<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997
REGISTRATION NO. 333-27495
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GALILEO INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 36-4156005
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
9700 WEST HIGGINS ROAD, SUITE 400
ROSEMONT, ILLINOIS 60018
(847) 518-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
BABETTA R. GRAY, ESQ.
SENIOR VICE PRESIDENT, LEGAL AND GENERAL COUNSEL
GALILEO INTERNATIONAL, INC.
9700 WEST HIGGINS ROAD, SUITE 400
ROSEMONT, ILLINOIS 60018
(847) 518-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<C> <C>
JOEL S. KLAPERMAN, ESQ. JEFFREY SMALL, ESQ.
SHEARMAN & STERLING DAVIS POLK & WARDWELL
599 LEXINGTON AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 848-4000 (212) 450-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [
] ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ] ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value..... 36,797,700 shares $23.00 $846,347,100 $256,469(3)
==============================================================================================================================
</TABLE>
(1) Includes 4,799,700 shares that the U.S. Underwriters have the option to
purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
(3) Of this amount, $121,213 was paid in connection with the initial filing of
the Registration Statement. Accordingly, the Registrant has paid the
difference of $135,256 in connection with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in connection with a United States and Canadian offering of the
registrant's Common Stock (the "U.S. Prospectus") and one to be used in
connection with a concurrent international offering of the Common Stock (the
"International Prospectus" and, together with the U.S. Prospectus, the
"Prospectuses"). The International Prospectus will be identical to the U.S.
Prospectus except that it will have a different front cover page. The U.S.
Prospectus is included herein and is followed by the front cover page to be used
in the International Prospectus. The front cover page for the International
Prospectus included herein has been labeled "Alternate Cover Page for
International Prospectus."
If required pursuant to Rule 424(b) of the General Rules and Regulations
under the Securities Act of 1933, as amended, ten copies of each of the
Prospectuses in the forms in which they are used will be filed with the
Securities and Exchange Commission.
<PAGE> 3
PROSPECTUS (Subject to Completion)
Issued June 27, 1997
[GALILEO LOGO]
31,998,000 Shares
Galileo International, Inc.
COMMON STOCK
------------------------
OF THE 31,998,000 SHARES OF COMMON STOCK BEING OFFERED HEREBY, 12,000,000 SHARES
ARE BEING SOLD BY THE COMPANY AND 19,998,000 SHARES ARE BEING SOLD BY THE
SELLING STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL
NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF COMMON STOCK BY THE
SELLING STOCKHOLDERS. OF THE 31,998,000 SHARES OF COMMON STOCK BEING OFFERED
HEREBY, 22,398,600 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND
CANADA BY THE U.S. UNDERWRITERS AND 9,599,400 SHARES ARE BEING OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL PUBLIC
OFFERING PRICE PER SHARE WILL BE BETWEEN $20 AND $23. SEE "UNDERWRITERS" FOR A
DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE.
------------------------
THE COMMON STOCK HAS BEEN APPROVED FOR LISTING, SUBJECT TO OFFICIAL NOTICE OF
ISSUANCE, ON THE NEW YORK STOCK EXCHANGE
UNDER THE SYMBOL "GLC."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
-------- -------------- ----------- -------------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
</TABLE>
- - ------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company, estimated at $3,000,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
4,799,700 additional Shares of Common Stock at the Price to Public less
Underwriting Discounts and Commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively.
See "Underwriters."
------------------------
The Shares of Common Stock are offered, subject to prior sale, when, as and
if accepted by the Underwriters named herein and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the Shares will be made on or about , 1997
at the office of Morgan Stanley & Co. Incorporated, New York, N.Y., against
payment therefor in immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SBC WARBURG INC.
, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
<PAGE> 4
2
photo of super computer
<PAGE> 5
3
photos of travel vendors
<PAGE> 6
4
Galileo logo
photo of subscribers
<PAGE> 7
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY, BY ANY SELLING STOCKHOLDER OR BY ANY
UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDERS AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE COMMON STOCK AND THE DISTRIBUTION OF THIS
PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 9
The Company........................... 15
Use of Proceeds....................... 18
Dividend Policy....................... 19
Dilution.............................. 19
Capitalization........................ 20
Selected Historical Consolidated
Financial and Operating Data........ 21
Pro Forma Condensed Combined Financial
Information......................... 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
The CRS Industry...................... 37
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................. 38
Management............................ 49
Relationship with Airline Stockholders
and Certain Transactions............ 63
Principal and Selling Stockholders.... 66
Description of Capital Stock.......... 67
Shares Eligible for Future Sale....... 74
Underwriters.......................... 75
Certain United States Tax
Considerations for Non-United States
Holders............................. 78
Legal Matters......................... 80
Experts............................... 80
Additional Information................ 81
Index to Financial Statements......... F-1
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
------------------------
Galileo, Apollo, CarMaster, Client File Plus, Focalpoint, GlobalFares,
Inside Availability, LeisureShopper, RoomMaster, Travelpoint and the Globe
Device are either registered trademarks and service marks or trademarks and
service marks of the Company in the United States and/or other countries. All
other trademarks and service marks appearing in this Prospectus are the property
of their respective holders.
------------------------
Certain statements contained herein under "Prospectus Summary," "Risk
Factors," "The Company," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" including, without
limitation, those concerning the Company's strategy and the Company's expansion
plans, contain certain forward-looking statements concerning the Company's
operations, economic performance and financial condition. Because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause such differences include, but are not limited to, those discussed
under "Risk Factors."
3
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Unless otherwise indicated,
references in this Prospectus to the "Company" and "Galileo International" mean,
at all times prior to the time of the consummation of the Offering, Galileo
International Partnership and its consolidated subsidiaries (the "Galileo
Partnership") and, at all times thereafter, Galileo International, Inc. and its
consolidated subsidiaries. Unless otherwise indicated, the information set forth
in this Prospectus assumes no exercise of the U.S. Underwriters' over-allotment
option.
Prior to the Offering, the Company was owned by direct or indirect
subsidiaries of 11 major North American and European airlines: United Airlines,
British Airways, SAirGroup (Swissair), KLM Royal Dutch Airlines ("KLM"), US
Airways, Alitalia, Olympic Airways, Air Canada, Aer Lingus, TAP Air Portugal and
Austrian Airlines. The term "airline stockholders," when used in this Prospectus
in the context of direct and immediate ownership of any equity interest in the
Company, means such subsidiaries. When used in any other context, including
commercial arrangements with the Company, the term "airline stockholders" may
mean such airlines, such subsidiaries or any of their respective affiliates, as
the context may require. No reference in this Prospectus to the "airline
stockholders" or any such airline is intended to create the implication that any
person other than such subsidiaries directly and immediately owns any equity
interest in the Company attributed to the applicable airline stockholder. Those
airline stockholders that are selling shares of Common Stock in the Offering are
referred to in this Prospectus as the "Selling Stockholders." See "Principal and
Selling Stockholders."
THE COMPANY
Galileo International is one of the world's leading providers of electronic
global distribution services for the travel industry utilizing a computerized
reservation system ("CRS"). The Company provides travel agencies at
approximately 36,000 locations, as well as other subscribers, with the ability
to access schedule and fare information, book reservations and issue tickets for
525 airlines. Galileo International also provides subscribers with information
and booking capability covering 48 car rental companies and more than 200 major
hotel chains with approximately 35,000 properties throughout the world. The
Company completed more than 300 million bookings in 1996, representing an
estimated $50 billion in travel services. The Company's travel agency
subscribers operate more than 148,000 computer terminals, all of which are
linked to the Company's Data Center, one of the world's largest commercial data
processing complexes, a system with an uptime performance record of better than
99.9%. The Company's estimated share of 1996 CRS airline bookings in the United
States was 27%; in Europe its estimated share was 39%.
Galileo International was founded by 11 major North American and European
airlines and, as of March 31, 1997, distributed its products in 73 countries on
six continents. The Company believes that, based on revenues, it is currently
the most internationally diversified provider of electronic global distribution
services for the travel industry. More than one-half of the Company's 1996
revenues were derived from bookings made by subscribers outside of the United
States. The Company believes that it has attained significant market share in
many of the most important and competitive markets for travel services,
including the United States and markets in Europe, the Middle East, Africa and
the Asia/Pacific region. The Company has entered into and competes in many of
these markets using its network of national distribution companies ("NDCs"), a
distribution structure that has enabled the Company to work closely with
associates that possess detailed knowledge of local travel market conditions.
The Company believes that its extensive international business experience, as
well as its experience in operating with an internationally diverse group of
airline stockholders, provides a firm base for expansion into new overseas
markets, many of which offer strong growth potential.
In addition to its core electronic global distribution services business,
the Company offers travel industry-related information services that draw upon
the Company's in-depth knowledge of the industry and its expertise in developing
and operating complex, mission-critical transaction processing systems. The
Company provides the internal reservation system used by United Airlines and
operates GlobalFares, a fares quotation system used by approximately 100
airlines worldwide.
4
<PAGE> 9
THE NDC ACQUISITIONS
The Company has identified opportunities to acquire NDCs in certain mature
CRS markets in which it has significant market share. Vertical integration
through the acquisition of these NDCs offers the Company an attractive
opportunity to further enhance customer service by allowing the Company to
improve its understanding of customers' product and service requirements, as
well as to increase its control over product design, service delivery and costs.
In particular, the Company believes that ownership of NDCs in these markets will
allow it to provide better and more consistent service to multinational travel
agencies at locations throughout the world. In addition, vertical integration
will enable the Company to capture profits derived from the distribution of its
products and to realize certain operational and overhead synergies.
In connection with this vertical integration strategy, simultaneously with
the consummation of the Offering, the Company expects to acquire Apollo Travel
Services Partnership ("ATS") at a purchase price of $700.0 million, Traviswiss
AG ("Traviswiss") at a purchase price of $8.0 million (as adjusted for cash to
be retained by Traviswiss) and, subject to receipt of Dutch regulatory approval,
Galileo Nederland BV ("Galileo Nederland") at a purchase price of $2.0 million.
ATS, Traviswiss and Galileo Nederland are the NDCs that market the Company's
products in the United States, Mexico, certain islands of the Caribbean,
Switzerland and The Netherlands. In the event that the Dutch regulatory approval
is not received prior to the consummation of the Offering, the Company expects
to receive such approval shortly thereafter. The Company intends to acquire
Galileo Nederland immediately following receipt of such approval. The Company
will use the net proceeds it receives from the Offering, together with
borrowings under the Credit Agreement (as defined herein), to pay the aggregate
purchase price for these acquisitions (the "NDC Acquisitions").
In connection with the NDC Acquisitions, the Company will enter into
services agreements with the sellers of ATS, Traviswiss and Galileo Nederland
whereby such sellers will provide the Company certain marketing and other
services designed to assist the Company in growing the businesses of the
acquired NDCs. Pursuant to such services agreements, the Company will be
required to pay the sellers of ATS, Traviswiss and Galileo Nederland fees of up
to $200.0 million, $6.8 million and $4.7 million (each on a present value
basis), respectively, in the sixth year following such NDC acquisitions, based
on improvements in the Company's airline booking fee revenue in the sellers'
respective NDC territories over the five-year period following such NDC
acquisitions. In addition, in connection with the Company's acquisitions of
Traviswiss and Galileo Nederland, the Company will terminate certain revenue
sharing obligations in exchange for the agreement to pay Swissair and KLM, in
four annual installments, the aggregate amounts of $22.4 million and $14.8
million, respectively.
For more information regarding the NDC Acquisitions, see "The Company --
The NDC Acquisitions" and "Use of Proceeds."
STRATEGY
The Company intends to reinforce its position as a leading provider of
electronic global distribution services and to continue to capitalize on its
competitive advantages, the key elements of which are: (i) a leading market
share, (ii) a well-balanced and global presence, (iii) established relationships
with a diverse group of travel vendors and subscribers, (iv) a technologically
advanced information system operated by a highly skilled technical staff, (v) a
comprehensive offering of innovative products and (vi) a strong business
partnership, reinforced through equity ownership, with 11 of the world's leading
airlines. From this base of competitive strengths, the Company plans to pursue a
strategy that includes the following initiatives:
- Expanding its influence through vertical integration and strategic
alliances;
- Expanding its core business through enhanced customer service;
- Accelerating product introduction;
- Strengthening its technological capabilities;
- Participating in emerging distribution channels; and
- Identifying and pursuing travel-related business opportunities.
See "Business -- Strategy."
5
<PAGE> 10
THE OFFERING
The offering hereby of 22,398,600 shares of common stock, par value $.01
per share, of the Company (the "Common Stock") in the United States and Canada
(the "U.S. Offering") and the concurrent offering of 9,599,400 shares of Common
Stock outside of the United States and Canada (the "International Offering") are
collectively referred to as the "Offering." The closing of each of the U.S.
Offering and the International Offering is conditioned upon the closing of the
other.
<TABLE>
<S> <C> <C>
Common Stock offered by the Company:
U.S. Offering...................................... 8,400,000 shares(1)
International Offering............................. 3,600,000 shares
----------
Total......................................... 12,000,000 shares(1)
----------
Common Stock offered by the Selling Stockholders:
U.S. Offering...................................... 13,998,600 shares
International Offering............................. 5,999,400 shares
----------
Total......................................... 19,998,000 shares
----------
Total Offering....................................... 31,998,000 shares(1)
==========
Common Stock outstanding after the Offering....... 100,000,000 shares(1),(2)
Use of proceeds................................... The net proceeds to the Company from the
Offering, together with borrowings under the
Credit Agreement, will be used to fund the
aggregate purchase price for the NDC
Acquisitions and to fund the initial payments
due in connection with the termination of
certain revenue sharing obligations. See "The
Company -- The NDC Acquisitions" and "Use of
Proceeds."
Dividend policy................................... The Company intends to pay regular quarterly
cash dividends of $.05 per share, beginning
with the dividend payable in the fourth
quarter of 1997 with respect to the operations
of the Company in the third quarter of 1997.
However, the declaration and payment of
dividends, as well as the amount thereof, are
subject to the discretion of the Company and
will depend upon a number of factors,
including the Company's results of operations
and financial condition. See "Dividend
Policy."
Risk factors...................................... Prospective investors should consider the
risks involved in an investment in the
Company's Common Stock, including factors
involving the Company's: (i) dependence upon
air travel; (ii) dependence upon large travel
agencies; (iii) relationship with airline
stockholders; (iv) technology investment; (v)
dependence upon facilities and network; (vi)
year 2000 compliance; (vii) competition;
(viii) expansion into developing and new CRS
markets; (ix) government regulation; and (x)
intellectual property rights. See "Risk
Factors."
NYSE symbol....................................... GLC
</TABLE>
- - -------------------------
(1) Assumes the U.S. Underwriters' over-allotment option is not exercised. See
"Underwriters."
(2) Excludes 8,140,000 shares of Common Stock expected to be reserved for
issuance pursuant to the Company's 1997 Stock Incentive Plan and 500,000
shares of Common Stock expected to be reserved for issuance pursuant to the
Company's 1997 Non-Employee Director Stock Plan. See "Management -- 1997
Stock Incentive Plan" and "-- Non-Employee Director Stock Plan."
6
<PAGE> 11
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary historical consolidated financial data presented below as of
and for each of the years ended December 31, 1994, 1995 and 1996 have been
derived from the consolidated financial statements of the Galileo Partnership,
which have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The summary historical consolidated financial data presented below
as of and for the three months ended March 31, 1996 and 1997 have been derived
from the unaudited consolidated financial statements of the Galileo Partnership.
The unaudited consolidated financial statements of the Galileo Partnership have
been prepared on a basis consistent with the audited consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of such information. The results for any interim period are not
necessarily indicative of the results for a full fiscal year. The unaudited
summary pro forma consolidated financial data presented below as of and for the
year ended December 31, 1996 and the three months ended March 31, 1997 give
effect to (i) the merger of the Galileo Partnership into a wholly owned limited
liability company subsidiary of Galileo International, Inc.; (ii) the Offering
at an assumed initial public offering price of $21.50 per share of Common Stock;
(iii) the incurrence of $474.9 million of indebtedness under the Credit
Agreement; and (iv) the NDC Acquisitions. See "Pro Forma Condensed Combined
Financial Information." All of the summary data presented below should be read
in conjunction with "Pro Forma Condensed Combined Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of the Galileo Partnership,
the consolidated financial statements of ATS and the other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- --------------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996 1996 1997 1997
------ ------ -------- --------- --------------------------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues(1)...................... $813.8 $966.4 $1,088.3 $1,230.8 $279.2 $307.6 $ 346.9
Operating expenses(2)............ 744.5 826.1 912.9 1,000.3 227.2 241.3 257.4
------ ------ -------- -------- ------ ------ --------
Operating income................. 69.3 140.3 175.4 230.5 52.0 66.3 89.5
Other income (expense), net(3)... (16.1) (16.6) (8.3) (35.6) (2.0) (.4) (8.1)
------ ------ -------- -------- ------ ------ --------
Income before income taxes....... 53.2 123.7 167.1 194.9 50.0 65.9 81.4
Income taxes(4).................. 4.4 2.6 1.9 79.5 .5 .4 32.4
------ ------ -------- -------- ------ ------ --------
Net income....................... $ 48.8 $121.1 $ 165.2 $ 115.4 $ 49.5 $ 65.5 $ 49.0
====== ====== ======== ======== ====== ====== ========
Pro forma net income per share... $ 1.15 $ .49
======== ========
Pro forma weighted average number
of shares outstanding
(in millions).................. 100.0 100.0
======== ========
BALANCE SHEET DATA
(AT END OF PERIOD):
Current assets................... $133.8 $187.3 $ 240.8 $249.2 $278.5 $ 320.2
Total assets..................... 555.5 569.0 599.9 618.7 631.4 1,465.9
Current liabilities.............. 191.5 227.6 199.6 224.5 167.0 276.7
Long-term debt................... 239.8 134.2 70.0 134.2 70.0 544.9
Other long-term obligations...... 84.7 77.6 74.9 80.7 72.7 170.3
Partners' capital................ 39.5 129.6 255.4 179.3 321.7 --
Pro forma stockholders' equity... 474.0
OTHER DATA:
Operating income as a percentage
of revenue..................... 8.5% 14.5% 16.1% 18.7% 18.6% 21.5% 25.8%
Percentage of revenue from non-
affiliated customers........... 61.7% 61.6% 64.2% 63.8% 64.5%
Net CRS bookings
(in millions)(5)............... 255.0 285.4 315.5 83.3 88.5
Net cash provided by operating
activities..................... $135.8 $172.6 $ 214.1 $ 17.6 $ 60.4
Capital expenditures(6).......... $ 33.2 $ 64.5 $ 40.0 $ 6.3 $ 11.7
Number of employees.............. 1,951 1,891 1,849 -- --
Revenue per employee............. $ .4 $ .5 $ .6 -- --
</TABLE>
(footnotes appear on following page)
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<PAGE> 12
(footnotes from previous page)
- - -------------------------
(1) Revenues include significant transactions with the airline stockholders and
certain of their affiliates. See Note 3 to the consolidated financial
statements of the Galileo Partnership appearing elsewhere in this
Prospectus.
(2) Operating expenses are categorized into cost of operations and commissions,
selling and administrative expenses in the consolidated financial
statements.
(3) Other income (expense), net includes interest expense related to the
issuance of $340 million of debt in connection with the 1993 combination of
Covia Partnership and The Galileo Company Ltd. See "The Company -- The
Galileo Partnership." At March 31, 1997, $70.0 million of debt was
outstanding.
(4) No provision for income taxes at the Galileo Partnership level is reflected
in the historical financial information, as such liability is the
responsibility of the partners. Certain of the Company's non-U.S.
subsidiaries are subject to income tax.
(5) Transactions in respect of bookings made in the United States, Canada,
Mexico and Japan have been converted to a net segment equivalent basis.
Bookings made in the rest of the world are reported on a net segment basis.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Overview."
(6) Capital expenditures include purchases of property and equipment and
purchases of computer software. In addition, the capitalization of
internally developed computer software was $25.7 million, $24.5 million, and
$21.6 million for the years ended December 31, 1994, 1995 and 1996,
respectively. Capitalization of internally developed computer software was
$4.8 million for each of the three months ended March 31, 1996 and 1997.
8
<PAGE> 13
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors.
DEPENDENCE UPON AIR TRAVEL
The Company derives substantially all of its revenues from the travel
industry. Accordingly, events affecting the travel industry can significantly
affect the Company's earnings. In particular, because a significant portion of
the Company's revenues is derived from fees generated by airline bookings, the
Company's earnings are especially sensitive to events that affect airline travel
and the airlines that participate in the Company's systems. Any adverse
occurrence, including political instability, armed hostilities, terrorism,
recession, excessive inflation, or strikes, lockouts or other labor
disturbances, that results in a significant decline in the volume of air travel
or in an overall downturn in the business and operations of the Company's
customers in the travel industry could have a material adverse effect on the
business, financial condition and results of operations of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
DEPENDENCE UPON LARGE TRAVEL AGENCIES
Travel agencies are the primary channel of distribution for the services
offered by travel vendors. In the United States, nearly all travel agencies
utilize a CRS, whether operated by the Company or by one of its competitors. The
Company's five largest travel agency subscribers, measured in terms of number of
1996 bookings, are American Automobile Association, Inc., American Express
Travel Related Services Company, Inc., Business Travel International, S.A.
Compagnie Internationale Des Wagon-Lits Et Du Tourisme (Carlson Wagonlit Travel)
and Rosenbluth International, Inc., which together accounted for approximately
21% of the bookings through the Company. No single travel agency generated more
than 10% of the bookings through the Company in 1996. If the Company were to
lose and not replace the bookings generated by one or more of these travel
agencies, its business, financial condition and results of operations could be
materially adversely affected.
RELATIONSHIP WITH AIRLINE STOCKHOLDERS
Contribution to the Company's Revenue
Each airline stockholder participates in the Company's systems for the
distribution of its travel services, and in 1996, booking fees charged to the
airline stockholders represented, in the aggregate, approximately 32% of the
Company's revenue. United Airlines is the largest single travel vendor utilizing
the Company's systems, as measured by booking fee revenue, generating booking
fees that accounted for approximately 12% of the Company's revenue in 1996. No
other travel vendor accounted for 10% or more of the Company's revenue and no
other airline stockholder accounted for 5% or more of the Company's revenue in
1996. Although the Company believes that, as a regulatory matter for certain
airline stockholders, and as a practical matter for all airline stockholders,
each airline stockholder will continue to distribute its travel services through
the Company's systems, the loss of booking fees from United Airlines or a number
of the other airline stockholders could have a material adverse effect on the
business, financial condition and results of operations of the Company.
Control of the Company
Upon completion of the Offering, the airline stockholders will own, in the
aggregate, approximately 68% of the outstanding Common Stock (65% if the U.S.
Underwriters' over-allotment option is exercised in full). The airline
stockholders controlled by United Airlines and KLM will be the Company's two
largest stockholders, owning approximately 33% and 11% of the outstanding Common
Stock, respectively (32% and 10%, respectively, if the U.S. Underwriters'
over-allotment option is exercised in full). No other airline stockholder will
own more than 10% of the outstanding Common Stock. See "Principal and Selling
Stockholders." In addition, the Special Voting Preferred Stock (as defined
herein) will allow certain of the
9
<PAGE> 14
airline stockholders to elect a total of seven of the 13 members of the
Company's Board of Directors. The airline stockholder controlled by United
Airlines will own three shares of such Special Voting Preferred Stock and the
airline stockholders controlled by KLM, US Airways, British Airways and
SAirGroup will each own one share, each such share entitling the holder thereof
(or in certain circumstances, such holder's transferee) to elect one director.
As to the remaining six directors, the airline stockholders have agreed,
pursuant to the Stockholders' Agreement (as defined herein), to vote their
shares of Common Stock in favor of the election of three independent directors
who will be nominated by the Board of Directors and three management directors.
As a result, as long as the Stockholders' Agreement remains in effect and the
airline stockholders own in the aggregate more than 50% of the outstanding
Common Stock, the airline stockholders will control the election of the entire
Board of Directors. See "Management -- Board Composition," "Relationship with
Airline Stockholders and Certain Transactions -- Stockholders' Agreement" and
"Description of Capital Stock -- Special Voting Preferred Stock."
Commercial Arrangements
Simultaneously with the consummation of the Offering, the Company will
enter into sales representation agreements with each of United Airlines and US
Airways pursuant to which these airlines will supply the sales force for the
Company's Apollo brand reservations products to subscribers in the United States
and Mexico. Any failure on the part of United Airlines or US Airways to provide
such services in an effective manner, coupled with the Company's inability to
replace such services, could weaken the Company's sales efforts in these
countries. This, in turn, could have a material adverse effect on the business,
financial condition and results of operations of the Company.
The Company distributes its products in certain territories through NDCs,
some of which will be owned in whole or in part by affiliates of the airline
stockholders following consummation of the Offering. At such time, distributor
sales and services agreements between the Company and the NDCs controlled by
Austrian Airlines, Air Canada, Olympic Airways, Aer Lingus, Alitalia and British
Airways (collectively, the "Distribution Agreements") will be in effect covering
Austria, Canada, Greece, Ireland, Italy and the United Kingdom, respectively.
The Distribution Agreements generally provide that they will remain in effect
for so long as the relevant airline stockholder continues to own an interest in
the Company and the relevant NDC remains an affiliate of such airline
stockholder. There can be no assurance that such Distribution Agreements will
continue in effect. The termination of certain Distribution Agreements could
leave the Company without an effective means of marketing its products in the
relevant territory. This, in turn, could have a material adverse effect on the
business, financial condition and results of operations of the Company.
Simultaneously with the consummation of the Offering, the Company will
enter into a non-competition agreement with each of the airline stockholders
which will prohibit the airline stockholders and their affiliates from competing
with the Company in providing reservations services to neutral travel agencies.
However, the non-competition agreements include certain exceptions that permit
the airline stockholders and their affiliates to, among other things, provide
and market certain reservations services to certain customers of the airline
stockholders.
If an airline stockholder believes it will be materially disadvantaged in
relation to one of its airline competitors by not being able to engage in an
activity that is prohibited by the non-competition agreement, such entity may
seek approval to engage in the activity from the Company's Airline Affiliate
Review Board (the "AARB"). The AARB, which will be comprised of a representative
of each of United Airlines, KLM, Swissair, British Airways and US Airways (so
long as the relevant airline stockholder is a beneficial owner of a share of
Special Voting Preferred Stock and is not the airline seeking relief), may
permit the airline stockholder to engage in the prohibited activity if it
determines that the damage to the airline stockholder from continued prohibition
of such activity would be greater than the damage that would be suffered by the
Company if such activity were allowed. The AARB may condition its permission
upon divestiture of the airline stockholder's interest in the Company's capital
stock, termination of its right to distribute the Company's products and
services or the payment of compensation to the Company.
The non-competition agreements may be terminated upon 12 months' notice
given at any time after the second anniversary of the consummation of the
Offering, or upon six months' notice after the third anniversary
10
<PAGE> 15
of such date, provided that the agreements may not be terminated while the
airline stockholder controls one of the Company's NDCs. Each non-competition
agreement also terminates automatically at such time as the airline stockholder
that is a party to such agreement ceases to own any shares of Common Stock,
although the agreement will continue to be binding on any NDC of the Company in
which such airline stockholder owns an interest. There can be no assurance that
the non-competition agreements will remain in effect or that the AARB will not
permit an airline stockholder to compete with the Company in a manner
detrimental to the Company. This, in turn, could have a material adverse effect
on the business, financial condition and results of operations of the Company.
See "Relationship with Airline Stockholders and Certain Transactions -- Non-
Competition Agreements."
Because the Company is controlled by the airline stockholders, the
foregoing agreements and the other commercial agreements between the Company and
the airline stockholders were not the result of arm's-length negotiations
between independent parties. In addition, certain of these agreements may be
modified, and additional agreements may be entered into by the Company and the
various airline stockholders, after completion of the Offering. The Company
believes that, to the extent the airline stockholders modify any such
arrangements, such modifications would be made in a manner fair to both the
Company and the airline stockholders. However, because of the influence over the
business and affairs of the Company that has been and may continue to be
exercised by the airline stockholders, there can be no assurance that the terms
and conditions of such agreements are, and in the future will be, at least as
favorable to the Company as could have been or would be obtained in agreements
with unaffiliated third parties.
TECHNOLOGY INVESTMENT
The Company's future results will depend, in part, upon its ability to make
timely and cost-effective enhancements and additions to its technology and to
introduce new products that meet the business demands of travel vendors and
subscribers. The success of new products is dependent on several factors,
including proper identification of travel vendors' and subscribers' needs, the
cost of developing new products, timely completion and implementation of new
products, differentiation of new products from those of the Company's
competitors and market acceptance of new products. In addition, maintaining the
flexibility to respond to technological and market changes may require
substantial expenditures and lead time. There can be no assurance that the
Company will successfully identify and develop new products in a timely manner,
that products developed by others will not render the Company's offerings
obsolete or noncompetitive or that the technologies in which the Company invests
will achieve broad acceptance in the marketplace.
The Company has made a significant investment in its technology
infrastructure. This infrastructure results in an operating expense structure
that is largely fixed. As a result, in the event of a significant reduction in
booking volumes, technology costs would remain relatively constant. If such a
reduction continued for a prolonged period, the Company's business, financial
condition and results of operations could be materially adversely affected.
DEPENDENCE UPON FACILITIES AND NETWORK
The Company's data and transaction processing services are dependent on the
Company's Data Center, located near Denver, Colorado. Although the Company
believes it has taken sufficient precautions to protect this facility and to
achieve network security, a natural or manmade disaster or other calamity that
causes significant damage to the facility or the Company's systems would have a
material adverse effect on the business, financial condition and results of
operations of the Company.
The Company relies on several communications companies in the United States
and internationally to provide network connections between the Data Center and
subscribers' access terminals. In particular, the Company relies upon Societe
Internationale de Telecommunications Aeronautiques ("SITA"), which is owned by a
consortium of airlines and other travel-related businesses, to maintain its data
communications and to provide network services for many countries served by the
Company. Any significant failure or inability of SITA or other communications
companies to provide and maintain network access could have a material adverse
effect on the business, financial condition and results of operations of the
Company.
11
<PAGE> 16
YEAR 2000 COMPLIANCE
The Company has implemented a program designed to ensure that all software
used in connection with the Company's products will 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. However, with
regard to bookings for travel beginning in the year 2000, any failure on the
part of the Company, its travel vendor customers or NDCs to ensure that any such
software complies with year 2000 requirements, regardless of when such bookings
occur, could have a material adverse effect on the business, financial condition
and results of operations of the Company.
COMPETITION
The Company competes in the provision of electronic global distribution
services primarily against other large and well-established CRSs in a highly
competitive market. The Company's principal competitor in the United States is
SABRE, and its competitors in the rest of the world include Abacus,
Amadeus/System One, SABRE and Worldspan, each of which offers many products
similar to those of the Company. In addition, although there are certain
barriers to entry to the CRS market, such as the need for significant capital
investment to acquire or develop the hardware, software and network facilities
necessary to effectively operate a CRS, as well as subscriber reluctance to
change systems once established, the Company is always faced with the
possibility that new competitors will enter the CRS market, particularly as new
channels for travel distribution develop. Factors affecting the competitive
success of electronic global distribution services systems include the depth and
breadth of the information offered, the reliability and ease of use of the CRS,
the incentives paid to travel agencies and the range of products available to
travel vendors, travel agencies and other subscribers. The Company believes it
competes effectively with respect to each of these factors. However, increased
competition could require the Company to increase spending on marketing or
product development or to take other actions that could have a material adverse
effect on the business, financial condition and results of operations of the
Company.
Competitive factors could also lead the Company to decrease the amount it
charges as booking fees in response to pressure from travel vendors. Any
decrease in the amount of such fees, or a change in related booking or billing
practices that results in an effective reduction in such fees, could have a
material adverse effect on the business, financial condition and results of
operations of the Company.
Competition to attract and retain travel agency subscribers is intense. In
highly competitive markets, the Company and other CRSs offer incentive payments
to travel agency subscribers if certain productivity or booking volume growth
targets are achieved. Although expansion of the use of such incentive payments
could adversely affect the Company's profitability, the Company's failure to
continue to make such incentive payments could result in the loss of some travel
agency subscribers. If the Company were to lose a significant portion of its
current base of travel agencies to a competing CRS or if the Company were forced
to increase the amounts of such incentive payments significantly, the Company's
business, financial condition and results of operations could be materially
adversely affected.
In addition to the traditional competitors described above, the emergence
of direct access has provided the Company with new competition from both
technology firms and from travel vendors themselves. Competition within the
direct access channel currently takes two forms. The first consists of on-line
services that provide a link between the end user and the CRS. These entities
generate competition among CRSs to provide the "engine" for such booking
services. The use of these on-line services, while potentially causing a bypass
of the traditional travel agency channel, does not typically divert bookings
away from CRSs. The Company believes it competes effectively with other CRSs for
business from on-line services providers.
The second form of competition within the direct access channel is from
travel vendors themselves, who may provide consumers with direct access to their
internal reservation systems. The Company believes that the features of CRS
products which allow subscribers to comparison shop and to obtain greater
functionality and more information for the end user reduce the potential that
the direct access products sponsored by travel vendors will divert bookings away
from CRSs. However, any significant diversion could have a material adverse
effect on the business, financial condition and results of operations of the
Company.
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<PAGE> 17
EXPANSION INTO DEVELOPING AND NEW CRS MARKETS
A core component of the Company's strategy involves penetrating developing
and new CRS markets. These markets generally exhibit lower levels of technology
and less developed communications infrastructures than mature CRS markets. The
Company is likely to be faced with different cost structures in these markets
from those that exist elsewhere. In particular, communications costs in
developing and new CRS markets may be higher than in mature markets.
Furthermore, in attempting to penetrate these markets, the Company may be faced
with other challenges inherent in international expansion, including hiring and
training qualified employees, consumer acceptance of technology and political
risk. If it is unable to respond to these risks, the Company may not be able to
effectively pursue its strategy of penetrating such markets or may not be able
to derive sufficient benefit from expansion into these markets. See
"Business -- Electronic Global Distribution Services -- Product Distribution."
GOVERNMENT REGULATION
United States
U.S. Department of Transportation regulations (the "U.S. CRS Rules") govern
several elements of the CRS industry. To the extent that a CRS is offered to
travel agencies within the United States, the U.S. CRS Rules apply to the
operation of that system and its marketing to travel agencies and airlines. The
U.S. CRS Rules require an airline that directly or indirectly owns five percent
or more of a CRS to participate in all other airline-owned CRSs at the same
level of functionality at which it participates in its own CRS. Accordingly, CRS
owners such as American Airlines, Continental Airlines, Delta Air Lines,
Northwest Airlines and TWA all participate at high levels of functionality
within the Company's systems. Although the Company does not believe that any of
these airlines would terminate its participation in the Company's systems
entirely, certain airlines have indicated that they would not participate
equally in all CRSs in the absence of the U.S. CRS Rules. The U.S. CRS Rules are
scheduled to expire on December 31, 1997; however, the Company believes these
rules will be extended. Nonetheless, in the event that such rules were to
expire, the decision by several airlines to downgrade their participation in the
Company's systems could result in a significant decrease in fees from such
airlines. This, in turn, could have a material adverse effect on the business,
financial condition and results of operations of the Company. See "Business --
Legal and Regulatory Matters -- Regulation."
European Union
The Company is also subject to detailed regulation in the European Union
(the "EU CRS Rules"). The main purpose of the EU CRS Rules is to encourage free
competition among airline vendors by ensuring that all airline vendors and
subscribers have equal access to all CRSs operating in the European Union and
that the systems and displays of CRSs are neutral and non-discriminatory to all
airline vendors, regardless of the size of the airline and whether or not it is
an owner of a CRS.
The EU CRS Rules state that fees charged by CRSs must be
non-discriminatory, reasonably structured and reasonably related to the cost of
the service provided and used and, in particular, must be the same for the same
level of service. CRS bills must be sufficiently detailed to allow participating
airlines and subscribers to see exactly which services have been used and
participating airlines may disallow certain bookings unless they have previously
accepted them. There can be no assurance that the European Commission will not
challenge the Company's fee structure or put pressure on the Company to reduce
fees charged to certain vendors. Any such action could have the effect of
decreasing revenues earned by the Company in Europe. This, in turn, could have a
material adverse effect on the business, financial condition and results of
operations of the Company. See "Business -- Legal and Regulatory Matters --
Regulation."
INTELLECTUAL PROPERTY RIGHTS
Among the Company's significant assets are its software and other
proprietary information and intellectual property rights. The Company relies on
a combination of copyright, trademark and patent laws, trade secrets,
confidentiality procedures and contractual provisions to protect these assets.
The Company's software and related documentation, however, are protected
principally under trade secret and copyright laws,
13
<PAGE> 18
which afford only limited protection. In addition, the laws of some foreign
jurisdictions may provide less protection for the Company's proprietary rights
than the laws of the United States. Unauthorized use of the Company's
intellectual property could have a material adverse effect on the business,
financial condition and results of operations of the Company, and there can be
no assurance that the Company's legal remedies would adequately compensate it
for the damages caused by such use.
The Company does not believe that any of its products infringes upon the
proprietary rights of third parties in any material respect. There can be no
assurance, however, that third parties will not claim infringement by the
Company with respect to current or future products. Any such claim, with or
without merit, could result in substantial costs and diversion of management
resources, and a successful claim could effectively block the Company's ability
to use or license products in the United States or abroad. Any such claim,
therefore, could have a material adverse effect on the business, financial
condition and results of operations of the Company.
Licenses for a number of software products have been granted to the
Company. Certain of these licenses, individually and in the aggregate, are
material to the business of the Company. Although the Company believes that the
risk that it will lose any material license is remote, any such loss could have
a material adverse effect on the business, financial condition and results of
operations of the Company.
POSSIBLE FUTURE SALES OF COMMON STOCK BY THE AIRLINE STOCKHOLDERS
Subject to applicable federal securities laws, the Stockholders' Agreement
and the restrictions set forth below, any airline stockholder may sell any or
all of the Common Stock owned by it after completion of the Offering. Sales or
distributions of substantial amounts of Common Stock in the public market, or
the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock. The airline stockholders are not subject to
any contractual obligation to retain their Common Stock, except that they have
agreed along with the Company, subject to certain exceptions, not to sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of Morgan Stanley
& Co. Incorporated on behalf of the Underwriters. See "Underwriters." The
airline stockholders will have registration rights with respect to the Common
Stock owned by them following the Offering, which would facilitate any future
disposition. As a result, after 180 days, there can be no assurance concerning
the period of time during which the airline stockholders will retain their
ownership of Common Stock. See "Shares Eligible for Future Sale."
ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE AND OF THE
SECURITIES MARKET
Prior to the Offering, there has been no public market for the shares of
Common Stock. Although the Common Stock has been approved for listing, subject
to official notice of issuance, on the New York Stock Exchange, there can be no
assurance that a regular trading market for the shares of Common Stock will
develop after the Offering or, if developed, that a public trading market can be
sustained. There can be no assurance that the prices at which the Common Stock
will sell in the public market after the Offering will not be lower than the
price at which it is offered by the Underwriters in the Offering. The initial
public offering price for the Common Stock will be determined by negotiations
among the Company, the Selling Stockholders and the representatives of the
Underwriters and may not be indicative of the market price for the Common Stock
after the Offering. See "Underwriters -- Pricing of Offering."
The market price for the Common Stock may be highly volatile. The Company
believes that factors such as announcements by it, or by its competitors or
travel vendors, of quarterly variances in financial results could cause the
market price of the Common Stock to fluctuate substantially. In addition, the
stock market may experience extreme price and volume fluctuations which often
are unrelated to the operating performance of specific companies. Market
fluctuations, perceptions regarding the electronic global distribution services
industry and travel-related industries and general economic or political
conditions may adversely affect the market price of the Common Stock.
DILUTION
Purchasers of Common Stock in the Offering will experience an immediate
dilution of $25.71 per share (assuming an initial public offering price of
$21.50 per share) in the net tangible book value of their shares of Common
Stock. See "Dilution."
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<PAGE> 19
THE COMPANY
Galileo International is one of the world's leading providers of electronic
global distribution services for the travel industry. The Company provides
travel agencies at approximately 36,000 locations, as well as other subscribers,
with the ability to access schedule and fare information, book reservations and
issue tickets for 525 airlines. Galileo International also provides subscribers
with information and booking capability covering 48 car rental companies and
more than 200 major hotel chains with approximately 35,000 properties throughout
the world. The Company completed more than 300 million bookings in 1996,
representing an estimated $50 billion in travel services. The Company's travel
agency subscribers operate more than 148,000 computer terminals, all of which
are linked to the Company's Data Center, one of the world's largest commercial
data processing complexes, a system with an uptime performance record of better
than 99.9%. The Company's estimated share of 1996 CRS airline bookings in the
United States was 27%; in Europe its estimated share was 39%.
The Company's principal executive office is located at 9700 West Higgins
Road, Suite 400, Rosemont, Illinois 60018 and its telephone number is (847)
518-4000.
THE GALILEO PARTNERSHIP
The Galileo Partnership, a Delaware general partnership, was formed in
September 1993 through the combination of Covia Partnership and The Galileo
Company Ltd. Covia Partnership owned the Apollo CRS, which began in 1971 as
United Airlines' internal reservation system. United Airlines later established
the Apollo business as a separate operating company, and over time sold 50% of
the business to affiliates of six other airlines. The Apollo CRS was marketed in
North America and Japan. The Galileo Company Ltd. was incorporated in England
and Wales in 1987 by five airlines in response to the growing need for CRS
automation. Its CRS, the Galileo system, was designed to provide services to the
travel industry outside of North America and Japan, principally in Europe. The
1993 combination created a global organization by bringing together two
companies which already shared certain common airline owners. This combination
resulted in the Company achieving significant synergies, particularly through
the consolidation of the data centers operated by each company. In connection
with the 1993 combination, ATS was formed to become the NDC for the United
States, Mexico and certain islands of the Caribbean.
GALILEO INTERNATIONAL, INC.
Galileo International, Inc., the issuer of the Common Stock being offered
hereby, is a newly organized Delaware corporation formed to be a holding company
for the business of the Galileo Partnership. Immediately prior to the
consummation of the Offering, the Galileo Partnership will merge with and into a
wholly owned limited liability company subsidiary of Galileo International, Inc.
Pursuant to such merger, the airline stockholders will receive shares of Common
Stock in the same proportion as that of their respective partnership interests
in the Galileo Partnership. In addition, certain of the airline stockholders
will receive shares of Special Voting Preferred Stock entitling them to elect
directors to the Company's Board of Directors. See "Management -- Board
Composition" and "Description of Capital Stock -- Special Voting Preferred
Stock." The airline stockholders and the Company will also enter into a
Stockholders' Agreement, a Registration Rights Agreement, non-competition
agreements and various commercial arrangements. See "Relationship with Airline
Stockholders and Certain Transactions."
THE NDC ACQUISITIONS
The Company has identified opportunities to acquire NDCs in certain mature
CRS markets in which it has significant market share. Vertical integration
through the acquisition of these NDCs offers the Company an attractive
opportunity to further enhance customer service by allowing the Company to
improve its understanding of customers' product and service requirements, as
well as to increase its control over product design, service delivery and costs.
In particular, the Company believes that ownership of NDCs in these markets will
allow it to provide better and more consistent service to multinational travel
agencies at locations
15
<PAGE> 20
throughout the world. In addition, vertical integration will enable the Company
to capture profits derived from the distribution of its products and to realize
certain operational and overhead synergies.
In connection with this vertical integration strategy, the Company expects
to acquire ATS, Traviswiss and, subject to receipt of Dutch regulatory approval,
Galileo Nederland simultaneously with the consummation of the Offering. In the
event that the Dutch regulatory approval is not received prior to the
consummation of the Offering, the Company expects to receive such approval
shortly thereafter. The Company intends to acquire Galileo Nederland immediately
following receipt of such approval. The Company will use the net proceeds it
receives from the Offering to pay a portion of the aggregate purchase price for
the NDC Acquisitions and will use borrowings under the Credit Agreement to pay
the balance of the aggregate purchase price. In addition, the Company has
entered into a non-binding letter of intent with Air Canada for the purchase of
its wholly owned NDC, Galileo Canada Distributions Systems Inc. The Company is
currently evaluating and will continue to evaluate acquisitions and joint
ventures involving other NDCs. See "Business -- Strategy -- Expanding Influence
Through Vertical Integration and Strategic Alliances."
Apollo Travel Services Partnership
Prior to the consummation of the Offering, the Company will enter into an
agreement (the "ATS Acquisition Agreement") with United Airlines, US Airways and
Air Canada and certain of their affiliates (collectively, the "ATS Partners") to
acquire ATS at a purchase price of $700.0 million. Pursuant to the ATS
Acquisition Agreement, wholly owned subsidiaries of the Company will acquire all
of the outstanding general partnership interests in ATS. In connection with its
acquisition of ATS, the Company will also enter into an agreement with United
Airlines, US Airways and Air Canada, pursuant to which these airlines will
provide services related to growing the business of ATS and pursuant to which,
during the sixth year following the acquisition of ATS, the Company will pay
United Airlines, US Airways and Air Canada a fee of up to $200.0 million (on a
present value basis), based on improvements in the Company's air booking fee
revenues over the five-year period immediately following the acquisition of ATS.
See "Relationship with Airline Stockholders and Certain Transactions --
Commercial Arrangements -- Services Agreements."
The ATS Acquisition Agreement contains certain customary representations,
warranties and covenants. Certain of the representations and warranties made by
the ATS Partners will survive for two years after the closing, and certain of
the ATS Partners' covenants will survive the closing. The ATS Acquisition
Agreement provides that, to the extent the Company has actual knowledge prior to
the closing that any of the representations and warranties or covenants of the
ATS Partners that survive the closing are not true or have been breached, as the
case may be, its sole remedy will be not to consummate the acquisition of ATS.
With certain exceptions, the ATS Partners' obligations to indemnify the Company
for breaches of their representations, warranties and covenants in the ATS
Acquisition Agreement will only apply to the extent such breaches result in
liability in excess of $5.0 million, and will be subject to an aggregate limit
of $175.0 million.
Consummation of the acquisition of ATS is subject to the satisfaction (or
waiver) of certain conditions set forth in the ATS Acquisition Agreement,
including: (i) the accuracy of the representations and warranties of the ATS
Partners; (ii) the receipt of certain regulatory approvals; (iii) completion of
the Offering and the receipt by the Company of any other required financing; and
(iv) satisfaction of a net asset test.
ATS, based near Chicago, Illinois, is responsible for the marketing, sales
and support of the Company's Apollo brand products in the United States, Mexico
and certain islands of the Caribbean. ATS provides its services to approximately
13,000 travel agency locations, representing an estimated 60,000 terminals.
Approximately 27% of all 1996 CRS airline bookings in the United States were
made through the Company by subscribers served by ATS. ATS's revenue and
operating income for the year ended December 31, 1996 were $380.0 million and
$85.0 million, respectively. As of December 31, 1996, ATS had net assets of
approximately $136.1 million. As of March 31, 1997, ATS had 1,070 employees.
ATS was established in 1993, when Covia Partnership and The Galileo Company
Ltd. combined to form the Galileo Partnership. Previously, Covia Partnership was
responsible for all ATS functions.
16
<PAGE> 21
Traviswiss AG
Prior to the consummation of the Offering, the Company will enter into an
agreement with SAirGroup and one of its affiliates to acquire Traviswiss at a
purchase price of $8.0 million (as adjusted for cash to be retained by
Traviswiss). Traviswiss, based in Zurich, Switzerland, was incorporated in 1993
as a wholly owned subsidiary of SAirGroup. Traviswiss provides its services to
approximately 1,400 travel agency locations in Switzerland, representing an
estimated 6,000 terminals. Approximately 77% of all 1996 CRS airline bookings in
Switzerland were made through the Company by subscribers served by Traviswiss.
Traviswiss's revenue and operating income for the year ended December 31, 1996
were $29.9 million and $.6 million, respectively. As of December 31, 1996,
Traviswiss had net assets of $3.1 million. As of March 31, 1997, Traviswiss had
52 employees.
In connection with its acquisition of Traviswiss, the Company has agreed to
pay SAirGroup a total of $22.4 million in four annual installments, beginning
upon the acquisition of Traviswiss, in connection with the termination of
certain revenue sharing obligations. See "Relationship with Airline Stockholders
and Certain Transactions -- Commercial Arrangements -- Termination of Revenue
Sharing Obligations." In addition, in connection with its acquisition of
Traviswiss, the Company will enter into an agreement with Swissair, pursuant to
which SAirGroup will provide services related to growing the business of
Traviswiss and pursuant to which, during the sixth year following the
acquisition of Traviswiss, the Company will pay SAirGroup a fee of up to $6.8
million (on a present value basis), based on improvements in the Company's air
booking fee revenues over the five-year period immediately following the
acquisition of Traviswiss. See "Relationship with Airline Stockholders and
Certain Transactions -- Commercial Arrangements -- Services Agreements."
Galileo Nederland BV
Prior to the consummation of the Offering, subject to receipt of Dutch
regulatory approval, the Company will enter into an agreement with KLM and one
of its affiliates to acquire Galileo Nederland at a purchase price of $2.0
million. In the event that the Dutch regulatory approval is not received prior
to the consummation of the Offering, the Company expects to receive such
approval shortly thereafter. The Company intends to acquire Galileo Nederland
immediately following receipt of such approval. Galileo Nederland, based near
Amsterdam, The Netherlands, was incorporated in 1988 as a wholly owned
subsidiary of KLM. Galileo Nederland provides its services to approximately
1,200 travel agency locations in The Netherlands, representing an estimated
4,200 terminals. Approximately 87% of all 1996 CRS airline bookings in The
Netherlands were made through the Company by subscribers served by Galileo
Nederland. Galileo Nederland's revenue and operating income for the year ended
March 31, 1997 were approximately $8.1 million and $.8 million, respectively. As
of December 31, 1996, Galileo Nederland had net assets of approximately $1.4
million. As of March 31, 1997, Galileo Nederland had 41 employees.
In connection with its acquisition of Galileo Nederland, the Company has
agreed to pay KLM a total of $14.8 million in four annual installments,
beginning upon the acquisition of Galileo Nederland, in connection with the
termination of certain revenue sharing obligations. See "Relationship with
Airline Stockholders and Certain Transactions -- Commercial Arrangements --
Termination of Revenue Sharing Obligations." In addition, in connection with its
acquisition of Galileo Nederland, the Company will enter into an agreement with
KLM pursuant to which KLM will provide services related to growing the business
of Galileo Nederland and pursuant to which, during the sixth year following the
acquisition of Galileo Nederland, the Company will pay KLM a fee of up to $4.7
million (on a present value basis), based on improvements in the Company's air
booking fee revenues over the five-year period immediately following the
acquisition of Galileo Nederland. See "Relationship with Airline Stockholders
and Certain Transactions -- Commercial Arrangements -- Services Agreements."
17
<PAGE> 22
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of 12,000,000
shares of Common Stock in the Offering are estimated to be approximately $240.8
million (approximately $338.3 million if the U.S. Underwriters' over-allotment
option is exercised in full), assuming an initial public offering price of
$21.50 per share. The net proceeds to the Company from the Offering, together
with an additional $474.9 million of borrowings under the Credit Agreement, will
be used by the Company to fund the aggregate purchase price for the NDC
Acquisitions and to fund the initial payments due in connection with the
termination of certain revenue sharing obligations. See "The Company -- The NDC
Acquisitions" and "Pro Forma Condensed Combined Financial Statements."
The following table illustrates the Company's sources and uses of funds:
<TABLE>
<CAPTION>
AMOUNT
------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Net proceeds from the Offering......................... $240.8
Borrowings under the Credit Agreement.................. 474.9
------
Total sources..................................... $715.7
======
USES OF FUNDS:
ATS acquisition........................................ $700.0
Traviswiss acquisition................................. 8.0
Galileo Nederland acquisition.......................... 2.0
Initial payments related to the termination of revenue
sharing obligations................................... 5.4
Estimated fees and expenses related to borrowings under
the Credit Agreement.................................. .3
------
Total uses........................................ $715.7
======
</TABLE>
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
18
<PAGE> 23
DIVIDEND POLICY
Although the Company expects to reinvest a substantial portion of its
earnings in its business, the Company currently intends to pay regular quarterly
cash dividends of $.05 per share, beginning with the dividend payable in the
fourth quarter of 1997 with respect to the operations of the Company in the
third quarter of 1997. However, the declaration and payment of dividends, as
well as the amount thereof, are subject to the discretion of the Board of
Directors of the Company and will depend upon the Company's results of
operations, financial condition, cash requirements, future prospects and other
factors deemed relevant by the Board of Directors. There can be no assurance
that the Company will declare and pay any dividends.
DILUTION
The deficit in pro forma net tangible book value of the Company at March
31, 1997 was $662.3 million, or $6.62 per share of Common Stock after giving
effect to (i) the merger of the Galileo Partnership into a wholly owned limited
liability company subsidiary of Galileo International, Inc.; (ii) the incurrence
of $474.9 million of indebtedness under the Credit Agreement; and (iii) the NDC
Acquisitions. Net tangible book value per share of Common Stock represents the
amount of total tangible assets less total liabilities, divided by the total
number of shares of Common Stock outstanding.
After giving effect to the sale of 12,000,000 shares of Common Stock
pursuant to the Offering at an assumed initial public offering price of $21.50
per share, the adjusted pro forma deficit in net tangible book value of the
Company at March 31, 1997 would have been approximately $421.4 million or $4.21
per share of Common Stock. Such amount represents an immediate dilution of
$25.71 per share of Common Stock to investors purchasing shares in the Offering.
Dilution per share represents the difference between the amount per share paid
by purchasers of Common Stock in the Offering and the pro forma net tangible
book value per share of Common Stock immediately after completion of the
transactions noted above.
The following table illustrates the dilution in pro forma net tangible book
value per share to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common
Stock..................................................... $21.50
Pro forma net tangible book value (deficit) per share of
Common Stock(1)........................................... (6.62)
Increase in pro forma net tangible book value per share
attributable to sale of shares of Common Stock in the
Offering.................................................. 2.41
------
Pro forma net tangible book value (deficit) per share of
Common Stock after the Offering........................... (4.21)
------
Dilution per share of Common Stock to new investors......... $25.71
======
</TABLE>
- - ---------------
(1) Pro forma net tangible book value (deficit) per share of Common Stock gives
effect to (i) the merger of the Galileo Partnership into a wholly owned
limited liability company subsidiary of Galileo International, Inc.; (ii)
the incurrence of $474.9 million of indebtedness under the Credit Agreement;
and (iii) the NDC Acquisitions.
19
<PAGE> 24
CAPITALIZATION
The following table sets forth information regarding the Company's
short-term debt and capitalization (i) at March 31, 1997; (ii) as adjusted to
give pro forma effect to the merger of the Galileo Partnership into a wholly
owned limited liability company subsidiary of Galileo International, Inc.
(including the effect of estimated distributions to the Galileo Partnership's
partners of undistributed earnings of the Galileo Partnership through March 31,
1997 of approximately $76.3 million), assuming such merger and distribution were
consummated at March 31, 1997; and (iii) as further adjusted to give pro forma
effect to (a) the Offering at an assumed initial public offering price of $21.50
per share of Common Stock; (b) the incurrence of $474.9 million of indebtedness
under the Credit Agreement; and (c) the NDC Acquisitions, assuming such
transactions were consummated at March 31, 1997. This table should be read in
conjunction with "Pro Forma Condensed Combined Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of the Galileo Partnership,
the consolidated financial statements of ATS and the other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------------------
HISTORICAL AS ADJUSTED AS FURTHER ADJUSTED
---------- ----------- -------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Capital lease obligations, current portion............. $ 7.0 $ 7.0 $ 7.3
Long-term debt, current portion........................ -- -- --
------ ------ --------
$ 7.0 $ 7.0 $ 7.3
====== ====== ========
Capital lease obligations, less current portion........ $ 32.2 $ 32.2 $ 32.2
Long-term debt, less current portion................... 70.0 70.0 544.9
Stockholders' equity:
Special Voting Preferred Stock: $.01 par value; 7
shares authorized; 7 shares issued and outstanding
as adjusted and as further adjusted............... -- * *
Ordinary Preferred Stock: $.01 par value; 25,000,000
shares authorized; no shares issued............... -- -- --
Common Stock: $.01 par value; 250,000,000 shares
authorized; 88,000,000 shares issued and
outstanding as adjusted; 100,000,000 shares issued
and outstanding as further adjusted(1)............ -- .9 1.0
Additional paid-in capital........................... -- 244.6 485.3
Retained earnings (accumulated deficit).............. -- (12.3) (12.3)
------ ------ --------
Total stockholders' equity...................... -- 233.2 474.0
Partners' capital, including cumulative translation
losses............................................... 321.8 -- --
------ ------ --------
Total capitalization................................... $424.0 $335.4 $1,051.1
====== ====== ========
</TABLE>
- - -------------------------
* Less than $100,000
(1) Excludes 8,140,000 shares of Common Stock expected to be reserved for
issuance pursuant to the Company's 1997 Stock Incentive Plan and 500,000
shares of Common Stock expected to be reserved for issuance pursuant to the
Company's 1997 Non-Employee Director Stock Plan. See "Management -- 1997
Stock Incentive Plan" and "-- Non-Employee Director Stock Plan."
20
<PAGE> 25
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected historical consolidated financial data presented below as of
December 31, 1993 and for the period September 16 to December 31, 1993 and as of
and for each of the years ended December 31, 1994, 1995 and 1996 have been
derived from the consolidated financial statements of the Galileo Partnership,
which have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The selected historical consolidated financial data presented below
as of September 15, 1993 (the date immediately prior to the combination of Covia
Partnership and The Galileo Company Ltd.) and for the period January 1 to
September 15, 1993 have been derived from the consolidated financial statements
of Covia Partnership, which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The selected historical consolidated
financial data presented below as of and for the year ended December 31, 1992
have been derived from the audited consolidated financial statements of Covia
Partnership. The selected historical consolidated financial data presented below
as of and for the three months ended March 31, 1996 and 1997 have been derived
from the unaudited consolidated financial statements of the Galileo Partnership.
The unaudited consolidated financial statements of the Galileo Partnership have
been prepared on a basis consistent with the audited consolidated financial
statements and, in the opinion of management, include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of such information. The results for any interim period are not
necessarily indicative of the results for a full fiscal year. All of the
selected data presented below should be read in conjunction with "Pro Forma
Condensed Combined Financial Information," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the consolidated financial
statements of the Galileo Partnership, the consolidated financial statements of
ATS and the other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD PERIOD
JANUARY 1 SEPTEMBER 16 THREE MONTHS
YEAR ENDED TO TO YEAR ENDED DECEMBER 31, ENDED MARCH 31,
DECEMBER 31, SEPTEMBER 15, DECEMBER 31, -------------------------- ---------------
1992 1993(1) 1993(1) 1994 1995 1996 1996 1997
------------ ------------- ------------ ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues(2).................... $527.4 $398.3 $ 188.4 $813.8 $966.4 $1,088.3 $279.2 $307.6
Operating expenses(3).......... 444.5 333.9 312.6 744.5 826.1 912.9 227.2 241.3
------ ------ ------- ------ ------ -------- ------ ------
Operating income (loss)........ 82.9 64.4 (124.2) 69.3 140.3 175.4 52.0 66.3
Other income (expense),
net(4)....................... 0.2 -- (16.4) (16.1) (16.6) (8.3) (2.0) (0.4)
------ ------ ------- ------ ------ -------- ------ ------
Income (loss) before income
taxes........................ 83.1 64.4 (140.6) 53.2 123.7 167.1 50.0 65.9
Income taxes(5)................ -- -- -- 4.4 2.6 1.9 0.5 0.4
------ ------ ------- ------ ------ -------- ------ ------
Income (loss) before cumulative
effect of accounting
change....................... 83.1 64.4 (140.6) 48.8 121.1 165.2 49.5 65.5
Cumulative effect of accounting
change(6).................... -- 17.4 -- -- -- -- -- --
------ ------ ------- ------ ------ -------- ------ ------
Net income (loss).............. $ 83.1 $ 47.0 $(140.6) $ 48.8 $121.1 $ 165.2 $ 49.5 $ 65.5
====== ====== ======= ====== ====== ======== ====== ======
BALANCE SHEET DATA (AT END OF
PERIOD):
Current assets................. $132.0 $167.6 $ 141.1 $133.8 $187.3 $ 240.8 $249.2 $278.5
Total assets................... 454.0 479.9 608.2 555.5 569.0 599.9 618.7 631.4
Current liabilities............ 98.2 76.8 170.2 191.5 227.6 199.6 224.5 167.0
Long-term debt................. -- -- 340.0 239.8 134.2 70.0 134.2 70.0
Other long-term obligations.... 12.4 49.7 102.8 84.7 77.6 74.9 80.7 72.7
Partners' capital (deficit).... 343.4 353.4 (4.8) 39.5 129.6 255.4 179.3 321.7
OTHER DATA:
Operating income (loss) as a
percentage of revenue........ 15.7% 16.2% (65.9)% 8.5% 14.5% 16.1% 18.6% 21.5%
Percentage of revenue from
non-affiliated customers..... 57.8% 57.2% 61.8% 61.7% 61.6% 64.2% 63.8% 64.5%
Net CRS bookings (in
millions)(7)................. 195.1 159.7 59.7 255.0 285.4 315.5 83.3 88.5
Net cash provided by operating
activities................... $167.5 $ 74.3 $ 26.3 $135.8 $172.6 $ 214.1 $ 17.6 $ 60.4
Capital expenditures(8)........ $ 59.5 $ 33.9 $ 14.9 $ 33.2 $ 64.5 $ 40.0 $ 6.3 $ 11.7
Number of employees............ -- -- -- 1,951 1,891 1,849 -- --
Revenue per employee........... -- -- -- $ .4 $ .5 $ .6 -- --
</TABLE>
(footnotes appear on following page)
21
<PAGE> 26
(footnotes from previous page)
- - -------------------------
(1) On September 16, 1993, the Galileo Partnership was formed by combining Covia
Partnership and The Galileo Company Ltd., and distributing certain
operations to United Airlines and ATS, a newly formed entity. See "The
Company -- The Galileo Partnership." For the period September 16 to December
31, 1993, operating expenses include $120.7 million related to this business
combination.
(2) Revenues include significant transactions with the airline stockholders and
certain of their affiliates. See Note 3 to the consolidated financial
statements of the Galileo Partnership appearing elsewhere in this
Prospectus.
(3) Operating expenses are categorized into cost of operations and commissions,
selling and administrative expenses in the consolidated financial
statements.
(4) Other income (expense), net includes interest expense related to the
issuance of $340 million of debt in connection with the 1993 combination of
Covia Partnership and The Galileo Company Ltd. At March 31, 1997, $70.0
million of debt was outstanding.
(5) No provision for income taxes at the Galileo Partnership level is reflected,
as such liability is the responsibility of the partners. Certain of the
Company's non-U.S. subsidiaries are subject to income tax.
(6) Effective January 1, 1993, the Company adopted FAS 106, "Accounting for
Postretirement Benefits Other Than Pensions," changing the method of
accounting for these benefits. The cumulative effect of adopting FAS 106 as
of January 1, 1993 was a charge of $17.4 million.
(7) Transactions in respect of bookings made in the United States, Canada,
Mexico and Japan have been converted to a net segment equivalent basis.
Bookings made in the rest of the world are reported on a net segment basis.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Overview."
(8) Capital expenditures include purchases of property and equipment and
purchases of computer software. In addition, the capitalization of
internally developed computer software was $18.2 million for the year ended
December 31, 1992, $12.7 million for the period ended September 15, 1993,
$7.0 million for the period ended December 31, 1993, and $25.7 million,
$24.5 million and $21.6 million for the years ended December 31, 1994, 1995
and 1996, respectively. Capitalization of internally developed computer
software was $4.8 million for each of the three months ended March 31, 1996
and 1997.
22
<PAGE> 27
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The accompanying pro forma condensed combined financial statements consist
of the pro forma condensed combined balance sheet as of March 31, 1997 and the
pro forma condensed combined statements of income for the year ended December
31, 1996 and for the three months ended March 31, 1996 and 1997 and are based
upon the historical financial statements of the Galileo Partnership, ATS,
Galileo Nederland and Traviswiss. The pro forma condensed combined financial
statements give pro forma effect to (i) the merger of the Galileo Partnership
into a wholly owned limited liability company subsidiary of Galileo
International, Inc.; (ii) the Offering at an assumed initial public offering
price of $21.50 per share of Common Stock; (iii) the incurrence of $474.9
million of indebtedness under the Credit Agreement; and (iv) the NDC
Acquisitions, assuming such transactions were consummated on March 31, 1997,
with respect to the unaudited pro forma condensed combined balance sheet, and on
January 1, 1996, with respect to the unaudited 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 "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the consolidated financial statements of the Galileo
Partnership, the consolidated financial statements of ATS and the other
financial information included elsewhere in this Prospectus.
23
<PAGE> 28
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1997
UNAUDITED
<TABLE>
<CAPTION>
GALILEO
NEDERLAND PRO FORMA ADJUSTMENTS
GALILEO AND -------------------------- PRO FORMA
PARTNERSHIP ATS TRAVISWISS DEBIT CREDIT COMBINED
----------- --- ---------- ----- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 71,163 $ 66,602 $ 670 $ 240,810(a) $ (710,000)(b) $ 71,163
474,590(c) (5,400)(g)
(67,272)(e)
Accounts receivable, net.......... 190,060 58,146 6,990 (40,882)(d) 214,314
Other current assets.............. 17,267 2,855 4,167 14,272(f) (3,867)(e) 34,694
-------- -------- ------- ---------- ---------- ----------
Total current assets................ 278,490 127,603 11,827 729,672 (827,421) 320,171
Property and equipment, at cost:
Land.............................. 5,070 2,430 -- 7,500
Buildings and improvements........ 64,752 2,292 -- 67,044
Equipment......................... 240,520 80,571 3,557 (312)(e) 324,336
Equipment held for lease.......... -- 329,953 1,377 331,330
-------- -------- ------- ---------- ---------- ----------
310,342 415,246 4,934 -- (312) 730,210
Less accumulated depreciation..... 203,828 327,433 -- (204)(e) 531,057
-------- -------- ------- ---------- ---------- ----------
Net property and equipment.......... 106,514 87,813 4,934 204 (312) 199,153
Computer software, net.............. 241,799 -- -- 241,799
Intangible assets................... -- -- -- 372,000(g) 616,468
244,468(g)
Other noncurrent assets............. 4,637 17,864 -- 28,293(f) 88,294
37,200(g)
300(c)
-------- -------- ------- ---------- ---------- ----------
$631,440 $233,280 $16,761 $1,412,137 $ (827,733) $1,465,885
======== ======== ======= ========== ========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable.................. $ 20,461 $ 29,003 $ 8,521 $ (3,641)(d) $ 50,691
(3,653)(e)
Accrued commissions............... 79,006 -- -- (37,241)(d) 41,765
Distributions payable............. -- -- -- 76,262(i) 76,262
Other accrued liabilities......... 67,515 29,333 583 (81)(e) 10,600(g) 107,950
Long-term debt, current portion... -- -- 1,486 (1,486)(e) --
-------- -------- ------- ---------- ---------- ----------
Total current liabilities........... 166,982 58,336 10,590 (46,102) 86,862 276,668
Other accrued liabilities........... 72,687 17,103 -- 4,453(h) 170,326
54,883(f)
21,200(g)
Long-term debt, less current
portion........................... 70,000 -- 1,726 (1,726)(e) 474,890(c) 544,890
Capital stock....................... -- -- 1,402 (1,402)(b) 1,000(a) 1,000
Additional paid-in capital.......... -- -- 10,565 (10,565)(b) 561,581(a) 485,319
(76,262)(i)
Retained earnings (accumulated
deficit).......................... -- -- (7,522) (12,318)(f) 7,522(b) (12,318)
Partners' capital, including
cumulative translation losses..... 321,771 157,841 -- (67,272)(e) --
(90,569)(b)
(321,771)(a)
-------- -------- ------- ---------- ---------- ----------
$631,440 $233,280 $16,761 $ (627,987) $1,212,391 $1,465,885
======== ======== ======= ========== ========== ==========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
24
<PAGE> 29
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 1997
UNAUDITED
<TABLE>
<CAPTION>
GALILEO
NEDERLAND PRO FORMA ADJUSTMENTS
GALILEO AND ------------------------ PRO FORMA
PARTNERSHIP ATS TRAVISWISS DEBIT CREDIT COMBINED
----------- --- ---------- ----- ------ ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Services revenues............. $307,646 $101,769 $10,002 $ (88,004)(j) $ 15,462(n) $346,875
Costs and expenses:
Cost of operations.......... 61,265 53,618 6,388 7,813(k) (2,048)(j) 127,036
Commissions, selling and
administrative............ 180,070 19,194 1,598 15,462(n) (85,956)(j) 130,368
-------- -------- ------- --------- -------- -----------
241,335 72,812 7,986 23,275 (88,004) 257,404
-------- -------- ------- --------- -------- -----------
Operating income.............. 66,311 28,957 2,016 (111,279) 103,466 89,471
Other income (expense):
Interest income (expense),
net....................... (1,774) 626 (67) (8,311)(l) (9,526)
Other, net.................. 1,370 105 9 1,484
-------- -------- ------- --------- -------- -----------
Income before income taxes.... 65,907 29,688 1,958 (119,590) 103,466 81,429
Income taxes.................. 415 -- 142 31,852(m) 32,409
-------- -------- ------- --------- -------- -----------
Net income.................... $ 65,492 $ 29,688 $ 1,816 $(151,442) $103,466 $ 49,020
======== ======== ======= ========= ======== ===========
Pro forma weighted average
number of shares
outstanding................. 100,000,000
===========
Pro forma earnings per
share....................... $ .49
===========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
25
<PAGE> 30
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
GALILEO
NEDERLAND PRO FORMA ADJUSTMENTS
GALILEO AND ----------------------- PRO FORMA
PARTNERSHIP ATS TRAVISWISS DEBIT CREDIT COMBINED
----------- --- ---------- ----- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Services revenues............. $279,177 $98,241 $10,220 $ (86,698)(j) $ 14,235(n) $315,175
Costs and expenses:
Cost of operations.......... 62,877 52,842 8,252 7,813(k) (3,274)(j) 128,510
Commissions, selling and
administrative............ 164,278 17,841 1,271 14,235(n) (83,424)(j) 114,201
-------- ------- ------- --------- -------- -----------
227,155 70,683 9,523 22,048 (86,698) 242,711
-------- ------- ------- --------- -------- -----------
Operating income.............. 52,022 27,558 697 (108,746) 100,933 72,464
Other income (expense):
Interest income (expense),
net....................... (2,335) 2,066 (67) (8,311)(l) (8,647)
Other, net.................. 284 441 8 733
-------- ------- ------- --------- -------- -----------
Income before income taxes.... 49,971 30,065 638 (117,057) 100,933 64,550
Income taxes.................. 481 -- 76 25,779(m) 26,336
-------- ------- ------- --------- -------- -----------
Net income.................... $ 49,490 $30,065 $ 562 $(142,836) $100,933 $ 38,214
======== ======= ======= ========= ======== ===========
Pro forma weighted average
number of shares
outstanding................. 100,000,000
===========
Pro forma earnings per
share....................... $ .38
===========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
26
<PAGE> 31
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
GALILEO
NEDERLAND
GALILEO AND PRO FORMA ADJUSTMENTS PRO FORMA
PARTNERSHIP ATS TRAVISWISS DEBIT CREDIT COMBINED
----------- --- ---------- ----- ------ ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Services revenues.............. $1,088,259 $379,977 $38,052 $(331,174)(j) $ 55,688(n) $1,230,802
Costs and expenses:
Cost of operations........... 250,788 213,411 31,014 31,253(k) (12,013)(j) 514,453
Commissions, selling and
administrative............. 662,132 81,595 5,596 55,688(n) (319,161)(j) 485,850
---------- -------- ------- --------- --------- -----------
912,920 295,006 36,610 86,941 (331,174) 1,000,303
---------- -------- ------- --------- --------- -----------
Operating income............... 175,339 84,971 1,442 (418,115) 386,862 230,499
Other income (expense):
Interest income (expense),
net........................ (8,060) 4,712 (333) (33,242)(l) (36,923)
Other, net................... (181) 1,342 137 1,298
---------- -------- ------- --------- --------- -----------
Income before income taxes..... 167,098 91,025 1,246 (451,357) 386,862 194,874
Income taxes................... 1,882 -- 106 77,519(m) 79,507
---------- -------- ------- --------- --------- -----------
Net income..................... $ 165,216 $ 91,025 $ 1,140 $(528,876) $ 386,862 $ 115,367
========== ======== ======= ========= ========= ===========
Pro forma weighted average
number of shares
outstanding.................. 100,000,000
===========
Pro forma earnings per share... $1.15
===========
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
27
<PAGE> 32
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS)
The accompanying pro forma condensed combined balance sheet reflects the
following pro forma adjustments as if the transactions giving rise thereto had
been consummated on March 31, 1997:
(a) To reflect the merger of the Galileo Partnership with and into a
wholly owned limited liability company subsidiary of Galileo International,
Inc. and the initial public offering of 12,000,000 shares of Common Stock
of the Company at an assumed initial public offering price of $21.50 per
share, resulting in estimated net proceeds to the Company of approximately
$240,810.
(b) To record the acquisitions of ATS, Galileo Nederland and
Traviswiss for $700,000, $2,000 and $8,000, respectively, and the transfer
of equity to additional paid-in capital.
(c) To record the estimated net proceeds from borrowings of $474,590
under the Credit Agreement, net of estimated debt issuance costs of $300.
(d) To record the elimination of the intercompany accounts between the
Galileo Partnership and ATS, Galileo Nederland, and Traviswiss upon the
combination of the entities.
(e) To record the elimination of assets not acquired and liabilities
not assumed as part of the NDC Acquisitions. The Company is currently in
discussions with United Airlines whereby a portion of the ATS cash may be
retained by the Company and paid to United Airlines within one year of
consummation of the Offering.
(f) To record deferred income taxes resulting from the incorporation
of the combined entities. Not reflected in the pro forma condensed combined
statements of income is the nonrecurring charge to income tax expense to
reflect the establishment of deferred tax assets and liabilities for the
Company at the time of the merger of the Galileo Partnership into a wholly
owned limited liability company subsidiary of Galileo International, Inc.
(g) To record the payments made in connection with the NDC
Acquisitions and the termination of certain revenue sharing obligations, as
follows:
<TABLE>
<S> <C>
Purchase price of the NDC Acquisitions and initial payments
due in connection with the termination of certain revenue
sharing obligations....................................... $715,400
Fair market value of net tangible assets acquired........... (97,985)
Fair market value of intangible assets acquired............. (372,000)
Asset recorded in connection with the termination of certain
revenue sharing obligations............................... (37,200)
Liability incurred in connection with the termination of
certain revenue sharing obligations....................... 31,800
Net pension liability recognized............................ 4,453
--------
Excess of purchase price over fair value of the net assets
of businesses acquired.................................... $244,468
========
</TABLE>
(h) To record the estimated net pension liability of $4,453 to be
assumed as a result of the acquisition of ATS. The pro forma net pension
liability to be assumed is based on an estimate, prepared by ATS's
actuaries, of the amounts of pension obligations and plan assets
attributable to employees of ATS as of December 31, 1996. The actual
obligation assumed will depend upon the amounts of pension obligations and
plan assets, as determined by the Company's actuaries, at the date that the
acquisition occurs.
(i) To record the estimated distributions to the Galileo Partnership's
partners of undistributed earnings of the Galileo Partnership through March
31, 1997.
28
<PAGE> 33
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS)
The accompanying pro forma condensed combined statements of income for the
year ended December 31, 1996 and for the three months ended March 31, 1996 and
1997 reflect the following pro forma adjustments as if the transactions giving
rise thereto had been consummated on January 1, 1996:
(j) To record the elimination of intercompany revenues and expenses
between the Galileo Partnership, ATS, Galileo Nederland and Traviswiss upon
the combination of the entities.
(k) To record the annual amortization of the pro forma excess of the
purchase price over the fair value of the net assets of businesses acquired
of $9,779 and annual amortization of other intangibles acquired of $21,474
in association with the NDC Acquisitions. The excess of the purchase price
over the fair value of the net assets of businesses acquired is amortized
over 25 years based on technological and economic factors. The intangible
assets acquired are amortized over 19 years based on ATS's experience with
managing customer relationships.
(l) To record interest expense and amortization of deferred financing
costs associated with the additional borrowings under the Credit Agreement
at an estimated rate of 7.0% per annum.
(m) To record the estimated income tax expense related to pre-tax pro
forma condensed combined income of the combined entities at the Company's
estimated effective tax rate of approximately 40%.
(n) To conform the accounting policy of ATS related to subscriber
incentive payments to the accounting policy of the Galileo Partnership.
29
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Prior to the consummation of the Offering, the business of the Company was
conducted through the Galileo Partnership. Immediately prior to the consummation
of the Offering, the Galileo Partnership will be merged into a wholly owned
limited liability company subsidiary of Galileo International, Inc. As a result
of this merger, (i) the Company will become subject to U.S. federal and state
income taxes that were previously borne by the partners of the Galileo
Partnership and (ii) the Company will incur 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 stockholders'
partnership interests will be replaced with Common Stock of the Company in the
same proportion as that of their respective partnership interests in the Galileo
Partnership.
The Company generates most of its revenues from the provision of electronic
global distribution services. Booking fees are the primary source of this
revenue and are charged to travel vendors for reservations made through the
Company. Booking fees depend on several factors, including the type of
reservation booked (primarily air, car rental or hotel), the location of the
booking and the level of travel vendor participation in the Company's systems.
The booking fee structure to airlines varies based upon the location of the
subscriber generating the booking. For bookings made in the United States,
Canada, Mexico and Japan, the Company charges airlines a fee per transaction
and, thereby, earns a separate fee for each booking and for each cancellation.
In the rest of the world, the Company charges airlines a booking fee per "net
segment." In that case, the Company earns a fee for net bookings (gross
bookings, less cancellations). Globally, non-air travel vendors are generally
charged a fee per net booking. The Company also charges premiums for higher
levels of functionality selected by the travel vendors. Since April 1996, all
booking fees and related premiums have been charged and paid in U.S. dollars.
See "Business -- Electronic Global Distribution Services -- Customer Base:
Travel Vendors."
In addition to booking fees and related premiums paid by travel vendors,
subscribers generally pay NDCs fees for hardware, software and certain services.
Such fees are often discounted or waived for travel agency subscribers,
depending upon the level of bookings generated by the travel agency. In highly
competitive markets, the Company often makes incentive payments to travel agency
subscribers that achieve defined productivity or booking volume growth
objectives.
The Company also provides information services to airlines, including
certain of its airline stockholders. The Company currently provides fares
quotation services, internal reservation services, other internal management
services and software development services to such airlines. See "Business --
Information Services."
The Company's earnings can be significantly impacted by events that affect
the travel industry. Such impact is typically caused by economic and other
conditions that decrease the number of bookings made through the Company's
systems as a result of decreased demand for airline seats and other travel
services. Other events, such as increased airline competition from low cost
carriers, excess capacity or deterioration of an airline's financial condition,
can often cause fare promotions within the airline industry. This may result in
an increased number of transactions and bookings for the Company, thereby
stimulating the Company's revenue-earning capability.
30
<PAGE> 35
The following table summarizes revenues by affiliation and geographic
location as a percentage of total revenues for each of the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------- THREE MONTHS ENDED
1994 1995 1996 MARCH 31, 1997
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Affiliated customers(1).......................... 38.3% 38.4% 35.8% 35.5%
Non-affiliated customers......................... 61.7 61.6 64.2 64.5
------ ------ ------ --------
Total revenues.............................. 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ========
United States(2)................................. 59.2% 52.4% 49.2% 47.9%
Rest of world(2)................................. 40.8 47.6 50.8 52.1
------ ------ ------ --------
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.
Revenues from affiliated customers have decreased as a percentage of total
revenues, as a result of the continued growth of booking volumes from
non-affiliated travel vendors. Non-affiliated customer revenue has increased at
a compound annual growth rate of 17.9% for the three-year period ended December
31, 1996 compared to a compound annual growth rate of 15.6% for total revenues
for the same period. Of the revenue generated in 1996, approximately 35.8% was
earned from affiliates, including $355.5 million and $34.4 million related to
electronic global distribution services and information services, respectively.
The Company has a strong international presence and expects revenues
generated by international travel agency bookings to continue to increase as a
percentage of total revenues as a result of expansion in key areas such as the
Asia/Pacific region, including high growth markets such as India and Thailand.
Revenues generated outside of the United States increased from 40.8% of total
revenues in 1994 to 50.8% of total revenues in 1996. Revenues earned outside of
the United States have increased at a compound annual growth rate of 29.1% for
the three-year period ended December 31, 1996, compared to a compound annual
growth rate of 5.4% for revenues from the United States and a compound annual
growth rate of 15.6% for total revenues for the same period.
The Company's expenses consist primarily of commissions paid to NDCs, costs
associated with the operation of the Data Center and wages and benefits payable
to employees of the Company. Substantially all of the Company's expenses are
denominated and paid in U.S. dollars, with the exception of operating expenses
incurred outside of the United States. Costs of operations shown on the
Company's statements of income consist primarily of the costs of operating the
Data Center (including wages and benefits of Data Center and other technical
services personnel, and hardware, software and communications costs) and costs
of operating Company-owned NDCs. Commissions, selling and administrative
expenses shown on the Company's statements of income consist primarily of
commissions payable to NDCs and other costs of the Company's selling and
administrative functions. 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.
The Company currently owns nine NDCs and, concurrent with the Offering,
subject to receipt of Dutch regulatory approval with respect to the acquisition
of Galileo Nederland, will purchase three additional NDCs. The Company has also
entered into a non-binding letter of intent with Air Canada to purchase its
wholly owned NDC, Galileo Canada Distributions Systems Inc. See "The Company --
The NDC Acquisitions." The Company is evaluating and will continue to evaluate
the acquisition of other NDCs. See "Business -- Strategy -- Expanding Influence
Through Vertical Integration and Strategic Alliances." The NDC Acquisitions will
result in the assumption of the operating costs of the acquired NDCs, offset by
(i) increased revenues related to charges to travel agency subscribers for the
provision of hardware needed to access the Company's systems and, in the case of
ATS, information services provided to United Airlines and (ii) the elimination
of commission payments to these NDCs. Increased interest expense and
amortization of goodwill
31
<PAGE> 36
and intangibles will also occur as a result of the NDC Acquisitions. See "Pro
Forma Condensed Combined Financial Information."
Aggregate wages and benefits grew at a compound annual rate of 2.9% for the
three-year period ended December 31, 1996, compared to a compound annual growth
rate of 15.6% for total revenues for the same period, reflecting the Company's
operating leverage and commitment to controlling costs and improving employee
productivity, while still providing competitive compensation packages to
employees. In addition, communications costs per booking have decreased,
reflecting economies of scale and rate reductions negotiated with service
providers. Approximately 48.1% of operating expenses was paid to affiliates in
1996, primarily representing commissions paid to NDCs owned by the airline
stockholders.
Operating income increased as a percentage of revenue from 8.5% in 1994 to
16.1% in 1996. This improvement in operating margin has been a key Company
objective in recent years, achieved through expense control initiatives such as
headcount rationalization and favorable supplier negotiations which have allowed
the Company to capitalize on its purchasing power. In addition, the use of newer
and lower-cost technology alternatives contributed to increased operating
income.
SEASONALITY
The travel industry is seasonal in nature. Historically, bookings and the
fees earned for such bookings are significantly lower each year in the fourth
quarter, primarily in December. This decrease is due to early bookings by
customers for holiday travel and due to a decrease in business travel during the
holiday season.
The following table summarizes certain quarterly financial and other data
for the Company for 1995 and 1996:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN MILLIONS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
1995:
Revenues................................................ $242.8 $251.2 $247.9 $224.5
Operating income........................................ $ 40.4 $ 38.3 $ 36.7 $ 24.9
Net income.............................................. $ 35.5 $ 35.2 $ 31.8 $ 18.6
Operating income as a percentage of revenue............. 16.6% 15.2% 14.8% 11.1%
Net CRS bookings(1)..................................... 75.1 74.2 72.5 63.6
1996:
Revenues................................................ $279.2 $278.0 $277.6 $253.5
Operating income........................................ $ 52.0 $ 50.0 $ 43.9 $ 29.5
Net income.............................................. $ 49.5 $ 46.7 $ 41.4 $ 27.6
Operating income as a percentage of revenue............. 18.6% 18.0% 15.8% 11.6%
Net CRS bookings(1)..................................... 83.3 80.6 80.3 71.3
</TABLE>
- - -------------------------
(1) Transactions in respect of bookings made in the United States, Canada,
Mexico and Japan have been converted to a net segment basis. Bookings made
in the rest of the world are reported on a net segment basis. See
"Business -- Electronic Global Distribution Services -- Customer Base:
Travel Vendors."
Except for the fourth quarter, the seasonality reflected above is not
necessarily indicative of future quarterly results as the Company cannot predict
the timing of airline fare promotions or their impact on the Company's quarterly
results.
32
<PAGE> 37
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's
consolidated statements of income expressed as a percentage of total revenues
for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------- -------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses.......................... 91.5 85.5 83.9 81.4 78.5
----- ----- ----- ----- -----
Operating income............................ 8.5 14.5 16.1 18.6 21.5
Other expenses, net......................... 2.0 1.7 0.7 0.7 0.1
----- ----- ----- ----- -----
Income before income taxes.................. 6.5 12.8 15.4 17.9 21.4
Income taxes(1)............................. 0.5 0.3 0.2 0.2 0.1
----- ----- ----- ----- -----
Net income........................ 6.0% 12.5% 15.2% 17.7% 21.3%
===== ===== ===== ===== =====
</TABLE>
- - -------------------------
(1) As a general partnership, the Company was not subject to U.S. federal or
state income tax, but certain of its non-U.S. subsidiaries were subject to
income tax. As a corporation, in future periods the Company will be subject
to U.S. federal and state income tax.
First Quarter 1997 Compared to First Quarter 1996
REVENUES. Revenues increased $28.4 million, or 10.2%, to $307.6 million for
the first quarter of 1997 from $279.2 million for the first quarter of 1996.
Electronic global distribution services revenues related to airline bookings
increased 10.5% in the first quarter of 1997 compared to the first quarter of
1996. Electronic global distribution services revenues related to bookings of
car rentals and hotel reservations increased 8.5% and 19.6%, 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 $14.1 million, or 6.2%, to
$241.3 million for the first quarter of 1997 from $227.2 million for the first
quarter of 1996. NDC commissions and subscriber incentive payments increased
$10.8 million, or 7.6%, to $152.3 million for the first quarter of 1997 from
$141.5 million for the first quarter of 1996. The remaining operating expenses
increased $3.3 million, or 3.9%, to $89.0 million for the first quarter of 1997
from $85.7 million for the first quarter of 1996, as a result of the Company's
continued focus on expense management.
OTHER EXPENSES, NET. Other expenses, net include interest expense, net of
interest income, and foreign exchange gains or losses. Other expenses, net
decreased $1.6 million, or 80.0%, to $.4 million for the first quarter of 1997
from $2.0 million for the first quarter of 1996. 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
during the first quarter of 1997 as compared to the first quarter of 1996.
NET INCOME. Net income increased $16.0 million, or 32.3%, to $65.5 million
for the first quarter of 1997 from $49.5 million for the first quarter of 1996.
Net income as a percentage of revenues increased to 21.3% from 17.7% over the
same periods. The provision for income taxes, related to income taxes payable by
non-U.S. subsidiaries, remained relatively unchanged at $.4 million and $.5
million, respectively, for the first quarters of 1997 and 1996.
1996 Compared to 1995
REVENUES. Revenues increased $121.9 million, or 12.6%, to $1,088.3 million
in 1996 from $966.4 million in 1995. Aggregate electronic global distribution
services revenues increased 14.0% in 1996. Electronic global distribution
services revenues related to airline bookings increased 13.3% in 1996.
Electronic global distribution services revenues related to bookings of car
rentals and hotel reservations increased 15.9% and 33.0%,
33
<PAGE> 38
respectively, over the same period. This revenue growth was principally the
result of increased worldwide booking volumes and participation by travel
vendors in the Company's systems at increased levels of functionality.
Information services revenues decreased $7.5 million from 1995 to 1996 primarily
as a result of the Company's decision to discontinue a line of business during
1995.
OPERATING EXPENSES. Operating expenses increased $86.8 million, or 10.5%,
to $912.9 million in 1996 from $826.1 million in 1995 while revenues increased
12.6%, resulting in an improved operating margin and a decrease in operating
expenses as a percentage of revenues to 83.9% in 1996 from 85.5% in 1995. This
improvement in operating margin reflected 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 $67.5 million,
or 14.0%, to $549.0 million in 1996 from $481.5 million in 1995, 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. Wages and
benefits increased only $2.2 million, or 1.6%, to $142.5 million in 1996 from
$140.3 million in 1995, as salary and benefit increases were largely offset by
management's efforts to increase productivity and optimize headcount. Equipment
maintenance and communications costs were relatively unchanged as a result of
negotiated savings with vendors.
OTHER EXPENSES, NET. In 1996, interest expense was $11.3 million, a decline
of $7.6 million, or 40.2%, from $18.9 million in 1995 as a result of the
repayment of $81.4 million of indebtedness early in 1996 and 1995 debt
repayments of $68.6 million.
NET INCOME. Net income increased $44.1 million, or 36.4%, to $165.2 million
in 1996 from $121.1 million in 1995. Net income as a percentage of revenues
increased to 15.2% from 12.5% over the same period.
1995 Compared to 1994
REVENUES. Revenues increased $152.6 million, or 18.8%, to $966.4 million in
1995 from $813.8 million in 1994. Electronic global distribution services
revenues related to airline bookings increased 19.4% in 1995. Electronic global
distribution services revenues related to bookings of car rentals and hotel
reservations increased approximately 11.5% and 25.2%, respectively. The strong
revenue growth was principally attributable to increased booking volumes
throughout the world and, to a lesser extent, exchange rate gains arising from
the fact that pricing in certain regions was ECU based. In April 1996, in an
effort to better match the Company's revenues with its expenses, the Company
converted to dollar-based pricing worldwide, thus eliminating future foreign
exchange risk related to revenues.
OPERATING EXPENSES. Operating expenses increased $81.6 million, or 11.0%,
to $826.1 million in 1995 from $744.5 million in 1994. Operating expenses as a
percentage of revenues decreased to 85.5% in 1995 from 91.5% in 1994. Commission
payments to NDCs and subscriber incentive payments increased $77.3 million, or
19.1%, to $481.5 million in 1995 from $404.2 million in 1994. Other operating
expenses increased $4.3 million, or 1.3%, to $344.6 million in 1995 from $340.3
million in 1994. In 1995, efficiencies from the September 1993 combination of
Covia Partnership and The Galileo Company Ltd. began to have a favorable impact
on operating expenses, especially in the areas of wages and benefits, equipment
leases and related software, and travel.
OTHER EXPENSES, NET. Interest expense decreased $7.0 million, or 27.0%, to
$18.9 million in 1995 from $25.9 million in 1994 primarily as a result of the
repayment of $70.0 million and $68.6 million of indebtedness during 1995 and
1994, respectively, offset by foreign currency fluctuations and other expense
items.
NET INCOME. Net income increased $72.3 million, or 148.2%, to $121.1
million in 1995 from $48.8 million in 1994 primarily as a result of strong
revenue growth compounded by operating efficiencies. Net income as a percentage
of revenues increased to 12.5% from 6.0% over the same periods. Income tax
expense, related to income taxes of foreign subsidiaries, decreased $1.8
million, or 40.9%, to $2.6 million in 1995 from $4.4
34
<PAGE> 39
million in 1994 as a result of the establishment of a one-time tax provision in
1994 related to taxation in the United Kingdom.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $71.2 million and working capital totaled
$111.5 million at March 31, 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 March 31, 1997 resulted
from strong operating results in the first quarter of 1997. Cash and cash
equivalents increased significantly in 1996 to $78.2 million at December 31,
1996 from $8.4 million at December 31, 1995 despite the repayment of $81.4
million of indebtedness. As a result of the Company's ability to accelerate the
repayment of indebtedness, the Company's $340.0 million of indebtedness at
September 30, 1993 was reduced to $70.0 million at March 31, 1997.
The Company's net cash provided by operating activities has grown at a
compound annual growth rate of 25.6% to $214.1 million in 1996 from $135.8
million in 1994. This strong growth was primarily attributable to increased net
income, which grew at a compound annual growth rate of 84.0% for the same
period. Cash in excess of operating requirements is invested daily in liquid,
income-producing investments, generally having a maturity of three months or
less.
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. The Company believes future capital expenditures will consist of similar
items. The Company expects to purchase equipment that will be provided to
subscribers by Company-owned NDCs to upgrade existing computer equipment and to
accommodate subscriber base growth. Capital expenditures, excluding the
capitalization of internally developed software, were $33.2 million, $64.5
million and $40.0 million for 1994, 1995 and 1996, respectively. The increased
1995 capital spending resulted principally from the procurement of mainframe
data processing hardware and investments in automation of certain Data Center
operations. The Company estimates that annual capital expenditures in the years
immediately following the Offering will range from $110.0 million to $120.0
million. A portion of this increase arises from the purchase of subscriber
equipment previously purchased by the acquired NDCs. The Company estimates that
the total cost of year 2000 compliance will be approximately $19.0 million, of
which $11.0 million is expected to be incurred in 1997. See "Risk Factors --
Year 2000 Compliance."
The Company is a party to a credit agreement with an international group of
banks (the "Credit Agreement") which provides for a $200 million revolving
credit facility that matures in July 2001. No principal payments are required
until the maturity date. Interest on the outstanding balance is based on a
moving one-month, three-month or six-month (depending on the length of
borrowing) London Interbank Offer Rate ("LIBOR") (5.5% at December 31, 1996),
plus a margin that fluctuates quarterly based on the Company's "cash flow
ratio." At December 31, 1996, the margin was an annual rate of .2625%. The
Credit Agreement limits, among other things, the sale of fixed assets, dividends
and issuance of debt, and it requires that the Company maintain minimum levels
of tangible capital, as well as threshold ratios for interest coverage and cash
flow. As of December 31, 1996, the Company was in compliance with the covenants
of the Credit Agreement. As of March 31, 1997, $70.0 million was outstanding
under the Credit Agreement.
The Company expects that, prior to the consummation of the Offering, the
Credit Agreement will be amended and restated so as to increase the revolving
credit facility to $600 million. The net proceeds of the Offering, together with
additional borrowings under the Credit Agreement as so amended, will be used by
the Company to fund the $710.0 million aggregate purchase price for the NDC
Acquisitions and to fund initial payments of $5.4 million in connection with the
termination of certain revenue sharing obligations. See "The Company -- The NDC
Acquisitions" and "Use of Proceeds." The Company expects to repay borrowings
under the Credit Agreement within approximately five years of the consummation
of the Offering using cash generated by operating activities.
The Company has entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its outstanding line of credit. At
December 31, 1996, the Company had five interest rate swap
35
<PAGE> 40
agreements, having a total notional value of approximately $120.3 million with
fixed interest rates averaging 5.075%. For the year ended December 31, 1996, the
effective interest rate on outstanding borrowings under the Credit Agreement was
5.7625%. The Company accounts for its interest rate swap agreements as an
adjustment to interest expense. The Company is exposed to credit loss in the
event of nonperformance by the counterparties to the interest rate swap
agreements. However, the Company's exposure to any credit loss due to
nonperformance by the counterparties is mitigated by the fact that such
counterparties are major financial institutions. The interest rate swap
agreements mature in December 1998.
The Company also enters into foreign exchange hedging contracts to manage
exposure to fluctuations in foreign exchange rates related to the funding of its
United Kingdom operations. The arrangements consist of foreign exchange forward
contracts with creditworthy counterparties. At December 31, 1996, the Company
had entered into foreign exchange forward contracts which provide for purchases
of approximately L3.5 million per month through December 31, 1997.
The Company expects that future cash requirements will principally be for
capital expenditures, repayments of indebtedness under the Credit Agreement,
acquisitions of additional NDCs, potential new initiatives in the information
services business and working capital requirements. The Company believes that
cash generated by operating activities will be sufficient to fund its future
cash requirements, except that significant NDC acquisitions may require
additional borrowings under the Credit Agreement.
In connection with the NDC Acquisitions, the Company will enter into
Services Agreements with the sellers of ATS, Traviswiss and Galileo Nederland
whereby such sellers will provide services to the Company related to growing the
respective business operations of the acquired NDCs. Pursuant to such Services
Agreements, the Company will be required to pay the sellers of ATS, Traviswiss
and Galileo Nederland fees of up to $200.0 million, $6.8 million and $4.7
million (each on a present value basis), respectively, in the sixth year
following such NDC acquisitions, contingent upon improvements in the Company's
airline booking fee revenue in the sellers' respective NDC territories over the
five-year period following such NDC acquisitions, as measured by the weighted
average annual air segment growth rate and the weighted average annual price
increase rate. Beginning in the quarter following the consummation of the
Offering, the Company will review and, to the extent deemed appropriate,
establish accruals for these payments based on an evaluation of the likelihood
that the revenue goals required under the terms of these agreements will be met.
See "Relationship with Airline Stockholders and Certain Transactions -- Services
Agreements."
In addition to reinvesting a substantial portion of earnings in its
business, the Company currently intends to pay regular quarterly dividends of
$.05 per share beginning with the dividend payable in the fourth quarter of 1997
with respect to the operations of the Company in the third quarter of 1997.
However, the declaration and payment of dividends, as well as the amount
thereof, are subject to the discretion of the Board of Directors of the Company
and will depend upon the Company's results of operations, financial condition,
cash requirements, future prospects and other factors deemed relevant by the
Board of Directors. There can be no assurance that the Company will declare and
pay any dividends. See "Dividend Policy."
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<PAGE> 41
THE CRS INDUSTRY
The computerized reservation system industry traces its origin to the
internal reservation systems that major United States airlines began to develop
and operate in the 1960s. In the mid 1970s, certain airlines, recognizing the
revenue-generating potential of providing travel agencies with access to these
systems, began to install proprietary CRS terminals within travel agencies.
These early reservation systems were largely biased in favor of displaying the
services of the airline that owned the CRS, to the disadvantage of competitor
airlines.
Over time, as a result of pressure from travel agencies, other airlines,
non-air travel service providers and various governmental regulatory bodies, CRS
owners increasingly made available schedule and fare information of competing
airlines and other travel vendors. In the 1980s, government regulations were
introduced in the United States and Europe that required CRSs to provide
unbiased access to information relating to all airlines that desired to offer
their services through a CRS. This and other factors led several major airlines
to spin off or create independent CRS companies. Since then, many CRSs have
evolved into global operators. Growth opportunities in international travel
markets, the globalization of the subscriber base and the advantages derived
from economies of scale in systems and operations have, in recent years,
resulted in a number of consolidations and strategic alliances among previously
single-market CRSs.
Today, the CRS industry provides subscribers with real-time access to
schedule, fare and other information and travel booking and ticketing capability
for a broad range of travel vendors. CRSs are now the predominant mode of
distributing travel services to end users. Over 75% of airline bookings made in
the United States are made through CRSs. The CRS industry also facilitates
non-air travel-related transactions, including car, hotel, leisure and other
travel bookings.
The CRS industry is organized around two major customer groups: travel
vendors (airlines, as well as car rental companies, hotels, cruise lines, tour
operators and railroads) and subscribers (travel agencies, corporate travel
departments and individuals). Travel vendors make their travel-related services
(such as airline seats, car rentals and hotel rooms) available for booking
through a CRS. Subscribers access a CRS in order to book travel-related services
on behalf of end users.
Travel Vendors
Airlines constitute the largest group of travel vendors that participate in
CRSs for the distribution of their services. Car rental companies, hotels,
cruise lines, tour operators and railroads also distribute their services
through CRSs. Travel vendors store, display, manage and sell their services
through CRSs. In return, CRSs charge travel vendors booking fees, plus premiums
for higher levels of functionality selected by the travel vendors. These levels
of functionality generally depend upon the type of communications and real-time
access allowed with respect to the particular travel vendor's internal systems.
Subscribers
Travel agencies provide the primary channel of distribution for the
services offered by travel vendors to end users, and constitute the largest
component of the CRS subscriber group. Travel agencies access a CRS using
software, and sometimes hardware, provided by the CRS. Although travel agencies
initiate and complete the bookings, the booking fee is paid by the travel
vendor. Subscribers may pay fees for the use of hardware and software provided
by the CRS. Competition among CRS providers to acquire new travel agencies and
maintain existing relationships is extremely intense and often requires the CRS
to provide volume-based compensation and other economic incentives to travel
agencies, especially mid-sized and larger travel agencies. Travel agencies
select CRSs based on the depth and breadth of the information offered, the
reliability and ease of use of the CRS, the incentives paid to travel agencies
and the range of products available. Larger travel agencies frequently use CRSs
from multiple providers.
Direct Access
Although the travel agency channel is the traditional method of
distribution, direct access is an emerging distribution channel which has
developed through the widespread acceptance of the Internet and other on-line
technology. Direct access allows the travel purchaser to access the CRS or, in
certain circumstances, the travel vendor, directly through desk-top software and
computer on-line services or through the Internet.
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<PAGE> 42
BUSINESS
GENERAL
Galileo International is one of the world's leading providers of electronic
global distribution services for the travel industry. The Company provides
travel agencies at approximately 36,000 locations, as well as other subscribers,
with the ability to access schedule and fare information, book reservations and
issue tickets for 525 airlines. Galileo International also provides subscribers
with information and booking capability covering 48 car rental companies and
more than 200 major hotel chains with approximately 35,000 properties throughout
the world. The Company completed more than 300 million bookings in 1996,
representing an estimated $50 billion in travel services. The Company's travel
agency subscribers operate more than 148,000 computer terminals, all of which
are linked to the Company's Data Center, one of the world's largest commercial
data processing complexes, a system with an uptime performance record of better
than 99.9%. The Company's estimated share of 1996 CRS airline bookings in the
United States was 27%; in Europe its estimated share was 39%.
The Company was founded by 11 major North American and European airlines
and, as of March 31, 1997, distributed its products in 73 countries on six
continents. The Company believes that, based on revenues, it is currently the
most internationally diversified provider of electronic global distribution
services for the travel industry. More than one-half of the Company's 1996
revenues were derived from bookings made by subscribers outside of the United
States. The Company believes that it has attained significant market share in
many of the most important and competitive markets for travel services,
including the United States and markets in Europe, the Middle East, Africa and
the Asia/Pacific region. The Company has entered into and competes in many of
these markets using its network of national distribution companies, a
distribution structure that has enabled the Company to work closely with
associates that possess detailed knowledge of local travel market conditions.
The Company believes that its extensive international business experience, as
well as its experience in operating with an internationally diverse group of
airline stockholders, provides a firm base for expansion into new overseas
markets, many of which offer strong growth potential. In this regard, the
Company intends to focus particular attention on those developing and new CRS
markets that are currently characterized by low travel agency automation, but
which are expected to undergo significant near-term growth in travel volume.
In addition to its core electronic global distribution services business,
the Company offers travel industry-related information services that draw upon
the Company's in-depth knowledge of the industry and its expertise in developing
and operating complex, mission-critical transaction processing systems. The
Company provides the internal reservation system used by United Airlines and
operates GlobalFares, a fares quotation system used by approximately 100
airlines worldwide. The Company intends to explore ways to apply its
technological expertise in new lines of business, including consulting for
airlines and other travel service providers and providing information processing
and network management for travel-related businesses that are increasingly
outsourcing such non-core functions.
STRATEGY
The Company intends to reinforce its position as a leading provider of
electronic global distribution services and to continue to capitalize on its
competitive advantages, the key elements of which are: (i) a leading market
share, (ii) a well-balanced and global presence, (iii) established relationships
with a diverse group of travel vendors and subscribers, (iv) a technologically
advanced information system operated by a highly skilled technical staff, (v) a
comprehensive offering of innovative products and (vi) a strong business
partnership, reinforced through equity ownership, with 11 of the world's leading
airlines. From this base of competitive strengths, the Company plans to pursue a
strategy that includes the initiatives described below.
Expanding Influence Through Vertical Integration and Strategic Alliances
The Company operates globally but believes that in-depth knowledge of the
local travel markets in which it distributes its products is essential to
developing and strengthening its ties to travel vendors and the local travel
agencies which generate high booking volumes. The Company will therefore
continue to attempt to
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<PAGE> 43
expand its influence in local markets by seeking opportunities to vertically
integrate its operations through the acquisition of NDCs in certain mature CRS
markets and, in other markets, by building alliances with influential associates
that understand the local travel market and are positioned to design and
implement successful sales and marketing programs.
In mature CRS markets where the Company enjoys a leading market share, the
Company's NDCs have developed strong commercial relationships with travel
agencies and have established effective sales, marketing and customer support
infrastructures. As a result, the Company believes that it can operate and
compete in these markets without its NDC being allied with an airline owner.
Vertical integration through the acquisition of these NDCs offers the Company an
attractive opportunity to further enhance customer service by allowing the
Company to improve its understanding of customers' product and service
requirements, as well as to increase its control over product design, service
delivery and costs. In particular, the Company believes that ownership of NDCs
in these markets will allow it to provide better and more consistent service to
multinational travel agencies at locations throughout the world. In addition,
vertical integration will enable the Company to capture profits derived from the
distribution of its products and to realize certain operational and overhead
synergies. See "-- Electronic Global Distribution Services -- Product
Distribution."
Expanding the Core Business Through Enhanced Customer Service
The Company strives to provide superior customer service in order to
strengthen relationships with its established base of travel vendors and
subscribers and to attract new travel vendors and subscribers to its core
electronic global distribution services business. The Company recently
reorganized its marketing, sales and distribution functions so that resources
are aligned with its two core groups of customers, travel vendors and
subscribers, rather than by geographic territory or product line. The Company
plans to support this realignment by reallocating its resources so as to
increase the number of account managers. As a result, account management
professionals will cover fewer travel vendors or subscribers and will have
increased responsibility for identifying and satisfying each customer's needs.
Accelerating Product Introduction
The Company intends to accelerate the development and deployment of its
products in the marketplace. To this end, the Company has established a rapid
application development program that is characterized by a set of protocols
which identify speed-to-market as a primary objective. The Company believes that
early introduction of products is an important factor in generating travel
vendor and subscriber interest. The Company includes travel vendors and
subscribers early in the product design process and has succeeded in working
closely with travel vendors and subscribers in the past to develop such
innovative products as GlobalFares, CarMaster and Travelpoint. Through precise
control over product specifications and market introduction, the Company
monitors the development of its products to ensure continuing market viability
and cost effectiveness.
Strengthening Technological Capabilities
The Company refines its information technology on a regular basis in order
to maintain a cost-effective system that is fully integrated from travel vendor
to subscriber and is tailored to individual customer needs. The Company utilizes
an architecture with standard open interfaces and protocols to ensure the
efficient distribution of information among users. Having accomplished a great
number of system performance advancements in recent years, the Company plans to
re-direct many of its technology resources from infrastructure enhancement to
product development.
Participating in Emerging Distribution Channels
Corporate travel departments and individual consumers are demonstrating an
increased interest in direct access products. In response, the Company is
developing new product offerings for travel agencies and travel vendors which
will enable their customers to access travel information through a variety of
media. The Company is introducing products with "intuitive" and graphical user
interface characteristics and expects that these products will enhance ease of
use, and thereby increase acceptance, of direct access products by
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<PAGE> 44
corporate travel departments and individuals. Among the Company's initiatives
are Travelpoint, a desk-top software and network package that links corporate
travel departments and individuals to travel agencies, and a variety of direct
access products branded and distributed by airlines that use the Company's
systems. The Company is currently beta testing a comprehensive corporate travel
management system with several large corporations in Europe and North America.
Identifying and Pursuing Travel-Related Business Opportunities
The Company expects to diversify beyond its core business and expand its
offerings of information services by capitalizing on its travel industry
knowledge, existing customer base and technologically advanced resources to
cross-sell new products. Airlines, travel agencies and other travel-related
businesses continue to face mounting pressure to outsource significant non-core
functions such as information technology management. The Company plans to focus
its attention in this regard exclusively on the travel industry. The Company
believes that its experience in providing information services products to its
airline stockholders and other airlines, coupled with its advanced systems and
technological resources, make it well-suited to provide internal reservation
services and other systems outsourcing to travel-related businesses. In
addition, the Company believes its technical staff is well-qualified to provide
focused travel industry information technology consulting, which represents the
largest related business opportunity and offers attractive margins and
relatively low capital risk. The Company believes that these initiatives will
diversify revenue sources, enhance customer relationships and reinforce the
Company's position as a technological leader in the travel industry.
ELECTRONIC GLOBAL DISTRIBUTION SERVICES
Markets
As of March 31, 1997, the Company provided electronic global distribution
services for the travel industry in 73 countries via a network of more than
148,000 on-line terminals operated at approximately 36,000 travel agency
locations worldwide.
The geographic breadth of the Company is demonstrated by the table below.
<TABLE>
<CAPTION>
TRAVEL AGENCY LOCATIONS TERMINALS AT
AT MARCH 31, 1997 MARCH 31, 1997
------------------------ --------------------- ESTIMATED
REGION NUMBER % NUMBER % MARKET SHARE*
------ ------ ------- ------ ----- -------------
<S> <C> <C> <C> <C> <C>
United States and Mexico............. 12,658 35.3 59,501 40.1 27%
Europe............................... 11,850 33.0 49,916 33.7 39%
Asia/Pacific......................... 4,881 13.6 19,199 13.0 34%
Canada............................... 2,959 8.2 10,225 6.9 59%
Middle East/Africa................... 2,195 6.1 6,726 4.5 63%
Latin America........................ 1,368 3.8 2,601 1.8 21%
------ ----- ------- -----
35,911 100.0% 148,168 100.0%
====== ===== ======= =====
</TABLE>
- - -------------------------
*Based on airline segments booked during the 12 months ended December 31, 1996.
The Company believes that its well-established global presence and
experience in establishing and maintaining successful NDC relationships with
local travel-related businesses position it well to compete for leading market
shares in developing and new CRS markets. "See -- Product Distribution." For
example, through an alliance with GETS Marketing Company entered into in March
1997, the Company is further strengthening its base in a diverse group of
developing and new CRS markets. GETS members, consisting primarily of national
airlines representing 22 markets in which the Company did not have a presence,
signed agreements to distribute the Company's systems to subscribers in Africa,
the Middle East, Eastern Europe, Asia and Latin America. The Company will
continue to evaluate and pursue growth opportunities in other developing and new
CRS markets.
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Customer Base: Travel Vendors
The Company derives substantially all of its revenues from booking fees
paid by travel vendors. In 1996, approximately 92% of the Company's booking fee
revenues were generated from airlines. While revenues from non-air travel
vendors such as car rental companies and hotels accounted for only 8% of the
Company's booking fee revenues in 1996, the number of bookings for car rental
companies and hotels through the Company's systems grew at a compound annual
rate of 18% from 1992 through 1996, reflecting increased subscriber use of the
car and hotel booking capabilities provided through the Company's systems.
Travel vendors store, display, manage and sell their services through the
Company's systems. Airlines and other travel vendors are offered varying levels
of functionality at which they can participate in the Company's systems. These
levels of functionality generally depend upon the type of communications and
real-time access allowed with respect to the particular travel vendor's internal
systems. The lowest level of schedule and availability functionality offered to
airlines, non-linked access, allows an airline to store its inventory data
within the Company's systems with updates accomplished via teletype. Linked
access allows an airline's internal reservation system to interface with the
Company's systems on a real-time basis, facilitating instantaneous
communications between the Company and the airline's inventory management
systems. Interactive Display and Interactive Sell, two of the Company's linked
access products, allow airlines to display actual inventory to subscribers and
permit the guaranteed booking of the last available seat on a particular flight.
Inside Availability, the Company's linked access product with the highest level
of functionality, allows the seamless display and booking of an airline's
services without the need for additional keyboard entries on the part of the
subscriber. Similar levels of linked access are available for other travel
vendors.
The booking fee structure for airlines varies based upon the location of
the subscriber generating the booking. For bookings made in the United States,
Canada, Mexico and Japan, the Company charges airlines a fee per transaction
and, thereby earns a separate fee for each booking and for each cancellation. In
the rest of the world, the Company charges airlines a booking fee per "net
segment." In that case, the Company earns a fee for net bookings (gross
bookings, less cancellations). Globally, non-air travel vendors are generally
charged a fee per net booking. The Company also charges premiums for higher
levels of functionality selected by the travel vendors.
The Company also provides travel vendors marketing data generated from
bookings through the Company's systems for fees that vary based on the type and
amount of information provided. This information assists travel vendors in the
management of their inventory and yields.
Although most of the world's airlines and many non-air travel vendors
participate in the Company's systems, the Company believes that the market for
travel vendor participation has potential for continued growth, both through the
addition of non-air travel vendors and through encouraging travel vendors to
upgrade their level of functionality. In marketing to travel vendors, the
Company emphasizes its global distribution capabilities, the ability of travel
vendors to display information at no charge until a booking is made and its
extensive subscriber network.
Customer Base: Subscribers
The Company offers products to travel agencies and other subscribers that
enable them to electronically locate, price, compare and purchase travel
vendors' services through the Company's systems. By accessing the electronic
marketplace created by the Company's systems, the subscriber is able to obtain
schedule, availability and pricing information, and purchase travel services,
from multiple travel vendors for complex travel itineraries. Focalpoint, the
basic point-of-sale product provided to travel agencies and other subscribers,
is an operating system that allows subscribers to integrate their desktop
applications with the Company's systems. Using other products, such as
CarMaster, RoomMaster and LeisureShopper, subscribers are able to display
information about and make bookings for rental cars, hotel rooms, cruises and
other leisure services through real-time connections to the Company's global
database of travel vendor offerings. Through Travelpoint, a desktop software
package distributed by travel agencies to corporate travel departments and
individual consumers, users may explore travel options and book travel services
through the Company's systems. The client can then provide the travel itinerary
to the travel agency for ticketing.
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<PAGE> 46
The Company's subscriber marketing is directed towards travel agencies,
including multinational travel agencies, corporate travel departments and
individual consumers.
TRAVEL AGENCIES. Travel agencies access the Company's systems using
hardware and software typically provided by the Company or an NDC. The Company
and the NDCs also provide technical support and other assistance to the travel
agencies. Through the NDCs, the Company has relationships with travel agencies
of all sizes throughout the world. In response to competition to establish new
travel agency relationships and maintain existing relationships, the Company
continues to add new products that address the varying business needs of travel
agencies. For example, in May 1997 the Company introduced Client File Plus, an
enhanced software application that allows travel agencies to efficiently manage
travel preferences and profiles of their frequent customers, thereby reducing
the time required to complete bookings for such customers.
MULTINATIONAL TRAVEL AGENCIES. Multinational travel agencies constitute an
important category of subscribers because of the high volume of business that
can be generated through a single relationship. Bookings generated by
multinational travel agencies constituted 19% of the bookings made through the
Company's systems in 1996. The Company has formed distinct customer service
units for its multinational travel agencies at local, regional and global
levels. NDCs manage the relationship at the local level and are responsible for
providing training and managing projects specific to the multinational travel
agency's local office. The Company's regional units support the regional
management structures operated by the multinational travel agencies. The global
relationship with a multinational travel agency's corporate headquarters is
managed by the Company's multinational account management group, which is
primarily responsible for directing global sales, marketing and support
activities and developing the global relationship with multinational travel
agencies.
CORPORATE TRAVEL DEPARTMENTS. Corporate travel departments form a separate
customer group because of their particular travel information and management
system requirements. Corporations typically have established information system
architecture and strategies, specific corporate travel policies and specific
internal accounting requirements with respect to recording travel expenditures.
The Company's products can be tailored to address these differing policies and
accounting system requirements.
INDIVIDUAL CONSUMERS. With the rise in popularity of personal computers,
commercial on-line services and other means of Internet access, individual
consumers increasingly have the ability to purchase services directly from
travel vendors that have electronic distribution capability. Because of the
highly complex nature of the travel industry, with hundreds of competing
providers, constantly changing schedules and often confusing fare structures,
the Company believes the consumer's need for experienced and well-informed
intermediaries will continue despite growing consumer acceptance of and demand
for electronic commerce. The Company has therefore developed or facilitated the
use of direct access products for travel vendors and travel agencies to target
individual consumers. The Company provides software products to travel vendors
and travel agencies which these customers can then distribute to their
end-users.
Product Distribution
The Company distributes its products to subscribers primarily through NDCs.
In a limited number of markets, the Company distributes its products directly to
subscribers without using an NDC. The Company also supports branded direct
access products offered by travel vendors and travel agencies.
NATIONAL DISTRIBUTION COMPANIES. The Company prefers to use the NDC
structure, where feasible, in order to take advantage of the NDC's local market
knowledge, as well as its travel vendor and subscriber relationships. The NDC is
responsible for cultivating the initial relationship with subscribers in its
territory, installing subscribers' computer equipment, maintaining the hardware
and software supplied to the subscribers and providing ongoing customer support.
The NDC earns a share of the booking fees generated from the NDC's territory, as
well as subscriber fees.
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<PAGE> 47
The Company has established NDC relationships in most of the markets in
which its products are distributed. As of March 31, 1997, the Company had
worldwide relationships with 63 NDCs covering 80 countries (including NDCs in
the GETS alliance) broken down into the following three groups.
- COMPANY-OWNED NDCS. Prior to the Offering, the Company owned NDCs in
Belgium, Brazil, France, Germany, Portugal, Spain, Hong Kong, Singapore
and The Philippines. The Company will use the net proceeds of the
Offering to help finance the acquisition of NDCs whose distribution
territories cover the United States, Mexico, certain islands of the
Caribbean, The Netherlands and Switzerland. Collectively, the
Company-owned NDCs (including those to be acquired) manage subscriber
accounts that generated approximately 59% of the Company's 1996 bookings.
- AIRLINE STOCKHOLDER-OWNED NDCS. Affiliates of certain airline
stockholders own the NDCs whose distribution territories cover Austria,
Canada, Greece, Ireland, Italy, Japan and the United Kingdom.
Collectively, these NDCs manage subscriber accounts that generated
approximately 27% of the Company's 1996 bookings.
- ASSOCIATE NDCS. Associates, typically the national airline of the
relevant country or a local travel-related business, own or operate NDCs
that accounted for approximately 14% of the Company's booking volume in
1996.
The table below presents certain information regarding the ten largest NDCs
in terms of travel agency locations supported by such NDCs:
<TABLE>
<CAPTION>
RELATIONSHIP WITH TERRITORY
NDC THE COMPANY SERVED
--- ----------------- ---------
<S> <C> <C>
Apollo Travel Services Company-owned* United States, Mexico, certain
islands of the Caribbean
Sigma Travel Services Airline stockholder-owned Italy
Galileo Canada Airline stockholder-owned Canada
Southern Cross Associate Australia, Cook Islands, Marshall
Islands, New Zealand, Samoa
Galileo United Kingdom Airline stockholder-owned United Kingdom
Traviswiss Company-owned* Switzerland
Galileo Japan Airline stockholder-owned Japan
Galileo Nederland Company-owned* The Netherlands
Galileo Southern Africa Associate South Africa, Lesotho, Namibia
Galileo India Associate India
</TABLE>
- - -------------------------
* Following the Offering.
Mature CRS markets, including the United States, Canada and Western
European countries, are characterized by high levels of travel agency
automation. The Company has a leading market share in those mature CRS markets
where its NDC began as an affiliate of a leading airline, such as the United
States, the United Kingdom, Italy, other markets that are home to the Company's
11 airline stockholders, and markets such as South Africa, Australia and New
Zealand. In other mature CRS markets where the leading airline is allied with a
competing CRS, such as France, Spain and Germany, the Company has generally
established a wholly owned NDC.
In mature CRS markets where the Company enjoys a leading market share, the
Company's NDCs have spent years developing strong commercial relationships with
travel agencies and establishing effective sales, marketing and customer support
infrastructures. As a result, the Company believes that it can operate and
compete in these markets without its NDC being allied with an airline owner. At
the same time, the Company believes there are advantages to acquiring ownership
of these NDCs, including (i) allowing the Company to provide better and more
consistent service to multinational travel agencies across local borders,
thereby stimulating the volume of bookings provided by this important group of
subscribers; (ii) improving the
43
<PAGE> 48
Company's cost structure by eliminating the profit margin component of the
commissions paid to these NDCs; and (iii) realizing operational and economic
synergies through enhanced buying power and the elimination of duplicative
service functions. Consistent with this strategy, with funds provided in part by
the Offering, the Company is acquiring the three NDCs that market the Company's
products in the United States, Mexico, certain islands of the Caribbean,
Switzerland and The Netherlands. The Company is also actively pursuing plans to
acquire or form joint ventures with NDCs in other mature CRS markets where there
are identifiable economic advantages to doing so and where the terms of such
transactions are attractive to the Company. See "The Company -- The NDC
Acquisitions."
Developing CRS markets, such as India and Thailand, are characterized by
low but rapidly advancing levels of travel agency automation. These markets
include many countries experiencing strong economic growth whose citizens are
increasingly able to afford travel. New CRS markets, including China, Russia and
other countries in which the Company has little or no market share, are
characterized by low levels of travel agency automation and low booking
activity. In both developing and new CRS markets, the Company believes that
there is a significant "early mover" advantage. Because of the importance of
solid ties to the local market in both developing and new CRS markets, the
Company expects to enter into distribution arrangements with NDCs that are
affiliated with a leading local airline or other dominant local travel service
provider. In many developing CRS markets, the Company has solidified
relationships with third-party NDCs with the necessary local market knowledge
and relationships. The Company expects to be able to work with these NDCs in
order to automate their local markets and build significant share as these
markets mature. In several new CRS markets, the Company is currently
distributing its products directly to subscribers, while carefully examining
local market travel-related businesses in order to identify a suitable associate
NDC candidate that will enable the Company to achieve early-mover status and
capture market share as automation and travel increase.
COMPANY DIRECT DISTRIBUTION. The Company distributes its systems directly
in 16 markets where an appropriate third-party NDC does not exist and the
establishment of a Company-owned NDC would not be cost-effective. Typically in
these markets, the Company's only business is supporting the location of a
multinational travel agency.
DIRECT ACCESS. The Company has developed or facilitated the development of
branded direct access products for certain airlines (such as Priority
TravelWorks for US Airways and United Connection for United Airlines). The
Company has adopted this approach in marketing and distributing direct access
products in order to avoid direct competition with its travel agency
subscribers. While these products are branded by the sponsoring airline and
marketed directly by the airline to its corporate and individual customers,
these products provide access to the Company's systems and, therefore, generate
booking fees for the Company.
NDCs distribute direct access products such as Travelpoint to travel
agencies for use by their corporate and individual clients. The NDCs also
distribute the Company's products to certain Internet-based travel service
providers. The World Wide Web sites of those travel service providers allow
individual consumers direct access to the Company's systems and provide the
Company with an additional means of generating booking fees.
INFORMATION SERVICES
As a result of developing and operating one of the world's largest CRSs,
the Company has acquired significant knowledge of, and experience in, both the
travel business and the information technology business. This knowledge and
experience has created a basis from which the Company has been able to provide a
range of specialized information technology solutions to airlines throughout the
world. The Company currently provides fares quotation services, internal
reservation services, other internal management services and software
development services to such airlines.
GlobalFares
The Company currently provides fares quotation services through its
GlobalFares quotation system to airlines throughout the world. GlobalFares is
used in conjunction with each airline's internal reservation
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<PAGE> 49
system, and provides pricing information which meets the challenges and
complexities of real-time fares quotation processing. GlobalFares is currently
utilized by approximately 100 airlines in approximately 120 countries, and the
Company plans to market GlobalFares to other airlines.
Internal Reservation and Other Internal Management Services
The Company provides internal reservation services to United Airlines. Such
services include the display of schedules and availability, the reservation,
sale and ticketing of travel services and the display of other travel-related
information to United Airlines' airport offices, city ticket offices and
reservations centers throughout the world. In addition, the Company provides
certain other internal management services to United Airlines and to other
airline stockholders. Other internal management services include departure
control, availability displays, inventory management, database management and
systems and software operations. The Company also provides certain of the
airline stockholders with software development services. The Company is
exploring opportunities to expand its offering of these services to other
airlines.
New Initiatives
Like their counterparts in other industries, travel vendors, travel
agencies and other providers of travel services have increasingly begun to focus
on core competencies and, therefore, have moved toward outsourcing functions
such as information processing and network management. This trend has created
new areas of opportunity for information services providers. With its travel
industry knowledge and experience, the Company believes it is better suited than
competitors outside of the travel industry to take advantage of these new market
opportunities. The Company has identified a number of areas where it believes
the specialized information technology skills it possesses are in demand and
intends to explore the financial attractiveness of offering technology solutions
to the travel industry in these areas, including advising airlines with respect
to the upgrade of "legacy" systems, the often outdated data processing systems
used by certain airlines.
TECHNOLOGY
Since 1994, the Company has made significant investments in technology and
related equipment. The Company believes that it will benefit from operating
economies of scale as its technology is easily expandable and can support
incremental volume with minimal additional investment.
Computer Operations
The Company's computer systems provide real-time, high-volume transaction
processing and are supported by 15 mainframes, providing 30 processor images
with a combined processing capacity of 3,585 MIPS (millions of instructions per
second). Additional peripheral hardware includes 4,141 disk storage modules,
providing approximately 10 terabytes of disk information storage. The Company's
computer systems are operational 24 hours a day, every day of the year. They
have an uptime record of better than 99.9% and process, on average, over 98
million requests for information per day. At peak times, the Company has
processed over 5,000 messages per second.
The Company has taken measures that it believes are appropriate to protect
its computer equipment, stored information and operating capabilities in the
event its Data Center is damaged by fire, power loss, telecommunications failure
or a similar event. The Company maintains comprehensive security and backup
systems in order to deliver consistent, reliable service to customers. See "Risk
Factors -- Dependence Upon Facilities and Network."
Network Operations
The Company's global communications network provides a fast, resilient and
reliable method for travel agencies and travel vendors to access the Company's
systems. The Company's sites near Denver and London use a meshed backbone
network to provide direct connections from the Company to certain locations in
North America and Europe. This backbone network provides automatic rerouting in
the event of a circuit failure. In
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<PAGE> 50
addition to the meshed backbone network, the Company makes extensive use of
independent international network service providers to increase its reach into
the global market.
Systems Consolidation
When Covia Partnership and The Galileo Company Ltd. combined in 1993, each
entity operated its own CRS. Covia Partnership operated the Apollo system in
North America and Japan, and The Galileo Company Ltd. operated the Galileo
system in the rest of the world. Each system has evolved to meet the specific
commercial and regulatory requirements of the markets it serves, and the Company
believes that both the Apollo and Galileo trademarks are well-known in their
respective markets and carry substantial brand equity. Therefore, from an end
user and a marketing standpoint, the Company intends to maintain the distinction
between its Apollo and Galileo systems.
From a technical standpoint, however, over the past few years, the Company
has worked to increase the level of shared resources between the two systems in
order to realize economies of scale. To this end, the Company hosts certain
applications on shared processors, such as its fares quotation system
(GlobalFares), its car rental booking system (CarMaster) and its hotel booking
system (RoomMaster). The Company is currently examining the commercial
feasibility of consolidating the two systems, or migrating one system's users to
the other system, so that the Company would operate a single core system. The
Company expects to accomplish this consolidation in a manner that will not
significantly impact subscribers' use of the Company's systems. While the
Company believes that significant efficiencies have already been achieved
through the deployment of shared processors, the Company believes that a single
core system would provide additional savings through the elimination of
duplicate development efforts currently required for enhancements and
modifications to core system applications.
COMPETITION
Electronic Global Distribution Services
The Company competes in the provision of electronic global distribution
services primarily against other well-established CRSs, principally Abacus,
Amadeus/System One, SABRE and Worldspan. To a lesser extent, the Company also
competes, on a regional basis, against Axess International Network, Infini
Travel Information and Topas. Abacus, headquartered in Singapore, is owned by a
consortium of Asian airlines and Worldspan. Amadeus/System One, headquartered in
Madrid, Spain was formed by the merger of Amadeus and System One in 1996 and is
owned by Air France, Continental Airlines, Electronic Data Systems ("EDS"),
Iberia Airlines and Lufthansa. SABRE, a public company which is 82% owned by AMR
Corp., the parent of American Airlines, is headquartered in Fort Worth, Texas.
Worldspan is owned by Abacus, Delta, Northwest and TWA and is headquartered in
Atlanta, Georgia. Axess and Infini operate regional CRSs in Japan. Topas
operates a regional CRS in Korea. As each of these competitors offers many
products which are similar to the products of the Company, competition for
business is extremely intense.
Factors affecting the competitive success of electronic global distribution
services systems include the depth and breadth of the information offered, the
reliability and ease of use of the CRS, the incentives paid to travel agencies
and the range of products available to travel vendors, travel agencies and other
subscribers. To increase global reach and reduce cost through economies of
scale, CRSs are realizing the importance of globalization. This has resulted in
a number of consolidations and alliances among CRS companies in recent years,
such as the merger of Amadeus and System One and the alliances formed by
Axess/SABRE and Worldspan/Abacus/Infini.
In addition to the traditional competitors described above, the emergence
of direct access has provided the Company with new competition from both
technology firms and from travel vendors themselves. Competition within the
direct access channel currently takes two forms. The first consists of on-line
services that provide a link between the end user and the CRS. These entities
provide competition among CRSs to provide the "engine" for such booking
services. The use of these on-line services, while potentially causing a bypass
of the traditional travel agency channel, does not typically divert bookings
away from CRSs. The Company believes it competes effectively with other CRSs for
business from on-line services providers.
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<PAGE> 51
The second form of competition within the direct access channel is from
travel vendors themselves, who may provide consumers with direct access to their
internal reservation systems. The Company believes that the features of CRS
products which allow subscribers to comparison shop and to obtain greater
functionality and more information for the end user reduce the potential that
the direct access products sponsored by travel vendors will divert bookings away
from CRSs.
Information Services
Competition within the information services market is segmented by the type
of service offering. Internal reservation services competitors include SABRE,
EDS and British Airways (through Speedwing). Competitors for data center and
network outsourcing include IBM, EDS and niche suppliers such as SABRE and
Speedwing. The primary competitors for information technology consulting include
IBM, EDS and Andersen Consulting for full service consulting, as well as SABRE
and Speedwing which provide specialized consulting within the information
technology arena.
FACILITIES
The Company's principal executive offices are located in Rosemont,
Illinois, a suburb of Chicago, where the Company leases 88,600 square feet of
office space pursuant to a lease that expires in the year 2000. The Company's
Data Center is located in Englewood, a suburb of Denver, Colorado, in two
adjacent buildings owned by the Company. The Data Center contains approximately
236,000 square feet of space, including approximately 130,000 square feet of
raised floor computer room space. The Company also leases office space in 14
other locations worldwide, including development and marketing offices located
near Denver and London. The Company believes that its offices and Data Center
are adequate for its immediate needs and that additional or substitute space is
available if needed to accommodate growth and expansion.
EMPLOYEES
The Company believes that its success is due in large part to its
employees. The Company strives to hire and retain highly skilled and motivated
personnel. As of December 31, 1996, the Company employed 1,838 people,
approximately two-thirds of whom provide technological services. The NDC
Acquisitions are expected to add approximately 1,200 employees. Approximately
60% of the Company's employees are located in the United States, 35% in Europe
and 5% in Latin America and countries throughout the Asia/Pacific region.
In some countries outside the United States, terms and conditions for the
Company's employees are determined in part by industry-wide collective
bargaining arrangements. The Company's employees in Brazil, representing
approximately 1% of the Company's workforce, are unionized. The Company believes
that its relationship with its employees is good.
LEGAL AND REGULATORY MATTERS
Legal Proceedings
The Company is involved in various matters of litigation as both plaintiff
and defendant. In the opinion of management, none of these matters, individually
or in the aggregate, if determined adversely to the Company would have a
material adverse effect on the business, financial condition or results of
operations of the Company.
Regulation
The Company's business is subject to regulation in the United States, the
European Union, Canada, Australia and New Zealand. Each jurisdiction's rules are
largely based on the same set of core premises: that a CRS must treat all
participating airlines equally, whether or not they are owners of the system;
that airlines owning CRSs must not discriminate against the CRSs they do not
own; and that CRS relationships with travel agencies should not be an impediment
to competition from other CRSs or to the provision of service to the
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<PAGE> 52
traveler. While each jurisdiction has focused on the CRS industry's role in the
airline industry, the U.S. CRS Rules and the EU CRS Rules have the greatest
impact on the Company because of the volume of business transacted by the
Company in the United States and the European Union. Neither jurisdiction
currently seeks to regulate CRS relationships with non-airline participants such
as hotel and car rental companies, although discussions have taken place in
Europe about whether rail services should be incorporated into CRS displays and
it is expected that future European Union regulations will address this issue.
The U.S. CRS Rules, among other things, prohibit a CRS that is owned by an
airline or an airline affiliate from entering into contracts with travel
agencies that contain exclusivity clauses or that require the agency to maintain
a certain percentage of computer terminals or bookings for a particular CRS.
In several respects, the United States and European Union regulators have
reached similar conclusions regarding the appropriate means of ensuring the
achievement of the desired results. Both jurisdictions recognize that there is a
possibility that subscribers will book flights which appear early on in
availability displays, as they may be reluctant to read through all information
presented in such displays. Accordingly, both jurisdictions require systems to
provide airline displays for travel agencies which are ordered on the basis of
neutral principles and that all airlines must be charged the same fees for the
same level of participation. The EU CRS Rules go further and require that fees
must be reasonably structured and reasonably related to the cost of the service
provided and used. Moreover, under EU CRS Rules, airlines have the ability to
disallow certain types of bookings, unless they have already been accepted.
Both the United States and European Union regulators seek to redress the
potential that a CRS used for internal reservation purposes would offer a travel
agency subscriber superior access to the hosted airline and inferior access to
all other airlines. The EU CRS Rules mandate a separation between the internal
reservations functionality and the functionality used by travel agencies to
provide neutral information, and require annual confirmation of compliance with
this rule, among others, by independent auditors. While the U.S. CRS Rules
contain several principles outlining the requirement of unbiased displays, the
EU CRS Rules prescribe a specific formula which a CRS must use to order its
display of flights. The U.S. CRS Rules also require functional equivalence
between the functionality offered to airlines whose internal reservation systems
are hosted in a CRS and those provided to all other airlines. The EU CRS Rules
require that CRS owner airlines must provide the same data, and accept and
confirm bookings with equal timeliness in all CRSs, when requested to do so. The
U.S. CRS Rules contain no counterpart to the European requirement that
subscribers be offered access to the CRS on a nondiscriminatory basis. Although
the U.S. CRS Rules extend only to use of CRSs by travel agencies (and do not
apply to products distributed directly to corporate travel departments and
individual consumers), European, Canadian and Australian rules apply to all
subscriber uses of CRSs, whether by travel agencies, individuals or corporate
travel departments.
The U.S. CRS Rules and the EU CRS Rules are currently under review by their
respective promulgating authorities. In its historical role as provider of two
distinct systems, Apollo in North America and Japan, and Galileo in the rest of
the world, the Company has developed familiarity with the requirements and
approval procedures of each regulatory jurisdiction, and is experienced in
addressing regulatory issues as they arise.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions with
the Company and their ages are as set forth below. There are no family
relationships among any directors or officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James E. Barlett.......................... 53 President and Chief Executive Officer,
Chairman of the Board of Directors
Paul H. Bristow........................... 54 Senior Vice President and Chief Financial
Officer, Director
Lyn Bulman................................ 37 Senior Vice President, Human Resources and
Communications
Michael Foliot............................ 43 Senior Vice President, Vendor Marketing
Babetta R. Gray........................... 38 Senior Vice President, Legal and General
Counsel, Director
James E. Lubinski......................... 41 Senior Vice President, Information
Services
David A. Near............................. 38 Senior Vice President, Subscriber
Marketing
</TABLE>
Mr. Barlett has been President and Chief Executive Officer since November
1994. Prior to joining the Company, he served as Executive Vice President of
Worldwide Operations and Systems of MasterCard International Corporation
("MasterCard") and was a member of the MasterCard International Operations
Committee. Prior to his employment at MasterCard, Mr. Barlett served as
Executive Vice President of Operations for NBD Bancorp where from 1979 to 1992
he managed the redevelopment of core banking systems and directed the
development, implementation and operation of the Cirrus international automated
teller switching system and served as Vice Chairman of Cirrus Inc.
Mr. Bristow has been Senior Vice President and Chief Financial Officer
since February 1993. Prior to joining the Company, Mr. Bristow served as
financial advisor to various companies in the United Kingdom before which he had
spent two years as a member of a buy-in group involved in corporate finance as
intermediaries, and as advisors. From 1980 to 1988 he worked for London
International, a listed international consumer products company in London,
initially as Division Finance Director and then on the Main Board as Group
Finance Director. Prior to 1980, Mr. Bristow worked for ITT in Canada, Norway
and Singapore; with Philip Morris in Switzerland; and with Arthur Andersen & Co.
in the United States and Canada.
Ms. Bulman has been Senior Vice President, Human Resources and
Communications since May 1995. From 1990 to May 1995, she served as Director of
Human Resources -- Europe. Prior to joining the Company, Ms. Bulman held
executive positions in the United Kingdom at Dun & Bradstreet Corporation and
Fisons (Pharmaceutical Division) plc.
Mr. Foliot has been Senior Vice President, Vendor Marketing since January
1997. In this position he is responsible for all airline, car, hotel, leisure
and GlobalFares sales and marketing as well as managing all airline stockholder
relationships. From 1993 to 1996, he served as Senior Vice President
Asia/Pacific and the Americas of the Company. From 1990 to 1993, Mr. Foliot was
Vice President and General Manager for all American Express activities in Canada
related to corporate card, corporate travel and leisure travel business and
prior to that he held various positions with American Express International in
Singapore, Indonesia and Korea.
Ms. Gray has been Senior Vice President, Legal and General Counsel since
March 1996. Prior to that she had been Vice President, Legal and General Counsel
since September 1995 and joined the Company as Senior Counsel in April 1990.
Before joining the Company, Ms. Gray was Counsel for Reebok International Ltd.
from 1989 to 1990 and an associate with the Boston law firm of Foley Hoag &
Eliot from 1984 through 1988.
Mr. Lubinski has been Senior Vice President, Information Services since
July 1995. In this position, Mr. Lubinski is responsible for ensuring
technological leadership in systems development for the Company. Prior
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<PAGE> 54
to joining the Company, Mr. Lubinski served since 1994 as Senior Vice President
and Division Head of Systems and Operations for Boatmen's Trust Company. From
1978 to 1994, Mr. Lubinski held several technical positions at NBD Bancorp,
including First Vice President and Development Manager.
Mr. Near has been Senior Vice President, Subscriber Marketing since January
1997. In this position, Mr. Near is responsible for all subscriber marketing and
direct access products. Prior to assuming these responsibilities, Mr. Near
served as Senior Vice President of Intuitive Products and Interactive Services
and as Director of Car, Hotel, Leisure and Advertising Product Management for
the Company and Covia Partnership. Prior to joining the Company in 1987, Mr.
Near held a number of management positions at United Airlines and B.F. Goodrich.
AIRLINE STOCKHOLDER DIRECTOR NOMINEES
Pursuant to the provisions of the Special Voting Preferred Stock, certain
of the airline stockholders will be entitled to elect a total of seven of the 13
members of the Board of Directors. Accordingly, following the Offering, the
airline stockholder controlled by United Airlines is expected to elect Frederic
F. (Jake) Brace, David A. Coltman and James E. Goodwin as directors. The airline
stockholders controlled by KLM, SAirGroup and British Airways are expected to
elect Frank H. Rovekamp, Georges P. Schorderet and Derek Stevens, respectively,
as directors. It is expected that the airline stockholder controlled by US
Airways will name its nominee for director prior to the consummation of the
Offering.
Mr. Brace, age 39, has been Vice President -- Financial Analysis and
Controller of United Air Lines, Inc. since April 1, 1995. Prior to that, he had
served as United Air Lines, Inc.'s Vice President -- Corporate Development and
Controller from January 1994 to April 1, 1995, as its Vice President --
Corporate Development from April 1993 to January 1994 and as its Vice President
and Controller from February 1991 to April 1993. Mr. Brace is also a director of
ATS. Mr. Brace has been a member of the Supervisory Board of the Galileo
Partnership since 1995.
Mr. Coltman, age 54, has been Senior Vice President -- Marketing of United
Air Lines, Inc. since April 1, 1995. Prior to that, he had served as Vice
President -- Atlantic Division of United Air Lines, Inc. in London since January
1989. He is also Chairman of Dunedin Worldwide Investment Trust, an Edinburgh-
based mutual fund. Mr. Coltman has been a member of the Supervisory Board of the
Galileo Partnership since May 1995 and its Chairman since September 1995.
Mr. Goodwin, age 52, has been Senior Vice President -- North America of
United Air Lines, Inc. since April 1, 1995. Prior to that, he had served as
Senior Vice President -- International of United Air Lines, Inc. since May 1992.
Mr. Rovekamp, age 42, has been Senior Vice President -- Marketing of KLM
since June 1992. He is also Chairman of the Board of Directors of Galileo
Nederland. Mr. Rovekamp has been a member of the Supervisory Board of the
Galileo Partnership since the combination of Covia Partnership and The Galileo
Company Ltd. in September 1993.
Mr. Schorderet, age 43, has been Executive Vice President and Chief
Financial Officer of SAirGroup (the parent company of Swissair) and its
predecessor since January 1996 and had served as Executive Vice President of the
predecessor to SAirGroup since joining that company in September 1995. Prior to
September 1995, Mr. Schorderet held various positions at Alusuisse-Lonza Holding
AG, most recently as Chief Financial Officer and a Member of the Executive
Committee, positions he had held since 1991. Mr. Schorderet is a member of the
boards of directors of Swiss Bank Corporation, Sabena Societe Anonyme, Crossair
Ltd. Co. for Regional European Air Transport and
Flughafen-Immobilien-Gesellschaft (the Zurich Airport real estate company). Mr.
Schorderet has been a member of the Supervisory Board of the Galileo Partnership
since February 1996.
Mr. Stevens, age 58, has been a member of the board of directors and Chief
Financial Officer of British Airways plc since 1989. Mr. Stevens is also a
non-executive director of Commercial Union plc and of Legal & General Recovery
Investment Trust Plc. Mr. Stevens has been a member of the Supervisory Board of
the
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Galileo Partnership since the combination of Covia Partnership and The Galileo
Company Ltd. in September 1993.
BOARD COMPOSITION
The Board of Directors will consist of 13 members, seven of whom will be
elected by the holders of the Special Voting Preferred Stock. Of the remaining
six directors, the airline stockholders have agreed pursuant to the
Stockholders' Agreement to vote their shares of Common Stock in favor of the
election of three management directors (the Chief Executive Officer, the Chief
Financial Officer and the Chief Operating Officer (or the General Counsel until
the Company has appointed a Chief Operating Officer)) and three "independent
directors" (within the meaning of the rules of the New York Stock Exchange)
nominated for election by the Board of Directors. It is expected that three
independent directors will be elected within three months following the closing
of the Offering. As a result of the Special Voting Preferred Stock and these
provisions of the Stockholders' Agreement, as long as the Stockholders'
Agreement remains in effect and the airline stockholders own in the aggregate
more than 50% of the outstanding Common Stock, the airline stockholders will
control the election of the entire Board of Directors. See "Relationship with
Airline Stockholders and Certain Transactions -- Stockholders' Agreement" and
"Description of Capital Stock -- Special Voting Preferred Stock."
Pursuant to the Certificate of Incorporation and By-Laws that will be in
effect upon the consummation of the Offering, the Board of Directors will be
divided into three classes of directors serving staggered three-year terms.
Pursuant to the Stockholders' Agreement, the initial Class I directors will be
Ms. Gray, one independent director, one of the directors to be elected by United
Airlines and one of the directors to be elected by a European airline
stockholder that will own Special Voting Preferred Stock; the initial Class II
directors will be Mr. Bristow, one independent director, one of the directors to
be elected by United Airlines and one of the directors to be elected by a
European airline stockholder that will own Special Voting Preferred Stock; and
the initial Class III directors will be Mr. Barlett, one independent director,
one of the directors to be elected by United Airlines, the director to be
elected by US Airways and one of the directors to be elected by a European
airline stockholder that will own Special Voting Preferred Stock. The term of
the initial Class I directors will expire on the date of the 1998 annual meeting
of stockholders; the term of the initial Class II directors will expire on the
date of the 1999 annual meeting of stockholders; and the term of the initial
Class III directors will expire on the date of the 2000 annual meeting of
stockholders. Beginning in 1998, at each annual meeting of stockholders,
successors to the class of directors whose term expires at that annual meeting
will be elected for a three-year term. Accordingly, approximately one-third of
the Company's Board of Directors will be elected each year and only one
management director and independent director will be elected each year. For
further information on the effect of the classified Board of Directors, see
"Description of Capital Stock -- Certificate of Incorporation and By-Laws --
Classified Board of Directors and Related Provisions."
COMMITTEES OF THE BOARD
The Company's By-Laws will authorize the Board of Directors to designate
three committees: an Audit Committee, a Compensation Committee and a Nominating
Committee. Pursuant to the Stockholders' Agreement, the airline stockholders
have agreed to cause the Board of Directors to designate such Committees upon
consummation of the Offering. In addition, the Board of Directors may, from time
to time, designate one or more Special Committees with such duties and such
powers as are granted to it by the Board of Directors.
The Audit Committee will be composed of two or more directors who are not
employees or officers of the Company or any of the airline stockholders. The
Audit Committee will review and recommend the selection of independent auditors,
the fees to be paid to such auditors, the adequacy of the audit and accounting
procedures of the Company and such other matters as may be specifically
delegated to it by the Board of Directors. In this connection, the Audit
Committee shall, at its request, meet with representatives of the independent
auditors and with the financial officers of the Company separately or jointly.
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Pursuant to the Stockholders' Agreement, the Compensation Committee will be
composed of at least one director elected by an airline stockholder holding
Special Voting Preferred Stock whose parent airline is based in North America
and one director elected by an airline stockholder holding Special Voting
Preferred Stock whose parent airline is based in Europe. In addition the
Compensation Committee will include one independent director and the Chief
Executive Officer of the Company. The Stockholders' Agreement provides that the
membership of the Compensation Committee will be adjusted to the extent
necessary to comply with Rule 16b-3 under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and applicable United States tax
regulations. The Compensation Committee will review and make recommendations
with respect to the management remuneration policies of the Company, 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 of Directors.
Pursuant to the Stockholders' Agreement, the Nominating Committee will be
composed of at least the Chief Executive Officer of the Company, one independent
director, one director elected by an airline stockholder holding Special Voting
Preferred Stock whose parent airline is based in North America and one director
elected by an airline stockholder holding Special Voting Preferred Stock whose
parent airline is based in Europe. The Nominating Committee will review, report
and make recommendations to the Board of Directors on the following matters: (i)
nominees for directors, selection criteria for directors and removal of
directors if deemed appropriate, in each case in a manner consistent with the
terms of the Stockholders' Agreement, but not with respect to directors
appointed pursuant to the Certificate of Incorporation by an airline stockholder
that owns one or more shares of Special Voting Preferred Stock; (ii) evaluation
and performance of the Board of Directors and individual directors; and (iii)
such other matters as the Board of Directors may from time to time prescribe.
COMPENSATION OF DIRECTORS
Directors who are not executive officers or employees of the Company will
receive an annual retainer of $25,000 for Board of Directors and committee
service and a fee of $1,000 for each meeting of the Board of Directors or any
committee thereof attended.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table presents information concerning
compensation for the fiscal year ended December 31, 1996 paid by the Company to
the Chief Executive Officer and four other individuals who, as of December 31,
1996, were the most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------
OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) COMPENSATION($)(3)
------------------ ---- --------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
James E. Barlett.............. 1996 435,750 565,584 -- 8,820
President and Chief
Executive Officer
Paul H. Bristow............... 1996 207,333 216,321 -- 6,992
Senior Vice President
and Chief Financial
Officer
Michael Foliot................ 1996 197,013 204,541 -- 6,591
Senior Vice President,
Vendor Marketing
W. Craig Thomson.............. 1996 203,336 110,957 54,825 37,061
Senior Vice President(4)
K. Norma Wood................. 1996 214,038 187,283 -- 59,931
Senior Vice President,
Marketing and Strategy(4)
</TABLE>
- - ---------------
(1) The bonus amounts listed include $138,916, $63,094 and $59,658 which will be
paid to Messrs. Barlett, Bristow, and Foliot respectively in two equal
installments, one in 1998 and one in 1999 subject to their continued
employment with the Company.
(2) Other Annual Compensation includes, among other things, $24,375 in flight
benefits and $30,450 in car costs paid by the Company to Mr. Thomson.
(3) All Other Compensation includes contributions of $4,500 to the Company's
401(k) Savings Plan for Messrs. Barlett, Bristow, and Foliot by the Company;
payment of $4,320, $2,492 and $2,091 to Messrs. Barlett, Bristow and Foliot,
respectively, representing money allocated to, but unused for, benefits
programs; contribution of $37,061 by the Company to Mr. Thomson's United
Kingdom defined contribution pension plan and payment of $59,931 to Ms. Wood
in lieu of contribution to a pension plan.
(4) Amounts have been translated into U.S. dollars at the rate of L1 = $1.7123,
the noon buying rate in New York City for cable transfers as certified for
customs purposes by the Federal Reserve Bank of New York on December 31,
1996. Ms. Wood and Mr. Thomson resigned as executive officers in January
1997.
53
<PAGE> 58
PENSION PLAN
The Company sponsors the Galileo International Pension Plan (the "Pension
Plan"), which is a non-integrated qualified defined benefit pension plan
covering most U.S. full time employees of the Company and certain affiliated
companies. The basic monthly payment under the Pension Plan is a single life
annuity equal to 1.6% of the participant's final average compensation multiplied
by the number of his months of qualified service divided by 12. However, the
basic monthly payment for a participant whose accrued benefit as of January 1,
1994 is based on compensation that exceeded $150,000, will be based on the
greater of (a) the accrued benefit as determined above with respect to the
benefit formula in effect for the plan year beginning on or after January 1,
1994 as applied to the participant's total months of qualified service, or (b)
the sum of the participant's accrued benefit as of January 1, 1994, frozen in
accordance with Section 1.401(a)(4)-13 of the Treasury Regulations, and the
participant's accrued benefit determined under the benefit formula applicable
for the plan year beginning on or after January 1, 1994, as applied to the
participant's months of benefit service credited for plan years beginning on or
after January 1, 1994. Retirement benefits are subject to the annual pension
limitations imposed under Sections 415(d) and 401(a)(17) of the Internal Revenue
Code, as amended (the "Code"), for which limitations vary annually. The Covia
Supplemental Retirement Plan (the "SERP"), a nonqualified plan, provides
benefits over the applicable Code limitations.
For purposes of the Pension Plan, "final average compensation" means the
highest monthly average of a participant's compensation attributable to the 60
consecutive months of service occurring during the last 120 months of service of
employment (unless the participant has fewer than 60 months of service with the
employer). "Compensation" means amounts paid to the participant for base pay,
overtime, double shift, shift differentials, lump sum merit pay, holiday
rotating day off, holiday worked rotating day off, commissions, retroactive pay,
management incentive bonuses and special pay incentives for certain retirees
paid prior to September 1, 1993. The following table shows the estimated annual
pension benefits under the Pension Plan and the SERP in the remuneration and
years of service classifications indicated (without regard to the offsets
described above).
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
REMUNERATION 15 20 25 30 35
- - ------------ -- -- -- -- --
<C> <C> <C> <C> <C> <C>
$200,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $112,000
$250,000 $ 60,000 $ 80,000 $100,000 $120,000 $140,000
$300,000 $ 72,000 $ 96,000 $120,000 $144,000 $168,000
$350,000 $ 84,000 $112,000 $140,000 $168,000 $196,000
$400,000 $ 96,000 $128,000 $160,000 $192,000 $224,000
$450,000 $108,000 $144,000 $180,000 $216,000 $252,000
$500,000 $120,000 $160,000 $200,000 $240,000 $280,000
$550,000 $132,000 $176,000 $220,000 $264,000 $308,000
$600,000 $144,000 $192,000 $240,000 $288,000 $336,000
$650,000 $156,000 $208,000 $260,000 $312,000 $364,000
$700,000 $168,000 $224,000 $280,000 $336,000 $392,000
$750,000 $180,000 $224,000 $300,000 $360,000 $420,000
$800,000 $192,000 $256,000 $320,000 $384,000 $448,000
$850,000 $204,000 $272,000 $340,000 $408,000 $476,000
or more
</TABLE>
The benefits under the Pension Plan and the SERP shown above are calculated
on a single life annuity basis, and assume retirement at age 65. As of May 19,
1997, Mr. Barlett, Mr. Bristow and Mr. Foliot had 13, 35 and 27 months of
qualified service respectively under the Pension Plan. Mr. Thomson had 60 months
of credited service under the United Kingdom defined contribution plan and Ms.
Wood participated in neither plan.
54
<PAGE> 59
EMPLOYMENT AGREEMENT
James E. Barlett is party to an employment agreement with the Company,
dated October 31, 1994 (the "Agreement"). The term of the Agreement will
continue until 15 days after written notice of termination is given by either
the Company or Mr. Barlett. The Agreement provides for a base salary of $420,000
per annum, reviewed by the Board of Directors of the Company and increased at
their discretion. The Agreement also provides for Mr. Barlett's participation in
the Company's Management Incentive Plan (the "MIP") and Long Term Incentive Plan
as well as an airfare and car allowance. The Agreement may be terminated
immediately by the Company with "Cause" or by Mr. Barlett with "Good Reason" (as
such terms are defined in the Agreement). If the Agreement is terminated by the
Company without Cause or by Mr. Barlett for Good Reason, the Company must pay
Mr. Barlett a lump sum equal to the balance of his base salary at the rate in
effect at the time of termination for a 12 month period, as well as an amount
equal to a reasonable estimate of the amount of annual compensation he would
have received under the MIP for that 12 month period assuming a 100% target
achievement by him. In addition, commencing 12 months after the date of
termination, the Company must pay Mr. Barlett an amount equal to his monthly
salary as well as the amount he would have earned under the MIP for that month,
assuming a 100% target achievement, each month for the ensuing 12 month period.
These monthly payments will be decreased to reflect compensation from any other
employment which Mr. Barlett obtains. The Company will also provide group health
insurance and other welfare and pension benefits to Mr. Barlett for a 12 month
period following a termination without Cause or a resignation for Good Reason.
The Agreement contains a confidentiality provision and a non-competition clause
that remains in effect during the term of the Agreement and for the longer of 12
months after the termination date or until the date Mr. Barlett ceases receiving
compensation from the Company.
1997 STOCK INCENTIVE PLAN
Prior to the consummation of the Offering, the Company intends to adopt the
Galileo International, Inc. 1997 Stock Incentive Plan (the "Stock Incentive
Plan"). The Stock Incentive Plan will be administered by the Compensation
Committee (the "Committee") of the Board of Directors (the "Board") upon
establishment thereof. The purposes of the Stock Incentive Plan are to attract,
retain and motivate officers and other key employees and consultants of the
Company, to compensate them for their contributions to the growth and profits of
the Company and to encourage ownership by them of Common Stock. The Stock
Incentive Plan authorizes the issuance of various forms of stock-based awards
(the "Awards") to such individuals.
Shares Available Under the Stock Incentive Plan. An aggregate of 8.14
million shares of Common Stock is expected to be authorized for issuance under
the Stock Incentive Plan. The number of shares available for issuance under the
Stock Incentive Plan will be proportionately adjusted in the event of certain
changes in the Company's capitalization or a similar transaction. Shares issued
pursuant to the Stock Incentive Plan may be authorized but unissued shares,
treasury shares or any combination thereof.
Additional Limits. In addition to the overall share limit, some special
limits apply. In accordance with the requirements under the regulations
promulgated under Section 162(m) of the Code, no eligible individual may receive
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 or stock awards
subject to performance requirements and performance shares with respect to more
than 50,000 shares of Common Stock per performance period. Stock Awards not
subject to performance goals may not exceed 814,000 and may only be used for
special situations. In accordance with the requirements under Section 422 of the
Code pertaining to incentive stock options ("ISO's"), the fair market value of
the number of shares of Common Stock that may be issued pursuant to ISO's which
are exercisable for the first time by a participant under any Company plan may
not exceed, in the aggregate, $100,000 during any calendar year.
Administration. The Committee will administer the Stock Incentive Plan,
select participants from among eligible individuals, and determine the number of
shares pursuant to each Award, and the terms and conditions of Awards, including
those related to vesting, forfeiture, payment and exercisability. Subject to
certain limitations, the Committee may from time to time delegate some or all of
its authority to one or more officers of the Company. The Committee shall also
have authority to determine the effect, if any, that a participant's termination
of employment will have on the vesting, exercisability, payment or lapse of
restrictions applicable to an Award.
55
<PAGE> 60
Awards Generally. The Stock Incentive Plan is expected to authorize the
following Awards based upon the Common Stock: (i) stock options, (ii) stock
appreciation rights, which may be granted in tandem with or independently of
stock options, (iii) stock awards, (iv) performance share awards and (v) other
forms of awards which the Committee determines to be consistent with the
purposes of the Stock Incentive Plan and the interests of the Company.
Stock Options. Stock options awarded under the Stock Incentive Plan may be
either nonqualified stock options ("NSO's") or ISO's within the meaning of
Section 422 of the Code. Under the terms of the Stock Incentive Plan, the per
share exercise price of a stock option shall be no less than 100% of the fair
market value of the Common Stock on the date of grant (subject to limited
exceptions for options assumed in connection with the acquisition of another
entity by the Company and ISO's granted to a participant who owns more than ten
percent of the voting power of the Company's stock). The term of a stock option
will be fixed by the Committee upon grant, and the term of an ISO may not exceed
ten years. The vesting schedules of the stock options will be governed by the
individual stock option agreements; provided, however, that no stock option may
vest prior to a year from the date of grant. The exercise price of a stock
option may be paid in cash or previously owned stock or a combination thereof.
It is currently anticipated that stock options will be granted to substantially
all employees of the Company under the Stock Incentive Plan at the time of
consummation of the Offering.
Stock Appreciation Rights. Stock appreciation rights entitle a participant
to receive upon exercise an amount equal to the excess, if any, of the fair
market value on the date of exercise of the number of shares of Common Stock
subject to the stock appreciation right over the applicable exercise price. The
exercise price will be determined by the award agreement but in no case may be
less than 100% of the fair market value of the underlying Common Stock at the
date of grant. The term of the stock appreciation right will be governed by the
Award agreement; provided, however, that no stock appreciation right may vest
prior to one year from the date of grant. At the discretion of the Committee,
payments to a participant upon exercise of a stock appreciation right may be
made in cash, shares of Common Stock or a combination thereof. Stock
appreciation rights may be granted alone or in tandem with other Awards.
Stock Awards. Stock Awards consist of one or more shares of Common Stock
granted or offered for sale to a participant subject to terms and conditions,
including vesting requirements or restrictions on transferability, as determined
by the Committee and specified in the Award agreement.
Performance Share Awards. Performance share Awards entitle a participant
to receive shares of Common Stock 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
will be made as soon as practicable following the conclusion of the applicable
performance period in shares of Common Stock, in an equivalent amount of cash or
in a combination of Common Stock and cash, as the Committee determines.
Other Awards. The Committee has 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
Stock Incentive Plan and the interests of the Company, which Awards may provide
for deferral of compensation through equity based units, 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 may also include cash payments based on one or more criteria
determined by the Committee which are unrelated to the value of Common Stock.
Change in Control. In the event of termination of a participant's
employment for Cause or Good Reason, as such terms may be defined in the
applicable Award agreements, within two years of a change in control, all such
participant's outstanding stock options and stock appreciation rights will
become fully exercisable, all restrictions and conditions of all stock Awards
then held by such participant will lapse, and all performance share Awards held
by such participant will be deemed to have been fully earned. In the case of a
change in control involving a merger or consolidation involving the Company in
which the Company is not the surviving corporation or becomes a wholly owned
subsidiary of another entity, outstanding and unexercised stock options held by
a participant will be converted into options to acquire common stock of the
survivor on
56
<PAGE> 61
substantially the same terms and conditions as the original option, with
appropriate adjustments as to the number and kind of shares and exercise prices.
For purposes of the Stock Incentive Plan, a change in control 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 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 stockholders 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
stockholders 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 of
the Stock Incentive Plan), 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 stockholders 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. For
the purpose of the definition of change in control, Airline Shareholder means
any of United Airlines, US Airways or KLM Royal Dutch Airlines.
Amendment. The Board may amend or terminate the Stock Incentive Plan at
any time, except that stockholder approval is required to increase the maximum
number of shares issuable under the plan or to reduce the exercise price of any
outstanding stock option or stock appreciation right. No amendment or
termination may adversely affect a participant's rights with respect to
previously granted Awards without his or her consent.
Certain Federal Income Tax Consequences of Awards. Certain of the federal
income tax consequences to participants and the Company of Awards granted under
the Stock Incentive Plan should generally be as set forth in the following
summary.
An employee to whom an ISO which qualifies under Section 422 of the Code is
granted will not recognize income at the time of grant or exercise of such
option. No federal income tax deduction will be allowable to the employee's
employer upon the grant or exercise of such ISO. However, upon the exercise of
an ISO, any excess in the fair market price of the Common Stock over the option
price constitutes a tax preference item which may have alternative minimum tax
consequences for the employee. When the employee sells such shares more than one
year after the date of transfer of such shares and more than two years after the
date of grant of such ISO, the employee will normally recognize a long-term
capital gain or loss equal to the difference, if any, between the sale prices of
such shares and the option price. If the employee does not hold such shares for
the required period, when the employee sells such shares, the employee will
recognize ordinary compensation income and possibly capital gain or loss in such
amounts as are prescribed by the Code and the regulations thereunder and the
Company will generally be entitled to a federal income tax deduction in the
amount of such ordinary compensation income.
57
<PAGE> 62
An employee to whom a NSO is granted will not recognize income at the time
of grant of such option. When such employee exercises such NSO, the employee
will recognize ordinary compensation income equal to the difference, if any,
between the option price paid and the fair market value, as of the date of
option exercise, of the shares the employee receives. The tax basis of such
shares to such employee will be equal to the option price paid plus the amount
includible in the employee's gross income, and the employee's holding period for
such shares will commence on the date on which the employee recognized taxable
income in respect of such shares. Subject to the applicable provisions of the
Code and regulations thereunder, the Company will generally be entitled to a
federal income tax deduction in respect of a NSO in an amount equal to the
ordinary compensation income recognized by the employee.
A participant who receives a grant of stock appreciation rights or
performance share Awards will recognize ordinary compensation income at the time
such Award is settled in cash or stock in an amount equal to the cash or the
fair market value of the stock received. Subject to the applicable provisions of
the Code and regulations thereunder, the Company will generally be entitled to a
federal income tax deduction in respect of a grant of stock appreciation rights
and performance shares in an amount equal to the ordinary compensation income
recognized by the participant.
No income will be recognized by a participant who is granted a stock Award
if the Award is subject to a substantial risk of forfeiture or restrictions on
transferability, unless the participant makes a special election with the
Internal Revenue Service pursuant to Section 83(b) of the Code to be taxed at
the time of grant. Upon lapse of the risk of forfeiture or restrictions on
transferability, the participant will be taxed at ordinary income tax rates on
the then fair market value of the Common Stock and a corresponding deduction
will be allowable. The participant's basis in the Common Stock will be equal to
the ordinary income so recognized. Upon subsequent disposition of such Common
Stock, the participant will realize capital gain or loss (long-term or
short-term, depending upon the holding period of the stock sold).
Pursuant to section 83(b) of the Code, a participant may elect within 30
days of receipt of the stock Award to be taxed at ordinary income tax rates on
the fair market value of the Common Stock comprising the stock Award at the time
of award. If the election is made, the Company will be entitled to a
corresponding deduction. No income will be recognized, and no deduction will be
allowed the Company, upon lapse of the risk of forfeiture or restrictions on
transferability.
The following table sets forth certain information concerning stock options
expected to be granted upon consummation of the Offering.
NEW PLAN BENEFITS
1997 STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
OPTIONS
--------------------------------
NO. OF
NAME AND POSITION UNITS(1) DOLLAR AMOUNT
----------------- ------------ ----------------
<S> <C> <C>
James E. Barlett............................................ 216,000 n/a
President and Chief Executive Officer
Paul H. Bristow............................................. 61,580 n/a
Senior Vice President and Chief Financial Officer
Michael Foliot.............................................. 57,860 n/a
Senior Vice President, Vendor Marketing
W. Craig Thomson............................................ 0 n/a
Senior Vice President
K. Norma Wood............................................... 0 n/a
Senior Vice President, Marketing and Strategy
Executive Group............................................. 517,210 n/a
Non-Employee Director Group................................. 0 n/a
Non-Executive Officer Employee Group........................ 1,172,100 n/a
</TABLE>
- - ---------------
(1) Assumes an initial public offering price of $21.50 per share of Common
Stock.
58
<PAGE> 63
Generally, each option will vest in equal annual tranches over a five year
period. The options will have a ten year term. Additionally, it is anticipated
that upon consummation of the Offering each of the Chief Executive Officer and
the Senior Vice Presidents of the Company will be awarded a one-time option
grant representing the options they each would have received under the Stock
Incentive Plan during the first two years of its existence. Fifty percent of
this initial option grant to each such employee will have an exercise price
equal to the Offering price and will vest over a five year period in 20%
tranches starting on the date of grant. The other fifty-percent of each option
grant will have an exercise price of 115% of the Offering price and will vest in
five equal annual tranches over a five year period beginning in the year
following the initial date of grant.
DEFERRED COMPENSATION ARRANGEMENTS
The Deferred Compensation Arrangements are designed to convert existing
awards under the Company's Long Term Incentive Plan (the "LTIP") into phantom
shares. Certain executives of the Company have been participants in the LTIP.
The LTIP is intended to reward executives for superior performance in achieving
long-term Company goals and facilitate the recruitment and retention of high
caliber executives. Each participant in the LTIP was granted a target cash award
expressed as a percentage of such participant's base salary at the start of that
performance period. Over the subsequent three year performance cycle, each
participant annually receives one-third of the award, provided that the
participant remains employed with the Company. The Company maintains the right
to amend or terminate the LTIP at any time.
The Company intends to discontinue granting awards under the LTIP upon
completion of the Offering. The Company intends to convert the outstanding
awards pursuant to remaining award cycles from 1995, 1996 and 1997 into phantom
shares, each of which will represent an unsecured contractual right to receive,
upon the payment of such phantom share in accordance with the terms of the award
agreement letter, cash in the amount of the fair market value of a share of
Common Stock as of the payment date. By signing the letter agreement which
grants such phantom shares, each LTIP award holder will waive all of his or her
rights and claims with respect to the LTIP and awards granted thereunder.
The number of phantom shares granted to each participant will be determined
by dividing the dollar amount of such participant's remaining unpaid award under
the LTIP by the initial public offering price of the Common Stock. In the event
that dividends are declared and paid on the Common Stock, each participant will
also be awarded dividend equivalents with respect to his or her phantom shares.
Such dividend equivalents will be placed in an account in each participant's
name and awarded simultaneously with such corresponding phantom shares.
In the event of the termination of a participant's employment for any
reason other than retirement, death or disability, or the Company's elimination
of the participant's position for reasons unrelated to the participant's
performance, all unpaid phantom shares granted to such participant will be
forfeited. In the event of a change in control, each participant will be paid
the "change in control price" as defined in the LTIP. The Board may accelerate
the payment of phantom shares granted pursuant to the deferred compensation
arrangements at any time.
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<PAGE> 64
It is currently anticipated that the following awards will be made to
certain executive officers under the Deferred Compensation Arrangements
concurrently with the Offering as set forth in the Deferred Compensation
Arrangement Table below.
NEW PLAN BENEFITS
DEFERRED COMPENSATION ARRANGEMENT
<TABLE>
<CAPTION>
PHANTOM SHARES
--------------------------------
APPROXIMATE
NAME AND POSITION NO. OF UNITS DOLLAR AMOUNT(1)
----------------- ------------ ----------------
<S> <C> <C>
James E. Barlett............................................ 13,120 $282,096
President and Chief Executive Officer
Paul H. Bristow............................................. 6,125 $131,690
Senior Vice President and Chief Financial Officer
Michael Foliot.............................................. 5,890 $126,653
Senior Vice President, Vendor Marketing
Non-Executive Director Group................................ 38,100 $819,170
</TABLE>
- - ---------------
(1) Assumes an initial public offering price of $21.50 per share of Common
Stock.
A participant who receives a grant of phantom shares will recognize
ordinary compensation income at the time such award is settled in cash or in
stock in an amount equal to the cash or fair market value of the stock received.
Subject to the applicable provisions of the Code and regulations thereunder, the
Company will be generally entitled to a federal income tax deduction in respect
of a grant of phantom shares in an amount equal to the ordinary compensation
income recognized by the participant.
MANAGEMENT INCENTIVE PLAN
The Company maintains the Galileo International, Inc. Annual Management
Incentive Plan (the "MIP") which is administered by the Chief Executive Officer
of the Company. Participation in the MIP, which is determined annually, is based
upon individual selection by the Chief Executive Officer, subject to the
approval of the Committee. The Chief Executive Officer selects participants
based upon the employee's level of duties and responsibilities and ability to
positively impact the financial performance of the Company. The Board may remove
participants from the MIP, permanently or for any other duration, at any time,
due to the participant's absence or unsatisfactory individual performance.
Awards, which are determined as soon as practicable after the close of the
fiscal year, are calculated by multiplying the participant's annual base salary
by the participant's "target incentive opportunity" and by the applicable
performance multiplier. The participant's target incentive opportunity is a
stated percentage of the participant's base salary. The target incentive
opportunity is comprised of a corporate objective component and an individual
objective component. The size of the target incentive opportunity is based upon
a number of factors including the participant's level of duties and
responsibilities, the participant's ability to positively impact the financial
results of the Company, prevailing competitive practices, current practices of
the Company, and local incentive pay practices. In determining whether
performance goals have been satisfied, "windfall" revenue, defined as earnings
not resulting from direct management actions, will be discounted from the total
earnings. The Company will not issue bonuses if it does not meet a defined
threshold level of corporate financial performance.
Participants who resign at any time prior to receipt of any award will
forfeit any award which may have accrued under the MIP. The Board may terminate
or amend the MIP, in whole or in part, at any time.
MANAGEMENT OWNERSHIP GUIDELINES
The Company has adopted the following management ownership guidelines (the
"MOG") for the purpose of better linking executive compensation with stockholder
value creation. The MOG requires each executive to acquire and hold a specified
multiple of such executive's salary in Common Stock and provides a
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<PAGE> 65
company-supported program to assist executives in acquiring the required amount
over a specified period of time. The MOG requires that within three years from
the date of the Offering the Chief Executive Officer of the Company own Common
Stock or phantom stock under the Deferred Compensation Arrangement with a market
value equal to 300% of his salary and the Senior Vice Presidents each own Common
Stock with a market value equal to 150% of such Senior Vice President's salary.
NON-EMPLOYEE DIRECTOR STOCK PLAN
Prior to the consummation of the Offering, the Company intends to adopt the
Galileo International, Inc. 1997 Non-Employee Director Stock Plan (the "Director
Plan"). The purposes of the Director Plan are to retain the services of
qualified individuals who are not employees of the Company to serve as members
of the Board and to secure for the Company the benefits of the incentives
inherent in increased Common Stock ownership by such individuals by granting
such individuals options to purchase shares of Common Stock and to provide such
individuals an opportunity to defer payment of a portion of their director's
fees in accordance with the terms and conditions set forth herein, to compensate
them for their contributions to the growth and profits of the Company and to
encourage ownership by them of Common Stock. It is anticipated that the
directors to be elected by the holders of the Special Voting Preferred Stock
will not participate in the Director Plan.
Shares Available Under the Stock Incentive Plan. Subject to the provisions
of the Director Plan, the maximum number of shares of Common Stock which may be
issued under the Director Plan shall not exceed 500,000. Either authorized and
unissued shares of Common Stock or treasury shares may be delivered pursuant to
the Director Plan.
Administration. The Board or an individual appointed by the Board (the
"Administrator") will be responsible for administering the Director Plan. The
Administrator will have authority to adopt such rules as it may deem appropriate
to carry out the purposes of the Director Plan, and will have authority to
interpret and construe the provisions of the Director Plan and any agreements
and notices under the Director Plan and to make determinations pursuant to any
Director Plan provision. Each interpretation, determination or other action made
or taken by the Administrator pursuant to the Director Plan will be final and
binding on all persons.
Stock Options. The Director Plan is expected to authorize awards of
options based upon the Common Stock. It is currently anticipated that options
will be granted to all non-employee directors whose employers' policies do not
prohibit the awards. Each option will generally vest and become exercisable six
months after the date of grant and will expire ten years from the date of grant,
subject to early vesting, exercisability, and expiration as provided in the
Director Plan. The option will have a per share exercise price equal to the fair
market value of the Common Stock on the date of grant. Upon the effective date
of the Director Plan and upon the date of a non-employee director's election,
appointment or reelection, such non-employee director will be granted an option
to purchase (4,000 X Y) - 1,000 X (Y - 1) shares of Common Stock where Y = the
number of years in such director's term. In non-election years an option to
purchase 1,000 shares of Common Stock will be granted to each eligible
non-employee director.
The exercise price of a stock option may be paid in cash or previously
owned stock or a combination thereof.
Deferral of Director's Fees. Non-employee directors may elect to defer all
or a specified percentage of their director's fees (in multiples of five
percent) under the Director Plan. A non-employee director's deferrals will be
credited to a deferred compensation account set up for that non-employee
director by the Company. All amounts in this account are nonforfeitable at all
times.
The portion of the director's fees that a non-employee director elects to
defer will be credited in the form of phantom stock units to the deferred
compensation account as of the last business day of the fiscal quarter in which
such portion of the director's fees would otherwise have been payable to the
non-employee director. The number of phantom stock units to be credited to the
deferred compensation account will be determined by dividing the amount of the
director's fees deferred over such quarter by the fair market value of a share
of
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<PAGE> 66
Common Stock as of the date of crediting. In the event that the Company pays any
cash or other dividend or makes any other distribution in respect of the Common
Stock, each phantom stock unit credited to the deferred compensation account of
a non-employee director will be credited with dividend equivalents. The
crediting of phantom stock units to a non-employee director's deferred
compensation account shall not confer on the non-employee director any rights as
a stockholder of the Company.
Payment of the deferred benefits credited in phantom stock units will be in
shares of Common Stock.
Change in Control. The definition of change of control for the purposes of
the Director Plan is substantially identical to that in the Stock Incentive
Plan. In the event of a change in control of the Company: (a) any options held
by a non-employee director who retires from service or who is removed from the
Board within two years of the date such a change in control occurred that are
not yet exercisable and vested will become fully exercisable and vested and (b)
all deferred benefits credited to the non-employee director's deferred
compensation account as of the date of the change in control will be paid in
cash to the non-employee director or, in the event of death of the non-employee
director prior to payment, to the beneficiary thereof on the date of the change
in control. The cash amount paid for each whole or partial phantom stock unit
will be the change in control price.
Amendment. The Board or the Committee may amend or terminate the Director
Plan at any time, except that stockholder approval is required to increase the
maximum number of shares issuable under the plan and when required by any
applicable law. No amendment or termination of the Director Plan may adversely
affect a participant's rights with respect to previously granted Awards or
result in the distribution of amounts credited to his or her deferred account in
a manner other than provided in the Director Plan or otherwise result in
immediate taxation without his or her consent.
Certain Federal Income Tax Consequences. Although no Federal income tax
liability accrues to a participant in the Director Plan at the time options are
granted pursuant to the Plan, the participant must recognize ordinary
compensation income in the year in which such options are exercised equal to the
amount by which the fair market value of the purchased shares on the date of
exercise exceeds the exercise price. The tax basis of such shares to such
participant will be equal to the exercise price paid plus the amount includible
in the participant's gross income, and the participant's holding period for such
shares will commence on the date on which the participant recognizes taxable
income in respect of such shares. Gain or loss upon a subsequent sale of any
Common Stock received upon the exercise of options granted pursuant to the
Director Plan generally would be taxed as capital gain or loss (long-term or
short-term, depending upon the holding period of the stock sold). Certain
additional rules apply if the exercise price for such options is paid in shares
previously owned by the participant.
Subject to the applicable provisions of the Code and regulations
thereunder, the Company will generally be entitled to an income tax deduction
equal to the amount of ordinary compensation income the participant recognizes
in connection with the exercise of any option granted pursuant to the Director
Plan. The deduction will, in general, be allowed for the taxable year of the
Company in which the participant recognizes such ordinary compensation income.
It is currently anticipated that awards will be made to the non-employee
directors upon their election following the Offering, set forth below in the
1997 Non-Employee Director Plan Table.
NEW PLAN BENEFITS
1997 NON-EMPLOYEE DIRECTOR PLAN
<TABLE>
<CAPTION>
PHANTOM DOLLAR
NAME AND POSITION OPTIONS SHARES AMOUNT
----------------- ------- ------- ------
<S> <C> <C> <C>
Non-Executive Director Group(1)............................. 30,000 0 0
</TABLE>
- - ---------------
(1) Assumes participation in the Director Plan by non-employee directors other
than those elected pursuant to the Special Voting Preferred Stock and
three-year terms of service.
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<PAGE> 67
RELATIONSHIP WITH AIRLINE STOCKHOLDERS AND CERTAIN TRANSACTIONS
COMMERCIAL ARRANGEMENTS
Computer Services Agreements
Simultaneously with the consummation of the Offering, each airline
stockholder may enter into a separate computer services agreement (collectively,
the "Computer Services Agreements") with the Company pursuant to which the
Company will provide certain fares quotation services, internal reservation
services, other internal management services and software development services.
The Computer Services Agreements, other than with respect to fares quotation
services and services to United Airlines, each discussed below, will generally
be cancellable by either party upon six months' prior written notice (except the
Company will not be able to cancel the agreement prior to the third anniversary
of the consummation of the Offering). The Computer Services Agreements generally
require the Company to provide the services thereunder at prices based upon a
fully allocated cost methodology for a period of up to three years, after which
pricing will be determined on an arm's-length basis.
The Company will also provide fares quotation services to many of the
airline stockholders, including United Airlines, through its GlobalFares fares
quotation system. The Company has agreed to provide such fares quotation
services under existing pricing arrangements for a period of approximately five
years, after which pricing will be determined on an arm's-length basis. These
services may be canceled by either party upon six months' prior written notice
(except the Company will not be able to cancel the provision of such services
prior to the end of the existing pricing period).
The Company will also provide internal reservation services, other internal
management services and software development services to United Airlines.
Internal reservation services will be provided for a minimum period of four or
six years following the consummation of the Offering at prices in effect
immediately prior to such consummation. Other internal management services and
software development services will generally be provided to United Airlines for
a minimum period of six years following the consummation of the Offering at
prices in effect immediately prior to such consummation with respect to other
internal management systems services, and at prices based upon a fully allocated
cost methodology for software development services, after which pricing will be
determined on an arm's-length basis.
Distributor Sales and Service Agreements
The Company is party to distributor sales and service agreements with NDC
affiliates of certain airline stockholders. In exchange for its efforts to sell
the Company's products to travel agencies in its territory, the NDC receives a
percentage of the booking fees generated by travel agency use of the Company's
systems within its territory. In the absence of material breach, these
agreements cannot be terminated by either party so long as an affiliate of the
relevant NDC retains an interest in the Company.
Termination of Revenue Sharing Obligations
In conjunction with the acquisitions of Galileo Nederland and Traviswiss,
the Company will terminate its obligations under the Galileo International
Partnership agreement to share with KLM and Swissair a portion of the booking
fee revenue generated in certain European territories. In consideration of the
termination of such revenue sharing obligations the Company will pay KLM and
Swissair, in four annual installments, the aggregate amounts of $14.8 million
and $22.4 million, respectively. See "The Company -- The NDC
Acquisitions -- Traviswiss AG" and "-- Galileo Nederland BV."
Sales Representation Agreements
Simultaneously with the consummation of the Offering, the Company will
enter into sales representation agreements with United Airlines and US Airways,
pursuant to which these airlines will provide the personnel to sell the
Company's Apollo brand reservations products to subscribers in the United States
and Mexico. Employees of the airlines will be responsible for the sales
function, while employees of the Company will be fully responsible for all
aspects of customer service and support. Each sales representation agreement
will remain in effect so long as the non-competition agreement between the
Company and United Airlines or US
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<PAGE> 68
Airways, as the case may be, remains in effect, and will provide base and
incentive compensation, based upon achievement of revenue goals to be
established annually.
Services Agreements
In connection with the Company's acquisition of ATS, the Company will enter
a services agreement (the "ATS Services Agreement") with United Airlines, US
Airways and Air Canada (collectively, the "ATS Services Providers"), pursuant to
which the ATS Services Providers will provide certain marketing and other
services designed to assist the Company in growing the business of ATS.
Specifically, each of the ATS Services Providers will agree to use its expertise
with respect to the airline distribution business, its sales personnel and its
sales offices in the ATS territory, in accordance with applicable law, to
increase the Company's competitiveness in the marketplace and generate
additional bookings and revenue for the Company. Representatives from the
marketing division of each ATS Services Provider will meet regularly with
representatives from the Company's marketing division 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. During the sixth year following the
effective date of the ATS Services Agreement, the Company will pay the ATS
Services Providers a fee of up to $200.0 million (on a present value basis),
based on improvements in the Company's air booking fee revenue over the
five-year period immediately following the acquisition of ATS, as measured by
the weighted average annual air segment growth rate and the weighted average
annual price increase rate over such period. The Company cannot currently
estimate how much, if any, of such maximum fee may be paid at such time.
In connection with the Company's acquisitions of Traviswiss and Galileo
Nederland, the Company will enter into a services agreement with each of
Swissair and KLM (collectively, the "Additional Services Agreements"; and,
together with the ATS Services Agreements, the "Services Agreements"), pursuant
to which Swissair and KLM will provide services designed to assist the Company
in growing the business of Traviswiss and Galileo Nederland, respectively.
During the sixth year following the effective dates of the Additional Services
Agreements, the Company will pay Swissair a fee of up to $6.8 million (on a
present value basis) and will pay KLM a fee of up to $4.7 million (on a present
value basis), in each case based on improvements in the Company's air booking
fee revenue over the five-year period immediately following such acquisitions,
measured in a manner similar to that provided in the ATS Services Agreement. The
Company cannot currently estimate how much, if any, of such maximum fees will be
paid at such time.
NON-COMPETITION AGREEMENTS
Simultaneously with the consummation of the Offering, the Company will
enter into a non-competition agreement with each of the airline stockholders.
These agreements will prohibit the airline stockholders and their affiliates
from competing with the Company in providing reservations services to neutral
travel agencies. However, the non-competition agreements include certain
exceptions that permit the airline stockholders and their affiliates to, among
other things, provide and market certain reservation services to certain
customers of the airline stockholders.
If an airline stockholder believes it will be materially disadvantaged in
relation to one of its airline competitors by not being able to engage in an
activity that is prohibited by the non-competition agreement, such entity may
seek approval to engage in the activity from the Company's Airline Affiliate
Review Board (the "AARB"). The AARB, which will be comprised of a representative
of each of United Airlines, KLM, Swissair, British Airways and US Airways (so
long as the relevant airline stockholder is a beneficial owner of a share of
Special Voting Preferred Stock and is not the airline seeking relief), may
permit the airline stockholder to engage in the prohibited activity if it
determines that the damage to the airline stockholder from continued prohibition
of such activity would be greater than the damage that would be suffered by the
Company if such activity were allowed. The AARB may condition its permission
upon divestiture of the airline stockholder's interest in the Company's capital
stock, termination of its right to distribute the Company's products and
services or the payment of compensation to the Company. The airline stockholder
may not engage in the prohibited activity until the AARB renders a decision
allowing such activity or, if the AARB's decision is appealed to an arbitrator,
until such arbitrator renders an award allowing such activity.
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<PAGE> 69
These agreements may be terminated upon 12 months' notice given at any time
after the second anniversary of the consummation of the Offering, or upon six
months' notice after the third anniversary of such date, provided that the
agreements may not be terminated while the stockholder controls one of the
Company's NDCs. Each non-competition agreement also terminates automatically at
such time as the airline stockholder that is a party to such agreement ceases to
own any shares of Common Stock, although the agreement will continue to be
binding on any NDC of the Company in which such airline stockholder owns an
interest.
In the event any airline stockholder that has elected a director to the
Company's Board of Directors in accordance with the provisions of the Special
Voting Preferred Stock gives notice of its intention to terminate its
non-competition agreement, such airline stockholder will no longer be entitled
to have a director on the Company's Board of Directors.
REGISTRATION RIGHTS AGREEMENT
The Company and the airline stockholders are parties to a registration
rights agreement (the "Registration Rights Agreement"), pursuant to which each
airline stockholder may, on two separate occasions, demand registration under
the Securities Act of shares of the Common Stock held by it. The Company may
postpone such a demand under certain circumstances. In addition, if the Company
registers any other shares of Common Stock under the Securities Act, subject to
certain limitations, each airline stockholder may request that the Company
include shares of its Common Stock in such registration.
STOCKHOLDERS' AGREEMENT
Simultaneously with the consummation of the Offering, the Company, certain
of its stockholders and certain parties related to such stockholders will enter
into a stockholders' agreement (the "Stockholders' Agreement") pursuant to which
they will vote their shares and take such other actions as are necessary to
cause the board of directors of the Company to (i) with limited exceptions,
consist of 13 members, (ii) be divided into three classes, (iii) consist of
seven directors elected by the airline stockholders, three management directors
and three independent directors and (iv) designate nominating, audit and
compensation committees. The Stockholders' Agreement contains certain
limitations on the transfer of shares of Special Voting Preferred Stock and
Common Stock, including provisions granting the airline stockholders, their
affiliates and certain transferees (collectively, the "Original Owners") the
right of first refusal in the event that an Original Owner proposes to sell or
transfer its shares of Common Stock to another Original Owner or an affiliate
thereof. In addition, the Stockholders' Agreement prohibits an Original Owner
from transferring its shares of Common Stock to any of its affiliates without
such affiliate executing a counterpart of the Stockholders' Agreement. The
Stockholders' Agreement also restricts the ability of an Original Owner to
acquire more than 50% of the capital stock of the Company entitled to vote in
the election of directors. Each of the Original Owners has agreed in the
Stockholders' Agreement not to sell any of its original shares of Common Stock
or Special Voting Preferred Stock within the first six months after the Offering
unless it provides a written opinion of tax counsel to the effect that such sale
will not cause the formation of the Company to fail to qualify as a tax-free
transaction under Section 351 of the Code. The Stockholders' Agreement will
terminate on the tenth anniversary of the consummation of the Offering.
TRANSACTION AGREEMENT
Simultaneously with the consummation of the Offering, the parties to the
original agreements relating to the formation, business, operations and
governance of the Galileo Partnership will enter into a transaction agreement
with the Company (the "Transaction Agreement"). Pursuant to the Transaction
Agreement, the parties will agree to enter into new agreements relating to the
governance of the Company and certain commercial relationships between the
Company and its airline stockholders (and certain of their affiliates) and to
extend, terminate or modify certain of the obligations of the parties under the
original agreements.
The new agreements will include the Computer Services Agreements, the
Non-Competition Agreements, the Sales Representation Agreements, the
Registration Rights Agreement, the Stockholders' Agreement, the agreements
pursuant to which the Company will effect the NDC Acquisitions and the Services
Agreements.
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<PAGE> 70
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding (i) the
beneficial ownership of the Common Stock by the airline stockholders immediately
prior to the Offering (after giving effect to the merger of the Galileo
Partnership into a wholly owned limited liability company subsidiary of Galileo
International, Inc.); (ii) the number of shares of Common Stock to be sold by
the Selling Stockholders in the Offering; (iii) the beneficial ownership of the
Common Stock by the airline stockholders as adjusted to give effect to the
Offering; and (iv) the beneficial ownership of Special Voting Preferred Stock
after giving effect to the Offering. Immediately prior to the Offering, no
director or executive officer of the Company will be the beneficial owner of any
shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
BENEFICIALLY NUMBER OF BENEFICIALLY NUMBER OF SHARES
OWNED PRIOR SHARES OF OWNED AFTER OF SPECIAL VOTING
TO THE OFFERING(2) COMMON THE OFFERING(2) PREFERRED STOCK
-------------------- STOCK BEING -------------------- BENEFICIALLY OWNED
BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT AFTER THE OFFERING(3)
------------------- ------ ------- ----------- ------ ------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
United Air Lines, Inc.(4)............ 33,440,000 38.0% -- 33,440,000 33.4% 3
British Airways plc(5)............... 12,892,000 14.7 5,891,600 7,000,400 7.0 1
SAirGroup (Ltd.)(6).................. 11,633,600 13.2 4,633,200 7,000,400 7.0 1
Koninklijke Luchtvaart Maatschappij
N.V. (KLM)(7)...................... 10,639,200 12.1 -- 10,639,200 10.6 1
US Airways, Inc.(8).................. 9,680,000 11.0 2,679,600 7,000,400 7.0 1
Alitalia-Linee Aeree Italiane
S.p.A.(9).......................... 7,664,800 8.7 6,065,840 1,598,960 1.6 --
Olympic Airways S.A.(10)............. 906,400 1.0 -- 906,400 * --
Air Canada(11)....................... 880,000 1.0 727,760 152,240 * --
Aer Lingus plc(12)................... 88,000 * -- 88,000 * --
Transportes Aereos Portugueses
S.A.(13)........................... 88,000 * -- 88,000 * --
Austrian Airlines Oesterreichische
Luftverkehrs
Aktiengesellschaft(14)............. 88,000 * -- 88,000 * --
</TABLE>
- - -------------------------
* Less than 1%.
(1) As used in this table, the terms "beneficial owner" and "beneficially own"
have the meanings given such terms in Rule 13d-3 of the Exchange Act.
(2) Assumes no exercise of the U.S. Underwriters' over-allotment option. See
"Underwriters."
(3) Each share of Special Voting Preferred Stock entitles the holder thereof to
elect one director to the Company's Board of Directors. See "Description of
Capital Stock -- Special Voting Preferred Stock."
(4) Shares are owned directly by Covia Corporation, a wholly owned subsidiary
of United Air Lines, Inc., whose business address is 1200 East Algonquin
Road, Elk Grove Township, Illinois 60007.
(5) Shares are owned directly by Distribution Systems, Inc., a Delaware
corporation and an indirect wholly owned subsidiary of British Airways plc.
The business address of British Airways plc is Speedbird House, Heathrow
Airport, Hounslow, Middlesex, TW6 2JA, England.
(6) Shares are owned directly by Roscor, A.G., a wholly owned subsidiary of
SAirGroup (Ltd.), whose business address is CH-8058, Zurich Airport,
Switzerland.
(7) Shares are owned directly by Travel Industry Systems B.V., a wholly owned
subsidiary of Koninklijke Luchtvaart Maatschappij N.V., whose business
address is Amsterdamseweg 55, 1182 GP Amstelveen, The Netherlands.
(8) Shares are owned directly by USAM Corp., a wholly owned subsidiary of US
Airways, Inc., whose business address is Crystal Park Four, 2345 Crystal
Drive, Arlington, Virginia 22227.
(9) Shares are owned directly by Racom Teledata S.p.A., a subsidiary of
Alitalia-Linee Aeree Italiane S.p.A., whose business address is Viale
Alessandro Marchetti No. 111, 00148 Rome, Italy.
(10) Shares are owned directly by Olynet, Inc., a wholly owned subsidiary of
Olympic Airways S.A., whose business address is 96, Syngrou Ave, Athens,
Greece.
(11) Shares are owned directly by Resnet Holdings, Inc., a wholly owned
subsidiary of Air Canada., whose business address is 130 Bloor Street West,
Toronto, Ontario, M5S 1P5, Canada.
(12) Shares are owned directly by Retford Limited, a wholly owned subsidiary of
Aer Lingus plc, whose business address is Head Office Block, Dublin
Airport, Dublin, Ireland.
(13) Shares are owned directly by Coporga, Inc., a wholly owned subsidiary of
Transportes Aereos Portugueses S.A., whose business address is Edificio 27,
10. andar, Aeroporto de Lisboa, 1700 Lisboa Codex, Portugal.
(14) Shares are owned directly by Travidata, Inc., a wholly owned subsidiary of
Austrian Airlines Oesterreichische Luftverkehrs Aktiengesellschaft, whose
business address is Fontanastrasse I, A-1107 Vienna, Austria.
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<PAGE> 71
DESCRIPTION OF CAPITAL STOCK
The following summary does not purport to be complete and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Restated Certificate of Incorporation (the "Certificate of Incorporation"), the
Restated By-Laws (the "By-Laws") of the Company and the Stockholders' Agreement
that will be in effect immediately prior to the consummation of the Offering,
forms of which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part, and to the applicable provisions of the
General Corporation Law of the State of Delaware (the "DGCL").
The Special Voting Preferred Stock will allow certain airline stockholders
to elect seven of the 13 members of the Company's Board of Directors. Of the
remaining six directors, the airline stockholders have agreed pursuant to the
Stockholders' Agreement to vote their shares of Common Stock in favor of the
election of three independent directors who will be nominated by the Board of
Directors and three management directors. As a result, so long as the
Stockholders' Agreement remains in effect and the airline stockholders own in
the aggregate more than 50% of the outstanding Common Stock, the airline
stockholders will control the election of the entire Board of Directors. See
"Relationship with Airline Stockholders -- Stockholders' Agreement."
GENERAL
Upon the effectiveness of the Certificate of Incorporation, the authorized
capital stock of the Company will consist of 250,000,000 shares of Common Stock,
par value $.01 per share, seven shares of Special Voting Preferred Stock, par
value $.01 per share (the "Special Voting Preferred Stock"), which will be
divided into seven series consisting of one share each, and 25,000,000 shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock").
COMMON STOCK
Upon completion of the Offering, the Company will have 100,000,000 shares
of Common Stock outstanding (assuming no exercise of the U.S. Underwriters'
over-allotment option).
Voting Rights. Each share of Common Stock entitles the holder thereof to
one vote in elections of directors and all other matters submitted to a vote of
stockholders.
Dividends. Each share of Common Stock has an equal and ratable right,
subject to any preferential rights of any outstanding Preferred Stock, to
receive dividends to be paid from the Company's assets legally available
therefor when, as and if declared by the Board of Directors. The DGCL generally
requires that dividends are payable only out of the Company's surplus or current
net profits. See "Dividend Policy."
Liquidation. Subject to the rights of any holders of Special Voting
Preferred Stock and Preferred Stock outstanding, upon the dissolution,
liquidation or winding up of the Company, the holders of Common Stock are
entitled to share equally and ratably in the assets available for distribution
after payments are made to the Company's creditors.
Other. The holders of shares of Common Stock have no preemptive,
subscription, redemption or conversion rights and are not liable for further
call or assessment. All of the outstanding shares of Common Stock are, and the
Common Stock offered by the Company hereby will be, validly issued, fully paid
and nonassessable.
Prior to the Offering, there has been no public market for the Common
Stock. Although the Company has applied to have the Common Stock approved for
listing on the New York Stock Exchange, there can be no assurance that an active
trading market will develop for the Common Stock. The initial public offering
price for the Common Stock will be determined by negotiations among the Company,
the Selling Stockholders and the Representatives of the Underwriters and may not
be indicative of the market price for the Common Stock after the Offering. See
"Underwriters -- Pricing of Offering."
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<PAGE> 72
SPECIAL VOTING PREFERRED STOCK
Upon completion of the Offering, the Company will have seven series of
Special Voting Preferred Stock outstanding, each series consisting of one share.
Voting Rights. Each series of Special Voting Preferred Stock, voting
separately as a single series, will generally be entitled to elect one director
to the Board of Directors so long as the number of Relevant Shares (as defined
below) that are held by the holder of the share of such series of Special Voting
Preferred Stock and its affiliates represents, with limited exceptions, at least
5% of the total number of shares of Common Stock outstanding; provided, however,
that in the event (i) a holder holds the shares of two or more series of Special
Voting Preferred Stock, such holder will be entitled to elect two directors to
the Board of Directors only if the number of Relevant Shares that are held by
such holder represents at least 15% of the total number of shares of Common
Stock outstanding and (ii) a holder holds the shares of three or more series of
Special Voting Preferred Stock, such holder will be entitled to elect three
directors to the Board of Directors only if the number of Relevant Shares held
by such holder represents at least 25% of the total number of shares of Common
Stock outstanding.
"Relevant Shares" means shares of Common Stock (i) beneficially owned by
subsidiaries of 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 (collectively, the "Original Owners")
immediately after consummation of the Offering (but excluding any shares of
Common Stock acquired in the Offering), (ii) transferred or acquired in
accordance with the provisions of the Stockholders' Agreement, including the
transfer restrictions provided below, (iii) issued by way of a stock split of
the Common Stock, or (iv) 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 distribution with respect to, or in exchange for, or in
replacement of, the Common Stock referred to in clauses (i) through (iii) above.
Transfer Restrictions. The holder of a share 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 (A) an Original Owner or (B) a third party that is or
becomes a party to the Stockholders' Agreement and a non-competition agreement,
and (iii) such transferee and its affiliates, in the aggregate, would, after
giving effect to such transfer or, in certain circumstances, within 90 days of
such transfer, hold Relevant Shares representing at least 5% (in the event such
transferee is receiving one share) of the then outstanding shares of Common
Stock. Only shares of Special Voting Preferred Stock transferred in accordance
with these restrictions will continue to have the special voting rights
described above.
Redemption. If at any time the holder of a share of Special Voting
Preferred Stock (i) is not entitled to elect a director to the Board of
Directors, (ii) is no longer subject to the terms of a non-competition
agreement, or (iii) has given the Company notice of its intention to terminate
its non-competition agreement, then the Company will immediately and
automatically redeem the share of such series of Special Voting Preferred Stock
at a redemption price of $100 per share (to the extent the Company has funds
legally available therefor).
Dividends. No share of Special Voting Preferred Stock will entitle the
holder thereof to receive dividends on such share.
Liquidation Rights. In the event of any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, before any payment
or distribution of the assets of the Company or proceeds thereof (whether
capital or surplus) is made to or set apart for the holders of any class or
series of stock of the Company ranking junior to the Special Voting Preferred
Stock upon liquidation, holders of the Special Voting Preferred Stock will be
entitled to receive $100 per share (the "preferential amount"), but such holders
will not be entitled to any further payment. If, upon any liquidation,
dissolution or winding-up of the Company, the assets of the Company, or proceeds
thereof, distributable among the holders of shares of Special Voting Preferred
Stock and any other class or series of stock ranking on a parity with the
Special Voting Preferred Stock as to payments upon liquidation, dissolution or
winding-up are insufficient to pay in full the preferential amount payable on
all such shares of stock, then such assets, or the proceeds thereof, will be
distributed
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<PAGE> 73
among such holders ratably in accordance with the respective amounts that would
be payable on such shares if all amounts payable thereon were paid in full. The
voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all the
property or assets of the Company to, or a consolidation or merger of the
Company with or into, one or more other corporations (whether or not the Company
is the corporation surviving such consolidation or merger) will not be deemed to
be a liquidation, dissolution or winding-up, voluntary or involuntary.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
stockholder action, to divide any or all shares of authorized Preferred Stock
into one or more series and to fix and determine the designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereon, of any series so
established, including voting powers, dividend rights, liquidation preferences,
redemption rights and conversion or exchange privileges. As of the date of this
Prospectus, the Board of Directors of the Company has not authorized any series
of Preferred Stock, and there are no plans, agreements or understandings for the
issuance of any shares of Preferred Stock.
The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility
in structuring possible future financings and acquisitions and in meeting other
corporate needs that might arise. The authorized shares of Preferred Stock will
be available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded. The New York Stock Exchange currently requires stockholder
approval as a prerequisite to listing shares in several instances, including
where the present or potential issuance of shares could result in an increase in
the number of shares of Common Stock outstanding, or in the amount of voting
securities outstanding, of at least 20%. The Board of Directors has no intention
at the present time to issue additional shares of Common Stock beyond those
contemplated by this Offering.
Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its stockholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage a potential acquiror from
making, without first negotiating with the Board of Directors, an acquisition
attempt that would enable the potential acquiror to change the composition of
the Board of Directors. This could discourage a tender offer or other
transaction that some, or a majority, of the Company's stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then-current market price of such stock.
CERTIFICATE OF INCORPORATION AND BY-LAWS
Stockholders' rights and related matters are governed by the DGCL, the
Certificate of Incorporation and the By-Laws. Certain provisions of the
Certificate of Incorporation and By-Laws, which are summarized below, may have
the effect, either alone or in combination with each other, of discouraging or
making more difficult a tender offer or takeover attempt that is opposed by the
Company's Board of Directors but that a stockholder might consider to be in its
best interest. Such provisions may also adversely affect prevailing market
prices for the Common Stock. The Company believes that such provisions are
necessary to enable the Company to develop its business in a manner that will
foster its long-term growth without disruption caused by the threat of a
takeover not deemed by the Board of Directors to be in the best interests of the
Company and its stockholders.
Classified Board of Directors and Related Provisions. The Certificate of
Incorporation provides that the Board of Directors of the Company is to be
divided into three classes of directors serving staggered three-year terms. The
classes of directors will be as nearly equal in number as possible. Accordingly,
approximately one-third of the Company's Board of Directors will be elected each
year. As a result of the Special Voting
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<PAGE> 74
Preferred Stock that will be outstanding upon completion of the Offering, and
the provisions of the Stockholders' Agreement regarding nomination and election
of directors, only one management director and only one independent director
will be elected each year. See "Management -- Board Composition" and
"Relationship with Airline Stockholders and Certain Transactions --
Stockholders' Agreement." Subject to the rights of the holders of shares of
Special Voting Preferred Stock to elect directors, the classified board
provisions will prevent a party who acquires control of a majority of the
outstanding voting stock of the Company from obtaining control of the Board of
Directors until the second annual stockholders meeting following the date such
party obtains the controlling interest. The provisions of the Certificate of
Incorporation relating to the classified nature of the Company's Board of
Directors may not be amended without the affirmative vote of the holders of at
least 66 2/3% of the voting power of the Company's outstanding voting stock.
The By-Laws provide that the number of directors will be 13 or, subject to
the provisions of the Stockholders' Agreement, such other number as shall be
fixed from time to time pursuant to a resolution adopted by the Board of
Directors. The By-Laws provide that subject to the rights of the holders of the
Special Voting Preferred Stock, that any vacancies on the Board of Directors may
only be filled by the remaining directors and not by the stockholders. These
provisions will preclude stockholders from removing incumbent directors without
cause and filling the resulting vacancies with their own nominees.
No Stockholder Action by Written Consent; Special Meeting. The Certificate
of Incorporation prohibits stockholders from taking action by written consent in
lieu of an annual or special meeting and, thus, stockholders may only take
action at an annual or special meeting called in accordance with the By-Laws.
The Certificate of Incorporation and the By-Laws provide that special meetings
of stockholders may only be called by the Chairman of the Board, the Chief
Executive Officer or pursuant to a resolution adopted by a majority of the Board
of Directors. Special meetings may not be called by the stockholders.
These provisions could have the effect of delaying consideration of a
stockholder proposal until the next annual meeting. The provisions would also
prevent the holders of a majority of the voting power of the capital stock of
the Company entitled to vote from unilaterally using the written consent
procedure to take stockholder action. Moreover, a stockholder could not force
stockholder consideration of a proposal over the opposition of the Chairman of
the Board, the Chief Executive Officer or a majority of the Board of Directors
by calling a special meeting of stockholders prior to the time such persons
believe such consideration to be appropriate.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Certificate of Incorporation and the By-Laws establish advance
notice procedures with regard to stockholder proposals and the nomination, other
than by or at the direction of the Board of Directors or a committee thereof, of
candidates for election as directors. These procedures provide that the notice
of stockholder proposals and stockholder nominations for the election of
directors at an annual meeting must be in writing and received by the Secretary
of the Company 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 received not later than the close
of business on the tenth day following the day on which notice of the date of
such meeting was mailed or public disclosure of the date of the annual meeting
was made, whichever first occurs. The notice of nominations for the election of
directors must set forth certain information with respect to the stockholder
giving the notice and with respect to each nominee.
By requiring advance notice of nominations by stockholders, the foregoing
procedures will afford the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board of Directors, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, such
procedures will provide the Board of Directors with an opportunity to inform
stockholders, prior to such meetings, of any business proposed to be conducted
at such meetings, together with any recommendations as to the Board of
Directors' position regarding action to be taken with respect to such business,
so that stockholders can better decide whether to attend such a meeting or to
grant a proxy regarding the disposition of any such business.
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<PAGE> 75
Although the Certificate of Incorporation and the By-Laws do not give the
Board of Directors any power to approve or disapprove stockholder nominations
for the election of directors or proposals for action, they may have the effect
of precluding a contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal,
without regard to whether consideration of such nominees or proposals might be
harmful or beneficial to the Company and its stockholders.
Indemnification. The Certificate of Incorporation and the By-Laws provide
that the Company shall advance expenses to and indemnify each director and
officer of the Company to the fullest extent permitted by law.
Amendments. Stockholders may adopt, alter, amend or repeal provisions of
the By-Laws only by vote of the holders of 66 2/3% or more of the outstanding
Common Stock. In addition, the affirmative vote of the holders of 66 2/3% or
more of the outstanding Common Stock and any other voting securities is required
to amend certain provisions of the Certificate of Incorporation, including the
provisions referred to above relating to the classification of the Company's
Board of Directors, prohibiting stockholder action by written consent,
prohibiting the calling of special meetings by stockholders and approval of
amendments to the By-Laws. In addition, the By-Laws may be amended by the
affirmative vote of a majority of the whole Board of Directors.
LIMITATIONS ON DIRECTORS' LIABILITY
The Certificate of Incorporation provides that no director of the Company
will be personally liable to the Company or its stockholders for monetary
damages for any breach of fiduciary duty as a director, except for liability:
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) in respect of
certain unlawful dividend payments or stock redemptions or purchases; or (iv)
for any transaction from which the director derived an improper personal
benefit. The effect of these provisions will be to eliminate the rights of the
Company and its stockholders (through stockholders' derivative suits on behalf
of the Company) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from grossly
negligent behavior), except in the situations described above. These provisions
will not limit the liability of directors under federal securities laws and will
not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of his duty of care.
CORPORATE OPPORTUNITIES POLICY
The Certificate of Incorporation provides that, except as the airline
stockholders may otherwise agree in writing, the airline stockholders shall have
no duty to refrain from engaging in the same or similar activities or lines of
business as the Company, and no airline stockholder nor any officer or director
thereof (except as described in the next paragraph) will be liable to the
Company or its stockholders for breach of any fiduciary duty by reason of any
such activities of such airline stockholder. See "Relationship With Airline
Stockholders and Certain Transactions -- Non-Competition Agreements." In the
event that any airline stockholder acquires knowledge of a potential transaction
or matter which may be a corporate opportunity for both such airline stockholder
and the Company, such airline stockholder will have no duty to communicate or
offer such corporate opportunity to the Company and will not be liable to the
Company or its stockholders for breach of any fiduciary duty as a stockholder of
the Company by reason of the fact that such airline stockholder 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 Company.
In the event that a director or officer of the Company who is also a
director or officer of an airline stockholder acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both the Company
and such airline stockholder, such director or officer of the Company will have
fully satisfied and fulfilled the fiduciary duty of such director or officer to
the Company and its stockholders with
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<PAGE> 76
respect to such corporate opportunity, if such director or officer acts in a
manner consistent with the following policy:
First, a corporate opportunity offered to any person who is an officer of
the Company, and who is also a director but not an officer of such airline
stockholder, will belong to the Company.
Second, a corporate opportunity offered to any person who is a director but
not an officer of the Company, and who is also a director, officer or employee
of such airline stockholder will belong to the Company if such opportunity is
expressly offered to such person primarily in his or her capacity as a director
of the Company, and otherwise will belong to such airline stockholder.
Third, a corporate opportunity offered to any person who is an officer of
both the Company and such airline stockholder will belong to the Company if such
opportunity is expressly offered to such person primarily in his or her capacity
as an officer of the Company, and otherwise will belong to such airline
stockholder.
For purposes of this corporate opportunities provision, a director of the
Company who is Chairman of the Board of Directors of the Company or of a
committee thereof will not be deemed to be an officer of the Company by reason
of holding such position, unless such person is a full-time employee of the
Company.
The Certificate of Incorporation also provides that, until the time that
the airline stockholders 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 Company, the affirmative vote of the holders of
more than 80% of the total voting power of all classes of outstanding Common
Stock of the Company will be required to alter, amend or repeal this corporate
opportunities provision in a manner adverse to the interests of the airline
stockholders.
The Certificate of Incorporation provides that any person purchasing or
otherwise acquiring any interest in shares of the capital stock of the Company
shall be deemed to have consented to this corporate opportunities provision.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder," which is defined as a person who,
together with any affiliates and/or associates of such person, beneficially
owns, directly or indirectly, 15% or more of the outstanding voting shares of a
Delaware corporation. This provision prohibits certain business combinations
(defined broadly to include mergers, consolidations, sales or other dispositions
of assets having an aggregate value of 10% or more of the consolidated assets of
the corporation, and certain transactions that would increase the interested
stockholder's proportionate share ownership in the corporation) between an
interested stockholder and a corporation for a period of three years after the
date the interested stockholder acquired its stock, unless: (i) the business
combination is approved by the corporation's board of directors prior to the
date the interested stockholder acquired shares; (ii) the interested stockholder
acquired at least 85% of the voting stock of the corporation in the transaction
in which it became an interested stockholder; or (iii) the business combination
is approved by a majority of the board of directors and by the affirmative vote
of two-thirds of the outstanding voting stock owned by disinterested
stockholders at an annual or special meeting. A Delaware corporation, pursuant
to a provision in its certificate of incorporation or by-laws, may elect not to
be governed by Section 203 of the DGCL. The Certificate of Incorporation does
not exclude the Company from the restrictions imposed by Section 203 of the DGCL
and, as a result, the Company will be subject to its provisions upon
consummation of the Offering.
Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who could be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation of the Company
does not exclude the Company from the restrictions imposed under Section 203 of
the DGCL. It is anticipated that the provisions of Section 203 of the DGCL may
encourage companies interested in acquiring the Company to negotiate in advance
with the Board of Directors, since the stockholder approval requirement would be
avoided if a majority of the directors then in
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office approves, prior to the date on which a stockholder becomes an interested
stockholder, either the business combination or the transaction which results in
the stockholder becoming an interested stockholder.
LISTING
The Common Stock has been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange under the symbol "GLC."
REGISTRAR AND TRANSFER AGENT
Harris Trust and Savings Bank will act as Registrar and Transfer Agent for
the Common Stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect prevailing market prices.
Upon completion of the Offering, the Company will have 100,000,000 shares
of Common Stock issued and outstanding (104,799,700 if the U.S. Underwriters'
over-allotment option is exercised in full). Of these shares, the 31,998,000
shares of Common Stock to be sold in the Offering will be freely tradable
without restrictions or further registration under the Securities Act, except
that shares purchased by an "affiliate" of the Company (as that term is defined
in Rule 144 under the Securities Act ("Rule 144")) will be subject to the resale
limitations of Rule 144. The remaining 68,002,000 shares of Common Stock
outstanding will be "restricted securities" as the term is defined by Rule 144
(the "Restricted Shares").
In general, under Rule 144 as currently in effect, if a period of at least
one year has elapsed between the later of the date on which the Restricted
Shares were acquired from the Company and the date on which they were acquired
from an "affiliate" of the Company (an "Affiliate," as that term is defined in
Rule 144), then the holder of such Restricted Shares (including an Affiliate) is
entitled to sell a number of shares within any three-month period that does not
exceed the greater of (i) one percent of the then outstanding shares of the
Common Stock or (ii) the average weekly reported volume of trading of the Common
Stock during the four calendar weeks preceding such sale. Sales under Rule 144
are also subject to certain requirements pertaining to the manner of such sales,
notices of such sales and the availability of current public information
concerning the Company. Affiliates may sell shares not constituting Restricted
Shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year period. Under Rule 144(k), if a
period of at least two years has elapsed between the later of the date on which
Restricted Shares were acquired from the Company and the date on which they were
acquired from an Affiliate, a holder of such Restricted Shares who is not an
Affiliate at the time of the sale and has not been an Affiliate for at least
three months prior to the sale would be entitled to sell such Restricted Shares
immediately without regard to the volume limitations and other conditions
described above. The foregoing description of Rule 144 is not intended to be a
complete description thereof.
