresponding quarter and the corresponding
portion of the Borrower's previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation in all material respects,
generally accepted accounting principles and consistency by the chief financial
officer or the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish (x) whether
the Borrower was in compliance with the requirements of Sections 5.10 and 5.14
on the date of such financial statements and (y) for so long as Pricing Schedule
A is the Pricing Schedule, the Applicable Cash Flow Ratio (as such term is
defined in Pricing Schedule A) derived from such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if any
Default then exists, setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements as to whether
anything has come to their attention to cause them to believe that any Default
existed on the date of such statements (which certificate may be limited to the
extent required by accounting rules or guidelines);
(e) within five Domestic Business Days after any officer of the
Borrower obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
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(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Borrower shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section 4043
of ERISA) with respect to any Material Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Material Plan has given or is required to give notice of
any such reportable event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose material liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a
copy of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of such application; (v)
gives notice of intent to terminate any Material Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a
copy of such notice; or (vii) fails to make any payment or contribution to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity (after giving effect to any applicable grace period), all their
respective material obligations and liabilities (including, without limitation,
tax liabilities
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and claims of materialmen, warehousemen and the like which if unpaid might by
law give rise to a Lien), except where the same may be contested in good faith
by appropriate proceedings, and will maintain, and will cause each Subsidiary to
maintain, in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all property and equipment useful
and necessary in its business in good working order and condition to the extent
required by sound business practices, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all its
respective properties and equipment in at least such amounts, against at least
such risks and with such risk retention as are usually maintained, insured
against or retained, as the case may be, in the same general area by companies
of established repute engaged in the same or a similar business; and will
furnish to the Banks, upon request from the Agent, information presented in
reasonable detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will preserve, renew and keep in full force and effect, and will cause
each Subsidiary to preserve, renew and keep in full force and effect its
respective existence and its respective rights, privileges and franchises
material to the normal conduct of business, provided that nothing in this
Section 5.04 shall prohibit (i) the merger of a Subsidiary into the Borrower or
the merger or consolidation of a Subsidiary with or into another Person if the
entity surviving such consolidation or merger is a Subsidiary and if, in each
case, after giving effect thereto, no Default shall have occurred and be
continuing, (ii) any transaction not prohibited by Section 5.07 or (iii) the
termination of the existence of any Subsidiary if the Borrower in good faith
determines that such termination is not materially disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except where either the necessity of compliance
therewith is contested in good faith by appropriate proceedings or any failure
to so comply, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect.
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SECTION 5.06. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of its respective properties, to examine
and make abstracts from any of its respective books and records and to discuss
its respective affairs, finances and accounts with its respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
SECTION 5.07. Mergers and Sales of Assets. The Borrower will not (i)
consolidate or merge with or into any other Person, (ii) sell, lease or
otherwise transfer, directly or indirectly (including any such transfer by way
of merger or consolidation), all or substantially all the assets of the Borrower
and its Subsidiaries, taken as a whole, to any other Person or Persons, provided
that the Borrower may merge with another Person if (x) the Borrower is the
corporation surviving such merger and (y) after giving effect to such merger, no
Default shall have occurred and be continuing.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans made under
this Agreement and any Letters of Credit issued under this Agreement will be
used by the Borrower (i) to pay the purchase price for, and fees and expenses
relating to, the NDC Acquisitions; (ii) to refinance certain existing
indebtedness of the Predecessor; and (iii) for general corporate purposes,
including acquisitions. None of such proceeds will be used, directly or
indirectly, for any purpose, whether immediate, incidental or ultimate, that
entails a violation of the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
SECTION 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the Closing Date securing (i) Debt in connection
with the Existing Capital Leases and (ii) other Debt outstanding on the Closing
Date in an aggregate principal or face amount not exceeding $10,000,000;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
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(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary and
not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any obligation in
an amount exceeding $10,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in the
operation of its business;
(h) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $10,000,000; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount not exceeding, on
the date of incurrence of any portion of such Debt, an aggregate of 10% of
Consolidated Tangible Net Worth at such date.
SECTION 5.10. Interest Coverage Ratio. As of the last day of each
fiscal quarter of the Borrower, the Interest Coverage Ratio at such last day
will not be less than 2.5 to 1.
SECTION 5.11. Restricted Payments. Neither the Borrower nor any
Subsidiary will make any Restricted Payment, provided that the foregoing shall
not prohibit or restrict Restricted Payments from time to time with respect to
any year in an aggregate amount not to exceed an amount equal to 50% of
Consolidated Net Income for such year.
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SECTION 5.12. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary than could have been obtained from a third party
who was not an Affiliate, provided that the foregoing provisions of this Section
shall not prohibit (i) the Borrower and each Subsidiary from performing their
respective obligations under the Transaction Documents or (ii) any such Person
from declaring or paying any lawful dividend or other payment ratably in respect
of all of its capital stock of the relevant class so long as, after giving
effect thereto, no Default shall have occurred and be continuing.
SECTION 5.13. Debt of Subsidiaries. Total Debt of all Subsidiaries
(excluding Debt of a Subsidiary to the Borrower or to a wholly owned Subsidiary)
will not, on the date of incurrence of any portion of such Debt, exceed the
greater of (x) $50,000,000 or (y) 10% of Consolidated Tangible Net Worth at such
date.
SECTION 5.14. Cash Flow Ratio. As of the last day of each fiscal
quarter of the Borrower, the Cash Flow Ratio at such last day will not be
greater than 2.0 to 1.
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall (i) fail to pay when due any principal of any
Loan or to reimburse when due any drawing under any Letter of Credit or (ii)
fail to pay any interest on any Loan or any fees or any other amount payable
hereunder within five Domestic Business Days of the date when due;
(b) the Borrower shall fail to observe or perform any covenant
contained in Article 5, other than those contained in Sections 5.01 through
5.06;
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(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
6.01(a) or 6.01(b) above) for 30 days after notice thereof has been given to the
Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables the holder of such
Debt or any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $10,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
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Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in excess of
$10,000,000 in respect of, or to cause a trustee to be appointed to administer
any Material Plan; or a condition shall exist by reason of which the PBGC would
reasonably be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there shall occur a complete or partial withdrawal from,
or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of $10,000,000;
(j) judgments or orders for the payment of money in excess of
$10,000,000 in the aggregate shall be rendered against the Borrower or any
Subsidiary and such judgments or orders shall continue unsatisfied and unstayed
for a period of 10 days;
(k) the Borrower shall be dissolved or terminated; or
(l) a Change in Ownership or Control shall have occurred;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding more than 50% of the aggregate principal amount of
the Loans, by notice to the Borrower declare the Loans (together with accrued
interest thereon) to be, and the Loans shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower, provided that in the case of any
of the Events of Default specified in clause 6.01(g) or 6.01(h) above with
respect to the Borrower, without any notice to the Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon terminate and the Loans
(together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
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continuance of any Event of Default, it shall, if requested by the Agent upon
the instruction of the Banks having more than 50% in aggregate amount of the
Commitments (or, if the Commitments shall have been terminated, holding more
than 50% of the Letter of Credit Liabilities), pay to the Agent an amount in
immediately available funds (which funds shall be held as collateral pursuant to
arrangements satisfactory to the Agent) equal to the aggregate amount available
for drawing under all Letters of Credit then outstanding at such time, provided
that, upon the occurrence of any Event of Default specified in Section 6.01(g)
or 6.01(h) with respect to the Borrower, the Borrower shall pay such amount
forthwith without any notice or demand or any other act by the Agent or the
Banks.
ARTICLE 7
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not the Agent.
SECTION 7.03. Action by Agent. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
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SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or, when expressly
required hereby, all the Banks or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any condition
specified in Article 3, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the
Notes or any other instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties. Without limiting the generality
of the foregoing, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) against any reasonable and customary out-of-pocket costs or expenses
(including counsel fees and disbursements), or any other claim, demand, action,
loss or liability (except such as result from such indemnitees' gross negligence
or willful misconduct) that such indemnitees may suffer or incur in connection
with this Agreement or any action taken or omitted by such indemnitees
hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
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SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the rights
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent.
SECTION 7.09. Agent's Fee; Arranger Fee. The Borrower shall pay to the
Agent for its own account and to J.P. Morgan Securities Inc. ("JPMSI"), in its
capacity as arranger, for its own account, fees in the amounts and at the times
previously agreed upon between the Borrower and the Agent and JPMSI,
respectively.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any CD Loan,
Euro-Dollar Loan or Money Market LIBOR Loan:
(a) the Agent is advised by the Reference Banks that deposits in the
relevant currency (in the applicable amounts) are not being offered to the
Reference Banks in the relevant market for such Interest Period, or
(b) in the case of CD Loans or Euro-Dollar Loans, Banks having 50% or
more of the aggregate principal amount of the affected Loans advise the Agent
that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may
be, as determined by the Agent will not adequately and fairly reflect the cost
to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
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the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, or to continue or
convert outstanding Loans as or into CD Loans or Euro-Dollar Loans, as the case
may be, shall be suspended and (ii) each outstanding CD Loan or Euro-Dollar
Loan, as the case may be, shall be converted into a Base Rate Loan on the last
day of the then-current Interest Period applicable thereto. At any time when the
circumstances giving rise to the above-described suspension are in effect,
unless the Borrower notifies the Agent at least two Domestic Business Days
before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such date, (i) if such
Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be
made as a Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money
Market LIBOR Borrowing, then (x) if such Borrowing is to be denominated in
Dollars, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day and
(y) if such Borrowing is to be denominated in an Alternative Currency, such
Borrowing shall not be made.
SECTION 8.02. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to
convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such notice is given, each
Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate
Loan either (a) on the last day of the then current Interest Period applicable
to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund
such Loan to such day or (b) immediately
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if such Bank shall determine that it may not lawfully continue to maintain and
fund such Loan to such day.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x)
the date hereof, in the case of any Committed Loan or Letter of Credit (or
participation therein) or any obligation to make Committed Loans or to issue or
participate in Letters of Credit or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, the adoption of any applicable law,
rule or regulation, or any change in any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify or
deem applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
(i) with respect to any CD Loan any such requirement included in an applicable
Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement with respect to which such Bank is entitled to compensation
during the relevant Interest Period under Section 2.17), special deposit,
insurance assessment (excluding, with respect to any CD Loan, any such
requirement reflected in an applicable Assessment Rate) or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its Fixed
Rate Loans, its Note or its participation in any Letter of Credit or its
obligation to make Fixed Rate Loans or to issue or participate in Letters of
Credit and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate
Loan or Letter of Credit (or participation therein), or to reduce the amount of
any sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto, by an amount deemed
by such Bank to be material, then, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased cost or
reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or
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any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency has or
would have the effect of reducing the rate of return on capital of such Bank (or
its Parent) as a consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have achieved but for such
adoption, change, request or directive (taking into consideration its policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank (with
a copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section shall set forth the additional amount
or amounts to be paid to it hereunder, shall set forth the method of determining
such additional amount or amounts in reasonable detail and shall be conclusive
in the absence of manifest error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
SECTION 8.04. Taxes. (a) For the purposes of this Section 8.04, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities with
respect thereto, excluding (i) in the case of each Bank and the Agent, taxes
imposed on its income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which such Bank or the Agent (as the case may be)
is organized or in which its principal executive office is located or, in the
case of each Bank, in which its Applicable Lending Office is located and (ii) in
the case of each Bank, any United States withholding tax imposed on such
payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or from
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the execution or delivery of, or otherwise with respect to, this Agreement or
any Note or Letter of Credit.
(b) Any and all payments by the Borrower to or for the account of any
Bank or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes, provided that, if the Borrower shall be required
by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Bank or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions, (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the Agent,
at its address referred to in Section 9.01, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower and the Agent with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Bank is entitled to benefits under an income tax treaty to
which the United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of interest
for the account of such Bank or certifying that the income receivable pursuant
to this Agreement is effectively connected with the conduct of a trade or
business in the United States.
(e) For any period with respect to which a Bank has failed to provide
the Borrower or the Agent with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
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subsequent to the date on which such form originally was required to be
provided), such Bank shall not be entitled to indemnification under Section
8.04(b) or 8.04(c) with respect to Taxes imposed by the United States, provided
that if a Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such Bank,
such change (i) will eliminate or reduce any such additional payment which may
thereafter accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make, or convert outstanding Loans
to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD
Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar
Business Days' prior notice to such Bank through the Agent, have elected that
the provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may
be, shall instead be Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other Banks);
and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid (or converted to a Base Rate Loan), all payments of
principal which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the
first day of the next succeeding Interest Period applicable to the related CD
Loans or Euro-Dollar Loans of the other Banks.
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SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank
to make Euro-Dollar Loans or to convert or continue outstanding Loans into Euro-
Dollar Loans shall be suspended pursuant to Section 8.02 or (ii) any Bank shall
demand compensation pursuant to Section 8.03 or 8.04, the Borrower shall have
the right, with the assistance of the Agent and the Issuing Banks, to seek a
mutually satisfactory bank or banks (which may be one or more of the Banks) to
purchase the outstanding Loans of such Bank and to assume the Commitment and
Letter of Credit Liabilities of such Bank.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party: (a)
in the case of the Borrower or the Agent, at its address, facsimile number or
telex number set forth on the signature pages hereof, (b) in the case of any
Bank (including any Issuing Bank), at its address, facsimile number or telex
number set forth in its Administrative Questionnaire or (c) in the case of any
party, such other address, facsimile number or telex number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section, provided that notices to the Agent or any
Issuing Bank under Article 2 or Article 8 and notices to the Borrower under
Section 9.06(c) shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
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SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all reasonable and customary out-of-pocket expenses of the Agent, including fees
and disbursements of special counsel for the Agent, in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all reasonable and customary
out-of-pocket expenses incurred by the Agent and each Bank, including (without
duplication) the fees and disbursements of outside counsel and the allocated
cost of inside counsel, in connection with any collection, bankruptcy,
insolvency and other enforcement proceedings resulting from such Event of
Default.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder, provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount then due and payable with respect to the
Loans and Letter of Credit Liabilities held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount then
due and payable with respect to the Loans and Letter of Credit Liabilities held
by such other Bank, the Bank receiving such proportionately greater payment
shall purchase such participations in the Loans and Letter of Credit Liabilities
held by the other Banks, and such other adjustments shall be made, as may be
required so that all such payments with respect to the Loans and Letter of
Credit Liabilities held by the Banks shall be shared by the Banks pro rata,
provided that nothing in this Section shall impair the right of any Bank to
exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of the Borrower
other than its indebtedness hereunder. The Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Loan or Letter of Credit Liability, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such
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participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers . Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Banks (and, if the
rights or duties of the Agent or an Issuing Bank are affected thereby, by it),
provided that no such amendment or waiver shall (i) increase or decrease the
Commitment of any Bank (except (x) as contemplated by Section 2.02 or (y) for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation without the written consent of each Bank, (ii) reduce the
principal of or rate of interest on any Loan or the amount to be reimbursed in
respect of any Letter of Credit or any interest thereon or any fees hereunder
without the written consent of each Bank affected thereby, (iii) postpone the
date fixed for any payment of principal of or interest on any Loan or the amount
to be reimbursed in respect of any Letter of Credit or interest thereon or any
fees hereunder or for any scheduled reduction or termination of any Commitment
without the written consent of each Bank or (iv) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
number of Banks, which shall be required for the Banks or any of them to take
any action under this Section or any other provision of this Agreement without
the written consent of each Bank.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of the Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment or
any or all of its Loans and Letter of Credit participations. In the event of any
such grant by a Bank of a participating interest to a Participant, whether or
not upon notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrower,
the Issuing Banks and the Agent shall continue to deal solely and directly with
such Bank in connection with such Bank's rights and obligations under this
Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement, provided that such participation
agreement may provide that such
63
<PAGE> 170
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), or (iii) of Section 9.05 that affects the
Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.17 and Article 8 with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to an
initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement, the Notes and Letters of Credit, and such
Assignee shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit G hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower (which shall not be unreasonably withheld so long as (i)
the Assignee is a commercial bank and (ii) the transferor Bank has given the
Agent and the Borrower not less than three Domestic Business Days' prior written
notice of such proposed assignment and the identity of the proposed Assignee),
the Agent and the Issuing Banks, provided that if an Assignee is an affiliate of
such transferor Bank or was a Bank immediately prior to such assignment, no such
consent of the Borrower, the Agent or any Issuing Bank shall be required,
provided further that in the event of an assignment by a Bank of a proportionate
part of its rights and obligations under this Agreement, the Notes and the
Letters of Credit, the part retained by such transferor Bank shall be equivalent
to an initial Commitment of not less than $10,000,000, and provided further that
such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower
shall make appropriate arrangements so that, if required, a new Note is issued
to the Assignee. In connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing such assignment in
the amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall deliver to the Borrower
and the Agent
64
<PAGE> 171
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. The Borrower and each of the Banks hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower and each of the
Banks irrevocably waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Agent of counterparts
hereof signed by each of the parties hereto (or, in the case of any party as to
which an executed counterpart shall not have been received, receipt by the Agent
in form
65
<PAGE> 172
satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. The Agent and each Bank agree to keep
any information delivered or made available by the Borrower pursuant to this
Agreement confidential from anyone other than persons employed or retained by
such Bank and its affiliates, provided that nothing herein shall prevent the
Agent or any Bank from disclosing such information (i) to any other Bank or to
the Agent, (ii) to such Bank's or Agent's legal counsel and independent
auditors, (iii) upon the order of any court or administrative agency, (iv) upon
the request or demand of any regulatory agency or authority, (v) which had been
publicly disclosed other than as a result of a disclosure by the Agent or any
Bank prohibited by this Agreement, (vi) in connection with any litigation to
which the Agent, any Bank or its subsidiaries or Parent may be a party, (vii) to
the extent necessary in connection with the exercise of any remedy hereunder,
(viii) subject to provisions substantially similar to those contained in this
Section, to any other Person if reasonably incidental to the administration of
the credit facility contemplated hereby and (ix) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed Participant or Assignee.