Sales of significant amounts of Common Stock, or the perception that such
sales could occur, could have an adverse impact on the market price of the
Common Stock. Each of the Company and the airline stockholders has agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters, it will not, during the period ending 180 days after the
date of this Prospectus, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock (other than any such
transaction between an airline stockholder and any affiliate thereof so long as,
on or before the date of such transaction, such affiliate has also agreed to be
bound by the restrictions set forth in this paragraph) or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to the sale of the shares of Common
Stock to the Underwriters. See "Underwriters."
The Company and the airline stockholders are also parties to the
Registration Rights Agreement pursuant to which each airline stockholder may, on
two separate occasions, demand registration under the Securities Act of shares
of the Common Stock held by it, subject to its agreement not to sell any shares
prior to the expiration of 180 days from the date of this Prospectus. The
Company may postpone such a demand under certain circumstances. In addition, if
the Company registers any other shares of Common Stock under the Securities Act,
subject to certain limitations, each airline stockholder may request that the
Company include shares of its Common Stock in such registration.
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UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, Lehman Brothers Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc.
and SBC Warburg Inc. are acting as U.S. Representatives, and the International
Underwriters named below for whom Morgan Stanley & Co. International Limited,
Swiss Bank Corporation, acting through its division, SBC Warburg, ABN AMRO
Rothschild, HSBC Investment Bank Limited, Lehman Brothers International
(Europe), Merrill Lynch International and J.P. Morgan Securities Ltd. are acting
as International Representatives, have severally agreed to purchase, and the
Company and the Selling Stockholders have agreed to sell to them, the respective
number of shares of Common Stock set forth opposite the names of such
Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Lehman Brothers Inc. .....................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
J.P. Morgan Securities Inc. ..............................
SBC Warburg Inc...........................................
----------
Subtotal............................................... 22,398,600
----------
International Underwriters:
Morgan Stanley & Co. International Limited................
Swiss Bank Corporation,
acting through its division, SBC Warburg...............
ABN AMRO Rothschild.......................................
HSBC Investment Bank Limited..............................
Lehman Brothers International (Europe)....................
Merrill Lynch International...............................
J.P. Morgan Securities Ltd. ..............................
----------
Subtotal............................................... 9,599,400
----------
Total................................................ 31,998,000
==========
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has
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not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common Stock to be purchased by the Underwriters under the
Underwriting Agreement are referred to herein as the "Shares."
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from, or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
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<PAGE> 81
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to or for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $. a share under the public offering price. Any Underwriter
may allow, and such dealers may reallow, a concession not in excess of $. a
share to other Underwriters or to certain other dealers. After the initial
offering of the shares of Common Stock, the offering price and other selling
terms may from time to time be varied by the Representatives.
Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of 4,799,700 additional shares of
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering over-allotments, if
any, made in connection with the offering of the shares of Common Stock offered
hereby. To the extent such option is exercised, each U.S. Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage of such additional shares of Common Stock as the number set
forth next to such U.S. Underwriter's name in the preceding table bears to the
total number of shares of Common Stock set forth next to the names of all U.S.
Underwriters in the preceding table.
The Common Stock has been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange under the symbol "GLC." In order to
meet the requirements for listing the Common Stock on the New York Stock
Exchange, the Underwriters have undertaken to meet the New York Stock Exchange's
minimum distribution, issuance and aggregate market value requirements.
Each of the Company and the airline stockholders has agreed that, without
the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the
Underwriters, it will not, during the period ending 180 days after the date of
this Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (other than any such transaction
between an airline stockholder and any affiliate thereof so long as, on or
before the date of such transaction, such affiliate has also agreed to be bound
by the restrictions set forth in this paragraph) or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The restrictions
described in this paragraph do not apply to the sale of the Shares to the
Underwriters.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the Offering, creating a short position in the Common Stock for
their own
77
<PAGE> 82
account. In addition, to cover over-allotments or to stabilize the price of the
Common Stock, the Underwriters may bid for, and purchase, shares of Common Stock
in the open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an Underwriter or a dealer for distributing the Common
Stock in the Offering, if the syndicate repurchases previously distributed
Common Stock transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of the Common Stock above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
Morgan Guaranty Trust Company of New York, an affiliate of J.P. Morgan
Securities Inc., is arranger for and a lender under the Credit Agreement, for
which it is entitled to customary fees. J.P. Morgan Securities Inc. served as
financial adviser to the Company in connection with the acquisition of ATS, for
which it is entitled to customary fees. Lehman Brothers Inc. served as financial
adviser to ATS in connection with the sale of ATS to the Company, for which it
is entitled to customary fees. From time to time, certain of the Underwriters
have provided, and continue to provide, investment banking services to the
Company, the Selling Stockholders and certain of their affiliates.
PRICING OF OFFERING
Prior to the Offering, there has been no public market for the shares of
Common Stock of the Company. Consequently, the initial public offering price
will be determined by negotiation among the Company, the Selling Stockholders
and the Representatives. Among the factors to be considered in determining the
initial public offering price will be the Company's record of operations, the
Company's current financial condition and future prospects, the experience of
its management, the economics of the industry in general, the general condition
of the equity securities markets, and the market prices of similar securities of
companies considered comparable to the Company. There can be no assurance that a
regular trading market for the shares of Common Stock will develop after the
Offering or, if developed, that a public trading market can be sustained. There
can be no assurance that the prices at which the Common Stock will sell in the
public market after the Offering will not be lower than the price at which it is
offered by the Underwriters in the Offering.
CERTAIN UNITED STATES TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a Non-U.S. Holder. For this purpose, a "Non-U.S. Holder" is any person
who is, for United States federal income tax purposes, a foreign corporation, a
non-resident alien individual, a foreign partnership or a foreign estate or
trust. This discussion does not address all aspects of United States federal
income and estate taxes and does not deal with foreign, state and local
consequences that may be relevant to such Non-U.S. Holders in light of their
personal circumstances, nor does it discuss certain tax provisions which may
apply to individuals who relinquish their U.S. citizenship or residence.
Furthermore, this discussion is based on provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), existing and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change. EACH PROSPECTIVE PURCHASER OF
COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND
POSSIBLE FUTURE TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON
STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S.
STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States on at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to U.S. federal tax as if they were U.S. citizens.
78
<PAGE> 83
DIVIDENDS
Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of United States federal income tax either at a rate of
30% of the gross amount of the dividends or at such lower rate as may be
specified by an applicable income tax treaty. However, dividends that are
effectively connected with the conduct of a trade or business by the Non-U.S.
Holder within the United States and, where a tax treaty applies, are
attributable to a United States permanent establishment of the Non-U.S. Holder,
are not subject to the withholding tax, but instead are subject to United States
federal income tax on a net income basis at applicable graduated individual or
corporate rates. Any such effectively connected dividends received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Dividends paid to an address outside the United States are presumed to be
paid to a resident of such country (unless the payer has knowledge to the
contrary) for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. However, under proposed
regulations, in the case of dividends paid after December 31, 1997 (December 31,
1999 in the case of dividends paid to accounts in existence on or before the
date that is 60 days after the proposed regulations are published as final
regulations), a Non-U.S. Holder generally would be subject to United States
withholding tax at a 31% rate under the backup withholding rules described
below, rather than at a 30% rate or at a reduced rate under an income tax
treaty, unless certain certification procedures (or, in the case of payments
made outside the United States with respect to an offshore account, certain
documentary evidence procedures) are complied with, directly or through an
intermediary. Currently, certain certification and disclosure requirements must
be complied with in order to be exempt from withholding under the effectively
connected income exemption discussed above.
A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States and, where a tax treaty
applies, is attributable to a United States permanent establishment of the
Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale or other disposition
and certain other conditions are met, or (iii) the Company is or has been a
"U.S. real property holding corporation" for United States federal income tax
purposes. The Company believes it is not and does not anticipate becoming a
"U.S. real property holding corporation" for United States federal income tax
purposes.
If an individual Non-U.S. Holder falls under clause (i) above, he will,
unless an applicable treaty provides otherwise, be taxed on his net gain derived
from the sale under regular graduated United States federal income tax rates. If
an individual Non-U.S. Holder falls under clause (ii) above, he will be subject
to a flat 30% tax on the gain derived from the sale, which may be offset by
certain United States capital losses.
If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, it will be taxed on its gain under regular graduated United States
federal income tax rates and may be subject to an additional branch profits tax
equal to 30% of its effectively connected earnings and profits within the
meaning of the Code for the taxable year, as adjusted for certain items, unless
it qualifies for a lower rate under an applicable income tax treaty.
79
<PAGE> 84
FEDERAL ESTATE TAX
Common Stock held by an individual Non-U.S. Holder at the time of death
will be included in such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
A backup withholding tax is imposed at the rate of 31% on certain payments
to persons that fail to furnish certain identifying information to the payer.
Backup withholding generally will not apply to dividends paid to a Non-U.S.
Holder at an address outside the United States (unless the payer has knowledge
that the payee is a U.S. person). However, under proposed regulations, in the
case of dividends paid after December 31, 1997 (December 31, 1999 in the case of
dividends paid to accounts in existence on or before the date that is 60 days
after the proposed regulations are published as final regulations), a Non-U.S.
Holder generally would be subject to withholding tax at a 31% rate, unless
certain certification procedures (or, in the case of payments made outside the
United States with respect to an offshore account, certain documentary evidence
procedures) are complied with, directly or through an intermediary. Backup
withholding and information reporting generally will also apply to dividends
paid on Common Stock at addresses inside the United States to Non-U.S. Holders
that fail to provide certain identifying information in the manner required.
Payment of the proceeds of a sale of Common Stock by or through a United
States office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner provides the payer with its name and
address and certifies under penalties of perjury that it is a Non-U.S. Holder,
or otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
Common Stock by or through a foreign office of a broker. If, however, such
broker is, for United States federal income tax purposes, a U.S. person, a
controlled foreign corporation, or a foreign person that derives 50% or more if
its gross income for certain periods from the conduct of a trade or business in
the United States, such payments will be subject to information reporting, but
not backup withholding, unless (i) such broker has documentary evidence in its
records that the beneficial owner is a Non-U.S. Holder and certain other
conditions are met, or (ii) the beneficial owner otherwise establishes an
exemption. Proposed regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the proposed regulations would provide
certain presumptions under which a Non-U.S. Holder would be subject to backup
withholding and information reporting unless the Company receives certification
from the holder of a non-U.S. status.
Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Shearman & Sterling,
New York, New York, and for the Underwriters by Davis Polk & Wardwell, New York,
New York.
EXPERTS
The balance sheet of Galileo International, Inc. as of May 13, 1997 and the
consolidated financial statements of Galileo International Partnership as of
December 31, 1995 and December 31, 1996 and for each
80
<PAGE> 85
of the years in the three-year period ended December 31, 1996 have been included
herein in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein and upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Apollo Travel Services Partnership
as of December 31, 1995 and December 31, 1996 and for each of the years in the
three-year period ended December 31, 1996 have been included herein in reliance
upon the report of Arthur Andersen LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. For the purposes hereof, the term
"Registration Statement" means the original registration statement and any and
all amendments thereto. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For further information with respect to the Company and such Common Stock,
reference is hereby made to such Registration Statement, including exhibits
thereto, which can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Regional Offices of the Commission at Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material can also be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
Statements contained in the Prospectus as to the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
The Company is not currently subject to the informational requirements of
the Exchange Act. As a result of the offering of the Company's Common Stock, the
Company will become subject to the reporting requirements of the Exchange Act.
The Company intends to furnish its stockholders with annual reports containing
consolidated financial statements audited by independent certified public
accountants.
81
<PAGE> 86
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
GALILEO INTERNATIONAL, INC.
Independent Auditors' Report.............................. F-2
Balance Sheet as of May 13, 1997.......................... F-3
Notes to Balance Sheet.................................... F-4
GALILEO INTERNATIONAL PARTNERSHIP
Independent Auditors' Report.............................. F-5
Consolidated Balance Sheets as of December 31, 1995 and
1996 and March 31, 1997................................ F-6
Consolidated Statements of Income for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997................... F-7
Consolidated Statements of Partners' Capital for the years
ended December 31, 1994, 1995 and 1996 and for the
three months ended March 31, 1997...................... F-8
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997................... F-9
Notes to Consolidated Financial Statements................ F-10
APOLLO TRAVEL SERVICES PARTNERSHIP
Report of Independent Public Accountants.................. F-19
Consolidated Balance Sheets as of December 31, 1995 and
1996 and March 31, 1997................................ F-20
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997................... F-21
Consolidated Statements of Partners' Capital for the years
ended December 31, 1994, 1995 and 1996 and for the
three months ended March 31, 1997...................... F-22
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996 and for the three
months ended March 31, 1996 and 1997................... F-23
Notes to Consolidated Financial Statements................ F-24
</TABLE>
F-1
<PAGE> 87
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Galileo International, Inc.:
We have audited the accompanying balance sheet of Galileo International,
Inc. (the Company) as of May 13, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Galileo International, Inc. as of
May 13, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
May 20, 1997
F-2
<PAGE> 88
GALILEO INTERNATIONAL, INC.
BALANCE SHEET
MAY 13, 1997
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 1
===
STOCKHOLDERS' EQUITY
Common stock, par value $.01 per share; authorized 1,000
shares; 100 shares issued and outstanding................. $ 1
===
</TABLE>
See accompanying notes to balance sheet.
F-3
<PAGE> 89
GALILEO INTERNATIONAL, INC.
NOTES TO BALANCE SHEET
(1) ORGANIZATION
Galileo International, Inc. (the "Company") is a Delaware corporation and
was incorporated on May 13, 1997. The Company is a wholly owned subsidiary of
Galileo International Partnership, a Delaware general partnership (the "Galileo
Partnership"). The Company was formed to effect an initial public offering of
its common stock (the "Offering"), to make selected acquisitions and to continue
the operations of a proprietary computer reservation system.
(2) CERTAIN TRANSACTIONS (UNAUDITED)
Substantially simultaneously with the consummation of the Offering, the
Company will effect the following transactions:
(i) The Company will amend and restate its Certificate of
Incorporation such that, among other things, its authorized capital stock
will consist of 250,000,000 shares of common stock, par value $.01 per
share; 7 shares of special voting preferred stock, par value $.01 per
share; and 25,000,000 shares of ordinary preferred stock, par value $.01
per share.
(ii) The Galileo Partnership will be merged into a wholly owned
limited liability company subsidiary of the Company. In connection with
this merger, the partners of the Galileo Partnership will receive shares of
common stock of the Company in the same proportion as that of their
respective partnership interests and certain of such partners will receive
shares of special voting preferred stock.
(iii) The Company will use the net proceeds of the Offering plus
borrowings under a credit agreement to acquire certain national
distribution companies from affiliates of certain of the partners of the
Galileo Partnership.
F-4
<PAGE> 90
INDEPENDENT AUDITORS' REPORT
The Supervisory Board
Galileo International Partnership:
We have audited the accompanying consolidated balance sheets of Galileo
International Partnership and subsidiaries (the Partnership) as of December 31,
1995 and 1996, and the related consolidated statements of income, partners'
capital, and cash flows for each of the years in the three-year period ending
December 31, 1996. These consolidated financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Galileo
International Partnership and subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 21, 1997
F-5
<PAGE> 91
GALILEO INTERNATIONAL PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 31,
1995 1996 1997
---- ---- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,367 $ 78,196 $ 71,163
Accounts receivable:
Due from affiliates..................................... 39,042 56,434 58,389
Travel vendors and others............................... 91,029 104,592 146,732
-------- -------- --------
130,071 161,026 205,121
Less allowances......................................... 11,713 14,747 15,061
-------- -------- --------
Net accounts receivable..................................... 118,358 146,279 190,060
Lease deposit............................................. 40,461 -- --
Prepaid expenses.......................................... 8,213 5,603 7,083
Other nontrade receivables................................ 10,462 9,243 8,231
Other current assets...................................... 1,450 1,478 1,953
-------- -------- --------
Total current assets........................................ 187,311 240,799 278,490
Property and equipment, at cost:
Land...................................................... 5,070 5,070 5,070
Buildings and improvements................................ 53,777 63,710 64,752
Equipment................................................. 242,314 235,983 240,520
-------- -------- --------
301,161 304,763 310,342
Less accumulated depreciation............................. 197,813 198,565 203,828
-------- -------- --------
Net property and equipment.................................. 103,348 106,198 106,514
Computer software, at cost.................................. 398,004 414,932 420,404
Less accumulated amortization............................. 124,490 166,911 178,605
-------- -------- --------
Net computer software....................................... 273,514 248,021 241,799
Other noncurrent assets..................................... 4,835 4,880 4,637
-------- -------- --------
$569,008 $599,898 $631,440
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable:
Due to affiliates....................................... $ 5,140 $ 6,013 $ 4,279
Others.................................................. 23,467 20,136 16,182
Accrued commissions:
Due to affiliates....................................... 37,194 48,298 60,635
Others.................................................. 10,584 10,288 18,371
Other accrued liabilities................................. 71,139 52,491 54,646
Income taxes payable...................................... 5,514 5,811 5,895
Capital lease obligations, current portion................ 7,372 6,600 6,974
Long-term debt, current portion........................... 67,204 50,000 --
-------- -------- --------
Total current liabilities................................... 227,614 199,637 166,982
Pension and postretirement benefits......................... 17,645 19,012 20,672
Capital lease obligations, less current portion............. 36,263 34,539 32,175
Data center consolidation reserve, less current portion..... 23,762 21,335 19,840
Long-term debt, less current portion........................ 134,171 70,000 70,000
Partners' capital, including cumulative translation losses
of $7,763, $10,558, and $9,654, respectively.............. 129,553 255,375 321,771
-------- -------- --------
$569,008 $599,898 $631,440
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 92
GALILEO INTERNATIONAL PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Electronic global distribution
services............................ $772,389 $921,338 $1,050,635 $269,136 $297,346
Information services................... 41,446 45,072 37,624 10,041 10,300
-------- -------- ---------- -------- --------
813,835 966,410 1,088,259 279,177 307,646
-------- -------- ---------- -------- --------
Costs and expenses:
Cost of operations..................... 209,624 237,313 250,788 62,877 61,265
Commissions, selling and
administrative...................... 534,913 588,799 662,132 164,278 180,070
-------- -------- ---------- -------- --------
744,537 826,112 912,920 227,155 241,335
-------- -------- ---------- -------- --------
Operating income......................... 69,298 140,298 175,339 52,022 66,311
Other income (expense):
Interest income (expense), net......... (21,670) (14,406) (8,060) (2,335) (1,774)
Other, net............................. 5,586 (2,177) (181) 284 1,370
-------- -------- ---------- -------- --------
Income before income taxes............... 53,214 123,715 167,098 49,971 65,907
Income taxes............................. 4,404 2,664 1,882 481 415
-------- -------- ---------- -------- --------
Net income............................... $ 48,810 $121,051 $ 165,216 $ 49,490 $ 65,492
======== ======== ========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 93
GALILEO INTERNATIONAL PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
TOTAL
-----
(IN THOUSANDS)
<S> <C>
Balance at December 31, 1993................................ $ (4,797)
Net income.................................................. 48,810
Distributions............................................... (671)
Allocation of increase in translation adjustment............ (3,860)
--------
Balance at December 31, 1994................................ 39,482
Net income.................................................. 121,051
Distributions............................................... (26,594)
Allocation of increase in translation adjustment............ (4,386)
--------
Balance at December 31, 1995................................ 129,553
Net income.................................................. 165,216
Distributions............................................... (36,599)
Allocation of increase in translation adjustment............ (2,795)
--------
Balance at December 31, 1996................................ 255,375
Net income (unaudited)...................................... 65,492
Distributions (unaudited)................................... --
Allocation of decrease in translation adjustment
(unaudited)............................................... 904
--------
Balance at March 31, 1997 (unaudited)....................... $321,771
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 94
GALILEO INTERNATIONAL PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income.................................. $ 48,810 $ 121,051 $ 165,216 $ 49,490 $ 65,492
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 91,488 80,151 80,369 20,000 19,140
Loss (gain) on disposal of property and
equipment.............................. 472 2,472 973 (94) 10
Provision for losses on accounts
receivable............................. 5,432 1,558 5,671 463 328
Decrease in noncurrent assets............. 9,566 (1,789) 2,260 249 147
Increase (decrease) in noncurrent
liabilities............................ (4,187) (8,887) (420) 4,303 (129)
Changes in operating assets and
liabilities:
Increase in accounts receivable........ (8,007) (30,970) (33,491) (59,607) (44,298)
Decrease (increase) in prepaid
expenses............................. (1,376) (3,433) 2,610 636 (1,480)
Decrease (increase) in other nontrade
receivables.......................... 129 (1,916) 1,219 (344) 1,012
Decrease (increase) in other current
assets............................... 147 (494) 934 489 (1,165)
Increase (decrease) in accounts payable
and commissions...................... (14,609) 18,581 4,812 15,115 17,395
Increase (decrease) in other accrued
liabilities.......................... 3,727 (5,078) (15,715) (13,382) 3,621
Increase (decrease) in income taxes
payable.............................. 4,210 1,304 (360) 285 319
-------- --------- --------- -------- --------
Net cash provided by operating activities..... 135,802 172,550 214,078 17,603 60,392
-------- --------- --------- -------- --------
Investing activities:
Purchase of property and equipment.......... (29,176) (56,726) (32,572) (5,626) (11,055)
Purchase and capitalization of computer
software.................................. (29,709) (32,287) (28,978) (5,457) (5,472)
Proceeds on disposal of property and
equipment................................. 246 2,883 408 108 --
Decrease in lease deposit................... -- -- 40,461 -- --
-------- --------- --------- -------- --------
Net cash used in investing activities......... (58,639) (86,130) (20,681) (10,975) (16,527)
-------- --------- --------- -------- --------
Financing activities:
Distributions to partners................... (5,428) (26,594) (36,599) -- --
Payment of capital lease obligations........ (12,798) (13,318) (5,559) (1,903) (638)
Borrowings under credit agreement........... -- -- 158,000 -- --
Repayments under credit agreement........... (70,000) (68,625) (239,375) (1,900) (50,000)
-------- --------- --------- -------- --------
Net cash used in financing activities......... (88,226) (108,537) (123,533) (3,803) (50,638)
-------- --------- --------- -------- --------
Effect of exchange rate changes on cash....... 70 (168) (35) 12 (260)
-------- --------- --------- -------- --------
Increase (decrease) in cash and cash
equivalents................................. (10,993) (22,285) 69,829 2,837 (7,033)
Cash and cash equivalents at beginning of
period...................................... 41,645 30,652 8,367 8,367 78,196
-------- --------- --------- -------- --------
Cash and cash equivalents at end of period.... $ 30,652 $ 8,367 $ 78,196 $ 11,204 $ 71,163
======== ========= ========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 95
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Galileo International Partnership (Partnership), a Delaware general
partnership, is one of the world's leading providers of electronic global
distribution services for the travel industry. The Company provides travel
agencies and other subscribers with the ability to access schedule and fare
information, book reservations and issue tickets for airlines. The Partnership
also provides subscribers with information and booking capability for car rental
companies and major hotel chains with properties throughout the world. The
Partnership's receivables are primarily due from airlines and other entities
operating in the travel industry.
On September 16, 1993, Covia Partnership (Covia) and The Galileo Company
Ltd. (TGC) combined (the "Combination"), resulting in realignment of the
partners' interests. The partners of Covia and the shareholders of TGC were
substantially the same. The operations of TGC and certain operations of Covia
were combined and the name of Covia was changed to Galileo International
Partnership. In addition, certain sales support and telecommunications
operations were distributed by Covia to Apollo Travel Services (ATS), a newly
formed entity owned by certain former Covia partners, and certain
telecommunications and data processing operations performed by Covia for United
Air Lines, Inc. (United) were distributed to United. On the date of the
combination, TGC sold Covia certain of its intellectual property, and TGC used
the proceeds to retire debt. Subsequent to the retirement of debt, TGC was
converted from a limited to an unlimited liability company and its shareholders
contributed 99% of their ownership interest in TGC to the Galileo International
Partnership.
The Partnership's partners' (Affiliated Travel Vendors) ownership, and net
income or loss, is allocated based on the following:
<TABLE>
<CAPTION>
OWNERSHIP
PARTNER PARTNER'S AFFILIATE PERCENTAGE
------- ------------------- ----------
<S> <C> <C>
Covia Corporation................. United Air Lines, Inc. 38.00%
Distribution Systems, Inc......... British Airways plc 14.65
Roscor A.G........................ Swissair Swiss Air Transport
Company Ltd. 13.22
Travel Industry Systems B.V....... KLM Royal Dutch Airlines 12.09
USAM Corporation.................. USAir Inc. 11.00
Racom Teledata S.p.A.............. Alitalia -- Linee Aeree Italiane
S.p.A. 8.71
Olynet, Inc....................... Olympic Airways S.A. 1.03
Resnet Holdings, Inc.............. Air Canada 1.00
Retford Limited................... Aer Lingus plc 0.10
Coporga, Inc...................... Transportes Aereos Portugueses S.A. 0.10
Travidata, Inc.................... Austrian Airlines Oesterreichische
Luftverkehrs Aktiengesellschaft 0.10
------
100.00%
======
</TABLE>
The consolidated financial statements include the accounts of the
Partnership and all majority-owned subsidiaries. All significant intercompany
accounts and transactions are eliminated in consolidation.
F-10
<PAGE> 96
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
(2) SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash in excess of operating requirements is invested daily in liquid,
income-producing investments, generally having maturities of three months or
less. The carrying amounts reported on the balance sheet for cash equivalents
include cost and accrued interest, which approximate fair value.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership's financial instruments are valued at their carrying
amounts, which are reasonable estimates of fair value due to the relatively
short period to maturity of the instruments.
ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The allowance for doubtful accounts receivable was $14,946, $11,713 and
$14,747 at December 31, 1994, 1995 and 1996, respectively. Provisions for bad
debts were $5,432, $1,558 and $5,671 for the years ended December 31, 1994, 1995
and 1996, respectively. Write-offs of uncollectible accounts, net of
recoverables and allowance adjustments, were $2,877, $4,791 and $2,636 for the
years ended December 31, 1994, 1995 and 1996, respectively.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is provided on the straight-line
method over the following estimated useful lives of the assets:
Buildings and improvements..............................5-35 years
Equipment...............................................3-10 years
Depreciation expense for the years ended December 31, 1994, 1995, and 1996
was $34,269, $33,280 and $31,533, respectively. Accounts payable at December 31,
1994, 1995 and 1996 include property and equipment additions of $1,951, $959 and
$1,555, respectively.
USES OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets and certain identifiable intangibles to be
held and used by any entity be reviewed for impairment wherever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The carrying amount of the Partnership's
long-lived assets at December 31, 1995 and 1996 primarily represents the
original amounts invested less the recorded depreciation and amortization.
Management believes the carrying amount of these investments is not impaired.
F-11
<PAGE> 97
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
AFFILIATE REVENUES AND EXPENSES
The Partnership receives booking fees and information services revenues
from partner affiliated airlines and other affiliated entities. The Partnership
also pays commissions to certain NDCs which are owned by affiliates of the
partners.
REVENUE RECOGNITION
Fees are charged to airline, car rental, hotel and other travel vendors for
bookings made through the Partnership's CRS and are dependent upon the level and
usage of functionality within the CRS at which the vendor participates. Booking
fee revenue is recognized at the time the reservation is made for air bookings,
at the time of pick-up for car bookings, and at the time of check-out for hotel
bookings.
FOREIGN CURRENCY TRANSLATION
The Partnership uses the U.S. dollar for financial reporting purposes and
substantially all of the Partnership's billings are in U.S. dollars. The balance
sheets of the Partnership's foreign subsidiaries are translated into U.S.
dollars using the current exchange rate, and revenues and expenses are
translated using the average exchange rate. The resulting translation gains or
losses are recorded as a separate component of partners' capital. Foreign
currency transaction gains and losses are reflected in the consolidated
statements of income.
COMPUTER SOFTWARE
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," certain software development costs are capitalized upon the
establishment of technological feasibility. The establishment of technological
feasibility and the ongoing assessment of recoverability of capitalized software
development costs require considerable judgment by management with respect to
certain external factors, including but not limited to anticipated future gross
revenues, estimated economic life and changes in software and hardware
technology.
Computer software consists principally of purchased computer software and
capitalized computer software development costs. The computer software purchased
as part of the Combination described in Note 1 was assigned an estimated
economic life of ten years due to the duration of the existing software code and
expected useful life in the Partnership's market. Computer software capitalized
subsequent to the Combination is assigned an estimated economic life of three to
five years, assigned on a product-by-product basis. Amortization expense for the
years ended December 31, 1994, 1995 and 1996 was $48,380, $46,225 and $47,611,
respectively.
MAINTENANCE AND INSTALLATION
Maintenance and installation expense, principally for computer equipment,
for the years ended December 31, 1994, 1995 and 1996 was $12,089, $12,362 and
$13,235, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs, excluding amortization of computer
software, are expensed as incurred and approximated $10,319, $10,094 and $8,185
for the years ended December 31, 1994, 1995 and 1996, respectively.
F-12
<PAGE> 98
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
INCOME TAXES
No provision for U.S. Federal income taxes is recorded as such liability is
the responsibility of the partners, rather than of the Partnership. Certain of
the Partnership's non-U.S. subsidiaries are subject to income taxes. Deferred
income taxes for the Partnership at December 31, 1995 and 1996 were not
significant.
The Partnership accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109 ("Statement 109"),
"Accounting for Income Taxes". Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
TAXES OTHER THAN INCOME
Taxes, excluding income and payroll taxes, included in commissions, selling
and administrative expense were $6,167, $7,693 and $6,275 for the years ended
December 31, 1994, 1995 and 1996, respectively.
INTEREST RATE SWAP AGREEMENTS
The Partnership accounts for its interest rate swap agreements as an
adjustment to interest expense to reflect the revised interest rate on the
notional debt.
INTERIM FINANCIAL DATA
The consolidated financial statements for the three months ended March 31,
1996 and 1997 have been prepared without audit. In the opinion of management,
all adjustments, which include only normal recurring adjustments necessary to
present fairly the consolidated balance sheet as of March 31, 1997, and the
consolidated statements of income, partners' capital, and cash flows for the
three months ended March 31, 1996 and 1997, have been made. Interim period
results are not necessarily indicative of the results to be achieved for the
full year.
(3) TRANSACTIONS WITH AFFILIATES
The Partnership received electronic global distribution services revenues,
primarily in the form of booking fees, from affiliates of the partners totaling
$282,744, $336,808 and $355,535 for 1994, 1995 and 1996, respectively. The
Partnership also received information services revenues from affiliates of the
partners totaling $29,097, $34,460 and $34,335 for 1994, 1995 and 1996,
respectively. Total revenues from United of approximately $152,395, $161,542 and
$164,179 were greater than 10% of the Partnership's revenues for the years ended
December 31, 1994, 1995 and 1996, respectively.
The Partnership, in the ordinary course of business, purchases services
from affiliates of the partners. Services purchased from affiliates of the
partners and classified within cost of operations in the accompanying
consolidated statements of income totaled $15,755, $14,638 and $14,232 during
1994, 1995 and 1996, respectively. Services purchased from affiliates and
classified within commissions, selling and administrative expense totaled
$343,185, $365,422 and $424,536 during 1994, 1995 and 1996, respectively.
Included within services purchased from affiliates and classified within
commissions, selling and administrative expense are costs related to a
commitment to ATS. In accordance with the agreement between the Partnership and
ATS
F-13
<PAGE> 99
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
dated September 16, 1993, payments to ATS increased 3% on an annual basis.
During the years ended December 31, 1994, 1995 and 1996, costs related to this
commitment were $45,417, $46,814 and $48,100, respectively.
(4) LEASES AND COMMITMENTS
The Partnership leases various office facilities and equipment under
operating leases with remaining terms of up to 17 years. Rental expense under
operating leases was $20,134, $16,510 and $23,935 for the years ended December
31, 1994, 1995 and 1996, respectively.
The Partnership also leases data processing equipment under capital leases.
Equipment, at cost, includes $33,187, $36,139 and $21,930 relating to capital
leases at December 31, 1994, 1995 and 1996, respectively. Accumulated
depreciation includes $19,349, $18,620 and $8,831 relating to capital leases at
December 31, 1994, 1995 and 1996, respectively, with lease amortization included
in depreciation expense. The Partnership entered into capital leases of $6,033,
$8,070 and $2,150 during the years ended December 31, 1994, 1995 and 1996,
respectively.
During 1996, the Partnership issued a letter of credit at the time its
$40,461 lease deposit held by the lessor of the Partnership's United Kingdom
facility was refunded to the Partnership.
Future minimum lease payments under capital leases and noncancelable
operating leases at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1997........................................................ $ 9,517 $ 22,038
1998........................................................ 8,423 15,961
1999........................................................ 7,306 9,305
2000........................................................ 6,889 5,900
2001........................................................ 6,889 5,565
Thereafter.................................................. 13,774 46,421
-------- --------
Total minimum lease payments................................ 52,798 $105,190
========
Less amount representing interest........................... (11,659)
--------
Present value of future minimum lease payments.............. $ 41,139
========
</TABLE>
(5) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Term loan................................................... $161,375 $ --
Cash collateral term loan................................... 40,000 --
Revolving credit facility................................... -- 120,000
-------- --------
201,375 120,000
Less current maturities of long-term debt................... 67,204 50,000
-------- --------
$134,171 $ 70,000
======== ========
</TABLE>
At December 31, 1995, the Partnership had an unused committed revolving
loan of $80,000, with commitment fees of 0.25% charged quarterly on the unused
credit facilities. Prior to renegotiation of the debt
F-14
<PAGE> 100
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
during 1995, the Partnership paid an annual fee equal to 0.50% of the aggregate
amount of the outstanding loan and the unused facilities to various partners who
had guaranteed the partnership debt. Interest on outstanding debt is based on a
moving three month London Inter-bank Offer Rate (LIBOR) plus an additional
percentage of 0.625%, at December 31, 1995.
On July 3, 1996, the Partnership secured a $200,000 revolving credit
facility and immediately drew $158,000 against the line of credit to retire an
existing term loan. The revolving credit facility matures in July 2001. No
principal payments are required until the maturity date. As there are no
formulas or other restrictions on the credit availability, the entire $200,000
credit facility is available for use at any time by the Partnership.
The Partnership pays a quarterly commitment fee on the entire $200,000
credit facility (regardless of the outstanding line of credit balance). The
commitment fee rate fluctuates based upon the Partnership's "cash flow ratio."
At December 31, 1996 the commitment fee rate is 0.1375% (annual rate). Interest
on the outstanding balance is based on a moving one-month, three-month, or
six-month (depending on the length of borrowing) London Interbank Offer Rate
(LIBOR) (5.5% at December 31, 1996), plus a margin that fluctuates quarterly
based upon the Partnership's "cash flow ratio." At December 31, 1996, the margin
stood at an annual rate of 0.2625%.
The credit agreement limits, among other things, the sale of fixed assets,
dividends, and issuance of debt, and it requires that the Partnership maintain
minimum levels of tangible partnership capital, as well as maintaining threshold
ratios for interest coverage and cash flow.
The Partnership has entered into interest rate swap agreements to reduce
the impact of changes in interest rates on its outstanding line of credit. At
December 31, 1996, the Partnership had outstanding five interest rate swap
agreements having a total notional value of $120,326 with fixed interest rates
averaging 5.075%. For the years ended December 31, 1994, 1995, and 1996, the
effective interest rate on outstanding debt was 5.77%, 6.55% and 5.73%,
respectively. The Partnership is exposed to credit loss in the event of non-
performance by the counterparties to the interest rate swap agreements. However,
the Partnership does not anticipate nonperformance by the counterparties, which
are major financial institutions. The interest rate swap agreements mature in
December 1998.
The Partnership also enters into foreign exchange hedging contracts to
manage exposure to fluctuations in foreign exchange rates related to the funding
of its United Kingdom operations. The arrangements consist of foreign exchange
forward contracts with creditworthy counterparties. At December 31, 1996, the
Partnership had entered into foreign exchange forward contracts which provide
for purchases of approximately L3,500 per month through December 31, 1997.
Total interest, including interest under capital leases, of $25,945 was
incurred and $24,930 was paid for the year ended December 31, 1994. Total
interest, including interest under capital leases, of $18,882 was incurred and
$19,299 was paid for the year ended December 31, 1995. Total interest, including
interest under capital leases, of $11,307 was incurred and $11,517 was paid for
the year ended December 31, 1996.
The Partnership has classified $40,461 and $50,000 of non-required debt
payments as current debt in the accompanying consolidated balance sheet at
December 31, 1995 and 1996, respectively. This classification reflected the
Partnership's intent to retire such debt.
(6) EMPLOYEE BENEFIT PLANS
The Partnership has a defined benefit pension plan that covers
substantially all U.S. employees. Plan benefits are based on the participants'
years of service and average compensation for a specified period before
F-15
<PAGE> 101
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
retirement. The Partnership's funding policy is to contribute annually an amount
which satisfies ERISA funding standards. The assets of the plan at December 31,
1995 and 1996 are principally comprised of marketable equity securities, U.S.
Government and government agency bonds, and short-term securities.
The following sets forth the plan's obligations, funded status, and pension
costs at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $(23,184) $(25,799)
Nonvested................................................. (5,626) (5,294)
-------- --------
$(28,810) $(31,093)
======== ========
Projected benefit obligation for service rendered to date... $(38,833) $(42,593)
Plan net assets at fair value............................... 25,421 34,768
-------- --------
Plan net assets less than projected benefit obligation...... (13,412) (7,825)
Unrecognized net loss (gain)................................ 4,125 (688)
Unrecognized prior service cost............................. 4,164 3,639
Unrecognized net transition obligation...................... 2,985 2,736
Adjustment to recognize minimum pension liability........... (1,251) --
-------- --------
Net pension liability....................................... $ (3,389) $ (2,138)
======== ========
</TABLE>
Net pension costs for the years ended December 31, 1994, 1995 and 1996
included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Interest cost on projected benefit obligation............... $2,218 $ 2,744 $ 3,093
Service cost................................................ 2,977 3,038 3,725
Actual investment return on plan assets..................... (200) (4,789) (5,089)
Net amortization and deferral............................... (326) 3,884 3,391
------ ------- -------
$4,669 $ 4,877 $ 5,120
====== ======= =======
</TABLE>
The discount rate and rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligation
were 8.5% and 5.5%, respectively, in 1994, 7.25% and 4.25%, respectively, in
1995, and 7.75% and 4.75%, respectively, in 1996. The expected long-term rate of
return on assets as of December 31, 1994, 1995 and 1996 was 9.5%.
The Partnership has a defined contribution pension plan covering a majority
of the United Kingdom employees which requires the Partnership to annually
contribute 10% of eligible employee compensation on behalf of each participant.
The Partnership's contributions to the plan were $1,861, $1,970 and $2,289
during the years ended December 31, 1994, 1995 and 1996, respectively.
The Partnership offers U.S.-based employees a 401(k) savings plan.
Employees can elect to contribute pretax earnings, as limited by the Internal
Revenue Code, to their account and can determine how the money is invested. The
Partnership's contributions to the plan were $1,983 during the year ended
December 31, 1996.
F-16
<PAGE> 102
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
(7) POSTRETIREMENT HEALTH CARE BENEFITS
The Partnership provides certain health care benefits to its retired
employees. The majority of its domestic employees may become eligible for these
benefits if they reach normal retirement age while working for the Partnership.
In addition, the Partnership provides retiree flight benefits to certain former
United employees. The discount rate used to develop the accumulated
postretirement benefit obligation for the retiree health care plan was 8.5%,
7.25% and 7.75% for 1994, 1995 and 1996, respectively. The Partnership's plan is
unfunded.
The following table sets forth the plan's funded status, reconciled with
amounts recognized in the Partnership's consolidated balance sheet at December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $ (4,761) $ (4,730)
Fully eligible active plan participants................... (3,471) (3,645)
Other active plan participants............................ (12,387) (13,122)
-------- --------
(20,619) (21,497)
-------- --------
Plan assets at fair value................................... -- --
-------- --------
Accumulated postretirement benefit obligation in excess of
plan assets............................................... (20,619) (21,497)
Unrecognized net (gain) loss from past experience different
from that assumed and from changes in assumptions......... 6,623 4,622
-------- --------
Accrued postretirement benefit cost......................... $(13,996) $(16,875)
======== ========
</TABLE>
Components of the expense recognized for the years ended December 31, 1994,
1995 and 1996 for the retiree health care plan were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service costs............................................... $ 894 $ 909 $1,169
Interest cost on projected obligation....................... 1,193 1,362 1,542
Amortization of losses...................................... 272 127 274
------ ------ ------
Net retiree health care expense............................. $2,359 $2,398 $2,985
====== ====== ======
</TABLE>
The health care trend rate used to determine the accumulated postretirement
benefit obligation was 14% for 1996, decreasing by 1% each year until reaching
4% for the year 2006 and beyond. Increasing the health care trend rate by one
percentage point would increase the accumulated postretirement benefit
obligation by $100, $127 and $88 in 1994, 1995 and 1996, respectively, and would
increase the 1994, 1995 and 1996 net retiree health care expense by $9, $10 and
$7, respectively. The Partnership has no significant postretirement health care
benefit plans outside of the United States.
(8) GEOGRAPHIC AND SEGMENT INFORMATION
The Partnership derives substantially all of its revenues from the global
travel industry. Revenues are generated domestically from both U.S. and non-U.S.
travel vendors. Revenues from non-U.S. travel vendors were approximately
$341,600, $474,500 and $561,900 for the years ended December 31, 1994, 1995 and
1996, respectively.
F-17
<PAGE> 103
GALILEO INTERNATIONAL PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
(DOLLARS IN THOUSANDS)
(9) COVIA TECHNOLOGIES
During 1995, the Partnership decided to discontinue the operations of Covia
Technologies. A charge of $12,388 was taken for disposal costs related to this
discontinuance and the write-off of intangible assets as of December 31, 1995.
The remaining reserve balance was $773 at December 31, 1996.
(10) DATA CENTER CONSOLIDATION RESERVE
As a result of the 1993 Combination described in Note 1, the Partnership
consolidated its two data center facilities resulting in the closing of the
Swindon, United Kingdom data center. The cost of the consolidation was estimated
and charged to expense at the time of the Combination. The Partnership has
recorded the estimated lease cost of the unoccupied portion of the Swindon
facility, reduced by estimated sublease income. At December 31, 1995 and 1996
the estimated remaining liabilities related to the consolidation were $29,987
and $25,045, respectively, and are included in the accompanying consolidated
balance sheets.
(11) LITIGATION
The Partnership has been notified by United that, in United's opinion,
certain billings made by the Partnership to United were not in accordance with
contractual agreements. The potential impact to the Partnership (disputed
billings less related commissions) was approximately $2,700 at December 31,
1996. Management disagrees with United's contention and believes that the
ultimate disposition of this contingency is not expected to materially affect
the Partnership's financial position and results of operations.
The Partnership is involved in various other matters of litigation as both
plaintiff and defendant. In the opinion of management, none of these matters,
individually or in the aggregate, if determined adversely to the Partnership
would have a material adverse effect on the business, consolidated financial
condition or results of operations of the Partnership.
F-18
<PAGE> 104
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners and Supervisory Board of
Apollo Travel Services Partnership
We have audited the accompanying consolidated balance sheets of Apollo
Travel Services Partnership (Partnership) as of December 31, 1995 and 1996, and
the related consolidated statements of operations, partners' capital and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Partnership
as of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 7, 1997
F-19
<PAGE> 105
APOLLO TRAVEL SERVICES PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
1995 1996 1997
---- ---- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $158,934 $ 53,253 $ 66,602
Accounts receivable:
United Air Lines, Inc................................... 15,553 15,085 16,589
Galileo International Partnership....................... 24,999 25,747 35,018
Galileo Japan Partnership............................... 205 214 99
Subscriber and other.................................... 8,258 10,647 10,774
Non-trade............................................... 3,249 3,210 1,180
-------- -------- --------
52,264 54,903 63,660
Less allowances......................................... 4,096 5,675 5,514
-------- -------- --------
Net accounts receivable................................... 48,168 49,228 58,146
Prepaid expenses.......................................... 1,377 1,760 1,461
Other current assets...................................... 1,327 1,348 1,394
-------- -------- --------
Total current assets........................................ 209,806 105,589 127,603
Property and equipment, at cost:
Land...................................................... 2,430 2,430 2,430
Buildings and improvements................................ 2,044 2,148 2,292
Equipment................................................. 81,423 82,383 80,571
Equipment held for lease.................................. 341,268 335,255 329,953
-------- -------- --------
427,165 422,216 415,246
Less accumulated depreciation............................. 323,135 323,859 327,433
-------- -------- --------
Net property and equipment.................................. 104,030 98,357 87,813
Deferred lease incentives, less accumulated amortization of
$13,099, $15,267 and $14,329.............................. 16,637 12,804 11,451
Other noncurrent assets..................................... 5,646 5,608 6,413
-------- -------- --------
$336,119 $222,358 $233,280
======== ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable:
United Air Lines, Inc................................... $ 5,358 $ 8,054 $ 7,941
Other related parties................................... 2,504 2,565 2,667
Trade payables.......................................... 25,044 30,915 18,395
Accrued financial assistance.............................. 14,268 12,257 16,205
Accrued compensation and benefits......................... 6,203 7,901 5,688
Accrued liabilities -- other.............................. 6,961 8,509 7,157
Capital lease obligations, current portion................ 697 467 283
-------- -------- --------
Total current liabilities................................... 61,035 70,668 58,336
Noncurrent liabilities:
Pension liability......................................... 6,283 1,402 2,409
Obligations under capital leases.......................... 467
Postretirement benefit obligation......................... 12,250 14,191 14,694
-------- -------- --------
Total noncurrent liabilities................................ 19,000 15,593 17,103
Partners' capital:
Partners' capital before cumulative translation
adjustment.............................................. 256,685 136,801 158,546
Cumulative translation adjustment......................... (601) (704) (705)
-------- -------- --------
Total partners' capital..................................... 256,084 136,097 157,841
-------- -------- --------
$336,119 $222,358 $233,280
======== ======== ========
</TABLE>
See accompanying notes.
F-20
<PAGE> 106
APOLLO TRAVEL SERVICES PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues:
Computer reservation system.............. $239,108 $236,096 $236,448 $61,805 $ 63,875
Services to affiliates................... 137,280 142,426 143,529 36,436 37,894
-------- -------- -------- ------- --------
376,388 378,522 379,977 98,241 101,769
-------- -------- -------- ------- --------
Operating expenses:
Cost of operations....................... 209,325 214,834 213,411 52,842 53,618
Selling, general and administrative
expenses.............................. 74,663 74,098 81,595 17,841 19,194
-------- -------- -------- ------- --------
283,988 288,932 295,006 70,683 72,812
-------- -------- -------- ------- --------
Operating income........................... 92,400 89,590 84,971 27,558 28,957
Interest income............................ 2,758 7,756 4,712 2,066 626
Other, net................................. 139 890 1,342 441 105
-------- -------- -------- ------- --------
Net income................................. $ 95,297 $ 98,236 $ 91,025 $30,065 $ 29,688
======== ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-21
<PAGE> 107
APOLLO TRAVEL SERVICES PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
COVIA USAM RESNET
CORPORATION CORPORATION HOLDINGS INC. TOTAL
----------- ----------- ------------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1993.................... $ 117,324 $ 32,119 $ 2,926 $ 152,369
Net income...................................... 73,379 20,088 1,830 95,297
Distributions................................... (27,805) (7,601) (692) (36,098)
Change in cumulative translation adjustment..... (189) (52) (4) (245)
--------- -------- ------- ---------
Balance at December 31, 1994.................... 162,709 44,554 4,060 211,323
Net income...................................... 75,641 20,709 1,886 98,236
Distributions................................... (40,901) (11,198) (1,020) (53,119)
Change in cumulative translation adjustment..... (274) (74) (8) (356)
--------- -------- ------- ---------
Balance at December 31, 1995.................... 197,175 53,991 4,918 256,084
Net income...................................... 70,089 19,188 1,748 91,025
Distributions................................... (162,390) (44,468) (4,051) (210,909)
Change in cumulative translation adjustment..... (79) (22) (2) (103)
--------- -------- ------- ---------
Balance at December 31, 1996.................... 104,795 28,689 2,613 136,097
Net income (unaudited).......................... 22,860 6,258 570 29,688
Distributions (unaudited)....................... (6,116) (1,674) (153) (7,943)
Change in cumulative translation adjustment
(unaudited)................................... (1) (1)
--------- -------- ------- ---------
Balance at March 31, 1997 (unaudited)........... $ 121,538 $ 33,273 $ 3,030 $ 157,841
========= ======== ======= =========
</TABLE>
See accompanying notes.
F-22
<PAGE> 108
APOLLO TRAVEL SERVICES PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income............................... $ 95,297 $ 98,236 $ 91,025 $ 30,065 $ 29,688
Adjustments to reconcile net income to
net cash provided by operating
activities --
Depreciation and amortization......... 44,857 45,518 49,501 11,804 12,142
Amortization of deferred lease
incentives.......................... 12,779 11,075 11,461 3,075 2,610
Gain on disposal of property and
equipment........................... (360) (974) (1,366) (516) (90)
Foreign exchange loss................. 66 3
Increase in deferred lease
incentives.......................... (9,038) (15,207) (7,628) (2,643) (1,257)
Provision for losses on accounts
receivable.......................... 4,910 3,732 4,019 566 703
Increase in noncurrent assets......... (992) (2,954) (2,090)
Increase in postretirement benefit
obligation.......................... 1,752 1,644 1,941 473 503
Changes in operating assets and
liabilities --
Increase in accounts receivable..... (3,830) (12,885) (5,091) (5,505) (9,621)
(Increase) decrease in prepaid
expenses......................... 182 (254) (383) 90 299
(Increase) decrease in other current
assets........................... 1,559 (31) (24) (320) (46)
Increase (decrease) in accounts
payable.......................... (3,278) 4,194 8,629 (5,329) (12,531)
(Decrease) increase in accrued
financial assistance............. 2,349 5,941 (2,011) (723) 3,948
Increase (decrease) in accrued
compensation and benefits........ (620) (974) 1,698 (1,684) (2,213)
(Decrease) increase in accrued
liabilities -- other............. (5,173) 1,340 (313) 467 (345)
-------- -------- --------- -------- --------
Net cash provided by operating
activities............................... 140,460 138,401 149,368 29,823 23,790
Investing activities:
Purchases of property and equipment...... (31,998) (45,006) (45,446) (6,179) (2,426)
Proceeds on disposal of property and
equipment............................. 701 1,335 2,078 730 112
-------- -------- --------- -------- --------
Net cash used in investing activities...... (31,297) (43,671) (43,368) (5,449) (2,314)
Financing activities:
Distributions to partners................ (36,098) (53,119) (210,909) (13,339) (7,943)
Payment of capital lease obligations..... (582) (697) (697) (184) (184)
-------- -------- --------- -------- --------
Net cash used in financing activities...... (36,680) (53,816) (211,606) (13,523) (8,127)
Effect of exchange rate changes on cash and
cash equivalents......................... (48) (18) (75)
-------- -------- --------- -------- --------
Net (decrease) increase in cash and cash
equivalents during period................ 72,435 40,896 (105,681) 10,851 13,349
Cash and cash equivalents at beginning of
period................................... 45,603 118,038 158,934 158,934 53,253
-------- -------- --------- -------- --------
Cash and cash equivalents at end of
period................................... $118,038 $158,934 $ 53,253 $169,785 $ 66,602
======== ======== ========= ======== ========
</TABLE>
See accompanying notes.
F-23
<PAGE> 109
APOLLO TRAVEL SERVICES PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Apollo Travel Services Partnership (Partnership) acts as the national
distributor in the United States and Mexico of the proprietary Apollo computer
reservation system which is owned and operated by Galileo International
Partnership (Galileo International). The Partnership performs certain sales
support and telecommunications operations pursuant to a distribution agreement
with Galileo International.
The Partnership, a Delaware general partnership, is owned by and net income
or loss is allocated based on the following:
<TABLE>
<CAPTION>
OWNERSHIP
PARTNER PARTNER'S AFFILIATE PERCENTAGE
------- ------------------- ----------
<S> <C> <C>
Covia Corporation............................. United Air Lines, Inc. 77.00%
USAM Corporation.............................. USAir Group, Inc. 21.08%
Resnet Holdings Inc........................... Air Canada 1.92%
</TABLE>
The preparation of the Partnership's consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation -- The consolidated financial statements include the
accounts of the Partnership and its substantially owned subsidiaries: Apollo
Travel Services Mexico S.A. de C.V., Apollo Communications Services and Premier
Travel Services.
Cash and cash equivalents -- Cash in excess of operating requirements is
invested in the United Air Lines, Inc. (United) liquidity investment pool which
consists of short-term, highly liquid, income-producing investments. The
proceeds from the sales of available-for-sale securities are included in
interest income for each respective year.
At December 31, 1995 and 1996, $85 million and $34 million, respectively,
of investments in debt securities included in cash and cash equivalents were
classified as available-for-sale and $74 million and $19 million, respectively,
were classified as held-to-maturity. Investments in debt securities classified
as available-for-sale are stated at fair value based on the quoted market prices
for the securities which does not differ significantly from their cost basis.
Investments classified as held-to-maturity are stated at cost which approximates
market value due to their short-term maturities.
Property and equipment -- Depreciation of property and equipment is
provided on the straight-line method over the following estimated useful lives
of the assets:
<TABLE>
<S> <C>
Buildings and improvements.................................. 31 years
Equipment................................................... 3-10 years
Equipment held for lease.................................... 3-7 years
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996,
respectively, was $44,857,000, $45,518,000 and $49,501,000.
Income taxes -- No provision for U.S. federal income taxes is recorded as
such liability is the responsibility of the partners rather than of the
Partnership.
Deferred lease incentives -- Deferred lease incentives include various
considerations provided to travel agencies in the form of cash payments or
special services in connection with long-term contracts to use the Apollo
system. Lease incentives are amortized on the straight-line method over
thirty-six months for contracts
F-24
<PAGE> 110
APOLLO TRAVEL SERVICES PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
executed in 1996 and thirty months for contracts executed prior to 1996. During
1994, 1995 and 1996, respectively, revenues were reduced by $7,248,000,
$6,669,000 and $7,809,000 related to the amortization of cash deferred lease
incentives, and operating expenses included amortization of special services
deferred lease incentives of $5,531,000, $4,406,000 and $3,652,000.
Accrued financial assistance -- The Partnership enters into service
contracts with significant subscribers containing booking fee productivity
clauses and other provisions which allow subscribers to receive various amounts
of cash financial assistance and other services from the Partnership. The
Partnership establishes accrued financial assistance liabilities for these
commitments as the subscribers satisfy the applicable contractual terms.
Partner distributions -- Distributions reported in the accompanying
consolidated statements of partners' capital included annual distributions which
are net of the required fifty-percent contribution to the Partnership by
partners in accordance with the Partnership agreement and a special distribution
of $160,000,000 in June 1996.
Foreign currency translation -- Gains and losses resulting from the
translation of the accounts of Apollo Travel Services Mexico S.A. de C.V. into
United States dollars are recorded as an adjustment to partners' capital in
accordance with the provisions of Statement of Financial Accounting Standards
No. 52, "Foreign Currency Translation."
Concentration of credit risk -- The Partnership's customers are primarily
in the United States and Mexico and are concentrated in the travel industry. The
Partnership generally does not require security or collateral from its customers
as a condition of sale. The Partnership maintained an allowance for losses of
$3,036,000 and $4,875,000 at December 31, 1995 and 1996, respectively, based
upon the expected collectability of all accounts receivable.
3. TRANSACTIONS WITH RELATED PARTIES
Pursuant to a distribution and sales agreement between the Partnership and
Galileo International, the Partnership, in the ordinary course of business,
receives a share of revenues related to its subscribers' use of the Apollo
computer reservations system which is passed through Galileo International from
travel vendors including United, USAir and Air Canada, related parties through
joint ownership in the Partnership. For 1994, 1995 and 1996, computer
reservations system revenues reported in the consolidated statements of
operations included the following related to bookings with United, USAir and Air
Canada (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
United............................................. $54,030 $55,080 $52,741
USAir.............................................. 21,205 19,350 19,403
Air Canada......................................... 482 618 762
------- ------- -------
$75,717 $75,048 $72,906
======= ======= =======
</TABLE>
In addition, the Partnership receives revenues directly from United for
data processing and communication-related services it provides to United. Rates
charged for such services are redetermined semi-annually. Included in services
to affiliates revenue in the accompanying consolidated statements of operations
is $78,756,000, $86,190,000 and $88,115,000 for services provided to United in
1994, 1995 and 1996, respectively.
The Partnership, in the ordinary course of business, purchases services and
rents facilities from United. For 1994, 1995 and 1996, respectively, operating
expenses in the accompanying consolidated statements of operations include
$14,290,000, $11,191,000 and $14,508,000 related to these services. In addition,
operating expenses include $3,469,000, $3,272,000 and $4,096,000 related to
marketing services provided the Partnership by USAir during 1994, 1995 and 1996,
respectively.
F-25
<PAGE> 111
APOLLO TRAVEL SERVICES PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In the ordinary course of business, the Partnership provides network
communication-related services to Galileo International, a related party through
certain common ownership. During 1994, 1995 and 1996, respectively, the
Partnership recognized revenues of $57,882,000, $55,878,000 and $54,819,000
related to these services.
The Partnership utilizes data processing and facilities-related services
provided by Galileo International. Total operating expenses included $5,618,000,
$5,478,000 and $4,079,000 related to such charges by Galileo International
during 1994, 1995 and 1996, respectively.
The Partnership provides financial, network and management services to
Galileo Japan Partnership, a related party through certain common ownership.
Revenues from such services included in services to affiliates revenue in the
accompanying consolidated statements of operations were $642,000, $358,000 and
$595,000 during 1994, 1995 and 1996, respectively.
4. EQUIPMENT HELD FOR LEASE
The Partnership leases computer equipment related to the Apollo system to
travel agencies under operating leases, generally for terms up to five years.
Such leases are generally noncancelable and contain damage clauses in the event
of unilateral termination of the lease by the lessee. The following represents
the cost and accumulated depreciation related to equipment held for lease at
December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Cost..................................................... $341,268 $335,255
Less: accumulated depreciation........................... 258,421 259,018
-------- --------
$ 82,847 $ 76,237
======== ========
</TABLE>
Aggregate future minimum leasing fees expected under these leases are (in
thousands):
<TABLE>
<S> <C>
1997....................................................... $27,037
1998....................................................... 23,935
1999....................................................... 19,905
2000....................................................... 10,076
2001....................................................... 3,401
-------
$84,354
=======
</TABLE>
5. CAPITAL LEASE AND OTHER LEASE COMMITMENTS
The Partnership leases various office facilities and equipment under
operating leases with terms of up to 10 years. Rental expense under operating
leases was $3,789,000, $3,752,000 and $3,818,000 during 1994, 1995 and 1996,
respectively. Included in rental expense was $924,000, $981,000 and $678,000
related to the rental of United facilities during 1994, 1995 and 1996,
respectively.
The Partnership also leases data processing equipment under capital leases.
Equipment, at cost, and the related accumulated depreciation included the
following amounts related to such leased equipment at December 31, 1995 and
1996, with lease amortization included in depreciation expense (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Cost........................................................ $3,105 $3,105
Less: accumulated depreciation.............................. 2,070 2,763
------ ------
$1,035 $ 342
====== ======
</TABLE>
F-26
<PAGE> 112
APOLLO TRAVEL SERVICES PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under capital leases and noncancelable
operating leases are (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1997........................................................ $482 $2,146
1998........................................................ 1,538
1999........................................................ 1,265
2000........................................................ 914
2001........................................................ 788
Thereafter.................................................. 1,932
---- ------
Total future minimum lease payments......................... 482 $8,583
======
Less amounts representing interest.......................... 15
----
Present value of future minimum lease payments.............. $467
====
</TABLE>
6. PENSION PLANS
The Partnership sponsors the defined benefit Apollo Travel Service Pension
Plan, covering substantially all employees. The plan benefits are based on
participant's years of service and annual compensation upon termination or
retirement. The plan assets at December 31, 1996 are principally comprised of
marketable equity securities, U.S. government and government agency bonds and
short-term securities. The Partnership's policy is to fund amounts which comply
with funding requirements under the Employee Retirement Income Security Act.
In addition to the above, the Partnership sponsors a nonqualified
supplemental defined benefit pension plan, the Apollo Travel Services
Supplemental Retirement Plan, covering certain highly compensated employees. The
plan benefits are based on years of service and annual compensation upon
termination or retirement. The Partnership's policy is to fund benefits as they
become payable to participants.
The following sets forth the Partnership's obligations, funded status and
pension costs related to the defined benefit plans at December 31, 1995 and
1996, as determined by an independent actuary (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $ 18,693 $ 20,833
Nonvested................................................. 5,566 5,452
-------- --------
$ 24,259 $ 26,285
======== ========
Actuarial present value of projected benefit obligation..... $ 33,476 $ 34,446
Plan assets at fair value................................... (16,524) (24,638)
-------- --------
Projected benefit obligation in excess of plan assets....... 16,952 9,808
Unrecognized net gain (loss)................................ (4,123) 1,403
Unrecognized prior service cost............................. (4,648) (4,088)
Remaining unrecognized net transition obligation............ (2,423) (2,221)
Adjustment required to recognize minimum liability.......... 2,018
-------- --------
Pension liability recognized in balance sheet............... $ 7,776 $ 4,902
======== ========
</TABLE>
F-27
<PAGE> 113
APOLLO TRAVEL SERVICES PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net pension cost:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost........................................ $2,947 $ 2,424 $ 3,140
Interest cost....................................... 1,828 2,011 2,325
Actual return on plan assets........................ 149 (2,700) (2,962)
Net amortization and deferral....................... 143 2,430 2,111
------ ------- -------
Net periodic pension cost........................... $5,067 $ 4,165 $ 4,614
====== ======= =======
</TABLE>
The following sets forth the discount rate, expected long-term rate of
return on assets and rate of increase in future compensation levels used in
determining the actuarial present value of projected benefit obligation:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Discount rate........................................ 8.75% 7.25% 7.75%
Long-term rate of return............................. 9.00% 8.50% 10.00%
Salary scale......................................... 4.50% 4.00% 4.00%
</TABLE>
The effect of the change in the discount rate from 1995 was to decrease the
projected benefit obligation by approximately $2,898,000 at December 31, 1996.
7. POSTRETIREMENT BENEFITS
In addition to the above pension plans, the Partnership sponsors a defined
benefit health care plan providing postretirement health care benefits to
full-time employees who have worked at least ten years and have attained age 55
while in service with the Partnership. The plan is contributory with retiree
contributions adjusted annually and contains other cost-sharing features such as
deductibles and coinsurance. In addition, the plan provides certain former
employees of United retiree flight benefits. The Partnership's policy is to pay
benefits under this plan as incurred. During the years ended December 31, 1994,
1995 and 1996, respectively, benefits of approximately $20,000, $53,000 and
$75,000 were paid to retirees under this plan.
The following table presents the plan's financial status reconciled to
amounts recognized in the Partnership's balance sheet at December 31, 1995 and
1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Vested................................................... $ 4,233 $ 5,384
Nonvested................................................ 10,403 10,414
------- -------
Accumulated postretirement benefit obligation.............. 14,636 15,798
Unrecognized net loss...................................... (3,379) (2,477)
Unrecognized prior service cost............................ 993 870
------- -------
Accrued postretirement benefit obligation.................. $12,250 $14,191
======= =======
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (health care cost trend factor) was 12% and 11% for 1995 and
1996, respectively, and is assumed to decrease gradually to 6% for 2003 and
remain at that level thereafter. The health care cost trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1996 by $460,000, and the aggregate of the service and interest cost components
of net periodic postretirement benefit cost for the year ended December 31, 1996
by $53,000. The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% and 7.75% at
F-28
<PAGE> 114
APOLLO TRAVEL SERVICES PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1995 and 1996, respectively. The increase in the weighted-average
discount rate from 1995 had the impact of decreasing the accumulated
postretirement benefit obligation at December 31, 1996 by approximately
$1,057,000.
Net periodic postretirement benefit cost:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................... $ 745 $ 695 $ 847
Interest cost......................................... 898 1,005 1,089
Net amortization and deferral......................... 129 (3) 80
------ ------ ------
Net periodic postretirement benefit cost.............. $1,772 $1,697 $2,016
====== ====== ======
</TABLE>
8. CONTINGENCIES
On February 7, 1996, the Partnership became aware that Galileo
International was notified by United that, in United's opinion, the method used
to determine certain computer reservation system revenues was not in accordance
with contractual agreements. Pursuant to a distribution agreement with Galileo
International, the Partnership shares in the subject revenue and the Partnership
could be obligated to refund any amounts collected in excess of contractual
revenues. At December 31, 1996, the Partnership has provided for $3,481,000 of
this contingency, representing the Partnership's share of the amount of refunds
claimed by United from Galileo International for the period from November 1995
through December 1996. Based upon United's interpretations of the contractual
agreements, the Partnership currently estimates the potential refund exposure to
Galileo International for the subject revenues since the inception of the
Partnership through December 31, 1996, ranges between $9,700,000 and
$11,300,000. As of December 31, 1996, United has not pursued refunds for the
period prior to November 1995 and no reserves have been provided for this
period. The eventual outcome of this matter is uncertain and Galileo
International is contesting United's interpretation of their contractual
agreements.
The Partnership also has certain other contingencies resulting from
litigation and claims incident to the ordinary course of business. Management
believes, after considering a number of factors, including (but not limited to)
the views of legal counsel, the nature of contingencies to which the Partnership
is subject and its prior experience, that the ultimate disposition of these
contingencies is not expected to materially affect the Partnership's financial
position and results of operations.
9. EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITORS' REPORT
During May 1997, Galileo International and United reached agreement to
resolve the contingency described in Note 8 upon the consummation of certain
transactions to be entered into between Galileo International and United. Upon
consummation of this agreement, the Partnership's reserves of $3,481,000 at
December 31, 1996 would be sufficient to provide for this contingency.
F-29
<PAGE> 115
5
List of countries where Galileo distributes products
<PAGE> 116
[GALILEO LOGO]
<PAGE> 117
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 256,469
NASD filing fee............................................. 30,500
NYSE listing fee............................................ 450,000
Blue Sky fees and expenses.................................. 5,000
Attorneys' fees and expenses................................ 950,000
Accountants' fees and expenses.............................. 525,000
Transfer Agent's and Registrar's fees and expenses.......... 10,000
Printing and engraving expenses............................. 400,000
Miscellaneous............................................... 373,031
----------
Total.................................................. $3,000,000
==========
</TABLE>
The amounts set forth above are estimates except for the SEC registration
fee and the NASD filing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, in summary,
that directors and officers of Delaware corporations are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities (including
attorney's fees) incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the Company,
unless and only to the extent that 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, they are fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Any such indemnification may be made by the Company only as authorized
in each specific case upon a determination by the shareholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company 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 Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) in
respect of certain unlawful dividend payments or stock redemptions or purchases;
or (iv) for any transaction from which the director derived an improper personal
benefit.
The Company's Restated Certificate of Incorporation and Restated By-Laws
provide for indemnification of its directors and officers to the fullest extent
permitted by Delaware law, as the same may be amended from time to time.
Section 9 of the Underwriting Agreement (Exhibit 1.1 hereto) contains
provisions for certain indemnification rights to the directors and officers of
the Registrant.
In addition, the Company maintains liability insurance for its directors
and officers.
II-1
<PAGE> 118
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the merger of Galileo International Partnership into a
wholly owned limited liability company subsidiary of the Company, an aggregate
of 88,000,000 shares of the Company's Common Stock and seven shares of the
Company's Special Voting Preferred Stock will be issued to the partners of
Galileo International Partnership. Such issuances will be exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - ------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
2.1** Form of General Partnership Interest Purchase Agreement
among United Air Lines Inc., Covia Corporation, U.S.
Airways, Inc., USAM Corp., Air Canada, Resnet Holdings,
Inc., Apollo Travel Services Partnership and Galileo
International Partnership.
2.2* Form of Share Purchase Agreement between SAirGroup and
Galileo International Partnership.
2.3* Form of General Share Purchase Agreement among Koninklijke
Luchtvaart Maatschappij N.V., Galileo Nederland BV and
Galileo International Partnership.
2.4 Form of Agreement and Plan of Merger by and among the
Registrant, Galileo International Partnership and Galileo
International, L.L.C.
3.1** Form of Restated Certificate of Incorporation of Registrant.
3.2 Form of Restated By-Laws of Registrant.
4.1** Form of Registration Rights Agreement among the Registrant
and Covia Corp., 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.
4.2 Specimen Certificate representing Common Stock.
5.1 Opinion of Shearman & Sterling as to the legality of the
Common Stock.
10.1* Form of Stockholders' Agreement among the Registrant,
certain of its stockholders and certain related parties of
such stockholders.
10.2 Form of Services Agreement among the Registrant, United Air
Lines, Inc., US Airways, Inc. and Air Canada.
10.3 Form of Services Agreement between the Registrant and
SAirGroup.
10.4 Form of Services Agreement between the Registrant and
Koninklijke Luchvaart Maatschappij N.V.
10.5* Form of Amended and Restated Non-Competition Agreement among
the Registrant, certain of its stockholders and certain
related parties of such stockholders.(c)
10.6* Form of Marketing Cooperation and Sales Representations
Agreement between United Air Lines, Inc. and the
Registrant.(c)
10.7* Form of Marketing Cooperation and Sales Representation
Agreement between US Airways, Inc. and the Registrant.(c)
10.8 Form of Rights Waiver Agreement between SAirGroup and
Galileo International Partnership.
10.9 Form of Rights Waiver Agreement between Koninklijke
Luchvaart Maatschappij N.V. and Galileo International
Partnership.
10.10 Form of Credit Agreements:
(a) 364 day agreement
*(b) 5 year revolving credit agreement
</TABLE>
II-2
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - ------- ----------------------
<C> <S>
10.11 Hillmead Lease
10.12 Underlease, dated 1996, between The Galileo Company and
Lucent Technologies Network Systems UK Limited.
10.13 Lease, dated March 1, 1997, between St. Martins Property
Investments Limited and The Galileo Company.
10.14 Lease, dated December 2, 1987, between St. Martins Property
Investments Limited and Galileo Distribution Systems
Limited.
10.15 Englewood, Colorado Office Lease, dated April 18, 1988.
10.16 First Amendment to Englewood, Colorado Office Lease, dated
June 23, 1988.
10.17 Rosemont Office Lease, dated March 31, 1995.
10.18 Term Master Lease Agreement, dated May 9, 1988, between IBM
Credit Corporation and Covia Partnership.
10.19 Master Lease Agreement, dated November 11, 1988, between
Comdisco, Inc. and Covia Partnership.
10.20 Software License Agreement, dated August 1, 1994, between
Allen Systems Group, Inc. and Galileo International.
10.21 Master License Agreement between Candle Corporation and
Galileo International Partnership.*
10.22 Foundation License between Galileo International and
Computer Associates International, Inc.
10.23 Software License Agreement, dated February 29, 1996, between
Sterling Software (U.S.A.), Inc. and Galileo International.*
10.24 Master Equipment Lease, dated November 19, 1991, between
General Electric Capital Computer Leasing Corporation and
Covia Partnership.
10.25 Master Equipment Lease, dated April 4, 1996, between AT&T
Systems Leasing Corporation and Galileo International
Partnership.
10.26 Dun & Bradstreet Software Services Agreement.
10.27 Cover Agreement, dated October 8, 1996, between Sprint
Communications Company L.P. and Galileo International
Partnership.
10.28 Agreement for Telecommunications Services, dated January 1,
1996, between Societe Internationale de Telecommunications
Aeronautiques and Galileo International Partnership.
10.29 Master Agreement for MCI Enhanced Services, dated February
14, 1996, between MCI Global Resources, Inc. and Galileo
International Partnership.
10.30 Communications Services Agreement, dated April 1, 1997,
between Galileo International and AT&T Corp.
10.31 Galileo International Severance Plan.
10.32 Galileo International Savings and Investment Plan.
10.33 Galileo International car policy.
10.34 Galileo Retirement and Death Benefit Scheme.
10.35 Galileo International Employee Pension Plan.
10.36 Galileo International Flextrack Benefits Plan.
</TABLE>
II-3
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- - ------- ----------------------
<C> <S>
10.37 Form of Galileo International Distributor Sales and Service
Agreement.
10.38 Form of Global Airline Distribution Agreement.
10.39 Miscellaneous Services Agreement between The Galileo Company
and Galileo International Partnership.
10.40 Galileo International Retiree Medical Plan.
10.41 Galileo International, Inc. 1997 Stock Incentive Plan.
10.42 Galileo International, Inc. 1997 Non-Employee Director Stock
Plan.
10.43 Form of Deferred Compensation Arrangements.
10.44 Galileo UK Health Benefit Policy.
10.45* Employment Contract of James E. Barlett.
21.1 List of Subsidiaries.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Shearman & Sterling (included in its opinion in
Exhibit 5.1).*
23.4 Consent of Frederic F. Brace.
23.5 Consent of David A. Coltman.
23.6 Consent of James E. Goodwin.
23.7 Consent of Frank H. Rovekamp.
23.8 Consent of Georges P. Schorderet.
23.9 Consent of Derek Stevens.
24.1 Powers of Attorney (included as part of signature page).
27.1 Financial Data Schedule.**
</TABLE>
- - ---------------
(c) Exhibits for which Registrant is seeking confidential treatment for certain
portions
* To be filed by amendment
** Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES.
The schedules have been omitted because of the absence of circumstances
under which they could be required.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-4
<PAGE> 121
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the U.S. Underwriting Agreement and the
International Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
II-5
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has duly caused this Amendment to the Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in Rosemont, Illinois on June 27, 1997.
Galileo International, Inc.
By: /s/ JAMES E. BARLETT
------------------------------------
James E. Barlett
President and Chief Executive
Officer
POWER OF ATTORNEY
The undersigned Directors and Officers of Galileo International, Inc.
hereby constitute and appoint James E. Barlett, Paul H. Bristow and Babetta R.
Gray, and each of them acting singly, as true and lawful attorneys-in-fact for
the undersigned, with full power of substitution and resubstitution, for, and in
the name, place, and stead of the undersigned, to sign and file with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), any and all amendments (including post-effective amendments) and
exhibits to this Registration Statement, any related registration statement and
its amendments and exhibits filed pursuant to Rule 462(b) under the Act and any
and all applications and other documents to be filed with the Securities and
Exchange Commission pertaining to the registration of the securities covered
hereby or under any related registration statement or any amendment hereto or
thereto, with full power and authority to do and perform each and every act and
thing requisite and necessary or desirable, hereby ratifying and confirming all
that each of such attorneys-in-fact or its substitute shall lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES E. BARLETT Chairman of the Board of Directors, June 27, 1997
- - --------------------------------------- President and Chief Executive Officer
James E. Barlett (principal executive officer)
/s/ PAUL H. BRISTOW Director, Senior Vice President and Chief June 27, 1997
- - --------------------------------------- Financial Officer (principal financial and
Paul H. Bristow accounting officer)
/s/ BABETTA R. GRAY Director June 27, 1997
- - ---------------------------------------
Babetta R. Gray
</TABLE>
II-6
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - ------- ----------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement..............................
2.1** Form of General Partnership Interest Purchase Agreement
among United Air Lines Inc., Covia Corporation, U.S.
Airways, Inc., USAM Corp., Air Canada, Resnet Holdings,
Inc., Apollo Travel Services Partnership and Galileo
International Partnership...................................
2.2* Form of Share Purchase Agreement between SAirGroup and
Galileo International Partnership...........................
2.3* Form of General Share Purchase Agreement among Koninklijke
Luchtvaart Maatschappij N.V., Galileo Nederland BV and
Galileo International Partnership...........................
2.4 Form of Agreement and Plan of Merger by and among the
Registrant, Galileo International Partnership and Galileo
International, L.L.C........................................
3.1** Form of Restated Certificate of Incorporation of
Registrant..................................................
3.2 Form of Restated By-Laws of Registrant......................
4.1** Form of Registration Rights Agreement among the Registrant
and Covia Corp., 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................
4.2 Specimen Certificate representing Common Stock..............
5.1 Opinion of Shearman & Sterling as to the legality of the
Common Stock................................................
10.1* Form of Stockholders' Agreement among the Registrant,
certain of its stockholders and certain related parties of
such stockholders...........................................
10.2 Form of Services Agreement among the Registrant, United Air
Lines, Inc., US Airways, Inc. and Air Canada................
10.3 Form of Services Agreement between the Registrant and
SAirGroup...................................................
10.4 Form of Services Agreement between the Registrant and
Koninklijke Luchvaart Maatschappij N.V......................
10.5* Form of Amended and Restated Non-Competition Agreement among
the Registrant, certain of its stockholders and certain
related parties of such stockholders.(c)....................
10.6* Form of Marketing Cooperation and Sales Representations
Agreement between United Air Lines, Inc. and the
Registrant.(c)..............................................
10.7* Form of Marketing Cooperation and Sales Representation
Agreement between US Airways, Inc. and the Registrant.(c)...
10.8 Form of Rights Waiver Agreement between SAirGroup and
Galileo International Partnership...........................
10.9 Form of Rights Waiver Agreement between Koninklijke
Luchvaart Maatschappij N.V. and Galileo International
Partnership.................................................
10.10 Form of Credit Agreements:..................................
(a) 364 day agreement.......................................
*(b) 5 year revolving credit agreement......................
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - ------- ----------- ------------
<C> <S> <C>
10.11 Hillmead Lease..............................................
10.12 Underlease, dated 1996, between The Galileo Company and
Lucent Technologies Network Systems UK Limited..............
10.13 Lease, dated March 1, 1997, between St. Martins Property
Investments Limited and The Galileo Company.................
10.14 Lease, dated December 2, 1987, between St. Martins Property
Investments Limited and Galileo Distribution Systems
Limited.....................................................
10.15 Englewood, Colorado Office Lease, dated April 18, 1988......
10.16 First Amendment to Englewood, Colorado Office Lease, dated
June 23, 1988...............................................
10.17 Rosemont Office Lease, dated March 31, 1995.................
10.18 Term Master Lease Agreement, dated May 9, 1988, between IBM
Credit Corporation and Covia Partnership....................
10.19 Master Lease Agreement, dated November 11, 1988, between
Comdisco, Inc. and Covia Partnership........................
10.20 Software License Agreement, dated August 1, 1994, between
Allen Systems Group, Inc. and Galileo International.........
10.21 Master License Agreement between Candle Corporation and
Galileo International Partnership.*.........................
10.22 Foundation License between Galileo International and
Computer Associates International, Inc.
10.23 Software License Agreement, dated February 29, 1996, between
Sterling Software (U.S.A.), Inc. and Galileo
International.*.............................................
10.24 Master Equipment Lease, dated November 19, 1991, between
General Electric Capital Computer Leasing Corporation and
Covia Partnership...........................................
10.25 Master Equipment Lease, dated April 4, 1996, between AT&T
Systems Leasing Corporation and Galileo International
Partnership.................................................
10.26 Dun & Bradstreet Software Services Agreement................
10.27 Cover Agreement, dated October 8, 1996, between Sprint
Communications Company L.P. and Galileo International
Partnership.................................................
10.28 Agreement for Telecommunications Services, dated January 1,
1996, between Societe Internationale de Telecommunications
Aeronautiques and Galileo International Partnership.........
10.29 Master Agreement for MCI Enhanced Services, dated February
14, 1996, between MCI Global Resources, Inc. and Galileo
International Partnership...................................
10.30 Communications Services Agreement, dated April 1, 1997,
between Galileo International and AT&T Corp.................
10.31 Galileo International Severance Plan........................
10.32 Galileo International Savings and Investment Plan...........
10.33 Galileo International car policy............................
10.34 Galileo Retirement and Death Benefit Scheme.
10.35 Galileo International Employee Pension Plan.................
10.36* Galileo International Flextrack Benefits Plan...............
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- - ------- ----------- ------------
<C> <S> <C>
10.37 Form of Galileo International Distributor Sales and Service
Agreement...................................................
10.38 Form of Global Airline Distribution Agreement...............
10.39 Miscellaneous Services Agreement between The Galileo Company
and Galileo International Partnership.......................
10.40 Galileo International Retiree Medical Plan..................
10.41 Galileo International, Inc. 1997 Stock Incentive Plan.......
10.42 Galileo International, Inc. 1997 Non-Employee Director Stock
Plan........................................................
10.43 Form of Deferred Compensation Arrangements..................
10.44 Galileo UK Health Benefit Policy............................
10.45* Employment Contract of James E. Barlett.....................
21.1 List of Subsidiaries........................................
23.1 Consent of KPMG Peat Marwick LLP............................
23.2 Consent of Arthur Andersen LLP..............................
23.3 Consent of Shearman & Sterling (included in its opinion in
Exhibit 5.1).*..............................................
23.4* Consent of Frederic F. Brace................................
23.5 Consent of David A. Coltman.................................
23.6* Consent of James E. Goodwin.................................
23.7 Consent of Frank H. Rovekamp................................
23.8 Consent of Georges P. Schorderet............................
23.9 Consent of Derek Stevens....................................
24.1 Powers of Attorney (included as part of signature page).
27.1 Financial Data Schedule.**..................................
</TABLE>
- - ---------------
(c) Exhibits for which Registrant is seeking confidential treatment for certain
portions
* To be filed by amendment
** Previously filed.
<PAGE> 1
Exhibit 1.1
- SHARES
GALILEO INTERNATIONAL, INC.
COMMON STOCK, $.01 PAR VALUE
UNDERWRITING AGREEMENT
<PAGE> 2
-, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
Swiss Bank Corporation
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
Galileo International, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters (as defined below) and
certain stockholders of the Company (the "Selling Stockholders") named in
Schedule I hereto severally propose to sell to the several Underwriters, an
aggregate of - shares of the common stock, par value $.01 per share, of the
Company (the "Firm Shares"), of which - shares are to be issued and sold by the
Company and - shares are to be sold by the Selling Stockholders, each Selling
1
<PAGE> 3
Stockholder selling the number of shares set forth opposite such Selling
Stockholder's name in Schedule I hereto.
It is understood that, subject to the conditions hereinafter stated, -
Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule II hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. Underwriters and International Underwriters of even date
herewith), and - Firm Shares (the "International Shares") will be sold to the
several International Underwriters named in Schedule III hereto (the
"International Underwriters") in connection with the offering and sale of such
International Shares outside the United States and Canada to persons other than
United States and Canadian Persons. Morgan Stanley & Co. Incorporated, Lehman
Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc. and Swiss Bank Corporation shall act as representatives (the
"U.S. Representatives") of the several U.S. Underwriters. The U.S. Underwriters
and the International Underwriters are hereinafter collectively referred to as
the "Underwriters."
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional - shares of the common stock, par value
$.01 per share, of the Company (the "Additional Shares") if and to the extent
that the U.S. Representatives shall have determined to exercise, on behalf of
the U.S. Underwriters, the right to purchase such shares of common stock granted
to the U.S. Underwriters in Section 3 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares." The shares of
common stock, par value $.01 per share, of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "Common Stock." The Company and the Selling Stockholders are hereinafter
sometimes collectively referred to as the "Sellers."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses, the U.S. prospectus, to be used in
connection with the offering and sale of Shares in the United States and Canada
to United States and Canadian Persons, and the international prospectus, to be
used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian Persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration
2
<PAGE> 4
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "Prospectus." If the
Company has filed an abbreviated registration statement to register additional
shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement.
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no
stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose
are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any 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, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and
the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, except that the representations and warranties set
forth in this paragraph 1(b) do not apply to statements or
omissions in the Registration Statement or the Prospectus
based upon information relating to any Underwriter furnished
to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to
transact
3
<PAGE> 5
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(d) Each of (i) Galileo Partnership, a general
partnership organized under the laws of Delaware (the
"Existing Partnership"), (ii) - LLC, a limited liability
company organized under the laws of Delaware ("- LLC"), (iii)
[Sub1], a Delaware corporation ("Sub1"), (iv) [Sub2], a
Delaware corporation ("Sub2") and (v) Apollo Travel Services
Partnership, a Delaware general partnership (the "ATS
Partnership") has been duly organized, is validly existing, is
in good standing under the laws of the jurisdiction of its
organization, has the power and authority to own its property
and to conduct its business as described in the Prospectus and
is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole.
(e) On or before the Closing Date (as defined below) and
prior to the purchase and sale of the Firm Shares in
accordance with Section 5 hereof, (i) all of the issued and
outstanding equity interest in - LLC will be owned directly by
the Company, free and clear of all liens, encumbrances,
equities or claims, (ii) the Existing Partnership will have
been merged with and into - LLC, (iii) all of the issued
shares of capital stock of each of Sub1 and Sub2 will have
been duly and validly authorized and issued, will be fully
paid and non-assessable and will be owned directly by - LLC,
free and clear of all liens, encumbrances, equities or claims,
and (iv) all of the outstanding partnership or other equity
interests in the ATS Partnership will be owned directly by
Sub1 or Sub2, in each case free and clear of all liens,
encumbrances, equities or claims.
(f) This Agreement has been duly authorized, executed and
delivered by the Company.
4
<PAGE> 6
(g) The registration rights agreement among the Company
and airline stockholders (the "Registration Rights Agreement")
and the stockholders' agreement among the Company and certain
of its stockholders and certain parties related to such
stockholders (the "Stockholders' Agreement") have been duly
authorized and, when executed and delivered by the Company,
will constitute valid and binding agreements of the Company
enforceable in accordance with their terms, except as (a)
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or other
similar laws affecting enforcement of creditors' rights
generally, (b) enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (c) in the
case of the Registration Rights Agreement, enforcement of the
indemnity provisions contained therein may be limited by
principles of public policy.
(h) The authorized capital stock of the Company conforms
in all material respects as to legal matters to the
description thereof contained in the Prospectus.
(i) On the Closing Date (as defined in Section 5), the
shares of Common Stock (including the Shares to be sold by the
Selling Stockholders and by the Company) will have been duly
authorized, validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any
preemptive or similar rights.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this
Agreement, the Registration Rights Agreement and the
Stockholders' Agreement will not contravene any provision of
(i) the certificate of incorporation or by-laws of the
Company, (ii) any applicable law or any agreement or other
instrument binding upon the Company or any of its
subsidiaries, except for any contraventions as would not
individually or in the aggregate have a material adverse
effect on the Company and its subsidiaries taken as a whole or
would materially and adversely affect the consummation by the
Company of the transactions contemplated by this Agreement, or
(iii) any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the
5
<PAGE> 7
Company or any subsidiary, and no consent, approval,
authorization or order of, or qualification with, any
governmental body or agency is required for the performance by
the Company of its obligations under this Agreement, the
Registration Rights Agreement or the Stockholders' Agreement,
except such as may be required by the Securities Act and the
Securities Exchange Act of 1934, as amended, the securities or
Blue Sky laws of the various states or the securities or
similar laws of any foreign jurisdiction in connection with
the offer and sale of the Shares.
(k) There has not occurred any material adverse change,
or any development involving a prospective material adverse
change, in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).
(l) There are no legal or governmental proceedings
pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of
the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to
be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(m) Each preliminary prospectus filed as part of the
Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the
Securities Act, complied when so filed in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(n) To the best of its knowledge, the Company and its
subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of
them under applicable Environmental
6
<PAGE> 8
Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, reasonably be expected
to have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(o) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, (i) the Company and its subsidiaries have not
incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in
the ordinary course of business; (ii) the Company has not
purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any
kind on its capital stock other than ordinary and customary
dividends; and (iii) there has not been any material change in
the capital stock, short-term debt or long-term debt of the
Company and its consolidated subsidiaries, except in each case
as described in or contemplated by the Prospectus (exclusive
of any amendments or supplements thereto subsequent to the
date of this Agreement).
(p) Except as described in the Prospectus under
"Relationship With Airline Stockholders and Certain
Transactions -- Registration Rights Agreement" and
"Management," there are no contracts, agreements or
understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Securities Act with respect
to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to
the Registration Statement.
(q) The Company and its subsidiaries own or possess, or
can acquire on reasonable terms, all material patents, patent
rights, licenses, inventions, copyrights, software, know-how
(including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
currently employed by them in connection with the business now
operated by them, and neither
7
<PAGE> 9
the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, singly or
in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in any material adverse change
in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries,
taken as a whole.
(r) The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither
the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any
such certificate, authorization or permit which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a material adverse change
in the condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries,
taken as a whole, except as described in or contemplated by
the Prospectus.
2. Representations and Warranties of the Selling Stockholders. Each
of the Selling Stockholders represents and warrants to and agrees with each of
the Underwriters that:
(a) This Agreement has been duly authorized, executed and
delivered by or on behalf of such Selling Stockholder.
(b) The Stockholders' Agreement has been duly authorized
by such Selling Stockholder and, when executed and delivered
by the such Selling Stockholder, will constitute, a valid and
binding agreement of such Selling Stockholder enforceable in
accordance with its terms except as enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and the availability of equitable
remedies may be limited by equitable principles of general
applicability.
(c) The execution and delivery by such Selling
Stockholder of, and the performance by such Selling
Stockholder of its obligations under, this Agreement and the
Stockholders' Agreement will not contravene any provision of
(i) the certificate
8
<PAGE> 10
of incorporation or by-laws or other constitutive documents of
such Selling Stockholder, (ii) any applicable law or any
agreement or other instrument binding upon such Selling
Stockholder, except for any contraventions as would not
individually or in the aggregate materially and adversely
affect the consummation by such Selling Stockholder of the
transactions contemplated by this Agreement or any judgment,
order or decree of any governmental body, agency or court
having jurisdiction over such Selling Stockholder, and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by such Selling Stockholder of its obligations
under this Agreement or the Stockholders' Agreement, except
such as may be required by the Securities Act, the securities
or Blue Sky laws of the various states or the securities or
similar laws of any foreign jurisdiction in connection with
the offer and sale of the Shares.
(d) On the Closing Date (as defined below) such Selling
Stockholder will have, valid title to the Shares to be sold by
such Selling Stockholder and the legal right and power, and
all authorization and approval required by law, to enter into
this Agreement and the Stockholders' Agreement and to sell,
transfer and deliver the Shares to be sold by such Selling
Stockholder.
(e) Delivery of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement will pass title to such
Shares free and clear of any security interests, claims,
liens, equities and other encumbrances.
(f) (i) The Registration Statement, when it became
effective, did not contain and, as amended or supplemented, if
applicable, will not contain any 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, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Securities Act and
the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as
amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided that the representations and warranties
set forth in this
9
<PAGE> 11
paragraph 2(f) apply only to statements or omissions in the
Registration Statement or the Prospectus based upon
information relating to such Selling Shareholder furnished to
the Company in writing by such Selling Shareholder expressly
for use therein.
(g) Such Selling Stockholder has not taken, and will not
take, directly or indirectly, any action designed to, or which
might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities
pursuant to the distribution contemplated by this Agreement,
and other than as permitted by the Securities Act, such
selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in
connection with the offering and sale of the Securities.
3. Agreements to Sell and Purchase. Each Seller, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Seller at U.S.$- a share (the "Purchase
Price") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Seller as the number of Firm Shares set
forth in Schedule II or Schedule III hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to - Additional
Shares at the Purchase Price. If the U.S. Representatives, on behalf of the U.S.
Underwriters, elect to exercise such option, the U.S. Representatives shall so
notify the Company in writing not later than 30 days after the date of this
Agreement, which notice shall specify the number of Additional Shares to be
purchased by the U.S. Underwriters and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date but not earlier than
the Closing Date nor later than ten business days after the date of such notice.
Additional Shares may be purchased as provided in Section 5 hereof solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each U.S.
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
the U.S.
10
<PAGE> 12
Representatives may determine) that bears the same proportion to the total
number of Additional Shares to be purchased as the number of U.S. Firm Shares
set forth in Schedule II hereto opposite the name of such U.S. Underwriter bears
to the total number of U.S. Firm Shares.
Each Seller hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (other than any such transaction between a Selling
Stockholder and any affiliate thereof provided that such affiliate has delivered
to you on or before the date of such transaction, a lock-up agreement,
substantially in the form of Exhibit A hereto) or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to the Shares to be sold hereunder. In addition, each
Selling Stockholder agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 180 days after the date of the Prospectus, make any demand
for, or exercise any right with respect to, the registration of any shares of
Common Stock or any security convertible into or exercisable or exchangeable for
Common Stock.
4. Terms of Public Offering. The Sellers are advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Sellers are further
advised by you that the Shares are to be offered to the public initially at
U.S.$- a share (the "Public Offering Price") and to certain dealers selected by
you at a price that represents a concession not in excess of U.S.$- a share
under the Public Offering Price, and that any Underwriter may allow, and such
dealers may reallow, a concession, not in excess of U.S.$- a share, to any
Underwriter or to certain other dealers.
5. Payment and Delivery. Payment for the Firm Shares to be sold by
each Seller shall be made to such Seller in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 A.M., New York City
11
<PAGE> 13
time, on -, 1997, or at such other time on the same or such other date, not
later than -, 1997, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several U.S.
Underwriters at 10:00 A.M., New York City time, on the date specified in the
notice described in Section 3 or at such other time on the same or on such other
date, in any event not later than -, 1997, as shall be designated in writing by
the U.S. Representatives. The time and date of such payment are hereinafter
referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
6. Conditions to the Underwriters' Obligations. The obligations of
the Sellers to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 3:00 P.M. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not have
occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise,
or in the earnings, business or operations of the Company and
its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your
judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
12
<PAGE> 14
(b) The Underwriters shall have received on the Closing
Date:
(i) a certificate of the Company, dated the
Closing Date and signed by an executive officer of
the Company, to the effect that the representations
and warranties of the Company contained in this
Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the
agreements and satisfied all of the conditions on its
part to be performed or satisfied hereunder on or
before the Closing Date (the officer signing and
delivering such certificate may rely upon the best of
his or her knowledge as to proceedings threatened);
and
(ii) a certificate of each Selling Stockholder,
dated the Closing Date and signed by an officer of
such Selling Stockholder, to the effect that the
representations and warranties of such Selling
Stockholder contained in this Agreement are true and
correct as of the Closing Date and that such Selling
Stockholder has complied with all of the agreements
and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the
Closing Date.
(c) The Underwriters shall have received on the Closing
Date (i) an opinion and a letter of Shearman & Sterling,
outside counsel for the Company, dated the Closing Date, in
the forms attached hereto as Exhibits A1 and A2 and (ii) an
opinion of Richards, Layton & Finger, outside counsel for the
Company, dated the Closing Date, in the form attached hereto
as Exhibit A3.
(d) The Underwriters shall have received on the Closing
Date an opinion of Audrey Rubin, General Counsel of ATS
Partnership, dated the Closing Date, in the form attached
hereto as Exhibit B1.
(e) The Underwriters shall have received on the Closing
Date an opinion of Babetta R. Gray, General Counsel of the
Company, dated the Closing Date, in the form attached hereto
as Exhibit C.
13
<PAGE> 15
(f) The Underwriters shall have received on the Closing
Date an opinion of -, local counsel to [Air Canada], dated the
Closing Date, in the form attached hereto as Exhibit D1 and an
opinion of -, U.S. counsel to [Air Canada], dated the Closing
Date, in the form attached hereto as Exhibit E1.
(g) The Underwriters shall have received on the Closing
Date an opinion of -, local counsel to [Alitalia-Linee Aeree
Italiane S.p.A.], dated the Closing Date, in the form attached
hereto as Exhibit D2 and an opinion of -, U.S. counsel to
[Alitalia-Linee Aeree Italiane S.p.A.], dated the Closing
Date, in the form attached hereto as Exhibit E2.
(h) The Underwriters shall have received on the Closing
Date an opinion of -, local counsel to [US Airways, Inc.],
dated the Closing Date, in the form attached hereto as Exhibit
D3 and an opinion of -, U.S. counsel to [US Airways, Inc.],
dated the Closing Date, in the form attached hereto as Exhibit
E3.
(i) The Underwriters shall have received on the Closing
Date an opinion of -, local counsel to [SAir Group (Ltd.)],
dated the Closing Date, in the form attached hereto as Exhibit
D4 and an opinion of -, U.S. counsel to [SAir Group (Ltd.)],
dated the Closing Date, in the form attached hereto as Exhibit
E4.
(j) The Underwriters shall have received on the Closing
Date an opinion of -, local counsel to [British Airways plc],
dated the Closing Date, in the form attached hereto as Exhibit
D5 and an opinion of -, U.S. counsel to [British Airways plc],
dated the Closing Date, in the form attached hereto as Exhibit
E5.
(k) The Underwriters shall have received on the Closing
Date an opinion of Davis Polk & Wardwell, counsel for the
Underwriters, dated the Closing Date, in form and substance
satisfactory to Morgan Stanley.
The opinions described in paragraphs (c), (d), (e),
(f), (g), (h), (i) and (j) above shall be rendered to the
Underwriters at the request of the Company, the ATS
Partnership or one or more of the Selling Stockholders, as the
case may be, and shall so state therein.
14
<PAGE> 16
(l) The Underwriters shall have received, on each of the
date hereof and the Closing Date, a letter dated the date
hereof or the Closing Date, as the case may be, in form and
substance satisfactory to the Underwriters, from each of KPMG
Peat Marwick LLP, independent public accountants, and Arthur
Andersen, independent public accountants, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial information
contained in the Registration Statement and the Prospectus;
provided that the letters delivered on the Closing Date shall
use a "cut-off date" not earlier than the date hereof.
(m) The "lock-up" agreements, each substantially in the
form of Exhibit A hereto, between you and the airline
stockholders of te Company relating to sales and certain other
dispositions of shares of Common Stock or certain other
securities, delivered to you on or before the date hereof,
shall be in full force and effect on the Closing Date.
The several obligations of the U.S. Underwriters to purchase Additional
Shares hereunder are subject to the delivery to the U.S. Representatives on the
Option Closing Date of such documents as they may reasonably request with
respect to the good standing of the Company, the due authorization and issuance
of the Additional Shares and other matters related to the issuance of the
Additional Shares.
7. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, seven signed
copies of the Registration Statement (including exhibits
thereto) and for delivery to each other Underwriter a
conformed copy of the Registration Statement (without exhibits
thereto) and to furnish to you in New York City, without
charge, prior to 10:00 A.M. New York City time on the business
day next succeeding the date of this Agreement and during the
period mentioned in paragraph (c) below, as many copies of the
Prospectus and any supplements and amendments thereto or to
the Registration Statement as you may reasonably request.
15
<PAGE> 17
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each
such proposed amendment or supplement and not to file any such
proposed amendment or supplement to which you reasonably
object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.
(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for
the Underwriters the Prospectus is required by law to be
delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result
of which it is necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish to the
Underwriters and to the dealers (whose names and addresses you
will furnish to the Company) to which Shares may have been
sold by you on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser,
be misleading or so that the Prospectus, as amended or
supplemented, will comply with law. The expense of complying
with this Section 7(c) shall be borne by the Company in
respect of any amendment or supplement required during the
nine-month period after effectiveness of the Registration
Statement and by the Underwriters thereafter.
(d) To endeavor to qualify the Shares for offer and sale
under the securities or Blue Sky laws of such jurisdictions as
you shall reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement
covering the twelve-month period ending -, 1998 that satisfies
the provisions of Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder.
16
<PAGE> 18
8. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 7(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) all fees and expenses in connection
with the preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to listing the
Shares on the New York Stock Exchange and foreign stock exchanges, (vi) the cost
of printing certificates representing the Shares, (vii) the costs and charges of
any transfer agent, registrar or depositary, (viii) the costs and expenses of
the Company relating to investor presentations on any "road show" undertaken in
connection with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show, and (ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise made
in this Section. Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, each Selling Stockholder agrees
to pay or cause to be paid all expenses incident to the performance of its
17
<PAGE> 19
obligations under this Agreement, including the fees, disbursements and expenses
of such Selling Stockholder's U.S. and local counsel, but not including any of
the expenses payable by the Company as set forth above. It is understood,
however, that except as provided in this Section, Section 9 entitled "Indemnity
and Contribution", and the last paragraph of Section 11 below, the Underwriters
will pay all of their costs and expenses, including fees and disbursements of
their counsel, stock transfer taxes payable on resale of any of the Shares by
them and any advertising expenses connected with any offers they may make.
9. Indemnity and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter or Selling Stockholder furnished to the
Company in writing by such Underwriter through you or by such Selling
Stockholder, respectively, expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such losses, claims, damages or liabilities purchased Shares, or any person
controlling such Underwriter, if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of such Underwriter to such
person, if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Shares to such person, and if the Prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.
(b) Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other
18
<PAGE> 20
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with reference to information relating to such
Selling Stockholder furnished in writing by or on behalf of such Selling
Stockholder expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto; provided,
that (i) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus the indemnity agreement
contained in this subsection (b) shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased any Shares, to the extent that a prospectus relating to
such Shares was required to be delivered by such Underwriter under the Act in
connection with such purchase and any such loss, claim, damage or liability of
such Underwriter results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such Shares to
such person, a copy of the Prospectus if the Company had previously furnished
copies thereof to such Underwriter, and (ii) the liability of any Selling
Stockholder pursuant to this paragraph (b) shall be limited to an amount equal
to the total net proceeds received by such Selling Stockholder from the sale of
Shares by such Selling Stockholder.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, each Selling Stockholder, the directors of the
Company (including persons identified to become directors), the officers of the
Company who sign the Registration Statement and each person, if any, who
controls the Company or any Selling Stockholder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with reference
to information relating to such Underwriter furnished to the Company in writing
by
19
<PAGE> 21
such Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a), (b) or (c) of this Section 9, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, (ii) the fees and expenses of
more than one separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement and each person,
if any, who controls the Company within the meaning of either such Section and
(iii) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Selling Stockholders and all persons, if any, who control
any Selling Stockholder within the meaning of either such Section, and that all
such fees and expenses shall be reimbursed as they are incurred. In the case of
any such separate firm for the Underwriters and such control persons of any
Underwriters, such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. In the case of any such separate firm for
the Selling Stockholders and such control persons of any Selling Stockholders,
such firm shall be designated in writing by the Selling Stockholders. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such
20
<PAGE> 22
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(e) To the extent the indemnification provided for in paragraph (a),
(b) or (c) of this Section 9 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Sellers
on the one hand and the Underwriters on the other hand in connection with the
offering of the Shares shall be deemed to be in the same respective proportions
as the net proceeds from the offering of the Shares (before deducting expenses)
received by each Seller and the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover of the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of the Sellers on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Sellers or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 9 are several in proportion to the respective number of
Shares they have purchased hereunder, and not joint. The Selling Stockholders'
respective obligations to contribute pursuant to this Section 9 are several in
proportion to the net proceeds from the sale of Shares by each such Selling
Stockholder hereunder, and not joint.
21
<PAGE> 23
(f) The Sellers and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (e) of this Section 9. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, (i) no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) no Selling Stockholder shall
be required to contribute any amount in excess of the amount by which the net
proceeds received from the sale of Shares by such Selling Stockholder exceeds
the amount of any damages that such Selling Stockholder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. 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. The remedies provided for in this Section 9 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this Section
9 and the representations, warranties and other statements of the Company and
the Selling Stockholders contained in this Agreement shall remain operative and
in full force and effect regardless of (i) any termination of this Agreement,
(ii) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, any Selling Stockholder or any person controlling
any Selling Stockholder, or the Company, its officers or directors or any person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
10. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities
22
<PAGE> 24
of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedules II and III
bears to the aggregate number of Firm Shares set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as you may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 11 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you, the Company and the Selling Stockholders for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders. In any such
case either you or the relevant Sellers shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus or
in any other documents or arrangements may be effected. If, on the Option
Closing Date, any U.S. Underwriter or U.S. Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of
23
<PAGE> 25
Additional Shares to be purchased, the non-defaulting U.S. Underwriters shall
have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting U.S. Underwriters would have been obligated to purchase
in the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting U.S. Underwriter from liability in respect of any default
of such U.S. Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of any Seller to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Sellers will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including reasonable fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
12. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
24
<PAGE> 26
Very truly yours,
GALILEO INTERNATIONAL, INC.
By:____________________________
Name:
Title:
The Selling Stockholders
named in Schedule I hereto,
acting severally
By:____________________________
Attorney-in-Fact
25
<PAGE> 27
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
LEHMAN BROTHERS INC.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
J.P. MORGAN SECURITIES INC.
SWISS BANK CORPORATION
Acting severally on behalf
of themselves and the
several U.S. Underwriters named
in Schedule II hereto.
By: Morgan Stanley & Co.
Incorporated
By:____________________________
Name:
Title:
MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
SWISS BANK CORPORATION,
ACTING THROUGH ITS DIVISION,
SBC WARBURG
ABN AMRO ROTHSCHILD
HSBC INVESTMENT BANK LIMITED
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
MERRILL LYNCH INTERNATIONAL
J.P. MORGAN SECURITIES LTD.
Acting severally on behalf
of themselves and the
several International Underwriters named
in Schedule III hereto.
By: Morgan Stanley & Co.
International
Limited
26
<PAGE> 28
By:____________________________
Name:
Title:
27
<PAGE> 29
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Selling Stockholder Shares to Be Sold
<S> <C> <C>
Total
</TABLE>
<PAGE> 30
SCHEDULE II
<TABLE>
<CAPTION>
Number of Firm Shares
U.S. Underwriter to Be Purchased
<S> <C>
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities Inc.
Swiss Bank Corporation
Total
</TABLE>
<PAGE> 31
SCHEDULE III
<TABLE>
<CAPTION>
Number of Firm Shares
International Underwriter to Be Purchased
<S> <C>
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International Limited
J.P. Morgan Securities Ltd.
Total
</TABLE>
<PAGE> 32
Exhibit A
[Form of Lock-up Letter]
-, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
Swiss Bank Corporation
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley"), as Representative of the several Underwriters, proposes to
enter into an Underwriting Agreement (the "Underwriting Agreement") with Galileo
International, Inc., a Delaware corporation (the "Company"), and certain
stockholders of the Company
<PAGE> 33
(the "Selling Stockholders") providing for the public offering (the "Public
Offering") by the several Underwriters, including Morgan Stanley (the
"Underwriters"), of up to shares (the "Shares") of the Common Stock ($.01 par
value per share) of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (other than any such transaction between an airline stockholder and
any affiliate thereof provided that such affiliate has delivered to you on or
before the date of such transaction, a "lock-up" agreement , substantially
identical to this agreement) (provided that such shares or securities are either
now owned by the undersigned or are hereafter acquired prior to or in connection
with the Public Offering), or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of such shares of Common Stock, whether any such transaction described
in clause (1) or (2) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to the sale of any Shares to the Underwriters pursuant to the Underwriting
Agreement. In addition, the undersigned agrees that, without the prior written
consent of Morgan Stanley on behalf of the Underwriters, it will not, during the
period commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation among the Company, the Selling Stockholders and the Underwriters.
Very truly yours,
-------------------------
(Name)
-------------------------
<PAGE> 34
(Address)
<PAGE> 35
Exhibit A1 - Letter of
Shearman & Sterling,
Counsel for the Company
__, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
SBC Warburg Inc.
As Representatives of the Several U.S.
Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
As Representatives of the Several
International Underwriters
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Galileo International, Inc.
Initial Public Offering
Ladies and Gentlemen:
We have acted as counsel for Galileo International, Inc., a Delaware
corporation (the "Company"), in connection with the purchase by the underwriters
(the "Underwriters"), including yourselves, named in Schedules II and III to the
Underwriting Agreement dated ______, 1997 (the "Underwriting Agreement") among
the Underwriters, the Company and the Selling Stockholders
<PAGE> 36
2
named in the Underwriting Agreement, of __________ shares of the Company's
common stock, $.01 par value.
In our capacity as counsel to the Company, we have examined signed
copies of the registration statement on Form S-1 (No. 333-27495) filed by the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") on May 20, 1997,
and of amendments 1-______ thereto filed by the Company with the Commission on
____ __, 1997 and ______ __, 1997, respectively, and copies of the related
prospectuses. The registration statement as amended at the time when it became
effective, including the information deemed to be part thereof at the time of
effectiveness pursuant to Rule 430A under the Securities Act, and also including
the exhibits and schedules thereto, is hereinafter referred to as the
"Registration Statement," and the final U.S. prospectus dated ______, 1997 and
the final international prospectus dated ______, 1997, in the forms filed by the
Company pursuant to Rule 424(b) under the Securities Act, are hereinafter
collectively referred to as the "Prospectus".
We have also reviewed and participated in discussions concerning the
preparation of the Registration Statement and the Prospectus with certain
officers and employees of the Company, with its counsel and its auditors, and
with representatives of the Underwriters. The limitations inherent in the
independent verification of factual matters and in the role of outside counsel
are such, however, that we cannot and do not assume any responsibility for the
accuracy, completeness or fairness of any of the statements made in the
Registration Statement or the Prospectus, except as set forth in paragraphs _
and _ of our opinion addressed to you, dated the date hereof.
Subject to the limitations set forth in the immediately preceding
paragraph, we advise you that, on the basis of the information we gained in the
course of performing the services referred to above, (i) in our opinion, the
Registration Statement and the Prospectus (other than the financial statements
and schedules and other financial and statistical data contained therein or
omitted therefrom, as to which we express no opinion) appear on their face to be
appropriately responsive in all material respects to the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder; (ii) no facts came to our attention which gave us reason to believe
that (a) the Registration Statement (other than the financial statements and
schedules and other financial and statistical data contained therein or omitted
therefrom, as to which we have not been requested to comment), at the time it
became effective, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not
<PAGE> 37
3
misleading, or (b) the Prospectus (other than the financial statements and
schedules and other financial and statistical data contained therein or omitted
therefrom, as to which we have not been requested to comment), as of its date or
the date hereof, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (iii) we do not know of any contract or other document of a
character required to be filed as an exhibit to the Registration Statement that
is not so filed.
This opinion is being rendered to you at the request of Galileo
International, Inc. pursuant to Section 6(c) of the Underwriting Agreement. This
letter is being furnished to you solely for your benefit, and is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
Shearman & Sterling
<PAGE> 38
ExhibitA2 - Opinion of Shearman & Sterling
Counsel for the Company
__, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
SBC Warburg Inc.
As Representatives of the Several U.S.
Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
As Representatives of the Several
International Underwriters
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Galileo International, Inc.
Initial Public Offering
Ladies and Gentlemen:
<PAGE> 39
2
We have acted as counsel for Galileo International, Inc., a Delaware
corporation (the "Company"), in connection with the purchase by the underwriters
(the "Underwriters"), including yourselves, named in Schedules II and III to the
Underwriting Agreement dated ________, 1997 (the "Underwriting Agreement") among
the Underwriters, the Company and the Selling Stockholders named in the
Underwriting Agreement (the "Selling Stockholders"), of ________ shares of the
Company's common stock, $.01 par value (the "Common Stock").
In our capacity as counsel to the Company, we have examined signed
copies of the registration statement on Form S-1 (No. 333-27495) filed by the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") on May 20, 1997,
and of amendments 1-_____ thereto filed by the Company with the Commission on
_______, 1997 and _______, 1997, respectively, and copies of the related
prospectuses. The registration statement as amended at the time when it became
effective, including the information deemed to be part thereof at the time of
effectiveness pursuant to Rule 430A under the Securities Act, and also including
the exhibits and schedules thereto, is hereinafter referred to as the
"Registration Statement", and the final U.S. prospectus dated _______, 1997 and
the final international prospectus dated _______, 1997, in the forms filed by
the Company pursuant to Rule 424(b) under the Securities Act, are hereinafter
collectively referred to as the "Prospectus".
We have also examined and relied as to factual matters upon the
representations and warranties contained in or made pursuant to the Underwriting
Agreement, and upon the originals, or copies certified or otherwise identified
to our satisfaction, of such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies.
Our opinion set forth below is limited to the law of the State of
New York, the General Corporation Law of the State of Delaware and the federal
law of the United States, and we do not express any opinion herein concerning
any other law.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE> 40
3
1. the Company has been duly incorporated and is validly existing as
a corporation in good standing under the law of the State of Delaware,
with corporate power and authority under such law to own its property and
to conduct its business as described in the Prospectus.
2. each of [Sub 1 and Sub 2 of Galileo International, LLC] has been
duly incorporated and is validly existing in good standing under the law
of the State of Delaware, with corporate power and authority under such
law to own its property and to conduct its business as described in the
Prospectus;
3. the authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof contained
in the Prospectus;
4. the statements (a) in the Prospectus under the captions "The
Company - Galileo International, Inc.", "The Company - the NDC
Acquisitions", "Relationship with Airline Stockholders and Certain
Transactions", "Description of Capital Stock" and "Underwriters" and (b)
in the Registration Statement in Items 14 and 15, in each case insofar as
such statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called for
with respect to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein;
5. the shares of Common Stock issued by the Company pursuant to the
[Certificate of Merger], including the shares of Common Stock sold to the
Underwriters today by the Selling Stockholders and the shares of Common
Stock to be sold by the Company to the Underwriters, have been duly
authorized and are validly issued, fully paid and non-assessable, and the
issuance and sale of such shares is not subject to any preemptive or
similar rights;
6. after giving effect to the transactions contemplated by the
General Partnership Interest Purchase Agreement dated as of ______, 1997,
among Galileo International Partnership and the other parties named
therein, the general partnership interests in ATS will be owned of record
by [Sub 1 and Sub 2]; all of the outstanding capital stock of [Sub 1 and
Sub 2] is owned of record by Galileo International LLC; [and all of the
equity interests in Galileo International LLC are owned of record by the
<PAGE> 41
4
Company], in each case, free and clear of all liens, encumbrances,
equities or claims known to us;
7. the Underwriting Agreement has been duly authorized, executed
and delivered by the Company;
8. Each of the Registration Rights Agreement (the "Registration
Rights Agreement"), dated _______, 1997, among the Company and the
Original Stockholders named therein, and the Stockholders' Agreement (the
"Stockholders' Agreement"), dated _______, 1997, among the Company and the
Original Owners named therein, has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms except
as (a) enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally, (b) enforcement thereof is
subject to general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law) and (c) in the case of
the Registration Rights Agreement, enforcement of the indemnity provisions
contained therein may be limited by principles of public policy;
9. the execution and delivery by the Company of, and the performance
by the Company of its obligations under, the Underwriting Agreement, the
Stockholders' Agreement and the Registration Rights Agreement will not
contravene any provision of (a) the certificate of incorporation or
by-laws of the Company or (b) the federal law of the United States or the
law of the State of New York, except in the case of this clause (b) for
any contraventions as would not individually or in the aggregate have a
material adverse effect on the Company and its subsidiaries taken as a
whole or materially and adversely affect the consummation by the Company
of the transactions contemplated by the Underwriting Agreement, the
Stockholders' Agreement or the Registration Rights Agreement;
10. no consent, approval, authorization or order of, or
qualification with, any governmental body or agency of the United States
of America or the State of New York is required for the performance by the
Company of its obligations under the Underwriting Agreement, the
Stockholders'
<PAGE> 42
5
Agreement and the Registration Rights Agreement, except as may be required
by the registration provisions of the Securities Act and the Securities
Exchange Act of 1934, as amended, or the securities or Blue Sky laws of
the State of New York; and
11. the Registration Statement became effective under the 1933 Act
on [-]; the Prospectus has been filed with the Commission in the manner
and within the time period required by Rules 430A and 424(b) under the
1933 Act; and, to the best of our knowledge, the Registration Statement is
still effective, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the 1933 Act.
This opinion is being rendered to you at the request of Galileo
International, Inc. pursuant to Section 6(c) of the Underwriting Agreement. This
letter is being furnished to you solely for your benefit, and is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
Shearman & Sterling
<PAGE> 43
Exhibit B1 - Opinion of Audrey Rubin,
General Counsel of ATS
__, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
SBC Warburg Inc.
As Representatives of the Several U.S.
Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
As Representatives of the Several
International Underwriters
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Galileo International, Inc.
Initial Public Offering
Ladies and Gentlemen:
<PAGE> 44
2
I am General Counsel of Apollo Travel Services Partnership, a
Delaware general partnership ("ATS"). In such capacity I have examined and
relied as to factual matters upon the originals, or copies certified or
otherwise identified to my satisfaction, of such records, documents,
certificates and other instruments as in my judgment are necessary or
appropriate to enable me to render the opinion expressed below. In my
examination, I have assumed the genuineness of all signatures, the authenticity
of all documents submitted tome as originals and the conformity with the
originals of all documents submitted to me as copies.
My opinion set forth below is limited to the law of the State of
Delaware, and I do not express any opinion herein concerning any other law.
Based upon and subject to the foregoing, I am of the opinion that
ATS has been duly formed and is validly existing as a general partnership in
good standing under the law of the State of Delaware, with power and authority
to own its property and to conduct its business now owned and conducted, and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on it
and its subsidiaries, taken as a whole.
This opinion is being rendered to you at the request of ATS pursuant
to Section 6(d) of the Underwriting Agreement.
Very truly yours,
Audrey Rubin
<PAGE> 45
Exhibit C - Opinion of Babetta R. Gray,
General Counsel of the Company
__, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
SBC Warburg Inc.
As Representatives of the Several U.S.
Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
As Representatives of the Several
International Underwriters
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Galileo International, Inc.
Initial Public Offering
Ladies and Gentlemen:
<PAGE> 46
2
I am Senior Vice President, Legal and General Counsel of Galileo
International, Inc., a Delaware corporation (the "Company"), and have acted as
counsel to the Company in connection with the purchase by the underwriters (the
"Underwriters"), including yourselves, named in Schedules II and III to the
Underwriting Agreement dated ______, 1997 (the "Underwriting Agreement") among
the Underwriters, the Company and the Selling Stockholders named in the
Underwriting Agreement (the "Selling Stockholders"), of _________ shares of the
Company's common stock, $.01 par value, (the "Common Stock").
In my capacity as counsel to the Company, I have examined signed
copies of the registration statement on Form S-1 (No. 333-27495) filed by the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") on May 20, 1997,
and of amendments 1-____ thereto filed by the Company with the Commission on
______, 1997 and ______, 1997, respectively, and copies of the related
prospectuses. The registration statement as amended at the time when it became
effective, including the information deemed to be part thereof at the time of
effectiveness pursuant to Rule 430A under the Securities Act, and also including
the exhibits and schedules thereto, is hereinafter referred to as the
"Registration Statement", and the final U.S. prospectus dated ______, 1997 and
the final international prospectus dated ______, 1997, in the forms filed by the
Company pursuant to Rule 424(b) under the Securities Act, are hereinafter
collectively referred to as the "Prospectus".
I have also examined and relied as to factual matters upon the
representations and warranties of persons other than the Company contained in or
made pursuant to the Underwriting Agreement, and upon the originals, or copies
certified or otherwise identified to my satisfaction, of such records,
documents, certificates and other instruments as in my judgment are necessary or
appropriate to enable me to render the opinion expressed below. In my
examination, I have assumed the genuineness of all signatures, the authenticity
of all documents submitted to me as originals and the conformity with the
originals of all documents submitted to me as copies.
My opinion set forth below is limited to the law of the State of
Illinois, the General Corporation Law of the State of Delaware and the federal
law of the United States, and I do not express any opinion herein concerning any
other law. Although I am licensed to practice law in the State of Colorado and
the Commonwealth of Massachusetts, I am not licensed to practice law in the
State of Illinois. To the extent my opinion set forth in paragraphs 3 and 4
below covers
<PAGE> 47
3
Illinois law, I am relying on attorneys under my supervision who are licensed to
practice in the State of Illinois.
Based upon and subject to the foregoing, I am of the opinion that:
1. the Company has been duly incorporated and is validly existing
as a corporation in good standing under the law of the State of Delaware,
with corporate power and authority under such law to own its property and
to conduct its business as described in the Prospectus, and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole;
2. Galileo International, LLC is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
3. the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Underwriting
Agreement will not contravene any provision of (a) the federal law of the
United States or the law of the State of Illinois, or, to my knowledge,
any agreement or other instrument that is binding upon the Company and
that is material to the Company and its subsidiaries, taken as a whole,
except in the case of this clause (a) for any contraventions as would not
individually or in the aggregate have a material adverse effect on the
Company and its subsidiaries taken as a whole or materially and adversely
affect the consummation by the Company of the transactions contemplated by
the Underwriting Agreement, or (b) to my knowledge, any judgment, order or
decree of any governmental body, agency or court of the United States of
America or the State of Illinois having jurisdiction over the Company;
4. no consent, approval, authorization or order of, or
qualification with, any governmental body or agency of the United States
of America or the State of Illinois is required for the performance by the
<PAGE> 48
4
Company of its obligations under the Underwriting Agreement, except as may
be required by the Securities Act or the securities or Blue Sky laws of
the State of Illinois; and
5. to my knowledge, there are no legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or of
any statutes, regulations, contracts or other documents that are required
to be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement that are not described or
filed as required.
I have not verified, and am not passing upon and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus. I have, however,
reviewed and participated in discussions concerning the preparation of the
Registration Statement and the Prospectus with certain officers and employees of
the Company, with its auditors, and with representatives of the Underwriters. In
the course of this review and discussion, no facts came to my attention which
gave me reason to believe that (a) the Registration Statement (other than the
financial statements and schedules and other financial and statistical data
contained therein or omitted therefrom, as to which I have not been requested to
comment), at the time it became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (b) the
Prospectus (other than the financial statements and schedules and other
financial and statistical data contained therein or omitted therefrom, as to
which I have not been requested to comment), as of its date or the date hereof,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
This opinion is being rendered to you at the request of Galileo
International, Inc. pursuant to Section 6(e) of the Underwriting Agreement. This
letter is being furnished to you solely for your benefit, and is not to be used,
circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
<PAGE> 49
5
Babetta R. Gray
Senior Vice President,
Legal and General Counsel
<PAGE> 50
Exhibit D1 - Opinion of
Local Counsel for
Selling Stockholder
__, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
SBC Warburg Inc.
As Representatives of the Several U.S.
Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
As Representatives of the Several
International Underwriters
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Galileo International, Inc.
Initial Public Offering
Ladies and Gentlemen:
<PAGE> 51
2
I have acted as counsel for [Name of Selling Stockholder], a
[description of entity] (the "Selling Stockholder"), in connection with the
purchase by the underwriters (the "Underwriters"), including yourselves, named
in Schedules II and III to the Underwriting Agreement dated ______, 1997 (the
"Underwriting Agreement") among the Underwriters, Galileo International, Inc., a
Delaware corporation (the "Company"), the Selling Stockholder and the other
selling stockholders named in the Underwriting Agreement, of the number of
shares of the Company's common stock, $.01 par value, set forth opposite the
name of the Selling Stockholder in Schedule __ to the Underwriting Agreement
(the "Shares").
In such capacity, I have examined and relied as to factual matters
upon the representations and warranties contained in or made pursuant to the
Underwriting Agreement, and upon the originals, or copies certified or otherwise
identified to my satisfaction, of such records, documents, certificates and
other instruments as in my judgment are necessary or appropriate to enable me to
render the opinion expressed below. In such examination, I have assumed the
genuineness of all signatures, the authenticity of all documents submitted to me
as originals and the conformity with the originals of all documents submitted to
me as copies.
My opinion set forth below is limited to the law of [jurisdiction of
incorporation], and I do not express any opinion herein concerning any other
law.
Based upon and subject to the foregoing, I am of the opinion that:
1. the Selling Stockholder has been duly incorporated and is validly
existing as a [type of entity] in good standing under the law of
[jurisdiction of incorporation], with corporate power and authority under
such law to enter into and perform its obligations under the Underwriting
Agreement and to sell, transfer and deliver the Shares as contemplated
thereby;
2. each of the Underwriting Agreement and the Stockholders'
Agreement (the "Stockholders' Agreement"), dated ___________, 1997, among
the Company, the Selling Stockholder and the other Original Owners named
therein has been duly authorized, executed and delivered by the Selling
Stockholder;
<PAGE> 52
3
3. the execution and delivery by the Selling Stockholder of, and the
performance by the Selling Stockholder of its obligations under, the
Underwriting Agreement and the Stockholders' Agreement will not contravene
any provision of (a) the certificate of incorporation or by-laws or other
constitutive documents of the Selling Stockholder, (b) the law of
[jurisdiction of incorporation], or, to my knowledge, any agreement or
other instrument that is binding upon the Selling Stockholder and that is
material to the Selling Stockholder and its affiliates, taken as a whole,
except in the case of this clause (b) for any contraventions as would not
individually or in the aggregate materially and adversely affect the
consummation by such Selling Stockholder of the transactions contemplated
by the Underwriting Agreement or the Stockholders' Agreement, or (c) to my
knowledge, any judgment, order or decree of any governmental body, agency
or court of [jurisdiction of incorporation] having jurisdiction over the
Selling Stockholder;
4. no consent, approval, authorization or order of, or qualification
with, any governmental body or agency of [jurisdiction of incorporation]
is required for the performance by the Selling Stockholder of its
obligations under the Underwriting Agreement or the Stockholders'
Agreement except as may be required by the securities or similar laws of
[jurisdiction of incorporation]; and
5. to the extent the matter is governed or affected by the law of
[jurisdiction of incorporation], the Selling Stockholder has valid title
to the Shares, and delivery of the Shares pursuant to the Underwriting
Agreement will pass title to the Shares free and clear of any security
interests, claims, liens, equities and other encumbrances.
This opinion is being rendered to you at the request of [Name of
Selling Stockholder] pursuant to Section 6(f) of the Underwriting Agreement.
This opinion is being furnished to you solely for your benefit, and is not to be
used, circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
<PAGE> 53
Exhibit E - Opinion of ________,
U.S. Counsel for
Selling Stockholder
__, 1997
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
J.P. Morgan Securities Inc.
SBC Warburg Inc.
As Representatives of the Several U.S.
Underwriters
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Swiss Bank Corporation,
acting through its division, SBC Warburg
ABN AMRO Rothschild
HSBC Investment Bank Limited
Lehman Brothers International (Europe)
Merrill Lynch International
J.P. Morgan Securities Ltd.
As Representatives of the Several
International Underwriters
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Galileo International, Inc.
Initial Public Offering
Ladies and Gentlemen:
<PAGE> 54
2
We have acted as counsel for [Name of Selling Stockholder], a
[description of entity] (the "Selling Stockholder"), in connection with the
purchase by the underwriters (the "Underwriters"), including yourselves, named
in Schedules II and III to the Underwriting Agreement dated ______, 1997 (the
"Underwriting Agreement") among the Underwriters, Galileo International, Inc., a
Delaware corporation (the "Company"), the Selling Stockholder and the other
selling stockholders named in the Underwriting Agreement, of the number of
shares of the Company's common stock, $.01 par value, set forth opposite the
name of the Selling Stockholder in Schedule __ to the Underwriting Agreement
(the "Shares").
We have also examined and relied as to factual matters upon the
representations and warranties contained in or made pursuant to the Underwriting
Agreement, and upon the originals, or copies certified or otherwise identified
to our satisfaction, of such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies.
Our opinion set forth below is limited to the law of the State of
New York and the federal law of the United States, and assumes without
independent inquiry (i) the correctness of the opinion of counsel for the
Selling Stockholder furnished to you today pursuant to Section __ of the
Underwriting Agreement and (ii) that the Stockholders' Agreement (the
"Stockholders' Agreement"), dated __, 1997, among the Company, the Selling
Stockholder and the other Original Owners named therein, has been duly
authorized, executed and delivered by each of the parties thereto and that each
of the parties thereto has the full power, authority and legal right to enter
into and perform its obligations thereunder.
Based upon and subject to the foregoing, we are of opinion that:
1. The Stockholders' Agreement constitutes the legal, valid and
binding obligation of the Selling Stockholder enforceable against the
Selling Stockholder in accordance with its terms except as (a) enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws affecting enforcement of creditors'
rights generally and (b) enforcement thereof is subject to general
principles of
<PAGE> 55
3
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law);
2. the execution and delivery by the Selling Stockholder of, and the
performance by the Selling Stockholder of its obligations under, the
Underwriting Agreement will not contravene any provision of the federal
law of the United States or the law of the State of New York, except for
any contraventions as would not materially and adversely affect the
consummation by the Selling Stockholder of the transactions contemplated
by the Underwriting Agreement;
3. no consent, approval, authorization or order of, or qualification
with, any governmental body or agency of the United States of America or
the State of New York is required for the performance by the Selling
Stockholder of its obligations under the Underwriting Agreement, except as
may be required by the Securities Act or the securities or Blue Sky laws
of the State of New York; and
4. to the extent the matter is governed by the law of the State of
New York, and assuming that each of the Underwriters acquired its interest
in such Shares delivered to it in good faith and without notice of any
adverse claims, upon delivery of such Shares to such Underwriter endorsed
to it or in blank in the State of New York, such Underwriter has acquired
all of the Selling Stockholder's rights in such Shares and acquired its
interest in such Shares free of any adverse claims (within the meaning of
Section 8-302 of the Uniform Commercial Code as in effect on the date
hereof in the State of New York).
This letter is being rendered to you at the request of [Name of
Selling Stockholder] pursuant to Section 6(g) of the Underwriting Agreement.
This letter is being furnished to you solely for your benefit, and is not to be
used, circulated, quoted or otherwise referred to for any other purpose.
Very truly yours,
<PAGE> 1
EXHIBIT 2.4
MERGER AGREEMENT
dated as of ______________, 1997
among
GALILEO INTERNATIONAL PARTNERSHIP,
GALILEO INTERNATIONAL, L.L.C.
and
GALILEO INTERNATIONAL, INC.
<PAGE> 2
MERGER AGREEMENT(1)
MERGER AGREEMENT, dated as of ________ __, 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").
- - --------
1 Subject to tax review.
<PAGE> 3
2
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 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
<PAGE> 4
3
immediately prior to the Effective Time shall be converted into and become (i)
the respective number of shares of Galileo, Inc. Common Stock listed in Schedule
C hereto, and (ii) in the case of certain Galileo Partners, the respective
number 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.
SECTION 2.03. Delivery of Certificates; 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 and (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.
(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 _______ __, 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> 5
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 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> 6
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 _________________________________
Name:
Title:
GALILEO INTERNATIONAL, L.L.C.
By _________________________________
Name:
Title:
GALILEO INTERNATIONAL, INC.
By _________________________________
Name:
Title:
<PAGE> 7
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> 8
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> 9
SCHEDULE C
Galileo Partner: Shares of Galileo, Inc. Common Stock:
- - ---------------- -------------------------------------
Covia _____
DSI _____
Roscor _____
TIS _____
USAM _____
Racom _____
Olynet _____
Resnet _____
Coporga _____
Retford _____
Travidata _____
2224.2/NYL3
<PAGE> 10
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> 11
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.................................................... 1
SECTION 1.02. Effective Time; Closing....................................... 2
SECTION 1.03. Effect of the Merger.......................................... 2
[SECTION 1.04. Managing Member; Officers.................................... 2
ARTICLE II
CONVERSION OF PARTNERSHIP INTERESTS
IN MERGER
SECTION 2.02. .............................................................. 2
Conversion of General Partnership Interests in Galileo General Partnership... 2
SECTION 2.03. Delivery of Certificates...................................... 3
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Further Action................................................ 3
SECTION 3.02. Representations............................................... 3
SECTION 3.03. Specific Performance.......................................... 3
SECTION 3.04. Benefit; Successors and Assigns............................... 3
SECTION 3.05. Miscellaneous................................................. 4
<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
_______ __, 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.
<PAGE> 6
6
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 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
<PAGE> 7
7
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.
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.
<PAGE> 8
8
(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 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
<PAGE> 9
9
Corporation compensation in an amount and form customary for comparable public
companies. Directors who are managers of the Corporation shall not receive
compensation 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
<PAGE> 10
10
Stock of the Corporation, selection criteria for directors, and removal of
Directors if deemed 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
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Board and until his or her successor is elected or until his or her earlier
death or resignation 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
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other officers, agents and employees of the Corporation and may assign such
duties to the 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
66 2/3% 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 5.1
June 27, 1997
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Ladies and Gentlemen:
We are acting as counsel for Galileo International, Inc., a Delaware
corporation (the "Company"), in connection with the filing by the Company with
the Securities and Exchange Commission of a Registration Statement on Form S-1
(No. 333-27495), as amended (the "Registration Statement"), and the prospectus
contained in the Registration Statement (the "Prospectus"), covering the
registration under the Securities Act of 1933, as amended (the "Act"), of
31,998,000 shares of the Company's common stock, par value $.01 per share, to
be sold by the Company and certain selling shareholders of the Company, plus up
to an additional 4,799,700 shares of common stock, to cover over-allotments, to
be issued by the Company, (collectively, the "Shares") as described in the
Registration Statement.
In connection with the foregoing, we have examined the originals, or
copies certified or otherwise identified to our satisfaction, of such records,
documents, certificates and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below. In our
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that the Shares to be
sold by the Company and the selling shareholders, upon the filing of a Restated
Certificate of Incorporation, will be duly authorized by the Company, and upon
effectiveness of the merger of The Galileo Partnership with and into a wholly
owned limited liability company subsidiary of the Company, when issued and paid
for in the manner and at the price set forth in the Prospectus, will be validly
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.01 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the Prospectus. In giving this consent, we do not thereby
concede that we come within the category of persons whose consent is required
by the Act or the General Rules and Regulations promulgated thereunder.
Very truly yours,
SHEARMAN & STERLING
<PAGE> 1
EXHIBIT 10.2
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement"), dated as of _________
__, 1997, among Galileo International, Inc., a Delaware corporation ("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
<PAGE> 5
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Weighted Air Segment Growth Rate are 3.4% and 5.4%, 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 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.
<PAGE> 6
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(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 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.
<PAGE> 7
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(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 $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.
<PAGE> 8
8
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 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
[Name of Accounting Firm] (or, if such firm shall decline to act or is
not, at the time of such submission, independent of Galileo and the
Service Providers, to another independent accounting firm of
international reputation mutually acceptable to Galileo and the Service
Providers) (either [Name of Accounting Firm] or such other accounting
firm being
<PAGE> 9
9
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 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 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
<PAGE> 10
10
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.
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 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
Facsimile: (212) 848-7179
Attention: Clare O'Brien, Esq.
(ii) if to United:
United Air Lines, Inc.
<PAGE> 11
11
1200 E. Algonquin Road
Elk Grove Township, Illinois 60007
Telecopy: (847) 700-4412
Attention: Frederick F. "Jake" Brace, III
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) ___________
Attention: Alan Abner
with a copy to:
US Airways, Inc.
2345 Crystal Drive
Arlington, Virginia 22227
Telecopy: (703) ___________
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.
<PAGE> 12
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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
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.
<PAGE> 13
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(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 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 _______ __, 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
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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, INC.
By:________________________
Name:
Title:
UNITED AIRLINES, INC..
By:________________________
Name:
Title:
US AIRWAYS, INC..
By:________________________
Name:
Title:
AIR CANADA
By:________________________
Name:
Title:
<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
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement"), dated as of _________ __, 1997,
between GALILEO INTERNATIONAL, INC., a Delaware corporation ("Galileo"), and
SWISSAIR SWISS AIR TRANSPORT COMPANY 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
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"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 [Name of Accounting Firm] (or, if
such firm shall decline to act or is not, at the time of such submission,
independent of Galileo and the Service Provider, to another independent
accounting firm of international reputation mutually acceptable to Galileo
and the Service Provider) (either [Name of Accounting Firm] or such other
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
<PAGE> 10
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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 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:
__________________________
__________________________
__________________________
Facsimile: _______________
Attention: ______________
<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:
__________________________
__________________________
__________________________
Facsimile: ______________
Attention: _____________
with a copy to:
__________________________
__________________________
__________________________
Facsimile: ______________
Attention: _____________
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
<PAGE> 12
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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
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
<PAGE> 13
13
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 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
<PAGE> 14
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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.
(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.
(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.
<PAGE> 15
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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
("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.
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, INC.
By:_____________________________________
Name:______________________________
Title:_____________________________
SWISSAIR SWISS AIR TRANSPORT
COMPANY LTD.
By:_____________________________________
Name:______________________________
Title:_____________________________
<PAGE> 16
EXHIBIT 1
Weighting Factors
<TABLE>
<CAPTION>
Post-Closing Year Weighting
<S> <C>
1 24%
2 22%
3 20%
4 18%
5 16%
</TABLE>
<PAGE> 1
Exhibit 10.4
SERVICES AGREEMENT
SERVICES AGREEMENT (this "Agreement"), dated as of _________ __, 1997,
between GALILEO INTERNATIONAL, INC., a Delaware corporation ("Galileo"), and
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V. (KLM Royal Dutch Airlines), a company
incorporated in The Netherlands (the "Service Provider").
WHEREAS, the Service Provider has a significant number of sales
personnel and sales offices in the Galileo Nederland Territory (as hereafter
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 Galileo Nederland 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
Galileo Nederland B.V. ("Galileo Nederland");
WHEREAS, the Service Provider desires to provide such marketing and
other services designed to assist Galileo in growing the business operations of
Galileo Nederland;
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:
"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
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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%.
"Galileo Nederland Territory" means The Netherlands.
"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 Galileo Nederland Territory by (i) Neutral Travel
Providers and Other Customers that have entered into subscriber agreements with
Galileo Nederland for Reservations Services (or, following the date hereof, by
Neutral Travel Providers and Other Customers within the Galileo Nederland
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 Galileo Nederland, with respect to NTP Revenue, in
accordance with the DSSA between Galileo and Galileo Nederland, or which is
split between Galileo and Galileo Nederland, 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 Galileo Nederland, with respect to NTP Revenue,
in accordance with the DSSA between Galileo and Galileo Nederland or which would
have been split between Galileo and Galileo Nederland, 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 Galileo Nederland 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 Galileo Nederland 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
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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 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, 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 Galileo Nederland 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 executive) to
users of the Galileo system throughout the Galileo Nederland Territory, as
mutually agreed between the parties.
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(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.
(f) The Service Provider and Galileo shall cooperate 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 increase rate ("Minimum
Weighted Air Price Increase Rate") and at or below the targeted weighted average
annual price
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increase rate ("Targeted Weighted Air Price Increase Rate"). The Minimum
Weighted Air Segment Growth Rate and the Targeted Weighted Air Segment Growth
Rate are 3.8% and 5.8%, 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 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 Galileo Nederland
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
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to 3.8%, no Segment Growth Payment shall be made.
(c) If the Weighted Air Segment Growth Rate is greater than or equal
to 4.8%, the Segment Growth Payment shall be $600,000.
(d) If the Weighted Air Segment Growth Rate is greater than 3.8% but
less than 4.8%, the Segment Growth Payment shall be an amount equal to (i)
$600,000 multiplied by (ii) a fraction, the numerator of which shall be (A) the
Weighted Air Segment Growth Rate minus (B) 3.8%, 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 Galileo Nederland Territory for the
Pre-Closing Year.
(ii) Galileo shall then calculate the aggregate revenue in the Galileo
Nederland 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 Galileo
Nederland Territory in the Pre-Closing Year.
(iii) Galileo shall then determine what the total revenue in the
Galileo Nederland 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 Galileo Nederland Territory in the Pre-Closing Year.
(iv) Galileo shall then calculate the percentage increase or decrease
in the aggregate revenue in the Galileo Nederland 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
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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.
(c) If the Weighted Air Price Increase Rate is greater than or equal
to 3.0%, the Price Increase Payment shall be $4,100,000;
(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)
$4,100,000 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 Galileo Nederland 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 Galileo Nederland 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 Galileo Nederland 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
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six months after the fifth anniversary hereof. If there is such a price increase
as to such Transaction Category in the Galileo Nederland 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 Galileo Nederland 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; provided, however,
that this Section 3.06(a) shall be without prejudice to the Service Provider's
right to dispute the Adjusted Services Payment pursuant to Section 3.06(c)(ii).
(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.
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(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 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 any "Big 6" accounting firm other than
accountants of Galileo or the Service Provider (or, if such firm shall
decline to act or is not, at the time of such submission, independent of
Galileo and the Service Provider, to another independent accounting firm of
international reputation mutually acceptable to Galileo and the Service
Provider) (either such accounting firm or such other 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) Co-operation. For purposes of complying with the terms set forth
herein, each party shall (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.
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(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 accounts designated in writing by the Service Provider not later than two
business days prior to the date of such payment a pro rata portion of the
Adjusted Services Payment, if any. 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 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):
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(i) if to Galileo:
________________________
________________________
________________________
Facsimile: _______________
Attention: ______________
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 the Service Provider:
________________________
________________________
________________________
Facsimile: ______________
Attention: _____________
with a copy to:
________________________
________________________
________________________
Facsimile: ______________
Attention: _____________
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
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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
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 ("nakoming").
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
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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. 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 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
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(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.
(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 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) shall be borne by the Party losing such
arbitration.
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(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
("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.
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, INC.
By:________________________________
Name:______________________________
Title:_____________________________
KONINKLIJKE LUCHTVAART
MAATSCHAPPIJ N.V.
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE> 1
EXHIBIT 10.8
S&S Draft
06/24/97
RIGHTS WAIVER AGREEMENT
dated as of
_____ __, 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.
(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
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:_____________________________________
Name:
Title:
SAIRGROUP
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
<PAGE> 1
Exhibit 10.9
RIGHTS WAIVER AGREEMENT
dated as of
_____ __, 1997
(this "Agreement")
between
KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V. (KLM), _______________,
_________________,
(hereinafter "KLM")
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 KLM
are referred to herein
as a "PARTY", and Galileo and
KLM 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), KLM 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, KLM 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 KLM's
waiver of the Revenue Receipt Rights shall be US$2,800,000 (the "Initial
Payment") which is payable 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 KLM the sum of US$4,000,000
(collectively, the "Anniversary Payments").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
As an inducement to the Parties to enter into this Agreement, KLM 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 KLM 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 KLM 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 KLM
SECTION 4.01. Further Action. KLM 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 KLM 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 KLM.
ARTICLE V
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. 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
<PAGE> 4
4
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 "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
<PAGE> 5
5
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.
(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 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) shall be borne by the Party losing such
arbitration.
(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.
ARTICLE VII
GOVERNING LAW
SECTION 7.01. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (other than its
rules of conflicts of laws).
<PAGE> 6
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:_____________________________________
Name:
Title:
KONINKLIJKE LUCHTVAART
MAATSCHAPPIJ N.V. (KLM)
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
<PAGE> 1
Exhibit
10.10
$200,000,000
364-DAY
CREDIT AGREEMENT
dated as of
July , 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
<PAGE> 2
TABLE OF CONTENTS
----------------------
PAGE
----
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
<PAGE> 3
PAGE
----
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...................................................44
SECTION 4.11. Regulatory Restrictions on Borrowing...........................44
SECTION 4.12. Full Disclosure................................................44
ARTICLE 5
COVENANTS
SECTION 5.01. Information....................................................45
SECTION 5.02. Payment of Obligations.........................................47
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...........................................48
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............................................50
SECTION 5.12. Transactions with Affiliates...................................50
SECTION 5.13. Debt of Subsidiaries...........................................50
SECTION 5.14. Cash Flow Ratio................................................50
ii
<PAGE> 4
PAGE
----
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default..............................................50
SECTION 6.02. Notice of Default..............................................53
SECTION 6.03. Cash Cover.....................................................53
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......................................54
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.....................................................62
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
iii
<PAGE> 5
PAGE
----
SECTION 9.07. Collateral.....................................................65
SECTION 9.08. Governing Law; Submission to Jurisdiction......................65
SECTION 9.09. Counterparts; Integration; Effectiveness.......................66
SECTION 9.10. WAIVER OF JURY TRIAL...........................................66
SECTION 9.11. Confidentiality................................................66
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
iv
<PAGE> 6
364-DAY
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of July , 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 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
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<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
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<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 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.
6
<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____
_______,__________ 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
9
<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 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 , 1998, 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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<PAGE> 23
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
$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
- - -----------------------------
*Will be $500,000,000 in Five-Year Credit Agreement.
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<PAGE> 24
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.
(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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<PAGE> 25
(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
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<PAGE> 26
(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.
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.
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(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;
(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;
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<PAGE> 28
(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).
(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
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<PAGE> 29
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
(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
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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 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.
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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 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 ]
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<PAGE> 32
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
- - --------------
*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. Section 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
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<PAGE> 33
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.
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
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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
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
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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 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 $10000,000 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.
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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 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
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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.
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
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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 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
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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.
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.
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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 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
- - -----------------------------
*Will be $100,000,000 in Five-Year Credit Agreement.
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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, 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
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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
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;
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(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
(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
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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.
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
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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 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
- - -----------------------------
*Will be $100,000,000 in Five-Year Credit Agreement.
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(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.
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
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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 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.
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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, 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
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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.
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.
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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 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;
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(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;
(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
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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 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 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 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
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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.
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
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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;
(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
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(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.
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 (i) Debt in connection with the Existing Capital Leases and (ii) 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 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.
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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;
(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;
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(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
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
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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
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
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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.
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
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(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.
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.
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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,
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
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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 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
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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 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
- - ----------------
* 364-Day only.
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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 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.
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(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
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
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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.
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.
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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 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.
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
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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 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
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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 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
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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 a financial officer of the Borrower not less than three 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 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
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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 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
66
<PAGE> 72
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.
67
<PAGE> 73
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:_____________________________________
Name:
Title:
Address: 9700 West Higgins Road,
Suite 400
Rosemont, IL 60018
Facsimile: (847) 518-4201
68
<PAGE> 74
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By:_____________________________________
Name:
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By:_____________________________________
Name:
Title:
Address: 60 Wall Street
NY, NY 10260
Telex:
Facsimile:
69
<PAGE> 75
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.
70
<PAGE> 76
"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.
71
<PAGE> 77
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 or 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.
72
<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.
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).
2
<PAGE> 79
SCHEDULE I
EXISTING CAPITAL LEASES
The Galileo Company Ltd. Letter of Credit
Collateralized Capital Leases
<TABLE>
<CAPTION>
Balance Sheet
Obligation/Amount
Available Maximum Outstanding as
Description Currency Available at [July 31, 1993?]
<S> <C> <C> <C>
MCC (No.15) Ltd Lease GBP [26,000,000.00] [23,487,958.00]
Schd Nos. 52/5050/
4933-3 [25,518,137.80]
52/5050/ 4437-4 Drawn
</TABLE>
<PAGE> 80
SCHEDULE II
EXISTING OWNERSHIP GROUP
Covia Corporation
Distribution Systems, Inc.
Roscor, A.G.
Travel Industry systems B.V.
USAM Corp.
<PAGE> 81
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
2
<PAGE> 82
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 , 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> 83
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:
2
<PAGE> 84
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>
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
______________________________________________________________________________________________
</TABLE>
3
<PAGE> 85
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 , 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 Period**
- - ----------------- ---------------------- -----------------
$
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> 86
Terms used herein have the meanings assigned to them in the Credit
Agreement.
Galileo International, Inc.
By:_____________________________________
Name:
Title:
2
<PAGE> 87
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 ,
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 Period
- - ---------------- ---------------------- ---------------
$
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> 88
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> 89
**** 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%).
2
<PAGE> 90
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 , 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
3
<PAGE> 91
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 , 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> 92
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
2
<PAGE> 93
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
3
<PAGE> 94
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 , 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> 95
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,
2
<PAGE> 96
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 , 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> 97
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.
2
<PAGE> 98
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:
3
<PAGE> 99
4
<PAGE> 100
[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:
5
<PAGE> 101
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET NAMES MAY NOT APPEAR IN THE
TARGET PULL-DOWN LIST.
(This list is for the use of the wordprocessor only, is not a part of
this document and may be discarded.)
<TABLE>
<CAPTION>
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
<S> <C> <C> <C> <C> <C> <C> <C>
1..................0001 2.11(c)............0051 5.01(b)............0103 7.05...............0157
1.01...............0002 2.11(d)............0052 5.01(c)............0104 7.06...............0158
1.02...............0003 2.12...............0053 5.01(d)............0105 7.07...............0159
1.03...............0004 2.13...............0054 5.01(e)............0106 7.08...............0160
2..................0005 2.13(a)............0055 ?..................0107 7.09...............0161
2.01...............0006 2.13(b)............0056 5.01(h)............0108 8..................0162
2.02...............0007 2.13(c)............0057 5.01(i)............0109 8.01...............0163
2.02(a)............0008 2.14...............0058 5.02...............0110 8.01(a)............0164
2.02(b)............0009 2.14(a)............0059 5.03...............0111 8.01(b)............0165
2.02(c)............0010 2.14(b)............0060 5.03(a)............0112 8.02...............0166
2.03...............0011 2.15...............0091 5.03(b)............0113 8.03...............0167
2.03(a)............0012 2.16...............0061 5.04...............0114 8.03(a)............0168
2.03(b)............0013 2.17...............0062 5.05...............0115 8.03(b)............0169
2.03(c)............0014 2.18...............0063 5.06...............0116 8.03(c)............0170
2.03(d)............0015 2.19...............0064 5.07...............0117 8.04...............0171
2.04...............0016 2.20...............0065 5.08...............0118 8.04(a)............0172
2.04(a)............0017 2.20(a)............0066 5.09...............0119 8.04(b)............0173
2.04(b)............0018 2.20(b)............0067 5.09(a)............0120 8.04(c)............0174
2.04(c)............0019 2.20(c)............0068 5.09(b)............0121 8.04(d)............0175
2.04(d)............0020 2.20(d)............0069 5.09(c)............0122 8.04(e)............0176
2.04(d)(i).........0205 2.20(d)(vii).......0208 5.09(d)............0123 8.04(f)............0177
2.04(d)(ii)........0206 2.20(e)............0070 5.09(e)............0124 8.05...............0178
2.04(d)(ii)(C).....0209 3..................0071 5.09(f)............0125 8.05(a)............0179
2.04(d)(iii).......0207 3.01...............0072 5.09(g)............0126 8.05(b)............0180
2.04(e)............0021 3.01(a)............0073 5.09(h)............0127 8.06...............0181
2.04(f)............0022 3.01(b)............0074 5.09(i)............0128 9..................0182
2.04(g)............0023 3.01(c)............0075 5.10...............0129 9.01...............0183
2.05...............0024 3.01(e)............0076 5.11...............0130 9.01(a)............0202
2.05(a)............0025 3.01(g)............0077 ?..................0131 9.01(b)............0203
2.05(b)............0026 3.02...............0078 ?..................0132 9.01(c)............0204
2.05(c)............0027 3.02(a)............0079 5.12...............0133 9.02...............0184
2.06...............0028 3.02(b)............0080 5.13...............0134 9.03...............0185
2.06(a)............0029 3.02(c)............0081 5.14...............0135 9.03(a)............0186
2.06(b)............0030 3.02(d)............0082 6..................0136 9.03(b)............0187
2.06(c)............0031 3.02(e)............0083 6.01...............0137 9.04...............0188
2.07...............0032 4..................0084 6.01(a)............0138 9.05...............0189
2.07(a)............0033 4.01...............0085 6.01(b)............0139 9.06...............0190
2.07(b)............0034 4.02...............0086 6.01(c)............0140 9.06(a)............0191
2.08...............0035 4.03...............0201 6.01(d)............0141 9.06(b)............0192
2.08(a)............0036 4.04...............0089 6.01(e)............0142 9.06(c)............0193
2.08(b)............0037 4.04(a)............0090 6.01(f)............0143 9.06(d)............0194
2.08(c)............0038 4.04(b)............0087 6.01(g)............0144 9.06(e)............0195
2.08(d)............0039 4.04(d)............0092 6.01(h)............0145 9.07...............0196
2.08(e)............0040 4.05...............0093 6.01(i)............0146 9.08...............0197
2.08(f)............0041 4.06...............0094 6.01(j)............0147 9.09...............0198
2.08(g)............0042 4.07...............0095 6.01(k)............0148 9.10...............0199
2.09...............0043 4.08...............0096 6.01(l)............0149 9.11...............0200
2.09(a)............0044 4.09...............0097 6.02...............0150
2.09(b)............0045 4.10...............0098 6.03...............0151
2.09(c)............0046 4.11...............0099 7..................0152
2.10...............0047 4.12...............0100 7.01...............0153
2.11...............0048 5..................0101 7.02...............0154
2.11(a)............0049 5.01...............0102 7.03...............0155
2.11(b)............0050 5.01(a)............0088 7.04...............0156
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME ARTICLE/SECTION TARGET NAME
</TABLE>
<PAGE> 1
Exhibit 10.11
DATED [23rd December] 1987
L.C.P. DEVELOPMENTS LIMITED
-to-
[LOGO] GALILEO DISTRIBUTION SYSTEMS LIMITED
U N D E R L E A S E
of
Unit 2CII Hillmead Complex, Swindon, in the County of Wiltshire
HIGGS & SONS
SOLICITORS
BRIERLEY HILL
<PAGE> 2
T H I S U N D E R L E A S E made the 23rd day of December One thousand nine
hundred and eighty seven B E T W E E N L.C.P. DEVELOPMENT LIMITED of The
Pensnett Estate Kingswinford West Midlands DY6 7NA (hereinafter called "the
Landlord" which expression shall include the person persons company for the
time being entitled to the reverse immediately expectant upon the determination
of the term hereby granted) of the one part GALILEO DISTRIBUTION SYSTEMS
LIMITED whose registered office is at P.O. Box 10 Speedbird House Heathrow
Airport (London) Hounslow Middlesex TW6 2JA (hereinafter called "the Tenant"
which expression shall include the Tenant's successors in title and permitted
assigns and where there are two or more persons for the time being constituting
the Tenant the obligations of each of such persons hereunder shall be joint and
several and the masculine shall include the feminine) of the other part.
W I T N E S S E T H as follows:
1. THE Landlord hereby demises into the Tenant ALL THE PREMISES more
particularly described in the First Schedule hereto together with the
Landlord's fixture and fittings set out in the Second Schedule hereto (all
of which premises are hereinafter referred to as "the demised premises") TO
HOLD the same unto the Tenant from the Twenty ninth day of September One
thousand nine hundred and eightY seven for the term of twenty four years
PAYING THEREFOR by equal quarterly payments to be made without any deduction
in advance by Bankers Standing Order if required by the Landlord on the
usual quarter days during the said term the respective rents following
Rent Review (A) yearly rents ascertained in accordance with the next four
Provisions sub-clauses (1) (2) (3) and (4) hereof (1) In this Lease
"Review Date" means the Twenty ninth day of September in
the year One thousand nine hundred and ninety one and in
every fourth year thereafter and "Review Period" means the
period starting with any Review Date up to the next Review
Date or starting with the last Review Date up to the end of
the term hereof
(2) The yearly rent shall be
<PAGE> 3
Exhibit 10.11
Unit 7
DATED 23rd DECEMBER 1987
L. C. P. DEVELOPMENTS LIMITED
-to-
GALILEO DISTRIBUTION SYSTEMS LIMITED
U N D E R L E A S E
of
Unit 2CIII Hillmead Complex, Swindon,
in the County of Wiltshire
HIGGS & SONS
SOLICITORS
BRIERLEY HILL
<PAGE> 4
THIS UNDERLEASE made the 23rd day of December One thousand
nine hundred and eighty seven BETWEEN L.C.P. DEVELOPMENTS
LIMITED of The Pensnett Estate Kingswinford West Midlands
DY6 7NA (hereinafter called "the Landlord" which expression
shall include the person persons company for the time being
entitled to the reverse immediately expectant upon the
determination of the term hereby granted) of the one part
GALILEO DISTRIBUTION SYSTEMS LIMITED whose registered office
is at P.O. Box 10 Speedbird House Heathrow Airport (London)
Hounslow Middlesex TW6 2JA (hereinafter called "the Tenant"
which expression shall include the Tenant's successors in
title and permitted assign and where there are two or more
persons for the time being constituting the Tenant the
obligations of each of such persons hereunder shall be joint
and several and the masculine shall include the feminine) of
the other part
WITNESSETH as follows: -
1. THE Landlord hereby demises unto the Tenant ALL THE PREMISES
more particularly described in the First Schedule hereto
together with the Landlord's fixtures and fittings set out
in the Second Schedule hereto (all which premises are
hereinafter referred to as "the demised premises") TO HOLD
the same unto the Tenant from the Twenty ninth day of
September One thousand nine hundred and eighty seven for the
term of twenty four years PAYING THEREFOR by equal quarterly
payments to be made without any deduction in advance by
Bankers Standing Order if required by the Landlord on the
usual quarter days during the said term the respective rents
following
(A) yearly rents ascertained in accordance with the next
four sub-clauses (1) (2) (3) and (4) hereof
(1) In this Lease "Review Date" means the Twenty ninth day
of September in the year One thousand nine hundred and
ninety one and in every fourth year thereafter and "Review
Period" means the period starting with any Review Date up to
the next Review Date or starting with the last Review Date
up to the end of the term hereof
(2) The yearly rent shall be: -
<PAGE> 5
(a) Until the first Review Date the rent of Forty one
thousand two hundred and fifty pounds (pound sterling
41,250) and (b) During each successive Review Period a
rent equal to the rent previously payable hereunder or such
revised rent as may be ascertained as herein provided which
ever be the greater
(3) Such revised rent for any Review Period may be agreed in
writing at any time between the Landlord and the Tenant or
(in the absence of agreement) determined not earlier than
the relevant Review Date at the option of the Landlord by an
independent arbitrator or by an independent valuer (such
valuer acting as an expert and not as at arbitrator) such
arbitrator or valuer being a Chartered Surveyor having not
less than ten years practice in England and recent
substantial experience in valuing and letting premises of
the kind and character similar to those of the demised
premises to be nominated in the absence of agreement
between the parties hereto by or on behalf of the President
for the time being of the Royal Institution of Chartered
Surveyors on the application of the Landlord (in exercise of
the said option) made not earlier than three months before
the relevant Review Date and so that in the case of such
arbitration or valuation the revised rent to be awarded or
determined by the arbitrator or valuer shall be such as he
shall decide is the yearly rent at which the demised
premises might reasonably be expected to be let at the
relevant Review Date (being the open market rental value
without any deduction whatsoever)
(a) On the following assumptions at that date:-
(i) that the demised premises:
(a) are available to let on the open market without
a fine or premium with vacant possession by a
willing landlord to a willing tenant for a term of
12 years or the residue then unexpired of the term
of this Lease (whichever be the longer)
(b) are to be let as a whole subject to the terms of
this lease (other than first the break conditions
contained in clause 4 (14) and secondly the amount
of the rent hereby reserved but including the
provisions for four yearly review of that rent)
<PAGE> 6
(c) are fit and available for immediate occupation
(d) may be used for any of the purposes permitted by
this lease as varied or extended by any licence
granted pursuant thereto
(ii) That the covenants herein contained on the part of
the Landlord and the Tenant have been fully performed
and observed Provided that no such assumption shall
be made in respect of covenants on the part of the
Landlord unless the Landlord has been and is
continuing to use its best endeavours to comply with
its covenants
(iii)That no work has been carried out to the demised
premises which has diminished the rental value and
that in case the demised premises have been destroyed
or damaged they have been fully restored
(iv) That no reduction is to be made to take account of
any rental concession which on a new letting with
vacant possession might be granted to an incoming
tenant for the purposes of fitting out
(b) But disregarding:
(i) any effect on rent of the fact that the Tenant or
its respective predecessors in title or other lawful
occupier have been in occupation of the demised premises
(ii) any goodwill attached to the demised premises by
reason of the carrying on thereat of the business of the
Tenant or other lawful occupier or its or their
predecessors in title in its business
(iii) any increase in rental value of the demised
premises attributable to the existence at the relevant
Review Date of any improvement to the demised premises
or any part thereof carried out with consent where
required otherwise than in pursuance of an obligation to
the Landlord or its predecessors in title except
obligations requiring compliance with statutes or
directions of Local Authorities or other bodies
exercising powers under statute or Royal Charter by the
Tenant or its predecessors in title or other lawful
occupier during the said term or during any period of
occupation prior thereto arising out of an agreement to
grant such term and
<PAGE> 7
(iv) the occupation by the Tenant or any associated
company of the Tenant of any other part of the Estate
and also disregarding the absence of any intertenancy
walls between the demised premises and any adjoining
premises
(4) IT IS HEREBY FURTHER PROVIDED in relation to the
ascertainment and payment of revised rent as follows:-
(a) (in the case of arbitration) the arbitration shall
be conducted in accordance with the Arbitration Acts 1950
and 1979 or any statutory modification or re-enactment
thereof for the time being in force with the further
provision that if the arbitrator nominated pursuant to
sub-clause (3) hereof shall die or decline to act the
President for the time being of the Royal Institution of
Chartered Surveyors or the person acting on his behalf may
on the application of either the Landlord or the Tenant by
writing discharge the arbitrator and appoint another in his
place
(b) (in the case of determination by a valuer)
(i) the fees and expenses of the valuer including the
cost of his nomination shall be borne equally by the
Landlord and the Tenant who shall otherwise each bear
their own costs and
(ii) the valuer shall afford the Landlord and the Tenant
an opportunity to make (and shall have regard to)
representations to him and
(iii) if the valuer nominated pursuant to sub-clause (3)
hereof shall die delay or become unwilling unfit or
incapable of acting or if for any other reason the
President for the time being of the Royal Institution of
Chartered Surveyors or the person acting on his behalf
shall in his absolute discretion think fit he may on the
application of either the Landlord or the Tenant by
writing discharge the valuer and appoint another in his
place
(c) When the amount of any rent to be ascertained as
hereinbefore provided shall have been so ascertained
memoranda thereof shall thereupon be signed by or on behalf
of the Landlord and the Tenant and annexed to this Lease and
Counterpart thereof and the Landlord and the Tenant shall
bear their own costs in respect thereof PROVIDED THAT the
failure to complete and sign such memorandum shall not
affect the efficacy of the review of the rent
<PAGE> 8
(d)(i) if the revised rent payable on and from any Review
Date has not been agreed by that Review Date rent shall
continue to be payable at the rate previously payable and
within fourteen days of the revised rent being ascertained
the Tenant shall pay to the Landlord any shortfall between
the rent and the revised rent payable up to and on the
preceding quarter day together with interest on any shortfall
at the rate of the Midland Bank plc base rate in force at the
relevant Review Date such interest to be calculated on a day
to day basis from the relevant Review Date on which it would
have been payable if the revised rent had then been
ascertained to the date of actual payment of any shortfall
(and the interest so payable shall be recoverable in the same
manner as rent in arrear)
(ii) for the purposes of this proviso the revised rent
shall be deemed to have been ascertained on the date when
the same has been agreed between the Landlord and the Tenant
or as the case may be the date of the award of
the arbitrator or of the determination by the valuer
(e) If either the Landlord or the Tenant shall fail to
pay any costs awarded against it in the case of an
arbitration or the moiety of the fees and expenses of the
valuer under the provisions hereof within Twenty one days of
the same being demanded by the arbitrator or the valuer (as
the case may be) the other shall be entitled to pay the same
and the amount so paid shall be repaid by the party
chargeable on demand
(f) Whenever a revised rent in respect of any Review
Period has not been agreed between the Landlord and the
Tenant before the relevant Review Date and where no
agreement has been reached as to the appointment of an
arbitrator or valuer nor has the Landlord made any
application to the President for the time being of the Royal
Institution of Chartered Surveyors as hereinbefore provided
the Tenant may at any time after the expiration of the
period of three months from the relevant Review Date reply
to the said President for the appointment (at the option of
the Tenant) of an arbitrator or an independent valuer
(acting as aforesaid) for the purpose of determining the
amount of the revised rent in accordance with the provisions
hereinbefore contained
<PAGE> 9
(g) If at the commencement of any Review Period the Landlord
shall be obliged legally or otherwise to comply with any
enactment (which expression shall include any Act of
Parliament now or hereafter in force and any instrument
regulation or order made thereunder or deriving validity
therefrom) dealing with the control of rent and which shall
restrict or modify the Landlord's right to review the rent
in accordance with the terms of this Lease then the Landlord
shall on each occasion that any such enactment is removed
relaxed or modified be entitled on giving not less than one
month's notice in writing to the Tenant expiring after the
date of each such removal relaxation or modification to
introduce an intermediate review date ("the Intermediate
Review Date") which shall be the date of expiration of such
notice and the rent payable hereunder from an Intermediate
Review Date to the commencement of the next succeeding
Review Period or Intermediate Review Date (whichever shall
first occur) shall be determined in like manner as the rent
payable during each Review Period as hereinbefore provided
subject to the rent being reviewed on the basis of values
existing at the Intermediate Review Date but on the same
assumptions as would have applied if the review had taken
place on the Review Date
Interest on (B) on demand by way of additional rent (and the Landlord's
rent remedies for recovering rent in arrears shall apply
hereto) a sum representing interest at rate of four pounds
per centum per annum above the Midland Bank plc base lending
rate in force at the date the rent falls due upon any
payment of rent outstanding and unpaid seven days after the
date when the payment of rent fell due and upon any other
sum or sums of money payable under the terms of this Lease
by the Tenant to the Landlord which shall remain unpaid for
seven days following written demand the interest to be
charged from the date upon which the payment of rent fell
due or the said sum or sums was or were (as the case may be)
demanded throughout the entire period during which the
payment of rent or other sum or sums remain outstanding or
unpaid Provided always that this Clause shall not prejudice
in any way the Landlord's right of re-entry contained in
Clause 4 (1) hereof
<PAGE> 10
Insurance (C) By way of further rent annually in advance forthwith
Rent upon demand without deduction or abatement whatsoever a
yearly sum equal to the sum or sums which the Landlord shall
from time to time pay by way of premium (including any
increased premium payable by reason of any act or omission
of the Tenant) for keeping the demised premises insured in
accordance with the Landlord's obligations in that behalf
contained in Clause 3 (2) hereof
Service Rent (D) a proportionate part (hereinafter called "the service
rent") of the Maintenance Charge (which expression in this
Lease shall mean the aggregate in any one year of the costs
expenses provisions liabilities and payments incurred or
otherwise provided for by the Landlord in relation to the
matters set forth in the Third Schedule hereto) being
subject to the following terms and provisions:-
(a) the amount of the service rent shall be ascertained and
certified annually by a certificate (hereinafter called "the
certificate") signed by the Landlord or its Managing Agents
(which expression in this Lease shall mean the Agents (if
any) nominated by the Landlord and for the time being
thereunto duly authorised by the Landlord to whom if
requested by the Landlord in writing all communications
intended for the Landlord shall be addressed) so soon after
the end of the Landlord's financial year as may be
practicable and shall relate to such year in manner
hereinafter mentioned
(b) the expression "the Landlord's financial year" shall
mean the period from the First day of February to the Thirty
first day of January or such other annual period as the
Landlord may in its discretion from time to time determine
as being that in which the accounts of the Landlord either
generally or relating to the Estate shall be made up
(c) a copy of the certificate for each such financial year
shall be supplied by the Landlord to the Tenant as soon as
the same is finalised (and in any event on or prior to the
provision by the Landlord to the Tenant of the amount
pursuant to sub-clause (g) below) and without charge to the
Tenant
(d) the certificate shall contain an itemised summary of the
Landlord's said expenses and outgoings incurred by the
Landlord during the Landlord's financial year to which it
relates and shall include a statement of
<PAGE> 11
monies received and expended by the Landlord pursuant to the
provisions relating to the reserve fund (if any) referred to
in paragraph (16) of the Third Schedule hereto together also
with a statement showing the balance of the reserve fund
held by the Landlord at the end of the Landlord's financial
year and the certificate (or a copy thereof duly certified
by the person by whom the same was given) shall (save in
the case of manifest error) be conclusive evidence for the
purposes hereof of the matters which it purports to certify
(e) the annual amount of the service rent payable by the
Tenant as aforesaid shall be a sum not exceeding Eight
decimal point twenty three per cent (8.23%) of the
Maintenance Charge in the year to which the certificate
relates
(f) on the usual quarter days in each year during the said
term the Tenant shall pay to the Landlord such a sum
(hereinafter referred to as "advance payment") in advance
and on account of the service rent for the Landlord's
financial year then current as the Landlord or its Managing
Agents (in either case acting reasonably) shall from time to
time specify at its or their discretion to be fair and
reasonable
(g) as soon as practicable after the end of each Landlord's
financial year the Landlord shall furnish to the Tenant an
account of the service rent payable by the Tenant for that
year due credit being given therein for the advance payments
made by the Tenant in respect of the said year and upon the
furnishing of such account there shall be paid by the Tenant
to the Landlord the service rent or any balance found
payable or there shall be allowed by the Landlord to the
Tenant any amount which may have been overpaid by the Tenant
by way of advance payment as the case may require PROVIDED
ALWAYS that the provisions of this sub-clause shall continue
to apply notwithstanding the expiration or sooner
determination of the term hereby granted but only in respect
of the period down to such expiration or sooner
determination as aforesaid and at such time any over payment
made by the Tenant shall be refunded to the Tenant
notwithstanding as aforesaid unless the Tenant shall after
such expiration continue in possession of the
<PAGE> 12
demised premises pursuant to any renewal of this Lease
pursuant to the provisions of Landlord and Tenant Act 1954
or any statutory re-enactment thereof
(h) it is hereby agreed and declared that the Landlord shall
not be entitled to re-enter under the provision in that
behalf hereinafter contained by reason only of non-payment
by the Tenant of any advance payment as aforesaid prior to
the signature of the certificate by nothing in this clause
or this Lease contained shall disable the Landlord from
maintaining an action against the Tenant in respect of
non-payment of any such advance payment notwithstanding that
the certificate had not been signed at the time of the
proceedings subject nevertheless to proof in such
proceedings by the Landlord that the advance payment
demanded and unpaid is of a fair and reasonable amount
having regard to the prospective service rent ultimately
payable by the Tenant
2. The Tenant hereby covenants with the Landlord as follows:-
To pay rent (1) To pay the rents hereby reserved and made payable and as
from time to time so revised and increased (if such shall be
the case) on the days and in manner aforesaid without any
deductions
To pay outgoings (2)(a) From time to time at all times throughout the term
hereby granted to pay and discharge all existing and future
rates taxes duties charges and assessments surcharges
impositions and outgoings whatsoever whether parliamentary
local one of any other description which now are or may at
any time during the term hereof be assessed imposed or
charged upon or payable in respect of the demised premises
or any part thereof or upon the owner or occupier in
respect thereof or payable by either in respect thereof and
whether of national or local and whether of a capital or
revenue nature and even though of a wholly novel character
provided that the Tenant shall not in any event be liable
for any payments as shall be occasioned by any development
disposition of or dealing with or ownership of any estate
or interest expectant in reversion on the determination of
the term hereby granted (b) If (the demised premises are
not kept in rateable occupation during the last three
months of the term hereby granted or such longer period as
The Secretary of State may specify as "the standard period"
for
<PAGE> 13
the purpose of Section 42 of the Local Government Planning
and Land Act 1980 the Tenant shall not claim relief from
payment of rates in respect of such period and shall
compensate the Landlord for any loss of relief on account
of the Tenant not keeping the demised premises in rateable
occupation during such period
(c) Immediately and in any case within seven days of
receipt of any proposal by the Valuation Officer or Rating
Authority respecting the rating assessment of the demised
premises to give notice thereof to the Landlord and not to
agree to any such proposal without the Landlord's written
consent (which shall not be unreasonably withheld or
delayed)
(3) (a) Well and substantially to repair cleanse maintain
and keep in good and substantial repair and condition
the demised premises and without prejudice to the generality
of the foregoing well and substantially to repair and keep
To repair in repair and maintain all party walls (jointly with tenants
and keep clean of adjoining premises) and all fencing and boundary walls
and tidy lighting heating and ventilation and drainage systems plate
glazing water gas and other installations fire fighting
equipment and all other machinery and Landlord's fixtures
and fittings in the demised premises and all sewers drains
channels watercourses gutters rainwater and soil pipes and
cables and supply lines in the demised premises (damage by
any of the insured risks save where and to the extent
the insurance moneys shall be irrecoverable in consequence
of any act or default of the Tenant or its agents licencees
servants or invitees or damage to the Tenants trade
fixtures fittings and stock (if any) only excepted)
(b) To keep all roofs and gutters of the demised premises
free from leaves and dirt unless the Landlord shall have
notified the Tenant in writing that the Landlord will carry
out such work itself
(c) Without prejudice to the generality of the foregoing to
clean all glazing (both inside and outside and including
frames) in the demised premises as often as shall reasonably
be necessary but not less than once in every three months
save that this obligation will be limited to the inside of
all such
<PAGE> 14
glazing if the Landlord shall have notified the Tenant
in writing that the Landlord will carry out such work to the
outside thereof itself
(d) To clean the brickwork cladding and other finishes to
the exterior of the demised premises in a good and
workmanlike manner as often times shall reasonably be
considered necessary by the Landlord but in any event not
less than once during every twelve month period of the term
hereby granted unless the Landlord shall have notified the
Tenant in writing that the Landlord will carry out such work
itself
(e) Immediately preceding the determination of
the tenancy (terminate when it may) thoroughly to clean and
scour the external and internal parts of the demised
premises and leave the same clean and secure in every respect
on the last day of the tenancy
(f) To make good all damages caused to the demised
premises and all other parts of the Estate by the Tenant its
servants agents or licensees or caused in the furtherance of
theft and within one month (or within twenty four hours in
case of emergency) after service upon the Tenant by the
Landlord of a notice in writing specifying any repairs for
which the Tenant is responsible necessary to be done
commence and thereafter proceed diligently to complete the
execution of such repairs and if the Tenant shall fail so to
do the Landlord may execute such repairs and the cost
thereof shall be a debt due from the Tenant to the Landlord
and be forthwith recoverable by action and the Landlord's
remedies for recovering rent in arrears shall apply hereto
(g) To pay to the Landlord forthwith upon written
demand (and the Landlord's remedies for recovering rent
in arrears shall apply hereto)
(i) the reasonable cost of carrying out any
works undertaken by the Landlord pursuant to clause 2
(3) (b) (c) (d) and clause 2 (4) (a) hereof unless the
same shall be recovered by the Landlord as part of the
Maintenance Charge
(ii) a proportionate part of the reasonable
cost to the Landlord of inspecting repairing
maintaining renewing replacing any party walls
separating the demised premises from any adjoining
premises in case of failure by the Tenant to comply
with its obligations under clause 2 (3) (a) of this
Lease
<PAGE> 15
and in default of agreement the question shall be
determined in accordance with the provisions of
Clause 4 (2) hereof
(h) To use all reasonable endeavours to prevent the
freezing of water pipes in the demised premises
To paint and (4)(a) Unless the Landlord shall have notified the
decorate Tenant in writing that the Landlord will carry out such work
itself once in every fourth year of the term hereby granted
and also immediately prior to vacating the demised premises
in the last quarter thereof (whether determined by effluxion
of time or otherwise) so that the Tenant shall yield up the
demised premises to the Landlord in a freshly decorated
condition to paint all the outside wood ironwork and other
parts usually painted in a proper and workmanlike manner
using good quality materials and colours in accordance
with a reasonable specification prepared from time to time
by the Landlord or its Managing Agents
(b) Once in every fourth year of the term hereby
granted and also immediately prior to vacating the demised
premises in the last quarter thereof (whether determined by
effluxion of time or otherwise) so that the Tenant shall
yield up the demised premises to the Landlord in a freshly
decorated condition to paint all the inside wood ironwork
and other parts usually painted of the demised premises and
all additions thereto in a proper and workmanlike manner
using good quality materials in accordance with a reasonable
specification prepared from time to time by the Landlord or
its Managing Agents
(c) To obtain written approval of the Landlord (such
approval not to be unreasonably withheld or delayed) to the
tints colours and patterns of all such works of internal
painting and decoration to be carried out in the last
quarter of the said term (howsoever determined)
(5) To abide by the reasonable decision of the Landlord
or the Landlord's Managing Agents as to whether and the time
Landlords and manner in which any work ought to be done pursuant to
discretion as the covenants in sub-clauses (3) and (4) of this clause and
to painting to comply with their reasonable directions in that behalf
and repairs and as to the mode of bringing telephone communication wires
and to making into the demised premises and to abide by all reasonable
regulations regulations from time to time in force (written details of
which shall have first been given
<PAGE> 16
to the Tenant) relating to the use of any parts of the
Estate which the Tenant is entitled to use but which are not
included in the demised premises the Landlord acting
reasonably being entitled to make and from time to time
amend any such regulations as it shall at its discretion
think appropriate for the preservation of the quality and
character of the Estate and the amenities thereof and the
wellbeing of its occupants (including but without limiting
the generality of the foregoing regulations restricting the
use of the Estate but not including the demised premises for
such periods as the Landlord shall deem reasonably necessary
or expedient in the interests of safety expedition of
repairs or decorations or otherwise but not so as to render
access to the demised premises (except in case of emergency)
incapable of exercise at any one time)
Restriction (6) (a) Not to discharge into the drains of the Landlord
on effluent any effluent other than storm water or into the sewers of
and rubbish the Landlord any effluent other than sewerage water and
soil without the consent in writing of the Landlord and not
to wash down vehicles of any type on any part of the Estate
(b) Not to form any refuse dump or rubbish or scrap heap on
the demised premises or in any yard passageway staircase or
balcony adjacent thereto but to remove as frequently as
reasonably necessary all refuse rubbish and scrap and all
used tins cans boxes and other containers which may have
accumulated on the demised premises and to use the skips
provided by the Landlord in the skip area shown on the plan
and to keep the demised premises generally free from weeds
deposits of materials or refuse and clean and tidy and not
to bring or keep or suffer to be brought or kept upon the
demised premises or other areas of the Estate anything which
is or may become untidy unclean unsightly or in any way
detrimental to the amenity of the neighbourhood and within
Forty eight hours to comply with the requirements of any
written notice from the Landlord to restore any amenity
injured as aforesaid and in the event of the Tenant failing
to comply with such notice the Landlord shall be entitled to
enter upon the demised premises or elsewhere on the Estate
and carry out any works necessary to comply with such notice
and to recover
<PAGE> 17
the reasonable cost thereof from the Tenant which shall at
the option of the Landlord be recoverable from the Tenant as
rent in arrear
(7)(a) To permit the Landlord or the Landlord's Managing
Agents or such workman as may be authorised in writing by
To permit them respectively at all reasonable times within seventy
entry for two hours of notice in writing from the Landlord to the
inspection Tenant (except in case of emergency when no notice shall
be required) to enter the demised premises
and make a plan and examine the state of repair and
condition of the same and to keep inventories of the
fixtures and things to be surrendered at the expiry of this
Lease and within one calendar month or sooner if requisite
after noti in writing to the Tenant of all defects and wants
of reparation for which the Tenant is liable under the
covenants on his part herein contained found on such
examination shall have been given or left at the demised
premises to proceed diligently to repair and make good the
same according to such notice and the covenants and
conditions in that behalf hereinbefore contained and in
accordance with the requirements of the Landlord or the
Landlord's Managing Agents and in case the Tenant shall make
default in so doing within one month of the service of such
notice (or within twenty four hours in case of emergency in
the opinion of the Landlord) it shall be lawful for
workmen and others to be employed by the Landlord to enter
upon the demised premises and repair and restore the same
and all costs and expenses incurred thereby and Value
Added Tax thereon (including Surveyor's and other
professional fees) shall on demand be paid by the Tenant
to the Landlord and if not so paid shall be recoverable
by the Landlord as rent in arrear
To permit (b) To permit the Landlord or its Agents or workmen
entry for at all reasonable times within seventy two hours of notice
repairs to in writing from the Landlord to the Tenant (except in case
adjoining of emergency when no notice shall be required) to enter
premises upon the demised premises for executing repairs additions or
alterations painting and redecoration to or upon such
adjoining or neighbouring premises or for making repairing
renewing or connecting or cleansing any services belonging
to or leading from the same such persons causing as little
inconvenience or interruption to business as possible and
making good to the reasonable
<PAGE> 18
satisfaction of the Tenant all damage to the demised
premises or to persons goods for chattels thereat thereby
occasioned (c) The Tenant shall indemnify the Landlord from
and against all liability whatsoever including all actions
proceedings costs claims and demands brought or made against
the Landlord under or by virtue of the Defective Premises
Act 1972 or any Act or Acts for the time being amending or
replacing the same or any regulations or orders made
thereunder in the event of the Landlord exercising the right
to enter the demised premises to carry out any description
of maintenance or repair thereof under the power contained
in sub-clause (a) of this sub-clause
Restriction (8)(a) Not to make any structural alterations to the
on demised premises or any part thereof nor to erect any new
Alterations buildings or extensions thereon and without prejudice to
the generality of the foregoing not to install any outlets
for pipes wires cables or flues through the walls doors or
windows of the demised premises
(b) Not without the previous consent in writing of the
Landlord such consent not to be unreasonably withheld or
delayed (and if required by the Landlord in accordance with
plans previously approved in writing by the Landlord such
approval not to be unreasonably withheld or delayed and
subject to conditions reasonably imposed by and under the
supervision and to the reasonable satisfaction of the
Landlord or its Surveyors or Architects) make any
non-structural alterations or additions to the demised
premises thereof and if required by the Landlord to
reinstate all such approved alterations and modifications at
the end of the term to the reasonable satisfaction of the
Landlord or its Surveyor Provided That nothing in this
sub-clause (8) shall oblige the Tenant to obtain the consent
of the Landlord or otherwise for the erection of
de-mountable partitioning and minor electrical and plumbing
works
(c) If required by the Landlord to take such steps at the
Tenants expense as shall be specified by the Landlord to
erect to the reasonable satisfaction of the Landlord an
intertenancy fire wall between the demised premises and the
adjoining premises known as Unit 2C II shown on the plan
annexed hereto in the event that (a) this Lease shall be
assigned otherwise
<PAGE> 19
than to an assignee of a lease of even date herewith
made between the parties hereto relating to the said Unit 2C
II or (b) the Tenant shall operate the break clause
contained in Clause 4 (14) of the said Lease relating to the
said Unit 2C II without operating the break clause contained
in Clause 4 (14) of this Lease and prior to either of such
events such intertenancy fire wall shall not have already
been constructed
Not to affix (9)(a) Not to affix to the structure or any part of the
heavy demised premises any heating apparatus ducting pipes or
apparatus or electric power cables or any crane or hoist for the lifting
exceed loads or transport of merchandise or other goods without the
or overload written permission of the Landlord first obtained and which
services shall not be unreasonably withheld
(b) Not to suspend or permit or suffer to be suspended
any heavy load from the ceilings or main structure of the
demised premises nor load or use or permit or suffer to be
loaded or used the floor or structure of the demised
premises in any manner which will in any way impose a weight
or strain excess of that which such premises are constructed
to bear with due margin for safety or which will in any way
strain or interfere with the structural members thereof
(c) Not to overload the services to the demised
premises
(d) To pay to the Landlord on demand all reasonable
costs reasonably incurred by the Landlord in obtaining the
opinion of a suitably qualified engineer as to whether the
Tenant has been in breach of this sub-clause (9) and the
Landlord's remedies for recovering rent in arrears shall
apply hereto
Not to avoid (10) (a) Not to do or permit or suffer to be done
insurance anything (save that the permitted use from time to time
shall not be deemed to be a breach of this covenant) whereby
the policy or policies of insurance on the demised premises
and/or the adjoining or neighbouring premises of the
Landlord may become void or voidable and to comply with all
reasonable recommendations and requirements of the insurers
as to fire precautions relating to the demised premises
(b) To pay to the Landlord on demand any increased
premium which the Landlord may be reasonably required to pay
under any insurance policy in respect of the demised
premises or any other property of the Landlord
<PAGE> 20
arising from the user as hereinafter mentioned of the
demised premises and all such payments shall be added to the
rent hereinbefore reserved and shall be recoverable as rent
(c) In the event of the demised premises or any part thereof
being destroyed or damaged by any of the insured risks and
the insurance moneys under any insurance against the same
effected thereon by the Landlord being wholly or partly
irrecoverable by reason solely or in part of any act or
default of the Tenant or its agents licensees servants or
invitees then and in every such case the Tenant will
forthwith (in addition to the said rent) pay to the Landlord
the irrevocable proportion of the cost of completely
rebuilding and reinstating the same
(d) Not to effect any policy or insurance of its own in
respect of risks covered by the insurance effected by the
Landlord of the demised premises (and in default any
insurance money received by or payable to the Tenant shall
become the property of the Landlord) save that any cover the
Tenant may effect in respect of any policy excesses in
respect of such risks shall not be a breach of the
obligation contained in this sub-clause and any insurance
money payable in respect thereof shall be the property of
the Tenant
Dangerous (11) (a) Not without the consent in writing of the Landlord
substances (which shall not be unreasonably withheld or delayed) to
keep or permit to suffer to be kept on the demised premises
any material liquid or gas of a dangerous combustible
corrosive explosive inflammable radio-active or offensive
nature and then only in accordance with the provisions of
any relevant Act or Acts of Parliament or regulations made
thereunder or issued by the Health and Safety Executive or
any other like statutory body for the time being in force
and after due notice to the insurers of the demised premises
and payment of every increased or extra premium which ought
properly to be paid and in any event not to store in the
demised premises materials the keeping of which may
contravene any statute order or regulation or bye-law
(b) If it shall be necessary for the Landlord or any
tenant of any unit adjoining the demised premises to carry
out any work to such adjoining unit as a result of the
storage in the demised premises
<PAGE> 21
of any of the substances mentioned in sub-clause
(11) (a) hereof then the Tenant shall forthwith on demand pay
to the Landlord or such adjoining tenant the cost incurred
in carrying out such work as aforesaid
(c) Within seven days to supply to the Landlord copies
of any applications to any statutory or other authority or
body for consent to keep any of the matters referred to in
sub-clause (11) (a) hereof on the demised premises together
with copies of any licences pursuant to such applications
Restriction (12)(a) Not to assign or transfer part only of the
on demised premises
alienation (b) Save as hereinafter appearing not to underlet or
part with or share occupation or possession of the demised
premises or any part thereof or permit any person or company
to occupy the same
(c) Not to assign or transfer the whole of the demised
premises without the previous consent in writing of the
Landlord (such consent not be unreasonably withheld or
delayed) and if required by the Landlord on any assignment
or transfer to procure that the Assignee shall enter into a
covenant with the Landlord to pay the rent hereby reserved
and to perform the covenants on the part of the Tenant
herein contained
(d) Without prejudice to the foregoing in the case of
an assignment or transfer to a limited company then if the
Landlord shall reasonably so require either the parent
subsidiary or other company associated with such Limited
Company or in the case of a private limited company not
having a trading record sufficient to enable the said
company to produce to the Landlord five years audited
accounts at least two of its directors shall join in such
assignment or transfer as sureties for, such company in
order jointly and severally to covenant with the Landlord as
surety that such company will pay the rents hereby reserved
and perform and observe the covenants on the Tenant's part
herein contained and to indemnify and save harmless the
Landlord against all losses damages costs and expenses
arising by reason of any default by the company and such
covenant shall further provide that any neglect or
forbearance of the Landlord shall not release or exonerate
the surety and shall further provide for the surety to
accept a new lease of the demised premises upon disclaimer
of these
<PAGE> 22
presents by the company or on its behalf or on
forfeiture of these presents if so required by the Landlord
within three months of such disclaimer or forfeiture such
new lease to be for the residue then unexpired of the term
hereby granted and at the rents payable and subject to the
same tenant's covenants and to the same provisos and
conditions as those in force immediately before such
disclaimer and to be granted at the cost of the surety in
exchange for a counterpart duly executed by the surety
(e) The Tenant (being a company) may share the
occupation of the demised premises with any company which is
a member of the same group of companies (as defined in
Section 42.(1) of the Landlord and Tenant Act 1954) as the
Tenant provided that the relationship of landlord and tenant
shall not be created thereby
(f) Not to underlet the whole of the demised premises
without the previous consent in writing of the Landlord
(such consent not to be unreasonably withheld or delayed)
such underletting to be at the best rent reasonably
obtainable without taking a fine or premium by means of an
underlease which contains the like covenants on the part of
the underlessee (both with the Tenant as landlord and with
the Landlord) and conditions to the Tenant's covenants and
the conditions herein contained and the like provisions for
review of the rent thereby reserved at each of the Review
Dates as defined by this lease
(g) Within one week of every assignment or transfer or
underlease to give notice thereof in writing with full
particulars thereof to the Landlord or its Solicitors
together with such further information as may reasonably be
required by the Landlord of the Company or person or persons
in whose favour the assignment or transfer shall have been
effected paying at the same time to the Landlord or its
Solicitors such reasonable sum (not being less than Ten
pounds) as shall be demanded by them as a registration fee
and producing a certified copy of the assignment or transfer
to the Landlord or its Solicitors for registration by the
Landlord
To pay costs (13)(a) To pay all proper and reasonable costs charges
of notices and expenses (including Solicitors costs and Surveyors fees)
and consents incurred by the Landlord in any proceedings under
and orders Sections 146 and 147 of the Law of
<PAGE> 23
Property Act 1925 or any statutory provision
replacing the same notwithstanding forfeiture
is avoided otherwise than by relief granted by
the Court (b) To reimburse to the Landlord on
demand all proper and reasonable fees costs
charges and expenses incurred or suffered
by the Landlord arising out of or in
connection with or incidental to any
application or request by the Tenant in
connection with the demised premises or any
provisions of this Lease whether or not the
same shall be proceeded with by the Tenant or
shall be granted subject to conditions or
arising out of or in connection with any steps
in connection with the preparation and service
of a Schedule of Dilapidations during or after
the expiry or sooner determination of the
term (but in relation only to dilapidations
occurring during the term) (c) To pay all
proper and reasonable legal costs and
disbursements incurred by the Landlord in the
recovery of arrears of rent and any other
monies due hereunder from the Tenant to the
Landlord and proceedings in connection
therewith
User (14) (a) Subject to sub-clause 16 (b) hereof to
use the demised premises as a computer centre
and/or offices or for such other use falling
within Classes B1 or B8 of the Town and Country
Planning (Use Classes) Order 1967 as shall be
first approved in writing by the Landlord (such
consent not to be unreasonably withheld) and
for no other purpose (b) Not to use the car
parking spaces allocated to the Tenant
otherwise than or parking private motor cars or
light vans not exceeding ten hundred weight on
the spaces at the front of the demised
premises or thirty hundred weight on the spaces
at the rear of the demised premises of the
Tenant its employees and visitors
Advertise- (15) (a) Not to affix or permit to be affixed
ments and or exhibited to or upon any part of the exterior of the
signs demised premises any placard poster
sign notice or advertisement save those of a
type size and in positions approved in
writing by the Landlord save that the Tenant
without such consent as aforesaid may erect a
sign giving details of the Tenant's name and
its business such sign to be erected on the
fixed brackets provided by the Landlord for
such purpose in front of the demised premises
<PAGE> 24
(b) At the end of the term hereby granted (terminate
when it may) and if so required by the Landlord to remove
such placard poster sign or advertisement from the demised
premises and to make good to the reasonable satisfaction of
the Landlord or its Surveyors any damage caused to the
demised premises by such removal
To comply (16)(a) At all times during the said term to observe
with and comply in all respects with the provisions and
statutory requirements of any and every enactment (which expression in
provisions this covenant includes as well any and every Act of
Parliament already or hereafter to be passed as any and
every order regulation and bye-law already or hereafter to
be made under or in pursuance of any such Act) so far as
they relate to or affect the user of the demised premises or
any additions or improvements thereto or the user thereof for
the purpose of any manufacture process trade or business or
the employment therein of any person or persons or any
fixtures machinery plant or chattels for the time being
affixed thereto or being thereupon or used for the purposes
thereof and to execute all works and provide and maintain
all arrangements which by or under any enactment or by any
government department local authority or other public
authority or duly authorised officer or court of competent
jurisdiction acting under or in pursuance of any enactment
are or may be directed or required to be executed provided
and maintained at any time during the said term upon or in
respect of the user of the demised premises or any
additions or improvements thereto or in respect of any such
user thereof or employment therein of any person or persons
or fixtures machinery plant or chattels as aforesaid whether
by the Landlord or Tenant thereof and to indemnify the
Landlord at all times against all costs charges and expenses
of or incidental to the execution of any works or the
provision or maintenance of any arrangements so directed or
required as aforesaid and not at any time during the said
term to do or omit or suffer to be done or omitted on or
about the demised premises any act or thing by reason of
which the Landlord may under any enactment incur or have
imposed upon him or become liable to pay any penalty damages
compensation costs
<PAGE> 25
charges or expenses and to keep the Landlord
effectually indemnified against all such compensation
damages penalties costs charges or expenses
(b) At all times during the term to comply in all
respects with the provisions and requirements of any Town
and Country Planning Act or Acts for the time being in force
and any regulations and orders made thereunder and all
licences consents permissions (to the extent such
permissions shall be implemented) and conditions (if any)
granted or imposed thereunder or under any enactment
repealed thereby so far as the same respectively relate to
or affect the demised premises or any part thereof or any
operations works acts or things already or hereafter to be
carried out executed or done or omitted thereon or the use
therefor any purpose and before making any applications to
the Local Authority for planning permission or bye-law
consent to obtain the consent in writing of the Landlord
(which consent shall not be unreasonably withheld) to such
application and to provide the Landlord with copies of the
relevant application and accompanying drawings and on the
granting of such planning permission or bye-law consent to
supply copies thereof to the Landlord
(c) Unless the Landlord shall otherwise direct to carry
out before the expiration or sooner determination of the
term any works stipulated to be carried out to the demised
premises by a date subsequent to such expiration or sooner
determination as a condition of any planning permission
which may have been granted and acted upon by the Tenant
during the said term
(d) To give notice to the Landlord as soon as
reasonably practicable after receipt of the same of any
notice order or proposal for notice or order served on the
Tenant under any legislation and if so reasonably required
by the Landlord to produce the same and at the request and
cost of the Landlord to make or join in making such
objections or representations in respect of any proposals as
the Landlord may reasonably require
(e) At all times during the said term to comply with
all requirements from time to time of the appropriate
authority in relation to means of escape from the demised
premises in case of fire and at the expense of the Tenant to
keep the demised premises
<PAGE> 26
sufficiently supplied and equipped with fire fighting and
extinguishing apparatus and appliances of a type to be
approved from time to time by the relevant Fire Authority
and suitable in all respects to the type of user of or
business manufacture process or trade carried on upon the
demised premises which shall be open to the inspection of
the Landlord and also not to obstruct the access to or means
of working such apparatus and appliances by their operations
at or connected with the demised premises
Restriction (17) (a) Not to use the demised premises or any part
on nuisance thereof for any immoral purpose or for any noisy noisome
and auctions dangerous or offensive trade business manufacture operation
or occupation provided that the permitted user from time to
time shall be deemed not to be in breach of this clause and
also not to do or permit to be done thereon anything which
may be or grow to the damage nuisance disturbance or
annoyance of the Landlord or the occupiers of any adjoining
or neighbouring premises or permit any sale by auction to be
held upon the demised premises or any part thereof or permit
the demised premises to be used for residential purposes or
as sleeping accommodation
(b) To pay to the Landlord all proper and reasonable costs
charges and expenses which may be properly and reasonably
incurred by the Landlord in abating a nuisance caused by the
Tenant or its servants licensees or customers and executing
all such works as may be necessary for abating a nuisance
in obedience to a notice served by a local or public
authority on the Landlord or the Tenant in respect of the
demised premises
(c) Not at any time to permit any musical instrument
gramophone or similar apparatus to be played or used on the
demised premises so as to be audible from outside the
demised premises
Sound (d) To comply in all respects with any scheme or
Insulation requirement which may be imposed by the Local Planning
Authority in connection with the sound insulation of all
plant and machinery
To yield up (18) (a) On the expiration or sooner determination of the
said term peaceably to yield up to the Landlord the demised
premises in a good and tenantable state of repair and
condition and decoration in accordance with the covenants
by the Tenant herein contained
<PAGE> 27
together with all additions and improvements thereto and the
keys and all Landlord's fixtures and fitting of every kind
now in or upon the demised premises or which during the said
term may be affixed or fastened to or upon the same all of
which shall be at the expiration or sooner determination of
the said term to be left complete with all parts and
appurtenances thereof and in proper working order and
condition PROVIDED ALWAYS that the foregoing covenants shall
not apply to any articles held by the Tenant on hire nor to
the Tenant's fixtures and fittings (including without
prejudice to the generality of the foregoing any such
fixtures and fittings installed by the Tenant during any
fitting out works) and to make good any damage caused to the
demised premises by the removal of tenants and trade
fixtures and fittings AND PROVIDED FURTHER that if so
required by the Landlord the Tenant will remove from the
demised premises such of the Tenant's fixtures and fittings
as are then installed in the demised premises as the
Landlord shall specify to be removed making good all damage
caused thereby to the Landlord's satisfaction and
reinstating the demised premises to their original condition
PROVIDED further that the Tenant may from time to time (but
only with the previous consent of the Landlord which shall
not be unreasonably withheld) substitute for any of the
Landlord's fixtures and fittings other fixtures and fittings
of at least as good a kind and quality as and not less
suitable in character
(b) if the Tenant shall fail to yield up the demised
premises in such repair and condition as aforesaid the
Landlord may if it thinks fit effect any repairs decorations
and other works which ought to have been carried out by the
Tenant pursuant to the covenants on the part of the Tenant
herein contained and the Tenant shall pay to the Landlord on
demand the cost of such repairs decorations and other works
effected by the Landlord together with mesne profits at a
rate equal to the rack rental value of the demised premises
at the date of such termination for the period reasonably
required for the carrying out of such work and the
Landlord's Surveyor's certificate as to the amount of such
cost and mesne profits shall be conclusive and binding on
the parties
<PAGE> 28
Indemnity Landlord from and against liability for all loss damage
of the actions proceedings claims demands costs damages and
Landlord expenses of whatever nature in respect of any injury to or
the death of any person or damage to any property movable or
immovable or in respect of the infringement disturbance or
destruction of any right easement or privilege or otherwise
by reason of or arising in any way directly or indirectly
out of
(i) the state of repair or condition of the demised
premises in so far as the Tenant is liable for such state or
condition under the covenants herein contained
(ii) the act omission or default of the Tenant its agents
employees customers invitees or visitors whilst on or about
the Estate or the demised premises
(iii) the construction or existence of any extensions of or
alterations to the demised premises carried out by or on
behalf of the Tenant
(iv) the user of the demised premises and other areas of the
Estate by the Tenant or its agents employees invitees or
visitors
(v) anything now or hereafter attached to or on the demised
premises or the Estate by or on behalf of the Tenant (b) To
keep the demised premises insured with such Insurance
Company as the Landlord may from time to time approve (such
approval not to be unreasonably withheld) in the joint names
of the Landlord and the Tenant against loss or damage in
furtherance of theft and to produce to the Landlord on
demand the policy of insurance maintained by the Tenant and
the receipt for the last premium payable for it and in the
event of the demised premises or part of them being
destroyed or damaged by the peril against the risk of which
the Tenant here covenants to insure forthwith to reinstate
the demised premises or such part of it as may have been so
damaged or destroyed
Not to (20) (a) Not to expose or place or permit or suffer to be
Obstruct exposed or placed any goods articles or things whatsoever
outside the demised premises or upon any part of the Estate
and to keep the same free from obstruction of any kind
(b) Not to stop up darken or obstruct any windows or
lights (except roof windows or roof lights provided always
that the same are reinstated to their former
25
<PAGE> 29
condition at the end or sooner determination of the term) of
ventilators belonging to the Landlord or to other tenants of
the Landlord or to tenants of other units on the Estate or
other property adjoining the demised premises and not to
stop up cover or obstruct access to any services on the
Estate or to any fire escapes and not to have to any third
party and acknowledgment that the tenant enjoys the access
of light or air to any windows or openings in the light or
air to any windows or openings in the demised premises by
the consent of such third party or to pay any sum of money
to or enter into agreement with such third party for the
purpose of inducing or binding him to abstain from
obstructing the access of light or air to any such windows
or lights or ventilators and in the event that any such
third party doing or threatening to do anything which
obstructs or would obstruct such access of light or air
forthwith in writing to notify the same to the Landlord
Prevention of (c) Without prejudice to sub-clause (b) above not to
acquisition of permit or suffer any cover of adjoining or neighbouring
easements property to acquire any rights of way light or air or other
easements over the demised premises but as soon as the
Tenant becomes aware thereof to inform the Landlord or the
Landlord's Managing Agents in writing of any act or thing
which may result in the acquisition of any right or
privilege over the demised premises (for the purpose of
enabling the Landlord if it thinks fit to do anything
necessary for preventing the acquisition of any such
right or privilege and to permit the Lessor and the
Landlord's Managing Agents to enter and examine the demised
premises accordingly) and at the joint cost of the Landlord
and the Tenant to take consent to or join with the Landlord
in taking such steps or action as may be reasonably required
by the Landlord to prevent any such right or privilege from
being acquired
To notify (21) (a) To notify the Landlord without delay of any
Landlord of "relevant defects" of which it is aware in the state of the
defects and demised premises within the meaning of Section 4 of the
damage Defective Premises Act 1972 or any statutory modification
or re-enactment thereof and (without prejudice to the
foregoing) will give notice thereof as soon as reasonably
practicable to the Landlord of any notice or claim
affecting the demised premises
<PAGE> 30
(b) In the event of the demised premises being destroyed or
damaged to give notice thereof immediately to the Landlord
or the Landlord's Managing Agents stating the cause of such
destruction or damage if the Tenant can infact determine
such cause
For sale or (22) To permit the Landlord and its surveyors workmen
Let boards and agents at any time during the term for the purpose of
selling or disposing of the Landlord's reversionary interest
or at any time within six calendar months next before the
expiration or sooner determination of the term for the
purposes of re-letting the demised premises to enter upon
the demised premises and to affix and retain upon any
suitable part thereof (but not so as to block any door or
window) a notice board for selling or letting the same
(with or without any other premises) as the case may be and
the Tenant will not remove or obscure the same and will at
all times throughout the said term permit all prospective
purchasers or tenants by order in writing of the Landlord or
its agents to enter and view the demised premises or any
part thereof at reasonable hours in the daytime without
interruption
To observe (23) To observe and perform the covenants on the part of
Head Lease the Landlord (as tenants) provisos and declarations
contained in a Lease dated the eighteenth day of December
One thousand nine hundred and eighty seven made between The
Council of the Borough of Thamesdown of the one part and the
Landlord of the other part insofar as the same relate to or
affect the demised premises and are not the responsibility
of the Landlord pursuant to Clause 3 hereof
3. The Landlord hereby covenants with the Tenant as follows:
Quiet (1) That the Tenant paying the rents hereby reserved and
enjoyment observing and performing the several covenants and
stipulations on its part herein contained shall peaceably
hold and enjoy the demised premises during the said term
without any interference of the Landlord or any person
rightfully claiming under or in trust for him or by title
paramount.
To insure (2) Subject to such limitations exclusions and excesses as
are required by the insurers normal terms of insurance to
keep insured at all times throughout the term hereby
granted with insurers of repute the demised premises (with
the Tenant's interest and the interest of any mortgagee of
the Tenant being noted
<PAGE> 31
upon the policy of insurance) against loss or damage by fire
explosion lightning storm and tempest riot civil commotion
and aircraft and articles dropped therefrom and (where
appropriate) flooding impact by vehicle (and in time of war
against war risks under any statutory insurance scheme which
may be applicable to the demised premises) the cost of
shoring up demolition and site clearance and against such
other risk as the Landlord may from time to time reasonably
require together with surveyors and architect's fees and two
years loss of rent in some insurance office of repute to a
value equal to the full cost of reinstatement thereof in
accordance with local and statutory requirements then
current and against loss of or damage to property or
personal injury arising by reason of the conditions of the
demised premises or any part thereof or any building erected
thereon or anything done therein and to make all payments
necessary for that purpose when the same shall respectively
become payable and unless the policy of insurance shall be
vitiated by act or default of the Tenant to cause all monies
received by virtue of any such insurance to be forthwith
laid out in rebuilding and reinstating the demised premises
in the event of the demised premises being damaged or
destroyed as aforesaid unless the Landlord is unable having
used its best endeavours (which the Landlord agrees to do)
to obtain permission for such rebuilding or reinstatement of
the demised premises whereupon this demise shall upon the
second anniversary of the occurrence of such damage or
destruction be at an end without prejudice to any right or
action of the Landlord or the Tenant in respect of any
breach of covenant
To provide (3) To use its best endeavours to do such of the things and
services to provide such of the services specified in the Third
Schedule hereto as the Landlord or Landlord's Managing
Agents from time to time shall deem appropriate provided
always that the Landlord shall be under no obligation to
provide any of the services therein referred to
4. PROVIDED ALWAYS and it is hereby agreed as follows:-
Proviso for (1) If the rent hereby reserved or any part
re-entry thereof shall at any time be unpaid for Twenty one days
after becoming payable (whether formally demanded or not) or
if the covenants on the Tenant's pary herein
<PAGE> 32
contained shall not be performed or observed or if the
Tenant or any other person in whom the term shall be vested
shall become bankrupt or have a Receiving Order made against
him or being a company enter into liquidation (save for the
purposes of amalgamation or reconstruction) or if a Receiver
shall be appointed of its undertaking or if the goods of the
Tenant on the demised premises shall be taken in execution
then and in any such case it shall be lawful for the
Landlord at anytime thereafter to re-enter upon the demised
premises or any part thereof in the name of the whole and
thereupon this demise shall absolutely determine but without
prejudice to the right of action of the Landlord in respect
of any antecedent breach of the Tenant's covenants herein
contained
Arbitration (2) If any dispute or difference (otherwise than on a
matter of law or in relation to any review of rent under
Clause 1 (A) hereof) shall arise between the parties hereto
touching their respective obligations duties and liabilities
under this Deed or the provisions hereof the matter in
dispute shall be determined by a single Arbitrator to be
mutually agreed between the parties and failing such
agreement to be appointed by the President for the time
being of the Law Society and otherwise in accordance with
and subject to the provisions of the Arbitration Acts 1950
and 1979 or any statutory modifications thereof for the time
being in force
Notices (3) Any notice under this Lease shall be in writing and
shall be deemed well served if posted to the Registered
Office of the recipient or if an individual at his last
known address by first class post recorded delivery in which
case the date of service shall be the day following the date
of posting
Waiver (4) No demand for or acceptance of or receipt for rent by
the Landlord after knowledge or notice received by the
Landlord or his agents or any breach of any of the Tenant's
convents hereunder shall be or operate as a waiver wholly
or partially of any such breach but any such breach shall
for all purposes of these presents be a continuing breach of
covenant so long as such breach shall be subsisting and the
Tenant shall not be entitled to set up any such demand or
acceptance of or receipt for rent by the Landlord as a
defence in any action or proceeding by the Landlord
<PAGE> 33
Value Added (5) For the avoidance of doubt it is hereby declared that
Tax where any party has an obligation to make payment of any
amount hereunder and any value added tax (or other like tax
excise or custom or other duty) becomes payable in respect
of the supply of any goods or services to which such amount
relates or by reference to which in whole or in part such
amount is ascertained then the obligation shall extend to
and include the value added tax (or other like tax as
hereinbefore mentioned) or the appropriate proportion
thereof save to the extent the same can be recovered from
H.M. Commissioners for Customs and Excise
Rent (6) If the demised premises or any part thereof shall at any
abatement time during the term hereby granted be destroyed or so
damaged by fine or other insured risk as to be unfit for
occupation or use then and in any such case unless the
insurance of the demised premises shall have been forfeited
or payment of the said policy monies or any part thereof
refused by or in consequence of any act or default of the
Tenant their licensees or agents the yearly rents Service
Charge and insurance rent hereby reserved (without prejudice
to any monies owing to the Landlord at the date of such
damage or destruction) on a fair and just proportion thereof
according to the nature and extent of the damage sustained
shall from the date of such damage or destruction and until
the demised premises shall have been rebuilt or reinstated
and made fit for occupation be suspended and cease to be
payable
Restriction on (7) The Tenant shall not by virtue of this demise be deemed
acquistion of to have acquired or be entitled to nor shall it during the
easements term hereby granted acquire or become entitled by any means
whatever in respect of the demised premises to any right of
light or air nor any other easement from or over or
affecting any other land or premises now or at any time
hereafter belonging to the Landlord and not comprised in
this demise save such as is necessary for the carrying on of
the Tenants business in the demised premises
Warranty (8) Nothing herein contained or implied shall be taken to be
a covenant warranty or representation by the Landlord that
the demised premises can lawfully be used for any particular
purpose
Removal of (9) If at such time as the Tenant has vacated the demised
Tenant's premises after the determination of the term hereby granted
property either by effluxion of time or
<PAGE> 34
otherwise any property of the Tenant shall remain in or on
the demised premises and the Tenant shall fail to remove the
same within Twenty eight days after being requested by the
Landlord so to do by a notice in that behalf then and in
such case the Landlord may as the agent of the Tenant (and
the Landlord is hereby appointed by the Tenant to act in
that behalf) sell such property and shall then hold the
proceeds of sale after deducting the reasonable costs and
expenses of removal storage and sale reasonably and properly
incurred by it to the order of the Tenant PROVIDED THAT the
Tenant will indemnify the Landlord against any liability
incurred by it to any third party whose property shall have
been sold by the Landlord in the bona fide mistaken
belief (which shall be presumed unless the contrary be
proved) that such property belonged to the Tenant and was
liable to be dealt with as such pursuant to this sub-clause
Party Walls (10) All walls separating the demised premises from any
adjoining premises shall be party walls and shall be used
and repaired and maintained as such
No liability (11) The Landlord shall not be responsible to the Tenant
for injury etc. or its servants or visitors for any injury death damage
destruction caused by natural or consequential loss whether
to person property or goods due directly or indirectly to
any act neglect or default of any other Tenant or permitted
occupier for the time being of the Estate or to the
condition of the demised premises or any of its
appurtenances
No compensation (12) Subject to the provisions of sub-clause (2) of Section
38 of that Act the Tenant shall not be entitled on quitting
the demised premises to any compensation under Section 37 of
the same Act or under any corresponding provision in any Act
amending or replacing the same
Freedom to deal (13) The Landlord may at any time or times hereafter convey
with Estate demise or otherwise deal with all or any of the Estate
subject to such covenants conditions or otherwise as the
Landlord thinks fit subject always to the provisions of this
lease
Break Provisions (14) If the Tenant shall be desirous of determining this
Lease at any time within the period from the Twenty ninth
day of September One thousand nine hundred and eighty nine
to the Twenty fifth day of March One thousand nine hundred
and ninety inclusive and of such desire shall give not less
than six
<PAGE> 35
months notice in writing to the Landlord (such notice to
expire at any time within the said period) then this Lease
and everything herein shall cease and determine but without
prejudice to any claim by either party against the other in
respect of any antecedent breach of any covenant or
condition herein contained
Marginal (15) The marginal notes hereto are inserted for convenience
Notes of reference only and shall not form part of the term of
this Lease
(16) All provisions of this Lease relating to:-
(a) the reservation of rights of entry upon the demised
premises to the Landlord and its lessees and assigns
and all persons to whom the Landlord shall hereafter
grant any such right and
(b) covenants contained on the part of the Tenant to
permit the Landlord and others authorised by it or
those specified in the Tenant's covenants herein
contained to enter upon the demised premises
shall be read and construed subject to the stipulation first
that entry upon the demised premises by the Landlord and
others as aforesaid shall not be exercised or made unless in
the presence of such person whom the Tenant shall notify to
the Landlord or its Managing Agents in writing from time to
time as shall be authorised to accompany those entering upon
the demised premises the person authorised by the Tenant
remaining with all such persons entering upon the demised
premises throughout the period of such entry and secondly
that all such persons entering upon the demised premises
shall comply with all reasonable security procedures
operated and required by the Tenant but not so as to prevent
entry upon any part or parts of the demised premises
Provided always that upon receipt of any notice from the
Landlord or its Managing Agents requiring entry upon the
demised premises the Tenant shall ensure that some person
will be available to accompany those so entering the demised
premises
(17) Nothing in this Lease shall be construed to prevent the
Tenant using the demised premises and the access thereto (in
accordance with the covenants contained in sub-clauses 14
(a) and 16 (b) of Clause 2 above) if it so wishes Twenty
four hours a day every day of the year
<PAGE> 36
[MAP OF DEVELOPMENT AT HILLMEAD SWINDON.]