66
<PAGE> 173
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
GALILEO INTERNATIONAL, INC.
By: /s/ Paul H. Bristow
----------------------------------
Title: Senior Vice President & CFO
Address: 9700 West Higgins Road,
Suite 400
Rosemont, IL 60018
Attn: Chief Financial Officer
Facsimile: (847) 518-4201
COMMITMENT
AGENT
$40,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ James E. Condon
----------------------------------
Title: Vice President
CO-ARRANGERS
BANK OF AMERICA NATIONAL
$40,000,000 TRUST AND SAVINGS ASSOCIATION
By: /s/ Carolyn D. Simmons
----------------------------------
Title: Vice President
<PAGE> 174
$40,000,000 BANK OF MONTREAL
By: /s/ Cecily M. Mistarz
----------------------------------
Title: Managing Director
CO-AGENTS
$33,333,333 ABN AMRO BANK N.V.
By: /s/ Willem van Beek
----------------------------------
Title: Vice President
By: /s/ John L. Church
----------------------------------
Title: Vice President
$33,333,333 THE BANK OF TOKYO-MITSUBISHI
LTD. CHICAGO BRANCH
By: /s/ Hajime Watanabe
----------------------------------
Title: Deputy General Manager
$33,333,333 MIDLAND BANK PLC
By: /s/ Christopher M. Samms
----------------------------------
Title: Corporate Banking Manager
$33,333,333 THE SUMITOMO BANK, LIMITED
CHICAGO BRANCH
By: /s/ Hiroyuki Iwami
----------------------------------
Title: Joint General Manager
<PAGE> 175
PARTICIPANTS
$20,000,000 CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Bertrand Cousin
----------------------------------
Title: Vice President
$20,000,000 ROYAL BANK OF CANADA
By: /s/ D. G. Calancie
----------------------------------
Title: Industry Manager
$20,000,000 SOCIETE GENERALE
CHICAGO BRANCH
By: /s/ Jose A. Moreno
----------------------------------
Title: Vice President & Team Leader
$20,000,000 SWISS BANK CORPORATION,
NEW YORK BRANCH
By: /s/ Thomas Eggenschwiler
----------------------------------
Title: Executive Director
Credit Risk Management
By: /s/ Dorothy L. McKinley
----------------------------------
Title: Associate Director Banking
Finance Support, N.A.
<PAGE> 176
$20,000,000 THE NORTHERN TRUST COMPANY
By: /s/ James F. T. Monhart
----------------------------------
Title: Vice President
$20,000,000 THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Gordon R. Holtby
----------------------------------
Title: Vice President & Manager
$16,666,668 WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Salvatore Battinelli
----------------------------------
Title: Vice President
By: /s/ Lisa Walker
----------------------------------
Title: Associate
$10,000,000 THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO CORPORATE
BANKING OFFICE
By: /s/ Armund J. Schoen, Jr.
----------------------------------
Title: Senior Vice President
====================
TOTAL COMMITMENTS
====================
$400,000,000
<PAGE> 177
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: /s/ James E. Condon
----------------------------------
Title: Vice President
Address: 60 Wall Street
NY, NY 10260
Telex: 177 615 MGT UT
Facsimile: 212-648-5018
<PAGE> 178
PRICING SCHEDULE A
Each of the terms "EURO-DOLLAR MARGIN", "CD MARGIN", "FACILITY FEE RATE" and
"LETTER OF CREDIT FEE RATE" means, for any date, the per annum rates set forth
below in the row opposite such term and in the column corresponding to the
"PRICING LEVEL" that applies at such date:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
CD Margin 0.295% 0.325% 0.350% 0.400% 0.650%
Euro-Dollar 0.170% 0.200% 0.225% 0.275% 0.525%
Margin
Facility Fee 0.080% 0.100% 0.125% 0.150% 0.225%
Rate
Letter of 0.170% 0.200% 0.225% 0.275% 0.525%
Credit Fee
Rate
</TABLE>
For purposes of this Schedule, the following terms have the following meanings:
"APPLICABLE CASH FLOW RATIO" means, on any day, the Cash Flow Ratio on
the last day of the most recently ended fiscal quarter of the Borrower for which
the Borrower has delivered financial statements pursuant to Section 5.01(a) or
5.01(b), as the case may be, provided that at any time a Default exists under
Section 5.01(a), 5.01(b) or 5.01(c), the Applicable Cash Flow Ratio shall be
deemed to be greater than or equal to 2.0 to 1.
"LEVEL I PRICING" applies at any date if, at such date, the Applicable
Cash Flow Ratio is less than .25 to 1.
"LEVEL II PRICING" applies at any date if, at such date, the Applicable
Cash Flow Ratio is greater than or equal to .25 to 1 but less than .50 to 1.
"LEVEL III PRICING" applies at any date if, at such date, the
Applicable Cash Flow Ratio is greater than or equal to .50 to 1 but less than
1.0 to 1.
"LEVEL IV PRICING" applies at any date if, at such date, the Applicable
Cash Flow Ratio is greater than or equal to 1.0 to 1 but less than 2.0 to 1.
<PAGE> 179
"LEVEL V PRICING" applies at any date if, at such date, no other
Pricing Level applies.
"PRICING LEVEL" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V
Pricing applies at any date.
<PAGE> 180
PRICING SCHEDULE B
Each of the terms "EURO-DOLLAR MARGIN", "CD MARGIN", "FACILITY FEE
RATE" and "LETTER OF CREDIT FEE RATE" means, for any date, the per annum rates
set forth below in the row opposite such term and in the column corresponding to
the "PRICING LEVEL" that applies at such date:
<TABLE>
<CAPTION>
Level I Level II Level III Level IV Level V
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
CD Margin 0.295% 0.325% 0.350% 0.400% 0.650%
Euro-Dollar 0.170% 0.200% 0.225% 0.275% 0.525%
Margin
Facility Fee 0.080% 0.100% 0.125% 0.150% 0.225%
Rate
Letter of 0.170% 0.200% 0.225% 0.275% 0.525%
Credit Fee
Rate
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings, subject to the concluding paragraph of this Schedule:
"LEVEL I PRICING" applies at any date if, at such date, the Borrower's
long-term debt is rated A- or higher by S&P or A3 or higher by Moody's.
"LEVEL II PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P or Baa1 or higher by
Moody's and (ii) Level I Pricing does not apply.
"LEVEL III PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by
Moody's and (ii) neither Level I Pricing nor Level II Pricing applies.
"LEVEL IV PRICING" applies at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB- or higher by S&P and Baa3 or higher by
Moody's and (ii) none of Level I Pricing, Level II Pricing and Level III Pricing
applies.
"LEVEL V PRICING" applies at any date if, at such date, no other
Pricing Level applies.
<PAGE> 181
"PRICING LEVEL" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V
Pricing applies at any date.
The credit ratings to be utilized for purposes of this Schedule are
those assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt security of the Borrower shall be disregarded. The ratings in effect for
any day are those in effect at the close of business on such day. In the case of
split ratings from S&P and Moody's, so long as the Borrower's long-term debt is
rated at least BBB by S&P and at least Baa2 by Moody's, the rating to be used to
determine the applicable Pricing Level is the higher of the two (e.g., BBB+/A3
results in Level I Pricing).
<PAGE> 182
SCHEDULE I
EXISTING CAPITAL LEASES
The Galileo Company Ltd. Letter of Credit
Collateralized Capital Leases
<TABLE>
<CAPTION>
Balance Sheet
Obligation/Amount
Available Maximum Outstanding
Description Currency Available at June 30, 1997
----------- -------- --------- ----------------
<S> <C> <C> <C>
MCC (No.15) Ltd GBP 26,000,000.00 18,744,196.00
Lease Schd Nos.
52/5050/ 4933-3 25,518,137.80
52/5050/ 4437-4 Drawn
</TABLE>
<PAGE> 183
SCHEDULE II
EXISTING OWNERSHIP GROUP
Covia Corporation
Distribution Systems, Inc.
Roscor, A.G.
Travel Industry Systems B.V.
USAM Corp.
<PAGE> 184
SCHEDULE III
TRANSACTION DOCUMENTS
Transaction Agreement
NDC Acquisition Agreements
Sales Representation Agreements
Registration Rights Agreement
Stockholders' Agreement
Services Agreements
Computer Services Agreements
Combination Agreement
ATS Partnership Agreement
Data Access Agreement
Trademark License Agreements
Programmer Support Agreements
Software License Agreements
Functionality Access Agreement
Omnibus Network Agreement
Distributor Sales and Services Agreement
Non-Competition Agreements
All other agreements or instruments entered into or to be entered into
pursuant to any of the foregoing at or prior to the time of the initial
public offering of the Borrower's common stock
<PAGE> 185
EXHIBIT A - NOTE
NOTE
New York, New York
___________ __, 199_
For value received, Galileo International, Inc., a Delaware corporation
(the "BORROWER"), promises to pay to the order of ______________________ (the
"BANK"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the maturity date provided for in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided for in the
Credit Agreement. All such payments of principal and interest shall be made in
the manner and at the place provided for in the Credit Agreement.
All Loans made by the Bank, the respective types and currencies thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
if the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof, provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Five-Year Credit
Agreement dated as of July 23, 1997 among Galileo International, Inc., the Banks
parties thereto, the Letter of Credit Issuing Banks parties thereto and Morgan
Guaranty Trust Company of New York, as Agent (as the same may be amended from
time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit
<PAGE> 186
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
GALILEO INTERNATIONAL, INC.
By:
---------------------------------------
Name:
Title:
<PAGE> 187
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount Currency Type Amount of
of of of Principal Notation
Date Loan Loan Loan Repaid Made By
---- ---- ---- ---- ------ -------
<S> <C>
</TABLE>
<PAGE> 188
EXHIBIT B - MONEY MARKET QUOTE REQUEST
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York (the "AGENT")
From: Galileo International, Inc.
Re: Five-Year Credit Agreement (as the same may be amended from
time to time, the "CREDIT AGREEMENT") dated as of July 23,
1997 among Galileo International, Inc., the Banks parties
thereto, the Letter of Credit Issuing Banks parties thereto
and the Agent
We hereby give notice pursuant to Section 2.04 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount* [Alternative Currency] Interest Perion**
- --------------------- ---------------------- -----------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
- --------------------
* Amount must be $5,000,000 or a larger multiple of $1,000,000 (or, in
the case of a Borrowing to be denominated in an Alternative Currency, a
comparable amount of such Alternative Currency as determined by the Agent).
** Not less than one month (LIBOR Auction) or not less than 30 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE> 189
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Galileo International, Inc.
By:
---------------------------------------
Name:
Title:
<PAGE> 190
EXHIBIT C - INVITATION FOR MONEY MARKET QUOTES
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Galileo International, Inc.
(the "BORROWER")
Pursuant to Section 2.04 of the Five-Year Credit Agreement dated as of
July 23, 1997 among Galileo International, Inc., the Banks parties thereto, the
Letter of Credit Issuing Banks parties thereto and the undersigned, as Agent, we
are pleased on behalf of the Borrower to invite you to submit Money Market
Quotes to the Borrower for the following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount [Alternative Currency] Interest Perion
- --------------------- ---------------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By:
---------------------------------------
Authorized Officer
<PAGE> 191
EXHIBIT D - MONEY MARKET QUOTE
FORM OF MONEY MARKET QUOTE
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to Galileo International, Inc. (the "BORROWER")
In response to your invitation on behalf of the Borrower dated
_____________, ____, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
________________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market [Absolute
Amount** Period*** [Margin****] Rate*****]
$
$
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
- ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify currency if an Alternative Currency. Specify
aggregate limitation if the sum of the individual offers exceeds the
amount the Bank is willing to lend. Bids must be made for $5,000,000 or
a larger multiple of $1,000,000 (or, in the case of a Borrowing to be
denominated in an Alternative Currency, a comparable amount of such
Alternative Currency as determined by the Agent).
*** Not less than one month or not less than 30 days, as specified in the
related Invitation. No more than five bids are permitted for each
Interest Period.
<PAGE> 192
**** Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
<PAGE> 193
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Five-Year Credit
Agreement dated as of July 23, 1997 among Galileo International, Inc., the Banks
parties thereto, the Letter of Credit Issuing Banks parties thereto and
yourselves, as Agent, irrevocably obligates us to make the Money Market Loan(s)
for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
---------------------- ------------------------------
Authorized Officer:
<PAGE> 194
EXHIBIT E - OPINION OF COUNSEL FOR THE BORROWER
OPINION OF
COUNSEL FOR THE BORROWER
July , 1997
To the Banks, the Issuing Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of Galileo
International, Inc. (the "BORROWER") and have acted as counsel for the Borrower
in connection with the Five-Year Credit Agreement (the "CREDIT AGREEMENT") dated
as of July 23, 1997 among the Borrower, the Banks parties thereto, the Letter of
Credit Issuing Banks parties thereto and Morgan Guaranty Trust Company of New
York, as Agent. Terms defined in the Credit Agreement are used herein as therein
defined. This opinion is being rendered to you at the request of the Borrower
pursuant to Section 3.01(b) of the Credit Agreement.
In connection with this opinion, I have investigated such questions of
law, received such information from officers and representatives of the Borrower
and its Subsidiaries and examined such certificates of public officials, and
corporate documents and records of the Borrower and its Subsidiaries and other
documents as I have deemed necessary or appropriate for purposes of this
opinion.
In rendering my opinion I have assumed (a) the due authorization,
execution and delivery of the Credit Agreement by each of the parties thereto
(other than the Borrower), (b) the authenticity of all documents submitted to me
as originals and (c) the conformity to original documents of all documents
submitted to me as copies.
Upon the basis of the foregoing, I am of the opinion that:
<PAGE> 195
1. The Borrower is a corporation duly organized and validly existing
under the laws of the State of Delaware and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are (a) within the corporate powers of the
Borrower, (b) have been duly authorized by all necessary corporate action, (c)
require no action by or in respect of, or filing with, any governmental body,
agency or official and (d) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of incorporation
or by-laws of the Borrower or of any indenture or other agreement or instrument
evidencing Debt of the Borrower or of any other material agreement, judgment,
injunction, order, decree or other instrument known to me and binding upon the
Borrower or any of its Subsidiaries or result in the creation or imposition of
any Lien on any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms except, (i) as
the same may be limited by bankruptcy, insolvency, fraudulent transfer or
similar laws affecting creditors' rights generally and by general principles of
equity, (ii) insofar as provisions contained in the Credit Agreement provide for
indemnification, the enforcement thereof may be limited by public policy
considerations, (iii) I express no opinion as to Section 9.04 of the Credit
Agreement insofar as it provides that any Bank purchasing a participation from
another Bank pursuant thereto may exercise set-off or similar rights with
respect to such participation and (iv) I express no opinion as to the effect of
the law of any jurisdiction (other than the States of New York and Colorado)
wherein any Bank may be located or wherein enforcement of the Credit Agreement
or the Notes issued thereunder may be sought which limits the rates of interest
legally chargeable or collectible. For purposes of my opinion in this paragraph
3, I have assumed that the laws of the State of New York are similar to the laws
of the State of Colorado.