OCTOBER 1987
<PAGE> 37
IN WITNESS whereof the parties hereto have executed this
deed the day and year first before written
THE FIRST SCHEDULE hereinbefore referred to (Description
of the demised premises)
ALL THAT piece or parcel of land situate at and forming
part of the Hillmead Complex (in this Lease called "the
Estate" edged green on the plan annexed hereto for the
purpose of identification which expression shall mean the
whole of the Estate or such part or parts thereof as
shall for the time being be vested in the Landlord pursuant
to the said Lease dated the eighteenth day of December one
thousand nine hundred and eighty seven) at Hillmead Swindon
in the County of Wiltshire which said piece of land is for
the purpose of identification thereof delineated upon the
plan hereto annexed and thereon edged red TOGETHER WITH the
unit erected thereon or on some part thereof known as Number
2C III Marshall Road Hillmead aforesaid TOGETHER ALSO WITH
full and free right and liberty for the Tenant and where
applicable the Tenant's licensees employees and customers
visiting the demised premises and all other persons so
authorised in common with the Landlord and the occupiers of
other parts of the Estate having the like right
(i) with or without vehicles to pass and repass to and from
the demised premises or any part thereof and the public
highway over and along the Estate road known as
Marshall Road coloured brown on the said plan and the roads
connecting the same to the public highway until such time
as the same shall become maintainable at public expense
(ii) upon reasonable notice being given to enter upon the
adjoining or neighbouring property of the Landlord where
the same is necessary for the purpose of complying with
it's covenants hereunder making good all damage occasioned
thereby
(iii) to pass and repass with or without vehicles
over the access roads laid out on the land coloured yellow
on the said plan
(iv) the free and uninterrupted passage and running of
water soil electricity gas and telephone and other services
to and from the demised premises through the sewers
drains watercourses conduits pipes wires and cables which
are now or may hereafter during the term hereby granted be
under the demised premises and the Estate and connecting
with the main water draining
<PAGE> 38
electricity and sewage systems serving the Estate PROVIDED
ALWAYS that no liability shall fall upon the Landlord for
any damage to the Tenant if there shall be any interruption
or obstruction to the Estate road coloured brown or the
access roads coloured yellow on the said plan or to the said
systems caused by accident flood tempest frost breakdown of
any machinery acts of the Queen's forces or of the Queen's
enemies riot civil commotion operation of aircraft hostile
or friendly or force majeure or act of God or by any
restrictions or regulations or Her Majesty's Government or
any strike or work to rule or lockout of workmen whether in
the employment of the Landlord or not or any other
circumstances or occurence beyond the Landlord's control
Provided that (without incurring any liability to the
Tenant) the Landlord will use its reasonable endeavours to
ensure that access to the denied premises shall not be
rendered totally incapable of exercise at any one time (v)
the right to use any skip or skips provided by the Landlord
on the service yard shown on the said plan (vi) the
exclusive right not in common with the Landlord and others
as aforesaid to use the Thirteen car parking spaces coloured
blue on the said plan or such other spaces (being not less
than an equivalent total number) allocated from time to time
by the Landlord to the Tenant for the purpose of parking
private motor cars or light vans not exceeding ten hundred
weight only (or other vehicles the type whereof shall be
first approved in writing by the Landlord)
(vii) the right to use the land hatched blue on the said
plan for the purposes only of
(a) access to and egress from the rear of the demised
premises on foot only
(b) access to and egress from the two car parking
spaces at the rear of the demised premises
coloured blue on the said plan with private motor
cars or light vans not exceeding thirty hundred
weight only
(c) loading and unloading vehicles of any nature
(viii) the right of support and protection for the benefit
of the demised premises as now enjoyed from the other
units and other parts of the Estate
EXCEPT AND RESERVED onto the Landlord the full right and
liberty for the Landlord and its tenants of any adjoining
premises of the Landlord on the Estate and where
<PAGE> 39
applicable their licensees employees and customers visiting
the said adjoining premises of the Landlord and all other
persons so authorised
(i) to build upon and use any land adjoining or near to the
demised premises and to rebuild or alter any of the
adjoining or neighbouring buildings including the right to
build on or into the side walls of the demised premises
according to such plans whether as to height extent or
otherwise and in such manner as shall be approved by the
Landlord or its surveyors notwithstanding any interference
thereby occasioned to the access of light or air to the
demised premises which light and air shall be deemed to be
enjoyed by licence only those exercising such rights making
good all damage caused as soon as practicable
(ii) The free and uninterrupted passage and running of water
soil electricity gas and telephone services from and to
other parts of the Estate through the sewers gutters drains
channels watercourses pipes conduits cables and wires which
are now or may hereafter during the term hereby granted be
in under or over the demised premises together with full
liberty and power at all times (but on reasonable notice
except in case of emergency) for the Landlord with or
without workmen or others together where necessary with
appliances to enter upon the demised premises to inspect
maintain repair cleanse amend re-route relay replace or
renew the said services and the demised premises and to
instal any additional services for the benefit of the
demised premises or the other buildings on the Estate which
the Landlord considers are reasonably required for the
purposes of good estate management but causing as little
interference as possible with the operation of the Tenant
carried on by it on the demised premises doing no
unnecessary damage by the exercise of this right and
forthwith making good any damage thereby occasioned
(iii) the right of support and protection for the benefit of
the other units and all other parts of the Estate as is now
enjoyed or as will be hereafter enjoyed from the demised
premises
(iv) the right of entry for the Landlord or the Landlord's
Managing Agents or others authorised by them for the
purposes of complying with any of the Landlord's obligations
hereunder or for the repair maintenance or alteration of any
adjoining premises of the Landlord
<PAGE> 40
(v) The mines minerals and mineral substances in and under
the demised premises (but such reservation shall not imply a
right for the Landlord or others to enter upon the surface
of the demised premises for the purpose of working or
extracting such mines or minerals or mineral substances)
THE SECOND SCHEDULE hereto
(Landlord's fixtures and fittings)
1. Gas central heating boiler and radiators including
controls in offices and toilet areas
2. Recessed fluorescent light fittings in offices and
toilet areas
3. Vinyl floor covering in toilet areas
4. Wiring conduit and outlets for production area
(excluding light fittings)
5. Toilets and hand basins in male and female toilet areas
THE THIRD SCHEDULE
(Services)
The Maintenance Charge shall include the following:-
(1) The reasonable cost of inspecting repairing
maintaining renewing replacing cleansing and keeping clean
and tidy any drains sewers or other services serving the
Estate together with all areas on the Estate to the west of
the Estate road coloured brown on the said plan except
any units let or available for letting to other tenants and
the Estate road coloured brown on the said plan until the
same shall become a highway maintainable at public expense
and the fences walls gates and other boundary structures
and other common facilities provided by the Landlord for
the common use and enjoyment of the Tenant's and other
occupiers of the Estate
(2) The reasonable cost of cleaning:-
(i) the gutters of the demised premises and gutters
shared with adjoining or adjacent premises
(ii) the exterior of the glazing (including frames) of
the demised premises and other premises on the Estate and
(iii) the brickwork cladding or other external finishes
of the demised premises and other premises on the Estate
<PAGE> 41
(3) The reasonable cost of inspecting and maintaining the
landscaped areas and hedges on that part of the Estate which
lies to the West of the Estate road coloured brown on the
said plan
(4) The reasonable cost of external decoration to
the demised premises and other premises on the Estate in the
event that the Landlord elects to carry out such work itself
(5) Without prejudice to paragraphs (1) (2) (3) and (4) of
this Schedule the reasonable cost of insurance repair
maintenance rebuilding renewing making lighting cleansing
and decoration of any parts of the Estate which in the
Landlord's or the Landlord's Managing Agents' opinion (in
either case acting reasonably) benefit more than one tenant
of the Landlord but are not the specific responsibility of
any one tenant
(6) The payment by the Landlord of any rates water rates
or other outgoings which in the Landlord's or
the Landlord's Managing Agents' reasonable opinion benefit
the Estate or any part thereof and which do not fall to be
paid by any other tenant on the Estate
(7) The reasonable cost of employment of any staff as may be
reasonably necessary to perform the services set out in this
Schedule on the Estate including periodical payments in
respect of National Health and Insurance Payments or similar
or ancillary payments required by statute to be made by the
Landlord in respect of any such staff and any reasonable
benefits paid by the Landlord to any such staff as a
condition of employment
(8) The carrying out of all works on the Estate which are
not the specific responsibility of any one tenant (including
without prejudice to the generality of the foregoing car
parking spaces for which an exclusive right is given to any
one tenant) and which shall be reasonably necessary to
comply with and the doing of anything which the Landlord or
the Landlord's Managing Agents consider necessary or prudent
to comply with or to contest the incidence of any
requirements under the Factory Act 1961 the Offices Shops
and Railway Premises Act 1963 the Fire Precautions Act 1971
the Town and Country Planning Acts 1971 to 1977 and the
Health and Safety at Work Act 1974 and in any other
legislation or order or instrument deriving validity from
any of them and any Act or Acts for the time being in force
amending or replacing the same and any future legislation or
order or instrument as aforesaid of the like nature or
effect
<PAGE> 42
(9) The provision repair maintenance and updating of Estate
sigh boards
(10) The payment of proper and reasonable management and
other professional costs and expenses reasonable incurred
by the Landlord from time to time by virtue of or in
relation to any matter provided for in this Lease and the
employment of any accountant solicitor or other
professional person for any proper or reasonable purpose
connected with the management of the Estate
(11) The enforcement of any regulations relating to the use
of the Estate or any part thereof and the preparation and
enforcement of any other regulations which may be made by
the Landlord of the Landlord's Managing Agents to amend
replace or extend the same unless the same can be
recovered from any other Tenant or occupier on the Estate
provided always that the Landlord will use its best
endeavours to pursue in the first instance such tenant or
occupier in default
(12) The reasonable provision repair maintenance and
replacement of such vehicles equipment plant tools and
materials as the Landlord or the Landlord's Managing
Agents may consider reasonably necessary for the provision
of services or the repair improvement and maintenance of
the Estate
(13) The provision maintenance and renewal of such other
reasonable services facilities or amenities or the
carrying out of such works to the Estate and its
appurtenances and the effecting of such insurances
in respect of third party and property owners' risks and
otherwise as the Landlord or the Landlord's Managing Agents
shall from time to time consider necessary or desirable in
accordance with principles of good estate management for the
use enjoyment or benefit of the Tenant jointly with other
tenants on the Estate
(14) The cost of provision of a skip service and of
providing and renewing rubbish bins and the periodical
refuse collection charged to or undertaken by the
Landlord
(15) The current rental value from time to time (as
certified by the Landlord's surveyor or valuer by reference
to other rentals payable for units on the Estate whose
certificate shall be final and binding upon the parties
hereto) of premises on the Estate provided for use by the
Landlord as may be reasonably necessary for the
<PAGE> 43
general management by the Landlord of the Estate and of
premises for reception facilities or for any other facility
made available by the Landlord as may be reasonably
necessary for the mutual use and benefit of the Tenant and
other tenants on the Estate together with the reasonable
cost of heating and lighting all such premises whether or
not the Tenant shall make use of such facilities
(16) The provision (if considered appropriate by the
Landlord) of any reserve fund reasonably set aside by the
Landlord for payment of any future liability in respect of
any of the foregoing Clauses Provided that all sums
allocated to such reserve fund shall be held by the Landlord
in a designated account separate from its own monies upon
trust to apply the same and any interest accruing to such
account for the purpose of the Estate
THE COMMON SEAL of L.C.P. DEVELOPMENTS LIMITED
was hereunto affixed in the presence of :-
[seal]
/s/ [SIG]
Director
/s/ [SIG]
Secretary
<PAGE> 44
DEED OF VARIATION made the Twenty first day of December 1992
1. PARTICULARS
Landlord
1.1 LLOYDS BANK PLC (as trustee for the SCHRODER EXEMPT PROPERTY UNIT TRUST)
whose registered office is at 71 Lombard Street, London EC3.
Tenant
1.2 THE GALILEO COMPANY LIMITED (Company Registration No. 2143570) whose
registered office is at Galileo Centre Europe, Windmill Hill, Swindon
SN5 9NX.
The Leases
1.3 Underleases of the Premises (as hereinafter defined) both made the 23rd
day of December, 1987 between L.C. Developments Limited (1) the Tenant
(2).
The Premises
1.4 Unit 6 (formerly 2CIII) and Unit 7 (formerly 2CII), Marshall Road,
Hillmead, Swindon, Wiltshire.
2. DEFINITIONS AND INTERPRETATIONS
In this Deed: The words and expressions in Clause 1 above shall have the
meanings specified therein and
2.1 The "Landlord" includes the person in whom the reversion immediately
expectant on the determination of the term is for the time being vested.
2.2 The "Tenant" includes its successors in title.
2.3 If the "Landlord" or the "Tenant" is at any time more than one person
its obligations shall be joint and several obligations of such persons.
2.4 The "Leases" includes all or any deeds and documents supplemental to the
Leases whether or not expressed to be so.
2.5 Words importing one gender import any other gender words importing the
singular import the plural and vice versa.
2.6 The clause headings shall not be taken into account for the purposes of
its construction or interpretation.
2.7 This deed of variation may be executed in any number of counterparts all
of which taken together shall constitute one and the same agreement
<PAGE> 45
2
and any party may enter into this deed of variation by executing a
counterpart.
3. RECITALS
A. This deed is supplemental to the Leases by which the Premises were
demised for a term of 24 years from the 29th September, 1987 ("the
Term") subject to the payment of the rent reserved by and the observance
and performance of the covenants and the conditions on the tenant's part
contained in the Leases.
B. The reversion immediately expectant on the determination of the term
granted by the Leases is vested in the Landlord.
C. The unexpired residue of the term granted by the leases is vested in the
Tenant.
D. The Landlord and Tenant have agreed that the Leases should be varied as
set out below.
NOW THIS DEED WITNESSETH as follows:
1. The Landlord and the Tenant agree that the Leases are hereby varied so
that the site of the car-parking spaces at the rear of the buildings
comprised in the Premises are relocated and are henceforth to be in the
positions as shown coloured blue on Plan A (relating to Unit 6) and Plan
B (relating to Unit 7) as attached to this Deed of Variation.
2. To give effect to the variation referred to in Clause 1 above the
Landlord and Tenant confirm that the covenants and conditions contained
in the Leases (save as varied by this deed) shall continue in full force
and effect.
3. The Landlord and the Tenant agree immediately to endorse memoranda of
this deed on the counterpart and the original parts of the Leases
respectively and to supply to the other party as appropriate a certified
copy of such memorandum within fourteen days of the date of this deed.
IN WITNESS of which this deed has been executed and has been delivered on the
date which appears first on page 1.
<PAGE> 46
3
Signed as a deed by
Richard J
SIGNED as a deed by LLOYDS } as Attorney for Lloyds Bank Plc
BANK PLC as trustee for the } in the presence of
Schroder Exempt Property Unit }
Trust acting by its attorney } 51-53 New London Road,
in the presence of: } Chelmsford, Essex, CM2 0SY
(Bank Official)
THE COMMON SEAL of THE }
GALILEO COMPANY LIMITED was }
hereunto affixed in the }
presence of: } [SEAL]
<PAGE> 1
Exhibit 10.12
DATED 1996
- - --------------------------------------------------------------------------------
(1) THE GALILEO COMPANY
(2) LUCENT TECHNOLOGIES NETWORK SYSTEMS UK LIMITED
- - --------------------------------------------------------------------------------
U N D E R L E A S E
of
Premises known as OPTIMUS Windmill Hill Business Centre Swindon
THIS IS A NEW LEASE FOR THE PURPOSES OF
THE LANDLORD AND TENANT (COVENANTS) ACT 1995
- - --------------------------------------------------------------------------------
RICHARDS BUTLER
[LETTERHEAD]
<PAGE> 2
CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS ...................................................................... 1
2. DEMISE TERM RENT.................................................................. 2
3. TENANT'S COVENANTS................................................................ 3
3.1. RENT.............................................................. 3
3.2. INSURANCE......................................................... 4
3.3. OUTGOINGS......................................................... 5
3.4. MAINTENANCE AND REPAIR............................................ 5
3.5. INTERNAL DECORATION............................................... 6
3.6. EXTERNAL DECORATION............................................... 7
3.7. CLEANING.......................................................... 7
3.8. PARTY STRUCTURES ETC.............................................. 7
3.9. ENTRY............................................................. 8
3.10. YIELDING UP....................................................... 8
3.11. ALTERATIONS AND ADDITIONS......................................... 9
3.12. DISREPAIR AND BREACH OF COVENANT.................................. 10
3.13. SIGNS............................................................. 11
3.14. STATUTORY AND PLANNING REQUIREMENTS............................... 11
3.15. NOTICES........................................................... 12
3.16. OVERLOADING....................................................... 12
3.17. ENCROACHMENT...................................................... 12
3.18. NUISANCE AND GENERAL PROHIBITIONS................................. 13
3.19. USER.............................................................. 14
3.20. RIGHTS OF LIGHT................................................... 14
3.21. REFUSE............................................................ 15
3.22. DANGEROUS SUBSTANCES.............................................. 15
3.23. DRAINS............................................................ 15
3.24. CONTROL OF COMMON PARTS........................................... 16
3.25. DISPUTES.......................................................... 16
3.26. INDEMNITY......................................................... 16
3.27. SUPPORT........................................................... 18
3.28. SALE AND LETTING BOARDS........................................... 18
3.29. DILAPIDATIONS AND SECTION 146 LAW OF
PROPERTY ACT 1925............................................... 18
3.30. ALIENATION........................................................ 19
3.31. REGISTRATION OF DEALINGS.......................................... 25
3.32. LANDLORD'S COSTS.................................................. 25
3.33. VALUE ADDED TAX................................................... 25
3.34. REGULATIONS....................................................... 26
3.35. FIRE CONTROL...................................................... 26
3.36. DEDICATION........................................................ 26
3.37. INTEREST.......................................................... 26
3.38. OBLIGATIONS AFFECTING LANDLORD'S TITLE............................ 27
4. LANDLORD'S COVENANTS.............................................................. 27
4.1. QUIET ENJOYMENT................................................... 27
4.2. HEAD LEASE........................................................ 28
4.3. INSURANCE......................................................... 28
5. GALILEO'S COVENANTS............................................................... 29
6. PROVISOS .................................................................. 30
6.1. RE-ENTRY.......................................................... 30
6.2. CESSER OF RENT.................................................... 31
6.3. BASE RATE......................................................... 31
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6.4. ARREARS........................................................... 32
6.5. SETTLEMENT OF DISPUTES............................................ 32
6.6. EXCLUSION OF IMPLIED RIGHTS....................................... 32
6.7. UNRESTRICTED USE OF ADJOINING PROPERTY............................ 32
6.8. EXCLUSION OF LIABILITY............................................ 33
6.9. COMPENSATION...................................................... 33
6.10. PERPETUITY PERIOD................................................. 33
6.11. NO PLANNING WARRANTY.............................................. 34
6.12. OPTION TO DETERMINE............................................... 34
6.13. FREEDOM TO USE THE DEMISED PREMISES............................... 34
6.14. HEAD LEASE........................................................ 34
6.15. RELEASE OF COVENANTS.............................................. 35
6.16. REPRESENTATIONS................................................... 35
6.17. CERTIFICATE AS TO AGREEMENT FOR LEASE............................. 35
7. INTERPRETATION .................................................................. 36
SCHEDULE 1 Part I The demised premises....................................... 37
Part II Matters to which the demised premises
is subject...................................................... 37
SCHEDULE 2 Easements and Rights Granted...................................... 38
SCHEDULE 3 Exceptions and Reservations....................................... 39
SCHEDULE 4 Provisions for Rent Review........................................ 40
</TABLE>
<PAGE> 4
THIS LEASE made the day of 1996
BETWEEN:-
(1) THE GALILEO COMPANY (Co. No. 2143570) whose registered office is at the
Galileo Centre Europe, Windmill Hill, Swindon SN5 6PH ("the Landlord" which
expression where the context admits includes the estate owner for the time being
of the reversion of the premises hereby demised expectant on the term hereby
granted) of the one part and
(2) LUCENT TECHNOLOGIES NETWORK SYSTEMS UK LIMITED (Co. No. 2022888) whose
registered office is at Swindon Road, Malmesbury, Wilts, SN6 9NA ("the Tenant"
which expression where the context admits includes his successors in title) of
the other part
WITNESSES as follows
1. DEFINITIONS
"COMMON PARTS OF THE DEVELOPMENT" - All parts of the Development which are
provided by the Superior Landlord for common use and enjoyment by the tenants
and occupiers of the Development
"DEMISED PREMISES" - The building and premises formerly known as Optimus,
Windmill Hill Business Centre Swindon and described in Part I of the First
Schedule hereto
"DEVELOPMENT" - The estate and premises thereon constructed from time to time
the extent whereof is for the purpose of identification only delineated and
edged blue on the plan annexed to the Head Lease
"ENACTMENT" - any and every Act of Parliament already or hereafter to be passed
and any and every order regulation and bye-law already or hereafter to be made
under or in pursuance of any such Act
1.
<PAGE> 5
"HEAD LEASE" - A lease dated 2nd December 1987 between (1) St. Martins Property
Investments Limited and (2) the Landlord (then known as "Galileo Distribution
Systems Limited")
"LANDLORD'S SURVEYOR" - such person or persons appointed by the Landlord to
carry out various functions herein in respect of the demised premises
"SUPERIOR LANDLORD" - the person for the time being in whom the reversion
immediately expectant on the term created by the Head Lease shall be vested
"THE TERM" - the term of years hereby granted
"WORKING HOURS" - the hours of 8.30 a.m. to 6.00 p.m. on Mondays to Fridays
(except public holidays) and such other times or days as the Superior Landlord
shall decide pursuant to the Head Lease
2. DEMISE TERM RENT
IN CONSIDERATION of the rents hereinafter reserved and of the Tenant's covenants
hereinafter contained the Landlord HEREBY DEMISES with limited title guarantee
unto the Tenant ALL THOSE the demised premises TOGETHER WITH the rights set out
in the Second Schedule hereto but EXCEPTING AND RESERVING unto the Landlord and
its predecessors in title and those deriving title from the Landlord as
mentioned in the Third Schedule hereto and EXCEPTING AND RESERVING unto the
Superior Landlord the matters excepted and reserved by the Head Lease TO HOLD
the same unto the Tenant SUBJECT to all rights of light and air and all other
easements rights quasi-easements and covenants (if any) affecting the demised
premises at the date hereof and subject to the matters described in Part II of
the First Schedule hereto for a term of years commencing on the date hereof and
expiring on the 22nd day of March 2013 YIELDING AND PAYING therefor unto the
Landlord yearly during the Term and so in proportion for any less time than a
year FIRST (a) during the period from the commencement of the Term until the
24th day of March 1998 a YEARLY RENT of EIGHT HUNDRED AND SEVENTY THREE THOUSAND
SEVEN HUNDRED AND SIXTY THREE POUNDS (L873,763) and (b) during the remainder of
the Term such yearly rent as
2.
<PAGE> 6
shall from time to time be equivalent to the yearly rent (including for the
avoidance of doubt sums in respect of rent pursuant to paragraph 8 of the Fourth
Schedule to the Head Lease) payable under the Head Lease as varied from time to
time provided that if the Head Lease shall cease to exist then such other yearly
rent as shall be determined in accordance with the provisions of the Fourth
Schedule hereto all and any such yearly rent to be paid clear of all deductions
whatsoever by equal quarterly payments in advance on the usual quarter days in
every year SECONDLY by way of further rent on demand (a) the sum or sums which
the Landlord shall from time to time throughout the Term pay or have paid to the
Superior Landlord in respect of (i) the rent secondly reserved by the Head Lease
(ii) any increased premiums expended by the Superior Landlord occasioned by the
nature of the occupation or business of the Tenant or use of the demised
premises (b) the sum or sums incurred by the Landlord in respect of insurance
throughout the Term against (i) loss of the rents hereby reserved due to damage
or destruction caused by a risk against which insurance shall have been effected
under the terms of the Head Lease in an amount being the Landlord's Surveyor's
reasonable estimate of the rent first hereby reserved in respect of the demised
premises for the period of three years and (ii) any liability of the Landlord to
the public or third parties arising out of or in connection with any matters
involving or relating to the demised premises THIRDLY by way of further rent on
demand the sum or sums which the Landlord shall from time to time throughout the
Term pay or have paid to the Superior Landlord in respect of the rent thirdly
reserved by the Head Lease and FOURTHLY all and any other sums payable to the
Landlord by the Tenant pursuant to the provisions of this Lease
3. TENANT'S COVENANTS
THE Tenant HEREBY COVENANTS with the Landlord as follows:-
3.1. RENT
To pay to the Landlord the rents hereinbefore reserved and made payable without
any deduction whatsoever at the times and in the manner aforesaid
3.
<PAGE> 7
3.2. INSURANCE
3.2.1. Not without the previous consent in writing of the Landlord to effect any
further or other insurance in respect of the demised premises in duplication to
the cover effected by the Superior Landlord or the Landlord
3.2.2. To comply with all the recommendations and requirements made in or under
any policy of insurance relating to the demised premises by any insurer (unless
the Tenant elects to pay the additional premium required by the insurers for
continuing cover without such compliance)
3.2.3. To comply with all recommendations and requirements made by any
appropriate authority with regard to fire health safety or otherwise
3.2.4. As often as the demised premises shall be destroyed or damaged forthwith
to notify the Landlord and Superior Landlord in writing
3.2.5. Not to carry on or do on the demised premises any trade or act in
consequence of which the Superior Landlord would or might be prevented from
insuring the demised premises or any other adjoining property for the time being
owned by the Superior Landlord at the ordinary rate of premium or whereby any
insurance effected in respect of the demised premises or any such other property
would or might be vitiated or prejudiced and not without the written consent of
the Landlord (such consent not to be unreasonably withheld) to do anything
whereby any additional premium may become payable for such insurance and the
Tenant shall pay for any additional premium incurred by the Landlord or the
Superior Landlord as the case may be
3.2.6. That in the event of the demised premises or any adjoining or
neighbouring property for the time being owned by the Superior Landlord or any
part thereof being destroyed or damaged by any of the risks against which
insurance is effected pursuant to the Head Lease and the insurance money under
any insurance against the same effected thereon by the Superior Landlord being
wholly or partly irrecoverable by reason solely or in part of any act or default
of the Tenant or the servants
4.
<PAGE> 8
agents or visitors of the Tenant then and in every such case the Tenant will
forthwith pay to the Superior Landlord the whole or (as the case may require)
the irrecoverable proportion of the costs and expenses incurred by the Superior
Landlord (including legal costs and surveyor's fees and other professional costs
and fees and disbursements) of completely rebuilding and reinstating the same
3.3. OUTGOINGS
To pay and discharge all rates taxes duties charges assessments impositions and
outgoings whatsoever whether Parliamentary Parochial local or otherwise and
whether or not of an annual or recurring nature (other than any such arising in
respect of any development dealing with disposition of or in or ownership of the
reversion mediately or immediately expectant on the Term or the right to
receive the rent payable hereunder) which are now or which may at any time
during the Term be assessed charged or imposed upon or payable in respect of the
demised premises or any part thereof or on the owner or occupier thereof whether
the same shall be in the nature of those now in being or not and/or to refund to
the Landlord on demand (in case any of the same are payable charged or assessed
in respect of the demised premises in common with other premises) a fair and
proper proportion thereof attributable to the demised premises to be properly
and reasonably determined by the Landlord's Surveyor or as may be determined
under clause 3.3 of the Head Lease as appropriate
3.4. MAINTENANCE AND REPAIR
3.4.1. From time to time and at all times during the Term well and substantially
to repair cleanse maintain amend and keep in good and substantial repair and
condition the demised premises and the appurtenances thereof including (but
without limitation) all carpets therein (damage by any of the risks against
which insurance shall have been effected under the Head Lease (in excess of any
policy excesses) excepted unless the policy or policies of insurance effected by
the Superior Landlord shall be vitiated or payment of the policy moneys refused
by reason of the act or default of the Tenant or the servants
5.
<PAGE> 9
agents or visitors of the Tenant) and where necessary in order to comply with
such covenant to repair as aforesaid to renew or replace the demised premises or
any part or parts thereof if the same shall so require or become beyond repair
or if the same shall require renewal or replacement by reason of any defect
therein AND to inform the Landlord and the Superior Landlord in writing at once
if the Tenant becomes aware of any defect in the demised premises
3.4.2. Not to remove or dispose of any machinery or plant comprising landlord's
as opposed to tenant's fixtures and fittings whether or not in the course of
renewing or replacing the same (except to the extent that the same are comprised
in a permitted dealing with the demised premises) without the Landlord's
previous written consent such consent not to be unreasonably withheld
3.4.3. From time to time and at all times during the Term to maintain and repair
in good working order and if and when necessary (but subject to Clause 3.4.2
hereof) to renew or replace the smoke-extractor air-conditioning heating
ventilating electrical water and sanitary installations and all other plant
machinery and equipment within the demised premises and forming part thereof
(damage as aforesaid excepted) and to procure that the same are properly and
regularly serviced by qualified persons approved by the manufacturers of such
plant machinery and equipment
3.4.4. Not to overload the electrical wiring installations and apparatus in or
serving the demised premises and at all times during the Term to ensure that the
same comply with the standards terms and conditions laid down by the Institution
of Electrical Engineers and the regulations of the Electricity Supply Authority
3.5. INTERNAL DECORATION
In the last year of the first period and of every consecutive period of five
years of the Term and also in the last year of the Term (howsoever determined)
to paint polish paper or otherwise treat as appropriate all the internal parts
(usually or requiring to be painted polished papered
6.
<PAGE> 10
or otherwise treated) of the demised premises and all additions and fixtures
thereto with two coats at least of best quality paint best quality polish or
other suitable material of best quality PROVIDED ALWAYS that in the last year of
the Term such work of painting and decoration shall be in tints colours and
designs previously approved in writing by the Landlord PROVIDED FURTHER that the
obligation contained in this sub-clause shall not apply in the case of the last
year of the Term if the Tenant shall have performed such obligation less than 18
months prior to the end of the Term
3.6. EXTERNAL DECORATION
In the year 1999 and in the last year of every consecutive period of three years
of the Term and also in the last year of the Term (howsoever determined) to
paint or otherwise treat as appropriate all the external parts (usually or
requiring to be painted or otherwise treated) of the demised premises with two
coats at least of best quality paint or other suitable material of best quality
in tints colours and designs previously approved in writing by the Landlord
PROVIDED FURTHER that the obligation contained in this sub-clause shall not
apply in the case of the last year of the Term if the Tenant shall have
performed such obligation less than 18 months prior to the end of the Term
3.7. CLEANING
At all times during the Term to keep the demised premises in a clean and tidy
condition and at least once in every month to clean the windows and window
frames of the demised premises and as often as occasion may require to wash down
all tiles and other washable surfaces
3.8. PARTY STRUCTURES ETC.
To pay on demand to the Landlord the sum or sums from time to time paid by the
Landlord to the Superior Landlord pursuant to the provisions of clause 3.8 of
the Head Lease
7.
<PAGE> 11
3.9. ENTRY
3.9.1. To permit the Landlord and all others authorised by it at all reasonable
times on not less than 72 hours' prior notice (except in emergency) to enter
upon the demised premises to view the state of repair and condition thereof and
to take a Schedule of the Landlord's fixtures and of any defects or
dilapidations or to do anything which the Landlord reasonably considers
necessary or desirable for the performance by the Landlord of its obligations
hereunder or under the Head Lease
3.9.2. To permit the Landlord and the Superior Landlord and (if authorised in
writing by the Landlord or the Superior Landlord) the owners lessees or
occupiers of adjoining or adjacent premises and their respective agents servants
contractors licensees and workmen with all necessary appliances at all
reasonable times on not less than 72 hours' prior notice (and at all times
without notice in case of emergency) to enter upon the demised premises for all
or any of the purposes mentioned in the Third Schedule hereto and/or the Third
Schedule to the Head Lease
PROVIDED THAT the person or persons entering upon the demised premises pursuant
to Clauses 3.9.1 and 3.9.2 shall do as little damage to the demised premises as
possible and make good all damage to the demised premises occasioned by such
entry and shall cause as little inconvenience as reasonably possible and shall
comply with all reasonable requirements of the Tenant as to the security of the
demised premises including (but not by way of limitation) a requirement that an
authorised representative of the Tenant should accompany such person or persons
at all times
3.10. YIELDING UP
At the expiration or sooner determination of the Term quietly to yield up unto
the Landlord the demised premises together with all additions and improvements
thereto and all fixtures which during the Term may be affixed or fastened to or
upon the demised premises (tenant's fixtures and fittings only excepted) in such
state and condition as shall in all respects be consistent with the full
performance by the Tenant of its covenants herein contained and in case any of
the Landlord's fixtures and
8.
<PAGE> 12
fittings shall be missing worn out broken damaged or destroyed forthwith to
replace them with others of a similar character and of equal value and to remove
the Tenant's fixtures and fittings including every moulding sign writing or
painting of the name or business of the Tenant or other occupiers from the
demised premises and to make good all damage caused to the demised premises by
such removal
3.11. ALTERATIONS AND ADDITIONS
3.11.1. Not at any time during the Term to make any alterations or additions to
the electrical installation of the demised premises save in accordance with the
standards terms and conditions laid down by the Institution of Electrical
Engineers and the regulations of the Electricity Supply Authority and not to
make any substantial such alteration or addition without the prior written
consent of the Landlord such consent not to be unreasonably withheld
3.11.2. Not at any time during the Term to construct any new or additional
building or structure on the demised premises nor make any alteration or
addition whatsoever structural or otherwise (save as hereinafter provided) in or
to the demised premises or any part thereof or change the existing design
elevation or the external decorative scheme thereof or cut maim or remove any of
the walls horizontal or vertical partitions beams columns or other structural
parts thereof
3.11.3. Subject to prior compliance with the following conditions the Tenant may
carry out non-structural internal alterations to the demised premises:
3.11.3.1 The Tenant shall not interfere with any sewers drains wires cables
pipes channels watercourses conduits subways or other conducting media which may
at any time be or run under in or through the demised premises or cause access
to the same to be or become more difficult than it now is
9.
<PAGE> 13
3.11.3.2 The Tenant shall supply to the Landlord seven copies of all plans and
specifications and any further information which the Landlord may reasonably
require at the cost of the Tenant; and
3.11.3.3 The prior written consent of the Landlord shall have been obtained such
consent not to be unreasonably withheld or delayed PROVIDED ALWAYS that the
Tenant shall be entitled to erect or remove internal demountable partitioning
and/or effect minor plumbing alterations or additions without such consent as
aforesaid
3.11.4. That if the Tenant shall have made or shall make any addition or
alteration to the demised premises either before or after the commencement of
the Term then at the expiration or sooner determination thereof the Tenant will
(if so required by the Landlord or the Superior Landlord but not otherwise) at
the Tenant's own cost and expense reinstate and make good to the satisfaction of
the Landlord and the Superior Landlord the demised premises and restore the same
to the plan and design as if such addition or alteration (or such of them as may
be specified by the Landlord or the Superior Landlord) had not been made and
will pay the costs and expenses properly and reasonably incurred by the Landlord
and the Superior Landlord (including legal costs and surveyors fees and other
professional costs and fees) of and incidental to the superintendence of such
reinstatement and making good PROVIDED THAT the Tenant shall not be obliged by
this clause to reinstate any works carried out by another party not under
obligation to it nor before the date of its first occupation of the demised
premises and in particular (but without prejudice to the generality of the
foregoing) shall not be obliged to reinstate any works authorised by the Licence
dated 23rd August 1995 made between (1) St. Martins Property Investments Limited
and (2) the Landlord nor the conservatory constructed in the Central Courtyard
of the building
3.12. DISREPAIR AND BREACH OF COVENANT
3.12.1. Well and substantially to repair remedy reinstate and make good with all
practicable speed all defects dilapidations unauthorised works and other
breaches of covenant of which notice in writing shall be given
10.
<PAGE> 14
to or left on the demised premises for the Tenant by the Landlord commencing
work within six weeks (or sooner if requisite) after the giving or leaving of
such notice and then proceeding diligently
3.12.2. If the Tenant shall fail to comply with Clause 3.12.1 hereof to allow
the Landlord or the Superior Landlord with all necessary workmen tools materials
and appliances to enter the demised premises to repair reinstate and make good
the same and to pay to the Landlord or the Superior Landlord on demand the costs
and expenses thereof
3.13. SIGNS
Not to erect or install any hanging sign projecting sign or other sign aerial or
similar thing on the exterior of the demised premises PROVIDED that this
covenant shall not prevent the inscription on the exterior of the building
constructed on the demised premises and a sign at the entrance to the demised
premises from the estate road in each case in a form style and manner as shall
have been previously approved in writing by the Landlord (such approval not to
be unreasonably withheld) of the name or names of the person or persons carrying
on business therein together with the description of his her or their business
or occupation
3.14. STATUTORY AND PLANNING REQUIREMENTS
3.14.1. At all times during the Term to observe and comply in all respects with
the provisions and requirements of any and every Enactment so far as it may
relate to or affect the demised premises or any works additions or improvements
therein or thereto or the user thereof or the employment therein of any person
and to execute all works and provide and maintain all arrangements and make all
payments which by or pursuant to any Enactment are or may be directed or
required to be executed provided maintained or made at any time during the Term
and to indemnify the Landlord at all times against all actions proceedings
claims costs charges and expenses of or incidental to the execution of any works
or the provision or maintenance of any arrangements or payments so directed or
required as aforesaid or otherwise arising from any contravention of any
Enactment save insofar as the Landlord is able to recover in respect
11.
<PAGE> 15
of the same pursuant to the Landlord's insurance referred to in part (b)(ii) of
the rents secondly reserved hereunder
3.14.2. Not at any time during the Term to do or omit on or about the demised
premises any act or thing by reason of which the Landlord may under any
Enactment incur or have imposed upon it or become liable to pay any penalty
damages compensation costs charges or expenses
3.14.3. Not to make any application for planning permission relating to the
demised premises or any part thereof or the user thereof
3.15. NOTICES
Within seven days of the receipt of notice of the same (whether by advertisement
or not) to give full particulars to the Landlord of any permission notice order
or proposal for a notice or order made given or issued to the tenant owner or
occupier of the demised premises pursuant to any Enactment and if so required by
the Landlord to produce such permission notice order or proposal for a notice or
order to the Landlord AND ALSO without delay to take all reasonable or necessary
steps to comply with any such notice or order AND ALSO at the request of the
Landlord but at the joint and equal cost and expense of the Tenant and the
Landlord to make or join with the Landlord in making such objections or
representations against or in respect of any such notice order or proposal as
aforesaid as the Landlord shall think fit
3.16. OVERLOADING
Not to overload any floor or roof of the demised premises so as to exceed the
permitted loadings thereof
3.17. ENCROACHMENT
Not knowingly to permit or suffer any encroachment upon the demised premises or
the acquisition of any new right of light way drainage or other easement on over
or under the demised premises for the benefit of other property not being the
property of the Landlord and if any such
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encroachment or easement shall be made or acquired or threatened to be made or
acquired forthwith to give notice in writing thereof to the Landlord and at the
joint and equal cost of the Landlord and the Tenant to do all such things as may
be necessary to prevent the making of such encroachment or the acquisition of
such easement or right PROVIDED ALWAYS that if the Tenant shall omit or neglect
to do all such things as aforesaid it shall be lawful for the Landlord or any
persons authorised by it to enter the demised premises and to do the same and
any expenses so incurred by the Landlord shall be repaid to the Landlord by the
Tenant on demand
3.18. NUISANCE AND GENERAL PROHIBITIONS
3.18.1. Not to do or permit to be done anything in the demised premises which
may in the reasonable opinion of the Landlord be prejudicial or detrimental to
the Landlord or be or become a nuisance annoyance or cause damage or
inconvenience to the Landlord or its tenants or the owners tenants or occupiers
of adjoining or nearby premises
3.18.2. Not to use the demised premises or any part thereof for any sale by
auction exhibition show or spectacle or for residential purposes or for any
illegal or immoral purpose or for any noxious offensive or noisy trade or
business
3.18.3. Not to use any radio or other sound producing apparatus so as to be
audible from outside the demised premises
3.18.4. Not without the Landlord's prior written consent (such consent not to be
unreasonably withheld) to install or use in the demised premises any equipment
which might (by the emission of any radiation vibration or otherwise) interfere
with any equipment which may be installed or used in any other premises in the
Development PROVIDED THAT this sub-clause shall not impose on the Tenant any
liability to the Landlord or any third party greater than that implied by the
common law should any equipment so installed or used in any other premises in
the Development be of an unusually or especially sensitive nature
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3.18.5.1 Not without the Landlord's prior written consent (such consent not to
be unreasonably withheld) to install in the demised premises any paraffin
burning apparatus whether for heating purposes or otherwise nor cause the
emission of any smoke effluvia vapour grit smell or odour from any apparatus on
the demised premises
3.18.5.2 Subject to the provisions of 3.18.5.1 on a written notice being served
by the Landlord requiring the abatement of any emission of smoke effluvia vapour
grit smell or odour to abate such emission accordingly as soon as possible
thereafter
3.18.6. To pay on demand all costs charges and expenses incurred by the Landlord
in abating a nuisance caused by the Tenant or his servants agents or visitors
and in executing all such works as may be necessary for abating such a nuisance
whether or not in obedience to a notice served by the local authority
3.19. USER
Not to use the demised premises or any part thereof except as High Class
Professional or Commercial Offices with ancillary car parking or for any purpose
comprising a use which may be carried on without detriment to the Landlord's
reversion or the amenity of the Development within Class B1 of the Schedule to
the Town and Country Planning (Use Classes) Order 1987
3.20. RIGHTS OF LIGHT
Not to stop up darken or obstruct any windows or lights belonging to the demised
premises or any other buildings belonging to the Landlord nor to give to any
third party any acknowledgment that the Tenant enjoys the access of light to any
of the windows or openings in the demised premises by the consent of such third
party nor to pay to such third party any sum of money nor to enter into any
agreement with such third party for the purpose of inducing or binding such
third party to abstain from obstructing the access of light to any of such
windows or openings And that in case the owners of adjacent land or buildings do
or threaten to
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do anything which obstructs the access of light to any of the windows or
openings in the demised premises the Tenant will give immediate notice thereof
to the Landlord and will adopt such means as may be reasonably required or
deemed proper for preventing the same And in the event of a breach by the Tenant
of this covenant it shall be lawful for the Landlord or its agents and others to
enter upon the demised premises and take such action and bring such proceedings
as the Landlord may think fit in the name of the Tenant and at the expense of
the Tenant for the purpose of remedying the same the person or persons entering
upon the demised premises pursuant to this Clause 3.20 complying with all
reasonable requirements of the Tenant as to the security of the demised premises
including (but not by way of limitation) a requirement that an authorised
representative of the Tenant should accompany such person or persons at all
times
3.21. REFUSE
3.21.1. Not to form a rubbish dump on the demised premises or in the common
parts of the Development and to keep all rubbish and refuse within the demised
premises and in properly covered receptacles to the reasonable satisfaction of
the Landlord
3.21.2. To comply with all reasonable directions and regulations made by the
Landlord from time to time relating to the removal storage and disposal of
rubbish and refuse
3.22. DANGEROUS SUBSTANCES
Not to bring into the demised premises or to place or store in or about the
demised premises any substance or material of a radioactive explosive dangerous
offensive combustible or inflammable nature save as may be agreed with the
Landlord (such agreement not to be unreasonably withheld)
3.23. DRAINS
Not to stop up or obstruct in any way whatsoever or permit oil grease or other
noxious or deleterious matter or substance to enter the drains
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sewers and watercourses serving the demised premises and to employ such plant
for treating any noxious or deleterious effluent before permitting the same to
enter such drains sewers and watercourses as may be reasonably required by the
Landlord from time to time in accordance with the best modern practice and in
the event of any such obstruction or injury being caused to the drains sewers or
watercourses forthwith to make good all such damage to the reasonable
satisfaction of the Landlord
3.24. CONTROL OF COMMON PARTS
3.24.1. Not to obstruct the common parts of the Development in any manner
whatsoever
3.24.2. Not to use the common parts of the Development for the parking of
vehicles
3.24.3. To co-operate with the Superior Landlord so as to prevent the common
parts of the Development from being obstructed or being used for the parking of
vehicles
3.25. DISPUTES
To permit all questions and disputes relating to easements rights privileges or
boundaries arising with the owner or occupier of any property adjoining adjacent
to or opposite the demised premises to be settled by the Superior Landlord under
the terms of clause 3.25 of the Head Lease and to indemnify the Landlord with
any expense incurred by the Landlord pursuant to such clause 3.25
3.26. INDEMNITY
3.26.1. Save to the extent that the Landlord is able to recover in respect of
the same pursuant to the Landlord's insurance mentioned in part (b)(ii) of the
rents secondly reserved hereunder to indemnify the Landlord in respect of all
actions proceedings liability costs claims and demands which might be instituted
incurred or made by any person
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(including officers and employees of the Landlord) or any competent authority by
reason of:
3.26.1.1 Any injury to or the death of any person or damage to any property
moveable or immoveable caused by or in any way arising out of the user of the
demised premises or the state of repair and condition of the demised premises or
anything therein arising from any act neglect or default of the Tenant or caused
by or in any way arising out of the execution by or on behalf of the Tenant of
any works at or alterations or additions to the demised premises
3.26.1.2 Any interference or alleged interference or obstruction of any right or
alleged right of light air drainage or other right or alleged right now or
hereafter existing for the benefit of any adjoining or neighbouring property
arising from any act or neglect of the Tenant its agents employees or visitors
3.26.1.3 Any stoppage of or damage to the sewers drains pipes wires cables or
other conveniences and services used in common with the owner tenant or occupier
of any adjoining neighbouring or nearby property arising from any act or neglect
of the Tenant its agents employees or visitors
3.26.2. Without prejudice to any covenant or liability of the Tenant under this
Lease to indemnify the Landlord against all liability to any present or future
tax duty charge assessment or imposition (whether Parliamentary Parochial local
or otherwise and whether in the nature of those now in being or not) and all
costs and expenses in relation thereto which may be payable in respect of the
reversion to this Lease by virtue of any works development or change of use
carried out by the Tenant (or any sub-tenant) in or to the demised premises or
any part thereof and also against any further liability to such taxation flowing
from this indemnity or any payment pursuant to it
3.26.3. To pay and make good to the Landlord all and every loss and damage
incurred or sustained by the Landlord as a consequence of every breach or non
observance of the Tenant's covenants herein contained and
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to indemnify the Landlord from and against all actions proceedings costs claims
and demands thereby arising
3.27. SUPPORT
Not to do anything on the demised premises which would remove support from any
adjoining premises or endanger such premises in any way
3.28. SALE AND LETTING BOARDS
To permit the Landlord and the Superior Landlord to enter upon the demised
premises and affix and retain without interference upon any part thereof at any
time during the last six months of the Term a notice for letting the demised
premises and at any time during the Term for selling or disposing of the
Landlord's or the Superior Landlord's interest therein and during such periods
to permit all persons with authority from the Landlord or the Superior Landlord
at all reasonable times during the daytime upon reasonable notice to enter and
view the demised premises or any part thereof the person or persons entering
upon the demised premises pursuant to this sub-clause complying with all
reasonable requirements of the Tenant as to security including (but not by way
of limitation) a requirement that an authorised representative of the Tenant
shall accompany such person or persons at all times
3.29. DILAPIDATIONS AND SECTION 146 LAW OF PROPERTY ACT 1925
To pay all reasonable costs charges and expenses (including solicitors' costs
and surveyors' fees) properly incurred by the Landlord:
3.29.1. In or in contemplation of the preparation and service of any notice
pursuant to or any proceedings under Sections 146 and 147 of the Law of Property
Act 1925 notwithstanding that forfeiture may be avoided otherwise than by relief
granted by the Court
3.29.2. In relation to the preparation and service of any Notice and/or Schedule
of Dilapidations whether during or after the expiration or prior determination
of the Term
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3.29.3. In the supervision or superintendence of any works to be carried out in
pursuance of any Notice and/or Schedule of Dilapidations whether or not such
works shall be carried out during or after the expiration or prior determination
of the Term
3.30. ALIENATION
3.30.1.1 Not to assign mortgage or underlet the whole or any part of the demised
premises at any time prior to the 1st July 1996
3.30.1.2 Not to assign mortgage or charge part only of the demised premises
3.30.1.3 Not to underlet part with or share the possession or occupation of the
whole or any part of the demised premises (save as hereinafter provided)
3.30.2. Not to assign mortgage or charge the whole of the demised premises
without the prior written consent (a) of the Landlord which (subject to the
satisfaction of the relevant conditions referred to in clause 3.30.3) shall not
be unreasonably withheld or delayed and as a condition of granting its consent
to any assignment of the demised premises it shall not be unreasonable for the
Landlord to require the Tenant to enter into an Authorised Guarantee Agreement
with the Landlord (such Authorised Guarantee Agreement to be in a form compliant
with s.16 Landlord and Tenant (Covenants) Act 1995 and reasonably acceptable to
the Landlord) that the relevant assignee will duly observe and perform the
Tenant's covenants contained in this Lease during such period only as such
assignee remains the Tenant hereunder and (b) of the Superior Landlord in
accordance with the provisions of clause 3.30.5.1.2 of the Head Lease
3.30.3. It shall not be unreasonable for the Landlord to withhold its consent to
any proposed assignment if any of the conditions ("the relevant conditions") set
out below shall not have been satisfied:-
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3.30.3.1 that the proposed assignee is not a person or company connected with
the Tenant within the meaning of Section 839 of the Taxes Act 1988 and a
proposed assignee shall be deemed for the purposes of this clause to be
connected with the Tenant in relation to any assignment or proposed assignment
if such person is dealing with the Tenant with regards to such proposed
assignment otherwise than at arms length
3.30.3.2 that (where the proposed assignee is a limited liability company whose
shares are publicly traded on a recognised stock exchange in the United Kingdom)
the audited reported profits after tax of such proposed assignee in each of the
three years immediately preceding the date of the Tenant's request to the
Landlord for consent to assign have exceeded three times the yearly rent first
reserved by this Lease
3.30.3.3 that at the date of the Tenant's request to the Landlord for consent to
assign the Yearly Rent and all sums due and payable by the Tenant to the
Landlord hereunder have been paid up to date and the covenants on the part of
the Tenant herein contained have been observed and performed in all material
respects to the reasonable satisfaction of the Landlord
3.30.3.4 that the Landlord shall be reasonably satisfied that the market value
and marketability of the Landlord's interest in the demised premises with the
benefit of the Lease will not be adversely affected in a material way by the
assignment of this Lease to the proposed assignee when compared with the
position immediately prior to such assignment
3.30.3.5 that (where the proposed assignee is not a limited liability company
whose shares are publicly traded on a recognised stock exchange in the United
Kingdom) the proposed assignee is able:-
(i) to establish that net profits after tax:-
(a) for each of the last three consecutive periods of account for which the
accounts of the proposed assignee were prepared immediately preceding the
application for consent to the proposed assignment exceed
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the yearly rent hereby first reserved at the rate then passing multiplied by
three; and
(b) for the five consecutive periods of account for which the accounts of the
proposed assignee are prepared immediately preceding the application for the
consent to the proposed assignment exceed in the average the yearly rent hereby
first reserved at the rate then passing multiplied by a factor of two; or
(ii) to procure as a party to the Licence to Assign a guarantor (reasonably
acceptable to the Landlord) for the obligations of the proposed assignee
3.30.4. The Landlord shall act reasonably in exercising its powers under this
Clause 3.30 but in the event that there shall be any dispute between the
Landlord and the Tenant as to whether the Landlord has acted reasonably in
determining whether those conditions referred to in sub-clauses 3.30.3.3 to
3.30.3.5 (inclusive) shall or shall not have been satisfied the Tenant shall
have an unrestricted right to have the matter in dispute referred for
determination to an independent surveyor (hereinafter called "the Assignment
Expert") agreed upon by the Landlord and the Tenant or failing agreement within
10 days of one party notifying the other in writing that a dispute has arisen
appointed on the application of either the Landlord or the Tenant by the
President for the time being or other appropriate officer having power from time
to time to make such appointments of the Royal Institution of Chartered
Surveyors (hereinafter called "the President")
3.30.5. The Assignment Expert shall act as an expert and not an arbitrator and
he shall afford the Landlord and the Tenant a reasonable opportunity of making
written representations to him as to the matter in dispute and the Assignment
Expert shall afford the Landlord and the Tenant an opportunity to comment in
writing to him upon the representations of the other. Whilst the Assignment
Expert may consider such representations and comments in arriving at his
decision he shall not in anyway be bound or fettered thereby and shall be
entitled to determine the issue in dispute on the basis of his own knowledge and
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judgment and in reaching such judgment he shall be entitled to seek the
professional opinion of independent third parties and to rely upon such opinions
as expressed to him
3.30.6. Once the Assignment Expert has been appointed the Landlord and the
Tenant shall each use all reasonable endeavours to see that the determination of
the issue in dispute is proceeded with as expeditiously as possible and the
Assignment Expert shall use all reasonable endeavours to give his decision as
speedily as possible but the Assignment Experts decision as to any matter
referred to him for determination shall as between the Landlord and the Tenant
be conclusive as to the matter in dispute
3.30.7. The fees of the Assignment Expert shall be paid by the Landlord and the
Tenant in such proportions as the Assignment Expert shall direct or failing any
such direction by the Landlord and the Tenant equally
3.30.8. If the Assignment Expert shall fail to reach a decision and shall give
notice thereof to the Landlord and the Tenant within thirty days after his
appointment or such longer period as the Landlord and the Tenant may from time
to time agree or if he shall relinquish his appointment or die or if it shall
become apparent that for any reason he will be unable to complete his duties
hereunder either the Landlord or the Tenant may apply to the President for a
substitute expert to be appointed in his place which procedure may be repeated
as many times as necessary
3.30.9. If the President shall for any reason not be available or be unable or
unwilling to make any appointment applied for pursuant to this clause at the
time of application therefor the appointment may be made by the Vice-President
or such other officer of the Royal Institution of Chartered Surveyors as is then
available and able and willing to make such appointment
3.30.10. Not otherwise than by assignment or underletting permitted under this
Clause 3.30 or as permitted by clause 3.30.12 hereof to part
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with or share possession or occupation of the whole or any part of the demised
premises or grant to third parties any rights over the demised premises
3.30.11. On an assignment to obtain a direct covenant by deed by the proposed
assignee:-
3.30.11.1 in favour of the Landlord to observe and perform the covenants of the
Tenant and the conditions in this Lease whilst the same is vested in the
assignee in such form as the Landlord may reasonably require and (if the
Landlord reasonably requires) guarantors reasonably acceptable to the Landlord
for the assignee to enter into a direct covenant by deed with the Landlord in
such form as the Landlord may reasonably require
3.30.11.2 in favour of the Superior Landlord in accordance with the provisions
of clause 3.30.5.1.2 of the Head Lease
3.30.12. Notwithstanding the provisions of Clause 3.30.10 the Tenant (being a
company) may share the occupation of the demised premises with any company which
is a member of the same group of companies (as defined in Section 42(l) of the
Landlord and Tenant Act 1954) as the Tenant Provided always that no demise or
other interest in the demised premises is thereby created or granted and the
Tenant does not thereby part with possession of the demised premises
3.30.13.1 In this sub-clause the expression "Permitted Undertenant" shall mean a
respectable and responsible person of good financial standing
3.30.13.2 Not to create any sub-lease of the whole or part of the demised
premises upon payment of a premium nor at a rent of less than the full market
rent obtainable without taking a fine or premium in respect of the premises to
be Underlet
3.30.13.3 Not to create any sub-lease of part of the demised premises save in
respect of a complete floor or complete floors of the demised premises so that
no floor of the demised premises shall be sub-divided in any way
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3.30.14.1 Not to create any sub-lease save by instrument in writing containing:-
(a) unqualified covenants on the part of the sub-tenant that the sub-tenant will
not assign mortgage or charge part only of the sub-let premises and will not
underlet or part with or share the possession or occupation of the whole or any
part thereof (in each case by way of absolute prohibition save as hereinafter
provided) and
(b) a covenant on the part of the sub-tenant that the sub-tenant will not (i)
assign the whole of the premises thereby demised without the prior written
consent of the Landlord under this Lease (such consent not to be unreasonably
withheld in the case of a respectable and responsible assignee of good financial
standing who has entered into a direct covenant with the Landlord to be bound by
and perform and observe the covenants and stipulations contained in the
sub-lease to be assigned to him) and will not mortgage or charge the said
premises without the prior written consent of the Landlord under this Lease
(such consent not to be unreasonably withheld) and (ii) assign the whole or
mortgage or charge the premises thereby demised without the prior written
consent of the Superior Landlord in accordance with the provisions of clause
3.30.5.1.3 (c) of the Head Lease
Provided that the Tenant may permit any Permitted Undertenant to share
occupation of any premises so sub-let to it in the like manner as provided in
sub-clause 3.30.12 (mutatis mutandis)
(c) similar agreements covenants and stipulations (mutatis mutandis) to those
contained in the Head Lease including provisions for rent reviews (at least as
often as those therein contained to the best yearly market rent obtainable
without taking a premium) as to the dates on which the rent reserved by the Head
Lease is to be reviewed
(d) a covenant by the undertenant for the payment of a service charge under
which the undertenant contributes a fair proportion of the
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cost of the provision of services by the Superior Landlord pursuant to the Head
Lease
3.30.15. Not to underlet the demised premises as a whole or in part to any
person who is not a Permitted Undertenant
3.30.16. Not without the prior written consent of the Landlord such consent not
to be unreasonably withheld or delayed to underlet the demised premises as a
whole or in part to a Permitted Undertenant
3.31. REGISTRATION OF DEALINGS
At the cost of the Tenant within fourteen days next after the execution of every
assurance assignment underletting mortgage or charge affecting the demised
premises to give notice thereof in writing with particulars thereof to the
Landlord and deliver to the Landlord a certified copy of the instrument
effecting the same and within fourteen days after the grant of Probate or
Letters of Administration in the case of a deceased tenant to produce the same
to the Landlord paying at the same time to the Landlord a registration fee of
twenty pounds for each such instrument or transaction
3.32. LANDLORD'S COSTS
To pay the proper and reasonable legal charges surveyors' or architect's fees
and any other costs and expenses incurred by the Landlord (including stamp duty
on licences and counterparts) resulting from all applications by the Tenant for
any consent or approval required by this Lease including those incurred in cases
where consent or approval is refused or the application is withdrawn
3.33. VALUE ADDED TAX
3.33.1. To pay Value Added Tax on all supplies received by the Tenant under or
in connection with this Lease.
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3.33.2. To pay to the Landlord an amount equivalent to any Value Added Tax on
supplies received by the Landlord under or in connection with this Lease to the
extent that the Landlord is unable to recover or obtain credit for the same.
3.33.3. All references in this Lease to amounts (including rent) payable by the
Tenant to the Landlord are references to such amounts exclusive of Value Added
Tax and the Tenant shall pay to the Landlord in addition to any such amount any
Value Added Tax payable on that amount.
3.34. REGULATIONS
To observe and perform and to ensure that the servants agents workmen and
visitors of the Tenant shall observe and perform any and all reasonable
regulations and instructions from time to time made or given to the Tenant in
writing by the Landlord in respect of the conduct and use of the Development and
in particular the conditions relating thereto set out in the Second Schedule
hereto
3.35. FIRE CONTROL
To keep any fire alarm and fire prevention and control apparatus installed in
the demised premises open to the inspection and maintained to the reasonable
satisfaction of the Landlord and not to obstruct the access to or means of
working such apparatus
3.36. DEDICATION
Not to make any objection to the dedication by the Superior Landlord of any part
of the common parts of the Development for public use and to consent to such
dedication if the consent of the Tenant is required
3.37. INTEREST
3.37.1. If and so often as any rent or other moneys due from the Tenant under
this Lease shall be unpaid for fourteen days after the due date the Tenant shall
pay (in the case of rent by way of additional rent) interest
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thereon (as well after as before any judgment) from the due date until payment
at a rate equivalent to 4% above the Base Rate for the time being declared by
Lloyds Bank PLC (or other clearing bank for the time being of the Landlord)
3.37.2. If the Landlord (as tenant pursuant to the Head Lease) becomes
liable to pay interest to the Superior Landlord pursuant to paragraph 8 of the
Fourth Schedule to the Head Lease then on the day that the Landlord is due to
pay such interest to the Superior Landlord the Tenant shall pay to the Landlord
an equivalent sum of money
3.38. OBLIGATIONS AFFECTING LANDLORD'S TITLE
To observe and perform:-
3.38.1. all obligations imposed on the Landlord in respect of the demised
premises arising from the matters specified in Part II of the First Schedule
3.38.2. all the covenants on the part of the Landlord and the conditions
contained in the Head Lease so far as they relate to the demised premises and
are not expressly assumed by the Landlord in this Lease or otherwise varied
herein
4. LANDLORD'S COVENANTS
THE Landlord HEREBY COVENANTS with the Tenant:-
4.1. QUIET ENJOYMENT
That the Tenant paying the rents and other moneys and performing and observing
the covenants agreements conditions and stipulations as herein provided may
peaceably and quietly hold and enjoy the demised premises for the Term without
any interruption from or by the Landlord or any person lawfully claiming through
under or in trust for it
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4.2. HEAD LEASE
4.2.1. To pay the rents reserved by the Head Lease and to perform so
far as the Tenant is not liable for such performance under the covenants on its
part contained in this Lease the lessee's covenants and conditions contained in
the Head Lease
4.2.2. At all times where necessary (and in any event upon the reasonable
request of the Tenant) and subject to the Tenant indemnifying the Landlord in
respect of all costs and disbursements thereby reasonably incurred to take such
action as is required to ensure the Superior Landlord's compliance with and to
use reasonable endeavours to enforce any breach of the Superior Landlord's
obligations under the Head Lease (and in particular, but without prejudice to
the generality of the foregoing, the obligations in respect of insurance and
services contained in clauses 4.2 and 4.3 of the Head Lease)
4.3. INSURANCE
4.3.1. Subject to the Landlord receiving the same from the Superior
Landlord in response to the Landlord's request to produce to the Tenant as soon
as practicable upon written request a copy of the Superior Landlord's insurance
policy and the last premium renewal receipt or reasonable evidence of the full
terms of such policy and of the fact that the last premium has been paid
4.3.2. If so required to use reasonable endeavours (and at the cost of the
Tenant) to procure that the interest of the Tenant and its mortgagees (if any)
is noted or endorsed upon the said policy
4.3.3. To notify the Tenant of any material change in the risks covered or
in the terms of the said policy from time to time as soon as practicable after
the Landlord becomes aware of the same
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5. GALILEO'S COVENANTS
THE Landlord (here meaning The Galileo Company only and not its successors in
title or assigns) hereby covenants with the Tenant:-
5.1. At the reasonable written request of the Tenant to use reasonable
endeavours (and subject to the Tenant fully indemnifying the Landlord in respect
of all costs expenses and disbursements and other liabilities it may thereby
reasonably incur and subject (if reasonably required by the Landlord) to the
Tenant from time to time providing full and sufficient security as may be
required in respect of the same) to enforce (in so far as there may be any
subsisting rights capable of enforcement pursuant to the same) the confirmations
given by St. Martins Property Investments Limited in its letter dated 2nd
December 1987 (a copy of which is attached and marked G6.2) and to request an
assignment of rights and interest in the circumstances mentioned in paragraph 3
thereof and thereafter itself to take such reasonable action as may be
reasonably appropriate against the building contractors and/or firms or
companies mentioned in the said letter at the Tenant's reasonable request AND
FURTHER should the Landlord assign its interest in the demised premises to first
procure that St Martins Property Investments Limited issues a letter of
confirmation in the same terms as the said letter either to the assignee of the
Landlord's interest or to the Tenant directly
5.2. At the reasonable written request of the Tenant to use reasonable
endeavours (and subject to the Tenant fully indemnifying the Landlord in respect
of all costs expenses and disbursements and other liabilities it may thereby
reasonably incur and subject (if reasonably required by the Landlord) to the
Tenant from time to time providing full and sufficient security as may be
required in respect of the same) to enforce (in so far as there may be any
subsisting rights capable of enforcement pursuant to the same) on the Tenant's
behalf the warranties contained in the following agreements:-
5.2.1. Warranty Agreement dated 2nd December 1987 made between (1)
Watkins Payne & Partners and (2) Galileo Distribution Systems Limited
29.
<PAGE> 33
5.2.2. Warranty Agreement dated 2nd December 1987 made between (1) Bunyan
Meyer & Partners and (2) Galileo Distribution Systems Limited
5.2.3. Warranty Agreement dated 2nd December 1987 made between (1) The
Chinman Partnership and (2) Galileo Distribution Systems Limited
5.2.4. Warranty Agreement dated 2nd December 1987 made between (1) Covell
Matthews Wheatley Architects Limited and (2) Galileo Distribution Systems
Limited
6. PROVISOS
PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED THAT:
6.1. RE-ENTRY
Notwithstanding and without prejudice to any other remedy and power herein
contained or otherwise available to the Landlord if the rents or other moneys
hereby reserved or made payable or any part thereof respectively shall be unpaid
for fourteen days after becoming payable (whether formally or legally demanded
or not) or if any covenant agreement or obligation on the Tenant's part herein
contained shall not be performed or observed or if the Tenant shall permit any
execution or distress to be levied on any goods for the time being in the
demised premises or (being a company) shall enter into liquidation whether
compulsory or voluntary (not being merely a voluntary liquidation while solvent
for the purpose of amalgamation or reconstruction) or shall suffer a receiver or
an Administrator to be appointed by the Court pursuant to the Insolvency Act
1986 or (being an individual) shall propose a voluntary arrangement under the
Insolvency Act 1986 (or any statutory modification or re-enactment thereof
from time to time in force) or shall suffer a Bankruptcy Order under the same
Act or petition the Court for his own bankruptcy then and in any such case it
shall be lawful for the Landlord at any time thereafter to re-enter upon the
demised premises or any part thereof in the name of the whole and thereupon this
demise shall absolutely determine but without prejudice to
30.
<PAGE> 34
[LETTERHEAD - ST MARTINS PROPERTY INVESTMENTS LIMITED]
Galileo Distribution Systems Limited 2nd December 1987
PO Box 10
Speedbird House
Heathrow Airport (London)
Hounslow
Middlesex
Dear Sirs
OPTIMUS, WINDMILL HILL BUSINESS CENTRE, SWINDON
In consideration of the completion today of the Lease ("the lease") of the above
property it is hereby confirmed on behalf of this Company that:-
1. It will preserve safely any and all information and documentation
(including but without limitation Minutes of all relevant site or other
meetings concerning the same) and details of and relating to the terms of
engagement or appointment of:-
(a) the building contractors and,
(b) each of all of the firms or companies (including Watkins Payne &
Partners, Bunyan Meyer & Partners, the Chinman Partnership and
Covell Matthews Wheatley Partnership) concerned in any way with the
design or construction of the above property retained either by this
Company directly or by St Martins Property Corporation Limited on
behalf of this Company.
2. This Company will at the cost of your Company provide you with all such
information, documents, Minutes and details as aforesaid as shall be
required by you for the purpose of enforcing any claims that you may have
or seek to have against such building contractors and/or firms or
companies as aforesaid and that prior to destroying any of such
information, documentation Minutes and/or details as aforesaid this
Company will, if your Company so requires, hand over all of such to you
and
3. In the event of this Company assigning or disposing of its interest in the
above property and if requested by your Company this Company will assign
to you as beneficial owner (and/or will procure such assignment to you by
St Martins Property Corporation Limited) all rights and interests either
this Company or St Martins Property Corporation Limited may have against
such building contractors firms and/or companies subject to your Company
indemnifying us for all reasonable costs thereby incurred.
<PAGE> 35
- 2 -
4. This Company will enforce the provisions relating to making good defects
within the defects liability periods in the building contract relating to
the above property and will take such reasonable action or proceedings as
may be reasonably appropriate against the building contractors and/or
firms or companies as aforesaid with a view to enforcing against such
building contractors and/or firms or companies as aforesaid their
obligations to make good any defects or other faults in the above
property.
Yours faithfully
/s/ [SIG]
- - ------------------------
Secretary
<PAGE> 36
any right of action of the Landlord in respect of any then existing breach
non-observance or non-performance of the Tenant's covenants agreements or
obligations herein contained
6.2. CESSER OF RENT
If during the Term the demised premises or any part thereof or all means of
access thereto shall be destroyed or damaged by any of the risks against which
insurance is effected pursuant to the Head Lease so as to render the demised
premises or any part thereof unfit for occupation or use then (if the Tenant
shall have duly carried out the Tenant's obligations under sub-clauses 3.1 and
3.2 hereof and if no insurance of the demised premises or rents payable
hereunder shall have been vitiated or payment of the policy moneys refused in
whole or in part by some act or default of the Tenant his servants agents or
visitors) the rents hereby reserved or a fair and just proportion thereof
according to the nature and extent of the damage sustained shall be suspended
and cease to be payable as from the date of such destruction or damage until the
demised premises shall have been rebuilt or reinstated and made fit for
occupation and use and any dispute as to the extent proportion or period of such
suspension shall be determined by a single arbitrator to be appointed by the
Landlord and the Tenant and in case of difference by the President for the time
being of the Royal Institution of Chartered Surveyors in accordance with the
provisions of the Arbitration Acts 1950 to 1979 or any statutory modification
re-enactment or replacement thereof for the time being in force
6.3. BASE RATE
In the event of the Base Rate of Lloyds Bank PLC (or other bank for the time
being of the Landlord) being abolished and no alternative rate being presented
by law to replace the said Base Rate for the purpose inter alia of construing
existing leases then any reference to the said Base Rate shall have effect as if
there had been substituted from time to time for the Base Rate such rate of
interest which shall be most closely comparable with the said Base Rate such
rate of interest to be reasonably determined by the Landlord's Surveyor
31.
<PAGE> 37
6.4. ARREARS
Any moneys due to the Landlord from the Tenant under any covenant condition or
provision contained in this Lease shall be due as a debt from the Tenant to the
Landlord payable on demand and in the event of non-payment such moneys shall be
recoverable by distress or otherwise in the same way as rent in arrear
6.5. SETTLEMENT OF DISPUTES
Any dispute arising as between the Tenant and the tenant or occupier of any
other property of the Superior Landlord as to any easement right or privilege in
connection with the use of the demised premises and such other property or as to
the amount of any contribution towards the expenses of works to services used in
common with such other property shall be decided by the Superior Landlord's
Surveyor for the time being whose decision shall be binding on all parties (save
on any question of law) and whose costs shall be paid by such of the parties to
the dispute in such proportions as he shall decide
6.6. EXCLUSION OF IMPLIED RIGHTS
Nothing herein contained shall by implication of law or otherwise operate to
confer on the Tenant any easement right or privilege whatsoever over or against
any adjoining or other property of the Landlord (whether in the Development or
not) either for an estate in fee simple or for a term of years
6.7. UNRESTRICTED USE OF ADJOINING PROPERTY
The Tenant shall not be entitled to the benefit of any restrictions which the
Landlord or the Superior Landlord may have imposed or may hereafter impose on
any owner or lessee of any property not comprised in the demised premises
(whether in the Development or not) and nothing herein contained or implied
shall impose or be deemed to impose any restrictions on the use of any such
property or give the Tenant the right to enforce
32.
<PAGE> 38
or to have enforced or to prevent the release or modification of any covenant
agreement or condition entered into by any purchaser from or any lessee tenant
or occupier of the Landlord or the Superior Landlord in respect of such property
And that this demise shall not be deemed to include and shall not operate to
convey or demise any ways water mains sewers drains lights liberties privileges
easements rights or advantages whatsoever in through over or upon the property
of the Landlord or the Superior Landlord adjoining or near to the demised
premises save as may be expressly granted by this Lease
6.8. EXCLUSION OF LIABILITY
The Landlord shall not be liable to the Tenant for any loss damage or
inconvenience which may be caused by reason of the failure stoppage leakage
bursting or defect of any water sanitary gas electricity or other apparatus or
by reason of a breakdown or defect of any plant or machinery in the demised
premises outside the Landlord's immediate control
6.9. COMPENSATION
Subject to the provisions of sub-clause (2) of Section 38 of the Landlord and
Tenant Act 1954 neither the Tenant nor any assignee or underlessee shall be
entitled on quitting the demised premises or any part thereof to any
compensation under Section 37 of the said Act
6.10. PERPETUITY PERIOD
All rights granted and all reservations made in respect of sewers drains wires
cables pipes channels watercourses conduits subways or other conducting media
not in existence at the date hereof shall be limited to those which shall come
into existence within eighty years from the date hereof (which shall be deemed
to be the perpetuity period for the purposes of this Lease)
33.
<PAGE> 39
6.11. NO PLANNING WARRANTY
Nothing in this Lease shall be deemed to constitute any warranty by the Landlord
that the demised premises or any part thereof are or will remain authorised for
use under the Planning Acts for any specific purpose
6.12. OPTION TO DETERMINE
If the Tenant shall wish to determine this Lease on the 30th day of June 2001 or
the 30th day of June 2006 (in either case "the Determination Date") and shall
give to the Landlord not less than twelve months' notice to that effect then
upon the Determination Date provided the Tenant shall have procured that the
demised premises shall then be fully vacant and not otherwise the Term shall
immediately cease and determine but without prejudice to the rights of the
Landlord and Tenant in respect of any antecedent claim or breach of covenant
Provided That the Tenant shall not serve a Determination Notice unless prior to
the date of such notice it shall in all material respects have substantially
complied with the terms and conditions and shall have substantially performed
and observed the covenants on its part herein contained and any Determination
Notice given by the Tenant shall be effective only if the Tenant shall continue
in all material respects to comply substantially with the terms and conditions
and substantially to perform and observe the covenants on the part of the Tenant
herein contained up to the Determination Date
6.13. FREEDOM TO USE THE DEMISED PREMISES
Despite any provision (express or implied) of this Lease to the contrary but
subject to paragraph 3.2 of the Second Schedule hereto the Tenant shall be
entitled to use and have access to the demised premises twenty-four hours a day
every day of the whole of the Term
6.14. HEAD LEASE
If at any time during the Term the Head Lease shall cease to exist (without
there being in reversion to this Lease a Superior Lease containing provisions
equivalent to the obligations and other provisions
34.
<PAGE> 40
in the Head Lease relating to insurance and the service charge and party
structures as therein more fully set out) then this Lease shall thereafter be
read and construed and the parties obligated to each other (as appropriate) as
if it contained (mutatis mutandis) obligations respectively on the part of the
Landlord and the Tenant and provisions equivalent to those relating to insurance
and service charge and party structures as set out in the Head Lease as if the
same appeared herein and as if any reference to the Superior Landlord was a
reference to the Landlord
6.15. RELEASE OF COVENANTS
6.15.1. Upon a lawful assignment of the whole of the demised premises by the
Tenant in accordance with Clause 3.30 the Tenant shall thereafter be released
from any future obligation to observe or perform the covenants on the Tenant's
part contained in this Lease
6.15.2. Upon a lawful assignment of its reversionary interest in the whole
of the demised premises the Landlord shall thereafter be released from any
future obligation to observe or perform the covenants on the Landlord's part
contained in this Lease
6.16. REPRESENTATIONS
The Tenant acknowledges that this Lease has not been entered into in reliance
wholly or partly on any statement or representation made by or on behalf of the
Landlord except any such statement or representation that is expressly set out
in this Lease or in the written replies to enquiries given by the Landlord's
Solicitors to the Tenant's Solicitors prior to the date hereof
6.17. CERTIFICATE AS TO AGREEMENT FOR LEASE
It is hereby certified that there is no Agreement for Lease to which this Lease
gives effect
35.
<PAGE> 41
7. INTERPRETATION
7.1. In this Lease where the context so admits:-
7.1.1. Words importing the masculine gender shall be deemed to include the
feminine and neuter genders
7.1.2. Where there are two or more persons included in the expression "the
Tenant" covenants expressed to be made by the Tenant shall be deemed to be made
by such persons jointly and severally
7.2. Reference in this Lease to any right exercisable by the Landlord or
any right exercisable by the Tenant shall be construed as including (where
appropriate) the exercise of such right in both cases in common with the
Landlord and all other persons having a like right or to whom such right may be
granted
7.3. Any negative covenant by the Tenant in this Lease shall be construed
as if it were also a covenant not to permit or suffer the act or thing in
question
7.4. The headings to clauses in this Lease shall not affect the
construction of such clauses
7.5. Whenever the consent or approval of the Landlord is required or
requested in relation to this Lease or any matter referred to herein, such
provision shall be construed as also requiring the consent or approval of the
Superior Landlord where the same shall be required except that nothing in this
Lease shall be construed as implying that any obligation is imposed upon the
Superior Landlord not unreasonably to refuse any consent or approval
7.6. Any reference in this Lease to the Landlord's excepting and
reserving a right or giving directions shall extend (where appropriate) to the
Superior Landlord and any reference to any right of the Landlord to enter or to
have access or to view the demised premises shall be
36.
<PAGE> 42
construed as extending to the Superior Landlord for the time being and to all
persons authorised by the Landlord and the Superior Landlord
7.7. Any reference to a specific statute or Enactment or a provision of a
specific statute or Enactment includes all regulations and orders from time to
time made pursuant to that statute Enactment or (as the case may be) provision
or any statute Enactment or provision amending or replacing the same
7.8. Unless the context otherwise requires references to the Term shall
be deemed to be references to the term of years hereby demised and to any
extension or continuation thereof whether by the provisions of the Landlord and
Tenant Act 1954 or any similar Enactment from time to time in force or otherwise
IN WITNESS whereof the parties hereto have signed or sealed this Deed as
indicated below and it has been delivered on their behalf the day and year first
before written
THE FIRST SCHEDULE
PART I
THE DEMISED PREMISES
The whole of the land and premises more particularly described in and demised by
the Head Lease together with the appurtenances thereto including all Landlord's
plant and equipment fixtures and fittings now or hereafter in and about the same
and all additions (except tenants and trade fixtures) at any time hereafter made
to the same
PART II
MATTERS TO WHICH THE DEMISED PREMISES IS SUBJECT
The covenants restrictions stipulations rights liabilities and other matters
other than charges to secure money set out or referred to in the Property and
Charges Registers of H.M. Land Registry Title number WT73145
37.
<PAGE> 43
THE SECOND SCHEDULE
EASEMENTS AND RIGHTS GRANTED
1. The right for all reasonable purposes connected with the demised
premises but not for any other purposes to pass and repass by foot only to and
from the demised premises over and along the walkways forming part of the common
parts of the Development as are from time to time constructed
2. The right for all reasonable purposes connected with the demised
premises but not for any other purposes to pass and repass with or without
vehicles over and along the roads forming part of the common parts of the
Development as are from time to time constructed Subject to compliance by the
Tenant with the following conditions
2.1 The Tenant shall not use the roads or permit the same to be used by
his servants agents or visitors for the parking of vehicles
2.2 The Tenant shall comply with such directions as may from time to
time be given by any competent authority or the Superior Landlord or any
representative of the Superior Landlord for the regulation and direction of
traffic
2.3 The Tenant shall co-operate with the Landlord and the Superior
Landlord so as to ensure that no rubbish or litter is left on the roads or any
part thereof and that no damage is caused by his servants agents or visitors
thereto and that no nuisance annoyance or inconvenience is caused to the
Landlord the Superior Landlord or to the owners or lessees or occupiers of the
Development
3. The rights granted by paragraphs 1 and 2 above are subject to
3.1 The right of the Superior Landlord in its absolute discretion to
close temporarily or permanently or alter from time to time the walkways and
roads and other common parts of the Development subject to
38.
<PAGE> 44
the Superior Landlord leaving available for use by the Tenant reasonable means
of access to and serving the demised premises
3.2 The right of the Superior Landlord to limit and restrict (but not so
as to render them totally incapable of exercise) the rights outside Working
Hours in such manner as the Superior Landlord's security arrangements may
require
4. The free and uninterrupted passage and running of water soil gas
electricity telephone heating and other services from and to the demised
premises in and through the sewers drains wires cables pipes channels water
courses conduits subways or other conducting media now or at any time in the
future in or under other parts of the Development
5. The right of support and protection for the demised premises from
other parts of the Development
THE THIRD SCHEDULE
EXCEPTIONS AND RESERVATIONS
THERE ARE EXCEPTED AND RESERVED to the Landlord and its lessees and assigns and
all persons to whom the Landlord shall hereafter grant any such right or
rights:-
1. The right to enter upon the demised premises in circumstances
equivalent to those where the Tenant has covenanted in this Lease to permit
entry subject to the proviso in clause 3.9 of this Lease
2. The right to enter upon the demised premises to enable the Landlord
to perform its obligations hereunder subject to the proviso in clause 3.9 of
this Lease
39.
<PAGE> 45
THE FOURTH SCHEDULE
PROVISIONS FOR RENT REVIEW
1. In this Schedule the following expressions shall have the
following meanings:
1.1 "review date" means the 25th day of March 1998 and every
subsequent fifth anniversary thereof
1.2 "rent" shall not include the rent secondly and thirdly reserved and
made Clause 2 of this Lease
1.3 "the quantified rent" means the yearly rent of eight hundred and
seventy-three thousand seven hundred and sixty-three pounds (L873,763.00)
1.4 "the relevant review date" means that review date at which the rent
is being agreed or determined pursuant to the provisions of this Schedule
1.5 "the open market rent" means the best yearly market rent
for which the demised premises might reasonably be expected to be let on the
relevant review date by a willing landlord to a willing tenant with vacant
possession without taking a premium:
1.5.1 For a term of 15 years and on the basis (whether or not it is a
fact) that the demised premises enjoy planning permission for the use authorised
under this Lease
1.5.2 Otherwise upon the terms and conditions of this Lease (save as to
the amount of rent but including the provisions for rent review herein
contained)
1.5.3 On the assumption (whether or not it is a fact) that at the
relevant review date the demised premises are fully equipped and ready
40.
<PAGE> 46
for immediate occupation and use and that no work has been carried out thereon
by the Tenant or his predecessors in title or sub-tenants or other lawful
occupier during the Term which has diminished the rental value of the demised
premises and that in case the demised premises or the accesses thereto have been
destroyed or damaged they have been fully restored
1.5.4 On the assumption (whether or not it is a fact) that all the
covenants and obligations in this Lease on the part of the Tenant have been
complied with
1.5.5 On the assumption that the said willing tenant or tenants do not
seek a rent free period nor any reduction in rent to allow them the equivalent
of a rent free period and in considering any comparable rents the existence of
any rent free period or any reduction in rent calculated to allow for any rent
free period shall be ignored and any abnormally high rent agreed to compensate a
landlord for an artificially extended rent free period or any other inducements
shall be ignored
1.5.6 But disregarding:
1.5.6.1 Any goodwill attached to the demised premises by reason of the
carrying on thereon of the trade or business of the Tenant (whether by him or
any predecessor of the Tenant in that trade or business) or of and sub-tenant or
other lawful occupier
1.5.6.2 Any improvements carried out during the Term by the Tenant or his
predecessors in title or sub-tenants or other lawful occupier otherwise than in
pursuance of an obligation to the Landlord to the extent such obligation does
not fall within the Tenant's covenant contained in this Lease to comply with
Enactments or at the expense or partly at the expense of the Landlord
1.5.6.3 Any statutory limitation or control of rents for the time being in
force
41.
<PAGE> 47
1.6 "revised rent" means the new or increased yearly rent payable
in substitution for the quantified rent or for a previous revised rent
1.7 "the current rent" means the yearly rent payable in the year ending
on the relevant review date
1.8 "the Surveyor" means the independent surveyor required
to be appointed pursuant to paragraph 3 of this Schedule
2. From and after each review date the rent shall be the rent agreed in
writing between the Landlord and the Tenant or in the absence of such agreement
shall be whichever is the higher of:
2.1 The current rent and
2.2 The open market rent
3. If the Landlord and the Tenant shall not have agreed in writing the
open market rent by the relevant review date the Landlord or the Tenant may at
any time thereafter (but before the review date next following the relevant
review date) require in writing to the other of them an independent surveyor to
be appointed to determine the open market rent
4. The Surveyor (who shall be a Fellow of the Royal Institution of
Chartered Surveyors and be experienced in the valuation of premises of a like
nature to the demised premises) may be agreed upon by the Landlord and the
Tenant and in default of such agreement within two months of a requirement being
made pursuant to paragraph 3 of this Schedule shall be appointed by the
President for the time being of the Royal Institution of Chartered Surveyors on
the application of the Landlord or the Tenant made at any time after the said
period of two months and if the said President shall for any reason not be
available or be unable to make such appointment then the appointment may be made
by the Vice President or next available senior officer of the said Institution
then available
42.
<PAGE> 48
5.1 Notice in writing of his appointment shall be given by the Surveyor
to the Landlord and the Tenant and he shall invite each to submit within a
specified period (which shall not exceed four weeks) a valuation accompanied if
the Landlord or the Tenant so desire by a statement of reasons
5.2 The Surveyor shall act as an expert and not as an arbitrator he
shall consider any valuation and reasons submitted to him within the said period
but shall not be in any way limited or fettered thereby and shall determine the
open market rent in accordance with his own judgment
5.3 The Surveyor shall give notice in writing of his decision to the
Landlord and the Tenant within two months of his appointment or within such
extended period as the Landlord may at any time allow
5.4 The decision of the Surveyor shall be final on all matters
referred to him
6. If the Surveyor shall fail to determine the open market rent and to
give notice thereof within the time and in manner hereinbefore provided or if he
shall relinquish his appointment or die or otherwise fail or be unable to
determine the same the Landlord may apply to the President or such other officer
of the Royal Institution of Chartered Surveyors as aforesaid for a substitute to
be appointed in his place which procedure may be repeated as many times as
necessary
7. The fees of any such Surveyor and the Royal Institution of
Chartered Surveyors shall be shared equally between the Landlord and the Tenant
8. In the event that by the relevant review date the Landlord and
the Tenant shall not have agreed in writing the rent to be payable from and
after such date or the Surveyor (if appointed) shall not have given the notice
provided for in paragraph 5.3 of this Schedule then the Tenant shall continue to
pay rent at the rate of the current rent until the quarter day immediately
following the reaching of such agreement or the giving of the said notice
whichever shall first occur If such agreement
43.
<PAGE> 49
or the giving of the said notice shall result in a revised rent there shall be
added to and be payable with the installment of the revised rent due on such
quarter day (notwithstanding that the provisions of paragraph 9 of this Schedule
remain to be complied with) the amount representing the difference between the
current rent and the revised rent from the relevant review date until such
quarter day together with interest on such amount at a rate equivalent to the
Base Rate of Lloyds Bank PLC (or such other London Clearing Bank for the time
being of the Landlord) from time to time from the relevant review date until
payment If such agreement or the giving of the said notice shall not have
resulted in a revised rent the current rent shall continue to be payable
9. Immediately after the open market rent shall have been agreed or
determined as aforesaid a memorandum of the revised rent (if any) in such form
as the Landlord may reasonably require shall be signed recording the amount of
the revised rent on behalf of the Landlord and the Tenant and the costs and
expenses thereof shall be paid by the Tenant
10. A revised rent shall be payable on the days and in the manner
for payment of the quantified rent and the terms of this Lease relating to the
reservation payment or suspension of rent and the consequences of non-payment
shall apply to a revised rent in the same manner as to the quantified rent
11. If at any time or times there shall be in force any Enactment which
shall restrict or in any way affect the Landlord's right to have the rent
reviewed as hereinbefore provided or which shall restrict or in any way affect
the Landlord's right to payment of a revised rent the Landlord shall be entitled
following the repeal termination or modification of such Enactment (but in the
event of a modification of such Enactment only to the extent permitted by such
modification) to serve notice upon the Tenant requiring the Tenant to pay to the
Landlord as from the first quarter day ("the interim review date") occurring not
less than twenty-eight days after the date of service of the Landlord's notice
until such rent shall next be varied in accordance with the provisions of this
Schedule the rent stated in the Landlord's notice and such rent shall become
payable accordingly unless the Tenant shall have
44.
<PAGE> 1
Exhibit 10.13
DATED 1ST MARCH 1994
WINDMILL HILL BUSINESS CENTRE
(1) ST. MARTINS PROPERTY
INVESTMENTS LIMITED
- and -
(2) THE GALILEO COMPANY
-----------------------------
LEASE
- of -
The Computer Centre
Windmill Hill Business Centre
Swindon
-----------------------------
STEPHENSON HARWOOD
One, St. Paul's Churchyard
London EC4M 8SH
Tel; 071 329 4422
Fax: 071 606 0822
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PROVISION
<S> <C>
1 Definitions
2 Demise and Rent
3 Tenant's Covenants
3.1 Rent
3.2 Insurance
3.3 Outgoings
3.4 Maintenance and Repair
3.5 Internal Decoration
3.6 External Decoration
3.7 Cleaning
3.8 Party Structures etc.
3.9 Entry
3.10 Yielding Up
3.11 Alterations and Additions
3.12 Disrepair and Breach of Covenant
3.13 Signs
3.14 Statutory and Planning Requirements
3.15 Notices
3.16 Overloading
3.17 Encroachment
3.18 Nuisance and General Prohibitions
3.19 User
3.20 Rights of Light
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CLAUSE PROVISION
<S> <C>
3.21 Refuse
3.22 Dangerous Substances
3.23 Drains
3.24 Control of Common Parts
3.25 Disputes
3.26 Indemnity
3.27 Support
3.28 Sale & Letting Boards
3.29 Dilapidations and Section 146
Law of Property Act 1925
3.30 Alienation
3.31 Registration of Dealings
3.32 Landlord's Costs
3.33 Value Added Tax
3.34 Regulations
3.35 Fire Control
3.36 Dedication
3.37 Interest on Late Payments
4. Landlord's Covenants
4.1 Quiet Enjoyment
4.2 Insurance
4.3 Provision of Services
5. Provisos
5.1 Re-entry
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
CLAUSE PROVISION
<S> <C>
5.2 Cesser of Rent
5.3 Base Rate
5.4 Arrears
5.5 Settlement of Disputes
5.6 Exclusion of Implied Rights
5.7 Unrestricted Use of Adjoining Property
5.8 Exclusion of Liability
5.9 Compensation
5.10 Perpetuity Period
5.11 No Planning Warranty
5.12 Tenant's Option to Renew
5.13 Freedom to use the Demised Premises
6. Interpretation
First Schedule The Demised Premises
Second Schedule Easements and Rights Granted
Third Schedule Exceptions and Reservations
Fourth Schedule Provisions for Rent Review
Fifth Schedule The Service Charge
</TABLE>
<PAGE> 5
THIS LEASE made the 1st day of March One thousand nine hundred and ninety-four
BETWEEN ST. MARTINS PROPERTY INVESTMENTS LIMITED whose registered office is at
Adelaide House London Bridge London EC4 ("the Landlord" which expression where
the context admits includes the estate owner for the time being of the reversion
of the premises hereby demised expectant on the term hereby granted) of the one
part and THE GALILEO COMPANY whose registered office is at Galileo Centre Europe
Windmill Hill Swindon SN5 6PH ("the Tenant" which expression where the context
admits includes his successors in title) of the other part
WITNESSES as follows:-
DEFINITIONS
1 "the demised premises" - The building(s) and surrounding land known as The
Computer Centre Windmill Hill Business Centre Swindon and described
in the First Schedule hereto
"the Development" - The estate and premises thereon constructed from
time to time the extent whereof is for the purpose of identification
only delineated and edged red on Plan 1 annexed
"the common parts of the Development" - All parts of the Development which
are provided by the Landlord for common use and enjoyment by the
tenants and occupiers of the Development
"the Insured Risks" - Fire explosion impact riots strike civil commotion
and malicious damage storm flood tempest including lightning
earthquake aircraft (except ???? aircraft) and other aerial
devices and articles dropped therefrom bursting or overflowing of
water pipes tanks and apparatus and in so far as the same ???
reasonably procurable subsidence landslip and heave (provided that
the Landlord shall notify the Tenant in the event of such risks or
any of them ceasing to be available) and such other risks as the
Landlord or the Tenant shall from time to time reasonably require
to have insured
"the Term" - the term of years hereby granted
"Enactment" - any and every Act of Parliament already or hereafter to be
passed and any and every order regulation and bye-law already or
hereafter to be made under or in pursuance of any such Act
"Working Hours" - the hours of 8-30 a.m. to 6-00 p.m. on Mondays to
Fridays (except public holidays) and such other days as the
Landlord shall decide
DEMISE AND RENT
2 IN CONSIDERATION of the rents hereinafter received and of the Tenant's
Covenants hereinafter contained the Landlord HEREBY DEMISES unto the Tenant
ALL THOSE the demised premises Together with the rights set out in the Second
Schedule hereto but Excepting
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and Reserving as mentioned in the Third Schedule hereto TO HOLD the same unto
the Tenant SUBJECT to all rights of light and air and all other easements rights
quasi-easements and covenants (if any) affecting the demised premises at the
date hereof for the term of TWENTY FIVE AND ONE HALF YEARS commencing on the
29th day of September 1987 and expiring on the 24th day of March 2013 yielding
AND PAYING therefor unto the Landlord yearly during the Term and so in
proportion for any less time than a year FIRST a YEARLY RENT of ONE MILLION TWO
HUNDRED AND SEVENTY-ONE THOUSAND ONE HUNDRED AND NINETY-FOUR POUNDS AND
SEVENTY-FIVE PENCE (L1,271,194.75) or such other yearly rent as shall be
determined in accordance with the provisions of the Fourth Schedule hereto such
rent to be paid clear of all deductions whatsoever by equal quarterly payments
in advance on the usual quarter days the first of such payments for the period
from the 5th February 1990 to the 24th March 1994 having been made prior to the
date hereof SECONDLY by way of further rent on demand (a) a sum or sums of money
equal to the amounts (net of any discounts received) properly and reasonably
expended by the Landlord pursuant to Clause 4.2 hereof or in effecting and
maintaining such other insurance as the Landlord shall from time to time require
and (b) the amount (net of any discounts received) (if any) properly and
reasonably expended by the Landlord in respect of increased premiums occasioned
by the nature of the occupation or business of the Tenant or use of the demised
premises THIRDLY by way of further rent a service charge calculated and payable
in accordance with the provisions of the Fifth Schedule hereto AND FOURTHLY by
way of a further rent any value added tax payable on the aforesaid rents first
secondly and thirdly reserved above
TENANT'S COVENANTS
3 THE Tenant HEREBY COVENANTS with the Landlord as follows:-
RENT
3.1 To pay the rents hereinbefore reserved and made payable without any
deduction whatsoever at the times and in the manner aforesaid
INSURANCE
3.2.1 Not without the previous consent in writing of the Landlord to
effect any further or other insurance in respect of the demised
premises in duplication to the cover effected by the landlord
3.2.2 To comply with all the recommendations and requirements made in or
under any policy of insurance relating to the demised premises by
any insurer (unless the Tenant elects to pay the additional premium
required by the insurers for continuing cover without such
compliance)
3.2.3 To comply with all recommendations and requirements made by any
appropriate authority with regard to fire health safety or otherwise
3.2.4 As often as the demised premises shall be destroyed or damaged
forthwith to notify the Landlord in writing
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3.2.5 Not to carry on or do on the demised premises any trade or act in
consequence of which the Landlord would or might be prevented from
insuring the demised premises or any other adjoining property for
the time being owned by the Landlord at the ordinary rate of premium
or whereby any insurance effected in respect of the demised premises
or any such other property would or might be vitiated or prejudiced
and not without the written consent of the Landlord (such consent
not to be unreasonably withheld) to do anything whereby any
additional premium may become payable for such insurance and the
Tenant shall pay for any additional premium incurred
3.2.6 That in the event of the demised premises or any adjoining or
neighbouring property for the time being owned by the Landlord or
any part thereof being destroyed or damaged by any of the Insured
Risks and the insurance money under any insurance against the same
effected thereon by the Landlord being wholly or partly
irrecoverable by reason solely or in part of any act or default of
the Tenant or the servants agents or visitors of the Tenant then and
in every such case the Tenant will forthwith pay to the Landlord the
whole or (as the case may require) the irrecoverable proportion of
the costs and expenses incurred by the Landlord (including legal
costs and Surveyors fees and other professional costs and fees and
disbursements) of completely rebuilding and reinstating the same
OUTGOINGS
3.3 To pay and discharge all rates taxes duties charges assessments
impositions and outgoings whatsoever whether Parliamentary Parochial local
or otherwise and whether or not of an annual or recurring nature (other
than any such arising in respect of any development dealing with
disposition of or in or ownership of the reversion mediately or
immediately expectant on the Term or the right to receive the rent payable
hereunder or any deemed disposition) which are now or which may at any
time during the Term be assessed charged or imposed upon or payable in
respect of the demised premises or any part thereof or on the owner or
occupier thereof whether the same shall be in the nature of those now in
being or not and/or to refund to the Landlord on demand (in case any of
the same are payable charged or assessed in respect of the Development as
a whole or any part thereof which includes the demised premises) a fair
and proper proportion thereof attributable to the demised premises to be
properly and reasonably determined by the Landlord's Surveyor
MAINTENANCE AND REPAIR
3.4.1 From time to time and at all times during the Term well and
substantially to repair cleanse maintain amend and keep in good and
substantial repair and condition the demised premises and the
appurtenances thereof including (but without limitation) all carpets
therein (damage by any of the Insured Risks (in excess of any policy
excesses) excepted unless the policy or policies of insurance
effected by the Landlord shall be vitiated or payment of the policy
moneys refused by reason of the act or default of the Tenant or the
servants agents or visitors of the Tenant) and where necessary in
order to comply with such covenant to repair as aforesaid to renew
or replace the demised premises or any part or parts thereof if the
same shall so require or become beyond repair or if
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the same shall require renewal or replacement by reason of any
defect therein AND to inform the Landlord in writing at once if the
Tenant becomes aware of any defect in the demised premises
3.4.2 Not to remove or dispose of any machinery or plant comprising
landlord's as opposed to tenant's fixtures and fittings whether or
not in the course of renewing or replacing the same (except to the
extent that the same are comprised in a permitted dealing with the
demised premises) without the Landlord's previous written consent
such consent not to be unreasonably withheld
3.4.3 From time to time and at all times during the Term to maintain and
repair in good working order and if and when necessary (but subject
to Clause 3.4.2 hereof) to renew or replace the smoke-extractor
air-conditioning heating ventilating electrical water and sanitary
installations and all other plant machinery and equipment within the
demised premises and forming part thereof (damage as aforesaid
excepted) and to procure that the same are properly and regularly
serviced by qualified persons approved by the manufacturers of such
plant machinery and equipment
3.4.4 Not to overload the electrical wiring installations and apparatus in
or serving the demised premises and at all times during the Term to
ensure that the same comply with the standards terms and conditions
laid down by the Institution of Electrical Engineers and the
regulations of the Electricity Supply Authority
INTERNAL DECORATION
3.5 In the last year of every consecutive period of five years of the Term and
also in the last year of the Term (howsoever determined) to paint polish
paper or otherwise treat as appropriate all the internal parts (usually or
requiring to be painted polished papered or otherwise treated) of the
demised premises and all additions and fixtures thereto with two coats at
least of best quality paint best quality polish or other suitable material
of best quality PROVIDED ALWAYS that in the last year of the Term such
work of painting and decoration shall be in tints colours and designs
previously approved in writing by the Landlord PROVIDED FURTHER that the
obligation contained in this sub-clause shall not apply in the case of the
last year of the Term if the Tenant shall have performed such obligation
less than 18 months prior to the end of the Term
EXTERNAL DECORATION
3.6 In the last year of every consecutive period of three years of the Term
and also in the last year of the Term (howsoever determined) to paint or
otherwise treat as appropriate all the external parts (usually or
requiring to be painted or otherwise treated) of the demised premises with
two coats at least of best quality paint or other suitable material of
best quality in tints colours and designs previously approved in writing
by the Landlord PROVIDED FURTHER that the obligation contained in this
sub-clause shall not apply in the case of the last year of the Term if the
Tenant shall have performed such obligation less than 18 months prior to
the end of the Term
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CLEANING
3.7 At all times during the Term to keep the demised premises in a clean and
tidy condition and at least once in every month to clean the windows and
window frames of the demised premises and as often as occasion may require
to wash down all tiles and other washable surfaces
PARTY STRUCTURES ETC.
3.8 To pay on demand a reasonable contribution towards the costs and expenses
property and reasonably incurred by the Landlord (including legal costs
surveyors fees and other professional costs fees and disbursements) of
constructing repairing rebuilding renewing lighting cleansing and
maintaining all things the use of which is common to or capable of being
used in common with the demised premises and other premises such
reasonable contribution to be assessed by the Landlord's Surveyor whose
decision shall be final and binding on all parties hereto (save on any
question of law)
ENTRY
3.9.1 To permit the Landlord and all others authorised by it at all
reasonable times on not less than 72 hours' prior notice (except in
emergency) to enter upon the demised premises to view the state of
repair and condition thereof and to take a Schedule of the
Landlord's fixtures and of any defects or dilapidations
3.9.2 To permit the Landlord and (if authorised in writing by the
Landlord) the owners lessees or occupiers of adjoining or adjacent
premises and their respective agents servants contractors licensees
and workmen with all necessary appliances at all reasonable times on
not less than 72 hours' prior notice (and at all times without
notice in case of emergency) to enter upon the demised premises for
all or any of the purposes mentioned in the Third Schedule hereto
the person or persons exercising such rights doing as little damage
to the demised premises as possible and making good all damage to
the demised premises occasioned by such entry
3.9.3 The person or persons entering upon the demised premises pursuant to
this Clause 3.9 complying with all reasonable requirements of the
Tenant as to the security of the demised premises including (but not
by way of limitation) a requirement that an authorised
representative of the Tenant should accompany such person or persons
at all times
YIELDING UP
3.10 At the expiration or sooner determination of the Term quietly to yield up
unto the Landlord the demised premises together with all additions and
improvements thereto and all fixtures which during the Term may be affixed
or fastened to or upon the demised premises (tenant's fixtures and
fittings only excepted) in such state and condition as shall in all
respects be consistent with the full performance by the Tenant of the
covenants herein contained and in case any of the Landlord's fixtures and
fittings shall be missing worn out broken damaged or destroyed forthwith
to replace them with others of a similar character and of equal value and
to remove the Tenant's fixtures and fittings including
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every moulding sign writing or painting of the name or business of the Tenant or
other occupiers from the demised premises and to make good all damage caused to
the demised premises by such removal
ALTERATIONS AND ADDITIONS
3.11.1 Not at any time during the Term to make any alterations or
additions to the electrical installation of the demised premises
save in accordance with the standards terms and conditions laid
down by the Institution of Electrical Engineers and the
regulations of the Electricity Supply Authority and not to make
any substantial such alteration or addition without the prior
written consent of the Landlord such consent not to be
unreasonably withheld
3.11.2 Not at any time during the Term to construct any new or
additional building or structure on the demised premises nor make
any alteration or addition whatsoever structural or otherwise
(save as hereinafter provided) in or to the demised premises or
any part thereof or change the existing design elevation or the
external decorative scheme thereof or cut maim or remove any of
the walls horizontal or vertical partitions beams columns or
other structural parts thereof
3.11.3 Subject to prior compliance with the following conditions the
Tenant may carry out non-structural internal alterations to the
demised premises:-
3.11.3.1 The Tenant shall not interfere with any sewers drains
wires cables pipes channels watercourses conduits subways
or other conducting media which may at any time be or run
under in or through the demised premises or cause access
to the same to be or become more difficult than it now is
3.11.3.2 The Tenant shall supply to the Landlord five copies of
all plans and specifications and any further information
which the Landlord may reasonably require at the cost of
the Tenant; and
3.11.3.3 The prior written consent of the Landlord shall have been
obtained such consent not to be unreasonably withheld or
delayed PROVIDED ALWAYS that the Tenant shall be entitled
to erect or remove internal demountable partitioning
and/or effect minor plumbing alterations or additions
without such consent as aforesaid
3.11.4 That if the Tenant shall have made or shall make any addition or
alteration to the demised premises either before or after the
commencement of the Term then at the expiration or sooner
determination thereof the Tenant will (if so required by the
Landlord but not otherwise) at the Tenant's own cost and expense
reinstate and make good to the satisfaction of the Landlord the
demised premises and restore the same to the plan and design as
if such addition or alteration (or such of them as may be
specified by the Landlord) had not been made and will pay the
costs and expenses properly and reasonably incurred by the
Landlord (including legal costs and surveyors fees and other
professional costs and fees) of and incidental to the
superintendence of such reinstatement and making good
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DISREPAIR AND BREACH OF COVENANT
3.12.1 Well and substantially to repair remedy reinstate and make good
with all practicable speed all defects dilapidations
unauthorised works and other breaches of covenant of which
notice in writing shall be given to or left on the demised
premises for the Tenant by the Landlord commencing work within
two calendar months (or sooner if requisite) after the giving or
leaving of such notice and then proceeding diligently
3.12.2. If the Tenant shall fail to comply with Clause 3.12.1 hereof to
allow the Landlord with all necessary workmen tools materials
and appliances to enter the demised premises to repair reinstate
and make good the same and to pay to the Landlord on demand the
costs and expenses thereof
3.12.3 The person or persons entering upon the demised premises
pursuant to this Clause 3.12 complying with all reasonable
requirements of the Tenant as to the security of the demised
premises including (but not by way of limitation) a requirement
that an authorised representative of the Tenant should
accompany such person or persons at all times
SIGNS
3.13 Not to erect or install any hanging sign projecting sign or other sign
aerial or similar thing on the exterior of the demised premises PROVIDED
that this covenant shall not prevent the inscription on the exterior of
the building constructed on the demised premises and a sign at the
entrance to the demised premises from the estate road in each case in a
form style and manner as shall have been previously approved in writing
by the Landlord (such approval not to be unreasonably withheld) of the
name or names of the person or persons carrying on business therein
together with the description of his her or their business or occupation
STATUTORY AND PLANNING REQUIREMENTS
3.14.1 At all times during the Term to observe and comply in all
respects with the provisions and requirements of any and every
Enactment so far as it may relate to or affect the demised
premises or any works additions or improvements therein or
thereto or the user thereof or the employment therein of any
person and to execute all works and provide and maintain all
arrangements and make all payments which by or pursuant to any
Enactment are or may be directed or required to be executed
provided maintained or made at any time during the Term and to
indemnify the Landlord at all times against all actions
proceedings claims costs charges and expenses of or incidental
to the execution of any works or the provision or maintenance of
any arrangements or payments so directed or required as
aforesaid or otherwise arising from any contravention of any
Enactment
3.14.2 Not at any time during the Term to do or omit on or about the
demised premises any act or thing by reason of which the
Landlord may under any Enactment incur
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or have imposed upon it or become liable to pay any penalty
damages compensation costs charges or expenses
3.14.3 Not to make any application for planning permission relating to
the demised premises or any part thereof or the user thereof
3.14.4 Unless the Landlord shall otherwise direct in writing to carry
out before the expiration or sooner determination of the Term any
works stipulated to be carried out to the demised premises as a
condition of any planning permission by a date subsequent to such
expiration or sooner determination
NOTICES
3.15 Within seven days of the receipt of notice of the same (whether by
advertisement or not) to give full particulars to the Landlord of any
permission notice order or proposal for a notice or order made given or
issued to the tenant owner or occupier of the demised premises pursuant
to any Enactment and if so required by the Landlord to produce such
permission notice order or proposal for a notice or order to the
Landlord AND ALSO without delay to take all reasonable or necessary
steps to comply with any such notice or order AND ALSO at the request of
the Landlord but at the joint and equal cost and expense of the Tenant
and the Landlord to make or join with the Landlord in making such
objections or representations against or in respect of any such notice
order or proposal as aforesaid as the Landlord shall think fit
OVERLOADING
3.16 Not to overload any floor or roof of the demised premises so as to
exceed the permitted loadings thereof
ENCROACHMENT
3.17 Not knowingly to permit or suffer any encroachment upon the demised
premises or the acquisition of any new right of light way drainage or
other easement on over or under the demised premises for the benefit of
other property not being the property of the Landlord and if any such
encroachment or easement shall be made or acquired or threatened to be
made or acquired forthwith to give notice in writing thereof to the
Landlord and at the joint and equal cost of the Landlord and the Tenant
to do all such things as may be necessary to prevent the making of such
encroachment or the acquisition of such easement or right PROVIDED
ALWAYS that if the Tenant shall omit or neglect to do all such things as
aforesaid it shall be lawful for the Landlord or any persons authorised
by it to enter the demised premises and to do the same and any expenses
so incurred by the Landlord shall be repaid to the Landlord by the
Tenant on demand the person or persons entering upon the demised
premises pursuant to this Clause 3.17 complying with all reasonable
requirements of the Tenant as to the security of the demised premises
including (but not by way of limitations) a requirement than an
authorised representative of the Tenant should accompany such persons at
all times
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NUISANCE AND GENERAL PROHIBITIONS
3.18.1 Not to do or permit to be done anything in the demised premises
which may in the reasonable opinion of the Landlord be
prejudicial or detrimental to the Landlord or be or become a
nuisance annoyance or cause damage or inconvenience to the
Landlord or its tenants or the owners tenants or occupiers of
adjoining or nearby premises
3.18.2 Not to use the demised premises or any part thereof for any sale
by auction exhibition show or spectacle or for residential
purposes or for any illegal or immoral purpose or for any noxious
offensive or noisy trade or business
3.18.3 Not to use any radio or other sound producing apparatus so as to
be audible from outside the demised premises
3.18.4 Not without the Landlord's prior written consent (such consent
not to be unreasonably withheld) to install or use in the demised
premises any equipment which might (by the emission of any
radiation vibration or otherwise) interfere with any equipment
which may be installed or used in any other premises in the
Development PROVIDED THAT this sub-clause shall not impose on the
Tenant any liability to the Landlord or any third party greater
than that implied by the common law should any equipment so
installed or used in any other premises in the Development be of
an unusually or especially sensitive nature
3.18.5.1 Not without the Landlord's prior written consent (such
consent not to be unreasonably withheld) to install in
the demised premises any paraffin burning apparatus
whether for heating purposes or otherwise nor cause the
emission of any smoke effluvia vapour grit smell or odour
from any apparatus on the demised premises
3.18.5.2 Subject to the provisions of 3.18.5.1 on a written notice
being served by the Landlord requiring the abatement of
any emission of smoke effluvia vapour grit smell or odour
to abate such emission accordingly as soon as possible
thereafter
3.18.6 To pay on demand all costs charges and expenses incurred by the
Landlord in abating a nuisance caused by the Tenant or his
servants agents or visitors and in executing all such works as
may be necessary for abating such a nuisance whether or not in
obedience to a notice served by the local authority
USER
3.19 Not to use the demised premises or any part thereof except as a computer
centre and/or as High Class Professional or Commercial Offices with
ancillary car parking or for any purpose comprising a use which may be
carried on without detriment to the Landlord's reversion or as to the
amenity of the Development within Class B1 of the Schedule to the Town
and Country Planning (Use Classes) Order 1987
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RIGHTS OF LIGHT
3.20 Not to stop up darken or obstruct any windows or lights belonging to the
demised premises or any other buildings belonging to the Landlord nor to
give to any third party any acknowledgment that the Tenant enjoys the
access of light to any of the windows or openings in the demised
premises by the consent of such third party nor to pay to such third
party any sum of money nor to enter into any agreement with such third
party for the purpose of inducing or binding such third party to abstain
from obstructing the access of light to any of such windows or openings
And that in case the owners of adjacent land or buildings do or threaten
to do anything which obstructs the access of light to any of the windows
or openings in the demised premises the Tenant will give immediate
notice thereof to the Landlord and will adopt such means as may be
reasonably required or deemed proper for preventing the same And in the
event of a breach by the Tenant of this covenant it shall be lawful for
the Landlord or its agents and others to enter upon the demised premises
and take such action and bring such proceedings as the Landlord may
think fit in the name of the Tenant and at the expense of the Tenant for
the purpose of remedying the same the person or persons entering upon
the demised premises pursuant to this Clause 3.20 complying with all
reasonable requirements of the Tenant as to the security of the demised
premises including (but not by way of limitation) a requirement than an
authorised representative of the Tenant should accompany such person or
persons at all times
REFUSE
3.21.1 Not to form a rubbish dump on the demised premises or in the
common parts of the Development and to keep all rubbish and
refuse within the demised premises and in properly covered
receptacles to the reasonable satisfaction of the Landlord
3.21.2 To comply with all reasonable directions and regulations made by
the Landlord from time to time relating to the removal storage
and disposal of rubbish and refuse
DANGEROUS SUBSTANCES
3.22 Not to bring into the demised premises or to place or store in or about
the demised premises any substance or material of a radio-active
explosive dangerous offensive combustible or inflammable nature save as
may be agreed with the Landlord (such agreement not to be unreasonably
withheld)
DRAINS
3.23 Not to stop up or obstruct in any way whatsoever or permit oil grease or
other noxious or deleterious matter or substance to enter the drains
sewers and watercourses serving the demised premises and to employ such
plant for treating any noxious or deleterious effluent before permitting
the same to enter such drains sewers and watercourses as may be
reasonably required by the Landlord from time to time in accordance with
the best modern practice and in the event of any such obstruction or
injury being caused to the
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drains sewers or watercourses forthwith to make good all such damage to
the reasonable satisfaction of the Landlord
CONTROL OF COMMON PARTS
3.24.1 Not to obstruct the common parts of the Development in any
manner whatsoever
3.24.2 Not to use the common parts of the Development for the parking of
vehicles
3.24.3 To co-operate with the Landlord so as to prevent the common parts
of the Development from being obstructed or being used for the
parking of vehicles
DISPUTES
3.25 To permit all questions and disputes relating to easements rights
privileges or boundaries arising with the owner or occupier of any
property adjoining adjacent to or opposite the demised premises to be
settled by the Landlord on behalf of the Tenant at the joint and equal
expense of the Tenant and the Landlord
INDEMNITY
3.26.1 To indemnify the Landlord in respect of all actions proceedings
liability costs claims and demands which might be instituted
incurred or made by any person (including officers and employees
of the Landlord) or any competent authority by reason of:-
3.26.1.1 Any injury to or the death of any person or damage to any
property moveable or immoveable caused by or in any way
arising out of the user of the demised premises or the
state of repair and condition of the demised premises or
anything therein arising from any act neglect or default
of the Tenant or caused by or in any way arising out of
the execution of any works at or alterations or additions
to the demised premises
3.26.1.2 Any interference or alleged interference or obstruction
of any right or alleged right of light air drainage or
other right or alleged right now or hereafter existing
for the benefit of any adjoining or neighbouring property
arising from any act or neglect of the Tenant its agents
employees or visitors
3.26.1.3 Any stoppage of or damage to the sewers drains pipes
wires cables or other conveniences and services used in
common with the owner tenant or occupier of any adjoining
neighbouring or nearby property arising from any act or
neglect of the Tenant its agents employees or visitors
3.26.2 Without prejudice to any covenant or liability of the Tenant
under this Lease to indemnify the Landlord against all liability
to any present or future tax duty charge assessment or imposition
(whether Parliamentary Parochial local or otherwise and whether
in the nature of those now in being or not) and all costs
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and expenses in relation thereto which may be payable in respect
of the reversion to this Lease by virtue of any works development
or change of use carried out by the Tenant (or any sub-tenant) in
or to the demised premises or any part thereof and also against
any further liability to such taxation flowing from this
indemnity or any payment pursuant to it
3.26.3 To pay and make good to the Landlord all and every loss and
damage incurred or sustained by the Landlord as a consequence of
every breach or non observance of the Tenant's covenants herein
contained and to indemnify the Landlord from and against all
actions proceedings costs claims and demands thereby arising
SUPPORT
3.27 Not to do anything on the demised premises which would remove support
from any adjoining premises or endanger such premises in any way
SALE AND LETTING BOARDS
3.28 To permit the Landlord to enter upon the demised premises and affix and
retain without interference upon any part thereof at any time during the
last six months of the Term a notice for letting the demised premises
and at any time during the Term for selling or disposing of the
Landlords interest therein and during such periods to permit all persons
with authority from the Landlord at all reasonable times during the
daytime upon reasonable notice to enter and view the demised premises or
any part thereof the person or persons entering upon the demised
premises pursuant to this sub-clause complying with all reasonable
requirements of the Tenant as to security including (but not by way of
limitation) a requirement that an authorised representative of the
Tenant shall accompany such person or persons at all times
DILAPIDATIONS AND SECTION 146 LAW OF PROPERTY ACT 1925
3.29 To pay all costs charges and expenses (including solicitors' costs and
surveyors' fees) incurred by the Landlord:-
3.29.1 In or in contemplation of the preparation and service of any
notice pursuant to or any proceedings under Sections 146 and 147
of the Law of Property Act 1925 notwithstanding that forfeiture
may be avoided otherwise than by relief granted by the Court
3.29.2 In relation to the preparation and service of any Notice and/or
Schedule of Dilapidations whether during or after the expiration
or prior determination of the Term
3.29.3 In the supervision or superintendence of any works to be carried
out in pursuance of any Notice and/or Schedule of Dilapidations
whether or not such works shall be carried out during or after
the expiration or prior determination of the Term
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ALIENATION
3.30.1.1 Not to assign mortgage or charge part only of the demised
premises
3.30.1.2 Not to underlet part with or share the possession or
occupation of the whole or any part of the demised
premises (save as hereinafter provided)
3.30.2.1 In this sub-clause the expression "Permitted Assignee"
shall mean a respectable and responsible person of good
financial standing who has entered into a direct covenant
with the Landlord to pay the rents reserved and other
moneys made payable by this Lease and to be bound by and
perform and observe the covenants and conditions
contained in this Lease for the balance of the Term then
unexpired and who (if the Landlord reasonably so
requires) has obtained a guarantor or guarantors to enter
into joint and several covenants with the Landlord for
the payment of the said rents and other moneys and the
performance and observance of the said covenants and
conditions for the balance of the Term as aforesaid
3.30.2.2 Not to assign the demised premises as a whole to any
person who is not a Permitted Assignee
3.30.2.3 Not without the prior written consent of the Landlord
such consent not to be unreasonably refused or delayed
either to mortgage or charge the demised premises as a
whole or to assign the demised premises as a whole to a
Permitted Assignee
3.30.3 The Tenant (being a company) may share the occupation of the
demised premises with any company which is a member of the same
group of companies (as defined in Section 42(l) of the Landlord
and Tenant Act 1954) as the Tenant Provided always that no
demise or other interest in the demised premises is thereby
created or granted and the Tenant does not thereby part with
possession of the demised premises
3.30.4.1 In this sub-clause the expression "Permitted Undertenant"
shall mean a respectable and responsible person of good
financial standing
3.30.4.2 Not to create any sub-lease of the whole of the demised
premises upon payment of a premium nor at a rent of less
than the full market rent obtainable without taking a
fine or premium
3.30.4.3 Not to create any sub-lease of part of the demised
premises save in respect of a complete floor or complete
floors of the demised premises so that no floor of the
demised premises shall be sub-divided in any way
3.30.5.1 Not to create any sub-lease save by instrument in writing
containing:-
3.30.5.1.1 unqualified covenants on the part of the
sub-tenant that the sub-tenant will not assign
mortgage or charge part only of the sub-let
premises and will not underlet or part with or
share the possession
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or occupation of the whole or any part thereof
(in each case by way of absolute prohibition
save as hereinafter provided) and
3.30.5.1.2 a covenant on the part of the sub-tenant that
the sub-tenant will not assign the whole of the
premises thereby demised without the prior
written consent of the Landlord under this Lease
(such consent not to be unreasonably withheld in
the case of a respectable and responsible
assignee of good financial standing who has
entered into a direct covenant with the Landlord
to be bound by and perform and observe the
covenants and stipulations contained in the
sub-lease to be assigned to him) and will not
mortgage or charge the said premises without the
prior written consent of the Landlord under this
Lease (such consent not to be unreasonably
withheld)
3.30.5.1.3 in the case of a sub-lease comprising a whole
floor or whole floors of the demised premises a
covenant on the part of the sub-tenant that the
sub-tenant will not sub-let the whole or any
part of the premises thereby demised:-
(a) otherwise than by way of a sub-lease
which shall contain an absolute
prohibition against further subletting
whether in whole or in part nor
(b) save in accordance with the same
conditions as are contained in all the
foregoing and following subclauses of
this Clause 3.30.5 nor
(c) without the prior written consent of the
Landlord under this Lease (such consent
not to be unreasonably withheld in the
case of a respectable and responsible
sub-tenant of good financial standing
who has entered into a direct covenant
with the Landlord to be bound by and
perform and observe the covenants and
stipulations contained in the sub-lease
to be granted to him)
Provided that the Tenant may permit any
Permitted Undertenant to share occupation of
any premises so sub-let to it in the like
manner as provided in sub-clause 3.30.3
(mutatis mutandis)
3.30.5.2.5 similar agreements covenants and stipulations
(mutatis mutandis) to those contained in this
Lease including provisions for rent reviews (at
least as often as those herein contained to the
best yearly market rent obtainable without taking
a premium) as at the dates on which the rent
hereby reserved is to be reviewed
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3.30.5.2.6 a covenant by the undertenant for the payment of
a service charge under which the undertenant
contributes a fair proportion of the cost of the
provision of services by the Landlord pursuant
to this Lease
3.30.5.3 Not to underlet the demised premises as a whole or in
part to any person who is not a Permitted Undertenant
3.30.5.4 Not without the prior written consent of the Landlord
such consent not to be unreasonably withheld or delayed
to underlet the demised premises as a whole or in part to
a Permitted Undertenant
REGISTRATION OF DEALINGS
3.31 At the cost of the Tenant within fourteen days next after the execution
of every assurance assignment underletting mortgage or charge affecting
the demised premises to give notice thereof in writing with particulars
thereof to the Landlord and deliver to the Landlord a certified copy of
the instrument effecting the same and within fourteen days after the
grant of Probate or Letters of Administration in the case of a deceased
tenant to produce the same to the Landlord paying at the same time to
the Landlord a registration fee of twenty pounds for each such
instrument or transaction
LANDLORD'S COSTS
3.32 To pay the proper and reasonable legal charges surveyors' or architect's
fees and any other costs and expenses incurred by the Landlord
(including stamp duty on licences and counterparts) resulting from all
applications by the Tenant for any consent required by this Lease
including those incurred in cases where consent is refused or the
application is withdrawn
VALUE ADDED TAX
3.33.1 Where by virtue of any of the provisions of these presents the
Tenant is required to pay repay or reimburse to the Landlord or
any person or persons any rents costs charges fees expenses or
any other sums or amounts whatsoever in respect of the supply of
any goods and/or services by the Landlord or any other person or
persons the Tenant shall also be required in addition to pay or
(as the case may be) keep the Landlord indemnified against:-
3.33.1.1 the amount of any Value Added Tax which may be chargeable
on the Landlord in respect of supplied made to the Tenant
under the terms of this Lease
3.33.1.2 the amount of Value Added Tax chargeable on any other
person or the Landlord in respect of supplies the cost of
which is included in the calculation of the sums which
the Tenant is required to pay repay or reimburse to the
Landlord save to the extent that such Value Added Tax is
available for credit or is recoverable by the Landlord
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3.33.2 For the avoidance of doubt the Landlord shall not be under a duty
to elect or refrain from electing pursuant to paragraph 2
Schedule 6A Value Added Tax Act 1983 (and any reference to this
enactment is a reference to it as from time to time amended
consolidated or re-enacted (with or without modification) and
includes all instruments or orders made thereunder) in respect of
the demised premises so as to reduce or avoid any liability to
Value Added Tax
REGULATIONS
3.34 To observe and perform and to ensure that the servants agents workmen
and visitors of the Tenant shall observe and perform any and all
reasonable regulations and instructions from time to time made or given
to the Tenant in writing by the Landlord in respect of the conduct and
use of the Development and in particular the conditions relating thereto
set out in the Second Schedule hereto
FIRE CONTROL
3.35 To keep any fire alarm and fire prevention and control apparatus
installed in the demised premises open to the inspection and maintained
to the reasonable satisfaction of the Landlord and not to obstruct the
access to or means of working such apparatus
DEDICATION
3.36 Not to make any objection to the dedication by the Landlord of any part
of the common parts of the Development for public use and to consent to
such dedication if the consent of the Tenant is required
INTEREST ON LATE PAYMENTS
3.37 If and so often as any rent or other moneys due from the Tenant under
this Lease shall be unpaid for fourteen days after the due date the
Tenant shall pay (in the case of rent by way of additional rent)
interest thereon (as well after as before any judgment) from the due
date until payment at a rate equivalent to 4% above the Base Rate for
the time being declared by Lloyds Bank PLC (or other clearing bank for
the time being of the Landlord)
LANDLORD'S COVENANTS
4. THE Landlord HEREBY COVENANTS with the Tenant:
QUIET ENJOYMENT
4.1 That the Tenant paying the rents and other moneys and performing and
observing the covenants agreements conditions and stipulations as herein
provided may peaceably and quietly hold and enjoy the demised premises
for the Term without any interruption from or by the Landlord or any
person lawfully claiming through under or in trust for it
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INSURANCE
4.2.1.1 To insure the demised premises at all times during the
Term against loss or damage by the Insured Risks (unless
such insurance shall be prevented by the act or default
of the Tenant or his servants or agents) with some
insurance office or underwriters of repute upon the usual
terms and conditions of such insurance office or
underwriters in the full reinstatement value thereof plus
value added tax or similar tax (together with Architects
Surveyors and other professional fees and demolition and
clearance expenses of such amounts as the Landlord shall
from time to time determine) and also four years (or such
longer period as the Landlord may from time to time
reasonably require) full rent and service charge payable
under this Lease (including any increased rent and
service charge payable hereunder)
4.2.1.2 To produce to the Tenant as soon as practicable upon
written request a copy of the Policy and the last premium
renewal receipt or reasonable evidence of the full terms
of the Policy and of the fact that the last premium has
been paid
4.2.1.3 To procure that the interest of the Tenant and its
mortgagees (if any) is noted or endorsed upon the Policy
4.2.1.4 To notify the Tenant of any material change in the risks
covered or in the terms of the Policy from time to time
4.2.1.5 Insofar as a letter agreeing to waive rights of
subrogation against the Tenant is reasonably procurable
from the insurance office with whom the Landlord is
insuring under Clause 4.2.1.1 hereof to use reasonable
endeavours to procure such a letter and to produce it to
the Tenant on demand
4.2.2 In case of damage to or destruction of the demised premises by
any of the Insured Risks to employ all insurance moneys (other
than for loss of rent and service charge) received by it in
reinstating and making good the demised premises with all
reasonable speed and to make up any deficiency out of its own
moneys PROVIDED THAT if the rebuilding and reinstatement of
the demised premises or any part thereof shall be frustrated
all moneys payable pursuant to any policy of insurance
effected hereunder shall be apportioned and there shall be
paid to the Tenant such proportion of such moneys as the value
of the fixtures set out in the Sixth Schedule hereto bears to
the construction costs of the demised premises at the date of
construction and the balance shall belong to the Landlord for
its own use and benefit
PROVISION OF SERVICES
4.3 At all times during the Term to carry out provide manage and operate
where appropriate the services mentioned in the Fifth Schedule hereto in
accordance with the principles of good estate management and where
proper to utilise any reserve fund towards the same
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save that where such services are expressed to be provided at the
Landlord's discretion the Landlord shall not be obliged to provide them
PROVIDED NEVERTHELESS that:
4.3.1 For the performance of its obligations hereunder the Landlord
shall be entitled to employ and pay such agents servants
contractors or such other persons as the Landlord may from time
to time think fit
4.3.2 The Landlord shall not be responsible for any delay suspension
breakdown or stoppage in connection with the performance or
observance of such obligations or for any omission to perform the
same due to any cause or circumstance not within the Landlord's
control but the Landlord will take all reasonable steps to remedy
or make good the same as soon as practicable
4.3.3 The Landlord shall not be liable to the Tenant for any defect or
want of repair unless the Landlord has had written notice thereof
nor in respect of any obligation mentioned in the said Fifth
Schedule that falls within the ambit of any of the Tenant's
covenants hereinbefore contained
PROVISOS
5 PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED THAT:-
RE-ENTRY
5.1 Notwithstanding and without prejudice to any other remedy and power
herein contained or otherwise available to the Landlord if
5.1.1 the rents or other moneys hereby reserved and made payable or
any part thereof respectively shall be unpaid for fourteen days
after becoming payable (whether formally or legally demanded or
not) or
5.1.2 any covenant agreement or obligation on the Tenant's part
contained in these presents shall not be performed or observed
or
5.1.3 the Tenant shall permit any execution or distress to be levied
on any goods for the time being in the demised premises or
5.1.4 the Tenant (being a company) or if more than one of them is a
company then any one of them shall enter into liquidation
whether compulsory or voluntary (not being merely a voluntary
liquidation while solvent for the purposes of amalgamation or
reconstruction) or a provisional liquidator shall be appointed
under the Insolvency Act 1986 or a receiver or manager or
administrative receiver or administrator shall be appointed or a
proposal shall be made for a voluntary arrangement or a proposal
shall be made for a scheme of arrangement or
5.1.5 the Tenant (being an individual) or if more than one individual
then any one of them shall apply for an interim order or shall
propose a voluntary arrangement under the Insolvency Act 1986 or
shall suffer a bankruptcy order to be made
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under the said Act or shall petition the Court for his own
bankruptcy or shall enter into a deed of arrangement or
5.1.6 the Tenant (being a company) or if more than one of them is a
company then any one of them shall be struck off the Register of
Companies or is dissolved or (being a company incorporated
outside Great Britain) is dissolved or ceases to exist under the
laws of the country or the state of its incorporation
then in every such case it shall be lawful for the Landlord at any time
thereafter to reenter upon the demised premises or any part thereof in
the name of the whole and thereupon this demise shall absolutely
determine but without prejudice to any right of action of the Landlord
in respect of any breach non-observance or non-performance of the
Tenant's covenants agreements or obligations herein contained
CESSER OF RENT
5.2 If during the Term the demised premises or any part thereof or all means
of access thereto shall be destroyed or damaged by any of the Insured
Risks so as to render the demised premises or any part thereof unfit for
occupation or use then (if the Tenant shall have duly carried out the
Tenant's obligations under sub-clauses 3.1 and 3.2 hereof and if no
insurance of the demised premises or rent and service charge shall have
been vitiated or payment of the policy moneys refused in whole or in
part by some act or default of the Tenant his servants agents or
visitors) the rents and service charge hereby reserved or a fair and
just proportion thereof according to the nature and extent of the damage
sustained shall as from the date of such destruction or damage until the
demised premises shall have been rebuilt or reinstated and made fit for
occupation and use be suspended and cease to be payable and any dispute
as to the extent proportion or period of such suspension shall be
determined by a single arbitrator to be appointed by the Landlord and
the Tenant and in case of difference by the President for the time being
of the Royal Institution of Chartered Surveyors in accordance with the
provisions of the Arbitration Acts 1950 to 1979 or any statutory
modification re-enactment or replacement thereof for the time being in
force
BASE RATE
5.3 In the event of the Base Rate of Lloyds Bank PLC (or other bank for the
time being of the Landlord) being abolished and no alternative rate
being presented by law to replace the said Base Rate for the purpose
inter alia of construing existing leases then any reference to the said
Base Rate shall have effect as if there had been substituted from time
to time for the Base Rate such rate of interest which shall be most
closely comparable with the said Base Rate such rate of interest to be
reasonably determined by the Landlord's Surveyor
ARREARS
5.4 Any moneys due to the Landlord from the Tenant under any covenant
condition or provision contained in this Lease shall be due as a debt
from the Tenant to the Landlord payable on demand and in the event of
non-payment such moneys shall be recoverable by distress or otherwise in
the same way as rent in arrear
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SETTLEMENT OF DISPUTES
5.5 Any dispute arising as between the Tenant and the tenant or occupier of
any other property of the Landlord as to any easement right or privilege
in connection with the use of the demised premises and such other
property or as to the walls separating the demised premises from such
other property or as to the amount of any contribution towards the
expenses of works to services used in common with such other property
shall be decided by the Landlord's Surveyor for the time being whose
decision shall be binding on all parties (save on any question of law)
and whose costs shall be paid by such of the parties to the dispute in
such proportions as he shall decide
EXCLUSION OF IMPLIED RIGHTS
5.6 Nothing herein contained shall by implication of law or otherwise
operate to confer on the Tenant any easement right or privilege
whatsoever over or against any adjoining or other property of the
Landlord (whether in the Development or not) either for an estate in fee
simple or for a term of years
UNRESTRICTED USE OF ADJOINING PROPERTY
5.7 The Tenant shall not be entitled to the benefit of any restrictions
which the Landlord may have imposed or may hereafter impose on any owner
or lessee of any property not comprised in the demised premises (whether
in the Development or not) and nothing herein contained or implied shall
impose or be deemed to impose any restrictions on the use of any such
property or give the Tenant the right to enforce or to have enforced or
to prevent the release or modification of any covenant agreement or
condition entered into by any purchaser from or any lessee tenant or
occupier of the Landlord in respect of such property And that this
demise shall not be deemed to include and shall not operate to convey or
demise any ways water mains sewers drains lights liberties privileges
easements rights or advantages whatsoever in through over or upon the
property of the Landlord adjoining or near to the demised premises save
as may be expressly granted by this Lease
EXCLUSION OF LIABILITY
5.8 The Landlord shall not be liable to the Tenant for any loss damage or
inconvenience which may be caused by reason of the failure stoppage
leakage bursting or defect of any water sanitary gas electricity or
other apparatus or by reason of a breakdown or defect of any plant or
machinery in the demised premises outside the Landlord's immediate
control
COMPENSATION
5.9 Subject to the provisions of sub-clause (2) of Section 38 of the
Landlord and Tenant Act 1954 neither the Tenant nor any assignee or
underlessee shall be entitled on quitting the demised premises or any
part thereof to any compensation under Section 37 of the said Act
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PERPETUITY PERIOD
5.10 All rights granted and all reservations made in respect of sewers drains
wires cables pipes channels watercourses conduits subways or other
conducting media not in existence at the date hereof shall be limited to
those which shall come into existence within eighty years from the date
hereof (which shall be deemed to be the perpetuity period for the
purposes of this Lease)
NO PLANNING WARRANTY
5.11 Nothing in this Lease shall be deemed to constitute any warranty by the
Landlord that the demised premises or any part thereof are or will
remain authorised for use under the Planning Acts for any specific
purpose
TENANT'S OPTION TO RENEW
5.12 The Tenant (here meaning The Galileo Company) shall have the right to
call for the grant of a new lease for a term of 25 years from the
expiration of the Term upon the same terms and conditions as this Lease
(save as to the amount of rent but including the provisions for rent
review herein contained such rent review being on every fifth
anniversary of the term created by the new lease and save also as to
this Clause) by giving to the Landlord not less than 12 months' nor more
than 18 months' previous written notice expiring upon the 24th March
2013 provided that this option shall not be exercisable by the Tenant
unless the rents hereby reserved shall have been paid and the covenants
on the part of the Tenant shall have been substantially observed and
performed throughout the Term
FREEDOM TO USE THE DEMISED PREMISES
5.13 Despite any provision (express or implied) of this Lease to the contrary
but subject to paragraph 3.2 of the Second Schedule hereto the Tenant
shall be entitled to use and have access to the demised premises
twenty-four hours a day every day of the whole of the Term
INTERPRETATION
6.1 IN this Lease where the context so admits:
6.1.1 Words importing the masculine gender shall be deemed to include
the feminine and neuter genders
6.1.2 Where there are two or more persons included in the expression
"the Tenant" covenants expressed to be made by the Tenant shall
be deemed to be made by such persons jointly and severally
6.2 Reference in this Lease to any right exercisable by the Landlord or any
right exercisable by the Tenant shall be construed as including (where
appropriate) the exercise of such right in both cases in common with the
Landlord and all other persons having a like right or to whom such right
may be granted
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6.3 Any negative covenant by the Tenant in this Lease shall be construed as
if it were also a covenant not to permit or suffer the act or thing in
question
6.4 The headings to clauses in this Lease shall not affect the construction
of such clauses
I N W I T N E S S whereof this document has been duly executed and had
been delivered on the date which appears first on page 1
THE FIRST SCHEDULE
The demised premises
1. All those premises for the purpose of identification only shown and
edged red on Plan 2 annexed
2. There shall be INCLUDED in this demise:-
2.1 All additions (except tenants and trade fixtures) at any time hereafter
made to the demised premises
2.2 All Landlord's plant and equipment fixtures and fittings in and about
the demised premises
2.3 The suspended ceiling(s) light fittings raised floors and carpet(s)
fitted or laid in the demised premises
2.4 All landscaping and the entirety of all boundary walls
2.5 The roof ground floor slabs and foundations of the demised premises
3 There shall be EXCLUDED from this demise the subsoil more than twelve
inches below the demised premises and the air space surrounding the
building constructed thereon
THE SECOND SCHEDULE
Easements and Rights granted
1 The right for all reasonable purposes connected with the demised
premises but not for any other purposes to pass and repass by foot only to and
from the demised premises over and along the walkways forming part of the common
parts of the Development as are from time to time constructed
2 The right for all reasonable purposes connected with the demised
premises but not for any other purposes to pass and repass with or without
vehicles over and along the roads forming part of the common parts of the
Development as are from time to time constructed Subject to compliance by the
Tenant with the following conditions
2.1 The Tenant shall not use the roads or permit the same to be used by his
servants agents or visitors for the parking of vehicles
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[PLAN 1]
<PAGE> 28
2.2 The Tenant shall comply with such directions as may from time to time be
given by any competent authority or the Landlord or any representative
of the Landlord for the regulation and direction of traffic
2.3 The Tenant shall co-operate with the Landlord so as to ensure that no
rubbish or litter is left on the roads or any part thereof and that no
damage is caused by his servants agents or visitors thereto and that no
nuisance annoyance or inconvenience is caused to the Landlord or to the
owners or lessees or occupiers of the Development
3 The rights granted by paragraphs 1 and 2 above are subject to
3.1 The right of the Landlord in its absolute discretion to close
temporarily or permanently or alter from time to time the walkways and
roads (other than the walkways and roads dividing the two separate areas
of land comprising the demised premises) and other common parts of the
Development subject to the Landlord leaving available for use by the
Tenant reasonable means of access to and serving the demised premises
3.2 The right of the Landlord to limit and restrict (but not so as to render
them totally incapable of exercise) the rights outside Working Hours in
such manner as the Landlord's security arrangements may require
4 The free and uninterrupted passage and running of water soil gas
electricity telephone heating and other services from and to the demised
premises in and through the sewers drains wires cables pipes channels water
courses conduits subways or other conducting media now or at any time in the
future in or under other parts of the Development
5 The right of support and protection for the demised premises from other
parts of the Development
THE THIRD SCHEDULE
Exceptions and Reservations
THERE ARE EXCEPTED AND RESERVED to the Landlord and its lessees and
assigns and all persons to whom the Landlord shall hereafter grant any such
right or rights:
1 The free and uninterrupted passage of and running of water soil gas
electricity telephone heating and other services to and from other parts of the
Development in and through the sewers drains wires cables pipes channels
watercourses conduits subways or other conducting media now or at any time in
the future in or under the demised premises
2 The right at all reasonable times upon reasonable notice and if
practicable providing outline details of the proposed works at the same time
(and at all times with or without notice in case of emergency) to enter upon the
demised premises for the purpose of connecting laying inspecting repairing
cleansing maintaining altering replacing relaying or renewing any sewer drain
wire cable pipe channel watercourse conduit sub-way or other conducting medium
and to erect construct or lay under the demised premises other than the building
or buildings constructed thereon any sewers drains wires cables pipes channels
watercourses conduits subways or other conducting media or other works for the
drainage of or for the supply of water gas electricity
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telephone heating and other services to the Development the person exercising
such right doing as little damage to the demised premises as possible and making
good any damage to the demised premises thereby occasioned but without payment
of compensation for any annoyance nuisance noise vibration or inconvenience
caused to the Tenant in connection with the use by the Tenant of the demised
premises provided that the person exercising such right shall explore all
reasonably practicable alternative methods of carrying out such works and cause
as little inconvenience as reasonably possible PROVIDED ALWAYS that the person
or persons entering upon the demised premises pursuant to any of the provisions
of this Schedule shall (save in case of emergency) comply with all reasonable
requirements of the Tenant as to the security of the demised premises including
(but not by way of limitation) a requirement that an authorised representative
of the Tenant should accompany such person or persons at all times
3 The right at all reasonable times on not less than 72 hours' prior
notice and if practicable providing outline details of the proposed works at the
same time (except in emergency) to enter upon the demised premises to view their
state and condition and to carry out the works and provide the services set out
in the Fifth Schedule hereto the person exercising such right doing as little
damage to the demised premises as possible and making good any damage to the
demised premises thereby occasioned but without payment of compensation for any
annoyance nuisance noise vibration or inconvenience caused to the Tenant in
connection with the use by the Tenant of the demised premises provided that the
person exercising such right shall explore all reasonably practicable
alternative methods of carrying out such works and cause as little inconvenience
as reasonably possible PROVIDED ALWAYS that the person or persons entering upon
the demised premises pursuant to any of the provisions of this Schedule shall
(save in case of emergency) comply with all reasonable requirements of the
Tenant as to the security of the demised premises including (but not by way of
limitation) a requirement that an authorised representative of the Tenant should
accompany such person or persons at all times
4 The right to the passage of light and air and any other easement to
which the Landlord may be or become entitled in respect of any adjoining or
neighbouring property of the Landlord (whether in the Development or not)
5 The right to erect build rebuild and/or alter as it may think fit at any
time and from time to time any buildings or bays or projections to buildings on
any property adjoining or neighbouring the demised premises but not above or
below the demised premises and the right to use and or develop any adjoining or
neighbouring property of the Landlord (whether in the Development or not) in
such manner as the Landlord may think fit in each case notwithstanding that the
access of light or air to the demised premises may thereby be obstructed or
affected and without payment of compensation for any annoyance nuisance noise
vibration or inconvenience caused to the Tenant in connection with the use by
the Tenant of the demised premises
THE FOURTH SCHEDULE
Provisions for Rent Review
1 In this Schedule the following expressions shall have the following
meanings:-
1.1 "review date" means the 25th day of March 1993 and every subsequent
fifth anniversary thereof
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1.2 "rent" shall not include the rent secondly thirdly and fourthly reserved
and made payable under Clause 2 of this Lease
1.3 "the quantified rent" means the yearly rent of One million two hundred
and seventy-one thousand one hundred and ninety four pounds and seventy
five pence (L1,271,194.75)
1.4 "the relevant review date" means that review date at which the rent is
being agreed or determined pursuant to the provisions of this Schedule
1.5 "the open market rent" means the best yearly market rent for which the
demised premises might reasonably be expected to be let on the relevant
review date by a willing landlord to a willing tenant with vacant
possession without taking a premium:-
1.5.1. For a term equal in duration to the greater of the unexpired
residue of the original term hereby granted or 15 years and on
the basis (whether or not it is a fact) that the demised premises
enjoy planning permission for the use authorised under this Lease
1.5.2 On the assumption that the demised premises comprise High Class
Professional or Commercial Offices with a net internal area of
One hundred and twenty four thousand and nineteen square feet
(124,019 sq ft) together with sufficient car parking spaces to
meet planning requirements
1.5.3 Otherwise upon the terms and conditions of this Lease (save as to
the amount of rent but including the provisions for rent review
herein contained and save for the option to renew)
1.5.4 On the assumption (whether or not it is a fact) that at the
relevant review date the demised premises are fully equipped and
ready for immediate occupation and use and that no work has been
carried out thereon by the Tenant or his predecessors in title or
sub-tenants or other lawful occupier during the Term which has
diminished the rental value of the demised premises and that in
case the demised premises or the accesses thereto have been
destroyed or damaged they have been fully restored
1.5.5 On the assumption (whether or not it is a fact) that all the
covenants and obligations in this Lease on the part of the Tenant
have been complied with
1.5.6 On the assumption that the said willing tenant or tenants do not
seek a rent free period nor any reduction in rent to allow them
the equivalent of a rent free period and in considering any
comparable rents the existence of any rent free period or any
reduction in rent calculated to allow for any rent free period
shall be ignored and any abnormally high rent agreed to
compensate a landlord for an artificially extended rent free
period or any other inducements shall be ignored
1.5.7 But disregarding:-
1.5.7.1 Any goodwill attached to the demised premises by reason
of the carrying on thereon of the trade or business of
the Tenant (whether by him or any
25
<PAGE> 31
predecessor of the Tenant in that trade or business) or
of any sub-tenant or other lawful occupier
1.5.7.2 Any improvements carried out during the Term by the
Tenant or his predecessors in title or sub-tenants or
other lawful occupier otherwise than in pursuance of an
obligation to the Landlord to the extent such obligation
does not fall within the Tenant's covenant contained in
this Lease to comply with Enactments or at the expense or
partly at the expense of the Landlord
1.5.7.3 Any statutory limitation or control of rents for the time
being in force
1.5.7.4 The fixtures set out in the Sixth Schedule hereto or any
works plant and equipment at the demised premises
replacing the same or in substitution therefor
1.6 "revised rent" means the new or increased yearly rent payable in
substitution for the quantified rent or for a previous revised rent
1.7 "the current rent" means the yearly rent payable in the year ending on
the relevant review date
1.8 "the Surveyor" means the independent surveyor required to be appointed
pursuant to Clause 3 of this Schedule
2 From and after each review date the rent shall be the rent agreed in
writing between the Landlord and the Tenant or in the absence of such agreement
shall be whichever is the higher of:-
2.1 The current rent and
2.2 The open market rent
3 If the Landlord and the Tenant shall not have agreed in writing the open
market rent by the relevant review date the Landlord or the Tenant may at any
time thereafter (but before the review date next following the relevant review
date) require in writing to the other of them an independent surveyor to be
appointed to determine the open market rent
4 The Surveyor (who shall be a Fellow of the Royal Institution of
Chartered Surveyors and be experienced in the valuation of premises of a like
nature to the demised premises) may be agreed upon by the Landlord and the
Tenant and in default of such agreement within two months of a requirement being
made pursuant to Clause 3 of this Schedule shall be appointed by the President
for the time being of the Royal Institution of Chartered Surveyors on the
application of the Landlord or the Tenant made at any time after the said period
of two months and if the said President shall for any reason not be available or
be unable to make such appointment then the appointment may be made by the Vice
President or next available senior officer of the said Institution then
available
26
<PAGE> 32
5.1 Notice in writing of his appointment shall be given by the Surveyor to
the Landlord and the Tenant and he shall invite each to submit within a
specified period (which shall not exceed four weeks) a valuation
accompanied if the Landlord or the Tenant so desire by a statement of
reasons
5.2 The Surveyor shall act as an expert and not as an arbitrator He shall
consider any valuation and reasons submitted to him within the said
period but shall not be in any way limited or fettered thereby and shall
determine the open market rent in accordance with his own judgment
5.3 The Surveyor shall give notice in writing of his decision to the
Landlord and the Tenant within two months of his appointment or within
such extended period as the Landlord may at any time allow
5.4 The decision of the Surveyor shall be final on all matters hereby
referred to him
6 If the Surveyor shall fail to determine the open market rent and to give
notice thereof within the time and in manner hereinbefore provided or if he
shall relinquish his appointment or die or otherwise fail or be unable to
determine the same the Landlord may apply to the President or such other officer
of the Royal Institution of Chartered Surveyors as aforesaid for a substitute to
be appointed in his place which procedure may be repeated as many times as
necessary
7 The fees of any such Surveyor and the Royal Institution of Chartered
Surveyors shall be shared equally between the Landlord and the Tenant
8 In the event that by the relevant review date the Landlord and the
Tenant shall not have agreed in writing the rent to be payable from and after
such date or the Surveyor (if appointed) shall not have given the notice
provided for in Clause 5.3 of this Schedule then the Tenant shall continue to
pay rent at the rate of the current rent until the quarter day immediately
following the reaching of such agreement or the giving of the said notice
whichever shall first occur If such agreement or the giving of the said notice
shall re-suit in a revised rent there shall be added to and be payable with the
instalment of the revised rent due on such quarter day (notwithstanding that the
provisions of Clause 9 of this Schedule remain to be complied with) the amount
representing the difference between the current rent and the revised rent from
the relevant review date until such quarter day together with interest on such
amount at a rate equivalent to the Base Rate of Lloyds Bank PLC (or other the
London Clearing Bank for the time being of the Landlord) from time to time from
the relevant review date until payment If such agreement or the giving of the
said notice shall not have resulted in a revised rent the current rent shall
continue to be payable
9 Immediately after the open market rent shall have been agreed or
determined as aforesaid a memorandum of the revised rent (if any) in such form
as the Landlord may reasonably require shall be signed recording the amount of
the revised rent on behalf of the Landlord and the Tenant and the costs and
expenses thereof shall be paid by the Tenant
10 A revised rent shall be payable on the days and in the manner appointed
for payment of the quantified rent and the terms of this Lease relating to the
reservation payment or suspension of rent and the consequences of non-payment
shall apply to a revised rent in the same manner as to the quantified rent
27
<PAGE> 33
11 If at any time or times there shall be in force any Enactment which
shall restrict or in any way affect the Landlord's right to have the rent
reviewed as hereinbefore provided or which shall restrict or in any way affect
the Landlord's right to payment of a revised rent the Landlord shall be entitled
following the repeal termination or modification of such Enactment (but in the
event of a modification of such Enactment only to the extent permitted by such
modification) to serve notice upon the Tenant requiring the Tenant to pay to the
Landlord as from the first quarter day ("the interim review date") occurring not
less than twenty-eight days after the date of service of the Landlord's notice
until such rent shall next be varied in accordance with the provisions of this
Schedule the rent stated in the Landlord's notice and such rent shall become
payable accordingly unless the Tenant shall have served upon the Landlord within
twenty-eight days of the date of service of the Landlord's notice a counter
notice requiring in substitution for the rent stated in the Landlord's notice
whichever is the higher of the yearly rent payable hereunder immediately before
the interim review date and the open market rent of the demised premises on the
interim review date whereupon in the absence of agreement a Surveyor shall be
appointed to determine the open market rent in accordance with the foregoing
provisions of this Schedule so far as the same shall be applicable with the
substitution of the interim review date for the relevant review date
THE FIFTH SCHEDULE
The Service Charge
PART I
1 In this Schedule:-
"Service Charge" means the service charge calculated in accordance
with this Schedule
"the Total Costs" means the reasonable costs expenses payments
liabilities and provisions incurred or made
by the Landlord or otherwise arising in
connection with or in the provision of or the
payment for the services and other matters
set out or referred to in Part II of this
Schedule
"Service Charge Year" means the period from the date provided herein for
the commencement of the Term to the next
following 31st March and thereafter each
successive period of twelve months ending on
the 31st March in each year of the Term or
ending on such other date as the Landlord
shall substitute as hereinafter provided
"the Tenants Percentage" means the lesser of the proportion determined by
the Landlord which the total gross floor area
(calculated by external measurement to the
nearest square foot or square metre) of the
demised premises shall from time to time bear
to the total gross floor area (calculated by
external
28
<PAGE> 34
measurement to the nearest square foot or
square metre) of the buildings erected on the
Development not comprising the common parts
of the Development as ascertained and
certified by the Landlord whose decision
shall be final and binding on the parties
hereto or 17.738%
2 The Tenant shall pay to the Landlord a Service Charge calculated as
hereinafter provided TO THE INTENT that the Landlord shall be fully indemnified
paid and reimbursed in respect of the Total Costs in respect of each Service
Charge Year
3 The Service Charge payable by the Tenant in each Service Charge Year
shall be the Tenant's Percentage of the Total Costs Provided that if at any time
the Landlord acting reasonably considers it fair and reasonable that the Tenant
should pay a different proportion of the Total Costs relating to any particular
service(s) or matter(s) the Landlord may adopt and apply such other
proportion(s) in place of the Tenant's Percentage as may be fair and reasonable
in all the circumstances
4 If owing to a change of circumstances it appears reasonable that the
Tenant's Percentage should be altered the Landlord may from time to time by
serving written notice thereof on the Tenant make such alteration as may be fair
and reasonable in all the circumstances
5 The Tenant shall pay to the Landlord by equal quarterly payments in
advance on the days hereinbefore specified for payment of rent on account of the
Service Charge in respect of each Service Charge Year such amount as the
Landlord or its agent in either case acting reasonably shall from time to time
specify at its discretion to be fair and reasonable
6 The amount of the Total Costs and the Service Charge finally payable by
the Tenant shall be certified and summarised by the Landlord or its agent or
professional auditors (at the Landlord's discretion) for each Service Charge
Year during the course of the next succeeding Service Charge Year or as soon
thereafter as may be practicable and in such certificate and summary credit
shall be given to the Tenant for all payments made on account of the Service
Charge Year in question pursuant to this Schedule and any balance then found
payable to the Landlord shall be paid by the Tenant to the Landlord on demand
and any over-payment then found shall either be placed to the credit of the
Tenant against the next quarterly advance payment of Service Charge payable by
the Tenant pursuant to the terms of this Schedule or (if the term hereby created
has then expired shall be refunded to the Tenant including either the Tenant's
Percentage of any unexpended reserved fund or such proportion of any unexpended
reserved fund as the Tenant has contributed whichever is the lesser) AND the
provisions of this Clause shall continue to apply notwithstanding the expiration
or sooner determination of the Term but only in respect of the period down to
such expiration or sooner determination so that any Service Charge remaining
unpaid at the date of such expiration or sooner determination of the Term or
calculated after such date shall be a debt due by the Tenant to the Landlord
payable on demand
7 The certificate of the Landlord or its agent or professional auditors as
aforesaid as to any amount payable by the Tenant hereunder shall (unless any
manifest error shall appear therein and save on any question of law) be
conclusive and binding upon the Tenant but upon request by the Tenant in writing
and at the Tenant's cost the Tenant shall be entitled as soon as may be
practicable to receive a certificate from the professional auditors for the time
being of the
29
<PAGE> 35
Landlord to the effect that the amount payable by the Tenant hereunder has been
computed in accordance with the terms hereof and that if any amount is included
in such amount by way of allocation to a reserve such allocation has been made
8 Notwithstanding the provisions hereinbefore contained the Landlord shall
be entitled from time to time to change the date of expiry of the Service Charge
Year from the 31st March to such other date as the Landlord may require and upon
any such change all necessary and requisite adjustments shall be made
PART II
EXPENSES RELATING TO THE DEVELOPMENT
1 The lighting cleaning maintenance redecoration repair replacement and
renewal and the payment of rates rents and other outgoings incurred in the
provision of a management centre for the Development during the daytime and/or
proper and reasonable residential accommodation for employees and garaging for
their vehicles
2 The purchase lease hire maintenance repair and when necessary renewal
and replacement of all electrical and mechanical apparatus plant vehicles tools
furniture materials and equipment installed or supplied by the Landlord from
time to time for the benefit of the Development and the provision of services
therein including (but not by way of limitation) traffic control equipment and
computer equipment
3 The lighting maintenance repair replacement and renewal of all the
common parts of the Development
4 The payment of any costs which may be levied by the local authority on
the Development in relation to the collection of refuse or any other service
rendered by the local authority for the benefit of the Development
5 The collection of refuse where undertaken by the Landlord at the
Landlord's discretion
6 The payment of rates water rates and other outgoings (if any) charged an
the common parts of the Development
7 The gardening planting landscaping (and maintenance thereof) of the
appropriate parts of the common parts of the Development at the Landlord's
discretion
8 The employment of supervisory and other staff porters watchmen cleaners
and others employed or under contract for the common parts of the Development at
the Landlord's discretion including salaries wages insurance pensions and
national insurance contributions and the provision of uniforms and/or protective
clothing
9 The supply of gas electricity oil or other fuel or energy required for
any of the services or matters referred to in this part of this Schedule
10 The cleaning painting decoration or other treatment of all the common
parts of the Development
30
<PAGE> 36
11 The execution of any works in compliance with any Enactment affecting
the common parts of the Development or any part thereof or the user thereof or
the employment therein of any person or in compliance with any notice or
requirement of any competent authority and/or the cost and expense of any
protest or appeal at the Landlord's discretion against any such notice or
requirement
12 The execution of any works at the Landlord's discretion for the
protection and safety of the members of the public visiting or passing the
common parts of the Development
13 The provision and upkeep of a security system for the common parts of
the Development at the Landlord's discretion including (but not by way of
limitation) a burglar alarm system closed circuit television and/or direct
communication with the police or other security service
14 The insurance of the common parts of the Development against the Insured
Risks and insurance against employer's liability public liability and third
party risks and any other insurances which shall in the opinion of the Landlord
be appropriate
15 All payments whether direct or indirect paid by the Landlord to or in
respect of any servant or agent or to any local authority or to any person or
body whatsoever towards or in connection with the carrying out of all or any of
the matters referred to in this part of this Schedule
16 Any additional new or extended service facility or matter which the
Landlord may reasonably decide shall be provided for or at the Development or
for the occupiers thereof or visitors thereto or for the modem and proper
operation and management thereof
17 The payment of all fees costs and expenses incurred in respect of the
Certificate and Summary to be provided under Part I of this Schedule and in
respect of all accounts kept and audits made for the purpose thereof
18 The payment of Value Added Tax on supplies made to the Landlord by third
parties or other taxation payments and any other expenditure of the Landlord in
the provision of and compliance with its obligations relating to the services
and other matters herein described in this Schedule save to the extent that
credit may be obtained for the same or the same may be recovered from H.M.
Commissioners for Customs and Excise
19 At the Landlord's discretion the creation and maintenance of a reserve
making provision for any costs expenses payments or liabilities which may arise
or be incurred in relation to any of the services and other matters set out in
this part of this Schedule in any subsequent year or years whether before or
after the expiry of the Term which reserve shall be applied at the Landlord's
discretion in or towards the discharge and payment of such future liabilities
costs or expenses (whether arising before or after the expiry of the Term) but
so that the Tenant shall not be entitled to any interest in or lien upon such
reserve PROVIDED THAT any sums allocated to such reserve shall be held in a
separately designated deposit account by the Landlord upon trust to apply the
same for the purpose of the Development and pending such application placed upon
deposit or otherwise invested in such manner as the Landlord shall determine and
the amount of interest earned (after deduction of tax at the appropriate rate)
shall be added to and become a part of the reserve
31
<PAGE> 37
20 A management fee (and the Value Added Tax thereon) not exceeding in any
one year Ten per centum of the Total Costs recoverable by the Landlord in that
year
THE SIXTH SCHEDULE
Fixtures to be Disregarded on Rent Review
- The air conditioning installations for the computer rooms, first floor
offices and atrium including dri-coolers;
- the heating and ventilation installations in the Building (including
for the avoidance of doubt the energy centre identified on the Lease
plan);
- all electrical installations excluding lighting;
- Building management systems;
- hot water installations and sanitary equipment;
- fire protection installations;
- security installations;
- passenger lifts and goods lifts;
- dock leveller;
- raised floors and carpets or other floor coverings; and
- the fuel farm.
(THE COMMON SEAL of ST.
(MARTINS PROPERTY
(INVESTMENTS LIMITED
(was hereunto affixed in
(the presence of.-
Authorised Signatory
Secretary
32
<PAGE> 1
Exhibit 10.14
DATED [2nd December] 1987
WINDMILL HILL BUSINESS CENTRE
ST. MARTINS PROPERTY
INVESTMENTS LIMITED
- and -
GALILEO DISTRIBUTION SYSTEMS LIMITED
------------------------
LEASE
- of -
Premises known as
OPTIMUS Windmill Hill
Business Centre Swindon
------------------------
STEPHENSON HARWOOD,
One, St. Paul's Churchyard,
London EC4M 8SH.
I/BB009
<PAGE> 2
CONTENTS
CLAUSE PROVISION
1 Definitions
2 Demise and Rent
3 Tenant's Covenants
3.1 Rent
3.2 Insurance
3.3 Outgoings
3.4 Maintenance and Repair
3.5 Internal Decoration
3.6 External Decoration
3.7 Cleaning
3.8 Party Structures etc.
3.9 Entry
3.10 Yielding Up
3.11 Alterations and Additions
3.12 Disrepair and Breach of Covenant
3.13 Signs
3.14 Statutory and Planning Requirements
3.15 Notices
3.16 Overloading
3.17 Encroachment
3.18 Nuisance and General Prohibitions
3.19 User
3.20 Rights of Light
3.21 Refuse
3.22 Dangerous Substances
3.23 Drains
<PAGE> 3
CLAUSE PROVISION
3.24 Control of Common Parts
3.25 Disputes
3.26 Indemnity
3.27 Support
3.28 Sale & Letting Boards
3.29 Dilapidations and Section 146 Law of Property Act 1925
3.30 Alienation
3.31 Registration of Dealings
3.32 Landlord's Costs
3.33 Value Added Tax
3.34 Regulations
3.35 Fire Control
3.36 Dedication
3.37 Interest on Late Payments
4. Landlord's Covenants
4.1 Quiet Enjoyment
4.2 Insurance
4.3 Provision of Services
5. Provisos
5.1 Re-entry
5.2 Cesser of Rent
5.3 Base Rate
5.4 Arrears
5.5 Settlement of Disputes
5.6 Exclusion of Implied Rights
<PAGE> 4
CLAUSE PROVISION
5.7 Unrestricted Use of Adjoining Property
5.8 Exclusion of Liability
5.9 Compensation
5.10 Perpetuity Period
5.11 No Planning Warranty
5.12 Tenant's Option to Renew
5.13 Freedom to Use the Demised Premises
6. Interpretation
First Schedule The Demised Premises
Second Schedule Easements and Rights Granted
Third Schedule Exceptions and Reservations
Fourth Schedule Provisions for Rent Review
Fifth Schedule The Service Charge
<PAGE> 5
T H I S L E A S E made the 2nd day of December, One thousand nine hundred and
eighty-seven BETWEEN ST. MARTINS PROPERTY INVESTMENTS LIMITED whose registered
office is at Adelaide House London Bridge London EC4 ("the Landlord") which
expression where the context admits includes the estate owner for the time being
of the reversion of the premises hereby demised expectant on the term hereby
granted) of the one part and GALILEO DISTRIBUTION SYSTEMS LIMITED whose
registered office is at PO Box 10 Speedbird House Heathrow Airport (London),
Hounslow Middlesex ("the Tenant" which expression where the context admits
includes his successors in title) of the other part
W I T N E S S E S as follows:
DEFINITIONS
1. "the demised premises". The building(s) and surrounding land known as
???????????? Windmill Hill Business Central Swindon and described in
the First Schedule hereto
"the Development" - The estate and premises thereon constructed from
time to time the extent whereof is for, the purpose of identification
only delineated and edged blue on the Plan annexed
"the common parts of the Development" - All parts of the Development
which are provided by the Landlord for common use and enjoyment by the
tenants and occupiers of the Development
"the Insured Risks" - Fire explosion impact riots strike civil
commotion and malicious damage storm flood tempest including lightning
earthquake aircraft (except hostile aircraft) and other aerial devices
and articles dropped therefrom bursting or overflowing of water pipes
tanks and apparatus and in so far as the same are reasonably procurable
subsidence landslip and heave (provided that the Landlord shall notify
the Tenant in the event of such risks or any of them ceasing to be
available) and such other risks as the Landlord or the Tenant shall
from time to time reasonably require to have insured
"the Term" the term of years hereby granted
"Enactment" any and every Act of Parliament already or hereafter to be
passed and any and every order regulation and by-law already or
hereafter to be made under or in pursuance of any such Act
<PAGE> 6
"Working Hours" the hours of 8-30 a.m. to 6-00 p.m., on Mondays to
Fridays (except public holidays) and such other times or days as the
Landlord shall decide
DEMISE AND RENT
2. IN CONSIDERATION of the rents hereinafter reserved and of the
Tenant's covenants hereinafter contained the Landlord HEREBY DEMISES unto the
Tenant ALL THOSE the demised premises Together with the rights set out in the
Second Schedule hereto but Excepting and Reserving as mentioned in the Third
Schedule hereto TO HOLD the same unto the Tenant SUBJECT to all rights of light
and air and all other easements rights quasi-easements and covenants (if any)
affecting the demised premises at the date hereof for the term of TWENTY FIVE
AND ONE HALF YEARS commencing on the 29th day of September 1987 and expiring on
the 24th day of March 2013 YIELDING AND PAYING therefor unto the Landlord yearly
during the Term and so in proportion for any less time than a year FIRST a
YEARLY RENT of SIX HUNDRED AND EIGHTY-FIVE THOUSAND SIX HUNDRED POUNDS
(L685,600.00) or such other yearly rent as shall be determined in accordance
with the provisions of the Fourth Schedule hereto such rent to be paid clear of
all deductions whatsoever by equal quarterly payments in advance on the usual
quarter days in every year the first of such payments for the period from the
25th day of March 1988 to be made on the 25th day of March 1988 SECONDLY by way
of further rent on demand (a) a sum or sums of money equal to the amounts (net
of any discounts received) properly and reasonably expended by the Landlord
pursuant to Clause 4.2 hereof or in effecting and maintaining such other
insurance as the Landlord shall from time to time require and (b) the amount
(net of any discounts received) (if any) properly and reasonably expended by the
Landlord in respect of increased premiums occasioned by the nature of the
occupation or business of the Tenant or use of the demised premises AND THIRDLY
by way of further rent a service charge calculated and payable in accordance
with the provisions of the Fifth Schedule hereto Provided that there shall as
regards the yearly rent first above described (but not as regards the yearly
rent secondly above described) be a rent free period commencing on the date
hereof and expiring on the 25th March 1988
TENANT'S COVENANTS
3. THE Tenant HEREBY COVENANTS with the Landlord as follows:
RENT
3.1 To pay the rents hereinbefore reserved and made payable without any
deduction whatsoever at the times and in the manner aforesaid
2.
<PAGE> 7
INSURANCE
3.2.1 Not without the previous consent in writing of the Landlord to effect
any further or other insurance in respect of the demised premises in
duplication to the cover effected by the Landlord
3.2.2 To comply with all the recommendations and requirements made in or
under any policy of insurance relating to the demised premises by any
insurer (unless the Tenant elects to pay the additional premium
required by the insurers for continuing cover without such
compliance)
3.2.3 To comply with all recommendations and requirements made by any
appropriate authority with regard to fire health safety or otherwise
3.2.4 As often as the demised premises shall be destroyed or damaged
forthwith to notify the Landlord in writing
3.2.5 Not to carry on or do on the demised premises any trade or act in
consequence of which the Landlord would or might be prevented from
insuring the demised premises or any other adjoining property for the
time being owned by the Landlord at the ordinary rate of premium or
whereby any insurance effected in respect of the demised premises or
any such other property would or might be vitiated or prejudiced and
not without the written consent of the Landlord (such consent not to
be unreasonably withheld) to do anything whereby any additional
premium may become payable for such insurance and the Tenant shall
pay for any additional premium incurred
3.2.6 That in the event of the demised premises or any adjoining or
neighbouring property for the time being owned by the Landlord or any
part thereof being destroyed or damaged by any of the Insured Risks
and the insurance money under any insurance against the same effected
thereon by the Landlord being wholly or partly irrecoverable by
reason solely or in part of any act or default of the Tenant or the
servants agents or visitors of the Tenant then and in every such case
the Tenant will forthwith pay to the Landlord the whole or (as the
case may require) the irrecoverable proportion of the costs and
expenses incurred by the Landlord (including legal costs and
Surveyors fees and other professional costs and fees and
disbursements) of completely rebuilding and reinstating the same
OUTGOINGS
3.3 To pay and discharge all rates taxes duties charges assessments
impositions and outgoings whatsoever whether Parliamentary Parochial local
or otherwise and whether or not of an annual or
3.
<PAGE> 8
recurring nature (other than any such arising in respect of any
development dealing with disposition of or in or ownership of the
reversion mediately or immediately expectant on the Term or the right to
receive the rent payable hereunder) which are now or which may at any time
during the Term be assessed charged or imposed upon or payable in respect
of the demised premises or any part thereof or on the owner or occupier
thereof whether the same shall be in the nature of those now in being or
not and/or to refund to the Landlord on demand (in case any of the same
are payable charged or assessed in respect of the Development as a whole
or any part thereof which includes the demised premises) a fair and proper
proportion thereof attributable to the demised premises to be properly and
reasonably determined by the Landlord's Surveyor
MAINTENANCE AND REPAIR
3.4.1 From time to time and at all times during the Term well and
substantially to repair cleanse maintain amend and keep in good and
substantial repair and condition the demised premises and the
appurtenances thereof including (but without limitation) all carpets
therein (damage by any of the insured Risks (in excess of any policy
excesses) excepted unless the policy or policies of insurance
effected by the Landlord shall be vitiated or payment of the policy
moneys refused by reason of the act or default of the Tenant or the
servants agents or visitors of the Tenant) and where necessary in
order to comply with such covenant to repair as aforesaid to renew or
replace the demised premises or any part or parts thereof if the same
shall so require or become beyond repair or if the same shall require
renewal or replacement by reason of any defect therein AND to inform
the Landlord in writing at once if the Tenant becomes aware of any
defect in the demised premises
3.4.2 Not to remove or dispose of any machinery or plant comprising
landlord's as opposed to tenant's fixtures and fittings whether or
not in the course of renewing or replacing the same (except to the
extent that the same are comprised in a permitted dealing with the
demised premises) without the Landlord's previous written consent
such consent not to be unreasonably withheld
3.4.3 From time to time and at all times during the Term to maintain and
repair in good working order and if and when necessary (but subject
to Clause 3.4.2 hereof) to renew or replace the smoke-extractor
air-conditioning heating ventilating electrical water and sanitary
installations and all other plant machinery and equipment within the
demised premises and forming part thereof (damage as aforesaid
excepted) and to procure that the same are properly and regularly
serviced by qualified persons approved by the manufacturers of such
plant machinery and equipment
4.
<PAGE> 9
3.4.4 Not to overload the electrical wiring installations and apparatus in
or serving the demised premises and at all times during the Term to
ensure that the same comply with the standards terms and conditions
laid down by the Institution of Electrical Engineers and the
regulations of the Electricity Supply Authority
INTERNAL DECORATION
3.5 In the last year of every consecutive period of five years of the Term and
also in the last year of the Term (howsoever determined) to paint polish
paper or otherwise treat as appropriate all the internal parts (usually or
requiring to be painted polished papered or otherwise treated) of the
demised premises and all additions and fixtures thereto with two coats at
least of best quality paint best quality polish or other suitable material
of best quality PROVIDED ALWAYS that in the last year of the Term such
work of painting and decoration shall be in tints colours and designs
previously approved in writing by the Landlord PROVIDED FURTHER that the
obligation contained in this sub-clause shall not apply in the case of the
last year of the Term if the Tenant shall have performed such obligation
less than 18 months prior to the end of the Term
EXTERNAL DECORATION
3.6 In the last year of every consecutive period of three years of the Term
and also in the last year of the Term (howsoever determined) to paint or
otherwise treat as appropriate all the external parts (usually or
requiring to be painted or otherwise treated) of the demised premises with
two coats at least of best quality paint or other suitable material of
best quality in tints colours and designs previously approved in writing
by the Landlord PROVIDED FURTHER that the obligation contained in this
sub-clause shall not apply in the case of the last year of the Term if the
Tenant shall have performed such obligation less than 18 months prior to
the end of the Term
CLEANING
3.7 At all times during the Term to keep the demised premises in a clean and
tidy condition and at least once in every month to clean the windows and
window frames of the demised premises and as often as occasion may require
to wash down all tiles and other washable surfaces
PARTY STRUCTURES ETC.
3.8 To pay on demand a reasonable contribution towards the costs and expenses
properly and reasonably incurred by the Landlord (including legal costs
surveyors fees and other professional costs fees and disbursements) of
constructing repairing rebuilding renewing lighting cleansing and
maintaining all things the use of
5.
<PAGE> 10
which is common to or capable of being used in common with the demised
premises and other premises such reasonable contribution to be assessed by
the Landlord's Surveyor whose decision shall be final and binding on all
parties hereto (save on any question of law)
ENTRY
3.9.1 To permit the Landlord and all others authorised by it at all
reasonable times on not less than 72 hours' prior notice (except in
emergency) to enter upon the demised premises to view the state of
repair and condition thereof and to take a Schedule of the Landlord's
fixtures and of any defects or dilapidations
3.9.2 To permit the Landlord and (if authorised in writing by the Landlord)
the owners lessees or occupiers of adjoining or adjacent premises and
their respective agents servants contractors licensees and workmen
with all necessary appliances at all reasonable times on not less
than 72 hours' prior notice (and at all times without notice in case
of emergency) to enter upon the demised premises for all or any of
the purposes mentioned in the Third Schedule hereto the person or
persons exercising such rights doing as little damage to the demised
premises as possible and making good all damage to the demised
premises occasioned by such entry
3.9.3 The person or persons entering upon the demised premises pursuant to
this Clause 3.9 complying with all reasonable requirements of the
Tenant as to the security of the demised premises including (but not
by way of limitation) a requirement that an authorised representative
of the Tenant should accompany such person or persons at all times
YIELDING UP
3.10 At the expiration or sooner determination of the Term quietly to yield
up unto the Landlord the demised premises together with all additions
and improvements thereto and all fixtures which during the Term may be
affixed or fastened to or upon the demised premises (tenant's fixtures
and fittings only excepted) in such state and condition as shall in all
respects be consistent with the full performance by the Tenant of the
covenants herein contained and in case any of the Landlord's fixtures
and fittings shall be missing worn out broken damaged or destroyed
forthwith to replace them with others of a similar character and of
equal value and to remove the Tenant's fixtures and fittings including
every moulding sign writing or painting of the name or business of the
Tenant or other occupiers from the demised premises and to make good all
damage caused to the demised premises by such removal
6.
<PAGE> 11
ALTERATIONS AND ADDITIONS
3.11.1 Not at any time during the Term to make any alterations or additions
to the electrical installation of the demised premises save in
accordance with the standards terms and conditions laid down by the
Institution of Electrical Engineers and the regulations of the
Electricity Supply Authority and not to make any substantial such
alteration or addition without the prior written consent of the
Landlord such consent not to be unreasonably withheld
3.11.2 Not at any time during the Term to construct any new or additional
building or structure on the demised premises nor make any alteration
or addition whatsoever structural or otherwise (save as hereinafter
provided) in or to the demised premises or any part thereof or change
the existing design elevation or the external decorative scheme
thereof or cut maim or remove any of the walls horizontal or vertical
partitions beams columns or other structural parts thereof
3.11.3 Subject to prior compliance with the following conditions the Tenant
may carry out non-structural internal alterations to the demised
premises:-
3.11.3.1 The Tenant shall not interfere with any sewers drains wires
cables pipes channels watercourses conduits subways or other
conducting media which may at any time be or run under in or
through the demised premises or cause access to the same to be
or become more difficult than it now is
3.11.3.2 The Tenant shall supply to the Landlord five copies of all plans
and specifications and any further information which the
Landlord may reasonably require at the cost of the Tenant; and
3.11.3.3 The prior written consent of the Landlord shall have been
obtained such consent not to be unreasonably withheld or delayed
PROVIDED ALWAYS that the Tenant shall be entitled to erect or
remove internal demountable partitioning and/or effect minor
plumbing alterations or additions without such consent as
aforesaid
3.11.4 That if the Tenant shall have made or shall make any addition or
alteration to the demised premises either before or after the
commencement of the Term then at the expiration or sooner
determination thereof the Tenant will (if so required by the Landlord
but not otherwise) at the Tenant's own cost and expense reinstate and
make good to the satisfaction of the Landlord the demised premises
and restore the same to the plan and design as if such addition or
alteration (or such of them as may be specified by the
7.
<PAGE> 12
Landlord) had not been made and will pay the costs and expenses
properly and reasonably incurred by the Landlord (including legal
costs and surveyors fees and other professional costs and fees) of
and incidental to the superintendence of such reinstatement and
making good
DISREPAIR AND BREACH OF COVENANT
3.12.1 Well and substantially to repair remedy reinstate and make good with
all practicable speed all defects dilapidations unauthorised works
and other breaches of covenant of which notice in writing shall be
given to or left on the demised premises for the Tenant by the
Landlord commencing work within two calendar months (or sooner if
requisite) after the giving or leaving of such notice and then
proceeding diligently
3.12.2 If the Tenant shall fail to comply with Clause 3.12.1 hereof to allow
the Landlord with all necessary workmen tools materials and
appliances to enter the demised premises to repair reinstate and make
good the same and to pay to the Landlord on demand the costs and
expenses thereof
SIGNS
3.13 Not to erect or install any hanging sign projecting sign or other sign
aerial or similar thing on the exterior of the demised premises PROVIDED
that this covenant shall not prevent the inscription on the exterior of
the building constructed on the demised premises and a sign at the
entrance to the demised premises from the estate road in each case in a
form style and manner as shall have been previously approved in writing
by the Landlord (such approval not to be unreasonably withheld) of the
name or names of the person or persons carrying on business therein
together with the description of his her or their business or occupation
STATUTORY AND PLANNING REQUIREMENTS
3.14.1 At all times during the Term to observe and comply in all respects
with the provisions and requirements of any and every Enactment so
far as it may relate to or affect the demised premises or any works
additions or improvements therein or thereto or the user thereof or
the employment therein of any person and to execute all works and
provide and maintain all arrangements and make all payments which by
or pursuant to any Enactment are or may be directed or required to be
executed provided maintained or made at any time during the Term and
to indemnify the Landlord at all times against all actions
proceedings claims costs charges and expenses of or incidental to the
execution of any works or the provision or maintenance of any
arrangements or
8.
<PAGE> 13
payments so directed or required as aforesaid or otherwise arising
from any contravention of any Enactment
3.14.2 Not at any time during the Term to do or omit on or about the demised
premises any act or thing by reason of which the Landlord may under
any Enactment incur or have imposed upon it or become liable to pay
any penalty damages compensation costs charges or expenses
3.14.3 Not to make any application for planning permission relating to the
demised premises or any part thereof or the user thereof
3.14.4 Unless the Landlord shall otherwise direct in writing to carry out
before the expiration or sooner determination of the Term any works
stipulated to be carried out to the demised premises as a condition
of any planning permission by a date subsequent to such expiration or
sooner determination
NOTICES
3.15 Within seven days of the receipt of notice of the same (whether by
advertisement or not) to give full particulars to the Landlord of any
permission notice order or proposal for a notice or order made given or
issued to the tenant owner or occupier of the demised premises pursuant
to any Enactment and if so required by the Landlord to produce such
permission notice order or proposal for a notice or order to the
Landlord AND ALSO without delay to take all reasonable or necessary
steps to comply with any such notice or order AND ALSO at the request of
the Landlord but at the joint and equal cost and expense of the Tenant
and the Landlord to make or join with the Landlord in making such
objections or representations against or in respect of any such notice
order or proposal as aforesaid as the Landlord shall think fit
OVERLOADING
3.16 Not to overload any floor or roof of the demised premises so as to
exceed the permitted loadings thereof
ENCROACHMENT
3.17 Not knowingly to permit or suffer any encroachment upon the demised
premises or the acquisition of any new right of light way drainage or
other easement on over or under the demised premises for the benefit of
other property not being the property of the Landlord and if any such
encroachment or easement shall be made or acquired or threatened to be
made or acquired forthwith to give notice in writing thereof to the
Landlord and at the joint and equal cost of the Landlord and the Tenant
to do all such things as may be necessary to prevent the making of such
9.
<PAGE> 14
encroachment or the acquisition of such easement or right PROVIDED
ALWAYS that if the Tenant shall omit or neglect to do all such things as
aforesaid it shall be lawful for the Landlord or any persons authorised
by it to enter the demised premises and to do the same and any expenses
so incurred by the Landlord shall be repaid to the Landlord by the
Tenant on demand
NUISANCE AND GENERAL PROHIBITIONS
3.18.1 Not to do or permit to be done anything in the demised premises which
may in the reasonable opinion of the Landlord be prejudicial or
detrimental to the Landlord or be or become a nuisance annoyance or
cause damage or inconvenience to the Landlord or its tenants or the
owners tenants or occupiers of adjoining or nearby premises
3.18.2 Not to use the demised premises or any part thereof for any sale by
auction exhibition show or spectacle or for residential purposes or
for any illegal or immoral purpose or for any noxious offensive or
noisy trade or business
3.18.3 Not to use any radio or other sound producing apparatus so as to be
audible from outside the demised premises
3.18.4 Not without the Landlord's prior written consent (such consent not to
be unreasonably withheld) to install or use in the demised premises
any equipment which might (by the emission of any radiation vibration
or otherwise) interfere with any equipment which may be installed or
used in any other premises in the Development PROVIDED THAT this
sub-clause shall not impose on the Tenant any liability to the
Landlord or any third party greater than that implied by the common
law should any equipment so installed or used in any other premises
in the Development be of an unusually or especially sensitive nature
3.18.5.1 Not without the Landlord's prior written consent (such consent
not to be unreasonably withheld) to install in the demised
premises any paraffin burning apparatus whether for heating
purposes or otherwise nor cause the emission of any smoke
effluvia vapour grit smell or odour from any apparatus on the
demised premises
3.18.5.2 Subject to the provisions of 3.18.5.1 on a written notice being
served by the Landlord requiring the abatement of any emission
of smoke effluvia vapour grit smell or odour to abate such
emission accordingly as soon as possible thereafter
3.18.6 To pay on demand all costs charges and expenses incurred by the
Landlord in abating a nuisance caused by the Tenant or his servants
agents or visitors and in executing all such works as may be
necessary for abating such a nuisance
10.
<PAGE> 15
whether or not in obedience to a notice served by the local authority
USER
3.19 Not to use the demised premises or any part thereof except as a computer
centre and/or as High Class Professional or Commercial Offices with
ancillary car parking or for any purpose comprising a use which may be
carried on without detriment to the Landlord's reversion or the amenity
of the Development within Class B1 of the Schedule to the Town and
Country Planning (Use Classes) Order 1987
RIGHTS OF LIGHT
3.20 Not to stop up darken or obstruct any windows or lights belonging to the
demised premises or any other buildings belonging to the Landlord nor to
give to any third party any acknowledgment that the Tenant enjoys the
access of light to any of the windows or openings in the demised
premises by the consent of such third party nor to pay to such third
party any sum of money nor to enter into any agreement with such third
party for the purpose of inducing or binding such third party to abstain
from obstructing the access of light to any of such windows or openings
And that in case the owners of adjacent land or buildings do or threaten
to do anything which obstructs the access of light to any of the windows
or openings in the demised premises the Tenant will give immediate
notice thereof to the Landlord and will adopt such means as may be
reasonably required or deemed proper for preventing the same And in the
event of a breach by the Tenant of this covenant it shall be lawful for
the Landlord or its agents and others to enter upon the demised premises
and take such action and bring such proceedings as the Landlord may
think fit in the name of the Tenant and at the expense of the Tenant for
the purpose of remedying the same the person or persons entering upon
the demised premises pursuant to this Clause 3.20 complying with all
reasonable requirements of the Tenant as to the security of the demised
premises including (but not by way of limitation) a requirement that an
authorised representative of the Tenant should accompany such person or
persons at all times
REFUSE
3.21.1 Not to form a rubbish dump on the demised premises or in the common
parts of the Development and to keep all rubbish and refuse within
the demised premises and in properly covered receptacles to the
reasonable satisfaction of the Landlord
3.21.2 To comply with all reasonable directions and regulations made by the
Landlord from time to time relating to the removal storage and
disposal of rubbish and refuse
<PAGE> 16
DANGEROUS SUBSTANCES
3.22 Not to bring into the demised premises or to place or store in or about
the demised premises any substance or material of a radio-active
explosive dangerous offensive combustible or inflammable nature save as
may be agreed with the Landlord (such agreement not to be unreasonably
withheld)
DRAINS
3.23 Not to stop up or obstruct in any way whatsoever or permit oil grease or
other noxious or deleterious matter or substance to enter the drains
sewers and watercourses serving the demised premises and to employ such
plant for treating any noxious or deleterious effluent before permitting
the same to enter such drains sewers and watercourses as may be
reasonably required by the Landlord from time to time in accordance with
the best modern practice and in the event of any such obstruction or
injury being caused to the drains sewers or watercourses forthwith to
make good all such damage to the reasonable satisfaction of the Landlord
CONTROL OF COMMON PARTS
3.24.1 Not to obstruct the common parts of the Development in any manner
whatsoever
3.24.2 Not to use the common parts of the Development for the parking of
vehicles
3.24.3 To co-operate with the Landlord so as to prevent the common parts of
the Development from being obstructed or being used for the parking
of vehicles
DISPUTES
3.25 To permit all questions and disputes relating to easements rights
privileges or boundaries arising with the owner or occupier of any
property adjoining adjacent to or opposite the demised premises to be
settled by the Landlord on behalf of the Tenant at the joint and equal
expense of the Tenant and the Landlord
INDEMNITY
3.26.1 To indemnify the Landlord in respect of all actions proceedings
liability costs claims and demands which might be instituted incurred
or made by any person (including officers and employees of the
Landlord) or any competent authority by reason of:-
3.26.1.1 Any injury to or the death of any person or damage to any
property moveable or immoveable caused by or in any way arising
out of the user of the demised premises
12.
<PAGE> 17
or the state of repair and condition of the demised premises or
anything therein arising from any act neglect or default of the
Tenant or caused by or in any way arising out of the execution
of any works at or alterations or additions to the demised
premises
3.26.1.2 Any interference or alleged interference or obstruction of any
right or alleged right of light air drainage or other right or
alleged right now or hereafter existing for the benefit of any
adjoining or neighbouring property arising from any act or
neglect of the Tenant its agents employees or visitors
3.26.1.3 Any stoppage of or damage to the sewers drains pipes wires
cables or other conveniences and services used in common with
the owner tenant or occupier of any adjoining neighbouring or
nearby property arising from any act or neglect of the Tenant
its agents employees or visitors
3.26.2 Without prejudice to any covenant or liability of the Tenant under
this Lease to indemnify the Landlord against all liability to any
present or future tax duty charge assessment or imposition (whether
Parliamentary Parochial local or otherwise and whether in the nature
of those now in being or not) and all costs and expenses in relation
thereto which may be payable in respect of the reversion to this
Lease by virtue of any works development or change of use carried out
by the Tenant (or any sub-tenant) in or to the demised premises or
any part thereof and also against any further liability to such
taxation flowing from this indemnity or any payment pursuant to it
3.26.3 To pay and make good to the Landlord all and every loss and damage
incurred or sustained by the Landlord as a consequence of every
breach or non observance of the Tenant's covenants herein contained
and to indemnify the Landlord from and against all actions
proceedings costs claims and demands thereby arising
SUPPORT
3.27 Not to do anything on the demised promises which would remove support
from any adjoining premises or endanger such premises in any way
SALE AND LETTING BOARDS
3.28 To permit the Landlord to enter upon the demised premises and affix and
retain without interference upon any part thereof at any time during the
last six months of the Term a notice for letting the demised premises
and at any time during the Term for selling or disposing of the
Landlords interest therein and during such
13.
<PAGE> 18
periods to permit all persons with authority from the Landlord at all
reasonable times during the daytime upon reasonable notice to enter and
view the demised premises or any part thereof the person or persons
entering upon the demised premises pursuant to this sub-clause complying
with all reasonable requirements of the Tenant as to security including
(but not by way of limitation) a requirement that an authorised
representative of the Tenant shall accompany such person or persons at
all times
DILAPIDATIONS AND SECTION 146 LAW OF PROPERTY ACT 1925
3.29 To pay all costs charges and expenses (including solicitors' costs and
surveyors' fees) incurred by the Landlord:-
3.29.1 In or in contemplation of the preparation and service of any notice
pursuant to or any proceedings under Sections 146 and 147 of the Law
of Property Act 1925 notwithstanding that forfeiture may be avoided
otherwise than by relief granted by the Court
3.29.2 In relation to the preparation and service of any Notice and/or
Schedule of Dilapidations whether during or after the expiration or
prior determination of the Term
3.29.3 In the supervision or superintendence of any works to be carried out
in pursuance of any Notice and/or Schedule of Dilapidations whether
or not such works shall be carried out during or after the expiration
or prior determination of the Term
ALIENATION
3.30.1.1 Not to assign mortgage or charge part only of the demised
premises
3.30.1.2 Not to underlet part with or share the possession or occupation
of the whole or any part of the demised premises (save as
hereinafter provided)
3.30.2.1 In this sub-clause the expression "Permitted Assignee" shall
mean a respectable and responsible person of good financial
standing who has entered into a direct covenant with the
Landlord to pay the rents reserved and other moneys made payable
by this Lease and to be bound by and perform and observe the
covenants and conditions contained in this Lease for the balance
of the Term then unexpired and who (if the Landlord reasonably
so requires) has obtained a guarantor or guarantors to enter
into joint and several covenants with the Landlord for the
payment of the said rents and other moneys and the performance
and observance of the said covenants and conditions for the
balance of the Term as aforesaid
14.
<PAGE> 19
3.30.2.2 Not to assign the demised premises as a whole to any person who
is not a Permitted Assignee
3.30.2.3 Not without the prior written consent of the Landlord such
consent not to be unreasonably refused or delayed either to
mortgage or charge the demised premises as a whole or to assign
the demised premises as a whole to a Permitted Assignee
3.30.3 The Tenant (being a company) may share the occupation of the demised
premises with any company which is a member of the same group of
companies (as defined in Section 42(l) of the Landlord and Tenant Act
1954) as the Tenant Provided always that no demise or other interest
in the demised premises is thereby created or granted and the Tenant
does not thereby part with possession of the demised premises
3.30.4.1 In this sub-clause the expression "Permitted Undertenant" shall
mean a respectable and responsible person of good financial
standing
3.30.4.2 Not to create any sub-lease of the whole of the demised premises
upon payment of a premium nor at a rent of less than the full
market rent obtainable without taking a fine or premium
3.30.4.3 Not to create any sub-lease of part of the demised premises
save in respect of a complete floor or complete floors of the
demised premises so that no floor of the demised premises shall
be sub-divided in any way
3.30.5.1 Not to create any sub-lease save by instrument in writing
containing:-
3.30.5.1.1 unqualified covenants on the part of the sub-tenant that the
sub-tenant will not assign mortgage or charge part only of
the sub-let premises and will not underlet or part with or
share the possession or occupation of the whole or any part
thereof (in each case by way of absolute prohibition save as
hereinafter provided) and
3.30.5.1.2 a covenant on the part of the sub-tenant that the sub-tenant
will not assign the whole of the premises thereby demised
without the prior written consent of the Landlord under this
Lease (such consent not to be unreasonably withheld in the
case of a respectable and responsible assignee of good
financial standing who has entered into a direct covenant
with the Landlord to be bound by and perform and observe the
covenants and stipulations contained in the sub-lease to be
assigned to him) and will not mortgage or charge
15.
<PAGE> 20
the said premises without the prior written consent of the
Landlord under this Lease (such consent not to be
unreasonably withheld)
3.30.5.1.3 in the case of a sub-lease comprising a whole floor or whole
floors of the demised premises a covenant on the part of the
sub-tenant that the sub-tenant will not sub-let the whole or
any part of the premises thereby demised:-
(a) otherwise than by way of a sub-lease which shall
contain an absolute prohibition against further
sub-letting whether in whole or in part nor
(b) save in accordance with the same conditions as are
contained in all the foregoing and following
sub-clauses of this Clause 3.30.5 nor
(c) without the prior written consent of the Landlord
under this Lease (such consent not to be unreasonably
withheld in the case of a respectable and responsible
sub-tenant of good financial standing who has entered
into a direct covenant with the Landlord to be bound
by and perform and observe the covenants and
stipulations contained in the sub-lease to be granted
to him)
Provided that the Tenant may permit any Permitted
Undertenant to share occupation of any premises so sub-let
to it in the like manner as provided in sub-clause 3.30.3
(mutatis mutandis)
3.30.5.2.5 similar agreements covenants and stipulations (mutatis mutandis)
to those contained in this Lease including provisions for rent
reviews (at least as often as those herein contained to the best
yearly market rent obtainable without taking a premium) as at
the dates on which the rent hereby reserved is to be reviewed
3.30.5.2.6 a covenant by the undertenant for the payment of a service
charge under which the undertenant contributes a fair proportion
of the cost of the provision of services by the Landlord
pursuant to this Lease
3.30.5.3 Not to underlet the demised premises as a whole or in part to any
person who is not a Permitted Undertenant
3.30.5.4 Not without the prior written consent of the Landlord such consent
not to be unreasonably withheld or delayed to
16.
<PAGE> 21
underlet the demised premises as a whole or in part to a Permitted
Undertenant
REGISTRATION OF DEALINGS
3.31 At the cost of the Tenant within fourteen days next after the execution
of every assurance assignment underletting mortgage or charge affecting
the demised premises to give notice thereof in writing with particulars
thereof to the Landlord and deliver to the Landlord a certified copy of
the instrument effecting the same and within fourteen days after the
grant of Probate or Letters of Administration in the case of a deceased
tenant to produce the same to the Landlord paying at the same time to
the Landlord a registration fee of twenty pounds for each such
instrument or transaction
LANDLORD'S COSTS
3.32 To pay the proper and reasonable legal charges surveyors' or architect's
fees and any other costs and expenses incurred by the Landlord
(including stamp duty on licenses and counterparts) resulting from all
applications by the Tenant for any consent required by this Lease
including those incurred in cases where consent is refused or the
application is withdrawn
VALUE ADDED TAX
3.33 To pay to the Landlord on demand in addition to any moneys due from the
Tenant under the terms and provisions of this Lease such Value Added Tax
or any other similar tax as shall be payable in respect of such moneys
REGULATIONS
3.34 To observe and perform and to ensure that the servants agents workmen
and visitors of the Tenant shall observe and perform any and all
reasonable regulations and instructions from time to time made or given
to the Tenant in writing by the Landlord in respect of the conduct and
use of the Development and in particular the conditions relating thereto
set out in the Second Schedule hereto
FIRE CONTROL
3.35 To keep any fire alarm and fire prevention and control apparatus
installed in the demised premises open to the inspection and maintained
to the reasonable satisfaction of the Landlord and not to obstruct the
access to or means of working such apparatus
DEDICATION
3.36 Not to make any objection to the dedication by the Landlord of any part
of the common parts of the Development for public use
17.
<PAGE> 22
and to consent to such dedication if the consent of the Tenant is
required
INTEREST ON LATE PAYMENTS
3.37 If and so often as any rent or other moneys due from the Tenant under
this Lease shall be unpaid for fourteen days after the due date the
Tenant shall pay (in the case of rent by way of additional rent)
interest thereon (as well after as before any judgment) from the due
date until payment at a rate equivalent to 4% above the Base Rate for
the time being declared by Lloyds Bank PLC (or other clearing bank for
the time being of the Landlord)
LANDLORD'S COVENANTS
4. THE Landlord HEREBY COVENANTS with the Tenant:-
QUIET ENJOYMENT
4.1 That the Tenant paying the rents and other moneys and performing and
observing the covenants agreements conditions and stipulations as herein
provided may peaceably and quietly hold and enjoy the demised premises
for the Term without any interruption from or by the Landlord or any
person lawfully claiming through under or in trust for it
INSURANCE
4.2.1.1 To insure the demised premises at all times during the Term against
loss or damage by the Insured Risks (unless such insurance shall be
prevented by the act or default of the Tenant or his servants or
agents) with some insurance office or underwriters of repute upon the
usual terms and conditions of such insurance office or underwriters
in the full reinstatement value thereof plus value added tax or
similar tax (together with Architects Surveyors and other
professional fees and demolition and clearance expenses of such
amounts as the Landlord shall from time to time determine) and also
four years (or such longer period as the Landlord may from time to
time reasonably require) full rent and service charge payable under
this Lease (including any increased rent and service charge payable
hereunder)
4.2.1.2 To produce to the Tenant as soon as practicable upon written request
a copy of the Policy and the last premium renewal receipt or
reasonable evidence of the full terms of the Policy and of the fact
that the last premium has been paid
4.2.1.3 To procure that the interest of the Tenant and its mortgagees (if
any) is noted or endorsed upon the Policy
18.
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4.2.1.4 To notify the Tenant of any material change in the risks covered or
in the terms of the Policy from time to time
4.2.1.5 Insofar as a letter agreeing to waive rights of subrogation against
the Tenant is reasonably procurable from the insurance office with
whom the Landlord is insuring under Clause 4.2.1.1 hereof to use
reasonable endeavours to procure such a letter and to produce it to
the Tenant on demand
4.2.2 In case of damage to or destruction of the demised premises by any of
the Insured Risks to employ all insurance moneys (other than for loss
of rent and service charge) received by it in reinstating and making
good the demised premises with all reasonable speed and to make up
any deficiency out of its own moneys PROVIDED THAT if the rebuilding
and reinstatement of the demised premises or any part thereof shall
be frustrated all moneys payable pursuant to any policy of insurance
effected hereunder shall belong to the Landlord for its own use and
benefit
PROVISION OF SERVICES
4.3 At all times during the Term to carry out provide manage and operate where
appropriate the services mentioned in the Fifth Schedule hereto in
accordance with the principles of good estate management and where proper
to utilise any reserve fund towards the same save that where such services
are expressed to be provided at the Landlord's discretion the Landlord
shall not be obliged to provide them PROVIDED NEVERTHELESS that :
4.3.1 For the performance of its obligations hereunder the Landlord shall
be entitled to employ and pay such agents servants contractors or
such other persons as the Landlord may from time to time think fit
4.3.2 The Landlord shall not be responsible for any delay suspension
breakdown or stoppage in connection with the performance or
observance of such obligations or for any omission to perform the
same due to any cause or circumstance not within the Landlord's
control but the Landlord will take all reasonable steps to remedy or
make good the same as soon as practicable
4.3.3 The Landlord shall not be liable to the Tenant for any defect or want
of repair unless the Landlord has had written notice thereof nor in
respect of any obligation mentioned in the said Fifth Schedule that
falls within the ambit of any of the Tenant's covenants hereinbefore
contained
19.
<PAGE> 24
PROVISOS
5. PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED THAT:-
RE-ENTRY
5.1 Notwithstanding and without prejudice to any other remedy and power
herein contained or otherwise available to the Landlord if the rents or
other moneys hereby reserved or made payable or any part thereof
respectively shall be unpaid for fourteen days after becoming payable
(whether formally or legally demanded or not) or if any covenant
agreement or obligation on the Tenant's part herein contained shall not
be performed or observed or if the Tenant shall permit any execution or
distress to be levied on any goods for the time being in the demised
premises or (being a company) shall enter into liquidation whether
compulsory or voluntary (not being merely a voluntary liquidation while
solvent for the purpose of amalgamation or reconstruction) or shall
suffer a receiver or an Administrator to be appointed by the Court
pursuant to the Insolvency Act 1986 or (being an individual) shall
propose a voluntary arrangement under the Insolvency Act 1986 (or any
statutory modification or re-enactment thereof from time to time in
force) or shall suffer a Bankruptcy Order under the same act or petition
the Court for his own bankruptcy then and in any such case it shall be
lawful for the Landlord at any time thereafter to re-enter upon the
demised premises or any part thereof in the name of the whole and
thereupon this demise shall absolutely determine but without prejudice
to any right of action of the Landlord in respect of any breach
non-observance or non-performance of the Tenant's covenants agreements
or obligations herein contained
CESSER OF RENT
5.2 If during the Term the demised premises or any part thereof or all means
of access thereto shall be destroyed or damaged by any of the Insured
Risks so as to render the demised premises or any part thereof unfit for
occupation or use then (if the Tenant shall have duly carried out the
Tenant's obligations under sub-clauses 3.1 and 3.2 hereof and if no
insurance of the demised premises or rent and service charge shall have
been vitiated or payment of the policy moneys refused in whole or in
part by some act or default of the Tenant his servants agents or
visitors) the rents and service charge hereby reserved or a fair and
just proportion thereof according to the nature and extent of the damage
sustained shall as from the date of such destruction or damage until the
demised premises shall have been rebuilt or reinstated and made fit for
occupation and use be suspended and cease to be payable and any dispute
as to the extent proportion or period of such suspension shall be
determined by a single arbitrator to be appointed by the Landlord and
the Tenant and in case of difference by the President for the time being
of the Royal Institution of Chartered Surveyors in accordance with the
provisions of the Arbitration Acts 1950 to 1979 or any statutory
20.
<PAGE> 25
modification re-enactment or replacement thereof for the time being in
force
BASE RATE
5.3 In the event of the Base Rate of Lloyds Bank PLC (or other bank for the
time being of the Landlord) being abolished and no alternative rate being
presented by law to replace the said Base Rate for the purpose inter alia
of construing existing leases then any reference to the said Base Rate
shall have effect as if there had been substituted from time to time for
the Base Rate such rate of interest which shall be most closely comparable
with the said Base Rate such rate of interest to be reasonably determined
by the Landlord's Surveyor
ARREARS
5.4 Any moneys due to the Landlord from the Tenant under any covenant
condition or provision contained in this Lease shall be due as a debt from
the Tenant to the Landlord payable on demand and in the event of
non-payment such moneys shall be recoverable by distress or otherwise in
the same way as rent in arrear
SETTLEMENT OF DISPUTES
5.5 Any dispute arising as between the Tenant and the tenant or occupier of
any other property of the Landlord as to any easement right or privilege
in connection with the use of the demised premises and such other property
or as to the walls separating the demised premises from such other
property or as to the amount of any contribution towards the expenses of
works to services used in common with such other property shall be decided
by the Landlord's Surveyor for the time being whose decision shall be
binding on all parties (save on any question of law) and whose costs shall
be paid by such of the parties to the dispute in such proportions as he
shall decide
EXCLUSION OF IMPLIED RIGHTS
5.6 Nothing herein contained shall by implication of law or otherwise operate
to confer on the Tenant any easement right or privilege whatsoever over or
against any adjoining or other property of the Landlord (whether in the
Development or not) either for an estate in fee simple or for a term of
years
UNRESTRICTED USE OF ADJOINING PROPERTY
5.7 The Tenant shall not be entitled to the benefit of any restrictions which
the Landlord may have imposed or may hereafter impose on any owner or
lessee of any property not comprised in the demised premises (whether in
the Development or not) and nothing herein contained or implied shall
impose or be deemed to impose any
21.
<PAGE> 26
restrictions on the use of any such property or give the Tenant the right
to enforce or to have enforced or to prevent the release or modification
of any covenant agreement or condition entered into by any purchaser from
or any lessee tenant or occupier of the Landlord in respect of such
property And that this demise shall not be deemed to include and shall not
operate to convey or demise any ways water mains sewers drains lights
liberties privileges easements rights or advantages whatsoever in through
over or upon the property of the Landlord adjoining or near to the demised
premises save as may be expressly granted by this Lease
EXCLUSION OF LIABILITY
5.8 The Landlord shall not be liable to the Tenant for any loss damage or
inconvenience which may be caused by reason of the failure stoppage
leakage bursting or defect of any water sanitary gas electricity or other
apparatus or by reason of a breakdown or defect of any plant or machinery
in the demised premises outside the Landlord's immediate control
COMPENSATION
5.9 Subject to the provisions of sub-clause (2) of Section 38 of the Landlord
and Tenant Act 1954 neither the Tenant nor any assignee or underlessee
shall be entitled on quitting the demised premises or any part thereof to
any compensation under Section 37 of the said Act
PERPETUITY PERIOD
5.10 All rights granted and all reservations made in respect of sewers drains
wires cables pipes channels watercourses conduits subways or other
conducting media not in existence at the date hereof shall be limited to
those which shall come into existence within eighty years from the date
hereof (which shall be deemed to be the perpetuity period for the purposes
of this Lease)
NO PLANNING WARRANTY
5.11 Nothing in this Lease shall be deemed to constitute any warranty by the
Landlord that the demised premises or any part thereof are or will remain
authorised for use under the Planning Acts for any specific purpose
TENANT'S OPTION TO RENEW
5.12 The Tenant (here meaning Galileo Distribution Systems Limited) shall have
the right to call for the grant of a new lease for a term of 25 years from
the expiration of the Term upon the same terms and conditions as this
Lease (save as to the amount of rent but including the provisions for rent
review herein contained such rent review being on every fifth anniversary
of the term
22.
<PAGE> 27
created by the new lease and save also as to this Clause) by giving to the
Landlord not less than 12 months' nor more than 18 months' previous
written notice expiring upon the 24th March 2013 provided that this option
shall not be exercisable by the Tenant unless the rents hereby reserved
shall have been paid and the covenants on the part of the Tenant shall
have been substantially observed and performed throughout the Term
FREEDOM TO USE THE DEMISED PREMISES
5.13 Despite any provision (express or implied) of this Lease to the contrary
but subject to paragraph 3.2 of the Second Schedule hereto the Tenant
shall be entitled to use and have access to the demised premises
twenty-four hours a day every day of the whole of the Term
INTERPRETATION
6.1 IN this Lease where the context so admits:-
6.1.1 Words importing the masculine gender shall be deemed to include the
feminine and neuter genders
6.1.2 Where there are two or more persons included in the expression "the
Tenant" covenants expressed to be made by the Tenant shall be deemed
to be made by such persons jointly and severally
6.2 Reference in this Lease to any right exercisable by the Landlord or any
right exercisable by the Tenant shall be construed as including (where
appropriate) the exercise of such right in both cases in common with the
Landlord and all other persons having a like right or to whom such right
may be granted
6.3 Any negative covenant by the Tenant in this Lease shall be construed as if
it were also a covenant not to permit or suffer the act or thing in
question
6.4 The headings to clauses in this Lease shall not affect the construction
of such clauses
I N W I T N E S S whereof the parties hereto have executed this Lease
the day and year first before written
THE FIRST SCHEDULE
THE DEMISED PREMISES
1. All those premises for the purpose of identification only shown and edged
red on the Plan annexed
2. There shall be INCLUDED in this demise:-
23.
<PAGE> 28
2.1 All additions (except tenants and trade fixtures) at any time hereafter
made to the demised premises
2.2 All Landlord's plant and equipment fixtures and fittings in and about the
demised premises
2.3 The suspended ceiling(s) light fittings raised floors and carpet(s) fitted
or laid in the demised premises
2.4 All landscaping and the entirety of all boundary walls
2.5 The roof ground floor slabs and foundations of the demised premises
3. There shall be EXCLUDED from this demise the subsoil more than twelve
inches below the demised premises and the air space surrounding the building
constructed thereon
THE SECOND SCHEDULE
EASEMENTS AND RIGHTS GRANTED
1. The right for all reasonable purposes connected with the demised premises
but not for any other purposes to pass and repass by foot only to and from the
demised premises over and along the walkways forming part of the common parts
of the Development as are from time to time constructed
2. The right for all reasonable purposes connected with the demised premises
but not for any other purposes to pass and repass with or without vehicles
over and along the roads forming part of the common parts of the Development
as are from time to time constructed Subject to compliance by the Tenant with
the following conditions
2.1 The Tenant shall not use the roads or permit the same to be used by his
servants agents or visitors for the parking of vehicles
2.2 The Tenant shall comply with such directions as may from time to time be
given by any competent authority or the Landlord or any representative of
the Landlord for the regulation and direction of traffic
2.3 The Tenant shall co-operate with the Landlord so as to ensure that no
rubbish or litter is left on the roads or any part thereof and that no
damage is caused by his servants agents or visitors thereto and that no
nuisance annoyance or inconvenience is caused to the Landlord or to the
owners or lessees or occupiers of the Development
3. The rights granted by paragraphs 1 and 2 above are subject to
3.1 The right of the Landlord in its absolute discretion to close temporarily
or permanently or alter from time to time the
24.
<PAGE> 29
walkways and roads and other common parts of the Development subject to
the Landlord leaving available for use by the Tenant reasonable means of
access to and serving the demised premises
3.2 The right of the Landlord to limit and restrict (but not so as to render
them totally incapable of exercise) the rights outside Working Hours in
such manner as the Landlord's security arrangements may require
4. The free and uninterrupted passage and running of water soil gas
electricity telephone heating and other services from and to the demised
premises in and through the sewers drains wires cables pipes channels water
courses conduits subways or other conducting media now or at any time in the
future in or under other parts of the Development
5. The right of support and protection for the demised premises from other
parts of the Development
THE THIRD SCHEDULE
EXCEPTIONS AND RESERVATIONS
THERE ARE EXCEPTED AND RESERVED to the Landlord and its lessees and assigns
and all persons to whom the Landlord shall hereafter grant any such right or
rights:
1. The free and uninterrupted passage of and running of water soil gas
electricity telephone heating and other services to and from other parts of the
Development in and through the sewers drains wires cables pipes channels
watercourses conduits subways or other conducting media now or at any time in
the future in or under the demised premises
2. The right at all reasonable times upon reasonable notice and if practicable
providing outline details of the proposed works at the same time (and at all
times with or without notice in case of emergency) to enter upon the demised
premises for the purpose of connecting laying inspecting repairing cleansing
maintaining altering replacing relaying or renewing any sewer drain wire cable
pipe channel watercourse conduit sub-way or other conducting medium and to erect
construct or lay under the demised premises other than the building or buildings
constructed thereon any sewers drains wires cables pipes channels watercourses
conduits subways or other conducting media or other works for the drainage of or
for the supply of water gas electricity telephone heating and other services to
the Development the person exercising such right doing as little damage to the
demised premises as possible and making good any damage to the demised premises
thereby occasioned but without payment of compensation for any annoyance
nuisance noise vibration or inconvenience caused to the Tenant in connection
with the use by the Tenant of the demised premises provided that the person
exercising such right shall explore all reasonably practicable alternative
methods of carrying out such works
25.
<PAGE> 30
and cause as little inconvenience as reasonably possible PROVIDED ALWAYS that
the person or persons entering upon the demised premises pursuant to any of the
provisions of this Schedule shall (save in case of emergency) comply with all
reasonable requirements of the Tenant as to the security of the demised premises
including (but not by way of limitation) a requirement that an authorised
representative of the Tenant should accompany such person or persons at all
times
3. The right at all reasonable times on not less than 72 hours' prior
notice and if practicable providing outline details of the proposed works at the
same time (except in emergency) to enter upon the demised premises to view their
state and condition and to carry out the works and provide the services set out
in the Fifth Schedule hereto the person exercising such right doing as little
damage to the demised premises as possible and making good any damage to the
demised premises thereby occasioned but without payment of compensation for any
annoyance nuisance noise vibration or inconvenience caused to the Tenant in
connection with the use by the Tenant of the demised premises provided that the
person exercising such right shall explore all reasonably practicable
alternative methods of carrying out such works and cause as little inconvenience
as reasonably possible PROVIDED ALWAYS that the person or persons entering upon
the demised premises pursuant to any of the provisions of this Schedule shall
(save in case of emergency) comply with all reasonable requirements of the
Tenant as to the security of the demised premises including (but not by way of
limitation) a requirement that an authorised representative of the Tenant should
accompany such person or persons at all times
4. The right to the passage of light and air and any other easement to which the
Landlord may be or become entitled in respect of any adjoining or neighbouring
property of the Landlord (whether in the Development or not)
5. The right to erect build rebuild and/or alter as it may think fit at any time
and from time to time any buildings or bays or projections to buildings on any
property adjoining or neighbouring the demised premises but not above or below
the demised premises and the right to use and or develop any adjoining or
neighbouring property of the Landlord (whether in the Development or not) in
such manner as the Landlord may think fit in each case notwithstanding that the
access of light or air to the demised premises may thereby be obstructed or
affected and without payment of compensation for any annoyance nuisance noise
vibration or inconvenience caused to the Tenant in connection with the use by
the Tenant of the demised premises
THE FOURTH SCHEDULE
PROVISIONS FOR RENT REVIEW
1. In this Schedule the following expressions shall have the following
meanings:-
26.
<PAGE> 31
1.1 "review date" means the 25th day of March 1993 and every subsequent fifth
anniversary thereof
1.2 "rent" shall not include the rent secondly and thirdly reserved and made
payable under Clause 2 of this Lease
1.3 "the quantified rent" means the yearly rent of Six hundred and eighty-five
thousand six hundred pounds (L685,600.00)
1.4 "the relevant review date" means that review date at which the rent is
being agreed or determined pursuant to the provisions of this Schedule
1.5 "the open market rent" means the best yearly market rent for which the
demised premises might reasonably be expected to be let on the relevant
review date by a willing landlord to a willing tenant with vacant
possession without taking a premium:-
1.5.1. For a term equal in duration to the greater of the unexpired residue
of the original term hereby granted or 15 years and on the basis
(whether or not it is a fact) that the demised premises enjoy
planning permission for the use authorised under this Lease
1.5.2 Otherwise upon the terms and conditions of this Lease (save as to the
amount of rent but including the provisions for rent review herein
contained and save for the option to renew)
1.5.3 On the assumption (whether or not it is a fact) that at the relevant
review date the demised premises are fully equipped and ready for
immediate occupation and use and that no work has been carried out
thereon by the Tenant or his predecessors in title or sub-tenants or
other lawful occupier during the Term which has diminished the rental
value of the demised premises and that in case the demised premises
or the accesses thereto have been destroyed or damaged they have been
fully restored
1.5.4 On the assumption (whether or not it is a fact) that all the
covenants and obligations in this Lease on the part of the Tenant
have been complied with
1.5.5. On the assumption that the said willing tenant or tenants do not seek
a rent free period nor any reduction in rent to allow them the
equivalent of a rent free period and in considering any comparable
rents the existence of any rent free period or any reduction in rent
calculated to allow for any rent free period shall be ignored and any
abnormally high rent agreed to compensate a landlord for an
artificially extended rent free period or any other inducements shall
be ignored
27.