4. There is no action, suit or proceeding pending against, or to the
best of my knowledge threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official, in which there is a reasonable possibility of an adverse decision
which could reasonably be expected to materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole, or which in
<PAGE> 196
any manner draws into question the validity or enforceability of the Credit
Agreement or the Notes.
I am admitted to practice in the State of Colorado and express no
opinion as to matters governed by the laws of any jurisdiction other than the
laws of the State of Colorado, the General Corporation Law of the State of
Delaware, and the Federal laws of the United States of America.
This opinion may be relied upon by each of you and any permitted
successor or assignee of each of you and any representative of each of you and
may not be relied upon by or disclosed to any other person (except to the extent
information is permitted to be disclosed pursuant to Section 9.11 of the Credit
Agreement) without my prior written consent.
Very truly yours,
Babetta R. Gray
<PAGE> 197
EXHIBIT F - OPINION OF SPECIAL COUNSEL FOR THE AGENT
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
________________, 1997
To the Banks, the Issuing Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Five-Year Credit
Agreement (the "CREDIT AGREEMENT") dated as of July 23, 1997 among Galileo
International, Inc., a Delaware corporation (the "BORROWER"), the Banks parties
thereto, the Letter of Credit Issuing Banks parties thereto and Morgan Guaranty
Trust Company of New York, as Agent, and have acted as special counsel for the
Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of
the Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that the Credit
Agreement constitutes a valid and binding agreement of the Borrower and each
Note constitutes a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms except as the same may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the federal laws of
the
<PAGE> 198
United States of America. In giving the foregoing opinion, (i) we express no
opinion as to the effect (if any) of any law of any jurisdiction (except the
State of New York) in which any Bank is located which limits the rate of
interest that such Bank may charge or collect and (ii) we have assumed that
under the applicable law of the State of Delaware, the execution, delivery and
performance by the Borrower of the Credit Agreement and the Notes are within the
Borrower's corporate powers and have been duly authorized by all necessary
corporate action.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
<PAGE> 199
EXHIBIT G - ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, ____ among [NAME OF ASSIGNOR] (the
"ASSIGNOR"), [NAME OF ASSIGNEE] (the "ASSIGNEE"), GALILEO INTERNATIONAL, INC.
(the "BORROWER") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"AGENT").
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the Five-Year Credit Agreement dated as of July 23, 1997 among the
Borrower, the Assignor and the other Banks parties thereto, as Banks, the Letter
of Credit Issuing Banks parties thereto and the Agent (as amended from time to
time, the "CREDIT AGREEMENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower and participate in Letters of Credit in
an aggregate principal amount at any time outstanding not to exceed
$____________;
[WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof;]
[WHEREAS, Letters of Credit with a total amount available for drawing
thereunder of $__________ are outstanding at the date hereof;] and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "ASSIGNED AMOUNT"),
together with a corresponding portion of its outstanding Committed Loans and
Letter of Credit Liabilities, and the Assignee proposes to accept assignment of
such rights and assume the corresponding obligations from the Assignor on such
terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
<PAGE> 200
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans and Letter of Credit Liabilities made by the Assignor
outstanding at the date hereof. Upon the execution and delivery hereof by the
Assignor, the Assignee, [the Borrower, the Agent] and the Issuing Banks and the
payment of the amounts specified in Section 3 required to be paid on the date
hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and
be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.*** It is
understood that facility fees and/or letter of credit fees accrued to the date
hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
SECTION 4. Consent of the Borrower, the Agent and the Issuing Banks.
This Agreement is conditioned upon the consent of the Borrower, the Agent and
the Issuing Banks pursuant to Section 9.06(c) of the Credit Agreement. The
execution of this Agreement by the Borrower, the Agent and the Issuing Banks is
evidence of this consent. Pursuant to Section 9.06(c), the Borrower agrees to
- -----------------
*** Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
<PAGE> 201
execute and deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the obligations of the Borrower
in respect of the Credit Agreement or any Note or Letter of Credit. The Assignee
acknowledges that it has, independently and without reliance on the Assignor,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and will
continue to be responsible for making its own independent appraisal of the
business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By:
---------------------------------------
Name:
Title:
[NAME OF ASSIGNEE]
By:
---------------------------------------
Name:
Title:
<PAGE> 202
[CONSENTED TO:
GALILEO INTERNATIONAL, INC.
By:
---------------------------------------
Name:
Title:
CONSENTED TO:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By:
---------------------------------------
Name:
Title:
CONSENTED TO:
[NAME OF ISSUING BANK],
as Issuing Bank
By:
---------------------------------------
Name:
Title: ]
<PAGE> 1
EXHBIIT 10.41
GALILEO INTERNATIONAL, INC.
1997 STOCK INCENTIVE PLAN
1. Purpose. The purposes of the Galileo International, Inc.
1997 Stock Incentive Plan (the "Plan") are to attract, retain and motivate
officers and other key employees and consultants of Galileo International, Inc.
(the "Company") and its Subsidiaries (as defined in Section 2 below) to
compensate them for their contributions to the growth and profits of the Company
and to encourage ownership by them of stock of the Company.
2. Definitions. For purposes of the Plan, the following terms
shall be defined as follows:
"Administrator" means the individual or individuals to whom
the Committee may delegate authority under the Plan in accordance with
Section 3(d).
"Affiliate" and "Associate" have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
"Airline Shareholder" means any of United Airlines, US
Airways, or KLM Royal Dutch Airlines or any of their respective
affiliates.
"Award" means an award made pursuant to the terms of the Plan
to an Eligible Individual in the form of Stock Options, Stock
Appreciation Rights, Stock Awards, Performance Share Awards or other
awards determined by the Committee.
"Award Agreement" means a written agreement or certificate
granting an Award. An Award Agreement shall be executed by an officer
on behalf of the Company and shall contain such terms and conditions as
the Committee deems appropriate and that are not inconsistent with the
terms of the Plan. The Committee may in its discretion require that an
Award Agreement be executed by the Participant to whom the relevant
Award is made.
"Beneficial Owner" has the meaning ascribed to such term in
Rule 13d-3 promulgated under the Exchange Act.
"Board" means the Board of Directors of the Company.
A "Change in Control" of the Company shall be deemed to have
occurred when:
(a) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act), other than a trustee or other
fiduciary holding
<PAGE> 2
2
securities under an employee benefit plan of the Company or any of the
Airline Shareholders (an "Acquiring Person"), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of more than 33-1/3% of the then outstanding
voting stock of the Company (49% of the then outstanding voting stock
of the Company if such person or group includes any of the Airline
Shareholders);
(b) the shareholders of the Company and a majority of the
non-employee directors of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 66-2/3% of the combined
voting power of the voting securities of the Company, such surviving
entity or the parent of such surviving entity outstanding immediately
after such merger or consolidation;
(c) the shareholders of the Company approve a plan of
reorganization (other than a reorganization or liquidation under the
United States Bankruptcy Code or complete liquidation of the Company)
or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets;
(d) during any period of two consecutive years (beginning on
or after the Effective Date), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
who is a representative or nominee of an Acquiring Person) whose
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least a majority of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved no longer constitute a majority of the
Board;
provided, however, that a Change in Control shall not be deemed to have occurred
in the event of
(i) a sale or conveyance in which the Company continues
as a holding company of an entity or entities that conduct the business
or businesses formerly conducted by the Company if such sale or
conveyance does not materially affect the beneficial ownership of the
Company's capital stock; or
(ii) any transaction undertaken for the purpose of
reincorporating the Company under the laws of another jurisdiction, if
such sale or conveyance does not materially affect the beneficial
ownership of the Company's capital stock.