<PAGE> 32
1.5.6. But disregarding:-
1.5.6.1 Any goodwill attached to the demised premises by reason of the
carrying on thereon of the trade or business of the Tenant
(whether by him or any predecessor of the Tenant in that trade
or business) or of any sub-tenant or other lawful occupier
1.5.6.2 Any improvements carried out during the Term by the Tenant or
his predecessors in title or sub-tenants or other lawful
occupier otherwise than in pursuance of an obligation to the
Landlord to the extent such obligation does not fall within the
Tenant's covenant contained in this Lease to comply with
Enactments or at the expense or partly at the expense of the
Landlord
1.5.6.3 Any statutory limitation or control of rents for the time being
in force
1.6 "revised rent" means the new or increased yearly rent payable in
substitution for the quantified rent or for a previous revised rent
1.7 "the current rent" means the yearly rent payable in the year ending on the
relevant review date
1.8 "the Surveyor" means the independent surveyor required to be appointed
pursuant to Clause 3 of this Schedule
2. From and after each review date the rent shall be the rent agreed in writing
between the Landlord and the Tenant or in the absence of such agreement shall be
whichever is the higher of:-
2.1 The current rent and
2.2 The open market rent
3. If the Landlord and the Tenant shall not have agreed in writing the open
market rent by the relevant review date the Landlord or the Tenant may at any
time thereafter (but before the review date next following the relevant review
date) require in writing to the other of them an independent surveyor to be
appointed to determine the open market rent
4. The Surveyor (who shall be a Fellow of the Royal Institution of Chartered
Surveyors and be experienced in the valuation of premises of a like nature to
the demised premises) may be agreed upon by the Landlord and the Tenant and in
default of such agreement within two months of a requirement being made pursuant
to Clause 3 of this Schedule shall be appointed by the President for the time
being of the Royal Institution of Chartered Surveyors on the application of the
Landlord or the Tenant made at any time after the said period of two months and
if the said President shall for any reason not be available or be unable to make
such appointment then the appointment may be
28.
<PAGE> 33
made by the Vice President or next available senior officer of the said
Institution then available
5.1 Notice in writing of his appointment shall be given by the Surveyor to the
Landlord and the Tenant and he shall invite each to submit within a
specified period (which shall not exceed four weeks) a valuation
accompanied if the Landlord or the Tenant so desire by a statement of
reasons
5.2 The Surveyor shall act as an expert and not as an arbitrator He shall
consider any valuation and reasons submitted to him within the said period
but shall not be in any way limited or fettered thereby and shall
determine the open market rent in accordance with his own judgment
5.3 The Surveyor shall give notice in writing of his decision to the Landlord
and the Tenant within two months of his appointment or within such
extended period as the Landlord may at any time allow
5.4 The decision of the Surveyor shall be final on all matters hereby referred
to him
6. If the Surveyor shall fail to determine the open market rent and to give
notice thereof within the time and in manner hereinbefore provided or if he
shall relinquish his appointment or die or otherwise fail or be unable to
determine the same the Landlord may apply to the President or such other officer
of the Royal Institution of Chartered Surveyors as aforesaid for a substitute to
be appointed in his place which procedure may be repeated as many times as
necessary
7. The fees of any such Surveyor and the Royal Institution of Chartered
Surveyors shall be shared equally between the Landlord and the Tenant
8. In the event that by the relevant review date the Landlord and the Tenant
shall not have agreed in writing the rent to be payable from and after such date
or the Surveyor (if appointed) shall not have given the notice provided for in
Clause 5.3 of this Schedule then the Tenant shall continue to pay rent at the
rate of the current rent until the quarter day immediately following the
reaching of such agreement or the giving of the said notice whichever shall
first occur If such agreement or the giving of the said notice shall result in a
revised rent there shall be added to and be payable with the instalment of the
revised rent due on such quarter day (notwithstanding that the provisions of
Clause 9 of this Schedule remain to be complied with) the amount representing
the difference between the current rent and the revised rent from the relevant
review date until such quarter day together with interest on such amount at a
rate equivalent to the Base Rate of Lloyds Bank PLC (or other the London
Clearing Bank for the time being of the Landlord) from time to time from the
relevant review date until payment If such agreement or the giving of the said
notice
29.
<PAGE> 34
shall not have resulted in a revised rent the current rent shall continue to be
payable
9. Immediately after the open market rent shall have been agreed or determined
as aforesaid a memorandum of the revised rent (if any) in such form as the
Landlord may reasonably require shall be signed recording the amount of the
revised rent on behalf of the Landlord and the Tenant and the costs and expenses
thereof shall be paid by the Tenant
10. A revised rent shall be payable on the days and in the manner
appointed for payment of the quantified rent and the terms of this Lease
relating to the reservation payment or suspension of rent and the consequences
of non-payment shall apply to a revised rent in the same manner as to the
quantified rent
11. If at any time or times there shall be in force any Enactment which shall
restrict or in any way affect the Landlord's right to have the rent reviewed as
hereinbefore provided or which shall restrict or in any way affect the
Landlord's right to payment of a revised rent the Landlord shall be entitled
following the repeal termination or modification of such Enactment (but in the
event of a modification of such Enactment only to the extent permitted by such
modification) to serve notice upon the Tenant requiring the Tenant to pay to the
Landlord as from the first quarter day ("the interim review date") occurring not
less than twenty-eight days after the date of service of the Landlord's notice
until such rent shall next be varied in accordance with the provisions of this
Schedule the rent stated in the Landlord's notice and such rent shall become
payable accordingly unless the Tenant shall have served upon the Landlord within
twenty-eight days of the date of service of the Landlord's notice a counter
notice requiring in substitution for the rent stated in the Landlord's notice
whichever is the higher of the yearly rent payable hereunder immediately before
the interim review date and the open market rent of the demised premises on the
interim review date whereupon in the absence of agreement a Surveyor shall be
appointed to determine the open market rent in accordance with the foregoing
provisions of this Schedule so far as the same shall be applicable with the
substitution of the interim review date for the relevant review date
THE FIFTH SCHEDULE
THE SERVICE CHARGE
PART I
1. In this Schedule:-
"Service Charge" means the service charge calculated in
accordance with this Schedule
"the Total Costs" means the reasonable costs expenses
payments liabilities and provisions
30.
<PAGE> 35
incurred or made by the Landlord or
otherwise arising in connection with or in
the provision of or the payment for the
services and other matters set out or
referred to in Part II of this Schedule
"Service Charge Year" means the period from the date provided herein
for the commencement of the Term to the
next following 31st March and thereafter
each successive period of twelve months
ending on the 31st March in each year of
the Term or ending on such other date as
the Landlord shall substitute as
hereinafter provided
"the Tenants Percentage" means the lesser of the proportion determined by
the Landlord which the total gross floor
area (calculated by external measurement
to the nearest square foot or square
metre) of the demised premises shall from
time to time bear to the total gross floor
area (calculated by external measurement
to the nearest square foot or square
metre) of the buildings erected on the
Development not comprising the common
parts of the Development as ascertained
and certified by the Landlord whose
decision shall be final and binding on the
parties hereto or 8.325%
2. The Tenant shall pay to the Landlord a Service Charge calculated as
hereinafter provided TO THE INTENT that the Landlord shall be fully indemnified
paid and reimbursed in respect of the Total Costs in respect of each Service
Charge Year
3. The Service Charge payable by the Tenant in each Service Charge Year shall be
the Tenant's Percentage of the Total Costs Provided that if at any time the
Landlord acting reasonably considers it fair and reasonable that the Tenant
should pay a different proportion of the Total Costs relating to any particular
service(s) or matter(s) the Landlord may adopt and apply such other
proportion(s) in place of the Tenant's Percentage as may be fair and reasonable
in all the circumstances
4. If owing to a change of circumstances it appears reasonable that the Tenant's
Percentage should be altered the Landlord may from time to time by serving
written notice thereof on the Tenant make such alteration as may be fair and
reasonable in all the circumstances
31.
<PAGE> 36
5. The Tenant shall pay to the Landlord by equal quarterly payments in advance
on the days hereinbefore specified for payment of rent on account of the Service
Charge in respect of each Service Charge Year such amount as the Landlord or its
agent in either case acting reasonably shall from time to time specify at its
discretion to be fair and reasonable
6. The amount of the Total Costs and the Service Charge finally payable by the
Tenant shall be certified and summarised by the Landlord or its agent or
professional auditors (at the Landlord's discretion) for each Service Charge
Year during the course of the next succeeding Service Charge Year or as soon
thereafter as may be practicable and in such certificate and summary credit
shall be given to the Tenant for all payments made on account of the Service
Charge Year in question pursuant to this Schedule and any balance then found
payable to the Landlord shall be paid by the Tenant to the Landlord on demand
and any over-payment then found shall either be placed to the credit of the
Tenant against the next quarterly advance payment of Service Charge payable by
the Tenant pursuant to the terms of this Schedule or (if the term hereby created
has then expired shall be refunded to the Tenant including either the Tenant's
Percentage of any unexpended reserved fund or such proportion of any unexpended
reserved fund as the Tenant has contributed whichever is the lesser) AND the
provisions of this Clause shall continue to apply notwithstanding the expiration
or sooner determination of the Term but only in respect of the period down to
such expiration or sooner determination so that any Service Charge remaining
unpaid at the date of such expiration or sooner determination of the Term or
calculated after such date shall be a debt due by the Tenant to the Landlord
payable on demand
7. The certificate of the Landlord or its agent or professional auditors as
aforesaid as to any amount payable by the Tenant hereunder shall (unless any
manifest error shall appear therein and save on any question of law) be
conclusive and binding upon the Tenant but upon request by the Tenant in writing
and at the Tenant's cost the Tenant shall be entitled as soon as may be
practicable to receive a certificate from the professional auditors for the time
being of the Landlord to the effect that the amount payable by the Tenant
hereunder has been computed in accordance with the terms hereof and that if any
amount is included in such amount by way of allocation to a reserve such
allocation has been made
8. Notwithstanding the provisions hereinbefore contained the Landlord shall be
entitled from time to time to change the date of expiry of the Service Charge
Year from the 31st March to such other date as the Landlord may require and upon
any such change all necessary and requisite adjustments shall be made
32.
<PAGE> 37
PART II
EXPENSES RELATING TO THE DEVELOPMENT
1. The lighting cleaning maintenance redecoration repair replacement and renewal
and the payment of rates rents and other outgoings incurred in the provision of
a management centre for the Development during the daytime and/or proper and
reasonable residential accommodation for employees and garaging for their
vehicles
2. The purchase lease hire maintenance repair and when necessary renewal and
replacement of all electrical and mechanical apparatus plant vehicles tools
furniture materials and equipment installed or supplied by the Landlord from
time to time for the benefit of the Development and the provision of services
therein including (but not by way of limitation) traffic control equipment and
computer equipment
3. The lighting maintenance repair replacement and renewal of all the common
parts of the Development
4. The payment of any costs which may be levied by the local authority on the
Development in relation to the collection of refuse or any other service
rendered by the local authority for the benefit of the Development
5. The collection of refuse where undertaken by the Landlord at the Landlord's
discretion
6. The payment of rates water rates and other outgoings (if any) charged on the
common parts of the Development
7. The gardening planting landscaping (and maintenance thereof) of the
appropriate parts of the common parts of the Development at the Landlord's
discretion
8. The employment of supervisory and other staff porters watchmen cleaners and
others employed or under contract for the common parts of the Development at the
Landlord's discretion including salaries wages insurance pensions and national
insurance contributions and the provision of uniforms and/or protective clothing
9. The supply of gas electricity oil or other fuel or energy required for any of
the services or matters referred to in this part of this Schedule
10. The cleaning painting decoration or other treatment of all the common parts
of the Development
11. The execution of any works in compliance with any Enactment affecting the
common parts of the Development or any part thereof or the user thereof or the
employment therein of any person or in compliance with any notice or requirement
of any competent authority
33.
<PAGE> 38
and/or the cost and expense of any protest or appeal at the Landlord's
discretion against any such notice or requirement
12. The execution of any works at the Landlord's discretion for the protection
and safety of the members of the public visiting or passing the common parts of
the Development
13. The provision and upkeep of a security system for the common parts of the
Development at the Landlord's discretion including (but not by way of
limitation) a burglar alarm system closed circuit television and/or direct
communication with the police or other security service
14. The insurance of the common parts of the Development against the Insured
Risks and insurance against employer's liability public liability and third
party risks and any other insurances which shall in the opinion of the Landlord
be appropriate
15. All payments whether direct or indirect paid by the Landlord to or in
respect of any servant or agent or to any local authority or to any person or
body whatsoever towards or in connection with the carrying out of all or any of
the matters referred to in this part of this Schedule
16. Any additional new or extended service facility or matter which the Landlord
may reasonably decide shall be provided for or at the Development or for the
occupiers thereof or visitors thereto or for the modern and proper operation and
management thereof
17. The payment of all fees costs and expenses incurred in respect of the
Certificate and Summary to be provided under Part I of this Schedule and in
respect of all accounts kept and audits made for the purpose thereof
18. The payment of Value Added Tax or other taxation payments and any other
expenditure of the Landlord in the provision of and compliance with its
obligations relating to the services and other matters herein described save to
the extent the same may be recovered from H.M. Commissioners for Customs and
Excise
19. At the Landlord's discretion the creation and maintenance of a reserve
making provision for any costs expenses payments or liabilities which may arise
or be incurred in relation to any of the services and other matters set out in
this part of this Schedule in any subsequent year or years whether before or
after the expiry of the Term which reserve shall be applied at the Landlord's
discretion in or towards the discharge and payment of such future liabilities
costs or expenses (whether arising before or after the expiry of the Term) but
so that the Tenant shall not be entitled to any interest in or lien upon such
reserve PROVIDED THAT any sums allocated to such reserve shall be held in a
separately designated deposit account by the Landlord upon trust to apply the
same for the purpose of the Development and pending such application placed upon
deposit or otherwise invested in
34.
<PAGE> 39
such manner as the Landlord shall determine and the amount of interest earned
(after deduction of tax at the appropriate rate) shall be added to and become a
part of the reserve
20. A management fee (and the Value Added Tax thereon) not exceeding in any one
year Ten per centum of the Total Costs recoverable by the Landlord in that year
THE COMMON SEAL of ST. )
MARTINS PROPERTY )
INVESTMENTS LIMITED )
was hereunto affixed in )
the presence of:- )
- - --------------------------------
Authorised Signatory
SEAL NO: 3735
- - --------------------------------
Secretary
THE COMMON SEAL of
GALILEO DISTRIBUTION
SYSTEMS LIMITED
was hereunto affixed in
the presence of:-
Director
Secretary
35.
<PAGE> 1
Lease
This Lease is made and entered into as of the 18th day of April, 1988,
by and between Linclay, a Missouri general partnership (hereinafter called
"Landlord") and Covia Partnership, a Delaware general partnership, (hereinafter
called "Tenant" or "Covia").
Whereas, Covia desires to have the Landlord construct a Building upon certain
land described below and lease the land and building to Covia as Tenant; and
Whereas Landlord desires to build the Building and lease it and the land to
Covia;
WITNESSETH THAT, in consideration of the rents, and the covenants and
agreements herein contained, Landlord and Tenant hereby covenant and agree as
follows:
1. PROPERTY. Landlord hereby leases to Tenant and Tenant hereby takes
and hires from Landlord the land consisting of approximately 18.88 acres as
legally described on Exhibit "A" attached hereto and incorporated by reference
herein (the "Land"), together with the (a) building (the "Building") containing
approximately 143,000 gross square feet of office space per BOMA standards for
single tenant users (the "Office Space"), and (b) not less than 700 paved
parking spaces on the Land (the "Parking
1
<PAGE> 2
Spaces"), together with access aisles, driveways, sidewalks and landscaping
(collectively called the "Appurtenances"), to be constructed by Landlord thereon
substantially as depicted on the site plan attached as Exhibit "B" hereto and
incorporated by reference herein. Landlord shall construct the Building and the
Appurtenances in accordance with the procedures set forth in Appendix "A" and in
accordance with the Design Criteria described in Appendix "A" which is attached
hereto and incorporated by reference herein. The Land, the Building and the
Appurtenances are sometimes hereinafter collectively called the "Property".
2. TERM
(a) The term of this Lease shall be for a period of fifteen (15)
years commencing on June 1, 1989 (provided that Landlord has completed
construction of the Building and the Appurtenances and has delivered possession
of the Property to Tenant on or before such date) and expiring at Midnight on
July 31, 2004 unless sooner terminated as herein provided.
(b) If Landlord does not deliver possession of the Property to
Tenant for Tenant's beneficial occupancy on or before October 1, 1989, Tenant
may, at its option, waive said delay or terminate this Lease and be relieved of
all obligations hereunder without prejudice to any other rights Tenant may have;
provided, however, that any delay occasioned by Tenant's failure to timely
approve design and construction drawings as set forth in Appendix A hereof, or
which results from occurrences outside of the control of Landlord shall permit
Landlord to postpone delivery of the Property to Tenant by a commensurate time
period without Tenant accruing any rights to
2
<PAGE> 3
terminate, except that Tenant may terminate this Lease in any event and without
regard to cause (other than delays caused by Tenant) without further obligation
if possession of the Property is not delivered to Tenant for Tenant's
beneficial occupancy by October 1, 1989. Completed construction of the Building
and The Appurtenances and delivery of the Property for the purposes of this
Lease shall be deemed to occur on the date of the issuance of the Certificate
of Occupancy for The Work required to be performed by Landlord pursuant to
Appendix A by the governmental authorities having appropriate jurisdiction
thereover and the Architect has inspected the Building and the Appurtenances
and issued a Certificate of Substantial Completion (utilizing AIA Document
C704) that the Building and The Appurtenances have been substantially
completed in accordance with the approved construction documents (hereinafter
called the "Commencement Date"). Notwithstanding anything contained herein to
the contrary, this Lease shall become null and void if the term of this Lease
does not commence on or before January 2, 1991.
3. RENTS.
(a) Tenant shall pay to Landlord as Base Rent, in legal tender, at
Landlord's office at 6300 South Syracuse Way, Englewood, Colorado 80111, or
such other place as may be designated from time to time by Landlord's notice,
without reduction, setoff, prior notice or demand, the annual sums set forth
below, payable in advance in equal monthly installments of one-twelfth (1/12)
of the annual sum payable for each lease year, promptly on the first day of
every calendar month of the term. Notwithstanding the foregoing, Tenant shall
have the option to cause the monthly Base Rent for
3
<PAGE> 4
the first sixty (60) days of the initial term to be waived by so notifying
Landlord prior to the Commencement Date, and if Tenant exercises such option,
Tenant shall pay to Landlord, in lieu of the monthly Base Rent for the first
sixty (60) days of the initial term, an amount equal to sixty (60) days
interest on the Total Assembly Costs expended as of sixty (60) days following
the Commencement Date at the annual rate payable under Landlord's loan on the
Property. The Base Rent for any partial month shall be pro rated. For the
purpose of calculating annual Base Rent, a lease year shall mean each
twelve (12) month period commencing with the actual Commencement Date of the
term of this Lease. The annual Base Rent shall be determined as follows:
(i) The Total Assembly Costs (as audited and approved by Tenant) which
shall consist of the following cost components:
(1) Land (Purchase Price, excluding Closing costs which are included
in subsection (7) of this Section 3(a)(i)
(2) The Adjusted Guaranteed Maximum Price (as defined in Section
II.F. of Appendix A
(3) Development Costs not included in the Adjusted Guaranteed
Maximum Price (water, sewer tap fees, testing, etc.)
(4) Architectural/Engineering Costs
(5) Development overhead and fees
(6) Broker Commissions
4
<PAGE> 5
(7) Legal, Points/Fees
(8) Project Contingency
(9) Construction Loan Interest
(ii) The estimated cost for each component of the Total Assembly Costs
is set forth on Exhibit "B" attached hereto, incorporated by reference
herein and made a part hereof. Such component costs, when added
together, shall constitute the Total Assembly Costs which Landlord
covenants and agrees will not exceed $18,297,380.00, except as increased
or decreased as a result of actions of the Tenant as provided in
Appendix A and/or delays caused by Tenant. The Total Assembly Costs of
$18,297,380.00 as increased or decreased as a result of actions of
Tenant as provided in Appendix A and/or delays caused by Tenant shall be
hereinafter called the "Adjusted Total Assembly Costs".
(iii) It is further understood and agreed that Landlord shall, within
thirty (30) days following completion of The Work, as more fully
described and defined in Appendix A, submit to Tenant in writing for its
review and approval, the actual cost for each component with reasonable
supporting detail which costs, when added together, shall be hereinafter
known as the "Actual Total Assembly Costs". The lesser of Actual Total
Assembly Costs or Adjusted Total Assembly Costs shall be used in
computing the rental rate pursuant to the formula set out in
subparagraph (iv) below. Tenant shall
5
<PAGE> 6
approve the Actual Total Assembly Costs within fifteen (15) days of
receipt from Landlord, or elect at its sole option and expense to audit
Landlord's books and the books of Landlord's General Contractor and
subcontractors. If Tenant elects to audit such books as herein
provided, Tenant shall have one hundred eighty (180) days from the date
the Actual Total Assembly Costs are submitted in writing to Tenant by
Landlord in which to complete its audit and notify Landlord of any
objections to the Actual Total Assembly Costs as so submitted to Tenant
by Landlord. If Tenant does not commence its audit within thirty (30)
days after submittal by Landlord to Tenant of the Actual Total Assembly
Costs, or if Tenant has elected to commence such audit and does not
notify Landlord within one hundred eighty (180) days from the date such
Actual Total Assembly Costs are submitted to Tenant by Landlord, of any
objections to the Actual Total Assembly Costs as so submitted to Tenant
by Landlord. Tenant shall be deemed to have waived any further right to
audit or to object to the Actual Total Assembly Costs as so submitted to
Tenant by Landlord, and the amount thereof as so submitted to Tenant by
Landlord shall be deemed to be correct. Tenant shall commence paying
the annual Base Rent according to the formula set forth in Paragraph
(iv) below, based upon the Actual Total Assembly Costs as submitted to
Tenant by Landlord. If an audit conducted by Tenant of such Actual
Total Assembly Costs in accordance with the provisions hereof shall
reasonably demonstrate an error in Landlord's calculations,
6
<PAGE> 7
the annual Base Rent shall be appropriately adjusted and any overpayment or
underpayment which occurred prior to such adjustment shall be refunded by
Landlord, or paid by Tenant, as appropriate. When the Actual Total Assembly
Costs have been finally determined, either by reason of Tenant's failure to
audit or to object to same, by agreement of the parties, or by appropriate
judicial determination in the event that the parties are unable to agree, the
parties shall execute a supplemental agreement setting forth the Actual Total
Assembly Costs and the annual Base Rent based upon the formula set forth in
subparagraph (iv) below.
(iv) Annual Base Rent for the first lease year of the initial term shall be
the Adjusted Total Assembly Costs or the Actual Total Assembly Costs, whichever
is less, multiplied by .1006. During the first ten (10) lease years of the
initial term of this Lease, the annual Base Rent shall increase each lease year
by two percent (2%) over the annual Base Rent in effect during the immediately
preceding lease year. During the eleventh (11th) through the fifteenth (15th)
lease years of the initial term of this Lease the annual Base Rent shall
increase each lease year by three percent (3%) over the annual Base Rent in
effect during the immediately preceding lease year. The term "lease year" shall
mean a period of twelve (12) months commencing on the first day of the month
following the Commencement Date, and
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<PAGE> 8
each succeeding twelve (12) months shall be deemed to be a lease year.
(b) In addition to Base Rent, Tenant shall pay throughout the term
hereof and during any extension periods, as additional rent hereunder, at least
fifteen (15) days before any fine, penalty interest or cost may be added
thereto for non-payment thereof, the following with respect to the Property and
all improvements now or at any time situated thereon, to wit: all levies, taxes
(excluding franchise taxes, assessments, water and sewer rents and charges,
liens, license and permit fees, charges for public utilities, and all charges
for refuse or garbage collection or disposal made in respect of the Property
and all improvements now or at any time situated thereon, and all other
charges, impositions or burdens of whatsoever kind and nature, whether or not
particiularized by name, and whether general or special, ordinary or
extraordinary, foreseen or unforeseen, which at any time during the term of
this Lease may be created, levied, assessed, confirmed, adjudged, imposed or
charged upon or with respect to the Property or any improvements made thereto
or any trade fixtures, furnishings, equipment and all other personal property
contained on the Property, or any part of the foregoing, or any Appurtenances
thereto, or directly upon this Lease or the rents or other sums payable
hereunder, or upon this transaction, by any federal, state, municipal or other
authority, or under any law, ordinance, regulation, or regulation of any such
authority, including, among other things, all special tax bills and general,
special and other assessments, or liens or charges made on local or general
improvements or under any
8
<PAGE> 9
governmental or public power or authority whatsoever, and all capital levy,
gross receipts or similar taxes imposed or levied upon sales or measured by the
rent or other sums payable by Tenant hereunder, or use taxes which may be
levied or assessed against or payable by Landlord or Tenant on account of the
leasing or use of the Property or improvements (all of which are referred to
herein as "Impositions") provided, however, if any Impositions shall be created,
levied, assessed, adjudged, imposed, charged or become a lien with respect to a
period of time which commences before or ends after the commencement and
expiration dates, respectively, of the term of this Lease (other than by reason
of breach of any of the terms hereof by Tenant), then Tenant shall only be
required to pay that proportion of such Imposition which is equal to the
proportion of said period of which falls within the term of this Lease.
Nothing herein contained shall require Tenant to pay any income or excess
profits tax assessed against Landlord, or any corporation capital stock or
franchise taxes imposed upon Landlord. Tenant shall furnish to Landlord
evidence of payment of all Impositions not less than ten (10) days prior to the
delinquency thereof, such evidence to be furnished at the place provided herein
by the giving of notice to Landlord. Tenant shall have the right, upon
obtaining Landlord's written consent, not to be unreasonably withheld, and
before any delinquency occurs, to contest the amount or validity of any taxes on
the Property and improvements thereon by appropriate legal proceedings,
diligently conducted in good faith, all at Tenant's expense. Tenant's right
to contest taxes shall not be construed in any way of relieving, modifying or
extending Tenant's covenant to pay any such taxes prior to the delinquency and
as otherwise provided in this Section 3. If Tenant fails to pay any Imposition
and furnish Landlord proof of payment not less than ten (10) days prior to the
delinquency date,
9
<PAGE> 10
Landlord shall have the right to make such payment and obtain reimbursement
from Tenant plus interest on such amount at the rate of 10% per annum from the
tenth (10th) day following Landlord's demand for the amount paid by Landlord.
If subsequent to the Commencement Date of this Lease the Landlord makes
any capital improvement to the Property during the term of the Lease in order
to comply with safety, health or any other requirement of any Federal, State or
local law or governmental regulations, then said cost of such improvements
shall be reimbursed by Tenant to Landlord upon demand and presentation to
Tenant of invoices or other reasonable evidence of the cost; provided, however,
that if such costs exceed $50,000.00, Tenant shall have the option to amortize
such costs, plus interest thereon, at the best current rate reasonably obtained
by Landlord (but in no event less than the rate of interest on any first deed
of trust then encumbering the Property) over the remainder of the then current
term of the Lease, and the monthly Base Rent shall be increased accordingly.
4. SERVICES. Landlord shall not be responsible or obligated to
furnish, pay for, or reimburse Tenant for payment of, any labor, materials or
services hired or contracted by Tenant in respect of the use, management,
operation or maintenance of the Property, except as otherwise expressly
provided herein. Tenant shall be obligated to furnish, at its own cost and
expense, all labor, materials and services, including without limitation, all
gas, electric, water, sanitary sewer service, telephone, microwave, and other
utilities, in respect of the use, management, operation and maintenance of the
Property, except as otherwise expressly provided herein.
10
<PAGE> 11
Tenant shall have the responsibility to furnish adequate heating to the
Building to prevent pipes from freezing. In the event that Tenant fails to
furnish or pay for labor, materials or services necessary to prevent the pipes
in the Building from freezing, Landlord shall have the right, but not the
obligation, to furnish same and obtain reimbursement for the cost thereof from
Tenant, as additional rent.
5. MAINTENANCE AND REPAIR. Tenant agrees that, at its cost and
expense, it will keep and maintain the land, the Building, the Appurtenances
and any other improvements at any time constructed or located thereon, in good,
safe and clean and orderly repair, condition and appearance, and will, with
reasonable promptness, make all nonstructural, foreseen and unforeseen,
ordinary and extraordinary changes, repairs, replacements and restorations of
every kind and nature which may be required to be made upon or in connection
with the Property and any such other improvements thereon in order to keep and
maintain the same in good, safe, clean and orderly repair, appearance, and in
good and usable condition, including, without limitation, all electrical,
plumbing, lighting, fire protection sprinklers, heating and air conditioning
equipment, and components thereof. All repairs, replacements and restoration
made by Tenant shall be at least equal in quality and usefulness to the initial
Building and Appurtenances materials and equipment. Tenant shall maintain all
parking areas on the Property in a clean, safe and sightly condition, including
without limitation, striping, paving and sealing, and will maintain the
landscaping on the Property. Tenant shall also perform and furnish at its cost
and expense periodic servicing and preventive maintenance in accordance with
reasonable and sound engineering practices. If Tenant fails to perform any of
its obligations
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<PAGE> 12
under this Section 5 after ten (10) days prior written notice from Landlord,
then Landlord shall have the right, but not the obligation, to perform same and
obtain reimbursement from Tenant, as additional rent, the cost incurred by
Landlord in performing such obligations.
6. QUIET ENJOYMENT. Tenant, upon paying the Base Rent and other charges
provided for in this Lease and observing and keeping all of the covenants,
agreements and conditions of this Lease on its part to be kept, shall quietly
have and enjoy the Property during the term of this Lease without hindrance or
molestation by Landlord, or anyone claiming by or through Landlord, subject,
however, to the terms and conditions of this Lease.
7. CERTAIN RIGHTS RESERVED TO LANDLORD. At any time in the event of an
emergency, and otherwise at reasonable times, and after Landlord has provided
Tenant with reasonable advance notice (except in case of emergency), Landlord
shall have the right to take any and all reasonable measures, including
inspections, repairs, alterations, additions and improvements to the Property,
as Landlord may deem necessary or desirable for the safety, protection or
preservation of the Property or Landlord's interest therein, or in order to
comply with all laws, orders and requirements of governmental or other
authority. Landlord agrees that, in taking such measures as provided herein, it
shall use its best efforts to avoid or minimize any disturbance of Tenant's use
and occupancy of The Property.
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<PAGE> 13
8. USE OF PROPERTY.
(a) The Office Space shall be used for general office purposes,
computer related testing and repair services and for all other lawful purposes.
The Parking Spaces shall be used for parking of motor vehicles by Tenant, its
employees and agents, and invitees of Tenant having business purposes in the
Building and for no other purpose;
(b) Landlord shall deliver the Building and the Appurtenances
to Tenant in compliance with all applicable statutes, laws, ordinances, rules,
regulations, orders and requirements. Thereafter, Tenant shall, throughout the
term of this Lease, at Tenant's cost and expense, promptly comply with all
laws, ordinances, notices, orders, rules, regulations and requirements of all
federal, state and municipal governments and appropriate departments,
commissions, boards and offices thereof relating to all or any part of the
Property, and Tenant's use thereof provided, however that Tenant may contest or
otherwise appeal such law using due process and without encumbering or
otherwise reducing the value of the Building or Appurtenances;
(c) Tenant shall not make nor permit to be made any use of the
Property or any part thereof which would violate any of the covenants,
agreements, terms, provisions or conditions of this Lease, or which directly or
indirectly is forbidden by public law, ordinance or governmental regulation, or
which may be dangerous to life, limb or property, or which may invalidate or
increase the premium cost of any policy of insurance carried on the Property,
or covering its operation;
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(d) Tenant shall not make any structural alterations, improvements or
additions to the Property, and Tenant shall not make any non-structural
alterations, improvements or additions to the Property in excess of $50,000
without Landlord's advance consent in each and every instance; which consent
will not be unreasonably withheld or delayed. Landlord's consent shall not be
required for changes in floor coverings, wall coverings and relocation of
moveable partitions, irrespective of the cost of such changes, but Tenant shall
notify Landlord of any such changes costing in excess of Fifty Thousand Dollars
($50,000.00). In the event Tenant desires to make any alterations, improvements
or additions, Tenant shall first submit to Landlord plans and specifications
therefor and obtain Landlord's written approval thereof prior to commencing any
such work. All alterations, improvements or additions, whether temporary or
permanent in character, made by Landlord or Tenant in or upon the Premises
shall become Landlord's property and shall remain upon the Property at the
termination of this Lease without compensation to Tenant (excepting only
Tenant's moveable office furniture, trade fixtures, computer equipment and
terminals, office and professional equipment).
(e) Tenant shall not overload any floor. Landlord may direct the time
and manner of delivery, routing and removal and the relocation of safes and
other heavy articles;
(f) Tenant shall not use or keep, nor permit to be used or kept, any
foul, noxious, toxic or hazardous gas, substance or material in, on or about
the Property, nor permit nor suffer the Property to be used in any manner which
would be detrimental to the safety or structure of the
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<PAGE> 15
Property, or any part thereof, nor shall any animals or birds be brought in or
kept in or about the Property.
9. DAMAGE AND DESTRUCTION.
(a) In the event that the Building or Appurtenances, or any
part thereof are damaged or destroyed, partially or totally, at any time during
the term of this Lease, from fire, acts of God or any other cause covered by
property insurance Landlord is required to carry under this Lease, Landlord
shall proceed with due diligence to restore, repair and replace the Building
and Appurtenances, as soon as reasonably possible, and from and after the date
of such damage to the date of substantial completion of said repairs,
replacements and restorations, a just proportion of the Base Rent herein
reserved shall abate according to the extent the full use and enjoyment of the
Property are rendered impossible by reason of such damage. Landlord shall be
under no duty to restore any alterations, improvements or additions made by
Tenant. In all cases, due allowance shall be given to Landlord for any
reasonable delays caused by adjustment of insurance loss, strikes, labor
difficulties or any cause beyond Landlord's control;
(b) In the event of damage or destruction of fifty percent
(50%) or more of the Building during the last two (2) years of the lease term,
or any lease renewal period, either party shall have the option to terminate
this Lease by giving written notice to the other within thirty (30) days from
the date of damage. If such notice of termination is not given, Landlord shall
be deemed to have elected to restore and in such event shall restore the
Building as soon as reasonably possible. In the event Landlord
15
<PAGE> 16
gives such notice of termination of the Lease and Tenant has any remaining lease
extension options and exercises the next ensuing renewal option within thirty
(30) days after receipt of Landlord's notice of termination, such notice of
termination shall become null and void and the Lease shall remain in full force
and effect to the same extent as though such notice of termination had not been
given, and in such event, Landlord's obligation to restore pursuant to Section
9(a) shall become applicable, subject, however, to Landlord's right to delay
commencement of restoration by reason of the voided notice of termination.
10. CONDEMNATION. In the event of any taking or damage of all or
part of the Property by reason of any exercise of the power of eminent domain,
including transfer in lieu thereof, during the term hereof, the rights and
obligations of Landlord and Tenant shall be as hereinafter set forth:
(a) Except as hereinafter expressly provided, Landlord shall be
entitled to the entire amount of any award for such taking, whether such award
be made for the whole or a part of the fee, or leasehold or both, or otherwise;
provided, however, that Tenant shall be entitled to any award for loss of, or
damage to, Tenant's trade fixtures and removable personal property and for
moving expenses. No such claim made by Tenant, or any award pursuant thereto,
or any other award to Tenant shall defeat or diminish Landlord's claim or award
or any portion thereof;
(b) If the entire Property is taken by condemnation, this Lease
shall terminate as of the date possession is taken by the condemnor;
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(c) In the event of a taking of ten percent (10%) or more of the
Building which would in Tenant's sole and absolute discretion leave the
remainder of the Property (after such reconstruction of the then remaining
improvements as may be necessary to restore them to an architectural and usable
whole) not reasonably suitable for Tenant's continued occupancy for the purpose
and uses for which the Property is leased, or if ten percent (10%) or more of
the parking spaces are taken and Landlord does not commit to replace enough of
such parking spaces on or near the Property so as to meet the parking needs of
Tenant, Tenant shall have the option to terminate this Lease upon written notice
to Landlord within thirty (30) days after possession is taken by the condemnor;
(d) In the event a portion of the Property is taken and Tenant does
not have the right, or does not exercise the right, to terminate this Lease in
accordance with subparagraph (c) hereof, Landlord, at its expense, shall perform
any reconstruction of the remaining improvements as may be necessary to restore
them to an architectural and usable whole; and a just proportion of the Base
Rent herein reserved shall abate according to the extent the full use and
equipment of the Property are rendered impossible by reason of such
condemnation.
(e) No agreement, settlement, sale or transfer to or with the
condemning authority shall be made without the written consent of Landlord.
Tenant agrees to execute and deliver to Landlord any instruments that may be
required to effectuate or facilitate the provisions of this Lease relating to
condemnation.
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11. FORCE MAJEURE. Either party shall be excused from performing any
obligation or undertaking provided in this Lease in the event, and so long as,
the performance of any such obligation is prevented or delayed, retarded or
hindered by acts of God, fire, earthquake, flood, explosion, actions of the
elements, war, invasion, insurrection, riot, mob violence, sabotage, inability
to procure labor or materials (unless such inability arises out of failure to
make timely payment therefor), failure of transportation, requisition, laws or
orders of government or civil or military or naval authorities, or any other
cause, whether similar or dissimilar to the foregoing, not within the
reasonable control of the excused party, excluding however (a) the inability to
obtain monies to perform or fulfill the party's obligations and undertakings,
and (b) Tenant's failure to pay Base Rent, additional rent, or any other sums
payable by Tenant hereunder.
12. DEFAULT BY TENANT. The occurrence of any one or more of the
following events shall constitute a default and breach of this lease by Tenant:
(a) If Tenant shall at any time be in default in the payment of
Base Rent, additional rent, or any other sums payable by Tenant hereunder when
same shall become due and payable and such default continues for a period of
ten (10) days after written notice thereof by Landlord to Tenant; or
(b) If Tenant shall fail to perform or observe any of the other
material agreements, terms, covenants or conditions hereof and such material
non-performance or material non-observance shall continue for a period of
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thirty (30) days after written notice thereof by Landlord to Tenant; provided,
however, if such performance or observance cannot be had within such thirty
(30) day period then Tenant shall not be deemed in default if Tenant shall have
commenced such performance within such thirty (30) day period and thereafter
diligently and continuously proceed with such performance to completion.
13. DEFAULT REMEDIES. In the event of a default or breach by Tenant,
Landlord shall have, in addition to any other rights or remedies Landlord may
have at law or in equity, the following rights which shall be distinct,
separate and cumulative:
(a) To terminate this Lease and the term hereby created by giving
Tenant notice of termination, without any right on the part of Tenant to waive
the forfeiture by payment of any sum due or by other performance of any
condition, term or covenant broken. Whereupon Landlord shall be entitled to
recover, in addition to any and all sums and damages for violation of Tenant's
obligations hereunder in existence at the time of such termination, damages
incurred by Landlord for Tenant's default, including the cost of recovering
possession of the Property; expenses of subletting, including necessary
renovation and alteration of the Property; reasonable legal fees; real estate
commission paid; and an amount equal to the amount of the Base Rent reserved
for the balance of the term of this Lease, as well as all other charges,
payments, costs and expenses herein agreed to be paid by Tenant, all discounted
at the rate of ten percent (10%) per annum to their then present worth, less
the fair rental value of the Property for the remainder of said term, also
discounted at the rate of ten percent (10%) per
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annum to its then present worth, all of which amount shall be immediately due
and payable from Tenant to Landlord.
(b) To re-enter the Property and remove all persons and all or any
property therefrom, either by summary dispossess proceedings or by any suitable
action or proceeding at law or in equity, and repossess and enjoy the Property,
together with all additions, alterations and improvements without terminating
this Lease. Upon recovering possession of the Property by reason of or based
upon or arising out of a default on the part of Tenant. Landlord shall use its
reasonable efforts to relet the Property. Landlord may, at Landlord's option,
make such alterations and repairs to the Property and/or divide or subdivide the
Property as Landlord reasonably determines necessary in order to relet the
Property or any part or parts thereof, either in Landlord's name or otherwise,
for a term or terms which may at Landlord's option be less than or exceed the
period which would otherwise have constituted the balance of the term of this
Lease and at such rent or rents and upon such other terms and conditions as in
Landlord's discretion maximizes the revenues of such reletting. Upon each such
reletting all rents received by Landlord from such reletting shall be applied:
first, to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to the payment of any reasonable costs and expenses
of such reletting, including brokerage fees and attorney's fees and all costs of
such alterations and repairs; third, to the payment of rent due and unpaid
hereunder; and the residue, if any, shall be held by Landlord and applied in
payment of future rent as it may become due and payable hereunder. If such
rentals received from such reletting during any month shall be less than that to
be paid during that month by Tenant
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hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly. Landlord shall have the right from time to
time to begin and maintain successive actions or other legal proceedings against
Tenant for the recovery of such deficiency and/or amounts in excess thereof
payable by Tenant and to recover the same upon the liability of Tenant herein
provided, which liability it is expressly covenanted shall survive the issuance
of any action to secure possession of the Property. Nothing herein contained
shall be deemed to require Landlord to wait to begin any such action or other
legal proceeding until the date when this Lease would have expired had there
been no default on the part of Tenant.
No such re-entry or taking possession of the Property or the making of
alterations and/or improvements thereto or the reletting thereof shall be
construed as an election on the part of Landlord to terminate this Lease unless
written notice of such intention be given to Tenant. Landlord shall not be
liable in any way whatsoever for failure to relet the Property or, in the event
that the Property or any part or parts thereof are relet, for failure to collect
the rent thereof under such reletting provided that Landlord has used reasonable
efforts to relet the property and collect such rentals. Tenant, for Tenant and
Tenant's successors and assigns, hereby irrevocably constitutes and appoints
Landlord as Tenant's and their agent to collect the rents due and to become due
under all subleases of the Property or any parts thereof without in any way
affecting Tenant's obligation to pay any unpaid balance of rent due or to become
due hereunder. Notwithstanding any such reletting without termination, Landlord
may at any time thereafter elect to terminate this Lease for such previous
breach;
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(c) If Tenant fails to pay to Landlord any rent or other sum
when the same is due and payable as provided in this Lease such unpaid amount
shall bear interest from the due date at the rate of the then existing prime
rate of interest charged by Citibank, N.A. in New York, New York (but in no
event exceeding the maximum rate per annum permitted by law) until such payment
is made.
14. DEFAULT BY LANDLORD. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord within a reasonable
time, but in no event later than thirty (30) days after written notice by Tenant
to Landlord specifying wherein Landlord has failed to perform such obligation;
provided, however, if such performance cannot be had within such thirty (30) day
period, then Landlord shall not be deemed in default if Landlord shall have
commenced such performance within such thirty (30) day period and thereafter
diligently and continuously proceed with such performance to completion.
15. LANDLORD'S MORTGAGE OR TRANSFER. The Landlord reserves the right
and privilege to subject and subordinate this Lease at all times to the lien of
any mortgages or deeds of trust (hereinafter referred to as a "mortgage" or
"mortgages") now or hereafter placed upon the Landlord's interest in the
Property, and to any and all advances to be made under such mortgages, and all
renewals, modifications, extensions, consolidations and replacements thereof,
such subordination to be effective upon notice by Landlord to Tenant of
Landlord's exercise of said right, without the necessity of any instrument or
act on the part of Tenant to effectuate such subordination; provided, however,
that in the event of any foreclosure of or sale under any
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Mortgage Tenant shall not be disturbed in its possession of the Property so long
as it is not in default under this Lease and it attorns to the purchaser or
Mortgagee as Landlord under this Lease. (The term "Mortgagee" shall also include
the holder or beneficiary of a deed of trust.)
Tenant covenants and agrees to execute and deliver, upon reasonable demand,
such further instrument or instruments subordinating this Lease on the foregoing
basis to the lien of any such mortgage or Mortgagee as shall be desired by the
Landlord and any mortgagees or proposed mortgagees, and hereby irrevocably
appoints Landlord the attorney-in-fact of Tenant (such power of attorney being
coupled with an interest) to execute and deliver such instrument or instruments
for and in the name of Tenant. In the event Tenant shall fail to execute such
instrument or instruments with ten (10) days after written notice to do so, and
Tenant agrees that upon written request by any transferee of fee title to the
Property whether by foreclosure, deed in lieu of foreclosure, sale or otherwise,
Tenant will attorn to (in writing) and recognize such transferee as the Landlord
under this Lease.
Notwithstanding the foregoing, any holder of any mortgage may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by notice in
writing to the Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution and delivery and
in that event such Mortgagee shall have the same rights with respect to this
Lease as though it had been executed prior to the execution and delivery of the
mortgage and had been assigned to such Mortgagee.
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16. BROKERS. Tenant represents and warrants to the Landlord that Tenant has
had no dealings, negotiations or consultations with respect to the Property or
this transaction with any broker or finder and that no broker or finder called
the Property to Tenant's attention for lease or took any part in any dealings,
negotiations or consultations with respect to the Property or this Lease, other
than Ilff Thorn and Co., and that Landlord will pay to said broker a commission
of Six Hundred Thousand Dollars ($600,000) payable as follows: The sum of
$200,000.00 shall be due on execution of this Lease and the remaining
$400,000.00 shall be due upon funding to Landlord of its first draw under the
construction loan on the Property.
In the event of any claim by any other broker or finder who claims to have
submitted this Property to Tenant, to have induced Tenant to lease the Property
or to have taken part in any dealings, negotiations or consultations with
respect to the Property or this Lease, Tenant will be responsible for and will
indemnify and save Landlord harmless from and against all costs, fees (including
without limitation, attorney's fees), expenses, liabilities and claims incurred
or suffered by Landlord as a result thereof.
17. TENANT'S CERTIFICATE. Tenant agrees, at any time and from time to time
within ten (10) days of Landlord's written request, to execute, acknowledge
and deliver to Landlord a written statement in form requested by Landlord,
certifying that this Lease is unmodified and in full force and effect (or, if
there have been modifications, that this Lease is in full force and effect as
modified and stating the modifications, and the dates to which the Base Rent and
other charges have been paid in advance, if any;
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whether or not there are then existing any setoffs or defenses against the
enforcement of any of the agreements, terms, or conditions hereof upon the part
of Tenant to be performed or complied with (and if so, specifying the same);
whether Landlord is in default hereunder (and, if so, specifying in reasonable
detail the default claimed); whether Landlord has furnished all items and
materials required to be furnished hereunder; and any other matters reasonably
requested concerning the status of the Lease; it being intended that any such
statement delivered pursuant to this Section 17 may be relied upon by a
prospective purchaser or Mortgagee of the fee or of Landlord's interest in this
Lease. If Landlord desires to sell, finance or refinance the Property, or any
part thereof, Tenant hereby agrees to deliver, within ten (10) days of
Landlord's written request, to any lender designated by Landlord, such
current financial statements of Tenant as may be reasonably required by such
prospective purchaser and lender. All such financial statements shall be
received by Landlord in confidence and shall be used only for the purposes
herein set forth.
18. NOTICES. Any notice, demand, request, consent, approval, or other
communication which either party hereto is required or desires to give or make
or communicate to the other shall be in writing and served either personally or
sent by United States registered or certified mail, postage prepaid, return
receipt requested, addressed, to the addresses set forth below. Notices shall be
deemed received five (5) days after being posted. In the case of Landlord:
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Linclay
Suite 600
6300 South Syracuse Way
Englewood, Colorado 80111
Attn: Division Manager
and in the case of Tenant to:
Covia Partnership
9700 W. Higgins
Rosemont, Illinois 60018
Attn: Treasurer
with a copy to:
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attn: Vice President - Airport Affairs
or at such other address as such party may designate, from time to time, by
notice to the other.
19. NET LEASE. It is the intention of the parties hereto that this
Lease is a "net lease" and that Landlord shall receive the annual Base Rent
hereinabove provided as net income from the Property, not diminished by (a) any
Impositions of any public authority of any nature whatsoever during the entire
term of this Lease notwithstanding any changes in the method of taxation or
raising, levying or assessing any Imposition, or any changes in the name of any
Imposition, excluding franchise or income taxes associated with the Landlord,
(b) the cost of any maintenance, utilities, insurance or other expenses or
changes required to be paid to maintain and carry the Property, other than
payments under any mortgage now existing or hereinafter created by Landlord, or
(c) any other costs or expenses involved in the care, operation and management
and use of the Property or any improvements
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thereto. All such Impositions, costs, expenses and charges shall be paid by
Tenant from and after the date of this Lease and during the entire term of this
Lease, such sums to be payable on the first day of the month following
presentation to Tenant of invoices or other reasonable evidence detailing the
appropriate costs. Wherever in this Lease provision is made for the performance
of any act by Tenant, it is understood and agreed that said act shall be done by
Tenant at its own cost and expense unless a contrary intent is specifically
expressed. It is expressed and agreed that Landlord is not and shall not be
required to render or furnish any services of any kind to Tenant or the
Property or any improvements at any time situated thereon, nor maintain, repair,
rebuild or restore the Property or any part of any improvements thereon, except
for Landlord's obligations with respect to damage and destruction in Section 9
and condemnation in Section 10, and the structural components as expressly
provided in Section 23, and Tenant hereby expressly waives the right to make
repairs at the expense of Landlord, which right may be provided for in any
statute or law, whether in effect at the time of execution and delivery of
this Lease or thereafter enacted. It is understood and agreed that no
condemnation of any of the Property or any improvements at any time situated
thereon shall terminate this Lease or entitle Tenant to surrender the Property
or in any way affect Tenant's obligation to pay the rents or other sums payable
hereunder, except as specifically provided in Section 10.
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20. INSURANCE.
(a) Landlord shall or with Landlord's approval, Tenant shall, at
Tenant's cost and expense (to the extent that such insurance coverage is
available) maintain and keep in effect throughout the term of this Lease:
(i) Insurance against loss or damage by fire, malicious
mischief, vandalism, sprinkler leakage and those perils included
from time to time in the so called "All Risk" Policy with broad
form extended coverage, covering the Building and all other
improvements at any time situated on the Property for the full
replacement value thereof, plus loss of rents coverage in an amount
equal to one (1) year's Base Rent;
(ii) If there is a boiler, pressure vessel, air conditioning
equipment or electrical distribution equipment on the Property,
broad form boiler or machinery insurance in an amount reasonably
acceptable to Landlord;
(b) Landlord shall have the right to maintain and keep in effect
throughout the term of this Lease, at Tenant's cost and expense, general public
liability insurance against claims for bodily injury, personal injury or death,
or for damage or injury to property occurring upon, in or about the Property.
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(c) Tenant shall, at Tenant's cost and expense (to the extent
that such insurance coverage is available) maintain and keep in effect
throughout the term of this Lease:
(i) General public liability insurance against claims for
bodily injury, personal injury or death, or for damage or injury to
property occurring upon, in or about the Property, such insurance
to afford protection in an amount not less than $5,000,000.00 in
respect to any one occurrence. Landlord shall be named as an
additional insured on such policy or policies to the extent of
liability assumed by Tenant under Section 30;
(ii) Workmen's Compensation Insurance covering all persons
employed by Tenant in connection with any work on the Property and
with respect to whom death or bodily injury claims could be
asserted against the Landlord or the Property.
(d) All insurance furnished by Tenant pursuant to this Section 20
shall be effected with insurers of recognized responsibility, authorized to do
business in the state where the Property is located, shall be considered primary
insurance with respect to Landlord, shall be reasonably acceptable to Landlord,
all policies described in Section 20(a) shall name Landlord as the "named
insured" and "loss payee", and a standard Mortgagee endorsement naming
Landlord's Mortgagee of the Property as a loss payee shall be issued. All
proceeds of such insurance shall be paid to Landlord, or if required under
Landlord's Mortgage, shall be payable to such Mortgagee, or as otherwise
provided in such mortgage. Such insurance policies shall also
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provide such endorsements as Landlord may reasonably request. All policies of
insurance shall be non-assessable and shall provide that same may not be
cancelled or materially changed without at least thirty (30) days prior written
notice to Landlord and any Mortgagee to whom losses are payable; that the full
amount of any losses sustained shall be payable to any such Mortgagee to whom
losses are payable, notwithstanding any act, omission, negligence or breach of
warranty of Landlord or Tenant which might otherwise result in forfeiture of
said insurance; that the full amount of any losses sustained shall be payable
to Landlord notwithstanding an act, omission, negligence or breach of warranty
of Tenant which might otherwise result in forfeiture of such insurance; that
the policies are primary and non-contributing with any insurance that may be
carried by Landlord or Tenant; and that the insurer waives the right of
subrogation against Landlord and its agents and employees. Tenant shall furnish
Landlord certificates or other reasonable evidence of such insurance coverage
throughout the term of this Lease with respect to such insurance required to be
carried by Tenant. If Tenant is furnishing any of the insurance under (a)(i) or
(a)(ii) Tenant shall, upon request of Landlord, furnish to Landlord a certified
copy of the original policies and certified copies of all endorsements.
(e) Tenant agrees that if any personal property, including, without
limitation, fixtures, furnishings, equipment and contents, any time located on
the Property shall be damaged or destroyed, and whether or not such damage or
destruction was caused by negligence of the Landlord, its agents or employees,
neither Landlord nor its agencies or employees shall have any liability to
Tenant therefor, and Tenant does hereby release Landlord,
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its agents and employees of and from any liability therefor. Tenant shall
require all policies of risk insurance carried by Tenant during the term of
this Lease upon such personal property to be endorsed with a provision in and
by which the insurer waives any right of subrogation against Landlord, its
agents and employees, or permits Tenant to so waive such subrogation, in which
event this Section 20 shall constitute such waiver.
(f) Landlord agrees that if the Building improvements shall be damaged
or destroyed, and whether or not such damage or destruction was caused by
negligence of the Tenant, its agents or employees, neither Tenant nor its
agents or employees shall have any liability to Landlord for such damage or
destruction and Landlord does hereby release Tenant, its agent and employees of
and from any liability therefor. Landlord shall require all policies of
property insurance carried by Landlord during the term of this Lease upon such
Building improvements pursuant to Section 20(a), (and if Tenant is carrying
such insurance on the Building pursuant to Section 20(a). Tenant shall require
such policies) to be endorsed with a provision in and by which the insurer
waives any right of subrogation against Tenant, its agents and employees, or
permits Landlord to so waive such subrogation, in which event this Section
20(e) shall constitute such waiver.
(g) The cost of insurance to be carried by Landlord under Section 20(a)
and Section 20(b) shall be reimbursed by Tenant to Landlord upon presentation
of an invoice or other evidence of the cost.
(h) If Tenant fails to provide and keep in force insurance as
aforesaid, Landlord may (but shall not be obligated to) obtain such
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insurance and the premiums shall be deemed additional rent payable by Tenant
upon demand; however, Landlord shall not be limited in the proof of any damages
which Landlord may claim against Tenant to the amount of the insurance premium
or premiums not paid or incurred and which would have been payable upon such
insurance, but Landlord shall also be entitled to recover as its damages for
such breach, the uninsured amount of any loss, to the extent of any deficiency
in the insurance proceeds as shall be necessary to cover the damages, expenses
and costs. The absence of any insurance requirements shall not work to relieve
the Tenant of any obligation imposed elsewhere in this Lease.
(i) Tenant shall not carry or maintain any property insurance on the
improvements which would in any way diminish, jeopardize or compromise the
property insurance required to be carried by Landlord hereunder unless Landlord
fails to carry such insurance.
21. HOLDING OVER. Unless otherwise agreed to in writing by Landlord and
Tenant, if Tenant retains possession of the Property or any part thereof after
the termination of the term, such occupancy shall be a tenancy from
month-to-month, and Tenant shall pay Landlord Base Rent at one and one-quarter
the monthly rate in effect immediately prior to the termination of the term for
the time Tenant thus remains in possession without the written consent of
Landlord and, in addition thereto, Tenant shall pay Landlord for all damages,
consequential as well as direct, sustained by reason of Tenant's retention of
possession. The provisions of this Section 21 do not exclude Landlord's right
of re-entry or any other right hereunder.
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No such holding over shall be deemed to constitute a renewal or extension of
the term hereof.
22. CONDITION OF PROPERTY. Tenant's taking possession of the Property
shall be conclusive evidence as against Tenant that the Premises were in good
order and satisfactory condition when Tenant took possession, except as to
latent defects which appear and are called to Landlord's attention within three
(3) years after the Commencement Data and subject to a "punch list" provided by
Tenant to Landlord at the time of taking possession, which repairs and "punch
list" items shall be made as promptly as possible by Landlord. The foregoing
three (3) year limitation on Landlord's obligations with respect to latent
defects shall not apply to Landlord's obligations under Section 23 below or to
express equipment warranties, if any, which may exceed three (3) years.
Landlord warrants that the Building and the Appurtenances will be constructed
in accordance with the provisions of Appendix A, and in accordance with all
applicable zoning, ordinances, and regulations governing the use of the
Property and improvements thereon as of the Commencement Date. At the
termination of this Lease, Tenant shall return the Building broom-clean and in
good condition, ordinary wear and tear and loss by fire or other casualty
excepted. Tenant shall repair any damage to the Property occasioned by its use
thereof or by the removal of Tenant's trade fixtures, furnishings and equipment.
23. STRUCTURAL REPAIRS. Upon notice from Tenant of the need for any
structural maintenance, repairs or replacements, with respect to the
foundation, exterior walls, and roof of The Building (including any design or
construction defects), Landlord shall act with due diligence to furnish
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<PAGE> 34
such structural maintenance, repairs or restoration at its cost and expense and
without reimbursement from Tenant. In the event the damage to the foundation,
exterior walls or roof of the Building is due to the fault or negligence of
Tenant, its employees, agents, contractors, suppliers, licensees or invitees,
and such damage is not covered by Landlord's insurance, Tenant shall bear the
full cost and obligation of repair. Tenant shall, at Tenant's sole expense,
immediately replace any and all glass in the Building that may be broken during
the term or any renewal hereof. The broken glass shall be replaced with glass at
least equal to the specification and quality of the glass so replaced.
24. MISCELLANEOUS.
(a) The captions of the Sections of this Lease are for convenience only
and shall not be considered or referred to in resolving questions of
interpretation or construction. Reference in this Lease to the "obligations" of
Tenant, and words of like import, shall mean the covenants to pay Base Rent and
all other charges and items payable by Tenant under this Lease and all other
covenants, agreements, terms, conditions, limitations, exceptions and
reservations contained in this Lease applicable to Tenant.
(b) The various rights, options, elections, powers and remedies
contained in this Lease, including the rights herein granted to terminate this
Lease, shall be construed as cumulative and no one of them shall be exclusive of
any of the others, or of any other legal or equitable remedy which either party
might otherwise have in the event of breach or default in
<PAGE> 35
the terms hereof, and the exercise of one right or remedy by such party shall
not impair its right to any other right or remedy until all obligations imposed
upon the other party have been fully performed. It is intended that such of the
agreements and covenants of Tenants and Landlord set forth herein shall be
deemed and construed as both a covenant and a condition.
(c) In addition to other remedies provided in this Lease, Tenant and
Landlord shall be entitled, to the extent permitted by applicable law, to
injunctive relief in case of violation, or attempted or threatened violation,
of any of the covenants, agreements, conditions or provisions of this Lease, or
to a decree compelling performance of any of the covenants, agreements,
conditions or provisions of this Lease, or to any other remedy allowed to
Tenant and Landlord at law or in equity.
(d) This Lease shall be interpreted and construed under the laws of the
State of Colorado.
(e) Each and all of the provisions of this Lease shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns, subject at all times,
nevertheless, to all agreements, covenants and conditions contained elsewhere
in this Lease. Any reference in this Lease to successors or assigns of Tenants
is not intended to constitute a consent to assignment by Tenant, but has
reference only to those instances where Landlord may have given written consent
to a particular assignment.
<PAGE> 36
(f) Nothing contained in this Lease shall be deemed or construed by
the parties hereto or by any third person to create the relationship of
principal and agent or of partnership or of joint venture or of any association
between Landlord and Tenant, and neither the method of computation of rent nor
any other provisions contained in this Lease nor any acts of the parties hereto
shall be deemed to create any relationship between Landlord and Tenant other
than the relationship of Landlord and Tenant.
(g) No waiver of any default hereunder shall be implied from any
omission by either party to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect any
default other than the default specified in the express waiver, and then only
for the time and to the extent therein stated. No delay or omission by either
party hereto to exercise any right or power accruing upon any non-compliance or
default by the other party with respect to any of the terms hereof, or
otherwise accruing hereunder shall impair any such right or power or be
construed to be a waiver thereof. One or more waivers of any breach of any
covenant, term or condition of this Lease shall not be construed as a waiver of
any subsequent breach of the same covenant, term or condition. The consent or
approval by a party to or of any act by the other party requiring the former
party's consent or approval shall not be deemed to waive or render unnecessary
such former party's consent or approval to or of any subsequent similar acts by
the other party.
(h) The acceptance of Base Rent or other payment by the Landlord at
any time when the Tenant is in default under any covenant or condition
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hereof shall not be construed as a waiver of such default or of the Landlord's
right to terminate this Lease on account of such default, it being expressly
understood that if at any time the Tenant shall be in default in any of its
covenants or conditions hereunder, an acceptance by the Landlord of Base Rent
or other payment during the continuance of such default or the failure on the
part of the Landlord promptly to avail itself of such other rights or remedies
as the Landlord may have shall not be construed as waiver of such default, but
the Landlord may at any time thereafter, if such default continues, terminate
this Lease on account of such default in the manner provided for in this Lease.
(i) This Lease contains all covenants and agreements between landlord
and Tenant relating in any manner to the rental, use and occupancy of the
Property and the other matters set forth in this Lease. No prior agreement or
understanding pertaining to the same shall be valid or of any force or effect,
and the covenants and agreements of this Lease cannot be altered, changed,
modified or added to, except in writing signed by Landlord and Tenant. No
representation, inducement, understanding or anything of any nature whatsoever,
made, stated or represented on either party's behalf, either orally or in
writing, except as in this lease stated, has induced the other party to enter
this Lease. No surrender to Landlord of this Lease or of the Property or any
part thereof or of any interest therein, shall be valid or effective unless
provided for in this Lease or otherwise agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
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(j) In the event of legal action between Landlord and Tenant on
account of any alleged default by either hereunder, the prevailing party in
such action shall be entitled to be reimbursed by the other party in the amount
of all reasonable attorney's fees and other costs incurred by the prevailing
party in connection with such action.
(k) Time is of the essence with respect to all matters in this Lease.
(l) The adverbs "herein," "hereunder," "hereto," "hereby,"
"hereinafter," and like words whenever the same appears herein, mean and refer
to this Lease in its entirety and not to any specific paragraph or subparagraph
hereof unless otherwise expressly designated in context.
(m) No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly Base Rent and other charges payable hereunder by Tenant shall
be deemed to be other than on account of the earliest stipulated Base Rent or
other charges, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Base Rent or other charges be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such Base Rent or other
charges, or pursue any other remedy in this Lease provided.
(n) In the even this Lease requires Tenant to submit payments for
items other than the Base Rent (examples -- maintenance contributions, and real
estate tax payments) and in the event Tenant submits a payment of less
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than the total combined amount of all of said payments, then the Landlord shall
have the option to credit said payments towards any of said items it so
desires, notwithstanding any specification of Tenant.
(o) The word "Landlord" is used herein to include the Landlord named above
and any subsequent owner of the Property, as well as their respective heirs,
personal representatives, successors and assigns, each of whom shall have the
same rights, remedies, powers, authorities and privileges as he would have had
had he originally signed this Lease as Landlord, but any owner of the Property,
whether or not named herein, shall have no liability hereunder after he ceases
to hold title to the Property, except for obligations which may have
theretofore accrued.
(p) Any provision or provisions of this Lease which shall be to any extent
in violation of any law or ordinance or which shall prove to be to any extent
invalid, void or illegal, shall in no way affect, impair or invalidate any
other provisions hereof, and the remaining provisions hereof shall nevertheless
remain in full force and effect.
(q) This instrument shall not be placed of record, but at request of
either party, the parties shall join in the execution of a Memorandum of Lease
for recording.
(r) All references to the "term" of this Lease shall mean the initial term
and any extended term, unless specific reference is made to the initial term or
to an extended term, in which event, the specific reference shall mean only the
initial term or an extended term, as the case may be.
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<PAGE> 40
(s) If the date for performance of any act hereunder falls on a Saturday,
Sunday or legal holiday, the date for performance thereof shall be extended to
the next succeeding business day.
25. OPTION TO EXTEND. If Tenant is not in default in performance of its
obligations under this Lease at the time of exercise of a renewal option or at
the time of commencement of a renewal term, Tenant shall have the option to
extend the term of this Lease for three (3) consecutive periods of five (5)
years each, the first extended term to commence immediately upon the expiration
of the initial term, and each additional extended term to commence immediately
upon the expiration of the then current extended term. Each option to extend
shall be exercised, if at all, by Tenant giving written notice of exercise to
Landlord at least six (6) months prior to the expiration of the then current
term. All of the terms and conditions of this Lease shall remain in full force
and effect during each extended term, except that Landlord shall have no
obligation to furnish any tenant finish, and the annual Base Rent shall be
increased for each year during each renewal term by three and three quarters
percent (3.75%) over the annual Base Rent in effect during the immediately
preceding lease year.
26. ASSIGNMENT AND SUBLETTING. Tenant may assign this Lease in whole or in
part or sublease the Property, in whole or in part, to its parent corporation,
or to a successor of all of its business and assets, or to an affiliate
corporation, or a partner owning not less than a thirty-five percent (35%)
partnership interest in Tenant. This Lease may not otherwise be assigned by
Tenant nor shall Tenant sublease the whole or any part of the Property without
the prior written consent of the Landlord which shall not
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be unreasonably withheld or delayed. Any unauthorized assignment or subletting
will be null and void, ab intitio. Consent by Landlord to one or more
assignments or sublettings shall not operate as a consent to, or a waiver of
Landlord's right with respect to, any subsequent assignments and sublettings.
Notwithstanding any assignment or subletting, Tenant shall at all times remain
fully responsible and liable for the payment of the Rent and for compliance
with all of Tenant's other obligations under this Lease. If an Event of Default
should occur while the Property or any part thereof is then assigned or sublet,
Landlord, in addition to any other remedies herein provided or provided by law,
may at its option collect directly from such assignee or subtenant all payments
becoming due to Tenant under such assignment or sublease and apply such
payments against any sums due to Landlord by Tenant hereunder, and Tenant
hereby authorizes and directs any such assignee or subtenant to make such
payments directly to Landlord upon receipt of notice from Landlord. No direct
collection by Landlord from any such assignee or subtenant shall be construed
to constitute a novation or a release of Tenant from the further performance of
its obligations hereunder. Receipt by Landlord of payments from any assignee,
subtenant or occupant of the Premises shall not be deemed a waiver of the
covenant in this Lease against assignment and subletting, or a release of
Tenant under this Lease. The receipt by Landlord from any such assignee or
subtenant obligated to make payments shall be a full and complete release,
discharge, and acquittance to such assignee or subtenant to the extent of any
such amount so paid to Landlord.
If Tenant requests Landlord's consent, which shall not be reasonably withheld,
to an assignment of the Lease or subletting of all or part of
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the Property, it shall submit to Landlord, in writing, the name of the proposed
assignee or subtenant and the nature of the business of the proposed assignee
or subtenants, the term, use, and other particulars of the proposed subletting
or assignment, including without limitation, evidence satisfactory to Landlord
that the proposed subtenant or assignee is financially responsible.
27. COMMENCEMENT OF POSSESSION. If Landlord shall be unable to give
possession of the Property on or about August 1, 1989 because the Property
shall not be ready for occupancy, Landlord shall not be subject to any
liability for the failure to tender possession on said date. Under such
circumstances, unless the delay is the fault of Tenant, the Base Rent shall not
commence until the Property is ready for occupancy by Tenant, and in such
event, the Commencement Date and termination date of the term hereof shall be
adjusted accordingly, which adjustment will be evidenced by an agreement signed
by Landlord and Tenant setting forth the adjusted commencement and termination
dates, subject, however, to Tenant's option to terminate this Lease pursuant to
Section 2 above if the Property is not timely delivered to Tenant for Tenant's
beneficial occupancy, unless delay is caused by Tenant. If, at Tenant's
request, Landlord shall make the Property available to Tenant prior to the date
of commencement of the term for the purpose of decorating, furnishing or
equipping the Property, the use of the Property for such work shall not create
a landlord/tenant relationship between the parties, or constitute occupancy of
the Property within the meaning of the next sentence, but the provisions of
Sections 20 and 31 of this Lease shall apply. If, with the consent of Landlord,
Tenant shall enter into occupancy of the Property to do business therein prior
to
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the date of commencement of the term, all provisions of this Lease, including
but not limited to the date for expiration of the term hereof, shall apply and
the Base Rent and other charges payable by Tenant hereunder shall accrue and be
payable from the date of occupancy.
28. UTILITIES. Landlord shall be solely responsible for installing and
arranging for satisfactory utility services and utilities to and for the
Property and Tenant's improvements and operations thereon up to the Tenant's
taking possession and Tenant shall itself pay promptly all deposits, rents,
costs, tap-in fees and other charges and fees for water services, sewer
service, gas, electricity, light, heat, steam, power, telephone and other
communication services and any and all other utility services desired, rendered
or supplied to or in connection with the Property or any improvements thereto,
and Tenant shall protect, defend and indemnify Landlord and save Landlord
harmless from and against any costs, liability, charges, fees or expenses
relating to any utility service, provided such tap-in fees and other charges
and fees have been excluded from Total Assembly Costs.
29. ALLOCATION OF RENT. Landlord and Tenant agree that no portion of
the Base Rent paid by Tenant after the expiration of any period during which
such Base Rent was abated shall be allocated by Landlord or Tenant to such
abatement period, nor is such Base Rent intended by the parties to be allocable
to any abatement period.
30. INDEMNIFICATION. Tenant agrees to indemnify and save harmless
Landlord from and against any and all claims by or on behalf of any person
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or persons, firm or firms, corporation or corporations, or other entity or
entities, arising from the occupancy, conduct, operation or management of the
Property and any improvements thereto (but excluding any claims arising out of
the design or construction of the Property), or the operation of its business
on the Property, or from any work or thing whatsoever done or which was not
done in or to the same, or arising from any breach or default on the part of
Tenant in the performance of any covenant or agreement on the part of Tenant to
be performed pursuant to the terms of this Lease, or arising from any act,
omission, neglect or negligence of Tenant or any of its agents, contractors,
servants, employees or licensees, or arising from any accident, injury or
damage whatsoever caused to any persons, firm, corporation or other entity
during the term of this Lease in or about the Property (except to the extent
same arises from the negligence of Landlord), and from and against all costs,
expenses, losses, damages, and liabilities incurred in connection with any such
claim, or action or proceeding brought thereon (including without limitation
the reasonable fees of attorneys, investigators and experts); and in case any
action or proceeding be brought against Landlord by reason or any such claim,
Tenant covenants upon notice from Landlord, at Tenant's cost and expense, to
resist or defend such action or proceeding.
31. REIMBURSEMENTS BY TENANT. In the event that Landlord elects to
perform any of Tenant's obligations upon failure of Tenant to perform such
obligations as provided for hereunder, Landlord shall be entitled to recover
from Tenant, in addition to the costs incurred by Landlord for performance of
such obligations, the sum of fifteen percent (15%) of such costs as
reimbursement to Landlord for its overhead and administration in performing such
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obligations of Tenant. The foregoing changes are not intended to constitute
interest; however, if such charges are construed to be interest, they shall not
exceed the maximum permitted by law and shall be credited against Base Rent to
the extent that such charges should be deemed to be interest in excess of the
maximum permitted by law.
32. ADJACENT PROPERTY. If Tenant exercises its Expansion Option(s)
(defined in Section 33 below) by at least 70,000 rentable square feet in the
aggregate, and as a result thereof, additional parking spaces are needed to
maintain a parking ratio of seven (7) parking spaces per 1,000 square feet of
office space, and if such additional parking spaces are not available on the
Property, then in that event, Tenant shall have the option at any time (after
exercising such Expansion Option(s) during the term of the Lease, and any lease
extension periods, to have said Adjacent Parcel added to this Lease at no cost
to Tenant for the leasing of said Adjacent Parcel. Provided Tenant is not in
default, pursuant to the terms and conditions provided in this Lease, Landlord
shall retain control of sufficient real property (approximate 3.6 acres) located
north of and immediately adjacent to the Land for the expansion of the Property
(the "Adjacent Parcel"). Tenant shall have no obligations for maintenance,
repairs or payment of Impositions with respect to the Adjacent Parcel unless and
until Tenant elects to have the Adjacent Parcel added to this Lease as
hereinafter provided. Landlord shall have no obligation to furnish any
improvements on or with respect to said Adjacent Parcel. If all or any part of
the Adjacent Parcel is taken by condemnation at any time during the term of this
Lease or any extension periods, (a) Landlord shall only be obligated to furnish
such portion of the Adjacent Parcel as is not taken, (b) Tenant shall not have
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any right to terminate this Lease by reason of such taking, and (c) Tenant shall
not be entitled to any compensation from the condemning authority or reduction
in Rent by reason of such taking. In the event Tenant notifies Landlord in
writing during the first seven (7) lease years subsequent to the commencement of
this Lease that Tenant elects to relinquish and cancel said option for the
Adjacent Parcel, Landlord shall pay Tenant the sum of $250,000 within thirty
(30) days of receipt of such notification from Tenant in consideration of such
option cancellation, whether or not the Adjacent Parcel or any part thereof is
taken by condemnation.
33. EXPANSION SPACE.
(a) Provided Tenant is not in default in any of its obligations
hereunder beyond any applicable cure period, Tenant shall have the option
("Expansion Option(s)") to require Landlord to construct (as an addition to the
Building) additional space (the "Expansion Space"), up to a maximum Building
total of 264,000 square feet of space as computed in accordance with Arapahoe
County zoning standards, to be added to and become a part of the Property
leased to Tenant hereunder, upon and subject to the terms and conditions
hereinafter set forth and subject to obtaining all applicable governmental
approvals. Such option shall be exercisable only twice and shall be exercisable
only during the first three (3) years of the second extension term. If Tenant
elects to exercise such option, Tenant shall do so by giving notice to Landlord
(the "Expansion Notice"), which Expansion Notice shall reference this Section
33 of the Lease, and shall specify the number of rentable square feet which
Tenant has elected to add as the Expansion Space. Upon receipt of the Expansion
Notice, Landlord and Tenant shall, as
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soon as reasonably possible, commence the holding of periodic meetings to
determine and arrive at a preliminary design of the Expansion Space to enable
Landlord to furnish to Tenant a preliminary cost estimate of the cost of
constructing the Expansion Space. The design and materials of the structure
containing the Expansion Space shall be as structurally, architecturally and
aesthetically compatible with the Building as is reasonably possible. Within
thirty (30) days after Landlord furnishes to Tenant the preliminary estimate of
the cost of constructing the Expansion Space, Tenant shall notify Landlord
whether Tenant elects to proceed to the final design phase of the Expansion
Space. If Tenant fails to give such notice within said thirty (30) day period,
or if Tenant notifies Landlord that it elects not to proceed to the final design
phase, then Tenant's Expansion Notice shall be deemed to be rescinded and shall
be of no further force or effect. If Tenant does elect to proceed to the final
design phase, Landlord shall cause final working drawings and specifications to
be prepared, in cooperation with Tenant, substantially in accordance with the
same procedures followed with respect to the design phase of the Building as set
forth in Appendix "A" attached hereto. When the final drawings and
specifications have been completed and approved, Landlord shall furnish Tenant a
further cost estimate based upon such final plans and specifications and within
sixty (60) days after receipt of such cost estimate, Tenant shall notify
Landlord whether it elects to have Landlord proceed with construction of the
Expansion Space. If Tenant fails to notify Landlord within said sixty (60) day
period or notifies Landlord not to proceed with such construction, then the
Expansion Notice shall be deemed to be rescinded and shall be of no further
force or effect. If such Expansion Notice is so rescinded at any time during the
design and estimating process, Tenant shall
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reimburse to Landlord all expenses incurred by Landlord for doing the designing
and work necessary to furnish Tenant such design and estimate, but such
rescinded Expansion Notice shall not count as one of the two expansion options
available to Tenant pursuant to this Section 33(a). If Tenant notifies Landlord
to proceed with construction of the Expansion Space, then Landlord shall
exercise reasonable diligence to construct and complete the Expansion Space.
The bidding procedures and order procedures set forth in Appendix "A" with
respect to construction of the Building shall be applicable to the Expansion
Space, to the extent applicable.
In calculating the cost of constructing the Expansion Space, the following
items with respect to such Expansion Space shall be included:
(i) All construction costs for the Expansion Space, parking, site work,
landscaping and tenant finish improvements;
(ii) Development costs (water and sewer tap fees, testing, etc., not included
in (i) above;
(iii) Architectural and engineering costs:
(iv) Development overhead and fees;
(v) Legal, points/fees;
(vi) Project contingency;
(vii) Construction loan interest.
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The total of (i) through (vii) is hereinafter referred to as the
"Expansion Assembly Cost."
(b) The Expansion Space shall be added to and become a part of the
Property and the term shall commence with respect to the Expansion Space, as
and when the Expansion Space is substantially completed and ready for
occupancy. Completed construction of the Expansion Space and delivery of same
to the tenant for purposes of this Lease shall be deemed to occur on the data
of the issuance of the Certificate of Occupancy for the work required to be
completed by Landlord for the Expansion Space by the governmental authorities
having appropriate jurisdiction thereover and the Architect has inspected the
Expansion Space and issued a Certificate of Substantial Completion (utilizing
AIA Document G704) that the Expansion Space has been substantially completed in
accordance with the approved construction documents. If the substantial
completion of the Expansion Space is delayed by reason of acts or omissions of
Tenant for more than six (6) months beyond the originally targeted substantial
completion date, then in that event, Tenant shall commence paying rent on the
Expansion Space at the expiration of said six (6) month period, whether or not
the Expansion Space is substantially completed, and in such event, Landlord
shall continue to exercise reasonable diligence to complete the Expansion
Space. Tenant shall commence paying rent on the expansion Space the earlier of:
(i) the commencement date of the term with respect to the
Expansion Space, or
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(ii) six (6) months after the originally anticipated target
date for completion of the Expansion Space, if Tenant has delayed
completion of the Expansion Space.
(c) The rent for the Expansion Space shall be determined by a
formula which will incorporate (i) the Expansion Assembly Cost, (ii) rate of
interest obtained by landlord on a construction loan and a permanent loan in
the amount of the Expansion Assembly Cost, and (iii) the coverage ratio
required by the lender for such loans. Landlord will exercise its best efforts
to obtain a market rate of interest for such loans.
(d) The Base Rent for such Expansion Space shall be determined by
the following rental formula:
The Expansion Assembly Costs shall be multiplied by the rate of interest of the
permanent loan obtained by the Landlord and the sum of such calculation shall
then be multiplied by the coverage ratio required by the maker of Landlord's
permanent loan. Landlord agrees to make a good faith effort to obtain a market
rate permanent loan. Prior to accepting a commitment for such loan, Landlord
shall notify Tenant of the proposed rate and coverage ratio for such loan, and
Tenant shall have sixty (60) days to provide Landlord with a permanent loan
commitment on the same or more favorable terms. If Tenant furnishes such
commitment on the same or more favorable terms, Landlord agrees to accept the
same or more favorable commitment in lieu of the loan proposed by Landlord. Such
rental formula calculation shall constitute the annual Base Rent for the first
year after the rental commencement date for such Expansion Space. If Landlord
elects to finance
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the Total Assembly Costs out of pocket (in lieu of obtaining a loan therefor),
the percentage rate to be used as a multiplier in determining the Base Rent for
the Expansion Space shall be the average current market rate of three (3)
institutional lenders (not affiliated with the Landlord), including any coverage
ratio required, for construction loans and permanent loans. The annual Base Rent
applicable to such Expansion Space shall be escalated each year at the same rate
as is provided in Sections 3(a) and 25 of this Lease for annual escalations of
the annual Base Rent with respect to the original Property. For the purpose of
such rental escalations under this Section 33, the first lease year shall be the
twelve (12) month period immediately following the date when Tenant's obligation
to commence paying rent on the Expansion Space occurred and the escalations
shall occur at each anniversary of such first lease year.
(e) If Tenant notifies Landlord to commence construction of the Expansion
Space after receiving the cost estimate based upon the final working drawings
and specifications, the parties shall promptly enter into an amendment of this
Lease incorporating the addition of the Expansion Space, the term with respect
thereto, and the formula for the additional rent payable for the Expansion
Space, and the commencement date for payment of such rent, as well as any other
relevant provisions.
(f) The term with respect to the Expansion Space shall coincide with the
remainder of the initial term of this Lease, and any extension options
applicable to the original Property (and any prior Expansion Space previously
added thereto) shall also be applicable to the Expansion Space, to the same
extent as through the Expansion Space was originally included as
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a part of the Property. Notwithstanding anything contained herein to the
contrary, if the Expansion Option is exercised by Tenant, during the initial
term or the first or second renewal term, then in such event, upon commencement
of the term with respect to the Expansion Space, Tenant shall be deemed to have
automatically exercised such renewal option(s) as shall be necessary to cause
the then remaining term of this Lease to be not less than six (6) years.
(g) If Tenant gives Landlord the Expansion Notice and thereafter elects
not to proceed with construction of the Expansion Space, Tenant shall reimburse
to Landlord all reasonable costs incurred by Landlord for design and
preparation of drawings and bids to enable Landlord to furnish to Tenant the
estimates of the cost of construction of the Expansion Space.
34. RIGHT OF FIRST OFFER/REFUSAL. During the initial term and first
renewal term of this Lease, Tenant shall have the first right of offer to
purchase the Property, upon the following terms and conditions: If Landlord
desires to sell the Property to any third party, Landlord shall, so long as
Tenant is not in default under this Lease beyond any cure period, first offer
to sell the Property to Tenant upon specified terms (hereinafter called the
"Offered Terms"). The Offered Terms shall specify the purchase price, financing
terms, if any, and length of time to close. Tenant shall have twenty (20) days
from receipt of such Offered Terms in which to notify Landlord in writing that
it elects to purchase the Property. If Tenant so notifies Landlord, such
notification shall constitute an acceptance of Landlord's offer, in which
event Tenant shall pay to Landlord a purchase price equal to ninety-four
percent (94%) of the purchase price specified in
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the Offered Terms, and closing shall occur not later than sixty (60) days after
the Offered Terms are submitted to Tenant, unless a longer period for closing is
specified in the Offered Terms. If Tenant does not elect to exercise its right
to purchase the Property, then Landlord shall have the right, for a period of
six (6) months from the date of Landlord's offer to sell the Property to Tenant
for the Offered Terms, to sell the Property to a third party at a price not
less than ninety-seven percent (97%) of the offering price contained in the
Offered Terms, and upon conditions (other than the purchase price) not less
favorable to Landlord than contained in the Offered Terms. If Landlord sells
the Property to a third party within said six (6) month period for ninety-seven
percent (97%) or more of the purchase price contained in the Offered Terms and
upon any other terms in the Offered Terms not less favorable to Landlord, then
Tenant's right of first offer shall terminate and such right of first offer
shall not be binding upon such purchaser or any subsequent owner of the
Property or Landlord's interest in this Lease. If Landlord does not sell the
Property under said terms within said six (6) month period, the Tenant's right
of first offer shall be reinstated to the same extent as though Landlord had
not previously offered to sell the Property to Tenant. If Tenant elects to
purchase the Property pursuant to the Offered Terms, then at closing, Landlord
shall convey to Tenant insurable fee simple title to the Property free and
clear of liens and encumbrances (unless the Offered Terms contain financing or
a sale subject to any existing indebtedness, in which case the mortgage or
proposed mortgage constituting part of the financing shall remain on the
Property), subject, however, to real estate taxes for the current year which
are a lien on the Property but are not yet due and payable, and easements,
covenants, conditions and restrictions of record as
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of the time the Offered Terms are submitted to Tenant. Notwithstanding anything
contained herein to the contrary, the right of first offer contained herein
shall not be binding upon a Mortgagee or holder of a deed of trust on the
Property in a foreclosure proceeding or in the event of a deed given in lieu
of foreclosure; provided, however, that the person or entity acquiring fee
ownership of the Property at a foreclosure sale or by a deed in lieu of
foreclosure, shall be obligated to recognize Tenant's right of first offer, if
such right of first offer had not, as of the time of acquisition of title,
previously terminated by reason of the Property having been sold during the six
(6) month period after tenant failed to exercise its right to purchase the
Property pursuant to a right of first offer.
35. BOARD OF DIRECTOR APPROVAL. Notwithstanding anything contained in
this Lease to the contrary, in the event that the Board of Directors of Allegis
Corporation or the Chairman of the Board of Directors of Allegis Corporation
does not ratify and approve the execution of this Lease by Tenant, Tenant shall
have the right to terminate this Lease by notice to Landlord on or before May
31, 1988. If such notice of termination is given, this Lease shall become null
and void and neither party shall have
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any further rights or obligations hereunder. If the lease is not so terminated,
Landlord and Tenant shall, promptly after May 31, 1988, execute and deliver to
each other an instrument evidencing the fact that the Lease has been ratified
and approved, and has not been terminated.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and
year first above written.
COVIA PARTNERSHIP
By: [SIG]
-------------------------
Name: [SIG]
-----------------------
Title: President
----------------------
LINCLAY
BY JDF INVESTMENT CORPORATION, general partner
By: [SIG]
-------------------------
Name: [SIG]
-----------------------
Title: Vice President
----------------------
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EXHIBIT B
(A) At the time of executive of this Lease, the Total Assembly Costs have been
estimated to be $18,297,380.00 (the "Estimated Total Assembly Costs") based on
the following list of component costs:
1. Land Purchase Price $ 2,455,100.00
2. Guaranteed Maximum Price (subject $12,041,800.00
to adjustment as provided in
this Lease)
3. Development Costs $ 500,000.00
4. Architectural and Engineering Costs $ 618,000.00
5. Development Overhead and Fees $ 800,000.00
6. Broker Commissions $ 600,000.00
7. Legal, Points/Fees $ 275,000.00
8. Project Contingency $ 200,000.00
9. Construction Loan Interest $ 807,480.00
--------------
Estimated Total Assembly Costs $18,297,380.00
(B) Landlord and Tenant acknowledge and agree that:
(a) The component costs described in Section 1 above (Land Purchase Price),
Section 5 above (Development Overhead and Fees), and Section 6 above (Broker
Commissions) are fixed component costs (which have been negotiated as such)
which shall not be subject to credit offset of one component cost against
another.
(b) The component cost described in Section 2 above (Guaranteed Maximum
Price) is a fixed component cost which is subject to adjustment pursuant to the
provisions of Appendix A, and subject to Tenant audit, but is not subject to
credit offset of one component cost against another, except for the Project
Contingency.
(c) The component costs described in Section 3 above (Development Costs),
Section 4 above (Architectural and Engineering Costs), Section 7 above (Legal,
Points and Fees), and Section 9 above (Construction Loan Interest) are variable
component costs and subject to Tenant audit. Any credits in any one of said
component costs may be used to offset any coverages in the component cost
categories described in Sections 3, 4, 7 and 9.
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APPENDIX A
TO THAT CERTAIN LEASE AGREEMENT
DATED AUGUST 18, 1988 BETWEEN
LINCLAY, AS LANDLORD, AND COVIA PARTNERSHIP, AS TENANT
I. DESIGN
A. Landlord has submitted names and qualifications of potential
members of the development team for Tenant review and approval.
Development team members include architects, engineers and
general contractors. Tenant shall have final authority in
approval of all and any team members.
1. Tenant has reviewed the development team members
submitted by Landlord as noted hereinabove and the
following persons and entities shall be deemed to be
acceptable to and approved by Tenant as the development
team members for The Work:
Core and Shell Architect/ Daniel, Mann, Johnson & Mendenhall
Civil Engineer: ("DMJM")
Suite 500
910 Fifteenth Street
Denver, Colorado 80202
General Contractor: Turner Construction Company
Suite 715
1560 Broadway
Denver, Colorado 80202
Landlord's Construction James D. Vasbinder
Managers: Herbert E. Prince
Donald McKinney
Mechanical, Electrical, Swanson Rink
Plumbing Engineer: Suite 3800
1801 California
Denver, Colorado 80202
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Planner/Zoning THK Associates, Inc.
Consultant: 40 Inverness Drive East
Englewood, Colorado 80112
Tenant's Construction Edward Tamminga
Representatives: Harm Helm, or their alternates
designated in writing
Any persons or entities other than the above-named persons and entities
shall require the review and approval of Tenant as herein provided prior
to their utilization by Landlord, such approval not to be unreasonably
withheld or delayed.
B. Landlord shall develop project design in consultation with Tenant and in
accordance with the Design Criteria specified hereinbelow. Landlord
shall conduct timely and periodic meetings with various Tenant personnel
to determine acceptable project design.
C. Tenant shall assist Landlord and the members of the development team in
preparing, completing and obtaining approval of the schematic design,
design development and construction plans by providing sufficient
information and direction to enable the development team to prepare
complete plans and specifications in a timely manner for Tenant's review
and approval and submittal to the appropriate governmental agencies.
Tenant approvals for development of items described in Paragraphs C and
D shall be submitted to the Landlord as required in writing. All such
approvals shall be subject to the time constraints provided for in this
Appendix A and shall be jointly signed by both tenant construction
representatives.
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D. Landlord and development team members shall diligently pursue the
preparation of the schematic design, design development and construction
plans and specifications. Landlord shall submit each phase of the design
to Tenant for Tenant's review and approval based on the following
schedule:
1. Schematic Design Documents -- Tenant shall provide review
comments and approval or disapproval within ten (10) business
days from receipt of the submittal. Should the schematic design
documents not be approved, Tenant shall provide the reasons for
such disapproval in adequate detail to allow Landlord to prepare
revised schematic design documents.
Should the schematic design documents be disapproved by Tenant,
Landlord shall be responsible for revising the documents and
resubmitting the revised schematic design documents to Tenant
for review and approval with the same procedure as noted in
Paragraph I.D.1. above.
If Landlord does not receive such notice from Tenant within the
ten (10) business day approval period, then Landlord may
conclusively assume the schematic design documents are approved
and Landlord may commence the design development documents.
2. Design Development Documents -- Tenant shall provide review
comments and approval or disapproval within ten (10) business
days from receipt of the submittal. Should the design
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development documents not to be approved. Tenant shall provide the reasons
for such disapproval in adequate detail to allow Landlord to prepare
revised design development documents.
Should the design development documents be disapproved by Tenant, Landlord
shall be responsible for revising the documents and resubmitting the
revised design development documents to Tenant for review and approval with
the same procedure as noted in Paragraph I.D.2. above.
If Landlord does not receive such notice from Tenant within the ten (10)
business day approval period, then Landlord may conclusively assume the
schematic design documents are approved and Landlord may commence the
construction plans and specifications.
3. Construction Plans and Specifications - Tenant shall provide review
comments and approval or disapproval within fifteen (15) business days from
receipt of the submittal. Should the construction plans and specifications
not be approved. Tenant shall provide the reasons for such disapproval in
adequate detail to allow Landlord to prepare revised construction plans and
specifications.
Should the construction plans and specifications be disapproved by Tenant,
Landlord shall be responsible for revising the documents and resubmitting
the revised construction plans and
<PAGE> 61
specifications to Tenant for review and approval with the same procedures
as noted in Paragraph I.D.3 above.
If Landlord does not receive such notice from Tenant within the fifteen (15)
business day approval period, Landlord may conclusively assume the construction
plans and specifications are approved and Landlord may submit same to the
appropriate governmental agencies for issuance of a building permit and
commence construction of The Work (as hereinafter defined).
E. Landlord's Construction Manager and Tenant's Construction
Representatives shall have the following respective responsibilities.
1. Landlord's Construction Manager shall have the authority to control
the design and construction process and approve the design and changes in the
design and construction of the project. Such representative shall be generally
available when needed to provide input and/or direction as required to maintain
the design and construction schedule. In all cases, the signature of any one of
Landlord's Construction Managers shall be final and binding upon Landlord with
respect to the authority herein granted him.
2. Tenant's Construction Representatives shall have the authority to
provide the programs required and review and approve the design and changes in
the design of the project. Such
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representatives shall be generally available when needed to
provide input and/or direction as required to maintain the design
schedule. In all cases, their signatures shall be final and
binding upon Tenant with respect to the authority herein granted
them.
II. CONSTRUCTION
A. Landlord shall construct the building and Appurtenances upon the Land
in accordance with:
(i) Design criteria dated as revised January 14, 1988 and with pages
15 and 24 revised January 19, 1988, and pages 16, 23 and 24 revised
January 27, 1988 prepared by Swanson Rink Consulting Engineers.
(ii) Schematic Design dated January 26, 1988 and with pages 24
through 35 revised January 29, 1988 prepared by Swanson Rink
Consulting Engineers.
(iii) Final Development Plan documents dated February 15, 1988
prepared by THK Associates, Inc.
(iv) First Floor Schematic Plan and Second Floor Schematic Plan, both
dated January 27, 1988 prepared by DMJM.
(v) Exterior Wall Section, dated January 12, 1988 prepared by DMJM,
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referenced in Items (i), (ii), (iii) and (iv) of this Section II.A.
which are made a part hereto by this reference (the "Design
Criteria"),
The Building and Appurtenances, the improvements on the Land and the Design
Criteria are collectively defined as the Work ("The Work").
Landlord shall prepare complete construction documents in consultation with
Tenant pursuant to Paragraph I hereinabove. Such consultation shall be
accomplished as follows:
1. During the design phases, Landlord and the development team shall
meet with Tenant as often as required to provide information to
each party as necessary for the continued preparation of the
design documents. Such periodic meetings shall take place at the
office of Landlord or the office of Architect as deemed
appropriate by Landlord. Either Landlord or Tenant may request
such meetings to take place upon verbal request to the other
party with the meetings scheduled for a mutually-agreed-upon day
and time as soon as reasonably practicable after request for such
meeting(s).
2. Following approval by Tenant of construction plans and
specifications, Landlord shall cause such work to be
competitively bid in accordance with paragraph (a) below or, with
the prior written approval of Tenant, priced in accordance with
paragraph (b) below.
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(a) Category A:
(i) Landlord expressly agrees that unless waived by Tenant
in writing, all work costing more than Ten Thousand Dollars
($10,000.00) to be performed hereunder (including work to be
performed by Landlord's own personnel) shall be
competitively bid by a minimum of three (3) competent and
responsible subcontractors. Landlord shall submit a list of
bidders in the following trades to Tenant for Tenant's
review and approval at least ten (10) days prior to such
bids being solicited: (i) Concrete; (ii) Structural; (iii)
Glass and Glazing; (iv) Roofing; (v) Mechanical; (vi)
Electrical: (vii) Plumbing: and (viii) Fire protection.
Tenant shall provide approval or disapproval of the bidders'
list for the above-referenced trades within two (2) business
days from receipt of the bidders' list from Landlord.
Failure by Tenant to respond in writing within the specified
two (2) business days of receipt of the bidders' list shall
constitute Tenant's approval, and Landlord may then utilize
the approved bidders' list for solicitation of bids for the
appropriate items of work.
(ii) Upon completion of competitive bidding, the Landlord
will notify Tenant at least three (3) business days in
advance of the date and place where the bids will
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be opened by Landlord or the General Contractor, and Tenant
shall have the right to have a representative present when
the bids are opened. Landlord will review the bids for
accuracy and completeness along with the ability of the
subcontractor or equipment vendor to perform the work or
provide the equipment in the time specified.
(iii) For each subcontract or major equipment purchase, the
Landlord will submit to Tenant, on a mutually acceptable
form, the results of the bidding analysis on a comparative
basis together with a recommendation for award.
(iv) Tenant shall have two (2) business days after receipt
of the bid tabulation and recommendation for award to
approve or reject Landlord's recommendations. Failure by
Tenant to respond within the specified two (2) business days
of receipt of Landlord's recommendations shall constitute
Tenant's approval of the recommendation, and Landlord may
then award the bid to the recommended bidder and the General
Contractor may subcontract with the recommended bidder to
perform the appropriate items of work. If Tenant rejects
Landlord's recommendations of award, the parties shall meet
and agree to either accept another bidder or rebid the work.
Except where otherwise approved by Tenant in writing, the
lowest qualified and
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responsive bidder shall be awarded the particular
subcontract by Landlord in each instance.
(b) Category B:
If Landlord reasonably determines that certain work activities
are encountered which cannot be competitively bid in accordance
with the procedure described in Category A hereinabove due to
schedule constraints, unknown scope, Landlord or Tenant interface
constraints, public safety, lack of qualified bidders or other
special conditions agreed to by Tenant ("Non-biddable Work"),
Landlord may elect, at its option, after notice to Tenant, to
accomplish said work activities in the following manner:
(i) Tenant shall approve the maximum cost for the
Non-biddable Work, such approval not to be unreasonably
withheld or delayed, and shall be deemed approved if
Tenant does not notify Landlord of disapproval within
five (5) business days after submittal to Tenant,
together with a detailed explanation of the reason for
disapproval. The subcontract(s) for Non-biddable Work
will be negotiated by Landlord as described on a
particular bid package or Change Item Request as agreed
to by the Tenant. Landlord will require that each
subcontractor furnishing a proposal for a
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subcontract for such Non-biddable Work shall specify in
its proposal the cost for the labor and materials to be
furnished under such subcontract, excluding overhead,
profit or fee to the subcontractor (such costs
excluding overhead, profit or fee being hereinafter
called the "Subcontract Cost"). The amount payable to
such subcontractor (hereinafter called the
"Non-biddable Subcontract Price") for such labor and/or
materials shall not exceed 115% of the Subcontract
Cost. The General Contractor shall be entitled to its
3% General Contractor's fee pursuant to Section F,
Paragraph 24 on the Non-biddable Subcontract Price. The
Landlord shall also be entitled to add a fixed fee of
5% to each Non-biddable Subcontract Price for the
additional effort required by Landlord to undertake and
complete this work as a subcontract item, as said cost
is provided by the General Contractor, subcontractors
or suppliers, as the case may be. Landlord shall
require the General Contractor to insert (or if
Landlord contracts directly, Landlord shall insert) in
each contract between the General Contractor (or
Landlord, as the case may be) and a subcontractor
supplying labor or materials comprising Non-biddable
Work, a provision requiring such subcontractor to
permit Tenant the right to examine and audit the books
and records of
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such subcontractor with respect to such Non-biddable
Work to the same extent as Tenant has the right
hereunder to examine and audit the books and records of
the General Contractor with respect to The Work.
(ii) The Non-biddable Subcontract Price, plus Landlord's fee
of 5% thereof (hereinafter called the "Non-biddable
Price") shall in no event exceed the maximum cost for
Non-biddable Work as approved by Tenant pursuant to
Section II.A2(b)(i) of this Appendix A.
(iii) If the Non-biddable Price of the Non-biddable Work
should be less than the approved maximum cost thereof,
the difference shall be applied as a credit to reduce
the Actual Construction Cost. In the event that the
Non-biddable Price of the Non-biddable Work should
exceed the approved maximum cost of the Non-biddable
Work, Tenant shall in no event be obligated to pay such
excess to Landlord,
(iv) After the completion of the Non-biddable Work and after
the determination of the Non-biddable Price in
accordance with paragraphs (ii) and (iii) above, the
Non-biddable Price may then be added to the
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cost of Category A subcontract work in order to
determine the Actual Construction Cost as provided in
Section II.F. of this Appendix A.
B. Separate Contracts and Assignments
1. Tenant reserves the right to let other contracts in connection with
The Work. If, in the opinion of the Landlord, the separate work will
delay completion of The Work, the Landlord and Tenant shall agree on a
reasonably acceptable extension of time to complete The Work. If the
parties are unable to agree upon the length of such extension, the
Core and Shell Architect shall make such determination within five (5)
business days, which determination shall be binding upon the parties.
After such determination is made, Tenant shall have the option to
either proceed with such assignment or to withdraw such assignment. If
Tenant fails to notify Landlord within five (5) business days (after
the Architect's determination) of its election to proceed with the
assignment, Tenant shall be deemed to have elected to withdraw such
assignment. Tenant understands and agrees that such extension of time
shall apply to the Commencement Date and such extension of time and
additional costs will also affect the construction loan interest
category (Section 3(a)(i)(9)) of the Lease, so as to entitle Landlord
to an increase in the guaranteed Total Assembly Costs, to the extent
applicable. Tenant shall ensure that such other contracts and the work
performed thereunder do
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<PAGE> 70
not unreasonably delay or interfere with Landlord's performance of The
Work. Landlord shall coordinate The Work with that of such other
contractors retained by Tenant. Subject to the foregoing, Landlord
shall not unreasonably interfere with the work of any such other
contractors and their workmen but shall afford them reasonable
opportunity for the introduction and storage of their materials and
execution of their work in order to comply with the design and
construction schedule to be developed and updated by Landlord and
approved by Tenant pursuant to Section II of this Appendix A.
All work performed by Tenant's contractors under this Section II.B. of
this Appendix A shall be in strict compliance with Paragraph 27 of the
Lease. In addition, Tenant's entry upon the Property prior to the
Commencement Date shall be at Tenant's sole risk; and (i) Tenant or
Tenant's contractors shall execute and furnish indemnity and general
liability insurance agreements in favor of Landlord and Landlord's
General Contractor in form and substance satisfactory to Landlord and
Tenant prior to commencing any work, such insurance naming Landlord
and Landlord's General Contractor as additional insureds; (ii) Tenant
shall pay any utility charges applicable to Tenant's contractors work
allocated to Tenant by Landlord.
2. Tenant shall have the right at its election (subject, however, to
Landlord's prior approval, such approval not to be
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unreasonably withheld or delayed) to assign, to Landlord any such contracts as
described above, or portions thereof, in connection with the work. Following
each such assignment, Landlord shall, as part of its obligations to Tenant,
hereunder assume all obligations of Tenant as stipulated in the assigned
contracts or the assigned portions thereof and the status of such contractors or
suppliers shall be that of subcontractors to Landlord, or Landlord's General
Contractor as the case may be, under this Lease. Following any such assignment
to Landlord, the assigned subcontractor or supplier shall thereafter submit its
invoices to Landlord for payment and the Guaranteed Maximum Price of The Work
defined in Section II.E. of this Appendix A, shall be adjusted by the remaining
amount due such subcontractor or supplier plus the fixed fee of three percent
(3.0%) of the remaining balance, plus a mutually agreed upon amount of general
conditions as required by the assigned work. If the parties are unable to reach
an agreement on the amount, the Core and Shell Architect shall make such
determination, which determination shall be binding upon the parties.
3. Tenant will ensure, prior to the assignment of separate contracts to
Landlord, that the contractor whose contracts are being assigned meets the
same contract requirements under which the General Contractor is
performing its services, including but not necessarily limited to
warranty, performance and payment bonds and construction schedule. Upon
notice by Tenant
<PAGE> 72
to Landlord of its intent to assign a contract, Landlord will advise Tenant of
any deficiencies in the assigned contract or any knowledge of objection to the
contractors that could adversely affect its performance under this Lease. Such
deficiencies will be addressed and corrected by Tenant to the mutual, reasonable
satisfaction of Landlord prior to Landlord accepting the contracts or portions
thereof in connection with the work.
C. Change Orders
1. Tenant shall have the right, at any time during the course of the design
or construction of The Work, to require Landlord to increase or decrease
the scope of The Work authorized for construction. Such increases or
decreases shall be accomplished through the use of Change Orders
(utilizing AIA Document G701) which shall adjust the Guaranteed Maximum
Price of The Work defined in Section II.E. hereof as appropriate, revise
the Completion Date, if necessary, of The Work as defined in Paragraph 2
of the Lease to a date satisfactory to Landlord and Tenant, taking into
account the magnitude of the change in The Work, and adjust the maximum
Total Assembly Costs guaranteed by Landlord to the extent of additional
construction loan interest incurred by reason of such Change Orders.
2. All Change Orders will be executed in accordance with the following
procedures:
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(a) Tenant will issue Landlord a Change Item Request on a form agreeable to
both parties which will describe the change and reference appropriate
drawings or specifications to adequately define the Change Item Request.
(b) Landlord will respond separately to each Change Item Request on an agreed
upon form with detailed back-up from Landlord, Landlord's General
Contractor and Subcontractors as applicable to describe and define the
costs to the understanding of Tenant. With respect to labor and/or
materials to be furnished under a Change Order, subcontractors furnishing
proposals to supply such labor and/or materials shall furnish the
Subcontract Cost" (as defined in Section II.A.2(b)(i) pertaining to
Non-biddable Work). The amount payable to such subcontractor for such
labor and/or materials for a Change Order shall not exceed 115% of the
Subcontract Cost therefor, and the General Contractor shall be entitled to
add its 3% General Contractor's fee to the amount payable to such
subcontractor.
(c) After Tenant's review and acceptance of the costs for the Change Item
Request, Landlord will draft a Change Order (utilizing AIA Document G701)
for execution by Tenant and Landlord.
<PAGE> 74
3. For work deleted from The Work by an authorized Change Order, no
overhead and profit shall be due for work deleted from The Work.
D. Warranties/Operating and Maintenance Manuals
1. Landlord shall verify in writing from the General Contractor that
all work incorporated into The Work is covered by a minimum of one
(1) year warranty from the Lease Commencement Date. Any equipment
provided and installed by Landlord on behalf of Tenant shall be
covered by warranties for a period equal to the normal standards of
the industry. Tenant reserves the right to examine and approve
actual warranties, such approval not to be unreasonably withheld so
long as such warranties are within applicable industry standards and
in compliance with the requirements of this Section D.1.
2. Landlord shall verify in writing from the General Contractor that
Operating and Maintenance (O&M) Manuals will be submitted to
Landlord on or before the Commencement Date as defined in Paragraph
2 of the Lease, O&M Manuals shall be delivered to Landlord in an
organized format reasonably agreeable to Tenant. Submittals to
include, but not be limited to, product data, final shop drawings,
flow diagrams, operating instructions, parts listings and other data
required to operate or maintain the specific system as requested by
Tenant. Provide submittals for, but not limited to, the following:
Heating, ventilating
<PAGE> 75
and air conditioning equipment and systems; plumbing equipment and
systems; electrical distribution systems; communications systems;
sprinkler, fire alarm and detection systems. Tenant reserves the
right to examine and approve actual submittals, such approval not to
be unreasonably withheld so long as such O&M Manuals are within
applicable industry standards and are in compliance with the
requirements of this Section D.2.
E. Guaranteed Maximum Price of The Work
1. Landlord hereby agrees to perform The Work, as defined in this
Appendix A to the Lease, for a Guaranteed Maximum Price (sometimes
hereinafter referred to as the "GMP"), which GMP will not exceed the
sum of Twelve Million Forty-One Thousand Eight Hundred Dollars
($12,041,800.00).
(a) It is mutually agreed and understood that the GMP as stated
above is to cover the construction of The Work based upon the
Design Criteria as specified in Section II.A.
(b) Landlord is aware and acknowledges that the Design Criteria
does not necessarily show all the work involved or required to
complete the building and The Appurtenances and that Landlord
will be required to perform all work described or reasonably
inferred by the Design Criteria as well as provide and install
the materials to be used in
<PAGE> 76
construction and specifications for building systems or
equipment and to provide the improvements as shown on the
construction plans and specifications for The Work per Section
I.D. of this Appendix A.
F. Guaranteed Maximum Price Determination
1. Upon satisfactory completion of The Work under this Appendix A,
Tenant shall reimburse Landlord through lease payments as stipulated
in Paragraph 3 of the Lease for the Adjusted Guaranteed Maximum
Price, which shall be a component of the Total Assembly Cost for the
Building and The Appurtenances for the purpose of calculating the
annual Base Rent under Paragraph 3 of the Lease, The Adjusted
Guaranteed Maximum Price is defined as the total of (i) the "Actual
Construction Cost" as hereinafter defined in this Section II.F. of
Appendix A; and (ii) the General Contractor's "Fixed Fee" as
determined in accordance with Paragraph 4 of this Section II.F of
Appendix A.
2. As used herein, the "Actual Construction Cost" of The Work shall be
the total of all work comprised of (a) the subcontract work awarded
in accordance with Section II.A. Paragraph 2 of this Appendix A; (b)
Landlord's or Landlord's General Contractor's "Direct Job Costs" as
hereinafter defined in Paragraph 3 of this Section II.F.; (c)
assigned contracts (if any) pursuant to Section II.B. of this
Appendix A: and (d) Change Orders as described in Section II.C. of
this Appendix A.
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At the completion of The Work. the Actual Construction Cost shall be
verified by audit pursuant to Section II.I. The Actual Construction
Cost shall NOT include the following, and these items are
specifically included as a part of General Contractor's fee:
(a) Salaries of Landlord's or Landlord's General Contractor's
executive or corporate officers:
(b) Expenses incurred in conducting Landlord's or Landlord's
General Contractor's main or regularly established branch
offices, including services of the General Contractor's
estimating, purchasing, clerical and cost accounting
departments;
(c) Overhead and general expenses of Landlord's or Landlord's
General Contractor's main office; and
(d) Interest (1) charged by suppliers of labor or materials
comprising The Work, or (ii) on capital employed by the
General Contractor to acquire offices or equipment in
connection with the furnishing of The Work.
3. As used herein. Landlord's or Landlord's General Contractor's
"Direct Job Costs" shall mean the actual costs (exclusive of all
work contracted in accordance with Section II.A) incurred
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by Landlord or Landlord's General Contractor in the construction of
The Work including, but not limited to:
(a) Salaries or wages of labor in the employ of Landlord or
Landlord's General Contractor at the job site, including
services of job supervision, field engineers, foremen,
timekeepers, clerks, secretary, purchasing agent, expediters,
watchmen, truck drivers, mechanics, laborers, project
executives, project superintendents, project accountants,
assistants, estimators, and others necessary for the proper
conduct of The Work for the time employed on The Work,
together with any Social Security and Unemployment Taxes,
State and Federal, as well as health, welfare and pension
costs in connection with such labor. Wage rates for the above
shall be within generally-accepted limits for such services.
(b) The cost of all temporary and expendable materials, supplies
and services not readily assigned to a subcontractor.
(c) The cost of labor and transportation in connection with
boarding and unloading of materials, supplies, equipment and
tools at the job site in support of work being performed by
Landlord or Landlord's General Contractor.
<PAGE> 79
(d) Rental charges for office trailers, special machinery and
equipment (exclusive of small tools) where rented from others
for such time as they are in actual use at The Work and when
such special equipment is required or agreed to.
(e) The cost of all building permits, inspection fees, bonds and
insurance required under this Appendix A or the contract
between Landlord and its General Contractor or subcontractors.
(f) Laboratory tests of material, utility monitoring and other
miscellaneous testing services as may be required by the
Architect, Tenant or appropriate governmental agencies having
jurisdiction over The Work.
(g) The cost of telephone and telegraph service, office supplies,
stationery and postage used at the job site office.
Landlord's and Landlord's General Contractor's Direct Job Costs, as
identified in the above-listed categories (a) through (g) of this
Section II.F.3. will be established by Landlord at the outset of the
project. At the conclusion of The Work, Tenant will audit, pursuant
to Section II.H. of this Appendix A, these Direct Job Costs and any
funds remaining in the aggregate total shall be credited to the
Guaranteed Maximum Price.
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Uncommitted funds remaining in the GMP after the awarding of the
subcontracts (hereinafter referred to as the "Bidding Reserve"),
shall be accounted for under this Section II.F. The Bidding Reserve
shall be available to assign to various Direct Cost categories or
other subcontracts as the need arises with the prior notification
and approval of Tenant, which approval shall not be unreasonably
withheld. Any funds remaining in the Bidding Reserve at the
conclusion of The Work shall be credited to the Guaranteed Maximum
Price.
4. As used herein, Landlord's General Contractor's "Fixed Fee" which
includes all overhead, costs to provide warranty coverage as
specified in this Appendix A, profit, off-the-job costs including
the cost to complete The Work shall be calculated on the basis of
three percent (3.0%) of the Actual Construction Cost, as defined in
this Section II.F. which, when added together with said Actual
Construction Cost, shall not exceed the Guaranteed Maximum Price as
specified in Section II.E. of this Appendix A.
5. The Fixed Fee of three percent (3.0%) shall also be applied against
the cost of all equipment or services which way be negotiated and
contracted for by Tenant and later assigned to Landlord pursuant to
Section II Paragraph 2 of this Appendix A. In the event additional
general conditions costs are incurred due to the assignment of these
contracts, a reasonable and mutually acceptable adjustment in the
Guaranteed Maximum
<PAGE> 81
Price as specified in Section II.E shall be made at the time of the
assignment.
6. After completion of The Work, the Adjusted Guaranteed Maximum Price of
The Work shall be determined by Landlord and submitted to Tenant for
verification by audit pursuant to Section II.H. of this Appendix A.
After verification is complete, the Adjusted Guaranteed Maximum Price
will be compared to the Guaranteed Maximum Price specified in Section
II.E. of this Appendix A.
(a) If the Adjusted Guaranteed Maximum Price is less than the
Guaranteed Maximum Price, the amount of the difference shall be
applied as a credit against the Total Assembly Costs. Should
there be an overall reduction in the Total Assembly Costs, an
appropriate reduction shall be made in the lease rate as
identified pursuant to Paragraph 3 of the Lease.
(b) In the event that the Adjusted Guaranteed Maximum Price of The
Work should exceed the Guaranteed Maximum Price, Tenant shall in
no event be obligated to pay such excess to Landlord or pay
additional rent to Landlord to compensate for this excess,
except to the extent that such Adjusted Guaranteed Maximum Price
exceeds the Guaranteed Maximum Price by reason of Change Orders,
delays caused by unauthorized access of Tenant, its agents,
contractors or
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employees, and assigned contracts pursuant to Section II.B., or
any of the foregoing.
G. EXCESS TOTAL ASSEMBLY COSTS
If, as a result of any assigned contract(s) pursuant to Section II.B.,
any Change Order(s) pursuant to Section II.C., and interest on
Landlord's construction loan attributable to such assigned contracts or
Change Orders, the approved Total Assembly Cost exceeds $18,500,000.00
(such amount(s) in excess of $18,500,000.00 being hereinafter called
"Excess Amount"), then Landlord shall furnish to Tenant at the time
Tenant proposed such assigned contract or Change Order a written
proposal (the "Proposal") to finance such Excess Amount on the basis of
fully amortizing such Excess Amount (together with (a) interest thereon
at the best rate of interest reasonably obtainable by Landlord, and (b)
all loan fees, points and other customary costs of obtaining such
financing) in equal monthly installments over a fifteen (15) year
period. Tenant shall have five (5) business days after receipt of said
Proposal to accept or reject same. If Tenant fails to notify Landlord
within said five (5) day period of its acceptance or rejection of the
Proposal, Tenant shall be deemed to have rejected the Proposal. If
Tenant rejects the Proposal, either expressly or by failure to respond,
Tenant shall pay the Excess Amount to Landlord in a lump sum at the
Commencement Date. If Tenant accepts the Proposal, Tenant shall
thereupon promptly execute such documents or instruments as may be
required by Landlord to establish and evidence Tenant's obligation
26
<PAGE> 83
to pay the Excess Amount (together with the applicable interest thereon,
loan fees, points and other customary costs of obtaining the financing)
in equal monthly installments ever the fifteen (15) year period
commencing upon the Commencement Date, as above provided.
Notwithstanding anything contained herein to the contrary, Landlord
shall not be required to finance any Excess Amount over Two Million
Dollars ($2,000,000.00), and if the Excess Amount exceeds Two Million
Dollars ($2,000.000.00), Tenant shall pay to Landlord at the
Commencement Date, any such amount in excess of Two Million Dollars
($2,000,000,00).
H. PROJECT RECORDS AND FINANCIAL ACCOUNTING
1. Landlord and Landlord's General Contractor will maintain and
keep current a computerized record and account of the contract
status in a form suitable to Tenant regarding such items as:
(a) Schedule of contract values
(b) Pending change item requests
(c) Finalized change orders
(d) Allowance expenditures
(e) Non-owner subcontract adjustments
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(f) Category B Items (Non-biddable Work) as defined in
Section II, Paragraph 2(b)
(g) Others as may be deemed appropriate by Tenant and/or
Landlord.
I. AUDIT PROCEDURE
Landlord and Landlord's General Contractor shall check and record all
direct job costs for material and labor entering into The Work and shall
keep such full and detailed accounts as may be necessary for proper
financial management under this Appendix A and the Lease, Tenant, its
representatives, auditors, timekeepers and clerks shall be afforded
access to The Work and to all of Landlord's and Landlord's General
Contractor's books, records, correspondence, instructions, drawings,
receipts, vouchers, memoranda, etc. relating to The Work during normal
working hours, and Landlord shall preserve all such records for a period
of six (6) months after the Commencement Date of the Lease at Landlord's
offices as specified in Paragraph 18 of the Lease. If Tenant does not
notify Landlord within six (6) months after the Commencement Date that
Tenant disputes any of the components of the Total Assembly Costs, the
Total Assembly Costs as submitted by Landlord to Tenant shall be
conclusively deemed to be correct.
28
<PAGE> 85
J. PROJECT SCHEDULE
Landlord shall provide to Tenant for written approval, which approval
shall not be unreasonably withheld, an itemized, comprehensive bar chart
project schedule commencing with the first Schematic Design Phase
meeting and updated at least once a month thereafter through the
completion of The Work as defined in Paragraph 2 of the Lease.
K. DELAYS AND EXTENSIONS OF TIME
All time limits stated in this Appendix A and the Lease are of the
essence. Should the completion of The Work be delayed beyond the time
specified in Paragraph 2 of the Lease, Tenant may, but shall not be
required to, grant Landlord additional time for completion thereof
provided, however, that if the failure of Landlord to complete The Work
within the time specified arises from unavoidable delays (as herein
defined), Tenant shall, upon request by Landlord, grant such additional
time for completion as is reasonable and proper after consideration of
the extent of the unavoidable delay. Unavoidable delays shall mean
delays which result from causes beyond Landlord's control and which he
could not have provided against by the exercise of reasonable foresight,
care, prudence or diligence; delays which result from orders altering or
increasing the amount of work or quantity of materials; and delays
resulting from damage to landlord's work by other contractors or because
of improper work by
29
<PAGE> 86
other contractors. Without limiting the foregoing, delays on account of
loss of time resulting from the necessity of submitting specifications,
plans, drawings or samples for approval and from making surveys,
measurements and inspections, and such interruptions as may occur on
account of reasonable interference by other contractors employed by
Tenant but which do not necessarily prevent the completion of The Work
within the time specified, are not unavoidable delays, and Tenant shall
not be under any obligation to grant an extension of time by reason
thereof.
L. CHANGES TO THE CONSTRUCTION SCHEDULE
1. As may be requested by Landlord: Extensions of time requested by
Landlord will be considered by Tenant only within the
provisions of Section II.K. of this Appendix A.
2. As may be necessitated by Change Orders:
(a) It is the intent of this Appendix A and the Lease that
the necessity for changes or additions to The Work imply
no desire on the part of Tenant to extend the completion
time for the Work. Landlord will price all Change Item
Requests on the basis of keeping the Construction
Schedule reasonably intact if practicable, including
such premium time, phase or shift work as necessary to
do so, and Landlord will notify Tenant prior to
execution of a Change Order if Landlord reasonably
determine that such Change
30
<PAGE> 87
Order will delay the construction schedule, such notice
to specify the amount of delay anticipated by Landlord.
(b) In the event extensions of time become (in Landlord's
opinion) unavoidable due to substantial changes or
additions to the work by Tenant, Landlord shall so state
on its response to the Tenant's Change Item Request.
(c) No extension of time is to be considered by Landlord as
implied or granted for work changed or added to The Work
as a result of a Change Order unless it is so stated on
the fully-executed Change Order.
M. ARBITRATION
1. It is hereby acknowledged that the Design Criteria as defined in
Section II.A. shall be the basis of defining the scope of The
Work. Prior to completion and approval of the final plans and
specifications, Tenant shall make the interpretation of the
Design Criteria with regard to work described or implied by
these documents as well as materials and systems intended to be
incorporated into The Work.
2. In the event Landlord is in disagreement with an interpretation
made by Tenant under Paragraph I of this Section M relating to
the interpretation of the Design Criteria with regard to work
described or performed or implied under these documents, or as
to materials and systems intended to be or actually
31
<PAGE> 88
incorporated into The Work. Landlord may evoke an appeal
process in conformance with the conditions as herein set forth
solely to resolve this issue. Issues relating to cost of work
are not to be subject to the aforementioned appeal process.
(a) Landlord may proceed to give notice to Tenant of its
intent to resolve a disputed issue by arbitration in
accordance with the provisions stated hereinafter:
(i) All disputes, claims or questions specifically
made the subject of arbitration by the terms of
this Appendix A shall be submitted to
arbitration and determined as follows: The party
desiring to arbitrate any such matter shall
give the other party written notice so stating
and specifying the specific matter or matters to
be arbitrated and the name and address of the
arbitrator selected by it. Each party hereto
mutually agrees that the arbitrators so selected
hereunder shall be located in the Denver,
Colorado metropolitan area. Within five (5) days
after receipt of such notice, the other party
shall select its arbitrator and give written
notice specifying the name and address of the
arbitrator of its selection to the party sending
the first notice. If, however, the other party
fails to select its arbitrator and give such
notice within said five (5) day period, the
32
<PAGE> 89
arbitrator selected by the party giving the
first above-mentioned notice shall have full
power to decide as sole arbitrator the matter or
matters specified in said notice. If the other
party selects its arbitrator and gives its
notice as herein required, the two (2)
arbitrators so selected shall select a third
arbitrator within five (5) days after the
selection of the second arbitrator. In the event
the two (2) arbitrators selected by the parties
fail to select a third arbitrator within said
five (5) day period, then the arbitrator of
either party may apply to a judge of the United
States District Court for the District and
Division embracing the site of the work,
requesting the appointment of the third
impartial arbitrator, it being hereby agreed
that such judge shall have jurisdiction to make
such appointment. The arbitrators shall reduce
their award, the facts found and the conclusions
made, in writing, and shall sign same and
deliver one (1) signed copy to each of the
parties, and from the time of such delivery,
said award shall be effective. A majority
finding shall govern if the arbitrators'
determination is not unanimous. Tenant and
Landlord shall each pay the fees and expenses of
their own arbitrator and one-half of the fees
and expenses of the third arbitrator
33
<PAGE> 90
Tenant and Landlord shall each pay their own
expenses, if any, irrespective of the outcome.
Landlord's share of costs for arbitration are
not to be included within the GMP, nor will
Tenant be obligated to reimburse Landlord for
these costs.
34
<PAGE> 1
(a) Distributor shall first receive such
level of revenue as it would have received had the Product
been a National Product;
(b) Galileo shall thereafter be entitled to
receive whichever is the lesser of (i) a sum equal to the Cost
to Galileo of processing transactions in the Galileo System
arising out of the provision of Distribution Services in
respect of the Product and (ii) the amount of revenue
remaining after the application of Clause (a); and
(c) any surplus revenue shall be apportioned
between Galileo and Distributor on a basis that is reasonable
taking into account the costs borne by Galileo and Distributor
respectively.
45. Marketing Efforts - National Subscribers:
A. Except as provided in Section 12, below, Distributor shall
be responsible for undertaking all marketing efforts directed at National
Subscribers in the Territory. Distributor will negotiate, hold, and administer
all Subscriber Agreements in the Territory (other than as provided in section 12
below), will be responsible for any financial assistance, and will collect and
retain all Subscriber revenues, lease fees, and all other fees from National
Subscribers. For any given Subscriber Agreement, Galileo and Distributor may
agree to alternative arrangements regarding financial assistance. The terms and
conditions of the contracts that Distributor proposes to enter into with
Subscribers shall be consistent with the provisions of this Agreement. If
Galileo receives any approaches from any Subscribers in the Territory it shall
refer them promptly to Distributor.
B. Distributor shall use its best efforts to market Galileo's
Distribution Services to National Subscribers in the Territory. Such efforts
shall include, but not be limited to, the establishment of regular contact with
all National Subscribers in the Territory with substantial travel industry sales
and the placing, where appropriate, of personal and telephone sales calls, and
the undertaking of point of sale and media advertising, promotions and other
sales efforts. Distributor shall not undertake any marketing activities in
respect of Galileo's Distribution Services that Galileo determines in its
reasonable discretion to be contrary to its marketing policies and objectives
and notifies Distributor to that effect.
C. Distributor shall conduct the promotion and marketing of
Galileo's Distribution Services in the Territory with all due care and diligence
and shall use its best efforts to cultivate and maintain good relations with
customers and prospective customers in the Territory in accordance with sound
commercial principles.
12
<PAGE> 2
correction and/or performance enhancement releases of the Programs not
separately marketed by D&B. Support entitles Customer's employees to telephone
D&B's Helpline and to have access to D&B's electronic support facilities.
Thereafter, on the anniversary of each Supplement, Customer may purchase
Maintenance and support so long as D&B makes Maintenance and Support for the
Programs licensed on that Supplement available to its customers in general. The
license granted to Customer under Section 1 shall extend to each update,
correction and enhancement release received from D&B.
2.2. Upon receipt from Customer of notice of a nonconformance between the
Program and the Documentation, D&B shall use reasonable efforts to correct or
circumvent the problem. Any corrections to the Program will be made only to the
most current generally available release of the Program. After the introduction
of a new generally available release of a Program, D&B will support the then
current and the previously released version of such Program.
2.3. D&B shall have no obligation to Support or Maintain the Program for Use on
any computer system other than the Hardware and Operating System Software or in
the event Customer modifies the Program other than as permitted by this
Agreement. Only those versions of different cooperating Programs specified by
D&B will execute correctly together on a single CPU or in a network. D&B shall
use commercially reasonable efforts to modify any version of the Program to run
with new versions or releases of the Operating System Software or Hardware. If
Customer purchases Maintenance from D&B for any Programs for Use on specific
hardware or in a specific network, Customer must purchase Maintenance from D&B
for all functionally related Programs licensed from D&B for Use on such hardware
or network.
2.4. D&B shall deliver one copy of any D&B source code not delivered to Customer
for the Program to D&B's then current escrow agent. So long as Customer is
current on maintenance and is in compliance with the provisions of its
agreements with D&B, in the event D&B ceases to maintain the Program(s),
Customer shall have a right to obtain access to such escrowed source code from
the escrow agent.
3. CONFIDENTIALITY; PROPRIETARY RIGHTS.
3.1. Each party shall hold Confidential Information of the other in confidence.
"Confidential Information" includes without limitation the terms of this
Agreement, the Program(s) and all Documentation, and all methods or concepts
utilized therein, plus all information identified by the disclosing party as
proprietary or confidential. All Confidential Information shall remain the sole
property of the disclosing party. Upon execution of a non-disclosure agreement
satisfactory to D&B, third parties may have access to Confidential Information
solely for the purpose of providing services to Customer. Information will not
be considered to be Confidential Information if (i) available to the public
other than by a breach of this Agreement; (ii) rightfully received from a third
party not in breach of any obligation of confidentiality; (iii) independently
developed by a party without access to Confidential Information of the other;
(iv) known to the recipient at the time of disclosure; (v) produced in
compliance with applicable law or a court order, provided the other party is
given notice and opportunity to intervene; or (vi) it does not constitute a
trade secret and more than five (5) years have elapsed from the date of
disclosure.
Dun & Bradstreet Software
<PAGE> 3
3.2. All Programs and Documentation, and any modifications or copies thereof,
are proprietary and protected by copyright and/or trade secret law and no
ownership rights are transferred by this Agreement. All proprietary notices
incorporated in, marked on, or affixed to a Program or other Confidential
Information by D&B or its suppliers shall be duplicated by Customer on all
copies of all or any part of the Program and shall not be altered, removed or
obliterated. Customer shall not reverse reengineer, reverse assemble or reverse
compile any Program or part thereof. Customer may modify the Programs to the
extent and in the manner described in the Documentation for the Programs.
4. WARRANTY.
4.1. D&B warrants that each Program licensed to Customer will operate
substantially in conformance with the Documentation for such Program for a
period of one year from the date of shipment of such Program to Customer. D&B
warrants that the media on which the Program is delivered will be free of
defects in material and workmanship for a period of ninety (90) calendar days
following the date of shipment.
4.2. Customer's sole and exclusive remedies for breach of either of the
foregoing warranties shall be either replacement of the defective materials or a
refund of the license fee paid for the Program(s) licensed on a
Dun & Bradstreet Software
<PAGE> 4
ATTACHMENT A
ATTACHED TO AND MADE A PART OF the License Agreement between Dun & Bradstreet
Software Services, Inc. ("D&B") and Galileo International Partnership
("Customer") dated May 25, 1995.
A.1. The second sentence of Section 1.2 of the License Agreement is deleted
and replaced with the following:
The Program may also be transferred to computer hardware or used with
an operating system, other than the specified Hardware or Operating
System Software, subject to D&B's transfer policies and fees stated
herein. The fee for such transfer(s) shall be Five Thousand Dollars
($5,000.00) per transfer.
A.2. The first sentence of Section 2.2 of the License Agreement is deleted
and replaced with the following:
Subject to Section 4.1, upon receipt from Customer of notice of a
nonconformance between the Program and the Documentation, D&B shall use
reasonable efforts to correct or circumvent the problem.
A.3. The following is added to Section 2.3 of the License Agreement:
In the event Customer transfers the Program(s) to hardware and/or
operating system software that is then-supported by D&B, D&B shall
Support and Maintain such version of the Programs, so long as Customer
has paid the applicable support and maintenance fees. In the event
Customer doesn't purchase Maintenance from D&B for all functionally
related Programs licensed from D&B for Use on such hardware or network,
then D&B may, but shall not be obligated to, provide services to
Customer on a time and materials basis for those Programs which
Customer has not purchased Maintenance.
A.4. The second sentence of Section 2.4 of the License Agreement is deleted
and replaced with the following:
So long as Customer is current on maintenance and is in compliance with
the provisions of its agreements with D&B, in the event D&B ceases to
maintain the Program(s), Customer shall have the right to obtain a copy
of such escrowed source code at no additional cost to Customer from the
escrow agent. D&B's current escrow agent is Data Securities
International with offices located at 6165 Greenwich Drive, Suite 200,
San Diego, California 92122. D&B shall use commercially reasonable
efforts to notify Customer of (i) any change in the escrow agent, or
(ii) any material change to the terms and conditions of the existing
escrow agreement with Data Securities International; provided, however,
that no such change shall preclude Customer from obtaining a copy of
the escrowed source code at no additional cost to Customer.
A.5. Section 4.1 of the License Agreement is deleted in its entirety and
replaced with the following:
D&B warrants that each Program, including updates delivered to Customer
<PAGE> 5
within the Warranty Period, licensed to Customer will operate in
conformance with the Documentation for such Program for a period of one
(1) year from the earlier of (a) thirty (30) days from the date of
delivery of the Program, or (b) the completion of installation of the
Program. D&B warrants that the media on which the Program is delivered
will be free of defects in material and workmanship for a period of
ninety (90) calendar days following the date of shipment. D&B also
warrants that it has the right to license the Program(s) and any other
software covered by the supplement.
A.6. Section 4.2 of the License Agreement is deleted in its entirety and
replaced with the following:
Customer's remedies for breach of either of the foregoing warranties
shall be either replacement of the defective materials or a refund of
the license fee paid for the Program(s) licensed on a Supplement in
addition to any remedies provided by law. Such remedies are available
only if D&B is notified within the applicable Warranty Period and is
provided with ninety (90) days to cure such breach.
A.7. Section 5.1 of the License Agreement is deleted in its entirety and
replaced with the following:
D&B shall indemnify, defend, or at its option settle, any claim or suit
against Customer on the basis of infringement of any patent, trademark,
copyright or trade secret by the Program or Use thereof and pay any
judgement entered against Customer on such issue in any such
proceeding; provided, D&B has sole control of such defense and/or
settlement and Customer promptly notifies D&B and gives D&B all related
information known to Customer. If any part of the Program is, or may
become, the subject of any such proceeding, D&B may, and in the event
of any adjudication that any part of a Program does so infringe or if
the licensing or Use of the Program or any part thereof is enjoined,
D&B shall, at its expense and option, do one of the following things:
procure for Customer the right to Use the Program or the affected part
thereof; replace the Program or affected part thereof with other
programs of at least comparable functionality and quality; modify the
Program or affected part thereof to make it non-infringing; or if none
of the foregoing remedies are commercially reasonable, refund the
aggregate payments paid by Customer for the Program or the affected
part thereof, less reasonable amortization for Use. Notwithstanding the
foregoing, one hundred percent (100%) of the License Fee shall be
refunded to Customer in the event a refund is necessary pursuant to
this Section 5 during the period of two years following execution of
this Agreement. D&B shall have no obligations under this Section 5 with
respect to any claim to the extent it is based upon (i) the Use of any
version of the Program other than a current, unaltered release of the
Program, if such infringement would have been avoided by the Use of a
current, unaltered release; (ii) the combination, operation, or Use of
the Program with software or hardware other than as specified or
recommended by D&B or if certified by D&B for use with the Programs, if
such infringement would have been avoided in the absence of such
combination, operation or Use; or (iii) the Use of the Program on or in
connection with a computer system other than the Hardware and the
Operating Software or any other hardware or computer system to which
the
<PAGE> 6
Programs may be transferred consistent with D&B's transfer policies as
stated herein.
A.8. The first sentence of Section 6 of the License Agreement is deleted and
replaced with the following:
Except (i) as provided in Section 5, (ii) in the event of death or
personal injury, and (iii) in the event of damage to personal property,
the total liability, if any, of D&B, including but not limited to
liability arising out of, resulting from or in any way related to,
contract, tort, breach of warranty, infringement or otherwise, shall
not in any event exceed one hundred twenty-five percent (125%) of the
license fees paid by Customer with respect to all Programs. Except (i)
as a result of any judgment issued against Customer as a result of the
Programs infringing on the rights of any third party or, (ii) in the
event of a breach of Sections 1 or 3 of this Agreement by either party,
neither party shall be liable for loss of profits, or indirect,
special, incidental, or consequential damages.
A.9. Section 7.1 of the License Agreement is deleted in its entirety and
replaced with the following:
Neither this Agreement nor any license hereunder may be assigned
(whether by operation of law or otherwise) by Customer without D&B's
prior written consent which shall not be unreasonably withheld or
delayed.
A.10. Section 7.2 of the License Agreement is deleted and replaced with the
following:
From time to time, but no more often than once each calendar year, D&B
may request Customer to provide a certification to the effect that
actual Use of the Program is in compliance with the terms of this
Agreement and any Supplement. In addition, D&B may, upon reasonable
prior written notice but not more often than once each calendar year,
and subject to compliance with Customer's reasonable security
procedures, perform at a mutually agreeable date and time an audit to
determine compliance with the terms of this Agreement. If the number of
copies or users is found to be greater than that contracted for or the
computer system on which the Program is in use differs from the
Hardware and Operating System Software specified on any Supplement
except for transfer consistent with D&B's policies as stated herein,
D&B shall have the right to charge Customer the applicable current list
prices therefor. If the resulting adjustments to the license fees owing
by Customer are greater than 5% of the license fees previously paid by
Customer to D&B, D&B may also charge Customer the reasonable expenses
associated with such audit.
A.11. Section 7.3 of the License Agreement is deleted in its entirety and
replaced with the following:
All fees shall be paid within thirty (30) days after the invoice date.
Customer shall pay all applicable shipping charges and sales, use,
personal property or similar taxes, exclusive of D&B's income and
corporate franchise taxes. After at least thirty (30) days written
<PAGE> 7
notice, past due amounts owing from Customer which are not reasonably
disputed by Customer, may bear interest at the rate of 1% per month.
A.12. Section 7.5 of the License Agreement is deleted in its entirety and
replaced with the following:
Each party's obligations under Section 3 hereof are a unique character
and each agrees that any breach may result in irreparable and
continuing damage to the other party for which there may be no adequate
remedy in damages. In the event of such a breach, the damaged party
will be entitled to seek injunctive relief and/or a decree for specific
performance and such further relief as may be proper.
A.13. The first sentence of Section 7.7 of the License Agreement is deleted
and replaced with the following:
If either party breaches any of its material obligations hereunder and
fails to remedy such breach (if such breach can be remedied) within
thirty (30) days of written notice of such breach, the other party may
terminate any license or this Agreement.
A.14. Section 7.8 of the License Agreement is deleted in its entirety and
replaced with the following:
This Agreement shall be governed by and construed under the laws of the
State of Illinois excluding its conflict of laws rules.
A.15. Section 7.9 of the License Agreement is deleted in its entirety.
A.16. The following sentence is added to Section 7.10 of the License
Agreement:
The Supplement shall prevail in the event of any conflict with the
License Agreement.
A.17. The following is added as Section 7.11 of the License Agreement:
Galileo International Partnership reserves the right to terminate this
license at any time, so long as all fees due and owing under this
License Agreement have been fully paid.
<PAGE> 1
Exhibit 10.17
OFFICE LEASE
between
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO,
not personally, but as Trustee under Trust No. 107101-01
(Landlord)
and
Galileo International Partnership
----------------------------------
----------------------------------
(Tenant)
<PAGE> 2
TABLE OF CONTENTS
OFFICE LEASE
<TABLE>
<CAPTION>
Article Title Page
- - ------- ----- ----
<S> <C> <C>
1 Definitions 1
2 Premises 2
3 Term 2
4 Rental 2
5 Security Deposit 6
6 Use of Premises 6
7 Utilities and Services 7
8 Maintenance and Repairs 8
9 Alterations, Additions and Improvements 8
10 Indemnification and Insurance 9
11 Damage or Destruction 11
12 Condemnation 12
13 Relocation 12
14 Assignment and Subletting 12
15 Default and Remedies 14
16 Attorneys' Fees; Costs of Suit 16
17 Subordination and Attornment 16
18 Quiet Enjoyment 16
19 Parking 17
20 Rules and Regulations 17
21 Estoppel Certificates 17
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS (Continued)
<TABLE>
<CAPTION>
Article Title Page
- - ------- ----- ----
<S> <C> <C>
22 Entry by Landlord 17
23 Landlord's Lease Undertakings-Exculpation
from Personal Liability; Transfer of
Landlord's Interest 18
24 Holdover Tenancy 19
25 Notices 19
26 Brokers 19
27 Miscellaneous 19
EXHIBITS
Exhibit A Floor Plan A-1 Concourse Level
A-2 3rd Floor
A-3 4th Floor
A-4 10th Floor
Exhibit B Work Letter Agreement
Exhibit C Rules and Regulations
[Intentionally Omitted]
Exhibit E The Second Floor Temporary Space
Exhibit F HVAC Temperature Specifications
Exhibit G Current Janitorial and Cleaning Specifications
Exhibit H The Eleventh Floor Temporary Space
</TABLE>
-ii-
<PAGE> 4
OFFICE LEASE
ORCHARD POINT OFFICE CENTER
ROSEMONT, ILLINOIS
THIS OFFICE LEASE ("Lease"), dated March 31, 1995, is made and entered
into by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not
personally, but as Trustee under Trust No. 107101-01 ("Landlord") and Galileo
International Partnership, a Delaware general partnership ("Tenant") upon the
following terms and conditions:
ARTICLE I -- DEFINITIONS
Unless the context otherwise specifies or requires, the following terms
shall have the meanings specified herein;
1.01 Building. The term "Building" shall mean that certain office
building located at 9700 Higgins Road in Rosemont, Illinois, commonly known as
Orchard Point Office Center together with all related land, improvements,
parking facilities, common areas, driveways, sidewalks and landscaping.
1.02 Premises. The term "Premises" shall mean certain space on the
concourse level and the 3rd, 4th and 10th floors of the Building, as more
particularly outlined on the drawings attached hereto as Exhibit A and
incorporated herein by reference. As used herein, "Premises" shall not include
any storage area in the Building (except for the "Storage Space" described in
Article XXXIII of this Lease) which shall be leased or rented pursuant to
separate agreement.
1.03 Rentable Area of the Premises. The term "Rentable Area of the
Premises" shall mean 85,521 square feet (concourse level: 3,584; 3rd and 4th
Floors: 58,488; 10th Floor: 23,449) which Landlord and Tenant have stipulated
as the Rentable Area of the Premises.
1.04 Lease Term. The term "Lease Term" shall mean the period between
the Commencement Date and the Expiration Date (as such terms are hereinafter
defined), unless sooner terminated or renewed as otherwise provided in this
Lease. (See Article XXXII for Tenant's "Renewal Option".)
1.05 Commencement Date. Subject to adjustment as provided in Article
3, the term "Commencement Date" shall mean April 1, 1995.
1.06 Expiration Date. The term "Expiration Date" shall mean March 31,
2000.
1.07 Base Rent. The term "Base Rent" shall mean the amounts set forth
in Insert No. 1 of the Rider attached herein (the "Rider") and shall be subject
to adjustment as provided in Article IV of this Lease.
1.08 Tenant's Percentage Share. The term "Tenant's Percentage Share"
shall mean Thirty-One and eleven hundredths percent (31.11%) with respect to
Property Taxes and Operating Expenses (as such terms are hereinafter defined)
and with respect to Tenant's law compliance obligations under Section 602(C) of
this Lease. (See Insert 1.08 on Page 1A)
1.09 [Intentionally Omitted].
1.10 Tenant's Permitted Use. The term "Tenant's Permitted Use" shall
mean general office use and related incidental office use and no other use.
(See Insert 1.10 on Page 1A.)
1.11 Tenant's Parking Stalls. The term "Tenant's Parking Stalls" shall
mean 8 parking stalls in the Building's garage and 2 parking stalls in the
Building's surface parking lot. (See Insert No. 5 in the Rider)
1.12 Business Hours. The term "Business Hours" shall mean the hours
of 8:00 A.M. to 6:00 P.M., Monday through Friday, and 8:00 A.M. to 1:00 P.M.,
Saturdays (federal and state holidays excepted).
1.13 Landlord's Address For Notices. The term "Landlord's Address for
Notices" shall mean Heitman Properties Ltd., 9700 Higgins Road, Rosemont,
Illinois 60018, Attn: Property Manager, with a copy to Heitman Properties Ltd.,
180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601, Attn: Property
Management.
10/18/93
-1-
<PAGE> 5
Insert 1.08
Landlord and Tenant agree that Tenant's Percentage Share may change
from time to time if (and only if) (i) Landlord increases or decreases the size
of the Building, (ii) Tenant leases additional space in the Building, or (iii)
Tenant ceases to lease any portion of the Premises as permitted or provided for
elsewhere in this Lease.
Insert 1.10
As used in Section 1.10, the phrase "related incidental office use"
shall mean that portions of the Premises may be used for computer, data and
word processing, bookkeeping, training, classrooms and auditoriums; provided,
however, that training, classrooms and auditorium use shall be (i) solely for
Tenant's employees and customers and (ii) conducted without creating noise
levels that interfere with other tenants of Building. Without limiting the
foregoing, Tenant may use no more than an aggregate amount of twenty thousand
(20,000) rentable square feet of space in the Premises for training, classroom
and auditorium use (or any combination thereof).
1A
<PAGE> 6
1.14 TENANT'S ADDRESS FOR NOTICES. The term "Tenant's Address for
Notices" shall mean Galileo International Partnership, 5350 S. Valentia Way,
Englewood, Colorado 80111, Attn: Manager of Administration, with a copy to
Galileo International Partnership, 9700 Higgins Road, Rosemont, Illinois 60018,
Attn: Legal Dept.
1.15 BROKERS. The term "Brokers" shall mean Goldie B. Wolfe and
Company and Heitman Properties Ltd.
[Intentionally Omitted]
ARTICLE II - PREMISES
2.01 LEASE OF PREMISES. Landlord hereby leases the Premises to Tenant,
and Tenant hereby leases the Premises from Landlord, upon all of the terms,
covenants and conditions contained in this Lease.
2.02 ACCEPTANCE OF PREMISES. Tenant acknowledges that except and only
to the extent expressly provided elsewhere in this Lease, Landlord has not made
any representation or warranty with respect to the condition of the Premises or
the Building or with respect to the suitability or fitness of either for the
conduct of Tenant's Permitted Use or for any other purpose. Tenant agrees to
accept the Premises in its "as is" condition without any credit or allowance
from Landlord with respect to the improvement thereof.
ARTICLE III - TERM
3.01 Except as otherwise provided in this Lease, the Lease Term shall
be for the period described in Section 1.04 of this Lease, commencing on the
Commencement Date described in Section 1.05 of this Lease and ending on the
Expiration Date described in Section 1.06 of this Lease; provided, however,
that, if, for any reason, Landlord is unable to deliver possession of the
Premises on the date described in Section 1.05 of this Lease, Landlord shall
not be liable for any damage caused thereby, nor shall the Lease be void or
voidable, but, rather, the Lease Term shall commence upon, and the Commencement
Date shall be, the date that possession of the Premises is so tendered to
Tenant (except for Tenant-caused delays which shall not be deemed to delay
commencement of the Lease Term), and the Expiration Date described in Section
1.06 of this Lease shall be extended by an equal number of days. (See Insert
3.01 on Page 2.)
ARTICLE IV - RENTAL
4.01 DEFINITIONS. As used herein,
(A) "Property Taxes" or "Taxes" shall mean the aggregate amount
of all real estate taxes, assessments (whether they be general or special),
sewer rents and charges, transit taxes, taxes based upon the receipt of rent
and any other federal, state or local governmental charge, general, special,
ordinary or extraordinary (but not including income or franchise taxes,
transfer taxes, corporate taxes, capital stock, inheritance, estate, gift, or
any other taxes imposed upon or measured by Landlord's gross income or profits,
unless the same shall be imposed in lieu of real estate taxes or other ad
valorem taxes), which Landlord shall pay or become obligated to pay in
connection with the Building, or any part thereof. Taxes shall include all fees
and costs, including reasonable attorneys' fees, appraisals and consultants'
fees, incurred by Landlord in seeking to obtain a reduction of, or a limit on
the increase in, any Taxes, regardless of whether any reduction or limitation
is obtained. Taxes for any calendar year shall be Taxes which are due for
payment in such year, rather than Taxes which are assessed or become a lien
during such year. If at any time during the Lease Term the method of taxation
then prevailing shall be altered so that any new tax, assessment, levy,
imposition or charge shall be imposed upon Landlord in place or partly in place
of any such Taxes, or contemplated increase in any such Taxes, and shall be
measured by or be based in whole or in part upon the Building or the rents or
other income from the Building, then all such new taxes, assessments, levies,
impositions or charges, to the extent that they are so measured or based, shall
be included in Taxes to the extent that such items would be payable if the
Building was the only property of Landlord subject to same and the income
received by Landlord from the Building was the only income of Landlord. Taxes
shall also include any personal property taxes imposed upon the furniture,
fixtures, machinery, equipment, apparatus, systems and appurtenances of
Landlord used in connection with the Building. Property Taxes shall be
appropriately reduced (or refunded to Tenant, as applicable) with respect to
any refunds received by Landlord during the Lease Term or within nine (9)
months after the expiration of the Lease Term for any over-payments of Property
Taxes actually paid during the Lease Term (the foregoing obligation regarding
reduction and refund of Property Taxes shall survive the termination or
expiration of the Lease or the Lease Term). (See Insert 4.01[A] on Page 2A)
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<PAGE> 7
Insert 3.01
Landlord agrees that if Landlord is unable to deliver the Premises to
Tenant on the Commencement Date for any reason other than (i) the occurrence of
an event caused by Tenant or (ii) the retention of possession by an occupant
claiming by, through or under Tenant, then anything set forth in that certain
Partial Lease Termination Agreement and Assignment of Lease of even date
herewith between Landlord and Tenant (the "Termination Agreement") to the
contrary notwithstanding, the lease termination provided for in the Termination
Agreement and the payment by Tenant to Landlord of the termination fee provided
for in the Termination Agreement shall be deferred until such time as Landlord
is able to deliver possession of the Premises to Tenant.
Insert 4.01(A)
(A) Landlord agrees that "Property Taxes" shall not include late
payment penalties or interest on delinquent tax payments, and Landlord further
agrees that if and to the extent any component of "Property Taxes" can be paid
in installments without incurring late payment penalties or delinquency
interest, Landlord shall pay such components of "Property Taxes" in the maximum
allowable number of installments.
(B) Landlord further agrees that neither "Property Taxes" nor
"Operating Expenses" shall include the following:
(i) impact fees for any capital improvements or capital
expenditures other than (x) any capital improvement made after the
date of this Lease which is intended to reduce or which actually
reduces Operating Expenses, or (y) any expenditures made pursuant to
Section 6.02(C) of this Lease (in each such case impact fees shall be
chargeable as provided in Section 4.01(B) (xii) or 6.02(C), as the
case may be); or
(ii) any prepaid attorneys' fees for services rendered to
achieve a reduction in Property Taxes to the extent such fees are
attributable to a reduction in the Property Taxes which become payable
after the expiration of the Lease Term.
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<PAGE> 8
(B) "Operating Expenses" shall mean all costs, fees, disbursements and
expenses paid or incurred by or on behalf of Landlord in the operation,
ownership, maintenance, insurance, management, replacement and repair of the
Building (excluding Property Taxes) including without limitation:
(i) Premiums for property, casualty, liability, rent
interruption or other types of insurance carried by Landlord.
(ii) Salaries, wages and other amounts paid or payable for
personnel including the Building manager, superintendent, operation and
maintenance staff, and other employees of Landlord involved in the maintenance
and operation of the Building, including contributions and premiums towards
fringe benefits, unemployment, disability and worker's compensation insurance,
pension plan contributions and similar premiums and contributions and the total
charges of any independent contractors or property managers engaged in the
operation, repair, care, maintenance and cleaning of any portion of the
Building (provided, that such salaries, wages and other amounts shall be
prorated appropriately for employees of Landlord or its agent that perform such
services for other properties).
(iii) Cleaning expenses, including without limitation
janitorial services, window cleaning, and garbage and refuse removal.
(iv) Landscaping expenses, including without limitation
irrigating, trimming, mowing, fertilizing, seeding, and replacing plants.
(v) Heating, ventilating, air conditioning and
steam/utilities expenses, including fuel, gas, electricity, water, sewer,
telephone, and other services.
(vi) Subject to the provisions of Section 4.01(B)(xii) below,
the cost of maintaining, operating, repairing and replacing components of
equipment or machinery, including without limitation heating, refrigeration,
ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers,
fire/life safety, security and energy management systems, including service
contracts, maintenance contracts, supplies and parts.
(vii) Other items of repair or maintenance of elements of the
Building.
(viii) The costs of policing, security and supervision of the
Building.
(x) The cost of the rental of any machinery or equipment and
the cost of supplies used in the maintenance and operation of the Building.
(xi) Seventy-five percent (75%) of the audit fees and of the
cost of accounting services incurred in the preparation of statements referred
to in this Lease and financial statements, and in the computation of the rents
and charges payable by tenants of the Building.
(xii) The costs of improvements, repairs, or replacements to
the Building or the equipment or machinery used in connection with the Building
if the capital improvement is made after the date of this Lease and is intended
to reduce or actually reduces Operating Expenses; provided, however, any such
costs which are properly charged to a capital account shall not be included
in Operating Expenses in a single year but shall instead be amortized on a
straight-line basis over their useful lives, as determined by the Landlord in
accordance with generally accepted accounting principles, and only the annual
amortization amount (not to exceed the amount of the annual reduction in
Operating Expenses or the annual reduction in known increases in Operating
Expenses, as the case may be, resulting from such improvement) shall be
included in the Operating Expenses for a particular year.
(xiii) Legal fees and expenses.
(xiv) A fee for the administration and management of the
Building appropriate to the first class nature of the Building as reasonably
determined by the Landlord from time to time. (See item [v] on Page 3A for
limitation thereof during the first five (5) years of the Lease Term)
Operating Expenses shall not include costs of alteration of the
premises of tenants of the Building, depreciation charges, interest and
principal payments on mortgages, ground rental payments, real estate brokerage
and leasing commissions, expenses incurred in enforcing obligations of tenants
of the Building, salaries and other compensation of executive officers of the
managing agent of the Building senior to the Building manager, costs of any
special service provided to any one term of the Building but not to tenants of
the Building generally, and costs of marketing or advertising the Building.
(See Insert 4.01[B] on Page 3A)
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<PAGE> 9
Insert 4.01(B)
Operating Expenses also shall not include the following costs and
expenses:
(i) expenses relating to the leasing of space in the
Building (including, without limitation, tenant improvements, leasing
commissions and advertising and promotional expenses incurred in connection
with the listing of available space in the Building [i.e. -- "open houses"
and/or "brokers parties"]);
(ii) legal fees and disbursements incurred in connection with
negotiation of space leases in the Building;
(iii) the cost of electricity or any other utility which is
separately metered to a tenant of the Building and for which such tenant pays
the utility provider directly or for which Landlord is reimbursed by such
tenant (other than through Tax and Operating Expense Adjustments [or the
equivalent of Tax and Operating Expense Adjustments] collected from tenants in
the Building, including Tenant);
(iv) debt service costs on mortgages and other liens
encumbering the Building or any part thereof or the land on which the Building
is erected;
(v) management fees paid with respect to management of the
Building for any of the first five (5) years of the Lease Term if and to the
extent said fees during such year exceed three percent (3%) of the gross
revenues of the Building during such year;
(vi) costs of preparing tenantable space for a tenant's
occupancy or lease renewal or extension and costs of relocating tenants of the
Building;
(vii) any compensation paid to clerks, attendants or other
persons in commercial concessions operated by Landlord for profit (as
distinguished from those concessions operated as Building amenities);
(viii) late payment penalties or interest charged for the
delinquent payment of any Operating Expenses;
(ix) expenditures for acquisition or leasing of sculptures,
paintings or other objects of art;
(x) brokerage commissions, legal costs (including, without
limitation, attorneys' fees and disbursements) and other costs incurred in
connection with any transfer or disposition of all or any part of the Building
or any interest therein or in Landlord or any entity comprising Landlord
provided any increase in Property Taxes resulting from such transfer or
disposition may be included in Property Taxes);
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<PAGE> 10
(xi) any cost representing any amount paid or allocated to any
affiliate of Landlord to the extent the same is in excess of the amount which
would have been paid in the absence of such relationship;
(xii) costs incurred in the removal, containment, encapsulation or
disposal of any Hazardous Material (other than any Tenant's Hazardous Material
or any other Hazardous Materials placed, stored, used, disturbed, or generated
by Tenant in the Premises or in the Building, which cost shall be Tenant's sole
liability as herein provided), provided that if such costs arise as a Landlord
expenditure pursuant to Section 6.02(C) below to eliminate Hazardous Materials
previously lawfully used in the operation of the Building, such costs shall be
chargeable as provided in Section 6.02(C);
(xiii) any expenditure which would otherwise be an Operating Expense to
the extent Landlord is actually reimbursed therefor by condemnation award or
insurance proceeds or by refund, credit, warranty, service contract or
otherwise;
(xiv) any fines or penalties incurred as a result of violation by
Landlord of any law, order, rule or regulation of any authority;
(xv) attorneys' fees and disbursements and court costs incurred in
connection with disputes with tenants of the Building, unless such disputes
relate to Landlord's enforcement of the rules and regulations of the Building;
(xvi) costs incurred to correct latent defects in the construction of
the Building which are covered by enforceable warranties;
(xvii) any portion of any insurance deductible which exceeds a
commercially reasonable deductible for such type of insurance;
(xviii) any equipment or other items leased by Landlord which, if
purchased by Landlord, would constitute capital items the cost of which could
not be included in Operating Expenses pursuant to Section 4.01(B)(xii) or
6.02(C); and
(xix) except if and then only to the extent expressly allowed pursuant
to Section 4.01(B)(xii) of the form portion of this Lease or Section 6.02(C) of
this Lease (and subject to the respective terms thereof), any expenditure
relative to the Building that, in accordance with generally accepted accounting
principles, constitutes or is generally treated as a capital expense.
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<PAGE> 11
If the Building does not have at least ninety-five percent (95%)
occupancy during an entire calendar year, then the variable cost components of
"Operating Expenses" shall be equitably adjusted so that the total amount of
Operating Expenses equals the total amount which would have been paid or
incurred by Landlord had the Building been one hundred percent (100%) occupied
for the entire calendar year. If the Building does not have at least
eighty-five percent (85%) occupancy during an entire calendar year, then at
Landlord's option the variable components of Property Taxes shall be equitably
adjusted so that the total amount of Property Taxes equals eighty-five percent
(85%) of the total amount which would have been paid or incurred by Landlord had
the Building been one hundred percent (100%) occupied for the entire calendar
year. In no event shall Landlord be entitled to receive from Tenant and any
other tenants in the Building an aggregate amount in excess of actual Operating
Expenses as a result of the foregoing provision.
4.02 Base Rent. During the Lease Term, Tenant shall pay to Landlord as
rental for the Premises the amount contained in Section 1.07 above, subject to
the following adjustments (herein called the "Rent Adjustments"):
[Intentionally Omitted]
Landlord, shall be increased by (collectively, the "Tax and Operating Expense
Adjustment"): (i) Tenant's Percentage Share of the Property Taxes paid or
incurred by Landlord during such year; and (ii) Tenant's Percentage Share of the
Operating Expenses paid or incurred by Landlord during such year. (See Insert
4.02[B] on Page 4A)
4.03 Adjustment Procedure; Estimates. The Tax and Operating Expense
Adjustment specified in Section 4.02(B) shall be determined and paid as follows:
(A) During each calender year Landlord shall give Tenant
written notice of its reasonable estimate of amounts payable under Section
4.02(B) for that calendar year. On or before the first day of each calendar
month during the calendar year, Tenant shall pay to Landlord one-twelfth
(1/12th) of such estimated amounts; provided, however, that, not more often
than quarterly, Landlord may, by written notice to Tenant, reasonably revise
its estimate for such year, and subsequent payments by Tenant for such year
shall be based upon such revised estimate. (See Insert 4.03[A] on Page 4B)
(B) Within ninety (90) days after the close of each calendar
year or as soon thereafter as is practicable, Landlord shall deliver to Tenant a
statement of that year's Property Taxes and Operating Expenses, and the actual
Tax and Operating Expense Adjustment to be made pursuant to Section 4.02(B) for
such calendar year, as determined by Landlord (the "Landlord's Statement") and
such Landlord's Statement shall be binding upon Landlord and Tenant, except as
provided in Section 4.04 below. If the amount of the actual Tax and Operating
Expense Adjustment is more than the estimated payments for such calendar year
made by Tenant, Tenant shall pay the deficiency to Landlord within thirty (30)
days after Tenant's receipt of Landlord's Statement. If the amount of the actual
Tax and Operating Expense Adjustment is less than the estimated payments for
such calendar year made by Tenant, any excess shall be credited against Rent (as
hereinafter defined next payable by Tenant under this Lease or, if the Lease
Term has expired, any excess shall be paid to Tenant. No delay in providing the
statement described in this subparagraph (B) shall act as a waiver of Landlord's
right to payment under Section 4.02(B) above.
(C) If this Lease shall terminate on a day other than the end
of a calendar year, the amount of the Tax and Operating Expense Adjustment to
be paid pursuant to Section 4.02(B) that is applicable to the calendar year in
which such termination occurs shall be prorated on the basis of the number of
days from January 1 of the calendar year to the termination date bears to 365.
The termination of this Lease shall not affect the obligations of Landlord and
Tenant pursuant to Section 4.03(B) to be performed after such termination.
4.04 Review of Landlord's Statement. Provided that Tenant strictly
complies with the provisions of this Section 4.04, Tenant shall have the right,
each calendar year, to reasonably review supporting data for any portion
of a Landlord's Statement (provided, however, Tenant may not have an audit
right to all documentation relating to Building operations as this would far
exceed the relevant
10/18/93
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<PAGE> 12
Insert 4.02(B)
Limit on Annual Increases in Controllable Operating Expenses.
For each calendar year during the initial 5-year Lease Term, solely for
purposes of calculating Tenant's Tax and Operating Expense Adjustment:
(a) Controllable Operating Expenses (as defined below) for the
calendar year of 1995 shall not exceed an amount equal to the product of
the total actual Controllable Operating Expenses for the calendar year
of 1994 multiplied by 1.050;
(b) Controllable Operating Expenses for the calendar year of
1996 shall not exceed an amount equal to the product of the total actual
Controllable Operating Expenses for the calendar year of 1994 multiplied
by 1.1025;
(c) Controllable Operating Expenses for the calendar year of
1997 shall not exceed an amount equal to the product of the total actual
Controllable Operating Expenses for the calendar year of 1994 multiplied
by 1.1576;
(d) Controllable Operating Expenses for the calendar year of
1998 shall not exceed an amount equal to the product of the total actual
Controllable Operating Expenses for the calendar year of 1994 multiplied
by 1.2155;
(e) Controllable Operating Expenses for the calendar year of
1999 shall not exceed an amount equal to the product of the total actual
Controllable Operating Expenses for the calendar year of 1994 multiplied
by 1.2763; and
(f) Controllable Operating Expenses for the calendar year of
2000 shall not exceed an amount equal to the product of the total actual
Controllable Operating Expenses for the calendar year of 1994 multiplied
by 1.3401.
For purposes of this Insert No. 4.02(B) "Controllable Operating
Expenses" shall mean only those items of Operating Expenses where the cost
or expense thereof shall be within the reasonable ability of Landlord to
control (specifically excluded from Controllable Operating Expenses, without
limitation, are the costs and expenses of electricity, fuels, management
fees and insurance and the wages of union employees [and the costs and
expenses of independent
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<PAGE> 13
contractors who employ union employees]). Such limitation on
Controllable Operating Expenses shall apply only to Controllable
Operating Expenses and not to other items of Operating Expenses or
Property Taxes and shall not limit or otherwise affect Tenant's
obligations regarding the payment of any component of Rent other than
the Controllable Operating Expenses component of Tenant's Tax and
Operating Expense Adjustment.
Insert 4.03(A)
(A) Anything set forth in Section 4.03(A) to the contrary
notwithstanding, Landlord agrees that Tenant's Proportionate Share of Property
Taxes shall be due and collectible from Tenant in two (2) annual installments,
each of which shall be due within ten (10) business days after Landlord bills
Tenant therefor unless, and except to the extent, the Building or the interest
of owner in the Building is sold (other than to an affiliate of Landlord) or
financing is placed on the Building (other than from an affiliate of Landlord)
and the lender requires that Property Taxes be collected on a monthly, quarterly
or other periodic basis that is more frequent than two times each year, in
which event Tenant shall be obligated to pay Landlord monthly estimates of the
Property Taxes as provided for in Section 4.03(A) of this Lease. Nothing
contained in this Insert 4.03(A) shall modify or change Tenant's obligation to
pay monthly installments of Tenant's Proportionate Share of Operating Expenses.
(B) If Landlord's Statement (as defined in Section 4.03[B] of this
Lease) reflects that Landlord's estimates of Operating Expenses and Tenant's
monthly installment payments of its share of Operating Expenses exceed the
actual Operating Expenses for such year by more than five percent (5%), then
Landlord agrees to pay or credit Tenant interest at the per annum rate of
twelve percent (12%) on the amount by which such estimated payments collected
from Tenant exceed the actual Operating Expenses for such year. Notwithstanding
the preceding sentence or anything elsewhere in this Lease, Landlord shall not
be responsible for paying Tenant interest on any such overage which pertains to
increases in Operating Expenses which had been announced and which Landlord
believed in good faith would be charged or payable but which do not become
charged or payable, as the case may be.
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<PAGE> 14
information necessary to properly document a pass-through billing statement,
but real estate tax statements, and information on utilities, repairs,
maintenance, insurance and any other expenditures included in Operating
Expenses will be available), in accordance with the following procedure:
(A) Tenant shall, within one hundred twenty (120) days after
any such Landlord's Statement is delivered, deliver a written notice to Landlord
specifying that Tenant desires to perform an audit relative to Landlord's
Statement and Tenant shall have paid to Landlord all amounts due from Tenant to
Landlord as specified in the Landlord's Statement. Except as expressly set
forth in subsection (C) below, in no event shall Tenant be entitled to
withhold, deduct, or offset any monetary obligation of Tenant to Landlord under
the Lease (including without limitation, Tenant's obligation to make all
payments of Base Rent and all payments of Tenant's Tax and Operating Expense
Adjustment) pending the completion of and regardless of the results of any
review of records under this Section 4.04. The right of Tenant under this
Section 4.04 may only be exercised once for any Landlord's Statement, and if
Tenant fails to meet any of the above conditions as a prerequisite to the
exercise of such right, the right of Tenant under this Section 4.04 for a
particular Landlord's Statement shall be deemed waived.
(B) Tenant acknowledges that Landlord maintains its records
for the Building at Landlord's manager's corporate offices, presently located
at the address set forth in Section 1.13 and Tenant agrees that any review of
records under this Section 4.04 shall be at the sole expense of Tenant and
shall be conducted by an independent firm of certified public accountants.
Tenant acknowledges and agrees that any records reviewed under this Section 4.04
constitute confidential information of Landlord, which shall not be disclosed
to anyone other than the accountants performing the review and the principals
of Tenant who receive the results of the review or as required by law or in
connection with enforcement of Tenant's rights under this Lease. The
disclosure of such information to any other person, whether or not caused by
the conduct of Tenant, shall constitute a material breach of this Lease.
(C) Any errors disclosed by the review shall be promptly
corrected by Landlord, provided, however, that if Landlord disagrees with any
such claimed errors, Landlord shall have the right to cause another review to
be made by an independent firm of certified public accountants. In the event
of a disagreement between the two accounting firms, Landlord and Tenant shall
promptly select a neutral independent certified public accountant to resolve
the disputes, and his decision shall be binding on Landlord and Tenant. In the
event that the results of the review of records (taking into account, if
applicable, the results of any additional review caused by Landlord) reveal
that Tenant has overpaid obligations for a preceding period, the amount of such
overpayment shall be credited against Tenant's subsequent installment
obligations to pay the estimated Tax and Operating Expense Adjustment. If the
results of such audit by such jointly selected accountant reveal that Tenant
has overpaid its Percentage Share of Operating Expenses for such calendar year
by more than three percent (3%), then the reasonable fees of such jointly
selected auditor and Tenant's third party accountants' fees shall be borne by
Landlord. Otherwise, the reasonable fees of such jointly selected auditor and
Tenant's third party accountants' fees shall be borne by Tenant. In the event
that such results show that Tenant has underpaid its obligations for a
preceding period, Tenant shall be liable for Landlord's accounting fees, and
the amount of such underpayment shall be paid by Tenant to Landlord with the
next succeeding installment obligation of estimated Tax and Operating Expense
Adjustment.
4.05 PAYMENT. Concurrently with the execution hereof, Tenant shall pay
Landlord Base Rent for the first calendar month of the Lease Term. Thereafter
the Base Rent described in Section 1.07, as adjusted in accordance with Section
4.02, shall be payable in advance on the first day of each calendar month. If
the Commencement Date is other than the first day of a calendar month, the
prepaid Base Rent for such partial month shall be prorated in the proportion
that the number of days this Lease is in effect during such partial month bears
to the total number of days in the calendar month. Except and only to the extent
expressly provided otherwise in this Lease, all Rent, and all other amounts
payable to Landlord by Tenant pursuant to the provisions of this Lease, shall be
paid to Landlord, without notice, demand, abatement, deduction or offset, in
lawful money of the United States at Landlord's office in the Building or to
such other person or at such other place as Landlord may designate from time to
time by written notice given to Tenant. No payment by Tenant or receipt by
Landlord of a lesser amount than the correct Rent due hereunder shall be deemed
to be other than a payment on account; nor shall any endorsement or statement on
any check or any letter accompanying any check or payment be deemed to effect or
evidence an accord and satisfaction; and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance or pursue
any other remedy in this Lease or at law or in equity provided.
4.06 LATE CHARGE; INTEREST. Tenant acknowledges that the late payment
of Base Rent or any other amounts payable by Tenant to Landlord hereunder (all
of which shall constitute additional rental to the same extent as Base Rent)
will cause Landlord to incur administrative costs and other damages, the
exact amount of which would be impracticable or extremely difficult to
ascertain. Landlord and Tenant agree that if Landlord does not receive any such
payment on or before five (5) business days after the date the payment is due,
(Tenant being first entitled to written notice for all monetary amounts due
hereunder except for Base Rent and Tax and Operating Expense Adjustment); Tenant
shall pay to Landlord, as additional rent, (a) a late charge equal to three
percent (3%) of the overdue amount to cover such additional administrative
costs.
4.07 ADDITIONAL RENTAL. For purposes of this Lease, all amounts
payable by Tenant to Landlord pursuant to this Lease, whether or not
denominated as such, shall constitute additional rental hereunder. Such
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<PAGE> 15
additional rental, together with the Base Rent and Rent Adjustments, shall
sometimes be referred to in this Lease as "Rent". (See Insert 4.08 on Page 6A)
ARTICLE V
[Intentionally Omitted]
ARTICLE VI - USE OF PREMISES
6.01 TENANT'S PERMITTED USE. Tenant shall use the Premises only for
Tenant's Permitted Use as set forth in Section 1.10 above and shall not use or
permit the Premises to be used for any other purpose without the prior written
consent of Landlord. Tenant shall, at its sole cost and expense, obtain all
governmental licenses and permits required to allow Tenant to conduct Tenant's
Permitted Use. Landlord disclaims any warranty that the Premises are suitable
for Tenant's use and Tenant acknowledges that it has had a full opportunity to
make its own determination in this regard.
6.02 COMPLIANCE WITH LAWS AND OTHER REQUIREMENTS.
(A) Tenant shall cause the Premises to comply in all material
respects with all laws, ordinances, regulations and directives of any
governmental authority having jurisdiction including without limitation any
certificate of occupancy and any law, ordinance or regulation affecting the
Building or the Premises which in the future may become applicable to the
Premises (collectively "Applicable Laws"). (See Insert 6.02[A] on Page 6A)
(B) Tenant shall not use the Premises, or permit the Premises to
be used, in any manner which: (a) violates any Applicable Law; (b) causes or is
reasonably likely to cause damage to the Building or the Premises; (c) violates
a requirement or condition of any fire and extended insurance policy covering
the Building and/or the Premises, or increases the cost of such policy (unless
Tenant pays such increased cost); (d) constitutes or is reasonably likely to
constitute a nuisance, annoyance or inconvenience to other tenants or occupants
of the Building or its equipment, facilities or systems; (e) materially
interferes with, or is reasonably likely to materially interfere with, the
transmission or reception of microwave, television, radio, telephone, or other
communication signals by antennae or other facilities located in the Building;
or (f) violates the Rules and Regulations described in Article XX.
(C) In addition to any other amounts payable by Tenant to
Landlord hereunder, Tenant shall pay to Landlord, as and when billed to Tenant
and as additional rental, Tenant's Percentage Share of the cost of any
improvements, capital expenditures, repairs, or replacements to the Building,
or any equipment or machinery used in connection with Building, if any such
item is required under any Applicable Law which was not applicable to the
Building at the time this Lease was fully signed and delivered; provided,
however, that any such costs which are properly charged to a capital account
shall not be payable in a single year but shall instead be amortized on a
straight-line basis over their useful lives, as determined by the Landlord in
accordance with generally accepted accounting principles, and only the annual
amortization amount (prorated based on the number of days of the Lease term in
the calendar year) shall be payable by the Tenant with respect to any calendar
year. (See Insert 6.02[C] on Page 6A)
6.03 HAZARDOUS MATERIALS.
(A) No Hazardous Materials, as defined herein, shall be Handled,
as also defined herein, upon, about, above or beneath the Premises or any
portion of the Building by or on behalf of Tenant, its subtenants or its
assignees, or their respective contractors, clients, officers, directors,
employees, agents, or invitees. Any such Hazardous Materials so Handled shall
be known as Tenant's Hazardous Materials. Notwithstanding the foregoing, normal
quantities of those Hazardous Materials customarily used in the conduct of
general administrative and executive office activities (e.g., copier fluids and
cleaning supplies) may be used and stored
-6-
<PAGE> 16
Insert 4.08
4.08 Landlord agrees that it will use reasonable efforts to keep
Operating Expenses at a level consistent with other Class A buildings in the
O'Hare corridor taking into account, among other things, the age and quality of
the Building and Landlord's obligations regarding services to be furnished to
and for Tenant as provided for in this Lease.
Insert 6.02(A)
(A) Anything set forth in Section 6.02(A) or the first sentence of
Section 8.02 to the contrary notwithstanding, Tenant shall not be obligated to
cause Building's mechanical, electrical, plumbing or HVAC systems located in
the Premises (except for those portions of such systems which are in the
control of Tenant) to comply with applicable law.
(B) Landlord agrees that it will use reasonable efforts to cause the
common areas of the Building utilized by Tenant and its invitees and the
parking areas of the Building utilized by Tenant and its invitees to comply in
all material respects with applicable laws relating thereto and to correct or
cause to be corrected any violations of law relating to such common areas or
parking areas in respect to which Landlord is given written notice by the
applicable governmental authority or entity having jurisdiction over the
Building.
Insert 6.02(C)
(A) Landlord covenants and agrees that during the Lease Term Landlord
shall cause the ground floor and concourse common areas of the Building, access
to the Building and the parking areas serving the Building to comply in all
material respects with the requirements (as reasonably interpreted from time to
time) of the American with Disabilities Act ("ADA"). Without limiting the
foregoing, Landlord agrees that Tenant shall not be obligated to pay Tenant's
Percentage Share of the cost of Landlord's compliance with ADA (as currently in
effect and as currently interpreted as of the date of this Lease) with respect
to the common areas of the Building, access to the Building or the parking
areas serving the Building. Subject to the amortization provisions of Section
6.02(C), Tenant shall be obligated to pay Tenant's Percentage Share of the cost
of Landlord's compliance with modifications of ADA and with modifications of
interpretations of ADA first enacted or made after the date of this Lease.
(B) Landlord further agrees that Tenant shall not obligated to pay
Tenant's Percentage Share of the cost of causing the mechanical systems of the
Building to comply with any provisions of the Clean Air Act relating to the
elimination of the use of Freon in the cooling system of the Building
(including the cost of replacing equipment in connection therewith).
6A
<PAGE> 17
at the Premises without Landlord's prior written consent, by only in compliance
with all applicable Environmental Laws, as defined herein and with the highest
prevailing industry standards.
(B) Notwithstanding the obligation of Tenant to indemnify Landlord
pursuant to this Lease, Tenant shall, at its sole cost and expense, promptly
take all actions required by any federal, state or local governmental agency or
political subdivision, or necessary for Landlord to make full economic use of
the Premises or any portion of the Building, which requirements or necessity
arises from the Handling of Tenant's Hazardous Materials upon, about, above or
beneath the Premises or any portion of the Building. Such actions shall include,
but not be limited to, the investigation of the environmental condition of the
Premises or any portion of the Building; the preparation of any feasibility
studies or reports and the performance of any cleanup, remedial, removal or
restoration work. Tenant shall take all actions necessary to restore the
Premises or any portion of the Building to the condition existing prior to the
introduction of Tenant's Hazardous Materials, notwithstanding any less stringent
standards or remediation allowable under applicable Environmental Laws. Tenant
shall nevertheless obtain Landlord's written approval prior to undertaking any
actions required by this Section, which approval shall not be unreasonably
withheld so long as such actions would not potentially have a material adverse
long-term or short-term effect on the Premises or any portion of the Building.
(C) "Environmental Laws" means and includes all now and hereafter existing
statutes, laws, ordinances, codes, regulations, rules, rulings, orders, decrees,
directives, policies and requirements by any federal, state or local
governmental authority regulating, relating to or imposing liability or
standards of conduct concerning public health and safety or the environment.
(D) "Hazardous Materials" means: (a) any material or substance: (i) which
is defined or becomes defined as a "hazardous substance", "hazardous waste,"
"infectious waste," "chemical mixture or substance," or "air pollutant" under
Environmental Laws; (ii) containing petroleum, crude oil or any fraction
thereof; (iii) containing polychlorinated biphenyls (PCB's); (iv) containing
asbestos; (v) which is radioactive; (vi) which is infectious; or (b) any other
material or substance displaying toxic, reactive, ignitable or corrosive
characteristics, as all such terms are used in their broadest sense, and are
defined, or become defined by Environmental Laws; or materials which cause a
nuisance upon or waste to the Premises or any portion of the Building.
(E) "Handle," "Handled," or "Handling" shall mean any installation,
handling, generation, storage, treatment, use, disposal, discharge, release,
manufacture, refinement, presence, migration, emission, abatement, removal,
transportation, or any other activity of any type in connection with or
involving Hazardous Materials. (See Insert 6.04 on Page 7A)
ARTICLE VII - UTILITIES AND SERVICES
7.01 BUILDING SERVICES. Landlord agrees to furnish or cause to be
furnished to the Premises the following utilities and services, subject to the
conditions and standards set forth herein:
(A) Non-attended automatic elevator service.
(B) During Business Hours, air conditioning, heating and ventilation in
accordance with the specifications attached as Exhibit "F" hereto; provided,
however, that if Tenant shall require heating, ventilation or air conditioning
in excess of that which Landlord shall be required to provide hereunder,
Landlord may provide such additional heating, ventilation or air conditioning at
such rates and upon such additional conditions as shall be determined by
Landlord from time to time (Landlord shall provide air conditioning, heating and
ventilation service 24 hours a day to a single portion of the Premises
designated by Tenant [not to exceed 10,000 rentable square feet] at no
additional cost to Tenant [but subject to inclusion in Operating Expenses].).
(C) Water for drinking and rest room purposes.
(D) Reasonable janitorial and cleaning services, for office use purposes.
Specifications for Landlord's current janitorial and cleaning services are
attached hereto as Exhibit G (Landlord shall not materially change such
specifications unless, as changed, the janitorial and cleaning services to be
furnished to the Premises are comparable to those generally furnished in first
class office buildings in the O'Hare corridor). If the Premises are not used
exclusively as offices, or if the Tenant elects and Landlord consents, the
Premises shall be kept clean and in order by Tenant, at Tenant's expense, to
the satisfaction of Landlord and by persons reasonably approved by Landlord;
and, in all events, Tenant shall pay to Landlord the cost of removal of
Tenant's refuse and rubbish, to the extent that the same exceeds the refuse and
rubbish attendant to normal office usage.
(E) Electricity shall not be furnished by Landlord, but shall be furnished
by the approved electric utility company serving the area. Landlord shall permit
the Tenant to receive such service direct from such utility company at Tenant's
cost and shall permit Landlord's wire and conduits, to the extent available,
suitable and safely capable, to be used for such purposes. Tenant shall make all
necessary arrangements with the utility company for metering and paying for
electrical current furnished by it to Tenant, and Tenant shall pay for all
-7-
<PAGE> 18
Insert 6.04
(A) If Landlord obtains actual knowledge of the existence of any Hazardous
Materials other than Tenant's Hazardous Materials in the Building or on or under
the land underlying the Building or in or under the parking areas serving the
Building in violation of applicable law, then to the extent required by
applicable law, Landlord's sole obligation and responsibility to Tenant with
respect to such Hazardous Materials (except for the other remedies provided in
this Insert 6.04) shall be (a) the commencement within ninety (90) days after
Landlord obtains actual knowledge of the existence of such Hazardous Materials
in violation of applicable law, of the removal, encapsulation or other
appropriate containment program reasonably elected by Landlord and designed to
comply with then applicable law, and (b) the diligent prosecution of such
program to completion in a manner designed to cause such portions of the
Building or such portions of such land, as the case may be, to be in compliance
with then applicable law. For purposes hereof, the phrase "Landlord's actual
knowledge" shall mean the actual, and not constructive, knowledge of the
regional property manager of Heitman Properties Ltd. in charge of the Building
(or, if Heitman Properties Ltd. is no longer the managing agent for the
Building, the regional property manager [or individual with a comparable
position] for such successor managing agent) without such manager having
undertaken any investigation.
(B) Notwithstanding anything in the Lease to the contrary, if as a result
of the existence of Hazardous Materials in the Building or on or under the
Building in violation of Applicable Laws (unless such Hazardous Materials
constitute Tenant's Hazardous Materials), the Premises, or a "material part" (as
defined below) of the Premises, is rendered untenantable, inaccessible or
unusable for Tenant's business, in Tenant's good faith business judgment, for a
period of three (3) consecutive business days and Tenant does not occupy the
Premises, or such material portion thereof which is rendered untenantable,
inaccessible or unusable, as the case may be, during such 3-business day period,
then as Tenant's sole remedy for such interruption of occupancy (except for the
remedies provided in subparagraphs [C] and [D] of this Insert 6.04), Base Rent
and Tax and Operating Expense Adjustment payable for such portion of the
Premises which Tenant does not so occupy shall abate for the period commencing
on the expiration of said three (3) business day period and expiring on the date
Tenant determines in its good faith business judgment that it is able to resume
occupancy of the Premises or such material part thereof, as the case may be. As
used in this subparagraph (B) of Insert 6.04, the phrase "material part" shall
mean an amount in excess of five thousand (5,000) rentable square feet of the
Premises.
7A
<PAGE> 19
(C) Notwithstanding anything in this Lease to the contrary, if as a
result of the existence of Hazardous Materials in the Building or on or under
the Building in violation of Applicable Laws (unless such Hazardous Materials
constitute Tenant's Hazardous Materials), the Premises or a "material part" (as
defined below) of the Premises is rendered untenantable, inaccessible or
unusable for Tenant's business, in Tenant's good faith business judgment, for a
period of one hundred-twenty (120) consecutive days and Tenant does not occupy
the Premises, or such material portion thereof which is rendered untenantable,
inaccessible or unusable, as the case may be, during such one hundred-twenty
(120) day period, then in addition to the remedies set forth in subparagraphs
(B) and (D) of this Insert 6.04, and as Tenant's sole additional remedy for
such one hundred-twenty (120) day interruption of occupancy, Tenant shall have
the right to terminate this Lease and its obligations under this Lease by
giving Landlord written notice of such termination within ten (10) business
days after the expiration of such one hundred-twenty (120) day period. As used
in this subparagraph (C) of Insert 6.04, the phrase "material part" shall mean
an amount in excess of twenty-three thousand (23,000) rentable square feet of
the Premises.
(D) In the event that during the Lease Term Tenant discovers the
existence in the Premises or the Building of Hazardous Materials that have been
brought upon the Premises or the Building by Landlord, its employees, agents,
contractors or assignees and such Hazardous Materials were not in compliance
with all Applicable Laws which were in effect at the time the Hazardous
Materials were brought upon the Premises, such Hazardous Materials shall be
defined as "Landlord's Unlawful Hazardous Materials". Landlord shall indemnify,
defend and hold harmless Tenant against any actual out-of-pocket losses,
including reasonable attorneys' fees, which result from Tenant's liability to
any third person, not a party to this Lease (including governmental authorities)
for any claims, judgments, penalties or fines which arise from the presence on
the Premises of any Landlord's Unlawful Hazardous Materials. Landlord's
obligations under this indemnification shall terminate upon the expiration or
earlier termination of the Lease Term, provided, however, Landlord's
indemnification obligations under this Insert 6.04(D) for any good faith claim
or demand made by written notice from Tenant to Landlord given prior to the
expiration or termination of the Lease Term shall survive the expiration or
termination of the Lease Term.
(E) Notwithstanding anything in this Insert 6.04 to the contrary,
Tenant covenants and agrees that it will cooperate, in all reasonable
respects, with Landlord in investigating and resolving any claims by any of
Tenant's employees, agents, contractors or invitees that such person has been
injured by Hazardous Materials in the Building (provided Tenant shall not be
required to prevent or discourage any such person from asserting any such claim
which Tenant believes in good faith to be valid).
7B
<PAGE> 20
charges for electric current consumed on the Premises during Tenant's occupancy
thereof. The electricity used during the performance of janitor service, the
making of alterations or repairs in the Premises, and for the operation of the
Building's air conditioning system at times other than as provided in paragraph
(b) hereof, or the operation of any special air conditioning systems which may
be required for data processing equipment or for other special equipment or
machinery installed by Tenant, shall be paid for by Tenant. Tenant shall make
no alterations or additions to the electric equipment or appliances serving the
Premises and other parts of the Building without the prior written consent of
the Landlord in each instance (which consent shall not be unreasonably
withheld). Tenant may purchase from the Landlord or its agent at competitive
market rates all lamps, bulbs, ballasts and starters used in the Premises after
the initial installation thereof. Tenant covenants and agrees that at all times
its use of electric current shall never exceed the capacity of the feeders to
the Building or the risers or wiring installed thereon.
Any amounts which Tenant is required to pay to Landlord pursuant to this
Section 7.01 shall be payable within thirty (30) days after demand by Landlord
and shall constitute additional rent.
7.02 INTERRUPTION OF SERVICES. Landlord shall not be liable for any
failure to furnish, stoppage of, or interruption in furnishing any of the
services or utilities described in Section 7.01, when such failure is caused by
accident, breakage, repairs, strikes, lockouts, labor disputes, labor
disturbances, governmental regulation, civil disturbances, acts of war,
moratorium or other governmental action or any other cause beyond Landlord's
reasonable control, and, in such event, Tenant shall not be entitled to any
damages nor shall any failure or interruption abate or suspend Tenant's
obligation to pay Base Rent and additional rental required under this Lease
(Except as provided in Insert No. 2 of the Rider) or constitute or be construed
as a constructive or other eviction of Tenant. Further, in the event any
governmental authority or public utility promulgates or revises any law,
ordinance, rule or regulation, or issues mandatory controls or voluntary
controls relating to the use or conservation of energy, water, gas, light or
electricity, the reduction of automobile or other emissions, or the provision of
any other utility or service, Landlord may take any reasonably appropriate
action to comply with such law, ordinance, rule, regulation, mandatory control
or voluntary guideline without affecting Tenant's obligations hereunder. Tenant
recognizes that any security services provided by Landlord at the Building are
for the protection of Landlord's property and under no circumstances shall
Landlord be responsible for, and Tenant waives any rights with respect to,
providing security or other protection for Tenant or its employees, invitees or
property in or about the Premises or the Building. (See Insert No. 2 of the
Rider.)
ARTICLE VIII -- MAINTENANCE AND REPAIRS
8.01 LANDLORD'S OBLIGATIONS. Except as provided in Sections 8.02 and 8.03
below, Landlord shall maintain the Building (including the exterior windows of
the Premises) in reasonable order and repair consistent with other comparable
buildings in the O'Hare corridor throughout the Lease Term; provided, however,
that Landlord shall not be liable for any failure to make any repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need for such repairs or maintenance is given
to Landlord by Tenant. Except as provided in Section 7.02 or in Article XI,
there shall be no abatement of Rent, nor shall there be any liability of
Landlord, by reason of any injury or inconvenience to, or interference with,
Tenant's business or operations arising from the making of, or failure to make,
any maintenance or repairs in or to any portion of the Building. (See Article
XXXIV for Tenant's limited self-help right.)
8.02 TENANT'S OBLIGATIONS. During the Lease Term, Tenant shall, at its
sole cost and expense, maintain the Premises in good order and repair. Further,
Tenant shall be responsible for, and upon demand by Landlord shall promptly
reimburse Landlord for, any damage to any portion of the Building or the
Premises caused by (a) Tenant's activities in the Building or the Premises; (b)
the performance or existence of any alterations, additions or improvements made
by Tenant in or to the Premises; (c) the installation, use, operation or
movement of Tenant's property in or about the Building or the Premises; or (d)
any negligent act or omission or wilful misconduct by Tenant or its officers,
partners, employees, agents or contractors.
8.03 LANDLORD'S RIGHTS. Landlord and its contractors shall have the
right, at all reasonable times, to enter upon the Premises to make any repairs
to the Premises or the Building reasonably required or deemed reasonably
necessary by Landlord and to erect such equipment, including scaffolding, as is
reasonably necessary to effect such repairs. (See Insert No. 8.03 on Page 8A.)
ARTICLE IX -- ALTERATIONS, ADDITIONS AND IMPROVEMENTS
9.01 LANDLORD'S CONSENT; CONDITIONS. Tenant shall not make or permit
to be made any alterations, additions, or improvements in or to the Premises
("Alterations") except in accordance with the Work Letter Agreement attached
hereto as Exhibit B.
-8-
<PAGE> 21
Insert 8.03
Landlord agrees that it will give Tenant at least 24 hours prior oral
notice of any repairs to be performed in the Premises if such repairs are to be
performed during Business Hours; provided, however, notice to Tenant shall not
be required if such repairs result from a breach or default by Tenant under
this Lease or arise out of or must be performed or remedied in an emergency
situation. Landlord agrees to use reasonable efforts to minimize interference
with Tenant's business operations in connection with Landlord's entry into the
Premises, provided Landlord shall be entitled to enter the Premises during
normal business hours.
8A
<PAGE> 22
(see Insert 9.01 on Page 9A.)
9.02 PERFORMANCE OF ALTERATIONS WORK. All work relating to the
Alterations shall be performed in compliance with the plans and specifications
approved by Landlord (to the extent Landlord's approval is required pursuant to
this Lease or the Work Letter Agreement), all applicable laws, ordinances,
rules, regulations and directives of all governmental authorities having
jurisdiction and the requirements of all carriers of insurance on the Premises
and the Building, the Board of Underwriters, Fire Rating Bureau, or similar
organization. All work shall be performed in a diligent, first class manner and
so as not to unreasonably interfere with any other tenants or occupants of the
Building.
9.03 LIENS. Tenant shall pay when due all costs for work performed and
materials supplied to the Premises. Tenant shall keep Landlord, the Premises and
the Building free from all liens, stop notices and violation notices relating to
the Alterations or any other work performed for, materials furnished to or
obligations incurred by Tenant and Tenant shall protect, indemnify, hold
harmless and defend Landlord, the Premises and the Building of and from any and
all loss, cost, damage, liability and expense, including attorneys' fees,
arising out of or related to any such liens or notices. Tenant shall satisfy or
otherwise discharge all liens, stop notices or other claims or encumbrances
within thirty (30) days after Landlord notifies Tenant in writing that any such
lien, stop notice, claim or encumbrance has been filed. If Tenant fails to pay
and remove such lien, claim or encumbrance with such thirty (30) days, Landlord,
at its election, may pay and satisfy the same and in such event the
sums so paid
by Landlord, with interest from the date of payment at the rate set forth in
Section 4.06 hereof for amounts owed Landlord by Tenant shall be deemed to be
additional rent due and payable by Tenant at once without notice or demand. (See
Insert 9.03 on Page 9A.)
9.04 LEASE TERMINATION. Except as provided in this Section 9.04, upon
expiration or earlier termination of this Lease Tenant shall surrender the
Premises to Landlord in the same condition as when received, subject to
reasonable wear and tear. All Alterations shall become a part of the Premises
and shall become the property of Landlord upon the expiration or earlier
termination of this Lease, unless Landlord shall, by written notice given to
Tenant, require Tenant to remove some or all of Tenant's Alterations, in which
event Tenant shall promptly remove the designated Alterations and shall promptly
repair any resulting damage, all at Tenant's sole expense. All business and
trade fixtures, machinery and equipment, furniture, movable partitions and items
of personal property owned by Tenant or installed by Tenant at its expense in
the Premises shall be and remain the property of Tenant; upon the expiration or
earlier termination of this Lease, Tenant shall, at its sole expense, remove all
such items and repair any damage to the Premises or the Building caused by such
removal. If Tenant fails to remove any such items or repair such damage promptly
after the expiration or earlier termination of the Lease, Landlord may, but need
not, do so with no liability to Tenant, and Tenant shall pay Landlord the cost
thereof upon demand. (See Insert 9.04 on Page 9A.)
ARTICLE X - INDEMNIFICATION AND INSURANCE
10.01 INDEMNIFICATION.
(A) Tenant agrees to protect, indemnify, hold harmless and defend
Landlord, its property manager and any mortgagee or ground lessor, and each of
their respective partners, directors, officers, and employees, successors and
assigns, (except to the extent of the losses described below are caused by the
negligence of Landlord, its agents and employees), from and against:
(i) any and all loss, cost, damage, liability or expense as
incurred (including but not limited to reasonable attorneys' fees and legal
costs) arising out of or related to any claim, suit or judgment brought by
or in favor of any person or persons for damage, loss or expense due to,
but not limited to, bodily injury, including death, or property damage
sustained by such person or persons which arises out of, is occasioned by
or is in any way attributable to the use or occupancy of the Premises
-9- 10/18/93
<PAGE> 23
Insert 9.01
Anything set forth in Section 9.01 or the Work Letter Agreement to the
contrary notwithstanding, Landlord's advance approval shall not be required for
painting and recarpeting performed within the Premises. However, Tenant shall
give Landlord advance written notice prior to commencing any repainting or
recarpeting and Tenant shall advise Landlord (and provide samples, if requested
by Landlord), of the specifications for such work.
Insert 9.03
Notwithstanding the provisions of Section 9.03 or the Work Letter
Agreement to the contrary, for so long as this Lease is in full force and
effect and Tenant is not in material monetary breach or default under this
Lease" (as hereinafter defined), beyond any cure period, or otherwise in
material breach or default under this Lease, beyond any cure period, Tenant
shall have the right to contest, in good faith, any liens affecting the
Premises or any other portion of the Building which, by the terms of Section
9.03, Tenant is responsible to discharge, provided Tenant furnishes Landlord
with a bond, title insurance endorsement or other reasonable security and for
so long as such bond, title insurance endorsement or other security provides
Landlord with reasonable security.
Insert 9.04
Anything set forth in Section 9.04 of the Lease to the contrary
notwithstanding, the only items (whether Alterations, Work [as defined in the
Work Letter Agreement] or part of Tenant's existing tenant improvements,
equipment or apparatus) that Landlord reserves the right to require Tenant to
remove at the expiration or early termination of this Lease or the Lease Term,
as the case may be, are the following:
1. any raised flooring or other computer flooring (except the
currently existing computer flooring on the third floor of the
Building);
2. supplemental heating, ventilation and air conditioning equipment
and associated plumbing (except any additional heat pumps and
related apparatus installed above the ceiling);
3. internal stairways;
4. security systems and card readers (excluding related wiring); and
5. Uninterrupted power apparatus.
9A
<PAGE> 24
Tenant understands that nothing contained in this Insert 9.04 shall relieve
Tenant of its duty and obligation to remove from the Premises as provided in
Section 9.04 all business and trade fixtures, machinery and equipment,
furniture, moveable partitions and items and personal property owned by Tenant
or installed by Tenant at its expense in the Premises, or to repair any damage
to the Premises or the Building caused by the removal therefrom of any
alterations, improvements, equipment, apparatus, trade fixtures, machinery,
furniture, moveable partitions or items of personal property (provided Tenant
shall not be required to repaint or recarpet the Premises or to repair minor
damage or to remove data, computer, telephone or other cabling).
9B
<PAGE> 25
by Tenant or the acts or omissions of Tenant or its agents, employees,
contractors, assigns or subtenants in the Premises or the negligent acts or
omissions of Tenant or its agents, employees, contractors, assigns or subtenants
in the Building, except that caused by the sole active negligence or willful
misconduct of Landlord or its agents or employees. Such loss or damage shall
include, but not be limited to, any injury or damage to, or death of, Landlord's
employees or agents or damage to the Premises or any portion of the Building.
(ii) any and all environmental damages which arise from: (i) the
Handling of any Tenant's Hazardous Materials, as defined in Section 6.03 or (ii)
the breach of any of the provisions of this Lease. For the purpose of this
Lease, "environmental damages" shall mean (a) all claims, judgments, damages,
penalties, fines, costs, liabilities and losses (including without limitation,
diminution in the value of the Premises or any portion of the Building, damages
for the loss of or restriction on use of rentable or usable space or of any
amenity of the Premises or any portion of the Building, and from any
adverse impact of Landlord's marketing of space); (b) all reasonable sums paid
for settlement of claims, reasonable attorney's fees, consultants' fees, and
experts' fees; and (c) all costs incurred by Landlord in connection with
investigation or remediation relating to the Handling of Tenant's Hazardous
Materials, whether or not required by Environmental Laws, necessary for
Landlord to make full economic use of the Premises or any portion of the
Building, or otherwise required under this Lease. To the extent that Landlord
is held strictly liable by a court or other governmental agency of competent
jurisdiction under any Environmental Laws, Tenant's obligation to Landlord and
the other indemnities under the foregoing indemnification shall likewise be
without regard to fault on Tenant's part with respect to the violation of any
Environmental Law which results in liability to the indemnities. Tenant's
obligations and liabilities pursuant to this Section 10.01 shall survive the
expiration or earlier termination of this Lease.
(B) Landlord agrees to protect, indemnify, hold harmless and defend
Tenant and its partners, directors, officers, employees, successors and assigns
from and against any and all loss, cost, damage, liability of expense as
incurred, including reasonable attorneys' fees, and legal costs with respect to
any claim of damage or injury to persons or property at the Premises, or the
Building caused by the negligence of Landlord or its authorized agents or
employees or contractors.
(C) Notwithstanding anything to the contrary contained herein, nothing
shall be interpreted or used to in any way affect, limit, reduce or abrogate any
insurance coverage provided by any insurers to either Tenant or Landlord.
(D) Notwithstanding anything to the contrary contained in this Lease,
nothing herein shall be construed to infer or imply that Tenant or Landlord
is a partner, joint venturer, agent, employee, or otherwise acting by or at
the direction of the other party to this Lease.
10.02 PROPERTY INSURANCE. (See Insert 10.02/10.03 on Page 10A.)
(A) At all times during the Lease Term, Tenant shall procure and maintain,
at its sole expense, "all-risk" property insurance, in an amount not less than
one hundred percent (100%) of the replacement cost covering (a) all leasehold
improvements in and to the Premises which are made at the expense of Tenant; (b)
all floor and wall coverings; and (c) Tenant's trade fixtures, equipment and
other personal property from time to time situated in the Premises. The
proceeds of such insurance shall be used for the repair or replacement of the
property so insured, except that if not so applied or if this Lease is
terminated following a casualty, the proceeds applicable to the leasehold
improvements shall be paid to Landlord and the proceeds applicable to Tenant's
personal property shall be paid to Tenant.
(B) At all times during the Lease Term, Tenant shall procure and maintain
business interruption insurance in such amount as will reimburse Tenant for
direct or indirect loss of earnings attributable to all perils insured against
in Section 10.02(A).
(C) Notwithstanding the foregoing, for so long as Galileo International
Partnership (or an Affiliate as hereinafter defined) is the "Tenant" under this
Lease and the Premises consist of at least 50,000 rentable square feet, Tenant
shall not be required to maintain the property insurance described in
subparagraphs (A) and (B) above.
10.03 LIABILITY INSURANCE
(A) At all times during the Lease Term, Tenant shall procure and maintain,
at its sole expense, general liability insurance applying to the use and
occupancy of the Premises and the business operated by Tenant. Such insurance
shall have a minimum combined single limit of liability of at least $1,000,000
per occurrence and a general aggregate limit of at least $2,000,000. All such
policies shall be written to apply to all bodily injury, property damage,
personal injury losses and shall be endorsed to include Landlord and its
property manager, beneficiaries, partners, employees, and any deed of
trust holder or mortgagee of Landlord or any ground lessor as additional
insureds. Such liability insurance shall be written as primary policies, not
excess or contributing with or secondary to any other insurance as may be
available to the additional insureds, insofar as the claim relates to a loss
arising out of the negligence of Tenant or its agents, employees, contractors,
assigns or subtenants.
(B) Prior to the sale, storage, use or giving away of alcoholic beverages
on or from the Premises by Tenant or another person, Tenant, at its own expense,
shall obtain a policy or policies of insurance issued
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<PAGE> 26
Insert 10.02/10.03
(A) During the Lease Term, Landlord agrees to maintain in force and effect
all-risk fire and extended coverage insurance (or a reasonable equivalent
thereof) in an amount equal to the replacement cost of the Building (insuring
the shell and core of the Building, the Building systems and those tenant
improvements and Alterations of Tenant which Landlord agrees to insure pursuant
to Section (B) of this Insert). The cost and expense of such insurance shall be
part of the Operating Expenses.
(B) Notwithstanding anything to the contrary in Section 10.02 (A),
Landlord agrees that it will insure as the primary carrier (i) those currently
existing leasehold improvements in the Premises described in detail in a
supplemental letter which Tenant shall furnish to Landlord not later than ten
(10) business days from the date this Lease is signed by Tenant and delivered to
Landlord (which letter shall also include Tenant's reasonable estimate of the
insurable value of such leasehold improvements) and (ii) all future alterations
which Tenant may make or have installed in the Premises and of which Tenant
shall give Landlord written notice (together with sufficient specificity
[including a reasonable estimate of the insurable value] to permit Landlord to
insure the same). The cost and expense of such insurance shall be part of
Operating Expenses. Landlord agrees that it will not file a claim under any
insurance policy maintained by Tenant to the extent the loss relates to any
leasehold improvements or alterations that are required to be covered by the
insurance policy of Landlord described in this subparagraph (B).
(C) At all times during the Lease Term, Landlord shall procure and
maintain general liability insurance with a combined single limit of liability
of at least $5,000,000 per occurrence and a general aggregate limit of
liability of at least $5,000,000.
10A
<PAGE> 27
by a responsible insurance company and in a form reasonably acceptable to
Landlord saving harmless and protecting Landlord and the Premises against any
and all damages, claims, liens, judgments, expenses and costs, including actual
attorneys' fees, arising under any present or future law, statute, or ordinance
of the State of Illinois or other governmental authority having jurisdiction of
the Premises, by reason of any storage, sale, use or giving away of alcoholic
beverages on or from the Premises. Such policy or policies of insurance shall
have a minimum combined single limit of $1,000,000 per occurrence and shall
apply to bodily injury, fatal or nonfatal; injury to means of support; and
injury to property of any person. Such policy or policies of insurance shall
name the Landlord and its agents, beneficiaries, partners, employees and any
mortgagee of Landlord or any ground lessor of Landlord as additional insureds.
10.04 WORKERS' COMPENSATION INSURANCE. At all times during the Lease
Term, Tenant shall procure and maintain Workers' Compensation Insurance in
accordance with the laws of the State of Illinois, and Employer's Liability
insurance with a limit not less than $1,000,000 Bodily Injury Each Accident;
$1,000,000 Bodily Injury By Disease - Each Person; and $1,000,000 Bodily Injury
By Disease - Policy Limit.
10.05 POLICY REQUIREMENTS. All insurance required to be maintained by
Tenant shall be issued by insurance companies authorized to do insurance
business in the State of Illinois and rated not less than A-VII in Best's
Insurance Guide. A certificate of insurance (or, at Landlord's option, copies
of the applicable policies) evidencing the insurance required under this
Article X shall be delivered to Landlord not less than thirty (30) days prior
to the Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any deed of trust holder, mortgagee or ground lessor designated by Landlord to
Tenant. Tenant shall furnish Landlord with a replacement certificate with
respect to any insurance not less than thirty (30) days prior to the expiration
of the current policy. Tenant shall have the right to provide the insurance
required by this Article X pursuant to blanket policies, but only if such
blanket policies expressly provide coverage to the Premises and the Landlord as
required by this Lease.
10.06 WAIVER OF SUBROGATION. Notwithstanding anything in this Lease to
the contrary, each party hereby waives any right of recovery against the other
for injury or loss due to hazards covered by insurance (or, with respect to
Tenant, which would have been covered by insurance had Tenant not elected not
to carry property insurance as provided in Section 10.02(C), or, with respect
to Landlord, which would have been covered by insurance had Landlord not
elected to self-insure as provided in subparagraph (D) of Insert 10.02/10.03)
to the extent of the injury or loss covered thereby. Any policy of insurance to
be provided by Tenant or Landlord pursuant to this Article X shall contain a
clause denying the applicable insurer any right of subrogation against the
other party. If the cost of such clause exceeds a commercially reasonable
amount, then the party seeking the benefit of such clause shall bear the cost
of procuring the same.
10.07 FAILURE TO INSURE. If Tenant fails to maintain any insurance
which Tenant is required to maintain pursuant to this Article X, Tenant shall
be liable to Landlord for any lessor cost resulting from such failure to
maintain. Landlord shall have the right, in its sole discretion, to procure and
maintain such insurance which Tenant is required to maintain hereunder and the
cost thereof shall be deemed additional rental due and payable by Tenant.
Tenant may not self-insure against any risks required to be covered by
insurance without Landlord's prior written consent.
ARTICLE XI - DAMAGE OR DESTRUCTION
11.01 TOTAL DESTRUCTION. Except as provided in Section 11.03 below,
this Lease shall automatically terminate if the Premises are totally destroyed.
11.02 PARTIAL DESTRUCTION OF PREMISES. If a Premises Casualty (as
defined in Insert No. 3) shall occur and, in Landlord's reasonable opinion, the
Premises (inclusive of any Alterations and other Tenant improvements that
Landlord has agreed to insure) can be restored to its pre-existing condition
within one hundred eighty (180) days after the date of the damage or
destruction, Landlord shall, upon written notice from Tenant to Landlord of
such damage, except as provided in Section 11.03, promptly and with due
diligence repair any damage to the Premises (Inclusive of any Alterations and,
other Tenant improvements that Landlord has agreed to insure) and, until such
repairs are completed, the Rent shall be abated from the date of damage or
destruction in the same proportion that the rentable area of the portion of the
Premises which is unusable by Tenant in its good faith business judgment in the
conduct of its business bears to the total rentable area of the Premises. If
such repairs cannot, in Landlord's reasonable opinion, be made within said one
hundred eighty (180) day period, then Landlord may, at its option, exercisable
by written notice given to the other party within forty-five (45) days after
the date of the damage or destruction elect to terminate this Lease as of the
date of the damage or destruction.
11.03 EXCEPTIONS TO LANDLORD'S OBLIGATIONS. Notwithstanding anything to
the contrary contained in this Article XI, Landlord shall have no obligation to
repair the Premises if either: (a) the Building in which the
10/18/93
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<PAGE> 28
Premises are located is so damaged as to require repairs to the Building
exceeding forty percent (40%) of the full insurable value of the Building; or
(b) Landlord by written notice to Tenant within forty-five (45) days after the
damage or destruction elects to demolish the Building in which the Premises are
located; or (c) the damage or destruction, the reasonably estimated cost of
repair of which exceeds $500,000, occurs less than one (1) year prior
to the Expiration Date, after giving effect to any exercised renewal option.
Further, Tenant's Rent shall not be abated if either (i) the damage or
destruction is repaired within five (5) business days after Landlord receives
written notice from Tenant of the casualty, or (ii) Tenant, or any officers,
partners, employees or agents of Tenant, or any assignee or subtenant of Tenant,
is primarily responsible for the damage or destruction. If Landlord
affirmatively elects not to repair the Premises as provided in the first
sentence of this Section 11.03, then notwithstanding the immediately preceding
sentence, Tenant may elect to terminate this Lease.
11.04 Waiver. The provisions contained in this Lease shall supersede
any contrary laws now or hereafter in effect relating to damage or destruction.
(See Insert No. 3 of the Rider.)
ARTICLE XII - CONDEMNATION
12.01 Taking. If the entire Premises or so much of the Premises as to
render the balance unusable by Tenant for the conduct of business (as
determined by Tenant in its good faith business judgment) shall be taken by
condemnation, sale in lieu of condemnation or in any other manner for any
public or quasi-public purpose (collectively "Condemnation"), this Lease shall
terminate on the date that title or possession to the Premises is taken by the
condemning authority, whichever is earlier.
12.02 Award. In the event of any Condemnation, the entire award for
such taking shall belong to Landlord. Tenant shall have no claim against
Landlord or the award for the value of any unexpired term of this Lease or
otherwise. Tenant shall be entitled to independently pursue a separate award in
a separate proceeding for Tenant's relocation costs directly associated with
the taking and the unamortized costs of any leasehold improvements paid for by
Tenant, provided such separate award does not diminish Landlord's award.
12.03 Temporary Taking. No temporary taking of the Premises shall
terminate this Lease or entitle Tenant to any abatement of the Rent payable to
Landlord under this Lease; provided, further, that any award for such temporary
taking shall belong to Tenant to the extent that the award applies to any time
period during the Lease Term and to Landlord to the extent that the award
applies to any time period outside the Lease Term.
(As used herein, a taking shall be deemed "temporary" if it does not exceed one
hundred twenty [120] days.)
ARTICLE XIII -
13.01 [Intentionally Omitted]
ARTICLE XIV - ASSIGNMENT AND SUBLETTING
14.01 Restriction. Without the prior written consent of Landlord,
Tenant shall not, either voluntarily or by operation of law, assign, encumber,
or otherwise transfer this Lease or any interest herein, or sublet the Premises
or any part thereof, or permit the Premises to be occupied by anyone other than
Tenant or Tenant's employees.* An assignment, subletting or other action in
violation of the foregoing shall be void and, at Landlord's option, shall
constitute a material breach of this Lease. For purposes of this Section 14.01,
an assignment shall include any transfer of any interest in this Lease or the
Premises by Tenant pursuant to a merger, division, consolidation or
liquidation, or pursuant to a change in ownership of Tenant involving a
transfer of voting control in Tenant (whether by transfer of partnership
interests, corporate stock or otherwise). Notwithstanding anything contained in
this Article XIV to the contrary, Tenant expressly covenants and agrees not to
enter into any lease, sublease, license, concession or other agreement for use,
occupancy or utilization of the Premises which provides for rental or other
payment for such use, occupancy or utilization based in whole or in part on the
net income or profits derived by any person from the property leased, used,
occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales), and that any such purported lease, sublease,
license, concession or other agreement shall be absolutely void and ineffective
as a conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises. (See Insert No. 4 of the Rider.)
14.02 Notice to Landlord. If Tenant desires to assign this Lease or any
interest herein (other than to an Affiliate), or to sublet all or any part of
the Premises (other than to an Affiliate), then at least twenty (20) business
days prior to the effective date of the proposed assignment or sublet (or
twenty [20] days prior to the effective date of a proposed subletting of less
than an entire floor), Tenant shall submit to Landlord in connection with
Tenant's request for Landlord's consent;
- - -------------
*See Insert 14.01 on Page 12A)
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<PAGE> 29
Insert 14.01
Anything set forth in Article XIV to the contrary notwithstanding,
Tenant shall have the right to pledge and grant a security interest in its
moveable trade fixtures and other personal property located in the Premises as
security for third party financing, and in such event Landlord agrees to waive
any claim it might have in or to said moveable trade fixtures and other
personal property in the event of any breach or default by Tenant under this
Lease or under the terms of said third party financing.
12A
<PAGE> 30
(A) A statement containing (i) the name and address of the proposed
assignee or subtenant; (ii) such financial information with respect to the
proposed assignee or subtenant as Landlord shall reasonably require; (iii) the
type of use proposed for the Premises; and (iv) all of the principal terms of
the proposed assignment or subletting; and
(B) Four (4) originals of the assignment or sublease and four (4)
originals of the Landlord's Consent to Sublease with such reasonable changes to
Landlord's form as Tenant may request to conform such form with the terms of
this Lease, or Assignment and Assumption of Lease and Consent with such
reasonable changes to Landlord's form as Tenant may request to conform such form
with the terms of this Lease.
14.03 LANDLORD'S RECAPTURE RIGHTS. Except with respect to a transfer to an
Affiliate, at any time within twenty (20) business days (or twenty [20] days, as
the case may be) after Landlord's receipt of all (but not less than all) of the
information and documents described in Section 14.02 above for any sublease or
assignment except for a sublease or assignment to an Affiliate (as defined in
Insert No. 4 of the Rider) permitted by the provisions of Insert No. 4 in the
Rider, Landlord may, at its option by written notice to Tenant, elect to: (a)
sublease the Premises or the portion thereof proposed to be sublet by Tenant
upon the same terms as those offered to the proposed subtenant; (b) take an
assignment of the Lease upon the same terms as those offered to the proposed
assignee; or (c) terminate the Lease in its entirety or as to the portion of the
Premises proposed to be assigned or sublet, with a proportionate adjustment in
the Rent payable hereunder if the Lease is terminated as to less than all of the
Premises. If Landlord does not exercise any of the options described in the
preceding sentence, then, during the above-described twenty (20) business day
period (or twenty [20] day period, as the case may be), Landlord shall either
consent or deny its consent to the proposed assignment or subletting. If
Landlord fails to timely consent or deny its consent to the proposed assignment
or subletting, Landlord shall be deemed to have consented thereto. Landlord
shall pay the reasonable cost of erecting partitioning to demise and separate
any such space recaptured by Landlord from the contiguous portion of the
Premises.
14.04 LANDLORD'S CONSENT; STANDARDS. Landlord's consent shall not be
unreasonably withheld; but, in addition to any other grounds for denial,
Landlord's consent shall be deemed reasonably withheld if, in Landlord's good
faith judgment: (i) the proposed assignee or subtenant does not have the
financial strength to perform its obligations under this Lease or any proposed
sublease**, (ii) the business and operations of the proposed assignee or
subtenant are not of comparable quality to the business and operations being
conducted by other tenants in the Building; (iii) the proposed assignee or
subtenant intends to use any part of the Premises for a purpose not permitted
under this Lease; (iv); (v) the proposed assignee or subtenant is
disreputable; or (vi) the use of the Premises or the Building by the proposed
assignee or subtenant would, in Landlord's reasonable judgment significantly
increase the pedestrian traffic in and out of the Building (such as a trade
school or governmental agency) or would require any alterations to the building
to comply with applicable laws.
*14.05 ADDITIONAL RENT. If Landlord consents to any such assignment or
subletting, fifty percent (50%) of the amount ("Excess Consideration") by which
(i) all sums or other economic consideration received by Tenant in connection
with such assignment or subletting, whether denominated as rental or otherwise,
minus (ii) the sum of the reasonable brokerage commission, contribution to new
subtenant or assignee leasehold improvements and other cash concessions or rent
abatements granted by Tenant to such subtenant or assignee, amortized on a
straight-line basis over the term of such sublease or assignment, exceeds, in
the aggregate, the total sum which Tenant is obligated to pay Landlord under
this Lease for the term of such sublease or assignment (prorated to reflect
obligations allocable to less than all of the Premises under a sublease) shall
be paid to Landlord as additional rent under the Lease without affecting or
reducing any other obligation of Tenant hereunder. The provisions of this
Section 14.05 shall not apply to a sublease or assignment to an Affiliate
permitted by the provisions of Insert No. 4 of the Rider.