<PAGE> 3
3
"Code" means the Internal Revenue Code of 1986, as amended,
and the applicable rulings and regulations thereunder.
"Combined Voting Power" means the combined voting power of the
Company's or other relevant entity's then outstanding voting
securities.
"Committee" means the Board, the Compensation Committee of the
Board, any successor committee thereto or any other committee appointed
by the Board to administer the Plan. The Committee shall consist of at
least two individuals and shall serve at the pleasure of the Board.
"Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
"Eligible Individuals" means the individuals described in
Section 6 who are eligible for Awards under the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the applicable rulings and regulations thereunder.
"Fair Market Value" means, in the event the Common Stock is
traded on a recognized securities exchange or quoted by the National
Association of Securities Dealers Automated Quotations on National
Market Issues, an amount equal to the average of the high and low
prices of the Common Stock on such exchange or such quotation on the
date set for valuation or, if no sales of Common Stock were made on
said exchange or so quoted on that date, the average of the high and
low prices of the Common Stock on the next preceding day on which sales
were made on such exchange or quotations, or, if the Common Stock is
not so traded or quoted, that value determined, in its sole discretion,
by the Committee.
"Incentive Stock Option" means a Stock Option which is an
"incentive stock option" within the meaning of Section 422 of the Code
and designated by the Committee as an Incentive Stock Option in an
Award Agreement.
"Nonqualified Stock Option" means a Stock Option which is not
an Incentive Stock Option.
"Parent" means any corporation which is a "parent corporation"
within the meaning of Section 424(e) of the Code with respect to the
relevant entity.
"Participant" means an Eligible Individual to whom an Award
has been granted under the Plan.
<PAGE> 4
4
"Performance Period" means a fiscal year of the Company.
"Performance Share Award" means a conditional Award of shares
of Common Stock granted to an Eligible Individual pursuant to Section
11 hereof.
"Person" means any person, entity or "group" within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.
"Stock Appreciation Right" means an Award to receive all or
some portion of the appreciation on shares of Common Stock granted to
an Eligible Individual pursuant to Section 9 hereof.
"Stock Award" means an Award of shares of Common Stock granted
to an Eligible Individual pursuant to Section 10 hereof.
"Stock Option" means an Award to purchase shares of Common
Stock granted to an Eligible Individual pursuant to Section 8 hereof.
"Subsidiary" means (i) any corporation which is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code with
respect to the Company or (ii) any other corporation or other entity in
which the Company, directly or indirectly, has an equity or similar
interest and which the Committee designates as a Subsidiary for the
purposes of the Plan.
"Substitute Award" means an Award granted upon assumption of,
or in substitution for, outstanding awards previously granted by a
company or other entity in connection with a corporate transaction,
such as a merger, combination, consolidation or acquisition of property
or stock.
"Ten Percent Shareholder" means an Eligible Individual who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
3. Administration of the Plan.
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee. The Committee shall have full power and
authority, subject to the express provisions hereof, (i) to select Participants
from among the Eligible Individuals, (ii) to make Awards in accordance with the
Plan, (iii) to determine the number of Shares subject to each Award or the cash
amount payable in connection with an Award, (iv) to determine
<PAGE> 5
5
the terms and conditions of each Award, including, without limitation, those
related to vesting, forfeiture, payment and exercisability, and the effect, if
any, of a Participant's termination of employment with the Company or, subject
to Section 15 hereof of a Change in Control on the outstanding Awards granted to
such Participant, and including the authority to amend the terms and conditions
of an Award after the granting thereof to a Participant in a manner that is not,
without the consent of the Participant, prejudicial to the rights of such
Participant in such Award, (v) to specify and approve the provisions of the
Award Agreements delivered to Participants in connection with their Awards, (vi)
to construe and interpret any Award Agreement delivered under the Plan, (vii) to
prescribe, amend and rescind rules and procedures relating to the Plan, (viii)
to vary the terms of Awards to take account of tax, securities law and other
regulatory requirements of foreign jurisdictions, (ix) subject to the provisions
of the Plan and subject to such additional limitations and restrictions as the
Committee may impose, to delegate to one or more officers of the Company some or
all of its authority under the Plan, and (x) to make all other determinations
and to formulate such procedures as may be necessary or advisable for the
administration of the Plan.
(b) Plan Construction and Interpretation. The Committee shall
have full power and authority, subject to the express provisions hereof, to
construe and interpret the Plan.
(c) Determinations of Committee Final and Binding. All
determinations by the Committee in carrying out and administering the Plan and
in construing and interpreting the Plan shall be final, binding and conclusive
for all purposes and upon all persons interested herein unless determined
otherwise by the Board.
(d) Delegation of Authority. The Committee may, but need not,
from time to time delegate some or all of its authority under the Plan to an
Administrator consisting of one or more members of the Committee or of one or
more officers of the Company; provided, however, that the Committee may not
delegate its authority (i) to make Awards to Eligible Individuals (A) who are
subject on the date of the award to the reporting rules under Section 16(a) of
the Exchange Act or (B) who are officers of the Company who are delegated
authority by the Committee hereunder, or (ii) under Sections 3(b) and 16 of the
Plan. Any delegation hereunder shall be subject to the restrictions and limits
that the Committee specifies at the time of such delegation or thereafter.
Nothing in the Plan shall be construed as obligating the Committee to delegate
authority to an Administrator, and the Committee may at any time rescind the
authority delegated to an Administrator appointed hereunder or appoint a new
Administrator. At all times, the Administrator appointed under this Section 3(d)
shall serve in such capacity at the pleasure of the Committee. Any action
undertaken by the Administrator in accordance with the Committee's delegation of
authority shall have the same force and effect as if undertaken directly by the
Committee, and any reference in the Plan to the Committee shall, to the extent
consistent with the terms and limitations of such delegation, be deemed to
include a reference to the Administrator.
<PAGE> 6
6
(e) Liability of Committee. No member of the Committee shall
be liable for anything whatsoever in connection with the administration of the
Plan except such person's own willful misconduct. Under no circumstances shall
any member of the Committee be liable for any act or omission of any other
member of the Committee. In the performance of its functions with respect to the
Plan, the Committee shall be entitled to rely upon information and advice
furnished by the Company's officers, the Company's accountants, the Company's
counsel and any other party the Committee deems necessary, and no member of the
Committee shall be liable for any action taken or not taken in reliance upon any
such advice.
4. Duration of Plan. The Plan shall remain in effect until
terminated by the Board of Directors and thereafter until all Awards granted
under the Plan are satisfied by the issuance of shares of Common Stock or the
payment of cash or are terminated under the terms of the Plan or under the Award
Agreement entered into in connection with the grant thereof. Notwithstanding the
foregoing, no Awards may be granted under the Plan after the tenth anniversary
of the Effective Date (as defined in Section 17(j)).
5. Shares of Stock Subject to the Plan. Subject to adjustment
as provided in Section 14(b) hereof, the number of shares of Common Stock that
may be issued under the Plan pursuant to Awards shall not exceed, in the
aggregate, 8.14 million shares (the "Section 5 Limit"). Such shares may be
either authorized but unissued shares, treasury shares or any combination
thereof. Stock Awards not subject to performance goals may not exceed 814,00 and
may be used only for special situations such as new hires or the conversion of
obligations, including cash denominated awards or payments under other plans or
arrangements maintained by the Company. For purposes of determining the number
of shares that remain available for issuance under the Plan, the following rules
shall apply:
(a) the number of Shares subject to outstanding Awards shall
be charged against the Section 5 Limit; and
(b) the Section 5 Limit shall be increased by:
(i) the number of shares subject to an Award (or
portion thereof) which lapses, expires or is otherwise
terminated without the issuance of such shares, and
(ii) the number of shares tendered to pay the
exercise price of a Stock Option or other Award, either
actually or by attestation equal to the number of shares
issued net of those tendered.
In addition, any shares underlying Substitute Awards shall not be counted
against the Section 5 Limit set forth in the first sentence of this Section 5.