14.06 LANDLORD'S COSTS. If Tenant shall assign this Lease or shall sublet
all or any part of the Premises (other than to an Affiliate) or shall request
the consent of Landlord to any assignment, subletting or other act (other than
to an Affiliate), Tenant shall pay to Landlord as additional rent Landlord's
out-of-pocket costs related thereto, including Landlord's reasonable attorneys'
fees.
14.07 CONTINUING LIABILITY OF TENANT. Notwithstanding any assignment or
sublease, Tenant shall remain as fully and primarily liable for the payment of
Rent and for the performance of all other obligations of Tenant contained in
this Lease to the same extent as if the assignment or sublease had not occurred;
provided, however, that any act or omission of any assignee or subtenant, other
than Landlord, that violates the terms of this Lease shall be deemed a violation
of this Lease by Tenant.
14.08 NON-WAIVER. The consent by Landlord to any assignment or subletting
shall not relieve Tenant, or any person claiming through or by Tenant, of the
obligation to obtain the consent of Landlord, pursuant to this Article XIV, to
any further assignment or subletting. In the event of an assignment or
subletting, Landlord may collect rent from the assignee or the subtenant without
waiving any rights hereunder and collection of the rent from a person other than
Tenant shall not be deemed a waiver of any of Landlord's rights under this
Article XIV, an acceptance of assignee or subtenant as Tenant, or a release of
Tenant from the performance of Tenant's obligations under this Lease.
- - ---------------------
*(See Insert 14.05 on Page 13A)
**(provided that if the proposed assignee or sublessee is then a Building
Occupant [as hereinafter defined], Landlord shall not be entitled to consider
its financial strength)
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<PAGE> 31
Insert 14.05
(A) Subject to the provisions of subparagraph (B) of this Insert No.
14.05, anything set forth in Section 14.05 to the contrary notwithstanding, for
and in respect to any sublease or assignment transaction entered into by Tenant
or any Affiliate of Tenant with a tenant, subtenant, assignee or other user or
occupant of space in the Building (such person or entity being hereinafter
called a "Building Occupant"), the following provisions shall apply:
(i) One hundred percent (100%) (rather than fifty percent [50%]) of
all Excess Consideration as received by Tenant shall be paid to Landlord
as additional rent under the Lease without affecting or reducing any
other obligation of Tenant under this Lease.
(ii) For and in respect to all portions of the Premises subleased or
assigned by Tenant to Building Occupants in excess of the first five
thousand (5,000) square feet, in the aggregate, of the Premises
subleased or assigned to Building Occupants, Tenant shall pay Landlord
Three Dollars ($3.00) per rentable square foot for all such space so
leased to Building Occupants (which amount shall be due and payable to
Landlord simultaneously with the possession of such space by each such
Building Occupant pursuant to each such sublease/assignment
transaction).
(B) The provisions of subparagraph (A) of this Insert No. 14.05 shall
not pertain or apply to any sublease for a sublease term (including extension
options) of less than twenty-four (24) months regardless of the size or the
amount of space that is subject to such sublease and any such sublease shall
not be counted in determining the 5,000 square feet described in clause (ii) of
subparagraph (A) of this Insert 14.05.
13A
<PAGE> 32
ARTICLE XV -- DEFAULT AND REMEDIES
15.01 EVENTS OF DEFAULT BY TENANT. The occurrence of any of the
following shall constitute a material default and breach of this Lease by
Tenant:
(A) The failure by Tenant to pay Base Rent or make any other
payment required to be made by Tenant hereunder as and when due and the
continuation of such failure for five (5) business days (Landlord hereby
agreeing to give Tenant written notice and five (5) business days to
cure same the first two (2) times such failure occurs in any twelve (12)
month period).
(C) The failure by Tenant to observe or perform any other
provision of this Lease to be observed or performed by Tenant, other
than those described in Section 15.01(A) above, if such failure
continues for thirty (30) days after written notice thereof by
Landlord to Tenant provided, however, that if the nature of the default
is such that it cannot reasonably be cured within the thirty (30) day
period, no default shall exist if tenant commences the curing of the
default within thirty (30) day period and thereafter diligently
prosecutes the same to completion. The thirty (30) day notice
described herein shall be in lieu of, and not in addition to, any
notice required under law now or hereinafter in effect requiring that
notice of default be given prior to the commencement of an unlawful
detainer or other legal proceedings.
(D) The making by Tenant of any general assignment for the benefit
of creditors, the filing by or against Tenant of a petition under any
federal or state bankruptcy or insolvency laws (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60)
days after filing); the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets at the Premises or
Tenant's interest in this Lease or the Premises, when possession is not
restored to Tenant within sixty (60) days; or the attachment, execution
or other seizure of substantially all of Tenant's assets located at the
premises or Tenant's interest in this Lease or the Premises, if such
seizure is not discharged within sixty (60) days.
15.02 LANDLORD'S RIGHT TO TERMINATE UPON TENANT DEFAULT. In the event
of any default by Tenant as provided in Section 15.01 above, Landlord shall
have the right upon five (5) days written notice to Tenant (Tenant hereby
irrevocably waiving all other notices and demands, statutory or otherwise
including without limitation, any notice otherwise required in connection with
any forcible entry and detainer action), to terminate this Lease and Tenant's
right to possession of the premises without terminating this Lease in which
event Landlord shall be entitled to receive from Tenant:
(A) The worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus
(B) The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss Tenant proves could
have been reasonably avoided; plus
(C) The worth at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably
avoided; plus
(D) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and
(E) At Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by
applicable law.
As used in subparagraphs (A) and (B) above, "worth at the time of
award" shall be computed by discounting such amounts at a rate of interest
equal to one percent (1%) per annum plus the rate then announced by LaSalle
National Bank (Chicago office) as its "prime" or "corporate base" rate. As used
in paragraph (C) above, "worth at the time of award" shall be computed by
discounting such amount at the "prime" or "corporate base" rate of LaSalle
National Bank at the time of award plus one percent (1%).
15.03 LANDLORD'S RIGHT TO CONTINUE LEASE UPON TENANT DEFAULT. In the
event of a default of this Lease and the continuation of such default beyond
any applicable cure period, if Landlord does not elect to terminate this Lease
as provided in Section 15.02 above, Landlord may from time to time, without
terminating this Lease, enforce all
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<PAGE> 33
of its rights and remedies under this Lease. Without limiting the foregoing,
Landlord may continue this Lease in effect after Tenant's default and recover
Rent as it becomes due. Landlord shall, to the extent required by applicable
law, use reasonable efforts to mitigate damages and to re-let all or any part of
the Premises (it being understood and agreed that in no event shall Landlord be
obligated to prefer or preferentially lease any portion of the Premises over any
other unleased space in the Building). In the event Landlord at its sole
discretion elects to re-let the Premises, to the fullest extent permitted by
law, the proceeds of any reletting shall be applied first to pay to Landlord all
reasonable costs and expenses of such reletting (including without limitation,
reasonable costs and expenses of retaking or repossessing the Premises, removing
persons and property therefrom, securing new tenants*, including expenses for
redecoration*, alterations* and other costs in connection with preparing the
Premises for the new Tenant*, and if Landlord shall maintain and operate the
Premises, the costs thereof) and receivers' fees incurred in connection with the
appointment of and performance by a receiver to protect the Premises and
Landlord's interest under this Lease and any necessary or reasonable
alterations; second, to the payment of any indebtedness of Tenant to Landlord
other than Rent due and unpaid hereunder; third, to the payment of Rent due and
unpaid hereunder; and the residue, if any, shall be held by Landlord and applied
in payment of other or future obligations of Tenant to Landlord as the same may
become due and payable, and Tenant shall not be entitled to receive any portion
of such revenue. (See asterisk insert on page 15A)
15.04 Right of Landlord to Perform. All covenants and agreements to be
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense. If Tenant shall fail to pay any sum of money, other than
Rent, required to be paid by it hereunder or shall fail to perform any other act
on its part to be performed hereunder, and such failure shall continue beyond
the applicable cure period or otherwise create an emergency situation, Landlord
may, but shall not be obligated to make any payment or perform any such other
act on Tenant's part to be made or performed, without waiving or releasing
Tenant of its obligations under this Lease. Any sums so paid by Landlord and all
necessary incidental costs, together with interest thereon at the lesser of the
maximum rate permitted by law if any or twelve percent (12%) per annum from the
date of such payment, shall be payable to Landlord as additional rent on demand
and Landlord shall have the same rights and remedies in the event of nonpayment
as in the case of default by Tenant in the payment of Rent.
15.05 DEFAULT UNDER OTHER LEASES. If the term of any lease, other than
this Lease (and other than a lease solely of storage space), heretofore or
hereafter made by Tenant for any space in the Building shall be terminated or
terminable after the making of this Lease because of any default by Tenant under
such other lease such fact shall empower Landlord, at Landlord's sole option, to
terminate this Lease by notice to Tenant or to exercise any of the rights or
remedies set forth in Section 15.02.
15.06 NON-WAIVER. Nothing in this Article shall be deemed to affect
either party's rights to indemnification for liability or liabilities arising
prior to termination of this Lease for personal injury or property damages under
the indemnification clause or clauses contained in this Lease. No acceptance by
Landlord of a lesser sum than the Rent then due shall be deemed to be other than
on account of the earliest installment of such rent due, nor shall any
endorsement or statement or any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy in the Lease provided.
The delivery of keys to any employee of Landlord or to Landlord's agent or any
employee thereof shall not operate as a termination of this Letter or a
surrender of the Premises.
15.07 CUMULATIVE REMEDIES. The specific remedies to which either party
may resort under the terms of the Lease are cumulative and are not intended to
be exclusive of any other remedies or means of redress to which it may be
lawfully entitled in case of any breach or threatened breach by the other party
of any provisions of the Lease. (See Insert 15.07 on page 15A) In addition to
the other remedies provided in the Lease including the right of Landlord to
terminate Tenant's right of possession of the Premises and reenter and repossess
the Premises and remove all persons and property from the Premises without
terminating this Lease as provided in Section 15.02, Landlord and Tenant shall
each be entitled to a restraint by injunction of the violation of any of the
covenants, conditions or provisions of the Lease or to a decree compelling
specific performance of any such covenants, conditions or provisions.
15.08 DEFAULT BY LANDLORD. Landlord's failure to perform or observe
any of its obligations under this Lease shall constitute a default by Landlord
under this Lease only if such failure shall continue for a period of thirty (30)
days (or the additional time, if any, that is reasonably necessary promptly and
diligently to cure the failure) after Landlord receives written notice from
Tenant specifying the default. The notice shall give in reasonable detail the
nature and extent of the failure and shall identify the Lease provision(s)
containing the obligation(s). If Landlord shall default in the performance of
any of its obligations under this Lease (after notice and opportunity to cure as
provided herein), Tenant may pursue any remedies available to it under the law
and this Lease (except to the extent any such remedies contained in this Lease
are expressly made Tenant's sole remedies for such defaults or failures). In
addition, if any such default by Landlord involves Landlord's failure to pay any
monetary amount to Tenant, interest shall accrue on such monetary amount at the
lesser of the maximum rate permitted by law or 2% per annum from the date Tenant
shall give Landlord notice of the default.
-15-
<PAGE> 34
Asterisk Insert
*if any reletting is for a term greater than the balance of the Lease
Term, such costs and expenses shall be amortized over the term of the reletting
and only the amortized amounts which fall during the Lease Term shall be
applied against the proceeds of the reletting
Insert 15.07
(excluding those instances in this Lease where a specific remedy or
remedies is expressly made a party's sole remedy or remedies)
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<PAGE> 35
ARTICLE XVI -- ATTORNEYS FEES; COSTS OF SUIT
16.01 Attorneys Fees. If either Landlord or Tenant shall commence any
action or other proceeding against the other (or, with respect to Landlord,
against Tenant's sublessees or assigns) arising out of, or relating to, this
Lease or the Premises, the prevailing party shall be entitled to recover from
the losing party, in addition to any other relief, its reasonable attorneys fees
irrespective of whether or not the action or other proceeding is prosecuted to
judgment and irrespective of any court schedule of reasonable attorneys' fees.
16.02 Indemnification. Should Landlord be made a party to any
litigation instituted by Tenant against a party other than Landlord, or by a
third party against Tenant, Tenant shall indemnify, hold harmless and defend
Landlord from any and all loss, cost, liability, damage or expense incurred by
Landlord, including reasonable attorneys' fees, in connection with the
litigation. (See Insert 16.02 on Page 16A)
ARTICLE XVII -- SUBORDINATION AND ATTORNMENT
*17.01 Subordination. This Lease, and the rights of Tenant hereunder,
are and shall be subordinate to the interests of (i) all present and future
ground leases and master leases of all or any part of the Building; (ii)
present and future mortgages and deeds of trust encumbering all or any part of
the Building; (iii) all past and future advances made under any such mortgages
or deeds of trust; and (iv) all renewals, modifications, replacements and
extensions of any such ground leases, master leases, mortgages and deeds of
trust; provided, however, that any lessor under any such ground lease or master
lease or any mortgagee or beneficiary under any such mortgage or deed of trust
shall have the right to elect, by written notice given to Tenant, to have this
Lease made superior in whole or in part to any such ground lease, master
lease, mortgage or deed of trust. Upon demand, Tenant shall execute,
acknowledge and deliver any instruments reasonably requested by Landlord or any
such lessor, mortgagee or beneficiary to effect the purposes of this Section
17.01. Such instruments may contain, among other things, provisions to the
effect that such lessor, mortgagee or beneficiary (hereafter, for the purposes
of this Section 17.01, a "Successor Landlord") shall (i) not be liable in
damages for any act or omission of Landlord or its predecessors, if any,
prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease; (ii) not be subject to any offsets or defenses which
Tenant might have been able to assert against Landlord or its predecessors, if
any, prior to the date of such Successor Landlord's succession to Landlord's
interest under this Lease (except and only to the extent such rights arise
under Article XXXIV of the Rider); (iii) not be liable for the return of any
security deposit under the Lease unless the same shall have actually been
deposited with such Successor Landlord; and (iv) be entitled to receive notice
of any Landlord default under this Lease plus a reasonable opportunity to cure
such default prior to Tenant having any right or ability to terminate this
Lease as a result of such Landlord default.
*17.02 Attornment. If requested to do so, Tenant shall attorn to and
recognize as Tenant's landlord under this Lease any superior lessor, superior
mortgagee or other purchaser or person taking title to the Building by reason
of the termination of any superior lease or the foreclosure of any superior
mortgage or deed of trust, and Tenant shall, upon demand, execute any documents
reasonably requested by any such person to evidence the attornment described in
this Section 17.02.
17.03 Mortgage and Ground Lessor Protection. Tenant agrees to give
any holder of any mortgage and any ground lessor, by registered or certified
mail, a copy of any notice of default served upon the Landlord by Tenant,
provided that prior to such notice Tenant has been notified in writing (by way
of service on Tenant of a copy of Assignment of Rents and Leases, or otherwise)
of the address of such mortgage holder or ground lessor (hereafter the "Notified
Party"). Tenant further agrees that if Landlord shall have failed to cure such
default within twenty (20) days after such notice to Landlord (or if such
default cannot be cured or corrected within that time, then such additional
time as may be necessary if Landlord has commenced within such twenty (20) days
and is diligently pursuing the remedies or steps necessary to cure or correct
such default), then the Notified Party shall have an additional thirty (30)
days within which to cure or correct such default (or if such default cannot be
cured or corrected within that time, then such additional time as may be
necessary if the Notified Party has commenced within such thirty (30) days and
is diligently pursuing the remedies or steps necessary to cure or correct such
default) (provided the foregoing shall not extend the notice periods set forth
in Article 34 below and Tenant may act pursuant to Article 34 within the time
frames therein set forth). Until the time allowed, as aforesaid, for the
Notified Party to cure such default has expired without cure, Tenant shall nave
no right to, and shall not, terminate this Lease on account of Landlord's
default.
ARTICLE XVIII -- QUIET ENJOYMENT
18.01 During the Term and for so long as this Lease is in full force
and effect, Tenant shall have and peaceably enjoy the Premises during the Lease
Term, subject to all of the terms and conditions contained in this Lease.
- - --------------------------
*(See Insert 17.01/17.02 on Page 16A)
-16-
<PAGE> 36
Insert 16.02
Should Tenant be made a party to any litigation instituted by Landlord
against a party other than Tenant, or by a third party against Landlord, then
Landlord shall indemnify, hold harmless and defend Tenant from any and all loss,
cost, liability, damage or expense incurred by Tenant, including reasonable
attorneys fees, in connection with such litigation.
Insert 17.01/17.02
Anything set forth in Section 17.01 or 17.02 of this Lease to the contrary
notwithstanding, this Lease and the rights of Tenant under this Lease shall be
subject and subordinate (i) to the interest of the holder of any ground lease or
master lease of all or part of the Building entered into after the date this
Lease is signed and delivered, and (ii) to the interest of any holder of a
mortgage or trust deed which becomes an encumbrance on all or any part of the
Building after the date this Lease is signed and delivered, only if such ground
lessor or master lessor or such mortgagee or holder of such deed of trust, as
the case may be, executes and delivers to Tenant a subordination,
non-disturbance and attornment agreement (an "SNDA") in a form consistent with
the SNDA's generally entered into between institutional lenders and tenants in
the Chicago metropolitan area leasing space of a comparable size as the Premises
in buildings comparable to the Building (and which form shall specifically
require the ground lessor, master lessor, mortgagee or holder of deed of trust
to recognize Tenant's rights set forth in Article 34 of this Lease).
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<PAGE> 37
ARTICLE XIX - PARKING
19.01 During the term of this Lease, Tenant shall be entitled to use 8
reserved parking spaces in the Building's garage and two reserved parking spaces
in the Building's surface parking lot on the West side of the Building, as more
particularly set forth in Insert No. 5 of the Rider. Tenant's employees and
visitors shall have the right to use the Building's non-reserved parking
facilities, at no charge subject to availability and to the rules and
regulations governing visitor parking from time to time adopted by Landlord (or,
at Landlord's option, the operator or master lessee of the parking facilities),
Landlord shall not materially reduce the amount of unreserved parking spaces
made available to Tenant's employees and visitors.
ARTICLE XX - RULES AND REGULATIONS
20.01 The Rules and Regulations attached hereto as Exhibit C are hereby
incorporated by reference herein and made a part hereof. Tenant shall abide by,
and faithfully observe and comply with the Rules and Regulations and any
reasonable and non-discriminatory amendments, modifications and/or additions
thereto as may hereafter be adopted and published by written notice to tenants
by Landlord for the safety, care, security, good order and/or cleanliness of the
Premises and/or the Building. Landlord shall not be liable to Tenant for any
violation of such rules and regulations by any other tenant or occupant of the
Building. (See Insert 20.01 on Page 17A)
ARTICLE XXI - ESTOPPEL CERTIFICATES
21.01 Tenant agrees at any time and from time to time upon not less than
twenty-five (25) days' prior written notice from Landlord to execute,
acknowledge and deliver to Landlord a statement in writing addressed and
certifying to Landlord, or to the holder or assignee of any existing or
prospective mortgage encumbering the Building or any part thereof (hereafter a
"Mortgagee"), or to the lessor, or existing or prospective assignee of the
lessor's position, under any existing or prospective ground lease of the land
underlying the Building (hereafter a "Ground Lessor"), or to any prospective
purchaser of the land, improvements or both comprising the Building, that this
Lease is unmodified and in full force and effect (or if there have been
modifications, that the same is in full force and effect as modified and stating
the modifications); that Tenant has accepted possession of the Premises, which
are acceptable in all respects, and that any improvements required by the terms
of this Lease to be made by Landlord have been completed (or have not been
completed) to the satisfaction of Tenant; that Tenant is in full occupancy of
the Premises; that no rent has been paid more than thirty (30) days in advance;
that the first month's Base Rent has been paid; that Tenant is entitled to no
free rent or other concessions except as stated in this Lease; that Tenant has
not been notified of any previous assignment of Landlord's or any predecessor
landlord's interest under this Lease; the dates to which Base Rent, additional
rental and other charges have been paid; that Tenant, as of the date of such
certificate to the best of its knowledge, has no charge, lien or claim of setoff
under this Lease or otherwise against Base Rent, additional rental or other
charges due or to become due under this Lease (or otherwise specifying the same
as known to Tenant); and that to the best of its knowledge Landlord is not in
default in performance of any covenant, agreement or condition contained in this
Lease or any other matter relating to this Lease or the Premises or, if so,
specifying each such default known to Tenant. In addition, in the event that
such certificate is being given to any Mortgagee or Ground Lessor, such
statement may contain any other provisions customarily required by such
Mortgagee or Ground Lessor (provided no such provision shall materially and
adversely affect the rights and benefits granted to Tenant pursuant to this
Lease) including, without limitation, an agreement on the part of Tenant to
furnish to such Mortgagee or Ground Lessor, as applicable, written notice of any
Landlord default and a opportunity for such Mortgagee or Ground Lessor to cure
such default prior to Tenant being able to terminate this Lease as provided in
Section 17.03. Any such statement delivered pursuant to this Section may be
relied upon by Landlord or any Mortgagee, Ground Lessor or prospective purchaser
to whom it is addressed and such statement, if required by its addressee, may so
specifically state. If Tenant does not execute, acknowledge and deliver to
Landlord the statement as and when required herein, and such failure continues
for five (5) days after written notice from Landlord, then such failure shall be
deemed to be a default by Tenant beyond all cure periods. (See Insert 21.01 on
Page 17A)
ARTICLE XXII - ENTRY BY LANDLORD
22.01 Landlord may enter the Premises at all reasonable times to inspect
the same; exhibit the same to prospective purchasers, lenders or tenants;
determine whether Tenant is complying with all of its obligations under this
Lease; supply janitorial and other services to be provided by Landlord to Tenant
under this Lease;
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<PAGE> 38
Insert 20.01
Landlord agrees that it will not unreasonably discriminate against
Tenant in the application and/or enforcement of the Rules and Regulations.
Insert 21.01
Landlord agrees that at any time and from time to time upon not less
than twenty-five (25) days' prior written notice from Tenant, Landlord shall
execute, acknowledge and deliver to Tenant a statement in writing addressed and
certifying to Tenant, any lender or prospective purchaser of Tenant, reasonable
relevant data and information regarding the status of Tenant's rights and the
performance of Tenant under the Lease. In no event, however, shall Landlord be
obligated to execute any such statement more frequently than two (2) times in
any calendar year. If Landlord does not execute, acknowledge and deliver to
Tenant the statement as and when required herein, and such failure continues
for five (5) days after written notice from Tenant, then such failure shall be
deemed to be a default by Landlord beyond all cure periods (except as provided
in Section 17.03 with respect to the Notified Party's cure period).
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<PAGE> 39
post notices of non-responsibility; and make repairs or improvements in or to
the Building or the Premises; provided, however, that all such work shall be
done as promptly as reasonably possible and so as to cause as little
interference to Tenant as reasonably possible. Tenant hereby waives any claim
for damages for any injury or inconvenience to, or interference with, Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises or any other
loss occasioned by such entry. Landlord shall at all times have and retain a key
with which to unlock all of the doors in, on or about the Premises (excluding
Tenant's vaults, safes, private executive suites, computer rooms, and similar
areas designated by Tenant in writing in advance), and Landlord shall have the
right to use any and all means by which Landlord may deem proper to open such
doors to obtain entry to the Premises, and any entry to the Premises obtained by
Landlord by any such means, or otherwise, shall not under any circumstances be
deemed or construed to be a forcible or unlawful entry into or a detainer of the
Premises or an eviction, actual or constructive, of Tenant from any part of the
Premises. Such entry by Landlord shall not act as a termination of Tenant's
duties under this Lease. If Landlord shall be required to obtain entry by means
other than a key provided by Tenant, the cost of such entry shall be payable by
Tenant to Landlord as additional rent. Landlord agrees to use reasonable efforts
to minimize interference with Tenant's business operations in connection with
Landlord's exercise of the foregoing rights, provided Landlord shall be entitled
to exercise such rights during normal business hours. Furthermore, Landlord
agrees to provide at least 24 hours prior oral or telephone notice to Tenant at
the Premises before entering the Premises (excluding emergencies or when
providing routine services, when no such notice shall be required). (See Insert
22.01 on Page 18A)
ARTICLE XXIII
LANDLORD'S LEASE UNDERTAKINGS-EXCULPATION FROM PERSONAL LIABILITY;
TRANSFER OF LANDLORD'S INTEREST
23.01 LANDLORD'S LEASE UNDERTAKINGS. Notwithstanding anything to the
contrary contained in this Lease or in any exhibits, Riders or addenda hereto
attached (collectively the "Lease Documents"), it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of Tenant or its
successors or assigns against Landlord with respect to the alleged breach by or
on the part of Landlord of any representation, warranty, covenant, undertaking
or agreement contained in any of the Lease Documents (collectively, "Landlord's
Lease Undertakings") shall extend only to Landlord's interest in the real estate
of which the Premises demised under the Lease Documents are a part ("Landlord's
Real Estate") and not to any other assets of Landlord or its beneficiaries; and
(b) except to the extent of Landlord's interest in Landlord's Real Estate, no
personal liability or personal responsibility of any sort with respect to any of
Landlord's Lease Undertakings or any alleged breach thereof is assumed by, or
shall at any time be asserted or enforceable against, Landlord, Heitman/JMB
Advisory Corporation or Heitman Properties Ltd., or against any of their
respective directors, officers, employees, agents, constituent partners,
beneficiaries, trustees or representatives. Notwithstanding the foregoing,
Landlord agrees that for so long as Landlord or an affiliate of Landlord owns
Landlord's Real Estate and Landlord's current beneficiary or an affiliate of
Landlord's beneficiary owns the beneficial interest in Landlord, Landlord shall
maintain an equity interest in Landlord's Real Estate of not less than Five
Million Dollars ($5,000,000).
It is expressly understood and agreed by and between the parties hereto,
anything herein to the contrary notwithstanding, that each and all of the
representations, warranties, covenants, undertakings and agreements herein made
on the part of Landlord while in form purporting to be the representations,
warranties, covenants, undertakings and agreements of Landlord are nevertheless
each and every one of them made and intended, not as personal representations,
warranties, covenants, undertakings and agreements by Landlord or for the
purpose or with the intention of binding Landlord personally, but are made and
intended for the purpose only of subjecting Landlord's interest in the Building,
the Land and the Premises to the terms of this lease and for no other purpose
whatsoever, and in case of default hereunder by Landlord (or default through,
under or by any of its beneficiaries, or agents or representatives of said
beneficiaries), the Tenant shall look solely to the interests of Landlord in the
Building and Land; that this lease is executed and delivered by Landlord not in
its own right, but solely in the exercise of the powers conferred upon it as
such Trustee; that neither the Landlord nor any of Landlord's beneficiaries
shall have any personal liability to pay any indebtedness accruing hereunder or
to perform any covenant, either express or implied, herein contained, and no
liability or duty shall rest upon Landlord to sequester the trust estate or the
rents, issues and profits arising therefrom, or the proceeds arising from any
sale or other disposition thereof; and that no personal liability or personal
responsibility of any sort is assumed by, nor shall at any time be asserted or
enforceable against, and Landlord, American National Bank and Trust Company of
Chicago, a national banking association, individually or personally, but only as
Trustee under the provisions of a Trust Agreement dated December 6, 1988 and
known as its Trust No. 107101-01, or against any of the beneficiaries under said
Trust Agreement, or their respective agents, on account of this lease or on
account of any representation, warranty, covenant, undertaking or agreement of
Landlord in this lease contained, either express or implied, all such personal
liability, if any, being expressly waived and released by Tenant and by all
persons claiming by, through or under Tenant.
23.02 TRANSFER OF LANDLORD'S INTEREST. Landlord and each successor to
Landlord shall be fully released from the performance of Landlord's obligations
subsequent to their transfer of Landlord's interest in the Building (but not
from obligations which accrued during their respective periods of ownership
unless their successor owner assumed such obligations in writing). Landlord and
each successor to Landlord shall be deemed to have assumed and be liable for all
obligations of the "Landlord" arising under this Lease during the respective
period it its ownership. Landlord shall not be liable for any obligation
hereunder after a transfer of its interest in the Building. Notwithstanding the
foregoing provisions of this Section 23.02, Tenant shall retain its limited
set-off rights provided for in Article XXXIV of the Rider.
23.03 TENANT'S PARTNERS' ESCULPATION FROM PERSONAL LIABILITY. (See Insert
23.03 on Page 18A)
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<PAGE> 40
Insert 22.01
Anything set forth in Section 22.01 of the Lease to the contrary
notwithstanding:
(b) Landlord shall not enter the Premises for the purposes specified in
Section 22.01 without first giving Tenant prior notice as provided herein.
(c) In no event shall Tenant's waiver pertain to claims arising out of the
negligence of Landlord or its employees or agents.
Insert 23.03
23.03 Tenant's Partners' Exculpation From Personal Liability.
Notwithstanding anything to the contrary contained in the Lease Documents, it is
expressly understood and agreed by and between the parties hereto that no
personal liability or personal responsibility of any sort with respect to any
representation, warranty, covenant, undertaking or agreement contained in any of
the Lease Documents or any alleged breach thereof is assumed by or shall at any
time be asserted or enforceable against any of the present or future general
partners of Tenant or any of such general partners' respective directors,
officers, employees, agents, constituent partners, beneficiaries, trustees or
representatives (provided, however, that the foregoing limitation upon personal
liability or personal responsibility shall not apply to any such general partner
to whom the interest of the "Tenant" under this Lease is hereafter assigned).
The foregoing limitation shall not affect or diminish the liability or
responsibility of Tenant (as opposed to the personal liability or personal
responsibility of its general partners as aforesaid) under the Lease Documents,
and Landlord shall have full and complete recourse to all assets and property of
Tenant of whatever kind (including, without limitation, all tangible and
intangible property, real property, revenues, accounts, income, contract rights
and proceeds), but excluding any recourse by Landlord to any rights or other
assets of Tenant that result from or on account of (a) any undertakings made by
any present or future general partner of Tenant in any partnership agreement or
other document governing or relating to the formation, operation, governance or
liquidation of Tenant or any obligation of any present or future general partner
of Tenant arising under or on account of any such document (excluding (i) loans
from Tenant to a general partner, (ii) accounts receivable owed by a general
partner to Tenant [which shall in no event include any capital contribution to
Tenant, or any accounts receivable, owed by the general partners of Tenant to
Tenant in proportion to such general partners' respective partnership interests
in Tenant] or
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(iii) any other contractual obligations owed by a general partner to Tenant so
long as the same do not relate to the formation, operation, governance or
liquidation of Tenant and are not owed by the general partners of Tenant to
Tenant in proportion to such general partners' respective partnership interests
in Tenant) or (b) any applicable case law or other law that holds any general
partner in Tenant liable to Tenant solely on account of such general partner's
status as a general partner of Tenant.
18B
<PAGE> 42
ARTICLE XXIV - HOLDOVER TENANCY
24.01 If Tenant holds possession of the Premises after the expiration or
termination of the Lease Term, by lapse of time or otherwise, Tenant shall
become a tenant at sufferance upon all of the terms contained herein, except as
to Lease Term and Rent. During such holdover period, Tenant shall pay to
Landlord a monthly rental equivalent to one hundred fifty percent (150%) of the
Base Rent and 100% of the Tax and Operating Expense Adjustment payable by Tenant
to Landlord with respect to the last month of the Lease Term for the first sixty
(60) days of such holdover and two hundred percent (200%) of the Base Rent and
100% of the Tax and Operating Expense Adjustment payable by Tenant to Landlord
with respect to the last month of the Term for the balance of such holdover. The
monthly rent payable for such holdover period shall in no event be construed as
a penalty or as liquidated damages for such retention of possession. Without
limiting the foregoing, Tenant hereby agrees to indemnify, defend and hold
harmless Landlord, its beneficiary, and their respective agents, contractors and
employees, from and against any and all claims, liabilities, actions, losses,
damages (including without limitation, direct, indirect, incidental and
consequential) and expenses (including, without limitation, court costs and
reasonable attorneys' fees) asserted against or sustained by any such party and
arising from or by reason of such retention of possession, which obligations
shall survive the expiration or termination of the Lease Term. Notwithstanding
the foregoing, Tenant shall not be liable to Landlord for consequential damages
unless such holdover exceeds sixty (60) days.
ARTICLE XXV - NOTICES
25.01 Except as otherwise provided in Article XXII, all notices which
Landlord or Tenant may be required, or may desire, to serve on the other may be
served, as an alternative to personal service, by overnight air freight courier
or by mailing the same by registered or certified mail, postage prepaid,
addressed to the Landlord at the address for Landlord set forth in Section 1.13
above and to Tenant at the address for Tenant set forth in Section 1.14 above,
or addressed to such other address or addresses as either Landlord or Tenant may
from time to time designate to the other in writing. Any notice shall be deemed
to have been served three (3) business days after the time the same was posted
or when actually received if delivered personally or by overnight air freight
courier.
ARTICLE XXVI - BROKERS
26.01 The parties recognize as the broker(s) who procured this Lease the
firm(s) specified in Section 1.15 and agree that Landlord shall be solely
responsible for the payment of any brokerage commissions to said broker(s), and
that Tenant shall have no responsibility therefor unless written provision to
the contrary has been made a part of this Lease. If Tenant has dealt with any
other person or real estate broker in respect to leasing, subleasing or renting
space in the Building, Tenant shall be solely responsible for the payment of any
fee due said person or firm and Tenant shall protect, indemnify, hold harmless
and defend Landlord from any liability in respect thereto.
ARTICLE XXVII - MISCELLANEOUS
27.01 Entire Agreement. This Lease and the Termination Agreement (as
defined in Section 35.01 of the Rider) contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties, or representations, promises or
statements made by Landlord or any agent of Landlord, except as expressly set
forth herein and in the Termination Agreement. This Lease supersedes any and all
prior agreements and understandings between Landlord and Tenant and alone
expresses the agreement of the parties.
27.02 Amendments. This Lease shall not be amended, changed or modified in
any way unless in writing executed by Landlord and Tenant. Neither Landlord nor
Tenant shall have waived or released any of its rights hereunder unless in
writing and executed by the party to be bound.
27.03 Successors. Except as expressly provided herein, this Lease and the
obligations of Landlord and Tenant contained herein shall bind and benefit the
successors and assigns of the parties hereto.
27.04 Force Majeure. Neither Landlord nor Tenant shall incur liability to
Tenant or Landlord, respectively, with respect to, and shall not be responsible
for any failure to perform, any of its obligations hereunder if such failure is
caused by any reason beyond the control of such party including, but not limited
to, strike, labor trouble, governmental rule, regulations, ordinance, statute or
interpretation, or by fire, earthquake, civil commotion, or failure or
disruption of utility services. Except and only to the extent expressly provided
otherwise elsewhere in this Lease, the amount of time for Landlord or Tenant to
perform any of its obligations shall be extended by the amount of time such
party is delayed in performing such obligation by reason of any force majeure
occurrence whether similar to or different from the foregoing types of
occurrences. (See Insert 27.04 on page 19A.)
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<PAGE> 43
Insert 27.04
In no event, however, shall any cause of any sort excuse Tenant from
its obligations to pay Rent where due and to surrender and vacate the Premises
upon the expiration or termination of the Lease Term or Tenant's right to
possession of the Premises.
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<PAGE> 44
27.05 SURVIVAL OF OBLIGATIONS. Except as expressly provided herein, any
obligations of either party accruing prior to the expiration of the Lease shall
survive the termination of the Lease, and the parties shall promptly perform
all such obligations whether or not this Lease has expired.
27.06 LIGHT AND AIR. No diminution or shutting off of any light, air or
view by any structure now or hereafter erected shall in any manner affect this
Lease or the obligations of Tenant hereunder, or increase any of the obligations
of Landlord hereunder.
27.07 GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
27.08 SEVERABILITY. In the event any provisions of this Lease is found to
be unenforceable, the remainder of this Lease shall not be affected, and any
provision found to be invalid shall be enforceable to the extent permitted by
law. The parties agree that in the event two different interpretations may be
given to any provision hereunder, one of which will render the provision
unenforceable, and one of which will render the provision enforceable, the
interpretation rendering the provision enforceable shall be adopted.
27.09 CAPTIONS. All captions, headings, titles, numerical references and
computer highlighting are for convenience only and shall have no effect on the
interpretation of this Lease.
27.10 INTERPRETATION. Tenant and Landlord each acknowledges to the other
party that it has read and reviewed this Lease and that it has had the
opportunity to confer with counsel in the negotiation of this Lease.
Accordingly, this Lease shall be construed neither for nor against Landlord or
Tenant, but shall be given a fair and reasonable interpretation in accordance
with the meaning of its terms and the intent of the parties.
27.11 INDEPENDENT COVENANTS. Each covenant, agreement, obligation or
other provision of this Lease to be performed by Landlord or Tenant are separate
and independent covenants of Landlord and Tenant respectively, and not dependent
on any other provision of the Lease.
27.12 NUMBER AND GENDER. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include the appropriate number and gender, as the context may require.
27.13 TIME IS OF THE ESSENCE. Time is of the essence of this Lease and
the performance of all obligations hereunder.
27.14 JOINT AND SEVERAL LIABILITY. If Tenant comprises more than one
person or entity, or if this Lease is guaranteed by any party, all such persons
shall be jointly and severally liable for payment of rents and the performance
of Tenant's obligations hereunder.
27.15 EXHIBITS. The Exhibits and a Rider are incorporated into this Lease
by reference and made a part hereof.
27.16 OFFER TO LEASE. The submission of this Lease to Tenant or its
broker or other agent, does not constitute an offer to Tenant to lease the
Premises. This Lease shall have no force and effect until (a) it is executed
and delivered by Tenant to Landlord and (b) it is fully reviewed and executed
by Landlord.
27.17 NO COUNTERCLAIM; CHOICE OF LAWS. It is mutually agreed that in the
event Landlord commences any summary proceeding for non-payment of Rent, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding (except for a mandatory counterclaim which would be waived as a
matter of law if not so imposed in such proceeding). In addition, Tenant hereby
submits to local jurisdiction in the State of Illinois and agrees that any
action by Tenant against Landlord shall be instituted in the State of Illinois
and that Landlord shall have personal jurisdiction over Tenant for any action
brought by Landlord against Tenant in the State of Illinois.
27.18 ELECTRICAL SERVICE TO THE PREMISES. Anything set forth in Section
7.01 or elsewhere in this Lease to the contrary notwithstanding, electricity to
the Premises shall not be furnished by Landlord, but shall be furnished by the
approved electric utility company serving the Building. Landlord shall permit
Tenant to receive such service directly from such utility company at Tenant's
cost (except as otherwise provided herein) and shall permit Landlord's wire and
conduits, to the extent available, suitable and safely capable, to be used for
such purposes.
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27.19 RIGHTS RESERVED BY LANDLORD. Landlord reserves the following rights
exercisable without notice (except as otherwise expressly provided to the
contrary in this Lease) and without being deemed an eviction or disturbance of
Tenant's use or possession of the Premises or giving rise to any claim for
set-off or abatement of Rent: (i) to change the name or street address of the
Building; (ii) to install, affix and maintain all signs on the exterior and/or
interior of the Building; (iii) to designate (to the extent Landlord so requires
all other office tenants of the Building for uniformity of appearance) and/or
approve (which approval shall not be unreasonably withheld) prior to
installation, all types of signs, window shades, blinds, drapes, awnings or
other similar items, and all internal lighting that may be visible from the
exterior of the Premises and, notwithstanding the provisions of Article IX, the
design, arrangement, style, color and general appearance of the portion of the
Premises visible from the exterior, and contents thereof, including, without
limitation, furniture, fixtures, signs, artwork, wall coverings, carpet and
decorations, and all changes, additions and removals thereto, shall, at all
times have the appearance of premises having the same type of exposure and used
for substantially the same purposes that are generally prevailing in first class
office buildings in the area. A violation of this provision may be deemed a
material breach of this Lease; (iv) to display the Premises and/or the Building
to mortgagees, prospective mortgagees, prospective purchasers and ground lessors
at reasonable hours upon reasonable advance notice to Tenant; (v) to change the
arrangement of entrances, doors, corridors, elevators and/or stairs in the
Building, provided no such change shall materially adversely affect access to
the Premises; (vi) to grant any party the exclusive right to conduct any
business or render any service in the Building, provided such exclusive rights
shall not operate to prohibit Tenant from using the Premises for the purposes
permitted under this Lease; (vii) to prohibit the placement of vending or
dispensing machines of any kind in or about the Premises other than for use by
Tenant's employees and business invitees; (viii) to prohibit the placement of
video or other electronic games in the Premises other than for use by Tenant's
employees; (ix) to have access for Landlord and other tenants of the Building to
any mail chutes and boxes located in or on the Premises according to the rules
of the United States Post Office and to discontinue any mail chute business in
the Building; (x) to close the Building after normal business hours, except that
Tenant and its employees and invitees shall be entitled to admission at all
times under such rules and regulations as Landlord prescribes for security
purposes; (xi) to install, operate and maintain security systems which monitor,
by closed circuit television or otherwise, all persons entering or leaving the
Building; (xii) to install and maintain pipes, ducts, conduits, wires and
structural elements located in the Premises which serve other parts or other
tenants of the Building; and (xiii) to retain at all times master keys or pass
keys to the Premises. (See Insert No. 27.19 on Page 21A.) (Additional provisions
are set forth in the Rider.)
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
date first above written.
LANDLORD: TENANT:
AMERICAN NATIONAL BANK AND TRUST GALILEO INTERNATIONAL PARTNERSHIP, a
COMPANY OF CHICAGO, not personally, Delaware general partnership
but as Trustee aforesaid
By: [sig] By: [sig]
------------------------------ -------------------------------------
Its: TRUST OFFICER Its: Senior Vice President &
------------------------------ Chief Financial Officer
-------------------------------------
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<PAGE> 46
Insert 27.19
(A) Anything set forth in Section 27.19 or elsewhere in the Lease to the
contrary notwithstanding, Landlord agrees that for so long as this Lease is in
full force and effect and Tenant is not in "material monetary breach or default"
(as hereinafter defined) under the Lease, beyond any applicable cure period, or
otherwise in material breach or default of any other obligation of Tenant under
the Lease, beyond any applicable cure period:
(i) Landlord will not change the name of the Building to the name of any
airline or any airline ticket reservation system company (unless, (a)
after the expiration of the initial Lease Term, the Building is sold
to an airline or to a person or entity engaged in the airline ticket
reservation system business or (b) Galileo International Partnership
and/or its Affiliates are no longer the "Tenant" under this Lease or
are not in actual physical occupancy of, and conducting business from,
at least 50,000 rentable square feet of space in the Building).
(ii) Landlord will not place the name of another tenant on the top of the
Building (unless Landlord has theretofore required Tenant to remove
its sign from the top of the Building pursuant to Section 29.01
below).
Nothing in this subparagraph (A) shall limit Landlord's right to place the name
of any tenant on any monument or other signage located on the Building or on
the land under the Building or under its parking and common areas; provided
that unless Galileo International Partnership and/or its Affiliates are no
longer the "Tenant" under this Lease or are not in actual physical occupancy
of, and conducting business from, at least 50,000 rentable square feet of space
in the Building, Landlord shall not place, or allow another tenant to place, a
sign on the existing monument sign of the Building which is larger than
Tenant's sign on such monument sign.
(B) Anything set forth in Section 27.19 or elsewhere in the Lease to the
contrary notwithstanding, Landlord currently intends to retain its current mail
chutes and Landlord currently intends to maintain air freight drop boxes in the
ground floor lobby of the Building. Landlord agrees that it will continue to
maintain drop boxes for reputable air freight carriers in the lobby of its
Building (or elsewhere in the Building) as long as such service is offered in
other comparable buildings in the O'Hare corridor.
21A
<PAGE> 47
RIDER TO OFFICE LEASE (THE "LEASE") DATED MARCH 31, 1995
BY AND BETWEEN
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, NOT
PERSONALLY BUT SOLELY AS TRUSTEE UNDER TRUST AGREEMENT KNOWN AS
TRUST NO. 107101-01 ("LANDLORD")
AND
GALILEO INTERNATIONAL PARTNERSHIP, A DELAWARE GENERAL PARTNERSHIP
This Rider and the Lease shall, for any and all purposes, be deemed to
be one instrument. In the event of any conflict or inconsistency between the
terms and provisions of the Lease and the terms and provisions of this Rider,
the terms and provisions of this Rider shall, in all instances, control and
prevail. Except as expressly defined or modified in this Rider, all words and
phrases which are defined in the Lease shall have the same meaning in this
Rider as is ascribed to such words and phrases in the Lease.
INSERT NO. 1 - BASE RENT
Period Annual Base Rent Monthly Base Rent
------ ---------------- -----------------
4/1/95 - 3/31/96 $684,168.00 $57,014.00
4/1/96 - 3/31/97 704,693.04 58,724.42
4/1/97 - 3/31/98 725,833.80 60,486.15
4/1/98 - 3/31/99 747,608.88 62,300.74
4/1/99 - 3/31/00 770,037.12 64,169.76
INSERT NO. 2 - INTERRUPTION IN SERVICE
(A) Notwithstanding anything in Section 7.02 of the Lease to the contrary, if
as a result of an act or omission of Landlord or any employee of Landlord or an
event of the type described in Section 27.04 of this Lease (as distinguished
from an act or omission of Tenant or the occurrence of a Premises Casualty [as
defined elsewhere in this Lease]), electricity, heating, air conditioning,
restroom facilities, water for Tenant's business machinery and equipment or
passenger elevator service to the Premises (at least one cab), as described in
Section 7.01 of the Lease, is not furnished to the Premises, and if as a result
thereof the Premises, or a "material part" (as defined below) of the Premises,
is rendered untenantable, inaccessible or unusable for Tenant's business, in
Tenant's good faith business judgment, for a period of three (3) consecutive
business days and Tenant does not occupy the Premises, or such material portion
thereof which is rendered untenantable, inaccessible or unusable, as the case
may be, during such 3-business day period, then as Tenant's sole remedy for
such failure to furnish such service (except for
<PAGE> 48
the remedy provided in subparagraph [B] of this Insert No. 2), Base Rent and
Tax and Operating Expense Adjustment payable for such portion of the Premises
which Tenant does not so occupy shall abate for the period commencing on the
expiration of said three (3) business day period and expiring on the date such
service is restored or Tenant determines in its good faith business judgment
that it is able to resume occupancy of the Premises or such material part
thereof, as the case may be. As used in this subparagraph (A) of Insert No. 2,
the phrase "material part" shall mean an amount in excess of five thousand
(5,000) rentable square feet of the Premises.
(B) Notwithstanding anything in Section 7.02 of the Lease to the contrary, if
as a result of an act or omission of Landlord or any employee of Landlord or an
event of the type described in Section 27.04 of this Lease (as distinguished
from an act or omission of Tenant or the occurrence of a Premises Casualty)
electricity, heating, air conditioning, rest room facilities, water for Tenant's
business machinery and equipment, or passenger elevator service to the Premises
(at least one cab) as described in Section 7.01 of the Lease, is not furnished
to the Premises, and if as a result thereof the Premises or a "material part"
(as defined below) of the Premises is rendered untenantable, inaccessible or
unusable for Tenant's business, in Tenant's good faith business judgment, for a
period of one hundred-twenty (120) consecutive days and Tenant does not occupy
the Premises, or such material portion thereof which is rendered untenantable,
inaccessible or unusable, as the case may be, during such one hundred-twenty
(120) day period, then in addition to the remedy set forth in subparagraph (A)
of this Insert No. 2, and as Tenant's sole additional remedy for such one
hundred-twenty (120) day interruption of service, Tenant shall have the right to
terminate this Lease and its obligations under this Lease by giving Landlord
written notice of such termination within ten (10) business days after the
expiration of such one hundred-twenty (120) day period. As used in this
subparagraph (B) of Insert No. 2, the phrase "material part" shall mean an
amount in excess of twenty-three thousand (23,000) rentable square feet of the
Premises.
INSERT NO. 3 -- TENANT'S TERMINATION RIGHT UPON PREMISES CASUALTY
Notwithstanding anything contained in Article XI of the Lease to the contrary,
the parties hereby agree as follows:
(A) Within thirty (30) days following the date of any damage or
destruction to the Premises (hereinafter a "Premises Casualty"), Landlord shall
provide to Tenant in writing Landlord's good faith estimate of the time
required by Landlord to restore the Premises. Notwithstanding the anything
contained in the Lease to the contrary, Tenant shall have no right to terminate
the Lease if the Premises Casualty was primarily caused by the intentional
misconduct,
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or by the wilful or wanton act or omission, of Tenant or Tenant's
agents, employees, contractors, clients, invitees or subtenants.
(B) If a Premises Casualty occurs during the second-to-last
year of the Lease Term (exclusive of option periods), then the one
hundred eighty (180) day period referred to in Section 11.02 of
the Lease shall be reduced to a one hundred twenty (120) day
period.
(C) If a Premises Casualty occurs during the last year of the
Lease Term, then the one hundred eighty (180) day period referred
to in Section 11.02 of the Lease shall be reduced to a ninety (90)
day period.
(D) If any Premises Casualty shall have occurred and neither
Landlord nor Tenant shall have elected to terminate the Lease as
allowed pursuant to the Lease, then Landlord shall diligently
proceed to repair and restore the Premises (inclusive of any
Alterations and other Tenant improvements that Landlord has agreed
to insure).
INSERT NO. 4 - RIGHT TO SUBLEASE OR ASSIGN TO AFFILIATE
Notwithstanding anything contained in Article XIV of the Lease to the contrary,
Tenant shall have the right to assign the Lease or sublease all or any part of
the Premises to an "Affiliate" without the prior written consent of Landlord,
but upon at least fifteen (15) days' prior written notice to Landlord and
subject to all of the other provisions of the Lease, specifically including,
without limitation, the continuation of liability of Tenant under the Lease;
provided, however, that Tenant shall not have the right to sublease the
Premises, or any part thereof, or to assign the Lease to any Affiliate which,
in Landlord's reasonable judgment, is disreputable or otherwise not in keeping
with the nature or class of tenants in the Building. For purposes of this
provision, the term "Affiliate" shall mean any corporation or other entity
controlling, controlled by, or under common control with (directly or
indirectly) Tenant, including, without limitation, any parent corporation
controlling Tenant or any subsidiary that Tenant controls, or any corporation
or other entity resulting from a merger or consolidation with Tenant, or any
person or entity which purchases all or substantially all of Tenant's assets.
The term "control" as used herein shall mean the power to direct or cause the
direction of the management and policies of the controlled entity through the
ownership of more than fifty percent (50%) of the voting securities in such
controlled entity, by contract or otherwise. Furthermore, Landlord agrees that
a transfer of any interest in Tenant to any person or entity in a good faith
business transaction which, by itself or in connection with related
transactions, is not primarily intended to allow Tenant to transfer its rights
in or to this Lease or in or to the Premises without having to comply with the
provisions of Section 14.01, shall not constitute an "assignment" or transfer
for which, pursuant to Section 14.01,
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Landlord's consent is required or as to which the remaining provisions of
Article XIV apply.
INSERT NO. 5 - RESERVED PARKING SPACES
Landlord agrees to furnish to Tenant, at no additional charge, eight (8)
reserved parking spaces in the Building's parking garage and two (2) reserved
parking spaces in the Building's surface parking lot on the west side of the
Building (collectively, "Tenant's Parking Spaces"), for so long as the Lease is
in full force and effect. The location of Tenant's Parking Spaces shall be
designated by Landlord and may be changed from time to time by Landlord by
notice to Tenant (provided Landlord shall not change the location of any such
parking space merely to grant such space to another person or entity).
Initially, such two (2) spaces in such surface lot shall be in the same
locations as their current locations and such eight (8) spaces in such garage
shall be in the locations designated by Tenant (which must be located among the
16 spaces currently utilized by Tenant). Landlord shall have no responsibility
for or liability to Tenant in the event of any unauthorized use of Tenant's
Parking Spaces. Tenant's use of Tenant's Parking Spaces shall be subject to
reasonable rules and regulations promulgated from time to time by Landlord for
the use of parking spaces.
ADDITIONAL PROVISIONS:
ARTICLE XXXVIII - INTERIM SPACE
28.01 Interim Space. Landlord grants a license to Tenant to use Suite
200 on the second floor of the Building, consisting of approximately 9,530
rentable square feet, as shown on Exhibit E attached hereto (the "Second Floor
Temporary Space"), Suite 1100 on the eleventh floor of the Building, consisting
of approximately 12,768 rentable square feet, as shown on Exhibit H attached
hereto (the "Eleventh Floor Temporary Space") and Suites 650 and 820 on the
sixth and eighth floors, respectively, of the Building (collectively, the
"Terminated Temporary Space"; the Second Floor Temporary Space, the Eleventh
Floor Temporary Space and the Terminated Temporary Space are hereinafter
collectively referred to as the "Temporary Spaces") for Tenant to conduct
business operations while Tenant performs tenant improvement work in the
Premises. Tenant's occupancy of the Temporary Spaces shall be upon all of the
same terms and provisions as are contained in this Lease, except as follows:
(A) Except as provided in subparagraph (E) below, Tenant shall not
be obligated to pay Base Rent or Tax and Operating Expense Adjustment
for the Temporary Spaces, but Tenant shall pay for all electricity and
supplemental building services provided to Tenant with respect to the
Temporary Spaces;
(B) Tenant's right to occupy the Temporary Spaces shall commence on
the date of full execution and
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<PAGE> 51
delivery of this Lease. Tenant's right to occupy the Second Floor
Temporary Space shall expire on the first to occur of (1) the completion
of Tenant's tenant improvement work in the Premises or (2) the date
which is six (6) months after the date of full execution and delivery of
this Lease. Either party hereto may terminate Tenant's right to occupy
the Eleventh Floor Temporary Space upon not less than thirty (30) days'
prior notice to the other party, but such termination shall not occur
earlier than June 30, 1995. Tenant's right to occupy the Terminated
Temporary Space shall expire on the date which is one month after the
date of full execution and delivery of this Lease;
(C) Tenant shall accept the Temporary Spaces in their "as-is"
physical condition, without any representation, credit or allowance from
Landlord with respect to the condition or improvement thereof;
(D) It shall be a condition of Tenant's right to occupy the
Temporary Spaces that this Lease is in full force and effect and Tenant
is not in material monetary breach or default under this Lease, beyond
any applicable cure period, or otherwise in material breach or default
under this Lease, beyond any applicable cure period, at any time while
Tenant is occupying the Temporary Spaces (as used in this Lease
"material monetary breach or default" shall mean non-payment of a sum
exceeding $25,000);
(E) For each month after April 30, 1995 that Tenant occupies all
or any part of the Eleventh Floor Temporary Space, Tenant shall pay to
Landlord gross rent therefor in the amount of $15,960.00 (which rent
shall be prorated for any partial month of such occupancy and shall be
payable at the same time and in the same manner as Base Rent due
hereunder); and
(F) Tenant shall surrender possession of the Temporary Spaces
in condition required pursuant to the Termination Agreement.
ARTICLE XXIX - SIGNAGE
29.01 Signage. Tenant shall have the right to maintain its current sign
on the exterior of the Building. Tenant shall further have the right to change
such sign or to identify an Affiliate on such sign (instead of Tenant), subject
to compliance with all applicable laws, codes and ordinances and subject to
Landlord's consent, which shall not be unreasonably withheld. Subject to
Landlord's supervision, Tenant, at Tenant's expense, shall maintain such sign
in a good, clean and sightly condition. It shall be a condition of Tenant's
right to maintain such sign that: (A) Tenant is not in material monetary breach
or default under this Lease, beyond any applicable cure period, or otherwise
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<PAGE> 52
in material breach or default under this Lease, beyond any applicable cure
period, (B) this Lease is in full force and effect and (C) Galileo International
Partnership and/or its Affiliates are the "Tenant" under this Lease and are in
actual physical occupancy of, and conducting business from, at least 50,000
rentable square feet of space in the Building. Notwithstanding the foregoing,
Landlord agrees that if it is entitled to require Tenant to remove such sign
because Tenant fails to satisfy the condition described in clause (C) in the
immediately preceding sentence, Landlord shall not require Tenant to remove
such sign unless it has granted the right to place a sign on the top of the
Building to another occupant of the Building that is (or after completing its
move into the Building will be) in physical occupancy of and conducting
business from a rentable area larger than the rentable area then occupied by
Tenant. Upon the expiration or termination of the Lease Term, Tenant, at
Tenant's expense, shall remove the sign and restore the affected areas of the
Building. The right granted to Tenant in this Article XXIX is personal to
Galileo International Partnership and its Affiliates and shall not inure for
the benefit of any subtenant or any other third party assignee.
ARTICLE XXX - CONTRACTION OPTION; RELOCATION OF 10TH FLOOR PREMISES
30.01 Contraction Option. Tenant shall have one option (the
"Contraction Option") to terminate this Lease with respect only to a portion of
the Premises on the tenth (10th) floor of the Building consisting of 6,666
rentable square feet (the "Contraction Space"), the location of which shall be
selected by Tenant, subject to Section 30.02(D). If Tenant exercises the
Contraction Option, this Lease shall terminate with respect only to the
Contraction Space effective as of any date selected by Tenant (the "Contraction
Date") but which date must occur during the period commencing on January 1, 1997
and expiring on December 31, 1997.
30.02 Exercise of Contraction Option. The Contraction Option is granted
subject to the following terms and conditions:
(A) Tenant shall give Landlord written notice (the "Contraction
Notice") of Tenant's election to exercise the Contraction Option not
later than one hundred eighty (180) days prior to the Contraction Date,
which notice shall (i) designate the actual Contraction Space and (ii)
designate the actual Contraction Date;
(B) This Lease shall be in full force and effect and Tenant
shall not be in material monetary breach or default under this Lease,
beyond any applicable cure period, or otherwise in material breach or
default under this Lease, beyond any applicable cure period, either on
the date Tenant exercises the Contraction Option or on the Contraction
Date;
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(C) Tenant shall pay to Landlord a Contraction Space termination
fee (the "Contraction Space Termination Fee") in an amount equal to the
unamortized amount as of the Contraction Date of the brokerage
commission paid by Landlord to Tenant's broker for the leasing by Tenant
of the Contraction Space pursuant to this Lease, together with interest
thereon at the per annum rate of ten percent (10%), amortized on a
straight-line basis over the five-year Lease Term.
(D) The Contraction Space must be a single, contiguous portion
of the Premises and the Contraction Space must be of a reasonably
marketable configuration, with full and direct access to public
corridors and other common areas of the Building and in compliance with
all applicable building codes and with ADA. Tenant shall reimburse
Landlord within ten (10) business days after billing for all costs paid
or incurred by Landlord (i) to separately demise the Contraction Space
from the remaining space located on the tenth (10th) floor of the
Building, (ii) to separately meter such remaining space on the tenth
(10th) floor, if required, and (iii) to otherwise cause the Contraction
Space and such remaining space and the common areas of such floor to
comply with all applicable building codes and with ADA. Notwithstanding
the preceding sentence, Tenant shall have the right, at is own cost and
expense to perform the work referred to in clauses (i), (ii) and (iii)
of the immediately preceding sentence if and to the extent it confers
with and obtains the reasonable approval of Landlord at least thirty
(30) days prior to the Contraction Date and otherwise complies with the
provisions of Article IX of this Lease.
30.03 Terms. If Tenant exercises the Contraction Option:
(A) This Lease shall terminate with respect only to the
Contraction Space effective as of the Contraction Date and Rent for the
Contraction Space shall be paid through and apportioned as of the
Contraction Date;
(B) Tenant shall surrender and vacate the Contraction Space and
deliver possession thereof to Landlord on or before the Contraction Date
in the condition required under Sections 9.04 and 30.02(D) of this
Lease;
(C) Neither Landlord nor Tenant shall have any rights, estates,
liabilities or obligations under this Lease with respect to the
Contraction Space first accruing after the Contraction Date, except
those which pursuant to this Lease are to expressly survive the
expiration or termination of the Lease Term;
(D) This Lease shall continue in full force and effect with
respect to the entire remaining portion of the Premises (other than the
Contraction Space) for the balance of the
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Lease Term. Effective as of the day immediately following the Contraction
Date, (1) the Base Rent payable under this Lease shall be reduced by the
amount of Base Rent which would otherwise have been payable under this
Lease for the Contraction Space (based upon the Rentable Area of the
original Premises compared to the Rentable Area of the original Premises
less the Contraction Space) and (2) Tenant's Percentage Share shall be
reduced to the percentage equivalent of a fraction, the numerator of which
is the Rentable Area of the Premises less the Contraction Space and the
denominator of which is the Rentable Area of the Building; and
(E) Landlord and Tenant shall enter into an amendment to this Lease
reflecting the termination of the Lease with respect only to the
Contraction Space, upon the terms herein provided.
30.04 Termination. The Contraction Option shall automatically terminate
and become null and void upon the earlier to occur of (A) the termination of
Tenant's right to possession of all or any part of the Premises as a result of a
breach or default by Tenant under this Lease or (B) the failure of Tenant to
timely or properly exercise the Contraction Option.
30.05 Relocation.
(A) (i) If Tenant has exercised the Contraction Option on or before
April 30, 1996, then on or before July 31, 1996, Landlord shall notify
Tenant in writing of whether Landlord has entered into an agreement with
ADP, Inc. ("ADP") or an affiliate of ADP, whereby Landlord has agreed to
lease to ADP or such affiliate the premises currently leased to ADP on the
second floor of the Building, consisting of 13,902 rentable square feet
(the "ADP Space"). If Landlord has entered into such an agreement to lease
the ADP Space to ADP or an affiliate of ADP, then Tenant's exercise of the
Contraction Option shall remain in full force and effect. If Landlord has
not entered into an agreement to lease the ADP Space to ADP or an affiliate
of ADP, then Landlord shall also advise Tenant of whether the balance (or a
designated portion thereof) of the second (2nd) floor also is available for
leasing to Tenant. If the ADP Space and no other space on the second (2nd)
floor is available for leasing to Tenant, then Tenant shall be obligated to
relocate all of its tenth (10th) floor premises to the ADP Space. If in
such notice Landlord notifies Tenant that the ADP Space and additional
space on the second (2nd) floor are available for leasing to Tenant, Tenant
shall notify Landlord in writing on or before August 15, 1996, whether
Tenant desires to also relocate into such additional space on the second
(2nd) floor (as well as into the ADP Space). If Landlord fails to notify
Tenant on or before July 31, 1996, of the availability for leasing by
Tenant of the ADP Space, then it shall be deemed that the
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ADP Space shall not be available for leasing to Tenant. In such event, Tenant's
exercise of the Contraction Option shall remain in full force and effect. If
Landlord notifies Tenant on or before July 31, 1996, that the ADP Space and
additional space on the second (2nd) floor of the Building are available for
leasing to Tenant and Tenant fails to notify Landlord in writing on or before
August 15, 1996 of whether Tenant desires to lease the ADP Space and such
additional space on the second (2nd) floor of the Building, then Tenant shall
have deemed to have elected not to lease such additional space on the second
(2nd) floor of the Building but only to lease the ADP Space, in which event
Tenant shall relocate all of its tenth (10th) floor premises solely to the ADP
Space.
(ii) If Tenant has not exercised the Contraction Option on or before
April 30, 1996, then not later than July 31, 1996 Landlord shall notify Tenant
whether the entire second floor of the Building is available for leasing by
Tenant. If the entire second floor of the Building is so available, by notice
given to Landlord not later than August 15, 1996, Tenant may elect to relocate
all of its tenth (10th) floor premises to the second floor. After any such
relocation, Tenant shall continue to have the Contraction Option as described
in, and subject to the terms of, Sections 30.1 through 30.04 above, provided
that the "Contraction Space" shall instead consist of all rentable space on the
second floor other than the ADP Space, consisting of 9,530 rentable square feet.
(iii) Provided that Tenant is not in material or monetary breach or
default under this Lease, beyond any applicable cure period, or otherwise in
material breach or default under this Lease, beyond any applicable cure period,
and provided that this Lease is in full force and effect, Landlord agrees that
Landlord shall not enter into an agreement to lease the ADP Space to any
person or entity other than ADP or an affiliate of ADP prior to May 1, 1996.
Landlord further agrees that if Tenant has exercised the Contraction Option on
or before April 30, 1996, Landlord shall not enter into an agreement to lease
the ADP Space to any person or entity other than ADP or an affiliate of ADP
prior to August 1, 1996. After the expiration of the applicable foregoing date,
Landlord may enter into an agreement with any party to lease the ADP Space
(subject to the terms of Article 31 below).
(B) It shall be a condition of Tenant's right to relocate a portion
of the Premises as provided herein that this Lease shall be in full force and
effect and Tenant shall not be in material monetary breach or default under
this Lease, beyond any applicable cure period, or otherwise
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in material breach or default under this Lease, beyond any applicable cure
period, either on the date Tenant exercises a right to relocate or on the
Relocation Effective Date (as hereinafter defined); provided, however, that
Landlord, in its sole discretion, may waive the foregoing condition.
(C) If Tenant becomes obligated to relocate any portion of its
Premises on the tenth floor (the "10th Floor Relocation Premises") to space on
the second floor (the "2nd Floor Relocation Premises") as provided above:
(1) Landlord shall deliver possession of the 2nd Floor Relocation
Premises to Tenant for Tenant to commence leasehold improvements desired by
Tenant therein (in accordance with Article 9 of this Lease and the Work
Letter Agreement) on or before January 1, 1997. Notwithstanding the
foregoing or anything else in this Section 30.05, Landlord shall not be
liable for any delay in delivery of all or any part of the 2nd Floor
Relocation Premises, provided that in the event of any such delay not
caused (wholly or in material part) by any act or omission of Tenant or its
agents, employees or contractors, (a) the Relocation Effective Date (as
hereinafter defined) shall be deferred by a number of days equal to the
number of days past January 1, 1997 that Landlord is delayed in delivering
possession of the entire 2nd Floor Relocation Premises to Tenant, and (b)
the adjustment of Tenant's Base Rent and Tax and Operating Expense
Adjustment described in clause (3) of this Section 30.05 (C) shall occur
effective as of April 1, 1995 (even though the Relocation Effective Date
may have been deferred and Tenant may thus remain in occupancy of all or a
portion of the 10th Floor Relocation Premises);
(2) Tenant shall be responsible for all costs and expenses with
respect to moving from the 10th Floor Relocation Premises to the 2nd Floor
Relocation Premises and for improving the 2nd Floor Relocation Premises
(Tenant hereby agreeing to accept the 2nd Floor Relocation Premises in its
"as is", "where is" condition, without any representation, credit or
allowance from Landlord with respect to the condition or improvement
thereof); and
(3) Effective as of April 1, 1997 (the "Relocation Effective
Date"), the Base Rent and Tax and Operating Expense Adjustment and other
expenses payable under this Lease shall be reduced or increased, as the
case may be, pro rata (based upon the rentable area of the 2nd Floor
Relocation Premises compared to the rentable area of the 10th Floor
Relocation Premises).
Upon such relocation, Tenant shall surrender and vacate the 10th Floor
Relocation Premises and deliver possession
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thereof to Landlord on or before the Relocation Effective Date in the
condition required under Section 9.04 of this Lease. Neither Landlord
nor Tenant shall have any rights, estates, liabilities or obligations
under this Lease with respect to the 10th Floor Relocation Premises
first accruing after the Relocation Effective Date, except those which
pursuant to this Lease expressly survive the expiration or termination
of the Lease Term.
(D) Tenant shall pay Landlord a relocation termination fee (the
"Relocation Space Termination Fee") in an amount equal to the
unamortized amount as of the Relocation Effective Date of the brokerage
commission paid by Landlord to Tenant's broker for the leasing by Tenant
pursuant to this Lease of "net terminated tenth (10th) floor space" (as
defined below), together with interest thereon at the per annum rate of
ten percent (10%), amortized on a straight-line basis over the five-year
Lease Term. As used herein, "net terminated tenth (10th) floor space"
shall mean the aggregate amount of the 10th Floor Relocation Premises in
excess of 13,902 square feet that shall be terminated and no longer
leased by Tenant as of the Relocation Effective Date.
(E) All portions of the 2nd Floor Relocation Premises shall be
contiguous and of reasonably marketable configurations, with full and
direct access to public corridors and other common areas of the Building
and in compliance with all applicable building codes and with ADA. If
and to the extent the 2nd Floor Relocation Premises requires separate
demising, Tenant shall reimburse Landlord within ten (10) business days
after billing for all costs paid or incurred by Landlord to separately
demise the same in compliance with applicable building codes and ADA
(provided Tenant shall have the right, at its own cost and expense, to
perform such demising work if and to the extent it confers with and
obtains the reasonable approval of Landlord at least thirty (30) days
prior to the effective date of such relocation).
(F) Landlord and Tenant shall enter into an amendment to this Lease
reflecting the relocation of Tenant from the 10th Floor Relocation
Premises to the 2nd Floor Relocation Premises, upon the terms herein
provided.
ARTICLE XXXI -- RIGHT OF FIRST OFFER
31.01 Expansion Space. For purposes of this Article XXXI, the
"Expansion Space" shall mean all of the Rentable Area located on the 2nd and 5th
floors of the Building provided that if Tenant subleases (other than to an
Affiliate) any space on the same floor as, or on a floor contiguous to any floor
containing, part of the Expansion Space, then all space on such same or
contiguous floor which was part of the "Expansion Space" shall no longer
constitute part of this "Expansion Space").
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31.02 Right of First Offer. In the event that at any time during the
Lease Term prior to March 31, 1998, Landlord desires to lease the Expansion
Space, or any part thereof, or any part thereof with other space in the
Building (which other space shall be considered part of the Expansion Space),
to a third party (excluding any new or renewal lease or lease expansion with
any present or future tenant of such Expansion Space, whether pursuant to the
exercise by such tenant of a renewal or expansion option contained in such
tenant's lease or pursuant to new negotiations between Landlord and said
tenant), Landlord shall give Tenant written notice thereof ("Landlord's Notice")
prior to Landlord entering into any lease for such Expansion Space, which
notice shall specify (A) the portion of the Expansion Space which Landlord
desires to lease (hereinafter referred to as the "Actual Expansion Space"), (B)
the date upon which such Actual Expansion Space shall be available for
occupancy and (C) the "market rate of rent" (as defined below) per square foot
of rentable area of such Actual Expansion Space to be quoted for a hypothetical
lease having a lease term expiring on the Expiration Date of the Lease Term.
Tenant shall thereupon have the right (a "First Offer Right") to lease all, but
not less than all of the Actual Expansion Space for a lease term commencing on
the available occupancy date for such Actual Expansion Space (as specified in
Landlord's Notice) and expiring on the Expiration Date of the Lease Term. Each
First Offer Right is conditioned upon strict compliance with the following
terms and conditions:
(1) Tenant gives Landlord written notice of its election to
exercise the First Offer Right within ten (10) business days after
Landlord gives Tenant the applicable Landlord's Notice for such First
Offer Right; and
(2) This Lease is in full force and effect and Tenant is not in
material monetary breach or default under this Lease, beyond any
applicable cure period, or otherwise in material breach or default under
this Lease, beyond any applicable cure period, either on the date Tenant
exercises the First Offer Right or on the proposed commencement date of
the lease term for the Actual Expansion Space.
As used herein, "market rate of rent" shall mean the total rate of rent,
including component parts of such rate of rent such as net rent, fixed and/or
indexed rental adjustments and all rental adjustments for Property Taxes and
Operating Expenses for the Building, and taking into account tenant
concessions, if any, such as rent abatements and improvements allowances, which
Landlord is offering to third party tenants for office space in the Building
(taking into account, among other things, the lengths of the terms and the
sizes of the spaces and levels of improvement of the spaces demised under such
leases to third party tenants).
31.03 Continuous Right. If Tenant does not timely or properly
exercise a First Offer Right, Landlord may at any time thereafter lease the
Actual Expansion Space to any third party on
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such terms and conditions as are acceptable to Landlord (but not on economic
terms substantially more favorable to such third party than those set forth in
Landlord's Notice), without any further rights of Tenant to lease such space
unless such space is not leased by a third party within 180 days after delivery
of Landlord's Notice or such space is vacated by the third party and is again
available for leasing, in each such case Landlord shall again comply with the
terms of this Article 31.
31.04 Terms. If Tenant exercises a First Offer Right:
(A) All of the terms, covenants and provisions of this Lease shall
be applicable to the lease of the Actual Expansion Space, except that
the initial annual rate of Base Rent per square foot of rentable area of
the Actual Expansion Space shall be equal to the "market rate of rent"
per square foot of rentable area of the Actual Expansion Space specified
in the applicable Landlord's Notice. The Base Rent applicable to the
Actual Expansion Space shall be subject to adjustments during the lease
term of the Actual Expansion Space in accordance with the applicable
Landlord's Notice. There shall be no abatement of Base Rent or Tax and
Operating Expense Adjustment for the Actual Expansion Space, except that
if Tenant elects to perform leasehold improvements in the Actual
Expansion Space to prepare the Actual Expansion Space for Tenant's
occupancy, Base Rent and Tax and Operating Expense Adjustment for the
Actual Expansion Space shall abate during the period Tenant performs
such leasehold improvements, until Tenant first conducts business from
any portion of the Actual Expansion Space (such abatement period not to
exceed 60 days).
(B) Tenant agrees to accept possession of the Actual Expansion
Space in an "as is," "where is" condition without any representation,
credit or allowance from Landlord for the improvement thereof.
(C) Landlord and Tenant shall promptly execute and deliver an
amendment to this Lease reflecting the lease by Landlord to Tenant of
the Actual Expansion Space on the terms herein provided.
31.05 Termination. Each First Offer Right granted in this Lease shall
automatically terminate and become null and void upon the earlier to occur of
(A) the expiration or termination of this Lease, (B) the termination of
Tenant's right to possession of all or any part of the Premises as a result of
a breach or default by Tenant under this Lease, or (C) the failure by Tenant to
timely or properly exercise such First Offer Right (without limiting any future
First Offer Rights which may arise under Section 31.03).
ARTICLE XXXII -- RENEWAL OPTION
32.01 Renewal Option. Tenant shall have an option (the "Renewal
Option") to renew the initial Lease Term with respect to
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all (but not less than all) of the Premises (including any space in addition to
the original Premises then demised to Tenant under or pursuant to this Lease,
as from time to time amended) as of the expiration date of the Lease Term for
the additional term (the "Renewal Term") of five (5) years, commencing on April
1, 2000 and expiring on March 31, 2005 (which upon exercise of the Renewal
Option, shall be the "Expiration Date" under this Lease), upon the following
terms and conditions:
(A) Tenant gives Landlord written notice ("Tenant's Exercise
Notice") of Tenant's election to exercise the Renewal Option no later
than November 30, 1998; and
(B) This Lease is in full force and effect and Tenant is not in
material monetary breach or default under this Lease, beyond any
applicable cure period, or otherwise in material breach or default under
this Lease, beyond any applicable cure period, either on the date Tenant
exercises the Renewal Option or on the expiration date of the initial
Lease Term.
32.02 Terms. If Tenant exercises the Renewal Option in accordance
with the provisions of Section 32.01:
(A) The Base Rent payable for the Renewal Term shall be equal to
the "market rate of rent" that Landlord reasonably anticipates will be
in effect at the commencement of the Renewal Term. If Tenant timely and
properly exercises the Renewal Option, Landlord agrees to give Tenant
written notice setting forth the "market rate of rent" within thirty
(30) days after Landlord's receipt of Tenant's Exercise Notice. For
purposes of this Section 32.02: (x) "market rate of rent" shall mean the
total rate of rent, including component parts of such rate of rent such
as net rent, fixed and/or indexed rental adjustments and all rental
adjustments for Property Taxes and Operating Expenses for the Building,
and taking into account Tenant concessions, if any, such as rent
abatements and improvement allowances, which Landlord is offering to
third party tenants for office space in the Building (taking into
account, among other things, the lengths of the terms and the sizes of
the spaces and levels of improvement of the spaces demised under such
leases to third party tenants); and (y) the Base Rent payable during the
Renewal Term shall be subject to adjustment during the Renewal Term as
provided in Landlord's written notice setting forth the market rate of
rent. There shall be no abatement of Base Rent or Tax and Operating
Expense Adjustment for the Premises during the Renewal Term.
(B) Tenant shall have no further options to renew the Lease Term
beyond the expiration date of the Renewal Term.
(C) Tenant agrees to accept the Premises at the commencement of the
Renewal Term in its "as is" condition,
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without any representation, credit or allowance from Landlord with respect
to the improvement thereof.
(D) Except for the rate of Base Rent and except as otherwise provided
herein, all of the terms and provisions of this Lease shall remain the same
and in full force and effect during the Renewal Term.
(E) Landlord and Tenant shall execute and deliver an amendment to
this Lease reflecting the lease of the Premises by Landlord to Tenant for
the Renewal Term on the terms herein provided promptly after Tenant's right
to rescind such exercise becomes null and void.
32.03 Rate Negotiations; Arbitration
Tenant shall have twenty (20) days ("Tenant's Review Period") after receipt
of Landlord's notice of the proposed "market rate of rent" within which to
accept such proposed "market rate of rent" or to object thereto in writing. In
the event Tenant so objects, Landlord and Tenant shall attempt in good faith to
agree upon such "market rate of rent". If Landlord and Tenant fail to reach
agreement on the "market rate of rent" by the date (the "Outside Agreement
Date") that is fifteen (15) days following the expiration of Tenant's Review
Period, Tenant and Landlord each shall submit their respective good faith
determinations of the applicable "market rate of rent" by sealed bid to
arbitration in accordance with the following procedure:
(A) (i) Not later than fifteen (15) days following the Outside Agreement
Date, Landlord and Tenant shall each appoint one independent arbitrator who
shall by profession be a real estate appraiser (with the professional
designation of M.A.I. or, if M.A.I. ceases to exist, a comparable
designation from an equivalent professional appraiser organization) or
office leasing broker who shall have been active over the ten (10) year
period ending on the date of such appointment in appraising or leasing of
commercial office properties in the O'Hare office corridor. The
determination of the arbitrators shall be limited solely to the issue of
whether Landlord's or Tenant's submitted "market rate of rent" for the
Premises is the closest to the "market rate of rent" for the Premises as
determined by the arbitrators, taking into account all relevant elements,
including, without limitation, the elements listed in Section 32.02(A) of
this Lease.
(ii) The two arbitrators so appointed shall within ten (10) days of
the date of the appointment of the last appointed arbitrator agree upon and
appoint a third arbitrator who shall be qualified under the same criteria
set forth hereinabove for qualification of the initial two arbitrators.
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(iii) The three arbitrators shall within thirty (30) days of the
appointment of the third arbitrator reach a decision as to whether the
parties shall use Landlord's or Tenant's submitted market rate of rent" and
shall notify Landlord and Tenant thereof in writing.
(iv) The decision of the majority of the three arbitrators shall be
binding upon Landlord and Tenant and judgment upon such decision may be
entered into by any court having jurisdiction over Landlord and Tenant.
(v) If the two arbitrators fail to agree upon and appoint a third
arbitrator within the time period herein provided, Landlord and Tenant
shall submit the task of appointing the third arbitrator to the Chicago
Office Leasing Brokers Association ("COLBA") and the President of COLBA
shall appoint the third arbitrator who shall possess the qualifications
described in clause (A) (i) of this Section 32.03.
(vi) The entire cost of arbitration shall be paid by Landlord if
Tenant's submitted "market rate of rent" is selected and by Tenant if
Landlord's submitted "market rate of rent" is selected; provided, however,
that regardless of the results of the arbitration, the cost of arbitration
shall be paid by Tenant if Tenant proceeds to rescind the exercise of the
Renewal Option pursuant to clause (C) of this Section 32.03.
(vii) Notwithstanding the foregoing, if either Landlord or Tenant fails to
appoint an arbitrator within fifteen (15) days after the Outside Agreement
Date as provided for in clause (A) (i) of this Section 32.03(1) and such
failure to appoint an arbitrator is not cured within ten (10) days after
receipt by such failing party of written demand to do so by the other party
(which other party shall have appointed its arbitrator prior to sending
such written demand), then the arbitrator appointed by the party sending
such demand, acting alone, shall reach a decision on the applicable "market
rate of rent", notify Landlord and Tenant in writing thereof, and such
arbitrator's decision shall be binding on the Landlord and Tenant.
(B) If for any reason whatsoever the applicable "market rate of rent" for
a Renewal Term has not been determined, as provided in this Lease, by the
commencement of such Renewal Term the "market rate of rent" (and terms of
payment) as proposed by Tenant in its sealed bid shall be utilized as the
new rate of Base Rent until such time as the final "market rate of rent"
for such Renewal Term has been conclusively determined (at which time
Tenant, if Landlord's submitted "market rate of rent" is selected as the
rate
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of rent for the Renewal Term, shall promptly pay Landlord the excess amount
due, if any, for the period during which Tenant's proposed "market rate of
rent" was utilized as the rate of Base Rent for the Premises).
(C) Notwithstanding anything to the contrary in this Article 32, if Tenant
is dissatisfied with the results of such arbitration or for any other
reason Tenant elects not to proceed (regardless of whether Tenant's
proposed "market rate of rent" prevails in arbitration), Tenant shall have
the right to retract, terminate and rescind and to declare null and void
Tenant's Exercise Notice exercising the Renewal Option by giving Landlord
written notice thereof not later than ten (10) days after the decision of
the arbitrators is rendered and communicated to Landlord and Tenant. In
such event, Tenant's right to extend the Lease Term shall be extinguished.
32.04 Termination. The Renewal Option shall automatically terminate and
become null and void and of no force or effect upon the earlier to occur of (A)
the expiration or termination of this Lease, (B) the termination of Tenant's
right to possession of all or any part of the Premises as a result of a breach
or default by Tenant under this Lease, or (C) the failure of Tenant to timely or
properly exercise the Renewal Option.
ARTICLE XXXIII - STORAGE SPACE
33.01 Storage Space. In addition to the Premises, Landlord hereby leases
to Tenant and Tenant hereby accepts that certain space (the "Storage Space")
consisting of approximately 3,085 square feet and identified as Storage Space
No. 6, located on the concourse level of the Building. Tenant agrees to accept
the Storage Space in an "as is" condition, without any representation, credit or
allowance from Landlord with respect to the improvement thereof. Landlord shall
provide the Storage Space with heating, air conditioning, janitorial and freight
elevator service at levels and at times as are substantially in accordance with
past practices.
33.02 Storage Space Rent. In addition to all Rent required under the
Lease for the Premises, (i) Tenant shall pay to Landlord as rent for the Storage
Space (the "Storage Space Rent") the sum of $2,570.83 per month and (ii) Tenant
shall pay for (A) the installation of a separate electrical meter and (B) all
electricity consumed in the Storage Space. Monthly payments of the Storage
Space Rent shall be payable at the same time and in the same manner as monthly
installments of Base Rent. Charges for consumption of supplemental services
requested by Tenant shall be payable within a reasonable period of time after
billing. The Storage Space Rent for the Renewal Term, if applicable, shall be
equal to the rental rate Landlord is generally charging other tenants in the
Building for storage
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space similar in size, location and level of service to the Storage Space. In
no event, however, shall Tenant have or be entitled to exercise the remedies
set forth in Insert No. 2 of this Rider for any purported interruption in
services in or for the Storage Space.
33.03 Use. Tenant shall use the Storage Space only for storage of normal
office equipment and supplies and business records and, if allowed by applicable
laws, codes and ordinances, for the operation of computer equipment and a mail
room. Tenant shall keep the Storage Space in a neat and orderly condition.
ARTICLE XXXIV - TENANT'S LIMITED RIGHT OF SELF-HELP
AND LIMITED RIGHT OF SET-OFF
34.01 Tenant's Limited Self-Help right. If landlord fails to maintain or
to make any necessary repairs to (a) the structural components of the Building,
(b) preserve at least one functioning means of access to the Premises or (c) the
major systems serving the Premises and providing services described in Section
7.01 of this Lease that Landlord is required to perform or make pursuant to the
provisions of the Lease, and any such failure continues for a period of thirty
(30) days after Landlord receives written notice of such failure from Tenant (it
being understood and agreed that such 30-day period may be extended for a
reasonable period of time if it is not reasonably practicable for Landlord to
complete such maintenance or repair within such 30-day period but Landlord
commences and diligently pursues the performance of such maintenance or repair
within such 30-day period) and, as a result of the condition of the Premises or
the Building caused by such failure, Tenant is unable, in its good faith
business judgment, to utilize any portion of the Premises which provides
material services or personnel necessary for the operation of Tenant's business
(or any other portion of the Premises with an aggregate rentable area of at
least 5,000 square feet) for the intended purposes specified in Section 1.10 of
the Lease, then at any time after the expiration of such 30-day period (as the
same may be extended as provided above) and prior to the time that Landlord
commences the repair work to cure such failure, Tenant, upon prior notice to
Landlord, shall be entitled to make such repair or perform such maintenance, as
the case may be, that Landlord has failed to make or perform. In the event that
Tenant exercises its right to make such repairs or perform such maintenance as
aforesaid, Landlord agrees to reimburse Tenant for the actual reasonable cost of
such repairs or maintenance within thirty (30) days after Landlord receives from
Tenant a written request for such reimbursement accompanied by invoices, paid
receipts and full and final waivers of lien evidencing the lien-free performance
of such work at the cost specified in such invoices.
34.02 Tenant's Limited Set-Off Right. In the event Tenant exercises its
right to make such repairs or perform such maintenance as provided and pursuant
to the provisions of Section 34.01 and Landlord fails to reimburse Tenant for
the reasonable
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necessary costs of such repairs or maintenance within such 30-day period if and
as required by the provisions of Section 34.01 above, and provided Tenant is
not otherwise in material monetary breach or default under this Lease, beyond
any applicable cure period, or in material breach or default under this Lease
with respect to any non-monetary obligation of Tenant, beyond any applicable
cure period, then Tenant shall have the right to give Landlord a written notice
of default and, if Landlord fails to make such reimbursements within five (5)
business days after Landlord's receipt of such notice of default, Tenant shall
have the right to set-off against Base Rent thereafter first becoming due under
the Lease the amount which Tenant is entitled to receive as reimbursement (as
the actual reasonable costs of such repairs or maintenance, as the case may
be); provided, however, that in no event shall the amount of such set-off for
any month exceed forty percent (40%) of the amount of Monthly Base Rent (as
specified in Insert No. 1 of this Lease) due for such month. The exercise of
such right of set-off by Tenant shall be communicated in writing to Landlord
not later than one (1) business day prior to the actual exercise of such right.
34.03 Sole Remedies. If Tenant exercises its right of self-help under
Section 34.01, then Tenant's sole remedy for Landlord's failure to make the
repair or perform the maintenance work that gave rise to Tenant's exercise of
self-help shall be to perform such self-help tasks and to recover the actual
reasonable costs thereof from Landlord as provided in Section 34.01 above
(failing which Tenant may exercise the set-off remedy as provided for in
Section 34.02).
ARTICLE XXXV - CONDITION
35.01 Condition. This Lease is conditioned upon the simultaneous
execution and delivery of a Lease Termination and Assignment of Lease
Agreement ( the "Termination Agreement") of even date herewith between
Landlord and Tenant with respect to Tenant's lease of certain premises in the
Building (including the Premises) pursuant to an Office Lease dated December
1, 1986 as amended and assigned from time to time, and receipt by Landlord of
all sums required to be paid to Landlord pursuant to the Termination
Agreement. If the Termination Agreement is not executed and delivered with
this Lease for any reason, this Lease shall be null and void and of no further
force or effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Rider to be
executed as of the date first written above.
TENANT: LANDLORD:
GALILEO INTERNATIONAL AMERICAN NATIONAL BANK AND
PARTNERSHIP, a Delaware TRUST COMPANY OF CHICAGO, not
general partnership personally but solely as
Trustee, as aforesaid
By: [sig] By: [sig]
--------------------------- ---------------------------
Its: Senior Vice President & Title:
Chief Financial Officer
<PAGE> 67
FLOOR PLANS OF PREMISES
A-1 Concourse Level
A-2 3rd Floor
A-3 4th Floor
A-4 10th Floor
EXHIBIT A
---------
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EXHIBIT A-1
[FLOOR PLANS OF PREMISES]
<PAGE> 69
EXHIBIT A-2
[FLOOR PLAN OF PREMISES]
<PAGE> 70
EXHIBIT A-3
[FLOOR PLAN OF PREMISES]
<PAGE> 71
EXHIBIT A-4
[FLOOR PLAN OF PREMISES]
<PAGE> 72
EXHIBIT B
WORK LETTER AGREEMENT
[Tenant Performs Work]
This Work Letter Agreement ("Work Letter") is executed simultaneously
with that certain Office Lease (the "Lease") between GALILEO INTERNATIONAL
PARTNERSHIP, a Delaware general partnership, as "Tenant" and AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO, not personally, but as Trustee under Trust
No. 107101-01, as "Landlord", relating to demised premises ("Premises") at the
building commonly known as ORCHARD POINT OFFICE CENTER, Rosemont, Illinois (the
"Building"), which Premises are more fully identified in the Lease. Capitalized
terms used herein, unless otherwise defined in this Work Letter Agreement,
shall have the respective meanings ascribed to them in the Lease.
For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant
hereby agree as follows:
1. Work. Tenant, at its sole cost and expense, may perform, or
cause to be performed, work (the "Work") in the Premises provided for in
Approved Plans (as defined in Paragraph 2 hereof). "Work" shall mean any
improvements performed by Tenant in the Premises. Notwithstanding the
foregoing, work of the types described in Insert 9.1 of the Lease shall not
constitute "Work".
2. Pre-Construction Activities.
a. Prior to commencing the Work, Tenant shall submit the following
information and items to Landlord.
(i) An informational construction schedule containing the major
components of the Work and the estimated time required for each, including the
scheduled commencement date of construction of the Work, milestone dates and
the estimated date of completion of construction.
(ii) An itemized statement of estimated construction cost, including
fees for permits and architectural and engineering fees.
(iii)
(iv) The names and addresses of Tenant's contractors (and said
contractor's subcontractors and materialmen to be engaged by Tenant for the Work
(individually, a "Tenant Contractor," and collectively, "Tenant's Contractors").
Landlord has the right to approve or disapprove all or any one or more of
Tenant's Contractors (which approval shall not be unreasonably withheld ([and if
Landlord's approval or disapproval is not given within three (3) business days
after Tenant has submitted its list of contractors, Landlord shall be deemed to
have granted its approval of all contractors on such list]).
(v) Certified copies of insurance policies or certificates of
insurance as hereinafter described. Tenant shall not permit Tenant's
Contractors to commence work until the required insurance has been obtained and
certified copies of policies or certificates have been delivered to Landlord.
(vi) Payment and performance bonds for all of Tenant's Contractors
naming Landlord (or an agent, designee or representative appointed by
Landlord's written notice to Tenant given prior to Tenant's procurement of paid
bonds) as a dual obligee (unless Landlord notifies Tenant in writing that such
bonds shall not be required for the Work). See insert 2(a)(vi).1 on Page 1A.
(vii) The Plans (as hereinafter defined) for the Work, which Plans
shall be subject to Landlord's approval in accordance with Paragraph 2(b) below.
Tenant will update such information and items by notice to Landlord of
any changes (other than changes of the types described on Schedule I attached
hereto).
(b) As used herein the term "Approved Plans" shall mean the Plans
(as hereinafter defined), as and when approved in writing by Landlord. As used
herein, the term "Plans" shall mean the full and detailed architectural and
engineering plans and specifications covering the Work (including, without
limitation, architectural, mechanical and electrical working drawings for the
Work). The Plans shall be subject to Landlord's approval and the approval of all
local governmental authorities requiring approval of the work and/or the
Approved Plan. Landlord shall give its approval or disapproval (giving specific
reasons in case of disapproval) of the Plans within three (3) business days
after their delivery to Landlord (if Landlord's approval or disapproval is not
given within such 3-business day period, Landlord shall be deemed to have
granted its approval). Landlord agrees not to unreasonably withhold its approval
of said Plans; provided, however, that Landlord shall
Exhibit B
-1-
<PAGE> 73
Insert 2(a)(vi).1
Notwithstanding anything in Paragraphs 2(a)(vi) or 9 of this Work
Letter Agreement to the contrary, provided (i) Galileo International
Partnership or an Affiliate is the "Tenant" under the Lease and the Premises
then consists of at least 50,000 rentable square feet, (ii) if a lien was filed
in connection with any prior Work or Alterations, Tenant promptly performed
its obligations under Section 9.03 of the Lease with respect to such lien claim
and thereafter used diligent efforts to cause the discharge of such lien, and
(iii) Tenant is not in "material monetary breach or default" (as defined in the
Lease) under the Lease, beyond any applicable cure periods, or in material
breach or default under the Lease, beyond any applicable cure periods,
then Tenant shall not be required to deliver payment and performance bonds or
to establish a construction escrow for any Work which will be completed during
the first two years of the Lease Term.
Exhibit B
-1A-
<PAGE> 74
not be deemed to have acted unreasonably if it withholds its approval of the
Plans because, in Landlord's reasonable opinion: the Work as shown in the Plans
is likely to adversely affect in a material manner Building systems, the
structure of the Building or the safety of the Building and/or its occupants;
the Work as shown on the Plans might impair Landlord's ability to furnish
services to Tenant or other tenants; the Work would materially increase the cost
of operating the Building; the Work would violate any governmental laws, rules
or ordinances (or interpretations thereof); the Work contains or uses hazardous
or toxic materials or substances; the Work would adversely affect the
appearance of the Building; or the Work might adversely affect another tenant's
premises. The foregoing reasons, however, shall not be exclusive of the reasons
for which Landlord may withhold consent, whether or not such other reasons are
similar or dissimilar to the foregoing (provided Landlord must in all events
act reasonably). If Landlord notifies Tenant that changes are required to the
final Plans submitted by Tenant, Tenant shall, submit to Landlord, for its
approval, the Plans amended in accordance with the changes so required
before commencing or resuming the Work. The Plans shall also be revised, and
the Work shall be changed, all at Tenant's cost and expense, to incorporate any
work required in the Premises by any local governmental field inspector.
Landlord's approval of the Plans shall in no way be deemed to be (i) an
acceptance or approval of any element therein contained which is in violation
of any applicable laws, ordinances, regulations or other governmental
requirements, or (ii) an assurance that work done pursuant to the Approved
Plans will comply with all applicable laws (or with the interpretations thereof)
or satisfy Tenant's objectives and needs. See Insert 2(b).1 on Page 2A.
(c) No Work shall be undertaken or commenced by Tenant in the Premises until
(i) Tenant has delivered, and Landlord has approved (to the extent Landlord's
approval is required), all items set forth in Paragraph 2(a) above, and (ii) all
necessary building permits have been applied for and obtained by Tenant.
(d)
3. Delays. Tenant shall be responsible for Rent and all other
obligations set forth in the Lease from the Commencement Date, and no delay in
completion of the Work shall relieve Tenant of any of its obligations under
the Lease.
4. Charges and Fees. Tenant shall pay Landlord a supervisory fee in
an amount equal to two percent (2%) of the direct cost of the materials and
labor for the Work (and all change orders with respect thereto) (excluding any
costs attributable to the purchase or installation of carpeting or wall or
floor coverings, painting or demolition, moving and installation of furniture
systems) to defray Landlord's administrative and overhead expenses incurred to
review the Plans and coordinate with Tenant's on-site project manager the
staging and progress of the Work. See Insert 4.1 on Page 2A.
5. Change Orders. All changes to the Approved Plans requested by
Tenant involving (i) a material change, (ii) a change affecting the structure
or mechanical, plumbing, electrical or other systems of the Building, (iii) a
change in partitions (which would affect the mechanical systems of the
Building) or (iv) a change affecting load-bearing attributes of the Premises
must be approved by Landlord in accordance with Paragraph 2(b) above in advance
of the implementation of such changes as part of the Work (which approval shall
not be unreasonably withheld). All delays caused by Tenant-initiated change
orders, including, without limitation, any stoppage of work during the change
order review process, are solely the responsibility of Tenant and shall not
affect Tenant's obligations under the Lease. All increases in the cost of the
Work resulting from such change orders shall be borne by Tenant.
6. Standards Of Design And Construction And Conditions Of Tenant's
Performance. All work done in or upon the Premises by Tenant shall be done
according to the standards set forth in this Paragraph 6, except as the same
may be modified in the Approved Plans approved by or on behalf of Landlord and
Tenant.
(a) Tenant's Approved Plans and all design and construction of the
Work shall comply with all applicable statutes, ordinances, regulations, laws,
codes and industry standards, including, but not limited to, requirements of
Landlord's fire insurance underwriters.
10/18/93
Exhibit B
-2-
<PAGE> 75
Insert 2(b).1
Landlord agrees that it shall not disapprove the Plans or require
Tenant to reconfigure interior walls in the Premises solely because Landlord
will have to bear the cost and expense of removing and/or remodeling the
Premises to prepare the same for occupancy by a successor tenant after the
expiration or earlier termination of the Lease Term or Tenant's right of
possession of the Premises, as the case may be. In addition, Landlord agrees
that Landlord shall not disapprove any Plan based solely upon purely aesthetic
or design features which are not visible from the exterior of the Premises.
Nothing herein shall release Tenant of any obligation it may have to remove
portions of the Work, alterations or any other leasehold improvements or items
pursuant to Section 9.04 of the Lease.
Insert 4.1
In addition to the supervisory fee, Tenant shall reimburse Landlord for
all out-of-pocket costs or expenses paid or incurred by Landlord relating to
review of the Plans or the Work by third parties (including, without
limitation, Landlord's engineering consultants).
Exhibit B
---------
-2A-
<PAGE> 76
(b) Tenant shall, at its own cost and expense, obtain all required
building permits and occupancy permits. Tenant's failure to obtain such permits
shall not affect Tenant's obligations under the Lease.
(c) Tenant's Contractors shall be licensed contractors, possessing good
labor relations, capable of performing quality workmanship and working in
harmony with Landlord's contractors and subcontractors and with other
contractors and subcontractors in the Building. All work shall be coordinated
with any other construction or other work in the Building in order not to
materially and adversely affect construction work being performed by or
for Landlord or its tenants.
(d) Landlord shall have the right, but not the obligation, to perform,
on behalf of and for the account of Tenant, subject to reimbursement by Tenant,
any work which pertains to the integration of the Work with other improvements
in areas of the Building other than the Premises.
(e) Tenant shall use only new, first-class materials in the Work,
except where explicitly shown in the Approved Plans. All Work shall be done in
good and workmanlike manner. Tenant shall obtain such contractors' warranties
relative to the Work as Tenant, in its sole discretion, deems appropriate.
(f) Tenant and Tenant's Contractors shall use reasonable efforts and
take all steps appropriate to assure that all construction activities
undertaken comport with the reasonable expectations of all tenants and other
occupants of a fully-occupied (or substantially fully occupied) first-class
office building and do not unreasonably interfere with the operation of the
Building or with other tenants and occupants of the Building. In any event,
Tenant shall comply with all reasonable rules and regulations existing from
time to time at the Building. Tenant and Tenant's Contractors shall take all
reasonable precautionary steps to minimize dust, noise and construction
traffic, and to protect their facilities and the facilities of other affected
by the Work and to properly police same. Construction equipment and materials
are to be kept within the Premises and delivery and loading of equipment and
materials shall be done at such locations and at such time as Landlord shall
direct so as not to burden the construction or operation of the Building. If
and as required by Landlord, the Premises shall be sealed off from the balance
of the office space on the floor(s) containing the Premises so as to minimize
the dispersement of dirt, debris and noise.
(g) Landlord shall have the right to order Tenant or any of Tenant's
Contractors who violate the requirements imposed on Tenant or Tenant's
Contractors in performing work, if such violations continue after written
notice from Landlord to Tenant, to cease work and remove its equipment and
employees from the Building. No such action by Landlord shall delay Tenant's
obligation to pay Rent or any other obligations set forth in the Lease.
(h) Utility costs or charges for any service (including HVAC, hoisting
or freight elevator and the like) to the Premises shall be the responsibility
of Tenant. Tenant shall pay for all support services provided by Landlord's
contractors at Tenant's request or at Landlord's discretion resulting from
breaches or defaults by Tenant under this Work Letter Agreement. All use of
freight elevators is subject to scheduling by Landlord and the rules and
regulations of the Building. Tenant shall arrange and pay for removal of
construction debris and shall not place debris in the Building's waste
containers. If required by Landlord, Tenant shall sort and separate its waste
and debris for recycling and/or environmental law compliance purposes. See
Insert 6(h).1 on Page 3A.
(i) Tenant shall permit access to the Premises, and the Work shall be
subject to inspection, by Landlord and Landlord's architects, engineers,
contractors and other representatives, at all times during the period in which
the Work is being constructed and installed and following completion of the
Work. See Insert 6(i).1 on Page 3A.
(j) Tenant shall proceed with its work expeditiously, continuously and
efficiently, and shall use its best efforts to complete the same within a
reasonable period of time. Tenant shall notify Landlord upon completion of the
Work and shall furnish Landlord and Landlord's title insurance company with
such further documentation as may be necessary under Paragraph 8 and 9 below.
(k) Tenant shall have no authority to deviate from the Approved Plans
in performance of the Work except as authorized by Landlord and its designated
representative in writing as provided in Paragraph 5 above. Tenant shall
furnish to Landlord "as-built" drawings of the Work within thirty (30) days
after completion of the Work.
(l) Landlord, at Landlord's cost, shall have the right to run utility
lines, pipes, conduits, duct work and component parts of all mechanical and
electrical systems where necessary or desirable through the Premises, to
repair, alter, replace or remove the same, and to require Tenant to install and
maintain proper access panels thereto. See Insert 6(i).1 on Page 3A.
Exhibit B
---------
-3-
<PAGE> 77
Insert 6(h).1
Notwithstanding anything in this Work Letter Agreement to the contrary,
Landlord agrees that it shall not charge Tenant for hoisting or freight
elevator services during Business Hours.
Insert 6(i).1
Landlord agrees that in connection with its entry into the Premises
pursuant to Paragraphs 6(i) and 6(l) of this Work Letter Agreement, Landlord
shall provide at least 4 hours prior oral or telephonic notice to Tenant at the
Premises (excluding emergencies or when accompanied by Tenant's personnel, when
no such notice shall be required). Landlord shall use reasonable efforts to
minimize interference with Tenant's occupancy of the Premises and the
performance of the Work in connection with any such entry into and work in the
Premises.
Exhibit B
-3A-
<PAGE> 78
(m) Tenant shall impose on and enforce all applicable terms of this
Work Letter Agreement against Tenant's architect and Tenant's Contractors.
7. INSURANCE AND INDEMNIFICATION.
(a) In addition to any insurance which may be required under the
Lease, Tenant shall secure, pay for and maintain or cause Tenant's Contractors
to secure, pay for and maintain during the continuance of construction and
fixturing work within the Building or Premises, insurance in the following
minimum coverages and the following minimum limits of liability.
(i) Worker's Compensation and Employer's Liability Insurance
with limits of not less than $500,000.00, or such higher amounts as may be
required from time to time by any Employee Benefit Acts or other statutes
applicable where the work is to be performed, and in any event sufficient to
protect Tenant's Contractors from liability under the aforementioned acts.
(ii) Comprehensive General Liability Insurance (including
Contractors' Protective Liability) in an amount not less than $1,000,000.00 per
occurrence, whether involving bodily injury liability (or death resulting
therefrom) or property damage liability or a combination thereof with a minimum
aggregate limit of $2,000,000.00, and with umbrella coverage with limits not
less than $5,000,000.00. Such insurance shall provide for explosion and
collapse, completed operations coverage and broad form blanket contractual
liability coverage and shall insure Tenant's Contractors against any and all
claims for bodily injury, including death resulting therefrom, and damage to the
property of others and arising from its operations under the contracts whether
such operations are performed by Tenant's Contractors or by anyone directly or
indirectly employed by any of them.
(iii) Comprehensive Automobile Liability Insurance, including
the ownership, maintenance and operation of any automotive equipment, owned,
hired, or non-owned in an amount not less than $500,000.00 for each person in
one accident, and $1,000,000.00 for injuries sustained by two or more persons in
any one accident and property damage liability in an amount not less than
$1,000,000.00 for each accident. Such insurance shall insure Tenant's
Contractors against any and all claims for bodily injury, including death
resulting therefrom, and damage to the property of others arising from its
operations under the contracts, whether such operations are performed by
Tenant's Contractors, or by anyone directly or indirectly employed by any of
them.
All policies (except the worker's compensation policy) shall be endorsed to
include as additional insured parties the parties listed on, or required by,
the Lease, Landlord's mortgagees, property manager, and their respective
beneficiaries, partners, directors, officers, and employees. The waiver of
subrogation provisions contained in the Lease shall apply to all insurance
policies (except the workmen's compensation policy) to be obtained by Tenant
pursuant to this paragraph. The insurance policy endorsements shall also
provide that all additional insured parties shall be given thirty (30) days'
prior written notice of any reduction, cancellation or non-renewal of
coverage (except that ten (10) days' notice shall be sufficient in the case of
cancellation for non-payment of premium) and shall provide that the insurance
coverage afforded to the additional insured parties thereunder shall be primary
to any insurance carried independently by said additional insured parties.
Additionally, where applicable, each policy shall contain a cross-liability and
severability of interest clause. See Insert 7.1 on Page 4A.
(b) Without limitation of the indemnification provisions contained in
the Lease, to the fullest extent permitted by law Tenant agrees to indemnify,
protect, defend and hold harmless Landlord, the parties listed, or required by,
the Lease to be named as additional insureds, Landlord's mortgagees, property
manager, and their respective beneficiaries, partners, directors, officers, and
employees from and against all claims, liabilities, losses, damages and
expenses of whatever nature arising out of or in connection with the negligent
acts or omissions or wilful misconduct of Tenant or its contractors, agents
or employees in connection with the Work
EXHIBIT B
-4-
<PAGE> 79
Insert 7.1
Landlord shall maintain, at Landlord's expense (but subject to inclusion in
Operating Expenses), "all risk" builders risk insurance upon the Work to the
full insurable value thereof. This insurance shall include the interests of
Landlord and Tenant (and their respective contractors and subcontractors of any
tier to the extent of any insurance interest therein) in the Work and shall
insure against the perils of loss and extended coverage and shall include "all
risk" builders risk insurance for physical loss or damage including, without
duplication of coverage, theft, vandalism and malicious mischief. Such
insurance shall be written as a primary policy. Any loss insured under said
builders risk insurance is to be adjusted with Landlord and Tenant and made
payable to Landlord, as trustee for the insureds, as their interests may
appear. Provided Tenant is not in monetary or other material default under the
Lease (after the expiration of any applicable notice and cure periods), and
no liens or lien claims exist with respect to the Work, or any portion thereof,
such proceeds shall be made available to Tenant to restore the improvements and
property damaged by the casualty or, if the Lease is terminated as a result of
such casualty, shall be paid to Tenant. Landlord's mortgagees shall have no
claim or right to the proceeds from the foregoing insurance greater than that
of Landlord hereunder. Landlord agrees that it shall not make a claim under any
of Tenant's insurance policies to the extent the loss relates to any leasehold
improvements or alterations that are required to be covered by the insurance
policy described in this Insert 7.1.
Exhibit B
-4A-
<PAGE> 80
It is understood and agreed that the foregoing indemnity shall be in addition
to the insurance requirements set forth above and shall not be in discharge of
or in substitution for same or any other indemnity or insurance provision of
the Lease.
8. COMPLETION OF THE WORK.
(a) Upon completion of the Work, Tenant shall furnish Landlord
with full and final waivers of liens and contractors' affidavits and
statements, in such form as may be required by Landlord, and Landlord's title
insurance company, if any, from all parties performing labor or supplying
materials or services in connection with the Work showing that all of said
parties have been compensated in full and waiving all liens in connection with
the Premises and Building. Tenant shall submit to Landlord a detailed
breakdown of Tenant's total construction costs, together with such evidence of
payment as is reasonably satisfactory to Landlord.
9. CONSTRUCTION ESCROW.
Prior to commencement of any construction or performance of any Work or
payment to or by Tenant or to any of Tenant's Contractors, Tenant shall at Land
lord's option, establish a construction escrow or other payment procedure
acceptable to Landlord at a title insurance company designated by Landlord
providing for payment to Tenant's Contractors and payment of all other costs
associated with the Work as the Work progresses, upon the title insurance
company's satisfactory review of lien waivers and sworn statements from
Tenant's Contractors and other applicable parties and upon the title insurance
company's willingness to issue title insurance over mechanic's liens relating
to Tenant's contracts and the Work to the date of each draw, subject to insert
9.03 of the Lease, Tenant shall pay for the Work when required under its
contracts for the Work and shall not permit the Premises or the Building to
be come subject to any lien or claim of lien on account of labor, material or
services furnished to or for the benefit of Tenant. Prior to commencement of
the Work, Tenant shall deposit funds into the construction escrow, in
amounts sufficient to pay the costs of the Work. Tenant may not withdraw funds
except to pay Tenant's Contractors unless Landlord has consented to such
withdrawal. The construction escrow agreement shall contain the foregoing
restriction on withdrawal of funds by Tenant (Landlord agrees not to
unreasonably withhold its consent to any withdrawal) and shall also provide
that if any mechanic's lien is filed in connection with the Work, and Tenant
does not discharge, bond over or provide other security for such lien pursuant
to Section 9.03 or Insert 9.03 of the Lease, Landlord may use and withdraw the
funds in the escrow to pay for the Work or remove the lien without Tenant's
consent. Tenant shall provide such contractor's affidavits, tenant (owner)
statements, partial and final waivers of lien, architect's certificates and any
additional documentation (including, without limitation, Tenant or contractor
personal undertakings) which may be reasonably requested by Landlord, or such
title insurance company in connection with said escrow or consistent with any
other title insurance requirements concerning the Work. See Insert 2(a)(vi).1
10. MISCELLANEOUS.
(a) If the Plans for the Work require the construction and installation
of more fire hose cabinets or telephone/electrical closets than the number
regularly provided by Landlord in the core of the Building in which the Premises
are located, Tenant agrees to pay all costs and expenses arising from the
construction and installation of such additional fire hose cabinets or
telephone/electrical closets.
(b) Time is of the essence of this Work Letter Agreement.
(c) Any person signing this Work Letter Agreement on behalf of Landlord
and Tenant warrants and represents he has authority to sign and deliver this
Work Letter Agreement and bind the party on behalf of which he has signed.
(d) Tenant's failure to pay any amounts owed by Tenant hereunder when
due or Tenant's failure to perform its obligations hereunder shall also
constitute a default under
EXHIBIT B 10/18/93
-5-
<PAGE> 81
the Lease and if, after notice, such failure continues beyond the
cure period applicable thereto as provided in Sections 15.01(A) and (C)
of the Lease, then Landlord shall have all the rights and remedies
granted to Landlord under the Lease for nonpayment of any amounts owed
thereunder or failure by Tenant to perform its obligations thereunder.
(e) Notices under this Work Letter shall be given in the same
manner as under the Lease.
(f) Subject to Article 23 of the Lease, the liability of Landlord
hereunder or under any amendment hereto or any instrument or document
executed in connection herewith (including, without limitation, the
Lease) shall be limited to and enforceable solely against Landlord's
interest in the Building.
(g) The headings set forth herein are for convenience only.
(h) This Work Letter and the Lease sets forth the entire agreement
of Tenant and Landlord regarding the Work. This Work Letter may only be
amended if in writing, duly executed by both Landlord and Tenant.
(i) All amounts due from Tenant hereunder shall be deemed to be
Rent due under the Lease.
11. ON-SITE PROJECT MANAGER.
As a condition of Tenant's right to commence and perform the Work,
Landlord reserves the right to require Tenant to designate an on-site project
manager (who may be an employee of Tenant or of Tenant's general contractor)
approved in advance by and reasonably acceptable to Landlord, who will be
charged with the task of performing daily supervision of the Work. Such on-site
manager shall be familiar with all rules and regulations and procedures of the
Building and all personnel of the Building engaged directly or indirectly in
the management, operation and construction of the Building. Such on-site
project manager shall be accountable and responsible to Tenant and to Landlord
and, where necessary, shall serve as a liaison between Landlord and Tenant with
respect to the Work. The entire cost and expense of the on-site project manager
shall be borne and paid for by Tenant.
12. EXCULPATION OF LANDLORD AND HEITMAN.
Notwithstanding anything to the contrary contained in this Work Letter
Agreement (but subject to Article 23 of the Lease), it is expressly understood
and agreed by and between the parties hereto that:
(a) The recourse of Tenant or its successors or assigns against
Landlord with respect to the alleged breach by or on the part of Landlord of
any representation, warranty, covenant, undertaking or agreement contained in
this Work Letter Agreement (collectively, "Landlord's Work Letter
Undertakings") shall extend only to Landlord's interest in the real estate of
which the Premises demised under this Lease Documents are a part (hereinafter,
"Landlord's Real Estate") and not to any other assets of Landlord or its
beneficiaries; and
(b) Except to the extent of Landlord's interest in Landlord's Real
Estate, no personal liability or personal responsibility of any sort with
respect to any of Landlord's Work Letter Undertakings or any alleged breach
thereof is assumed by, or shall at any time be asserted or enforceable against,
Landlord, Heitman/JMB Advisory Corporation or Heitman Properties Ltd., or
against any of their respective directors, officers, employees, agents,
constituent partners, beneficiaries, trustees or representatives.
It is expressly understood and agreed by and between the parties
hereto, anything herein to the contrary notwithstanding, that each and all of
the representations, warranties, covenants, undertakings and agreements herein
made on the part of Landlord while in form purporting to be the
representations, warranties, covenants, undertakings and agreements of Landlord
are nevertheless each and every one of them made and intended, not as personal
representations, warranties, covenants, undertakings and agreements by Landlord
or for the purpose or with the intention of binding Landlord personally, but
are made and intended for the purpose only of subjecting Landlord's interest in
the Building, the Land and the Premises to the terms of this lease and for no
other purpose whatsoever, and in case of default hereunder by Landlord (or
default through, under or by any of its beneficiaries, or agents or
representatives of said beneficiaries), the Tenant shall look solely to the
interests of Landlord in the Building and Land; that this lease is executed and
delivered by Landlord not in its own right, but solely in the exercise of the
powers conferred upon it as such Trustee; that neither the Landlord nor any of
Landlord's beneficiaries shall have any personal liability to pay any
indebtedness accruing hereunder or to perform any covenant, either express or
implied, herein contained, and no liability or duty shall rest upon Landlord to
sequester the trust estate or the rents, issues and profits arising therefrom,
or the proceeds arising from any sale or other disposition thereof; and that no
personal liability or personal responsibility of any sort is assumed by, nor
shall at any time be asserted or enforceable against, said Landlord, American
National Bank and Trust Company of Chicago, a national banking association,
individually or personally, but only as Trustee under the provisions of a Trust
Agreement dated December 6, 1988 and known as its Trust No. 107101-01, or
against any of the beneficiaries under said Trust Agreement, or their
respective agents, on account of this lease or on account of any representation,
warranty, covenant, undertaking or agreement of Landlord in this lease
EXHIBIT B
-6-
<PAGE> 82
contained, either express or implied, all such personal liability, if any,
being expressly waived and released by Tenant and by all persons claiming by,
through or under Tenant.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of this
31st day of March, 1995
LANDLORD
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, not personally, but as
Trustee aforesaid
By: [sig]
-------------------------------------
Its:
-------------------------------------
TENANT:
GALILEO INTERNATIONAL PARTNERSHIP,
------------------------------------------
a Delaware general partnership
By: [sig]
-------------------------------------
Senior Vice President &
Its: Chief Financial Officer
-------------------------------------
EXHIBIT B
-7-
<PAGE> 83
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress. The halls, passages, entrances, elevators,
stairways, balconies and roof are not for the use of the general public, and
Landlord shall in all cases retain the right to control or prevent access
thereto by all persons whose presence in the judgment of Landlord shall be
prejudicial to the safety, character, reputation or interests of Landlord and
its tenants, provided that nothing herein contained shall be construed to
prevent such access by persons with whom the tenant normally deals in the
ordinary course of its business unless such persons are engaged in illegal
activities. No tenant and no employees of any tenant shall go upon the roof of
the Building without the written consent of Landlord.
2. No awnings or other projections shall be attached to the outside
walls or surfaces of the Building nor shall the interior or exterior of any
windows be coated without the prior written consent of Landlord. Except as
otherwise specifically approved by Landlord, all electrical ceiling fixtures
hung in offices or spaces along the perimeter of the Building must be
fluorescent and of a quality, type, design and bulb color approved by Landlord.
Tenant shall not place anything or allow anything to be placed near the glass
of any window, door, partition or wall which may appear unsightly from outside
the Premises.
3. No sign, picture, plaque, advertisement, notice or other material
shall be exhibited, painted, inscribed or affixed by any tenant on any part of,
or so as to be seen from the outside of, the Premises or the Building without
the prior written consent of Landlord. In the event of the violation of the
foregoing by any tenant, Landlord may remove the same without any liability,
and may charge the expense incurred in such removal to the tenant violating this
rule. Interior signs on doors and the directory tablet shall be inscribed,
painted or affixed for each tenant by Landlord at the expense of such tenant,
and shall be of a size, color and style acceptable to Landlord.
4. The toilets and wash basins and other plumbing fixtures shall not be
used for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein. All
damage resulting from any misuse of the fixtures shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same.
5. No tenant or its officers, agents, employees or invitees shall
mark, paint, drill into, or in any way deface any part of the Premises or the
Building. No boring, cutting or stringing of wires or laying of linoleum or
other similar floor coverings shall be permitted except with the prior written
consent of Landlord and as Landlord may direct.
6. No bicycles, vehicles or animals of any kind shall be brought into
or kept in or about the Premises and no cooking shall be done or permitted by
any tenant on the Premises except that microwave cooking in a UL-approved
microwave oven and the preparation of coffee, tea, hot chocolate and similar
items for the tenant and its employees and business visitors shall be
permitted. Tenant shall not cause or permit any unusual or objectionable odors
to escape from the Premises.
7. The Premises shall not be used for manufacturing or for the storage
of merchandise except as such storage may be incidental to the use of the
Premises for general office purposes. No tenant shall engage or pay any
employees on the Premises except those actually working for such tenant on the
Premises nor advertise for laborers giving an address at the Premises. The
Premises shall not be used for lodging or sleeping or for any immoral or
illegal Purposes.
8. No tenant or its officers, agents, employees or invitees shall
make, or permit to be made any unseemly or disturbing noises, sounds or
vibrations or disturb or interfere with occupants of this or neighboring
buildings or Premises or those having business with them whether by the use of
any musical instrument, radio, phonograph, unusual noise, or in any other way.
9. No tenant or its officers, agents, employees or invitees shall
throw anything out of doors, balconies or down the passageways.
10. Tenant shall not maintain armed security in or about the Premises
nor possess any weapons, explosives, combustibles or other hazardous devices in
or about the Building and/or Premises.
11. No tenant or its officers, agents, employees or invitees shall at
any time use, bring or keep upon the Premises any inflammable, combustible,
explosive, foul or noxious fluid, chemical or substance, or do or permit
anything to be done in the leased Premises, or bring or keep anything therein,
which shall in any way increase the rate of fire insurance on the Building, or
on the property kept therein, or obstruct or interfere with the rights of other
tenants, or in any way injure or annoy them, or conflict with the regulations
of the Fire
EXHIBIT C
-1-
<PAGE> 84
Department or the fire laws, or with any insurance policy upon the Building, or
any part thereof, or with any rules and ordinances established by the Board of
Health or other governmental authority.
12. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows by any tenant, nor shall any changes be made in
existing locks or the mechanism thereof. Each tenant must, upon the termination
of this tenancy, restore to Landlord all keys of stores, offices, and toilet
rooms, either furnished to, or otherwise procured by, such tenant, and in the
event of the loss of any keys so furnished, such tenant shall pay to Landlord
the cost of replacing the same or of changing the lock or locks opened by such
lost key if Landlord shall deem it necessary to make such change.
13. All removals, or the carrying in or out of any safes, freight,
furniture, or bulky matter of any description must take place during the hours
which Landlord may determine from time to time. The moving of safes or other
fixtures or bulky matter of any kind must be made upon previous notice to the
manager of the Building and under his or her supervision, and the persons
employed by any tenant for such work must be acceptable to Landlord. Landlord
reserves the right to inspect all safes, freight or other bulky articles to be
brought into the Building and to exclude from the Building all safes, freight or
other bulky articles which violate any of these Rules and Regulations or the
Lease of which these Rules and Regulations are a part. Landlord reserves the
right to prohibit or impose conditions upon the installation in the Premises of
heavy objects which might overload the building floors. Landlord will not be
responsible for loss of or damage to any safes, freight, bulky articles or
other property from any cause, and all damage done to the Building by moving or
maintaining any such safe or other property shall be repaired at the expense of
the tenant.
14. No tenant shall purchase or otherwise obtain for use in the
Premises water, ice, towel, vending machine, janitorial, maintenance or other
like services, or accept barbering or bootblacking services, except from persons
authorized by Landlord, and at hours and under regulations fixed by Landlord.
15. Landlord shall have the right to prohibit any advertising by
any tenant which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as an office building and upon written notice from
Landlord any tenant shall refrain from or discontinue such advertising.
16. Landlord reserves the right to exclude from the Building
between the hours of 10:00 p.m. and 7:00 a.m. and at all hours of Saturdays,
Sundays and legal holidays all persons who do not present a pass signed by
Landlord. Landlord shall furnish passes to persons for whom any tenant requests
the same in writing. Each tenant shall be responsible for all persons for whom
he requests passes and shall be liable to Landlord for all acts of such persons.
Landlord shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. In the case of
invasion, mob, riot, public excitement or other commotion, Landlord reserves the
right to prevent access to the Building during the continuance of the same, by
the closing of the gates and doors or otherwise, for the safety of the tenants
and others and the protection of the Building and the property therein.
17. Any persons employed by any tenant to do janitorial work,
shall, while in the Building, be subject to the prior written approval of the
Landlord and subject to the Rules and Regulations of the Building. Tenant shall
be responsible for all acts of such persons and Landlord shall not be
responsible for any loss or damage to property in the Premises, however
occurring.
18. All doors opening onto public corridors shall be kept closed,
except when in use for ingress and egress, and left locked when not in use.
19. The requirements of tenants will be attended to only upon
application to the Office of the Building.
20. Canvassing, soliciting and peddling in the Building are
prohibited and each tenant shall cooperate to prevent the same.
21. All office equipment of any electrical or mechanical nature
shall be placed by tenants in the Premises in settings approved by Landlord, to
absorb or prevent any vibration, noise or annoyance.
22. No air conditioning unit or other similar apparatus shall be
installed or used by any tenant without the written consent of Landlord.
23. There shall not be used in any space, or in the public halls of
the Building either by any tenant or others, any hand trucks except those
equipped with rubber tires and side guards.
24. Landlord will direct electricians as to where and how telephone
and telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Premises shall be
EXHIBIT C 10/18/93
-2-
<PAGE> 85
subject to the approval of Landlord. All such work shall be effected pursuant to
permits issued by all applicable governmental authorities having jurisdiction.
25. No vendor with the intent of selling such goods shall be
allowed to transport or carry beverages, food, food containers, etc., on any
passenger elevators. The transportation of such items shall be via the service
elevators in such manner as prescribed by Landlord.
26. Tenants shall cooperate with Landlord in the conservation of
energy used in or about the Building, including without limitation, cooperating
with Landlord in obtaining maximum effectiveness of the cooling system by
closing drapes or other window coverings when the sun's rays fall directly on
windows of the Premises, and closing windows and doors to prevent heat loss.
Tenant shall not obstruct, alter or in any way impair the efficient operation of
Landlord's heating, lighting, ventilating and air conditioning system and shall
not place bottles, machines, parcels or any other articles on the induction
unit enclosure so as to interfere with air flow. Tenant shall not tamper with
or change the setting of any thermostats or temperature control valves, and
shall in general use heat, gas, electricity, air conditioning equipment and
heating equipment in a manner compatible with sound energy conservation
practices and standards.
27. All parking ramps and areas, pedestrian walkways, plazas and
other public areas forming a part of the Building shall be under the sole and
absolute control of Landlord with the exclusive right to regulate and control
these areas. Tenant agrees to conform to the rules and regulations that may be
established by Landlord for these areas from time to time.
28. Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is intoxicated or under
the influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.
29. Tenant and its employees, agents, subtenants, contractors and
invitees shall comply with all applicable "no-smoking" ordinances and,
irrespective of such ordinances, shall not smoke or permit smoking of
cigarettes, cigars or pipes outside of Tenant's Premises (including plaza
areas) in any portions of the Building except areas specifically designated as
smoking areas by Landlord. If required by applicable ordinance, Tenant shall
provide smoking areas within Tenant's Premises.
EXHIBIT C 10/18/93
-3-
<PAGE> 86
Exhibit G
Current Janitorial and Cleaning Specifications
TENANTED AREAS
A. Nightly:
1. Carpeted Floors. All carpeted floors will be carefully vacuumed daily,
moving only chairs. All furniture will be replaced to its original
position. Vacuum under all desks and large furniture, where possible.
2. Uncarpeted Floors. All hard-surfaced floors will be dust-mopped nightly,
using a treated dust mop, moving all light furniture. All furniture will
be replaced to its original position. Mop under all desks and large
furniture, where possible. Spot clean where necessary to remove spills
and smudges and spray buff as necessary.
3. Dusting. Using a treated dust cloth, wipe all furniture tops, legs and
sides. Wipe clean telephones, moving lamps, ash trays, and other
accessories. Dust wipe all horizontal surfaces within reach, including
window ledges, moldings and sill on glass and banker-type partitions.
Papers left on desk tops will not be moved.
4. Furniture and Accessories. Wipe file cabinets, telephones and
accessories to remove streaks, stains, spills and fingermarks. Wash
blackboards and chalk trays. Empty and clean all waste baskets and
replace liners where necessary. Liners to be provided by Owner.
<PAGE> 87
5. Desk Tops. Clean with a mild soap solution, all steel desk
tops and polish wooden desks and furniture as required.
Clean tops of all glass topped furniture.
6. Doors and Walls. All doors, jambs, walls, window mullions
and glass partitions will be spot-cleaned to remove
streaks, smudges, fingermarks, spills and stains, paying
particular attention to walls around switchplates and door
jambs and doors around knob opening edges.
7. Trash Removal. Empty and clean all waste receptacles, and
remove waste paper and replace liners in each receptacle.
Dust interiors of receptacles and wash as necessary.
8. Stairways. Dust mop all private stairways and vacuum, if
carpeted.
9. Private Washrooms. Clean and sanitize all private
washrooms, including toilets, related plumbing fixtures,
mirrors, and other cleanable surfaces.
10. Building Recycling. Contractor agrees to pull all
recyclable white paper, aluminum cans, and newspapers from
tenant space on an as needed basis without additional
charge to the Owner. The Contractor agrees to keep the
above recyclable materials separate from the normal
building trash stream such that the above recyclable
materials are ultimately deposited in separate trash
dumpsters on the loading dock.
B. Weekly:
1. Carpeted Floors. All carpeted floors will be edged with a
small broom or other edging tool, paying particular
attention to corners, behind doors and around furniture
legs and bases. Baseboards will be wiped with a treated dust
cloth and spot cleaned where necessary.
2. Uncarpeted Floors. All hard-surfaced floors will be spray buffed
with an electric rotary buffing machine as necessary. All wax marks
will be removed from baseboards, doors and frames.
3. Furniture. Wipe with treated dust cloth, all chair legs and rungs
and furniture legs and other areas of furniture and accessories not
dusted during the nightly dusting.
4. Bright Work. Wipe clean all bright work, including but not limited
to chrome hardware.
C. Monthly:
1. High-Dusting. All horizontal surfaces and ledges such as picture
frames, etc., that are beyond the reach of normal nightly dusting,
will be dusted monthly using a treated dust cloth.
<PAGE> 88
2. Glass Partitions and Doors. All glass doors and partitions will be
thoroughly washed, dried and polished, but not less than once a
month. All water marks and stains will be wiped from adjoining
surfaces.
<PAGE> 89
1. Uncarpeted. All uncarpeted stairs and landings will be wet mopped
and dried monthly.
<PAGE> 90
2. Dusting. All risers, handrails, stingers, baseboards, light
fixtures and all horizontal ledges and surfaces will be wiped with a
treated dust cloth.
c. Quarterly:
1. High-Dusting. All high-dusting, including but not limited to, door
closers and all other surfaces not reached during normal dusting
operations, will be dusted or cleaned, as necessary, but not less
often than each three months.
Snow Removal
Contractor shall remove all snow which accumulates on the exterior
sidewalks, exterior stairs, exterior walkways and exterior entrances
leaving all areas in a clean and trip/hazard free condition. Contractor
shall ensure the areas described snow removal responsibilities are
completed by 7:00 a.m. each occurrence. Owner will provide all materials
required for the snow removal.
Miscellaneous
A. Under no circumstances is Contractor to use tenant kitchens,
refrigerators or vending machines.
B. There will be no smoking while in tenant areas or while performing
assigned duties elsewhere.
C. Vacant Areas will receive an initial complete and thorough cleaning
and will be cleaned periodically when requested by Owner's agent.
<PAGE> 91
D. Quarterly:
1. Fabric Furniture. Thoroughly vacuum all fabric furniture every
three months.
2. Baseboards. Wash all baseboards every three months.
3. Venetian Blinds. Clean and dust venetian blinds.
4. Uncarpeted Floors. All hard-surfaced floors will be completely
stripped, removing al finish down to the bare, clean floor. After
the floors have been mopped, rinsed, and dried, they will be
refinished and machine polished to a uniformly bright, clean
appearance. All was spills and splashes will be removed from
baseboards, doors jambs, and walls.
5. Waste Baskets. As requested by Owner or Tenant, thoroughly wash
waste baskets inside and out, dry and replace to their original
position using plastic liners, furnished by Owner.
JANITORIAL CLOSETS AND STORAGE ROOMS
All janitors closets, mop sinks, storage rooms, restrooms, lunchrooms,
work areas provided by Owner for use of Contractors personnel, will be
kept in a neat, clean and orderly condition at all times. Mop sinks and
the area immediately adjacent will be thoroughly cleaned immediately
after each use. The restrooms will be maintained in the same condition
as the public restrooms. Before leaving the premises each night, all of
the service areas will be dust-mopped and spot cleaned, where necessary
but not less often than every sixth days. Concrete floors will be
dust-mopped nightly and wet-mopped monthly. All doors and walls will be
spot-cleaned nightly.
TENANT STORAGE -- AREAS BASEMENT
All concrete floors in storage areas and adjacent corridors (not
lockers) will be kept in a neat, clean and orderly condition, free from
dirt, dust and debris. These areas will be checked daily and swept,
using sweeping compound if necessary, but not less than once per month,
or as needed. Any discrepancies, safety or fire hazards will be reported
to the Building Manager.
STAIRWELLS
A. Daily:
1. Carpeted. All tenant and common areas carpeted stairs and landings
will be vacuumed at least once daily to remove all dust, litter and
footprints and spot-cleaned, as necessary, to remove all spills and
stains.
2. Uncarpeted. All uncarpeted stairs and landings will be swept with a
treated dust mop daily and spot-cleaned, as necessary, to remove all
spills and stains.
B. Monthly:
<PAGE> 92
ADDITIONAL SERVICES
GALILEO INTERNATIONAL
3rd, 4th and 10th Floors
ORCHARD POINT OFFICE CENTER
Janitorial Schedule
DAILY:
1. Empty wastebaskets; insert liners if required (supplied by
customer.)
2. Transport trash to designated areas.
3. Empty and damp clean ashtrays.
4. Dust horizontal surfaces of all furniture, including desks, chairs
and tables.
5. Clean and sanitize drinking fountains.
6. Spot clean reception lobby glass.
7. Spot clean interior glass in partition and doors.
8. Remove fingerprints from front doors, frames, light switches, kick
and push plates, and handles.
9. Papers on desks, drafting tables, filing cabinets, etc. are not to
be disturbed.
10. Damp clean blackboards (on request only).
11. Dust mop hard surface floors.
12. Spot mop for spillage on hard surface floors.
13. Vacuum carpet with upright vacuum and spot clean small stains.
14. Turn out lights and properly secure doors.
WEEKLY:
1. Dust all exposed surfaces of furniture, filing cabinets,
bookcases, and shelves.
2. Spot clean walls.
3. Clean and sanitize telephones.
4. Low dust all horizontal surfaces to hand height (70"), in frames,
ducts, radiators, furniture legs, etc.
5. Damp mop hard surface floors.
6. Spray buff resilient tile floors.
7. Dust plastic chair mats.
MONTHLY:
1. Vacuum inaccessible areas under desks, between furniture and walls,
along edge of walls, etc.
ANNUALLY:
1. Strip and refinish resilient tile floors.
2. Dust wall paneling.
3. Dust venetian blinds.
4. Clean ceiling and wall mounted supply and return air grills.
5. High dust above head light.
<PAGE> 93
EXHIBIT E
THE SECOND FLOOR TEMPORARY SPACE
<PAGE> 94
EXHIBIT F
Air Conditioning and Heating Specifications
The ventilation air-cooling and heating system for the Building shall
provide temperature conditions in the Premises within the following ranges (and
within normal tolerances for a first class office building in the O'Hare
corridor): (i) no greater than +78 degrees Fahrenheit (hereinafter "F") when
the outside temperature is greater than +94 degrees F and (ii) no lower than +70
degrees F and no greater than +78 degrees F when the outside temperature is more
than +0 degrees F and less than +95 degrees F. Such system specifications
assume customary density and the absence of heat generating equipment that might
affect the temperature condition, as well as proper usage of installed window
coverings to diminish solar heat.
<PAGE> 95
EXHIBIT H
THE ELEVENTH FLOOR TEMPORARY SPACE
<PAGE> 96
[AMERICAN NATIONAL BANK LETTERHEAD]
LAND TRUST DEPARTMENT
April 3, 1995
RE: Land Trust Number 107101-01
To Whom It May Concern:
At the direction of the beneficiary(ies) of the above-captioned land
trust, please pay the proceeds of the (sale)(mortgage)(loan) to the order of or
at the direction of: HEITMAN PROPERTIES, LTD., AS AGENT TO ORCHARD POINT
PARTNERS, AN ILLINOIS GENERAL PARTNERSHIP.
Sincerely,
American National Bank & Trust
Company of Chicago, not individually,
but as trustee as aforesaid
/s/Anita M. Lutkus
------------------
Anita M. Lutkus
Trust Officer
<PAGE> 1
EXHIBIT 10.18
[STAMP: COVIA'S COPY]
290 Harbor Drive
IBM CREDIT CORPORATION Stamford, CT 06904
203/352-5100
- - --------------------------------------------------------------------------------
ADDENDUM TO TERM LEASE MASTER AGREEMENT
[STAMP: COVIA CONTRACT 00823 2]
Term Lease Master Agreement No. 0070264
Document No. 00290488
IBM Credit Corporation and Covia Partnership (Lessee) agree that the Term Lease
Master Agreement between the parties is hereby modified as follows:
Paragraph 4 - Changes - in the third line after "notice" insert "only".
Paragraph 12 - Late Delivery - before "If" insert "Unless solely caused by
Lessor,".
Paragraph 17 - Renewal - in line three insert before "Lessor shall offer"
the following:
"Lessor will provide prior notification of Lease expiration and end of
Lease options including any extension, renewal or purchase option
available to Lessee."
Paragraph 24 - Leases for Modifications and Additions - in line six insert
before "These Modifications" the words "If Lessor arranges for leasing of
Modifications and Additions then".
Paragraph 25 - Return of Equipment - is changed as follows:
In the seventh line after "service," insert "Existence of a maintenance
agreement with IBM covering the Equipment at the date of de-installation
shall be sufficient to establish that the Equipment qualifies for IBM's
maintenance agreement service without further obligation of Lessee."
Add the following to the end of the Paragraph:
"Nevertheless, Lessor agrees to first charge its new lessee for any
transportation costs and, only to the extent the new lessee does not exist
or is not liable in the regular course of Lessor's business, to secondly
charge Lessee the cost of returning Equipment as above."
- - --------------------------------------------------------------------------------
NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED
May 17 1988
1
<PAGE> 2
- - --------------------------------------------------------------------------------
Paragraph 26 - Casualty Insurance; Loss or Damage - in line sixteen before
"Equipment" insert "item of".
Paragraph 30 - General Indemnity - in line five after "legal fees" insert
"and any additional tax liability".
Delete the fourth sentence beginning with "Any payment" found on lines
fourteen through eighteen.
Paragraph 31 - Liability Insurance - in line three replace "an insurer
having a 'Best Policyholders' rating of B+ or better" with "responsible
insurers".
In the fifth line replace "as Lessor's interests may appear" with "to the
extent of the liability assumed by lessee in Paragraph 30 herein."
In the seventh line after "any" insert "material".
Paragraph 38 - Remedies - is changed as follows:
At the end of the first paragraph, add "Nevertheless, the Lessor, in
implementation of this Paragraph 38 shall act in good faith and in a
commercially responsible manner."
In Paragraph 39 - Lessor's Expense - replace the entire Paragraph with the
following:
"Upon receipt of notice from Lessor, Lessee shall pay all costs and
expenses of Lessor, including legal and collection fees, due to Lessee's
acts or failures to act to protect Lessor's interests."
Accepted by:
IBM Credit Corporation Covia Partnership
by /s/ [Illegible] by /s/ [Illegible]
------------------------ -----------------------
Date 6/3/8 Date 5/20/88
IBM Credit Corporation reserves the right to decline acceptance if the
Addendum is not signed and submitted by Lessee on or before June 14, 1988.
C0290488/BP4
- - --------------------------------------------------------------------------------
NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED
May 17 1988
2
<PAGE> 3
[STAMP: COVIA'S COPY]
290 Harbor Drive
IBM CREDIT CORPORATION Stamford, CT 06904
203/352-5100
- - --------------------------------------------------------------------------------
[STAMP: COVIA CONTRACT 00823 1]
ADDENDUM TO TERM LEASE SUPPLEMENT
Term Lease Master Agreement No. 0070264
Supplement No. 0001
IBM Credit Corporation and Covia Partnership (Lessee) agree that for the
purposes of the referenced Supplement only, the Term Lease Master Agreement
between the parties is hereby modified as follows:
Paragraph 4 - Changes - in the third line after "notice" insert "only".
Paragraph 12 - Late Delivery - before "If" insert "Unless solely caused by
Lessor,".
Paragraph 17 - Renewal - in line three insert before "Lessor shall offer"
the following:
"Lessor will provide prior notification of Lease expiration and end of
Lease options including any extension, renewal or purchase option
available to Lessee."
Paragraph 24 - Leases for Modifications and Additions - in line six insert
before "These Modifications" the words "If Lessor arranges for leasing of
Modifications and Additions then".
Paragraph 25 - Return of Equipment - is changed as follows:
In the seventh line after "service." insert "Existence of a maintenance
agreement with IBM covering the Equipment at the date of de-installation
shall be sufficient to establish that the Equipment qualifies for IBM's
maintenance agreement service without further obligation of Lessee."
Add the following to the end of the Paragraph:
"Nevertheless, Lessor agrees to first charge its new lessee for any
transportation costs and, only to the extent the new lessee does not exist
or is not liable in the regular course of Lessor's business, to secondly
charge Lessee the cost of returning Equipment as above."
- - --------------------------------------------------------------------------------
NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED
Apr 11 1988
1
<PAGE> 4
- - --------------------------------------------------------------------------------
Paragraph 26 - Casualty Insurance; Loss or Damage - in line sixteen before
"Equipment" insert "item of".
Paragraph 30 - General Indemnity - in line five after "legal fees" insert
"and any additional tax liability".
Delete the fourth sentence beginning with "Any payment" found on lines
fourteen through eighteen.
Paragraph 31 - Liability Insurance - in line three replace "an insurer
having a 'Best Policyholders' rating of B+ or better" with "responsible
insurers".
In the fifth line replace "as Lessor's interests may appear" with "to the
extent of the liability assumed by Lessee in Paragraph 30 herein."
In the seventh line after "any" insert "material".
Paragraph 38 - Remedies - is changed as follows:
At the end of the first paragraph, add "Nevertheless, the Lessor, in
implementation of this Paragraph 38 shall act in good faith and in a
commercially responsible manner."
In Paragraph 39 - Lessor's Expense - replace the entire Paragraph with the
following:
"Upon receipt of notice from Lessor, Lessee shall pay all costs and
expenses of Lessor, including legal and collection fees, due to Lessee's
acts or failures to act to protect Lessor's interests."
Accepted by:
IBM Credit Corporation Covia Partnership
by /s/ [Illegible] by /s/ [Illegible]
----------------------- ----------------------
Date 5/28/8 Date 4/13/88
C0VPSA11/BP4
- - --------------------------------------------------------------------------------
NO CHANGES TO THIS ADDENDUM ARE AUTHORIZED
Apr 11 1988
2
<PAGE> 5
[STAMP COVIA's COPY]
IBM Credit Corporation 00823
Term Lease Master Agreement
Name and Address of Lessee: Covia Partnership Agreement No. 0070264
9700 W. Higins Road
Rosemont, IL 60018 IBM Branch Office No.: 007
IBM Branch Office Address: One IBM Plaza IBM Customer No.: 2237433
Chicago, IL 60611
The Lessor pursuant to this Term Lease Master Agreement (Agreement) will be (a)
IBM Credit Corporation, or a subsidiary or affiliate thereof, (b) a partnership
in which IBM Credit Corporation is a partner, or (c) a related business
enterprise for whom IBM Credit Corporation is the agent (Lessor). The subject
matter of the lease shall be machines, field installable upgrades, feature
additions or accessories marketed by International Business Machines Corporation
(IBM) and shall be referred to as Equipment. Any lease transaction requested by
Lessee and accepted by Lessor shall be specified in a Term Lease Supplement
(Supplement). A Supplement shall refer to and incorporate by reference this
Agreement and, when signed by the parties, shall constitute the lease (Lease)
for the Equipment specified therein. Additional details pertaining to a Lease
shall be specified in a Supplement. A Supplement may also specify additional
terms and conditions as well as other amounts to be financed (Financing).
Financing may include licensed program material charges (LPM Charges) for
licensed programs marketed by IBM under the referenced IBM license agreement
(License Agreement).
1. OPTIONS. The Supplement shall designate various lease and financing
options. Option A is a Lease available only for Modifications (Paragraph 23) to
Equipment under Option A prior to enactment of the Tax Reform Act of 1986.
Option B is a Lease with an option to purchase during the Lease. For Equipment
under Option B Prime (B'), Lessor assumes for tax purposes that Lessee is the
owner. For financing LPM Charges, Option S will apply.
2. CREDIT REVIEW. For each Lease, Lessee consents to any reasonable credit
investigation and review by Lessor.
3. AGREEMENT TERM. This Agreement shall be effective when signed by both
parties and may be terminated by either party upon one month's written notice.
However, each Lease then in effect shall survive any termination of this
Agreement.
4. CHANGES. Lessor may, upon prior written notice, change the terms and
conditions of this Agreement. Any change will apply on the effective date
specified in the notice to Leases which have an Estimated Shipment Date, or
Effective Date for Additional License, one month or more after the date of
notice. By notice to Lessor in writing prior to delivery, or Effective Date for
Additional License, and within 15 days after receipt of such notice, Lessee may
terminate the Lease for an affected item. Otherwise, the change shall apply.
5. ADVANCE RENT. Lessee shall pay to Lessor, prior to Lessor's acceptance
of a Lease, Advance Rent, if specified. Advance Rent shall be refunded if Lessor
for any reason does not accept the Lease or Lessee terminates the Lease in
accordance with Paragraph 4, 12 or 15.
6. SELECTION AND USE OF EQUIPMENT, PROGRAMMING AND LICENSED PROGRAM
MATERIALS. Lessee agrees that it shall be responsible for the selection, use of,
and results obtained from, the Equipment, any programming supplied by IBM
without additional charge for use on the Equipment (Programming), licensed
program materials, and any other associated equipment, programs or services.
7. ASSIGNMENT TO LESSOR. Lessee hereby assigns, exclusively to Lessor,
Lessee's right to purchase the Equipment from IBM. This assignment is effective
when Lessor accepts the applicable Supplement and Lessor shall then be obligated
to purchase and pay for the Equipment. Other than the obligation to pay the
purchase price, all responsibilities and limitations applicable to Customer as
defined in the referenced IBM purchase agreement in effect at the time the Lease
is accepted by Lessor (Purchase Agreement) shall apply to Lessee.
If the Equipment is subject to a volume procurement amendment to the
Purchase Agreement or to another discount offering, (a) Lessor will pay the same
amount for the Equipment that would have been payable by Lessee, and (b) Lessee
will remain responsible to IBM for any late order change charges, settlement
charges, adjustment charges or any other charges incurred under the volume
procurement amendment or other discount offering.
8. LEASE NOT CANCELLABLE; LESSEE'S OBLIGATIONS ABSOLUTE. Lessee's
obligation to pay shall be absolute and unconditional and shall not be subject
to any delay, reduction, set-off, defense, counterclaim or recoupment for any
reason whatsoever, including any failure of the Equipment, Programming or
licensed program materials or any representations by IBM. If the Equipment,
Programming or licensed program materials are unsatisfactory for any reason,
Lessee shall make any claim solely against IBM and shall, nevertheless, pay
Lessor all amounts payable under the Lease.
9. WARRANTIES. Lessor grants to Lessee the benefit of any and all
warranties made available by IBM in the Purchase Agreement. Lessor warrants that
neither Lessor nor anyone acting or claiming through Lessor, by assignment or
otherwise, will interfere with Lessee's quiet enjoyment of the use of the
Equipment so long as no event of default shall have occurred and be continuing.
EXCEPT FOR LESSOR'S WARRANTY OF QUIET ENJOYMENT, LESSOR MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
AS TO LESSOR, LESSEE LEASES THE EQUIPMENT AND TAKES
THE ADDITIONAL TERMS AND CONDITIONS ON PAGES 2 THROUGH 4 ARE PART OF THIS
AGREEMENT.
LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THIS AGREEMENT AND ITS SUPPLEMENT,
UNDERSTANDS THEM, AND AGREES TO BE BOUND BY THEIR TERMS AND CONDITIONS. FURTHER,
LESSEE AGREES THAT THIS AGREEMENT AND ITS SUPPLEMENT ARE THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, SUPERSEDING ALL
PROPOSALS OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS
BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF.
THIS AGREEMENT INCLUDES THE ADDENDUM ATTACHED HERETO AND
MADE A PART HEREOF.
Accepted by: Covia Partnership
IBM Credit Corporation ---------------------------------
Lessee
By /s/ R.E. Chuhta By /s/ R J Fitzgerald
------------------------------- ---------------------------------
Authorized Signature Authorized Signature
RICHARD J. FITZGERALD
R.E. Chuhta 5/9/88 DIRECTOR PURCHASING
- - ---------------------------------- ------------------------------------
Name (Type or Print) Date Name (Type or Print) Date
Page 1 of 4
<PAGE> 6
ANY PROGRAMMING "AS IS." IN NO EVENT SHALL LESSOR HAVE ANY LIABILITY FOR, NOR
SHALL LESSEE HAVE ANY REMEDY AGAINST LESSOR FOR, CONSEQUENTIAL DAMAGES, ANY LOSS
OF PROFITS OR SAVINGS, LOSS OF USE, OR ANY OTHER COMMERCIAL LOSS.
10. LESSEE AUTHORIZATION. So long as Lessee is not in default under the
Lease (a) Lessee is authorized to act on Lessor's behalf concerning delivery and
installation of the Equipment, any IBM warranty service for the Equipment, and
any programming services for the Programming, (b) Lessee shall have, solely for
these purposes, all rights Lessor may have against IBM under the Purchase
Agreement. The foregoing authorization shall not constitute any surrender of
Lessor's interest in the Equipment.
11. DELIVERY AND INSTALLATION. Lessee shall arrange with IBM for the
delivery of the Equipment and Programming and for installation of the Equipment
at the Equipment Location. Lessee shall pay any delivery and installation
charges. Lessor shall not be liable to Lessee for any delay in, or failure of,
delivery of the Equipment and Programming. Lessee shall examine the Equipment
and Programming immediately upon delivery. If the Equipment is not in good
condition or the Equipment or Programming does not correspond to IBM's
specifications, Lessee shall promptly give IBM written notice and shall provide
IBM reasonable assistance to cure the defect or discrepancy.
12. LATE DELIVERY. If the Equipment or licensed program materials are not
delivered to the Equipment Location on or before the 15th day after the
Estimated Shipment Date, Lessor may, upon written notice to Lessee, increase the
Lease Rate. Lessee may terminate the Lease for the affected item by giving
Lessor written notice prior to delivery. Otherwise, the Rent shall be adjusted
to reflect such increase.
13. RENT COMMENCEMENT DATE. The Rent Commencement Date, unless otherwise
specified in the Supplement, shall be the date payment is due IBM under the
applicable referenced Agreement Lessee shall be notified on the Rent
Commencement Date and the serial numbers of the Equipment.
14. LEASE TERM. The Lease shall be effective when signed by both parties.
The initial Term of the Lease shall expire at the end of the number of Payment
Periods, specified as "Term" in the Supplement, after the Rent Commencement
Date. However, obligations under the Lease shall continue until they have been
performed in full.
15. RATE PROTECTION. Unless modified pursuant to Paragraph 12, the rent
shall be based on the Lease Rate specified in the Supplement or such greater
Lease Rate as may be specified by written notice to Lessee more than one month
before the Estimated Shipment Date or Effective Date for Additional License. By
notice to Lessor in writing prior to delivery, or Effective Date for Additional
License, and within 15 days after receipt of such notice, Lessee may terminate
the Lease for the affected item. Otherwise the Rent shall be adjusted to reflect
the increase. The Unit Purchase Price and LPM Charges are subject to change in
accordance with the referenced Agreements.
16. RENT. During the initial Term, Lessee shall pay Lessor, for each
Payment Period, Rent as determined in Paragraph 15. Lessee's obligation to pay
shall begin on the Rent Commencement Date. Rent will be invoiced in advance as
of the first day of each Payment Period and will be due on the day following the
last day of the Payment Period. When the Rent Commencement Date is not on the
first day of a calendar month and/or when the initial Term does not expire on
the last day of a calendar month, the applicable Rent will be prorated on the
basis of 30-day months. Advance Rent, if any, will be applied to the initial
invoice(s).
17. RENEWAL. If Lessee is not then in default under the Lease, Lessee may
renew the Lease one or more times but not beyond six years from the expiration
of the initial Term. Lessor shall offer renewal Terms of one year and may offer
longer Terms if then generally available. For a renewal Term, upon request by
Lessee, at least five months prior to Lease expiration, Lessor shall notify
Lessee, at least four months prior to expiration, of the Rent, any changes to
the Payment Period and due dates, and of any required Purchase Option or Renewal
Option Percents not specified in the Supplement. The Rent shall be objectively
determined by Lessor by using the projected fair market rental value of the
Equipment as of the commencement of such renewal Term. However, for Option B',
the Rent shall be as specified in the Supplement. Lessee may renew for any
renewal Term only by so notifying Lessor in writing at least three months before
expiration.
18. PURCHASE OF EQUIPMENT. Under Option A, if Lessee is not then in default
under the Lease, Lessee may purchase Equipment only upon expiration of the
Lease. Upon request by Lessee, at least five months prior to Lease expiration,
Lessor shall notify Lessee, at least four months prior to expiration, of the
purchase price. The purchase price shall be objectively determined by Lessor by
using the projected fair market sales value of the Equipment as of such
expiration date, plus the total of (a) any recapture of investment tax credit
and (b) any tax due thereon. Lessee may purchase such Equipment by notifying
Lessor in writing at least three months before such expiration.
Under Option B or B', if Lessee is not then in default under the Lease,
Lessee may, upon notice to Lessor, purchase Equipment at any time on or after
the second anniversary of the Rent Commencement. Such notice shall be given not
later than three months prior to Lease expiration and shall specify the desired
date of purchase which shall be one month or more after the date of notice. If
the date of purchase is an anniversary of the Rent Commencement Date, the
purchase price shall be an amount determined by multiplying the Unit Purchase
Price by the Purchase Option Percent for such Equipment for such anniversary. If
the date of purchase is between two anniversaries, the purchase price shall be
the prorated price (in 12 monthly steps) between the purchase prices described
above for such anniversaries. If the date of purchase is the expiration of the
Lease, Lessor shall objectively determine the projected fair market sales value
and Lessee shall have the benefit of that value, if lower.
If Lessee purchases any Equipment, Lessee shall, on or before the date of
purchase, pay to Lessor the purchase price, any applicable taxes, all Rent due
through the day preceding the date of purchase, any other amounts due, and the
prepayment of Financing (Paragraph 35). Lessor shall, on the date of purchase,
transfer to Lessee by bill of sale, without recourse or warranty of any kind,
express or implied, all of Lessor's right, title and interest in and to such
Equipment on an "As Is, Where Is" basis except that Lessor shall warrant title
free and clear of all encumbrances.
19. OPTIONAL EXTENSION. If Lessee has not elected to renew or purchase,
and as long as Lessee is not in default under the Lease, the Lease will be
extended unless Lessee notifies Lessor in writing, not less than three months
prior to Lease expiration, that Lessee does not want the extension. The
extension will be under the same terms and conditions then in effect, including
Rent (but, for Options A or B, not less than fair market rental value) and will
continue until the earlier of termination by either party upon three months'
prior written notice or six years after expiration of the initial Term.
20. INSPECTION; MARKING; FINANCING STATEMENT. Upon request, Lessee shall
make the Equipment and its maintenance records available for inspection by
Lessor during Lessee's normal business hours. Lessee shall affix to the
Equipment any labels indicating ownership supplied by Lessor. Lessee shall
execute and deliver to Lessor for filing any Uniform Commercial Code financing
statements or similar documents Lessor may reasonably request.
21. EQUIPMENT USE. Lessee agrees that Equipment will be operated by
competent, qualified personnel, in accordance with applicable operating
instructions, laws and government regulations and that Equipment under Option A
will be used only for business purposes.
22. MAINTENANCE. Lessee, at its expense, shall keep the Equipment in a
suitable environment as specified by IBM and in good condition and working
order, ordinary wear and tear excepted.
23. ALTERATIONS; MODIFICATIONS; PARTS. Lessee may alter or modify the
Equipment only upon written notice to Lessor. Any non-IBM alteration is to be
removed and the Equipment restored to its normal, unaltered condition at
Lessee's expense prior to its return to Lessor. At Lessee's option, any IBM
field installable upgrade, feature addition or accessory added to any item of
Equipment (Modification) may be removed. If removed, the Equipment is to be
restored at Lessee's expense to its normal, unmodified condition. If not
removed, such Modification shall, upon return of the Equipment, become, without
charge, the property of Lessor free of all encumbrances. Restoration will
include replacement of any parts removed in connection with the installation of
an alteration or Modification. Any part installed in connection with warranty or
maintenance service shall be the property of Lessor.
Page 2 of 4
<PAGE> 7
24. LEASES FOR MODIFICATIONS AND ADDITIONS. Lessor will arrange for
leasing of Modifications and Additions under terms and conditions then generally
in effect, subject to satisfactory credit review. Additions shall be machines,
or LPM Charges for licensed program materials, which are associated with the
Equipment. These Modifications and Additions must be ordered by Lessee from IBM.
Any lease for Modifications shall, and any lease for Additions may, expire at
the same time as the Lease for the Equipment. The rent shall be determined by
Lessor and specified in a Supplement. If Lessee purchases Equipment prior to
Lease expiration, Lessee shall simultaneously purchase any Modifications under
the Lease.
25. RETURN OF EQUIPMENT. Upon expiration or termination of the Lease for
any item of Equipment, or upon demand by Lessor pursuant to Paragraph 38, Lessee
shall promptly return the Equipment, freight prepaid, to a location in the
continental United States specified by Lessor. Except for Casualty Loss, Lessee
shall pay any costs and expenses incurred by Lessor to inspect and qualify the
Equipment for IBM's maintenance agreement service. Any parts removed in
connection therewith shall become Lessor's property.
26. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessor will maintain, at its own
expense, insurance covering loss of or damage to the Equipment (but excluding
any Modifications not subject to a Lease and any non-IBM alterations) with a
$5,000 deductible per incident. If any item of Equipment shall be lost, stolen,
destroyed or irreparably damaged for any cause whatsoever (Casualty Loss) before
the Date of Installation as defined in the Purchase Agreement, the Lease for
that item shall terminate. If any item of Equipment suffers Casualty Loss, or
shall be otherwise damaged, on or after the Date of Installation, Lessee shall
promptly inform Lessor. If Lessor determines that the item can be economically
repaired, Lessee shall place the item in good condition and working order and
Lessor will reimburse Lessee the reasonable cost of such repair, less the
deductible. If not so repairable, Lessee shall pay Lessor the lesser of $5,000
or the fair market value of the Equipment immediately prior to the Casualty
Loss. Upon Lessor's receipt of payment the Lease for that item shall terminate.
27. TAXES. Lessee shall promptly reimburse Lessor for, or shall pay
directly if so requested by Lessor, as additional Rent, all taxes, charges, and
fees imposed or levied by any governmental body or agency upon or in connection
with the purchase, ownership, leasing, possession, use or relocation of the
Equipment or Programming or in connection with the financing of LPM Charges or
otherwise in connection with the transactions contemplated by the Lease,
excluding, however, all taxes on or measured by the net income of Lessor. Upon
request, Lessee will provide proof of payment. Any other taxes, charges and
fees relating to the licensing, possession or use of licensed program materials
will be governed by the License Agreement.
28. LESSOR'S PAYMENT. If Lessee fails to perform its obligations under
Paragraph 27 or 31 or to discharge any encumbrances created by Lessee, Lessor
shall have the right to substitute performance, in which case, Lessee shall pay
Lessor the cost thereof.
29 TAX INDEMNIFICATION (APPLIES ONLY FOR EQUIPMENT UNDER OPTIONS A OR B).
The Lease is entered into on the basis that under the Internal Revenue Code of
1985, as amended (Code), Lessor shall be entitled to (1) Maximum Accelerated
Cost Recovery System (ACRS) deductions for 5-year property, and (2) deductions
for interest expense incurred to finance purchase of the Equipment. The Bulletin
"Lessor's Tax Assumptions" will be given to Lessee on request.
Lessee represents, warrants and covenants that at all times during the
Lease:
(a) no item of Equipment will constitute "public utility property" as
defined in the Code;
(b) Lessee will not make any election under the Code or take any action,
or fail to take any action, if such election, action or failure to act would
cause any item of Equipment to cease to be eligible for any ACRS deductions or
interest deductions;
(c) Lessee will keep and make available to Lessor the records required to
establish the matters referred to in this Paragraph 29; and
(d) for Equipment located in a United States possession, Lessee represents
that Lessee is a tax exempt entity as defined in the Code.
Furthermore, if Lessee is a tax exempt [ILLEGIBLE] that it will not renew
or extend the Lease if such action shall cause Lessor a Tax Loss as described
below.
If, as a result of any act, failure to act, misrepresentation, inaccuracy,
or breach of any warranty or covenant, or default under the Lease, by Lessee, an
affiliate of Lessee, or any person who shall obtain the use or possession of any
item of Equipment through Lessee, Lessor shall lose the right to claim or shall
suffer any disallowance or recapture of all or any portion of any ACRS
deductions or interest deductions (Tax Loss) with respect to any item of
Equipment, then, promptly upon written notice to Lessee that a Tax Loss has
occurred, Lessee shall reimburse Lessor the amount determined below.
The reimbursement shall be an amount that, in the reasonable opinion of
Lessor, shall make Lessor's after-tax rate of return and cash flows (Financial
Returns), over the term of the Lease for such item of Equipment, equal to the
expected Financial Returns that would have been otherwise available. The
reimbursement shall take into account the effects of any interest, penalties and
additions to tax required to be paid by Lessor as a result of such Tax Loss and
all taxes required to be paid by Lessor as a result of any payments pursuant to
this paragraph. Financial Returns shall be based on economic and tax assumptions
used by Lessor in entering into the Lease.
All the rights and privileges of Lessor arising from this Paragraph 29
shall survive the expiration or termination of the Lease.
For purposes of determining tax effects under Paragraphs 18, 27, 29 and
30, the term "Lessor" shall include, to the extent of interests, any partner in
Lessor and any affiliated group of corporations, and each member thereof, of
which Lessor or any such partner is or shall become a member and with which
Lessor or any such partner joins in the filing of consolidated or combined
returns.
30. GENERAL INDEMNITY. This Lease is a net lease. Therefore, Lessee shall
indemnify Lessor against, and hold Lessor harmless from, any and all claims,
actions, damages, obligations, liabilities and liens; and all costs and
expenses, including legal fees, incurred by Lessor in connection therewith;
arising out of the Lease including, without limitation, the purchase, ownership,
lease, licensing, possession, maintenance, condition, use or return of the
Equipment, Programming or licensed program materials; or arising by operation of
law; excluding, however, any of the foregoing which result from the sole
negligence or willful misconduct of Lessor. Lessee agrees that upon written
notice by Lessor of the assertion of any claim, action, damage, obligation,
liability or lien, Lessee shall assume full responsibility for the defense
thereof. Any payment pursuant to this paragraph shall be of such amount as shall
be necessary so that, after payment of any taxes required to be paid thereon by
Lessor, including taxes on or measured by the net income of Lessor, the balance
will equal the amount due hereunder. Lessee's obligations under this paragraph
shall not constitute a guarantee of the residual value or useful life of any
item of Equipment or a guarantee of any debt of Lessor. The provisions of this
paragraph with regard to matters arising during the Lease shall survive the
expiration or termination of the Lease.
31. LIABILITY INSURANCE. Lessee shall obtain and maintain comprehensive
general liability insurance, in an amount of $1,000,000 or more for each
occurrence, with an insurer having a "Best's Policyholders" rating of B+ or
better. The policy shall name Lessor as an additional insured as Lessor's
interests may appear and shall contain a clause requiring the insurer to give
Lessor at least one month's prior written notice of the cancellation, or any
alteration in the terms, of the policy. Lessee shall furnish to Lessor, upon
request, evidence that such insurance coverage is in effect.
32. SUBLEASE AND RELOCATION OF EQUIPMENT; ASSIGNMENT BY LESSEE. Upon
Lessor's prior written consent, which will not be unreasonably withheld, Lessee
may sublet the Equipment or relocate it from the Equipment Location. No sublease
or relocation shall relieve Lessee of its obligations under the Lease. In no
event shall Lessee remove the Equipment from the United States. Lessee shall not
assign, transfer or otherwise dispose of the Lease or Equipment, or any interest
therein, or create or suffer any levy, lien or encumbrance thereof except those
created by Lessor.
33. ASSIGNMENT BY LESSOR. Lessee acknowledges and understands that the
terms and conditions of the Lease have been fixed to enable Lessor to sell and
assign its interest or grant a security interest or interests in the Lease and
the Equipment individually
Page 3 of 4
LESSEE'S COPY
<PAGE> 8
or together, in whole or in part, for the purpose of securing loans to Lessor or
otherwise. If Lessee is given written notice of any assignment, it shall
promptly acknowledge receipt thereof in writing. Each such assignee shall have
all of the rights of Lessor under the Lease. Lessee shall not assert against any
such assignee any set-off, defense or counterclaim that Lessee may have against
Lessor or any other person, Lessor shall not be relieved of its obligations
hereunder as a result of any such assignment unless Lessee expressly consents
thereto.
34. FINANCING. If the Lease provides for financing of LPM Charges, Lessor
will pay such Charges directly to IBM. Any other charges due IBM under the
License Agreement shall be paid directly to IBM by Lessee. Lessee's obligation
to pay Rent shall not be affected by any discontinuance, return or destruction
of any license or licensed program materials under the License Agreement on or
after the date LPM Charges are due. If Lessee discontinues any of the licensed
program materials in accordance with the terms of the License Agreement prior to
the date LPM Charges are due, the financing of affected LPM Charges shall be
cancelled.
35. FINANCING PREPAYMENT (Does Not Apply For Items Of Equipment). Lessee
may terminate an item of Financing (but not an item of Equipment) by prepaying
its remaining Rent. Lessee shall provide Lessor with notice of the intended
prepayment date which shall be at least one month after the date of the notice.
Lessor may, depending on market conditions at the time, make an adjustment in
the remaining Rent to reflect such prepayment and shall advise Lessee of the
balance to be paid. If, prior to Lease expiration, Lessee purchases the
Equipment or if the Lease is terminated, Lessee shall at the same time prepay
any related Financing including that for programs licensed to the Equipment.
36. DELINQUENT PAYMENTS. If any amount to be paid to Lessor is not paid on
or before its due date, Lessee shall pay Lessor on demand 2% of such late
payment for each month or part thereof from the due date until the date paid or,
if less, the maximum allowed by law.
37. DEFAULT; NO WAIVER. Lessee shall be in default under the Lease upon
the occurrence of any of the following events: (a) Lessee fails to pay when due
any amount required to be paid by Lessee under the Lease and such failure shall
continue for a period of seven days after the due date; (b) Lessee fails to
perform any other provisions under the Lease or violates any of the covenants or
representations made by Lessee in the Lease, or Lessee fails to perform any of
its obligations under any other Lease entered into pursuant to this Agreement,
and such failure or breach shall continue unremedied for a period of 15 days
after written notice is received by Lessee from Lessor; (c) Lessee violates any
of the covenants or representations made by Lessee in any application for credit
or in any agreement with IBM with respect to the Equipment or licensed program
materials or fails to perform any provision in any such agreement (except the
obligation to pay the purchase price or LPM Charges); (d) Lessee makes an
assignment for the benefit of creditors, whether voluntary or involuntary, or
consents to the appointment of a trustee or receiver, or if either shall be
appointed for Lessee or for a substantial part of its property without its
consent; (e) any petition or proceeding is filed by or against Lessee under any
Federal or State bankruptcy or insolvency code or similar law, or (f) if
applicable, Lessee makes a bulk transfer subject to the provisions of the
Uniform Commercial Code.
Any failure of Lessor to require strict performance by Lessee or any
waiver by Lessor of any provision in the Lease shall not be construed as a
consent or waiver of any other breach of the same or of any other provision.
38. REMEDIES. If Lessee is in default under the Lease, Lessor shall have
the right, in its sole discretion, to exercise any one or more of the following
remedies in order to protect its interests, reasonably expected profits and
economic benefits. Lessor may (a) declare any Lease entered into pursuant to
this Agreement to be in default; (b) terminate in whole or in part any Lease;
(c) recover from Lessee any and all amounts then due and to become due; (d) take
possession of any or all items of Equipment, wherever located, without demand or
notice, without any court order or other process of law; and (e) demand that
Lessee return any or all such items of Equipment to Lessor in accordance with
Paragraph 25 and, for each day that Lessee shall fail to return any item of
Equipment, Lessor may demand an amount equal to the Rent, pro-rated on the basis
of a 30-day month, in effect immediately prior to such default. Upon
repossession or return of such item or items of Equipment, Lessor shall sell,
lease or otherwise dispose of such item or items in a commercially reasonable
manner, with or without notice and on public or private bid, and apply the net
proceeds thereof towards the amounts due under the Lease but only after
deducting (i) in the case of sale, the estimated fair market value of such item
or items as of the scheduled expiration of the Lease; or (ii) in the case of any
replacement lease, the rent due for any period beyond the scheduled expiration
of the Lease for such item or items (iii) in either case, all expenses,
including legal fees, incurred in connection therewith; and (iv) where
appropriate, any amount in accordance with Paragraph 29. Any excess net proceeds
are to be retained by Lessor. Lessor may pursue any other remedy available at
law or in equity, including, but not limited to, seeking damages, specific
performance and an injunction.
No right or remedy is exclusive of any other provided herein or permitted
by law or equity. All such rights and remedies shall be cumulative and may be
enforced concurrently or individually from time to time.
39. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all costs and
expenses, including legal and collection fees, incurred by Lessor in enforcing
the terms, conditions or provisions of the Lease or in protecting Lessor's
rights and interests in the Lease and the Equipment.
40. OWNERSHIP; PERSONAL PROPERTY; LICENSED PROGRAM MATERIALS. The
Equipment under Lease is and shall be the property of Lessor. Lessee shall have
no right, title or interest therein except as set forth in the Lease. The
Equipment is, and shall at all times be and remain, personal property and shall
not become a fixture or realty. Licensed program materials are licensed and
provided by IBM directly to Lessee under the terms and conditions of the License
Agreement.
41. NOTICES; ADMINISTRATION. Service of all notices under the Lease shall
be sufficient if delivered personally or mailed to Lessee at its address
specified in the Supplement or to IBM Credit Corporation as Lessor in care of
the IBM Branch Office specified in the Supplement. Notice by mail shall be
effective when deposited in the United States mail, duly addressed and with
postage prepaid. Notices, consents and approvals from or by Lessor shall be
given by Lessor or on its behalf by IBM and all payments shall be made to IBM
until Lessor shall notify Lessee otherwise.
42. LESSEE REPRESENTATION. If the Lease includes Financing, Lessee
represents that it is (a) a corporation if any item of Equipment is located in
Ohio, Mississippi, Virginia or West Virginia and/or (b) a business corporation
if any item of Equipment is located in Pennsylvania.
43. REVISIONS FOR PREVIOUSLY INSTALLED EQUIPMENT. Equipment installed with
Lessee under an IBM lease or rental agreement may be purchased by Lessor, on the
Effective Date of Purchase (as defined in the Purchase Agreement), for lease to
Lessee under Option B or B'. For such Equipment, the Lease shall be revised as
follows:
Paragraphs 4 and 26 -- replace "Estimated Shipment Date" by "Intended
Effective Date of Purchase"; replace "delivery" and "Date of Installation" by
"Effective Date of Purchase";
Paragraph 7 -- add at the end of the first paragraph, "Assignment of the
option to purchase installed Equipment at the net purchase option price under an
IBM lease or rental agreement will be permitted only when Lessee submits the
Supplement in sufficient time to achieve the Intended Effective Date of
Purchase. The Effective Date of Purchase under this assignment shall be the
later of the first day of the Quotation Month or the day on which the applicable
Supplement is accepted by Lessor. If the Quotation Month expires and the
purchase of Equipment is not concluded, this assignment and Lease will be null
and void regarding any such Equipment and all rights, duties and obligations of
Lessee and IBM will remain in accordance with the provisions of the IBM
agreement under which the Equipment is currently installed.";
Paragraphs 11 and 12 -- delete both paragraphs; and
Paragraph 15 -- replace the entire paragraph with the following: "The Rent
shall be based on the Lease Rate specified in the Supplement or such greater
Lease Rate as may be specified by written notice to Lessee more than one month
before the Effective Date of Purchase. The Unit Purchase Price is subject to
change in accordance with the referenced Purchase Agreement. Lessee may
terminate the Lease for any item subject to an increase by giving Lessor written
notice on or before the Effective Date of Purchase."
44. APPLICABLE LAW; SEVERABILITY. The Lease shall be governed by the laws
of the State of Connecticut. If any provision shall be held to be invalid or
unenforceable, the validity and enforceability of the remaining provisions shall
not in any way be affected or impaired.
Page 4 of 4
<PAGE> 1
Exhibit 10.19
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COVIA CONTRACT
--------------
00970
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COMDISCO(R) MASTER LEASE
Comdisco, Inc. -- Lessor
MASTER LEASE AGREEMENT dated as of November 11, 1988 by and between
COMDISCO, INC. (hereinafter called "Lessor") having its principal office and
place of business at 6400 Shafer Court, Rosemont, Illinois 60018 and Covia
Partnership (hereinafter called "Lessee") having its principal office and place
of business at 9700 West Higgins Road, Rosemont, IL 60018
IN CONSIDERATION of the mutual agreements hereinafter set forth and the
payment of rent as herein provided for, the parties hereto agree as follows:
1. Property Leased.
In consideration of the rent to be paid by Lessee and the covenants and
agreements of Lessee hereinafter set forth, Lessor hereby rents, demises and
lets to Lessee all of the tangible personal property listed on each Equipment
Schedule executed, from time to time, pursuant to this Master Lease (with
respect to any Equipment Schedule, hereinafter called the "Equipment"). Each
Equipment Schedule shall be substantially in the form annexed hereto as Exhibit
A and made a part hereof, shall incorporate therein all of the terms and
conditions of this Master Lease and shall contain such additional terms and
conditions as Lessor and Lessee shall agree upon.
2. Term.
The term of this Master Lease shall commence on the date set forth above
and shall continue in effect thereafter so long as any Equipment Schedule
entered into pursuant to this Master Lease remains in effect.
The lease term for each Equipment Schedule shall commence on the first to
occur of the day on which the Equipment listed on said Equipment Schedule is
installed and approved for coverage under a prime shift maintenance contract by
the manufacturer thereof or the seventh (7th) day after delivery by Lessor if a
delay of installation and approval is caused by Lessee (hereinafter called the
"Commencement Date"); provided, however, that if the Equipment is specified as
"new" in such Equipment Schedule the date of installation of such Equipment
shall constitute the Commencement Date. The lease term shall continue for the
number of full months set forth in such Equipment Schedule (hereinafter called
the "Initial Term"), commencing on the first day of the month following the
Commencement Date (or commencing on the Commencement Date if such Date is on the
first day of the month). On the Commencement Date the Lessee will execute and
deliver to the Lessor a letter, in a form to be specified by the Lessor, which
confirms such Commencement Date.
3. Rent and Payment.
Lessee shall pay to Lessor, as rental for the Equipment during each month
of the Initial Term of any Equipment Schedule, the Monthly Rent set forth in
such Equipment Schedule, which shall be due and payable in advance on the first
day of each calendar month during such Initial Term (each such date being
hereinafter called a "Monthly Rent Payment Date"). If the Commencement Date of
any Equipment Schedule shall be other than the first day of the month, Lessee
shall make rental payments ("Interim Rent") equal to one-thirtieth of the
Monthly Rent set forth in the Equipment Schedule for each day from and including
the Commencement Date through and including the last day of the month prior to
the beginning of the Initial Term. Rent shall be paid to Lessor by check or wire
transfer so as to constitute immediately available funds at the address of
Lessor set forth above or at such other place as Lessor shall designate in
writing, or, if to an assignee of Lessor, at such place as such assignee shall
designate in writing, and shall be paid free and clear of all claims, demands or
setoffs against Lessor or such assignee. Whenever any payment (of rent or
otherwise) is not made when due hereunder, Lessee shall pay interest on such
amount at the rate of 18% per annum or the maximum allowable rate of interest
permitted by the law of the state where the Equipment is located, whichever is
less (the "Overdue Rate"), to the date of payment.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges, represents and warrants that it has
made the selection of the Equipment based on its own judgment and expressly
disclaims any reliance upon statements made by the Lessor. Lessee authorizes
Lessor to insert in each Equipment Schedule the serial number and other
identifying data of the Equipment.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that,
so long as Lessee shall not be in default of any of the provisions of the
applicable Equipment Schedule, neither owner, Lessor, nor any assignee or
secured party of Lessor will disturb Lessee's quiet and peaceful possession of
the Equipment and Lessee's unrestricted use thereof for its intended purpose.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS
MERCHANTABILITY OR ITS FITNESS OR CAPACITY OR DURABILITY FOR ANY PARTICULAR
PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT OR
CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE
ORDER OR ORDERS RELATING THERETO AND, AS TO LESSOR, LESSEE LEASES THE EQUIPMENT
"AS IS". Lessor shall not be liable, to any extent whatever, for the selection,
quality, condition, merchantability, suitability, fitness, operation or
performance of the Equipment. Without limiting the generality of the foregoing,
Lessor shall not be liable to Lessee for any liability, claim, loss, damage or
expense of any kind or nature (including strict liability in tort) caused,
directly or indirectly, by the Equipment or any inadequacy thereof for any
purpose, or any deficiency or defect therein, or the use or maintenance thereof,
or any repairs, servicing or adjustments thereto; or any delay in providing or
failure to provide any part thereof, or any interruption or loss of service or
use thereof, or any loss of business, or any damage whatsoever and howsoever
caused except for any such loss or damage caused by the wilful misconduct of
Lessor, or its agents and representatives. Lessor hereby appoints Lessee as
Lessor's agent to assert, during the term of the applicable Equipment Schedule,
any right Lessor may have to enforce the manufacturer's warranties, if any;
provided, however, that Lessee shall indemnify and hold Lessor or its assignee
harmless from and against any and all claims, costs, expenses, damages, losses
and liabilities incurred or suffered by Lessor as a result of or incident to any
action by Lessee in connection therewith.
5. Title and Assignment.
5.1 Title. Nothing contained in any Equipment Schedule shall give or
convey to Lessee any right, title or interest in or to the Equipment, except as
a Lessee as set forth therein and Lessee represents and agrees that Lessee shall
hold the Equipment subject and subordinate to the rights of the owner.
<PAGE> 2
Lessor, any Assignee and any Secured Party (as defined in Section 5.3) and
Lessee shall furnish Lessor with such documentation as Lessor shall reasonably
require with respect thereto. Lessor is hereby authorized by Lessee, at Lessor's
expense, to cause this Master Lease, any Equipment Schedule or any statement or
other instrument in respect of any Equipment Schedule as may be required by law
showing the interest of Lessor, any Assignee and any Secured Party in the
Equipment to be filed and Lessee agrees to execute and deliver Uniform
Commercial Code financing statements reasonably requested by Lessor for such
purpose. Lessee shall, at its expense, protect and defend Lessor's title as well
as the interest of any Assignee and any Secured Party against all persons
claiming against or through Lessee and shall at all times keep the Equipment
free and clear from any legal process, liens or encumbrances whatsoever (except
any placed thereon by Lessor) and shall give Lessor immediate written notice
thereof and shall indemnify and hold Lessor, any Assignee and any Secured Party
harmless from and against any loss caused thereby.
5.2 Assignment, Sublease or Relocation by Lessee. Upon at least sixty (60)
days prior written notice to Lessor, Lessee may assign or sublease the Equipment
to any party, or relocate the Equipment to any location, within any state of the
continental United States which shall have in effect the Uniform Commercial
Code, provided that Lessor, any Assignee and any Secured Party, in such parties'
sole discretion, shall have approved such assignee, sublessee or location and
provided (i) that all costs of any nature whatsoever (including any additional
property taxes or other taxes and any additional expenses of insurance coverage)
resulting from any relocation, assignment or sublease shall be promptly paid by
Lessee upon presentation to Lessee of evidence supporting such cost, and (ii)
any assignment or sublease shall be made expressly subject and subordinate to
the terms of this Lease and Lessee shall assign its rights under said assignment
or sublease to Lessor, any Assignee and any Secured Party as additional
collateral and security for Lessee's obligations hereunder. If Lessee fails to
so notify Lessor and, as a result of such failure, Lessor has paid or is
required by the jurisdiction where the Equipment was originally located to
continue to pay taxes of the sort for which Lessee is responsible under Section
6.2 below, then Lessee shall reimburse Lessor for such taxes, which payment
(less Lessor's reasonable costs and expenses) will be refunded to Lessee if and
when Lessor receives a corresponding refund from said jurisdiction. In the event
of a relocation, assignment or sublease, Lessee, its assignee, or its sublease,
if any, shall cooperate with Lessor in taking all reasonable measures to protect
the title of Lessor or any Assignee and the interest of any Secured Party to and
in the Equipment. No relocation, assignment or sublease permitted hereunder
shall relieve Lessee from any of its obligations under this Lease. Lessee hereby
grants to Lessor the right and opportunity to submit or match the last proposal
for the sublease or assignment of the Equipment, and to submit a proposal for
the financing of any Equipment which is replacing Equipment leased pursuant to
this Master Lease. Each of the foregoing shall be conducted in a commercially
reasonable time frame and manner.
5.3 Assignment by Lessor. Lessee acknowledges and understands that the
terms and conditions of each Equipment Schedule have been fixed by Lessor in
anticipation of its ability to sell and assign its interest or grant a security
interest under each Equipment Schedule and the Equipment listed therein in whole
or in part to a security assignee (the "Secured Party") for the purpose of
securing a loan to the Lessor. The Lessor may also sell and assign its rights as
owner and lessor of the Equipment under any Equipment Schedule to an assignee
(the "Assignee") which may be represented by a bank or trust company acting as a
trustee (the "Owner Trustee") for the Assignee. After such assignments the term
Lessor shall mean, as the case may be, such Assignee or Owner Trustee and any
Secured Party. Notwithstanding the foregoing, any assignment by Lessor shall not
relieve Lessor of its obligations to Lessee hereunder. The Lessee hereby
consents to and shall acknowledge such assignment or assignments as shall be
designated by written notice given by Lessor to Lessee and further convenants
and agrees that:
(a) Any such Secured Party shall have and be entitled to exercise any
and all discretions, rights and powers of Lessor hereunder or under
any Equipment Schedule, but such Secured Party shall not be
obligated to perform any of the obligations of Lessor hereunder or
under any Equipment Schedule, provided, however that such Secured
Party shall not disturb Lessee's quiet and peaceful possession of
the Equipment and unrestricted use thereof for its intended purpose
during the term hereof so long as Lessee is not in default of any of
the provisions hereof and such Secured Party continues to receive
all amounts of Monthly Rent payable under such Equipment Schedule:
(b) Lessee will pay all Monthly Rent and any and all other amounts
payable by Lessee under any Equipment Schedule to such Secured
Party, notwithstanding any defense or claim of whatever nature,
whether by reason of breach of such Equipment Schedule or otherwise
which it may or might now or hereafter have as against Lessor
(Lessee reserving its right to have recourse directly against Lessor
on account of any such defense or claim); and
(c) Subject to and without impairment of Lessee's leasehold rights in
and to the Equipment, Lessee holds the Equipment for such Secured
Party to the extent of such Secured Party's rights therein.
6. Net Lease, Taxes and Fees.
6.1 Net Lease. Lessor and Lessee acknowledge and agree that each Equipment
Schedule constitutes a net lease and that Lessee's obligation to pay all Monthly
Rent and any and all amounts payable by Lessee under any Equipment Schedule
shall be absolute and unconditional and shall not be subject to any abatement,
reduction, set-off, defense, counterclaim, interruption, deferment or recoupment
for any reason whatsoever, and that such payments shall be and continue to be
payable in all events.
6.2 Taxes and Fees. Lessee covenants and agrees to pay when due or
reimburse and indemnify and hold the Lessor harmless from and against all taxes,
fees or other charges of any nature whatsoever (together with any related
interest or penalties not arising from negligence on the part of Lessor) now or
hereafter imposed or assessed during the term of each Equipment Schedule against
Lessor, Lessee or the Equipment by any Federal, state, county, or local
governmental authority upon or with respect to the Equipment or upon the
ordering, purchase, sale, ownership, delivery, leasing, possession, use,
operation, return or other disposition thereof or upon the rents, receipts or
earnings arising therefrom or upon or with respect to any Equipment Schedule
(excepting only Federal, state and local taxes based on or measured by the net
income of Lessor). Notwithstanding the foregoing, unless otherwise specified in
the Equipment Schedule, Lessor shall be responsible for the filing of all
personal property tax returns in respect of the Equipment and shall pay all
taxes indicated thereon. Lessee shall reimburse Lessor for all such taxes within
ten (10) days of receipt of Lessor's invoice therefor.
7. Care and Use, Maintenance and Repair, and Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee shall, at its sole expense, at all
times during the term of each Equipment Schedule, maintain the Equipment in good
operating order, repair, condition and appearance and protect the Equipment from
deterioration, other than normal wear and tear. Lessee shall not use the
Equipment for any purpose other than that for which it was designed. Lessee
shall, at its sole expense, enter into and maintain in force, for the term of
each Equipment Schedule, a prime shift maintenance contract with the
manufacturer of the Equipment or such other party as shall be acceptable to
Lessor, and shall provide Lessor with a copy of such contract and all
supplements thereto which are applicable to the Equipment. If Lessee has the
Equipment maintained by a party other than the manufacturer, Lessee hereby
assumes and agrees to pay any costs necessary to have the manufacturer
re-certify the Equipment at the scheduled expiration of the lease term, which
lease term shall continue upon the same terms and conditions until such
recertification has been obtained.
7.2 Alterations and Attachments. Upon prior written notice to Lessor,
Lessee may, at its expense, add or install any Upgrade (as hereinafter defined)
on the Equipment leased hereunder. For purposes hereof and all documents
relating hereto, the term "Upgrade" shall mean: (i) any accessory, equipment or
device manufactured or sold by the manufacturer of the Equipment for
installation on the Equipment and installed in compliance with said
manufacturer's installation procedures (other than those added by the
manufacturer in order to maintain the Equipment at current engineering levels),
or (ii) any other accessory, equipment or device installed on the Equipment so
long as such item does not impair the original function or use of the Equipment
and is capable of being removed without causing material damage to the
Equipment. An Upgrade shall not become an accession to the Equipment and shall
not become the property of Lessor. For purposes hereof and of all documents
relating hereto, the term "Equipment" shall not be deemed to include any such
Upgrade. At the request of Lessor, Lessee shall (and, absent such request, at
its option, Lessee may), upon expiration or termination of the Equipment
Schedule covering such Equipment, remove any such Upgrade and restore the
Equipment to its original condition (ordinary wear and tear excepted), all at
Lessee's expense, prior to returning the Equipment to Lessor. Lessee will not,
without the prior written consent of Lessor and subject to such conditions as
Lessor may impose for its protection, affix the Equipment to any real property
if, as a result thereof, the Equipment will become a fixture under applicable
law.
2
<PAGE> 3
7.3 Inspection by Lessor. Upon the request of Lessor, Lessee shall at
reasonable times during business hours make the Equipment available to Lessor
for inspection at the place where it is normally located and shall make Lessee's
log and maintenance records pertaining to the Equipment available to Lessor for
inspection.
8. Representations and Warranties of Lessee.
Lessee hereby represents, warrants and covenants that, with respect to the
Master Lease and each Equipment Schedule executed hereunder:
(a) The execution, delivery and performance thereof by the Lessee have
been duly authorized by all necessary corporate action.
(b) The individual executing such was duly authorized to do so.
(c) The Master Lease and each Equipment Schedule constitute legal, valid
and binding agreements of the Lessee enforceable in accordance with
their respective terms.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) Lessee shall furnish, upon request by Lessor, audited financial
statements for the most recent period.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Equipment Schedule, Lessee
shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear, and excepting physical loss, damage or destruction for which Lessee is not
responsible as provided in Section 12, Lessee shall return the Equipment to
Lessor at its address set forth herein or at such other address within the
continental United States as directed by Lessor.
10. Labeling.
Lessee convenants and agrees that, upon the request of Lessor, it shall
cause the Equipment to be plainly, permanently and conspicuously marked, by
stenciling or by metal tag or place affixed thereto, indicating Lessor's
interest in the Equipment. Lessee shall replace any such stenciling, tag or
place which may be removed or destroyed or become illegible. Lessee shall keep
all Equipment free from any marking or labeling which might be interpreted as a
claim of ownership thereof by Lessee or any party other than Lessor or anyone so
claiming through Lessor.
11. Indemnity.
Lessee shall and does hereby indemnify and hold Lessor, any Assignee and
any Secured Party harmless from and against any and all claims, costs, expenses,
damages and liabilities, including reasonable attorneys fees, arising out of the
ownership, selection, possession, leasing, renting, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment.
Notwithstanding the foregoing, Lessee shall not be responsible under the terms
of this Section 11 to a party indemnified hereunder for any claims, costs,
expenses, damages and liabilities occasioned by the gross negligence or wilful
misconduct of such indemnified party. Lessee shall, at its own expense, carry
bodily injury and property damage liability insurance during the term of the
Master Lease in amounts and against risks customarily insured against by the
Lessee on equipment owned by it. Any amounts received by Lessor with respect to
such insurance shall be credited against the Lessee's obligations hereunder.
12. Risk of Loss.
The responsibilities of Lessee and Lessor with respect to the risk of loss
of the Equipment shall be as set forth in the Equipment Schedule.
13. Default.
13.1 Definition. The occurrence of any one or more of the following events
(herein called "Events of Default") shall constitute a default under an
Equipment Schedule:
(a) Default by Lessee in the payment of any installment of Monthly Rent
or other charge payable by Lessee under such Equipment Schedule as
and when the same becomes due and payable and such default continues
for a period of ten (10) days; or
(b) Default by Lessee in the performance of any other term, covenant or
condition of such Equipment Schedule or the inaccuracy in any
material respect of any representation or warranty made by the
Lessee in such Equipment Schedule or in any document or certificate
furnished to the Lessor in connection therewith, which default or
inaccuracy shall continue for a period of fifteen (15) days after
notice; or
(c) The making of an assignment by Lessee for the benefit of its
creditors or the admission by Lessee in writing of its inability to
pay its debts as they become due, or the insolvency of Lessee, or
the filing by Lessee of a voluntary petition in bankruptcy, or the
adjudication of Lessee as a bankrupt, or the filing by Lessee of any
petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any present or future statute, law or
regulation, or the filing of any answer by Lessee admitting, or the
failure by Lessee to deny, the material allegations of a petition
filed against it for any such relief, or the seeking or consenting
by Lessee to, or acquiescence by Lessee in, the appointment of any
trustee, receiver or liquidator of Lessee or of all or any
substantial part of the properties of Lessee, or the inability of
Lessee to pay its debts when due, or the commission by Lessee of any
act of bankruptcy as defined in the Federal Bankruptcy Act, as
amended; or
(d) The failure by Lessee, within sixty (60) days after the commencement
of any proceeding against Lessee seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, to obtain the dismissal of such proceeding or, within
sixty (60) days after the appointment, without the consent or
acquiescence of Lessee, of any trustee, receiver or liquidator of
Lessee or of all or any substantial part of the properties of
Lessee, to vacate such appointment; or
(e) The default by Lessee under any other Equipment Schedule or other
agreement between Lessee and Lessor or its assignee or Secured Party
hereunder.
13.2 Remedies. Upon the occurrence of any one or more Events of Default,
Lessor, at its option, may (1) proceed by appropriate court action or actions
either at law or in equity to enforce performance by Lessee of the applicable
convenants and terms of the applicable Equipment Schedule, or to recover from
Lessee any and all damages or expenses, including reasonable attorneys' fees,
which Lessor shall have sustained by reason of Lessee's default in any covenant
or covenants of the applicable Equipment Schedule or on account of Lessor's
enforcement of its remedies thereunder, or (2) without notice or demand,
accelerate the balance of the monthly rentals thereafter accruing under the
applicable Equipment Schedule, which, together with all rent and other amounts
then due shall become immediately due and payable, as liquidated damages and not
as a penalty, and Lessor shall have the right to the extent permitted by law;
(i) to recover all sums so due thereunder; (ii) to retake immediate possession
of the Equipment without any process of law and for such purpose Lessor may
enter upon premises where the Equipment may be located and may remove the same
therefrom without notice, and without being liable to Lessee therefor, except
that Lessor shall be liable for damages resulting from the fault or negligence
of Lessor, Lessor's assignee or their respective agents and representatives in
any such entry or repossession; (iii) to sell, lease or otherwise dispose of all
or any portion of the Equipment, with the priviledge of becoming the purchaser
thereof, at public or private sale, for cash or on credit and without notice of
its
3
<PAGE> 4
intention to do so or of its doing so, in which event Lessor shall apply the
cash proceeds from any sale or other disposition (less the estimated Fair Market
Value of the Equipment at the expiration of the Initial Term or any
extension thereof), or the present value (discounted at the Overdue Rate) of the
rentals under any lease for a term not to exceed the expiration of the Initial
Term or any extension thereof (all such amounts to be called "Proceeds"
hereinafter), less all costs and expenses incurred in connection with the
recovery, repair or storage of the Equipment or the transaction itself, against
all sums due from Lessee and to the extent and in the manner permitted by law.
Lessee shall be liable to Lessor for, and Lessor may recover from Lessee, the
amount by which the Proceeds of any such transaction, less the expenses of
retaking, storing, repairing and the transaction itself, including reasonable
attorneys' fees incurred by Lessor, is less than all sums due from Lessee under
the applicable Equipment Schedule; and (iv) to pursue any other remedy permitted
by law or equity. The above remedies, to the extent permitted by law, any one of
which Lessor need not, in its discretion, exercise, shall be deemed cumulative
and may be exercised successively or concurrently. Lessee shall reimburse Lessor
for all costs and expenses incurred in connection with the enforcement of any
right or remedy under such Equipment Schedule, including reasonable attorneys'
fees. Except as set forth in this Section and to the extent permitted by
applicable law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise which may require Lessor to sell, lease or otherwise use
any Equipment in mitigation of Lessor's damage or which may otherwise limit or
modify any of Lessor's rights or remedies. Fair Market Value of the Equipment
shall be determined on the basis of and shall be the aggregate amount which
would be obtainable at the expiration of the Initial Term or any extension
thereof in an arm's-length transaction between an informed and willing
buyer/user and an informed and willing seller under no compulsion to sell.
14. Miscellaneous.
14.1 Entire Agreement. Lessor and Lessee acknowledge that there are no
agreements or understandings, written or oral, between Lessor and Lessee with
respect to the Equipment, other than as set forth herein and in each Equipment
Schedule and that this Master Lease Agreement and each Equipment Schedule
contains the entire agreement between Lessor and Lessee with respect thereto.
Neither this Master Lease nor any Equipment Schedule may be altered, modified,
terminated or discharged except by a writing signed by the party against whom
such alteration, modification, termination or discharge is sought.
14.2 No Waiver. No omission, or delay, by Lessor at any time to enforce
any right or remedy reserved to it, or to require performance of any of the
terms, covenants or provisions hereof by Lessee at any time designated, shall be
a waiver of any such right or remedy to which Lessor is entitled, nor shall it
in any way affect the right of Lessor to enforce such provisions thereafter.
14.3 Binding Nature. Each Equipment Schedule shall be binding upon, and
shall inure to the benefit of Lessor, Lessee and their respective successors,
legal representatives and assigns, except, in the case of any Secured Party, to
the extent set forth in the Subsection 5.3 of Section 5 hereof.
14.4 Survival of Obligations. All agreements, representations and
warranties contained in this Master Lease, any Equipment Schedule or in any
document delivered pursuant hereto or in connection herewith shall be for the
benefit of Lessor and any assignee or Secured Party and shall survive the
execution and delivery of this Master Lease and the expiration or other
termination of this Master Lease.
14.5 Notices. Any notice, request or other communication to either party
by the other as provided for herein shall be given in writing and only shall be
deemed received upon the earlier of receipt or three days after mailing if
mailed postage prepaid by regular or airmail to Lessor (to the attention of
"Lease Administrator") or Lessee, as the case may be, at the address for such
party set forth in the Equipment Schedule or at such changed address as may be
subsequently submitted by written notice of either party.
14.6 Applicable Law. This Master Lease has been, and each Equipment
Schedule will have been made, executed and delivered in the State of Illinois
and shall be governed and construed for all purposes under and in accordance
with the laws of the State of Illinois.
14.7 Severability. In the event any one or more of the provisions of this
Master Lease and/or any Equipment Schedule shall for any reason be held invalid,
illegal or unenforceable, the remaining provisions of this Master Lease and/or
any such Equipment Schedule shall be unimpaired, and the invalid, illegal or
unenforceable provision shall be replaced by a mutually acceptable valid, legal
and enforceable provision, which comes closest to the intention of the parties
underlying the invalid, illegal or unenforceable provision.
14.8 Counterparts. This Master Lease and any Equipment Schedule may be
executed in any number of counterparts, each of which shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. If Lessor grants a security interest in all or any part of an
Equipment Schedule, the Equipment covered thereby and/or sums payable
thereunder, only that counterpart Equipment Schedule marked "Secured Party's
Original" shall be effective to transfer Lessor's rights therein and all other
counterparts shall be market "Duplicate" to indicate that they are not the
"Secured Party's Original".
14.9 Nonspecified Features. If the Equipment delivered pursuant to any
Equipment Schedule contains any features not specified therein, Lessee grants
Lessor, at Lessor's option, the right to remove or deactivate any of such
features. Such removal or deactivation shall be performed by the manufacturer or
another party acceptable to Lessee, upon the request of Lessor, at a time
convenient to Lessee, provided that Lessee shall not unreasonably delay the
removal of such features.
14.10 Additional Matters.
(a) Lessee, upon execution of this Master Lease and thereafter upon
execution of each Equipment Schedule, shall provide Lessor with
certified resolutions and an opinion from Lessee's counsel addressed
to Lessor or any Secured Party with respect to the representations
and warranties set forth in subparagraphs (a) through (d) of Section
8 above and shall also supply such other documents as Lessor may
reasonably request. If Lessee shall fail to timely and properly
deliver any of the aforesaid documents within fourteen (14) days of
the execution of this Master Lease and each Equipment Schedule,
Lessor, in its discretion and notwithstanding anything to the
contrary contained in Section 2 hereof, may postpone the
commencement of the Initial Term. Lessor shall give Lessee prompt
written notice of any such postponement.
(b) Section headings are for convenience only and shall not be construed
as part of this Master Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on
or as of the day and year first above written.
COVIA PARTNERSHIP COMDISCO, INC.,
---------------------------- as Lessor
as Lessee
By: /s/ Barry A. Kotar By: /s/ Debra Sall
----------------------- ---------------------------
BARRY A. KOTAR Debra Sall
Title: PRESIDENT AND CEO Title: Operations Manager
See Addendum attached hereto and made a part hereof
- - -------------
DEPT. INITIAL
- - -------------
MGR.
PP [Illegible]
- - -------------
LAW [Illegible]
- - -------------
USER
- - -------------
BUYER
PP
- - -------------
V.P.
PP
- - -------------
4
<PAGE> 5
COVIA'S COPY
--------------
COVIA CONTRACT
--------------
00970
--------------
ADDENDUM
to the Master Lease Agreement dated as of November 11, 1988
by and between Comdisco, Inc., as Lessor,
and Covia Partnership, as Lessee
The terms and conditions of the Master Lease Agreement are hereby modified
and amended as follows:
1. Section 2. "Term."
In line 7, delete the words "in a form to be specified by the Lessor."
2. Section 3. "Rent and Payment."
After the third sentence, insert the following: "For purposes of this
Section 3, Lessee's corporate check dated and mailed so as to be received on or
prior to the due date shall constitute compliance with the requirement of
payment in immediately available funds."
In line 9, delete the words "18% per annum" and replace them with the
words "14% per annum."
3. Section 4.2 "Warranty and Disclaimer of Warranties."
In line 2, after the words "secured party of Lessor" insert the following:
"nor any other parties claiming under or through Lessor."
Add the following to the end of this section: "Lessor warrants that any
used Equipment supplied by Lessor hereunder will be in good operating conditions
and, if applicable, approved by the manufacturer for coverage under the
manufacturer's maintenance contract."
4. Section 5.1 "Title."
Delete the last sentence of this section and replace it with the
following:
"Lessee shall, at its expense, protect and defend Lessor's title as well
as the interest of any Assignee and any Secured Party against all persons
claiming against or through Lessee as a result of Lessee's acts or
omissions and shall at all times keep the Equipment free and clear from
any legal process, liens or encumbrances resulting from Lessee's acts or
omissions and shall give Lessor immediate written notice thereof and shall
indemnify and hold Lessor, any Assignee and any Secured Party harmless
from and against any loss caused thereby."
<PAGE> 6
5. Section 5.2 "Assignment, Sublease or Relocation by Lessee."
In line 3, after the words "provided that" insert the words "within thirty
(30) days of Lessee's notice."
In line 4, after the word "provided" insert the words "such approval shall
not be unreasonably withheld and provided further."
In line 5, insert the word "actually" before the word "resulting."
In line 14, delete the words "or match the last" and replace them with the
word "a."
Add the following to the end of this section: "Notwithstanding the
foregoing, Lessee may assign or sublease the Equipment to any of its partners or
subsidiaries without prior approval of Lessor, any Assignee or Secured Party;
provided, however, that no assignment or sublease shall relieve Lessee of its
obligations under the Lease."
6. Section 5.3 "Assignment by Lessor."
In line 7, delete the words "and shall acknowledge."
7. Section 6.2 "Taxes and Fees."
Delete the remainder of this section after the words "Equipment Schedule"
at the beginning of line 6 and insert the following:
"(except for taxes based on or measured by the gross or net income of
Lessor, gross receipts taxes (other than gross receipt taxes which are a
sale, use or rental tax), capital stock taxes, franchise taxes, net worth
taxes, doing business taxes, excess profit taxes, or taxes imposed in lieu
of a gross or net income tax). If a claim is made against Lessor for any
such charges, Lessor shall promptly notify Lessee in writing thereof. If
requested by Lessee, Lessor shall at Lessee's expense, take such action as
Lessee may reasonably direct with respect to such asserted liability and
shall not pay any such charges, except under protest, if protest is
necessary. If payment is made, Lessor shall, at Lessee's expense, which
expense will be reimbursed by Lessee upon Lessor's demand, take such
action as Lessee may reasonably direct to recover payment and shall, if
requested, permit Lessee in Lessor's name to file a claim or commence an
action to recover such payment. If Lessor shall receive a refund or credit
and any interest thereon for all or any part of such charges then Lessor
shall promptly pay Lessee the amount of any such charges or
2
<PAGE> 7
credits which are attributable to the amount paid by Lessee including any
interest received thereon. Notwithstanding the foregoing, unless otherwise
specified in the Equipment Schedule, Lessor shall be responsible for the
filing of all personal property tax returns in respect of the Equipment
and shall pay all taxes indicated thereon and Lessee shall reimburse
Lessor for all such personal property taxes within twenty (20) days of
receipt of Lessor's invoice and supporting documentation sent to the
attention of Lessee's Tax Department."
8. Section 7.1 "Care, Use and Maintenance."
In line 5, delete the words "and shall provide Lessor with a copy of such
contract and all supplements thereto which are applicable to the Equipment" and
replace them with the words "and shall certify to Lessor that the Equipment is
covered by the manufacturer's maintenance contract."
9. Section 8. "Representations and Warranties of Lessee."
In paragraph (c), place a period after the word "Lessee" and delete the
remainder of the sentence.
10. Section 9. "Delivery and Return of Equipment."
In line 1, delete the words "Lessee hereby assumes the full expense of
transportation" and replace them with the following: "Lessee hereby assumes the
full expense, if any, of transportation (provided that Lessee may specify the
method of transportation)."
In line 2, delete the words "pursuant to Lessor's instructions" and
replace them with the words "in accordance with the manufacturer's packaging and
transportation instructions."
In line 6, after the word "Lessor" insert the following: "; provided,
however, that Lessee's expense shall not be greater than that incurred by
returning the Equipment to Lessor at its Schaumburg, Illinois location."
11. Section 11. "Indemnity."
In line 2, add the following after the word "ownership": "(as it relates
to strict liability in tort only)."
In line 5, delete the words "gross negligence or wilful misconduct of such
indemnified party" and replace them with the following: "(i) negligence or
wilful misconduct of the Lessor, (ii) the gross negligence or wilful misconduct
of the Secured Party or Assignee, or (iii) as a result of the Lessor's, Secured
Party's or Assignee's dealings and contracts with third parties
3
<PAGE> 8
not arising from this Master Lease."
12. Section 13.1 "Definition."
In line 2 of paragraph (a), after the words "ten (10) days" insert the
words "after written notice."
In line 3 of paragraph (b), before the word "notice" insert the word
"written."
13. Section 13.2 "Remedies."
In line 11, after the words "private sale" insert the words "and in a
commercially reasonable manner."
Delete the penultimate sentence of this section in its entirety.
Add the following to the end of this section: "In no event, shall the
exercise of Lessor's remedies hereunder result in the Lessee becoming obligated
to pay an amount greater than the aggregate remaining rentals due under the
lease plus Lessor's reasonable fees and expenses to recover the payment of said
rentals."
14. Section 14.9 "Nonspecified Features."
In line 2, after the words "at Lessor's option" insert the words "and
expense."
15. Section 14.10 "Additional Matters."
In lines 1 and 2 of paragraph (a), delete the words "certified
resolutions."
Add the following to the end of this section: "Notwithstanding the
foregoing, Lessee shall only be required to provide an opinion of counsel for
Equipment Schedules with aggregate rentals of $5 million or more."
COVIA PARTNERSHIP COMDISCO, INC.
as Lessee as Lessor
By: /s/ Barry A. Kotar By: /s/ Debra Sall
--------------------------- ---------------------------
BARRY A. KOTAR Debra Sall
Title: PRESIDENT AND CEO Title: Operations Manager
HSH/PD
11/16/88
4
<PAGE> 1
Exhibit 10.20
ALLEN SYSTEMS GROUP, INC.
SOFTWARE LICENSING AGREEMENT
This AGREEMENT, dated and effective as of the 1st day of August 1994, between
Allen Systems Group, Inc. ("ASG"), a Delaware corporation, with offices at 750
11th Street South, Naples, Florida 33940, and Galileo International ("Client"),
a Delaware partnership, with offices at 5350 South Valentia Way, Englewood,
Colorado 80111, sets forth the terms and conditions under which ASG will license
the Licensed Product(s) as specified herein.
LICENSE GRANT
In accordance with the terms and conditions of this agreement, ASG hereby agrees
to grant to Client, and Client hereby accepts from ASG a nonassignable,
nonexclusive and nontransferable license to use the proprietary software
system(s) including programs, options, technical and other documentation, data
and information (hereinafter referred to as "Licensed Product(s)") listed on the
attached Product Schedule(s) which forms a part of this Agreement in accordance
with the terms specified in the Product Schedule(s).
Client shall have the right to use the Licensed Product(s) solely for its own
internal use and benefit and only on the computer(s) and at the location(s)
designated in the attached Product Schedule(s). Client shall not transfer,
sublease, assign or deliver Licensed Product(s) or this License to another
computer or another location or provide or otherwise make Licensed Product(s)
available to anyone other than Client's personnel or do processing for the
benefit of any entity other than the Client, unless Client shall have obtained
ASG's prior written consent. Should Client change its computer to a higher
group, Client agrees to pay an upgrade fee equal to the then current perpetual
license fee of the new group less one hundred percent (100%) credit for previous
perpetual license fee(s) paid for the Licensed Product(s). Client is authorized
to use the Licensed Product(s) on a back-up computer when the designated
computer is temporarily inoperable until operable status is restored and
processing on the back-up computer is completed. More than one Product Schedule
may be incorporated into this Agreement and each Product Schedule together with
the terms and conditions of this Agreement shall constitute a separate Agreement
which is independent from other Product Schedules incorporated in this
Agreement.
LICENSED MATERIAL
Upon execution of this Agreement, ASG shall furnish Client one (1) full set of
the technical documentation, indicated on the Product Schedule(s), describing
ASG's recommended use and application of the Licensed Product(s). Additional
copies may be obtained by Client upon payment to ASG of ASG's published price
for such materials.
TERM
Each license granted hereunder shall become effective upon the date specified in
the Product Schedule(s) and shall remain in force for the term specified therein
unless terminated earlier as provided in this Agreement. The license shall be
automatically renewed for a like term unless Client or ASG gives written notice
of termination no less than thirty (30) days prior to the expiration of the term
provided in this Agreement.
<PAGE> 2
ACCEPTANCE PERIOD
Client shall have the number of days specified in the Product Schedule(s) to
evaluate and accept the Licensed Product, beginning on the date the Licensed
Product is received by Client. If during the acceptance period the Licensed
Product does not perform as specified in the user documentation supplied by ASG,
Client shall notify ASG in writing of its nonacceptance of the Licensed
Product(s), at which time the license for the Licensed Product(s) shall be
terminated. Client shall immediately destroy all copies of Licensed Product(s)
on Client's computer(s) and return all copies of Licensed Product(s) to ASG. ASG
shall refund to Client all license fees paid by Client to ASG for the
nonaccepted Licensed Product(s).
PAYMENT AND ANNUAL RENEWAL FEES
In consideration of the license provided by ASG to Client under the terms and
conditions contained herein, Client shall pay a license fee to ASG in accordance
with the appropriate Product Schedule(s). This notwithstanding, a Perpetual (99
year) Product License Agreement requires, in addition to the payment of the
license fee specified above, an annual license renewal fee to be paid annually
on the anniversary of the effective date specified in the Product Schedule(s).
The annual license renewal fee shall be a percentage of the then current license
fee.
All payments shall be due thirty (30) days after receipt of a proper invoice.
Invoices unpaid by Client within thirty (30) days of the date the payment is due
to ASG shall be subject to one and one half percent (1.5%) rate of interest per
month which shall be added to the license fee due and owing ASG.
The license fee does not include any taxes. Unless ASG is provided with a valid
tax exemption certificate, Client shall pay or promptly reimburse ASG for all
federal, state, local, foreign or other taxes of any kind whatsoever,
exclusive only of U.S. taxes based on ASG's net income, whether such taxes are
presently or hereafter imposed.
MAINTENANCE AND ENHANCEMENTS
ASG will provide Client for the term of the license all enhancements,
improvements, and updates to the Licensed Product(s) which ASG similarly
provides or offers to provide to its other clients of the Licensed Product(s).
ASG will correct errors or malfunctions in the Licensed Product(s) as supplied
for the term of this Agreement. If the Client notifies ASG of an error or
malfunction, which, after investigation by ASG, is determined to have been
caused by computer malfunction, or by an enhancement not made by ASG or by
incorrect data or procedures used by Client then Client shall pay ASG, at ASG's
rate then in effect, for all services rendered and costs incurred by ASG in
investigating or remedying such error or malfunction. All notices of error or
malfunctions shall be in writing and provide details sufficient to diagnose or
reproduce said failure. ASG has placed copies of source program statements
(including source code) of the Licensed Product(s) in escrow with Escrow
Services, Inc. ("ESI") for the nonexclusive benefit of Client in the event that
ASG, for any reason, shall cease doing business or cease to provide ongoing
support for the Licensed Product(s) with no successor in interest. At its
option, Client may obtain exclusive source code protection by subscribing to
ESI's Premier Registration Program by marking the appropriate box on the Product
Schedule.
<PAGE> 3
WARRANTY
ASG represents and warrants that it is the owner or authorized licensee of the
Licensed Product(s). ASG further warrants that at the time of delivery of the
initial Licensed Product(s) and for a period of one (1) year thereafter,
Licensed Product(s) will be in substantial accordance with the user
documentation supplied to Client. The extent of ASG's liability under this
warranty shall be limited to the correction or replacement as soon as reasonably
practicable of any defective item(s) in the initial Licensed Product(s) which
ASG determines to be necessary at ASG's sole cost and expense, provided notice
of such defect is provided to ASG during the warranty period. The warranty shall
not apply if: (i) an item of Licensed Product(s) was not used in accordance with
ASG's instructions; (ii) an item of Licensed Product(s) shall have been altered,
modified or converted by Client without ASG's written approval; (iii) any of
Client's equipment shall malfunction causing the defect in Licensed Product(s).
THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
LIMITATION OF LIABILITY
In the event of a United States copyright or patent infringement claim as a
result of the use of Licensed Product(s) under the terms and conditions
specified herein, under normal use and not in combination with other items and
further provided that ASG is promptly notified of such claim in writing, then
ASG shall, at its own expense, defend such claim or may procure for Client the
right to continue using all or part of the Licensed Product(s) or may terminate
the license for the Licensed Product(s). In the event of a termination of the
Licensed Product(s), ASG will reimburse Client's initial fees on a pro rated
basis. This shall constitute the entire liability of ASG with respect to a
copyright or patent infringement claim.
Except with respect to its aforementioned obligations in connection with
copyright or patent infringement claims, ASG has no liability to Client for any
damages whatsoever. ASG shall in no event be liable for loss of profit,
goodwill, or other special, indirect or any consequential damages suffered by
Client or others in any way attributable to Client's use of the Licensed
Product(s). Client shall indemnify and hold harmless ASG from any claim by a
third party for any damage, liability, cost or expense incurred by ASG arising
out of or related to Client's use of the Licensed Product(s).
NONDISCLOSURE AND CONFIDENTIALITY
The Licensed Product(s) are, and shall at all times remain property of ASG, and
Client shall have no right, title, or interest therein, except as expressly set
forth in this Agreement. Client further acknowledges that the Licensed
Product(s) contain proprietary and confidential information of ASG (whether or
not any portion thereof may be validly copyrighted or patented). Client agrees
to keep Licensed Product(s) strictly confidential and will use all reasonable
care and take all necessary steps to ensure that no unauthorized persons shall
have access to the Licensed Product(s). And Client will take appropriate action,
by instruction, agreement or otherwise, with any persons permitted access to the
Licensed Product(s), including representatives of the Client(s) to restrict the
disclosure, duplication or reproduction of Licensed Product(s) so as to enable
Client to satisfy obligations hereunder. Client agrees not to reverse compile,
disassemble, or otherwise attempt to obtain the source code for Licensed
Product(s) except through ASG.