<PAGE> 7
7
6. Eligible Individuals.
(a) Eligibility Criteria. Awards may be granted by the
Committee to individuals ("Eligible Individuals") who are employees or
consultants of the Company (or a subsidiary) with the potential to contribute to
the future success of the Company or its Subsidiaries as well as nonemployee
members of the Board. Members of the Committee shall not be eligible to receive
Awards under the Plan. An individual's status as an Administrator will not
affect his or her eligibility to participate in the Plan.
(b) Maximum Number of Shares per Eligible Individual. In
accordance with the requirements under Section 162(m) of the Code, no Eligible
Individual shall receive (i) Stock Options or Stock Appreciation Rights with
respect to an aggregate of more than 750,000 shares of Common Stock in any five
year period and (ii) Stock Awards subject to performance requirements or
Performance Shares with respect to an aggregate of more than 50,000 shares of
Common Stock per performance period. For purposes of the preceding sentence, any
Award that is made as bonus compensation or is made in lieu of compensation that
otherwise would be payable to an Eligible Individual, shall be considered made
in respect of the fiscal year to which such bonus or other compensation relates
or otherwise was earned. Any shares underlying Substitute Awards shall be
excluded from the limits described in this Section 6(b).
7. Awards Generally. Awards under the Plan may consist of
Stock Options, Stock Appreciation Rights, Stock Awards, Performance Share
Awards, or other awards determined by the Committee. The terms and provisions of
an Award shall be set forth in a written Award Agreement approved by the
Committee and delivered or made available to the Participant as soon as
practicable following the date of the award. The vesting, exercisability,
payment and other restrictions applicable to an Award (which may include,
without limitation, restrictions on transferability or provision for mandatory
resale to the Company) shall be determined by the Committee and set forth in the
applicable Award Agreement. Notwithstanding the foregoing, the Committee may
accelerate (i) the vesting or payment of any Award, (ii) the lapse of
restrictions on any Award or (iii) the date on which any Option or Stock
Appreciation Right first becomes exercisable. The date of a Participant's
termination of employment for any reason shall be determined for the purposes of
the Plan in the sole discretion of the Committee. The Committee shall also have
full authority to determine and specify in the applicable Award Agreement the
effect, if any, that a Participant's termination of employment for any reason
will have on the vesting, exercisability, payment or lapse of restrictions
applicable to an outstanding Award.
8. Stock Options.
(a) Terms of Stock Options Generally. Subject to the terms of
the Plan and the applicable Award Agreement, each Stock Option shall entitle the
Participant to whom
<PAGE> 8
8
such Stock Option was granted to purchase the number of shares of Common Stock
specified in the applicable Award Agreement and shall be subject to the terms
and conditions established by the Committee in connection with the Award and
specified in the applicable Award Agreement. Upon satisfaction of the conditions
to exercisability specified in the applicable Award Agreement, a Participant
shall be entitled to exercise the Stock Option in whole or in part and to
receive, upon satisfaction or payment of the exercise price or an irrevocable
notice of exercise in the manner contemplated by Section 8(d) below, the number
of shares of Common Stock in respect of which the Stock Option shall have been
exercised. Stock Options may be either Nonqualified Stock Options or Incentive
Stock Options.
(b) Exercise Price. The exercise price per share of Common
Stock purchasable under a Stock Option shall be determined by the Committee at
the time of grant and set forth in the Award Agreement, provided, that the
exercise price per share shall be no less than 100% of the Fair Market Value per
share on the date of grant (110% in the case of an Incentive Stock Option
granted to a Ten Percent Shareholder). Notwithstanding the foregoing, the
exercise price per share of a Stock Option that is a Substitute Award may be
less than the Fair Market Value per share on the date of award.
(c) Option Term. The term of each Stock Option shall be fixed
by the Committee and set forth in the Award Agreement, provided, however, that
an Incentive Stock Option shall not be exercisable after the expiration of ten
(10) years after the date such Incentive Stock Option is granted.
(d) Vesting. The vesting schedule of each Stock Option shall
be fixed by the Committee and set forth in the Award Agreement provided,
however, that a Stock Option may not vest prior to one year after the date of
grant.
(e) Method of Exercise. Subject to the provisions of the
applicable Award Agreement, the exercise price of a Stock Option may be paid in
cash or, at the discretion of the Committee, previously owned shares for a
period of at least six months or a combination thereof either actually by
attestation. At the discretion of the Committee, the Stock Option may also be
exercised through a "cashless exercise" procedure approved by the Committee
involving a broker or dealer approved by the Committee that affords Participants
the opportunity to sell immediately some or all of the shares underlying the
exercised portion of the Stock Option in order to generate sufficient cash to
pay the Stock Option exercise price and/or to satisfy withholding tax
obligations related to the Stock Option.
(f) Special Rule for Incentive Stock Options. With respect to
Incentive Stock Options granted under the Plan, if the aggregate Fair Market
Value (determined as of the date the Incentive Stock Option is granted) of the
number of shares with respect to which Incentive Stock Options are exercisable
for the first time by a Participant during any calendar year under all plans of
the Company or a Parent or Subsidiary exceeds One Hundred
<PAGE> 9
9
Thousand Dollars ($100,000) or such other limit as may be required by the Code,
such Incentive Stock Option shall be treated, to the extent of such excess, as
Nonqualified Stock Options.
9. Stock Appreciation Rights. Stock Appreciation Rights shall
be subject to the terms and conditions established by the Committee in
connection with the Award thereof and specified in the applicable Award
Agreement provided, however, that no Stock Appreciation Right shall vest prior
to one year after the date of grant. Upon satisfaction of the conditions to the
payment specified in the applicable Award Agreement, each Stock Appreciation
Right shall entitle a Participant to an amount, if any, equal to the Fair Market
Value of a share of Common Stock on the date of exercise over the Stock
Appreciation Right exercise price specified in the applicable Award Agreement.
At the discretion of the Committee, payments to a Participant upon exercise of a
Stock Appreciation Right may be made in Shares, cash or a combination thereof. A
Stock Appreciation Right may be granted alone or in addition to other Awards, or
in tandem with a Stock Option. If granted alone, the term and vesting schedule
of a Stock Appreciation Right shall be fixed by the Committee and set forth in
the Award Agreement. If granted in tandem with a Stock Option, a Stock
Appreciation Right shall cover the same number of shares of Common Stock as
covered by the Stock Option (or such lesser number of shares as the Committee
may determine) and shall be exercisable only at such time or times and to the
extent the related Stock Option shall be exercisable, and shall have the same
term and exercise price as the related Stock Option. Upon exercise of a Stock
Appreciation Right granted in tandem with a Stock Option, the related Stock
Option shall be canceled automatically to the extent of the number of shares
covered by such exercise; conversely, if the related Stock option is exercised
as to some or all of the shares covered by the tandem grant, the tandem Stock
Appreciation Right shall be canceled automatically to the extent of the number
of shares covered by the Stock Option exercise. The exercise price per share of
Common Stock covered by a Stock Appreciation Award shall be determined by the
Committee at the time of grant and set forth in the Award Agreement, provided,
however, that the exercise price per share shall be no less than 100% of the
Fair Market Value per share on the date of grant.
10. Stock Awards. Stock Awards shall consist of one or more
shares or units of Common Stock granted or offered for sale to an Eligible
Individual, and shall be subject to the terms and conditions established by the
Committee in connection with the Award and specified in the applicable Award
Agreement. The shares of Common Stock subject to a Stock Award may, among other
things, be subject to vesting requirements or restrictions on transferability.
11. Performance Share Awards. Performance Share Awards shall
be evidenced by an Award Agreement in such form and containing such terms and
conditions as the Committee deems appropriate and which are not inconsistent
with the terms of the Plan. The performance goals that may be used by the
Committee for such awards shall consist of
<PAGE> 10
10
cash generation targets, profit, revenue, and market share targets,
profitability targets as measured by return ratios, and shareholder returns. The
Committee may designate single or multiple goal performance criteria with the
measurement based on absolute Company performance and/or Company performance
relative to that of other publicly-traded companies. Each Award Agreement shall
set forth the number of shares of Common Stock to be earned by a Participant
upon satisfaction of certain specified performance criteria and subject to such
other terms and conditions as the Committee deems appropriate. Payment in
settlement of a Performance Share Award shall be made as soon as practicable
following the conclusion of the applicable performance period, or at such other
time as the Committee shall determine, in shares of Common Stock, in an
equivalent amount of cash or in a combination of Common Stock and cash, as the
Committee shall determine.