<PAGE> 4
Client agrees that an enhancement to the Licensed Product(s) developed by ASG,
whether or not developed in conjunction with Client's employees or agents shall
be the exclusive property of ASG. Client further agrees that enhanced versions
of the Licensed Product(s) do not constitute a program different from the
Licensed Product(s), and as such, shall fall under the other terms and
conditions of this Agreement.
TERMINATION
This Agreement may be terminated by Client upon sixty (60) days written notice
to ASG of a material breach of the Software Licensing Agreement if ASG fails to
correct or cure said material breach prior to the expiration of said sixty (60)
day period. Upon condition that any monies payable by Client to ASG shall not be
affected by termination, ASG may terminate this Agreement upon sixty (60) days
prior written notice to Client in the event of Client's insolvency, nonpayment,
or breach of agreement, if Client fails to correct or cure said condition prior
to the expiration of said sixty (60) day period. The right of either party to
terminate this Agreement hereunder shall not be affected in any way by its
waiver of or failure to take action with respect to any previous default. Upon
termination of this Agreement, Client shall immediately return the Licensed
Product(s) and any copies thereof to ASG and shall certify (or deliver a
certification by a duly authorized officer of Client stating to ASG) that it no
longer has any rights to use the Licensed Product(s) and that the original and
all copies of the Licensed Product(s) have been returned to ASG.
<PAGE> 5
GENERAL PROVISIONS
Any notice to be sent under this Agreement shall be in writing, delivered by
hand or mailed by certified mail, return receipt requested, to the address of
the parties first set forth on the attached Client Administration Information
attachment. Any other notices permitted under this Agreement shall be mailed or
shipped as indicated in the appropriate sections of the Client Administration
Information attachment.
Neither party shall be responsible for delay or failure in performance resulting
from acts beyond the control of such party. Such acts shall include, but not be
limited to: an act of God; an act of war, riot; an epidemic; fire; flood or
other disaster; an act of government; a strike or lockout; a communication line
failure; power failure or failure of the computer equipment on non-ASG developed
software.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Florida.
This Agreement along with the aforementioned Product Schedule(s) contains the
entire understanding of the parties with respect to the matter contained herein.
There are no promises, covenants or undertakings other than those expressly set
forth herein. In the event of a conflict between the terms of this Agreement and
the Product Schedule(s), the terms of the Product Schedule(s) shall prevail. If
Client currently has in effect any license for any of ASG's software products,
the terms of this Agreement shall apply to any such license. No employee, agent,
or representative of ASG has the authority to bind ASG to any oral
representation or warranty concerning the Licensed Product(s). No
representation or statement not expressly contained in this Agreement will be
binding on either party. This Agreement may not be modified except in writing
and signed by authorized representatives of ASG and Client.
The Clients remedies in this Agreement are exclusive.
This Agreement shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and assigns.
THIS AGREEMENT IS ACCEPTABLE TO BOTH CLIENT AND ASG.
ALLEN SYSTEMS GROUP, INC.
By:
Robin C. Wilson
Manager of Contract Administration
Date:
GALILEO INTERNATIONAL
By:
Print Name:
Title:
Date:
<PAGE> 1
Exhibit 10.22
GALILEO'S COPY
FOUNDATION LICENSE
ADDENDUM
TO
ORDER FORM
OR
GALILEO INTERNATIONAL ("LICENSEE")
AND
COMPUTER ASSOCIATES INTERNATIONAL, INC. ("CA")
FOR (SEE ATTACHMENTS) ("LICENSED PROGRAMS")
The attached Order Form and the referenced License Agreement are amended to add
the following provisions with respect to Licensee's use of the Licensed
Programs. (The Order Form, License Agreement and this Addendum are referred to
collectively as this "Foundation License." In the event of any conflict between
the terms of this Foundation License and those of either the Order Form or the
referenced License Agreement, the terms of this Addendum shall prevail.
Capitalized terms used herein without definition are used as defined in the
attached Order Form and the referenced License Agreement.
1. Definitions.
(a) The "Foundation Site(s)" mean the data center site or sites identified on
Exhibit "A" to this Addendum, which Licensee represents are owned, operated or
controlled by Licensee.
(b) The "Licensee" shall mean, individually and collectively, Licensee and
Licensee's majority-owned subsidiaries and their permitted successors in
accordance with this agreement. No other third person shall be or be deemed to
be entitled to the use or benefit of the Licensed Programs at any Foundation
Site.
(c) "MIPS Capacity" shall mean the aggregate computing power (expressed in
millions of instructions per second and rounded to the next even multiple of 10)
of all computers located at the Foundation Site(s), or which can remotely access
such computers, irrespective of the platform designations of the hardware or
operating systems, provided that such computer is accessing, using or benefiting
from the Licensed Programs.
2. Foundation Fee.
The initial Foundation Fee, inclusive of usage and maintenance of the Licensed
Programs during the initial three (3) year term is $XXXXXX due and payable
as follows:
<TABLE>
<CAPTION>
Amount Due
<S> <C>
September 30, 1995
September 30, 1996
September 30, 1997
</TABLE>
3. Authorized Use. The Licensed Programs may be used only by and for the
benefit, and to process exclusively the data, of Licensee at Foundation Site(s)
(except as provided in section 15), provided that the MIPS Capacity does not
exceed 1060 MIPS (the "Licensed MIPS Capacity"). In the event that the MIPS
Capacity does exceed the Licensed MIPS Capacity, then Licensee shall pay to CA
the Supplemental Foundation Fee as provided in paragraph 4 of this Addendum. The
Supplemental Foundation Fee shall be due and payable, without
<PAGE> 2
any requirement of notice or demand by CA, within 30 days of the date on which
the MIPS Capacity exceeds the Licensed MIPS Capacity.
4. Supplemental Foundation Fee. Licensee may increase the Licensed MIPS Capacity
upon prior written notice to CA and payment of Ca's supplemental Foundation Fee,
which shall be $30,000 per ten (10) MIPS of increased Licensed MIPS Capacity for
the Licensed Programs listed on Attachment A. Notwithstanding any installment
payment schedule for the initial Foundation Fee, such Supplemental Foundation
Fee shall be paid within thirty (30) days from the date such additional MIPS are
installed.
5. Adjusted UMF. The annual UMF shall, in the event of an adjustment in the
Licensed MIPS Capacity, be proportionately adjusted by the same percentage
increase as the increase of MIPS Capacity bears to the initial Licensed MIPS
Capacity. Such annual UMF as adjusted shall be paid pro rata from the adjustment
date to the expiration of the then current year, and thereafter annually in
full.
6. MIPS Capacity Calculation. MIPS Capacity shall be calculated by reference to
CA's published schedules of MIPS or IBM MSU capacity of processors. In the event
that any particular processor is not accounted for on CA's schedules, then the
manufacturer's published specification of MIPS or IBM MSU capacity shall
control; provided, however, that the minimum number of MIPS to be attributed to
each Foundation Site shall equal 28 MIPS, regardless of whether or what CPUs may
actually be installed at such Foundation Site(s). For purposes of utilizing the
IBM MSU standard (expressed in millions of service units), the IBM MSU capacity
shall be multiplied by a factor of 5.4 to yield the corresponding MIPS Capacity.
Future MIPS capacity shall not exceed the average of Amdahl, IBM, and COMDISCO
MIP ratings, such information to be provided by Licensee.
7. Quarterly Reports; Audit. On or before the 15th day following each calendar
quarter beginning with the first full quarter commencing after the effective
date of this Order Form (the "Effective Date"), Licensee shall report to CA in
writing, as of the end of each such quarter, the MIPS Capacity at each
Foundation Site, listing each CPU located at, or remotely accessing, each
Foundation Site by manufacturer, model, operating system, location and (except
for micro processors) the serial number thereof. CA shall thereupon review such
report and advise Licensee of any applicable supplemental foundation fee due, as
well as any UMF adjustment due. The parties agree that in order to verify the
accuracy of Licensee's report, Licensee will, at CA's request upon reasonable
notice, grant CA access to each Foundation Site, during reasonable business
hours for Licensee and according to Licensee's existing security rules, and
Licensee shall provide any further information as CA may reasonably require.
8. License Termination. All licenses and order forms respecting use of the
Licensed Programs granted to Licensee by CA or any of its predecessor for use at
any Foundation Site are hereby suspended subject to their reinstatement upon
termination of this license and Licensee's election to revert to prior license
terms under section 10. II. Of this Agreement, subject, however, to the
obligations of Licensee (a) to pay all contracted payments when and as the same
shall otherwise have become due and payable, and (b) to maintain the
confidentiality of the Licensed Programs and comply with the non-disclosure
<PAGE> 3
provisions of such terminated licenses. Except in the event of any reinstatement
hereunder, any future use of or access to the Licensed Programs by Licensee at
any Foundation Site shall be controlled exclusively by the terms of the
referenced License Agreement and this Order Form, including this and any other
Addendum thereto.
9. License Transfers. Notwithstanding any provision of any license granted by CA
or its predecessors (regardless of when such license was or is granted), (a) the
Licensed Programs may be used during the existence of this license at a
Foundation Site only pursuant to this Foundation License and under no
circumstances pursuant to such other license; (b) no such other license may be
transferred to a Foundation Site; and (C) the Licensed Programs may not be
transferred to a Foundation Site from any other site, even if the Licensed
Programs are to be run on the same CPU as the one on which they are currently
running.
In the event that Licensee certifies in writing to CA that it has a bona fide
disaster recovery plan with respect to the computer software programs used in
its operations, Licensee may make one copy of the Licensed Program for archival
purposes and use such archival copy on a CPU other than the Designated CPU or at
an installation site other than that identified on the order form, such other
CPU or installation site to be owned or controlled by licensee. The use of such
archival copy shall be limited (a) for the purpose of conducting limited testing
of the disaster recovery plan is procedures and effectiveness (which testing
shall not exceed one week in any three month period) and (b) during any period
subsequent to the occurrence of an actual disaster during which the Licensee
cannot operate the Licensed Program on the Designated CPU or at the installation
site identified on the Order Form. Licensee agrees to furnish such further
documentation with respect to its disaster recovery plan and procedures as CA
may reasonably request from time to time.
10. Term and Renewal. This Foundation License shall have an initial term of
three years from the Effective Date and shall automatically renew and be
extended for additional periods of three years each, subject to the parties'
agreement concerning payments to be made during the extended term. If the
parties do not agree in writing upon such payment terms prior to the expiration
of the then current three-period, I. (A) the then prevailing Licensed MIPS
Capacity shall be frozen without Licensee having the right to exceed the same,
and Licensee shall pay the annual UMF for the Licensed Programs based upon CA's
then prevailing published fee schedule for software licensed per CPU at each
distinct Foundation Site, and (b) no new fee schedule for software licensed per
CPU at each distinct Foundation Site, and (b) no new entities may be included
within Licensee to thereafter use, access or benefit from the Licensed Programs,
or II. Licensee may revert to the Licensee Agreement(s) for each respective
Licensed program as applicable immediately preceding the Effective Date of this
Foundation License.
11. Total Client Care (TCC) Program. Licensee will be and will remain, enrolled
in CA'S TCC Program during the initial three-year term and any renewal period.
12. Eligibility. Licensee represents that neither it nor any subsidiary is
engaged in the business of providing data processing services to third persons
under any facility management, service bureau, outsourcing or similar
<PAGE> 4
arrangement, and Licensee agrees not to use or operate or permit the use or
operation of the Licensed Programs under any such arrangement.
13. Amendment. Any amendment of this foundation License must be in writing
signed by both parties.
14. Credit for discontinued Licenses. Should Licensee provide CA with notice in
writing that Licensee has discontinued the use of a designated Licensed Program
during the term of this License, deleted all copies from all computer libraries
and storage devices and returned the discontinued Licensed programs and all
related documentation to CA or certified that the same have otherwise been
destroyed, Licensee will receive a discount, in no event to be reimbursed by
cash, representing the unused portion of the License Fee for the designated
Licensed Program for the remainder of the term of this License. Licensee shall
be entitled to apply this discount amount as a discount of 35% of the then
prevailing License Fee for additional CA software products under three year or
five year payment options.
15. Nothing in this Agreement shall be deemed to prohibit Licensee from
operating, providing, or supporting the discreet applications processing
services which Licensee currently provides to its bona fide customers for
distribution of travel services or information.
COMPUTER ASSOCIATES LICENSEE: GALILEO
INTERNATIONAL
INTERNATIONAL, INC.
By By
------------------------------------ ------------------------------
: (Authorized Signature) : (Authorized Signature)
------------------------------------ ------------------------------
(Name) (Name)
------------------------------------ ------------------------------
(Title) (Title)
------------------------------------ ------------------------------
(Date) (Date)
<PAGE> 1
EXHIBIT 10.24
MASTER EQUIPMENT LEASE
This Master Equipment Lease Agreement ("Agreement") is entered into as
of the 19th day of November, 1991, by and between General Electric Capital
Computer Leasing Corporation ("Lessor") and Covia Partnership ("Lessee").
Article I. Leasing, Term and Rent
1.1 This Agreement states the general terms and conditions upon which Lessor
from time to time will acquire and lease certain equipment, additions or
upgrades ("Equipment") to Lessee. At the time Lessor and Lessee mutually agree
to lease particular Equipment, such items of Equipment ("Item") shall be
described on an Equipment schedule ("Schedule") in the form of Exhibit A, which
Schedule shall incorporate this Agreement by reference. Each Schedule shall
constitute a separate lease ("Lease"). If specific provisions of a Schedule are
inconsistent with this Agreement, the Schedule shall control.
1.2 A Lease shall commence with respect to an Item on the date ("Lease
Commencement Date") which (a) for Equipment installed by the vendor, supplier or
manufacturer (any such vendor, supplier or manufacturer being herein called a
"Vendor"), is the date the Equipment is accepted by Lessee, and (b) for all
other Equipment (e.g., not requiring installation, or used), is five days after
the Equipment is delivered to Lessee. Lessee shall notify Lessor of the Lease
Commencement Date by promptly delivering to Lessor a Certificate of Acceptance
in the form of Exhibit B. If the Lease Commencement Date is the first day of a
month, the "Term Commencement Date" shall be the same date. If not, the Term
Commencement Date shall be the first day of the month immediately following the
Lease Commencement Date.
1.3 Prior to any Lease Commencement Date, Lessee agrees to provide to Lessor an
executed Schedule and the documents identified on the Schedule. If Lessee shall
fail timely and properly to deliver such documents to Lessor, Lessor shall have
no obligation to lease the Equipment in respect of which such documents are
requested. Lessors' obligation to lease Equipment to Lessee is further subject
to (a) no "Default" (as defined in Section 6.1), or event which with the giving
of notice, passage of time or both, would constitute a Default, occurring and
continuing under this Agreement or any Lease, and (b) the Lease Commencement
Date being prior to the "Cut off Date" (as set forth in the applicable
Schedule). In the event the conditions precedent stated in this Section 1.3 are
not satisfied, and Lessor has delivered its purchase order for the Equipment to
Vendor or entered into a purchase order assignment with Lessee, then Lessor
shall be entitled to (x) assign (or re-assign, as applicable) the purchase order
for the Equipment to Lessee without recourse or warranty, (y) collect from
Lessee all sums theretofore paid by Lessor to Vendor (less any sums previously
paid by Lessee to Lessor), and (z) collect from Lessee any out-of-pocket
expenses incurred in connection with the Equipment or purchase order (less any
sums previously paid by Lessee to Lessor).
1.4 The "Term" of the Lease shall consist of the "Interim Period" (the period of
time from and including the Lease Commencement Date to the Term Commencement
Date), if any, plus the number of full months specified in the Schedule as the
"Initial Term." Thereafter, if no Default, or event which
<PAGE> 2
with the giving of notice, passage of time or both, would constitute a Default,
has occurred and is continuing under a Lease, the Term shall be automatically
extended on a month-to-month basis unless the Lease is terminated by either
party by giving sixty days' notice of termination to the other party. Such
termination shall be effective on a date not earlier than sixty days after said
notice, and in no event prior to expiration of the Term. The last day of the
Term (i.e., Initial Term or month-to-month extension period, as applicable)
shall be the "Termination Date."
1.5 Lessee shall pay to Lessor as rent ("Rent") for the Equipment, "Interim
Rent" equal to one-thirtieth of the "Basic Rent" specified in the Schedule for
each day of the Interim Period, plus the Basic Rent for each full month of the
Term. All Rent payments shall be due for such periods and at such times as
indicated on the applicable Schedule. Lessee shall pay to Lessor one-thirtieth
of the Basic Rent for each day beginning with the day after the Termination Date
up to and including the date the Equipment is made available for shipment in
accordance with Section 2.8.
ARTICLE II. USE OF EQUIPMENT BY LESSEE
2.1 Lessee shall be responsible for the preparation of a suitable site for the
Equipment on or before its scheduled delivery date and for the installation of
the Equipment. Equipment which requires installation shall be installed by the
Equipment manufacturer or its designated representatives. All installation
charges shall be borne by the Lessee.
2.2 Lessee shall at its expense comply with and conform to all federal, state
and local laws, ordinances, rules and regulations relating to the possession,
use, maintenance or modification of the Equipment. Lessee shall not take any
action which would impair or violate Vendor's patent rights or copyrights in and
to the Equipment, or any software license for the Equipment. On reasonable prior
notice to Lessee, Lessor and Lessor's agents shall have the right, during
Lessee's business hours, to enter the premises where the Equipment is located
for the purpose of inspecting the Equipment and observing its use. Lessor and
Lessor's agents shall comply with any reasonable security measures established
by Lessee.
2.3 Lessee shall at its expense affix and maintain in a prominent position on
each item any plates, tags or identifying labels provided by Lessor to indicate
its ownership of the Equipment.
2.4 Lessee may at its expense relocate the Equipment with the prior written
consent of Lessor, which consent shall not be unreasonably withheld. In no event
shall Lessee relocate the Equipment outside the continental United States.
2.5 Lessor hereby assigns to Lessee for the Term all warranties made with regard
to the Equipment by Vendor. With respect to warranties which are not assignable,
Lessor agrees to take such reasonable actions at Lessee's request and expense as
are necessary to enforce such warranties for Lessee's benefit.
2.6 It is the intention of Lessor and Lessee that the Equipment shall at all
times be and remain personal property and shall not become a fixture upon or a
part of any real property where the Equipment is located. Lessee shall not
<PAGE> 3
affix the Equipment to the real property. Lessee shall obtain and provide to
Lessor, upon request, waivers from each real property landlord, mortgagee or
lienholder for the site at which the Equipment is located, waiving any interest
that it may have in the Equipment arising from its interest in the real
property.
2.7 Lessee shall at its expense and at all times during the Term operate and
maintain the Equipment in good operating order, repair, condition and
appearance, normal wear and tear excepted, and in accordance with Vendor's
specifications and recommendations. Lessee covenants that it will, at its
expense, enter into, maintain and enforce for the Term a maintenance agreement
with a maintenance organization acceptable to Lessor, covering at least prime
shift maintenance of the Equipment.
2.8 On or before the Termination Date, Lessee shall pack the Equipment in
accordance with Vendor's guidelines and in Vendor's standard packaging
materials, load the Equipment on board such carrier as Lessor shall specify, and
deliver the same to Lessor at any destination within the continental United
States designated by Lessor. Any dismantling, packaging, transportation and
shipping charges shall be borne by Lessee, and at Lessee's option, arranged by
Lessee. The Equipment returned to Lessor shall, at the time it is removed from
Lessee's premises, be in the same condition and working order as when delivered
to Lessee, reasonable wear and tear excepted, and certified for manufacturer's
maintenance by its manufacturer.
ARTICLE III. UPGRADES
3.1 Lessee may from time to time install alterations, additions and upgrades to
the Equipment (collectively "Upgrades") if they are readily removable, will not
impair the originally intended function or purpose of the Equipment, and are not
subject to any lien or security interest in favor of any other party. Upgrades
which are owned by Lessee shall, upon Lessor's request, be removed from the
Equipment prior to return of the Equipment pursuant to Section 2.8. Lessee at
its own expense shall repair any damage caused by such removal and return the
Equipment to its original state, normal wear and tear excepted. Any Upgrade
which is not removed prior to return of the Equipment to Lessor shall become the
property of Lessor upon return of the Equipment, and Lessee shall have no
further right, title or interest in the upgrade or in the proceeds thereof.
Alternatively, Lessee and Lessor may negotiate a sale of the Upgrade to Lessor,
provided that Lessor may accept or reject a purchase price in its sole
discretion.
3.2 Lessee shall not, without the prior written consent of Lessor, affix or
install any Upgrade on the Equipment if it is not readily removable. If Lessor
consents to a non-removable Upgrade, it shall be affixed or installed in
accordance with applicable law, shall become the property of Lessor upon
affixation or installation, and shall be considered an Item.
ARTICLE IV. RISK OF LOSS
4.1 From the date Equipment is delivered to Lessee until it is returned to
Lessor, Lessee shall bear all risk of loss, damage, theft, destruction, wearing
out and condemnation to or of the Equipment from any and every cause whatsoever.
<PAGE> 4
4.2 Lessee shall at its expense maintain all risk, public liability, theft and
property damage insurance on the Equipment in amounts as stated in the Schedule.
Additionally, if Lessee shall relocate the Equipment in accordance with Section
2.4, Lessee shall maintain in-transit insurance on the Equipment. All policies
for such insurance shall include Lessor as an additional insured, as its
interest may appear, and shall name Lessor as loss payee. All insurance shall be
primary and shall not be subject to any co-insurance clause. All policies of
insurance required hereunder shall be issued by insurance companies acceptable
to Lessor and shall provide that they may not be canceled or materially altered
without at least thirty days' prior written notice to Lessor. Not later than the
Lease Commencement Date, Lessee shall furnish Lessor with certificates and, if
requested, copies of all insurance policies required to be carried by Lessee
with respect to the Equipment.
4.3 In the event any Item is lost, destroyed, stolen or damaged beyond repair
("Casualty"), Lessee shall be liable to Lessor and shall pay Lessor an amount
("Casualty Value") equal to all Rent and other amounts then due and owing with
respect to such Item plus the Stipulated Loss Value determined in accordance
with Annex A to the applicable Schedule. Lessee shall pay Lessor such Casualty
Value within thirty days of the date of the Casualty. Upon receipt by Lessor of
the Casualty Value for any Item, the Lease shall terminate with respect to such
Item. Upon termination of the Lease with respect to an Item, Lessee shall
dispose of Item salvage in accordance with Lessor's instructions. In the event
of a partial destruction of or repairable damage to any Item, the Lease shall
continue with respect to such Item and Lessee shall at its expense promptly
cause such Item to be repaired to a condition acceptable to Lessor. There shall
be no abatement of Rent hereunder in such event. Lessee will notify Lessor of
any Casualty or partial destruction to the Equipment within three business days
of the date of its occurrence.
ARTICLE V. ASSIGNMENT OR SUBLEASE
5.1 Lessee SHALL NOT ASSIGN, SUBLEASE, HYPOTHECATE, MORTGAGE, PLEDGE OR
ENCUMBER, IN WHOLE OR IN PART, ITS RIGHTS UNDER THIS AGREEMENT OR ANY LEASE, OR
ITS RIGHTS TO THE Equipment OR ANY ITEM, WITHOUT THE PRIOR WRITTEN CONSENT OF
Lessor, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. Any action in
contradiction hereto shall be null and void and without force or effect. Lessee
may assign or sublease this Agreement or any Lease to any affiliate of Lessee,
provided that such assignment or sublease shall not relieve Lessee of its
obligations under this Agreement or such Lease. Lessor shall have the option to
substitute itself for the assignee or subleasees under the terms of any proposed
assignment or sublease.
5.2 Lessor may without notice to Lessee assign, sublease, hypothecate, mortgage,
pledge or encumber, in whole or in part, its right, title and interest in and to
this Agreement, any Lease or, subject to Lessee's rights hereunder, any Item. In
the event of any such action by Lessor: (a) upon notification by Lessor and
request by an assignee, Lessee will make all payments of Rent and other amounts
due hereunder directly to such assignee; (b) Lessee's obligations hereunder
shall not be subject to any reduction, abatement, defense, set-off, counterclaim
or recoupment for any reason whatsoever; (c) Lessee will not, after obtaining
knowledge of any such assignment, consent to any modification of the Agreement
or any assigned Lease
<PAGE> 5
without the consent of such assignee; (d) Lessor's assignee shall be entitled to
such right, title and interest in the Agreement, Lease or Equipment as is set
forth in Lessor's notification of assignment to Lessee; (e) Lessor's assignee
shall have no right to modify the Lease without the prior written consent of
Lessee; and (f) Lessor shall not be relieved of its obligations under the Lease.
ARTICLE VI. DEFAULT AND REMEDIES
6.1 With respect to each Lease, the occurrence of any of the following events
shall constitute a Default hereunder; (a) a failure by Lessee to pay when due
any Rent or other charge required to be paid by Lessee hereunder, and the
continuance of such failure for seven days after notice from Lessor; (b) a
failure by Lessee to maintain insurance on the Equipment as required by Section
4.2; (c) a failure by Lessee to perform or observe any other term or condition
of a Lease, which failure is not cured within thirty days after notice from
Lessor; (d) the breach by Lessee of any term or condition of any software
license for the Equipment or used in conjunction with the Equipment, provided
that such breach has a material adverse impact on the value or usefulness of the
Equipment; (e) Lessee ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability to pay
its debts as they become due, files a petition seeking relief for itself under
the federal Bankruptcy Code or any similar federal or state statute, law or
regulation, or files an answer admitting the material allegation of such a
petition, or consents to or acquiesces in the appointment of a trustee, receiver
or liquidator for the Equipment or for Lessee or all or any substantial part of
its assets or properties; (f) the filing of proceedings against Lessee under the
federal Bankruptcy Code or any similar federal or state statute, law or
regulation, which have not been dismissed within sixty days of filing, or the
appointment without Lessee's consent or acquiescence of any trustee, receiver or
liquidator for Lessee or any substantial part of Lessee's assets or properties,
which appointment has not been vacated within sixty days of appointment; (g)**;
or (h) any representation or warranty of Lessee proves untrue.
6.2 Upon the occurrence of a Default, Lessor by written notice to Lessee may
declare the subject Lease in default, and unless otherwise agreed to by Lessor,
such Default shall apply to any Leases executed hereunder specifically
designated in such notice. Alternatively, Lessor may, without waiving the
Default, make a payment or perform or comply with the provisions of the Lease,
the nonpayment, nonperformance or noncompliance of which caused the Default, and
in addition to any other obligations hereunder, Lessee shall pay Lessor upon
demand the amount of such payment and/or shall reimburse Lessor for the expenses
actually incurred in connection with such payment, performance or compliance, as
the case may be.
6.3 Upon Default, Lessor shall have the right, in its sole discretion, to
exercise any one or more of the following remedies in order to protect its
interests, reasonably expected profits and economic benefits. Lessor may (a)
declare any Lease entered into pursuant to this Agreement in default, (b)
terminate in whole or in part any Lease, (c) recover from Lessee any and all
amounts then due and to become due, discounted to present value at the rate of
U.S. Treasury bills with a three-month maturity, (d) take possession of any or
all Items, wherever located, with demand and notice, and without any court
<PAGE> 6
order or other process of law, and (e) demand that Lessee return any or all
Items in accordance with Section 2.8 and, for each day that Lessee shall fail to
return any Item, Lessor may demand an amount equal to the Rent, prorated on the
basis of a thirty-day month, in effect immediately prior to such Default. Upon
repossession or return of such Item(s), Lessor may sell, lease or otherwise
dispose of such Items in a commercially reasonable manner, with or without
notice and on public or private bid, and apply the net proceeds thereof toward
the amounts due under the Lease, but only after deducting (x) all expenses,
including attorneys' fees, incurred in connection therewith, and (y) in the case
of any sale, the estimated fair market value at retail of such Items as of the
scheduled expiration of the Lease, or (z) in the case of any replacement lease,
the rent due for any period beyond the scheduled expiration of the Lease for
such Items. Any excess proceeds are to be retained by Lessor.
6.4 The foregoing remedies are cumulative and may be exercised in lieu of or in
addition to each other or any remedies at law, in equity or under statute.
Lessee waives demand of performance and notice of or place of sale or other
disposition and the manner and place of any advertising. No delay or failure to
exercise any right, power or remedy by Lessor shall impair any such right, power
or remedy of Lessor, nor shall it be construed to be a waiver of or acquiescence
in any later breach or Default.
ARTICLE VII. NET LEASE PROVISIONS
7.l Lessor warrants that Lessor will not interfere, nor cause anyone acting by
or through Lessor to interfere, with Lessee's quiet enjoyment of the use of the
Equipment, so long as no Default shall have occurred and be continuing. EXCEPT
FOR Lessor'S WARRANTY OF QUIET ENJOYMENT, Lessor MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO THE Equipment
DESIGN, WORKMANSHIP OR MATERIALS, OR THE IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE. Lessee ACKNOWLEDGES THAT VENDOR AND Lessor
ARE SEPARATE ENTITIES, EACH OF WHICH HAS ENTERED INTO THIS TRANSACTION FOR
INDEPENDENT BUSINESS REASONS, AND THAT NEITHER Lessor NOR VENDOR HAS ACTED,
ACTS, OR SHALL BE DEEMED TO HAVE ACTED OR ACT, AS AN AGENT OF THE OTHER. Lessor
shall have no responsibility or liability to Lessee for (a) loss or damage
caused directly or indirectly by any Item, or (b) the delivery, use, operation,
servicing, maintenance, repair, replacement or performance of any Item. The
foregoing disclaimers shall not operate to release General Electric Company, if
it is the manufacturer of the Equipment, or any other Vendor, from warranties
provided in any other operative document.
7.2 Each Lease is a net lease and Lessee's obligations to pay Rent and other
amounts due shall be absolute and unconditional. This obligation of Lessee shall
not be affected by or subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment of any kind whatsoever,
including without limitation Lessor's actual or alleged negligence or willful
misconduct, frustration of contract, or the loss of possession or destruction of
all or any part of the Equipment. It is the intent of the parties that Rent and
other amounts due shall continue to be payable in all events in the manner and
at the times set forth in the Lease. Nothing contained herein shall impair
Lessee's right to maintain an independent action at law or in equity.
<PAGE> 7
7.3 As additional Rent, Lessee shall pay and discharge before they become
delinquent, or shall reimburse Lessor in accordance with this Section for, all
license fees, assessments and sales, use, property, excise and other taxes,
however designated (each such fee, assessment or tax an "Imposition") now or
hereafter imposed or assessed by any foreign, federal, state or local government
upon the ownership, delivery, installation, leasing, renting, use or sale of the
Equipment, or the Rent or other charges payable hereunder, whether assessed on
Lessor or Lessee, together with any penalties or interest in connection
therewith attributable to Lessee's acts or failure to act. Notwithstanding the
foregoing, Lessee shall have no liability for any Imposition on or measured by
the net income "or gross revenue" of Lessor. For Imposition for which Lessor is
responsible under applicable law, Lessor shall file all declarations, forms and
returns and shall pay the taxing authority directly. Lessor shall invoice Lessee
for such Impositions and Lessee shall pay Lessor as additional Rent amounts owed
for such Impositions within thirty days of receipt of such invoice. For all
Impositions other than those described in the preceding sentence, Lessee shall
file all declarations, forms and returns and do all things necessary and
appropriate in connection with the levy, assessment, billing or payment of same,
including whatever action may be required to have the Imposition billed directly
to Lessee or to the Lessor in the care of Lessee. In all declarations, forms or
returns Lessee shall show Lessor as owner of the Equipment and shall send copies
of same to Lessor with evidence of payment.
7.4 Lessee shall indemnify, defend and hold harmless Lessor, its agents and
assignees, from and against any and all claims, actions, suits, proceedings,
costs, expenses (including court costs and "reasonable" attorneys' fees),
damages, obligations, penalties, injuries and liabilities (whether or not
discovered or arising before or after Lease termination) ("Claims"), arising out
of, connected with or resulting from the selection, manufacture, purchase,
acceptance or rejection of Equipment, the ownership of Equipment during the term
of this Agreement or any Lease (other than an action brought by a creditor of
Lessor or otherwise claiming title to the Equipment), and the delivery, lease,
possession, maintenance, use, condition, return or operation of Equipment or
Upgrades thereto (including, without limitation, latent and other defects,
whether or not discoverable by Lessor or Lessee, and any claim for patent,
trademark or copyright infringement), excepting only Claims that arise solely
out of the gross negligence or willful misconduct of Lessor. Lessee shall at its
expense defend any and all actions based on or arising out of the foregoing.
Lessee shall notify Lessor immediately upon receipt of notice or knowledge of
any event which may give rise to a Claim, and shall not, without the consent of
Lessor, settle any Claim without obtaining a full release of any and all
possible claims against Lessor. By way of example, Claims shall include any
action brought against Lessor based on a tort theory of liability which requires
that the plaintiff prove only that the defendant possessed or otherwise
controlled the Equipment in order to establish liability.
7.5 Lessee shall have no right, title or interest in or to the Equipment except
as Lessee and as expressly set forth in the Lease. Throughout the term of each
Lease, Lessee shall, upon Lessor's request, execute and deliver to Lessor for
filing such Uniform Commercial Code financing statements or other similar or
substitute documents as Lessor in its discretion deems necessary and/or
appropriate to protect its right, title and interest in and to the
<PAGE> 8
Equipment. Lessee shall at its expense protect and defend the title and rights
of Lessor to or in the Equipment from and against all claims, liens, charges,
encumbrances and legal processes, whether imposed, asserted or instituted by
creditors of Lessee or otherwise, and shall at its expense promptly take all
action necessary to discharge the same.
7.6 Lessee hereby represents, warrants and covenants that (a) Lessor as owner of
the Equipment shall be entitled to all items of deduction specified in the
applicable Schedule ("Tax Benefits"), and (b) at no time will Lessee take or
omit to take, or permit any sublessee or assignee to take or omit to take, any
action (whether or not permitted hereby) which would result in the
disqualification of the Equipment for, or recapture of, all or any portion of
the Tax Benefits. If as a result of a breach of any representation, warranty or
covenant of Lessee relating to any Item(x) Lessor is not entitled to claim on
its Federal income tax return all or any portion of the Tax Benefits with
respect to any Item, or (y) any Tax Benefit claimed on the Federal income tax
return of Lessor is disallowed or adjusted by the Internal Revenue Service, or
(z) any Tax Benefit is recomputed or recaptured (any such determination,
disallowance, adjustment, recomputation or recapture being herein called a
"Loss"), then Lessee shall pay to Lessor as additional Rent such amounts, or
from time to time such amounts, on the next succeeding Rent payment date but in
no event more than thirty days after written notice to Lessee of such Loss, as
shall cause Lessor's net after-tax rate of return that would have been in effect
had Lessor been entitled to its anticipated utilization of all of the Tax
Benefits. Lessee shall not be responsible for any Loss which results from
Lessor's failure to accurately determine the Tax Benefits which apply to a
Lease. Lessee shall be entitled, at its expense, to dispute a disallowance,
adjustment, recomputation or recapture by the Internal Revenue Service, and
Lessor will provide reasonable assistance to support Lessee's actions.
7.7 Lessee agrees to take such further action and to execute such additional
documents, instruments and financing statements as Lessor shall reasonably
request in order to complete the transactions contemplated by this Agreement or
any assignment by Lessor or to protect Lessor's interest in the Equipment.
7.8 The rights and obligations set forth in this Article shall survive the
termination or expiration of this Agreement or any Lease.
ARTICLE VIII. MISCELLANEOUS
8.1 Any notice shall be effective upon personal delivery or mailing by certified
mail, return receipt requested. Notices shall be delivered or sent to the
addresses stated below, or at such other address as a party may provide by
notice.
8.2 Lessee shall upon Lessor's written request deliver to Lessor Financial
Statements certified to by a recognized firm of certified public accountants.
Upon written request, Lessee will deliver to Lessor quarterly, within ninety
days of the close of each fiscal quarter of Lessee, in reasonable detail,
quarterly Financial Statements certified to by the chief financial officer of
Lessee.
8.3 THIS AGREEMENT SHALL BE INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAW,
BUT NOT THE CHOICE OF LAW RULES, OF THE STATE OF ILLINOIS.
<PAGE> 9
8.4 This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, both written and oral, with
respect to the subject matter hereof. Lessor's failure at any time to require
strict performance by Lessee of any of the provisions hereof shall not waive or
diminish Lessor's right thereafter to demand strict compliance therewith. If any
provision of this Agreement shall be deemed unenforceable under applicable law,
it shall be deemed stricken, but the remainder of this Agreement shall remain in
full force and effect and shall be construed to give effect to the intent of the
parties. In any litigation arising out of a Lease, the prevailing party shall be
entitled to recover its costs and reasonable attorneys' fees, whether or not the
action is prosecuted to judgment. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY CONSEQUENTIAL DAMAGES ARISING UNDER OR IN ANY WAY CONNECTED WITH
THIS AGREEMENT. Time is of the essence in this Agreement.
8.5 This Agreement may not be altered or varied nor its provisions waived except
in writing duly executed by Lessor and Lessee.
8.6 Any payments of Rent or other amounts payable by Lessee hereunder that
become past due shall bear interest compounded monthly from the due date until
the date received by Lessor at the rate of twelve percent per annum or the
prevailing prime interest rate plus two hundred basis points, whichever is
greater.
8.7 This Agreement may be executed by the parties in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one instrument. To the extent a Lease constitutes chattel paper (as
such term is defined in the Uniform Commercial Code or portions thereof adopted
by the applicable jurisdiction), no security interest may be created or conveyed
through the transfer or possession of any document other than the original
Schedule to such Lease.
8.8 This Agreement may be terminated by either party upon thirty days' notice,
provided that each Lease then in effect shall survive any termination of this
Agreement.
<PAGE> 10
In witness whereof, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first
above-written.
Lessee: Lessor:
Covia Partnership General Electric Capital
Computer Leasing Corporation
By:_______________________________ By:___________________________________
Name: Allan Z. Loren Name: David J. Lidstein
Title: President and CEO Title: VP - General Counsel
Address: 5350 South Valentia Way Address: 353 Sacramento Street
Englewood, CO 80111 San Francisco, CA 94111
Attn: VP-Operations
<PAGE> 11
ATTACHMENT TO MASTERLEASE
PAGE 4
COVIA 12/3/91
GENERAL ELECTRIC CAPITAL COMPUTER LEASING CORPORATION
(g) the sale, transfer or disposal by Lessee of all or substantially all of its
assets or property, or the merger or consolidation of Lessee with any other
entity, unless
(i) Lessee is the surviving entity and has a net worth greater than or equal to
its net worth immediately prior to the merger or consolidation;
(ii) A majority of the surviving entity is retained by the entity holding a
majority interest in Lessee; or
(iii) Lessor consents to the sale, transfer or disposal, such consent not to be
unreasonably withheld;
<PAGE> 1
Exhibit 10.25
MASTER EQUIPMENT LEASE
This Master Equipment Lease Agreement ("Agreement") is entered into as of the
4th day of April, 1996, by and between AT&T SYSTEMS LEASING CORPORATION
("Lessor") and GALILEO INTERNATIONAL PARTNERSHIP ("Lessee")
Article 1. Leasing, Term and Rent
1.1 This Agreement states the general terms and conditions upon which Lessor
from time to time will acquire and lease certain equipment, additions or
upgrades ("Equipment") to Lessee. At the time Lessor and lessee mutually agree
to lease particular Equipment, each item of Equipment ("Item") shall be
described on an equipment schedule ("Schedule") in the form of Exhibit A, which
Schedule shall incorporate this Agreement by reference. Each Schedule shall
constitute a separate lease ("Lease"). If specific provisions of a Schedule are
inconsistent with this Agreement, the Schedule shall control.
1.2 A Lease shall commence with respect to an Item on the date ("Lease
Commencement Date") which (a) for Equipment installed by the vendor, supplier or
manufacturer (any such vendor, supplier or manufacturer being herein called a
"Vendor"), is the date the Equipment is accepted by Lessee, and (b) for all
other Equipment (e.g., not requiring installation or used), is five days after
the Equipment is delivered to Lessee. Lessee shall notify Lessor of the Lease
Commencement Date by promptly delivering to Lessor a Certificate of Acceptance
in the form of Exhibit B. If the Lease Commencement Date is the first day of a
month, the "Term Commencement Date" shall be the same date. If not, the Term
Commencement Date shall be the first day of the month immediately following the
Lease Commencement Date.
1.3 Prior to any Lease Commencement Date, Lessee agrees to provide to Lessor an
executed Schedule and the documents identified on the Schedule. If the Lessee
shall fail timely and properly to deliver such documents to Lessor, Lessor shall
have no obligation to lease the Equipment in respect of which such documents are
requested. Lessor's obligation to lease Equipment to Lessee is further subject
to (a) no "Default" (as defined in Section 6.1), or event which with the giving
of notice, passage of time or both, would constitute a Default, occurring and
continuing under this Agreement or any Lease, and (b) the Lease Commencement
Date being prior to the "Cut-off Date" (as set forth in the applicable
Schedule). In the event the conditions precedent stated in this Section 1.3 are
not satisfied, and Lessor has delivered its purchase order for the Equipment to
Vendor or entered into a purchase order assignment with Lessee, then Lessor
shall be entitled to (x) assign (or re-assign, as applicable) the purchase order
for the Equipment to Lessee without recourse or warranty, (y) collect from
Lessee all sums theretofore paid by Lessor to Vendor (less any sums previously
paid by Lessee to Lessor), and (z) collect from Lessee any out-of-pocket
expenses incurred in connection with the Equipment or purchase order (less any
sums previously paid by Lessee to Lessor).
1.4 The "Term" of the Lease shall consist of the "Interim Period" (the period of
time from and including the Lease Commencement Date to the Term Commencement
Date), if any, plus the number of full months specified in the Schedule as the
"Initial Term." Thereafter, if no Default, or event which with the giving of
notice, passage of time or both, would constitute a Default, has occurred and
is continuing under a Lease, the Term shall be automatically extended on a
month-to-month basis unless the Lease is terminated by either party by giving
sixty days' notice of termination to the other party. Such termination shall be
effective on a date not earlier than sixty days after said notice, and in no
event prior to expiration of the Term. The last day of the Term (i.e.), initial
Term or month-to-month extension period, as applicable) shall be the
"Termination Date."
1.5 Lessee shall pay to Lessor as rent ("Rent") for the Equipment, "Interim
Rent" equal to one-thirtieth of the "Basic Rent" specified in the Schedule for
each day of the Interim Period, plus the Basic Rent for each full month of the
Term. All Rent payments shall be due for such periods and at such times as
<PAGE> 2
indicated on the applicable Schedule. Lessee shall pay to Lessor one-thirtieth
of the Basic Rent for each day beginning with the day after the Termination Date
up to and including the date the Equipment is made available for shipment in
accordance with Section 2.8.
Article II. Use of equipment by Lessee
2.1 Lessee shall be responsible for the preparation of a suitable site for the
Equipment on or before its scheduled delivery date and for the installation of
the Equipment. Equipment which requires installation shall be installed by the
Equipment manufacturer or its designated representative. All installation
charges shall be borne by the Lessee.
2.2 Lessee, shall at the expense comply with and conform to all federal, state,
and local laws, ordinances, rules and regulations relating to the possession,
use maintenance or modification of the Equipment. Lessee shall not take any
action which would impair or violate Vendor's patent rights or copyrights in and
to the Equipment, or any software license for the Equipment. On reasonable prior
notice to Lessee, Lessor and Lessor's agents shall have the right, during
Lessee's business hours, to enter the premises where the Equipment is located
for the purpose of inspecting the equipment and observing its use. Lessor and
Lessor's agent shall comply with any reasonable security measures established by
Lessee.
2.3 Lessee shall at its expense affix and maintain in a prominent position on
each Item any plates, tags or identifying labels provided by Lessor to indicate
its ownership of the Equipment.
2.4 Lessee may at its expense relocate the Equipment with the prior written
consent of Lessor, which consent shall not be unreasonably withheld. In no event
shall Lessee relocate the Equipment outside the continental United States.
2.5 Lessor hereby assigns to Lessee for the Term all warranties made with regard
to the Equipment by Vendor. With respect to warranties which are not assignable,
Lessor agrees to take such reasonable actions at Lessee's request and expense as
are necessary to enforce such warranties for Lessee's benefit.
2.6 It is the intention of Lessor and Lessee that the Equipment shall at all
times be and remain personal property and shall not become a fixture upon or a
part of any real property where the Equipment is located. Lessee shall not affix
the Equipment to the real property. Lessee shall obtain and provide to Lessor,
upon request, waivers from each real property landlord, mortgage or lienholder
for the site at which the Equipment is located, waiving any interest that it may
have in the Equipment arising from its interest in the real property.
2.7 Lessee shall at its expense and at all times during the Term operate and
maintain the Equipment in good operating order, repair, condition and
appearance, normal wear and tear excepted, and in accordance with Vendor's
specifications and recommendations. Lessee covenants that it will, at its
expense, enter into, maintain and enforce for the Term a maintenance agreement
with a maintenance organization acceptable to Lessor, covering at least prime
shift maintenance of the Equipment.
2.8 On or before the Termination Date, Lessee shall pack the equipment in
accordance with Vendor's guidelines and in Vendor's standard packaging
materials, load the Equipment on board such carrier as Lessor shall specify, and
deliver the same to Lessor at any destination within the continental United
States designated by Lessor. Any dismantling, packaging, transportation and
shipping charges shall be borne by Lessee, and at Lessee's option, arranged by
Lessee. The Equipment returned to Lessor shall, at the time it is removed from
Lessee's premises, be in the same condition and working order as when deliver to
Lessee, reasonable wear and tear expected, and certified for manufacturer's
maintenance by its manufacturer.
Article III. Upgrades
<PAGE> 3
3.1 Lessee may from time to time install alterations, additions, and upgrades to
the equipment (collectively "Upgrades") if they are readily removable, will not
impair the originally intended function or purpose of the Equipment, and are not
subject to any lien or security interest in favor of any other party. Upgrades
which are owned by Lessee shall, upon Lessor's request, be removed from the
Equipment prior to return of the Equipment pursuant Section 2.8. Lessee at its
own expense shall repair any damage caused by such removal and return the
Equipment to its original state, normal wear and tear expected. Any Upgrade
which is not removed prior to return of the Equipment to Lessor shall become
property of the Lessor upon return of the Equipment, and Lessee shall have no
further right, title or interest in the Upgrade or in the proceeds thereof.
Alternatively, Lessee and Lessor may negotiate a sale of the Upgrade to Lessor,
provided that Lessor may accept or reject a purchase price in its sole
discretion.
3.2 Lessee shall not, without the prior written consent of Lessor, affix or
install any Upgrade on the Equipment if it is not readily removable. If Lessor
consents to a non-removable Upgrade, it shall be affixed or installed in
accordance with applicable law, shall become the property of Lessor upon
affixation or installation, and shall be considered in Item.
Article IV. Risk of Loss
4.1 From the date Equipment is delivered to Lessee until it is returned to
Lessor, Lessee shall bear all risk of loss, damage, theft, destruction, wearing
out and condemnation to or of the Equipment from any and every day use
whatsoever.
4.2 Lessee shall at its expense maintain all-risk, public liability, theft and
property damage insurance on the Equipment in amounts as stated in the Schedule.
Additionally, if Lessee shall relocate the Equipment in accordance with Section
2.4, Lessee shall maintain in-transit insurance on the Equipment. All policies
for such insurance required hereunder shall be issued by insurance companies
acceptable to Lessor and shall provide that they may not be canceled or
materially altered without at least thirty days' prior written notice to Lessor.
Not later than the Lease Commencement Date, Lessee shall furnish Lessor with
certificates and, if requested, copies of all insurance policies required to be
carried by Lessee with respect to the Equipment.
4.3 In the event any Item is lost, destroyed, stolen or damaged beyond repair
("Casualty"), Lessee shall be liable to Lessor and shall pay Lessor an amount
("Casualty Value") equal to all rent and other amounts then due and owing with
respect to such Item plus the Stipulated Loss Value determined in accordance
with Annex A to the applicable Schedule. Lessee shall pay Lessor such Casualty
Value within thirty days of the date of the Casualty. Upon receipt by Lessor of
The Casualty Value for any Item, The Lease shall terminate with respect to such
Item. Upon termination of the Lease with respect to an Item, Lessee shall
dispose of Item salvage in accordance with Lessor's instructions. In the event
of a partial destruction of or repairable damage to any Item, The Lease shall
continue with respect to such Item and Lessee shall at its own expense promptly
cause such Item to be repaired to a condition acceptable to Lessor. There shall
be no abatement of rent hereunder in such event. Lessee will notify Lessor of
any Casualty or partial destruction to the equipment within three business days
of the date of its occurrence.
Article V. Assignment or Sublease
5.1 LESSEE SHALL NOT ASSIGN, SUBLEASE, HYPOTHECATE, MORTGAGE, PLEDGE OR
ENCUMBER, IN WHOLE OR IN PART, ITS RIGHTS UNDER THIS AGREEMENT OR ANY LEASE, OR
ITS RIGHTS TO THE EQUIPMENT OR ANY ITEM, WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. Any action in
contradiction hereto shall be null and void and without force or effect. Lessee
may assign or sublease this Agreement or any Lease to an affiliate of Lessee,
provided that such assignment or sublease shall not relieve Lessee of its
obligations under this Agreement or such Lease. Lessor shall have the option to
substitute itself for the assignee or sublessee under the terms of any proposed
<PAGE> 4
assignment or sublease.
5.2 Lessor may without notice to Lessee assign, sublease, hypothecate, mortgage,
pledge or encumber, in whole or in part, its right, title and interest in and to
this Agreement, any Lease or, subject to Lessee's rights hereunder, any Item. In
the event of any such action by Lessor: (a) upon notification by Lessor and
request by an assignee, Lessee will make all payments of Rent and other amounts
due hereunder directly to such assignee; (b) Lessee's obligations hereunder
shall not be subject to any reduction, abatement, defense, set-off, counterclaim
or recoupment for any reason whatsoever; (c) Lessee will not, after obtaining
knowledge of any such assignment, consent to any modification of the Agreement
or any assigned Lease without the consent of such assignee; (d) Lessor's
assignee shall be entitled to such right, title and interest in the agreement,
Lease or Equipment as is set forth in Lessor's notification of assignment to
Lessee; (e) Lessor's assignee shall have no right to modify the Lease without
prior written consent of Lessee; and (f) Lessor shall not be relieved of its
obligations under the Lease.
Article VI. Default and Remedies
6.1 With respect to each Lease, the Occurrence of any of the following events
shall constitute a Default hereunder; (a) a failure by Lessee to pay when due
any Rent or other charge required to be paid by Lessee hereunder, and the
continuance of such failure for seven days after notice from Lessor; (b) a
failure by Lessee to maintain insurance on the Equipment as required by section
4.2; (c) a failure by Lessee to perform or observe any other term or condition
of a Lease, which failure is not cured within thirty days after notice from
Lessor; (d) the breach by Lessee of any term or condition of any software
license for the Equipment or used in conjunction with the Equipment, provided
that such breach has a material adverse impact on the value or usefulness of the
Equipment; (e) Lessee ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability to pay
its debts as they become due, files a petition seeking relief for itself under
the Federal Bankruptcy Code or any similar federal or state statute, law or
regulation, or files an answer admitting the material allegation of such a
petition, or consents to or acquiesces in the appointment of a trustee, receiver
or liquidator for the equipment or for Lessee or all or any substantial part of
its assets or properties; (f) the filing of proceedings against Lessee under
Federal Bankruptcy Code or any similar federal or state statute, law or
regulation, which have not been dismissed within sixty days of filing, or the
appointment without Lessee's consent or acquiescence of any trustee, receiver or
liquidator for Lessee or any substantial part of Lessee's assets or properties,
which appointment has not been vacated within sixty days of appointment; (g) the
sale, transfer or disposal by Lessee of all substantially all of its assets or
property, or the merger or consolidation of Lessee with any other entity, unless
(i) Lessee is the surviving entity and has a net worth greater than or equal to
its net worth immediately prior to the merger or consolidation; (ii) a majority
of the surviving entity is retained by the entity holding a majority interest in
Lessee; or (iii) Lessor consents to the sale, transfer or disposal, such consent
not to be unreasonably withheld or; (h) any representation or warranty of Lease
proves untrue.
6.2 Upon the occurrence of a Default, Lessor by written notice to Lessee may
declare the subject Lease in default, and unless otherwise agreed to by Lessor,
such Default shall apply to any Leases executed hereunder specifically
designated in such notice. Alternatively, Lessor may, without waiving the
Default, make a payment or perform or comply with the provisions of the Lease,
the nonpayment, nonperformance or noncompliance of which caused the Default, and
in addition to any other obligations hereunder, Lessee shall pay Lessor upon
demand the amount of such payment and/or shall reimburse Lessor for the expenses
actually incurred in connection with such payment, performance or compliance, as
the case may be.
6.3 Upon Default, Lessor shall have the right, in its sole discretion, to
exercise any one or more of the following remedies in order to protect its
<PAGE> 5
interests, reasonably expected profits and economic benefits. Lessor may (a)
declare any Lease entered into pursuant to this Agreement in default, (b)
terminate in whole or in part any Lease, (c) recover from Lessee any and all
amounts then due and to become due, discounted to present value at the rate of
U.S. Treasury Bills with a three-month maturity, (d) take possession of any or
all Items, wherever located, with demand and notice, and without any court order
or other process of law, and (e) demand that Lessee return any or all Items in
accordance with Section 2.8 and, for each day that Lessee shall fail to return
any Item, Lessor may demand an amount equal to the Rent, prorated on the basis
of a thirty-day month, in effect immediately prior to such Default. Upon
repossession or return of such Item(s), Lessor may sell, Lease or otherwise
dispose of such Items in a commercially reasonable manner, with or without
notice and on public or private bid, and apply the net proceeds thereof toward
the amounts due under the Lease, but only after deducting (x) all expenses,
including reasonable attorneys' fees, incurred in connection therewith, and (y)
in the case of any sale, the estimated fair market value at retail of such Items
as of the Scheduled expiration of the Lease, or (z) in the case of any
replacement lease, the rent due for any period beyond the scheduled expiration
of the Lease for such Items. Any excess proceeds are to be retained by Lessor.
6.4 The foregoing remedies are cumulative and may be exercised in lieu of or in
addition to each other or any remedies at law, in equity or under statute.
Lessee waives demand of performance and notice of or place of sale or other
disposition and the manner and place of advertising. No delay or failure to
exercise any right, power or remedy by Lessor shall impair any such right, power
or remedy of Lessor, nor shall it be construed to be a waiver of or acquiescence
in any later breach or Default.
Article VII. Net Lease Provisions
7.1 Lessor warrants that Lessor will not interfere, nor cause anyone acting by
or through Lessor to interfere with Lessee's quiet enjoyment of the use of the
Equipment, so long as no Default shall have occurred and be continuing. EXCEPT
FOR LESSOR'S WARRANTY OF QUIET ENJOYMENT, LESSOR MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING BUT NOT LIMITED TO THE EQUIPMENT
DESIGN, OR FITNESS FOR A PARTICULAR PURPOSE. LESSEE ACKNOWLEDGES THAT VENDOR AND
LESSOR ARE SEPARATE ENTITIES, EACH OF WHICH HAS ENTERED INTO THIS TRANSACTION
FOR INDEPENDENT BUSINESS REASONS, AND THAT NEITHER LESSOR NOR VENDOR HAS ACTED,
ACTS, OR SHALL BE DEEMED TO HAVE ACTED OR ACT, AS AN AGENT OF THE OTHER. Lessor
shall have no responsibility or liability to Lessee for (a) loss or damage
caused directly or indirectly by any Item, or (b) the delivery, use, operation,
servicing, maintenance, repair, replacement or performance of any Item. The
foregoing disclaimers shall not operate to release Lessor, if it is the
manufacturer of the Equipment, or any other Vendor, from warranties provided in
any other operative document.
7.2 Each Lease is a net lease and Lessee's obligations to pay Rent and other
amounts due shall be absolute and unconditional. This obligation of Lessee shall
not be affected by or subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment of any kind whatsoever,
including without limitation Lessor's actual or alleged gross negligence or
willful misconduct, frustration of contract, or the loss or possession or
destruction of all or any part of the Equipment. It is the intent of the parties
that Rent and other amounts due shall continue to be payable in all events in
the manner and at the times set forth in the Lease. Nothing contained herein
shall impair Lessee's right to maintain an independent action at law or in
equity.
7.3 As additional Rent, Lessee shall pay and discharge before they become
delinquent, or shall reimburse Lessor in accordance with this Section for, all
license fees, assessments and sales, use, property, excise and other taxes,
however designated (each such fee, assessment or tax and "Imposition") now or
hereafter imposed or assess by ban foreign, federal, state or local government
upon the ownership, delivery, installation, leasing, renting, use or sale of the
Equipment, or the Rent or other charges payable hereunder, whether assessed on
Lessor or Lessee, together with any penalties or interest in connection
therewith
<PAGE> 6
attributable to Lessee's acts or failure to act. Notwithstanding the foregoing,
Lessee shall have no liability for any Imposition on or measured by the net
income or gross revenue of Lessor. For Impositions for which Lessor is
responsible under applicable law, Lessor shall file all declarations, forms and
returns and shall pay the taxing authority directly. Lessor shall invoice Lessee
for such Impositions and Lessee shall pay Lessor as additional Rent amounts owed
for such Impositions with thirty days of receipt of such invoice. For all
Impositions other than those necessary and appropriate in connection with the
levy, assessment, billing or payment of same, including whatever action may be
required to have the Imposition billed directly to Lessee or to the Lessor in
the care of Lessee. In all declarations, forms or returns Lessee shall show
Lessor as owner of the Equipment and shall send copies of same to Lessor with
evidence of payment.
7.4 Lessee shall indemnify, defend and hold harmless Lessor, its agents and
assignees, from and against any and all claims, actions suits, proceedings,
costs, expenses (including court costs and reasonable attorneys' fees), damages,
obligations, penalties, injuries and liabilities (whether or not resulting from
the selection, manufacture, purchase, acceptance or rejection of Equipment, the
ownership of Equipment during the term of this Agreement or any Lease (other
than an action brought by a creditor of Lessor or otherwise claiming title to
the Equipment), and the delivery, lease, possession, maintenance, use,
condition, return or operation of Equipment or Upgrades thereto (including,
without limitation, latent, and other defects, whether or not discoverable by
Lessor or Lessee, and any claim for patent, trademark or copyright
infringement), excepting only Claims that arise solely out of the gross
negligence or willful misconduct of Lessor. Lessee shall at its expense defend
any and all actions based on or arising out of the foregoing. Lessee shall
notify Lessor immediately upon receipt of notice or knowledge of any event which
may give rise to a Claim, and shall not, without the consent of Lessor, settle
any Claim without obtaining a full release of any and all possible claims
against Lessor. By way of example, Claims shall include any action brought
against Lessor based on a tort theory of liability which requires that the
plaintiff prove only that the defendant possessed or otherwise controlled the
Equipment in order to establish liability.
7.5 Lessee shall have no right, title or interest in or to the Equipment except
as Lessee and as expressly set forth in the Lease. Throughout the term of each
Lease, Lessee shall, upon Lessor's request, execute and deliver to Lessor for
filling such Uniform Commercial Code financing statements or other similar or
substitute documents as Lessor in its discretion deems necessary and/or
appropriate to protect its right, title and interest in and to the Equipment.
Lessee shall at its expense protect and defend the title and rights of Lessor to
or in the Equipment from and against all claims, liens, charges, encumbrances
and legal processes, whether imposed, asserted or instituted by creditors of
Lessee or otherwise, and shall at its expense promptly take all action necessary
to discharge the same.
7.6 Lessee hereby represents, warrants and covenants that (a) Lessor as owner of
the Equipment shall be entitled to all items of deduction specified in the
applicable Schedule ("Tax Benefits"), and (b) at no time will Lessee take or
omit to take, or permit any sublessee or assignee to take or omit to take, any
action (whether or not permitted hereby) which would result in the
disqualification of the Equipment for, or recapture of, all or any portion of
the Tax Benefits. If as a result of a breach of any representation, warranty or
covenant of Lessee relating to any Item (x) Lessor is not entitled to claim on
its Federal Income Tax return all or any portion of the Tax Benefits with
respect to any Item, or (y) any Tax Benefit claimed on the Federal Income Tax
return of Lessor is disallowed or adjusted by the Internal Revenue Service, or
(z) any Tax Benefit is recomputed or recaptured (any such determination,
disallowance, adjustment, recomputation or recapture being herein called
"Loss"), then Lessee shall pay to Lessor as additional Rent event more than
thirty days after written notice to Lessee of such Loss, as shall cause Lessor's
net after-tax rate of return in respect of each Item as to which a Loss has
occurred to equal the net after-tax rate of Benefits. Lessee shall not be
responsible for any Loss which results from Lessor's failure to accurately
determine the Tax Benefits which apply to a
<PAGE> 7
Lease. Lessee shall entitled, at its expense, to dispute a disallowance,
adjustment, recomputation or recapture by the Internal Revenue Service, and
Lessor will provide reasonable assistance to support Lessee's action.
7.7 Lessee agrees to take such further action and to execute such additional
documents, instruments and financing statements as Lessor shall reasonably
request in order to complete the transactions contemplated by this Agreement or
any assignment by Lessor or to protect Lessor's interest in the Equipment.
7.8 The rights and obligation set forth in this Article shall survive the
termination or expiration of this Agreement or any Lease.
Article VIII. Miscellaneous
8.1 Any notice shall be effective upon personal delivery or mailing by certified
mail, return receipt requested. Notices shall be delivered or sent to the
address stated below, or at such other address as a party may provide by notice.
8.2 Lessee shall upon Lessor's written request deliver to Lessor financial
statements certified to by a recognized firm of certified public accountants.
Upon written request, Lessee will deliver to Lessor quarterly, within ninety
days of the close of each fiscal quarter of Lessee, in reasonable detail,
quarterly financial statements certified to by the chief financial officer
Lessee.
8.3 THIS AGREEMENT SHALL BE INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAW,
BUT NOT THE CHOICE OF LAW RULES, OF THE STATE ILLINOIS.
8.4 This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, both written and oral, with
respect to the subject matter hereof. Lessor's failure at any time to require
strict performance by Lessee of any of the provisions hereof shall not waive or
diminish Lessor's right thereafter to demand strict compliance therewith. If any
provision of this Agreement shall be deemed unenforceable under applicable law,
it shall be deemed stricken, but the remainder of this Agreement shall remain in
full force and effect and shall be construed to give effect to the intent of the
parties. In any litigation arising out of a Lease, the prevailing party shall be
entitled to recover its costs and reasonable attorneys' fees, whether or not the
action is prosecuted to judgement. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY CONSEQUENTIAL DAMAGES ARISING UNDER OR IN ANY WAY CONNECTED WITH
THIS AGREEMENT. Time is of the essence in this Agreement.
8.5 This Agreement may not be altered or varied nor provisions waived except in
writing duly executed by Lessor and Lessee.
8.6 Any payments of Rent or other amounts payable by Lessee hereunder that
become past due shall bear interest compound monthly from the due date until the
date received by Lessor at the rate of twelve percent per annum or the
prevailing prime interest rate plus two hundred basis points, whichever is
greater.
8.7 This Agreement may be executed by the parties in any number of counterpart,
each of which shall be deemed an original, but all of which together shall
constitute one instrument. To the extent a Lease constitutes chattel paper (as
such term is defined in the Uniform Commercial Code or portions thereof adopted
by the applicable jurisdiction), no security interest may be created or conveyed
through the transfer or possession of any document other than the original
Schedule to such Lease.
8.8 This Agreement may be terminated by either party upon thirty days' notice
provided that each Lease then in effect shall survive any termination of this
Agreement.
<PAGE> 8
Article IX - Representation and Warranties of Lessee
1.1 Lessee represents and warrants for the benefit of Lessor and any Assignee,
and, if requested, will provide for each Schedule: (I) an Incumbency Certificate
or other document identifying the signatures and establishing the authority of
the signer of the lease document; and (ii) an opinion of counsel to the effect
that as of the time of execution and deliver of this Agreement and each
Schedule:
(a) Lessee is a legal entity, duly organized, validly existing and has
adequate corporate power to enter into and perform this Agreement and each
Schedule;
(b) This Agreement and each Schedule have been duly authorized,
executed and delivered by Lessee and constitute a valid, legal and binding
agreement of Lessee, together enforceable in accordance with their terms,
subject to enforcement limitations imposed by state for federal laws affecting
the rights of creditors;
(c) The execution, delivery and the performance by Lessee of its
obligations under this agreement and each Schedule will not violate any
judgement, order, law or governmental regulation applicable to lessee or any
provision of Lessee's General Partner Agreement or other organizational
documents or result in any breach of or constitute a default under and
instrument or agreement to which Lessee is a party or by which Lessee or its
assets may be bound or result in the creation of any lien, charge, security
interest or encumbrance upon the Equipment;
(d) To the best of counsel's knowledge there are no actions, suites or
proceedings pending before and court, administrative agency, arbitration
tribunal or government body which will, if determined adversely to Lessee,
materially adversely to Lessee, materially adversely affect its ability to
perform its obligations under this Agreement, each Schedule or any related
agreement to which it is a party; and,
(e) Lessee is not a tax exempt entity under the Internal Revenue Code
of 1986 as amended ("the Code").
In witness whereof, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
Lessee: GALILEO INTERNATIONAL PARTNERSHIP Lessor: AT&T SYSTEMS LEASING
CORPORATION
By:___________________________________ By:________________________________
Name:_________________________________ Name:______________________________
Title:________________________________ Title:_____________________________
Address:
Suite 400 Address: Third Floor
9700 West Higgins Road 2555 Telegraph Road
Rosemont, IL 60018 Bloomfield Hills, MI 48302
<PAGE> 9
EXHIBIT A
EQUIPMENT SCHEDULE ______
AT&T Systems Leasing Corporation ("Less") and Galileo International Partnership
("Lessee") are parties to a Master Equipment Lease dated as of April 4, 1996
(the "Agreement"). This Schedule and the Agreement together comprise a separate
Lease between the parties. The terms and conditions of the Agreement are hereby
incorporated by reference into this Schedule. All initially-capitalized terms
are not defined in this Schedule shall have the meanings ascribed to them in the
Agreement.
EQUIPMENT
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Qty. Type and Model of Used Equipment Serial Description
- - ---- -------------------------------- Number -----------
------
<S> <C> <C> <C>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
</TABLE>
DOCUMENTS
Lessee shall provide the following prior to the Lease Commencement
Date:
1. Execute Schedule ______
2. UCC-1 Financing Statement(s)
3. Certificate of Insurance
WARRANTIES AND REPRESENTATIONS
Lessee hereby represents, warrants and covenants to Lessor that:
1. Lessee is a partnership validly existing and in good standing under
the laws of the state of its creation, with adequate power and capacity to enter
into this Lease, documents relative to the purchase of the Equipment and any
other documents required to be delivered in connection with this Lease (the
Lease, purchase documents and other documents collectively referred to as the
"Documents"), and is qualified to do business wherever necessary to carry on its
present business and operations, including the jurisdiction(s) where the
Equipment is to be located. Lessee is not a public utility holding company, a
tax exempt entity or a not-for profit corporation.
2. The Documents have been duly authorized, executed and delivered by
Lessee and constitute valid, legal, and binding agreements, enforceable in
accordance with their terms, except to the except to the extent that the
enforcement of remedies may be limited under applicable bankruptcy and
insolvency laws.
3. No approval, consent or withholding of objections is required from
any federal, state or local governmental authority or instrumentality with
respect to the entry to the entry into or performance by Lessee of the
Documents.
4. The entry into and performance by Lessee of the Documents will not
(a) violate any judgment, order, law or regulation applicable to Lessee, or any
provision of Lessee's partner agreement, or (b) result in any breach of,
constitute a default under, or result in the creation of, any lien, charge,
security interest or other encumbrance upon any Equipment.
<PAGE> 10
5. There are not suits or proceedings pending or threatened in court or
before any regulatory commission, board or other administrative governmental
agency against or affecting Lessee which will have a material adverse effect on
the ability of Lessee to fulfill its obligations under this Lease.
6. The Financial Statements delivered to Lessor have been prepared in
accordance with generally accepted accounting principle consistently applied and
fairly present the financial position of Lessee on and as of the date thereof
and the results of its operations for the period or periods or periods covered
thereby. Since the date of such Financial Statements there has been no material
adverse change that would affect the accuracy of such Financial Statements.
MISCELLANEOUS
1. The Lease Commencement Date shall be _____________.
2. The Initial Term is ______________.
3. The Basic Rent shall be ______________ per month, payable
in advance.
4. The Lessor's Basis is _______________.
5. Commencing on _______________, and on the same date of each
month thereafter during the Initial Term and any Renewal Term, Lessee shall Pay
the Basic Rent in Immediately-available U.S. funds.
6. The equipment is to be located at Lessee's offices at
_____________________________________.
7. Transportation, installation and in-transit insurance costs
related to shipping the Equipment to Lessee's site shall be borne by __________.
8. Lessee shall carry public liability insurance in the amount
of $2,000,000 total liability per occurrence and casualty and property damage
insurance in an amount equal to the greater of the Casualty Value or full
replacement cost of the Equipment.
9. The Stipulated Loss Values shall as determined by the
attached Annex A.
10. The Tax Benefits are depreciation and interest deductions.
As its depreciation method, Lessor shall use a 200% declining balance method,
switching to a straight-line method for the first taxable year for which the
straight-line method with respect to the adjusted basis as of the beginning of
such year yields a larger allowance and assumes a recovery period of five years.
11. Lessee agrees that it shall not allow another party to
have or take any interest in the Equipment, whether through upgrade, sublease,
assignment or otherwise, without first having providing Lessor with an
opportunity to provide similar services and prices to those proposed by such
other party in connection with the Equipment.
12. Lessor shall not be liable to pay any damages to Lessee if
its inability to deliver the Equipment is due to acts of god, natural disasters,
strikes, lock-outs, acts of civil disobedience, rebellion, war or other events
beyond lessor's reasonable control and not attributable to lessor's negligence.
13. Neither party shall be liable to the other for any
incidental, special or consequential damages, including without limitation, lost
profits, arising in any way in connection with this Equipment Schedule, whether
or not
<PAGE> 11
such damages were foreseeable.
IN WITNESS WHEREOF, Lessor and Lessee have caused this
Schedule to be executed by their duly authorized representative on the dates
indicated below.
LESSEE: LESSOR:
GALILEO INTERNATIONAL PARTNERSHIP AT&T SYSTEMS LEASING CORPORATION
By: By:
------------------------------ ------------------------------
Name: Name:
Title: Title:
Date: Date:
<PAGE> 12
ANNEX A
TO
EQUIPMENT SCHEDULE ___
TABLE OF STIPULATED LOSS VALUES
The Rent payments numbered below commence with the Term Commencement Date and
coincide with the rent payment dates through the end of the Initial Term in a
similar manner to provide for renewals and extensions beyond the Initial Term.
The Stipulated Loss Value of a Leased Item is equal to the lessor's Basis of
that leased Item multiplied by its Stipulated Loss Value Percentage which is
determined by looking in the table below for the Stipulated Loss Value
Percentage opposite the Rent payment date next following Casualty or other event
requiring payment of the Casualty Value.
<TABLE>
<CAPTION>
Stipulated Loss Stipulated Loss
Rental Period Value Percentage Rental Period Value Percentage
------------- ---------------- ------------- ----------------
<S> <C> <C> <C>
1 and Prior 110.20 31 79.60
2 109.18 32 78.58
3 108.16 33 77.56
4 107.14 34 76.54
5 106.12 35 75.52
6 105.10 36 74.50
7 104.02 37 73.48
8 103.06 38 72.46
9 102.04 39 71.44
10 101.02 40 70.42
11 100.00 41 69.40
12 98.98 42 68.38
13 97.96 43 67.36
14 96.94 44 66.34
15 95.92 45 65.32
16 94.90 46 64.30
17 93.88 47 63.28
18 92.86 48 62.26
19 91.84 49 61.24
20 90.82 50 60.22
21 89.80 51 59.20
22 88.78 52 58.18
23 87.76 53 57.16
24 86.74 54 56.14
25 85.72 55 55.12
26 84.70 56 54.10
27 83.68 57 53.08
28 82.66 58 52.06
29 81.64 59 51.04
30 80.62 60 50.02
</TABLE>
<PAGE> 1
Exhibit 10.26
D&B SOFTWARE
- - --------------------------------------------------------------------------------
LICENSE AGREEMENT
LICENSE AGREEMENT, dated 25 day of May, 1995, by and between Dun & Bradstreet
Software Services, Inc. ("D&B"), with offices at 3445 Peachtree Road, N.E.,
Atlanta, Georgia 30326 and Galileo International Partnership ("Customer"), with
offices at 9700 W. Higgins Road, Rosemont, IL 60018. For each Program the
applicable Supplement shall specify: (i) the Hardware (including the central
processing unit(s) (CPU), (ii) the Operating System Software, (iii) the total
fees, (iv) the number of permitted users, (v) the Site, and (vi) the Geographic
Territory.
1. LICENSE.
1.1. For each Program, and related Documentation, listed on a Supplement, D&B
grants to Customer a perpetual, non-exclusive, non-transferable license, to Use,
and allow its Affiliates (for so long as they are Affiliates) to Use, the
Program solely for their internal administrative purposes on the Hardware and
Operating System Software at the Site in the Geographic Territories subject to
restrictions set forth on the applicable Supplement. In this Agreement (a)
"Documentation" means user guides, operating manuals, and specifications,
whether in print or machine readable media, in effect as of the date of
shipment, (b) "Use" means to load, execute, employ, utilize, store or display
the Program, (c) "Affiliates" means any entity controlling, controlled by, or
under common control with, Customer, (d) "Server" means one or more
interconnected computer hardware systems configured to run the program(s), and
(e) "Geographic Territories" means the country in which this Agreement has been
executed unless otherwise specified on the applicable supplement. Customer shall
ensure that its Affiliates comply with the terms of this Agreement and will be
liable for any breach by any Affiliate. Customer may delegate authority to
execute Supplements to any Affiliate.
1.2. The Program may be transferred temporarily to a backup computer if the
Hardware is inoperative. The Program may also be transferred to computer
hardware or used with an operating system, other than the specified Hardware or
Operating system Software, subject to D&B's transfer policies and fees then in
effect. Customer may make and Use additional copies of Programs and machine
readable Documentation for the number of Users specified on the applicable
Supplement, if any. In addition, Customer may make a reasonable number of copies
of the Program exclusively for testing, disaster recovery, inactive back-up or
archival purposes. Copying or Use of the Program or Documentation other than as
expressly authorized by this Agreement is not permitted.
1.3. As soon as practicable after signing the applicable supplement, D&B shall
deliver the Program and Documentation to the Site. One (1) set of Documentation
and one copy of each Program shall be delivered to Customer.
2. SUPPORT AND MAINTENANCE.
2.1. The License Fee includes the standard level of Maintenance and Support for
a period of one year from the date of execution of the applicable Supplement.
Maintenance entitles Customer to have access to D&B's electronic support
facilities, and to receive tax and regulatory updates and all error
Dun & Bradstreet Software
<PAGE> 2
correction and/or performance enhancement releases of the Programs not
separately marketed by D&B. Support entitles Customer's employees to telephone
D&B's Helpline and to have access to D&B's electronic support facilities.
Thereafter, on the anniversary of each Supplement, Customer may purchase
Maintenance and support so long as D&B makes Maintenance and Support for the
Programs licensed on that Supplement available to its customers in general. The
license granted to Customer under Section 1 shall extend to each update,
correction and enhancement release received from D&B.
2.2. Upon receipt from Customer of notice of a nonconformance between the
Program and the Documentation, D&B shall use reasonable efforts to correct or
circumvent the problem. Any corrections to the Program will be made only to the
most current generally available release of the Program. After the introduction
of a new generally available release of a Program, D&B will support the then
current and the previously released version of such Program.
2.3. D&B shall have no obligation to Support or Maintain the Program for Use on
any computer system other than the Hardware and Operating System Software or in
the event Customer modifies the Program other than as permitted by this
Agreement. Only those versions of different cooperating Programs specified by
D&B will execute correctly together on a single CPU or in a network. D&B shall
use commercially reasonable efforts to modify any version of the Program to run
with new versions or releases of the Operating System Software or Hardware. If
Customer purchases Maintenance from D&B for any Programs for Use on specific
hardware or in a specific network, Customer must purchase Maintenance from D&B
for all functionally related Programs licensed from D&B for Use on such hardware
or network.
2.4. D&B shall deliver one copy of any D&B source code not delivered to Customer
for the Program to D&B's then current escrow agent. So long as Customer is
current on maintenance and is in compliance with the provisions of its
agreements with D&B, in the event D&B ceases to maintain the Program(s),
Customer shall have a right to obtain access to such escrowed source code from
the escrow agent.
3. CONFIDENTIALITY; PROPRIETARY RIGHTS.
3.1. Each party shall hold Confidential Information of the other in confidence.
"Confidential Information" includes without limitation the terms of this
Agreement, the Program(s) and all Documentation, and all methods or concepts
utilized therein, plus all information identified by the disclosing party as
proprietary or confidential. All Confidential Information shall remain the sole
property of the disclosing party. Upon execution of a non-disclosure agreement
satisfactory to D&B, third parties may have access to Confidential Information
solely for the purpose of providing services to Customer. Information will not
be considered to be Confidential Information if (i) available to the public
other than by a breach of this Agreement; (ii) rightfully received from a third
party not in breach of any obligation of confidentiality; (iii) independently
developed by a party without access to Confidential Information of the other;
(iv) known to the recipient at the time of disclosure; (v) produced in
compliance with applicable law or a court order, provided the other party is
given notice and opportunity to intervene; or (vi) it does not constitute a
trade secret and more than five (5) years have elapsed from the date of
disclosure.
Dun & Bradstreet Software
<PAGE> 3
3.2. All Programs and Documentation, and any modifications or copies thereof,
are proprietary and protected by copyright and/or trade secret law and no
ownership rights are transferred by this Agreement. All proprietary notices
incorporated in, marked on, or affixed to a Program or other Confidential
Information by D&B or its suppliers shall be duplicated by Customer on all
copies of all or any part of the Program and shall not be altered, removed or
obliterated. Customer shall not reverse reengineer, reverse assemble or reverse
compile any Program or part thereof. Customer may modify the Programs to the
extent and in the manner described in the Documentation for the Programs.
4. WARRANTY.
4.1. D&B warrants that each Program licensed to Customer will operate
substantially in conformance with the Documentation for such Program for a
period of one year from the date of shipment of such Program to Customer. D&B
warrants that the media on which the Program is delivered will be free of
defects in material and workmanship for a period of ninety (90) calendar days
following the date of shipment.
4.2. Customer's sole and exclusive remedies for breach of either of the
foregoing warranties shall be either replacement of the defective materials or a
refund of the license fee paid for the Program(s) licensed on a
Dun & Bradstreet Software
<PAGE> 4
ATTACHMENT A
ATTACHED TO AND MADE A PART OF the License Agreement between Dun & Bradstreet
Software Services, Inc. ("D&B") and Galileo International Partnership
("Customer") dated May 25, 1995.
A.1. The second sentence of Section 1.2 of the License Agreement is deleted
and replaced with the following:
The Program may also be transferred to computer hardware or used with
an operating system, other than the specified Hardware or Operating
System Software, subject to D&B's transfer policies and fees stated
herein. The fee for such transfer(s) shall be Five Thousand Dollars
($5,000.00) per transfer.
A.2. The first sentence of Section 2.2 of the License Agreement is deleted
and replaced with the following:
Subject to Section 4.1, upon receipt from Customer of notice of a
nonconformance between the Program and the Documentation, D&B shall use
reasonable efforts to correct or circumvent the problem.
A.3. The following is added to Section 2.3 of the License Agreement:
In the event Customer transfers the Program(s) to hardware and/or
operating system software that is then-supported by D&B, D&B shall
Support and Maintain such version of the Programs, so long as Customer
has paid the applicable support and maintenance fees. In the event
Customer doesn't purchase Maintenance from D&B for all functionally
related Programs licensed from D&B for Use on such hardware or network,
then D&B may, but shall not be obligated to, provide services to
Customer on a time and materials basis for those Programs which
Customer has not purchased Maintenance.
A.4. The second sentence of Section 2.4 of the License Agreement is deleted
and replaced with the following:
So long as Customer is current on maintenance and is in compliance with
the provisions of its agreements with D&B, in the event D&B ceases to
maintain the Program(s), Customer shall have the right to obtain a copy
of such escrowed source code at no additional cost to Customer from the
escrow agent. D&B's current escrow agent is Data Securities
International with offices located at 6165 Greenwich Drive, Suite 200,
San Diego, California 92122. D&B shall use commercially reasonable
efforts to notify Customer of (i) any change in the escrow agent, or
(ii) any material change to the terms and conditions of the existing
escrow agreement with Data Securities International; provided, however,
that no such change shall preclude Customer from obtaining a copy of
the escrowed source code at no additional cost to Customer.
A.5. Section 4.1 of the License Agreement is deleted in its entirety and
replaced with the following:
D&B warrants that each Program, including updates delivered to Customer
<PAGE> 5
within the Warranty Period, licensed to Customer will operate in
conformance with the Documentation for such Program for a period of one
(1) year from the earlier of (a) thirty (30) days from the date of
delivery of the Program, or (b) the completion of installation of the
Program. D&B warrants that the media on which the Program is delivered
will be free of defects in material and workmanship for a period of
ninety (90) calendar days following the date of shipment. D&B also
warrants that it has the right to license the Program(s) and any other
software covered by the supplement.
A.6. Section 4.2 of the License Agreement is deleted in its entirety and
replaced with the following:
Customer's remedies for breach of either of the foregoing warranties
shall be either replacement of the defective materials or a refund of
the license fee paid for the Program(s) licensed on a Supplement in
addition to any remedies provided by law. Such remedies are available
only if D&B is notified within the applicable Warranty Period and is
provided with ninety (90) days to cure such breach.
A.7. Section 5.1 of the License Agreement is deleted in its entirety and
replaced with the following:
D&B shall indemnify, defend, or at its option settle, any claim or suit
against Customer on the basis of infringement of any patent, trademark,
copyright or trade secret by the Program or Use thereof and pay any
judgement entered against Customer on such issue in any such
proceeding; provided, D&B has sole control of such defense and/or
settlement and Customer promptly notifies D&B and gives D&B all related
information known to Customer. If any part of the Program is, or may
become, the subject of any such proceeding, D&B may, and in the event
of any adjudication that any part of a Program does so infringe or if
the licensing or Use of the Program or any part thereof is enjoined,
D&B shall, at its expense and option, do one of the following things:
procure for Customer the right to Use the Program or the affected part
thereof; replace the Program or affected part thereof with other
programs of at least comparable functionality and quality; modify the
Program or affected part thereof to make it non-infringing; or if none
of the foregoing remedies are commercially reasonable, refund the
aggregate payments paid by Customer for the Program or the affected
part thereof, less reasonable amortization for Use. Notwithstanding the
foregoing, one hundred percent (100%) of the License Fee shall be
refunded to Customer in the event a refund is necessary pursuant to
this Section 5 during the period of two years following execution of
this Agreement. D&B shall have no obligations under this Section 5 with
respect to any claim to the extent it is based upon (i) the Use of any
version of the Program other than a current, unaltered release of the
Program, if such infringement would have been avoided by the Use of a
current, unaltered release; (ii) the combination, operation, or Use of
the Program with software or hardware other than as specified or
recommended by D&B or if certified by D&B for use with the Programs, if
such infringement would have been avoided in the absence of such
combination, operation or Use; or (iii) the Use of the Program on or in
connection with a computer system other than the Hardware and the
Operating Software or any other hardware or computer system to which
the
<PAGE> 6
Programs may be transferred consistent with D&B's transfer policies as
stated herein.
A.8. The first sentence of Section 6 of the License Agreement is deleted and
replaced with the following:
Except (i) as provided in Section 5, (ii) in the event of death or
personal injury, and (iii) in the event of damage to personal property,
the total liability, if any, of D&B, including but not limited to
liability arising out of, resulting from or in any way related to,
contract, tort, breach of warranty, infringement or otherwise, shall
not in any event exceed one hundred twenty-five percent (125%) of the
license fees paid by Customer with respect to all Programs. Except (i)
as a result of any judgment issued against Customer as a result of the
Programs infringing on the rights of any third party or, (ii) in the
event of a breach of Sections 1 or 3 of this Agreement by either party,
neither party shall be liable for loss of profits, or indirect,
special, incidental, or consequential damages.
A.9. Section 7.1 of the License Agreement is deleted in its entirety and
replaced with the following:
Neither this Agreement nor any license hereunder may be assigned
(whether by operation of law or otherwise) by Customer without D&B's
prior written consent which shall not be unreasonably withheld or
delayed.
A.10. Section 7.2 of the License Agreement is deleted and replaced with the
following:
From time to time, but no more often than once each calendar year, D&B
may request Customer to provide a certification to the effect that
actual Use of the Program is in compliance with the terms of this
Agreement and any Supplement. In addition, D&B may, upon reasonable
prior written notice but not more often than once each calendar year,
and subject to compliance with Customer's reasonable security
procedures, perform at a mutually agreeable date and time an audit to
determine compliance with the terms of this Agreement. If the number of
copies or users is found to be greater than that contracted for or the
computer system on which the Program is in use differs from the
Hardware and Operating System Software specified on any Supplement
except for transfer consistent with D&B's policies as stated herein,
D&B shall have the right to charge Customer the applicable current list
prices therefor. If the resulting adjustments to the license fees owing
by Customer are greater than 5% of the license fees previously paid by
Customer to D&B, D&B may also charge Customer the reasonable expenses
associated with such audit.
A.11. Section 7.3 of the License Agreement is deleted in its entirety and
replaced with the following:
All fees shall be paid within thirty (30) days after the invoice date.
Customer shall pay all applicable shipping charges and sales, use,
personal property or similar taxes, exclusive of D&B's income and
corporate franchise taxes. After at least thirty (30) days written
<PAGE> 7
notice, past due amounts owing from Customer which are not reasonably
disputed by Customer, may bear interest at the rate of 1% per month.
A.12. Section 7.5 of the License Agreement is deleted in its entirety and
replaced with the following:
Each party's obligations under Section 3 hereof are a unique character
and each agrees that any breach may result in irreparable and
continuing damage to the other party for which there may be no adequate
remedy in damages. In the event of such a breach, the damaged party
will be entitled to seek injunctive relief and/or a decree for specific
performance and such further relief as may be proper.
A.13. The first sentence of Section 7.7 of the License Agreement is deleted
and replaced with the following:
If either party breaches any of its material obligations hereunder and
fails to remedy such breach (if such breach can be remedied) within
thirty (30) days of written notice of such breach, the other party may
terminate any license or this Agreement.
A.14. Section 7.8 of the License Agreement is deleted in its entirety and
replaced with the following:
This Agreement shall be governed by and construed under the laws of the
State of Illinois excluding its conflict of laws rules.
A.15. Section 7.9 of the License Agreement is deleted in its entirety.
A.16. The following sentence is added to Section 7.10 of the License
Agreement:
The Supplement shall prevail in the event of any conflict with the
License Agreement.
A.17. The following is added as Section 7.11 of the License Agreement:
Galileo International Partnership reserves the right to terminate this
license at any time, so long as all fees due and owing under this
License Agreement have been fully paid.
<PAGE> 8
SMARTSTREAM(R) SUPPLEMENT NO. 001
This Supplement is made a part of the License Agreement dated as of May 25,
1995, between Dun & Bradstreet Software Services, Inc. ("D&B") and Galileo
International Partnership ("Customer").
<TABLE>
<CAPTION>
PROGRAM/VERSION License Fee
<S> <C>
SmartStream Platform (Version 3.0) incl.
Number of Servers: 1
Number of Clients: 190
InterQ (Version 3.0) $ 15,000.00
SmartStream Analyzer (Version 3.0) 84,050.00
Number of Servers: 1
Number of Analyzer Plus Users: 15
Number of DSS Viewer Users: 125
SmartStream Management Report (Version 3.0) incl.
Number of Servers: 1
Number of Users: 9 Standard, 100 Casual
SmartStream Purchasing (Version 3.0) 146,370.00
Number of Servers: 1
Number of Users: 11 Standard, 235 Casual
SmartStream Allocations (Version 3.0) 27,880.00
Number of Servers: 1
Number of Users: 9 Standard
SmartStream Budget (Version 3.0) 99,220.00
Number of Servers: 1
Number of Administrator Users: 21
Number of Workbench Users: 100
Financial Stream: Financial Records (Version 3.0) 105,370.00
Number of Servers: 1
Number of Users: 56 Standard, 45 Casual
Financial Stream: Receivables Processing (Version 3.0) 52,480.00
Number of Servers: 1
Number of Users: 8 Standard, 12 Casual
Financial Stream: Payments (Version 3.0) 49,200.00
Number of Servers: 1
Number of Users: 10 Standard
Financial Stream: Asset Management (Version 3.0) 45,100.00
Number of Servers: 1
Number of Users: 5 Standard
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
Distribution Stream: Inventory Management (Version 3.0) 46,740.00
Number of Servers: 1
Number of Users: 7 Standard
Powersoft PowerBuilder Development Tool Kit (Version 3.0A) 3,000.00
-------------
Total License Fee: $ 674,410.00
Less Discount: (134,282.00)
Less Migration Credit: (159,408.00)
Less Implementation Credit: (5,000.00)
-------------
Subtotal: $ 375,720.00
Support/Maintenance Fee: 107,426.00
------------
TOTAL FEES: $ 483,146.00
============
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
HOST ENVIRONMENT SERVER ENVIRONMENT
- - -----------------------------------------------------------------------------------
HARDWARE OPSYS DBASE APPLIC. HARDWARE OPSYS DBASE
ENVIRONMENT
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IBM MVS VSAM M Series Hewlett HP-UX Sybase
Packard
- - -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------
NETWORK ENVIRONMENT TCP/IP WINDOWS DRIVER INTERQ ACCESS METHOD
- - -----------------------------------------------------------------------------------
<S> <C> <C>
IBM Lan Manager FTP PC/TCP 3.0 M Series MVS/VSAM VS Cobol
- - -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------
CLIENT ENVIRONMENT MAIL SYSTEM
- - ------------------------------------------------------------------
<S> <C>
Intel 486, 66 MHZ, 16 Meg Ram Microsoft Mail
- - ------------------------------------------------------------------
</TABLE>
PAYMENT TERMS: Upon Customer's execution of this Supplement, D&B shall invoice
Customer for fifty percent (50%) of the Total Fees and Customer shall pay said
invoice within thirty (30) days after its date. D&B shall invoice Customer for
the remaining fifty percent (50%) of the Total Fees on August 31, 1995, and
Customer shall pay said invoice within thirty (30) days after its date.
LICENSE SITE: 9700 West Higgins Road, Rosemont, Illinois 60018
SPECIAL PROVISIONS APPLICABLE TO PROGRAMS LICENSED ON THIS SUPPLEMENT
The following special provisions shall apply to the Programs listed on this
Supplement notwithstanding anything else in the License Agreement and shall
prevail in the event of any conflict with the License Agreement:
1. The Total Fees shall include the standard level of Support (electronic
plus phone support during normal business hours) and Maintenance for a
period of one year from the date of execution of this Supplement;
<PAGE> 10
Customer may obtain any other level of Support provided by D&B for a
period of one year from execution date of this Supplement by paying the
fee set forth on this Supplement (if any).
2. Use of third party products embedded within certain of the D&B Programs
listed on the Supplement:
a. Sybase(R) Program(s):
The embedded development and run-time version of the Sybase
program(s) is limited to Use with, and modification of,
licensed D&B programs and tools only. Customer's right to Use
the embedded development and run-time version of the Sybase
Program(s) is limited to Use in conjunction with licensed D&B
Programs unless Use is required for purposes of systems
administration or to develop report writing and decision
support applications in conjunction with D&B's programs. In
the event Customer desires to Use the embedded Sybase
Program(s) for any other purpose, Customer shall obtain a
full-use license from Sybase, Inc.
b. Powersoft PowerBuilder(TM)
The embedded run-time version of Powersoft PowerBuilder is
limited to Use with D&B Programs Only.
c. D&B shall provide Support and Maintenance pursuant to
Paragraph 2.1 of the License Agreement for those third-party
products which are embedded within certain of D&B's Programs,
so long as Customer is current on Support and Maintenance.
These embedded programs include the programs covered by this
paragraph 2 and by Paragraph 5 of this Supplement.
d. Except as otherwise provided by this Paragraph 2, all of D&B's
and Customer's respective rights and obligations under the
License Agreement and this Supplement shall apply to the
programs set forth in this Paragraph 2 as if they were
"Programs" hereunder.
3. The Use of any third-party product delivered to Customer by D&B in a
sealed package containing a "shrink wrap" license shall be governed by
the terms of the license agreement contained within the package.
Notwithstanding any terms and conditions set forth in the License
Agreement, D&B shall have no responsibility for such Programs, and all
problem resolution and support for such Programs shall be obtained by
Customer from the applicable vendor.
4. For purposes of this Supplement, a "Standard User" shall mean any
individual whose primary job function includes responsibility for one
or more activities associated with the Program. If accessing a Program
is directly related to the individual's primary job functions or if the
individual access the Program most days of the week, then such
individual is a Standard User of the Program. A "Casual User" shall
mean any individual who infrequently Uses the Programs and whose
interaction with the Programs is not directly related to the
individual's primary responsibility.
5. In connection with the delivery of the Programs licensed on this
Supplement, D&B will deliver to Customer certain programs which are not
<PAGE> 11
listed herein for the sole and exclusive purpose of enabling Customer
to Use the Programs licensed on this Supplement. All of D&B's
obligations under the License Agreement and Supplement shall apply to
these programs as if they were "Program(s)" hereunder. Customer shall
Use such additional programs only as required for the Use of the
Programs licensed on this Supplement and for no other purpose
whatsoever. All of Customer's obligations under the License Agreement
and this Supplement shall apply to such additional programs.
6. It is understood and agreed between the parties hereto that the License
Fee for SmartStream Purchasing, Financial Stream: Financial Records,
Financial Stream: Receivables Processing, Financial Stream: Payments,
and Financial Stream: Asset Management is in consideration of the
License Agreements between Customer and D&B dated October 28, 1987, and
August 5, 1988, as amended, for the right to use the Purchase Order,
General Ledger, Accounts Receivable, and Accounts Payable Systems -
IBM/MVS/CICS M Series Versions and the Fixed Assets Accounting System -
IBM/MVS/CICS E Series Version.
7. The License Site address and the environmental information listed on
the face of this Supplement is for the first Server. Prior to
installation of the Programs on any additional Servers, Customer shall
complete the Additional Server Rider(s) (Rider A) and forward the same
to D&B. Such Additional Server Rider(s) shall provide the necessary
information regarding the location of the Servers as well as the
Server, client and network environmental information. In the event such
Additional Servers exceeds four (4), for a period of three (3) years
from the date of this Supplement, Customer shall pay to D&B a one-time
fee equal to Eight Thousand Dollars ($8,000.00) per Additional Server,
payable at the time of completion of the Additional Server Riders.
Thereafter, Customer shall pay D&B's then-current Additional Server
fee.
8. a. Until May 15, 1996, Customer shall have the option to add
Light Users in increments of fifty (50) for the Program(s)
licensed on this Supplement for a license fee of Three Hundred
Twenty Five Dollars ($325.00) per Light User per Program. A
"Light User" shall mean an individual who rarely Uses the
Program(s) and whose primary job function requires very little
interaction with the activities associated with the
Program(s).
b. Until November 15, 1995, Customer shall have the option to
license StreamBuilder for use with up to 8 SmartStream
Program(s) for a license fee of $16,000.00 each, up to a
maximum of $128,000.00. Thereafter, there shall be no
additional license fee for StreamBuilder for use with
additional SmartStream Programs.
c. Until November 15, 1995, Customer shall have the option to
license the following D&B Program(s) for the following License
Fee(s). If the following Program(s) are not available by
November 15, 1995, D&B agrees to extend this option to ninety
(90) days subsequent to the final release date of the
Program(s).
<PAGE> 12
<TABLE>
<CAPTION>
Program/Version License Fee
- - --------------- -----------
<S> <C>
HR Steam: Personnel $32,800.00
$32,800.00 per 50 Standard Users
$32,800.00 per 100 Casual Users
HR Steam: Payroll (when $32,800.00
available) $32,800.00 per 50 Standard Users
$32,800.00 per 100 Casual Users
HR Steam: Benefits (when $32,800.00
available) $32,800.00 per 50 Standard Users
$32,800.00 per 100 Casual Users
</TABLE>
d. Customer shall exercise its option(s) by execution of a
Supplement to the License Agreement and by contemporaneously
paying D&B the applicable fees in accordance with the terms of
such Supplement.
9. For a period of three (3)years from the date of this Supplement, the
fee charged Customer per year for maintenance shall not increase over
the prior year's maintenance fee by more than five percent (5%) over
the prior year's percentage increase in the Consumer Price Index.
10. Prior to D&B's shipment of the Programs listed on this Supplement to
Customer, Customer shall provide D&B with all reasonably necessary
information pertaining to the Operating Environment.
11. Upon general availability of the 3.1 version of the Program(s) licensed
on this Supplement, and upon Customer's request, D&B shall ship such
version of the Program(s) to Customer for no additional license fee so
long as Customer is current on support and maintenance.
12. Subject to Section 7.2 of the License Agreement, Customer agrees to
host one (1) site visit per month in 1996, so long as Customer agrees
in advance to the date(s) of such visits.
13. This offer is valid only until May 26, 1995.
14. All other terms and conditions of the License Agreement shall remain in
full force and effect.
GALILEO INTERNATIONAL PARTNERSHIP DUN & BRADSTREET SOFTWARE
CUSTOMER SERVICES INC.
By:______________________________ By:_________________________________
Name:____________________________ Name:_______________________________
Title:___________________________ Title:______________________________
Date:____________________________ Date:_______________________________
<PAGE> 13
D&B SOFTWARE
425 North Martingale Road, Schaumburg, IL 60173
(708) 995-7300
October 4, 1995
Mr. Doug Allen
Galileo International
9700 West Higgins Road
Rosemont, IL 60018
Dear Doug:
Dun & Bradstreet Software (DBS) welcomes the opportunity again to provide
Galileo International with consulting services requested during a previous
discussion, regarding the establishment and use of the Allocations module as it
relates to the business needs and allocation methodology at Galileo
International.
Our Understanding
An allocation methodology is being developed and proposed within Galileo
International. A review of the methodology is currently being conducted with the
assistance of Arthur Anderson LLP consultant. DBS will provide the services of
a SmartStream Allocation consultant to review, discuss and make recommendations
on any issues which may arise during the mapping of the methodology. Upon final
approval of the recommend methodology and approach, the DBS consultant will
assist in the development and implementations of the module.
OBJECTIVES
The objective of this engagement is to provide Galileo International with the
product expertise services required to develop and implement the SmartStream
Allocation module by:
- Assist in the review of the proposed methodology and bring forth
recommendations and approaches as they pertain to the allocation
module.
- Mapping and developing the Allocation module to incorporate the
methodology.
- Building and testing the developed allocations to ensure expected
results.
- Review reporting requirements and recommend tools applicable to the
reports.
DUN & BRADSTREET SOFTWARE
<PAGE> 14
Mr. Doug Allen
October 4, 1995
Page 2
SCOPE AND APPROACH
The scope is the framework under which the allocation implementation plan will
be developed in conjunction with the Financial Stream implementation plan. A
more general definition of the scope includes:
- Run UDAK on client stations for reporting purposes and ensure user
workstations are set-up appropriately for Allocation.
- DBS education of the project term on Allocation.
- Assistance with the review of the proposed allocation methodology.
- Advise on design of the allocations within the module.
- Development and test application.
To accomplish the project scope, D&B Software will work closely with the Galileo
project team throughout the project to support the development and
implementation of the SmartStream Allocation module. Our assistance will focus
on providing education and consulting services on how best to implement the
allocation solution consistent with Galileo's business and systems objectives.
Our assistance will be as follows:
Provide onsite education for the allocation project team.
Transfer product and technical knowledge to the project team through consulting
services.
Provide consulting services to review methodology, design, build and test the
allocation routines.
Review project outputs and deliverables developed by the project team to ensure
that they are in compliance with SmartStream system capabilities.
DBS engagement management will:
- Coordinate / schedule DBS resources
- Resolve product / support issues
- Attend periodic project status meetings
- Enable transfer of knowledge to project team personnel
- Meet / converse with Galileo project sponsors to discuss project issues
and progress
- Perform other engagement management services as may be required
- Assist in the definition of policy requirements for allocations that
will control Galileo's use of Allocation features
- Participate in the definition of the allocations
<PAGE> 15
Mr. Doug Allen
October 4, 1995
Page 3
-- Participate in the design and definition of the allocations
-- Make recommendations on how to effectively use SmartStream software for
the purpose of the Allocation module
-- Participate in the implementation tasks of SmartStream Allocations over
the life of the project.
FEES AND TIME ESTIMATES
The fees and estimates outlined in this proposal are an estimate of what would
be required from DSS to facilitate the implementation of the Allocation
module, which includes education and application services, as well as project
management. Our fees are based on actual number of hours worked. This includes
on-site hours and any office time associated with follow-up activities as well
as reasonable travel and living expenses, when applicable. The resource
requirements and assumptions specified in this document are as a minimum
essential to the success of this project. The following proposed level of D&B
Software consulting:
<TABLE>
<S> <C> <C>
Engagement Management 5 days $ 6,400
Consulting: Review & design 15 days $17,400
Build and Test 20 days $23,200
-------
$47,000
TOTAL: 2 days of education services (as per previously negotiated
education engagement)
</TABLE>
Should it be determined that our consulting fees will exceed estimates, we will
notify you promptly and obtain your approval before incurring additional costs.
The estimates contained in this engagement letter are based on the requirements
listed in the assumptions being agreed to by the Galileo International. Changes
in project scope or activities that would result in additional fees will be
submitted to Galileo for review by the Engagement Manager for approval prior to
additional work to be performed. Our fees are based on actual number of hours
worked which includes on A site time and some office time associated with
follow-up activities. As well, the above time is presented as an estimate of
the effort and not a commitment to purchase.
D&B Software requires two weeks advance notice before resources can be assigned.
Cancellation of services requires one week notice. Failure to give such notice
will result in a billing for fifty percent of the time scheduled.
This letter is subject to the terms and conditions, attached, of the Services
Agreement entered into between Galileo International and Dun & Bradstreet
Software Services, Inc. on May 3, 1995.
<PAGE> 16
Mr. Doug Allen
October 4, 1995
Page 4
NEXT STEPS
To accept the engagement as detailed in this letter, we have provided two
originals. Please sign both originals and return them to me in the Schaumburg
Office. When we receive the signed letters, we will complete the acceptance
sections and return one copy with original signatures for your files.
In closing, we at Dun & Bradstreet are looking forward to continuing our work
with Galileo on this project and into the future. It is critical for us not only
to assist you in this phase of the project, but to ensure "Transfer of
Knowledge" takes place when our services are used. Please contact me at (613)
748-0909 if you have any questions.
Sincerely,
Sandra Monette
DBS Engagement Manager
cc: Kathy Ameche
Lou Meshulam
Enclosure: Professional Terms and Conditions
ALLOCATIONS MODULE
IMPLEMENTATION
Total Services Cost $47,000.
ACCEPTED:
GALILEO INTERNATIONAL DUN & BRADSTREET SOFTWARE SERVICES, INC.
By:____________________________ By: ___________________________________
Authorized Representative Authorized Representative
Name Printed: Ken Mueller Name Printed: _________________________
Title: Corporate Controller Title: ________________________________
Date: 11/1/95 Date: _________________________________
<PAGE> 17
================================================================================
DUN & BRADSTREET SOFTWARE SERVICES, INC.
PROFESSIONAL SERVICES TERMS AND CONDITIONS
================================================================================
The following terms and conditions shall govern the attached Letter Agreement
between Dun & Bradstreet Software Services, Inc. (DBS) and Galileo
International (Customer).
1. Rights to Programs, DBS shall retain all right and title to any
computer programs developed hereunder and shall have the right to
incorporate such programs in work for the other customers and in its
programs generally. Upon payment of DBS's charges hereunder, Customer
shall have a nontransferable license to use such programs for its and
its affiliated companies' internal data processing. Nothing in the
Agreement shall be construed as restraining DBS, its employees, agents,
or subcontractors in the use of the techniques and skills of computer
programming and design which may be acquired in the course of
performance of this Agreement or providing Customer with any rights in
the DBS proprietary programs in which Customer's programs may be
written.
2. Confidentiality, DBS and Customer shall maintain the confidentiality of
all information of DBS and Customer which at the time of first
disclosure to DBS or Customer is clearly identified as confidential to
the same extent that DBS and Customer keep confidential such
information relating to their own business. DBS shall not be required
to keep as confidential information which is, or becomes, publicly
known, is already within DBS's possession or knowledge, is
independently developed by DBS outside the scope hereof, is rightfully
obtained from third parties, or after three (3) years from the
completion of the engagement for which the information was disclosed.
3. Limitation of Liability, In no event shall DBS be liable to Customer
for incidental, special, or consequential damages arising out of,
resulting from, or in any way connected with, the performance or breach
of this Agreement (regardless of the form of action) even if DBS has
been advised of the possibility of such damages. DBS's liability to
Customer for any cause whatsoever, and regardless of the form of action
(including negligence), arising out of, resulting from, or in any way
connected with, the performance or breach of the Agreement shall in no
event exceed the amount actually paid for the portion of the services
involved (or, if greater, $25,000). Copyright - D&B Software - 1991 -
All Rights Reserved. This is unpublished material and contains trade
secrets and is subject to a confidentiality agreement. The unauthorized
possession, use, reproduction, distribution, display or disclosure of
this material or information contained herein is prohibited.
<PAGE> 18
D&B SOFTWARE
425 North Martingale Road, Schaumburg, IL 60173
(708) 995-7300
May 1, 1995
Mr. Doug Allen
U.S. Controller
Galileo International
9700 West Higgins Road Ste 400
Rosemont, IL 60018
Dear Doug:
Thank you for taking the time to discuss the Financial Management Systems
project with myself and members of Dun & Bradstreet Software (D&B Software). We
appreciate the time you and members of Galileo International (Galileo) have
spent with us reviewing your goals and objectives. Our discussions have helped
us understand Galileo's business issues and timing.
Galileo has made the decision to implement D&B Software's FinancialStream,
Decision Support, HR Stream, Purchasing and Inventory applications on a global
basis. It is our understanding that it is Galileo's objective to implement the
FinancialStream applications in Chicago and Swindon by January 31, 1996. In
order to support this initiative it has been decided that the implementation
approach will be to complete a Business Process Simulation first with a roll-out
to the two locations to follow.
In order to support the Business Process Simulation we have all agreed that a
two-phased approach to the project will be employed. The first phase will be a
planning and analysis project to provide the blueprints for the remainder of the
simulation. Based upon the results of this initial phase, Galileo will be able
to confidently plan the resource and system requirements needed to achieve your
goals.
This engagement letter describes the project objectives, scope and approach, our
respective roles and responsibilities and our estimated fees.
PROJECT OBJECTIVES
The primary objectives of the planning project are to:
- Develop a high-level workplan to support the successful completion of
the Business Process Simulation of the FinancialStream and Decision
Support systems.
- Define the resource commitments required by Finance, Business Systems
Development, Information Systems, and D&B Software personnel to meet
the simulations goals.
Dun & Bradstreet Software
<PAGE> 19
Mr. Doug Allen
May 1, 1995
Page 2
BENEFITS
The benefits to Galileo for utilizing D&B Software services in this two-phased
implementation approach include:
- Ensure that the appropriate resource requirements are identified to
achieve the target simulation completion date of August 31, 1995.
- Empower Galileo with the knowledge and skills to successfully implement
and maintain the systems on an ongoing basis.
- Leverage D&B Software's experience in implementing SmartStream and
FinancialStream in similar environments.
- Further strengthen the business partnership between Galileo and D&B
Software.
SCOPE AND APPROACH
SCOPE
D&B Software's involvement will be to advise and participate in the planning and
analysis phase of the business process simulation and will include:
- Facilitate and participate in a project planning workshop.
- Define the project "scope" - what is, and what is not included in the
business process simulation prepared by Arthur Anderson.
- Participate in developing the tasks, time frames and resource
requirements to achieve Galileo's simulation's goals.
- Develop the project planning workshop deliverables.
APPROACH
The scope will be accomplished by conducting a project planning workshop and
developing the phase deliverables. A project planning workshop is scheduled for
May 2 - 3, 1995 and will be conducted by D&B Software at the Galileo offices.
Exhibit 1 in the attachment outlines the agenda to be followed during the two
day workshop. The purpose of the project planning workshop will be to review the
project scope and implementation approach as well as to define the project
constraints, objectives, benefits, assumptions, timeframes, project
organization chart, resource requirements and deliverables for the business
process simulation.
At the conclusion of this phase, D&B Software will be able to determine
<PAGE> 20
Mr. Doug Allen
May 1, 1995
Page 3
resource requirements, timeframes and fees for the remainder of the business
process simulation.
DELIVERABLES
The primary deliverables from this phase include:
Project Definition Document - contains the project issues, scope, assumptions,
organization chart, deliverables, risks and project administration procedures.
Project Plan - contains high-level tasks and timeframes for the business
process simulation. Resource requirements for Finance, Business Systems
Development, Information Systems, Arthur Anderson and D&B Software personnel are
an integral component of the plan. Major project milestones will also be
identified.
ROLES AND RESPONSIBILITIES
D&B Software will take the lead role during this phase of the project. We will
provide the expertise and guidance in conducting the workshop and developing the
phase deliverables. D&B Software will utilize the resources best able to
contribute to the project, including:
Project Manager - will coordinate our resources, ensure that the scope is
consistent with Galileo's overall project objectives and address any issues that
are identified during the workshop. We will also have an additional Senior
Project Manager present to facilitate the workshop.
Application Consultant - will work with the project team to provide knowledge
and business expertise to utilize the software consistent with Galileo's
business objectives. Our consultant will have responsibility for the development
of the deliverables.
Galileo's responsibility in this first phase of the project is to provide the
resources and required information on a timely basis in order to meet the
project deadline. Management's support and a timely decision-making process are
necessary to achieve the simulation's objectives. At minimum we are anticipating
the following participation from Galileo:
Project Sponsor - this person is ultimately responsible for the overall success
of this effort. In this role, the project sponsor will provide the leadership
and guidance necessary to support the ongoing efforts of this project.
Project Manager - responsible for managing all aspects of the project. The
Project Manager is responsible for assuring that the project deliverables
<PAGE> 21
Mr. Doug Allen
May 1, 1995
Page 4
meets the needs of the Galileo organization. Our Project Manager will work
closely with this individual to assist in this process and to make sure that the
appropriate D&B Software approach and resources are being applied to this
effort.
User and Implementation Support - representatives from the user community that
understand the current processing and will be an ongoing member of the
implementation team. Our application consultant will work closely with these
individuals in developing the solution that best fits Galileo's objectives.
ASSUMPTIONS
The success of the workshop and the estimate of our professional services is
based on several assumptions. The following is a list of those assumptions:
Required resources will be available to attend the project planning
workshop and respond to follow-up questions when needed.
D&B Software will be responsible for producing the deliverable outputs
from the Project Planning Workshop.
Workshop discussion will focus on the business process simulation
activities of the FinancialStream and Decision Support implementation
project.
Additional D&B Software personnel required to complete the business
process simulation will be identified during the workshop and a follow-
up services agreement will be developed.
FEE AND TIME ESTIMATES
We estimated the fees associated with performing the activities proposed based
on the scope and approach of this phase. Our fees are based on actual number of
hours worked which includes onsite time and some office time associated with
follow-up activities.
We estimate that our total professional services fees for this project will be
between $15,000 - 17,000, plus reasonable travel and living expenses. We
anticipate providing a draft copy of the deliverables to Galileo within five
working days after the end of the workshop.
To conduct the workshop, Galileo should provide a meeting room large enough to
accommodate the participants, and business supplies including a whiteboard,
flipcharts and overhead projector. A monitor or projection unit for a laptop may
also be required.
<PAGE> 22
Mr. Doug Allen
May 1, 1995
Page 5
Billing will occur on a monthly basis for the work performed. Out of pocket
expenses are not included in these fees, and will be billed separately. It is
D&B Software's practice to invoice and collect monthly for the professional
services and expenses associated with an engagement. Any changes to the approach
or scope outlined in this letter may have an impact on the overall effort and
its associated cost. Changes in project scope or activities that will result in
additional fees will be submitted to the Project manager for approval prior to
additional work to be performed.
The Professional Service Terms and Conditions attached are an integral part of
this letter.
NEXT STEPS
To accept the engagement as detailed in this letter, we have provided two
originals. Please sign both originals and return them to them in the Schaumburg
Office. Once we have received the signed letters, we will complete the
acceptance sections and return one copy with original signatures for your files.
<PAGE> 23
Mr. Doug Allen
May 1, 1995
Page 6
We at Dun & Bradstreet Software value your business and look forward to
furthering our relationship with Galileo International through a successful
implementation of the FinancialStream and Decision Support applications. If you
have any questions, please feel free to contact me at (708) 995-7524.
Sincerely,
H. Kathleen Ameche
Consulting Manager
cc: L. Meshulam
K. Farb
Exhibit 1 - Project Planning Workshop Agenda
Exhibit 2 - Professional Services Terms and Conditions
ACCEPTED:
GALILEO INTERNATIONAL DUN & BRADSTREET SOFTWARE SERVICES, INC.
By: ____________________________ By: ___________________________________
Authorized Representative Authorized Representative
Name Printed: Douglas J. Allen Name Printed: Sharon K. Poturica
Title: U.S. Controller Title: Client Consulting Manager
Date: May 3, 1995 Date: June 23, 1995
<PAGE> 24
EXHIBIT 1
GALILEO INTERNATIONAL
PROJECT PLANNING WORKSHOP
AGENDA
Day 1 8:30am - 5:00pm
- Agenda Overview
- Introductions
- Workshop Objectives/Expectations
- Project Scope
- Implementation Approach
- Project Constraints
- Project Assumptions
- Project Objectives
- Project Issues
- Project Organization/Responsibilities
- Success Definition/Success Factors
Day 2 8:30am - 5:00pm
- Project Administration
- Project management procedures Overview
- Implementation Activities and Assignments
- High-level Plan
- Assignment of Issue Resolution (dates)
- Follow-up Action Items
- Closure
May 2 - 3, 1995
Galileo International
9700 West Higgins Road Ste 400
Rosemont, IL 60018
<PAGE> 25
EXHIBIT 2
================================================================================
DUN & BRADSTREET SOFTWARE SERVICES, INC.
PROFESSIONAL SERVICES TERMS AND CONDITIONS
================================================================================
The following terms and conditions shall govern the attached Letter Agreement
between Dun & Bradstreet Software Services, Inc. (DBS) and Galileo
International (Customer).
1. Rights to Programs, DBS shall retain all right and title to any
computer programs developed hereunder and shall have the right to
incorporate such programs in work for other customers and in its
programs generally. Upon payment of DBS's charges hereunder, Customer
shall have a nontransferable license to use such programs for its and
its affiliated companies' internal data processing. Nothing in the
Agreement shall be construed as retraining DBS, its employees, agents,
or subcontractors in the use of the techniques and skills of computer
programming and design which may be acquired in the course of
performance of this Agreement or providing Customer with any rights in
the DBS proprietary programs in which Customer's programs may be
written.
2. Confidentiality, DBS and Customer shall maintain the confidentiality of
all information of DBS and Customer which at the time of first
disclosure to DBS or Customer is clearly identified as confidential to
the same extent that DBS and Customer keep confidential such
information relating to their own business. DBS shall not be required
to keep as confidential information which is, or becomes, publicly
known, is already within DBS's possession or knowledge, is
independently developed by DBS outside the scope hereof, is rightfully
obtained from third parties, or after three (3) years from the
completion of the engagement for which the information was disclosed.
3. Limitation of Liability, In no event shall DBS be liable to Customer
for incidental, special, or consequential damages arising out of,
resulting from, or in any way connected with, the performance or breach
of this Agreement (regardless of the form of action) even if DBS has
been advised of the possibility of such damages. DBS's liability to
Customer for any cause whatsoever, and regardless of the form of action
(including negligence), arising out of, resulting from, or in any way
connected with, the performance or breach of the Agreement shall in no
event exceed the amount actually paid for the portion of the services
involved (or, if greater, $25,000). Copyright - D&B Software - 1991 -
All Rights Reserved. This is unpublished material and contains trade
secrets and is subject to a confidentiality agreement. The unauthorized
possession, use, reproduction, distribution, display or disclosure of
this material or information contained herein is prohibited.
<PAGE> 1
Exhibit 10.27
COVER AGREEMENT
FOR
SPRINT DATA COMMUNICATIONS PRODUCTS AND SERVICES
This Cover Agreement ("Agreement") is entered into by and between Sprint
Communications Company L.P. ("Sprint") with offices at 13221 Woodland Park Road,
Herndon, VA 22071, and Galileo International Partnership ("Customer") with
offices at 5350 S. Valentia Way, Englewood, Colorado 80111, on the date signed
by both parties below.
WHEREAS, Sprint offers certain telecommunications products and
services, specifically International Private Line (IPL) products and services
(hereinafter the "Products and Services"): and
WHEREAS, Customer has placed orders and may place additional orders
with Sprint for the Products and Services; and
WHEREAS, Customer wishes to establish new prices and certain terms
with respect to the Products and Services ordered and any future Products and
Services to be ordered.
NOW THEREFORE, the parties hereby agree to the following:
1. PURPOSE AND INTENT
The purpose of this Agreement is to establish special prices and certain
terms relative to the Products and Services ordered and to be ordered by
Customer during the Term of this Agreement. Customer shall order the
Products and Services by executing Sprint's standard Clearline Private
Line Application for Service form ("Orders"). The parties agree that all
Orders placed for Products and Services shall be subject to the special
prices and terms set forth herein. It is understood and agreed that this
Agreement shall not supersede the terms and conditions of each Order, but
rather shall supplement such Orders to the extent set forth in this
Agreement.
2. TERM
The term of this Agreement shall begin on the date signed by both parties
below ("Effective Date") and shall end one (1) year thereafter, unless
extended by mutual written agreement of the parties. Except for IPL
circuits to Amsterdam, Netherlands, the term for all existing IPL circuits
shall be extended for a minimum term of one (1) year beginning on the
Effective Date. The term for the IPL circuit to Amsterdam, Netherlands
shall be on a month-to-month basis, cancelable upon thirty (30) days
written notice to Sprint. Any new IPL circuits ordered during the Term of
this Agreement shall have a minimum term of one (1) year.
- - --------------------------------------------------------------------------------
SPRINT PROPRIETARY INFORMATION
- - --------------------------------------------------------------------------------
Cover Agreement - Galileo International
1
<PAGE> 2
3. PRICES
A. The following prices shall be applied to the existing IPL circuits
ordered by Customer beginning September 1,1996 provided that the
Effective Date of this Agreement is on or before October 15, 1996,
otherwise such prices shall be applied in the first month following
the Effective Date of this Agreement:
Sprint Half-Circuit
IPL City Pairs IPL Bandwidth Monthly Recurring Charge
-------------- ------------- ------------------------
Denver, CO to UK 1,544 Kbps $21,900.00 each
Denver, CO to Amsterdam, NE 384 Kbps $10,060.00 each
Denver, CO to Zurich, SWITZ 384 Kbps $10,060.00 each
Denver, CO to Rome, IT 384 Kbps $10,060.00 each
Denver, CO to Rome, IT 256 Kbps $ 7,660.00 each
The prices above are in U.S. Dollars. The prices above do not
include charges for Local Access Facilities or charges for the
half-circuit provided by the foreign carrier. If provided by Sprint,
the monthly charges for T-1 access in Denver are as follows:
Service One-Time Charge Monthly Recurring Charge
------- --------------- ------------------------
T-1 (303-799) Waived $ 361.00(Tariff 8)
COC Waived $ 157.00
ACF Waived $ 78.00
B8ZS $ 0.00 $ 5.00
B. If ordered by Customer, Sprint shall provide the following Customer
Premise Equipment (CPE) for rent in the U.S. at the corresponding
charges (minimum term is one year):
CPE One-Time Monthly Recurring Charge
--- -------- ------------------------
CSU (SP3110) Waived $ 110.00
Channel Bank (SP3210) $ 500.00 $ 320.00
C. Sprint shall apply the following discounts to the Sprint-provided
half-circuit portion of the monthly recurring charges (not including
Local Access Charges) based on (i) the total bandwidth of all IPL
circuits ordered during the term of this Agreement and, (ii) the
term of the IPL circuit.
Total Bandwidth Term of IPL Circuit
= or > < One Year Three Year Five Year
------ ------ -------- ---------- ---------
0 Mbps 4 Mbps 15% 20% 25%
4 Mbps 6 Mbps 22% 27% 32%
6 Mbps 8 Mbps 25% 30% 35%
8 Mbps -- 30% 35% 40%
- - --------------------------------------------------------------------------------
SPRINT PROPRIETARY INFORMATION
- - --------------------------------------------------------------------------------
Cover Agreement - Galileo International
2
<PAGE> 3
The discounted charges shall be determined as follows:
(i) Customer shall receive the applicable discount on all Orders
placed by Customer as of the Effective Date of this Agreement
based on the total bandwidth of all such Orders as of the
Effective Date. If the existing IPL circuits and quantities
ordered by Customer remain in place as of the Effective Date
of this Agreement, then the discount shall be based on the 4
Mbps to 6 Mbps level above. Except as otherwise specified in
Section 3(D) below, such discounted price shall remain fixed
for the term of such existing IPL circuits.
(ii) Customer shall receive the applicable discount on each new
Order placed after the Effective Date of this Agreement based
on the total bandwidth of all Orders in effect as of the date
of such new Order (including the bandwidth of the new Order)
and the term of the IPL circuit.
D. Customer may, at anytime upon thirty (30) days advance written
notice, terminate IPL circuits (up to an aggregate of 768 Kbps of
IPL bandwidth) provided by Sprint under Orders in effect as of the
Effective Date of this Agreement without incurring any termination
liability, except for any termination liability incurred by Sprint
from the foreign service providers if applicable, provided however,
that the half-circuit monthly recurring charges for all remaining
IPL circuits shall be adjusted if the reduced level of total
bandwidth after such termination reflects a lower discount level as
set forth in Section 3 (C) above.
E. Price Notes
1. All new circuits ordered are subject to availability.
2. Any applicable taxes, duties or levies are not included in the
prices.
3. All prices are subject to future tariff changes.
4. All prices are in U.S. dollars and are payable in U.S.
dollars.
F. Taxes and Duties
The prices set forth in this Agreement do not include any country,
state, departmental, city, local or other taxes, duties or imposts
however designated. Customer shall bear the ultimate cost of, and
Sprint shall invoice Customer for, any such taxes paid or payable by
Sprint with respect to the Products and Services, irrespective of
the country in which, or the authority to which, such taxes are paid
or payable. Sprint will delineate and provide backup information, if
available, any such taxes on the Customer invoice at the time of
billing. Sprint will provide any documentation reasonably requested
by Customer and available to Sprint should Customer have a dispute
with the local taxing authority, in order to make a legitimate claim
for refund, at Customers expense.
G. Purchase Commitment
Customer is under no commitment to Order more than $950,000 of
Products and Service during the Term of this Agreement.
4. SERVICE LEVEL AGREEMENT
Attachment A to this Cover Agreement sets forth the Circuit Availability
Service Level Agreement (SLA) which shall be applicable to the Products
and Services covered under this Agreement for a period of one (1) year
beginning on the Effective date of this Cover Agreement.
- - --------------------------------------------------------------------------------
SPRINT PROPRIETARY INFORMATION
- - --------------------------------------------------------------------------------
Cover Agreement - Galileo International
3
<PAGE> 4
5. CONFIDENTIALITY
A. The subject matter of this Agreement is confidential, and neither
party shall, without the prior written consent of the other party,
disclose the contents of this Agreement except to such of its
employees as need to know its contents, and who are parties to a
written agreement prohibiting the disclosure of such confidential
information, or as required by law.
6. LIABILITY
A. Neither party shall be liable to the other, and each hereby waives
and releases any claims against the other party, for any special,
incidental, punitive or consequential damages, including without
limitation lost revenues, lost profit or loss of prospective
economic advantage, arising from performance or failure to perform
under this Agreement.
7. ASSIGNMENT
Either party may assign its interest in this Agreement with prior
written consent of the other party, which shall not be unreasonably
withheld. However, either party may, on written notice, assign its
interest in this Agreement to its parent entity or to an affiliated
entity owned by a common parent in connection with the transfer of
all or substantially all of such party's business and assets to such
entity. Customer may assign this Agreement to a successor company if
Customer provides Sprint with written notice of the proposed
assignment, and Sprint has not, within forty-five (45) days of
receipt of such notice, notified Customer that it does not accept
the proposed assignment.
8. ENTIRE AGREEMENT
A. This Cover Agreement represents the entire agreement of the parties
with respect to the subject matter stated herein, and supersedes all
other previous agreements, understandings, statements,
communications or representations, whether oral or written. This
Cover Agreement may not be modified, changed or amended without the
prior written agreement of both parties.
B. This Cover Agreement and the Orders will represent the entire
agreement of the parties with respect to Sprint's provision of the
Products and Services to Customer. In the event of any conflict
between the Orders and the terms of this Cover Agreement, the terms
of this Cover Agreement shall govern.
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SPRINT PROPRIETARY INFORMATION
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Cover Agreement - Galileo International
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto, each by a duly authorized officer, have
caused this Cover Agreement to be executed as of the date signed by both parties
below.
Galileo International Partnership Sprint Communications Company L.P.
By: By:
/s/ Lori M. Tobin /s/ Paul Gray
- - --------------------------------- ---------------------------------
Signature Signature
Lori M. Tobin Paul Gray
- - --------------------------------- ---------------------------------
Name Typed or Printed Name Typed or Printed
U.S. Purchasing Manager Regional Director
- - --------------------------------- ---------------------------------
Title Title
8 October, 1996 October 8, 1996
- - --------------------------------- ---------------------------------
Date Date
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SPRINT PROPRIETARY INFORMATION
- - --------------------------------------------------------------------------------
Cover Agreement - Galileo International
5
<PAGE> 6
ATTACHMENT A
TO COVER AGREEMENT
INTERNATIONAL PRIVATE LINE PRODUCTS AND SERVICES
Circuit Availability Service Level Agreement
1. Service Level Agreement
This Service Level Agreement covers the Sprint-provided portion of the IPL
circuit between sites located within the United States and sites located
outside the United States ("IPL Half-Circuit"). Sprint is committed to
maintain an availability of 99.8% for each IPL Half-Circuit provided to
Customer under this Agreement. Sprint shall measure availability and
report on the performance of the IPL Half-Circuits in accordance with
Section 5 below.
2. Calculation
The calculation for availability of an IPL Half-Circuit for a given month
shall be as follows:
IPL Half-Circuit Outage Time
1 - ---------------------------- = Availability
(24 Hours x Days in Month)
3. Components Included
The performance of the following components shall be included in the
determination of the availability:
- All components of the Sprint provided IPL Half-Circuit.
- Sprint-provided local access facilities in the United States.
- Sprint-provided Customer Premise Equipment ("CPE") located in the
United States.
4. Components Excluded
The following shall be excluded from any network outage time when
calculating availability under this Service Level Agreement:
- The failure of any components of the IPL circuit provided by the
foreign carrier.
- The failure of any CPE not provided by Sprint or located outside the
United States.
- The failure of any components located beyond the Customer side of
the telco demarcation point or the Sprint-provided CPE.
- The failure of any components which cannot be corrected by Sprint
due to the inaccessibility of the Customer or causes beyond the
reasonable control of Sprint.
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SPRINT PROPRIETARY INFORMATION
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Cover Agreement - Galileo International
1
<PAGE> 7
5. Availability Measurement and Remedies
A. Availability is measured based on the total outage time of the
affected circuit subject to the included and excluded components set
forth herein. An outage condition shall exist when a Customer site
is unable to transmit data as recorded in the Sprint Trouble
Reporting System ("TRS"). An outage condition begins at the time the
outage condition is reported to Sprint by Customer or when Sprint
identifies an outage condition. Sprint will analyze the trouble
ticket in the TRS to determine the duration of outage time. Outage
time is measured from the time the outage is reported to Sprint by
Customer to the time the circuit is available for traffic. Trouble
tickets for an outage condition of an IPL Half-Circuit in which no
trouble is found (NTF), and such outage is longer than one-half-hour
in duration shall be used in the calculation of availability. All
other NTFs shall not be used in the determination of availability
B. Sprint shall provide Customer a report of the availability of each
of the IPL Half-Circuits on a monthly basis within fifteen (15)
working days from the last day of the month covered in the report.
Sprint and Customer will meet monthly to review the performance
reports of the IPL Half-Circuits and reach agreement on the
availability of each IPL Half Circuit. These meetings will be held
at mutually agreeable locations and each party shall pay its own
expenses.
C. Upon agreement that the calculated availability of the Sprint
provided portion of the IPL circuit is below 99.8% for a given
month, Sprint shall evaluate the network and take corrective action
to remedy the problem or problems. Customer shall be notified of the
action undertaken by Sprint within fifteen (15) working days from
the date Sprint and Customer verified such non-performance.
D. If the availability of the Sprint provided IPL Half-Circuit remains
below 99.8% for the month following Sprint's non-performance, then
Customer may, upon thirty (30) days advance written notice to
Sprint, terminate the affected circuit or circuits with no further
liability to either party, except for the Customer's payment to
Sprint for Products and Services delivered up to the effective date
of termination plus any liability incurred by Sprint from the
foreign carriers due to such termination.
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SPRINT PROPRIETARY INFORMATION
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Cover Agreement - Galileo International
2
<PAGE> 1
Exhibit 10.28
AGREEMENT FOR TELECOMMUNICATIONS SERVICES
THIS AGREEMENT is made with effect from the Effective Date
BETWEEN: Societe Internationale de Telecommunications Aeronautiques, a Belgian
cooperative corporation with its registered office at 14, avenue Henri Matisse,
1140 Brussels, Belgium and registered with the Registry of Companies of Brussels
under the number B 217.548 (hereinafter referred to as "SITA");
AND: The Galileo International Partnership, having offices at 5350 South
Valentia Way, Englewood, Colorado 80111 (hereinafter referred to as "Galileo")
1. Introduction
1.1 Galileo is a member of SITA and presently takes telecommunications
services from SITA.
1.2 The purpose of this Agreement is to set out the terms and conditions
applicable to the supply by SITA to Galileo of Galileo's requirements for
telecommunications services as more particularly described in Part One of
the Exhibit.
1.3 The service consisting of the supply of such requirements is referred to
in this Agreement as "Services".
1.4 Additional terms and conditions applicable to the supply of Services are
set out in Part Three of the Exhibit.
2. Effective Date and Term
2.1 This Agreement has effect as from the first day of January 1996 (the
"Effective Date").
2.2 Subject to paragraph A.1 of Part Three of the Exhibit, the initial term of
this Agreement is three (3) years from the Effective Date. This Agreement
is automatically extended for successive terms each of one (1) year,
unless a party notifies the other, in writing, of its intention not to
extend this Agreement, at least three (3) months before the end of the
then current term.
3. Services
<PAGE> 2
Page 2
3.1 SITA shall provide Services in accordance with its obligations to Galileo
as a Member of SITA pursuant to the TEL 1/2 Agreement concluded between
Galileo and SITA, as it is modified by this Agreement, and as provided in
paragraph 8.1.
3.2 In particular, SITA shall:
(a) on behalf of Galileo, order, pay for, and administer the continued
provision of, local circuits from the relevant Post, Telephone and
Telegraph utility ("PTT") responsible for providing them, monitor
the installation of such circuits, and order and monitor the
installation of modems where such installation by SITA is
prohibited;
(b) install and maintain SITA modems, except as provided in paragraph
3.2(a); and
(c) provide such assistance as Galileo may reasonably require in
connecting Galileo's sites to SITA service centers and in testing
the operation of such local links and of the Services generally.
4. Charges
4.1 In consideration of the supply of Services by SITA to Galileo, Galileo
shall pay to SITA the charges set out in Part Two of the Exhibit, instead
of the amounts which would otherwise be payable for the provision of
Services under SITA's Schedule of Charges in effect from time to time
("SOC").
4.2 Amounts payable by Galileo pursuant to paragraph 4.1 are referred to in
this Agreement as "Charges".
4.3 Charges are payable in United States dollars.
4.4 Charges payable pursuant to this Agreement do not include any country,
state, departmental, city, local or other taxes, duties or imposts however
designated. Galileo shall bear the ultimate cost of, and SITA shall
invoice Galileo for, any such taxes paid or payable by SITA with respect
to Services, irrespective of the country in which, or the authority to
which, such taxes are paid or payable. SITA will provide backup for taxes
invoiced to Galileo at the time of billing. SITA will provide any
paperwork reasonably requested by Galileo should Galileo have a dispute
with the local taxing authority, in order to make a legitimate claim for
refund, at Galileo's cost.
<PAGE> 3
Page 3
4.5 SITA may modify Charges payable pursuant to paragraph 4.1 at the end of
the initial three-year term of this Agreement, and annually thereafter,
upon four (4) months' notice to Galileo.
5. Billing
5.1 SITA shall include in its invoices currently delivered to Galileo for
services as referred to in paragraph 1.1, amounts payable for Services
rendered under this Agreement, including any amounts payable pursuant to
paragraph 3.2(a).
6. Confidentiality
6.1 The subject matter of this Agreement is confidential, and neither party
shall, without the prior written consent of the other party, disclose the
contents of this Agreement except to such of its employees as need to know
its contents and who are parties to a written agreement prohibiting the
disclosure of such confidential information, or as required by law.
6.2 Either party may announce the fact and time of having concluded this
Agreement, without including any of its specific terms.
7. Liability
7.1 Neither party shall be liable to the other, and each party hereby waives
and releases any claims against the other party, for any special,
incidental, punitive or consequential damages, including without
limitation lost revenues, lost profit or loss of prospective economic
advantage, arising from performance or failure to perform under this
Agreement.
<PAGE> 4
Page 4
8. Miscellaneous
8.1 Except to the extent that its terms may be inconsistent with this
Agreement (in which case this Agreement prevails), SITA's TEL 1/2 contract
governing the supply of its services to its members applies to the
Services.
8.2 This Agreement constitutes the entire agreement of the parties with
respect to Services and supersedes any and all prior or contemporaneous
proposals, agreements and negotiations, whether written or oral, with
respect thereto except as referenced herein in Part Three, item 6., the
CPE-AM Service Agreement of March 23, 1994, and the section titled
"Article 6: Performance and Reliability Norms" located in the
Telecommunications Agreement (MDNS) dated February 28, 1992. This
Agreement may be modified only by the written agreement of the parties.
8.3 Either party may assign its interest in this Agreement with the prior
written consent of the other party, which shall not be unreasonably
withheld. However, either party may assign its interest in this Agreement
to a successor to its business or affiliate without prior written consent
provided, in the case of a purported assignment by Galileo, that the
assignee is, or is entitled to become and becomes, a member of SITA.
IN WITNESS WHEREOF each party has executed this Agreement
Societe Internationale de Telecommunications The Galileo International
Aeronautiques Partnership
By: /s/ By: /s/
-------------------------- ---------------------------
Title: VP & General Manager Title: President
North American Region
Date: April 25, 1996 Date: April 22, 1996
<PAGE> 1
Exhibit 10.29
MASTER AGREEMENT FOR MCI ENHANCED SERVICES
This Master Agreement for MCI Enhanced Services, together with the ESA Schedules
attached hereto and incorporated herein by reference (collectively, the
"Agreement"), is made, by and between MCI Telecommunications Corporation and
its appropriate affiliated companies, including MCI Global Resources, Inc.
(collectively, "MCI"), and Galileo International Partnership, a Delaware
partnership, with offices at 5350 S. Valentia Way ("Customer"). This Agreement
shall become effective on the first day of the first full calendar month
following the date on which this Agreement is fully executed by Customer and MCI
(the "Effective Date").
1. MCI Enhanced Service(s). As used in this Agreement, the term "MCI Enhanced
Service(s)" means all commercially available MCI non-tariffed services provided
by MCI to Customer pursuant to this Agreement. Enhanced Services do not include
any MCI tariffed services provided pursuant to any filed tariff of MCI or an MCI
affiliated company. The descriptions of MCI Enhanced Services set forth in the
respective ESA Schedules are subject to revision by MCI from time to time by
issuance to Customer of a revised schedule. This Agreement does not include
provision of any equipment.
2. Service Term. After the Ramp Period, this Agreement is for a thirty six (36)
month service term (the "Term"). The "Ramp Period" shall commence on the
Effective Date and shall end on (a) the six (6) month anniversary of the
Effective Date or (b) an earlier date identified in writing by Customer.
After the expiration of the initial Term, the Term shall be extended
automatically, under the terms then in effect, on a month-to-month basis until
such time as either party provides the other with at least ninety (90) days
prior written notice of termination.
3. Minimum Volume Requirement and Underutilization Charge.
3.1 Minimum Volume Requirement. During each monthly billing period of the Term
(following the Ramp Period), Customer's Net
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Usage under this Agreement shall equal or exceed One Hundred Thousand Dollars
($100,000) (the "MVR"). For purposes of this Agreement, "Net Usage" means
recurring and usage charges accruing to Customer's account, prior to application
of discounts provided hereunder, during each monthly billing period, for the MCI
services identified in Section 4.1 below and monthly recurring "Payments" for
the equipment identified in Schedule 5 the "MCI Telecommunications Corporation
Master Payment Agreement between MCI and Customer, dated _______________,
attached hereto and excluding non-recurring and one time installation charges,
any charges expressly excluded in the applicable ESA Schedule and all taxes and
surcharges.
3.2 Underutilization Charge. Following the Ramp Period, if Customer does not
satisfy the MVR for any monthly billing period, then Customer will pay to MCI an
underutilization charge (which Customer agrees is reasonable) equal to the
difference between the MVR and Customer's actual Net Usage for such month.
3.3 Technology Change. In the event that Customer converts an MCI service
provided under this Agreement ("Current MCI Service") to a new MCI Service"
that:
(i) is not provided pursuant to the terms of this Agreement; and
(ii) is subject to a separate agreement between the parites with a
mutually agreed upon term and volume commitment; and
(iii) results in Customer's total usage volume for the month or subsequent
months to be reduced and causes Customer not to achieve the MVR for that
month.
Then Customer may reduce the MVR for each month remaining in the Service Term
by an amount equal to the amount of the average monthly recurring and usage
charges for the Current MCI Service that is converted to the New MCI Services.
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4. Provision of ESA Services.
4.1 MCI shall provide the following MCI Enhanced Services to Customer under this
Master Agreement:
Concert Virtual Network Service (Rest of World) - Schedule 1
Domestic MCI Hyperstream Frame Relay Service - Schedule 2
CPE Services/Network Management - Schedule 3
Canadian Cross-Border Hyperstream Frame Relay Service - Schedule 4
4.2 ESA Schedules. Each MCI Enhanced Service provided under this Agreement shall
have a corresponding ESA Schedule specifying the applicable rates, discounts,
and other terms and conditions on which MCI will provide such MCI Enhanced
Service. To the extent that the terms and conditions of any ESA schedule are
inconsistent with the terms and conditions of the Master Agreement, the ESA
Schedule shall govern with respect to the corresponding MCI Enhanced Service.
4.3 Pass-Through Charges. For all domestic and international access services
provided in conjunction with the MCI Enhanced Services, MCI shall be entitled to
pass through to Customer any charges, fees, taxes and terms and conditions of
service imposed by access suppliers, including but not limited to rate
fluctuations in telephone tariffs, communications charges and access charges
that are imposed or enacted by access suppliers to MCI after the Effective Date.
4.4 Settlement Gains or Losses. If the charges of international
telecommunications operators (ITO's) or other third party service providers are
billed to the Customer on a pass-through basis, the charges payable to the ITO
or third party service provider will be converted to U.S. Dollars at the
exchange rates applicable for billing in a foreign currency stated above. The
payments to the ITO's or third parties are generally made at the end of the
month. Any difference between the amount billed and the equivalent U.S. Dollar
amounts paid will be included in a subsequent period's invoice as loss or gain
on settlements.
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4.5 Effect of Tariffing. If at any time during the Ramp Period or the Term MCI
tariffs any of the MCI Enhanced Services provided pursuant to this Agreement
(each a "Newly Tariffed Service"), Customer agrees to promptly, upon written
notice from MCI, execute appropriate additional agreements and amendments to
this Agreement the effect of which shall be to eliminate the Newly Tariffed
Service from this Agreement and to incorporate such Newly Tariffed Service into
an agreement for MCI tariffed services, including adjustment to the minimum
volume commitments in this Agreement and in the agreement for MCI tariffed
services. Such MCI tariffed services agreement shall contain the same rates,
charges, discounts, term commitment, and volume commitment for the Newly
Tariffed Service as set forth in this Agreement. Customer acknowledges and
agrees that MCI shall have no obligation to include any equipment provided under
this Agreement or any charges payable for such equipment in any such agreement
for tariffed services. In the event that a Newly Tariffed Service is eliminated
from this Agreement, the MVR will be adjusted accordingly.
4.6 Mid-Term Review. On or about the eighteenth (18th) month of the Term,
Customer and MCI shall meet to review the rates and charges, including
associated discounts, paid by Customer pursuant to this Agreement. It is the
parties' intent and understanding that this Mid-Term Review shall facilitate
dialogue between the parties regarding the rates and charges hereunder and is
not intended to be an option to terminate this Agreement without cause.
5. MCI Invoices and Payment.
5.1 Payment of MCI Invoices. Unless otherwise agreed, all amounts due for MCI
Enhanced Services shall be billed in U.S. Dollars. Customer shall pay MCI for
MCI Enhanced Services within thirty (30) calendar days after the date of MCI's
invoice. Independent of such payment obligation, Customer shall make a separate
claim in writing, with adequate support, for any credit for service interruption
to which Customer believes itself entitled under this Agreement, and MCI and
Customer will promptly address and resolve the claim. Failure of MCI to invoice
Customer in a timely manner
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for any amounts due hereunder shall not be deemed a waiver by MCI of its
rights to payment therefor.
5.2 Taxes. Except as otherwise indicated herein, the charges specified in the
attached Schedule(s) do not include, and Customer agrees to pay, all taxes
levied by any duly constituted taxing authority against or upon MCI Enhanced
Services or otherwise arising out of this Agreement (including, without
limitation, any sales, gross receipts or value-added taxes), except any such
income tax based on or measured in whole or in part by gross or net income,
gross or net payments, profits, or net worth of MCI or its affiliates (the
"Taxes"); so long as, in the case of foreign tax withholdings, Customer shall
agree to cooperate with MCI in providing foreign tax receipts to MCI; utilize
best efforts to comply with foreign tax laws; and utilize best efforts to
provide MCI and/or a foreign taxing authority with additional information to
support MCI's claim for foreign tax credit(s), as requested in writing by MCI.
6. Customer Obligations.
6.1 Customer-Obtained Equipment, Services and Interconnections. Unless otherwise
specified in an attached ESA Schedule, Customer shall be responsible for
obtaining, installing, and maintaining all equipment, software and/or
communications services necessary for inter-connection with MCI's network or
otherwise for use in conjunction with the applicable MCI Enhanced Services.
Customer shall have sole responsibility for ensuring that such equipment,
software and/or services are compatible with MCI's requirements and that they
continue to be compatible with subsequent revision levels of MCI-provided
equipment, software and services. Unless otherwise expressly agreed in writing,
MCI shall have no responsibility for the availability, capacity and/or condition
of any equipment, software or services not provided by MCI under this Agreement.
Should Customer undertake to connect any MCI products or services to any third
party service or network, Customer shall indemnify and hold harmless MCI from
any damages, costs, liabilities and expenses resulting from such connection or
attempted connection, including but not limited to damages resulting from
unauthorized use of, or access to, MCI's network.
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6.2 Security. Customer shall, at its own expense, take all physical and
information systems security measures necessary to protect all equipment,
software, data and systems located on Customer's premises or otherwise in
Customer's control and used in connection with the MCI Enhanced Services,
whether owned by Customer, MCI, or MCI's subcontractors. Customer acknowledges
and agrees that MCI shall not be liable, either in contractor in tort, for any
loss resulting from any unauthorized access to, or alteration, theft,
destruction, corruption, or use of, equipment, software, data, or systems used
in connection with the MCI Enhanced Services.
6.3 Access to Customer Sites. Customer agrees to provide MCI and its
subcontractors and their respective employees and agents access to Customer's
sites where any MCI Enhanced Services are provided (including access to
associated equipment) as necessary for MCI and its subcontractors to perform the
MCI Enhanced Services.
7. Software and Documentation. All rights, including but not limited to
copyright, patent, trademark and other intellectual property rights, in any
software and/or documentation provided by MCI in connection with any MCI
Enhanced Service shall remain the exclusive property of MCI or its licenser(s).
MCI grants to Customer a non-exclusive, non-transferable license to use such
software and documentation solely for Customer's internal business purposes in
accordance with the terms of this Agreement. No portion of such software or
documentation shall be copied, decompiled, downloaded, transmitted, and/or
delivered to a third party without MCI's prior written consent. Customer agrees
to notify MCI immediately of any suspected or actual unauthorized use of such
software or documentation which comes to Customer's attention.
8. Termination.
8.1 Discontinuation of Business; Bankruptcy. Either party may terminate this
Agreement immediately upon notice to the other party if: (i) such other party
dissolves, discontinues or
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terminates its business operations to which this Agreement pertains; (ii)) any
bankruptcy, reorganization, insolvency, dissolution or similar proceeding is
instituted by or against such other party; or (iii) such other party makes any
assignment for the benefit of creditors.
8.2 Termination by MCI.
(a) MCI may terminate this Agreement immediately upon notice to Customer if any
of the following events occur:
(i) Customer fails to meet any payment obligation hereunder for charges that
have been invoiced to Customer and such failure is not cured within twenty (20)
business days after Customer's receipt of written notice from MCI notifying
Customer of such failure; or
(ii) MCI determines in its sole discretion that continued provision of such
facility, equipment, or service would contravene any local, state, national or
international regulation, law, or tariff; or
(iii) MCI determines that interruption or termination of an MCI Enhanced Service
is necessary to prevent or protect against fraud or otherwise protect its
personnel, agents, facilities, or services; or
(iv) Any third-party subcontractor or vendor to MCI is unable to continue to
provide such facility, or component of equipment, or service for any reason;
provided, however, that where such third party has ceased to provide any
facility, equipment, or service, MCI will, at its option, continue to provide to
Customer a comparable facility, equipment, or service by or through another
vendor under comparable terms and conditions for a ninety (90) day period.
(b) MCI may also terminate this Agreement upon sixty (60) days written notice to
Customer if Customer fails to comply with any other material term of this
Agreement and Customer does not cure such failure within such 30-day period.
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8.3 Termination by Customer. Customer may terminate this Agreement upon thirty
(30) days written notice to MCI if MCI fails to comply with a material term of
this Agreement and does not cure such failure within such 30-day period.
8.4 Early Termination Charges. In the event Customer terminates this Agreement
prior to the expiration of the Term other than in accordance with Section 8.3 or
if MCI terminates this Agreement pursuant to Section 8.2(a) (i) or Section
8.2(b), then, in addition to any other rights and remedies available to MCI,
Customer shall pay to MCI an early termination charge (which Customer agrees is
reasonable) equal to One Hundred percent (100%) of the MVR for each month (and a
pro rata portion thereof for any partial month) remaining in the Term after the
date of such termination, together with the aggregate termination charges, if
any, imposed in connection with such termination by any overseas local access
providers who contracted directly with MCI.
9. Warranty. MCI's warranty obligations, if any, with respect to each Enhanced
Service are set forth in the applicable ESA schedule. EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT AND THE ESA SCHEDULES, MCI MAKES NO
WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MCI ENHANCED SERVICES. MCI
SPECIFICALLY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING
WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND ANY INTELLECTUAL PROPERTY WARRANTIES OF ANY TYPE.
10. Indemnification. Customer agrees to indemnify MCI and its affiliates and
their respective employees, officers, directors, agents and subcontractors, and
hold them harmless against any damages, including personal injury and property
damage and expenses incurred by any of them arising out of Customer's acts,
omissions and/or breach of its obligations hereunder, and/or Customer's use of
any MCI Enhanced Services in a manner other than as contemplated herein,
including without limitation any use that gives rise to claims for libel,
slander, invasion of privacy, or infringement of any patent, copyright,
trademark, or other proprietary right of a third party.
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MCI agrees to indemnify Customer and its respective employees, officers,
directors, and agents, and hold them harmless against any damages, including
personal injury and property damage and expenses incurred by any of them arising
out of MCI's acts, omissions and/or breach of its obligations hereunder,
including any infringement of any patent, copyright, trademark, or other
proprietary right of a third party.
11. Compliance. Customer is responsible for complying with all local license or
permit requirements, and all laws and regulations, including but not limited to
export, import and customs laws and regulations. MCI shall provide reasonable
assistance to Customer and its affiliates to facilitate such compliance. Such
assistance may include preparation of import and customs forms and/or, where
requested by Customer, acting as Customer's agent in the import process.
12. Liability.
12.1 Disclaimer of Certain Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR ANY CONSEQUENTIAL, EXEMPLARY, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES
ARISING FROM THIS AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
12.2 Limitation of Liability. NOTWITHSTANDING THE FOREGOING, MCI'S TOTAL
LIABILITY TO CUSTOMER ARISING FROM THIS AGREEMENT SHALL BE LIMITED TO THE LESSER
OF (A) CUSTOMER'S PROVEN DIRECT DAMAGES OR (B) THE TOTAL AMOUNT PAID BY CUSTOMER
TO MCI FOR THE SPECIFIC SERVICE UPON WHICH THE CAUSE OF ACTION IS BASED DURING
THE THREE (3) MONTH PERIOD PRIOR TO THE EVENT GIVING RISE TO THE CAUSE OF
ACTION. THE FOREGOING LIMITATION APPLIES TO ALL CAUSES OF ACTIONS AND CLAIMS,
INCLUDING WITHOUT LIMITATION BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE,
STRICT LIABILITY, MISREPRESENTATION AND OTHER TORTS. FURTHER, NO CAUSE OF ACTION
WHICH AROSE MORE THAN ONE (1) YEAR PRIOR TO THE INSTITUTION OF A LEGAL
PROCEEDING ALLEGING SUCH CAUSE OF ACTION MAY BE ASSERTED BY EITHER PARTY AGAINST
THE OTHER.
13. Confidential Information. Customer shall not disclose to any third party
during the Term of this Agreement, or during the three (3) year period after
expiration or termination of this Agreement,
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any of the terms and conditions of this Agreement unless such disclosure is
lawfully required by any federal governmental agency or is otherwise required to
be disclosed by law or is necessary in any legal proceeding establishing rights
and obligations under this Agreement. MCI reserves the right to terminate this
Agreement upon delivering ten (10) days written notice to Customer if there has
been any unpermitted third party disclosure hereunder by Customer.
MCI, however acknowledges that it may be necessary for Customer to disclose the
terms of this Agreement to it airline owners (the "Partners") for the limited
purpose of accounting and audit, and agrees to permit such disclosures to the
Partners, provided that Customer has entered into agreements with such Partners
with similar restrictions on disclosure that protect this Agreement from further
disclosure to other third parties as described above. MCI reserves the right to
terminate this Agreement upon delivering ninety (90) days written notice to
Customer if there has been any unpermitted third party disclosure hereunder by a
Partner.
14. Export Controls. The parties acknowledge that certain equipment, software
and technical data which may be provided hereunder may be subject to export and
re-export controls under the U.S. Export Administration Regulations and/or
similar regulations of the U.S. or any other country. No party shall export or
re-export any such equipment, software, technical data or any direct product
thereof in violation of any such laws.
15. Foreign Corrupt Practices. Customer agrees that neither it nor any of its
directors, officers, employees, subcontractors or agents will make any offer,
payment, promise to pay or authorization of the payment of any money, offer,
gift, promise to give, or authorization of the giving of anything of value to
any official, political party, party official or political candidate or any
person, knowing that all or a portion of such money or thing of value will be
offered, given or promised, directly or indirectly to any official, political
party, party official or political candidate, for the purpose of retaining
business for or with, or directing business to Customer or MCI. As used in this
section, the term "official" refers to any officer or employee in
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private or public service and includes any officer or employee of a
government, or any department, agency or instrumentality thereof, or any person
acting in such an official capacity for or on behalf of any such government or
department, agency or instrumentality thereof.
16. Miscellaneous.
16.1 Assignment. Neither party may assign this Agreement, or any of its rights
or obligations hereunder, without the prior written consent of the other party,
which consent shall not be unreasonably withheld. Any attempted assignment
without such prior written consent shall be void. Notwithstanding the foregoing,
MCI may assign this Agreement to its parent or any of their subsidiaries or
affiliates.
16.2 Governing Law. This Agreement, and all causes of action arising out of this
Agreement, shall be subject to the Communications Act of 1934, as amended (the
"Act"), or, if any part of this Agreement is not governed by the Act, by the
domestic law of the State of Illinois without regard to its choice of law
principles. In the event of a conflict between this Agreement and any subsequent
translations, this English language version shall prevail.
16.3 Enforceability. If any paragraph or clause of this Agreement shall be held
to be invalid or unenforceable by any body or entity of competent jurisdiction,
then the remainder of the Agreement shall remain in full force and effect and
the parties shall promptly negotiate a replacement provision or agree that no
replacement is necessary.
16.4 No Waiver. Neither party's failure, at any time, to enforce any right or
remedy available to it under this Agreement shall be construed to be a waiver of
such party's right to enforce each and every provision of this Agreement in the
future.
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11
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16.5 Force Majeure. Any delay in or failure of performance by either party under
this Agreement (other than a failure to comply with payment obligations) shall
not be considered a breach of this Agreement if and to the extent caused by
events beyond the reasonable control of the party affected, including but not
limited to acts of God, embargoes, governmental restrictions, strikes,
subcontractor failures or delays, riots, wars or other military action, civil
disorders, rebellion, vandalism, or sabotage. Market conditions and/or
fluctuations (including a downturn of Customer's business) shall not be deemed
force majeure events. The party whose performance is affected by such events
shall promptly notify the other party, giving details of the force majeure
circumstances, and the obligations of the party giving such notice shall be
suspended during but not longer than the continuance of the force majeure, and
the time for performance of the affected obligation hereunder shall be extended
by the time of the delay caused by the force majeure event.
16.6 Trademarks. Except as otherwise expressly provided in this Agreement,
nothing in this Agreement shall create in either party any rights in any
trademark, trade name, service mark, insignia, symbol, identification and/or
logotype of the other party. Before either party uses any such mark of the other
party, it shall obtain the prior written consent of the other party.
16.7 Entire Agreement. This Agreement, including the ESA Schedules, constitutes
the entire agreement between the parties with respect to its subject matter, and
as to all other representations, understandings or agreements which are not
fully expressed herein. No amendment to this Agreement shall be valid unless in
writing and signed by both parties.
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12
<PAGE> 13
16.8 Signature Authorization. The parties have duly executed and agreed to
be bound by this Agreement as evidenced by the signatures of their authorized
representatives below. Each party represents and warrants to the other that the
signatory identified beneath its name below has full authority to execute this
Agreement on its behalf.
ACCEPTED:
GALILEO INTERNATIONAL
By: /s/ Lori M. Tobin
--------------------------------
Name: Lori M. Tobin
--------------------------------
Title: U.S. Purchasing Manager
--------------------------------
Date: 2/14/96
--------------------------------
MCI TELECOMMUNICATIONS CORPORATION MCI GLOBAL
RESOURCES, INC.
By: By:
------------------------------ --------------------------
Name: Name:
------------------------------ --------------------------
Title: Title:
------------------------------ --------------------------
Date: Date:
------------------------------ --------------------------
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13
<PAGE> 1
Exhibit 10.30
COMMUNICATIONS SERVICES AGREEMENT
This Agreement is made as of this 1 day of April, 1997 (the "Effective
Date"), by and between Galileo International, a Delaware general partnership
("GALILEO") with offices at 9700 West Higgins Road, Suite 400, Rosemont,
Illinois 60018, and AT&T Corp., a New York corporation with offices at 400
Interpace Parkway, Parsippany, New Jersey 07054, on behalf of itself and its
affiliates, including, without limitation, AT&T Global Communications Services
Inc. ("AT&T").
WHEREAS, GALILEO has developed a computer system (the "System") with
electronic facilities to provide, store, communicate, distribute, process and
document such information as is from time to time stored in databases created
and maintained for the System;
WHEREAS, AT&T provides domestic and international communications services,
including the AT&T EasyLink Fax Services (as described in further detail in
Exhibit A attached hereto, the "Communications Services");
WHEREAS, GALILEO provides its subscribers with access to the System and
its functions as agreed upon between GALILEO and each of its Subscribers. A
"GALILEO Subscriber" shall be defined as a person or entity licensed or
otherwise authorized to use the System for reservations and information
services; and
WHEREAS, the parties desire to provide an interface between AT&T's
EasyLink Services messaging network and the System, to provide the ability for
GALILEO and GALILEO Subscribers to use the Communications Services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein
the parties hereto agree as follows:
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1. Interface Operation and Maintenance.
1.1 GALILEO and AT&T will establish an interface (the "Interface") between
AT&T's EasyLink Services messaging network and the System in accordance with the
terms of this Agreement, including, without limitation, Exhibit A hereto. The
Interface will include the physical leased-line connection(s) and the
inter-working message transmission procedures between AT&T's EasyLink Services
messaging network and the System. The Interface will be designed to provide
continuous transmission service 24 hour per day, 7 days per week. The Interface
shall provide diverse routing of the communication connections between AT&T
EasyLink Services messaging network and the System, with no
single-point-of-failure that could interrupt the Communications Services.
1.2 Neither party may modify the Interface if such modification is
reasonably likely to adversely impact operation of the System or AT&T EasyLink
Services messaging network or use of the System or the Communication Services by
GALILEO Subscribers. AT&T and GALILEO shall establish a procedure for
notification and review in order to support the timely exchange of planning
information of their respective systems.
1.3 The Interface demarcation point shall be the termination point of the
common-carrier line(s) that connects GALILEO's communication facility with the
AT&T EasyLink Services network. The Interface demarcation point shall be located
at the AT&T EasyLink Data Center in Bridgeton, Missouri, USA.
1.4 Each party will provide the facilities and connection from its
respective system to the Interface demarcation point; provided that GALILEO will
provide the DSUs at both the GALILEO and the AT&T side of the demarcation point.
1.5 Each party will be responsible for the operation and maintenance of
the facilities on its side of the demarcation point; provided that GALILEO will
provide the maintenance to the DSUs at both the GALILEO and the AT&T side of the
demarcation point. The parties will review jointly, at the other party's
reasonable request, the current and expected traffic volumes to assure that
ample transmission capacity is maintained for the Interface.
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1.6 GALILEO will provide AT&T with access to the System at no charge;
provided that the use and provision of such access and services shall be limited
to the implementation and support of this Agreement, and is subject to
revocation in the event of abuse; provided, further, that any information to
which AT&T has access as a result hereof will be deemed Confidential Information
and subject to the provisions of Section 7.1 hereof. AT&T will provide special
electronic mail addresses to which messages may be sent by GALILEO Help Desk
personnel at no charge to GALILEO; provided that use of such addresses shall be
limited to the implementation and support of this Agreement and free usage shall
in no event exceed $200 in any month (as calculated in accordance with AT&T's
standard prices for such electronic mail usage, a current copy of which are
attached as Exhibit C).
1.7 Each party will provide the other with all reasonable technical
information and support necessary to the effective implementation, operation,
and maintenance of the Interface.
1.8 Except to the extent expressly provided for otherwise herein, each
party will be responsible for its own costs and expenses incurred in connection
with its performance of its obligations hereunder, including, without
limitation, any incurred in connection with the operation of the Interface and
any associated software that may be necessary or appropriate in its operation.
2. Service Promotion
2.1 Both parties will cooperate in the marketing, promotion and sale of
the Communications Services to GALILEO Subscribers.
2.2 Within 30 days after the Effective Date, GALILEO will provide to AT&T
a list, in a mutually agreed format, of all of the GALILEO Subscribers,
indicating the billing address, phone number and primary contact person for each
such Subscriber. Each month thereafter, GALILEO shall provide AT&T, in a
mutually agreed format, with any updates to such list and any information
regarding GALILEO Subscriber cancellations. Subject to the provisions of Section
2.3, AT&T may communicate at its own cost and expense with GALILEO Subscribers
in such manner as it deems appropriate to draw attention to the availability of
the Communication Services, to encourage GALILEO Subscribers to utilize the
Communication Services and generally to promote the Communication Services or
any other AT&T services.
<PAGE> 4
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2.3 Each party must obtain the prior written approval of the other, in
respect of any promotional communication which use the other party's name or any
of the other party's registered service marks or trademarks. Such approval shall
not be unreasonably withheld by either party.
2.4 By mutual consent, AT&T and GALILEO may issue joint communications to
GALILEO Subscribers regarding the availability of the Communications Services.
Subject to Section 2.3, GALILEO may support and advertise the Communication
Services through its marketing materials and its other relevant publications for
GALILEO Subscribers at GALILEO's cost.
2.5 Exhibit B to this Agreement sets forth the terms and conditions (the
"Terms and Conditions") upon which AT&T shall provide Communications Services to
GALILEO and to GALILEO Subscribers who properly register with AT&T and agree to
be bound by the Terms and Conditions. GALILEO shall store the Terms and
Conditions on the GALILEO Briefing Profiles and shall notify each GALILEO
Subscriber prior to providing access to the Communications Services to such
Subscriber that use of the Communications Services is governed by the Terms and
Conditions and that using the Communications Services indicates acceptance the
Terms and Conditions. GALILEO shall indemnify, defend and hold harmless AT&T
from any loss, liability or expense (including, without limitation, any unpaid
fees for Communications Services provided to any GALILEO Subscriber) incurred or
suffered by AT&T as a result of GALILEO's failure to perform any of the
obligations set forth in this Section 2.5 or Section 2.7.
2.6 AT&T, at its sole and exclusive option, may require any or all GALILEO
Subscribers to submit valid VISA, MasteCard, American Express or Diners' Cards
as a precondition to using the Communications Services and to agree that all
Communications Services usage be directly billed to such credit card.
2.7 GALILEO and GALILEO Subscribers shall pay AT&T for the Communications
Services at the AT&T EasyLink Fax Itinerary rates. Any mailbox fees or monthly
minimum commitment shall be waived by AT&T. The AT&T EasyLink Fax Itinerary
rates (adjusted for the discounts specified in the preceding sent in effect as
of the Effective Date are specified in Schedule B to Exhibit B hereto. AT&T may
revise such rates at any time, and from time to time, upon thirty (30) days'
written notice to GALILEO, together with an
<PAGE> 5
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electronic file setting forth the revised rates. GALILEO shall post such
increased rates on the Briefing Profiles within fifteen (15) business days of
receipt of such file from AT&T.
3. Rights and Responsibilities of GALILEO
3.1 GALILEO's responsibility for traffic which is (i) transmitted by
GALILEO Subscribers via the AT&T EasyLink Services network or (ii) addressed to
GALILEO Subscribers for delivery via the AT&T EasyLink Services network shall
end and begin, respectively, at GALILEO's side of the Interface demarcation
point.
3.2 GALILEO shall provide the necessary technical services and support to
allow GALILEO Subscribers to utilize the Communications Services through the
Interface, in the manner specified in Exhibit A.
3.3 GALILEO shall operate the System and provide GALILEO subscribers
access to Communications Services in all material respects in accordance with
all applicable foreign, U.S., state and local laws, statutes, rules and
regulations.
3.4 GALILEO will maintain full twenty-four (24) hours per day, seven (7)
days per week telephone support by trained GALILEO Support Personnel (as
subsequently defined) for GALILEO Subscribers. GALILEO shall instruct each
GALILEO Subscriber to call GALILEO directly, not AT&T, in the event such
Subscriber requires any support or has any problem with the System or the
Communication Services. In the event that the problem is AT&T's responsibility
under Section 4.1, GALILEO Support Personnel shall contact AT&T for additional
assistance in resolving the problem, if necessary, as provided for in Section
4.3.
4. Rights and Responsibilities of AT&T
4.1 AT&T's responsibility for traffic which is (i) transmitted by GALILEO
Subscribers via the System or (ii) addressed to GALILEO Subscribers for delivery
via the System shall begin and end, respectively, at AT&T's side of the
Interface demarcation point.
<PAGE> 6
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4.2 In order to provide GALILEO Subscribers access to the Communications
Services, AT&T will develop and maintain coding and routing tables, perform such
functions as message format validation and error handling.
4.3 AT&T shall assist GALILEO Support Personnel with any problems or
questions with respect to a message after AT&T acknowledges its receipt by AT&T
over the Interface. AT&T, at its own expense, shall make available personnel in
its customer care unit to assist the GALILEO Help Desk twenty-four (24) hours
per day, seven (7) days per week.
4.4 AT&T shall bill GALILEO Subscribers directly for charges incurred by
GALILEO Subscribers associated with use of the Communications Services and
Galileo shall in no event be responsible for such charges except to the extent
that a failure to pay directly results from Galileo's breach of Section 2.5 or
2.7 hereof.
4.5 AT&T shall provide the Communications Services to GALILEO in all
material respects in accordance with all applicable foreign, U.S., state and
local laws, statutes, rules and regulations.
4.6 AT&T shall provide training to a reasonable number of GALILEO
personnel who will be providing training and customer support to GALILEO
Subscribers using the Communications Services ("GALILEO Support Personnel").
Such training by AT&T shall be provided without charge to GALILEO at one U.S.
location to be mutually agreed upon by the parties. AT&T shall be required to
provide no more than three training sessions in any year and no training session
shall exceed five (5) days. GALILEO agrees to cooperate with AT&T in
coordinating these sessions at mutually acceptable times throughout the term of
this Agreement and to arrange for a reasonable number of GALILEO Support
Personnel to attend all training sessions. Both parties shall use reasonable
commercial efforts to hold three (3) training sessions by the first anniversary
of the Effective Date.
4.7 AT&T shall pay GALILEO a commission equal to fifteen (15%) percent of
the GALILEO Subscriber Net Revenue (as defined below) for performing it
obligations hereunder, and referring GALILEO Subscribers to AT&T. Such
commissions shall be payable within 90 days after the end of each month. For
purposes of this Section 4.7, "GALILEO Subscriber Net Revenue" shall mean the
charges billed and paid by GALILEO Subscribers (excluding any charges billed to
GALILEO or its
<PAGE> 7
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affiliates) to AT&T for usage of the communications Services net of any
discounts, taxes and credits. In the event that AT&T compensates GALILEO based
on uncollected charges and subsequently such charges are deemed uncollectible,
then AT&T may, in its sole discretion, deduct the amount of the commission paid
on such charges from future commissions payable to GALILEO. For the purpose of
this Section 4.7, any charge shall be deemed uncollectible in the event not paid
within 90 days after the date upon which it is due.
4.8 Not more frequently than once during each calendar year, upon at least
ninety (90) days' advance written notice and during normal business hours,
Galileo shall have the right to appoint, at its sole cost, an independent
certified public accountant reasonably acceptable to AT&T to inspect AT&T's
books and records, at the place where AT&T keeps such books and records, for the
sole purpose of verifying the accuracy of AT&T's calculation of the payments due
hereunder. Unless Galileo shows good cause why additional audits are necessary,
Galileo may make such an examination for a particular statement only once upon
reasonable advance written notice, and only within one (1) year after the date
that statement was rendered to Galileo. Galileo will not be entitled to examine
any records that do not relate specifically to the Galileo Subscriber Net
Revenue and in no event shall Galileo have the right to inspect statements or
information pertaining to users other than Galileo and Galileo Subscribers.
5. Term and Termination.
5.1 This Agreement shall commence on the Effective Date, and shall
continue until terminated by either party in accordance with this Agreement.
This Agreement may be terminated by either party at any time, without cause,
upon thirty days' prior written notice to the other.
5.2 If either party shall (i) become insolvent or become unable to meet
its obligations as they become due or make a general assignment for the benefit
of creditors; (ii) petition, apply for, suffer, or permit with or without its
consent the appointment of a custodian, receiver, trustee in bankruptcy or
similar officer for all or any substantial part of its business or assets; or
(iii) become subject to any proceeding under the Federal Bankruptcy Code or any
similar state, federal or foreign statute relating to bankruptcy, insolvency,
reorganization, receivership, arrangement, adjustment of debts, dissolution or
liquidation and such
<PAGE> 8
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proceedings are not vacated or set aside within sixty (60) days from the date of
commencement thereof, the other party may immediately terminate this Agreement.
5.3 If either party materially defaults in the observance or performance
of any term, covenant or agreement contained in this Agreement, then the other
party may terminate this Agreement upon thirty (30) days' written notice to the
defaulting party detailing the alleged material default, unless the defaulting
party cures such default and so notifies the other party within such thirty-day
period.
5.4 Any termination of this Agreement shall not serve to eliminate any
liability arising out of conduct prior to the actual date of termination, and
either party may, following such termination, pursue such remedies as may be
available with respect to such liabilities.
5.5 Notwithstanding anything to the contrary contained in this Agreement,
Sections 1.9, 7, 8, 9 and 14 of this Agreement shall in all cases survive any
expiration or termination of this Agreement
6. Independent Contractors
The relationship between GALILEO and AT&T shall be that of independent
contractors, and neither party nor any officer, agent or employee retained by
either party shall be held or construed to be employees or agents of the other.
Neither party shall have the right to bind the other party, whether directly or
indirectly, to any agreement with a third party or to incur any obligation or
liability on behalf of such other party, whether directly or indirectly.
7. Confidentiality
7.1 Each party hereto (the "Disclosing Party") may disclose to the other
party (the "Receiving Party") technical or business information that is
proprietary or confidential to the Disclosing Party, its affiliates or a third
party ("Information") to further the performance of this Agreement. In order to
be deemed Confidential Information hereunder and subject to the restrictions set
forth herein, the Disclosing Party must clearly mark the Information proprietary
or confidential, if provided in tangible form, and if provided orally, the
Disclosing Party must, at the time of disclosure, clearly identify it as
proprietary or confidential. The terms and conditions of this Agreement shall
also be deemed Confidential Information and subject to the restrictions
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set forth herein. All Confidential Information shall remain the sole property of
Disclosing Party and the Receiving Party shall have no rights to the
Confidential Information except pursuant to the terms of this Agreement. The
Receiving Party agrees that for the three-year period commencing on the date of
disclosure of any Confidential Information: (a) it shall protect such
Confidential Information by using the same degree of care (which shall be no
less than reasonable care) to prevent its unauthorized disclosure as the
Receiving Party uses to protect its own confidential information of a like
nature; (b) without the prior written consent of the other party, it shall not
make any disclosure of such Confidential Information (including methods or
concepts utilized in Confidential Information) to anyone other than employees,
consultants, and agents to whom disclosure is necessary to further the
performance of this Agreement and who agree (which agreement in the case of
consultants and agents shall be in writing) to be bound by the confidentiality
provisions set forth herein; and (c) it shall not use such Confidential
Information for any purpose other than to perform its obligations or exercise
its rights under this Agreement. Notwithstanding the restrictions contained in
this Section 7.1, the Receiving Party may disclose Confidential Information if
each of the following conditions are met: (i) such disclosure is required by
applicable law, regulation or other governmental requirement; (ii) the receiving
party gives the disclosing party prompt advance notice of such requirement, to
the extent permitted by law, in order to enable the disclosing party to object
to such disclosure; (iii) the receiving party discloses only that portion of
Confidential Information which it is advised in writing by counsel it is
required to disclose; and (iv) the receiving party uses reasonable efforts to
obtain safeguards to ensure that confidential treatment reasonably acceptable to
the disclosing party will be accorded to such Confidential Information.
7.2 Notwithstanding the other provisions of this Agreement, no information
shall be considered to be Confidential Information, if: (i) it is or becomes
available to the public without restriction other than by a breach of this
Agreement; (ii) it has been received by the Receiving Party from a third party
without breach of this Agreement, (iii) it was known to the Receiving Party
prior to its first receipt by the Receiving Party, as shown by files existing at
the time of initial disclosure; (iv) it was independently developed by the
Receiving Party without reference to any Confidential Information, as evidenced
by documentation maintained by the Receiving Party. In addition, Confidential
Information shall in no event be deemed to be disclosed by one party to the
other by the virtue of the fact that such information is transmitted using the
Communications
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Services or the System as the case may be, but must instead be directly
addressed to such party to be subject to Section 7.1.
8. Indemnification
8.1 Subject to the limitations on liability set forth in Section 9, AT&T
will at all times defend, indemnify and hold harmless GALILEO, its affiliates
and all officers, directors, shareholders, successors and assigns of each of the
foregoing (collectively, the "GALILEO Indemnified Parties") from and against,
and pay and reimburse them for, any and all liabilities, obligations, losses,
damages, costs or expense (including interest, penalties and reasonable
attorney's fees and expenses incurred in the investigation or defense of any of
the same or in asserting any of their respective rights hereunder) incurred in
connection with any third party claim arising out of any failure by AT&T to
perform its obligations or abide by the covenants set forth in this Agreement or
relating to matters for which AT&T is responsible under Section 4.1.
8.2 Subject to the limitations on liability set forth in Section 9,
GALILEO will, at all times defend, indemnify and hold harmless AT&T, its
subsidiaries and affiliates and all officers, directors, shareholders,
successors and assigns of each of the foregoing (collectively, the "AT&T
Indemnified Parties") from and against, and pay and reimburse the AT&T
Indemnified Parties for, any and all liabilities, obligations, losses, damages,
costs or expense including interest, penalties and reasonable attorney's fees
and expenses incurred in the investigation or defense of any of the same or in
asserting any of their respective rights hereunder) incurred in connection with
any third party claim arising out of any failure by GALILEO to perform its
obligations or abide by the covenants set forth in this Agreement or otherwise
relating to the System or any other matters for which GALILEO is responsible
under Section 3.1.
8.3 If a third party asserts any claim against any AT&T or GALILEO
indemnified party (each, an "Indemnified Party") for which the other party (the
"Indemnifying Party") is responsible under Section 8.1 or 8.2, as the case may
be, the Indemnified Party shall give the Indemnifying Party written notice
promptly after the Indemnified Party has actual knowledge of such claim and the
Indemnified Party shall permit the
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Indemnifying Party (at such party's expense) to assume the defense of any claim
or any litigation resulting therefrom; provided that (a) the failure by the
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its indemnification obligations under this Agreement except to the extent
that such failure results in a failure of actual notice to the Indemnifying
Party and, as a result, the Indemnifying is materially prejudiced; and (b) the
Indemnified Party may participate in such defense at the Indemnified Party's
sole expense. Without the Indemnified Party's express written consent, the
Indemnifying Party shall not, in the defense of any such claim or litigation,
consent to the entry of any judgment or enter into any settlement that provides
for injunctive or other nonmonetary relief affecting any related Indemnified
Party.
9. Limitation of Liability
9.1 FOR THE PURPOSES OF THIS SECTION 9, ANY REFERENCE TO "AT&T" OR
"GALILEO" SHALL INCLUDE EACH OF THEIR RESPECTIVE PARENTS, SUBSIDIARIES, AND
AFFILIATES, SUCCESSOR AND ASSIGNS AND THE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, REPRESENTATIVES, SUBCONTRACTORS, INTERCONNECTION SERVICE PROVIDERS AND
SUPPLIERS OF ALL OF THEM; AND "DAMAGES" SHALL BE DEEMED TO REFER COLLECTIVELY TO
ALL INJURY, DAMAGE, LOSS OR EXPENSE INCURRED.
9.2 Neither party shall have any liability for damages caused by acts or
events beyond such party's control.
9.3 To the extent not excluded from liability pursuant to Section 9.2
above, AT&T's entire liability for any damage arising from AT&T's performance or
non-performance of the communications services or any of its obligations
hereunder, any software defect or otherwise arising under or related to this
Agreement; regardless of the form of action, whether in contract, tort including
negligence, strict liability or otherwise, shall be as follows:
1. For improper performance or non-performance of the Communications
Services, the remedy set forth in the Terms and Conditions.
2. For bodily injury or death to any person negligently caused by
AT&T, GALILEO's right to proven damages.
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3. For claims other than set forth above, AT&T's liability shall be
limited to direct damages which are proven in an amount not to exceed U.S.
$100,000 in the aggregate for all such claims.
9.4 NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, INCOME OR
BUSINESS OPPORTUNITIES) WHETHER OR NOT IT HAD ANY KNOWLEDGE, ACTUAL OR
CONSTRUCTIVE, THAT SUCH DAMAGES MIGHT BE INCURRED.
9.5 NO THIRD PARTY WHICH INTERCONNECTS WITH AT&T TO SUPPLY THE
COMMUNICATIONS SERVICES SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, INCOME OR
BUSINESS OPPORTUNITIES) WHETHER OR NOT IT HAD ANY KNOWLEDGE, ACTUAL OR
CONSTRUCTIVE, THAT SUCH DAMAGES MIGHT BE INCURRED.
10. Severability
If any paragraph or clause contained in this Agreement shall be held to be
invalid or unenforceable in any competent jurisdiction in which these provisions
apply, then the meaning of such paragraph or clause shall be construed for such
jurisdiction so as to render it enforceable to the extent feasible; and if no
feasible interpretation would save such paragraph or clause, it shall be severed
from this Agreement and the remainder shall remain in full force and effect,
unless leaving the remainder in full force and effect would make this Agreement
unjust.
11. Assignment
Neither party shall transfer or assign this Agreement, or any right or
obligation hereunder, by operation of law or otherwise, without the prior
written consent of the other party; provided, however, that transfer or
assignment to a successor, affiliate, subsidiary or parent is permissible
without consent if written notification of such transfer or assignment is given
and the assignee gives written assurance of its intention to comply with the
obligations of this Agreement.
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12. Applicable Law
12.1 The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of Illinois, excluding its choice of
law provisions.
12.2 In the event of any dispute between the parties under this Agreement
including any dispute whether based on contract, tort, statute or other legal
theory (including, but not limited to, a claim of fraud or misrepresentation)
arising out of or related to this Agreement, or the breach, termination or
validity thereof, the parties shall first attempt to resolve the dispute through
discussions between an authorized representative of GALILEO and an authorized
representative of AT&T. The use of the foregoing procedure is a condition
precedent to the commencement of any mediation, arbitration or other legal
proceedings hereunder.
12.3 If any dispute is not resolved by use of the foregoing dispute
resolution within thirty days, the parties may agree to submit the dispute to a
sole mediator selected by the parties or, at any time at the option of a party,
to mediation by the American Arbitration Association ("AAA"). If not thus
resolved, it shall be referred to a sole arbitrator selected by the parties
within thirty (30) days of the mediation or, in the absence of such selection,
to AAA arbitration which shall be governed by the United States Arbitration Act.
The exclusive mediation/arbitration dispute resolution procedure provided above
shall not be applicable to requests for equitable relief.
12.4 Any award made hereunder shall be made within four (4) months of the
appointment of the arbitrator and may be entered in any court of competent
jurisdiction.
12.5 The requirement for mediation and arbitration shall not be deemed a
waiver of any right of termination under this Agreement and the arbitrator is
not empowered to act or make any award other than based solely on the rights and
obligations of the parties prior to any such termination.
12.6 The arbitrator shall determine issues of arbitrability but may not
limit, expand, or otherwise modify the terms of this agreement. Issues of
arbitrability shall be determined in accordance with the federal
<PAGE> 14
-14-
substantive and procedural laws relating to arbitration; all other aspects of
this Agreement shall be interpreted in accordance with, and the arbitrator shall
apply and be bound to follow the substantive laws of, the State of New York.
12.7 The place of mediation and arbitration shall be New York City, New
York if the request therefor is made by GALILEO, or Chicago, Illinois if the
request therefor is made by AT&T.
12.8 Each party shall bear its own attorneys' fees and other costs and
expenses but those related to the compensation and expenses of the mediator and
arbitrator shall be borne as provided by the AAA.
12.9 A request by a party to a court for interim measures or equitable
relief shall not be deemed a waiver of the obligation to mediate and arbitrate.
12.10 If court proceedings to stay litigation or compel arbitration are
necessary, the party who unsuccessfully opposes such proceedings shall pay all
associated costs, expenses and attorney's fees which are reasonably incurred by
the other party.
12.11 Notwithstanding anything to the contrary in this Section, in the
event of alleged violation of a party's intellectual property rights (including
but not limited to unauthorized disclosure of Confidential Information), that
party may seek temporary injunctive relief from any court of competent
jurisdiction pending appointment of an arbitrator. The party requesting such
relief shall simultaneously file a demand for arbitration of the dispute, and
shall request the AAA to proceed under its rules for expedited hearing. In no
event shall any such temporary injunctive relief continue for more than 30 days.
12.12 The arbitrator shall not have authority to award punitive or other
damages in excess of compensatory damages and each party irrevocably waives any
claim thereto.
12.13 The parties, their representatives, other participants and the
mediator and arbitrator shall hold the existence, content, and result of
mediation and arbitration in confidence.
<PAGE> 15
-15-
13. Notice
Notice given or required under the Agreement, unless otherwise specified,
shall be delivered by overnight courier or by first class mail, postage prepaid
to the respective address of GALILEO or AT&T as set forth at the beginning of
the Agreement or to such other person or address specified by each party in
writing pursuant to this Article. If to AT&T, such notice shall be to Vice
President, Sales, with a copy to General Attorney, AT&T EasyLink Services. If to
GALILEO, such notice shall be sent to:
Lori Tobin
Purchasing Department
Galileo International
9700 West Higgins Road
Suite 400
Rosemont, Illinois 60018
14. Waiver
A failure or delay of GALILEO or AT&T to require strict performance or to
enforce a provision of this Agreement or a previous waiver or forbearance by
GALILEO or AT&T shall in no way be construed as a waiver or continuing waiver of
any provision of this Agreement.
15. Headings
The headings or titles to the Articles are for convenience only and are
not binding on either party hereto.
16. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument.
17. Entire Agreement
This Agreement, including Exhibits A and B hereto, sets forth the entire
agreement and understanding of the parties with respect to the subject matter
hereof, and supersedes all prior negotiations, oral and written
<PAGE> 16
-16-
agreements and understandings relating thereto. Each party acknowledges that it
is not entering into this Agreement on the basis of any representations not
expressly contained herein.
GALILEO and AT&T, by their respective duly authorized representatives, have
executed this Agreement as of the date written above.
AT&T CORP. GALILEO INTERNATIONAL
By By /s/ Lori M. Tobin
---------------------------- ----------------------------
Name Name LORI M. TOBIN
--------------------------
Title Title U.S. PURCHASING MANAGER
--------------------------
Date Date 1 APRIL 1997
--------------------------
<PAGE> 1
Exhibit 10.31
GALILEO INTERNATIONAL SEVERANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996)
-------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
<S> <C>
ARTICLE I - ESTABLISHMENT OF THE PLAN......................................... 1
ARTICLE II - PURPOSE OF THE PLAN.............................................. 2
ARTICLE III - ELIGIBLE EMPLOYEES.............................................. 2
ARTICLE IV - CONDITIONS OF INELIGIBILITY...................................... 4
ARTICLE V - TERMINATION OF EMPLOYMENT......................................... 5
ARTICLE VI - SEVERANCE PAY.................................................... 6
ARTICLE VII - PAYMENT OF SEVERANCE PAY........................................ 9
ARTICLE VIII - WAIVER AND RELEASE............................................. 10
ARTICLE IX - IMPACT ON OTHER BENEFITS......................................... 12
ARTICLE X - PLAN ADMINISTRATION............................................... 14
ARTICLE XI - BENEFIT CLAIMS PROCEDURES ....................................... 15
ARTICLE XII - AMENDMENT/TERMINATION/VESTING................................... 17
ARTICLE XIII - NO ASSIGNMENT.................................................. 17
ARTICLE XIV - NO EMPLOYMENT RIGHTS............................................ 18
ARTICLE XV - PLAN FUNDING..................................................... 18
ARTICLE XVI - APPLICABLE LAW.................................................. 18
ARTICLE XVII - PLAN YEAR...................................................... 18
ARTICLE XVIII - MISCELLANEOUS PROVISIONS...................................... 19
</TABLE>
<PAGE> 3
GALILEO INTERNATIONAL SEVERANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1996)
--------------------------------------------------
ARTICLE I
ESTABLISHMENT OF THE PLAN
-------------------------
The Covia 1991 Severance Plan (the "Plan") was originally established
effective March 18, 1991, by Covia Partnership ("Covia") for the benefit of
Covia's eligible employees. The Plan was extended in operation by amendment,
then amended and restated effective March 1, 1992 and renamed the Covia
Severance Plan. The Plan was further amended and restated effective January 1,
1993. Effective as of September 16, 1993, pursuant to a combination of the
operations of Covia, certain of the assets and business of Covia were assumed
by Apollo Travel Services, a general partnership, and Covia Partnership was
renamed as Galileo International Partnership ("Galileo" or "Galileo
International"). Accordingly, effective September 16, 1993, the Plan was
renamed the Galileo International Severance Plan. The Plan was further amended
and restated effective January 1, 1994. The Plan is hereby further amended and
restated as set forth in this document, effective January 1, 1996. The Plan is
an unfunded welfare benefit plan for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
<PAGE> 4
- 2 -
ARTICLE II
PURPOSE OF THE PLAN
-------------------
The purpose of the Plan is to provide eligible employees with severance
pay for a specified period of time and in a specified amount in the event their
employment with Galileo is terminated under prescribed circumstances. This Plan
shall be the exclusive source and basis of severance pay for any employee
eligible hereunder and Galileo shall have no obligation to provide severance pay
to or on behalf of any such individual under any other group severance plan,
program, practice or arrangement.
ARTICLE III
ELIGIBLE EMPLOYEES
------------------
Three categories of employees of Galileo are covered by the Plan:
1. Category A - Those employees who were approved for participation in
Galileo's annual management incentive plan for the calendar year of the
employee's separation, as determined by Galileo's Supervisory Board in or
near February of that year;
2. Category B - Those Galileo employees who, as of the start of the
calendar year of the employee's separation (or as the employee's date of
hire with Galileo, if the employee was not employed by Galileo as of the
start of that calendar year) are in (i) job grade 7 or below; (ii) job
grade T3 or below;
3. Category C - All Galileo employees not in Category A or B described
above and not excluded by any other provisions of this Article III.
<PAGE> 5
-3-
Subject to the other provisions of this Plan, employees covered by the
Plan shall be considered eligible employees only if they are within any of
the three aforesaid covered categories on the date their employment with
Galileo terminates and their employment with Galileo terminates both on or
after the January 1, 1996 effective date of this Plan restatement and under
circumstances that would not disqualify the individual for a benefit under
this Plan.
The Plan does not apply to employees of Galileo, if any, who are covered
by a collective bargaining agreement unless such collective bargaining
agreement provides for their coverage under this Plan, nor does the Plan apply
to any temporary, seasonal or leased employees or to any independent
contractors providing services to Galileo, nor does the Plan apply to any
persons who were employed by Covia Partnership prior to September 16, 1993,
and who became employees of Apollo Travel Services, a general partnership
("ATS"), in connection with the combination of the operations of Galileo,
whereby certain assets and business of Galileo were assumed by ATS.
<PAGE> 6
-4-
ARTICLE IV
CONDITIONS OF INELIGIBILITY
---------------------------
An eligible employee shall not be eligible to commence or continue
receiving severance pay under this Plan if:
(a) the employee switches or is switched to employment in a category
of Galileo employees that is not covered by the Plan before the
employee ceases employment with Galileo;
(b) the employee's employment with Galileo terminates by reason
of discharge for cause (other than consolidation, elimination or
rearrangement of jobs) or death;
(c) the employee's employment with Galileo terminates voluntarily through
resignation or failure to report for work (but not through
retirement);
(d) the employee ceases active service but remains an employee
of Galileo on layoff, leave of absence, sabbatical or other inactive
status; provided, however, that an eligible employee who returns from
an authorized leave of absence during the term of this Plan and for
whom no active position with Galileo is found upon such return shall
be eligible for severance pay under the Plan;
(e) the Employee's employment with Galileo terminates when the Plan is
not in effect;
(f) the employee is employed in an operation or facility of
Galileo (or a subsidiary or affiliate of Galileo), and substantially
all of the assets of the operation or facility are sold, and the
employee is offered a comparable position, as determined by the Plan
Administrator, with the purchaser;
(g) the employee receives direct or indirect compensation
as a result of Galileo's acquisition of the employee's services
through any independent contractor arrangement or other contractual
provision;
(h) the Plan terminates.
In the exclusive discretion of the Plan Administrator, these provisions
may be modified by the Plan Administrator based on such other factors as the
Administrator deems appropriate.
<PAGE> 7
-5-
ARTICLE V
TERMINATION OF EMPLOYMENT
-------------------------
If an eligible employee's termination of employment is involuntary,
Galileo may give the employee such advance notice, if any, as it deems
appropriate.
If an eligible employee's termination of employment date is not the last
day of a payroll period, then the employee's paycheck for that payroll period
shall be allocated between his earned compensation and severance benefits
payable under the Plan, respectively, based on the proportionate number of
business days of that payroll period for which he was or was not a Galileo
employee. The entire amount of that final paycheck shall be counted as
compensation for purposes of Galileo's cafeteria and retirement plans which
are qualified under Sections 125 and 401 of the Internal Revenue Code, but no
portion of any severance benefits payable under this Plan after that paycheck
shall be counted as a basis for contributions made or benefits accrued under any
qualified cafeteria or retirement plans maintained by Galileo.
Galileo may offer an employee supplemental severance benefits in
exchange for his agreeing to continue active, dedicated employment with
Galileo in good faith for a further mutually agreed upon period of
generally not more than six months to assist in job transition, training,
special projects or for other specialized business reasons.
<PAGE> 8
- 6 -
ARTICLE VI
SEVERANCE PAY
-------------
An eligible employee who is eligible for severance pay under the Plan
shall be entitled to receive base severance pay (and supplemental severance
pay, if applicable) in an amount determined under this Article VI, subject to
the other conditions of the Plan. The amount shall be based on the eligible
employee's base rate of pay at the time his employment terminates, without
regard to overtime, commissions, bonuses, profit sharing, incentive payments
or imputed income of any kind. For part-time employees, their base rate of pay
shall be based on their regularly scheduled work week.
The supplemental severance pay formula also is based on the eligible
employee's years of service, which shall include complete years of service as
defined in this paragraph. Years of service shall be measured from the
employee's most recent date of hire and subsequent anniversaries thereof.
Service shall include all continuous employment, whether inactive or active and
whether as an eligible employee or not. Only service with Galileo (including
the predecessor to Galileo) shall count, except:
(i) prior service with United Airlines also will count as
employment with Galileo for purposes of this Plan if the individual
was transferred directly from employment with United Airlines to
employment with Galileo without interruption; and
(ii) an employee's immediate prior service for any business or
operation acquired by Galileo (or by the predecessor to Galileo)
shall also be counted as employment with Galileo to the same extent
such service is counted, if at all, by Galileo as of the effective
date of this restated Plan for purposes of the employee's vacation.
<PAGE> 9
-7-
Fractional years of service shall be credited to the nearest month
(representing one-twelfth [1/12] of a year), with service for any one day in a
month constituting service for the entire month.
The severance pay amount shall be determined under whichever of the
following formulas applies to the category of eligible employees covering the
individual whose severance pay is being calculated. The amount of severance
pay an employee becomes entitled to also varies depending on whether the
employee voluntarily signs and gives Galileo an acceptable valid and
enforceable general waiver and release of all claims (except age
discrimination claims) in accordance with Article VIII. Only base severance
pay amounts are payable if no such waiver and release is given. Supplemental
severance pay amounts also become payable if such a waiver and release is
given.
Base severance pay shall equal:
(a) for eligible employees in Category A, eight (8) weeks of base pay;
(b) for eligible employees in Category B, two (2) weeks of base pay:
(c) for eligible employees in Category C, four (4) weeks of base pay.
Supplemental severance pay shall equal:
(i) for eligible employees in Category A, two (2) weeks of base pay,
plus two (2) more weeks of base pay for each complete year of
service credited to the employee under this Plan;
(ii) for eligible employees in Category B, one (1) week of base pay for
each complete year of service credited to the employee under this
Plan;
(iii) for eligible employees in Category C, two (2) weeks of
base pay, plus one (1) more week of base pay for each complete year
of service credited to the employee under this Plan.
<PAGE> 10
- 8 -
Notwithstanding these formulas, for employees who provide the required
waiver and release a minimum level of total (base plus supplemental) severance
pay shall be paid to eligible employees in each Category in the event the
combined applicable formulas yield a lesser amount of total severance pay.
These minimum levels of severance pay shall be:
(a) for Category A, twenty-eight (28) weeks of base pay;
(b) for Category B, six (6) weeks of base pay; and
(c) for Category C, fourteen (14) weeks of base pay.
Where special circumstances warrant, the amount of severance pay awarded
to any eligible employee under this Plan may be adjusted up or down from the
amount determined as described above, in the exclusive discretion of the Plan
Administrator, based on such other factors as the Plan Administrator deems
appropriate. In no event, however, shall severance pay to any eligible
employee under this Plan exceed two times the employee's annual compensation
during the year immediately preceding his termination of employment.
<PAGE> 11
-9-
ARTICLE VII
PAYMENT OF SEVERANCE PAY
------------------------
Subject to the preconditions stated in Articles VIII and XVIII of this
Plan, severance pay which is payable to an eligible employee under this Plan
shall be payable in accordance with Galileo's regular payroll schedule. The
Plan Administrator may, either at its own election or if it so chooses in
response to an eligible employee's request (made in writing and signed on a
form provided by or acceptable to the Plan Administrator), pay all or any
portion of the unpaid balance of severance pay due an eligible employee under
this Plan in monthly or quarterly installments or a single lump sum. In no
event, however, may severance pay continue to any eligible employee for more
than two years beyond the later of his employment termination date or his
normal retirement age under any qualified retirement plan maintained by
Galileo.
In appropriate cases, the Plan Administrator may permit severance
benefits to be paid at a reduced periodic and extended over a longer period
(but not beyond the aforesaid two year limit) so that payments are scheduled to
continue until the employee would attain eligibility for a particular bonus or
other benefit or for early retirement. Under such extended payment arrangements,
the employee shall be considered to have terminated employment with Galileo,
solely for purposes of eligibility for any bonus or benefit agreed upon by
Galileo, as of the last day for which severance payments are made. The Plan
Administrator also shall have authority to permit employees to exchange, by an
acceptable written election and waiver, a portion of their severance pay for
an equivalent duration of continued employment so as to remain eligible
<PAGE> 12
-10-
(subject to the terms of the applicable benefit plans or policies) during such
continued employment for flight passes or other benefits of particular
importance to the employee at that time.
Severance pay is considered taxable income and will be subject to
Federal, State, and local income tax withholding as well as all applicable
payroll taxes as and to the extent required by applicable law.
ARTICLE VIII
WAIVER AND RELEASE
------------------
A condition for receiving any supplemental severance pay under this Plan
shall be that the eligible employee voluntarily give Galileo a valid and
enforceable written waiver and release of all claims (except age
discrimination claims) relating in any way to employment and termination of
employment with Galileo. Such waiver and release shall be substantially in the
form attached as Exhibit "A" to this Plan.
No waiver and release by the employee of age discrimination claims
against Galileo shall be required as a condition for severance pay under this
Plan, except in those individual cases where Galileo so directs. In those
individual cases, the employee shall be notified of the release requirement,
and offered additional severance pay in an amount equal to the lesser of two
(2) weeks of base pay or 50% of his regular severance pay under the Plan in
exchange for the Release. The Release shall be substantially in the form
attached as Exhibit "B" to this Plan.
<PAGE> 13
-11-
The employee shall be given at least twenty-one (21) days to consider and
return the appropriate Release form, and shall have the right to revoke the
release within seven (7) days after giving it, by delivering written notice to
the Plan Administrator within that seven (7) day period of his intent to
revoke. If the employee is asked to provide a Release that also covers age
discrimination claims and his termination of employment is instead part of a
coordinated group program of terminations, then he shall have at least
forty-five (45) days to consider and return the appropriate Release form (See
Exhibit "C" attached), with the same seven (7) day right of revocation. The
employee shall be encouraged to consult with counsel of his choice when the
Release form is provided to him. No release shall be accepted if signed by the
employee before his termination of employment date.
For any employee who gives the required release, his additional
severance pay shall be paid on regular payroll dates consecutively following
the conclusion of his regular severance payments under this Plan, subject to
his single sum election rights and any applicable payment limits under this
Plan. However, no portion of the additional severance pay to which an employee
may become entitled under this Article in exchange for giving an enforceable
general waiver and release shall be paid before the close of the first
payroll period beginning after the expiration of the Release revocation
period. This Article shall be operated in conformity with the Older Workers
Benefit Protection Act amendments to the federal Age Discrimination in
Employment Act, insofar as applicable.
<PAGE> 14
- 12 -
ARTICLE IX
IMPACT ON OTHER BENEFITS
------------------------
Unless otherwise stated in this Plan provided by individual agreement
between Galileo and any particular eligible employee, this Plan shall impact on
Galileo's other employee benefit plans as follows:
(a) Group Health and Life Benefits. An eligible employee's
coverage under Galileo's life insurance, medical, dental, vision
care, health care reimbursement account and prescription drug plans
shall terminate on the date his employment terminates, except for any
COBRA continued coverage rights that the terminated employee may have
under one or more such plans.
During the period that severance pay installments are being paid (or
would have been paid had the employee commenced receiving severance
pay installments beginning with the first pay period beginning after
the termination of his employment) to such terminated employee under
this Plan, Galileo shall pay his costs of COBRA coverage if he duly
elects such coverage. Galileo shall not pay COBRA costs for coverage
continuing after the date the individual either elects a single sum
severance payment or would have received a final installment
severance payment had he commenced receiving severance pay
installments with the first pay period beginning after the
termination of his employment (after counting any severance pay
included in his final paycheck).
(b) Flight Benefits. Flight benefits will be extended for the
length of time severance payments are made only in those cases where
the employee was either a voluntary or involuntary transfer from
United Airlines. In these cases, flight benefits will cease at the
end of the severance period.
(c) Tuition Reimbursement. Galileo's tuition reimbursement
policy for active employees shall continue to apply only to any
courses or classes which commenced before the employee's employment
is terminated under the Plan and which were previously approved for
the employee.
<PAGE> 15
- 13 -
(d) Retirement Benefits. Severance pay under this Plan shall
not count as compensation for any purposes under any qualified
retirement plan maintained by Galileo, nor shall the period during
which or for which severance payments are made be credited as service
with Galileo for any purposes under any such Galileo qualified
retirement plans.
Except with respect to extended severance payment arrangements authorized
in Article VII, an employee shall be considered terminated from employment
with Galileo, for purposes of all other Galileo benefit plans, policies and
programs, as of his termination date under this Plan without regard to his
severance pay period. An employee's severance pay under this Plan shall not be
considered compensation for purposes of earning him any benefit rights under
any other Galileo benefit plan, policy or program. This Plan and the severance
pay provided under it shall not confer any particular rights or benefits on an
eligible employee except those stated specifically in this Plan.
<PAGE> 16
- 14 -
ARTICLE X
PLAN ADMINISTRATION
-------------------
Galileo's President shall designate and appoint to serve as the "Plan
Administrator" and the "named fiduciary" of the Plan (within the meaning of
such terms as defined in ERISA), a committee consisting of not more than five
(5) individuals, who may be Galileo employees (and who may be the members of
Galileo's ERISA Plans Administration Committee). The Plan Administrator shall
have the exclusive and discretionary authority to determine eligibility for
Plan benefits, to construe the terms of the Plan and to make factual
determinations about all Plan matters. The decisions of the Plan Administrator
shall be final and conclusive with respect to all questions concerning the
administration of this Plan. The Plan Administrator may delegate to other
persons responsibilities for performing certain of the duties of the Plan
Administrator under the terms of this Plan and may seek such expert advice as
the Plan Administration deems reasonably necessary with respect to the Plan.
The Plan Administrator shall be entitled to rely upon the information and advice
furnished by such delegates and experts, unless actually knowing such
information and advice to be inaccurate or unlawful.
<PAGE> 17
- 15 -
ARTICLE XI
BENEFIT CLAIMS PROCEDURES
-------------------------
Any eligible employee who believes he is eligible for any benefit under
this Plan which has not been paid shall file a claim for such benefit in
accordance with this Article XI. Such claim shall be filed in writing with the
Plan Administrator as promptly as practicable, but in no event later than
three years after the first delinquent severance payment would have been
scheduled to be paid to the claimant had the benefits claimed by him been paid
in the ordinary course under the Plan.
Each claim for benefits under the Plan shall be considered by the Plan
Administrator and granted or denied, in whole or in part, in the sole
discretion of the Plan Administrator. The Plan Administrator's decision shall
be issued in writing to the claimant within ninety (90) days (or, if special
circumstances require it, within a further period of ninety (90) days,
provided notice is issued to the claimant of such extension before the first
ninety (90) days expires). A decision of the Plan Administrator denying a
claim, in whole or in part, will set forth in a clear and understandable
manner:
(a) the specific reason or reasons for the denial;
(b) specific reference to pertinent Plan provisions on which the denial
is based;
(c) a description of any additional material or information necessary
for the claimant to perfect the claim, and an explanation of why
such material or information is necessary; and
(d) an explanation of the appeal procedures set forth below in this
Article XI.
<PAGE> 18
-16-
If notice of an extension or of a decision has not been furnished within
ninety (90) days of the filing of a claim, the claimant may presume the claim
to have been denied as of that 90th day for the purpose of proceeding to the
appeal stage set forth below.
A claimant, or his authorized representative, shall have sixty (60) days
following receipt of a claim denial in which to appeal that denial. During
that sixty (60) day period, the claimant or authorized representative may
review the plan's records pertaining to the claim and may submit a written
appeal, to include all issues, comments and further materials and information
in support of the claim. Such appeals shall be directed to and considered by
the ERISA Plans Administration Committee of Galileo ("EPAC"), as constituted
from time to time. Failure to appeal within such sixty (60) day period
constitutes a waiver of the right to challenge the claim denial.
Upon receipt of an appeal, the EPAC shall review and consider the appeal
and reach a decision, in its sole discretion, within sixty (60) days after
receipt of the appeal (or, if special circumstances require it, within a further
period of (60) days, provided notice is issued to the claimant or his
representative of such extension before the first sixty (60) day period
expires). The EPAC may request and explore such additional materials and
information as it deems necessary and appropriate in order to render a
decision. The decision of EPAC shall be issued in writing and will set forth
in a clear and understandable manner the reasons for the decision and make
specific references to pertinent Plan provisions on which the decision is
based. Except as otherwise may be required by law, the decision of EPAC (or of
the Plan Administrator, if different and an appeal is not made) shall be final
and binding.
<PAGE> 19
-17-
ARTICLE XII
AMENDMENT/TERMINATION/VESTING
-----------------------------
Eligible employees do not have any vested right to severance pay under
this Plan. Galileo reserves the right in its sole discretion to amend, extend
or terminate this Plan by a written instrument of amendment executed by the
President of Galileo or jointly by any two Galileo Vice Presidents. Absent
such action by Galileo, this Plan shall terminate at midnight on December 31,
1999, although severance payments may continue thereafter, according to the
terms of this Plan, to eligible employees whose employment terminated on or
before the Plan termination date.
ARTICLE XIII
NO ASSIGNMENT
------------------
No severance pay payable under this Plan shall be subject to
anticipation, alienation, pledge, hypothecation, sale, transfer, assignment,
garnishment, attachment, execution, encumbrance, levy, lien, or charge, and any
attempt to cause such severance pay to be so subjected shall not be recognized,
except to the extent required by law.
<PAGE> 20
- 18 -
ARTICLE XIV
NO EMPLOYMENT RIGHTS
--------------------
This Plan shall not confer employment rights upon any person. No person
shall be entitled, by virtue of the Plan, to remain in the employ of Galileo.
ARTICLE XV
PLAN FUNDING
------------
No eligible employee shall acquire by reason of this Plan any right in or
title to any assets, funds, or property of Galileo. Any severance pay benefits
which become payable under this Plan are unfunded obligations of Galileo and
are payable solely from the general assets of Galileo.
ARTICLE XVI
APPLICABLE LAW
--------------
This Plan shall be governed and construed in accordance with ERISA and in
the event that any reference shall be made to State law, the laws of the State
of Illinois shall apply.
ARTICLE XVII
PLAN YEAR
---------
The ERISA plan year of this Plan shall be the calendar year.
<PAGE> 21
- 19 -
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
------------------------
All Galileo property (i.e., keys, credit cards, documents and records,
identification cards, equipment, etc.) must be returned by an eligible
employee as of his date of termination of employment in order for such
eligible employee to commence receiving severance pay under this Plan. Failure
to return Galileo property shall cause a forfeiture of the eligible employee's
rights to severance pay under this Plan, or to any severance payments still
unpaid to such individual if the failure is not discovered before severance
payments have begun. This forfeiture remedy is not exclusive and is in
addition to any and all other legal and equitable rights and remedies
available to Galileo to protect or recover its property under applicable law.
Any failure by Galileo to apply this forfeiture remedy in one or more
instances shall not waive Galileo's right to apply such remedy in any other
case.
<PAGE> 22
- 20 -
For purposes of construing this Plan, all references in the masculine
shall include the feminine and all references in the singular shall include
the plural, as the context and circumstances may require.
IN WITNESS WHEREOF, GALILEO INTERNATIONAL has caused this amended and
restated Plan to be adopted, put into effect in accordance with its terms, and
executed on this 30 day of DEC., 1996, to be effective as of the
January 1, 1996 effective date.
GALILEO INTERNATIONAL
By: /s/ [Signature]
--------------------------------
Its: SUP, HUMAN RESOURCES
-------------------------------
ATTEST:
By: /s/ [Signature]
-----------------------------------
Its: SR. MGR. COMPENSATION & BENEFITS
----------------------------------
<PAGE> 23
GALILEO INTERNATIONAL SEVERANCE PLAN
SINGLE SUM ELECTION
-------------------
- - ------------------------- -------------------------------------
Employee's Name Social Security Number
(Please Print)
By signing below and returning this form, I ELECT to receive all future
severance pay (net of applicable tax and payroll deductions) for which I am
eligible under the Galileo International Severance Plan in A SINGLE SUM and not
in installments.
GALILEO INTERNATIONAL
By: Date:
-------------------------------- -------------------------------
Title:
-----------------------------
EMPLOYEE:
Date:
- - ----------------------------------- -------------------------------
Signature
- - -----------------------------------
Print Name
Please provide your mailing Please return this election to:
address for your severance
check:
- - ---------------------------- Galileo International
Human Resources Department
- - ---------------------------- 9700 W. Higgins Road, Suite 400
Rosemont, IL 60018
- - ----------------------------
- - ----------------------------
<PAGE> 24
IMPORTANT INFORMATION ON LEGAL RELEASE FORM
PLEASE READ CAREFULLY
Your severance benefits are conditioned in part on you waiving all claims
(except age discrimination claims) against Galileo International and its
partners relating to your employment and its termination. The enclosed waiver
and release form is provided by the Plan Administrator for this purpose. Even
if you do not sign and return the waiver and release, you will still be
eligible for COBRA offered under the Plan, as well as for any base severance
pay.
You have 21 days to sign and return the waiver and release; otherwise, you
forfeit all other severance pay.
EXHIBIT "A"
<PAGE> 25
EMPLOYEE SEPARATION RELEASE AGREEMENT
-------------------------------------
This is an agreement between you, as the Employee (for yourself, your
spouse and dependents and anyone acting for you) and Galileo International, as
the Employer (for itself, its partners and anyone acting for it or them).
1. In exchange for your making this agreement and your return of any
property of the Employer, the Employer promises to pay you supplemental
severance benefits in accordance with the Galileo International Severance
Plan. Those severance benefits include certain cash payments in a lump sum (if
you so elect) or on the Employer's semi-monthly payroll schedule, less
standard tax and payroll deductions. You acknowledge having received with this
agreement a booklet describing that Plan and certain other information about
the scope of Plan eligibility.
2. By making this agreement, and in exchange for the supplemental
severance pay benefits described above, you hereby waive and release the
Employer from any and all disputes, disagreements and claims of any kind
(except age discrimination claims) arising to date from your employment with
the Employer or your separation from employment with the Employer. This
includes, but is not limited to, breach of any implied or express employment
agreements or covenants; entitlement to any pay, insurance or benefits earned
to date; any claims for wrongful termination, public policy violations,
defamation, emotional distress or other common law matters; and claims of
discrimination, including but not limited to discrimination based on race,
sex, religion, national origin, color, ancestry, handicap, disability,
veteran's status, sexual preference, marital status, parental status,
harassment or any type of retaliation.
3. It is understood and agreed that you are not entitled to the
supplemental severance pay benefits described in paragraph 1 above without
agreeing to the waiver and release of claims described in paragraph 2 above.
Those benefits exceed any benefits that would normally be provided to you upon
separation of your employment with the Employer. If any part of this agreement
is found to be illegal or invalid, you agree that the rest of this agreement
will still be valid and enforceable. However, if your waiver and release in
paragraph 2 above is declared illegal or invalid, you shall have no right to
receive or retain the severance pay benefits described in paragraph 1 above.
4. You agree that you are signing this agreement knowingly and
voluntarily, that you have not been coerced or threatened into signing this
agreement and that you have not been promised anything else in exchange for
signing this agreement. You acknowledge and agree that you have had sufficient
time to consider this agreement. You have twenty-one (21) days in which to
consider this agreement and the accompanying information and to sign and
return this agreement or forever forfeit your right to supplemental severance
pay, but your supplemental severance pay benefits will not begin until after a
signed agreement is returned. You are advised to consult with an attorney, if
desired, before signing below. This agreement may be revoked if you notify the
Plan Administrator in writing of that desire and that notice is
EXHIBIT "A"
<PAGE> 26
-2-
received by the Plan Administrator within seven (7) days after you sign this
Agreement. If you have not revoked this Agreement within that time, the
agreement will then take effect as of the 8th day after you sign it. If your
signature is undated, the agreement will take effect on the 8th day after it
is received by the Employer.
You and the Employer each signify acceptance of the terms of this
agreement by signing below.
GALILEO INTERNATIONAL
By: Date:
-------------------------------- -------------------------------
Title:
-----------------------------
EMPLOYEE:
Date:
- - ----------------------------------- -------------------------------
Signature
- - -----------------------------------
Print Name
Please Provide tour mailing Please return this election
check: to:
- - ----------------------------------- Human Resources Department
Galileo International
- - ----------------------------------- 9700 W. Higgins Road, Suite 400
Rosemont, IL 60018
- - -----------------------------------
- - -----------------------------------
EXHIBIT "A"
<PAGE> 27
IMPORTANT INFORMATION ON LEGAL RELEASE FORM
PLEASE READ CAREFULLY
Your severance benefits are conditioned in part on you waiving all claims
against Galileo International and its partners relating to your employment and
its termination. The enclosed waiver and release form is provided by the Plan
Administrator for this purpose. Even if you do not sign and return the waiver
and release, you will still be eligible for COBRA offered under the Plan, as
well as for any base severance pay.
You have 21 days to sign and return the waiver and release; otherwise, you
forfeit all other severance pay. The waiver and release covers age
discrimination claims and many other types of claims. Section 7 of the Federal
Age Discrimination in Employment Act (the "ADEA"), 29 U.S.C.s626 (f), as
recently amended by the Older Workers Benefits Protection Act, requires
Galileo International to give you that 21 day period and certain information
in order for your waiver and release to be valid and enforceable with respect
to age discrimination claims.
EXHIBIT "B"
<PAGE> 28
EMPLOYEE SEPARATION RELEASE AGREEMENT
This is an agreement between you, as the Employee (for yourself, your
spouse and dependents and anyone acting for you) and Galileo International, as
the Employer (for itself, its partners and anyone acting for it or them).
1. In exchange for your making this agreement and your return of any
property of the Employer, the Employer promises to pay you enhanced severance
benefits in accordance with the Galileo International Severance Plan. Those
severance benefits include certain cash payments in a lump sum (if you so
elect) or on the Employer's semi-monthly payroll schedule, less standard tax
and payroll deductions. You acknowledge having received with this agreement a
booklet describing that Plan and certain other information about the scope of
Plan eligibility.
2. By making this agreement, and in exchange for the enhanced severance
pay benefits described above, you hereby waive and release the Employer from
any and all disputes, disagreements and claims of any kind arising to date
from your employment with the Employer or your separation from employment with
the Employer. This includes, but is not limited to, breach of any implied or
express employment agreements or covenants; entitlement to any pay, insurance or
benefits earned to date; any claims for wrongful termination, public policy
violations, defamation, emotional distress or other common law matters; and
claims of discrimination, including but not limited to discrimination based on
race, sex, age, religion, national origin, color, ancestry, handicap,
disability, veteran's status, sexual preference, marital status, parental
status, harassment or any type of retaliation.