12. Other Awards. The Committee shall have the authority to
specify the terms and provisions of other forms of equity-based or
equity-related Awards not described above which the Committee determines to be
consistent with the purpose of the Plan and the interests of the Company, which
Awards may provide for cash payments based in whole or in part on the value or
future value of Common Stock, for the acquisition or future acquisition of
Common Stock, or any combination thereof. Other Awards shall also include cash
payments (including the cash payment of dividend equivalents) under the Plan
which may be based on one or more criteria determined by the Committee which are
unrelated to the value of Common Stock and which may be granted in tandem with,
or independent of, other Awards under the Plan.
13. Non-transferability. No Award granted under the Plan or
any rights or interests therein shall be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of except by will or by the laws of descent and
distribution or pursuant to a "qualified domestic relations order" ("QDRO") as
defined in the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder; provided, however,
that the Committee may, subject to such terms and conditions as the Committee
shall specify, permit the transfer of an Award to a Participant's family members
or to one or more trusts established in whole or in part for the benefit of one
or more of such family members; and provided further, that the restrictions in
this sentence shall not apply to the shares received in connection with an Award
after the date that the restrictions on transferability of such shares set forth
in the applicable Award Agreement have lapsed. During the lifetime of a
Participant, a Stock Option or Stock Appreciation Right shall be exercisable
only by, and payments in settlement of Awards shall be payable only to, the
Participant or, if applicable, the "alternate payee" under a QDRO or the family
member or trust to whom such Stock Option, Stock Appreciation Right or other
Award has been transferred in accordance with the previous sentence.
<PAGE> 11
11
14. Recapitalization or Reorganization.
(a) Authority of the Company and Shareholders. The existence
of the Plan, the Award Agreements and the Awards granted hereunder shall not
affect or restrict in any way the right or power of the Company or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
(b) Change in Capitalization. Notwithstanding any provision of
the Plan or any Award Agreement, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, reorganization,
merger, consolidation, stock split, combination or exchange of shares or any
other significant corporate event affecting the Common Stock, the Committee, in
its discretion, may make (i) such proportionate adjustments as it considers
appropriate (in the form determined by the Committee in its sole discretion) to
prevent diminution or enlargement of the rights of Participants under the Plan
with respect to the aggregate number of shares of Common Stock for which Awards
in respect thereof may be granted under the Plan, the number of shares of Common
Stock covered by each outstanding Award, and the exercise or Award prices in
respect thereof and/or (ii) such other adjustments as it deems appropriate. The
Committee's determination as to what, if any, adjustments shall be made shall be
final and binding on the Company and all Participants.
15. Change in Control. In the event of termination of a
Participant's employment by the Company without Cause or by the Participant for
Good Reason (as such terms are defined in the applicable Award Agreement) within
two years after a Change in Control, (i) all such Participant's Stock Options or
Stock Appreciation Rights then outstanding shall become fully exercisable as of
the date of the termination of employment, whether or not then exercisable, (ii)
all restrictions and conditions of all Stock Awards then held by such
Participant shall lapse as of the date of the termination of employment, and
(iii) all Performance Share Awards shall be deemed to have been fully earned as
of the date of the termination of employment. In addition, in the case of a
Change in Control involving a merger of, or consolidation involving, the Company
in which the Company is (A) not the surviving corporation (the "Surviving
Entity") or (B) becomes a wholly owned subsidiary of the Surviving Entity or any
Parent thereof, each outstanding and unexercised Stock Option granted under the
Plan to such Participant (a "Predecessor Option") shall be converted into an
option (a "Substitute Option") to acquire common stock of the Surviving Entity
or its
<PAGE> 12
12
Parent, which Substitute Option shall have substantially the same terms and
conditions as the Predecessor Option, with appropriate adjustments as to the
number and kind of shares and exercise prices.
16. Amendment of the Plan. The Board may at any time and from
time to time terminate, modify, suspend or amend the Plan in whole or in part;
provided, however, that no such termination, modification, suspension or
amendment shall be effective without shareholder approval if such approval is
required to comply with any applicable law or stock exchange rule; and provided,
further, that the Board may not, without shareholder approval, increase the
maximum number of shares issuable under the Plan or change the minimum exercise
price for a Stock Option or Stock Appreciation Right. No termination,
modification, suspension or amendment of the Plan shall, without the consent of
a Participant to whom any Awards shall previously have been granted, adversely
affect his or her rights under such Awards. Notwithstanding any provision herein
to the contrary, the Board shall have broad authority to amend the Plan or any
Stock Option to take into account changes in applicable tax laws, securities
laws, accounting rules and other applicable state and federal laws.
17. Miscellaneous.
(a) Tax Withholding. No later than the date as of which an
amount first becomes includable in the gross income of the Participant for
applicable income tax purposes with respect to any award under the Plan, the
Participant shall pay to the Company or make arrangements satisfactory to the
Committee regarding the payment of any federal, state or local taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise
determined by the Committee, in accordance with rules and procedures established
by the Committee, the minimum required withholding obligations may be settled
with Common Stock, including Common Stock that is part of the award that gives
rise to the withholding requirement. The obligation of the Company under the
Plan shall be conditioned upon such payment or arrangements and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.
(b) No Right to Grants or Employment. No Eligible Individual
or Participant shall have any claim or right to receive grants of Awards under
the Plan. Nothing in the Plan or in any Award or Award Agreement shall confer
upon any employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, as the case may be, or interfere
in any way with the right of the Company or a Subsidiary to terminate the
employment of any of its employees at any time, with or without cause.
<PAGE> 13
13
(c) Unfunded Plan. The Plan is intended to constitute an
unfunded plan for incentive compensation. With respect to any payments not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company. In its sole discretion, the Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or payments in lieu thereof with respect to awards
hereunder.
(d) Other Employee Benefit Plans. Payments received by a
Participant under any Award made pursuant to the provisions of the Plan shall
not be included in, nor have any effect on, the determination of benefits under
any other employee benefit plan or similar arrangement provided by the Company.
(e) Securities Law Restrictions. The Committee may require
each Eligible Individual purchasing or acquiring shares of Common Stock pursuant
to a Stock Option or other Award under the Plan to represent to and agree with
the Company in writing that such Eligible Individual is acquiring the shares for
investment and not with a view to the distribution thereof. All certificates for
shares of Common Stock delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any exchange upon which the Common Stock is then listed,
and any applicable federal or state securities law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. No shares of Common Stock shall be issued
hereunder unless the Company shall have determined that such issuance is in
compliance with, or pursuant to an exemption from, all applicable federal and
state securities laws.
(f) Compliance with Rule 16b-3.
(i) The Plan is intended to comply with Rule 16b-3 under
the Exchange Act or its successors under the Exchange Act, and the
Committee shall interpret and administer the provisions of the Plan or
any Award Agreement in a manner consistent therewith. To the extent any
provision of the Plan or Award Agreement or any action by the Committee
fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee. Moreover, in
the event the Plan or an Award Agreement does not include a provision
required by Rule 16b-3 to be stated therein, such provision (other than
one relating to eligibility requirements or the price and amount of
Awards) shall be deemed automatically to be incorporated by reference
into the Plan or such Award Agreement insofar as Participants subject
to Section 16 of the Exchange Act are concerned.
<PAGE> 14
14
(ii) Notwithstanding anything contained in the Plan or any
Award Agreement to the contrary, if the consummation of any transaction
under the Plan would result in the possible imposition of liability on
a Participant pursuant to Section 16(b) of the Exchange Act, the
Committee shall have the right, in its sole discretion, but shall not
be obligated, to defer such transaction to the extent necessary to
avoid such liability.
(g) Award Agreement. In the event of any conflict or
inconsistency between the Plan and any Award Agreement, the Plan shall govern,
and the Award Agreement shall be interpreted to minimize or eliminate any such
conflict or inconsistency.
(h) Expenses. The costs and expenses of administering the Plan
shall be borne by the Company.
(i) Applicable Law. Except as to matters of federal law, the
Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Delaware without
giving effect to conflicts of law principles.
(j) Effective Date. The Plan shall be effective as of July 24,
1997 (the "Effective Date"). No Incentive Stock Option may be granted
under the Plan after July 24, 2007.
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
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