3. It is understood and agreed that you are not entitled to the enhanced
severance pay benefits described in paragraph 1 above without agreeing to the
waiver and release of claims described in paragraph 2 above. Those enhanced
benefits exceed any benefits that would normally be provided to you upon
separation of your employment with the Employer. If any part of this agreement
is found to be illegal or invalid, you agree that the rest of this agreement
will still be valid and enforceable. However, if your waiver and release in
paragraph 2 above is declared illegal or invalid, you shall have no right to
receive or retain the severance pay benefits described in paragraph 1 above.
4. You agree that you are signing this agreement knowingly and
voluntarily, that you have not been coerced or threatened into signing this
agreement and that you have not been promised anything else in exchange for
signing this agreement. You acknowledge and agree that you have had sufficient
time to consider this agreement. You have twenty-one (21) days in which to
consider this agreement and the accompanying information and to sign and return
this agreement or forever forfeit your right to enhanced severance pay, but
your enhanced severance pay benefits will not begin until after a signed
agreement is returned. You are advised to consult with an attorney, if desired,
before signing below. This agreement may be revoked if you notify the Plan
Administrator in writing of that desire and that notice is
EXHIBIT "B"
<PAGE> 29
- 2 -
received by the Plan Administrator within seven (7) days after you sign this
Agreement. If you have not revoked this Agreement within that time, the
agreement will then take effect as of the 8th day after you sign it. If your
signature is undated, the agreement will take effect on the 8th day after it
is received by the Employer.
You and the Employer each signify acceptance of the terms of this
agreement by signing below.
GALILEO INTERNATIONAL
By: Date:
-------------------------------- -------------------------------
Title:
-----------------------------
EMPLOYEE:
Date:
- - ----------------------------------- -------------------------------
Signature
- - -----------------------------------
Print Name
Please provide your mailing Please return this election
address for your severance to:
check:
- - ----------------------------------- Human Resources Department
Galileo International
- - ----------------------------------- 9700 W. Higgins Road, Suite 400
Rosemont, IL 60018
- - -----------------------------------
- - -----------------------------------
EXHIBIT "B"
<PAGE> 30
IMPORTANT INFORMATION ON LEGAL RELEASE FORM
PLEASE READ CAREFULLY
Your severance benefits are conditioned in part on you waiving all claims
against Galileo International and its partners relating to your employment and
its termination. The enclosed waiver and release form is provided by the Plan
Administrator for this purpose. Even if you do not sign and return the waiver
and release, you will still be eligible for COBRA offered under the Plan, as
well as for any base severance pay.
You have 45 days to sign and return the waiver and release; otherwise, you
forfeit all other severance pay. The waiver and release covers age
discrimination claims and many other types of claims. Section 7 of the Federal
Age Discrimination in Employment Act (the "ADEA"), 29 U.S.C.s626 (f), as
recently amended by the Older Workers Benefits Protection Act, requires
Galileo International to give you that 45 day period and certain information
in order for your waiver and release to be valid and enforceable with respect
to age discrimination claims.
EXHIBIT "C"
<PAGE> 31
EMPLOYEE SEPARATION RELEASE AGREEMENT
This is an agreement between you, as the Employee (for yourself, your
spouse and dependents and anyone acting for you) and Galileo International, as
the Employer (for itself, its partners and anyone acting for it or them).
1. In exchange for your making this agreement and your return of any
property of the Employer, the Employer promises to pay you enhanced severance
benefits in accordance with the Galileo International Severance Plan. Those
severance benefits include certain cash payments in a lump sum (if you so
elect) or on the Employer's semi-monthly payroll schedule, less standard tax
and payroll deductions. You acknowledge having received with this agreement a
booklet describing that Plan and certain other information about the scope of
Plan eligibility.
2. By making this agreement, and in exchange for the enhanced severance
pay benefits described above, you hereby waive and release the Employer from
any and all disputes, disagreements and claims of any kind arising to date
from your employment with the Employer or your separation from employment with
the Employer. This includes, but is not limited to, breach of any implied or
express employment agreements or covenants; entitlement to any pay, insurance
or benefits earned to date; any claims for wrongful termination, public policy
violations, defamation, emotional distress or other common law matters; and
claims of discrimination, including but not limited to discrimination based on
race, sex, age, religion, national origin, color, ancestry, handicap,
disability, veteran's status, sexual preference, marital status, parental
status, harassment or any type of retaliation.
3. It is understood and agreed that you are not entitled to the enhanced
severance pay benefits described in paragraph 1 above without agreeing to the
waiver and release of claims described in paragraph 2 above. Those enhanced
benefits exceed any benefits that would normally be provided to you upon
separation of your employment with the Employer. If any part of this agreement
is found to be illegal or invalid, you agree that the rest of this agreement
will still be valid and enforceable. However, if your waiver and release in
paragraph 2 above is declared illegal or invalid, you shall have no right to
receive or retain the severance pay benefits described in paragraph 1 above.
4. You agree that you are signing this agreement knowingly and
voluntarily, that you have not been coerced or threatened into signing this
agreement and that you have not been promised anything else in exchange for
signing this agreement. You acknowledge and agree that you have had sufficient
time to consider this agreement. You have forty-five (45) days in which to
consider this agreement and the accompanying information and to sign and return
this agreement or forever forfeit your right to enhanced severance pay, but
your enhanced severance pay benefits will not begin until after a signed
agreement is returned.
EXHIBIT "C"
<PAGE> 32
- 2 -
You are advised to consult with an attorney, if desired, before signing below.
This agreement may be revoked if you notify the Plan Administrator in writing
of that desire and that notice is received by the Plan Administrator within
seven (7) days after you sign this Agreement. If you have not revoked this
Agreement within that time, the agreement will then take effect as of the 8th
day after you sign it. If your signature is undated, the agreement will take
effect on the 8th day after it is received by the Employer.
You and the Employer each signify acceptance of the terms of this
agreement by signing below.
GALILEO INTERNATIONAL
By: Date:
-------------------------------- -------------------------------
Title:
-----------------------------
EMPLOYEE:
Date:
- - ----------------------------------- -------------------------------
Signature
- - -----------------------------------
Print Name
Please provide your mailing Please return this election
address for your severance to:
check:
- - ------------------------------------ Human Resources Department
Galileo International
- - ------------------------------------ 9700 W. Higgins Road, Suite 400
Rosemont, IL 60018
- - ------------------------------------
- - ------------------------------------
EXHIBIT "C"
<PAGE> 1
Exhibit 10.32
GALILEO INTERNATIONAL SAVINGS AND INVESTMENT PLAN
<PAGE> 2
<TABLE>
<CAPTION>
Table Of Contents
INTRODUCTION
<S> <C> <C>
ARTICLE I Definitions......................................................... 1
ARTICLE II Service............................................................. 13
ARTICLE III Eligibility, Enrollment and Participation........................... 15
ARTICLE IV Contributions ...................................................... 16
ARTICLE V Limitations on Allocations ......................................... 27
ARTICLE VI Distribution of Benefits ........................................... 32
ARTICLE VI-A Direct Rollovers ................................................... 37
ARTICLE VII Retirement Benefits ................................................ 39
ARTICLE VIII Joint and Survivor Annuity Requirements ............................ 40
ARTICLE IX Termination of Employment .......................................... 44
ARTICLE X Withdrawals ........................................................ 45
ARTICLE X-A Loans .............................................................. 48
ARTICLE XI Fiduciary Duties and Responsibilities .............................. 50
ARTICLE XII The Administrator .................................................. 51
ARTICLE XIII Participants' Rights ............................................... 53
ARTICLE XIV Amendment or Termination of the Plan ............................... 56
ARTICLE XV Substitution of Plans .............................................. 58
ARTICLE XVI Miscellaneous ...................................................... 59
ARTICLE XVI-A Top-Heavy Provisions ............................................... 61
</TABLE>
December, 1996
<PAGE> 3
INTRODUCTION
The Covia Savings and Investment Plan (the "Plan") was originally
established effective January 1, 1987, by Covia Corporation to provide
Eligible Employees with the opportunity to reduce their current income for
Federal income tax purposes while saving for retirement.
On January 1, 1988, Covia Partnership was created as a partnership under
the laws of the state of Delaware, consisting of Covia Corporation and Cypher
Corporation, a wholly owned subsidiary of United Air Lines Inc. ("United").
Covia Partnership became the Plan sponsor effective as of January l, 1988. On
August 5, 1988, additional partners purchased a 50% interest in Covia
Corporation.
This Plan was first amended effective November 30, 1988 to change the
applicable Plan Year, and subsequently amended effective January 1, 1987, to
cause it to comply with changes in applicable law. The Plan was further amended
and restated effective as of January 1, 1987, in order to incorporate the
requirements of the Tax Reform Act of 1986 and to make certain other changes
to the Plan.
Effective as of January 1, 1993, the Covia Retirement Plan (the
"Retirement Plan") was merged into this Plan. Unless otherwise provided
herein, the rights of any individual who was a participant in the Retirement
Plan as of January 1, 1993 shall be determined in accordance with the
provisions of this Plan.
Effective as of September 16, 1993, pursuant to a combination of the
operations of Covia, certain of the assets and business of Covia was assumed
by Apollo Travel Services, a general partnership, and Covia Partnership was
renamed as Galileo International Partnership. Accordingly, effective September
16, 1993, the Plan was renamed the Galileo International Savings and
Investment Plan.
The Plan is hereby amended and restated effective July 1, 1994 and
January 1, 1996, in order to provide for Nonelective Contributions and
Matching Contributions, respectively, and to make certain other changes to the
Plan. The Plan, as amended and restated, is intended to continue to qualify
as a 401(k) plan within the meaning of Section 401(a) and 401(k) of the
Internal Revenue Code of 1986 (the "Code"), and the related Trust is intended
to continue to be a qualified trust within the meaning of Section 501(a) of
the Code.
<PAGE> 4
ARTICLE I
DEFINITIONS
1.1 ACCOUNT. The term Account means the sum of the following sub-accounts
held on behalf of each Participant:
- Elective Deferral Contributions, if any, and earnings thereon (401(k));
- Matching Contributions, if any, and earnings thereon;
- Nonelective Contributions, if any, and earnings thereon (Employer
Contribution);
- Qualified Nonelective Contributions, if any, and earnings thereon;
- Prior Employer Contributions, if any, and earnings thereon (5%
Retirement Plan);
- Prior Employee Contributions, if any, and earnings thereon (After-Tax);
- Rollover Contributions, if any, and earnings thereon.
1.2 ACTIVE PARTICIPANT. The term Active Participant means any Participant
who (a) performs duties as an Employee for the Employer, and (b) is not an
Inactive Participant.
1.3 ACTUAL CONTRIBUTION PERCENTAGE. The term Actual Contribution
Percentage means the average of the Actual Contribution Ratios of a
specified group computed to the nearest one-hundredth of one percent.
1.4 ACTUAL CONTRIBUTION PERCENTAGE TEST.
(A) For each Plan Year, the Plan shall satisfy the contribution percentage
requirement described in section 401(m)(2) of the Code and the
regulations thereunder, which are incorporated herein.
The Plan satisfies the Actual Contribution Percentage Test if:
(1) The Actual Contribution Percentage for the group of eligible Highly
Compensated Employees is not more than the Actual Contribution
Percentage for the group of all other eligible Employees multiplied by
1.25; or
(2) The excess of the Actual Contribution Percentage for the group of
eligible Highly Compensated Employees over the Actual Contribution
Percentage for the group of all other eligible Employees is not more
than two percentage points, and the Actual Contribution Percentage for
the group of eligible Highly Compensated Employees is not more than the
Actual Contribution Percentage for the group of all other eligible
Employees multiplied by two.
1
<PAGE> 5
(B) Special Rules.
(1) For purposes of determining the Actual Contribution Percentage Test,
Employee Contributions are considered to have been made in the Plan
Year in which they were contributed tO the Plan. Matching
Contributions and Qualified Nonelective Contributions will be
considered for a Plan Year only if allocated to the Employee's
Account as of any date within the Plan Year being tested and only if
made before the last day of the twelve-month period immediately
following the Plan Year to which such contributions relate.
(2) A Matching Contribution that is forfeited tO correct Excess Aggregate
Contributions, or because the contribution to which it relates is
treated as an Excess Contribution, Excess Deferral, or Excess
Aggregate Contribution. shall not be taken into account for purposes
of the Actual Contribution Percentage Test.
(3) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Contribution Percentage Test, including
records showing the extent to which Qualified Nonelective
Contributions and Elective Deferral Contributions are taken into
account.
1.5 ACTUAL CONTRIBUTION RATIO.
(A) An Employee's Actual Contribution Ratio is the sum of the
Contribution Percentage Amounts allocated to the Employee's Account
for the Plan Year (including any amounts required tO be taken
into account under subparagraphs (B) (1) and (B) (2) of this
section) divided by the Employee's Compensation for the Plan Year.
If no Matching Contributions, Qualified Nonelective Contributions,
or Elective Deferral Contributions are allocated to the Account of
an eligible Employee during the Plan Year, the Actual Contribution
Ratio of the Employee is zero.
(B) Special Rules.
(1) In the event that this Plan is aggregated with one or more plans
for purposes of section 410(b) of the Code (other than for
purposes of the average benefit percentage test), or if one or
more other plans satisfy the requirements of section 410(b) of
the Code (other than the average benefit percentage test) only
if aggregated with this Plan, then this section shall be applied
by determining the Actual Contribution Ratios of Employees as if
all such plans were a single plan. Plans may be aggregated only
if they have the same Plan Year.
(2) The Actual Contribution Ratio of a Highly Compensated Employee
who is eligible to participate in more than one plan of the
Employer to which Employee Contributions or Matching
Contributions are made shall be calculated by treating all
such plans in which the Employee is eligible to participate as
one plan. For Plan Years beginning after December 31, 1988, if a
Highly Compensated Employee participates in two or more plans
that have different plan years, all plans ending with or within
the same calendar year shall be treated as a single plan.
However, plans that are not permitted to be aggregated under
Treasury Regulation section 1.401(m)-1(b)(3)(ii) shall not be
aggregated for purposes of this section.
(3) For purposes of determining the Actual Contribution Ratio of a
Participant who is a 5-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participant shall
include the Contribution Percentage Amounts (including any
amounts required to be taken into
2
<PAGE> 6
account under subparagraphs (B) (1) and (B) (2) of this section)
and Compensation for the Plan Year of all Family Members.
If the Participant is required to be aggregated as a member of
more than one family group under the Plan, all eligible
Employees who are members of those family groups that include
that Employee are aggregated as one family group.
Family Members, with respect to Highly Compensated Employees,
shall be disregarded as separate Employees in determining the
Actual Contribution Ratio both for Participants who are
Nonhighly Compensated Employees and for Participants who are
Highly Compensated Employees.
(4) The determination and treatment of the Actual Contribution Ratio
amounts of any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
1.6 ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral Percentage means the
average of the Actual Deferral Ratios of a specified group, computed to
the nearest one-hundredth of one percent.
1.7 ACTUAL DEFERRAL PERCENTAGE TEST.
(A) For each Plan Year, the Plan shall satisfy the Actual Deferral
Percentage Test described in section 401(k)(3) and the regulations
thereunder, which are herein incorporated by reference.
The Plan satisfies the Actual Deferral Percentage Test for a Plan
Year only if:
(1) The Actual Deferral Percentage for the group of eligible Highly
Compensated Employees is not more than the Actual Deferral
Percentage for the group of all other eligible Employees
multiplied by 1.25; or
(2) The excess of the Actual Deferral Percentage for the group of
eligible Highly Compensated Employees over the Actual Deferral
Percentage for the group of all other eligible Employees is not
more than two percentage points, and the Actual Deferral
Percentage for the group of eligible Highly Compensated
Employees is not more than the Actual Deferral Percentage for
the group of all other eligible Employees multiplied by two.
(B) Special Rules.
(1) For purposes of determining the Actual Deferral Percentage Test,
Elective Deferral Contributions and Qualified Nonelective
Contributions must be allocated to the Employee's Account as of
a date within the Plan Year being tested and must be made before
the last day of the twelve-month period immediately following
the Plan Year to which such contributions relate.
(2) The Excess Deferrals of a Highly Compensated Employee shall be
taken into account for purposes of the Actual Deferral
Percentage Test. Conversely, the Excess Deferrals of an Employee
who is a Nonhighly Compensated Employee shall not be taken into
account for purposes of the Actual Deferral Percentage Test.
(3) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Deferral Percentage Test, including
the extent to which Qualified Nonelective
3
<PAGE> 7
Contributions are taken into account.
1.8 ACTUAL DEFERRAL RATIO.
(A) An Employee's Actual Deferral Ratio for the Plan Year is the sum of
the Employee's Deferral Percentage Amounts allocated to the
Employee's Account for the Plan Year (including any amounts required
to be taken into account under subparagraphs (B) (1) and (B) (2) of
this section), divided by the Employee's Compensation taken into
account for the Plan Year. If an eligible Employee makes no Elective
Deferral Contributions, and no Qualified Nonelective Contributions
are taken into account with respect to the Employee, the Actual
Deferral Ratio of the Employee is zero.
(B) Special Rules.
(1) In the event that this Plan is aggregated with one or more
plans for purposes of section 410(b) of the Code (other than
for purposes of the average benefit percentage test), or if one
or more other plans satisfy the requirements of section 410(b)
of the Code (other than the average benefit percentage test)
only if aggregated with this Plan, then this section shall be
applied by determining the Actual Deferral Ratio of Employees as
if all such plans were a single plan. Plans may be aggregated
only if they have the same Plan Year.
(2) The Actual Deferral Ratio of a Highly Compensated Employee who
is eligible to participate in more than one cash or deferred
arrangement (as described in section 40l(k) of the Code) of the
same Employer shall be calculated by treating all the cash or
deferred arrangements in which the Employee is eligible to
participate as one arrangement. If the cash or deferred
arrangements that are treated as a single arrangement under the
preceding sentence are parts of plans that have different Plan
Years, the cash or deferred arrangements are treated as a single
arrangement with respect to the Plan Years ending with or within
the same calendar year. However, plans that are not permitted to
be aggregated under Treasury Regulation section
1.401(k)-l(b)(3)(ii)(B) are not aggregated for purposes of this
section.
(3) For purposes of determining the Actual Deferral Ratio of a
Participant who is a 5 percent owner or one of the 10 most
Highly Compensated Employees, the Deferral Percentage Amounts
and Compensation of such Participant shall include the Deferral
Percentage Amounts (including any amounts required to be taken
into account under subparagraphs (B) (1) and (B) (2) of this
section) and Compensation for the Plan Year of Family Members.
If an Employee is required to be aggregated as a member of more
than one family group under the Plan, all eligible Employees who
are members of those family groups that include that Employee
are aggregated as one family group.
Family Members, with respect to such Highly Compensated
Employees, shall be disregarded as separate Employees in
determining the Actual Deferral Percentage both for
Participants who are Non-highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(4) The determination and treatment of the Actual Deferral Ratio
amounts of any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
4
<PAGE> 8
1.9 ANNUITY. The term Annuity means a series of payments made over a specified
period of time which, for a fixed annuity are, of equal, specified
amounts, and for a variable annuity increase or decrease to reflect
changes in investment performance of the underlying portfolio.
1.10 ANNUITY STARTING DATE. The term Annuity Starting Date means the first
day of the first period for which an amount is payable as an Annuity. In
the case of a benefit not payable in the form of an Annuity, the term
Annuity Starting Date means the first day on which all events have
occurred which entitle the Participant to such benefit.
1.11 BENEFICIARY. The Participant's Spouse is the designated Beneficiary of the
Participant's entire Vested Interest. However, each Participant shall have
the right to designate another Beneficiary and to specify the form
of death benefit the Beneficiary is to receive, subject to the
requirements of the "Qualified Election" provisions of Article VIII, Joint
and Survivor Annuity Requirements. The Participant may change the
Beneficiary and/or the form of death benefit at any time, subject to the
requirements of the "Qualified Election" provisions of Article VIII, Joint
and Survivor Annuity Requirements.
If any distribution hereunder is made to a Beneficiary in the form of an
Annuity, and if such Annuity provides for a death benefit, then such
Beneficiary shall also have the right to designate a Beneficiary and to
change that Beneficiary from time to time. As an alternative to
receiving the benefit in the form of an Annuity, the Beneficiary may elect
to receive a single cash payment or any other form of payment provided for
in the Plan.
If a Beneficiary has not been designated, or if a Beneficiary
designation or change of Beneficiary designation does not meet the
requirements of the "Qualified Election" provisions of Article VIII, Joint
and Survivor Annuity Requirements, or if no designated Beneficiary
survives the Participant, the Participant's entire Vested Interest shall
be distributed to the Participant's Spouse, if living; otherwise in equal
shares to any surviving children of the Participant. In the event none of
the above named individuals survives the Participant, the Participant's
entire Vested Interest shall be paid to the executor or administrator of
the Participant's estate.
For purposes of Investment of Contributions as described in Article
XIII, an individual who is designated as an alternate payee in a qualified
domestic relations order (as defined in section 414(p) of the Code)
relating to a Participant's benefits under this Plan shall be treated as a
Beneficiary hereunder, to the extent provided by such order.
1.12 BOARD OF SUPERVISORS. The term Board of Supervisors means the Employer's
board of supervisors or other comparable governing body.
1.13 CODE. The term Code means the Internal Revenue Code of 1986, as amended
from time to time.
1.14 COMPENSATION.
(A) Except as otherwise provided in the Plan, the term Compensation means
a Participant's earned base pay (including for purposes of Nonelective
Contributions only, pre-tax FlexTrack benefit contributions), plus
pay for:
Overtime Holiday Worked Rotating Day Off
Doubletime Commissions
Shift Differential Retroactive Pay
Holiday Rotating Day Off Lump-Sum Merit Pay
Corporate Recognition Bonus Management Incentive Bonuses*
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*Management Incentive Bonuses will be considered Compensation for
the calendar year in which paid.
(B) Base pay shall include regular pay, plus pay for the following:
a. short term disability
b. paid leave of absence
c. funeral leave
d. jury duty
e. military duty
f. vacation pay
g. sick pay
(C) In addition to other applicable limitations set forth in the Plan,
and notwithstanding any other provision of the Plan to the contrary,
for Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Employee taken into account under the Plan shall
not exceed the OBRA'93 annual Compensation limit. The OBRA'93 annual
Compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with section
401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months,
over which Compensation is determined (determination period)
beginning in such calendar year. If a determination period consists
of fewer than 12 months, the OBRA'93 annual Compensation limit will
be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is
12. For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under section 401(a)(17) of
the Code shall mean the OBRA '93 annual Compensation limit set forth
in this provision. If Compensation for any prior determination period
is taken into account in determining an employee's benefits accruing
in the current Plan Year, the Compensation for that prior
determination period is subject to the OBRA '93 annual Compensation
limit in effect for that prior determination period. For this
purpose, for determination periods beginning before the first day of
the first Plan Year beginning on or after January 1, 1994, the OBRA
'93 annual Compensation limit is $150,000.
In determining the Compensation of a Participant for purposes of this
limitation, the rules of section 414(q)(6) of the Code shall
apply, except in applying such rules, the term "family" shall include
only the Spouse of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of the
year. If, as a result of the application of such rules, the adjusted
OBRA'93 annual compensation limit is exceeded, then either the
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined under
this section prior to the application of this limitation, or the
limitation shall be allocated among the affected individuals in an
objective and nondiscriminatory manner based on a reasonable, good
faith interpretation of section 401(a)(17) of the Code. The method
chosen in the preceding sentence shall be uniformly applied to all
affected individuals in a Plan Year and shall be applied consistently
from year to year.
1.15 CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution Percentage
Amounts means the sum of the Matching Contributions and Qualified
Matching Contributions (to the extent not taken into account for
purposes of the Actual Deferral Percentage Test) made under the Plan on
behalf of the Employee for the Plan Year. The term Contribution
Percentage Amounts also includes Qualified Nonelective Contributions and
Elective Deferral Contributions treated as Matching Contributions and
taken into account in determining the Employee's Actual Contribution
Ratio for the Plan Year.
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1.16 DEFERRAL PERCENTAGE AMOUNTS. The term Deferral Percentage Amounts means
an Employee's Elective Deferral Contributions for the Plan Year. The term
Deferral Percentage Amounts also includes Qualified Nonelective
Contributions treated as Elective Deferral Contributions and taken into
account in determining the Employee's Actual Deferral Ratio for the Plan
Year.
1.17 DISABILITY. The term Disability means a Participant's incapacity to
engage in any substantial gainful activity because of a medically
determinable physical or mental impairment which can be expected to
result in death, or to be of long, continued and indefinite duration.
Such determination of Disability shall be made by the Administrator with
the advice of competent medical authority. All Participants in similar
circumstances will be treated alike.
1.18 DISABILITY RETIREMENT DATE. The term Disability Retirement Date means
the first day of the month after the Plan Administrator has determined
that a Participant's incapacity is a Disability.
1.19 EARLY RETIREMENT DATE. The term Early Retirement Date means the first
day of the month coinciding with or next following the date a Participant
is separated from Service with the Employer on or after the date he
attains age 55, provided that on such date the Participant has not
attained his Normal Retirement Age.
1.20 EFFECTIVE DATE. The term Effective Date means July 1, 1994, the date on
which this amendment and restatement of the Plan first became effective.
1.21 ELECTIVE DEFERRAL CONTRIBUTION. The term Elective Deferral Contribution
means any Employer Contribution made to the Plan at the election of the
Participant, in lieu of cash compensation, and includes contributions
made pursuant to a Salary Deferral Agreement or other deferral mechanism.
Solely for purposes of the dollar limitation specified in section 402(g)
of the Code, with respect to any taxable year, a Participant's Elective
Deferral Contributions are the sum of all employer contributions made on
behalf of such Participant pursuant to an election to defer under any
qualified cash or deferred arrangement as described in section 401(k) of
the Code, any simplified employee pension cash or deferred arrangement
described in section 402(h)(1)(B) of the Code, any plan as described under
section 501(c)(18) of the Code, and any employer contributions made on
behalf of a Participant for the purchase of a tax sheltered annuity
contract under section 403(b) of the Code pursuant to a salary reduction
agreement.
The term Elective Deferral Contribution shall not include any deferrals
properly distributed as excess annual additions.
1.22 EMPLOYEE. The term Employee means an individual who performs services for
the Employer and who is a common law employee of the Employer, other than
(i) a leased employee (within the meaning of Section 414(n) of the
Code), and (ii) an employee covered by a collective bargaining agreement
between the Employee representatives and the Employer, if retirement
benefits were the subject of good faith bargaining, unless the collective
bargaining agreement provided for coverage under the Plan.
1.23 EMPLOYER. The term Employer means Galileo International Partnership and
any successor organization to such Employer which elects to continue the
Plan. In the case of a group of employers which constitutes a controlled
group of corporations (as defined in Code section 414(b)), or which
constitutes trades or businesses (whether or not incorporated) which are
under common control (as defined in Code section 414(c)), or which
constitutes an affiliated service group (as defined in Code section
414(m)), all such employers shall be considered a single employer for
purposes of participation, vesting, Top-Heavy provisions and
determination of Highly Compensated Employees.
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1.24 EMPLOYER CONTRIBUTION. The term Employer Contribution means any
contribution made to the Plan by the Employer on behalf of a Participant,
other than a Rollover Contribution.
1.25 ERISA. The term ERISA means the Employee Retirement Income Security Act of
1974 (PL 93-406) as it may be amended from time to time, and any
regulations issued pursuant thereto as such Act and such regulations
affect this Plan and Trust.
1.26 EXCESS AGGREGATE CONTRIBUTIONS.
(A) The term Excess Aggregate Contributions means, with respect to any
Plan Year, the excess of the aggregate amount or the Contribution
Percentage Amounts actually made on behalf of Highly Compensated
Employees for the Plan Year (including any amounts required to be
taken into account under subparagraphs (B) (1) and (B) (2) of the
Definition of Actual Contribution Ratio found in this Section 1.5),
over the maximum amount of contributions permitted under the Actual
Contribution Percentage Test. The amount of Excess Aggregate
Contributions for each Highly Compensated Employee is determined by
using the method described in paragraph (B) of this section.
(B) The amount of Excess Aggregate Contributions for a Highly Compensated
Employee for a Plan Year is the amount (if any) by which the
Employee's Employee Contributions and Matching Contributions must be
reduced for the Employee's Actual Contribution Ratio to equal the
highest permitted Actual Contribution Ratio under the Plan.
To calculate the highest permitted Actual Contribution Ratio under the
Plan, the Actual Contribution Ratio of the Highly Compensated Employee
with the highest Actual Contribution Ratio is reduced by the amount
required to cause the Employee's Actual Contribution Ratio to equal
the ratio of the Highly Compensated Employee with the next highest
Actual Contribution Ratio. If a lesser reduction would enable
the Plan to satisfy the Actual Contribution Percentage Test, only this
lesser reduction may be made. This process shall be repeated until the
Plan satisfies the Actual Contribution Percentage Test. The highest
Actual Contribution Percentage Ratio remaining under the Plan after
leveling is the highest permitted Actual Contribution Ratio.
For each Highly Compensated Employee, the amount of Excess Aggregate
Contributions for a Plan Year is equal to the total Contribution
Percentage Amounts (including any amounts required to be taken into
account under subparagraphs (B) ( 1) and (B) (2) of the Definition of
Actual Contribution Ratio found in Section 1.5), minus the amount
determined by multiplying the Employees's highest permitted Actual
Contribution Ratio (determined after application or this section) by
the compensation used in determining the ratio.
1.27 EXCESS CONTRIBUTION.
(A) The term Excess Contribution means, with respect to a Plan Year, the
excess of Deferral Percentage Amounts made on behalf of eligible
Highly Compensated Employees for the Plan Year (including any
amounts required to be taken into account under subparagraphs (B) (1)
and (B) (2) of Section 1.8 of the Plan) over the maximum amount of
such contributions permitted under the Actual Deferral Percentage Test
for the Plan Year. The amount of Excess Contributions for each Highly
Compensated Employee is determined by using the method described in
paragraph (B) of this section.
(B) The amount of Excess Contributions for a Highly Compensated Employee
for a Plan Year is the amount (if any) by which the Employee's
Elective Deferral Contributions must be reduced for the
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Employee's Actual Deferral Ratio to equal the highest permitted
Actual Deferral Ratio under the Plan.
To calculate the highest permitted Actual Deferral Ratio under the
Plan, the Actual Deferral Ratio of the Highly Compensated Employee
with the highest Actual Deferral Ratio is reduced by the amount
required to cause the Employee's Actual Deferral Ratio to equal the
ratio of the Highly Compensated Employee with the next highest
Actual Deferral Ratio. If a lesser reduction would enable the
arrangement to satisfy the Actual Deferral Percentage Test, only
this lesser reduction shall be made. This process shall be repeated
until the cash or deferred arrangement satisfies the Actual
Deferral Percentage Test. The highest Actual Deferral Ratio
remaining under the Plan after leveling is the highest permitted
Actual Deferral Ratio.
1.28 EXCESS DEFERRALS. The term Excess Deferrals means those Elective
Deferral Contributions that are includible in a Participant's gross
income under section 402(g) of the Code to the extent such Participant's
Elective Deferral Contributions for a taxable year exceed the dollar
limitation under such Code section.
1.29 FAMILY MEMBER. The term Family Member means, with respect to any
Employee, such Employee's Spouse and lineal ascendants and descendants
and the spouses of such lineal ascendants and descendants.
1.30 FIDUCIARY. The term Fiduciary means any, or all, of the following, as
applicable:
(A) Any Person who exercises any discretionary authority or control
respecting the management of the Plan or its assets; or
(B) Any Person who renders investment advice for a fee or other
compensation, direct or indirect, respecting any monies or other
property of the Plan or has authority or responsibility to do so; or
(C) Any Person who has discretionary authority or responsibility in
the administration of the Plan; or
(D) Any Person who has been designated by a Named Fiduciary pursuant
to authority granted by the Plan, who acts to carry out a fiduciary
responsibility, subject to any exceptions granted directly or
indirectly by ERISA.
1.31 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee means
any Highly Compensated Active Employee or Highly Compensated Former
Employee as further defined herein.
For purposes of the determination of Highly Compensated Employees, the
term Compensation means Compensation as defined in Article V of the
Plan, but includes the amount of any elective contributions made by the
Employer on the Employee's behalf to a cafeteria plan established in
accordance with the provisions of Code section 125, a qualified cash or
deferred arrangement in accordance with the provisions of Code section
402(e)(3), a simplified employee pension plan in accordance with the
provisions of Code section 402(h), or a tax sheltered annuity plan
maintained in accordance with the provisions of Code section 403(b).
A "Highly Compensated Active Employee" is any Emplovee who performs
services for the Employer during the current Plan Year and who, during
the current Plan Year or the l2-month period immediately preceding such
Plan Year:
(A) Owns (or is considered to own within the meaning of section
318 of the Code, as modified by section 416(i)(1)(B)(iii) of the
Code), more than 5% of the outstanding stock of the Employer or
stock possessing more than 5% of the total combined voting power of
all stock of the Employer,
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or, if the Employer is other than a corporation, owns more than
5% of the capital or profits interest in the Employer. The
determination of 5% ownership shall be made separately for each
member of a controlled group of corporations (as defined in Code
section 414(b)), or of a group of trades or businesses (whether or not
incorporated) that are under common control (as defined in Code
section 414(c)), or of an affiliated service group (as defined in Code
section 414(m)); or
(B) Receives Compensation in excess of $75,000 multiplied by the
applicable cost-of-living adjustment factor prescribed under Code
section 415(d) and then prorated in the case of a short Plan Year: or
(C) Receives Compensation in excess of $50,000, as adjusted for
cost-of-living increases in accordance with Code section 415(d) and
then prorated in the case of a short Plan Year, and is in the top 20%
of Employees ranked by Compensation; or
(D) Is, at any time, an officer of the Employer and receives Compensation
in excess of 50% of the amount in effect under Code section
415(b)(1)(A) for the applicable period.
If no officer receives Compensation in excess of the amount specified
above, the highest paid officer for the applicable period shall be a
Highly Compensated Employee.
In no event if there are more than 500 Employees, shall more than 50
Employees or, if there are less than 500 Employees, shall the greater
of three Employees or 10% of all Employees, be taken into account
as officers.
In determining both the top 20% of Employees ranked by Compensation
for purposes of paragraph (C) above, and officers of the Employer
for purposes of paragraph (D) above, Employees who have not completed
six months of Service by the end of the applicable period, Employees
who normally work less than 17-1/2 hours per week, Employees who
normally work less than six months during a year, Employees who have
not attained 21, and nonresident aliens who receive no earned income
from U.S. sources shall be excluded.
Also excluded under the above paragraph are Employees who are covered
by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement. Such Employees will be excluded only
if retirement benefits were the subject of good faith bargaining, 90%
of the Employees of the Employer are covered by the agreement, and the
Plan covers only Employees who are not covered by the agreement.
Notwithstanding the above provisions, an Employee, other than a 5%
owner as described in paragraph A above who was not highly compensated
during the 12-month period immediately preceding the current Plan
Year will not be considered to be a Highly Compensated Employee in the
current Plan Year unless such Employee is one of the top 100 Employees
ranked by Compensation for the current Plan Year.
A "Highly Compensated Former Employee" is any former Employee who
separated from Service with the Employer in a Plan Year preceding
the current Plan Year and was a Highly Compensated Active Employee in
either:
(A) the Plan Year in which his separation from Service occurred; or
(B) any Plan Year ending on or after such former Employee's 55th
birthday.
A former Employee is an Employee who performs no services for the
Employer during a Plan Year (for example, by reason of a leave of
absence).
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1.32 INACTIVE PARTICIPANT. The term Inactive Participant means any
Participant who does not currently meet the requirements to be an Active
Participant due to a suspension of the performance of duties for the
Employer.
In addition, a Participant who ceases to meet the eligibility
requirements in accordance with Section 3.1 shall be considered an
Inactive Participant.
1.33 JOINT AND SURVIVOR ANNUITY. The term Joint and Survivor Annuity means an
Annuity for the life of the Participant with a survivor Annuity for the
life of the Participant's Spouse which is not less than one-half, nor
greater than, the amount of the Annuity payable during the joint lives of
the Participant and the Participant's Spouse. The Joint and Survivor
Annuity will be the amount of benefit which can be purchased with the
Participant's Vested Interest. In the case of an unmarried Participant,
Joint and Survivor Annuity means an Annuity payable over the
Participant's life.
1.34 LATE RETIREMENT DATE. The term Late Retirement Date means the first day
of the month coinciding with or next following the date a Participant is
separated from Service with the Employer after his Normal Retirement Age,
for any reason other than death.
1.35 MATCHING CONTRIBUTIONS. The term Matching Contributions means
contributions made by the Employer to the Plan on behalf of a Participant
on account of Elective Deferral Contributions, if any.
1.36 NAMED FIDUCIARY. The term Named Fiduciary means the Plan Administrator,
the Trustee and any other Fiduciary designated in writing by the
Employer, and any successor thereto.
1.37 NONELECTIVE CONTRIBUTIONS. The term Nonelective Contributions means
contributions made by the Employer (other than Matching Contributions)
that the Participant may not elect to have paid in cash or other benefits
instead of being contributed to the Plan.
1.38 NONHIGHLY COMPENSATED EMPLOYEE. The term Nonhighly Compensated Employee
means an Employee who is not a Highly Compensated Employee.
1.39 NORMAL RETIREMENT AGE. The term Normal Retirement Age means the date the
Participant attains age 65.
1.40 NORMAL RETIREMENT DATE. The term Normal Retirement Date means the first
day of the month coinciding with or next following the date a Participant
attains his Normal Retirement Age.
1.41 PARTICIPANT. The term Participant means any Employee of the Employer,
who is or becomes eligible to participate under this Plan in accordance
with its provisions and shall include an Active Participant, Inactive
Participant and for purposes of Investment of Contributions as described
in Article XIII of the Plan, former participants. Former participants
shall include those Participant's who upon Termination of Employment
defer distribution in accordance with Section 6.2 of the Plan.
1.42 PERSON. The term Person means any natural person, partnership,
corporation, trust or estate.
1.43 PLAN. The term Plan means Galileo International Savings and Investment
Plan, as amended and restated herein and as may be amended from time to
time.
1.44 PLAN ADMINISTRATOR. The terms Plan Administrator and Administrator are
used interchangeably throughout the Plan and mean the Employee Plans
Administration Committee appointed by the Board of Supervisors.
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1.45 PLAN YEAR. The term Plan Year means the 12-month period commencing on
January 1 and ending on the following December 31.
1.46 PRIOR EMPLOYEE CONTRIBUTIONS. The term Prior Employee Contributions
means employee contributions that were made prior to January 1, 1991.
1.47 PRIOR EMPLOYER CONTRIBUTIONS. The term Prior Employer Contributions
means employer contributions that were made prior to January 1, 1993.
1.48 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified Matching
Contributions shall mean Matching Contributions which are subject to the
distribution and nonforfeitability requirements under section 401(k) of
the Code when made.
1.49 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term Qualified Nonelective
Contributions shall mean Nonelective Contributions which are subject to
the distribution and nonforfeitability requirements under section 401(k)
of the Code when made.
1.50 ROLLOVER CONTRIBUTION. The term Rollover Contribution means an amount
representing all or part of a distribution from a pension or
profit-sharing plan meeting the requirements of Code section 401(a) that
is eligible for rollover to this Plan in accordance with the requirements
set forth in Code section 402 or Code section 408(d)(3), whichever is
applicable.
1.51 SALARY DEFERRAL AGREEMENT. The term Salary Deferral Agreement means an
agreement between a Participant and the Employer to defer the
Participant's Compensation for the purpose of making Elective Deferral
Contributions to the Plan.
1.52 TERMINATION OF EMPLOYMENT. The term Termination of Employment means a
severance of the Employer-Employee relationship which occurs prior to a
Participant's Normal Retirement Age for any reason other than Early
Retirement, Disability or death.
1.53 TRUST. The term Trust means the trust agreement entered into by the
Employer, the Administrator and the Trustee.
1.54 TRUSTEE. The term Trustee means one or more persons collectively
appointed and acting under the trust agreement, and any successor thereto.
1.55 VESTED INTEREST. The term Vested Interest on any date means the
nonforfeitable right to an immediate or deferred benefit in the amount
which is equal to the value on that date of the Participant's Account.
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ARTICLE II
SERVICE
2.1 SERVICE. The term Service means active employment with the Employer
as an Employee. Additionally, Service for a transferring Employee of the
Galileo International Swindon, England office shall be recognized as
Service from original date of hire. For purposes of determining Service,
employment with any company which is under common control with the
Employer as specified in section 414 of the Code shall be treated as
employment with the Employer.
2.2 ABSENCE FROM EMPLOYMENT. Absence from employment on account of a
leave of absence authorized by the Employer pursuant to the Employer's
established leave policy will be counted as employment with the Employer
provided that such leave of absence is of not snore than two years'
duration. Absence from employment on account of active duty with the Armed
Forces of the United States will be counted as employment with the
Employer. If the Employee does not return to active employment with the
Employer, his Service will be deemed to have ceased on the date the
Administrator receives notice that such Employee will not return to the
active Service of the Employer. The Employer's leave policy shall be
applied in a uniform and nondiscriminatory manner to all Participants
under similar circumstances.
2.3 HOUR OF SERVICE. The term Hour of Service means a period of Service during
which an Employee shall be credited with one Hour of Service as described
in (A), (B), (C), and (D) below:
(A) Each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer for the performance of duties.
These hours shall be credited to the Employee for the computation
period or periods in which the duties are performed; and
(B) Each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer for reasons (such as vacation,
sickness or Disability) other than for the performance of duties.
Hours under this Subsection shall be calculated and credited
pursuant to section 2530.200b-2 of the Department of Labor Regulations
which are incorporated herein by this reference; and
(C) Each hour for which back pay, irrespective of mitigation of damages,
has been either awarded or agreed to by the Employer. These hours
shall be credited to the Employee for the computation period or
periods to which the award or agreement pertains rather than the
computation period in which the award, agreement or payment is made;
and
(D) Each hour for which an Employee is on an authorized unpaid leave
(such as service with the Armed Forces, jury duty, educational leave).
These hours shall be credited to the Employee for the computation
period or periods in which such authorized leave takes place. However,
no more than 501 hours shall be credited under this subparagraph (D).
Hours of Service will be credited for employment with other members of an
affiliated service group (under Code section 414(m)), a controlled
group of corporations (under Code section 414(b)), or a group of trades or
businesses under common control (under Code section 4l4(c)), of which the
adopting employer is a member. Hours of Service will also be credited for
any individual considered an Employee under Code section 414(n).
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Solely for purposes of determining whether a One-Year Break in Service,
as defined in Section 2.4. for vesting purposes has occurred, an
individual who is absent from work for maternity or paternity reasons
shall receive credit for the Hours of Service which would otherwise have
been credited to such individual but for such absence, or in any case in
which such hours cannot be determined, eight Hours of Service per day of
such absence. For purposes of this paragraph, an absence from work for
maternity or paternity reasons means an absence (1) by reason of the
pregnancy of the individual, (2) by reason of a birth of a child of the
individual, (3) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or (4)
for purposes of caring for such child for a period beginning immediately
following such birth or placement. The Hours of Service credited under
this paragraph shall be credited (1) in the Plan Year in which the
absence begins if the crediting is necessary to prevent a One-Year Break
in Service in that period, or (2) in all other cases, in the following
Plan Year.
2.4 ONE-YEAR BREAK IN SERVICE. The term One-Year Break in Service means any
Plan Year during which an Employee fails to complete more than 500 Hours
of Service.
2.5 YEAR OF SERVICE. The term Year of Service means a Plan Year during which
an Employee has completed at least 1,000 Hours of Service.
2.6 MILITARY SERVICE. Notwithstanding any provision of this Plan to the
contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section
414(u) of the Code.
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ARTICLE III
ELIGIBILITY, ENROLLMENT AND PARTICIPATION
3.1 ELIGIBILITY. Each Employee who was a Participant prior to the
Effective Date and who is in the Service of the Employer on the
Effective Date shall continue as a Participant in the Plan. Each other
Employee shall be eligible to become a Participant as of the date on which
he becomes an Employee.
3.2 ENROLLMENT AND PARTICIPATION. Each eligible Employee may enroll in the
Plan by completing and delivering to the Administrator an enrollment form
and, if applicable, a Salary Deferral Agreement.
3.3 RE-EMPLOYED EMPLOYEE. In the case of an individual who ceases to be an
Employee and is subsequently rehired as an Employee, such individual
shall again become an Active Participant as of the date he is re-employed.
3.4 ELIGIBLE CLASS. In the event a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, such Employee shall participate immediately upon his return to
an eligible class of Employees.
In the event an Employee who is not a member of the eligible class of
Employees becomes a member of the eligible class, such Employee shall
participate immediately.
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ARTICLE IV
CONTRIBUTIONS
4.1 ELECTIVE DEFERRAL CONTRIBUTIONS. Each Active Participant may enter into a
written Salary Deferral Agreement with the Employer in an amount equal
to not less than 1% nor more than 15% of his Compensation for the Plan
Year. In consideration of such agreement, the Employer will make a
contribution to the Plan on behalf of the Participant in an amount equal
to the total amount by which the Participant's Compensation from the
Employer was deferred pursuant to the Salary Deferral Agreement then in
effect. Elective Deferral Contributions shall be paid by the Employer to
the Trust not less frequently than semi-monthly, but in no event later
than 90 days following the date the amounts were deferred.
Salary Deferral Agreements shall be governed by the following provisions:
(A) Amounts contributed pursuant to a Salary Deferral Agreement shall be
100% vested and non-forfeitable at all times.
(B) No Participant shall be permitted to have Elective Deferral
Contributions made under this Plan, or any other qualified plan
maintained by the Employer, during any taxable year, in excess of the
dollar limitation contained in section 402(g) of the Code in effect at
the beginning of the taxable year.
(C) Amounts contributed pursuant to a Salary Deferral Agreement, which
are not in excess of the limit described in Subsection (B) above,
shall be subject to the Limitations on Allocations in accordance with
Article V. Elective Deferral Contributions that are in excess of
the limit described in Subsection (B) shall also be subject to the
Limitations on Allocations in accordance with Article V.
(D) A Salary Deferral Agreement may be changed by a Participant four
times during the Plan Year, at any time, by filing written notice
thereof with the Administrator. Such notice shall be effective, and
the Salary Deferral Agreement shall be changed on the date specified
in such notice or as soon as administratively possible, which date
must be at least 15 days after such notice is filed.
(E) Elective Deferral Contributions shall be subject to the Actual
Deferral Percentage Test limitations.
(F) Correction of Excess Contributions.
(1) If the Employer determines prior to the end of the Plan Year that
the Actual Deferral Percentage Test may not be satisfied, the
Employer may take the corrective action specified in Section 4.9
of the Plan.
(2) If, after the end of the Plan Year, the Employer determines that
the Plan will fail the Actual Deferral Percentage Test, the
Employer shall take the corrective action specified in Section
4.11 or Section 4.14 of the Plan, or a combination of such
corrective actions, in order to ensure that the Plan does not
fail the Actual Deferral Percentage Test for the Plan Year being
tested.
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<PAGE> 20
4.2 NONELECTIVE CONTRIBUTIONS. The Employer, in its discretion and upon
authorization from the Board of Supervisors, may make a contribution under
the Plan for any Plan Year of such an amount as the Employer may
determine.
The Employer may designate at the time of contribution that all or a
portion of such Nonelective Contribution be treated as a Qualified
Nonelective Contribution.
Such Nonelective Contribution shall be allocated as of the last day of the
Plan Year for which such contribution is made to each Participant who:
- was employed on or before July 1st of the Plan Year for which the
contribution is being made;
- has a Year of Service for contribution purposes, as defined in Article
II;
- is an Active Participant as of the last day of the Plan Year;
- is not eligible for benefits under the Management Incentive Plan.
Notwithstanding the above provision, an allocation will be made on behalf
of a Participant who dies, retires on or after attaining his Early
Retirement Date or Normal Retirement Date, or becomes disabled during the
Plan Year.
For each Plan Year the contribution shall be allocated to each Participant
in the proportion that the Compensation paid to each Participant during
the Plan Year bears to the Compensation paid to all such Participants,
subject to the Limitations on Allocations specified in Article V.
The contribution as described above, for any Plan Year, shall be paid to
the Trust at the end of the Plan Year, or as soon as possible on or
after the last day of such Plan Year, but in any event not later than the
date which is prescribed by law for filing the Employer's income tax
return, including any extension thereof.
4.3 QUALIFIED NONELECTIVE CONTRIBUTION. The Employer reserves the right
to make a discretionary Nonelective Contribution to the Plan for any
Plan Year, if the Employer determines that such a contribution is
necessary to ensure that either the Actual Deferral Percentage Test or the
Actual Contribution Percentage Test will be satisfied for that Plan
Year. Such amount shall be designated by the Employer at the time of
contribution as a Qualified Nonelective Contribution.
The Qualified Nonelective Contribution shall be made on behalf of all
eligible non-Highly Compensated Employees who are Participants and who
are considered under the Actual Deferral Percentage Test or the Actual
Contribution Percentage Test. This contribution shall be allocated to the
Participant's Account of each such Participant in an amount equal to a
fixed percentage of such Participant's Compensation. The fixed percentage
shall be equal to the minimum fixed percentage necessary to be contributed
by the Employer on behalf of each eligible non-Highly Compensated Employee
who is a Participant so that the Actual Deferral Percentage Test or the
Actual Contribution Percentage Test is satisfied.
The Qualified Nonelective Contribution for any Plan Year as determined
above shall be paid to the Trust at the end of the Plan Year, or as
soon as possible on or after the last day of such Plan Year, but in no
event later than the date which is prescribed by law for filing the
Employer's income tax return, including any extensions thereof.
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<PAGE> 21
4.4 MATCHING CONTRIBUTIONS. Effective for Plan Years beginning on and
after January l, 1996, for each payroll period the Employer shall
contribute to the Plan on behalf of each Participant on whose behalf
an Elective Deferral Contribution has been made for such payroll period,
a Matching contribution in an amount equal to fifty percent (50%) of the
amount of such Elective Deferral Contributions, up to a maximum Elective
Deferral Contribution of six percent (6%) of the Participant's
Compensation for such payroll period. The Participant shall at all times
be one hundred percent (100%) vested in Matching Contributions allocated
to his Account.
Matching Contributions shall be paid by the Employer to the Trust as
soon as practicable after the end of each payroll period and in no event
later that the date which is prescribed by law for filing the Employer's tax
return, including any extensions thereof, for the Plan Year for which the
Matching Contribution is made. However, with respect to a Participant who
has deferred the maximum amount permitted by law pursuant to Section
4.1(B), and who is an Employee on the last day of a Plan Year and who has
not been allocated a Matching Contribution during such Plan Year that is
equal to fifty percent (50%) of the amount of such Participant's Elective
Deferral Contributions for such Plan Year up to a maximum Elective Deferral
Contribution of six percent (6%) of the Participant's Compensation for such
Plan Year, such Participant's Employer shall contribute to the Plan on
behalf of such Participant an amount equal to:
(A) Fifty percent (50%) of the amount of such Participant's Elective
Deferral Contribution for such Plan Year up to a maximum Elective
Deferral Contribution of six percent (6%) of the Participant's
Compensation for such Plan Year; less
(B) The amount of Matching Contributions otherwise allocated to a
Participant during such Plan Year pursuant to the first sentence
of this Section 4.4.
4.5 CREDITING OF ELECTIVE DEFERRAL AND OTHER CONTRIBUTIONS. Elective Deferral
Contributions and other contributions made by the Employer shall be
credited to the Account of each Participant for whom such contributions
are made.
4.6 ROLLOVER CONTRIBUTIONS. The Plan may receive Rollover Contributions on
behalf of an Employee. Receipt of a Rollover Contribution shall be subject
to the approval of the Plan Administrator. Before approving the receipt of
a Rollover Contribution, the Plan Administrator may request any documents or
other information from an Employee or opinions of counsel which the Plan
Administrator deems necessary to establish that such amount is a Rollover
Contribution.
An Account shall be maintained on behalf of each Employee from whom
Rollover Contributions are received, regardless of such Employee's
eligibility to participate in the Plan in accordance with the requirements
of Article III, and Rollover Contributions may be invested in any manner
authorized under the provisions of this Plan.
Rollover Contributions received from an Employee who is not otherwise
eligible to participate in the Plan may not be withdrawn in accordance with
the provisions of Article X until such Employee becomes a Participant,
except that such Employee may receive a distribution of his Account if his
Termination of Employment occurs.
Rollover Contributions shall be credited to the Participant's Account and
may be invested in any manner authorized under the provisions of this Plan.
4.7 TRANSFERS. Without regard to the Limitations on Allocations imposed under
Article V, the Plan may receive, directly from another qualified pension
or profit sharing plan meeting the requirements of Code section 401(a),
all or part of the entire amount distributable on behalf of a Participant
from such plan.
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<PAGE> 22
Likewise, the Plan may receive Transfers representing the assets of any
predecessor plan.
Transfers may be invested in any manner authorized under the provisions
of this Plan.
4.8 SUSPENSION OF ELECTIVE DEFERRAL CONTRIBUTIONS. The following provisions
shall apply with respect to suspension of Elective Deferral Contributions.
(A) Elective Suspension. An Active Participant may elect to suspend his
Salary Deferral Agreement for Elective Deferral Contributions by
filing a written notice thereof with the Administrator at any
time. The Salary Deferral Agreement shall be suspended on the date
specified in such notice, which date must be at least 15 days after
such notice is filed. The notice shall specify the period for which
such suspension shall be effective. Such period may extend
indefinitely.
(B) Suspension for Leave. A Participant who is absent from employment on
account of an authorized leave of absence or military leave shall have
his Salary Deferral Agreement suspended during such leave. Such
suspension of contributions shall be effective on the date payment of
Compensation by the Employer to him ceases, and shall remain in effect
until payment of Compensation is resumed.
(C) Withdrawal Suspension. An Active Participant who elects a withdrawal
in accordance with Article X may have his Salary Deferral Agreement
suspended on the date such election becomes effective. Such suspension
shall remain in effect for the number of months specified therein.
(D) Non-Elective Suspension. An Active Participant who ceases to meet the
eligibility requirements as specified in Section 3.1 but who remains
in the employ of the Employer, shall have his Salary Deferral
Agreement suspended, effective as of the date he ceases to meet the
eligibility requirements. Such suspension shall remain in effect until
he again meets such eligibility requirements.
The Participant may elect to reactivate his Salary Deferral Agreement for
Elective Deferral Contributions by filing a written notice thereof with
the Plan Administrator. The Salary Deferral Agreement shall be reactivated
at any time following the expiration of the suspension period described
above.
4.9 LIMITATION OF ELECTIVE DEFERRAL CONTRIBUTIONS. If the Employer determines
prior to the end of the Plan Year that the Plan may not satisfy the Actual
Deferral Percentage Test for the Plan Year, the Employer may require that
the amount of Elective Deferral Contributions being allocated to the
accounts of Highly Compensated Employees be reduced to the extent
necessary to prevent Excess Contributions from being made to the Plan.
Although the Employer may reduce the amount of Elective Deferral
Contributions that may be allocated to the Participant's Account of
Highly Compensated Employees, the affected Employees shall continue to
participate in the Plan. When the situation that resulted in the
reduction of Elective Deferral Contributions ceases to exist, the
Employer shall reinstate the amount of Elective Deferral Contributions
elected by the Participant in the Salary Deferral Agreement to the
fullest extent possible for all affected Participants in a
nondiscriminatory manner.
4.10 LIMITATION OF MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS. If the
Employer determines prior to the end of the Plan Year that the Plan may
not satisfy the Actual Contribution Percentage Test for the Plan Year,
the Employer may require that the amount of Matching Contributions or
Employee Contributions, or both, being allocated to the Accounts of
Highly Compensated Employees be reduced to the extent necessary to
prevent Excess Aggregate Contributions from being made
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<PAGE> 23
to the Plan.
4.11 CORRECTIVE DISTRIBUTION OF EXCESS CONTRIBUTIONS.
(A) The Employer may distribute Excess Contributions (and income
allocable thereto) to the appropriate Highly Compensated Employee
after the close of the Plan Year in which the Excess Contribution
arose and within 12 months after the close of that Plan Year;
provided, however, that any such distribution made after March 15
following the close of the Plan Year in which such excess arose may
subject the Employer to a 10 percent penalty tax.
(B) The income allocable to Excess Contributions is equal to the sum of
the allocable gain or loss for the Plan Year and shall be determined as
follows:
(1) The income allocable to Excess Contributions is determined by
multiplying the income for the Plan Year allocable to Deferral
Percentage Amounts by a fraction. The numerator of the fraction
is the Excess Contributions attributable to the Employee for
the Plan Year. The denominator of the fraction is equal to the
sum of (A) the total account balance of the Employee attributable
to Deferral Percentage Amounts as of the beginning of the Plan
Year, plus (B) the Employee's Deferral Percentage Amounts for the
Plan Year.
(2) The allocable gain or loss for the period between the end of the
Plan Year and the date of distribution shall not be taken into
consideration when determining the income allocable to Excess
Contributions.
(C) The amount of Excess Contributions to be distributed with respect to
an Employee for a Plan Year shall be reduced by Excess Deferrals
previously distributed to the Employee for the Employee's taxable
year ending with or within the Plan Year.
(D) The distribution of Excess Contributions made to the Family Members
of a family group that was combined for purposes of determining a
Highly Compensated Employee's Actual Deferral Ratio shall be
allocated among the Family Members in proportion to the Elective
Deferral Contribution (including any amounts required to be taken
into account under subparagraphs (B) (I) and (B) (2) of Section 1.8
of the Plan) of each Family Member that is combined to determine the
Actual Deferral Ratio.
(E) A corrective distribution of Excess Contributions (and income) shall be
made without regard to any Participant or spousal consent or any
notice otherwise required under sections 4ll(a)(1l) and 417 of the
Code.
(F) In no case may the amount of Excess Contributions to be distributed
for a Plan Year with respect to any Highly Compensated Employee
exceed the amount of Elective Deferral Contributions made on behalf
of the Highly Compensated Employee for the Plan Year.
(G) In the event of a complete termination of the Plan during the Plan
Year in which an Excess Contribution arose, the corrective
distribution must be made as soon as administratively feasible
after the date of the termination of the Plan, but in no event later
than 12 months after the date of termination.
(H) Any distribution of less than the entire amount of Excess
Contributions with respect to any Highly Compensated Employee shall
be treated as a pro-rata distribution of Excess Contributions and
allocable income or loss.
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<PAGE> 24
(I) Any Matching Contributions or Qualified Matching Contributions that
relate to the Excess Contribution being distributed shall be
forfeited. The Matching Contribution so forfeited shall be
in proportion to the applicable Employee's vested and nonvested
interest in Matching Contributions under the Plan for the Plan Year
in which the Excess Contribution arose. Forfeitures of Matching
Contributions or Qualified Matching Contributions that relate to
Excess Contributions shall be applied to reduce Employer
contributions or pay Plan expenses.
4.12 CORRECTION OF EXCESS AGGREGATE CONTRIBUTIONS.
(A) Excess Aggregate Contributions may be corrected using one of the
methods described in subparagraphs (1) and (2) below. The Employer
shall elect the method of correction to be used and shall apply such
method to the correction of the Excess Aggregate Contribution for the
Plan Year.
(1) Method 1:
(a) Any unmatched Employee Contributions (and income)
allocated to the Plan for the Plan Year in which the Excess
Aggregate Contribution arose shall be distributed to the
appropriate Employee after the close of the Plan Year in
which the Excess Aggregate Contribution arose and within
12 months after the close of that Plan Year.
(b) If, after the application of subparagraph (1) (a) above, an
Excess Aggregate Contribution still exists, the remaining
Excess Aggregate Contribution (and income) shall be forfeited,
if forfeitable, or distributed on a pro-rata basis from the
Employee's Account attributable to Contribution Percentage
Amounts. The distribution or forfeiture shall be made after
the close of the Plan Year in which the Excess Aggregate
Contribution arose and within 12 months after the close of
that Plan Year. Whether an amount is distributed or forfeited
under this subparagraph (b) shall be determined based on the
rules set forth in paragraph (B) of this section.
(2) Method 2:
(a) Any Matching Contributions (and Qualified Matching
Contributions, to the extent not taken into account for
purposes of the Actual Deferral Percentage Test), and
income allocable thereto, shall be forfeited, if forfeitable,
or distributed to the appropriate Highly Compensated Employee.
The distribution or forfeiture shall be made after the close
of the Plan Year in which the Excess Aggregate Contribution
arose and within 12 months after the close of that Plan Year.
Whether an amount is forfeited or distributed shall be
determined under the rules set forth in paragraph (B) of this
section.
(B) Determination of Distributable and Forfeitable Amounts. For purposes
of paragraph (A) of this section:
(1) An Excess Aggregate Contribution attributable to Employee
Contributions, vested Matching Contributions, Qualified Matching
Contributions (and, if applicable, Qualified Nonelective
Contributions and Elective Deferral Contributions) shall be
distributed to the appropriate Highly Compensated Employee in
accordance with the terms of this section.
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<PAGE> 25
(2) An Excess Aggregate Contribution attributable to an Employee's
nonvested Matching Contributions shall be forfeited in accordance
with the terms of this section.
(3) A Highly Compensated Employee's vested and nonvested interest
in Matching Contributions (and income allocable thereto)
attributable to Excess Aggregate Contributions shall be based on
the proportion that represents the Employee's Vested Interest in
Matching Contributions under the Plan for the Plan Year in which
the Excess Aggregate Contribution arose.
(C) Forfeited Excess Aggregate Contributions. In accordance with
paragraph (B) of this section, the amount that represents the
Employee's nonvested interest in Matching Contributions (and income),
and is attributable to Excess Aggregate Contributions, shall be
forfeited and, as such, shall be applied to reduce Employer
contributions or pay expenses.
(D) Income Allocable to Excess Aggregate Contributions. For purposes of
this section, the income allocable to Excess Aggregate Contributions
is equal to the sum of the allocable gain or loss for the Plan Year,
and shall be determined as follows:
(1) The income allocable to Excess Aggregate Contributions is
determined by multiplying the income for the Plan Year allocable
to Contribution Percentage Amounts by a fraction. The numerator
of the fraction is the Excess Aggregate Contributions for the
Employee for the Plan Year. The denominator of the fraction is
equal to the sum of (A) the total account balance of the Employee
attributable to Contribution Percentage Amounts as of the
beginning of the Plan Year, plus (B) the Contribution Percentage
Amounts for the Plan Year.
(2) The allocable gain or loss for the period between the end of the
Plan Year and the date of correction shall not be taken into
consideration when determining the income allocable to Excess
Aggregate Contributions.
(E) The distribution of Excess Aggregate Contributions (and income) made
to Family Members of a family group that was combined for purposes of
determining a Highly Compensated Employee's Actual Contribution Ratio
shall be allocated among Family Members in proportion to the
Contribution Percentage Amounts (including any amounts required to be
taken into account under subparagraphs (B) (1) and (B) (2) of the
Definition of Actual Contribution Ratio in Section 1.5) of each
Family Member that are combined to determine the Actual Contribution
Ratio.
(F) In the event of a complete termination of the Plan during the Plan
Year in which an Excess Aggregate Contribution arose, the corrective
distribution or forfeiture shall be made as soon as administratively
feasible after the date of termination of the Plan, but in no event
later than 12 months after the date of termination.
(G) If the entire account balance of a Highly Compensated Employee is
distributed during the Plan Year in which the Excess Aggregate
Contribution arose, the distribution shall be deemed to have been a
corrective distribution of Excess Aggregate Contributions (and
income) to the extent that a corrective distribution would otherwise
have been required.
(H) Any distribution of less than the entire amount of Excess Aggregate
Contributions (and income) shall be treated as a pro-rata
distribution of Excess Aggregate Contributions and allocable income
or loss.
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<PAGE> 26
(I) In no case may the amount of Excess Aggregate Contributions
distributed to a Highly Compensated Employee exceed the amount of
Employee Contributions and Matching Contributions made on behalf of
the Highly Compensated Employee for the Plan Year.
(J) A distribution of Excess Aggregate Contributions (and income) shall
be made under this section without regard to any notice or consent
otherwise required under sections 41l(a)(11) and 417 of the Code.
4.13 CORRECTIVE DISTRIBUTION OF EXCESS DEFERRALS. Notwithstanding any other
provision of the Plan, Excess Deferrals, plus any income and minus any
loss allocable thereto, may be distributed to any Participant to whose
account Excess Deferrals were allocated for the individual's taxable
year. Such a corrective distribution shall be made in accordance with
this section.
(A) Correction of Excess Deferrals After Taxable Year.
(1) Not later than the April 15 following the close of a
Participant's taxable year, the Participant may notify the Plan
of the amount of Excess Deferrals received by the Plan during
that taxable year. The notification shall be in writing, shall
specify the Participant's Excess Deferrals, and shall be
accompanied by the Participant's written statement that if
such amounts are not distributed, these amounts, when added to all
other Elective Deferral Contributions made on behalf of the
Participant during the taxable year, shall exceed the dollar
limitation specified in section 402(g) of the Code.
(2) The Participant is deemed to have notified the Plan of Excess
Deferrals if, not later than the March 1 following the close of a
Participant's taxable year, the Employer notifies the Plan on
behalf of the Participant of the Excess Deferrals. Such Excess
Deferrals shall be calculated by taking into account only
Elective Deferral Contributions under the Plan and any other
plans of the Employer.
(3) Not later than the April 15 following the close of the taxable
year, the Plan shall distribute to the Participant the amount of
Excess Deferrals designated under subparagraphs (1) or (2) above.
(B) Correction of Excess Deferrals During the Taxable Year. A Participant
who has an Excess Deferral during a taxable year may receive a
corrective distribution during the same year. Such a corrective
distribution shall be made if:
(1) The Participant designates the distribution as an Excess Deferral.
The designation shall be made in the same manner as the
notification described in subparagraph (A) (1) of this section.
The Participant will be deemed to have designated the
distribution as an Excess Deferral if the Employer makes the
designation on behalf of the Participant to the extent that
the Participant has Excess Deferrals for the taxable year
calculated by taking into account only Elective Deferral
Contributions to the Plan and other plans of the Employer.
(2) The corrective distribution is made after the date on which the
Plan received the Excess Deferral.
(3) The Plan designates the distribution as a distribution
of Excess Deferrals.
(C) If the Participant provides the Employer with satisfactory evidence
and written notice to demonstrate that all Elective Deferral
Contributions by the participant in this Plan and any other
23
<PAGE> 27
qualified plan exceed the applicable limit under section 402(g) of the Code
for such individual's taxable year, then the Plan Administrator may (but is
not required to) distribute sufficient Elective Deferral Contributions
(not to exceed the amount of Elective Deferral Contributions actually
contributed on behalf of the Participant to this Plan during the
Participant's taxable year) from this Plan to allow the Participant to
comply with the applicable limit. The evidence provided by the
Participant must establish clearly the amount of Excess Deferrals. The
Participant must present this evidence to the Plan Administrator by the
March 1 following the end of the calendar year in which the Excess
Deferrals occurred.
(D) Income Allocable to Excess Deferrals. The income allocable to Excess
Deferrals is equal to the sum of allocable gain or loss for the
taxable year of the individual and shall be determined as follows:
(1) The gain or loss allocable to Excess Deferrals is determined by
multiplying the income for the taxable year allocable to Elective
Deferral Contributions by a fraction. The numerator of the
fraction is the Excess Deferrals by the Employee for the taxable
year. The denominator of the fraction is equal to the sum of:
(a) The total account balance of the Employee attributable to
Elective Deferral Contributions as of the beginning of the
Plan Year, plus
(b) The Employee's Elective Deferral Contributions for the
taxable year.
(2) The income allocable to Excess Deferrals shall not include the
allocable gain or loss for the period between the end of the
taxable year and the date of distribution.
(E) No Employee or Spousal Consent Required. A corrective distribution of
Excess Deferrals (and income) shall be made without regard to any
notice or consent otherwise required under sections 411(a)(11) and
417 of the Code.
(F) Any Matching Contributions or Qualified Matching Contributions that
relate to the Excess Deferral being distributed shall be forfeited.
The Matching Contribution so forfeited shall be in proportion
to the applicable Employee's vested and nonvested interest in Matching
Contributions under the Plan for the Plan Year in which the Excess
Deferral arose. Forfeitures of Matching Contributions or Qualified
Matching Contributions that relate to Excess Deferrals shall be
applied to reduce Employer contributions or pay Plan expenses.
4.14 QUALIFIED CONTRIBUTIONS. In lieu of distributing Excess Contributions as
provided in Section 4.11 of the Plan, or Excess Aggregate Contributions
as provided in Section 4.12 of the Plan, the Employer may take the
actions specified below in order to satisfy the Actual Deferral
Percentage Test or the Actual Contribution Percentage Test, or both,
pursuant to the regulations under the Code.
(A) At the election of the Employer, only if the conditions described in
section 1.401(k)-l(b)(5) of the regulations are satisfied, Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both, may be taken into account as Elective Deferral Contributions for
purposes of calculating the Actual Deferral Ratio of a Participant.
The amount of Qualified Nonelective Contributions or Qualified
Matching Contributions made under the terms of this Plan and taken
into account as Elective Deferral Contributions for purposes of
calculating the Actual Deferral Ratio, subject to such other
requirements as may be prescribed by the Secretary of the
Treasury, shall be such Qualified Nonelective Contributions or
Qualified
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<PAGE> 28
Matching Contributions, or both, that are needed to meet the Actual
Deferral Percentage Test.
(B) At the election of the Employer, only if the conditions described in
section 1.401(m)-l(b)(5) of the regulations are satisfied, Qualified
Nonelective Contributions or Elective Deferral Contributions, or both,
may be taken into account as Matching Contributions for purposes
of calculating the Actual Contribution Ratio of a Participant.
The amount of Qualified Nonelective Contributions or Elective Deferral
Contributions made under the terms of this Plan and taken into
account for purposes of calculating the Actual Contribution Ratio,
subject to such other requirements as may be prescribed by the
Secretary of the Treasury, shall be such Qualified Nonelective
Contributions or Elective Deferral Contributions, or both, that are
needed to meet the Actual Contribution Percentage Test.
(C) Any Qualified Nonelective Contribution. Qualified Matching
Contribution, and Elective Deferral Contribution taken into account
under paragraphs (A) or (B) must be allocated to the Employee's
Account as of a date within the Plan Year in which the Excess
Contribution or Excess Aggregate Contribution arose and must be paid
to the Plan no later than the 12-month period immediately following
the Plan Year to which the contribution relates.
4.15 MULTIPLE USE OF ALTERNATIVE LIMITATION.
(A) Multiple use of the alternative limitation occurs if all of the
conditions of this paragraph (A) are satisfied:
(1) One or more Highly Compensated Employee of the Employer are
eligible employees in both a cash or deferred arrangement subject
to section 401(k) and a plan maintained by the Employer subject
to section 40l(m).
(2) The sum of the Actual Deferral Percentage of the entire group of
eligible Highly Compensated Employees under the arrangement
subject to section 401(k) and the Actual Contribution Percentage
of the entire group of eligible Highly Compensated Employees
under the Plan subject to section 401(m) exceeds the aggregate
limit of paragraph (C) of this section.
(3) Actual Deferral Percentage of the entire group of eligible Highly
Compensated Employees under the arrangement subject to section
401(k) exceeds the amount described in section
401(k)(3)(A)(ii)(I).
(4) The Actual Contribution Percentage of the entire group of
eligible Highly Compensated Employees under the arrangement
subject to section 401(m) exceeds the amount described in section
40l(m)(2)(A)(i).
(B) For purposes of this section, the aggregate limit is the greater of:
(1) The sum of
(a) 1.25 times the greater of the relevant Actual Deferral
Percentage or the relevant Actual Contribution Percentage, and
(b) Two Percentage points plus the lesser of the relevant Actual
Deferral Percentage or the relevant Actual Contribution
Percentage. In no event, however, may this
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<PAGE> 29
amount exceed twice the lesser of the relevant Actual Deferral
Percentage or the Actual Contribution Percentage; or
(2) The sum of
(a) 1.25 times the lesser of the relevant Actual Deferral
Percentage or the relevant Actual Contribution Percentage, and
(b) Two percentage points plus the greater of the relevant Actual
Deferral Percentage or the relevant Actual Contribution
Percentage. In no event, however, may this amount exceed
twice the greater of the relevant Actual Deferral
Percentage or the relevant Actual Contribution Percentage.
(C) For purposes of paragraph (B) of this section, the term "relevant
Actual Deferral Percentage" means the Actual Deferral Percentage of
the group of Nonhighly Compensated Employees under the arrangement
subject to section 401(k) for the Plan Year, and the term "relevant
Actual Contribution Percentage" means the Actual Contribution
Percentage of the group of Nonhighly Compensated Employees eligible
under the Plan subject to section 401(m) for the Plan Year
beginning with or within the Plan Year of the arrangement subject
to section 401(k).
(D) The Actual Deferral Percentage and Actual Contribution Percentage of
the group if eligible Highly Compensated Employees are determined
after use of Qualified Nonelective Contributions and Qualified
Matching Contributions to meet the requirements of the Actual
Deferral Percentage Test and after use of Qualified Nonelective
Contributions and Elective Deferral Contributions to meet the
requirements of the Actual Contribution Percentage Test. The Actual
Deferral Percentage and Actual Contribution Percentage of the group
of Highly Compensated Employees are determined after any corrective
distribution or forfeiture of Excess Deferrals, Excess Contributions,
or Excess Aggregate Contributions and after recharacterization of
Excess Contributions required without regard to this section. Only
plans and arrangements maintained by the Employer are taken into
account under paragraph (B). If the Employer maintains two or more
cash or deferred arrangements subject to section 401(k) that must be
mandatorily disaggregated pursuant to section 401(k)-1(g)(11)(iii)
multiple use is tested separately with respect to each plan.
(E) If multiple use of the alternative limit occurs with respect to two
or more plans or arrangements maintained by the Employer, it shall
be corrected by reducing the Actual Contribution Percentage of
Highly Compensated Employees in the manner described in paragraph (F)
of this section. Instead of making this reduction, the Employer
may eliminate the multiple use of the alternative limitation by
making Qualified Nonelective Contributions to the Plan.
(F) The amount of the reduction by which each Highly Compensated
Employee's Actual Contribution Ratio is reduced shall be treated as
an Excess Aggregate Contribution. The Actual Contribution
Percentage of all Highly Compensated Employees under the plan
subject to reduction shall be reduced so that there is no multiple
use of the alternative limitation.
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ARTICLE V
LIMITATIONS ON ALLOCATIONS
5.1 DEFINITIONS. The following definitions refer only to terms used in the
Limitations on Allocations Sections of this Article V.
(A) Annual Additions. The term Annual Additions shall mean the sum of the
following amounts allocated on behalf of a Participant for a
Limitation Year:
(1) all contributions made by the Employer which shall include:
- Elective Deferral Contributions, if any;
- Matching Contributions, if any;
- Nonelective Contributions, if any;
- Qualified Nonelective Contributions, if any;
(2) all Forteitures, if any;
(3) all Employee Contributions, if any.
For the purposes of this Article, Excess Amounts reapplied under
Section 5.2 (D) shall also be included as Annual Additions. Also, for
the purposes or this Article, Employee Contributions are determined
without regard to deductible employee contributions within the meaning
of section 72(o)(5) of the Code.
Amounts allocated, to an individual medical account, as
defined in Internal Revenue Code section 415(1)(1), which is part of a
defined benefit plan maintained by the Employer, are treated as Annual
Additions to a defined contribution plan. Also, amounts derived from
contributions paid or accrued attributable to post-retirement medical
benefits allocated to the separate account of a key employee, as
defined in Code section 419A(d)(3), under a welfare benefit fund, as
defined in Code section 419(e), maintained by the Employer, are
treated as Annual Additions to a defined contribution plan.
Contributions do not fail to be Annual Additions merely because they
are Excess Deferrals, Excess Contributions or Excess Aggregate
Contributions or merely because Excess Contributions or Excess
Aggregate Contributions are corrected through distribution or
recharacterization. Excess Deferrals that are distributed in
accordance with Section 4.14 of the Plan are not Annual Additions.
(B) Compensation. The term Compensation means wages within the meaning of
section 3401(a) of the Code for the purposes of income tax
withholding at the source but determined without regard to any rules
that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the
exception for agricultural labor in section 3401(a)(2) of the Code).
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<PAGE> 31
For purposes of applying the limitations of this article, Compensation
for a Limitation Year is the Compensation actually paid or made
available during such Limitation Year.
(C) Defined Contribution Dollar Limitation. The term Defined Contribution
Dollar Limitation shall mean $30,000 or, if greater, one-fourth of
the defined benefit dollar limitation set forth in Code section
415(b)(1) as in effect for the Limitation Year.
(D) Employer. The term Employer shall mean the Employer that adopts this
Plan. In the case of a group of employers which constitutes a
controlled group of corporations (as defined in Code section 414(b)
as modified by section 415(h)), or which constitutes trades or
business (whether or not incorporated) which are under common control
(as defined in section 414(c) as modified by section 4l5(h)), or
affiliated service groups (as defined in section 414(m)) of which the
adopting Employer is a part, all such employers shall be considered a
single Employer for purposes of applying the limitations of this
Article.
(E) Excess Amount. The term Excess Amount shall mean the excess of the
Participant's Annual Additions for the Limitation Year over the Maximum
Permissible Amount.
(F) Limitation Year. The term Limitation Year shall mean the calendar year.
(G) Maximum Permissible Amount. The term Maximum Permissible Amount
shall mean the lesser of (1) the Defined Contribution Dollar
Limitation, or (2) 25% of the Participant's Compensation for the
Limitation Year.
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different period of 12 consecutive
months, the Maximum Permissible Amount for the short Limitation
Year will be the lesser of (1) the Defined Contribution Dollar
Limitation multiplied by a fraction, the numerator of which is the
number of months in the short Limitation Year, and the denominator
or which is 12, or (2) 25% of the Participant's Compensation for the
short Limitation Year.
5.2 LIMITATIONS ON ALLOCATIONS. If the Employer does not maintain any
qualified plan in addition to this Plan:
(A) The amount of Annual Additions which may be allocated under this Plan
on a Participant's behalf for a Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation
contained in this Plan.
(B) Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Maximum Permissible Amount may be
determined on the basis of the Participant's estimated
annual Compensation. Such Compensation shall be determined on a
reasonable basis and shall be uniformly determined for all
Participants similarly situated. Any employer contributions based on
estimated annual Compensation shall be reduced by any Excess Amounts
carried over from prior years.
(C) As soon as is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for such
Limitation Year shall be determined on the basis of the Participant's
actual Compensation for such Limitation Year. In the event a
Participant separates from the Service of the Employer prior to the
end of the Limitation Year, the Maximum Permissible Amount for such
Participant shall be determined prior to any distribution of his
Participant's Account on the basis of his actual Compensation. Any
Excess Amounts shall be disposed of in
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accordance with Section 5.2 (D).
(D) If there is an Excess Amount with respect to a Participant for
a Limitation Year as a result of a reasonable error in estimating the
Participant's annual compensation, an allocation of forfeitures, a
reasonable error in determining the amount of elective deferrals
(within the meaning of section 402(g)(3) of the Code) that may be made
with respect to any individual under the limits of section 415 of the
Code, or under other limited facts and circumstances which the
commissioner finds justified, such Excess Amount shall be disposed of
as follows:
(1) The Excess Amount (excluding Elective Deferral Contributions)
shall be held unallocated in a suspense account for the
Limitation Year and allocated and reallocated in the next
Limitation Year to all Participants in the Plan. The excess
amount must be used to reduce Employer Contributions for the next
Limitation Year (and succeeding Limitation Years, as necessary)
for all of the Participants in the Plan. For purposes of this
subparagraph, the Excess Amount may not be distributed to
Participants or former Participants.
(2) If, after the application of subparagraph (2) an Excess Amount
still exists, then the Participant's Elective Deferral
Contributions (including earnings and losses thereon) allocated
for the Limitation Year shall be returned to the Participant to
the extent that an Excess Amount exists. This distribution shall
be made as soon as administratively feasible after the Excess
Amount is determined. Any Elective Deferral Contributions
returned under this paragraph shall be disregarded for purposes
of the Actual Deferral Percentage Test.
(3) Alternatively, the Plan Administrator may elect to dispose of
the Excess Amount by applying the procedure in subparagraph (2)
before applying the procedure in subparagraph (1). If the Plan
Administrator makes this election, the Plan Administrator must
apply it uniformly to all Participants in a Limitation Year.
(4) If a suspense account is in existence at any time during a
Limitation Year pursuant to this section, it will not participate
in the allocation of investment gains or losses. If a suspense
account is in existence at any time during a particular
Limitation Year, all amounts in the suspense account must be
allocated and reallocated to Participants' Accounts before any
Employer Contributions which would constitute Annual Additions
may be made to the Plan for that Limitation Year.
5.3 MULTIPLE PLAN LIMITATIONS. If the Employer maintains one or more defined
contribution plans in addition to this Plan:
(A) The amount of Annual Additions which may be allocated under
this Plan on a Participant's behalf for a Limitation Year, shall not
exceed the lesser of:
(1) The Maximum Permissible Amount, reduced by the sum of any
Annual Additions allocated to the Participant's Account for the
same Limitation Year under this Plan and such other defined
contribution plan; or
(2) Any other limitation contained in this Plan.
Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in
Subsection (1) above may be determined on the basis of the
Participant's estimated annual Compensation for such Limitation Year.
Such estimated annual Compensation
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<PAGE> 33
shall be determined for all Participants similarly situated.
Any contribution made by the Employer based on estimated annual
Compensation shall be reduced by any Excess Amounts carried over from
prior years, if applicable.
(B) As soon as is administratively feasible after the end of the
Limitation Year, the amounts referred to in Section 5.3 (A) shall be
determined on the basis of the Participant's actual Compensation for
such Limitation Year.
(C) If amounts are contributed to a Participant's Account under
this Plan on an allocation date which does not coincide with the
allocation date(s) for all such other plans, and if a Participant's
Annual Additions under this Plan and all such other plans result in an
Excess Amount, such Excess Amount shall be deemed to have derived from
those contributions last allocated.
(D) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributable to this Plan will be the
product of (l) and (2) below:
(1) The total Excess Amount allocated as of such date (including
any amount which would have been allocated but for the
limitations of Code section 415).
(2) The ratio of (1) the amount allocated to the Participant as
if such date under this Plan, divided by (2) the total amount
allocated as of such date under all qualified defined
contribution plans (determined without regard to the limitations
of Code section 415).
(E) Any Excess Amounts attributed to this Plan shall be disposed of
as provided in Section 5.2 (D).
5.4 COMBINED PLAN LIMITATIONS. If the Employer maintains a defined benefit
plan in addition to this Plan:
(A) If an individual is a Participant at any time in both this Plan
and a defined benefit plan maintained by the Employer, the sum of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction for any year may not exceed 1.0. In the event that the sum of
the Defined Contribution Plan Fraction and the Defined Benefit Plan
Fraction exceeds 1.0, the Defined Contribution Plan Fraction will be
reduced until the sum of the Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction does not exceed 1.0.
For purposes of this Section 5.4, all defined benefit plans of
the Employer, whether or not terminated, will be treated as one defined
benefit plan and all defined contribution plans of the Employer,
whether or not terminated, will be treated as one defined contribution
plan.
(B) The Defined Benefit Plan Fraction for any year is a fraction,
the numerator of which is the Participant's Projected Annual Benefit
under the defined benefit plan (determined as of the close of the
Limitation Year), and the denominator of which is the lesser of (1) or
(2) below:
(1) 1.25 times the dollar limitation in effect under Internal
Revenue Code section 415(b)(1)(A) on the last day of the
Limitation Year; or
(2) 1.4 times the amount which may be taken into account under
Internal Revenue Code section 415(b)(1)(B) with respect to such
Participant for the Limitation Year.
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(C) A Participant's Projected Annual Benefit is equal to the annual
benefit to which the Participant would be entitled under the terms of
the defined benefit plan based upon the following assumptions:
(1) The Participant will continue employment until reaching Normal
Retirement Age as determined under the terms of the plan (or
current age, if that is later);
(2) The Participant's Compensation for the Limitation Year under
consideration will remain the same until the date the Participant
attains the age described in sub-division (1) of this
subparagraph; and
(3) All other relevant factors used to determine benefits under the
plan for the Limitation Year under consideration will remain
constant for all future Limitation Years.
(D) The Defined Contribution Plan Fraction for any Limitation Year
is a fraction, the numerator of which is the sum of the Annual
Additions to the Participant's Accounts in such Limitation Year and for
all prior Limitation Years, and the denominator of which is the lesser
of (1) or (2) below for such Limitation Year and for all prior
Limitation Years of such Participant's employment (assuming for this
purpose, that Code section 415(c) had been in effect during such prior
Limitation Years):
(1) 1.25 times the dollar limitation in effect under Code section
415(c)(1)(A) on the last day of the Limitation Year; or
(2) 1.4 times the amount which may be taken into account under Code
section 4l5(c)(l)(B) with respect to such Participant for the
Limitation Year.
For the purposes of determining these Limitations on
Allocations, any non-deductible employee contributions made under a
defined benefit plan will be considered to be a separate defined
contribution plan and will be considered to be part of the Annual
Additions for the appropriate Limitation Year.
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ARTICLE VI
DISTRIBUTION OF BENEFITS
6.1 DISTRIBUTIONS IN GENERAL. Each Participant may elect, with his Spouse's
consent if required, a distribution in the form of an Annuity, a single
sum cash payment, or a combination of the above. All distributions are
subject to the provisions of Article VIII, Joint and Survivor Annuity
Requirements.
6.2 TIMING OF DISTRIBUTIONS. If the value of a Participant's Vested
Interest exceeds (or at the time of any prior distribution exceeded)
$3,500 and is immediately distributable (as defined in Section 8.5), the
Participant and his Spouse, if required, must consent in writing to the
distribution before it is made.
Instead of consenting to a distribution, the Participant may make a
written election to deter the distribution for a specified period of time
ending no later than the Participant's Normal Retirement Age.
If the Participant and Spouse, if applicable, do not consent to a
distribution or if no election to defer is made within 90 days after
receiving a written explanation of the optional forms of benefit available
pursuant to Income Tax Regulation 1.411 (a)(11), all benefits shall be
deferred to, and distribution shall be made as of the Participant's Normal
Retirement Age. The distribution will be made in the form of a single sum
cash payment (in the case of a Participant meeting the requirements of
Section 8.1) or in accordance with Section 8.2 (in the case of a
Participant's not meeting the requirements of Section 8.1), unless the
Participant elects another form of benefit within the 90-day period prior
to the date the distribution is made.
A Participant whose actual retirement date is on or after his Normal
Retirement Age may not elect to defer distribution of his benefit beyond
the date of his actual retirement.
If the value of a Participant's Vested Interest is $3,500 or less at
the time it becomes payable, the distribution shall be made in the form of
a single sum cash payment and shall be made upon such Participant's
Termination or Employment. Such a distribution may not be deferred.
Unless the Participant elects otherwise, the payment of benefits under
this Plan to the Participant shall begin not later than the 60th day
after the close of the Plan Year in which the later of (A) or (B), below,
occurs:
(A) the date on which the Participant attains his Normal Retirement
Age; or
(B) the date on which the Participant terminates his Service
(including Termination of Employment, death or Disability) with the
Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse,
if required, to consent to a distribution while a benefit is immediately
distributable shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy the above paragraph.
6.3 DISTRIBUTION LIMITATION. Elective Deferral Contributions, Qualified
Nonelective Contributions, and income allocable to each, are not
distributable to a Participant or a Beneficiary, in accordance with such
Participant's or Beneficiary's election, earlier than upon the
Participant's Termination of Employment, death, or disability.
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<PAGE> 36
Such amounts may also be distributed upon:
(A) Termination of the Plan without the establishment or maintenance of a
successor plan (other than an employee stock ownership plan).
(B) The disposition by the Employer to an unrelated corporation of
substantially all the assets (within the meaning of section 409(b)(2)
of the Code) used in the trade or business of the Employer if the
Employer continues to maintain this Plan after the disposition.
However, a distribution may be made under this paragraph only to an
Employee who continues employment with the corporation acquiring such
assets.
(C) The disposition by the Employer to an unrelated entity or
individual of the Employer's interest in a subsidiary (within the
meaning of section 409(d)(3) of the Code) if the Employer continues tO
maintain this Plan. However, a distribution may be made under this
paragraph only to an Employee who continues employment with such
subsidiary.
(D) A distribution may be made under paragraphs (A), (B) or (C)
only if it is a lump sum distribution. The term "lump sum distribution"
has the same meaning provided in section 402(e)(4) of the Code, without
regard to subparagraphs (A)(i) through (iv), (B), and (H) of that
section.
(E) In the case of Elective Deferral Contributions only, the attainment of
age 59-1/2, as described in Section 10.1 of the Plan.
(F) In the case of Elective Deferral Contributions only, the hardship of
the Participant, as described in Section 10.3 of the Plan.
6.4 COMMENCEMENT OF DISTRIBUTIONS. Notwithstanding the provisions of the
preceding Timing of Distributions Section, distributions to a Participant
will commence no later than the date determined in accordance with the
provisions of this Section.
Distribution to a Participant must commence no later than the required
beginning date. The first required beginning date of a Participant is the
first day of April of the calendar year following the calendar year in
which the Participant attains age 70-1/2.
The required beginning date of a Participant who attains age 70-l/2
before January 1, 1988, shall be the first day of April of the calendar
year following the calendar year in which the later of retirement or
attainment of age 70-1/2 occurs, provided the Participant was not a 5%
owner in the Plan Year ending in the year in which the Participant attained
age 66-1/2 or any later Plan Year. A Participant is treated as a 5% owner
for purposes of this section if such Participant is a 5% owner as defined
in section 416(i) of the Code (determined in accordance with section 416
but without regard to whether the Plan is Top-Heavy). The required
beginning date of a Participant who is a 5% owner during any year beginning
after December 31, 1979, is the first day of April following the later of:
(A) the calendar year in which the Participant attained age 70-1/2, or
(B) the earlier of the calendar year with or within which ends the
Plan Year in which the Participant becomes a 5% owner, or the calendar
year in which the Participant retires.
Once distributions have begun to a 5% owner under this section, they
must continue to be distributed, even if the Participant ceases to be a 5%
owner in a subsequent year. Distribution to such Participant must commence
no later than the first day of April following the calendar year in which
the Participant's
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Termination of Employment occurs.
If distribution to any Participant is made in other than a single sum
payment, the second payment shall be distributed no later than the
December 31 following the April 1 by which the first payment was required
to be distributed. Each succeeding payment shall be distributed no later
than each December 31 thereafter.
6.5 DISTRIBUTION REQUIREMENTS.
(A) All distributions required under this Article shall be
determined and made in accordance with the Income Tax Regulations
under section 401(a)(9), including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the regulations.
(B) Limits on Settlement Options. Distributions, if not made in a
lump sum, may only be made over one of the following periods (or a
combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a designated Beneficiary,
(3) a period certain not extending beyond the life expectancy of
the Participant, or
(4) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
Beneficiary.
(C) Minimum Amounts to be Distributed.
(1) If the Participant's entire Vested Interest is to be
distributed in other than a lump sum, then the amount to be
distributed each year must be at least an amount equal to the
quotient obtained by dividing the Participant's entire Vested
Interest by the life expectancy of the Participant or the joint
and last survivor expectancy of the Participant and designated
Beneficiary. Life expectancy and joint and last survivor
expectancy are computed by the use of the return multiples
contained in section 1.72-9 of the Income Tax Regulations. For
purposes of this computation, a Participant's life expectancy may
be recalculated no more frequently than annually; however, the
life expectancy of a Beneficiary other than the Participant's
Spouse may not be recalculated.
(2) If the Participant's Spouse is not the designated Beneficiary,
the method of distribution selected must assure that at least 50%
of the present value of the amount available for distribution is
paid within the life expectancy of the Participant.
(3) The amount to be distributed each year, beginning with
distributions for the first distribution calendar year, shall not
be less than the quotient obtained by dividing the Participant's
benefit by the lesser of (l) the applicable life expectancy or
(2) if the Participant's Spouse is not the designated
Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401 (a)(9)-2 of the Income Tax
Regulations. Distributions after the death of the Participant
shall be distributed using the applicable life expectancy in
subsection (d)(1) above as the relevant divisor without regard
to regulations section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date. The minimum
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distribution for other calendar years, including the minimum
distribution for the distribution calendar year in which the
Employee's required beginning date occurs, must be made on or
before December 31 of that distribution calendar year.
6.6 DEATH DISTRIBUTION PROVISIONS. If the Participant dies before
distribution of his Vested Interest commences, the following provisions
shall apply:
(A) If a distribution is to be made to a Beneficiary other than the
Surviving Spouse:
(1) If the present value of the Participant's Vested Interest
exceeds (or at the time of any prior distribution exceeded)
$3,500, unless the Beneficiary elects another form of
distribution, that portion of the Participant's Vested Interest
payable to the Beneficiary will be distributed in the form of a
single sum cash payment within a reasonable period of time after
the Plan Administrator is notified of the Participant's death.
(2) If the present value of the Participant's Vested Interest is
$3,500 or less at the time it becomes payable, the distribution
shall always be made in the form of a single sum cash payment and
shall be paid within a reasonable period of time after the Plan
Administrator is notified of the Participant's death.
(B) If the distribution is to be made to a Beneficiary who is the
Surviving Spouse, such distribution will be made in accordance with
the following:
(1) If the Participant had never elected a life Annuity form of
distribution under the Plan:
(a) If the present value of the Participant's Vested
Interest exceeds (or at the time of any prior distribution
exceeded) $3,500, unless the surviving spouse elects another
form of distribution, that portion of the Participant's
Vested Interest payable to the Surviving Spouse will be
distributed in the form of a single sum cash payment within
a reasonable period of time after the Plan Administrator is
notified of the Participant's death.
(b) If the present value of the Participant's Vested
Interest payable to the Surviving Spouse is $3,500 or less
at the time it becomes payable, the distribution shall
always be made in the form of a single sum cash payment and
shall be made within a reasonable period of time after the
Plan Administrator is notified of the Participant's death.
(2) If the Participant had previously elected a life Annuity form
of distribution under the Plan:
(a) If the present value of the Participant's Vested
Interest exceeds (or at the time of any prior distribution
exceeded) $3,500 and is immediately distributable (as
defined in Section 8.5), the Surviving Spouse must consent
to the distribution before it is made. If the Surviving
Spouse does not consent to a distribution, all benefits
shall be deferred to a date that complies with the terms of
Section 6.8 (B).
The distribution shall be made in accordance with the
provisions of Section 8.3.
(b) If the present value of the Participant's Vested
Interest is $3,500 or less at the time it becomes payable,
the distribution shall always be made in the form of a
single sum cash payment and shall be paid within a
reasonable period of time after the
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Plan Administrator is notified of the Participant's
death.
6.7 DEATH DISTRIBUTION COMMENCEMENT DATE. Upon the death of the
Participant, the following distribution provisions shall take effect:
(A) If the Participant dies after distribution of his entire Vested
Interest has commenced, the remaining portion of such Vested Interest
will continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Participant's death.
In no event shall distribution of the Participant's remaining
Vested Interest be made in a lump sum after the Participant's death
unless such distribution is consented to, in writing, by the
Participant's Surviving Spouse, if any.
(B) If the Participant dies before distribution of his Vested
Interest commences, the Participant's entire Vested Interest will be
distributed no later than five years after the Participant's death
except to the extent that an election is made to receive distributions
in accordance with (1) or (2) below:
(1) If any portion of the Participant's Vested Interest is payable
to a designated Beneficiary, distributions may be made in
substantially equal installments over the life or life expectancy
of the designated Beneficiary (or over a period not extending
beyond the life expectancy of such Beneficiary), commencing no
later than one year after the Participant's death;
(2) If the designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the date on
which the Participant would have attained age 70-1/2. However,
the Surviving Spouse may elect, at any time following the
Participant's death, to defer the date on which distributions
will begin until no later than the date on which the Participant
would have attained age 70-l/2 and, if the Spouse dies before
payments begin, subsequent distributions shall be made as if the
Spouse had been the Participant.
(C) For purposes of (B) above, payments will be calculated by use
of the return multiples specified in section 1.72-9 of the Income Tax
Regulations. Life expectancy of a Surviving Spouse may be recalculated
annually; however, in the case of any other designated Beneficiary,
such life expectancy will be calculated at the time payment first
commences without further recalculation.
(D) For purposes of this Section (Death Distribution Commencement
Date) any amount paid to a child of the Participant will be treated as
if it had been paid to the Surviving Spouse if the amount becomes
payable to the Surviving Spouse when the child reaches the age of
majority.
6.8 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions pursuant to Section
16.8 may be made without regard to the age or employment status of the
Participant.
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ARTICLE VI-A
DIRECT ROLLOVERS
6A.1 Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Article, a
Distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by
the Distributee in a Direct Rollover, except as otherwise provided by the
Employer's administrative procedures as permitted by regulations. In
addition, a Distributee's election of a Direct Rollover shall be subject
to the following requirements:
(A) If the Distributee elects to have only a portion of an Eligible
Rollover Distribution paid to an Eligible Retirement Plan in a
Direct Rollover, that portion must be equal to at least $500.
(B) If the entire amount of a Distributee's Eligible Rollover
Distribution is $500 or less, the distribution may not be divided.
Instead, the entire amount must either be paid to the Distributee or
to an Eligible Retirement Plan in a Direct Rollover.
(C) A Distributee may not elect a Direct Rollover if the Distributee's
Eligible Rollover Distributions during a year are reasonably
expected by the Plan Administrator to total less than $200 (or any
lower minimum amount specified by the Plan Administrator).
(D) A Distributee may not elect a Direct Rollover of an Offset Amount.
(E) A Distributee's election to make or not make a Direct Rollover with
respect to one payment in a series or periodic payments shall apply
to all subsequent payments in the series, except that a
Distributee shall be permitted at any time to change, with respect to
subsequent payments in the series of periodic payments, a previous
election to make or not make a Direct Rollover. A change of election
shall be accomplished by the Distributee notifying the Plan
Administrator of the change. Such notice must be in the form and
manner prescribed by the Plan Administrator.
6A.2 Definitions.
(A) Direct Rollover: A Direct Rollover is a payment by the plan to the
Eligible Retirement Plan specified by the Distributee.
(B) Distributee: A Distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's Surviving Spouse
and the Employee's or former Employee's Spouse who is the alternate
payee under a qualified domestic relations order, as defined in
section 414(p) of the Code, are Distributees with regard to the
interest of the Spouse or former Spouse.
(C) Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in section 408(a) of the
code, an individual retirement annuity described in section 408(b)
of the Code, an annuity plan described in section 403(a) of the
Code, or a qualified trust described in section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
Surviving Spouse, an Eligible Retirement Plan is an individual
retirement account or an individual retirement annuity.
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<PAGE> 41
(D) Eligible Rollover Distribution: An Eligible Rollover Distribution is
any distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the Distributee
or the joint lives (or joint life expectancies) of the Distributee
and the Distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(E) Offset Amount: An Offset Amount is the amount by which a
Participant's Account is reduced to repay a loan from the Plan
(including the enforcement of the Plan's security interest in the
Participant's Account).
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ARTICLE VII
RETIREMENT BENEFITS
7.1 NORMAL RETIREMENT. A Participant who attains his Normal Retirement Age
shall have a vesting percentage of 100%. If a Participant retires from
the active Service of the Employer on his Normal Retirement Date, he
shall be entitled to receive a distribution of the entire value of his
Account as of his Normal Retirement Date.
7.2 EARLY RETIREMENT. A Participant who retires from the Service of the
Employer on his Early Retirement Date shall have a vesting percentage of
lOO% and shall be entitled to receive a distribution of the entire value
of his Account as of his Early Retirement Date.
7.3 LATE RETIREMENT. A Participant may continue in the Service of the
Employer after his Normal Retirement Age, and in such event he shall
retire on his Late Retirement Date. Such Participant shall continue as a
Participant under this Plan until such Late Retirement Date. The
Participant shall have a vesting percentage of 100% and shall be
entitled to receive a distribution of the entire value of his
Account as of his Late Retirement Date.
7.4 DISABILITY RETIREMENT. A Participant who retires from the Service of the
Employer on account of Disability shall have a vesting percentage of
100% and shall be entitled to receive a distribution of the
entire value of his Account as of his Disability Retirement Date.
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ARTICLE VIII
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
8.1 GENERAL. The provisions of this Article shall take precedence over any
conflicting provision in this Plan.
The provisions of this Article shall apply to any Participant unless:
(A) upon the death of the Participant the Participant's entire Vested
Interest will be paid to the Participant's Surviving Spouse, but if
there is no Surviving Spouse, or, if the Surviving Spouse
has already consented in a manner conforming to a Qualified Election,
then to the Participant's designated Beneficiary:
(B) the Participant does not elect payments in the form of a Life
Annuity and has not previously elected payments in the form of a
Life Annuity under the Plan, and
(C) as to the Participant, the Plan is not a direct or indirect
transferee of a defined benefit plan, money purchase pension plan
(including a target benefit plan), stock bonus, or profit-sharing
plan which would otherwise provide for a Life Annuity form of
payment to the Participant.
8.2 PAYMENT OF QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an
optional form of benefit is selected pursuant to a Qualified Election
within the ninety-day period ending on the first day on which
all events have occurred which entitle the Participant to a benefit, a
married Participant's Vested Interest will be paid in the form of a
Qualified Joint and Survivor Annuity.
An unmarried Participant will be provided a single Life Annuity unless
the Participant elects another form of benefit during the applicable
Election Period.
8.3 PAYMENT OF QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an
optional form of benefit has been selected within the Election Period
pursuant to a Qualified Election, if a married Participant dies before his
Annuity Starting Date, then the Participant's entire Vested Interest, less
the amount of any unpaid loan balance outstanding under the terms of
Article X-A, shall be applied toward the purchase of an immediate Annuity
for the life of the Surviving Spouse. As an alternative to receiving the
benefit in this form of an Annuity, the Surviving Spouse may elect to
receive a single cash payment or any other form of payment provided for
in the Plan within a reasonable time after the Participant's death.
8.4 DEFINITIONS.
(A) Election Period: The period which begins on the first day of the Plan
Year in which the Participant attains age 35 and ends on the date of
the Participant's death. If a Participant separates from Service
prior to the first day of the Plan Year in which age 35 is attained,
with respect to the account balance as of the date of separation,
the Election Period shall begin on the date of separation.
A Participant who has not attained age 35 as of the end of a Plan
Year, may make a special Qualified Election to waive the Qualified
Preretirement Survivor Annuity for the period beginning on the date
of such election and ending on the first day of the Plan Year in
which the Participant
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will attain age 35. Such election shall not be valid unless the Participant
receives a written explanation of the Qualified Preretirement Survivor
Annuity in such terms as are comparable to the explanation required under
Section 8.6 (A). Qualified Preretirement Survivor Annuity coverage will
be automatically reinstated as of the first day of the Plan Year in which
the Participant attains age 35. Any new waiver on or after such date
shall be subject to the full requirements of this Article.
(B) Qualified Election: A waiver of a Qualified Joint and Survivor Annuity or
a Qualified Preretirement Survivor Annuity. Any waiver of a Qualified
Joint and Survivor Annuity or a Qualified Preretirement Survivor Annuity
shall not be effective unless: (a) the Participant's Spouse consents in
writing to the election; (b) the election designates a specific
Beneficiary, including any class of Beneficiaries or any contingent
Beneficiaries, which may not be changed without spousal consent (or the
Spouse expressly permits designations by the Participant without any
further spousal consent); (c) the Spouse's consent acknowledges the
effect of the election: and (d) the Spouse's consent is witnessed by a
Plan representative or notary public. Additionally, a Participant's
waiver of the Qualified Joint and Survivor Annuity shall not be effective
unless the election designates a form of benefit payment which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent). If
it is established to the satisfaction of a Plan representative that such
written consent cannot be obtained because:
(1) there is no Spouse:
(2) the Spouse cannot be located:
(3) the Participant is legally separated or has been abandoned within the
meaning of local law, and the Participant has a court order to such
effect;
(4) of other circumstances as the Secretary of the Treasury may by
regulations prescribe, the Participant's election to waive coverage
will be considered a Qualified Election.
Any consent by a Spouse obtained under this provision (or establishment
that the consent of a Spouse may not be obtained) shall be effective
only with respect to such Spouse. A consent that permits designations
by the Participant without any requirement of further consent by such
Spouse must acknowledge that the Spouse has the right to limit consent
to a specific Beneficiary and a specific form of benefit where applicable,
and that the Spouse voluntarily elects to relinquish either or both of
such rights. A revocation of a prior waiver may be made by a Participant
without the consent of the Spouse at any time before the commencement of
benefits. The number of revocations shall not be limited. No consent
obtained under this provision shall be valid unless the Participant has
received notice as provided in Section 8.6 below.
(C) Qualified Joint and Survivor Annuity: An immediate Annuity for the life
of the Participant with a survivor Annuity for the life of the Spouse
which is not less than 50% and not more than 100% of the amount of the
Annuity which is payable during the joint lives of the Participant and the
Spouse and which is the amount of benefit which can be purchased with the
Participant's entire Vested Interest. If no survivor Annuity percentage has
been specified in an election, the percentage payable to the Spouse will
be 50%.
Notwithstanding the above paragraph, a Qualified Joint and Survivor
Annuity for an unmarried Participant shall mean an Annuity for the life
of the Participant.
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(D) Qualified Preretirement Survivor Annuity: A survivor Annuity for the
life of the Spouse in the amount which can be purchased with the
Participant's entire Vested Interest.
(E) Spouse (Surviving Spouse): The Spouse or Surviving Spouse of the
Participant. A former Spouse may be treated as the Spouse or
Surviving Spouse to the extent provided under a Qualified Domestic
Relations Order as described in Code section 414(p).
8.5 CONSENT REQUIREMENTS. Only the Participant need consent to the
commencement of a distribution in the form of a Qualified Joint and
Survivor Annuity while the account balance is immediately distributable.
Neither the consent of the Participant nor the Participant's Spouse shall
be required to the extent that a distribution is required to satisfy
section 401(a)(9) or section 415 of the Code. An account balance is
immediately distributable if any part of the account balance could be
distributed to the Participant (or Surviving Spouse) before the Participant
attains (or would have attained if not deceased) the later of Normal
Retirement Age or age 62.
8.6 NOTICE REQUIREMENTS.
(A) In the case of a Qualified Joint and Survivor Annuity as described
in Section 8.4 (C), the Plan Administrator shall, no less than 30 days
and no more than 90 days prior to the Annuity Starting Date, provide
each Participant with a written explanation of: (i) the terms and
conditions of a Qualified Joint and Survivor Annuity; (ii) the
Participant's right to make and the effect of an election to waive
the Qualified Joint and Survivor Annuity form of benefit; (iii) the
rights of a Participant's Spouse; (iv) the right to make, and the
effect of, a revocation of a previous election to waive the Qualified
Joint and Survivor Annuity; (v) a general description of the
eligibility conditions and other material features of the optional
forms of benefit; and (vi) sufficient additional information to
explain the relative values of the optional forms of benefit
available to them under this Plan.
(B) If a distribution is one to which sections 401(a)(11) and 417 of the
Code do not apply, such distribution may commence less than 30 days
after the notice required provided that:
(1) the plan administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular
distribution option), and
(2) the Participant, after receiving the notice, affirmatively elects
a distribution.
(C) In the case of a Qualified Preretirement Survivor Annuity as described
in Section 8.4 (D), the Plan Administrator shall provide each
Participant within the period beginning on the first day of the
Plan Year in which the Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age 35, a written explanation of the Qualified
Preretirement Survivor Annuity in such terms and in such manner
as would be comparable to the explanation provided for meeting the
requirements of Section 8.6 (A) to a Qualified Joint and Survivor
Annuity.
If a Participant enters the Plan after the first day of the Plan
Year in which the Participant attained age 32, the Plan
Administrator shall provide notice no later than the close of the
second Plan Year succeeding the entry of the Participant in the Plan.
If a Participant enters the Plan after he has attained age 35, the Plan
Administrator shall provide notice within a reasonable period of time
following the entry of the Participant in the Plan.
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If a Participant's Termination of Employment occurs before the Participant
attains age 35, the Plan Administrator shall provide notice within one
year of such Termination of Employment.
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ARTICLE IX
TERMINATION OF EMPLOYMENT
9.1 DISTRIBUTION. As of a Participant's Termination of Employment, he shall
be entitled to receive a distribution of his entire Vested Interest. Such
distribution shall be further subject to the terms and conditions of
Article VI.
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ARTICLE X
WITHDRAWALS
10.1 WITHDRAWAL AFTER AGE 59-1/2. A Participant who has attained age 59-1/2,
may elect to withdraw from his Account, at any time, an amount which is
equal to any whole percentage (not exceeding 100%) of his Vested
Interest in his Account attributable to:
- Elective Deferral Contributions, including earnings
- Matching Contributions, including earnings
- Nonelective Contributions, including earnings
- Prior Employer Contributions, including earnings
- Rollover Contributions, including earnings.
10.2 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP. A Participant may withdraw
a portion of his Vested Interest in the event of a hardship. For
purposes of this section, a withdrawal is made on account of hardship
only if the withdrawal is made both on account of an immediate and heavy
financial need of the Employee and is necessary to satisfy the financial
need. In addition, any withdrawal on account of hardship shall be
limited to the distributable amount described in paragraph (C) of this
section.
(A) The following are the only financial needs considered immediate
and heavy for purposes of this section:
(1) Expenses for medical care described in section 213(d) of the Code
previously incurred by the Employee, the Employee's Spouse, or
any dependents of the Employee (as defined in section 152 of the
Code) or necessary for these persons to obtain medical care
described in section 213(d) of the Code;
(2) Payment of tuition and related educational fees for the next
12 months of post-secondary education for the Employee, his
Spouse, children, or dependents (as defined in section 152 of
the Code);
(3) Costs directly related to the purchase of a principal residence
for the Employee (excluding mortgage payments); or
(4) Payments necessary to prevent the eviction of the Employee from
the Employee's principal residence or foreclosure on the
mortgage on that residence.
(B) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if all of the
following requirements are satisfied:
(1) The hardship distribution is not in excess of the amount of the
immediate and heavy financial need of the Employee. The amount
of an immediate and heavy financial need may include the amounts
necessary to apply any federal, state, or local income taxes or
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penalties reasonably anticipated result from the distribution.
(2) The Employee had obtained all distributions, other than hardship
distributions, and all nontaxable (at the time of the loan) loans
currently available under all plans maintained by the Employer.
(3) The Employee is suspended from making Elective Deferral
Contributions and Employee Contributions to the Plan for at least
12 months after receipt of the hardship distribution. In
addition, the Employee must be prohibited under the terms of the
plan or an otherwise enforceable agreement from making Elective
Deferral Contributions and Employee Contributions to all other
plans maintained by the Employer for at least 12 months after
receipt of the hardship distribution.
For this purpose, the phrase "all other plans of the Employer"
means all qualified and nonqualified plans of deferred
compensation maintained by the Employer. The phrase includes a
stock option, stock purchase, or similar plan, or a cash or
deferred arrangement that is part of a cafeteria plan within the
meaning of section 125 of the Code. However, it does not include
the mandatory employee contribution part of a defined benefit
plan. It also does not include a health or welfare benefit plan,
including one that is part of a cafeteria plan within the meaning
of section 125 of the Code.
(4) The Employee may not make Elective Deferral Contributions to
the Plan for the Employee's taxable year immediately following the
taxable year of the hardship distribution in excess of the
applicable limit under section 402(g) of the Code for such
taxable year less the amount of such Employee's Elective Deferral
Contributions for the taxable year of the hardship distribution.
In addition, all other plans maintained by the Employer must
limit the Employee's Elective Deferral Contributions for the next
taxable year to the applicable limit under section 402(g) of the
Code for that year minus the Employee's Elective Deferral
Contributions for the year of the hardship distribution.
(C) The amount that may be withdrawn from a Participant's Elective
Deferral Account is equal to the Employee's total Elective Deferral
Contribution as of the date of withdrawal, reduced by the amount of
previous withdrawals of Elective Deferral Contributions on account of
hardship. In the case of income allocable to Elective Deferral
Contributions, the distributable amount may only include amounts that
were credited to the Employee's Account as of December 31, 1988.
10.3 WITHDRAWAL OF PRIOR EMPLOYEE CONTRIBUTIONS. A Participant may elect to
withdraw from his Account, once every Plan Year, an amount equal to any
whole percentage (not exceeding 100%) of his Vested Interest in his
Account attributable to the value of his Prior Employee Contributions,
including earnings.
10.4 WITHDRAWALS FOR TERMINATED DEFERRED PARTICIPANTS. A Participant who has
terminated employment with the Employer and who has deferred his
distribution, may elect to withdraw from his Account an amount not
exceeding 100% of the value of his Account balance.
10.5 NOTIFICATION. The Participant shall notify the Administrator in writing
of his election to make a withdrawal under the preceding provisions of
this Article X. Any such election shall be effective as of the date
specified in such notice, which date must be at least 15 days after such
notice is filed. Payment of the withdrawal shall be subject to the terms
and conditions of Article VI.
10.6 NON-REPAYMENT. Withdrawals made in accordance with this Article X may
not be repaid.
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10.7 SPOUSAL CONSENT TO WITHDRAWAL. Prior to obtaining a withdrawal in
accordance with this Article X, a married Participant must obtain spousal
consent in accordance with the provisions of Article VIII unless such
Participant meets the requirements set forth in Sections 8.1 (A), (B) and
(C).
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ARTICLE X-A
LOANS
10A.l LOANS TO PARTICIPANTS. Effective January 1, 1995, the Plan
Administrator may make a bona fide loan to a Participant, in an amount
which, when added to the outstanding balance of all other loans to the
Participant from all qualified plans of the Employer, does not exceed the
lesser of $50,000 reduced by the excess of the Participant's highest
outstanding loan balance during the 12 months preceding the date on
which the loan is made over the outstanding loan balance on the date the
new loan is made, or 50% of the Participant's Vested Interest in his
Account.
The loan shall be made under such terms, security interest, and
conditions as the Plan Administrator deems appropriate, provided,
however, that all loans granted hereunder:
(A) are available to all Participants and Beneficiaries, who are
parties-in-interest pursuant to section 3(14) of ERISA, on a
reasonably equivalent basis:
(B) are not made available to Highly Compensated Employees on a basis
greater than the basis made available to other Employees:
(C) bear a reasonable rate of interest;
(D) are adequately secured:
(E) unless a Participant meets the requirements set forth in Sections 8.1
(A), (B) and (C), are made only after a Participant obtains the
consent of his Spouse, if any, to use his Participant's Account
as security for the loan. Spousal consent shall be obtained no
earlier than the beginning of the 90-day period that ends on the
date on which the loan is to be so secured. The consent must be
in writing, must acknowledge the effect of the loan, and must be
witnessed by a plan representative or notary public. Such consent
shall thereafter be binding with respect to the consenting Spouse
or any subsequent Spouse with respect to that loan. A new consent
shall be required if the Participant's Account is used for
renegotiation, extension, renewal or other revision of the loan.
(F) are made in accordance with and subject to all of the
provisions of this Article.
l0A.2 LOAN PROCEDURES. The Plan Administrator shall establish a written set
of procedures, set forth in the summary plan description, by which all
loans will be administered. Such rules, which are incorporated herein by
reference, will include, but not be limited to, the following:
(A) the person or persons authorized to administer the loan program,
identified by name or position;
(B) the loan application procedure;
(C) the basis for approving or denying loans;
(D) any limits on the types of loans permitted;
(E) the procedure for determining a "reasonable" interest rate;
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(F) acceptable collateral;
(G) default conditions; and
(H) steps which will be taken to preserve Plan assets in the event of
default.
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ARTICLE XI
FIDUCIARY DUTIES AND RESPONSIBILITIES
11.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall
discharge his duties hereunder solely in the interest of the Participants
and their Beneficiaries and for the exclusive purpose of providing
benefits to Participants and their Beneficiaries and defraying
reasonable expenses of administering the Plan. Each Fiduciary shall act
with the care, skill, prudence, and diligence under the circumstances
that a prudent man acting in a like capacity and familiar with such
matters would use in conducting an enterprise of like character and with
like aims, in accordance with the documents and instruments governing
this Plan, insofar as such documents and instruments are consistent with
this standard.
11.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of persons may
serve in more than one fiduciary capacity with respect to this Plan.
11.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be
construed to prevent any Fiduciary from receiving any benefit to which he
may be entitled as a Participant or Beneficiary in this Plan, so long as
the benefit is computed and paid on a basis which is consistent with the
terms of this Plan as applied to all other Participants and
Beneficiaries. Nor shall this Plan be interpreted to prevent any
Fiduciary from receiving any reasonable compensation for services
rendered, or for the reimbursement of expenses properly and actually
incurred in the performance of his duties with the Plan; except that no
Person so serving who already receives full-time pay from an Employer
shall receive compensation from this Plan, except for reimbursement of
expenses properly and actually incurred.
11.4 INVESTMENT MANAGER. When an Investment Manager has been appointed, he is
required to acknowledge in writing that he has undertaken a Fiduciary
responsibility with respect to the Plan.
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ARTICLE XII
THE ADMINISTRATOR
12.1 DESIGNATION AND ACCEPTANCE. Employer shall designate a person or persons
to serve as Administrator under the Plan and such person, by joining in
the execution of this Plan and Trust Agreement accepts such appointment
and agrees to act in accordance with the terms of the Plan.
12.2 DUTIES AND AUTHORITY. The Administrator shall administer the Plan in a
nondiscriminatory manner for the exclusive benefit of Participants and
their Beneficiaries.
The Administrator shall perform all such duties as are necessary to
operate, administer, and manage the Plan in accordance with the terms
thereof, including but not limited to the following:
(A) To determine all questions relating to a Participant's coverage under
the Plan:
(B) To maintain all necessary records for the administration of the Plan:
(C) To compute and authorize the payment of retirement income and other
benefit payments to eligible Participants and Beneficiaries:
(D) To adopt such rules, regulations and procedures as, in its opinion,
may be necessary for the proper and efficient administration of the
Plan which are not inconsistent with the terms thereof;
(E) To advise or assist Participants regarding any rights, benefits, or
elections available under the Plan;
(F) To determine, in its sole discretion, eligibility for Plan benefits
and to construe and interpret the terms of the Plan, to make factual
determination and to remedy inconsistencies, ambiguities or
omissions, and the decision thereon of the Administrator shall be
conclusive and binding upon all persons to the extent permitted by
law; and
(G) To direct the payment of all benefits under the Plan.
The Administrator shall take all such actions as are necessary to operate,
administer, and manage the Plan as a retirement program which is at all
times in full compliance with any law or regulation affecting this Plan.
The Administrator may allocate certain specified duties of plan
administration to an individual or group of individuals who, with respect
to such duties, shall have all reasonable powers necessary or appropriate
to accomplish them.
12.3 EXPENSES AND COMPENSATION. All expenses of administration may be paid
out of the Trust fund unless paid by the Employer. Such expenses shall
include any expenses incident to the functioning of the Administrator,
including, but not limited to, fees of accountants, counsel, and other
specialists and their agents, and other costs of administering the Plan.
Until paid, the expenses shall constitute a liability of the Trust fund.
However, the Employer may reimburse the Trust fund for any
administration expense incurred. Any administration expense paid to the
Trust fund as a reimbursement shall not be considered an Employer
Contribution. Nothing shall prevent the Administrator from receiving
reasonable
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compensation for services rendered in administering this Plan, unless the
Administrator already receives full-time pay from any Employer adopting
the Plan.
12.4 INFORMATION FROM EMPLOYER. To enable the Administrator to perform
his functions, the Employer shall supply full and timely information to
the Administrator on all matters relating to this Plan as the
Administrator may require.
12.5 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the event that more
than one person has been duly nominated to serve on the Administrative
Committee and has signified in writing the acceptance of such
designation, the signature(s) of one or more persons may be accepted by
an interested party as conclusive evidence that the Administrative
Committee has duly authorized the action therein set forth and as
representing the will of and binding upon the whole Administrative
Committee. No person receiving such documents or written instructions and
acting in good faith and in reliance thereon shall be obliged to
ascertain the validity of such action under the terms of this Plan. The
Administrative Committee shall act by a majority of its members at the
time in office and such action may be taken either by a vote at a meeting
or in writing without a meeting.
12.6 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The Administrator, or
any member of the Administrative Committee, may resign at any time by
delivering to the Employer a written notice of resignation, to take
effect at a date specified therein, which shall not be less than 30 days
after the delivery thereof, unless such notice shall be waived.
The Administrator may be removed with or without cause by the Employer by
delivery of written notice of removal, to take effect at a date specified
therein, which shall be not less than 30 days after delivery thereof,
unless such notice shall be waived.
The Employer, upon receipt of or giving notice of the resignation or
removal of the Administrator, shall promptly designate a successor
Administrator who must signify acceptance of this position in writing. In
the event no successor is appointed, the Board of Supervisors of the
Employer will function as the Administrative Committee until a new
Administrator has been appointed and has accepted such appointment.
12.7 INVESTMENT MANAGER. The Administrator may appoint, in writing, an
Investment Manager or Managers to whom is delegated the authority to
manage, acquire, invest or dispose of all or any part of the Trust
assets. With regard to the assets entrusted to his care, the Investment
Manager shall provide written instructions and directions to the
Trustee, who shall in turn be entitled to rely upon such written
directions. This appointment and delegation shall be evidenced by a
signed written agreement.
12.8 DELEGATION OF DUTIES. The Administrator shall have the power, to the
extent permitted by law, to delegate the performance of such Fiduciary
and non-Fiduciary duties, responsibilities and functions as the
Administrator shall deem advisable for the proper management and
administration of the Plan in the best interests of the Participants and
their Beneficiaries.
12.9 INDEMNIFICATION. To the extent permitted by law, no Administrative
Committee member, director, officer or Employee of the Employer, shall
incur any personal liability of any nature for any act or failure to act
in good faith in connection with the administration of the Plan, except
in cases of gross negligence or willful misconduct by such individual.
The Board of Supervisors, the Administrative Committee, and any
Employees operating with the approval of the Employer or the
Administrative Committee will be indemnified and saved harmless by the
Employer from and against any and all liabilities to which they may be
subjected by reason of any act or failure to act made in good faith
pursuant to the provisions of the Plan, including expenses reasonably
incurred in the defense of any claim relating thereto.
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ARTICLE XIII
PARTICIPANTS' RIGHTS
13.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The Plan is
established and the Trust assets are held for the exclusive purpose of
providing benefits for such Employees and their Beneficiaries as have
qualified to participate under the terms of the Plan.
13.2 FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary of the
Employer acting in his behalf, shall notify the Administrator of a claim
of benefits under the Plan. Such request shall be in writing to the
Administrator and shall set forth the basis of such claim and shall
authorize the Administrator to conduct such examinations as may be
necessary to determine the validity of the claim and to take such steps
as may be necessary to facilitate the payment of any benefits to which
the Participant or Beneficiary may be entitled under the terms of the
Plan.
A decision by the Administrator shall be made promptly and not later than
90 days after the Administrator's receipt of the claim of benefits under
the Plan, unless special circumstances require an extension of the time
for processing, in which case a decision shall be rendered as soon as
possible, but not later than 180 days after the initial receipt of the
claim of benefits.
13.3 DENIAL OF CLAIM. Whenever a claim for benefits by any Participant or
Beneficiary has been denied by a Plan Administrator, a written notice,
prepared in a manner calculated to be understood by the Participant, must
be provided, setting forth (1) the specific reasons for the denial; (2)
the specific reference to pertinent Plan provisions on which the denial
is based; (3) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why
such material or information is necessary; and (4) an explanation of the
Plan's claim review procedure.
13.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or Beneficiary may (1)
request a review by a Named Fiduciary, other than the Administrator, upon
written application to the Plan; (2) review pertinent Plan documents; and
(3) submit issues and comments in writing to a Named Fiduciary. A
Participant or Beneficiary shall have 60 days after receipt by the
claimant of written notification of a denial of a claim to request a
review of a denied claim.
A decision by a Named Fiduciary shall be made promptly and not later than
60 days after the Named Fiduciary's receipt of a request for review, unless
special circumstances require an extension of the time for processing, in
which case a decision shall be rendered as soon as possible, but not later
than 120 days after receipt of a request for review. The decision on
review by a Named Fiduciary shall be in writing and shall include
specific reasons for the decision, written in a manner calculated to be
understood by the claimant, and specific references to the pertinent Plan
provisions on which the decision is based.
A Participant or Beneficiary shall be entitled, either in his own name
or in conjunction with any other interested parties, to bring such
actions in law or equity or to undertake such administrative actions or
to seek such relief as may be necessary or appropriate to compel the
disclosure of any required information, to enforce or protect his rights,
to recover present benefits due to him, or to clarify his rights to
future benefits under the Plan.
13.5 REINSTATEMENT OF BENEFIT. In the event any portion of a distribution
which is payable to a Participant or a Beneficiary shall remain unpaid on
account of the inability of the Plan Administrator, after
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<PAGE> 57
diligent effort, to locate such Participant or Beneficiary, the amount so
distributable shall be treated as a Forfeiture under the Plan. If a claim
is made by the Participant or Beneficiary for any benefit forfeited under
this section, such benefit shall be reinstated.
13.6 LIMITATION OF RIGHTS. Participation hereunder shall not grant any
Participant the right to be retained in the Service of the Employer or
any other rights or interest in the Plan or Trust fund other than those
specifically herein set forth.
13.7 PARTICIPANT CONTRIBUTIONS. Each Participant, regardless of his length of
Service with the Employer, shall be fully vested (100%) at all times in
any portion of his Participant's Account attributable to the following:
* Rollover Contributions
* Prior Employee Contributions.
13.8 MERGERS OR TRANSFERS. In the case of any merger or consolidation with
or transfer of assets or liabilities to any other qualified plan, the
following conditions must be met:
(A) The sum of the account balances in each plan shall equal the
fair market value (determined as of the date of the merger or
transfer as if the plans had then terminated) of the entire plan
assets.
(B) The assets of each plan shall be combined to form the assets of the
plan as merged (or transferred).
(C) Immediately after the merger (or transfer), each Participant in the
plan merged (or transferred) shall have an account balance equal to
the sum of the account balances the Participant had in the plans
immediately prior to the merger (or transfer).
(D) Immediately after the merger (or transfer) each Participant in the
plan merged (or transferred) shall be entitled to the same optional
benefit forms as he was entitled to immediately prior to the merger
(or transfer).
In the case of any merger or consolidation with or transfer of assets or
liabilities to any defined benefit plan, one of the plans before such
merger, consolidation, or transfer shall be converted into the other type
of plan and either the rules described above, applicable to the merger of
two defined contribution plans, or the rules applicable to the merger of
two defined benefit plans, as appropriate, shall be applied.
13.9 PARTICIPANT'S ACCOUNT AND VALUATION. A Participant's Account shall be
maintained on behalf of each Participant until such account is
distributed in accordance with the terms of this Plan. At least once per
year, as of the last day of the Plan Year, each Participant's Account
shall be adjusted for any earnings, gains, losses, contributions,
withdrawals, loans, and expenses, attributable to such Plan Year, in
order to obtain a new valuation of the Participant's Account.
13.10 INVESTMENT OF CONTRIBUTIONS. Each Participant and/or Beneficiary
shall have the exclusive authority to direct the investment of
contributions made to his Participant's Account. In accordance with the
procedures established by the Plan Administrator, the Participant and/or
Beneficiary shall elect to have a specified percentage invested in one or
more investment funds, as long as the designated percentage for each fund
is a whole number, and the sum of the percentages allocated is equal to
100%. In addition, the Participant and/or Beneficiary may change such
election on any normal business day of the Insurance Company. All
investment changes are subject to the rules of the investment fund(s)
in which the
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<PAGE> 58
Participant's Account is or is to be invested.
13.11 TRANSFERS BETWEEN INVESTMENT FUNDS. A Participant and/or Beneficiary
may designate amounts invested pursuant to the section above to be
transferred between the investment funds on any normal business day of
the Insurance Company, in accordance with the procedures established by
the Plan Administrator.
Notwithstanding the above, the transfer of amounts between investment
funds shall be subject to the rules of the investment funds in which the
Participant's Account is invested or is to be invested.
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<PAGE> 59
ARTICLE XIV
AMENDMENT OR TERMINATION OF THE PLAN
14.l AMENDMENT OF PLAN. The Employer shall have the right from time to time
to modify or amend, in whole or in part, any or all provisions of the
Plan, provided that a Board of Supervisors' resolution pursuant to such
modification or amendment shall first be adopted and provided further
that the modification or amendment is signed by the Employer and the
Administrator. Upon any such modification or amendment the Administrator
and the Trustee shall be furnished a copy thereof. No amendment shall
deprive any Participant or Beneficiary of any Vested Interest hereunder.
Any Participant having not less than three Years of Service shall be
permitted to elect, in writing, to have his Vesting Percentage computed
under the Plan without regard to such amendment.
The period during which the election must be made by the Participant shall
begin no later than the date the Plan Amendment is adopted and end no later
than after the latest of the following dates:
(A) The date which is 60 days after the day the amendment is adopted; or
(B) The date which is 60 days after the day the amendment becomes
effective; or
(C) The date which is 60 days after the day the Participant is issued
written notice of the amendment by the Employer or Administrator.
Such written election by a Participant shall be made to the Administrator.
No amendment to the Plan shall decrease a Participant's Account balance or
eliminate an optional form of distribution. Notwithstanding the preceding
sentence, a Participant's Account balance may be reduced to the extent
permitted under Code section 412(c)(8). Furthermore, no amendment to the
Plan shall have the effect of decreasing a Participant's Vested Interest
determined without regard to such amendment as of the later of the date
such amendment is adopted or the date it becomes effective.
14.2 CONDITIONS OF AMENDMENT. The Employer shall not make any amendment
which would cause the Plan to lose its status as a qualified plan within
the meaning of section 401(a) of the Code.
14.3 TERMINATION OF THE PLAN. The Employer intends to continue the Plan
indefinitely for the benefit of its Employees, but reserves the right to
terminate the Plan at any time by resolution of its Board of Supervisors.
Upon such termination, the liability of the Employer to make
contributions hereunder shall terminate
14.4 DISTRIBUTIONS UPON PLAN TERMINATION. If this Plan is terminated and the
Employer does not maintain or establish another defined contribution
plan, pursuant to Code section 401(k)(10)(A)(i), each Participant shall
receive a total distribution, in the form of a lump-sum distribution as
defined in Code section 401(k)(10)(B)(ii), of his Participant's Account
in accordance with the terms and conditions of Article VI.
However, if this Plan is terminated and the Employer does maintain or
establish another defined contribution plan as discussed in the above
paragraph, or if the Plan is only partially terminated, each Participant
shall receive a total distribution of his Participant's Account,
excluding any amounts attributable
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to Elective Deferral Contributions and contributions made by the Emplover
designated as 401(k) contributions in accordance with the terms and
conditions of Article VI. In such a situation any amounts in a
Participant's Account attributable to Elective Deferral Contributions and
contributions made by the Employer designated as 401(k) contributions may
be distributed only upon the occurrence of an event described in Article
VI.
No Participant and/or spousal consent will be required for a distribution
where no successor plan exists. However, if the Employer does maintain a
successor plan, Participant and/or spousal consent is required for a
distribution exceeding $3,500. The Participant's Account will be
transferred to such successor plan if the required consents are not
received.
14.5 APPROVAL BY THE INTERNAL REVENUE SERVICE. Notwithstanding any other
provisions of this Plan, the Employer's adoption of this Plan is subject
to the condition precedent that the Employer's Plan shall be approved and
qualified by the Internal Revenue Service as meeting the requirements of
section 401(a) of the Internal Revenue Code and that the Trust
established in connection herewith shall be entitled to exemption under
the provisions of section 501(a). In the event the Plan initially fails
to qualify and the Internal Revenue Service issues a final ruling that
the Employer's Plan or Trust fails to so qualify as of the Effective
Date, all liability of the Employer to make further contributions
hereunder shall cease. The Plan Administrator, Trustee and any other
Named Fiduciary shall be notified immediately by the Employer, in
writing, of such failure to qualify. Upon such notification, the value of
the Participants' Accounts shall be distributed in cash to the Employer,
subject to the terms and conditions of Article VI.
That portion of such distribution which is attributable to Participant
Contributions as specified in Section 13.7, if any, shall be paid to the
Participant, and the balance of such distribution shall be paid to the
Employer.
14.6 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer is notified
subsequent to initial favorable qualification that the Plan is no longer
qualified within the meaning of section 401(a) of the Internal Revenue
Code, or that the Trust is no longer entitled to exemption under the
provisions or section 501(a), and if the Employer shall fail within a
reasonable time to make any necessary changes in order that the Plan
and/or Trust shall so qualify, the Participants' Accounts shall be
disposed of as if the Plan had terminated, in the manner set forth in
this Article XIV.
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ARTICLE XV
SUBSTITUTION OF PLANS
15.1 SUBSTITUTION OF PLANS. Subject to the provisions of Section 13.8 the
Employer may substitute an individually designed plan or a master or
prototype plan for this Plan without terminating this Plan as embodied
herein and this shall be deemed to constitute an amendment and
restatement in its entirety of this Plan as heretofore adopted by the
Employer; provided, however, that the Employer shall have certified to
the Trustee that this Plan is being continued on a restated basis which
meets the requirements of section 401(a) of the Code and ERISA.
15.2 TRANSFER OF ASSETS. Upon 90 days written notification from the
Employer that a different plan meeting the requirements set forth in
Section 15.1 above has been executed and entered into by the
Administrator and the Employer, and after the Trustee has been furnished
the Employer's certification in writing that the Employer intends to
continue the Plan as a qualified Plan under section 401(a) of the Code
and ERISA, assets which represent the value of all Participant's Accounts
may be transferred in accordance with the instructions received from or
on behalf of the Employer. The Trustee may rely fully on the
representations or directions of the Employer with respect to any such
transfer and shall be fully protected and discharged with respect to any
such transfer made in accordance with such representations, instructions,
or directions.
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ARTICLE XVI
MISCELLANEOUS
16.1 NON-REVERSION. This Plan has been established by the Employer for the
exclusive benefit of the Participants and their Beneficiaries. Except as
otherwise provided in Sections 14.5, 16.7, and 16.8, under no
circumstances shall any funds contributed hereunder, at any time, revert
to or be used by the Employer, nor shall any such funds or assets of any
kind be used other than for the benefit of the Participants or their
Beneficiaries.
16.2 GENDER AND NUMBER. When necessary to the meaning hereof, and except when
otherwise indicated by the context, either the masculine or the neuter
pronoun shall be deemed to include the masculine, the feminine, and the
neuter, and the singular shall be deemed to include the plural.
16.3 SERVABILITY. If any provision of the Plan is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions, and this Plan shall be construed and enforced as if
such provision had not been included.
16.4 GOVERNING LAW. To the extent not preempted by Federal law, the Plan and
Trust shall be governed and construed in accordance with the laws of the
state where the Trustee has its principal office if the Trustee is a
corporation or an association, otherwise under the laws of the state
where the Employer has its principal office.
16.5 COMPLIANCE WITH THE CODE AND ERISA. This Plan is intended to comply with
all requirements for qualification under the Code and to meet the
requirements of ERISA, and if any provision hereof is subject to more
than one interpretation or any term used herein is subject to more than
one construction, such ambiguity shall be resolved in favor of that
interpretation or construction which is consistent with the Plan being so
qualified. Any reference to any section of the Internal Revenue Code,
ERISA, or to any other statute or law shall be deemed to include any
successor law of similar import.
16.6 NON-ALIENATION. It is a condition of the Plan, and all rights of each
Participant shall be subject thereto, that no right or interest of any
Participant in the Plan shall be assignable or transferable in whole
or in part, either directly or by operation of law or otherwise,
including, but without limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner, and no right or
interest of any Participant in the Plan shall be liable for or subject to
any obligation or liability of such Participant. The preceding sentence
shall not preclude the enforcement of a federal tax levy made pursuant to
section 6331 of the Code or the collection by the United States on a
judgement resulting from an unpaid tax assessment.
16.7 CONTRIBUTION RECAPTURE. Notwithstanding any other provisions of this
Plan, (1) in the case of a contribution which is made by an Employer by a
mistake of fact, Section 16.1 shall not prohibit the return of such
contribution to the Employer within one year after the payment of the
contribution, and (2) if a contribution is conditioned upon the
deductibility of the contribution under section 404 of the Code, then, to
the extent the deduction is disallowed, Section 16.1 shall not prohibit
the return to the Employer of such contribution (to the extent
disallowed) within one year after the disallowance of the deduction. The
amount which may be returned to the Employer is the excess of (1) the
amount contributed over (2) the amount that would have been contributed
had there not occurred a mistake of fact or a mistake in determining the
deduction. Earnings attributable to the excess contribution may not be
returned to the Employer, but losses attributable thereto must reduce
the amount to be so returned. Furthermore, if the
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withdrawal of the amount attributable to the mistaken contribution would
cause the balance of the individual account of any Participant to be
reduced to less than the balance which would have been in the account had
the mistaken amount not been contributed, then the amount to be returned
to the Employer would have to be limited so as to avoid such reduction.
16.8 QUALIFIED DOMESTIC RELATIONS ORDERS. Notwithstanding any other
provisions of this Plan, the Participant's Account may be segregated and
distributed pursuant to a Qualified Domestic Relations Order within the
meaning of Code section 414(p). The Plan Administrator shall establish
procedures for determining if a Domestic Relations Order is qualified
within the meaning of section 414(p).
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ARTICLE XVI-A
TOP-HEAVY PROVISIONS
16A.1 DEFINITIONS. The following definitions are used only in this Article
XVI-A.
(A) Compensation. The term Compensation, whenever used in this
Article XVI-A, means Compensation as defined in Article V of the
Plan, but includes the amount of any elective contributions made by
the Employer on the Employee's behalf to a cafeteria plan established
in accordance with the provisions of Code section 125, a qualified
cash or deferred arrangement in accordance with the provisions of
Code section 402(e)(3), a simplified employee pension plan in
accordance with the provisions of Code section 402(h), or a tax
sheltered annuity plan maintained in accordance with the provisions
of Code section 403(b).
(B) Key Employee. The term Key Employee means any Employee or former
Employee (including deceased Employees) of the Employer who at any
time during the Plan Year or the four preceding Plan Years was:
(1) An officer of the Employer, but in no event if there are more than
500 Employees, shall more than 50 Employees be considered Key
Employees. If there are less than 500 Employees, in no event
shall the greater of three Employees or l0% of all Employees, be
taken into account under this Subsection as Key Employees. If
the number of officers is limited by the terms of the preceding
sentence, the Employees with the highest Compensation will be
considered to be officers.
In no event shall an officer whose annual Compensation is less
than 50% of the dollar limitation in effect under Code section
415(b)(1)(A) as adjusted from time to time, be a Key Employee for
any such Plan Year.
In making a determination under this Subsection. Employees who
have not completed six months of Service by the end of the
applicable Plan Year, Employees who normally work less than
17-l/2 hours per week, Employees who normally work less than
six months during a year. Employees who have not attained 21,
and nonresident aliens who receive no earned income from U.S.
sources, shall be excluded.
Also excluded under the above paragraph are Employees who are
covered by an agreement which the Secretary of Labor finds to be
a collective bargaining agreement. Such Employees will be
excluded only if retirement benefits were the subject of good
faith bargaining, 90% of the Employees of the Employer are
covered by the agreement, and the Plan covers only Employees
who are not covered by the agreement.
(2) One of the 10 Employees who has annual Compensation greater
than the amount in effect under Internal Revenue Code section
415(c)(1)(A) and who owns (or is considered to own within the
meaning of Internal Revenue Code section 318, as modified by
section 416(i)(1)(B)(iii)) both more than 1/2% interest and the
largest interest in the Employer. If two or more Employees own
equal interests in the Employer, the ranking of ownership share
will be in descending order of such Employees' Compensation. If
the Employer is other than a corporation, the term "interest" as
used herein shall refer to capital or profits
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interest.
(3) An Employee who owns (or is considered to own within the meaning of
Internal Revenue Code section 318, as modified by section
416(i)(1)(B)(iii)) more than 5% of the outstanding stock of the
Employer or stock possessing more than 5% of the total combined
voting power of all stock of the Employer. If the Employer is other
than a corporation, an Employee who owns, or is considered to own,
more than 5% of the capital or profits interest in the Employer. The
determination of 5% ownership shall be made separately for each
member of a controlled group of corporations (as defined in Code
section 414(b)), or of a group of trades or businesses (whether or
not incorporated) that are under common control (as defined in Code
section 414(c)), or of an affiliated service group (as defined
in Code section 4l4(m)).
(4) An Employee who owns (or is considered to own within the meaning of
Internal Revenue Code section 318, as modified by section
416(i)(1)(B)(iii)) more than 1% of the outstanding stock of the
Employer or stock possessing more than 1% of the total combined
voting power of all stock of the Employer, and whose annual
Compensation is more than $150,000. If the Employer is other than
a corporation, an Employee who owns, or is considered to own, more
than 1% of the capital or profits interest in the Employer, and
whose annual Compensation is more than $150,000.
For the purposes of paragraphs (2), (3) and (4) above, if an Employee's
ownership interest changes during a given Plan Year, his ownership interest
for that Plan Year is the largest interest owned at any time during the
Plan Year.
The Beneficiary of any deceased Employee who was a Key Employee shall be
considered a Key Employee for the same period as the deceased Employee
would have been so considered.
(C) Non-Key Employee. The term Non-Key Employee means any Employee or
former Employee of the Employer who is not a Key Employee. The
Beneficiary of any deceased Employee who is a Non-Key Employee shall be
considered a Non-Key Employee for the same period as the deceased
Employee would have been so considered.
(D) Determination Date. The term Determination Date means, with respect
to a Plan Year, the last day of the preceding Plan Year, or, in the case
of the first Plan Year of a plan, the last day of the first Plan Year.
(E) Valuation Date. The term Valuation Date means, with respect to a Plan
Year, the last day of the preceding Plan Year and is the date on which
Account Balances are valued for the purpose of determining the Plan's
Top-Heavy status.
(F) Account Balance. The term Account Balance means the value of the
Participant's Account standing to the credit of a Participant, a former
Participant, or the Beneficiary of a former Participant, as the case may
be, as or the Valuation Date. Such Account Balance shall include any
contributions due as of the Determination Date and all distributions made
to the Participant (or former Participant or Beneficiary, as the case may
be) during the Plan Year or the preceding four Plan Years, except for
distributions of Related Rollovers. However, the Account Balance shall not
include any deductible Employee Contributions made pursuant to Internal
Revenue Code section 219 or Unrelated Rollovers made to the Plan after
December 31, 1983.
A Related Rollover is a Rollover Contribution or Transfer that either was
not initiated by the
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Employee or was made to a plan maintained by the same Employer.
An Unrelated Rollover is a Rollover Contribution or Transfer that was
initiated by the Employee and was made from a plan maintained by one
employer to a plan maintained by another employer.
For purposes of this Subsection (F), the term Employer shall include
all employers that are required to be aggregated in accordance with
Internal Revenue Code sections 414(b), (c) or (m).
(G) Required Aggregation Group. The term Required Aggregation Group means
all of the plans of the Employer which cover a Key Employee,
including any such plan maintained by the Employer pursuant to the
terms of a collective bargaining agreement, and each other plan of
the Employer which enables any plan in which a Key Employee
participates to satisfy the requirements of Internal Revenue Code
sections 401(a)(4) or 410.
(H) Permissive Aggregation Group. The term Permissive Aggregation Group
means all of the plans of the Employer which are included in the
Required Aggregation Group plus any plans of the Employer which
provide comparable benefits to the benefits provided by the plans in
the Required Aggregation Group and are not included in the Required
Aggregation Group, but which satisfy the requirements of Internal
Revenue Code sections 401(a)(4) and 410 when considered together
with the Required Aggregation Group, including any plan maintained
by the Employer pursuant to a collective bargaining agreement which
does not include a Key Employee.
(I) Top-Heavv Plan. The Plan is Top-Heavy if it meets the requirements of
Section 16A.2.
(J) Super Top-Heavy Plan. The Plan is Super Top-Heavy if it meets the
requirements of Section 16A.3
(K) Terminated Plan. A plan shall be considered to be a Terminated Plan
if it:
(1) has been formally terminated;
(2) has ceased crediting service for benefit accruals and vesting; or
(3) has been or is distributing all plan assets to Participants (or
Beneficiaries) as soon as administratively possible.
With the exception of the Minimum Employer Contribution
Requirements and the Minimum Vesting Requirements, the
Top-Heavy provisions of this Article XVI-A will apply to any
Terminated Plan which was maintained at any time during the
five years ending on the Determination Date.
(L) Frozen Plan. A plan shall be considered to be a Frozen Plan if
all benefit accruals have ceased but all assets have not been
distributed to Participants or Beneficiaries. The Top-Heavy
provisions of this Article XVI-A will apply to any such Frozen Plan.
16A.2 TOP-HEAVY PLAN STATUS. This Plan shall be determined to be Top-Heavy
if, as of the Determination Date, the aggregate of the Account Balances
of Key Employees exceeds 60% of the aggregate of the Account Balances
of all Employees covered by the Plan. The determination of whether the
Plan is Top-Heavy shall be made after aggregating all plans in the
Required Aggregation Group, and after aggregating any other plans which
are in the Permissive Aggregation Group, if such permissive aggregation
thereby eliminates the Top-Heavy status of any plan within such Required
Aggregation Group.
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In determining whether this Plan is Top-Heavy, the Account Balance of a
former Key Employee who is now a Non-Key Employee will be disregarded.
Likewise, for Plan Years beginning after December 31, 1984, the Account
Balance of any Employee who has not performed an Hour of Service during
the five-year period ending on the Determination Date will be excluded.
16A.3 SUPER TOP-HEAVY PLAN STATUS. This Plan shall be determined to be Super
Top-Heavy if, as of the Determination Date, the Plan would meet the test
specified in Section 16A.2 above, if 90% were substituted for 60% in
each place where it appears. The Plan may be permissively aggregated in
order to avoid being Super Top-Heavy.
16A.4 TOP-HEAVY REQUIREMENTS. Notwithstanding anything in the Plan to the
contrary, if the Plan is Top-Heavy with respect to any Plan Year, then
the Plan shall meet the following requirements for such Plan Year:
(A) Minimum Employer Contribution Requirements. A Minimum Employer
Contribution of 3% of each Eligible Employee's Compensation will be
made on behalf of each Eligible Employee in the Plan.
If the actual Employer Contribution made or required to be made for
Key Employees is less than 3%, the Minimum Employer Contribution
required hereunder shall not exceed the percentage contribution made
for the Key Employee for whom the percentage of Employer
Contributions and Forfeitures relative to the first $150,000 of
Compensation is the highest for the Plan Year after taking into
account contributions or benefits under other qualified plans in the
Plan's Required Aggregation Group.
However, if a Participant in this Plan is also a participant in a
defined benefit plan maintained by the Employer, such Participant
shall receive the Top-Heavy minimum benefit under the defined benefit
plan in lieu of the Minimum Employer Contribution described herein.
Such minimum benefit will be equal to the Participant's average yearly
Compensation during his five highest-paid consecutive years,
multiplied by the lesser of 2% per Year of Service or 20%.
Compensation periods and Years of Service to be taken into account in
the calculation of this benefit shall be subject to any limitations
set forth in the defined benefit plan.
For any Limitation Year in which this Plan is Top-Heavy but not
Super Top-Heavy, the Minimum Employer Contribution shall be increased
to 4% of each Eligible Employee's Compensation in order to preserve
the use of the factor 1.25 in the denominators of the fractions
described in Section 5.4 (B) (1) and Section 5.4 (D) (1). A
Participant who receives the Top-Heavy minimum benefit in lieu of
the Minimum Employer Contribution shall receive an increased minimum
benefit equal to the Participant's average yearly Compensation
during his five highest-paid consecutive years, multiplied by the
lesser of 3% per Year of Service or 20% plus one percentage point
(to a maximum of 10 percentage points) for each year that this Plan
is maintained. Compensation periods and Years of Service to be
taken into account in the calculation of this increased minimum
benefit shall be subject to any limitations set forth in the defined
benefit plan.
For any Limitation Year in which this Plan is Super Top-Heavy, the
factor of 1.25 in the denominators of the fractions described in
Sections 5.4 (B) (1) and 5.4 (D) (1) shall be reduced to 1.0.
The Minimum Employer Contribution payable in such years shall be 3% of
each Eligible Employee's Compensation and the defined benefit
Top-Heavy minimum benefit shall be average Compensation multiplied
by the lesser of 2% per Year of Service or 20%.
Eligible Employees are all Non-Key Employees who are Participants in
the Plan as of the last day
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of the Plan Year regardless of whether they had completed 1,000 Hours
of Service during the Plan Year. Also included are Non-Key
Employees who would have been Participants as of the last day of the
Plan Year except:
The Employee's Compensation was below a required minimum; or
The Employee chose not to make Elective Deferral Contributions
when he was eligible to do so.
(B) Minimum Vesting Requirements. The vesting provisions set forth in the
definition of Vested Interest in Article I shall continue to apply
whether or not the Plan is a Top-Heavy Plan. Such vesting provisions
satisfy the requirements of section 416(b) of the Internal Revenue
Code, as applicable to Top-Heavy Plans.
IN WITNESS WHEREOF, the Employer has caused this Plan to be executed by its
duly authorized officers this day of , .
---------- --------- ---------
GALILEO INTERNATIONAL PARTNERSHIP
By:
---------------------------
Its:
---------------------------
ATTEST
By:
--------------------
Its:
--------------------
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<PAGE> 69
of the Plan Year regardless of whether they had completed 1,000 Hours
of Service during the Plan Year. Also included are Non-Key
Employees who would have been Participants as of the last day of the
Plan Year except:
The Employee's Compensation was below a required minimum; or
The Employee chose not to make Elective Deferral Contributions
when he was eligible to do so.
(B) Minimum Vesting Requirements. The vesting provisions set forth in the
definition of Vested Interest in Article I shall continue to apply
whether or not the Plan is a Top-Heavy Plan. Such vesting provisions
satisfy the requirements of section 416(b) of the Internal Revenue
Code, as applicable to Top-Heavy Plans.
IN WITNESS WHEREOF, the Employer has caused this Plan to be executed by
its duly authorized officers this 31st day of December, 1996.
----- --------- ----
GALILEO INTERNATIONAL PARTNERSHIP
By: [Signature]
----------------------------
Its: SVP - HR
----------------------------
ATTEST
By: [Signature]
-----------------------------
Its:MGR, COMPENSATIONS BENEFITS
-----------------------------
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Exhibit 10.33
CASH ALLOWANCE IN LIEU OF COMPANY CARS
INFORMATION SHEET FOR M1 AND M2 MANAGERS
The following information is intended for guidance only. If you choose to opt
for a cash allowance you will be asked to sign a form indicating your
acceptance of the terms and conditions of the allowance.
Entitlement to Cash Allowance
All Managers who are entitled to a company car can opt for a cash
allowance in lieu of a company car with effect from 01 October 1996. Any
employee who has a car for job requirement purposes will not be entitled to
choose the cash allowance.
Value of Allowance
The allowance is equal to the monthly lease benchmark costs of the level of the
car that you are entitled to. As at June 1996 this level is as follows:
M1/M2 Group C 346.40
Uprating of Allowances
The monthly benchmark lease costs for company cars are reviewed every
six months and cash allowances will be kept in line with these lease cost,
which can increase or decrease. However, if you are in receipt of the allowance
any changes will only be implemented after 3 years.
Frequency of Choice between Company Car and Cash Allowance
If you opt for the cash allowance in lieu of a company car you are
expected to keep the allowance for at least three months when you can review
your choice. If you are promoted to a grade which offers an improved level of
car you can again choose whether you would prefer an allowance or a car unless
you already have a company car in which case you will have to keep the car
until the end of its lease.
Business Mileage Allowance
Grade M1 and M2 who opt for the cash allowance can claim the business
mileage rate at the same rate as company car holders in these grades. The rate
for April 96 to March 97 is 9p per mile and is reviewed with effect from 01
April every year. Revisions to the rate are shown on the Office Vision notice
board.
Deductions from Allowances
Both the cash allowance and the fuel allowance, if applicable, are
subject to the usual statutory deductions, i.e. National Insurance and Tax. The
allowances are non-pensionable, separate from your basic pay, and will not be
taken into account during the salary review process. An element of the
allowance may qualify for tax exemption but it is your responsibility to
discuss this with the Inspector of Taxes and agree any increase in your tax
code.
Purchase of Your Vehicle
If you choose to receive a cash allowance it is your responsibility to
buy a car that will meet the requirements of your job. You should therefore
consider such factors as whether you are likely to need to transport staff,
customers and/or equipment in your car, the image that you need to present to
customers and reliability of your transport.
Upkeep of Your Vehicle
It is your responsibility to tax, insure and maintain your car. Please make
sure that your insurance covers you in occasions when you need to use your car
for company business (including cover for both personal and company property
inside the car). It is also your responsibility to provide an alternative
vehicle if your car cannot be used for any reason.
Human Resources
September 1996
<PAGE> 2
CASH ALLOWANCE IN LIEU OF COMPANY CARS
INFORMATION SHEET FOR M3, M4 AND M5 MANAGERS
The following information is intended for guidance only. If you choose to
opt for a cash allowance you will be asked to sing a form indicating your
acceptance of the terms and conditions of the allowance.
Entitlement to Cash Allowance
All Managers who are entitled to a company car can opt for a cash
allowance in lieu of a company car with effect from 01 October 1996. Any
employee who has a car for job requirement purposes will not be entitled to
choose the cash allowance.
Value of Allowance
The allowance is equal to the monthly lease benchmark costs of the
level of the car that you are entitled to. As at June 1996 this level is as
follows:
M3/M4 Group B 449.00
M5 Group A 594.53
Uprating of Allowances
The monthly benchmark lease costs for company cars are reviewed every
six months and cash allowances will be kept in line with these lease cost,
which can increase or decrease. However, of you are in receipt of the allowance
any changes will only be implemented after 3 years.
Frequency of Choice between Company Car and Cash Allowance
If you opt for the cash allowance in lieu of a company car you are
expected to keep the allowance for at least three months when you can review
your choice. If you are promoted to a grade which offers and improved level of
car you can again choose whether you would prefer an allowance or a car unless
you already have a company car in which case you will have to keep the car
until the end of its lease.
Fuel Allowance
Grades M3 and above who opt for the cash allowance will be entitled to
a fuel allowance of 125:00 per month which covers both business and private
mileage. This is calculated by using the current company car mileage rate of 9p
per mile and the average mileage for Galileo car holders. This allowance will
reviewed with effect from 01 April each year as above if you are already in
receipt of the fuel allowance any changes will only be implemented after 3
years.
Business Mileage Allowance
Grade M1 and M2 who opt for the cash allowance can claim the business
mileage rate at the same rate as company car holders in these grades. The rate
for April 96 to March 97 is 9p per mile and is reviewed with effect from 01
April every year. Revisions to the rate are shown on the Office Vision notice
board.
Deductions from Allowances
Both the cash allowance and the fuel allowance, if applicable, are
subject to the usual statutory deductions, i.e. National Insurance and Tax. The
allowances are non-pensionable, separate from your basic pay, and will not be
taken into account during the salary review process. An element of the
allowance may qualify for tax exemption but it is your responsibility to
discuss this with the Inspector of Taxes and agree any increase in your tax
code.
Purchase of Your Vehicle
If you choose to receive a cash allowance it is your responsibility to
buy a car that will meet the requirements of your job. You should therefore
consider such factors as whether you are likely to need to transport staff,
customers and/or equipment in your car, the image that you need to present to
customers and reliability of your transport.
Upkeep of Your Vehicle
It is your responsibility to tax, insure and maintain your car. Please
make sure that your insurance covers you in occasions when you need to use your
car for company business (including cover for both personal and company
property inside the car). It is also your responsibility to provide an
alternative vehicle if you car cannot be used for any reason.
Human Resources
September 1996
<PAGE> 3
CASH ALTERNATIVE IN LIEU OF COMPANY CARS
If you wish to receive a monthly allowance from Galileo International as an
alternative to a company car please read the information below and sign at the
bottom of the page to say that you have chosen the option of a cash allowance
and that you accept the conditions of the allowance.
The cash allowance that Galileo International offers is equivalent to the
benchmark monthly lease cost of the level of the car that you are entitled to.
This allowance is reviewed every 6 months and can increase or decrease. If you
are in receipt of the allowance, any change to the allowance value as a result
of the 6 monthly review will only be implemented after 3 years. The allowance
will be paid monthly through the payroll and subject to the usual statutory
deductions. Note than an element of the allowance may qualify for tax exemption
but it is your responsibility to discuss this with the Inspectors of Taxes and
agree any increase on your tax code. It is non pensionable allowance, separate
from your basic pay, and will not be taken into account during the salary
review process.
If you choose to receive a monthly allowance it is your responsibility to find
alternative travel arrangements that will meet the requirements of your job.
You should therefore consider such factors as whether you are likely to need to
transport staff, customers and/or equipment in your car, the image that you
need to present to customers and/or equipment in your car, the image that you
need to present to customers and reliability of your transport. It is your
responsibility to tax, insure and maintain your car. You need to ensure that
your insurance covers you on occasions when you need to use your car for
company business as well as travelling from home to work and vice versa.
If you travel on company business a mileage allowance may be claimed as per the
rate for company car holders - please see the Office Vision bulletin board for
current rates. If the Company considers your business mileage to be excessive
at any time (at the level of 10,000 miles per annum approximately) your option
to the cash allowance option will be reviewed.
If you choose to receive a car allowance, you will keep this allowance for at
least three months, after which time you may reconsider whether you would
prefer a company car. If you are promoted to a grade which offers an improved
level of car you can again choose whether you would prefer an allowance or a
car unless you are already in receipt of a car in which case you will have to
keep the car until the end of its lease.
If you are also entitled to a fuel allowance for private mileage please note
that this allowance will be reviewed with effect from 01 April each year and
can increase or decrease. However, if you are already in receipt of the fuel
allowance any changes will only be implemented after three years.
I would like to choose the cash allowance (and fuel allowance if applicable) as
an alternative to receiving a company car and have read and understood the
conditions above.
Signed
------------- -----------------------------------------------------------
Name
------------- -----------------------------------------------------------
Staff No
------------- -----------------------------------------------------------
Cost Centre
------------- -----------------------------------------------------------
Nat. Ins. No
------------- -----------------------------------------------------------
Date
------------- -----------------------------------------------------------
Cash Alternative in Lieu of Company Cars
Acceptance Form
<PAGE> 4
GALILEO CAR POLICY AND CONDITIONS OF ALLOCATION
WHO QUALIFIES:
Galileo allocates company cars to employees in three categories. These are:
1. Status Related i.e.: where the level of your job is such that you
qualify for a car as a benefit of your employment - Manager grades M1 - M4,
VPs and SVPs.
2. Essential User i.e.: where the volume or frequency of business travel
is such that it is economically sensible for Galileo to provide a vehicle.
3. Seconded Staff i.e.: those who are on long term assignment in Swindon
from one of our Owner companies.
You will be advised on appointment or promotion which of these categories
applies to you.
CAR ALLOCATION
Galileo operates a system of benchmark lease costs/cars which reflects the
level of benefit which is extended to you. Base levels will be amended
periodically at the company's discretion. On appointment, you will be offered a
wide choice of vehicles at the appropriate level. Full details of benchmarks
will be advised by your Car Fleet Administrator. A scheme car cannot be
provided to drivers who hold a provisional driving licence or who are
disqualified from driving. Special arrangements are possible for disabled
drivers. All cars are allocated on a non-contractual basis and Galileo reserves
the right at its absolute discretion to:-
(A) TERMINATE THE SCHEME;
(B) VARY THE TERMS OF THE SCHEME;
(C) WITHDRAW THE BENEFIT FROM ANYONE WHO FAILS TO COMPLY WITH ITS TERMS; AND
(D) REQUEST THAT THE CAR IS RETURNED TO THE SUPPLIER.
ENTITLEMENTS:
GROUP JOB GROUP
SENIOR VICE PRESIDENT
A VICE PRESIDENT AND DIRECTOR
B JOB GRADES M3/M4 (SENIOR MANAGER)
C JOB GRADES M1/M2 (MANAGER)
D ESSENTIAL USERS
S ALL SECONDEES
CHOICE
If you are in groups A, B or C you will be allowed to choose a new car. You may
choose an approved car within your lease cost limit, or, within defined
constraints, upgrade to a more expensive car. If you choose a more expensive
car, you will be required, as a condition of the car being made available for
your private use, to pay the higher cost for the use of the car. Galileo may
restrict choice on any vehicle considered inappropriate to its fleet. If you
are unsure, check with your Car Fleet Administrator. In any event cars must not
exceed a Group 14 insurance and must not be a two seater, a cabriolet or be
fitted with nudge/bull bars. Staff in groups D and S are limited to the
standard car.
PROMOTION
If, on promotion to a higher grade, you qualify for a car in a different group,
your private use charge will be adjusted as appropriate. However, you will not
qualify for a change of vehicle until the lease on your present vehicle is due
for termination under the rules of the policy.
USAGE:
1
<PAGE> 5
THE CAR MAY BE USED ONLY:-
A IN CONNECTION WITH GALILEO BUSINESS;
B FOR SOCIAL, PLEASURE AND DOMESTIC USE; AND
C FOR TOWING A CARAVAN PROVIDED THE MANUFACTURER'S PERMITTED LOAD IS NOT
EXCEEDED.
YOU MAY NOT USE THE CAR FOR:-
A NON GALILEO BUSINESS PURPOSES;
B HIRE OR REWARD;
C DRIVING TUITION; OR
D RACING OR COMPETITIVE EVENTS ETC.
UPGRADES
If you choose a car which is more expensive to lease than your standard
entitlement, you will be required to pay the difference in cost as a personal
contribution for private usage of that car. You may upgrade to not more than
one level above your entitlement. Should you decide to leave Galileo before
your car lease has expired, you will be required to pay any outstanding balance
on your upgrade costs.
EXTRAS
You may choose extras from the manufacturer's list of options at a cost to
yourself, payable over the lease of the vehicle. The additional costs will be
the difference between the standard car lease cost and the more expensive car
charge to Galileo at the time of delivery. All extras must be authorised by the
Car Fleet Administrator. Staff who upgrade or buy extras will not be entitled
to any part of the value of the car when the car is returned
VEHICLE LIFE
Galileo acquires its cars on a lease or contract hire basis for a fixed term at
a mileage per annum rate (at the discretion of the Car Fleet Administrator).
ORDERING/REPLACEMENT
Your Car Fleet Administrator will advise you when your car is due for
replacement in accordance with the lease agreement. You will receive estimated
costs of alternative vehicles to help you make your decision in choosing your
next company car. It will help her to give you a better service if you can be
clear about your car requirements and avoid requests which are outside of this
policy. YOU MUST NOT APPROACH DEALERS OR SUPPLIERS DIRECT. Galileo will not be
bound by any commitment or arrangement made in this way. All orders and
delivery instructions will be arranged by the Fleet Office. Your car will be
delivered to the Car Fleet Administrator who will delivery check the vehicle,
and sign on behalf of Galileo for its acceptance.
FUEL
Galileo will provide fuel and oil for cars allocated in job grades M3/M4 and
above, for business and reasonable private mileage. This facility will be
provided through a charge card system which may be used for the company
allocated car only. When using the card, your car mileage must be recorded on
the sales slip. If you are not eligible for a fuel charge card, then you are
personally responsible for all fuel purchases (including any necessary oil top
ups and other lubricants between services). However, fuel for authorised
business travel may be reclaimed at Galileo's current business mileage rate.
The rate may be changed periodically, so you should check before making any
claims. Travel from home to the normal place of work does not constitute
business mileage. Those in job grades M3/M4 and above are required to keep a
log of their business journeys, so that at the end of the tax year they can
report their total business mileage for the year to the Finance Department.
WHAT YOUR CAR PACKAGE INCLUDES
Galileo's lease and hire agreements will cover you for the following:
2
<PAGE> 6
1 all standard servicing and maintenance charges;
2 replacement tyres, batteries and exhausts;
3 breakdown assistance, including roadside help and home start, with a
national motoring organisation. (This does not constitute personal
membership and cannot be used other than for assistance with the company
car.);
4 a relief vehicle when your company car is off the road; and
5 MOT costs/Road Fund Licence/insurance.
ROAD FUND LICENCE
This will come with your car. Renewal will be undertaken automatically by the
lease or hire company, but should there be a delay you should contact the Car
Fleet Administrator. You must ensure that a valid Road Fund Licence is
displayed on the car in accordance with UK Road Traffic requirements.
MAINTENANCE
IT IS YOUR RESPONSIBILITY TO KEEP THE CAR IN GOOD REPAIR AND GENERALLY MAINTAIN
IT IN AN EFFICIENT, ROAD WORTHY CONDITION, COMPLYING WITH EXISTING LEGAL
REQUIREMENTS. THERE WILL BE A DRIVER'S PACK IN YOUR CAR, WHICH SHOULD BE READ
AS SOON AS YOU TAKE DELIVERY. THIS WILL GIVE YOU INFORMATION ON THE SERVICING
OF THE VEHICLE. IT IS IMPORTANT THAT YOU HAVE YOUR CAR SERVICED IN ACCORDANCE
WITH THE MANUFACTURER'S MILEAGE OR TIME SCHEDULE. FAILURE TO DO SO WILL BE A
BREACH OF GALILEO'S LEASING/HIRE AGREEMENTS AND ANY COSTS ARISING AS A RESULT
OF THIS MAY BE CHARGED TO YOU. ALL SERVICING AND REPAIRS MUST ONLY BE CARRIED
OUT BY A GARAGE APPROVED BY GALILEO AND THE CAR LEASING COMPANY. WHEN ARRANGING
SUCH WORK, YOU SHOULD IDENTIFY THE VEHICLE AS BELONGING TO THE APPROPRIATE
LEASE/HIRE COMPANY.
YOU MUST REGULARLY CHECK ALL LUBRICANTS, RESERVOIRS, COOLANT AND ANTI-FREEZE
LEVELS, TYRE PRESSURES AND TREADS, AND ALL BRAKES AND LIGHTS. THE LEASE/HIRE
COMPANIES HAVE ARRANGEMENTS OPERATING THROUGHOUT THE COUNTRY FOR REPLACEMENT
WINDOW GLASS, TYRES, BATTERIES AND EXHAUSTS AT ADVANTAGEOUS PRICES. YOU MUST
USE THE COMPANY'S APPROVED FACILITIES FOR THESE ITEMS AND NOT A NORMAL
SERVICING GARAGE. YOU ARE ALSO REQUIRED, AT YOUR OWN EXPENSE, TO CLEAN THE CAR
REGULARLY INSIDE AND OUT. THE COMPANY RESERVES THE RIGHT TO MAKE ARRANGEMENTS
FOR ALL VEHICLES TO BE INSPECTED PERIODICALLY TO CHECK THE GENERAL CONDITION
AND APPEARANCE OF THE VEHICLES.
ALTERATIONS TO THE CAR
You may not make any alterations to the car without written authorisation from
Galileo or the leasing company.
INSURANCE
Galileo provides fully comprehensive cover. The Car Fleet Administrator will
provide you with a copy of Galileo's insurance certificate if it is required.
You are only insured to drive your Galileo car on Galileo business and for
domestic purposes. The insurance cover does not extend to any car which has
not been allocated to or authorised for you to drive by the Car Fleet
Administrator. If required, in connection with work or personal use of the
car, the Car Fleet Administrator may authorise another driver to drive your
car. All such requests must be approved in advance and must be accompanied by
your driving licence. You will be held personally responsible for any
uninsured losses which involve either un-named/unauthorised drivers, or which
result from failing to reveal full information about any driver.
INSURANCE - CAR CONTENTS
3
<PAGE> 7
Personal effects in your car are insured to a maximum of Pound 100:00 under
Galileo's motor insurance policy. If you require further cover, most
household policies include this as a standard provision or cover can be
extended at low cost.
EXCESS INSURANCE
If at any time you, or any nominated driver, have an insurance claims record
which requires Galileo's insurers to impose an increased excess, then such
costs will be charged to you. Any drivers convicted of drink, drug or driving
related offences which result in higher insurance premiums for Galileo will be
required to pay the full excess personally. Where theft is a frequent problem,
you will be advised to exchange your vehicle for a model which is less
attractive to thieves. Staff choosing not to take up this option will be asked
to meet any insurance excess in the case of further thefts.
DRIVERS
In addition to yourself, your spouse, children (over the age of 21) or
allocated driver may drive your allocated car. If you are single, you may
nominate one other driver. This nomination may be changed annually in January
only, by advising the Car Fleet Administrator in writing. All drivers must be
over the age of 21 and hold a valid full driving licence, which must be shown
to the Car Fleet Administrator who will take a copy to be held on file.
Provisional licences are not acceptable. If you hold a licence in a European
Community (EC) country other than the UK, the company will require you to take
any necessary action to obtain a UK licence within the legal time frame.
If you hold a licence from outside the EC, the company will require you to
undertake instruction and pass the UK driving test at your own expense within
the legal time frame.
Anyone not conforming to these requirements is prohibited from driving a
company fleet vehicle. If they do, they will not be covered by Galileo's
insurance and as a consequence may be liable for prosecution, including any
accident costs etc.
DRIVING WITHIN THE LAW
YOU ARE RESPONSIBLE FOR ENSURING THAT YOUR CAR IS KEPT IN A ROAD WORTHY
CONDITION AND THAT ALL LEGAL REQUIREMENTS ARE MET. IN PARTICULAR DRIVERS MUST:-
A ENSURE THAT A VALID ROAD FUND LICENCE IS DISPLAYED;
B OBSERVE TRAFFIC SIGNS AND SPEED LIMITS;
C NOT BREACH PARKING REGULATIONS ETC.; AND
D ENSURE THAT TYRES ARE WITHIN THE LEGAL REQUIREMENTS.
ANY FINES IMPOSED FOR VIOLATION OF STATUTORY REQUIREMENTS WILL BE YOUR
RESPONSIBILITY. ANY FINES REFERRED TO GALILEO BECAUSE YOU OR YOUR OTHER
DRIVERS WERE IN BREACH OF THE LAW AND FAILED TO PAY WILL BE PAID BY GALILEO
AND RECHARGED TO YOU, TOGETHER WITH AN ADDITIONAL ADMINISTRATION CHARGE OF
(POUND) 25:00.
YOU MUST NOTIFY GALILEO IN WRITING OF ANY MOTORING OFFENCES WITH WHICH YOU OR
YOUR NOMINATED DRIVERS HAVE BEEN CHARGED OR CONVICTED.
IT SHOULD BE NOTED THAT USING THE CAR WITH TYRES WHICH DO NOT MEET LEGAL
REQUIREMENTS WILL INVALIDATE GALILEO'S INSURANCE FOR THAT CAR. ANY SUCH
OCCURRENCE WOULD THEREFORE BE A BREACH OF THE LAW ON TWO COUNTS. IN ADDITION,
THE DRIVER WILL HAVE FULL LIABILITY FOR ANY DAMAGE IN THE EVENT OF AN ACCIDENT.
BREAKDOWNS
Your Driver's Pack contains full details of what to do in this situation.
4
<PAGE> 8
ACCIDENTS AND THEFTS
Accidents in which people are injured, and all theft incidents, be it the car
or its contents, must be reported to the police immediately and a crime report
number obtained. You, or your nominated driver, are responsible for obtaining
details of any persons involved in an accident, in addition to the names and
addresses of any witnesses.
You must promptly report to Galileo any incident involving the car by
completing a written accident/theft report. Failure to do so within 24 hours
may result in your losing the right to make an insurance claim. You could also
be required to meet the cost of any relief car.
With the regrettably high incidence of theft, you must exercise reasonable care
where you park your car. You should avoid parking overnight in lay-bys, public
transport car parks or other insecure locations.
Full details of accident procedures can be found in the Driver's
Pack in the vehicle.
TAKING YOUR CAR ABROAD
Written authority must be obtained from the lease/hire company before the car
can be used outside mainland GB. This is arranged by the Car Fleet
Administrator, who should be given 21 days' notice to make the necessary
arrangements on your behalf. Authority will not be granted if the journeying
party does not include the employee.
AA Five Star Coverage and RAC European Assistance MUST also be obtained or you
will not be covered by the relevant hire companies. In the event you do have an
incident whilst abroad and have no cover, you will be required to pay for any
roadside assistance or repairs yourself. Such costs will not be refunded by the
company.
TAXATION
Your allocated car, which is given to you for both business and private usage,
is a taxable benefit under current UK tax legislation. Fuel provided for
private mileage is also a taxable benefit.
Galileo is required to declare to the Inland Revenue all relevant information
regarding these taxable benefits and will do so on a P11D form at the end of
each tax year.
Under the new self-assessment legislation which took effect in April 1996,
Galileo is required to provide employees with a copy of their P11D by 6th July
each year. Because individual employees may be required to complete a tax
return giving details of the 'cash equivalents' of the taxable benefits
received, Galileo will now calculate the taxable benefit value and show this on
the P11D.
The Inland Revenue also requires employees to keep records in support of their
tax return for 22 months after the end of the relevant tax year. You must
therefore keep a record of your business mileage. You must also advise the Car
Fleet Administrator of this business mileage, so that Galileo can calculate the
correct taxable value of your company car. In the absence of a return from you,
backed up by proper business mileage records retained by you (i.e. a log
showing dates, trips made and business miles travelled), Galileo will be
required to report on your annual P11D that you have done less than 2,500
business miles per year. (NB. Travel from home to normal place of work does not
constitute business mileage.)
You may also be able to reduce the amount of your car benefit tax charge by
claiming for any payments which you make for the private use of the car.
Details of current tax scale charges for fuel benefit are available from your
Car Fleet Administrator or your local tax office.
The Company, but not you, incurs a National Insurance contribution liability
based on the price of the car, business mileage and scale charges attributable
to any private fuel benefit.
RETURNING YOUR CAR
5
<PAGE> 9
At the end of your employment with Galileo, or when your car is due to be
replaced, your car must be returned to the Car Fleet Administrator at Galileo
Centre Europe. It must be returned in a thoroughly clean condition, both
inside and out. If you cannot do this yourself, the Car Fleet Administrator
will arrange to have it cleaned professionally on your behalf, at a cost to
you of (Pound)45:00.
Any damage to the car which has not been previously reported to the Car Fleet
Administrator will be charged to you.
You may purchase your current vehicle at a price determined by the supplier
based on current market value. If you wish to take advantage of this facility,
at least three weeks' notice is required. Negotiations for purchase must be
completed before you leave.
OWNERSHIP
The car and its accessories will at all times be the property of Galileo or the
leasing/hire company. You will not be entitled to any part of its value or
proceeds in the event of its sale.
WITHDRAWAL OF THE CAR
THE CAR WILL BE WITHDRAWN FROM YOU:
A ON TERMINATION OF YOUR EMPLOYMENT WITH GALILEO INTERNATIONAL;
B DURING PERIODS OF EXTENDED ABSENCE (OTHER THAN MATERNITY LEAVE);
C IF YOU HAVE A MEDICAL CONDITION OR ARE RECEIVING TREATMENT WHICH
PROHIBITS DRIVING;
D IF YOU VIOLATE THE CAR RULES AND AGREEMENT;
E FOR CARELESS DRIVING, EXCESSIVE NUMBER OF ACCIDENTS, DRIVING CONVICTIONS
OR DISQUALIFICATIONS;
F ESSENTIAL USER CARS ARE ALLOCATED WHEN A JOB REQUIRES A HIGH DEGREE OF
MOBILITY AND BUSINESS TRAVEL. WHEN THIS IS NO LONGER THE CASE, THE
ALLOCATED CAR WILL BE WITHDRAWN WITH THREE MONTHS' NOTICE BEING GIVEN.
YOUR ALLOCATED CAR AGREEMENT
All staff to whom Galileo provides a car are required to sign an agreement,
confirming that they will abide by the company's rules for the provision of the
car. Even if for some reason you have not signed such an agreement, by
accepting the car you are deemed to have accepted the conditions under which it
is allocated to you. You have temporary custody of an expensive piece of
company equipment so please take care of it!
AND FINALLY
If you have any questions or problems relating to your car, your Car Fleet
Administrator will only be too pleased to try and help you.
CARPOL.DOC
FEBRUARY 1997
6
<PAGE> 1
Exhibit 10.34
GROUP LIFE ASSURANCE POLICY
issued to the Trustees of
> THE GALILEO RETIREMENT AND DEATH BENEFIT SCHEME
("the Scheme")
=providing lump sum and annuity
death in service Benefits=
[LOGO]
<PAGE> 2
[LOGO]
GROUP LIFE ASSURANCE POLICY
> POLICY NUMBER 102020-GLS
THIS GROUP LIFE ASSURANCE POLICY ("the Policy") is hereby issued by SUN
LIFE ASSURANCE COMPANY OF CANADA ("Sun Life of Canada") to the Trustees of
the Scheme named hereunder in respect of certain members ("the Members") of
that Scheme:
> THE GALILEO RETIREMENT AND DEATH BENEFIT SCHEME
The Scheme has been or will be approved by the Inland Revenue under Chapter
I of Part XIV of the Income and Corporation Taxes Act 1988. The Trustees
(hereinafter referred to as "the Policyholder" in respect of the Policy)
shall thereafter receive and disburse any Benefit arising under the Policy
in accordance with the terms and Provisions.
Any communication in respect of the Policy should be sent to:-
SUN LIFE OF CANADA, BRITISH HEADQUARTERS OFFICE, BASING VIEW,
BASINGSTOKE, HAMPSHIRE, RG21 4DZ.
- Sun Life of Canada hereby agrees to pay to the Policyholder the
Benefits specified in the Policy upon the terms and Provisions
appearing therein.
- The Policy is issued by Sun Life of Canada on the basis of the
application ("the Application") by the Policyholder and in
consideration of the payment of Premiums as provided for in the
Policy. The Policy consists of this page and the eight Provisions
which incorporate Definitions and Endorsements. The terms and
Provisions of the Application and the Policy shall constitute the
entire agreement between Sun Life of Canada and the Policyholder.
- All sums payable or receivable in respect of the Policy shall be
payable in the principal lawful currency of Great Britain at the above
address.
> - The effective date ("the Effective Date") of the Policy is 1st April
1995.
DATED:
The 31st day of May 1996.
SIGNED ON BEHALF OF SUN LIFE OF CANADA:
Gregory W. Gee John R. Gardner
---------------------------- -------------------------------
Gregory Gee John Gardner
(Senior Vice-President and (President)
Secretary)
prepared: [sig] checked: [sig]
------- -------
<PAGE> 3
= PROVISIONS =
INTERPRETATION
A. GENERAL.
1. In the Policy, where the context so allows, words importing the
singular shall include the plural and vice versa;
2. References in the Policy to any statute shall be deemed to include any
amendment, re-enactment or any regulation made thereby which is still
in force;
3. The headings at the front of any Provision or sub-Provision shall not
effect the interpretation thereof;
4. The Policy shall be in all respects governed by and construed in
accordance with English Law.
B. DEFINITIONS.
ACTIVE EMPLOYMENT means in relation to an EMPLOYEE the execution of the
normal contractual duties for the EMPLOYER.
> ANNIVERSARY DATE means each 1st April.
> ANNUITY BENEFIT means the PARTNER'S ANNUITY and DEPENDANT'S ANNUITY
jointly.
> ANNUITY PREMIUM RATE means:
(a) from the EFFECTIVE DATE to 7th March 1996 such amount as was
determined by SUN LIFE OF CANADA and notified to the POLICYHOLDER, and
thereafter
(b) Pound 0.74 per hundred pounds of the sum assured in respect of ANNUITY
BENEFIT or such other amount as is determined from time to time by SUN
LIFE OF CANADA and notified to the POLICYHOLDER in accordance with the
PROVISIONS.
> ASSURABLE EARNINGS means in relation to a MEMBER the MEMBERS basic annual
salary determined at the date of death subject to INLAND REVENUE limits.
ASSURABLE SERVICE means in relation to a MEMBER, subject to PROVISION 3.3,
service as an EMPLOYEE before NORMAL RETIREMENT AGE (or such later age as
is permitted by PROVISION 3.6) which qualifies the EMPLOYEE for MEMBERSHIP.
BENEFIT means the LIFE ASSURANCE BENEFIT and the ANNUITY BENEFIT jointly.
> CHILDREN'S ANNUITY has no applicable meaning under this POLICY.
> DEPENDANT means either or both of the following:
(a) any child of the MEMBER who is under the age of 18 years or, if still
in full time education or vocational training, under the age of 21
years, or
(b) any other person who, in the opinion of the POLICYHOLDER is, at the
date of the MEMBERS death, dependent on the MEMBER for all the
ordinary necessities of life.
> DEPENDANT'S ANNUITY means a sum equal to one forty-fifth of the MEMBERS
ASSURABLE EARNINGS for each year of ASSURABLE SERVICE which the MEMBER
could have completed had he or she survived until NORMAL RETIREMENT AGE
(subject to a maximum of four-ninths of the MEMBERS ASSURABLE EARNINGS),
calculated in accordance with the RULES and subject to INLAND REVENUE
limits.
EMPLOYEE means an individual who is currently in the permanent service of
the EMPLOYER and who is either wholly employed in the United Kingdom or
temporarily overseas with the written agreement of SUN LIFE OF CANADA.
> EMPLOYER means Galileo International and includes any associated or
subsidiary employer which has covenanted to observe the terms and
conditions of the POLICY and the APPLICATION with the written agreement of
SUN LIFE OF CANADA, provided that such participation shall not prejudice
INLAND REVENUE approval of the SCHEME.
<PAGE> 4
EXPIRY DATE means such date as is determined by SUN LIFE OF CANADA and
notified in writing to the POLICYHOLDER being the last date on which the
LUMP SUM PREMIUM RATE and ANNUITY PREMIUM RATE are guaranteed to remain
unaltered subject to the PROVISIONS.
FREE COVER LIMIT means in relation to any one MEMBER or group of MEMBERS
the amount applicable in respect of each MEMBER that SUN LIFE OF CANADA
shall determine and notify in writing to the POLICYHOLDER from time to
time, which amount shall represent the maximum sum assured for which the
POLICYHOLDER will be covered under the Policy in respect of such MEMBERS
without evidence relating to their health.
INLAND REVENUE means the Board or Commissioners of the Inland Revenue in
the United Kingdom.
LIFE ASSURANCE BENEFIT means in relation to a MEMBER a sum equal to four
times ASSURABLE EARNINGS, subject to INLAND REVENUE limits.
> LUMP SUM PREMIUM RATE means:
(a) from the EFFECTIVE DATE to 7th March 1996 such amount as was
determined by SUN LIFE OF CANADA and notified to the POLICYHOLDER, and
thereafter
(b) Pound 0.69 per thousand pounds of the sum assured under the POLICY in
respect of LIFE ASSURANCE BENEFIT or such other amount thereafter as
is determined from time to time by SUN LIFE OF CANADA and notified to
the POLICYHOLDER in accordance with the PROVISIONS.
MEMBER means an EMPLOYEE who is insured in respect of the BENEFITS from
this POLICY in relation to the SCHEME in accordance with PROVISION 3.1,
and MEMBERSHIP shall be construed accordingly.
NORMAL RETIREMENT AGE means the age notified to SUN LIFE OF CANADA in
writing by the POLICYHOLDER as being the age on which a MEMBER normally
retires from employment with the EMPLOYER.
PARTNER means either:-
(a) the surviving legal husband or wife of the deceased MEMBER, or
surviving first such legal husband or wife if more than one such
person, or
(b) (i) a named person of the opposite sex, or
(ii) such other person
who has been notified by the POLICYHOLDER to SUN LIFE OF CANADA in writing
prior to the MEMBERS death and who has been accepted by SUN LIFE OF CANADA
as being DEPENDANT in accordance with the provisions of the POLICY.
PARTNERS ANNUITY means a sum equal to one forty-fifth of the MEMBERS
ASSURABLE EARNINGS For Each Year Of ASSURABLE SERVICE which the MEMBER
could have completed had he or she survived until NORMAL RETIREMENT AGE
(subject to a maximum of twenty forty-fifths of the MEMBERS ASSURABLE
EARNINGS), calculated in accordance with the RULES and subject to INLAND
REVENUE limits.
POLICY YEAR means a period of twelve calendar months commencing on each
ANNIVERSARY DATE.
PREMIUM means any premium paid or due in respect of the POLICY.
> PREMIUM DUE DATE means the first day of each month.
PROVISION means a provision of the POLICY.
RULES means the rules from time to time of the SCHEME and its governing
trusts.
SCHEME ENTRY DATE means in relation to an EMPLOYEE the date described under
PROVISION 3.1.
TRUSTEE means the trustee or trustees for the time being of the SCHEME.
<PAGE> 5
1.0. GENERAL PROVISIONS
1.1. THE POLICY: The Policy is approved by the Inland Revenue for the
purposes of Chapter 1 of Part XIV of the Income and Corporation Taxes
Act 1988. All of the Policy Provisions shall be subject to but not
bound by the Rules and shall be exercisable only to the extent that
Inland Revenue approval of the Scheme shall not be prejudiced.
Subject to Provision 1.2, all of the Provisions shall apply unless,
and to the extent that, the whole or part of any Provision may be
deleted in accordance with Provision 8.2. No Benefits under the Policy
may form part of any Member transfer value under the Rules. The
Policy may not be assigned unless Provision 1.5 applies. Any attempt
to otherwise assign it shall render it void.
1.2. CHANGES TO POLICY: Only the President or a Vice-President of Sun Life
of Canada shall have the power to approve the alteration of any of the
Provisions. Sun Life of Canada shall not be bound by any variation in
the terms of the Policy unless any such alteration has been detailed
in writing to the Policyholder by an employee authorised for the
purpose by Sun Life of Canada, and unless any due Premium in respect
of that variation has been received at the address on page 1 of the
Policy. Any such variation shall be on the basis that it shall not
contravene any statutory requirement. The Policyholder if so required
by Sun Life of Canada, shall produce the Policy so that Sun Life of
Canada may suitably endorse Provision 8.3.
1.3. SCHEME INFORMATION: The Policyholder shall upon request furnish Sun
Life of Canada with all pertinent particulars of the Scheme and shall,
if so required, forward a copy of the current Rules to Sun Life of
Canada, together with the Scheme Inland Revenue approval number.
1.4. INFORMATION TO BE PROVIDED TO SUN LIFE OF CANADA: The Policyholder
shall provide Sun Life of Canada with such information as Sun Life of
Canada shall require in order to calculate risk and Premiums and shall
also provide any documentary evidence and any other information
required by Sun Life of Canada related to the payment of Benefit. Sun
Life of Canada shall not be liable for any errors or omissions on its
part arising solely from any errors in or omissions from any such
evidence.
1.5. CHANGE OF EMPLOYER: Where a change in the legal identity or
constitution of the Employer occurs, the Policy shall remain valid
only upon application being made to Sun Life of Canada by the
successor employer within a period of 31 days from the date of formal
succession. The Policy shall remain valid thereafter only upon the
specific agreement in writing by Sun Life of Canada, and shall be
subject to any modification in Lump Sum Premium Rate or Annuity
Premium Rate or endorsement as may be imposed by Sun Life of Canada.
1.6. EXERCISE OF DISCRETION: Where any discretion is implied or imputed
under the terms and conditions of the Policy such discretion shall be
solely that of Sun Life of Canada, unless Sun Life of Canada shall
itself declare otherwise.
2.0. GUARANTEED MINIMUM PENSION
2.1. CONTRACTING OUT: In the event that this Policy is to be used to
secure part or all of the Benefit payable under the Scheme in respect
of a Member's Partner or Dependants, with regard to the Policyholder's
obligations under the Pension Schemes Act 1993, Benefit payable under
the Policy shall only relate to the death of the Member before State
pension age (as described in section 27 of the Social Security Act
1975) or such later age as is permitted under Provision 3.6 and the
Rules. Such Benefit shall be paid in accordance with the Provisions.
3.0. ELIGIBILITY PROVISIONS
3.1. MEMBERSHIP: Subject to Provisions 3.2 and 3.7, an Employee shall
become a Member and shall commence to be covered for Benefit on the
Scheme Entry Date, which date shall be the day on which the Employee
fulfils the criteria under any of paragraphs (a), (b) or (c)
immediately below. The criteria are that the Employee:-
(a) on the Effective Date
(i) had life assurance cover provided by an alternative
arrangement under the Scheme on the day immediately
preceding the Effective Date, and
(ii) is in Assurable Service; or
<PAGE> 6
> (b) on or after the Effective Date
(i) has attained the age of 16 years but has not attained Normal
Retirement Age, and
(ii) is a permanent employee in Assurable Service who is resident
in the United Kingdom; or
(c) in other circumstances
although not eligible under either (a) or (b) immediately above
is deemed by the Policyholder to be eligible for membership,
subject to such restrictive modifications of the Scheme as may be
determined by or imposed on the Policyholder by the Rules, as
notified to the Member and with the prior written agreement of
Sun Life of Canada.
Neither the Employer nor the Policyholder shall have the power to
waive the eligibility for membership conditions.
3.2. COMMENCEMENT OF BENEFIT COVER: Benefit cover in respect of a Member
shall commence on the required date in accordance with the Provisions,
PROVIDED that the Member is in Active Employment on such date. If the
Member is not in Active Employment on that date, Benefit cover shall
commence on the first day on which the Member is in Active Employment,
subject to Provision 3.7.
3.3. INCREASES IN BENEFIT COVER: Benefit cover in respect of a Member
shall increase on the required date in accordance with the Provisions,
PROVIDED that the Member is in Active Employment on such date. If a
Member is not in Active Employment on that date, Benefit cover shall
not increase until the first day on which that Member resumes Active
Employment.
3.4. TEMPORARY ABSENCE: Eligibility to remain covered for Benefit
hereunder shall cease unless otherwise agreed in writing by Sun Life
of Canada and the Policyholder on the day that a Member is temporarily
laid off employment without pay or on the day that the Member is
granted leave of absence without pay for any reason other than
illness, injury or pregnancy. In the event of a Member being absent
from work due to illness, injury or pregnancy, entitlement shall
continue at the amount in force at the beginning of such absence for
so long as the Member is considered by the Employer to remain an
Employee, but only for a period not exceeding three years (or such
longer period as is permitted by the Rules with the prior agreement of
Sun Life of Canada), or until Membership is terminated in accordance
with the Provisions, whichever is the shorter period.
3.5. EARLY RETIREMENT: Where the Rules have a provision allowing
retirement on or before Normal Retirement Age on the grounds of
ill-health or otherwise Members may be permitted to retain Benefit
cover in accordance with the Rules until Normal Retirement Age upon
application being made by the Policyholder, the said application being
agreed to by Sun Life of Canada.
3.6. LATE RETIREMENT: Where the Rules allow retirement to be deferred
beyond any Member's Normal Retirement Age, that Member may be
permitted to retain Benefit cover until the date of actual retirement,
PROVIDED that:-
(a) the amount of cover in respect of the Member shall be such as is
agreed in writing between the Policyholder and Sun Life of
Canada,
(b) an additional single Premium shall become payable in respect of
each year (or part thereof) of the cover so required by the
Policyholder,
(c) Sun Life of Canada agree to cover the Member.
3.7. SCHEME RE-ENTRY: Where an Employee having opted out of the Scheme or
having otherwise left Assurable Service with respect to the Scheme is
subsequently re-admitted to membership of the Scheme, the Policyholder
shall notify that fact to Sun Life of Canada in writing. The Employee
who has been thus re-admitted to the Scheme shall only be covered for
Benefit on such basis as shall be determined by Sun Life of Canada.
4.0. BENEFIT PROVISIONS
4.1. BENEFIT ON MEMBER'S DEATH: The Policy is constituted to provide
Benefits payable in the following form when a Member dies:-
<PAGE> 7
(a) Lump sum Benefit:
(i) subject to paragraph (ii) below, a lump sum equal to the
Life Assurance Benefit, and
(ii) in the event that the Life Assurance Benefit is adjudged by
the Policyholder to be in excess of Inland Revenue limits,
the Policyholder shall convert such excess amount into an
annuity within Inland Revenue limits, to be provided in
accordance with the Rules to such of the Member's
Dependants as the Policyholder may lawfully decide;
(b) Annuity Benefit:
(i) Partner's Annuity shall be payable to the Partner of the
deceased Member, and
> (ii) Children's Annuity shall be payable to the Partner of the
deceased Member in respect of any children who were
Dependants at the date of the Member's death, and
> (iii) if the Partner dies leaving children who would have been
regarded as Dependants at the date of death of the Member
or if the Member dies leaving no surviving Partner but
dependent children then the Dependant's Annuity shall be
payable.
> Annuity Benefit in excess of that which falls under Provision 2.1
of this Policy will be increased whilst in payment on each
anniversary of date of commencement at the rate of 3% per annum
compound. All other Annuity Benefit shall be similarly increased
at the rate of 3% per annum compound.
4.2. GENERAL CONDITIONS: The following general conditions shall apply in
relation to the payment of Benefit:-
(a) the Policyholder shall give notice in writing to Sun Life of
Canada of any event which gives rise to a claim under the Policy
within a reasonable time;
(b) sums representing the amounts necessary to pay Benefit shall be
dealt with in the following manner:-
(i) in respect of Life Assurance Benefit, Sun Life of Canada
shall pay such amount to the Policyholder, and
(ii) in respect of Annuity Benefit, Sun Life of Canada shall
secure such amount within Sun Life of Canada who shall pay
Annuity Benefit in accordance with Provision 4.3,
in accordance with the Rules;
(c) Sun Life of Canada shall not be liable in respect of any claim
after the expiration of a period of seven years following the
date of an event giving rise to entitlement to Benefit, unless
liability has been previously accepted in writing in respect of
that event;
(d) all Benefit shall correspond to the relevant benefit liabilities
from time to time of the Scheme.
4.3. PAYMENT OF ANNUITY BENEFIT: Annuity Benefit shall be secured in
accordance with Provision 4.2(b)(ii) and shall be payable either for
the life of the Partner or whilst any Dependant remains so defined.
Sun Life of Canada shall not recognise any assignment or charge on
Annuity Benefit and any attempt to do so shall be void. Annuity
Benefit so secured shall be paid out by Sun Life of Canada in respect
of the beneficiary in such manner and in accordance with such
requirements (including any guarantees relating to the payment
thereof) as Sun Life of Canada shall determine and agree from time to
time with the Policyholder. Annuity Benefit shall be liable to tax to
be effected at a rate and manner determined from time to time by the
Inland Revenue.
4.4. COVER IN EXCESS OF THE FREE COVER LIMIT: If at any date the amount of
Benefit in relation to a Member exceeds any Member's Free Cover Limit
(such additional cover being hereinafter referred to as "the Excess
Cover" with respect to that Member), the following paragraphs shall
apply:
(a) the Policyholder shall not be covered for the Excess Cover until
Sun Life of Canada has received, accepted and approved such
evidence regarding that Member's health as Sun Life of Canada may
notify in writing to the Policyholder;
<PAGE> 8
(b) Sun Life of Canada may also require additional evidence relating
to the Member's health for any subsequent increases in his or her
Excess Cover;
(c) where evidence is received relating to that Member's health such
that the insured risk, in the opinion of Sun Life of Canada,
cannot be sustained by the standard life assurance rates then Sun
Life of Canada, at the written request of the Policyholder, and
subject to the payment of additional annual Premiums at an
alternative Premium rate notified to the Policyholder, may insure
the Policyholder for that Member's Excess Cover.
Notwithstanding the immediately above paragraphs (a) to (c), a Member
who is to be covered for the Excess Cover shall at all times be
covered for Benefit equal to the Free Cover Limit, unless notified in
writing to the contrary by Sun Life of Canada.
5.0. PREMIUM PROVISIONS
5.1. WHEN CALCULATED: Subject to the Provisions, the Lump Sum Premium Rate
and Annuity Premium Rate shall be determined by Sun Life of Canada at
the Effective Date and on each subsequent Expiry Date and shall remain
in force until the day before the next following Expiry Date. The
said Premium rates shall be used in the calculation of the due
Premiums as described under Provision 5.2.
5.2. HOW CALCULATED: Premiums shall be payable in accordance with
Provision 5.3. and shall be calculated by applying parts A to C of
this Provision 5.2:-
A. Regular Premiums-
The amount of the regular Premium shall be a sum equal to:-
(a) the total sum assured under the Policy in respect of the
Life Assurance Benefit at the beginning of each Policy Year
multiplied by the Lump Sum Premium Rate then in force and
divided by the number of Premium Due Dates occurring in that
Policy Year, PLUS
(b) the total sum assured under the Policy in respect of Annuity
Benefit at the beginning of each Policy Year multiplied by
the Annuity Premium Rate then in force and divided by number
of Premium Due Dates occurring in that Policy Year.
B. Sweep Up Premiums-
The amount of the sweep up Premium (if any) shall be calculated
at such times as are indicated in paragraphs (a) or (b) of this
part B below or, on any other date on which the Employer acquires
or disposes of any part of its business in the circumstances
where Provision 5.6(a) applies, notwithstanding Provision 1.5.
Subject to Provision 5.5, the sweep up Premium shall be
calculated by applying whichever part of paragraphs (a) and (b)
of this part B below is applicable according to the table
immediately following:-
<TABLE>
<CAPTION>
PARAGRAPHS APPLICABLE TO
PROVISION 5.2.B
Provision Provision Provision Provision
5.2.B(a)(i) 5.2.B(a)(ii) 5.2.B(b)(i) 5.2.B(b)(ii)
-----------------------------------------------------------------
<S> <C> <C> <C>
NOT APPLICABLE NOT APPLICABLE
APPLICABLE APPLICABLE
</TABLE>
The sweep up Premium shall be equal to adding paragraphs (a) and
(b) and deducting from the result the amount in paragraph (c) as
follows:-
<PAGE> 9
(a) EITHER
(i) a figure equal to the average amount of Life Assurance
Benefit cover in force between the first and last day
of the Policy Year in question times the appropriate
Lump Sum Premium Rate, OR
(ii) a figure equal to the average amount of Life Assurance
Benefit cover in force on the first day of the Policy
Year in question and the first day of the next Policy
Year times the appropriate Lump Sum Premium Rate;
whichever is applicable according to the table above; PLUS
(b) EITHER
(i) a figure equal to the average amount of Annuity Benefit
cover in force between the first and last day of the
Policy Year in question times the appropriate Annuity
Premium Rate, OR
(ii) a figure equal to the average amount of Annuity Benefit
cover in force between the first day of the Policy Year
in question and the first day of the next Policy Year
times the appropriate Annuity Premium Rate;
whichever is applicable according to the table above, LESS
(c) the total of the regular Premiums, determined as in part A
above, due and paid during the said Policy Year.
C. Additional Premiums-
These shall be payable where appropriate under Provisions 3.6 and
4.3(c) or on any other date as is applicable with regard to any
other agreed cover under the Policy and notified in writing to
the Policyholder by Sun Life of Canada.
5.3. WHEN PAYABLE: Premiums shall be payable as follows:
A. REGULAR PREMIUMS shall be paid on each Premium Due Date whilst
the Policy remains in force;
B. SWEEP UP PREMIUMS (where applicable) shall be due and paid on the
Anniversary Date immediately following the year to which they
relate or such later date or dates as Sun Life of Canada shall
advise in writing;
C. ADDITIONAL PREMIUMS received in relation to the Excess Cover
shall become due and paid respectively on the first day that the
Excess Cover becomes effective, and thereafter annually in
advance on each Anniversary Date in relation to the Premium
payable under Provision 4.4(c), or on such other dates in respect
of such other agreed cover as are otherwise applicable and
notified in writing to the Policyholder by Sun Life of Canada.
5.4. DAYS OF GRACE: A period of 31 days of grace shall be allowed without
interest charge for the payment of any Premium. If a claim for
Benefit is made during that period, no Benefit shall become due in
respect of such a claim until such due Premium is paid. If any
Premium payment is not made within the said period, the Policyholder
shall be deemed to have discontinued payment of Premiums on the date
on which the unpaid Premium was first due to be paid.
5.5. TERMINATION PREMIUM: Where the Policy is terminated, a Premium shall
fall due calculated in accordance with Provision 5.2 (applying
sub-paragraph (a)(i) and (b)(i)) and not sub-paragraphs (a)(ii) and
(b)(ii)), and payable as under Provision 5.3.B as if the date of
termination of the Policy were the Anniversary Date.
5.6. CHANGE OF PREMIUM RATE: Notwithstanding Provision 5.1, Sun Life of
Canada reserves the right to alter the Premium Rate at any time in the
following circumstances:
(a) with effect from any Anniversary Date where on that date the
total number of lives covered for Benefit is greater than 125% or
less than 75% of the number of lives so covered at the later of
the immediately preceding Expiry Date or Effective Date, or
<PAGE> 10
(b) with effect from any date where on that date there is a change in
the basis of the calculation of the sum assured in respect of any
or all categories of Member, or where there is a change in the
Scheme eligibility conditions, or where Provision 1.5 applies.
6.0 MEMBERSHIP TERMINATION PROVISIONS
6.1. TERMINATION OF ASSURANCE: The Policyholder shall cease to be covered
for Benefit hereunder on the first date on which any one of the
following events shall first occur in relation to a Member:-
(a) the day on which the Member's Employer ceases to participate in
the Scheme;
(b) the day on which a failure to pay a Premium within the period
allowed by Provision 5.4. arises;
(c) the day on which the Member ceases to be a Member.
6.2. CONTINUATION OPTION: Where any Member's Life Assurance Benefit cover
has ceased as a result of the application of Provision 6.1, that
Member shall be entitled to acquire from Sun Life of Canada individual
life assurance cover, without evidence relating to health, in the form
of an individual whole life or endowment assurance policy on his or
her own life, subject to the following conditions:
(a) AGE - this option is only available to Members who are under age
60 on the date of termination of Assurable Service;
(b) RATES AND AMOUNTS - the rate of premium payable in respect of the
new policy will be governed by the Sun Life of Canada basis in
force at the date of the exercise of the option, having regard to
the then age of the ex-Member. The sum assured under the new
policy and the rate of premium payable in respect of that policy
shall not be less than the Sun Life of Canada minimum amount and
rate then in force in respect of that type of policy. The amount
of cover in respect of a new policy shall not exceed the lesser
of the amount of either: -
(i) the Life Assurance Benefit, or
(ii) the Free Cover Limit,
then in force in respect of the Member under the Policy.
(c) METHOD OF EXERCISING THE OPTION - the method of exercising the
option shall be by written application to Sun Life of Canada by
the Member or ex-Member PROVIDED that such application shall be
made via a duly appointed sales representative of Sun Life of
Canada. The application shall be made within 31 days of the date
that the period of Life Assurance Benefit cover ceased in
respect of the Member or ex-Member.
(d) EFFECTIVE DATE OF NEW POLICY - the new policy shall be effective
from the date on which a formal application as described under
paragraph (c) immediately above is received and accepted by Sun
Life of Canada at the address on page 1 of the Policy.
7.0 POLICY TERMINATION PROVISIONS
7.1 DISCONTINUANCE OF PREMIUM PAYMENTS: If the Policyholder discontinues
the payment of Premiums the assurances under the Policy shall cease.
7.2 POLICYHOLDER OBLIGATIONS: If the Policyholder fails to observe any of
the Policy terms and Provisions, Sun Life of Canada may decline to
accept any further Premiums, and thereupon the Policyholder shall be
deemed to have discontinued the payment of Premiums.
7.3 DISCONTINUANCE FINAL: If the Policyholder discontinues payment of
Premiums, the Policyholder shall not be entitled to resume Premium
payments without the prior consent of Sun Life of Canada.
7.4 POLICYHOLDERS' TERMINATION: The Policyholder may terminate the Policy
by giving Sun Life of Canada written notice to that effect and the
actual date of termination shall be the later of the date of receipt
by Sun Life of Canada of the notice and the date specified by the
Policyholder.
<PAGE> 11
7.5. SUN LIFE OF CANADA TERMINATION: Sun Life of Canada may terminate the
Policy on any Anniversary Date by giving the Policyholder at least 31
days' notice if, on any such date, the number of Members for whom the
Policyholder is actually covered under the terms of the Policy is less
than 100% (or such lesser percentage as Sun Life of Canada may
expressly from time to time determine and notify to the Policyholder
in writing in any particular case) of the number of Employees who are
eligible for that cover.
7.6. TERMINATION PREMIUM: Provisions 7.1, 7.2, 7.4 and 7.5 will not in any
event prejudice the obligation imposed by Provision 5.5 to pay a
termination Premium.
8.0. ENDORSEMENT PROVISION
8.1. ENDORSEMENTS AT EFFECTIVE DATE: The Policy is agreed as at the
Effective Date between the Policyholder and Sun Life of Canada subject
to any existing amendments given in the table under Provision 8.2, and
subject to any later amendment being appended under Provision 8.3.
8.2. THE TABLE: The table referred to in Provision 8.1 is as follows:-
===============================================================================
THE TABLE
===============================================================================
PROVISION OR PART DELETED (Yes) SUBJECT
PROVISION NOT DELETED (No)
===============================================================================
3.1(a)(b) NO Eligibility
- - -------------------------------------------------------------------------------
3.2(proviso) YES Commencement dependent on
Active Employment
- - -------------------------------------------------------------------------------
3.3(proviso) YES Increases dependent on Active
Employment
- - -------------------------------------------------------------------------------
3.5 YES Early retirement
- - -------------------------------------------------------------------------------
3.6 YES Late retirement
- - -------------------------------------------------------------------------------
4.1(b)(ii) YES Children's Annuity
- - -------------------------------------------------------------------------------
4.1(b)(iii) NO Dependant's Annuity
- - -------------------------------------------------------------------------------
6.2 YES Continuation option
===============================================================================
8.3 SUBSEQUENT ENDORSEMENTS: Endorsements to be submitted and agreed by
Sun Life of Canada subsequent to the date of signature appearing on
page 1 of the Policy shall be rendered hereunder by Sun Life of Canada
which endorsement shall be signed and dated by Sun Life of Canada in
accordance with Provision 1.2:
<PAGE> 12
[LOGO]
Sun Life Assurance Company of Canada Incorporated in Canada in 1865 as a
Limited Company, A Mutual Company since 1962.
Sun Life Assurance Company of Canada (U.K.) Limited Registered in England with
number 959082.
Registered Office: Basing View, Basingstoke, Hampshire RG21 4DZ.
Members of the Association of British Insurers (ABI) and regulated by the
Personal Investment Authority (PIA).
<PAGE> 13
THE GALILEO RETIREMENT AND DEATH BENEFIT SCHEME
DEFINITIVE DEED AND RULES 1993 [SEAL]
Made 8th November
BETWEEN
(1) THE GALILEO COMPANY (Registration number 2143570) whose registered office
is at Galileo Centre Europe, Windmill Hill, Swindon SN5 6PH ("the
Principal Employer") and
(2) THE GALILEO COMPANY whose registered office is at the Galileo Centre
Europe, as above and GODWINS (TRUSTEES) LIMITED whose registered office
is at Briarcliff House, Kingsmead, Farnborough, Hampshire GU14 7TE ("the
Trustees")
INTRODUCTION
A. This Deed is supplemental to previous deeds which include a declaration
of trust ("Declaration of Trust") dated 1st May 1988 and made by the
Principal Employer (previously known as Galileo Distribution Systems
Limited and The Galileo Company Limited) whereby The Galileo Retirement
and Death Benefit Scheme ("the Scheme") was established
B. The Declaration of Trust stated that the Scheme was to be administered in
accordance with rules which would be made and adopted within 24 months of
the Declaration of Trust.
1
<PAGE> 14
CONTENTS OF RULES
PART 1
ENTRY, BENEFITS AND CONTRIBUTIONS
Page No.
1. MEMBERSHIP 5
2. CONTRIBUTIONS 7
3. APPLICATION OF CONTRIBUTIONS 10
4. RETIREMENT 11
5. ALTERNATIVE BENEFITS 13
6. PAYMENT OF PENSION 14
7. DEATH BENEFITS 16
8. LEAVING PENSIONABLE SERVICE 22
9. ABSENCE FROM WORK 24
10. TRANSFER OPTIONS 26
11. FORFEITURE OF BENEFITS 29
PART 2
STATUTORY PROVISIONS
12. INLAND REVENUE LIMITS 32
13. CONTRACTING OUT UNDER THE PENSIONS ACT 40
14. OVERRIDING LEGISLATION 45
PART 3
ADMINISTRATION
15. PURPOSE OF SCHEME 46
16. CONTINGENCY FUND 46
17. TAX AND EXPENSES 47
18. ACTUARIAL VALUATION OF THE FUNDS 48
3
<PAGE> 15
19. TRUSTEES APPOINTMENT AND REMOVAL 48
20. INVESTMENT POWERS 49
21. MANAGING INVESTMENTS 50
22. AGENTS, DELEGATION AND PROFESSIONAL ADVICE 51
23. MEETINGS, PAYMENTS AND ACCOUNTS 52
24. TRUSTEES' LIABILITY AND INDEMNITY 54
25. ADDING ASSOCIATED EMPLOYERS 55
26. SALE OF AN EMPLOYER OR BUSINESS 55
27. WHEN AN EMPLOYER STOPS CONTRIBUTING 57
28. ACTION IF AN EMPLOYER STOPS CONTRIBUTING 57
29. PRINCIPAL EMPLOYER'S CONTRIBUTIONS STOPPING 57
30. TERMINATION DEFICIT 58
31. SECURING TERMINATION BENEFITS 60
32. CHANGES TO THE SCHEME 62
PART 4
33. INTERPRETATION AND DEFINITIONS 63
4
<PAGE> 16
PART 1
ENTRY, BENEFITS AND CONTRIBUTIONS
1. MEMBERSHIP
ELIGIBILITY
1.1 A person is eligible to join the Scheme if:-
1.1.1 he is a permanent Employee employed in
Great Britain or Northern Ireland, and
1.1.2 he is under age 55.
DATE OF JOINING
FULL BENEFITS
1.2.1 An Employee becomes a Member on the first day of the month
on which or after he satisfies the eligibility
conditions in rule 1.1 and completes an application to the
Trustees in such form and including such information as the
Trustees may prescribe.
MEMBERSHIP FOR LUMP SUM AND DEPENDANTS' PENSIONS ON DEATH IN
SERVICE
1.2.2 An Employee who satisfies the condition in rule 1.1.1
and is under age 60 becomes a Life Assurance Member
when his employment starts, provided he is not absent from
work on that date, until he becomes a Member under rule
1.2.1, reaches Normal Retirement Date or leaves Service,
if earlier.
5
<PAGE> 17
DISCRETIONARY ENTRY
1.3 The Trustees shall waive one or more of the conditions in rules
1.1 and 1.2 as the Principal Employer directs.
1.4 If an Employee does not apply to become a Member when first
eligible or opts-out under rule 1.7, he may not become a Member
or re-start his Pensionable Service unless:
1.4.1 the Trustees and the Principal Employer agree, and
1.4.2 he accepts any special conditions in respect of his
membership which the Trustees may consider appropriate.
EVIDENCE OF HEALTH
1.5 Death benefits are subject to rule 7.1.3 and any restrictions
which the Trustees from time to time send in writing to a
Member and evidence of the Member's health may be requested. On
receiving evidence of the Member's health the Trustees may remove
any of the restrictions. This rule 1.5 shall also apply to Life
Assurance Members.
1.6 Unless the Trustees decide otherwise, if an Employee is
absent from work owing to injury or illness when he joins the
Scheme, neither the lump sum death benefit nor the dependants'
pensions, except the pension under rule 7.2.2, shall be payable
under rule 7 until he has returned to work and satisfied any
conditions which the Trustees specify.
6
<PAGE> 18
OPTING-OUT
1.7 A Member may give one month's written notice to the Employer and
the Trustees that he wishes to end his Pensionable Service. As
soon as practicable, the Trustees shall inform the Member when his
Pensionable Service is deemed to end and the provisions of rule 8
shall apply.
2. CONTRIBUTIONS
MEMBER'S CONTRIBUTIONS
2.1 Each Member shall pay contributions to the Scheme while he is in
Pensionable Service at the rate of 5% of his Basic Salary.
2.2 Contributions shall be deducted from a Member's pay and paid to
the Trustees in a manner agreed between the Trustees and the
Principal Employer.
EMPLOYER'S CONTRIBUTIONS
2.3 Subject to rule 2.7, each Employer shall pay,
2.3.1 monthly in arrears, in respect of each of its Employees
in Pensionable Service contributions to the Scheme at
the rate of 10% of the Member's Basic Salary (or such
higher amount as the Employer and the Trustees may decide)
inclusive of any incentive payments received under the
Social Security Act 1986, and
2.3.2 at such times as the Principal Employer and the Trustees
shall agree, the cost of insuring the death benefits under
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<PAGE> 19
rule 7.
2.4 If, in the opinion of the Trustees, acting on the advice of the
Actuary, the contributions under rule 2.1 and rule 2.3.1
in any Tax Year are insufficient to secure Guaranteed Minimum
Pensions the Employers shall, subject to rule 16.3, make good the
shortfall at the end of that Tax Year.
STOPPING, REDUCING OR SUSPENDING CONTRIBUTIONS
2.5 Contributions shall stop at
2.5.1 Normal Retirement Date, or
2.5.2 the earlier date on which the Member's Pensionable Service
ends.
2.6 A Member who remains in Service after Normal Retirement Date and
defers payment of his benefits under rule 4.4 may, with the
agreement of the Trustees, continue to pay contributions while he
remains in Service to increase his benefits up to Inland Revenue
Limits.
2.7 An Employer may
2.7.1 reduce or suspend its contributions under rule 2.3 in
relation to an Employee if, in the opinion of the
Actuary, Inland Revenue Limits are likely to be exceeded
when that Employee's benefits become payable or
2.7.2 stop its contributions under rule 2.3 by giving 30 days
written notice to the Trustees. An Employer shall stop
contributing in the circumstances specified in rules 27 or
29. If contributions are stopped, reduced or suspended
8
<PAGE> 20
the Trustees shall inform each Member who is affected
and, if contributions are stopped, rule 28 shall apply to
such Members.
VOLUNTARY CONTRIBUTIONS
2.8 A Member in Pensionable Service may, subject to Inland Revenue
Limits, pay Voluntary Contributions to secure additional Relevant
Benefits in respect of him.
2.9 Unless the Inland Revenue (either generally or in the Member's
case) otherwise agree, the Relevant Benefits secured by a
Member's Voluntary Contributions cannot be taken as a lump sum.
2.10 Voluntary Contributions may start on the first day of any month
before Normal Retirement Date and a Member may increase, stop or
reduce them on any subsequent first day of a month by giving
notice in writing to the Trustees.
2.11 Voluntary Contributions shall be restricted:
2.11.1 to ensure that the Member's total contributions to the
Scheme, Related Schemes and Connected Schemes do not
exceed the lesser of:-
(1) 15% of his Earnings (ignoring for a Capped Member,
any part in excess of the Cap) in each Tax Year, and
(2) for a Capped Member, 15% of the Cap, less his
contributions to Connected Schemes
2.11.2 if the Trustees consider that benefits payable under the
Scheme in respect of a
9
<PAGE> 21
Member will exceed Inland Revenue Limits.
2.12 When the Member's Pensionable Service ends, Voluntary
Contributions shall stop unless the Trustees agree to them
continuing in the case of a Member who remains in Service after
Normal Retirement Date and who defers payment of his benefits
under rule 4.4. In such a case, the Member may continue paying
Voluntary Contributions while he remains in Service.
2.13 The Trustees may, if permitted by the Taxes Act (and shall, if
required to do so), refund the value of any excess Voluntary
Contributions, calculated in accordance with that Act, to the
Member subject to rule 17.1 (tax).
3. APPLICATION OF CONTRIBUTIONS
MEMBER'S ACCOUNT
3.1 The accumulated balance of
3.1.1 the contributions paid by and in respect of each
Member under rule 2 (other than contributions under
rule 2.3.2),
3.1.2 any sums transferred to the Scheme in respect of the
Member under rule 10.1,
3.1.3 any sums transferred in respect of the Member from the
Contingency Fund under rule 16.4, and
3.1.4 the investment income accruing on the above
shall be held in the Member's Account to secure
10
<PAGE> 22
Relevant Benefits for and in respect of the Member in
accordance with rule 4.
3.2 Each Member's Account shall be administered so that
3.2.1 a separate account is maintained for each Member, and
3.2.2 the value of each Member's Account can be calculated at
any time.
ANNUAL STATEMENT
3.3 The Trustees shall send an annual statement to each Member giving
details of his Member's Account.
4. RETIREMENT
NORMAL RETIREMENT DATE
4.1 On retirement from Pensionable Service and Service at Normal
Retirement Date the Trustees will apply the Member's Account:
first, to secure Guaranteed Minimum Pension for the Member and
his spouse, and
second, to secure, out of any balance remaining, Relevant
Benefits for the Member and his Dependants in such one
or more of the ways set out in rule 5 as the Member
shall decide.
In the case of a male Member, if any increase in his pension under
rule 6.4 by State Pensionable Age is less than his GMP
Revaluation, his pension will increase at State Pensionable Age by
the shortfall.
11
<PAGE> 23
EARLY RETIREMENT
4.2 Subject to rule 4.3 a Member may, with the consent
of the Employer and the Trustees, receive immediate payment of
his benefits under rule 4.1 if he retires from Pensionable Service
and Service before Normal Retirement Date:
4.2.1 because of ill-health which in the Trustees' opinion
prevents a Member from following his normal employment or
seriously impairs his earning capacity (including a
Member whose ill-health stops him asking for immediate
payment of his benefits), or
4.2.2 for any reason after reaching age 50.
4.3 A Member may only receive immediate payment of his
benefits under this rule if his pension at State Pensionable Age
would at least equal his Guaranteed Minimum Pension.
LATE RETIREMENT
4.4 Where, with the consent of the Employer and the Trustees, a
Member remains in Service after Normal Retirement Date then,
unless in the case of a Member who is not a Capped Member the
Trustees agree to their immediate payment, the Member's benefits
under rule 4.1 will, subject to rule 4.3 become payable on the
date his Service ends (or his 75th birthday if earlier).
4.5 Where a male Member receives a benefit under this rule before
State Pensionable Age, then if any increase in his pension under
rule 6.4 by State
12
<PAGE> 24
Pensionable Age is less than his GMP Revaluation, his pension
will increase at State Pensionable Age by the shortfall.
4.6 Where a Member defers payment of his benefits under this rule
until after State Pensionable Age, the increase on that part of
the Member's benefit which represents the Accrued Guaranteed
Minimum shall at least equal GMP Revaluation.
5. ALTERNATIVE BENEFITS
LUMP SUM BENEFIT
5.1 The Member may, subject to Inland Revenue Limits, take all or
part of the balance of the Member's Account remaining after
Guaranteed Minimum Pension has been secured (excluding, unless the
Inland Revenue agree otherwise, that part secured by Voluntary
Contributions) as a tax-free lump sum.
PENSION BENEFIT
5.2 Any part of the Member's Account which is not taken as a lump sum
under rule 5.1 shall, subject to rule 5.3, be applied by the
Trustees with an Insurer chosen by the Member (or, if the Member
fails to do so, by the Trustees) to secure either:
5.2.1 an immediate pension for the Member, or
5.2.2 an immediate pension for the Member and a contingent
pension payable on his death to one or more of his surviving
Dependants.
5.3 Any pension secured under rule 5.2 shall be
13
<PAGE> 25
subject to Inland Revenue Limits and shall be payable
as set out in rule 6.
6. PAYMENT OF PENSION
FREQUENCY AND DURATION
6.1 Subject to rule 13 (Guaranteed Minimum Pension), any pension
payable under this rule shall be payable monthly in advance from:
6.1.1 in the case of a pension payable to the Member the Normal
Retirement Date (or any earlier or later date which
applies under the Rules) until the payment on or
immediately after the Member's death, or
6.1.2 in the case of a pension payable to a spouse from the date
on which the Member's next instalment would have been
paid and in the case of a pension payable to a Child, from
the date on which the Member's or the spouse's next
instalment would have been paid, as appropriate until, in
either case, the payment on or immediately after:-
6.1.2.1 in the case of a pension under rule 6.2.1 the
end of the specified period, or
6.1.2.2 in the case of any other pension, the earlier
of:
(1) the Dependant's death, or
(2) where the Dependant is a
14
<PAGE> 26
child the date on which he attains age
18 or 21 if he is in full time education.
Guarantee
6.2 Unless the Member makes a request in accordance with rule 6.3,
the Trustees shall arrange for any pension payable under this
rule to be secured on the basis that if a Member dies within a
specified period of five years of his pension starting, a lump sum
shall be payable. The lump sum shall be equal to the instalments
of pension which would have been paid under this rule during the
remainder of the specified period, including any increases under
rule 6.4.
6.3 The Member may ask the Trustees in writing not to secure the
pension with a guarantee in accordance with rule 6.2 or to secure
the pension on the basis of a specified period of ten years.
INCREASES
6.4.1 If, before the pension becomes payable, the Member (or
where rule 7.4 applies, the Member's spouse) so
requests, the Trustees shall arrange for any pension
payable under this rule to be secured on the basis that it
will increase annually by a specific percentage subject
to Inland Revenue Limits.
6.4.2 If the Principal Employer agrees and
15
<PAGE> 27
Inland Revenue Limits are not exceeded, the Trustees
may increase any pension payable under this rule. The
Principal Employer and the Trustees shall decide whether
the cost of any increase is taken from the Contingency Fund
or paid by the Employers.
7. DEATH BENEFITS
DEATH OF A MEMBER IN PENSIONABLE SERVICE
7.1.1 If a Member dies while in Pensionable Service a lump sum
shall be payable equal to the sum of:
7.1.1.1 subject to rule 7.1.3, 4 times the annual rate
of his Basic Salary at the date of his death,
(or, for a Capped Member, 4 times the Cap in
force on the date of his death, if less) and
7.1.1.2 that part of the Member's Account attributable
to his Member Contributions, with interest
determined by the Trustees on the advice of the
Actuary and his Voluntary Contributions (if any).
DEATH OF A LIFE ASSURANCE MEMBER IN SERVICE
7.1.2 If a Life Assurance Member dies while in
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<PAGE> 28
Service, subject to rule 7.1.3, a lump sum shall be
payable equal to 4 times the annual rate of his Basic
Salary at the date of his death, (or, for a Capped Member,
4 times the Cap in force on the date of his death, if
less).
LUMP SUM UNDER INSURANCE POLICY
7.1.3 Unless the Trustees decide otherwise, any lump sum payable
under rules 7.1.1.1 or 7.1.2 shall not exceed the
amount payable to the Trustees from a policy with an
Insurer, in force at the date of death, in relation to the
deceased Member or Life Assurance Member.
DEPENDANT'S PENSION ON DEATH IN SERVICE
7.2 If a Member dies while in Pensionable Service or a Life Assurance
Member dies while in Service leaving a spouse, such spouse
shall be entitled to a pension equal to the greater of:
7.2.1 a pension calculated using the table below:-
<TABLE>
<CAPTION>
Years of Prospective % of Basic Salary
Service at the date of death
-------------------- --------------------
<S> <C>
1 2.22
2 4.44
3 6.67
4 8.89
5 11.11
6 13.33
7 15.56
8 17.78
9 20.00
10 22.22
11 24.44
</TABLE>
17
<PAGE> 29
<TABLE>
<S> <C>
12 26.67
13 28.89
14 31.11
15 33.33
16 35.56
17 37.78
18 40.00
19 42.22
20 or more 44.44
</TABLE>
Note - Additional complete months of Prospective Service count in
the above table.
For the purposes of rule 7.2.1, any reduction in Basic Salary due
to the Cap shall be ignored, so far as Inland Revenue Limits permit
and Prospective Service shall mean the Pensionable Service which
the Member would have completed if he had remained a Member until
Normal Retirement Date; and
7.2.2 the spouse's Guaranteed Minimum Pension.
7.3 On the death of a Member who dies in Pensionable Service or on the
death of a Life Assurance Member who dies in Service leaving no
spouse or on the death of a Member's or Life Assurance Member's
spouse while receiving a pension under rule 7.2 or 7.3, leaving a
Child or Children, each Child shall be entitled to a pension while
it is a Child. The pension shall be equal to the spouse's pension
calculated under rule 7.2 divided by the number of Children from
time to time surviving the Member or spouse.
The spouse's or Children's pension shall be payable as set
out in rule 6.
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<PAGE> 30
Death before any benefits become payable
7.4 If a Member dies after Pensionable Service has ended and before
any benefits become payable under rule 4, the Member's Account
shall be applied by the Trustees as follows:
7.4.1 if the Member is married at the date of his death:
first, to secure the spouse's Guaranteed Minimum Pension;
second, that part of the Member's Account attributable to
his Member Contributions with interest
determined by the Trustees on the advice of the
Actuary and Voluntary Contributions (less any
amount used to secure the spouse's Guaranteed
Minimum Pension) shall be paid as a lump sum, and
third, the balance (if any) of the Member's Account
shall be applied by the Trustees to secure from
an Insurer chosen by the Member's spouse (or if
the spouse fails to do so, by the Trustees) an
additional pension for the Member's spouse. Any
pension secured under this rule shall be
19
<PAGE> 31
subject to Inland Revenue Limits and shall be
payable as set out in rule 6
7.4.2 if the Member is unmarried at the date of his death, that
part of the Member's Account attributable to his
Member Contributions with interest determined by the
Trustees on the advice of the Actuary and Voluntary
Contributions shall be paid as a lump sum.
DEATH AFTER BENEFITS HAVE BECOME PAYABLE
7.5 If a married Member dies after his benefits have become payable
under rule 4 his spouse shall be entitled to the spouse's
Guaranteed Minimum Pension.
TRANSFER TO THE CONTINGENCY FUND
7.6 Any part of the Member's Account which is not paid or applied
under rule 7 shall be held by the Trustees in the Contingency Fund.
PAYMENT OF LUMP SUMS
7.7 The Trustees shall within two years of a Member's death select one
or more of the following methods to pay lump sums due on his
death which are payable in accordance with this rule:-
7.7.1 payment may be made to any one or more of the Designated
Beneficiaries
7.7.2 unless payment would result in the sum passing to the
Crown, or to the Duchies of Lancaster or Cornwall, payment
may be made to the Member's legal personal
20
<PAGE> 32
representatives for disposal as part of his estate
7.7.3 a lump sum may be settled on a trust or trusts separate
from the Scheme trusts; any trust shall be for the
benefit of one or more Designated Beneficiaries on such
terms and conditions as the Trustees decide.
Any lump sums not paid at the end of the two year period shall
be held by the Trustees in the Contingency Fund if:-
7.7.4 the Trustees know of no surviving Designated Beneficiaries
and
7.7.5 the restrictions in rule 7.7.2 prevent payment to the
legal personal representatives.
SMALL ESTATE
7.8 The Trustees may pay an amount due to a Member's estate to any
one or more of the Member's next of kin if a grant of
representation has not been taken out to the deceased Member's
estate and the amount is less that #.5000 (or any higher amount
which the Trustees resolve).
PAYMENTS TO MINORS
7.9 The Trustees shall pay a minor's benefit on behalf of the minor to
one or more of:-
7.9.1 the minor's parent, legal guardian or
7.9.2 any other person or body which, in the Trustees' opinion,
has the care of the minor.
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<PAGE> 33
Alternatively, the Trustees may decide that the benefit is held
or applied under trusts established for the minor's benefit which
are separate from the Scheme trusts. The Trustees shall decide the
form and nature of any such trusts.
8. LEAVING PENSIONABLE SERVICE
RETAINING BENEFITS IN THE SCHEME
8.1.1 A Member whose Pensionable Service ends before Normal
Retirement Date and remains in Service will become a
Life Assurance Member until he reaches Normal Retirement
Date or leaves Service, if earlier and will also be
entitled to preserved benefits under the Scheme, payable at
Normal Retirement Date in accordance with rule 4.1, if
8.1.1.1 he does not receive immediate payment of his
benefits under rule 4.2, and
8.1.1.2 either
(1) he has completed at least 2 years'
Qualifying Service, or
(2) a transfer has been accepted in respect of
him under rule 10.1 from a Personal
Pension, or
22
<PAGE> 34
(3) if (l) and (2) above do not apply, he
resigns or he has been dismissed except
the Trustees' consent shall be required if
the reason for the dismissal was his
misconduct.
8.1.2 If, in the case of a male Member any increase in his
pension under rule 6.4 by State Pensionable Age is less
than his GMP Revaluation, his pension will increase at
State Pensionable Age by the shortfall.
EARLY PAYMENT OF PRESERVED BENEFITS
8.2 A Member who is no longer an Employee may, with his former
Employer's and the Trustees' agreement, receive immediate payment
of his preserved benefits after reaching age 50 or at any time if
he is in ill-health (rule 4.2.1).
LATE PAYMENT OF PRESERVED BENEFITS
8.3 A Member who remains in employment after the date his preserved
benefits are due to be paid may, with his former Employer's and
the Trustees' agreement, defer payment of his preserved benefits
until his employment ends or he reaches age 70, if earlier.
REFUND
8.4 A Member who ceases to be in Pensionable Service
23
<PAGE> 35
before Normal Retirement Date and who becomes entitled to
preserved benefits under rule 8.1.1.2(3), may receive instead of
his preserved benefits a refund of his Member Contributions with
interest determined by the Trustees on the advice of the Actuary
and Voluntary Contributions less deductions under rule 13.10
(contribution equivalent premium) and rule 17.1 (tax).
TRANSFER TO THE CONTINGENCY FUND
8.5 That part of the Member's Account which is not refunded to the
Member under rule 8.4 shall be held by the Trustees in the
Contingency Fund.
9. ABSENCE FROM WORK
9.1 While a Member in Pensionable Service is absent from work with an
Employer and either remains an Employee or rule 9.2.5 (absence
due to pregnancy) applies, rule 9 sets out
9.1.1 the benefits in respect of his membership, and
9.1.2 his liability to pay contributions.
CONTINUED DEATH BENEFIT
9.2 Death benefits will be calculated on Basic Salary based on salary
on the day before absence started or such higher amount as the
Trustees shall determine.
Death Benefits shall be payable under rule 7, except if rule
1.6 applies, if the Member dies within:-
24
<PAGE> 36
9.2.1 the first 36 months of absence (or any longer period the
Trustees and the Employer may agree so long as Inland
Revenue Approval is not affected), if absent for a reason
not referred to in the remainder of rule 9.2
9.2.2 the period before Normal Retirement Date, if absent due to
sickness or injury and the Member remains an Employee
9.2.3 one year if absent due to membership of H.M. Forces
9.2.5 if a female Member is absent due to pregnancy and gives
notice that she intends to return to work, the period while
she has a right to return under the Employment Protection
(Consolidation) Act 1978.
EFFECT ON PENSIONABLE SERVICE AND CONTRIBUTIONS
9.3 Unless the Trustees decide otherwise, a Member shall continue to
pay Member Contributions (and may pay Voluntary Contributions)
while he is receiving pay until the end of the appropriate period
specified in rule 9.2. The period while Member Contributions are
paid counts as Pensionable Service.
MATERNITY PAY
9.4 If a female Member is absent due to pregnancy:
9.4.1 she shall, if the Trustees agree, pay
25
<PAGE> 37
Member Contributions (and may pay Voluntary
Contributions) on the greater of her statutory maternity
pay under the Social Security Act 1986 and her
remuneration, and
9.4.2 where absence commences on or after the date when
Schedule 5 of the Social Security Act 1989 is brought
into force ("the New Maternity Date") no account shall be
taken when calculating the Employer's contributions under
rule 2.3 of any alteration in her Basic Salary attributable
to her absence from work.
Before the New Maternity Date, the period while contributions are
paid under this rule counts as Pensionable Service and on or after
the New Maternity Date, the period of absence specified in rule
9.2.5 shall count as Pensionable Service.
UNPAID CONTRIBUTIONS
9.5 A Member who does not contribute during a period of absence
specified in rule 9.2 may, if the Trustees agree, pay the
unpaid contributions on his return to work. His contributions will
not qualify for full tax relief if they exceed the limit set out
in rule 2.11.1.
10. TRANSFER OPTIONS
TRANSFERRING RIGHTS INTO THE SCHEME
10.1 If the Member:-
10.1.1 before becoming a Member was a member of
26
<PAGE> 38
another Retirement Benefits Scheme or of a scheme
approved for the purposes of this rule by the Inland
Revenue, or
10.1.2 has contributed to a Personal Pension or to a
retirement annuity contract approved under Chapter III of
Part XIV of the Taxes Act, or
10.1.3 holds a deferred annuity contract securing
benefits which have accrued by virtue of membership of a
scheme described in rule 10.1.1
the Trustees may, subject to Inland Revenue Approval not being
affected, accept a transfer payment therefrom which shall be
applied to secure Relevant Benefits in respect of the Member.
10.2 If a Transferred GMP is expressed to form part of another amount,
the Transferred GMP shall be included in the Accrued Guaranteed
Minimum to calculate GMP Revaluation.
10.3 Relevant Benefits provided by a transfer payment are subject to
Inland Revenue Limits and to rule 13 (Guaranteed Minimum Pension).
10.4 Any part of the transfer payment certified by the trustees or
managers of the transferring arrangement as attributable to an
individual's contributions shall be treated as that person's
Member Contributions except where the Trustees decide they shall
be treated as Voluntary Contributions.
27
<PAGE> 39
TRANSFERRING RIGHTS OUT OF THE SCHEME
10.5 The provisions of rule 10.5 are in addition to
any statutory rights a Member may have under the
Pensions Act on his Pensionable Service ending.
10.5.1 Subject to rule 13 (Guaranteed Minimum
Pension), the Trustees may apply the Member's
Account as a transfer payment to:
10.5.1.1 a Retirement Benefits Scheme
(but not if the Inland Revenue regard it as a
free-standing additional voluntary
contribution scheme), or
10.5.1.2 any other scheme approved for
the purposes of this rule by
the Inland Revenue, or
10.5.1.3 a Personal Pension.
The Trustees shall ascertain from the
trustees or administrator of the receiving
scheme the section of the Act under which
it is approved by the Inland Revenue.
10.5.2 The trustees or administrator of the
receiving scheme shall provide Relevant
Benefits on a basis agreed with the Trustees.
10.5.3 A transfer may be made under rule 10.5
without the consent of any person except
that the Member's consent shall be
28
<PAGE> 40
obtained if required by the Pensions Act or
the Preservation Act.
10.5.4 The Trustees shall provide the trustees or
administrator of the receiving scheme with
such relevant information as may be
requested and, in particular where a
transfer has been accepted under rule 10.1,
will advise them of any restrictions on the
amount of contributions paid by the Member
that may be refunded or of any tax-free
lump sum which may be payable.
10.5.6 After making the transfer payment the
Trustees shall be fully discharged from
their obligations to any person in respect
of any benefits to which the transfer
relates.
11. FORFEITURE OF BENEFITS
CRIMINAL, NEGLIGENT OR FRAUDULENT ACT
11.1 If a Member has committed a criminal, negligent or
fraudulent act or omission and
11.1.1 as a result an Employer has suffered loss and
11.1.2 the Employer so requests the Trustees may,
subject to the rest of rule 10, deduct from the
Member's Account an amount not exceeding the
Employer's loss. Any reduction is subject to the
provisions of rule 13 (Guaranteed
29
<PAGE> 41
Minimum Pension) and to the rest of rule 11.
11.2 No deduction may be made from any part of the
Member's Account attributable to sums received
under rule 10.1 (transferring rights into the
Scheme) unless the Occupational Pensions Board
agrees.
11.3 The Trustees shall pay any amount deducted from
the Member's Account to the Employer.
11.4 The Trustees shall not
11.4.1 make any deduction before giving the Member a
certificate showing the amount of the
deduction, nor
11.4.2 pay any amount to the Employer if the Member
disputes the proposed deduction, until the
Employer's right to recover his loss becomes
legally enforceable.
IF BENEFITS UNCLAIMED WITHIN 6 YEARS
11.5 Where any benefit payable is not claimed
within 6 years of its due date, that benefit
shall be forfeit and the appropriate assets
shall held by the Trustees in the
Contingency Fund.
If ATTEMPT MADE TO ASSIGN BENEFITS
11.6 If any person attempts to assign or charge his
beneficial interest under the Scheme or
shall permit any act (other than a Scheme
option) where a benefit would be payable to
some other person, that benefit shall be
forfeit. The Trustees may in the case of
hardship, apply that benefit for the
maintenance and support of
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the first mentioned person, his spouse and
children as they see fit.
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PART 2
STATUTORY PROVISIONS
12. INLAND REVENUE LIMITS
For the purposes of this rule, the term Member shall include Life
Assurance Member.
MEMBER'S PENSION
12.1 Subject to rule 12.9 (Capped Member), the annual total
under the Scheme and Related Schemes of a Member's
pension and the pension equivalent of any retirement
benefits in non-pension form will not exceed:-
12.1.1 if a Member (other than a Capped Member)
retires from Service at or before Normal
Retirement Date, or a Capped Member
retires from Service at any time, 1/60th
of Final Remuneration for each year of
Service (not exceeding 40) or any
greater amount which will not prejudice
Inland Revenue Approval
12.1.2 if a Member (other than a Capped Member)
retires from Service after Normal Retirement
Date the greatest of:-
12.1.2.1 the limit under rule 12.1.1
using the date of retirement
as Normal Retirement Date
12.1.2.2 the limit under rule 12.1.1 at
Normal Retirement Date increased
by the Trustees for
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the period from Normal
Retirement Date to the date of
retirement from Service either
on the advice of the Actuary or
by the percentage increase in
the Government's Index of Retail
Prices during that period
12.1.2.3 if a Member's total Service exceeds 40
years, the total of 1/60th of Final
Remuneration for each year before Normal
Retirement Date (up to 40 years) and
1/60th of Final Remuneration for each
subsequent year, with an overall maximum
of 45 years.
If a Member receives a pension under the Scheme before
he retires from Service, rule 12.1.2 shall be read as
if he had retired from Service when his pension began.
12.1.3 on ceasing to be an Employee before Normal Retirement
Date, 1/60th of Final Remuneration for each year of
Service (not exceeding 40) or any greater amount which
will not prejudice Inland Revenue Approval. The amount
so calculated is multiplied by the
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percentage increase in the Government's Index
of Retail Prices from the date of ceasing to
be an Employee until the pension starts.
MEMBER'S LUMP SUM RETIREMENT BENEFIT
12.2 Subject to rule 12.9, a lump sum retirement benefit
when added to other Relevant Benefits in non-pension
form (other than a payment under rule 2.13 or a
similar payment from any other Retirement Benefits
Scheme) from the Scheme and
Related Schemes, shall not exceed:-
12.2.1 if the lump sum is payable to a Member (other
than a Capped Member) at or before Normal
Retirement Date or a Capped Member at any
time, 3/80ths of Final Remuneration for each
year of service (not exceeding 40) or any
greater amount which will not prejudice
Inland Revenue Approval
12.2.2 if the lump sum is payable to a Member (other
than a Capped Member) after Normal
Retirement Date the greatest of:-
12.2.2.1 the limit under rule 12.2.1
using the date the lump sum is
payable as Normal Retirement Date
12.2.2.2 the limit under rule 12.2.1 at
Normal Retirement Date increased
by reasonable
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interest decided by the
Trustees
12.2.2.3 if a Member's total Service
exceeds 40 years, the total of
3/80ths of Final Remuneration
for each year before Normal
Retirement Date (up to 40 years)
and 3/80ths of Final
Remuneration for each subsequent
year with an overall maximum of
45 years
12.2.3 on ceasing to be an Employee a lump sum
payable at Normal Retirement Date or earlier
date when his pension is due to start,
3/80ths of Final Remuneration for each year
of Service (not exceeding 40) or any greater
amount which will not prejudice Inland
Revenue Approval.
20% DIRECTORS
12.3 If a Member is a 20% Director:
12.3.1 the limits described in rules 12.1 and 12.2
may be subject to greater restriction to
maintain Inland Revenue Approval if the
Member is entitled to benefits under any
retirement arrangement approved under
section 620 of the Taxes Act or a Personal
Pension
12.3.2 (other than a Capped Member) who retires from
Service after Normal Retirement Date:-
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12.3.2.1 the period after Normal Retirement
Date and prior to his 70th
birthday does not qualify for any
increase under rules 12.1.2.2 and
12.2.2.2, and
12.3.2.2 in rules 12.1.2.3 and 12.2.2.3
the Member's 70th birthday is deemed
to be his Normal Retirement Date
12.3.2.3 if the Member takes part
of his benefit as a lump sum
before retirement, increases to
any pension provided from the
remainder as described in rule
12.1.2.2 may only be determined by
reference to the Government's
Index of Retail Prices in respect
of the period up to age 70
12.3.3 any lump sum payable on death in Service
after attaining age 75 where a Member's
benefits under the Scheme have not then become
payable shall instead of being disposed of
under rule 7.7 be paid by the Trustees to the
Member's spouse or the Member's legal
personal representatives.
20% PRE-17.3.87 DIRECTOR
12.4 If a Member is a 20% pre-17.3.87 Director at the
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date of retirement from Service or death in Service, he
will be subject to rule 12.3.
CONTROLLING DIRECTORS
12.5 Rule 12.3.1 shall apply to a Member who was a controlling
director as defined in section 624(3) of the Taxes Act in
respect of an Employer before 6th April 1973.
LUMP SUM DEATH BENEFITS
12.6 Subject to rule 12.9 (Capped Member), the lump sum
benefit payable on a Member's death (excluding refunds
of the Member Contributions and Voluntary Contributions)
before his benefits become payable starts shall not, when
added to similar benefits under Related Schemes, exceed the
greatest of.
12.6.1 Pound 5000
12.6.2 4 times whichever is the greater of
12.6.2.1 the annual rate of Remuneration on his
last day of Service (ignoring for a
Capped Member, any part of the Cap
on that day) and
12.6.2.2 Final Remuneration, less, if the total
exceeds Pound 2,500 (or any other
amount laid down by the Inland
Revenue):-
(1) any lump sums (other
than refunds of his own
contributions) payable in the
same circumstances under
Retirement Benefits
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Schemes or free-standing
additional voluntary
contribution schemes
relating to previous
employments, and
(2) any lump sum life assurance
benefit payable in the same
circumstances under any
retirement arrangement approved
under section 621 of the Taxes
Act or a Personal Pension
12.6.3 any higher amount which would not prejudice
Inland Revenue Approval.
DEPENDANTS' PENSIONS
12.7 Subject to rule 12.9, any pension for a Dependant
when added to any pension paid to that person under
Related Schemes, shall not exceed 2/3rds of the Member's
Appropriate Maximum or any higher amount which would not
affect Inland Revenue Approval.
For the purposes of rule 12.7, if the Member dies while
receiving a pension, the "Appropriate Maximum" is the
Member's maximum Aggregate Retirement Benefit at his
death (including any increase permitted by rule 12.8).
If the Member is not receiving a pension at his death,
the "Appropriate Maximum" is:-
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12.7.1 if the Member is a former Employee
entitled to a preserved
pension, the maximum in rule 12.1.3
increased as described to the date
of his death
12.7.2 if the Member is in Service and has
not reached Normal Retirement Date,
the maximum in rule 12.1.1 which
would have applied if he had
remained in Service until Normal
Retirement Date without any further
increases in earnings or the Cap
12.7.3 if the Member is in Service beyond
Normal Retirement Date, the maximum
in rule 12.1.2 as if he had retired
on the day before his death.
If more than one Dependant of a Member
receives a Scheme pension their total pensions,
including those under Related Schemes, shall not exceed
the Appropriate Maximum.
PENSION INCREASES
12.8 After a pension starts the amount payable under
the Scheme and Related Schemes shall not exceed
the appropriate maximum under rules 12.1 or 12.7
multiplied by the percentage increase in the
Government's Index of Retail Prices since the
pension began or any higher amount which would not
affect Inland Revenue Approval.
BENEFITS FROM CONNECTED SCHEMES
12.9 If a benefit is payable from a Connected Scheme in
respect of a Capped Member, the limit under rule
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12 in respect of any similar Scheme benefit,
shall, if lower, be (1) the limit which would have
applied if the Member's Final Remuneration equalled the
Cap, less (2) the Connected Scheme Benefit.
13 CONTRACTING-OUT UNDER THE PENSIONS ACT
Rule 13 applies while a Member or a Member's spouse is entitled
(whether prospectively or contingently) to a Guaranteed Minimum
Pension from the Scheme and shall override any provisions of the
Rules which conflict with it.
MEMBER'S GUARANTEED MINIMUM PENSION
13.1 If a Member is entitled to a guaranteed minimum
under the Scheme by virtue of section 35 of the
Pensions Act, his Scheme pension at State Pensionable Age
shall at least equal the annual equivalent of his
guaranteed minimum under rule 13, subject to rule 13.3
(deferment). It may however be taken as a lump sum if it
does not exceed Pound 104 or any other amount permitted
by the Preservation Act and the Pensions Act.
For the comparison, Scheme pension shall exclude, subject
to Inland Revenue Limits, pension secured by
13.1.1 Graduated Scheme Pension and
13.1.2 Voluntary Contributions, but if the Member's
pension starts before State Pensionable Age the
Trustees may include Voluntary Contributions
pension in the
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comparison if the benefits payable in respect
of the Member are determined by the Actuary to
be at least equal in value as those otherwise
payable from State Pensionable Age.
13.2 If a Member's Contracted-out Employment ends at
State Pensionable Age and payment of the
Member's benefits is not deferred, subject to rule
13.11.2, the guaranteed minimum under rule 13.1 for
that period is calculated in accordance with sections
35(1) to 35(5) of the Pensions Act.
13.3 If the payment of a Member's benefits is deferred
beyond State Pensionable Age (either because
Normal Retirement Date is later than State Pensionable
Age or because rule 4.4 applies), the Member's
Guaranteed Minimum Pension is also deferred. When the
pension starts the guaranteed minimum under rule 13.2
shall be increased for the period of deferment as
described in sections 35(6), 35(6A) and 35(6B) of the
Pensions Act.
13.4 If a Member's Contracted-out Employment ends
before the Tax Year in which State Pensionable
Age occurs, the guaranteed minimum shall be calculated
by whichever of the methods in rule 13.4 is
then in force. The Trustees shall, with the Principal
Employer's agreement, adopt a method by resolution and
notify the Occupational Pensions Board.
Section 21 Orders
13.4.1 The Member's guaranteed minimum may be
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calculated as the Member's Accrued Guaranteed
Minimum when Contracted-out Employment ends increased
in accordance with orders made under section 21 of
the Pensions Act.
Fixed Rate Revaluation
13.4.2 The Member's guaranteed minimum may be calculated as
the Member's Accrued Guaranteed Minimum when
Contracted-out Employment ends, increased by the rate
specified in regulations made under section 45(1)(b)
of the Pensions Act for each complete Tax Year
between the date on which Contracted-out Employment
ends and State Pensionable Age (or earlier death).
Limited Rate Revaluation
13.4.3 After payment of any limited revaluation premium
required under the Pensions Act, the guaranteed
minimum may be calculated as the Member's Accrued
Guaranteed Minimum when Contracted-out Employment
ends increased as set out in Section 35(5) of the
Pensions Act.
SPOUSE'S GUARANTEED MINIMUM PENSION
13.5 If a male Member entitled to a guaranteed minimum
dies at any time leaving a widow, she shall be entitled
as a minimum from the Scheme to a pension (excluding,
subject to Inland Revenue Limits, any
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0
pension secured by Voluntary Contributions) which,
expressed as a weekly amount, is one half the Member's
guaranteed minimum when he dies.
13.6 If a female Member entitled to a guaranteed
minimum dies leaving a widower, he shall be entitled as
a minimum from the Scheme to a pension (excluding, subject
to Inland Revenue Limits, any pension secured by Voluntary
Contributions) which, expressed as a weekly amount, is one
half that part of the Member's guaranteed minimum when she
dies which is attributable to earnings in the Tax Year
1988/89 and subsequent Tax Years.
GUARANTEED MINIMUM PENSION INCREASES
13.7 Guaranteed Minimum Pensions in payment under the
Scheme shall, insofar as they are attributable to
earnings in the Tax Years from and including 1988/89, be
increased to the extent required by section 37A of the
Pensions Act.
STATE SCHEME PREMIUMS
13.8 The Trustees may pay any State Scheme Premium
permitted by the Pensions Act and shall reimburse an
Employer from the Contingency Fund if it has paid one
13.9 If a State Scheme Premium is paid or treated as
having been paid:-
13.9.1 if it is a contributions equivalent premium or a
transfer premium under the Pensions Act, the
pension otherwise payable is reduced by the amount
of the
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Guaranteed Minimum Pension extinguished by the
premium
13.9.2 if it is an accrued rights premium or a pensioners
rights premium under the Pensions Act, the
pension otherwise payable is reduced by the
Trustees having regard amongst other matters to
13.9.2.1 the amount of Guaranteed Minimum
Pension and the methods by
which it may be calculated under the
Pensions Act and
13.9.2.2 the alternative benefits likely to
arise from the State as a result of
the premium having being paid.
13.10 The Trustees shall reduce a refund of Member
Contributions by the amount they are entitled to
recover on paying a contributions equivalent premium under
the Pensions Act, whether or not they pay one.
TRANSFERRED GMP
13.11 If a Member, or the Member's spouse, has a
Transferred GMP: --
13.11.1 the guaranteed minimum described in rule 13.1
shall, if the Pensions Act requires it, include
the Transferred GMP calculated as if rights to
it had accrued under the Scheme in a continuous
period of Contracted-out Employment
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13.11.2 if rule 13.11.1 does not apply, the
guaranteed minimum described in rule
13.1 shall be calculated so that the
Transferred GMP is increased by a method
permitted under the Pensions Act which the
Trustees select.
13.12 Unless the Occupational Pensions Board agrees
otherwise, (either generally or on a specific
case), rights to a Guaranteed Minimum Pension may only
be transferred to a contracted-out scheme for the
purposes of the Pensions Act which calculates those
rights on a basis permitted by the Pensions Act.
14. OVERRIDING LEGISLATION
14.1 If a person's benefits under the Rules are less
than a minimum amount to which that person is entitled
under the Pensions Act, the Rules shall be read as if they
gave rights to that minimum amount.
14.2 If the Pensions Act or any other legislation
oblige the Trustees to provide information or take any
action, that obligation shall apply as if it had arisen
under the Rules.
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PART 3
ADMINISTRATION
15. PURPOSE OF SCHEME
15.1 The Trustees shall hold the Funds on trust for the
purpose of providing Relevant Benefits for Members and
their Dependants and other persons subject to the Rules.
15.2 The Trustees shall be the administrator of the
Scheme for the purposes of Chapter I of Part XIV of the
Taxes Act and shall administer the Scheme to:-
15.2.1 maintain Inland Revenue Approval, and
15.2.2 comply with the Pensions Act as far as those
provisions apply.
16. CONTINGENCY FUND
The Trustees may use the Contingency Fund in such one or
more of the following ways as they shall decide:
16.1 to make any payment which may be made from it
under the Rules
16.2 to pay the death benefits under rule 7
16.3 to meet any shortfall in the contributions
required to secure Guaranteed Minimum Pensions
16.4 with the agreement of the Employer, to provide
Relevant Benefits
16.4.1 in addition to the benefits to which Members or
their Dependants are already entitled under
the Scheme, or
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16.4.2 for any Employee or former Employee who is not a
Member and his Dependants
16.5 to pay interest (at whatever rate the Trustees may
in each case decide) on any sums due under the
Scheme which are not paid within 28 days
16.6 to pay any insurance premiums due in respect of
the death benefits under rule 7, or
16.7 in such other way as may be specifically agreed
with the Inland Revenue.
The Contingency Fund shall be administered as a separate
account and, unless the Inland Revenue otherwise agrees, its
value shall not exceed 5% of the aggregate value of the
Member's Accounts.
17. TAX AND EXPENSES
17.1 If any tax liability arises on paying a benefit or
any sum out of the Funds, the Trustees may reduce
the benefit or sum by the amount of tax.
17.2 Unless the Trustees agree to meet some or all of
them from the Contingency Fund, any expenses incurred
by the Trustees in
17.2.1 operating the Scheme including the cost of
professional services, and/or
17.2.2 maintaining, investing and insuring the
Funds
shall be reimbursed by the Employers in the same
proportions as their contributions under rule 2.3
during the period to which the expenses relate.
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18. ACTUARIAL VALUATION OF THE FUNDS
The Trustees shall arrange at intervals not greater than 42
months, for the Actuary to:-
18.1 value the Funds' assets, and
18.2 report to the Trustees and the Principal Employer on the
financial position of the Funds.
19. TRUSTEES APPOINTMENT AND REMOVAL
19.1 Unless a company is sole trustee the minimum
number of trustees of the Funds shall be two and the
maximum number shall be seven.
19.2 The Principal Employer may by deed executed by the
Principal Employer alone, remove any of the trustees
from office. A trustee who leaves office shall take
whatever action is necessary to ensure that the
continuing trustees have a valid title to the Funds.
19.3 A trustee may resign from office by giving the
Principal Employer at least 14 days' written notice. At
the end of the period of notice, the trustee shall be
deemed to have retired from office and the Principal
Employer shall execute a deed to discharge him from the
trusts of the Scheme.
19.4 The Principal Employer may by deed executed by the
Principal Employer and any new or additional trustee,
appoint a new trustee either:
19.4.1 in place of a trustee who dies or is removed
from office, or
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19.4.2 as an additional trustee.
19.5 A trustee (or director of a corporate trustee) may
validly execute his trustee duties even if he is
entitled to receive benefits under the Scheme or
has an interest in the result of his actions.
19.6 If a trustee is engaged in a profession or is a
corporate body the trustee shall be entitled to
charge for work done in relation to the Scheme.
It shall be treated as an expense under rule 17.
20. INVESTMENT POWERS
20.1 Subject to the provisions of The Occupational
Pension Schemes (Investment of Scheme's Resources)
Regulations 1992, the Trustees may apply the Funds
to:-
20.1.1 operate current and deposit accounts with any
company, bank, building society, local
authority or Insurer or other financial
institution
20.1.2 hold any annuity or assurance contract or any
deposit administration or managed fund
arrangement with an Insurer
20.1.3 invest in stocks, shares, debentures or
debenture stocks or other securities
20.1.4 underwrite, sub-underwrite or guarantee the
subscription of any investments referred to in
rule 20.1.3, upon whatever terms they arrange
20.1.5 purchase and dispose of any interest in
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land, or personal property whether or not of a
wasting nature
20.1.6 invest in units of any unit trust
20.1.7 deal in traded options and financial futures
which are regarded as investments by virtue of
section 659 of the Taxes Act
20.1.8 borrow money for any purpose of the Scheme, or
20.1.9 lend money on such security as the Trustees think
fit to any person.
In addition to their powers above the Trustees may make
any investment which they could make if they were absolute
owners of the Funds.
20.2 The Trustees may give indemnities secured on the Funds and
grant mortgages or charges over the Funds.
21. MANAGING INVESTMENTS
INVESTMENT MANAGERS
21.1 The Trustees may, with the Principal Employer's
agreement, appoint and dismiss investment managers to
manage the investment of the Funds and delegate
investment decisions to them.
NOMINEES
21.2 The Trustees may appoint a nominee or nominees to
hold assets of the Funds. The Trustees shall
decide the terms on which the nominee shall hold
assets or exercise any rights in respect of those
assets.
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Insurance
21.3 The Trustees may insure assets of the Funds at
their full value.
POOLING INVESTMENTS
21.4 The Trustees may (with the Inland Revenue's and
the Principal Employer's agreement) arrange for
the pooling and joint investment of assets with
another Retirement Benefits Scheme if:-
21.4.1 the other scheme is one to which the Principal
Employer or an Associated Employer
contributes, and
21.4.2 the Trustees agree in writing with the
trustees of the other scheme, the terms on
which expenses, income, gains and losses
shall be apportioned.
Investments may be pooled on a unitised basis or
any other basis which the Trustees approve where:
21.4.3 a nominee holds and manages the investments
and issues units to the trustees of the
schemes, and
21.4.4 the interests of the trustees of the
participating schemes are restricted to the
units issued by the nominee and do not
extend to the underlying assets.
22. AGENTS, DELEGATION AND PROFESSIONAL ADVICE
AGENTS
22.1 The Trustees may, with the Principal Employer's
agreement, employ agents to perform any
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administrative duties. This may include the operation
of bank accounts, the payment of benefits or other sums and
the receipt of money due to the Trustees. Any persons
appointed to operate bank accounts must be appointed by a
memorandum signed by all the Trustees.
DELEGATION
22.2 The Trustees may, with the Principal Employer's
agreement, delegate any of the Trustees' powers
and discretions to any person or persons whether
incorporated or not.
PROFESSIONAL ADVICE
22.3 The Trustees shall be entitled to obtain professional
advice and services whenever they consider it necessary
for the proper administration of the Scheme in addition
to the specific cases referred to in the Rules.
DISCHARGES
22.4 A written authority given by all of the Trustees shall
give the same protection to a person dealing with anyone
authorised under rules 22.1 and 22.2 as if they had dealt
with the Trustees.
23. MEETINGS, PAYMENTS AND ACCOUNTS
MEETINGS
23.1 Unless a company is sole Trustee the following provisions
shall apply:-
23.1.1 The Trustees shall meet at least once a year and
shall, subject to the remainder
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of rule 23.1, make regulations governing their
meetings.
23.1.2 There shall be a quorum at a meeting if a
majority of the Trustees are present. At a
meeting of the Trustees all resolutions shall
be decided by a majority of the Trustees
present. If there is an equality of votes the
chairman of the meeting shall have a casting
vote.
23.1.3 The Principal Employer may, by board resolution,
appoint one of the Trustees to be a chairman of
Trustees' meetings and appoint another Trustee
to replace him at any time. If the appointed
chairman cannot attend any meeting he may
nominate another Trustee as chairman for that
meeting.
23.1.4 If the Principal Employer has not appointed a
chairman, or no alternative chairman has been
nominated under rule 23.1.3 for a meeting which
the appointed chairman cannot attend, the
chairman of the meeting shall be elected by a
majority of the Trustees present. If there is
an equal number of highest votes cast, the
chairman shall be chosen by lot.
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RESOLUTIONS
23.2 A written Trustees' resolution (of which notice
has been given to all the Trustees) signed by a
majority of the Trustees, whether on the same or
separate copies of the resolution, shall be regarded as
having been validly passed at a Trustees' meeting.
PAYMENTS
23.3 The Trustees shall keep proper records of all
transactions and arrange to make payments on
their due dates and collect money and property when
due.
ACCOUNTS
23.4 The Trustees shall prepare annual accounts
to 31st March in each year and arrange for them to be
audited by an accountant qualified under section 31 of
the Companies Act 1989 who is not
23.4.1 a Member,
23.4.2 an Employer, an employee or director of
an Employer or a company or firm connected
with an Employer,
23.4.3 a Trustee or director of a corporate
Trustee, or
23.4.4 an employee of the Trustees.
24. TRUSTEES' LIABILITY AND INDEMNITY
24.1 A trustee or a director of a corporate trustee
shall only be liable for actions or omissions
of the trustees or any agents properly
employed to act on their behalf involving his
own personal
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dishonesty.
24.2 To the extent that he is not indemnified under
rule 24.3, each trustee or each director of a
corporate trustee shall be kept indemnified out of
the Funds against any claim or demand made against
him arising out of any action or omission of the
trustees, their agents and persons appointed under
rule 22.2 except where any claim or demand involves his
own personal dishonesty.
24.3 The Trustees and the Principal Employer shall be
entitled to use the Funds to buy insurance which:
24.3.1 indemnifies the Funds against losses or
expenses caused by a breach of trust
24.3.2 indemnifies each trustee or the directors of a
corporate trustee against liability not involving
personal dishonesty.
25. ADDING ASSOCIATED EMPLOYERS
If the Principal Employer and the Trustees consent, an
Associated Employer may participate in the Scheme if it
enters into a deed with the Trustees agreeing to comply with
the requirements on an Employer under the Rules.
26. SALE OF AN EMPLOYER OR BUSINESS
26.1 If an agreement is made in respect of an Employer
which:
26.1.1 results in the Employer ceasing to be an
Associated Employer, or
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26.1.2 results in a Member's Service with that
Employer ending,
the Employer's liability to contribute in respect
of Termination Beneficiaries shall immediately
stop and rule 28 shall apply unless, with the
approval of the Inland Revenue:
26.1.3 where rule 26.1.1 applies, the Trustees and the
Principal Employer agree to the Employer's
continued participation for a limited period,
26.1.4 where rule 26.1.2 applies:
26.1.4.1 the Members concerned are employed
by an Acquiring Employer, and
26.1.4.2 the Trustees and the Principal
Employer agree to the Acquiring
Employer becoming an Employer
under rule 25 for a limited period
in respect of those Members.
The Employer's or Acquiring Employer's contributions
and their employees' contributions shall stop at the end
of such limited period.
26.2 If a Member transfers from the employment of one
Employer to another in the circumstances described
in rule 26.1, the transfer shall not cause:
26.2.1 a break in a Member's Pensionable
Service, nor
26.2.2 benefits or options to arise as if the
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Member had left Pensionable Service.
27. WHEN AN EMPLOYER STOPS CONTRIBUTING
27.1 An Employer's liability to contribute to the
Scheme stops if it gives notice under rule 2.7
that it is stopping contributions or if:-
27.1.1 it is no longer an Associated Employer and rule 26.1.3
does not apply
27.1.2 the Principal Employer informs the Trustees that the
Employer's contributions shall stop, or
27.1.3 rule 29 (Principal Employer's
contributions stopping) applies.
27.2 An Employer whose liability to contribute has ended
is liable for its unpaid contributions and
contributions deducted from Member's pay.
28. ACTION IF AN EMPLOYER STOPS CONTRIBUTING
If an Employer's contributions stop under rule 27.1 the
Trustees shall, subject to rules 13 (Guaranteed Minimum
Pensions) and 30 (Termination Deficit), secure for its
Termination Beneficiaries the Termination Benefits to which
they are entitled (in so far as they have not already been
secured) by any combination of the methods set out in rule
31.
29. PRINCIPAL EMPLOYER'S CONTRIBUTIONS STOPPING
29.1 Unless the Principal Employer is replaced under
rule 29.2, the Trustees (after paying any lump sum
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death benefits, Members' refunds, transfers of
rights and lump sums under rule 5.1 which are due
but not paid) shall apply rule 28 to every
Employer:-
29.1.1 where the Principal Employer's
contributions remain unpaid at the end
of any period which the Trustees may
notify in writing to the Principal
Employer
29.1.2 the Principal Employer gives notice in
writing to the Trustees that it is
stopping its contributions to the
Scheme, or
29.1.3 on the earlier expiry of the Trust
Period.
29.2 If the Principal Employer stops participating in
the Scheme, the Trustees may, subject to rule
29.3, by entering into a deed with another company
firm or person agree that it shall assume the Principal
Employer's obligations under the Scheme.
If the Trustees do so, the Scheme shall continue
and references in the Rules to the Principal Employer
shall mean that company firm or person.
29.3 The Scheme trusts shall not continue beyond the
Trust Period.
30. TERMINATION DEFICIT
If the assets of the Funds are insufficient to secure in
full the Termination Benefits to which the Termination
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Beneficiaries are entitled, the assets shall be applied to secure benefits
in the following order. Where the benefits in one category can only be
partly secured, the Trustees shall reduce the benefits in that
category as they see fit: PENSIONERS AND THEIR DEPENDANTS
Category 1 For persons receiving a pension at the Termination Date and
their Dependants, their Termination Benefits.
PERSONS OTHER THAN PENSIONERS WHO HAVE REACHED NORMAL
RETIREMENT DATE AND THEIR DEPENDANTS
Category 2 For persons (other than pensioners) who have
reached Normal Retirement Date and their
Dependants, their Termination Benefits.
GRADUATED SCHEME PENSIONS
Category 3 To the extent that they are not provided
under Categories 1 and 2, Graduated Scheme
Pensions.
GUARANTEED MINIMUM PENSIONS
Category 4 To the extent that they are not provided
under Categories 1 and 2, Guaranteed Minimum
Pensions or alternatively State Scheme
Premiums.
MEMBERS WHO HAVE NOT REACHED NORMAL RETIREMENT DATE
Category 5.1 For Members in Pensionable Service on the
Termination Date who have not reached Normal
Retirement Date and their Dependants, the
Termination Benefits which would have been
payable in respect of the Member if he had
left Pensionable Service on that date, less
any amounts referred to in Categories 3 and 4.
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5.2 For persons (other than pensioners) who are not in
Pensionable Service at the Termination Date and have
not reached Normal Retirement Date and their Dependants,
the Termination Benefits to which they are entitled,
less any amounts referred to in Categories 3 and 4.
31. SECURING TERMINATION BENEFITS
31.1 The methods to secure Termination Benefits are:-
PAYMENT FROM THE SCHEME
31.1.1 The Trustees may retain the Member's
Account and pay the benefits (including Guaranteed
Minimum Pensions) from the Scheme.
INSURANCE POLICIES
31.1.2 The Trustees may buy a policy in the Member's name or
in the name of a trustee or trustees, from an
Insurer. The policy shall meet the requirements of the
Pensions Act, the Preservation Act and Inland Revenue
Approval and provide benefits matching, as near as
practicable, the benefits in respect of the Member.
If there is no Member the Trustees may buy a policy
in the name of the person concerned or in the name of
a person following whose death the benefits will
become payable.
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GROUP TRANSFER VALUE TO ANOTHER SCHEME OF THE EMPLOYER
31.1.3 The Trustees may pay a transfer value to another
Retirement Benefits Scheme in which the Employer
(or a successor to part or all of its business)
participates to provide benefits in substitution for
the benefits otherwise payable. The transfer may be for
a group or category of persons and may be made without
Members' consents unless these are required by the
Pensions Act and the Preservation Act.
CONTINGENCY FUND
31.2 The Contingency Fund shall be applied in any one
or more of the following ways, as the Trustees
direct:
31.2.1 paid to the Employer (after obtaining the agreement of
the Inland Revenue if this is a requirement of the
Taxes Act)
31.2.2 used to meet the costs of securing the Termination
Benefits
31.2.3 applied to increase the Termination Benefits or to
provide other Relevant Benefits for Termination
Beneficiaries,
31.2.4 transferred to another Retirement Benefits Scheme
(after obtaining the agreement of the Inland Revenue if
this is a requirement of the Taxes Act), or
31.2.5 retained in the Scheme unless all the Employers have
stopped contributing.
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32. CHANGES TO THE SCHEME
32.1 The Trustees may, with the consent of the Principal Employer
and subject to the remainder of rule 32 alter modify or add to
the provisions of this deed and the Rules in such manner
and for such purposes as it thinks fit.
32.2 No such alteration, modification or addition shall
reduce the benefit of any person entitled to benefit from
the Scheme to less than it would have been if the Scheme had
been wound up immediately before the amendment.
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PART 4
33. INTERPRETATION AND DEFINITIONS
33.1 The Trustees shall decide all questions and matters of doubt
arising in connection with the Scheme. Their decision shall be
final unless made on an error of fact.
33.2 Unless it is inconsistent with the context, the masculine
includes the feminine and the singular includes the plural and
vice versa.
33.3 A reference to an Act of Parliament includes amendments,
consolidations and regulations issued in connection with that
Act. In relation to events occurring before the passing of
the Taxes Act references to that Act shall be read as
references to the provisions in force before that Act.
33.4 Words in the Rules beginning with a capital letter which are
listed below have the following meanings:-
"ACCRUED GUARANTEED MINIMUM" means for a Member the amount of Guaranteed
Minimum Pension (excluding any prospective increases in it) accrued when
Contracted-out Employment ends.
The amount shall be calculated in accordance with sections 35(1) to 35(5) of
the Pensions Act. The Member's spouses's Accrued Guaranteed Minimum is 50% of
the Member's.
Any part of the Guaranteed Minimum Pension which relates to a Transferred GMP
shall be excluded from the Accrued Guaranteed
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Minimum to calculate GMP Revaluation, unless rule 10.2 requires
it to be included.
"ACQUIRING EMPLOYER" means a company or firm which is not associated in
business with the Principal Employer and which
(i) buys any part of an Employer's undertaking or
(ii) is associated in business with, the company or firm
which buys any part of an Employer's undertaking.
"ACTUARY" means the person appointed by the Trustees, with the
consent of the Principal Employer, to be the actuary to the Scheme. The
Actuary shall be a Fellow of the Institute of Actuaries or a Fellow of the
Faculty of Actuaries.
"AGGREGATE RETIREMENT BENEFITS" means for a Member the annual total of:
(i) the pension payable under the Scheme and Related
Schemes
(ii) pensions given up for a lump sum or to provide
Dependant's pension under the Scheme and Related Schemes
(iii) the annuity equivalent of all retirement benefits in
non-pension form under the Scheme and Related Schemes.
"ASSOCIATED EMPLOYER" means an employer which is either
(i) associated in business with the Principal Employer and
which the Inland Revenue permit to participate in the
Scheme or
(ii) a wholly owned subsidiary of the Principal Employer as
defined under section 736 of the Companies Act 1985 if
at any time the Principal Employer of the Scheme is a
company.
"BASIC SALARY" is determined on the day a Member joins the Scheme
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and on the first day of each month thereafter and means his basic salary from
the Employers exclusive of any commission, bonus or other fluctuating
payments. In the case of a Capped Member, the annual rate of his Basic Salary
shall not exceed the Cap in force on the date of determination.
"CAP" means Pound 60,000 or such higher figure as may be specified under
section 590C(6) of the Taxes Act.
"CAPPED MEMBER" means a person who either
(i) becomes a Member or restarts his Pensionable Service on
or after 1st June 1989 (unless the Inland Revenue
otherwise agrees) or
(ii) becomes a Life Assurance Member under rule 1.2.2 on or
after 1st June 1989, or
(iii) has before the date on which his Pensionable Service
ends elected by notice in writing to the Trustees to be
a Capped Member.
"CHILD" means the natural or legally adopted child of the Member who is
under age 18 or under age 21 if he is in full time education and includes a
child conceived but not born when the Member dies.
"CONNECTED SCHEME" means a Retirement Benefits Scheme (other than a scheme
providing Relevant Benefits in respect of Service) which is connected
with the Scheme in accordance with the provisions of section 590A(2) of the
Taxes Act.
"CONTINGENCY FUND" means those assets of the Scheme which are not held by
the Trustees as part of a Member's Account.
"CONTRACTED-OUT EMPLOYMENT" means employment with an Employer which is
contracted-out employment for the purpose of the Pensions Act
under the Scheme.
"DEPENDANT" means
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(i) the Member's spouse,
(ii) the Member's Child, or
(iii) a person who in the Trustees' opinion was wholly or
partly maintained by the Member at the date of the
Member's retirement or death.
"DESIGNATED BENEFICIARIES" are
(i) a Member's spouse
(ii) a child of the Member or of the Member's spouse
(iii) a Member's grandparents and grandparents of the
Member's spouse and those grandparents descendants
(iv) any person who in the Trustees' opinion has at any time
been wholly or partly maintained by the Member
(v) any person (or body of persons whether or not
incorporated)
(a) whom a Member has asked the Trustees in
writing to consider as a recipient of lump
sum death benefits or
(b) who is named as a beneficiary in the Member's
will.
For the purpose of this definition a person's legally adopted child shall be
regarded as that person's natural child. "EARNINGS" means a Member's total pay
from his Employer including the value of any non-monetary benefits which
are chargeable to tax BUT no account shall be taken of anything excluded from
the definition of remuneration in section 612 of the Taxes Act OTHER THAN
(where the right giving rise to that income was acquired before 17th March
1987, but not to calculate a Member's maximum contributions under rule 2.11),
amounts chargeable under Schedule E of the Taxes Act in respect of
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(i) the acquisition or disposal of shares or an interest in
shares or
(ii) a right to acquire shares.
"EMPLOYEE" means an employee of any Employer.
"EMPLOYER" means the Principal Employer and any Associated Employer or
Acquiring Employer which participates in the Scheme under rule 26.
"FINAL REMUNERATION" is calculated at the date a Member's Service
ends (or in certain circumstances at Normal Retirement Date if Service
continues after Normal Retirement Date) and means the greatest of
(i) any Remuneration during the 5 years preceding calculation but
(a) not if a Member at any time after 16th March 1987 and within
the 10 years before Service ends is a 20% Director and
(b) ignoring any part of emoluments in any period
after 5th April 1987 which are in excess of
Pound 100,000
(ii) the yearly average of total Earnings during any period
of 3 or more years ending during the 10 years before
calculation
(iii) any higher amount which would not prejudice Inland
Revenue Approval.
If earnings relate to a period more than 12 months before calculation
they may be increased by the percentage increase in the Government's Index of
Retail Prices from the end of that period until calculation, but for the
purpose of rule 12.2, only to any extent that the Member's pension is increased
solely under
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this paragraph.
Final Remuneration shall not exceed
(1) for a Capped Member, the Cap and
(2) to calculate a maximum lump sum under rule 12.2,
Pound 100,000 (or any other figure which would not prejudice
Inland Revenue Approval).
"FUNDS" means collectively
(i) the aggregate of the Member's Accounts, and
(ii) the Contingency Fund.
"GMP REVALUATION" means where a Member's Contracted-out
Employment ends before State Pensionable Age:-
(i) for the Member, the excess of (a) his Guaranteed
Minimum Pension over (b) his Accrued Guaranteed Minimum
when Contracted-out Employment ends
(ii) for the Member's widow, one half of the excess of (a)
the Member's Guaranteed Minimum Pension when he dies
over (b) his Accrued Guaranteed Minimum Pension when
his Contracted-out Employment ended
(iii) for the Member's widower, one half of the excess of (a)
the Member's Guaranteed Minimum Pension when she dies
based on earnings from the 1988/89 Tax Year onwards,
over (b) the Member's Accrued Guaranteed Minimum when
her Contracted-out Employment ended.
The Member's Guaranteed Minimum Pension which relates to a Transferred GMP
shall only be used to calculated GMP Revaluation if rule 10.2 requires
the Transferred GMP to be used to calculate the Accrued Guaranteed Minimum.
"GRADUATED SCHEME PENSION" means the minimum pension satisfying the conditions
of section 57(1)(d) of the National Insurance Act
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1965 where a transfer has been accepted under rule 10.1 in respect of any
period of non-participating employment for the purposes of that Act.
"GUARANTEED MINIMUM PENSION" means
(i) for the Member, the guaranteed minimum amount of
pension required by section 35 of the Pensions Act
calculated under rule 13
(ii) for the Member's widow, an amount equal to 50% of the
Member's guaranteed minimum in (i) above
(iii) for the Member's widower, an amount equal to 50% of the
Member's guaranteed minimum in (i) above based on
earnings from the 1988/89 Tax Year onwards.
"INLAND REVENUE APPROVAL" means approval as an exempt approved scheme under
Chapter I of Part XIV of the Taxes Act.
"INLAND REVENUE LIMIT" means the limits described in rule 12 on Relevant
Benefits under the Scheme.
"INSURER" means a United Kingdom branch or office of an insurance company to
which Part II of the Insurance Companies Act 1982 applies and which is
authorised by or under section 3 or 4 of that Act to carry on ordinary
long-term insurance business as defined in that Act.
"LIFE ASSURANCE MEMBER" means an Employee who joins the Scheme under rule 1.2.2
and who is covered solely for the lump sum death benefit under rule
7.1.2 and the dependants' pensions on death in Service under rules 7.2 or 7.3.
"MEMBER" means a person who has become a Member under rule 1. Such a person
shall remain a Member while he is entitled to any benefit from the Scheme.
"MEMBER CONTRIBUTIONS" means a Member's contributions under rule
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2.1 together with any assets transferred to the Scheme which under rule 10.4
are treated as contributions to the Scheme by the Member. Any contributions
which are refunded or applied to secure Relevant Benefits on the basis
that those assets are not payable on death or on leaving Pensionable Service
shall be ignored.
"MEMBER'S ACCOUNT" means the accumulated balance held in respect of a
Member under rule 3.
"NORMAL RETIREMENT DATE" means the last day of the month in which a
Member attains his 60th birthday. If a Member's employment terms permit him to
retire at another age, Inland Revenue Approval is not prejudiced and the
Trustees agree, Normal Retirement Date shall mean the age the Principal
Employer notifies to him.
"PENSIONABLE SERVICE" means, subject to rule 8 (absence from work), Service
after becoming a Member under rule 1 until the day before Normal Retirement
Date or if earlier
(i) the date his Pensionable Service is deemed to end under
rule 1.7, or
(ii) when he stops satisfying the eligibility conditions in
rule 1.1.
"PENSIONS ACT" means the Social Security Pensions Act 1975.
"PERSONAL PENSIONS" means a personal pension scheme approved (or seeking
approval) under Chapter IV of Part XIV of the Taxes Act.
"PRESERVATION ACT" means the Social Security Act 1973.
"PRINCIPAL EMPLOYER" means The Galileo Company or any other company or person
who may by deed executed with the Trustees, assume the Principal Employer's
powers and obligations under the Rules.
A certificate of the Principal Employer's company secretary shall
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for all Scheme purposes be conclusive evidence of the Principal
Employer's act or opinion.
"QUALIFYING SERVICE" is
(i) a Member's last period of Pensionable Service and
(ii) following a transfer payment to the Scheme, any period
of membership of a former employer's Retirement
Benefits Scheme which the Preservation Act requires to
count as Qualifying Service.
If a Member
(a) has a break in Pensionable Service of 31 days or less,
the periods before and after the break are regarded as
one continuous period of Pensionable Service for the
purpose of this definition.
(b) has a previous period of Pensionable Service
(1) which ended on or after 6th April 1975 and
(2) when it ended his Qualifying Service, excluding
any period for which his contributions were
refunded, totalled at least 2 years (5 years if
the previous period ended before 6th April 1988)
he shall be regarded as having completed at least 2
years Qualifying Service (5 years if the previous
period ended before 6th April 1988) in any later period
of Pensionable Service.
"RELATED SCHEMES" are Retirement Benefits Schemes other than the
Scheme, which provide Relevant Benefits in respect of Service
with an Employer and includes a scheme regarded by the Inland
Revenue as a free-standing additional voluntary contributions
scheme.
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"RELEVANT BENEFITS" are benefits which may be given by a
Retirement Benefits Scheme approved under section 612 of the
Taxes Act.
"REMUNERATION" means in respect of any 12 month period the total
of
(i) a Member's basic pay from his Employer
(ii) the annual average of all pay, including the value of
non-monetary benefits which are chargeable to income
tax, for that 12 months and the preceding 24 months.
Anything excluded from the definition of "remuneration" in
section 612 of the Taxes Act shall be ignored
(a) for the purpose of calculating a Member's maximum
contributions under rule 2.3, on and from 6th April 1987
(b) for other purposes, where a Members Pensionable
Service ends on or after 17th March 1987, other than
amounts chargeable under Schedule E of the Taxes Act in
respect of the acquisition or disposal of shares, or an
interest in shares or from a right to acquire shares
where the right giving rise to that income was acquired
before 17th March 1987.
"RETIREMENT BENEFITS SCHEME" is a scheme within the definition of
retirement benefits scheme in section 611 of the Taxes Act which
has received or is seeking Inland Revenue Approval.
"RULES" means these rules and any amendment of these rules.
"SCHEME" means The Galileo Retirement and Death Benefit Scheme.
"SERVICE" means a Member's latest or only period of continuous service whilst
in the employment of a company or firm which is or was an Employer unless the
Rules indicate otherwise.
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"STATE PENSIONABLE AGE" means a male's 65th birthday and a
female's 60th birthday or any other age laid down by the
Department of Social Security.
"STATE SCHEME PREMIUM" means a payment to the Secretary of State
to discharge Scheme liabilities in respect of Guaranteed Minimum
Pension.
"TAX YEAR" means a year starting on 6th April.
"TAXES ACT" means the Income and Corporation Taxes Act 1988.
"TERMINATION BENEFICIARIES" are persons who on the Termination
Date are:-
(i) Members who are either employed by or when last
Employees were employed by the Employer
(ii) Dependants of Members who would be included under (i)
if they were alive
(iii) any other Employees or former Employees of the Employer
and their Dependants who have an entitlement to Scheme
benefits.
"TERMINATION BENEFITS" means Relevant Benefits, including any
rights to increases under the Rules, of the following amounts:
(i) in the case of a pensioner, it is the amount being paid
(ii) in the case of an Employee, it is his preserved benefit
entitlement under rule 8.1 on the basis of Pensionable
Service ending on the Termination Date or the earlier
date when Pensionable Service in fact ended
(iii) in the case of a former Employee who left before the
Termination Date, it is his preserved benefit
entitlement under rule 8.1
(iv) in the case of a Dependant of any of the above persons,
it is any contingent benefit payable on that person's
subsequent death.
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Instead of the preserved benefits in rules (ii) and (iii), the Trustees
may pay immediate benefits in the same circumstances as the Rules permit.
"TERMINATION DATE" means
(i) where no Acquiring Employer is involved, the date the
Employer's liability to contribute ends or
(ii) where an Acquiring Employer is involved
(a) if it participates in the Scheme, the date it stops
participating
(b) if it does not participate, the date the
Employer or part of its undertaking is sold.
"TRANSFERRED GMP" means rights to guaranteed minimum pension under section
35 of the Pensions Act which are transferred into the Scheme under rule 10.1.
"TRUST PERIOD" means the period ending on 1st May 2068 (being the 80th
anniversary of the commencement of the Scheme) or any longer period which does
not offend the maximum legal duration of a trust.
"TRUSTEES" means the trustees or sole trustee for the time being of the
trusts of the Scheme.
"VOLUNTARY CONTRIBUTIONS" means the value of any contributions paid by a Member
under rule 2.8 and any voluntary contributions transferred into the Scheme but
ignoring any contributions which are refunded or applied to secure Relevant
Benefits on the basis that they are not payable on death or on leaving
Pensionable Service.
"20% DIRECTOR" means a Member who at any time after 16th March 1987 and within
10 years before leaving Service is both a director of an Employer and within
section 417(5)(b) of the Taxes Act.
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"20% PRE-17.3.87 DIRECTOR" means a Member who
(i) is a director of any Employer and
(ii) beneficially owns shares which (when added to any
shares held by his spouse, minor children and the
trustees of any settlement to which he or his spouse
has transferred assets) carry more than 20% of the
voting rights of the Employer or any company which
controls the Employer.
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EXHIBIT 10.35
GALILEO INTERNATIONAL
EMPLOYEES PENSION PLAN
ARTICLE I
INTRODUCTION
Section 1.01 History and Purpose. Effective as of January 1, 1993,
Covia Partnership ("Covia") established the Covia Employees Pension Plan (the
"Plan") for the benefit of all eligible employees of Covia and its Affiliated
Employers. The Plan replaced the Covia Pension Plan (previously known as the
"Covia Mirror Pension Plan") (previously known as the "Covia Mirror Pension
Plan") (the "Prior Plan") that was originally established August 5, 1988, and
was amended and restated thereafter.
Effective as of January 1, 1993, the Prior Plan was merged into this
Plan. In no case will the Accrued Benefit of a Participant under this Plan who
was a Participant in the Prior Plan be less than such Participant's Accrued
Benefit under the Prior Plan as of December 31, 1992.
The rights of any person whose status as an Employee terminated prior
to the Effective Date of this Plan, and who had deferred vested benefits under
the Prior Plan shall be determined in accordance with the Prior Plan as in
effect on the date of such Participant's termination of employment, unless
otherwise specifically provided under the terms of this Plan.
Effective as of September 16, 1993, pursuant to a combination of the
operations of Covia, certain of the assets and business of Covia were assumed by
Apollo Travel Services, a general partnership, and Covia Partnership was renamed
as Galileo International Partnership. Accordingly, effective September 16, 1993,
the Plan is renamed the Galileo International Employees Pension Plan.
The Plan, as amended and restated herein, is intended to continue to
qualify as a non-integrated defined benefit pension plan under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). The Covia
Partnership Employees Pension Trust (the "Trust"), now known as the Galileo
International Partnership Employees Pension Trust, is intended to continue to be
tax-exempt under Section 501(a) of the Code.
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ARTICLE II
DEFINITIONS AND CONSTRUCTION
Where the following words and phrases appear in this Plan, they will
have the meanings set forth in this Article unless the context of a given
Section indicates otherwise.
Section 2.01 Accrued Benefit. A Participant's benefit, determined as of
any date, based on the formula set forth in Section 6.02 of this Plan. Such
Accrued Benefit will be determined in accordance with the provisions of Articles
VI through X of the Plan.
Section 2.02 Actuarial Equivalent. Equality in the value of the
aggregate amounts expected to be received under the different forms of benefit
payments provided by the Plan relating to the present value of a Single Life
Annuity that would be payable to any Participant at age 65 in accordance with
the terms of the Plan. Unless specifically stated otherwise in the Plan, such
actuarial equivalencies shall be based on the tables listed in Appendix B of
this Plan.
Section 2.03 Affiliated Employer. Any of the following entities as
defined under Section 414 of the Code:
(a) any trade or business, whether or not incorporated, that is
under common control (within the meaning of Section 414(c) of
the Code) with Galileo International;
(b) any trade or business that is a member of an affiliated
service group (within the meaning of Section 414(m) of the
Code) of which Galileo International is also a member;
(c) any other entity required to be aggregated with Galileo
International under Section 414(o) of the Code; or
(d) the entities described in Appendix A;
provided that "Affiliated Employer" does not include any entity for any period
before the date such entity satisfied (or after the date the entity ceases to
satisfy) the affiliation or control tests of (a) through (d) above, subject to
the provisions of Appendix A.
For periods prior to the closing date of the Covia Reorganization,
unless otherwise specifically provided under the Plan, the term "Affiliated
Employer" shall also include United Air Lines; provided, however, that United
Air Lines retains not less than fifty percent (50%) ownership of the Employer.
For periods on and after the closing date of the Covia
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Reorganization, the term "Affiliated Employer" shall not include United Air
Lines, unless otherwise specifically provided under the Plan.
Section 2.04 Authorized Leave of Absence. Any absence authorized by the
Employer under the Employer's standard personnel practices, provided that all
persons under similar circumstances must be treated alike in the granting of
such Authorized Leaves of Absence; and provided further that the Employee timely
returns to employment with the Employer or retires immediately following his
Authorized Leave of Absence. An absence caused by service in the Armed Forces of
the United States will be considered an Authorized Leave of Absence provided
that the Employee complies with all of the requirements of federal law in order
to be entitled to reemployment and provided further that the Employee returns to
employment with the Employer within the period provided by such law.
Section 2.05 Beneficiary. Any legal or natural person or persons
designated by a Participant or otherwise authorized in accordance with the
provisions of Article XIV herein to receive any benefit that may be payable
under this Plan with respect to a Participant upon such Participant's death.
Section 2.06 Benefit Service. Subject to the limitations set forth in
Articles III and IV of the Plan, for purposes of determining the amount of a
Participant's benefit payable under this Plan, a Participant will be credited
with Benefit Service under subparagraphs (a) through (d) below, as applicable to
such Participant:
(a) Regular Full-Time and Part-Time Employees. A Participant who
is a regular Full-Time or Part-Time Employee (as defined in
Sections 2.25 and 2.35, respectively, of this Plan) shall be
credited with one (1) month of Benefit Service for each Month
of Service (as defined in Section 2.30) earned by such
Participant on or after January 1, 1993.
(b) Prior Plan Participant. A Participant who was a participant in
the Prior Plan shall be credited with months of Benefit
Service equal to the number of Months of Service for benefit
accrual purposes that were standing to his credit under the
Prior Plan as of December 31, 1992.
(c) Disabled Participants. A Participant who was a regular
Full-Time or Part-Time Employee and who becomes Disabled on or
after the Effective Date shall be credited with one (1)
calendar month of Benefit Service for each full calendar month
he is not actively employed due to his Disability, up to the
date such Participant elects to retire on his Disability
Retirement Date.
(d) Employment with Affiliated Employer. A Participant shall not
be credited with Benefit Service during his period of
employment with an Affiliated Employer,
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unless such Affiliated Employer has adopted this Plan and
become an Employer hereunder or unless otherwise provided in
Appendix A.
Notwithstanding the foregoing, the maximum number of months of Benefit Service
that may be credited to a Participant under subparagraphs (a) through (d) of
this Section 2.06 shall not exceed four hundred eighty (480), i.e., forty (40)
years.
Section 2.07 Board. The Supervisory Board of Galileo International.
Section 2.08 Code. The Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
Section 2.09 Committee or Plan Administrator. The ERISA Plans
Administration Committee ("EPAC"), whose members shall be appointed from time to
time by the Board. The authority to control and manage the operation and
administration of the Plan will be vested in the Committee, as described in
Article XVII. The Committee will be the Plan "administrator" as described in
Section 3(16)(A) of ERISA, and the "named fiduciary" within the meaning of
Section 402 of ERISA.
Section 2.10 Compensation. The term Compensation shall mean the
following amounts paid during the calendar year ending with or within a Plan
Year: amounts paid to the Participant for base pay, overtime, doubletime, shift
differentials, lump sum merit pay, holiday rotating day off, holiday worked
rotating day off, commissions, retroactive pay, management incentive bonuses,
and special pay incentives for Secondee retirees paid prior to September 1,
1993. Management incentive bonuses shall be considered "Compensation" for the
calendar year to which such management incentive bonuses are paid. Compensation
shall also include any amounts not currently includible in taxable income that
constitute elective pre-tax salary reduction contributions under Sections 125,
129 and 401(k) of the Code. Effective for Plan Years beginning on and after
January 1, 1995, Compensation shall also include Employer profit sharing
contributions made on behalf of a Participant under the Galileo International
Savings and Investment Plan, which contributions shall be considered
"compensation" for the Plan Year in which such contributions are made.
For purposes of Section 2.23 of this Plan, Compensation for any given
Month of Service within a calendar year shall be determined by dividing a
Participant's Compensation for that calendar year by the number of Months of
Service completed by the Participant during such year; provided, further, that
for purposes of determining monthly Compensation, management incentive bonuses
attributable to the calendar year in which a Participant retires under this Plan
shall be divided by twelve (12) months, then multiplied by the number of Months
of Service completed by the Participant during such calendar year.
<PAGE> 5
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A Participant's Compensation for the Plan Year beginning January 1,
1993 in excess of $200,000 (as adjusted for inflation under Sections 415(d) and
401(a)(17) of the Code) shall be disregarded for all purposes under the Plan.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding twelve (12) months,
over which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than twelve (12)
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is twelve (12).
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the annual compensation
limit is $150,000.
In determining the Compensation of a Participant for purposes of the
above limitations, the rules of Section 414(q)(6) of the Code shall apply,
except that, in applying such rules, the term "family" shall include the Spouse
of the Participant and any lineal descendants of the Participant who have not
attained age nineteen (19) before the close of the Plan Year.
Section 2.11 Covia Reorganization. The transaction contemplated by the
Combination Agreement dated January 29, 1993, by and among: Aer Lingus PLC; Air
Canada; Alitalia-Linee Aeree Italiane S.p.A.; Austrian Airlines Oesterreichische
Luftverkehrs Aktiengesellschaft; British Airways Plc; Covia Corporation; Covia
Partnership; Distribution Systems Inc.; The Galileo Company Ltd.; Koninklijke
Luchtvaart Maatschappij N.V. KLM Royal Dutch Airlines; Olympic Airways S.A.;
Racom Teledata S.p.A.; Resnet Holdings, Inc.; Retford Limited; Roscor A.G.;
Swissair Swiss Air Transport Company Ltd.; Transportes Aereos Portugueses S.A.;
Travel Industry Systems B.V.; Travidata, Inc.; United Air Lines, Inc.; USAir,
Inc.; and USAM Corp.
<PAGE> 6
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Section 2.12 Disability; Disabled. A physical or mental condition
which, in the sole judgment of the Committee, permanently prevents a Participant
from satisfactorily performing his usual duties for the Employer or the duties
of such other position or job which the Employer makes available to him and for
which he is qualified by reason of training, education or experience. The
decision of the Committee may be based on the medical report of an independent
physician selected by the Committee, or evidence that the Participant is
eligible for disability benefits under the Social Security Act as in effect on
his date of disability, or the eligibility of such Participant to receive long
term disability benefits from a long term disability plan sponsored by the
Employer, which factors need not be conclusive.
Notwithstanding the foregoing, Disability shall not include any injury
or disease which:
(a) was contracted, suffered or incurred while the Participant was
engaged in, or resulted from his having engaged in, a criminal
enterprise;
(b) was intentionally self-inflicted;
(c) resulted from chronic or excessive use of intoxicants, drugs
or narcotics; or
(d) arose after his termination of employment with the Employer.
Section 2.13 Disability Retirement Date. The first day of the calendar
month coinciding with or next following the date on which a Participant elects
to retire due to his Disability; provided, however, that such Participant has
attained at least age fifty (50) and has at least ten (10) full Years of Service
then standing to his credit under the Plan; provided, further, that a
Participant's Disability Retirement Date shall not be later than his Normal
Retirement Date.
Section 2.14 Early Retirement Date. The first day of the calendar month
coinciding with or next following the date on which a Participant elects to
retire from employment after the Participant has attained age fifty-five (55)
and has at least ten (10) full Years of Service then standing to his credit
under the Plan, but prior to his Normal Retirement Date.
Section 2.15 Effective Date. January 1, 1993, the date this Plan first
became effective.
Section 2.16 Eligible Employee. Subject to any election required under
the provisions of Section 3.03 of the Plan, any Employee of the Employer.
Notwithstanding any other provision of the Plan, a leased employee (within the
meaning of Section 414(m) of the Code) shall be deemed to be in a class of
Employees not eligible to participate in this Plan, unless such participation is
required as a condition of the Plan's qualification under Section 401(a) of the
Code.
<PAGE> 7
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Notwithstanding any other provision of the Plan to the contrary,
"Eligible Employee" shall not include any non-resident alien who receives no
income from United States sources, transferred foreign nationals with temporary
residence in the United States, foreign based employees temporarily working in
the United States on any payroll, nor any person who is included in a unit of
employees covered by a collective bargaining agreement between any employee
bargaining representative(s) and one or more Employers, if retirement benefits
were a subject of good faith bargaining between such employee representatives
and the Employer, unless such collective bargaining agreement specifically
provides for participation in this Plan by the bargaining unit members.
Section 2.17 Employee. Any person who, on or after the Effective Date,
is receiving remuneration for personal services rendered to the Employer as a
regular Full-Time or Part-Time Employee, including an Employee who would be
receiving such remuneration except for an Authorized Leave of Absence.
Section 2.18 Employer. Galileo International, and any successors
thereto, and any Affiliated Employer which has adopted the Plan, for so long as
such adoption and the Plan both remain in effect.
Section 2.19 Employment Date. An Employee's first day of employment
with the Employer as set forth in the records of the Employer, subject to the
limitations and exceptions, if any, set forth in Appendix A of the Plan.
Section 2.20 Entry Date. The first day of each calendar month.
Section 2.21 ERISA. The Employee Retirement Income Security Act of
1974, as amended from time to time.
Section 2.22 Fiduciaries. The Plan Trustee and the Committee, but only
with respect to the specific fiduciary responsibilities of each, as set forth in
Article XVII of the Plan.
Section 2.23 Final Average Compensation. The highest monthly average of
a Participant's Compensation attributable to the sixty (60) consecutive Months
of Service occurring during the last one hundred twenty (120) Months of Service
of employment with the Employer; provided, however, that if a Participant has
fewer than sixty (60) Months of Service with the Employer, such Participant's
Final Average Compensation shall be determined by dividing his total
Compensation for all Months of Service during his period of employment by the
number of such Months of Service.
Section 2.24 Forfeiture. The present value of a Participant's nonvested
Accrued Benefit, determined as of the last day of the Plan Year during which
such Participant first incurs a One Year Period of Severance.
<PAGE> 8
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Section 2.25 Full-Time Employee. Any Employee who is classified as a
regular full-time Employee of the Employer and who regularly completes at least
forty (40) Hours of Service per week.
Section 2.26 Galileo International. Galileo International Partnership,
which, prior to September 16, 1993, was known as Covia Partnership.
Section 2.27 Hour of Service. Each hour for which an Employee is paid
or entitled to payment for the performance of duties for the Employer, as well
as certain periods of absence for which the Employee is compensated by the
Employer, according to Department of Labor Regulation Section 2530.200b-2.
Section 2.28 Late Retirement Date. The first day of the calendar month
coinciding with or next following the date a Participant elects to retire after
his Normal Retirement Date.
Section 2.29 Limited Participant. A former Participant under this Plan
or the Prior Plan whose employment with the Employer has terminated for reasons
other than his Retirement, and who has a vested benefit under this Plan. The
term Limited Participant shall also include former Participants who are no
longer employed by the Employer, but are employed by an Affiliated Employer (as
listed on Appendix A of the Plan). Notwithstanding the preceding sentence, a
Participant who terminates employment prior to the closing date of the Covia
Reorganization who does not transfer to United Air Lines on the date of the
closing of the Covia Reorganization, nor on any other date of transfer
determined by the Committee, in its sole discretion, to be resulting from the
Covia Reorganization, and who is subsequently employed by United Air Lines,
shall not be a Limited Participant within the meaning of this Section 2.29 or
Section 3.04.
Section 2.30 Months of Service.
(a) Subject to the following provisions of this Section 2.30 and the
limitations under Articles III and IV of this Plan, the term "Month of Service"
means, with respect to any Employee or Participant:
(i) Month of Service on or after the Effective Date shall mean
each calendar month during which an Employee was a Participant
in the Plan for which he is either directly or indirectly paid
or entitled to payment by an Employer or Affiliated Employer,
for the performance of duties including backpay without regard
to mitigation of damages; provided, however, that for purposes
of determining Benefit Service, Months of Service with an
Affiliated Employer shall not be taken into account. A
Participant shall also be credited with Months of Service for
any period during which no duties were performed by reason of
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military
<PAGE> 9
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duty, or authorized leave of absence; provided, however,
that not more than six (6) Months of Service will be
credited for any such period;
(ii) Service prior to the Effective Date shall equal the Months of
Service standing to the credit of the Employee or Participant
as of December 31, 1992 under the Prior Plan.
Months of Service for purposes of determining the Benefit Service for a
Participant's period of Disability shall be determined and credited in
accordance with the provisions of Section 9.03, including Months of Service
beginning after the Effective Date and credited to a Participant during such
period of Disability and ending on such Participant's Disability Retirement
Benefit commencement date.
(b) Notwithstanding the foregoing, solely for the purpose of
determining an Employee's or Participant's Severance from Service Date, and the
number of whole years elapsed between the date of such Severance from Service
and the date of the Employee's or Participant's reemployment under Article III,
an Employee or Participant on a Maternity or Paternity Absence (as defined
below) will be credited with a Month of Service for each month of such an
absence; provided, however, that not more than six (6) Months of Service will be
credited for any one such absence, and such Months of Service will be credited
for the first year during which the Participant would not otherwise be credited
with at least six (6) Months of Service. A "Maternity or Paternity Absence"
means a Participant's absence from work because of the pregnancy of the
Participant, the birth of a child of the Participant, the placement of a child
with the Participant in connection with the adoption of such child by the
Participant, or for the purpose of caring for the child immediately following
such birth or placement. The Committee may require the Participant to furnish
such information as the Committee considers necessary to establish that the
Participant's absence was for one of the reasons specified above.
Section 2.31 Normal Retirement Age. The later of:
(a) the date on which the Participant attains age sixty-five (65);
or
(b) the date on which the Participant has completed at least five
(5) years of Vesting Service.
Section 2.32 Normal Retirement Date. The first day of the calendar
month next following the month in which the Participant attains Normal
Retirement Age, or the day the Participant attains Normal Retirement Age if that
day is the first day of a calendar month.
Section 2.33 One Year Period of Severance. The twelve (12) month period
beginning on the date of a Participant's Severance from Service Date and ending
on the first anniversary of such date.
<PAGE> 10
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Section 2.34 Participant. An Employee of the Employer who has satisfied
the eligibility requirements set forth in Article III of this Plan and has
commenced participation in the Plan, but only as long as such individual either
remains an Employee or is entitled to benefits payable under the Plan.
Section 2.35 Part-Time Employee. Any Employee who is classified as a
part-time regular Employee of the Employer, and who completes 1,000 or more
Hours of Service in a Plan Year.
Section 2.36 Period of Severance. The period beginning on an
Employees's Severance from Service Date and ending on his Reemployment Date.
Section 2.37 Plan. Covia Employees Pension Plan, as amended and
restated effective January 1, 1993. Effective September 16, 1993, the Plan has
been renamed the Galileo International Employees Pension Plan.
Section 2.38 Plan Year. The Plan Year shall be the calendar year.
Section 2.39 Pre-Retirement Survivor Benefit. The benefit payable to
the surviving Spouse of a Participant pursuant to Section 13.02.
Section 2.40 Prior Plan. The Covia Pension Plan which was originally
established as the Covia Mirror Pension Plan as of August 5, 1988. Accruals
under the Prior Plan were frozen as of December 31, 1992 and the Prior Plan was
merged into this Plan effective January 1, 1993.
Section 2.41 Prior Plan Frozen Accrued Benefit. The benefits payable
under the terms of the Prior Plan.
Section 2.42 Qualified Domestic Relations Order. A judgment, decree, or
order relating to the provision of child support, alimony payments, or marital
property rights; provided, however, that the Committee has determined that such
judgment, decree, or order meets the qualification requirements under Section
414(p) of the Code. The Committee shall adopt such rules, regulations and
policies as it deems necessary and appropriate to identify and administer
Qualified Domestic Relations Orders in accordance with Code Section 414(p) of
the Code.
Section 2.43 Qualified Joint and Survivor Annuity. A joint and survivor
annuity form of benefit that provides a reduced amount during the Participant's
lifetime and, upon the death of the Participant, provides a Participant's
surviving Spouse with a monthly benefit that is at least fifty percent (50%) of
the benefit payable to the Participant prior to his death, in accordance with
the provisions of Section 401(a)(11) of the Code and the regulations
<PAGE> 11
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thereunder. Such Joint and Survivor Annuity shall be the Actuarial Equivalent of
the Single Life Annuity that would otherwise be paid to the Participant.
Section 2.44 Reemployment Date. The date on which an Employee is
employed with the Employer or an Affiliated Employer subsequent to his prior
termination of employment with the Employer or an Affiliated Employer.
Section 2.45 Retired Participant. A former Participant of this Plan or
the Prior Plan, who is currently receiving benefits under one or more of those
Plans.
Section 2.46 Severance from Service Date. The earlier of:
(a) the date on which an employee quits, retires, is discharged or
dies; or
(b) the first anniversary of the first date of a period in which
an Employee remains absent from service (with or without pay)
with the Employer or Affiliated Employer(s) for any reasons
other than quit, retirement, discharge or death, such as
vacation, holiday, sickness, disability, leave of absence or
layoff. For purposes of the preceding sentence, an Employee
shall not be deemed to be absent from service for any period
of absence resulting from leave taken under the Family and
Medical Leave Act of 1993.
Notwithstanding the provisions of this Section 2.46, if a Participant is
Disabled under the terms of this Plan, such Participant shall not incur a
Severance from Service until such Participant's Disability Retirement Date.
Section 2.47 Single Life Annuity. An annuity which provides a monthly
benefit for the Participant, payable for his lifetime only.
Section 2.48 Spousal Consent. The written, notarized consent of a
Participant's Spouse which is required to perfect any elections, waivers, or
designations made under Article XII or Article XIII of the Plan.
Section 2.49 Spouse. The individual to whom a Participant was legally
married for at least one (1) year prior to the date benefit payments are
scheduled to begin. The determination of the legal status of the Participant's
marriage shall be made in accordance with the laws of the state in which the
Participant maintains his legal residence.
Section 2.50 Trust. The Covia Employees Pension Trust, which
establishes and forms a part of the Plan. Effective September 16, 1993, the
Trust has been renamed the Galileo International Employees Pension Trust.
<PAGE> 12
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Section 2.51 UA Covered Employment. Employment with United Air Lines
that is recognized for purposes of determining a Participant's service under
this Plan or the Prior Plan, in accordance with the provisions of Article III
and Article IV of the Plan.
Section 2.52 UA Prior Plan. The United Air Lines Non-Union Ground
Employees' Retirement Plan, or any successor plan thereto.
Section 2.53 UA Prior Plan Benefits. The accrued benefit of any
Participant under the Prior Plan attributable to participation in the UA Prior
Plan; or the deferred vested benefit of any Participant under the UA Prior Plan.
Section 2.54 Vesting Service. A Participant shall earn one year of
Vesting Service for each full year of employment with the Employer. The year of
Vesting Service shall be measured beginning on his Employment Date, and every
anniversary thereof, and shall end on his Severance from Service Date. Any
Eligible Employee hired by the Employer prior to the Effective Date from
contiguous service with an Affiliated Employer shall be credited with Vesting
Service, if any, for prior employment with such Affiliated Employer in
accordance with Appendix A. Eligible Employees who participated in the Prior
Plan shall have Vesting Service prior to the Effective Date credited in an
amount equal to the Vesting Service standing to his credit under the Prior Plan
as of December 31, 1992, without regard to Appendix A. Notwithstanding the
foregoing, a Participant who terminates his employment prior to or at the
closing date of the Covia Reorganization, but not as a result of a transfer of
employment to United Air Lines in connection with the Covia Reorganization, who
is subsequently employed by United Air Lines shall not earn any years of Vesting
Service under the Plan for such subsequent employment.
Section 2.55 Year of Service. For purposes of eligibility to
participate in the Plan, Year of Service means each year of employment with an
Employer or an Affiliated Employer, that begins on an Employee's Employment Date
and each anniversary thereof, and ends on his Severance from Service Date.
Notwithstanding the foregoing, a Participant who terminates his employment prior
to or at the closing date of the Covia Reorganization, but not as a result of a
transfer of employment to United Air Lines in connection with the Covia
Reorganization, who is subsequently employed by United Air Lines shall not earn
any Years of Service under the Plan for such subsequent employment.
<PAGE> 13
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ARTICLE III
ELIGIBILITY, PARTICIPATION AND SERVICE
Section 3.01 Eligibility. Each Eligible Employee shall become a
Participant in the Plan as of the later of the Effective Date or the first Entry
Date coinciding with or next following the date they have:
(a) attained age 21; and
(b) completed one (1) Year of Service.
Section 3.02 Participation and Service Credits Upon Reemployment.
(a) Reemployment Prior to Incurring a One Year Period of
Severance.
(i) If a former Participant is reemployed as an Employee prior to
incurring a One Year Period of Severance, he shall be eligible
to commence participation in the Plan as of the Entry Date
coinciding with or next following his Reemployment Date. If
such Participant's Period of Severance commenced due to the
Participant's quit, retirement or discharge, then the
Participant shall not be credited with Benefit Service for
such Period of Severance; however, such Participant shall be
credited with Vesting Service for such Period of Severance.
(ii) If such Participant's Period of Severance commenced for any
other reason, such Participant shall be credited with both
Vesting Service and Benefit Service for such Period of
Severance. A Participant that satisfies the requirements of
this subparagraph (a) shall have his prior Benefit Service and
Vesting Service restored to his credit as of his Reemployment
Date, subject to the limitations set forth in subparagraph (d)
below.
(b) Reemployment after Incurring a One Year Period of Severance. If a
former Participant is reemployed as an Employee after incurring a One Year
Period of Severance, but prior to incurring five (5) consecutive One Year
Periods of Severance, such Employee shall not be eligible to resume
participation in the Plan until the Entry Date coinciding with or next following
the date such Employee completes one (1) Year of Service, which shall commence
on his Reemployment Date, and end on the first anniversary of such date. An
Employee who again becomes a Participant in accordance with the provisions of
this subparagraph (b) shall then be given credit for his Benefit Service and
Vesting Service retroactive to his Reemployment Date, and such a Participant
shall also have any Benefit Service and Vesting Service that was standing to his
credit immediately prior to his Period of Severance restored to his credit once
he resumes participation, subject to the limitations of subparagraph (d) below.
<PAGE> 14
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(c) Reemployment after Incurring Five Consecutive One Year Periods
of Severance. If a former Participant is reemployed as an Employee after
incurring a Period of Severance that is equal to the greater of:
(i) five (5) consecutive One Year Periods of Severance; or
(ii) his prior years of Benefit Service;
such former Participant shall be treated as a new Employee, and shall be subject
anew to the eligibility requirements under Section 3.01 of the Plan.
(d) Reemployment after Lump Sum Distribution. If a former Participant
is reemployed as an Employee and had received a lump sum distribution of his
Prior Accrued Benefit he shall not be given credit for his previous Benefit
Service attributable to such distribution; provided, however, that if such
Participant shall repay the amount previously distributed to him with interest
of five percent per annum, within the earlier of:
(i) five (5) years from his Reemployment Date,
(ii) the close of the first period of five (5) consecutive One Year
Periods of Severance commencing for the Participant as of the
date such distribution was made, if any,
such prior Benefit Service shall be restored.
Section 3.03 Participation Upon Reemployment After Retirement.
(a) Election to Participate in Plan. Subject to the participation
provisions of Section 3.02, a previously Retired Participant who is reemployed
as an Employee may elect in writing, in the form and manner required by the
Committee, to again become an active Participant. If such a Retired Participant
elects to become an active Participant in the Plan, payment of any benefits
under this Plan shall be suspended for each successive month during such period
of reemployment in accordance with Article XI; provided, however, that such
Retired Participant completes at least forty (40) Hours of Service in the prior
calendar month, as specifically provided under Article XI of the Plan.
Such a reemployed Retired Participant shall be credited with Benefit
Service with respect to such reemployment as provided in Section 2.06 of the
Plan. Benefits upon such a Retired Participant's subsequent Retirement Date or
Severance from Service Date shall be distributed in accordance with the
applicable provisions of Articles VI through IX of the Plan.
(b) Election to Waive Participation. If a previously Retired
Participant who is reemployed as an Employee elects in writing, in the form and
manner required by the
<PAGE> 15
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Committee, to waive participation in the Plan for this period of reemployment,
payment of any benefits under this Plan shall continue. An election made under
this paragraph shall remain in effect for the duration of a Retired
Participant's period of reemployment. Any periods of service or Compensation
earned during such Participant's period of reemployment shall not be considered
for purposes of such Participant's benefits under this Plan upon his subsequent
Severance from Service.
Section 3.04 Limited Participation - Employment Transfers. If a
Participant transfers employment to an Affiliated Employer that has not adopted
this Plan, he shall be considered a Limited Participant as of his date of
transfer. Such Limited Participant will continue to earn Vesting Service, but
shall not earn any Benefit Service; and, provided, further, that the Final
Average Compensation of such Limited Participant shall not include Compensation
earned while a Limited Participant, subject to any limitations or conditions set
forth in Appendix A.
If a Limited Participant again transfers to employment as an Employee,
he shall again become an active Participant in the Plan after he has completed
one new Year of Service, which shall commence on his Reemployment Date and end
on the first anniversary of such date. An Employee who again becomes a
Participant in accordance with this Section 3.04 shall be given credit for
Benefit Service and Vesting Service retroactive to the date of his Reemployment
Date with the Employer.
Notwithstanding the foregoing, if a Participant terminates his
employment and such termination was not the result of a transfer to United Air
Lines on the date of the closing of the Covia Reorganization, or any other date
of transfer determined by the Committee, in its sole discretion, to be resulting
from the Covia Reorganization, and such Participant is subsequently employed by
United Air Lines on or after the date of the Covia Reorganization, such
subsequent employment shall not be considered a transfer to an Affiliated
Employer within the meaning of this Section 3.04 and such Participant shall not
be considered a Limited Participant for any purpose under the Plan.
Section 3.05 Participation in Prior Plans. Participation in the Prior
Plan or the UA Prior Plan shall not exempt any Employee from the eligibility
requirements of Article III of this Plan.
Section 3.06 Participation Not a Contract of Employment. The Plan does
not constitute a contract of employment and participation in the Plan will not
give any Employee the right to be retained in the employ of any Employer, nor
give any person any right or claim to any benefit under the Plan unless such
benefit is specifically payable under the terms of the Plan.
<PAGE> 16
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ARTICLE IV
EMPLOYMENT WITH UNITED AIR LINES
Section 4.01 Employment With United Airlines Credited for Participants
in Prior Plan. Employees who were hired by the Employer from contiguous service
with United Air Lines shall be credited with service as follows:
(a) Participants in Prior Plan as of December 31, 1992. If such
Employee participated in the Prior Plan and remained an Employee as of the
Effective Date, his service credits under this Plan as of the Effective Date
shall equal the service standing to his credit for eligibility, vesting and
benefit accrual purposes, respectively, under the Prior Plan as of December 31,
1992;
(b) Employees Not in Prior Plan Hired Prior to January 1, 1993. If such
Employee did not participate in the Prior Plan, he shall be credited with
service for purposes of vesting and eligibility to participate from the date his
employment with United Air Lines commenced by applying the usual service
crediting and break in service rules of this Plan; provided, however, that no
such service prior to the Effective Date shall be credited to him for benefit
accrual purposes;
(c) Former Participants in the Prior Plan. If such Employee
participated in the Prior Plan but was not an Employee as of the Effective Date,
he shall be a Limited Participant for purposes of this Plan (subject to any
future reemployment as an Employee and to the conditions set forth in Section
3.03 regarding suspension of benefits for reemployed Retired Participants) and
his benefits shall be determined under the provisions of the Prior Plan in
effect as of the date of his prior severance from service as an employee in
accordance with Section 10.06;
(d) Employees Hired After January 1, 1993. If such Employee is hired by
the Employer on or after the Effective Date, he shall not be credited with
service prior to the Effective Date for any purposes under this Plan.
<PAGE> 17
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ARTICLE V
EMPLOYER CONTRIBUTIONS
Section 5.01 Employer Contributions. Each Employer shall make
contributions to the Plan on behalf of its Employees in amounts determined by
Plan actuaries to be necessary to fund benefits payable under the Plan only to
the extent required by the provisions of Section 412 of the Code. Such
contributions shall be made no less frequently than quarterly. Any Forfeitures
that arise under this Plan shall be used to reduce the amount the Employer is
otherwise required to contribute to fund benefits payable under the Plan.
Section 5.02 Participant Contributions. Participants shall not be
required nor permitted to make contributions to the Plan.
Section 5.03 Rollover, Transfer Contributions. Individual Participants
shall not be permitted to rollover or transfer benefit distributions from other
plans to this Plan.
Section 5.04 Prior Plan Accrued Benefit. Effective as of January 1,
1993, the Prior Plan is merged into this Plan. The value of a Participant's
Accrued Benefit under this Plan shall not be less than the value of such
Participant's accrued benefit under the Prior Plan, if any, as a result of this
merger.
Section 5.05 Return of Employer Contributions. No part of any
contribution made by the Employer under the Plan or the income therefrom will
revert to the Employer or be used for, or diverted to, purposes other than for
the exclusive benefit of Participants and other persons entitled to benefits
under the Plan; provided, however, that, consistent with Section 403(c) of
ERISA:
(a) If any contribution by the Employer under the Plan is
conditioned on the initial qualification of the Plan under
Section 401(a) of the Code and if the Plan does not so
qualify, the Trustee will, upon written request of the
Employer, return to the Employer the amount of such
contribution and any earnings thereon within one (1) year
after the date that initial qualification of the Plan is
denied;
(b) If any contribution is made by the Employer by a mistake of
fact, the Trustee will, upon written request of the Employer,
return to the Employer the amount of such contribution and any
earnings thereon within one (1) year after the payment of such
contribution;
(c) If any contribution made by the Employer is determined not to
be deductible, in whole or in part, by the Employer for the
tax year for which it was made, then the Trustee will, upon
written request of the Employer, return to the Employer
<PAGE> 18
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the nondeductible amount of such contribution and any
earnings thereon within one (1) year after the payment of such
contribution; and
(d) If, after all liabilities of the Plan to Participants and
other persons entitled to benefits under the Plan have been
satisfied, any residual assets remain, such assets will be
returned to the Employer.
All contributions to the Plan are hereby conditioned on being fully deductible
for the year to which the contribution relates, and are further conditioned on
the Plan being qualified throughout the period for which the contribution is
made.
Section 5.06 Investment and Valuation of Trust Assets. Assets of the
Trust shall be invested in accordance with the requirements set forth under the
terms of the Trust. The valuation of the assets of the Plan shall be made no
less frequently than as of the last day of each Plan Year.
<PAGE> 19
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ARTICLE VI
NORMAL RETIREMENT BENEFIT
Section 6.01 Eligibility. A Participant shall be eligible to retire
from employment as of his Normal Retirement Date once he has attained his Normal
Retirement Age. A Participant who retires from employment on his Normal
Retirement Date shall be entitled to receive a Normal Retirement Benefit as
described in this Article VI.
Section 6.02 Normal Retirement Benefit. (a) Subject to the limitations
set forth under Section 6.04, a Participant's monthly Normal Retirement Benefit
shall be determined as follows:
1.6% of his Final Average Compensation
MULTIPLIED BY:
Months of Benefit Service
12
(b) Unless otherwise provided under the Plan, each Section 401(a)(17)
Employee's Accrued Benefit under this Plan will be the greater of the Accrued
Benefit determined for the Employee under (i) or (ii) below:
(i) the Employee's Accrued Benefit as determined above
with respect to the benefit formula applicable for
the Plan Year beginning on or after January 1,
1994, as applied to the Employee's total Months of
Benefit Service taken into account under the Plan
for the purposes of benefit accruals, or
(ii) the sum of:
(A) the Employee's Accrued Benefit as of January
1, 1994, frozen in accordance with Section
1.401(a)(4)-13 of the regulations, and
(B) the Employee's Accrued Benefit determined
under the benefit formula applicable for the
Plan Year beginning on or after January 1,
1994, as applied to the Employee's Months of
Benefit Service credited to the Employee for
Plan Years beginning on or after January 1,
1994, for purposes of benefit accruals.
The total Months of Benefit Service taken into account under clause (ii)(B)
above shall not exceed the maximum number of Months of Benefit Service takes
into account under Section
<PAGE> 20
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2.06, minus the number of Months of Benefit Service taken into account under
clause (ii)(A) above.
A Section 401(a)(17) Employee means an Employee whose Accrued Benefit
as of January 1, 1994, is based on Compensation that exceeded $150,000.
Section 6.03 Commencement of Normal Retirement Benefits. A Participant
may elect to have payment of his Normal Retirement Benefit begin as of his
Normal Retirement Date. If a Participant wishes to defer payment of his benefit,
he may so direct the Committee in writing, subject to the limitations set forth
under Section 12.11 of the Plan.
Section 6.04 UA Prior Plan Benefits. Any benefits payable under this
Plan shall be reduced by any portion of the benefits payable under the UA Prior
Plan to the extent that Months of Service and Final Average Compensation under
this Plan are also used to determine such Participant's accrued benefit under
the UA Prior Plan.
<PAGE> 21
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ARTICLE VII
EARLY RETIREMENT BENEFIT
Section 7.01 Eligibility. A Participant shall be eligible to retire
from employment as of his Early Retirement Date, provided he has attained at
least age fifty-five (55) and has at least ten (10) years of Vesting Service
standing to his credit. A Participant who retires from employment as of his
Early Retirement Date shall be entitled to receive an Early Retirement Benefit
as described in this Article VII.
Section 7.02 Early Retirement Benefit. A Participant's monthly Early
Retirement Benefit shall be determined using the formula set forth under Section
6.02, but based on the months of Benefit Service standing to his credit as of
his Early Retirement Date, subject to reduction for commencement prior to his
Normal Retirement Date, under Section 7.03 below.
Any Participant whose employment is terminated at a time when he is
within twenty-four (24) months of his Early Retirement Date and who is entitled
to benefits under the Galileo International Severance Plan, shall be considered
to have retired on what would have been his earliest possible Early Retirement
Date had his employment continued until such date, notwithstanding his prior
termination of employment. This special early retirement rule shall apply only
if the Participant elects under the Galileo International Severance Plan to have
his monthly severance payments reduced in amount and extended in duration until
such earliest possible Early Retirement Date and if the Participant remains
entitled to receive such severance payments until such earliest possible Early
Retirement Date. This special early retirement rule shall not apply to any
Participant who would have attained his earliest possible Early Retirement Date
during the regularly scheduled (i.e., unextended) term of his severance payments
under the Galileo International Severance Plan.
Section 7.03 Commencement of Payments as of Early Retirement Date. A
Participant may elect to have Early Retirement Benefits commence as of his Early
Retirement Date, or, by written request to the Committee, as of the first day of
any calendar month thereafter, subject to the limitations set forth under
Section 12.11 of the Plan.
(a) If a Participant retires from employment with the Employer on his
Early Retirement Date and elects to have payment of his benefit commence on or
after his Early Retirement Date but not later than his Normal Retirement Date,
the amount of his benefit shall be reduced by:
(i) 0.25% for each complete month, up to a total of twenty-four
(24) such months, by which such Participant's Early Retirement
Date precedes his attainment of age sixty-two (62); and
<PAGE> 22
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(ii) 0.375% for each complete month by which such Participant's
Early Retirement Date precedes his attainment of age 60.
(b) If a Participant ceases to be employed as an Employee prior to his
Early Retirement Date, is entitled to a Deferred Vested Benefit (in accordance
with the provisions of Article X), and elects to have payment of his benefits
commence as of his Early Retirement Date but not later than his Normal
Retirement date, the amount of his benefit shall be reduced by:
(i) 0.60% for each complete month, up to a total of sixty (60)
such months by which such Participant's Early Retirement Date
precedes his attainment of age sixty-five (65); and
(ii) 0.30% for each complete month by which such Participant's
Early Retirement Date precedes his attainment of age sixty
(60).
Section 7.04 Commencement of Payments as of Normal Retirement Date. A
Participant may retire on his Early Retirement Date and elect, by written
request to the Committee, to defer payment of his benefit to his Normal
Retirement Date or later, subject to the limitations set forth under Section
12.11 of the Plan. The amount of his deferred benefit shall be the amount
determined in accordance with Section 7.02 above.
Section 7.05 UA Prior Plan Benefits. Any benefits payable under this
Plan shall be reduced by any portion of the benefits payable under the UA Prior
Plan to the extent that Months of Service and Final Average Compensation under
this Plan are also used to determine such Participant's accrued benefit under
the UA Prior Plan.
<PAGE> 23
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ARTICLE VIII
LATE RETIREMENT DATE
Section 8.01 Eligibility. A Participant shall be eligible to retire
from employment as of his Late Retirement Date pursuant to his election to do
so. A Participant who retires from employment as of his Late Retirement Date
shall be entitled to receive a Late Retirement Benefit as described in this
Article VIII.
Section 8.02 Late Retirement Benefit. A Participant's monthly Late
Retirement Benefit shall be determined using the formula set forth under Section
6.02, but based on the months of Benefit Service standing to his credit as of
his Late Retirement Date.
Section 8.03 Commencement of Payment of Late Retirement Benefit. A
Participant may elect to have benefit payments commence as of his Late
Retirement Date, or, by written request to the Committee, as of the start of any
calendar month thereafter; provided, however, that payment of such benefit must
begin not later than the April 1 following the calendar year in which the
Participant attains age 70-1/2 in accordance with the limitations set forth
under Section 12.11 of the Plan.
Section 8.04 UA Prior Plan Benefits. Any benefits payable under this
Plan shall be reduced by any portion of the benefits payable under the UA Prior
Plan to the extent that Months of Service and Final Average Compensation under
this Plan are also used to determine such Participant's accrued benefit under
the UA Prior Plan.
<PAGE> 24
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ARTICLE IX
DISABILITY RETIREMENT DATE
Section 9.01 Eligibility. A Participant shall be eligible to retire
from employment due to his Disability (as defined in Section 2.12 of the Plan),
provided that such Participant has attained at least age fifty (50) and has at
least ten (10) years of Vesting Service standing to his credit. A Participant
who retires from employment due to Disability in accordance with this Section
shall be entitled to receive a Disability Retirement Benefit as described in
this Article IX.
Section 9.02 Disability Retirement Benefit. A Participant's monthly
Disability Retirement Benefit shall be determined based on the formula set forth
under Section 6.02, but based on the number of months of Benefit Service that
are standing to his credit as of his Disability Retirement Date, including any
Months of Service credited in accordance with Section 9.03 below, subject to any
reduction for early commencement as provided under Section 7.03.
Section 9.03 Commencement of Payments of Disability Retirement Benefit.
If a Participant retires on his Disability Retirement Date and elects by written
request to the Committee to have payment of his benefit commence as of his
Disability Retirement Date, such Participant's benefit will be based on the
Months of Benefit Service standing to his credit as of his Disability Retirement
Date; provided, however, that such benefit shall be reduced as provided under
Section 7.03 (a) or (b) depending upon whether the Participant has reached his
Early Retirement Date as of his date of Disability for benefits commencing prior
to the Participant's Normal Retirement Date.
If a Participant becomes Disabled and elects to defer payment of his
Disability Retirement Benefit, he shall be credited with the additional months
of Benefit Service to his Disability Retirement Date in accordance with the
provisions of Section 2.06(c). A Disabled Participant under this paragraph must
file a written request with the Committee at least ninety (90) days prior to the
time he would like payment of his Disability Retirement Benefit to commence.
Section 9.04 UA Prior Plan Benefits. Any benefits payable under this
Plan shall be reduced by any portion of the benefits payable under the UA Prior
Plan to the extent that Months of Service and Final Average Compensation under
this Plan are also used to determine such Participant's accrued benefit under
the UA Prior Plan.
<PAGE> 25
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ARTICLE X
DEFERRED VESTED BENEFITS
Section 10.01 Eligibility. If a Participant terminates his employment
after completing at least five (5) years of Vesting Service, such Participant
shall be eligible for a Deferred Vested Benefit as described in this Article X.
Section 10.02 Deferred Vested Benefit. The amount of a Participant's
monthly Deferred Vested Benefit shall be determined using the formula set forth
under Section 6.02, but based on the months of Benefit Service standing to his
credit as of his Severance from Service Date.
Section 10.03 Commencement of Payment of Deferred Vested Benefit. A
Participant who is entitled to a Deferred Vested Benefit may elect in a written
request to the Committee to have payment of such Benefit commence as of what
would have been his Early Retirement Date, Normal Retirement Date, or Late
Retirement Date. Such benefits will be paid in accordance with the provisions of
Articles VI, VII or VIII of the Plan, whichever Article is applicable, to
benefits commencing as of the date selected.
Section 10.04 UA Prior Plan Benefits. Any benefits payable under this
Plan shall be reduced by any portion of the benefits payable under the UA Prior
Plan to the extent that Months of Service and Final Average Compensation under
this Plan are also used to determine such Participant's accrued benefit under
the UA Prior Plan.
Section 10.05 Severance From Service Prior to Completing Five Years of
Vesting Service. If a Participant terminates his employment prior to completing
at least five (5) years of Vesting Service, such Participant shall not be
entitled to any benefit payments from the Plan. If such Participant incurs a One
Year Period of Severance, the present value of his Accrued Benefit shall become
a Forfeiture, and shall be used to reduce the amount the Employer is otherwise
required to contribute to the Plan, as provided in Article V of the Plan.
Section 10.06 Deferred Vested Benefits Under Prior Plan. If a
Participant in the Prior Plan has a deferred vested benefit under the Prior Plan
or has retired but has not commenced payment of his benefits under the Prior
Plan, such benefits shall be paid solely from the Trust established under this
Plan, based solely on the benefit provisions of the Prior Plan in effect as of
such Participant's termination of employment, which provisions are incorporated
herein by reference for this purpose. This Section 10.06 shall apply to any
Limited Participant who, prior to the Effective Date, retired or attained
deferred vested status under the Prior Plan.
<PAGE> 26
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ARTICLE XI
REEMPLOYMENT AFTER RETIREMENT
Section 11.01 Participation Upon Retirement. Participation in the Plan
upon reemployment shall be determined according to the provisions of Article III
of this Plan. The amount of benefit payable to such former Participant upon his
subsequent retirement shall be determined according to the provisions of
Articles VI, VII, VIII, or IX, whichever Article is applicable; provided,
further, that his benefit shall be adjusted to reflect any additional months of
Benefit Service, increases in Final Average Compensation, if any, and benefits
previously paid.
Section 11.02 Suspension of Benefits Upon Reemployment.
(a) Prior Retirement From the Employer or Affiliated Employer. If a
former Participant who has retired under the terms of this Plan or the Prior
Plan is reemployed as an Employee and elects to participate in the Plan as
provided under Section 3.03, payment of his monthly benefits shall be suspended
in accordance with the provisions of Section 11.02(b), as of his Reemployment
Date; provided, however, that such former Participant completes at least forty
(40) Hours of Service during each Month of Service.
(b) Suspension of Benefits. A Participant who continues or resumes
employment of at least forty (40) hours of covered service (as defined in U.S.
Department of Labor regulations ss. 2530.203-3(c)(2)) for any calendar month
after he first becomes eligible for a Normal Retirement Benefit shall have such
pension payments suspended during such months of resumed or continued service.
The Participant's benefits shall be actuarially calculated upon his subsequent
termination of employment or retirement to take into account both (i) years of
service credited during the period his benefits were suspended and (ii) the
value of the benefits that were suspended. If benefit payments have been
suspended under this section, payments shall resume no later than the first day
of the third calendar month in which the Participant fails to complete at least
forty (40) hours of such service. The initial payment upon the cessation of
suspensions shall include the payments due for the interim period when the
suspension ceased and the benefit payments resumed or commenced. Notwithstanding
the foregoing, no benefit payment may be suspended under this section unless the
Participant receives written notice, by personal delivery or first class mail
during the first calendar month or corresponding payroll period for which
payments are suspended. Such notice shall: (i) explain why benefits are being
suspended, (ii) describe the applicable Plan provisions, (iii) include a copy of
such Plan provisions, (iv) contain a statement identifying by reference
applicable U.S. Department of Labor regulations, and (v) inform the Employee of
procedures for seeking review of the benefit suspension, all in accordance with
U.S. Department of Labor regulations ss.2530.203-3. Requests for such review
shall be considered in accordance with the benefit claim review procedure
adopted by the Committee under Section 503 of ERISA and the
<PAGE> 27
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regulations thereunder, unless other rules are adopted by the Committee for
purposes of reviewing benefit suspension claims. Benefits that are payable on or
after the Participant attains age sixty-five (65) and that are not suspended
under this section, or deferred pending exhaustion of benefit claim and review
procedures, shall be actuarially increased (if they are not paid as due) to the
actuarial equivalent of such benefits as were due.
(c) Prior Retirement From United Airlines. If an individual:
(i) has retired from United Air Lines,
(ii) is currently receiving benefits under the UA Prior
Plan,
(iii) becomes an Employee, and
(iv) becomes eligible to participate in the Plan under
Article III,
then any benefits payable under this Plan shall be reduced by any portion of the
benefits payable under the UA Prior Plan to the extent that Months of Service
and Final Average Compensation under this Plan are also used to determine such
Participant's accrued benefit under the UA Prior Plan.
<PAGE> 28
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ARTICLE XII
PAYMENT OF RETIREMENT INCOME AND
VESTED TERMINATION BENEFITS
Section 12.01 Application for Benefits. A Participant shall notify the
Committee in writing in such manner as may be required by the Committee that he
elects to have his benefit paid to him. This notification should be provided to
the Committee at least ninety (90) days prior to the date the Participant would
like payment of his benefit to commence.
Section 12.02 Payment of Retirement Income in Normal Form.
(a) Payment in Single Life Annuity Form. Except as otherwise
specifically provided in this Article, benefit payments to an unmarried
Participant will be paid to him monthly, in the form of a Single Life Annuity
commencing as of his Normal, Early, Late or Disability Retirement Date, and
ending on the first day of the calendar month during which the Participant's
death occurs.
(b) Payment in Qualified Joint and Survivor Annuity Form. If a
Participant who is eligible to receive benefit payments under Articles VI
through X has a Spouse, then such Participant's Accrued Benefit under the Plan
will be reduced in accordance with the appropriate adjustment factors listed on
Appendix B, and will be paid in the form of a Qualified Joint and Survivor
Annuity; provided, however, that the Participant may elect an optional form of
payment pursuant to Section 12.04. If a Participant elects an optional form of
payment, then such Participant must obtain Spousal Consent to both the waiver of
the Qualified Joint and Survivor Annuity and the election of an optional form of
benefit payment as set forth in Sections 12.03 and 12.04 below.
Section 12.03 Election to Waive Qualified Joint and Survivor Annuity. A
Participant may elect to waive the Qualified Joint and Survivor Annuity form of
payment at any time during the 90-day period ending on such Participant's
"Annuity Starting Date." The "Annuity Starting Date" with respect to each
Participant or Limited Participant is the first day of the first period for
which an amount is paid as an annuity (or in any other form) under the Plan.
Such an election must be made in writing in the form and manner required by the
Committee, and will be effective only if the Participant's Spouse consents in
writing to the election, such consent acknowledges the effect of the waiver, and
such consent is witnessed by a notary public. Within a reasonable period of time
before the earliest date on which a Participant may begin to receive benefits
under the Plan, the Committee will furnish him with a written explanation of the
terms and conditions of the Qualified Joint and Survivor Annuity, the
Participant's right to make, and the effect of, any election to waive the
Qualified Joint and Survivor Annuity, the requirement of Spousal Consent to such
a waiver, and the Participant's right to make, and the effect of, a revocation
of such a waiver. An election under this
<PAGE> 29
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Section 12.03 may be revoked by a Participant without the need for Spousal
Consent at any time before the date payment of his benefits commences; provided,
however, that any subsequent election by the Participant to again waive the
Qualified Joint and Survivor Annuity form of payment must also satisfy the
requirements of this Section 12.03.
Section 12.04 Election of Optional Form of Payment. A Participant's
election of one of the optional forms of benefit payment available under Section
12.05 must be made in writing and filed with the Committee at any time during
the Election Period, consisting of the ninety (90)-day period ending on such
Participant's Annuity Starting Date (as defined in Section 12.03 above). Each
election under this Section 12.04 must contain such information as the Committee
may require to determine the amount of the Participant's optional form of
benefit; provided, however, that such election will be effective only if the
Participant's Spouse, if any, consents to the election in writing and such
consent acknowledges the effect of the election and is witnessed by a notary
public. Subject to being revoked as provided in Section 12.06, an election filed
in accordance with this Section 12.04 will become effective on the date on which
the election is filed with the Committee.
Section 12.05 Optional Forms of Payment. (a) Subject to the provisions
of Sections 12.04 and 12.06, in lieu of the normal form of benefit payable to a
Participant under Section 12.02, a Participant may elect to receive payment of
his benefit in one of the optional forms listed below which shall be the
Actuarial Equivalent of a Single Life Annuity (as determined by applying the
appropriate adjustment factor found in Appendix B):
(i) Single Life Annuity. A monthly benefit payable for the
Participant's remaining lifetime only, with no further
benefits payable at such Participant's death;
(ii) Ten Year Certain Option. A reduced monthly payment terminating
at the Participant's death and, if the Participant dies within
a period of ten (10) years after the date payments commence, a
continuing payment of the same amount to his designated
Beneficiary for the remainder of such 10-year period;
(iii) Contingent Annuitant Option. A reduced monthly payment
terminating at the Participant's death with the provision that
upon his death a continuing payment of 100%, 66-2/3%, or 50%
(as he may elect in writing, filed with the Committee) thereof
will be made to the surviving contingent annuitant (designated
by him at the time his election of this option is filed with
the Committee) for such contingent annuitant's remaining life;
or
(iv) Level Income Option. In the case of a Participant with respect
to whom monthly payments commence before the date that would
otherwise be his Normal Retirement Date, an increased monthly
payment for the period before the earlier of his Normal
Retirement Date or the date determined by the Committee to be
the date on which his primary Social Security benefits under
<PAGE> 30
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the Federal Social Security Act are expected to commence, and
a decreased monthly payment thereafter, so that the monthly
payments made to the Participant under the Plan, together with
the amount of his monthly primary Social Security benefits (as
determined by the Committee based on the Federal Social
Security Act as in effect on the date his payments under the
Plan commence) will form, as nearly as practicable, a uniform
series of payments.
(b) Notwithstanding the foregoing provisions of Section 12.05(a),
if a Participant has elected an optional form of payment under Sections
12.05(a)(ii) or 12.05(a)(iii) above, he may elect to receive a benefit of
actuarially equivalent value to the amount that would otherwise be payable to
him in such optional form in the form provided by Section 12.05(a)(iv) next
above. Notwithstanding the provisions to Sections 12.05(a)(ii) or 12.05(a)(iii)
next above, if a Participant who has elected to receive monthly payments in an
amount determined in accordance with Sections 12.05(a)(ii) or 12.05(a)(iii) and
who has also made the election provided by the foregoing sentence dies, then,
respectively:
(i) the amount payable, if any, to his Beneficiary as provided in
Section 12.05(a)(ii) will be the decreased monthly payment
described in Section 12.05(a)(iv); or
(ii) the amount payable to his surviving contingent annuitant as
provided in Section 12.05(a)(iii) will be determined on the
basis of the monthly payment that would have been payable to
him under that Section 12.05(a)(iii) if the Level Income
Option had not been elected.
(c) Notwithstanding the foregoing provisions of Section 12.05(a),
if a Participant has elected an optional form of payment solely under Section
12.05(a)(iv) next above, without regard to Sections 12.05(a)(ii) or
12.05(a)(iii), such optional form will automatically be payable as an
actuarially equivalent Single Life Annuity. A Participant may also elect the
optional form of payment under Section 12.05(a)(iv) to be paid in the form of a
Qualified Joint and Survivor Annuity.
<PAGE> 31
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Section 12.06 Revocation of Optional Forms of Payment.
(a) A Participant may cancel or revoke any option elected under Section
12.04, and may make a new election, subject to the requirements of Sections
12.03 and 12.04, at any time during the Election Period consisting of the ninety
(90) day period ending on the Participant's Annuity Starting Date (as defined in
Section 12.03), and any option elected by the Participant shall be automatically
revoked if the Participant dies before benefit payments to him commence.
(b) If a Participant has elected an optional form of payment providing
survivor benefits under Section 12.05 and the Beneficiary of such Participant
dies before the date the Participant's benefit payments are scheduled to begin,
the election will be automatically canceled; provided, however, that the
Participant notifies the Committee in writing of such an event. The
Participant's benefit will then be paid in accordance with Sections 12.02 or
12.07, whichever is applicable, unless he makes a new election in accordance
with Section 12.04.
Section 12.07 Payment of Deferred Vested Termination Benefit. A
Participant who is entitled to a deferred vested benefit under Article X, shall
have his benefit paid to him in accordance with Section 12.02; provided,
however, that such Participant may elect an optional form of benefit under
Section 12.05, subject to the waiver and election requirements of Sections 12.03
and 12.04.
Section 12.08 Small Amounts. Notwithstanding any other provision of the
Plan, if the Committee determines that the present value of the vested portion
of any Participant's Accrued Benefit is $3,500 or less as of the date a
Participant separates from service or retires, the Committee shall direct the
Trustee to distribute such benefit to the Participant in a single lump sum. For
the purpose of this Section 12.08, present value will be determined as of the
scheduled date of distribution by using an interest rate which is the lesser of:
(i) the rate that would be used (as of such date) by the Pension
Benefit Guaranty Corporation ("PBGC") for the purpose of
determining the present value of a single sum distribution on
plan termination; or
(ii) the interest rate used for annual Plan valuation purposes in
effect from time to time as set forth in Appendix B.
Section 12.09 Payments to Minors and Other Persons under Disability.
Notwithstanding any other provisions of the Plan, if the payee of any Plan
benefit is a minor or is otherwise found incompetent for any reason by the
Committee or is declared incompetent by a Court of competent jurisdiction, then
any Plan benefit to which such payee is entitled will be paid only to such
guardian, conservator, or other person legally charged with the care of the
person or of his estate as is duly appointed under the laws of the applicable
jurisdiction.
<PAGE> 32
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Section 12.10 Benefits May Not Be Assigned or Alienated. Benefits
payable under this Plan will not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution, or levy of any kind, either voluntary or involuntary;
and any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge, or otherwise dispose of any right to benefits payable
hereunder will be void. The Trust Fund will not in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements, or torts of any
person entitled to benefits hereunder.
The Accrued Benefit of any Participant, however, shall be subject to
and payable in accordance with the applicable requirements of any Qualified
Domestic Relations Order, as that term is defined in Section 414(p) of the Code
and any Regulations promulgated thereunder. Effective October 1, 1993, a payment
from a Participant's Accrued Benefit may be made to an alternate payee (as
defined in Section 414(p)(8) of the Code) prior to the date the Participant
reaches his earliest retirement age (as defined in Section 414(p)(4)(B) of the
Code) if such payments are made pursuant to a Qualified Domestic Relations
Order. All such payments pursuant to a Qualified Domestic Relations Order shall
be subject to reasonable rules promulgated by the Committee; provided that such
rules and Regulations are consistent with Section 414(p) of the Code. The
Accrued Benefit that is subject to any Qualified Domestic Relations Order shall
be reduced by the amount of any payment made pursuant to such Order.
Section 12.11 Commencement of Benefits, Required Beginning Date. (a)
Notwithstanding any other provision of the Plan to the contrary, payment of a
Participant's benefit must begin not later than April 1 of the calendar year
following the calendar year in which the Participant attains age 70-1/2, even if
the Participant is continuing employment.
(b) If a Participant dies after the payment of his benefits has begun,
the remaining portion of such benefits shall be distributed at least as rapidly
as the manner in which benefits were scheduled to be paid to the Participant. If
a Participant dies before payment of his benefits has begun, his benefits must
be distributed over a period not exceeding the greatest of:
(i) five (5) years from the date of death of the Participant;
(ii) in the case of payments to a designated Beneficiary other than
the Participant's Spouse, the life expectancy of such
Beneficiary, provided also that such payments begin within one
year of the Participant's death; or
(iii) in the case of payments to the Participant's Spouse, the life
expectancy of such Spouse.
Section 12.12 Optional Direct Transfer of Eligible Rollover
Distributions. (a) Notwithstanding anything contained in the Plan to the
contrary, effective for eligible rollover distributions made on or after January
1, 1993, if a Participant or other Distributee elects:
(i) to have such distribution paid directly to an eligible
retirement plan, and
<PAGE> 33
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(ii) specifies the eligible retirement plan to which such
distribution is to be paid (in such form and at such time as
the Committee may prescribe), such distribution shall be made
in the form of a direct trustee-to-trustee transfer to the
eligible retirement plan so specified.
(b) Subsection (a) above shall apply only to the extent that the
eligible rollover distribution would be includible in gross income if not
transferred as provided in subsection (a) above (determined without regard to
Section 401(c) of the Code).
(c) For purposes of this Section 12.12, the term "eligible rollover
distribution" has the meaning given to such term by Section 402(f)(2)(A) of the
Code.
(d) For purposes of this Section 12.12, the term "eligible retirement
plan" has the meaning given to such term by Section 402(c)(8)(B) of the Code,
except that a qualified trust shall be considered an eligible retirement plan
only if it is a defined contribution plan, the terms of which permit the
acceptance of rollover distributions.
(e) For purposes of this Section 12.12, the term "Distributee" includes
a Participant or an inactive Participant. In addition, the Participant's or
inactive Participant's surviving Spouse or former Spouse who is the alternate
payee under a Qualified Domestic Relations Order as defined in Section 414(p) of
the Code, is a Distributee with regard to the interest of the Spouse or former
Spouse.
For purposes of this Section 12.12(e), an inactive Participant is an
Employee who is eligible to be and becomes a Participant in accordance with the
provisions of Article III or a former Employee who has not received a
distribution of his Accrued Benefit.
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ARTICLE XIII
PRE-RETIREMENT SURVIVOR BENEFIT
Section 13.01 Eligibility. If a Participant dies:
(a) either:
(i) prior to his earliest retirement date under the
Plan; or
(ii) prior to commencing payment of his benefit from the
Plan; and
(b) with a vested interest in his Accrued Benefit;
then his surviving Spouse shall be entitled to a Pre-Retirement Survivor Benefit
as described in this Article XIII.
Section 13.02 Pre-Retirement Survivor Benefit. The surviving Spouse, if
any, of a Participant who dies while satisfying the conditions of Section 13.01
will be eligible to receive a monthly Pre-Retirement Survivor Benefit in an
amount equal to 50% of the vested Accrued Benefit as of the date of the
Participant's death; provided, however, that such amount shall be reduced in
accordance with the provisions of Section 7.03(a) or (b) (whichever shall be
applicable) for each calendar month by which payment of the Pre-Retirement
Survivor Benefit precedes the earliest retirement date under the Plan and
further reduced in accordance with the provisions of Section 12.02(b).
Notwithstanding the foregoing, that portion of a Pre-Retirement
Survivor Benefit attributable to such Participant's Prior Plan accrued benefit
shall not be reduced for commencement of benefit payments which precede the
Participant's earliest retirement date under the Plan; provided, however,
subject to any plan qualification provisions of the Code to the contrary, a
Participant's Pre-Retirement Survivor Benefit under this Article shall be
determined in accordance with the preceding paragraph in this Section 13.02 but
shall in no event be less than the amount attributable to his unreduced Prior
Plan accrued benefit payable as a Pre-Retirement Survivor Benefit as described
in this sentence. The amount of this Pre-Retirement Survivor Benefit will be
payable in accordance with the provisions of Section 13.03.
Section 13.03 Payment of Pre-Retirement Survivor Benefit.
Pre-Retirement Survivor Benefit payments will be paid monthly to the
Participant's surviving Spouse commencing as of the first day of the calendar
month next following the later of:
(a) the Participant's earliest retirement date under the Plan; or
<PAGE> 35
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(b) the death of the Participant;
and ending on the first day of the calendar month during which the surviving
Spouse's death occurs.
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ARTICLE XIV
DESIGNATION OF BENEFICIARY
Each Participant or Limited Participant may designate any legal or
natural person or persons as his Beneficiary under the Plan to receive any
portion of such Participant's benefit that remains unpaid as of the date of his
death; provided, however, that benefits payable as a Pre-Retirement Survivor
Benefit under Article XIII shall be payable only to a Participant's surviving
Spouse. Each Beneficiary designation will be in the form prescribed by the
Committee and will be effective only when filed with the Committee during the
Participant's or Limited Participant's lifetime. Each Beneficiary designation
filed with the Committee will cancel all prior Beneficiary designations filed
with the Committee.
Notwithstanding the foregoing, if a Participant was married for the
twelve consecutive month period immediately prior to such Participant's Annuity
Starting Date (as defined in Section 12.03), no Beneficiary designation will be
effective under the Plan unless the Participant's Spouse consents in writing to
such designation, such consent acknowledges the effect of such designation, and
such Spouse's signature is witnessed by a notary public. Spousal Consent to a
Participant's Beneficiary designation will not be required if:
(a) the Participant's Spouse is designated as the primary
Beneficiary by the Participant, or
(b) it is established to the satisfaction of the Committee that
Spousal Consent cannot be obtained because there is no
Participant's Spouse, or because of such other circumstances
as may be prescribed in regulations issued by the Secretary of
the Treasury.
Any consent by the Participant's Spouse or any determination that the consent is
not required pursuant to paragraphs (a) or (b) above, will be effective only
with respect to that particular Spouse.
<PAGE> 37
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ARTICLE XV
LIMITATION ON BENEFITS
Section 15.01 Maximum Benefits. Notwithstanding any other provision of
this Plan, benefits shall not accrue under this Plan as of any Plan Year with
respect to any Employee such that the annual pension benefit payable, as
adjusted in accordance with regulations prescribed by the Secretary of the
Treasury to reflect changes in the cost of living, shall exceed the lesser of
ninety thousand dollars ($90,000) or one hundred percent (100%) of the
Employee's average compensation for the three (3) consecutive calendar years
during which he was participating in the Plan and his aggregate compensation
from the Employer was highest. For purposes of the foregoing limitation, the
annual pension benefit shall be calculated as a Normal Retirement Benefit under
this Plan payable in the form of a Single Life Annuity and without reference to
benefits funded by employee contributions or rollover contributions, to benefits
other than a Normal Retirement Benefit, and to Qualified Joint and Survivor
Annuity benefits as defined in Section 417(b) of the Code.
The annual benefit payable under the Plan with respect to a Participant
whose benefits commence before his Social Security Retirement Age (as defined
below) shall not exceed the limitation set forth above; provided, however, that
the dollar amount referred to above shall be reduced actuarially to reflect the
commencement of benefits prior to his Social Security Retirement Age. Such
reduced dollar amount shall be the Actuarial Equivalent of an annual benefit
equal to the dollar amount referred to above commencing at his Social Security
Retirement Age.
The annual benefit payable under the Plan with respect to a Participant
whose benefits commence after his Social Security Retirement Age shall not
exceed the limitation contained above; provided, however, that the dollar amount
referred to above shall be increased actuarially to reflect the commencement of
benefits after his Social Security Retirement Age. Such increased dollar amount
shall be the Actuarial Equivalent of an annual benefit equal to the dollar
amount referred to above commencing at his Social Security Retirement Age.
In the event payment of a Participant's annual benefit commences prior
to the completion of ten (10) years of participation under this Plan, the dollar
limitations contained above, whichever is applicable, shall be adjusted by
multiplying the amount of such limitation by a fraction, the numerator of which
is the Participant's years of such participation and the denominator of which is
ten (10).
A Participant's "Social Security Retirement Age" means the age used as
the retirement age for the Participant under Section 216(1) of the Social
Security Act, except that such Section shall be applied without regard to the
age increase factor contained therein, and shall
<PAGE> 38
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be further applied as if the early retirement age under Section 216(l)(2) of
said Act were age 62.
For the purpose of adjusting amounts under this Section 15.01, the
interest rate assumption will be the greater (or the lesser, in the case of
benefits beginning after age 65) of five percent (5%), or the rate used in
determining Actuarial Equivalence under the Plan.
Section 15.02 Maximum Benefits - Multiple Plans Covering Participant.
In the event that an Employee also participates in any defined contribution plan
maintained by the Employer as stated below, a further limitation on annual
benefits payable to such Employee under this Plan shall apply to the extent
necessary to prevent disqualification of the Plan under Section 415(e), or
Section 416(h) if applicable, of the Code. The sum of the defined benefit plan
fraction and the defined contribution plan fraction, determined in accordance
with Section 414(e) of the Code and applicable regulations thereunder, for such
Employee shall not exceed 1.0. Adjustments to the defined benefit plan fraction
and to pay benefits accrued under this Plan shall be made in accordance with
applicable regulations and as necessary to avoid exceeding such 1.0 limitation.
Section 15.03 Early Termination. In the event the Plan is terminated,
the benefit of any highly compensated active or former Employee is limited to a
benefit that is nondiscriminatory under Section 401(a)(4) of the Code.
For Plan Years beginning on or after January 1, 1994, benefits
distributed to any of the 25 most highly compensated active and highly
compensated former Employees with the greatest Compensation in the current or
any prior year are restricted such that the annual payments are no greater than
an amount equal to the payment that would be made on behalf of any Employee
under a Single Life Annuity that is the Actuarial Equivalent of the sum of the
Employee's Accrued Benefit, the Employee's other benefits under the Plan (other
than a social security supplement, within the meaning of Section
1.411(a)-7(c)(4)(ii) of the Treasury Regulations), and the amount the Employee
is entitled to receive under a social security supplement.
The preceding paragraph shall not apply if: (1) after payment of the
benefit to an Employee described in the preceding paragraph, the value of Plan
assets equals or exceeds 110% of the value of current liabilities, as defined in
Section 412(1)(7) of the Code, (2) the value of the benefits for an Employee
described above is less than 1% of the value of current liabilities before
distribution, or (3) the value of the benefits payable under the Plan to an
Employee described above does not exceed $3,500.
For purposes of this Section 18.06, benefit includes loans in excess of
the amount set forth in Section 72(p)(2)(A) of the Code, any periodic income,
any withdrawal values payable to a living Employee, and any death benefits not
provided for by insurance on the Employee's life.
<PAGE> 39
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An Employee's otherwise restricted benefit may be distributed in full
to the affected Employee if prior to receipt of the restricted amount, the
Employee enters into a written agreement with the Plan Administrator to secure
repayment to the Plan of the restricted amount. The restricted amount is the
excess of the amounts distributed to the Employee (accumulated with reasonable
interest) over the amounts that could have been distributed to the Employee
under a Single Life Annuity described in the Plan (accumulated with reasonable
interest). The Employee may secure repayment of the restricted amount upon
distribution by: (1) entering into an agreement for promptly depositing in
escrow with an acceptable depositary property having a fair market value equal
to at least 125 percent of the restricted amount, (2) providing a bank letter
of credit in an amount equal to at least 100 percent of the restricted amount,
or (3) posting a bond equal to at least 100 percent of the restricted amount.
If the Employee elects to post bond, the bond will be furnished by an insurance
company, bonding company or other surety for federal bonds.
The escrow arrangement may provide that an Employee may withdraw
amounts in excess of 125 percent of the restricted amount. If the market value
of the property in an escrow account falls below 110 percent of the remaining
restricted amount, the Employee must deposit additional property to bring the
value of the property held by the depositary up to 125 percent of the restricted
amount. The escrow arrangement may provide that Employee may have the right to
receive any income from the property placed in escrow, subject to the Employee's
obligation to deposit additional property, as set forth in the preceding
sentence.
A surety or bank may release any liability on a bond or letter of
credit in excess of 100 percent of the restricted amount.
If the Plan Administrator certifies to the depositary, surety or bank
that Employee (or the Employee's estate) is no longer obligated to repay any
restricted amount, a depositary may redeliver to the Employee any property held
under an escrow agreement, and a surety or bank may release any liability on an
Employee's bond or letter of credit.
<PAGE> 40
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ARTICLE XVI
TOP HEAVY PROVISIONS
Section 16.01 Purpose and Effect. The purpose of this Article is to
comply with the requirements of Section 416 of the Code. The provisions of this
Article will be effective for each Plan Year in which the Plan is a "Top-Heavy
Plan" within the meaning of Section 416(g) of the Code.
Section 16.02 Top-Heavy Plan. In general, the Plan will be a Top-Heavy
Plan for any Plan Year if, as of the last day of the preceding Plan Year (the
"Determination Date"), the sum of the amounts in (a), (b), and (c) below for Key
Employees (as defined below and in Section 416(i)(1) of the Code) exceeds 60% of
the sum of such amounts for all employees who are covered by a defined
contribution plan or defined benefit plan that is included in the Required
Aggregation Group (as defined in Section 16.06):
(a) The present value of the cumulative Accrued Benefit of such
Employees under this Plan.
(b) The present value of the cumulative accrued benefits of such
Employees calculated under any other defined benefit plans
included in the Required Aggregation Group.
(c) The aggregate account balances of such Employees under any
defined contribution plan included in the Required Aggregation
Group.
In determining the present value of the aggregate benefits of an Employee in any
plan:
(i) such benefits will be increased by the aggregate
distributions, if any, made from such plan during the
five-year period ending on the Determination Date;
(ii) the accrued benefit or account balance of any employee who
was previously a Key Employee, but who has become a Non-Key
Employee, will be disregarded;
(iii) the accrued benefit or account balance of a beneficiary of an
employee will be considered the accrued benefit or account
balance of the employee;
(iv) the accrued benefit or account balance of any former employee
who has not performed any services for the Employer at any
time during the five-year period ending on the Determination
Date will be disregarded;
(v) the actuarial assumptions for all defined benefit plans in
the Required Aggregation Group will be identical; and
<PAGE> 41
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(vi) the accrued benefit of any employee will not include any
proportional subsidies but will include any non-proportional
subsidies.
For purposes of determining whether this Plan is a Top-Heavy Plan for
its initial Plan Year (beginning January 1, 1993), this Section shall be
applied as though this Plan were the Prior Plan for purposes of the December
31, 1992 Determination Date.
Section 16.03 Key Employee. In general, a "Key Employee" is an
employee who, at any time during the five-year period ending on the
determination date, is:
(a) an officer of the Employer or an Affiliated Employer
receiving annual Compensation from the Employer and any
Affiliated Employer greater than 150% of the limitation in
effect under Section 415(c)(1)(A) of the Code; provided, that
for the purposes of this Section 16.03(a), no more than 50
employees of the Employer and Affiliated Employer (or if
lesser, the greater of three employees or 10% of the
employees) will be treated as officers;
(b) one of the 10 employees receiving annual Compensation from
the Employer or an Affiliated Employer of more than the
limitation in effect under Section 415(c)(1)(A) of the Code
and owning the largest interests in the Employer or in an
Affiliated Employer;
(c) a 5% owner of the Employer or an Affiliated Employer; or
(d) a 1% owner of the Employer or an Affiliated Employer
receiving annual Compensation from the Employer or Affiliated
Employer (whichever he owns), of more than $150,000.
A "Non-Key Employee" is, for the purposes of the Plan, any Employee who is not
a Key Employee.
Section 16.04 Minimum Vesting. For any Plan Year for which the Plan is
a Top-Heavy Plan, a Participant's vested percentage in his Accrued Benefit will
not be less than the percentage determined under the following table:
<TABLE>
<CAPTION>
Vested
Years of Service Percentage
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
</TABLE>
<PAGE> 42
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<TABLE>
<S> <C>
5 or more 100%
</TABLE>
If the foregoing provisions of this Section 16.04 become effective, and
the Plan later ceases to be a Top-Heavy Plan, each Participant who then has
three (3) or more Years of Service standing to his credit may elect to continue
to have the vested percentage of his Accrued Benefit determined under the
provisions of this Section 16.04.
Section 16.05 Minimum Benefit. A Participant's monthly benefit,
commencing at his Normal Retirement Date and payable as a Single Life Annuity,
will not be less than two percent (2%) of his Final Average Compensation
multiplied by the number of years (not to exceed ten (10)) of his Top-Heavy
Service (as defined below). A Participant's "Final Average Compensation" for
this purpose means the monthly average of his Compensation for the five (5)
consecutive years for which his Compensation was highest, disregarding any
Compensation paid after the last year in which the Plan is a Top-Heavy Plan. A
Participant will be entitled to one (1) year of "Top-Heavy Service" for each
Year of Service after the Effective Date during which the Plan is a Top-Heavy
Plan and during which he is a Participant thereunder.
Section 16.06 Required Aggregation Group. For the purposes of this
Article the "Required Aggregation Group" means this Plan and each other defined
benefit plan and defined contribution plan maintained by the Employer or an
Affiliated Employer (including any plan that was terminated within the five (5)
year period ending on the Determination Date) that covers a Key Employee as a
participant, or that is maintained by the Employer or an Affiliated Employer in
order for a plan which covers a Key Employee to be qualified.
Section 16.07 Adjustment of Combined Benefit Limitations. For any Plan
Year in which the Plan is a Top-Heavy Plan, the determination of the defined
benefit plan fraction and defined contribution plan fraction under Section 15.02
of the Plan will be adjusted in accordance with the provisions of Section 416(h)
of the Code by substituting 1.0 for 1.25 in adjusting the dollar limitations of
Sections 415(b)(1)(A) and 415(c)(1)(A) of the Code.
<PAGE> 43
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ARTICLE XVII
COMMITTEE AND PLAN ADMINISTRATION
Section 17.01 Membership and Authority. The Committee referred to in
Section 2.09 will consist of one or more persons appointed, from time to time,
by the Board, or by the authorized designee of such Board. The Committee will be
the "named fiduciary" (as described in ERISA Section 402) with respect to the
Plan, and will have complete authority and discretion in exercising rights,
powers and duties granted to it as Plan Administrator under the Plan. Except as
otherwise specifically provided in this Article XVII, in controlling and
managing the operation and administration of the Plan, the Committee will act by
a majority of its then members, by meeting or by writing filed without meeting.
The Committee shall have the discretionary authority to determine eligibility
for Plan benefits and to construe the terms of the Plan, including the making of
factual determinations, and the decision thereon of the Committee shall be final
and conclusive and binding upon all persons to the extent permitted by law. The
Committee shall have the power and duty to do all things necessary or convenient
to effect the intent and purposes of the Plan and not inconsistent with any of
the provisions hereof, whether or not such powers and duties are specifically
set forth herein. Not in limitation but in amplification of the foregoing, the
Committee will have the following powers, rights, and duties in addition to
those vested in it elsewhere in the Plan:
(a) To adopt such rules of procedure and regulations as, in its
opinion, may be necessary for the proper and efficient
administration of the Plan and as are consistent with the
provisions of the Plan.
(b) To enforce the Plan in accordance with its terms and such
applicable rules and regulations as may be adopted by the
Committee.
(c) To construe and interpret the Plan and to determine all
questions arising under the Plan, including the power to
determine the rights or eligibility of Employees or
Participants and their Beneficiaries and their respective
benefits.
(d) To maintain and keep adequate records concerning the Plan and
concerning its proceedings and acts in such form and detail as
the Committee may decide, and to make such reports on the Plan
to the Employer, government agencies, or others as the
Committee or the Employer determines to be appropriate.
(e) To direct all payments of benefits under the Plan.
The certificate of a majority of the members of the Committee, or of the
Secretary of the Committee, that the Committee has taken or authorized any
action will be conclusive in favor of any person relying on the certificate.
<PAGE> 44
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Section 17.02 Delegation by Committee. In exercising its authority to
control and manage the operation and administration of the Plan, the Committee
may employ agents and counsel (who may also be employed by or represent the
Employer) and to delegate to them or allocate to individual Committee members
such powers as the Committee deems desirable. Any such delegation will be in
writing and will reflect the action of the Committee members then acting. The
writing contemplated by the foregoing sentence will fully describe the advice to
be rendered or the functions and duties to be performed by the delegatee.
Section 17.03 Uniform Rules. In managing the Plan, the Committee will
uniformly apply rules and regulations that have been adopted by the Committee to
all similarly situated Participants.
Section 17.04 Information to be Furnished to Committee. The Employer
and Affiliated Employers will furnish the Committee such data and information as
may be required. The records of such Employers or Affiliated Employers as to an
Employee's or Participant's period of employment, termination of employment (and
the reason therefor), leave of absence, reemployment, and compensation will be
conclusive on all persons, unless determined to be incorrect. Participants and
other persons entitled to benefits under the Plan must furnish the Committee
with such evidence, data, or information as the Committee considers desirable to
carry out the terms of the Plan.
Section 17.05 Committee's Decision Final. All determinations and
decisions regarding provisions of the Plan involving eligibility to participate
in the Plan, eligibility for benefits under the Plan, and the amount and form of
benefits payable under the Plan are to be made by, and in the sole discretion,
of the Committee. All such decisions and determinations shall be final and
binding. A misstatement or other mistake of fact will be corrected when it
becomes known, and the Committee will make any such adjustment required thereof
as it considers equitable and practicable.
Section 17.06 Exercise of Committee's Duties. Notwithstanding any other
provisions of the Plan, the Committee will discharge its duties hereunder solely
in the interests of the Participants in the Plan and their Beneficiaries, and:
(a) For the exclusive purpose of:
(i) providing benefits to Plan Participants and other
persons entitled to benefits under the Plan; and
(ii) defraying reasonable expenses of administering the
Plan;
(b) And with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent person acting in
a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like
aims.
<PAGE> 45
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Section 17.07 Remuneration and Expenses. No remuneration shall be paid
to any Committee member or designatee of the Committee as such. However, the
reasonable expenses of a Committee member or designatee of the Committee
incurred in the performance of a Committee function, and any other reasonable
expenses of Plan administration, may be paid from the Trust, at the direction of
the Committee, if not paid by the Employers.
Section 17.08 Resignation or Removal of Committee Member. A Committee
member may resign at any time by giving written notice to Galileo International
and the other Committee members. Galileo International may remove a Committee
member, in accordance with Section 17.01 by giving written notice to him and the
other Committee members.
Section 17.09 Appointment of Successor Committee Members. Galileo
International may fill any vacancy in the membership of the Committee, in
accordance with Section 17.01, and will give prompt written notice thereof to
the other Committee members. While there is a vacancy in the membership of the
Committee, the remaining Committee members will have the same powers as the full
Committee until the vacancy is filled.
Section 17.10 Records and Reports. The Committee will exercise such
authority and responsibility as it deems appropriate to comply with ERISA and
Code requirements relating to: records of a Participant's service, Accrued
Benefit; notifications to Participants; registration with the Internal Revenue
Service; and annual reports to the Department of Labor or Internal Revenue
Service.
Section 17.11 Indemnification. To the extent permitted by law, no
Committee member, shareholder, director, officer or Employee of an Employer,
shall incur any personal liability of any nature for any act or failure to act
in good faith in connection with the administration of the Plan, except in cases
of gross negligence or willful misconduct by such individual. The Board, the
Committee, and any Employees operating with the approval of the Employer or the
Committee will be indemnified and saved harmless by Galileo International, from
and against any and all liabilities to which they may be subjected by reason of
any act or failure to act made in good faith pursuant to the provisions of the
Plan, including expenses reasonably incurred in the defense of any claim
relating thereto.
Section 17.12 Claims Procedure. A person or persons or an entity named
by the Committee (which person, persons, or entity may be the Committee) will
make all determinations as to the right of any person to a benefit. If a claim
is denied, in whole or part, the party making the claim will be given a written
notice of denial of the claim containing the following:
(a) Specific reasons for the denial;
(b) Specific reference to pertinent Plan provisions on which the
denial is based;
<PAGE> 46
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(c) A description of any additional material or information
necessary for the claimant to perfect the claim, and an
explanation of why the material or information is necessary;
and
(d) An explanation of the claim review procedure.
The notice will be furnished within a reasonable time after receipt of the
claim. If the notice is not furnished within sixty (60) days following the
claim, the claim will be deemed denied.
The following claim review procedure will apply to any denied claim:
(a) Review may be requested in writing within ninety (90) days
following the date of denial of the claim. During such period
the claimant may inspect or copy any Plan records pertaining
to his claim. The request for review must contain all reasons,
facts and documents in support of the denied claim.
(b) The decision on review will be by the Committee or its
designee, will be in writing, and will be issued within sixty
(60) days, provided that the period for decision may extend to
a date not later than one hundred twenty (120) days after such
request if it is determined that special circumstances require
such an extension. The decision on review will include
specific reasons for the decision and specific references to
the Plan provisions on which the decision is based.
<PAGE> 47
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ARTICLE XVIII
AMENDMENT AND TERMINATION
Section 18.01 Amendment; Termination. Galileo International shall have
the right at any time, and from time to time, to amend, in whole or in part, any
or all of the provisions of the Plan, or to terminate the Plan, in whole or in
part. No such amendment shall authorize or permit any part of the Trust to be
usedfor or diverted to purposes other than for the exclusive benefit of the
Participants or other beneficiaries or permit any portion of the Trust to revert
to or become the property of Galileo International. However, upon termination of
the Plan, if after all liabilities to Participants and Beneficiaries have been
met, a balance remains in the Trust, Galileo International may recover such
balance if such balance is due to an erroneous actuarial computation.
Notwithsanding the foregoing, no amendment (except as provided below) shall:
(i) retroactively decrease the benefits accrued to any
Participant, or
(ii) eliminate or reduce an early retirement benefit, subsidy, or
optional form of benefit with respect to benefits attributable
to service before the amendment.
Galileo International also shall have the right to make any amendment
retroactively which is necessary to qualify the Plan for tax exemption or to
bring the Plan into conformity with the Code or ERISA, and regulations or
rulings thereunder.
Section 18.02 Merger and Consolidation of Plan, Transfer of Plan
Assets. In the case of any merger or consolidation of the Plan with, or transfer
of assets and liabilities of the Plan to, any other plan, provisions will be
made so that each affected Participant in the Plan on the date thereof, if the
Plan, as applied to that Participant, then terminated, would receive a benefit
immediately after the merger, consolidation, or transfer that is equal to or
greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation, or transfer if the Plan, as applied to him,
had then terminated.
Section 18.03 Distribution on Termination and Partial Termination. On
termination of the Plan, and after payment of all reasonable administrative
expenses, the Committee will allocate the assets in the manner and order set
forth in ERISA Section 4044 to the extent of the sufficiency of such assets. The
assets of the Plan attributable to benefits accrued under the Prior Plan shall
be allocated, to the extent necessary, in accordance with any applicable special
schedule of benefits maintained pursuant to the requirements of Code Section
414(l) in connection with the merger of the Prior Plan into this Plan, and such
schedule of benefits also shall be operated, as needed, in accordance with the
requirements of Code Section 414(l) and regulations thereunder. Such assets, as
allocated, will be fully vested and will be distributed in accordance with the
applicable provisions of the Plan. If a partial termination of the Plan occurs,
the Participants affected by such partial termination, shall be treated as
though the Plan
<PAGE> 48
-48-
had terminated with respect to their vested rights and benefit distribution
rights; provided, however, that the Plan shall continue with respect to all
other Participants.
Section 18.04 Notice of Amendment, Termination, or Partial Termination.
Affected Participants and other persons will be notified of any material
amendment to the Plan and of the termination of the Plan, as required by law.
<PAGE> 49
-49-
ARTICLE XIX
MISCELLANEOUS PROVISIONS
Section 19.01 Rights to Trust Assets. Upon termination of his
employment, no Employee, Participant or Limited Participant, and no Beneficiary
(in the case of a Participant's death) will have any right to, or interest in,
any assets of the Trust Fund other than the benefits specifically accrued by or
on behalf of such a Participant, and then only to the extent such benefits are
payable out of the available assets of the Trust Fund under the terms of the
Plan to such person. Payment of all benefits under the Plan will be made solely
out of the assets of the Trust Fund, and neither the Employer, any Affiliated
Employer, nor the Plan Administrator will be personally liable for any loss of
assets or decrease in value due to adverse investment experience of the Trust
Fund.
Section 19.02 Nonforfeitability of Benefits. Subject only to the
specific provisions of this Plan, nothing will be deemed to divest a Participant
of his right to the nonforfeitable benefit to which he becomes entitled in
accordance with the provisions of this Plan.
Section 19.03 Word Usage. Words used in the masculine shall apply to
the feminine where applicable and, wherever the context of the Plan dictates,
the plural shall be read as the singular and the singular as the plural.
<PAGE> 50
-50-
ARTICLE XX
SPECIAL PROVISIONS RELATING TO APOLLO TRAVEL SERVICES
Section 20.01 Introduction. Pursuant to the Covia Reorganization,
certain of the assets and business of Covia were assumed by Apollo Travel
Services, a general partnership ("ATS") and certain persons who were employed by
Covia immediately prior to the Closing, became employees of ATS. In connection
with the Covia Reorganization, Covia and ATS entered into a certain Employee
Benefits Agreement (the "Agreement") providing for the participation of certain
employees of ATS in this Plan for the period from the closing of the Covia
Reorganization (the "Closing") until the later of December 31, 1993, or such
later date as Galileo International and ATS may mutually agree (the "Coverage
Period"). The provisions of this Article XX govern the coverage of those
Employees who became employees of ATS pursuant to the Covia Reorganization.
Section 20.02 Adoption of Plan by Apollo Travel Services.
Notwithstanding the provisions of Section 2.18 hereof, ATS may, by resolution of
its Supervisory Board, or a duly authorized committee thereof, adopt the Plan
and become an Employer under the Plan. ATS' status as a participating Employer
in the Plan will terminate as of the later of December 31, 1993, or such later
date as Galileo International and ATS may mutually agree.
Section 20.03 ATS Contributions. ATS shall contribute to the Plan its
allocable share of the minimum funding obligation (as defined in Section 412 of
the Code) for the Plan Year ending December 31, 1993, as determined by the
Plan's actuaries in accordance with the Plan and the Agreement. Such
contributions shall be made not less frequently than quarterly.
Section 20.04 ATS Employees. Notwithstanding Section 2.16, during the
Coverage Period the term "Eligible Employee" shall include any employee of ATS
who was a participant in the Plan immediately prior to the Closing. Each such
Eligible Employee shall continue to be a Participant during the Coverage Period.
Section 20.05 Vesting Service and Benefit Service for ATS Employees.
(a) A Participant who becomes an employee of ATS pursuant to the Covia
Reorganization shall continue to earn Vesting Service in accordance with Section
2.54 hereof during the Coverage Period.
(b) Subject to the limitations set forth in Articles III and IV of the
Plan, for purposes of determining the amount of a Participant's benefit payable
under this Plan, a Participant will be credited with Benefit Service during his
period of employment with ATS during the Coverage Period.
<PAGE> 51
-51-
Section 20.06 Composition and Administration of the Committee During
the Coverage Period. Notwithstanding Article XVII hereof, during the Coverage
Period the Committee shall be appointed and administered in accordance with
Section C of the Agreement.
IN WITNESS WHEREOF, this Plan, having been first duly adopted is hereby
executed below by the duly authorized officers of the Employer on this day
of , 1994, to be effective as of January 1, 1993.
GALILEO INTERNATIONAL
By:
----------------------------
Its:
---------------------------
ATTEST:
By:
-------------------------------
Its:
------------------------------
<PAGE> 52
APPENDIX A
The following entities shall be considered Affiliated Employers as of
the "Acquisition Date," which shall mean the date set forth in that certain
agreement or agreements which govern the terms of the purchase and sale of
assets and/or stock by or between each separate entity listed below and Covia
Partnership:
1. TS2000 shall be considered an Affiliated Employer as of the
Acquisition Date. Persons who were employed by TS2000 as of the Acquisition Date
shall be credited with Years of Service, if any, for purposes of eligibility and
vesting only, from the date specified in the applicable agreement;
2. Travel Master shall be considered an Affiliated Employer as of the
Acquisition Date. Persons who were employed by Travel Master as of the
Acquisition Date shall be credited with Years of Service, if any, for purposes
of eligibility and vesting only, from the date specified in the applicable
agreement;
3. Ritz Carlton shall be considered an Affiliated Employer as of the
Acquisition Date. Persons who were employed by Ritz Carlton as of the
Acquisition Date shall be credited with Years of Service, if any, for purposes
of eligibility and vesting only, from the date specified in the applicable
agreement;
4. Flight Safety shall be considered an Affiliated Employer as of the
Acquisition Date. Persons who were employed by Flight Safety as of the
Acquisition Date shall be credited with Years of Service, if any, for purposes
of eligibility and vesting only, from the date specified in the applicable
agreement;
5. For purposes of determining eligibility and vesting service under
this Plan, United Air Lines shall be considered an Affiliated Employer from the
Acquisition Date until the date of the closing of the Covia Reorganization. An
Employee who transfers employment from the Employer to United Air Lines on the
date of the closing of the Covia Reorganization, or any other date of transfer
which is determined by the Committee to be resulting from the Covia
Reorganization, shall be considered a Limited Participant. Any other Employee
who terminates his employment and who is subsequently employed by United Air
Lines shall be deemed to have separated from service with all Employers and
shall not be considered a Limited Participant for any purpose under the Plan.
<PAGE> 53
APPENDIX B
<PAGE> 54
FIRST AMENDMENT TO
THE GALILEO INTERNATIONAL PENSION PLAN
(As Amended and Restated Effective January 1, 1993)
WHEREAS, Galileo International Partnership ("Company") adopted the Galileo
International Pension Plan, as Amended and Restated Effective January 1, 1993
("Plan");
WHEREAS, Section 18.01 of the Plan provides that the Company may amend the
Plan;
WHEREAS, the Company desires to amend the Plan to obtain a determination
that the Plan meets the requirements of the Tax Reform Act of 1986 and
subsequent legislation and regulations thereunder;
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby adopts the following
First Amendment to the Plan, effective as of January 1, 1993:
1. Section 18.03 of the Plan is amended by adding the following sentence
to the beginning thereof:
"Upon termination or partial termination of the Plan, the
rights of all affected Participants to benefits accrued to the
date of such termination or partial termination shall become
nonforfeitable to the extent funded as of such date."
IN WITNESS WHEREOF, this First Amendment to the Plan is executed this ____
day of ________________, 1997.
GALILEO INTERNATIONAL PARTNERSHIP
By:
------------------------------
Its:
------------------------------
<PAGE> 55
GALILEO INTERNATIONAL SUPPLEMENTAL RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
INTRODUCTION
The Covia Supplemental Retirement Plan (the "Plan") was originally
established effective January 1, 1991, by Covia Partnership ("Covia") to provide
certain highly compensated employees of Covia with the opportunity to receive
retirement benefits in excess of those which they would have been entitled to
receive under Covia's tax-qualified retirement plans and to thereby attract,
retain and motivate qualified management personnel. Effective as of September
16, 1993, pursuant to a combination of the operations of Covia, certain of the
assets and business of Covia were assumed by Apollo Travel Services, a general
partnership, and Covia Partnership was renamed Galileo International Partnership
(the "Company"). The Plan was subsequently amended and restated effective
January 1, 1994, to rename the Plan the "Galileo International Supplemental
Retirement Plan," and to make certain other changes to the Plan. The Plan is
hereby further amended and restated effective January 1, 1997. The Plan, as
amended and restated herein, is intended to be an unfunded deferred compensation
plan for a select group of management or highly compensated employees within the
meaning of Sections 201(2), 301(a) and 401(a)(1) of the Employee Retirement
Income Security Act of 1974 ("ERISA").
<PAGE> 56
2
ARTICLE I
DEFINITIONS
When used in this Plan, the following words shall have the meanings
respectively stated in this Article, unless the context clearly indicates
otherwise:
1.01 Account means the account maintained by the Plan Administrator to
reflect the benefits a Participant is entitled to receive under Article III of
the Plan.
1.02 Beneficiary means the Participant's beneficiary under the Savings
Plan as defined by the Savings Plan.
1.03 Code means the Internal Revenue Code of 1986, as amended from time
to time, and any final or temporary regulations relating thereto.
1.04 Company means Galileo International Partnership and any successor
or affiliate thereto which adopts this Plan.
1.05 Employee means a full-time salaried employee of the Company,
excluding:
(i) leased employees; and
(ii) any employee whose terms and conditions of employment
are governed by a collective bargaining agreement,
provided that retirement benefits have been a good
faith subject of negotiation with respect to that
bargaining unit and the collective bargaining
agreement does not provide specifically for
participation in this Plan.
1.06 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations relating thereto.
<PAGE> 57
3
1.07 Participant means an individual who satisfies all the conditions
for participation set forth in Section 2.01.
1.08 Plan means the Galileo International Supplemental Retirement Plan,
as set forth in this document and as amended hereafter from time to time.
1.09 Plan Administrator means the Committee appointed pursuant to
Section 4.01, or the Company acting through its chief executive officer in the
absence of any such Committee.
1.10 Plan Year means the calendar year.
1.11 Savings Plan means the Galileo International Savings and
Investment Plan, a qualified profit sharing and 401(k) plan sponsored by the
Company, as from time to time in effect.
1.12 Termination means the termination of a Participant's employment
with the Company for any reason.
1.13 Rules of Construction. Words in the masculine gender shall include
the feminine and the singular shall include the plural and vice versa, unless
the context clearly requires otherwise. Any headings in this Plan are included
for ease of reference only and are not to be construed so as to alter the terms
of the Plan. If any provision of the Plan is held to be invalid, illegal or
unenforceable, the Plan shall be interpreted and applied by severing such
provision from the Plan to the extent necessary to avoid rendering the Plan
invalid, illegal or unenforceable.
<PAGE> 58
4
ARTICLE II
ELIGIBILITY AND PARTICIPATION
2.01 Eligibility. To be eligible to participate in the Plan for a Plan
Year, an individual must be an Employee (i) who is a participant in the Savings
Plan; (ii) who had compensation from the Company during the preceding Plan Year
at least equal to the level of compensation needed to qualify as a "highly
compensated employee" of the Company for the current Plan Year, within the
meaning of Section 414(q) of the Code; and (iii) whose allocations under the
Savings Plan for the Plan Year are limited by the application of Sections
401(a)(17), 401(k)(3), 401(m)(2), 402(g) and 415 of the Code.
2.02 Participation. An Employee shall become a Participant in the Plan
as of the start of any Plan Year during which he or she becomes eligible to
participate. Once an Employee becomes a Participant, he or she shall remain a
Participant until his or her termination of employment with the Company and
thereafter until all benefits to which the Employee or his or her Beneficiary is
entitled under the Plan have been paid or forfeited as provided in the Plan.
ARTICLE III
PAYMENT OF BENEFITS
3.01 Eligibility for Benefits. Any Participant who terminates employment
with the Company and is then entitled to a benefit from the Savings Plan, shall
be eligible to receive a benefit from this Plan in accordance with the
provisions of this Article. The right of any Participant to receive any portion
of a benefit under this Plan shall vest to the same extent as
<PAGE> 59
5
the Participant's right are vested under the Savings Plan with respect to the
corresponding type of contribution; provided, however, that a Participant shall
forfeit his or her benefit under this Plan if he or she is not a highly
compensated employee (as defined in Section 414(q) of the Code) as of the date
his or her employment terminates with the Company, except any portion of his or
her benefit attributable to salary reduction contributions under Section 3.02(a)
shall not be forfeited under that circumstance.
No benefit shall be paid to any Employee who is discharged for gross
misconduct, including theft, disclosure or misappropriation of trade secrets or
other confidential information, sabotage of computer operations, negligently
endangering the welfare or security of Company property or personnel, commission
of a felony while at work or on Company premises, or other forms of misconduct
determined to be gross misconduct by the Plan Administrator. No benefit shall be
paid to any Employee who engages in employment determined by the Plan
Administrator to be in competition with the Company's business during his or her
employment with the Company or within one (1) year of his or her termination of
employment with the Company. Benefit payments are subject to the Company's
ability to pay.
3.02 Benefit Amount. The benefit payable to any Participant who becomes
entitled to a benefit from this Plan shall equal the sum of the contributions
credited to his or her Account under this Plan for each Plan Year, plus interest
accrued thereon. The following amounts shall be credited as contributions to a
Participant's Account with respect to a Plan Year:
(i) any salary reduction amounts which he or she elected under the
Savings Plan for the plan year of the Savings Plan which ends
within the subject Plan Year and which cannot be credited to his
or her account under the Savings Plan for
<PAGE> 60
6
its plan year due to the operation of the $7,000 (indexed)
limit on annual cash or deferred contributions under Code
Section 402(g);
(ii) any salary reduction amounts which cannot be allocated to the
Participant's account under the Savings Plan due to the
operation of the actual deferral percentage test under Code
Section 401(k)(3);
(iii) any matching contributions which cannot be allocated to the
Participant's account under the Savings Plan due to the
operation of the contribution percentage test under Code
Section 401(m)(2);
(iv) any salary reduction amounts which cannot be allocated to the
Participant's account under the Savings Plan due to the
operation of the limit on annual compensation under Code
Section 401(a)(17); and
(v) any amounts that would have been allocated to the
Participant's Account under the Savings Plan but for the
limits on annual additions under Code Sections 415(c) and (e).
Amounts described in (i), (ii) and (iv) above shall be credited to a
Participant's Account under this Plan only to the extent that, for the subject
Plan Year, the Participant elects to have such amounts be credited under this
Plan in lieu of being paid or refunded to the Participant as cash compensation.
Any such election shall be made in a written salary reduction agreement filed
with the Plan Administrator prior to the start of the Plan Year to which it
relates. No such election shall be valid with respect to any excess salary
reduction amounts described in (i), (ii) or (iv) above that are attributable to
payroll periods beginning before such election is made. Contributions described
in (i)-(v) above shall be credited to this Plan at the time they would have been
made to the Savings Plan had it been permissible for the Company to make such
contributions to that Savings Plan.
Interest shall be credited to each Participant's Account under this Plan
as of the last day of each calendar quarter. Interest shall accrue on the
Participant's prior quarterly account
<PAGE> 61
7
balance (less any distributions made from the account since that last valuation)
at a rate which matches the rate of interest being credited for the same period
with respect to the fixed income fund (or similar fund) under the Savings Plan.
3.03 Distribution of Benefits. A Participant's Account shall be
distributed to the Participant as provided below.
(a) The vested portion of a Participant's Account shall be payable to
the Participant in a single lump sum cash distribution at the earliest date on
which he or she is first eligible to begin receiving a distribution of benefits
from the Savings Plan following his or her Termination. Alternatively, the
Participant may elect to have his or her Account paid in any optional form of
benefit under the Savings Plan and/or to have payment of his or her Account be
made or commenced on a date specified by the Participant which is not later than
one (1) year after the Participant's Termination. The Participant's election
shall be made on a form acceptable to the Plan Administrator at least one (1)
year prior to the date on which payment of the Participant's Account is to be
made or commenced. In the event of the death of the Participant prior to the
date on which payment of the Participant's Account is to be made or commenced,
the Participant's benefits will be paid to his or her Beneficiary in the form of
a single lump sum payment.
(b) Notwithstanding the foregoing:
(i) the Company shall have the authority, in its sole
discretion, to defer payment of any single benefit
payment of $100,000 or more for up to six (6)
months or to convert such payment into monthly or
quarterly installments over a period of up to
twelve (12) months, if such payment otherwise would
create an undue financial burden for the Company;
(ii) spousal consent shall not be required for any
distribution election under
<PAGE> 62
8
this Plan;
(iii) no benefit shall be payable under this Plan to any
Participant prior to the termination of his or her
employment with the Company, even if the
Participant's Savings Plan benefit commences during
his employment; and
(iv) no qualified domestic relations order applicable to
a Participant's Savings Plan benefits shall apply
to the Participant's benefits under this Plan.
ARTICLE IV
ADMINISTRATION
4.01 Plan Administrator. The Plan Administrator shall be responsible for
the general operation and administration of the Plan and for carrying out its
provisions. The Plan Administrator shall consist of the members of the Company's
ERISA Plans Administration Committee, as appointed from time to time by the
Company's Board of Supervisors; provided, however, that no member of that
Committee shall participate as a member of that Committee in any act or decision
concerning entitlement to his own benefit under this Plan.
4.02 Powers of Administration. The Plan Administrator shall have full
authority, in its sole discretion, to interpret the Plan, to decide all
questions of eligibility to participate and to receive benefits under the Plan,
to direct the Company to pay benefits and Plan administration expenses, to
retain clerical, professional and actuarial assistance as needed, to adopt rules
for operating the Plan, to notify eligible individuals of their rights under the
Plan, to keep records of each Participant's interest under the Plan, and to
adopt a benefit claim and review procedure consistent with that required by
ERISA. The Plan Administrator shall be
<PAGE> 63
9
entitled to rely conclusively upon all tables, valuations, calculations,
certifications, opinions, reports and data furnished with respect to the Plan by
the Company or by any actuary, accountant, controller, attorney or other person
employed or engaged by the Company. The Plan Administrator's actions and
decisions shall be final and binding.
4.03 Claims. All claims for benefits must be made under the rules and
procedures then in effect under the Savings Plan, including the Plan's
procedures with respect to review of denied claims.
4.04 Incorporation by Reference. The provisions of the Savings Plan
related to its administrative committee and claims procedures are hereby
incorporated by reference in this Plan.
4.05 Suspension of Payments in Event of Dispute. If the Plan
Administrator is in doubt concerning the entitlement of any person to nay
payment claimed to be due under the plan, the Plan Administrator may direct the
Company to suspend any such payment until satisfied as to the entitlement of
such person to such payment. The Plan Administrator or the Company may file or
cause to be filed in any court of competent jurisdiction an appropriate legal
action or process in such form as the Plan Administrator or the Company deems
appropriate, including an interpleader action or an action for declaratory
judgment, for a legal determination of the entitlement of any person to any
payment claimed to be due under the Plan. The Company and the Plan Administrator
shall comply with any final order of the court in any such suit, subject to
appellate review, and the Participant and Beneficiary will be similarly bound
thereby.
<PAGE> 64
10
ARTICLE V
AMENDMENT AND TERMINATION
5.01 Amendment and Termination. The Company reserves the right to amend
the Plan in any respect, retroactively or prospectively, at any time and from
time to time by a written instrument stating such intent and adopted by the
Company's Board of Supervisors. The Company also reserves the right to terminate
the Plan at any time pursuant to a resolution of the Company's Board of
Supervisors.
5.02 Effect of Amendment or Termination. No amendment or termination of
the Plan shall directly or indirectly deprive any Participant or beneficiary of
any portion of a supplemental benefit to which he or she was entitled when
payment of such benefit commenced, if payment commenced prior to the effective
date of such Plan amendment or termination, nor shall any Participant or
beneficiary be deprived of his or her right to receive any benefit to which he
would be entitled if the Participant had terminated employment on the day before
the effective date of such amendment or termination, subject to the conditions
of Section 3.01. Termination of this Plan shall not cause any rights not then
vested to become vested.
<PAGE> 65
11
ARTICLE VI
GENERAL PROVISIONS
6.01 Participant's Rights Unsecured. The Plan at all times shall be
entirely unfunded and, except as provided in the following paragraph, no
provision shall at any time be made with respect to segregating any assets of
the Company for payment of any distributions hereunder. The right of a
Participant or the Participant's designated Beneficiary to receive a
distribution hereunder shall be an unsecured claim against the general assets of
the Company and neither the Participant nor the Participant's designated
Beneficiary shall have any rights in or against any specific assets of the
Company.
The Company may establish a reserve of assets to provide funds for the
payment of benefits under the Plan. Such reserve may be through a trust account
and such reserve shall, at all times, be subject to the claims of unsatisfied
judgment creditors of the Company and shall otherwise be on such terms and
conditions as shall prevent taxation to Employees and Beneficiaries of any
amounts held in the reserve or credited to an Account prior to the time payments
are made. No Employee or Beneficiary shall have any ownership rights in or to
any reserve.
6.02 General Conditions. Salary reduction contributions under this Plan
shall be subject to the same right to amend, suspend and restore such
contributions as applies to the Participant under the Savings Plan, and shall be
adjusted automatically to reflect changes in the Participant's salary levels the
same as would be the case under the Savings Plan. Nothing in this Plan shall
operate or be construed in any way to modify, amend or affect the terms and
<PAGE> 66
12
provisions of the Savings Plan.
6.03 No Contract of Employment. The establishment of the Plan, any
modification thereof, the creation of one or more Accounts, and/or the making of
any payments under the Plan, shall not give any employee or other person the
right to remain in the service of any Employer, and all Participants and other
employees shall remain subject to discharge to the same extent as if the Plan
had never been adopted.
6.04 No Guarantee of Benefits. Nothing contained in the Plan shall
constitute a guaranty by the Company or any other person or entity that the
assets of the Company will be sufficient to pay any benefit hereunder.
6.05 No Enlargement of Employee Rights. No Participant shall have any
right to receive a distribution of contributions made under the Plan except in
accordance with the terms of the Plan. Establishment of the Plan shall not be
construed to give any Participant the right to be retained in the service of the
Company.
6.06 Spendthrift Provision. No interest of any person or entity in, or
right to receive a distribution under, the Plan shall be subject in any manner
to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right to receive
a distribution be taken, either voluntarily or involuntarily for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.
6.07 Applicable Law. The Plan shall be construed and administered under
the laws of the State of Illinois, except to the extent pre-empted or
supplemented by ERISA or other
<PAGE> 67
13
applicable federal law.
6.08 Incapacity of Recipient. If any person entitled to a distribution
under the Plan is deemed by the Plan Administrator to be incapable of personally
receiving and giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Plan Administrator may provide for such
payment or any part thereof to be made to any other person or institution then
contributing toward or providing for the care and maintenance of such person.
Any such payment shall be a payment for the account of such person and a
complete discharge of any liability of the Company and the Plan therefor.
6.09 Corporate Successors. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other entity,
but the Plan shall be continued after such sale, merger or consolidation only if
and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan. In the event that the Plan is not continued by the
transferee, purchaser or successor entity, then the Plan shall terminate,
subject to the provisions of Section 5.02.
6.10 Unclaimed Benefit. Each Participant shall keep the Company informed
of his current address and the current address of his designated beneficiary.
The Company shall not be obligated to search for the whereabouts of any person.
If the location of a Participant is not made known to the Company within three
(3) years after the date on which payment of the Participant's benefit may first
be made, payment may be made as though the Participant had died at the end of
the three-year period. If, within one additional year after such three-year
<PAGE> 68
14
period has elapsed, or, within three years after the actual death of a
Participant, the Company is unable to locate any designated beneficiary of the
Participant, then the Company shall have no further obligation to pay any
benefit hereunder to such Participant or designated beneficiary and such benefit
shall be irrevocably forfeited.
6.11 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as
employee or agent of the Company shall be liable to any Participant, former
Participant or other person for any claim, loss, liability or expense incurred
in connection with the Plan.
IN WITNESS WHEREOF, GALILEO INTERNATIONAL has caused this amended and
restated Plan to be adopted, put into effect in accordance with its terms, and
executed on this _______ day of_______ , 1997, to be effective as of January 1,
1997
GALILEO INTERNATIONAL PARTNERSHIP
By:
--------------------------------
Its:
-------------------------------
ATTEST:
By:
----------------------------
Its:
---------------------------
<PAGE> 1
Exhibit 10.37
GALILEO INTERNATIONAL
DISTRIBUTOR SALES AND SERVICE AGREEMENT
between
Galileo International Partnership
and
_________, 1993
<PAGE> 2
DISTRIBUTOR SALES AND SERVICE AGREEMENT
Table of Contents
1. INTRODUCTION
2. DEFINITIONS
3. DISTRIBUTORSHIP
4. TERRITORIAL RIGHTS AND LIMITATIONS
5. THE GALILEO SYSTEM AND THE NATIONAL SYSTEM
6. DEVELOPMENT OF INTERNATIONAL PRODUCTS
7. DEVELOPMENT OF NATIONAL PRODUCTS
8. GALILEO MARKETING EFFORTS - VENDORS
9. DISTRIBUTOR MARKETING EFFORTS - VENDORS
10. VENDOR COORDINATION
11. MARKETING EFFORTS - NATIONAL SUBSCRIBERS
12. MULTINATIONAL SUBSCRIBERS
13. REGULATORY REQUIREMENTS
14. HARDWARE AND SOFTWARE PROVISION TO SUBSCRIBERS AND VENDORS
15. PROVISION OF SOFTWARE PRODUCTS TO DISTRIBUTORS
16. PROVISION OF DISTRIBUTION SERVICES
17. PROVISION OF SUPPORT SERVICES
18. TRAINING
19. PAYMENTS
20. REPORTING REQUIREMENTS
21. PERFORMANCE STANDARDS
22. TERM
23. ARBITRATION
24. CONFIDENTIALITY
25. INTELLECTUAL PROPERTY
26. FORCE MAJEURE AND LIABILITY
27. ASSIGNMENT
28. RELATIONSHIP OF THE PARTIES
29. GOVERNING LAW AND JURISDICTION
30. WAIVER AND AMENDMENT
31. ENTIRE AGREEMENT
32. NOTICES
Attachment A
Attachment B
Attachment C
Attachment D
1
<PAGE> 3
Attachment E
Attachment F
2
<PAGE> 4
DISTRIBUTOR SALES AND SERVICE AGREEMENT
AGREEMENT, effective September 16, 1993, by and between GALILEO
INTERNATIONAL PARTNERSHIP, a Delaware general partnership ("Galileo" or the
"Partnership") and _____________________________ ("Distributor").
33. Introduction: Galileo generates Distribution Services for use by
Subscribers and Vendors and has established a network of distributors that shall
be responsible for the marketing of its Distribution Services and for the
provision of ongoing maintenance and support services. This Agreement specifies
the terms and conditions under which Distributor will become a Galileo
distributor of Distribution Services and is not intended by the parties to
affect any other relationship between the parties or their Affiliates.
34. Definitions: As used herein, the following terms will have the
meanings set forth for each.
Booking Fee Revenue. "Booking Fee Revenue" means all revenue received
by Galileo from Vendors as a result of transactions in or through the Galileo
System or a National System, including reservation bookings, cancellations,
inquiries, or other Reservations Services.
Galileo Network. "Galileo Network" means the Network provided by
Galileo (up to and including the Gateway Router inside the Territory) for the
provision of Galileo Network Services.
Galileo Network Services. "Galileo Network Services" means those
services that Galileo is obligated to perform pursuant to section 5 hereof.
Galileo System. "Galileo System" means (i) the Galileo Computer System
and (ii) the network of computer hardware, including central processing hardware
and network hardware from the central site up to and including the Gateway
Router, or such other connecting point in the Territory as may be agreed between
Galileo and Distributor pursuant to Section 5 hereto.
Gateway Router. "Gateway Router" means the hardware and software used
to connect the Galileo Network to the National Network.
Intellectual Property. "Intellectual Property" means all patents,
trademarks, servicemarks, trade names, copyrights, know-how, processes, trade
secrets, computer software (including without limitation all applications,
operating systems and interface software, in object and source code form; all
tapes, disks and other electronic or print media embodying or containing any
software; all enhancements, improvements,
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modifications, and derivative versions of software; and all documentation
related to the software and any modifications thereof) and any other
intellectual property, and all licenses and rights with respect to the
foregoing.
International Product. "International Product" means a Reservations
Service that is available from Galileo and meets the approved specifications for
that product for the Territory as provided in section 6. Reservations Services
provided for Air Vendors or in which Air Vendors participate, including air
charter "seat only" flights, but excluding Limited Air Charters, will be
International Products.
Limited Air Charter. "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 as determined pursuant to Clause 7. Once
Galileo develops a Replacement Product to serve a particular air charter Vendor,
such Vendor will no longer be considered a Limited Air Charter for the purposes
of this Agreement.
Multinational Subscriber. "Multinational Subscriber" means a Subscriber
that operates locations both inside and outside the Territory.
National CRS Rules. "National CRS Rules" means all rules and
regulations, issued by any governmental authority having jurisdiction with
respect to such issuance, applicable to the Territory.
National Network. "National Network" means the Network owned or
licensed by Distributor for the provision of network services to (i) Neutral
Travel Providers located in the Territory, or (ii) any other Person contracting
with Distributor for the provision of such network services.
National Product. "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 Distributor's cost.
National Products will include products not otherwise available from Galileo
that are developed by Galileo in accordance with section 7.B.
National Subscriber. "National Subscriber" means a Subscriber that is
located in the Territory, including any local branches, subsidiary, affiliate,
or franchisee of a Multinational Subscriber.
National System. "National System" means the network of computer
hardware located between a Subscriber location and up to but excluding the
Gateway Router or such other connecting point in each territory, as may be
agreed between Galileo and Distributor pursuant to Clause 5.D hereto, and also
excluding any data converter or protocol converter serving such Subscriber
location, together with all necessary connections, System Software, equipment,
and Application Software.
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National Territory. "National Territory" or "Territory" means the
territory in which Distributor is designated as a Distributor. Such Territory
shall be as described on Attachment A hereto.
NTP Revenue. "NTP Revenue" means all Vendor Revenue arising from
computer transactions in or through the Galileo System by Neutral Travel
Providers in the Territory.
Other Customer Revenue. "Other Customer Revenue" means all Vendor
Revenue arising from computer transactions in or through the Galileo System by
Other Customers in the Territory.
Override Agreement. "Override Agreement" means an agreement between
Galileo and the principal office of a Multinational Subscriber governing
Subscriber locations in more than one Territory.
Replacement Product. "Replacement Product" means any Galileo product
that is agreed by Distributor or otherwise approved by the NCC for deployment
and that replaces or supersedes a National Product in accordance with the
provisions of Paragraph 7.C.
Revenue Customer. "Revenue Customer" means Other Customers of Group
Members that generate Booking Fee Revenue.
Vendor Revenue. "Vendor Revenue" means all revenue received by Galileo
from Vendors, including without limitation all Booking Fee Revenue and other
service charges or fees paid by Vendors from services provided by or through the
Galileo System including Air and Non-Air (hotel, car, rail, ferry, cruise, tour,
charter, and leisure), Apollo Headlines (net of OAG or similar commissions),
multi-access fees, and including cancellations, inquiries, or other services but
excluding any revenue generated from Spectrum.
A. A reference to this Agreement is, unless the context otherwise
requires, a reference to the Agreement including the Attachments hereto.
B. All references to "Clauses" and "Attachments" are, unless otherwise
stated, references to clauses hereof and attachments hereto.
C. The Clause headings are for ease of reference only and shall not in
any way affect the interpretation hereof.
D. Unless the context otherwise requires, the singular includes the
plural and vice versa.
E. All capitalized terms used herein and not otherwise defined herein
or in Annex I hereto will have the meanings provided in the Partnership
Agreement or in the Computer Services Agreement attached thereto.
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35. Distributorship: Galileo hereby appoints Distributor to market the
Distribution Services of Galileo. Distributor will market and provide Galileo's
International Products to Distributor's National Subscribers. Distributor also
will provide Distribution Services using the Galileo System to Other Customers
of any Partner's Group Members which Other Customers are located in the
Territory upon request by such Group Member, and, where the Galileo System is
not used, may negotiate with such Group Members regarding support services
similar to those described in section 17 hereof. Distributor may also market and
provide National Products for Non-Air Vendors, or in which Non-Air Vendors
participate, and for Limited Air Charter Services, as provided below.
Distributor may also provide Cargo Services on behalf of itself or any Group
Member to any Person. Distributor will have the ability to control the sales
force of Distributor and will have the right to control decisions about National
Product functionalities and services, as provided below. Subject to section 6
hereof, the Distributor shall be required to deploy all International Products
in the Territory to all of its National Subscribers.
36. Territorial Rights and Limitations:
A. Distributor shall perform its responsibilities within the Territory
to the best of its ability. Distributor shall solicit Neutral Travel Providers
(i) only in the Territory (except with respect to the Non-Neutral Travel
Business of such Neutral Travel Providers) and (ii) with regard to International
Products, only on behalf of Galileo. Distributor may market Distribution
Services to Other Customers of Distributor or its Group Members world-wide. Upon
the request of another distributor or that distributor's Group Members,
Distributor will enter into a contract and provide Distribution Services using
the Galileo System to Other Customers of such distributor or its Group Members
within the Territory; provided, however, Group Members shall have the right (i)
to market DAP Diskettes in the Territory, (ii) to request Distributor to
distribute DAP Diskettes on behalf of such Group Member to its Other Customers
and (iii) to distribute DAP Diskettes directly to its Other Customers in the
Territory. Distributor may respond to approaches it receives from Subscribers
(or potential Subscribers) wherever such Subscribers (or potential Subscribers)
are located. Upon receipt of an inquiry from a Neutral Travel Provider (except
with respect to the Non-Neutral Travel Business of such Neutral Travel
Providers) with respect to providing Distribution Services outside the
Territory, the Distributor shall give notice to the local distributor for such
location(s) (the "Local Distributor") and to Galileo. If Distributor agrees to
enter into an agreement for the provision of Distribution Services at such
locations, the Local Distributor may elect to provide Distribution Services to
such Neutral Travel Providers (except with respect to the Non-Neutral Travel
Business of such Neutral Travel Providers) if the Local Distributor agrees to be
bound by all terms (price, service, functionality, etc.) of the agreement
between the Distributor and such Neutral Travel Providers (except with respect
to the Non-Neutral Travel Business of such Neutral Travel Providers).
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<PAGE> 8
B. Subject to section 22 hereof, provided that notice of termination of
this Agreement has not been served in accordance with the provisions of this
Agreement, Galileo shall not permit any Person other than Distributor to solicit
Neutral Travel Providers (except with respect to the Non-Neutral Travel Business
of such Neutral Travel Providers) in the Territory for the purposes of the
provision of Galileo's Distribution Services in the Territory except as
expressly permitted by the Non-Competition Agreement described below and shall
not itself solicit Subscribers for such purposes except as expressly permitted
by this Agreement.
C. Distributor shall, prior to entering into this Agreement, deliver to
Galileo a Non-Competition Agreement in the form attached to the Combination
Agreement as Exhibit 1R duly executed by (i) Distributor, (ii) any owner of
Distributor that is a Partner of Galileo (if applicable), (iii) any of
Distributor's Affiliates that is an airline, (iv) the Distributor's Ultimate
Parent Entity and (v) any of Distributor's Affiliates that perform any of
Distributor's obligations hereunder pursuant to Clause 27.A. hereof. Distributor
shall deliver to Galileo as promptly as possible, but not later than 60 days
following the date on which the event giving rise to this obligation shall
occur, a Non-Competition Agreement in the form attached to the Combination
Agreement as Exhibit 1R duly executed by any Affiliate of such Distributor (if
applicable) that becomes an airline or its Ultimate Parent Entity after the date
hereof.
D. The provisions of this Clause are considered reasonable by Galileo
and Distributor but in the event that any such provision shall be found to be
void but would be valid if some part thereof were deleted or the period or area
of application reduced such provision shall apply with such modification as may
be necessary to make it valid and effective.
E. Each of the parties signatory hereto accept and agree to be bound by
Article VIII of the Partnership Agreement.
F. To the extent that any provision with respect to an International
Product contained herein conflicts with a provision with respect to a Direct
Access Product contract in Article VIII of the Partnership Agreement, such
provision contained in Article VIII of the Partnership Agreement shall prevail.
G. Distributor shall not offer Distribution Services in any territory
listed in Attachment F, all of which are covered by existing distribution
agreements between Galileo or one of its predecessors and a third party
distributor, unless the prior written consents have been obtained. In the event
of any conflict between this section and any other provision of this agreement,
this section shall prevail.
37. The Galileo System and the National System:
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A. Galileo System/Network: Galileo will have complete responsibility
for The Galileo System and the Galileo Network.
(i) Galileo will determine the technical direction and
specifications of the Galileo System. Galileo will be responsible for
the data center required to generate Galileo's Distribution Services
and will be responsible for the software design and development
activities for Distribution Services generated by the Galileo System.
(ii) Galileo will determine the technical direction and
specifications of the Galileo Network. Galileo will be responsible for
the Galileo Network and will establish the communications interface and
message format requirements of the Galileo Network.
B. National System/Network: Distributor will have complete
responsibility for the National System and the National Network. Distributor
will be responsible for the development and implementation of appropriate
network technologies in the National Network that are compatible, on a technical
basis, with the communications interface and message format requirements of the
Galileo Network insofar as such requirements relate to the provision of
Galileo's Distribution Services and International Products in the Territory.
Distributor's responsibilities include, without limitation, the management of
the National Network staff, the procurement of local telecommunications
services, and the operation and maintenance of the National Network.
C. Gateway Router: Galileo may place a single Gateway Router within the
Territory. Such Gateway Router will be part of the Galileo Network and Galileo
will bear all costs related to the provision and operation of the Gateway
Router. If Galileo decides not to place a Gateway Router in the Territory, then
Galileo and Distributor will work jointly to establish a single communications
interconnection between the Galileo Network and the National Network and Galileo
will pay the Cost associated with the provision and operation of such an
interconnection.
D. Distributed Processing: Galileo may, with Distributor's consent,
transfer software applications logic from the Galileo System to Subscriber
workstations or other computer equipment within the Territory for software
utilized to provide Distribution Services for International Products, provided
that such transfer reduces the costs or increases the effectiveness of Galileo,
or of Distributor, or of both, without increasing the other party's costs, and
provided, further, that Distributor's operations are not otherwise materially
infringed or disrupted.
38. Development of International Products: Galileo shall decide, in its
sole discretion, which International Products to develop and the order and
timing of deployment. Galileo will be responsible for the software design and
development required to support and enhance the functionality and operating
performance of Distribution Services related to
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International Products (including adaptation of the International Product to
satisfy requirements and standards of the Territory). The adaptation of an
International Product to meet the product specifications for the deployment of
such International Product in the Territory shall be developed and performed by
Galileo at its sole cost. Galileo will consult with the Distributor in preparing
the product specifications to take into account the needs of the Territory. If
the Distributor rejects the final proposed product specifications set by Galileo
and Galileo is unwilling to make the modifications requested by Distributor, the
Distributor may refer the issue to the National Distribution Coordinating
Committee (the "NCC"). The NCC shall determine by a majority vote of its
members, voting one vote per person and taking into account the extent to which
the product is intended by Galileo for use in other territories: (i) whether
deployment of the proposed International Product in the Territory would be
commercially reasonable without additional modifications, or (ii) whether
additional modifications to the final proposed specifications are necessary
before that product is deployed in the Territory. The decision by the NCC that
additional modifications are required prior to deployment will not obligate
Galileo to undertake such modifications but Distributor will not be required to
deploy that product until such modifications are made or the NCC subsequently
votes that the product be deployed.
39. Development of National Products:
A. Distributor will control decisions about functionality and services
(including Subscriber premises applications) in the Territory for Non-Air
Vendors, National Subscribers, and Other Customers in the Territory of
Distributor, where such functionality or service is a National Product and not
provided by Galileo. Distributor also will be allowed to provide National
Products in the Territory to Limited Air Charters. Distributor may undertake
development of National Products at its own cost and may license such
functionality to Galileo and other Galileo distributors on mutually agreeable
terms. Any National Product must meet Galileo's technical requirements and other
reasonable criteria specified by Galileo and must not conflict, on a technical
basis, with the Distribution Services or International Products of Galileo.
B. If the development, implementation, or use of such National Product
results in additional Cost to Galileo or another Galileo distributor,
Distributor will bear such additional Cost. In addition, Distributor may request
that Galileo undertake the development of a National Product, and Galileo, in
its sole discretion, may develop such National Product with the Cost thereof
paid by Distributor.
C. Galileo retains the right to develop or make available an
International Product for the Territory that replaces, supersedes, or performs
substantially in accordance with the specifications for any National Product, in
which case Distributor will cease providing such National Product in the
Territory. If Galileo and Distributor, after negotiation in good faith, cannot
agree whether a product from Galileo replaces, supersedes, or performs
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substantially in accordance with the specifications for any National Product,
then that question will be referred to the NCC. The NCC shall determine by a
majority vote of its members, voting one vote per person and taking into account
the extent to which the product is intended by Galileo for use in other
territories: (i) whether deployment of the Replacement Product in the Territory
would be commercially reasonable without additional modifications, or (ii)
whether additional modifications to the final proposed specifications are
necessary before the proposed Replacement Product is deployed in the Territory.
The decision by the NCC that additional modifications are required prior to
deployment will not obligate Galileo to undertake such modifications but
Distributor will not be required to deploy that product in place of the National
Product until such modifications are made or the NCC subsequently votes that the
product be deployed.
D. In the event that Galileo deploys a Replacement Product in the
Territory (other than those products and services of Galileo deployed as a
result of migration of Subscribers in the Territory to the Galileo System),
Galileo will pay to Distributor all booking fee revenue received by Galileo
therefrom up to the amount that Distributor otherwise would have received had
the product continued to be a National Product (but in no event shall such
payment exceed the booking fee revenue received by Galileo from such product)
for a period of three years following date of deployment of the Replacement
Product. Any excess booking fee revenue received by Galileo from such
Replacement Product will be retained by Galileo.
40 Galileo Marketing Efforts - Vendors:
A. Overall Strategy: Galileo is responsible for: (i) establishing a
global marketing strategy for International Products and for advertising and
promoting International Products to Vendors; and (ii) coordinating the sales
efforts of Galileo's distributors. Booking fee levels for International Products
will be set by Galileo.
B. International Products: Galileo will undertake all marketing efforts
regarding International Products and will negotiate, hold, and administer all
agreements with Vendors for International Products; except as described in this
Article, or unless otherwise agreed, Distributor shall not undertake such
efforts. Distributor shall inform Galileo promptly of any approaches it receives
from Vendors (or potential Vendors) interested in participating in International
Products.
(i) If a Non-Air Vendor notifies Galileo or Distributor that
such Non-Air Vendor desires to do business directly with Distributor
regarding an International Product, Galileo will cooperate with
Distributor to allow Distributor to respond to any such approach within
the guidelines prescribed by Galileo.
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(ii) If a Non-Air Vendor notifies Galileo or
Distributor that the Non-Air Vendor desires to do business directly
with Galileo regarding a National Product, Distributor will cooperate
with Galileo to allow Galileo to respond to any such approach within
the guidelines prescribed by Distributor.
41. Distributor Marketing Efforts - Vendors: Distributor may enter into
sales, marketing, or promotional arrangements in the Territory with any Non-Air
Vendors regarding National Products. Distributor shall set the terms and
conditions (including booking fee levels) on which National Products are to be
provided to Non-Air Vendors in the Territory and shall have the right to enter
into all contracts with Non-Air Vendors with respect to the provision of
National Products in the Territory, the terms and conditions of which shall be
consistent with the provisions of this Agreement. Distributor will collect and
retain all booking fees generated from the provision of National Products by
Distributor to Non-Air Vendors in the Territory.
42. Vendor Coordination:
A. Galileo and Distributor shall consult with each other prior to
entering into arrangements with Vendors (or potential Vendors) who are, or may
wish to be, purchasers of Distribution Services for both International Products
and National Products, with the intention of ensuring that there is effective
coordination or relationships with such Vendors.
B. In the case of International Products in relation to which the
Product Database is maintained outside the Galileo System and the relevant
Vendor is an existing customer of Distributor, Galileo shall consider whether,
instead of being treated as an International Product in the normal manner, this
"Product" should instead be treated as provided below. In taking such decision,
Galileo shall act reasonably and shall take into account the extent to which the
Product is or shall be distributed through National Systems other than
Distributor's National System. Galileo may in its reasonable discretion
determine that such treatment should apply for a limited period of time.
C. The treatment referred to above is as follows:
43. The terms and conditions on which Distribution Services
are to be provided to the Vendor in respect of the Product shall be
set, at Galileo's discretion, by either Galileo or Distributor;
44. Galileo shall pay to Distributor a commission in respect
of bookings made by Distributor's Subscriber customers in respect of
the Product on a basis established by Galileo in accordance with the
following criteria:
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(a) Distributor shall first receive such
level of revenue as it would have received had the Product
been a National Product;
(b) Galileo shall thereafter be entitled to
receive whichever is the lesser of (i) a sum equal to the Cost
to Galileo of processing transactions in the Galileo System
arising out of the provision of Distribution Services in
respect of the Product and (ii) the amount of revenue
remaining after the application of Clause (a); and
(c) any surplus revenue shall be apportioned
between Galileo and Distributor on a basis that is reasonable
taking into account the costs borne by Galileo and Distributor
respectively.
45. Marketing Efforts - National Subscribers:
A. Except as provided in Section 12, below, Distributor shall
be responsible for undertaking all marketing efforts directed at National
Subscribers in the Territory. Distributor will negotiate, hold, and administer
all Subscriber Agreements in the Territory (other than as provided in section 12
below), will be responsible for any financial assistance, and will collect and
retain all Subscriber revenues, lease fees, and all other fees from National
Subscribers. For any given Subscriber Agreement, Galileo and Distributor may
agree to alternative arrangements regarding financial assistance. The terms and
conditions of the contracts that Distributor proposes to enter into with
Subscribers shall be consistent with the provisions of this Agreement. If
Galileo receives any approaches from any Subscribers in the Territory it shall
refer them promptly to Distributor.
B. Distributor shall use its best efforts to market Galileo's
Distribution Services to National Subscribers in the Territory. Such efforts
shall include, but not be limited to, the establishment of regular contact with
all National Subscribers in the Territory with substantial travel industry sales
and the placing, where appropriate, of personal and telephone sales calls, and
the undertaking of point of sale and media advertising, promotions and other
sales efforts. Distributor shall not undertake any marketing activities in
respect of Galileo's Distribution Services that Galileo determines in its
reasonable discretion to be contrary to its marketing policies and objectives
and notifies Distributor to that effect.
C. Distributor shall conduct the promotion and marketing of
Galileo's Distribution Services in the Territory with all due care and diligence
and shall use its best efforts to cultivate and maintain good relations with
customers and prospective customers in the Territory in accordance with sound
commercial principles.
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46. Multinational Subscribers:
A. Galileo will have overall responsibility for Multinational
Subscribers. For the purposes of this Agreement, Multinational Subscribers will
be, in respect of any territory taken as a whole, either "Existing Subscribers"
or "New Subscribers."
(i) Existing Subscribers. "Existing Subscribers" are
Neutral Travel Providers who are retail outlet, Affiliate, or
franchisee locations of a Multinational Subscriber which are located in
a territory in which, as of the date of commencement of negotiations
with the headquarters of such Multinational Subscriber ("Negotiation
Commencement Date"), multiple (if applicable) locations of such
Multinational Subscriber in such territory subscribe for Galileo
Distribution Services as a result of negotiations with the local
distributor.
(ii) New Subscribers. "New Subscribers" are Neutral
Travel Providers who are retail outlet, Affiliate, or franchisee
locations of a Multinational Subscriber that are located in a territory
in which multiple (if applicable) locations of such Multinational
Subscriber in such territory are not Galileo Subscribers as a result of
negotiations with the local distributor.
B. Galileo: Galileo will determine the global strategy for
dealing with Multinational Subscribers. Galileo's responsibilities include the
establishment of pricing guidelines and the coordination of services levels for
subscriber services provided to Multinational Subscribers by Galileo and
individual distributors. Galileo will hold and administer all Multinational
Subscriber Agreements and Override Agreements.
C. Distributor: Distributor will have primary account
responsibility for those Multinational Subscribers who have their headquarters
in the Territory. This responsibility will include the negotiation by
Distributor of all Override Agreements and of Subscriber Agreements covering all
locations of that Multinational Subscriber that are either (i) New Subscribers
who are located outside the Territory, or (ii) located in the Territory,
pursuant to the strategy determined by and within the pricing and financial
assistance guidelines established by Galileo and pursuant to the direction given
by Galileo. Distributor may at its option and with the agreement of another
distributor cooperate with such distributor with respect to Distribution
Services to Multinational Subscriber locations in that other distributor's
territory.
D. Services: Distributor will execute Subscriber Agreements
with and will provide services to Multinational Subscriber locations in the
Territory according to service level guidelines established by Galileo,
including customer premises equipment, premises equipment installation and
maintenance, and training and help desk assistance.
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(i) Local Existing Subscribers: Existing Subscribers
that are located in a Galileo territory other than the territory in
which the headquarters of such Existing Subscribers are located ("Local
Existing Subscribers") will receive Distribution Services pursuant to
agreements negotiated by the Galileo distributor for that territory
pursuant to Section 11, above.
(ii) New Subscribers: New Subscribers will receive
Distribution Services pursuant to an agreement negotiated with the
headquarters of such New Subscriber by the distributor in whose
territory such headquarters are located.
(iii) Coordination: Galileo will coordinate service
levels provided to Multinational Subscribers worldwide and will ensure
that service level commitments negotiated with a particular
Multinational Subscriber pursuant to guidelines provided by Galileo
will be met by all Galileo distributors (including if applicable
Galileo). Distributors having responsibility for the territories in
which the Multinational Subscriber has locations will provide to the
distributor, in whose territory the headquarters of the Multinational
Subscriber is located, term sheets regarding local pricing practices in
their respective territories and shall provide such further assistance
as may be reasonably requested.
(iv) Compliance; Cost: If such service levels under
an Override Agreement vary from those set forth in agreements between
Distributor and any Local Existing Subscriber, Distributor will provide
such alternative service levels, subject to the technical capabilities
of Distributor, with any additional cost being borne by Galileo as
provided below.
E. Costs: Galileo's actions regarding Multinational
Subscribers will not operate to raise Distributor's costs or to shift costs from
Galileo to Distributor. Galileo will reimburse Distributor for any one-time,
unusual, extraordinary, or specific on-going or recurring costs that result from
policies established by Galileo regarding Multinational Subscribers.
F. Financial: Galileo will determine strategies regarding
financial assistance guidelines for Multinational Subscribers. Galileo will be
responsible for financial assistance payments on Multinational Subscriber
agreements. Galileo will be required to provide direct financial assistance only
to the extent that the financial assistance provided to a particular
Multinational Subscriber exceeds the financial assistance that Distributor would
otherwise provide to a similar category subscriber (based on such factors as the
volume of transactions generated by similar subscribers in that Territory)
located in Distributor's Territory. For any given Subscriber Agreement, Galileo
and Distributor may agree alternative arrangements regarding financial
assistance.
G. The provisions of this Article 12 will be reviewed by
Galileo and the NCC on the third anniversary of the Effective Date and, upon
such review, may be modified by
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Galileo either to maintain the distinction between New Subscribers and Existing
Subscribers or to eliminate the distinction and treat all Multinational
Subscriber locations either as New Subscribers or as Existing Subscribers.
47. Regulatory Requirements: Each party hereto undertakes to
comply with all applicable legal requirements (whether existing or hereafter
imposed) relating to its activities pursuant to this Agreement.
14. Hardware and Software Provision
to Subscribers and Vendors
A. Subscriber/Vendor Hardware/Software: Distributor shall
supply (i) to its Subscriber and Vendor customers and (ii) to Revenue Customers
the computer hardware and software required by such Persons to enable them to
use Galileo's Distribution Services. Galileo may recommend specific hardware and
software to Distributor. Distributor may permit its Subscriber and Vendor
customers to obtain such hardware and software from other sources in addition to
Distributor. Distributor may obtain such hardware and software, or other
compatible hardware or software, from sources other than Galileo. Attached
hereto as Attachment B is a form of license by which Galileo will license
software to Distributor and consents to the sub-license of certain Subscriber
location software from Distributor to Subscribers and Vendors. Distributor may
connect Subscriber third-party equipment (i) at Subscriber's request, (ii) at
Distributor's discretion, or (iii) when required by CRS Rules.
B. Certification: Subject to section 14.A above, Distributor
shall ensure that all computer hardware and software used by it and its
Subscriber and Vendor customers to access the Galileo System have been certified
by Galileo prior to connection. In considering applications for certification,
Galileo shall, in general, accept and certify hardware and software that is
compatible with the existing Galileo Network and National Network. At all times,
Galileo shall act reasonably and shall take into account only such
considerations as are relevant to technical integrity, system performance
(including the performance of the hardware or software to which the application
relates).
C. Cost: All hardware Galileo offers to supply or arrange to
supply to Distributor shall be offered by Galileo on a pass-through basis (plus
out-of-pocket handling and delivery expenses) and shall be offered on terms
other than as to cost that are reasonable in relation to the terms available to
Galileo from hardware suppliers. Galileo shall inform Distributor regularly of
the hardware supply arrangements Galileo is able to make available to
Distributor.
15. Provision of Software
Products to Distributors:
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A. Galileo shall from time to time grant to Distributor
royalty-free licenses of software products developed by Galileo (or that Galileo
has the right to transfer or sublicense) (with right to sub-license in the case
of Subscriber-based software) where such grant is necessary for the provision of
Galileo's Distribution Services in the Territory as contemplated by the terms of
this Agreement. Galileo shall provide at no cost to Distributor, all third-party
software and the rights to use such software as required for use on Subscriber
based hardware in conjunction with the provision of Distribution Services.
Galileo will license to Distributor (with right to sub-license) Subscriber-based
software products such as Corporate Apollo and Personal Apollo, which
Distributor will be authorized to market to Other Customers under Distributor's
name (e.g., "Personal Apollo by Distributor"). Unless otherwise agreed by
Galileo and Distributor, all licenses granted by Galileo to Distributor pursuant
to this Clause shall be in the form set out in Attachment B to this Agreement.
B. At the request of Distributor, Galileo shall use all
reasonable endeavors to extend to Distributor on reasonable terms the benefit of
licensing arrangements negotiated by Galileo in relation to third party software
products of the type referred to in Clause 15.A.
C. The consideration payable by Distributor for the grant of
licenses of software products pursuant to this section 15 (including software
for use by Vendors in respect of National Products) shall be set at a price
which takes into account only Galileo's cost of reproducing copies of the
licensed products onto diskette format and shipment to Distributor.
16. Provision of Distribution Services:
A. The overall objective of Galileo and Distributor in
relation to the supply of Distribution Services in the Territory shall be to
provide a level of service that is comparable to that provided by Galileo and
its distributors in other markets, taking into account local market conditions.
Without prejudice to this general objective, Galileo shall adopt the more
specific objectives set out in Attachment C to this Agreement. Attachment C also
sets out the objectives Galileo wishes its distributors to adopt. Distributor
will provide Distribution Services in the Territory to Other Customers of Group
Members, including system availability and performance, data
security/confidentiality, use of Galileo functionality and enhancements
(excluding functionality or enhancements that are proprietary to any Group
Member), availability of hardware, access to training, scheduling and delivery
of installation, maintenance and other support, in a manner equal to that
provided to Subscribers of Distributor. Galileo and Distributor shall consult in
good faith on the basis of such objectives to produce specific objectives for
Distributor that take into account technological constraints and local market
requirements. The objectives of Galileo and Distributor shall be reviewed by
both parties at intervals of no more than one year.
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<PAGE> 18
B. Galileo shall maintain at Galileo's expense a telephone
assistance desk, for the use of Distributor, that will be staffed by
knowledgeable employees capable of providing technical assistance regarding the
Galileo System, the Galileo Network, Galileo's Distribution Services, and
International Products. Such telephone assistance will be available to
Distributor during normal business hours for Subscribers in the Territory.
C. At Distributor's request and at Galileo's expense, Galileo
will make the Galileo System available to Distributor for the purposes of (i)
storing and processing Distributor's data related to the marketing and support
services provided by Distributor in the Territory, and (ii) help desk or other
product assistance (including automated training and support and system testing)
to Subscribers and Vendors in the Territory.
17. Provision of Support Services:
A. Unless otherwise agreed, Distributor shall provide at its
cost installation, maintenance and support services reasonably required by
Subscribers and Vendors who are Distributor's customers and by Revenue Customers
of Group Members. Such services shall be provided in accordance with reasonable
support service procedures and requirements as may be agreed between Galileo and
its distributors from time to time which procedures for each distributor shall
be consistent across national territories, taking into account local market
conditions. Distributor and Galileo shall consult on a regular basis regarding
service requirements.
B. Cost of Services to Other Customers: Distributor will have
no obligation to provide financial assistance or rebates of booking fees to
Other Customers (including with respect to Direct Access Products and
Partner-Developed Products). Distributor's obligation to provide hardware and
support services and training to Revenue Customers of Group Members in the
Territory will be reasonably related to the volume of bookings from such
locations (as compared to the level of bookings by comparable Subscribers in the
Territory). If booking fee revenue generated from any Revenue Customer is not
sufficient to cover the cost of meeting the criteria set by the NCC annually for
such location, Distributor may terminate or reduce service to such Revenue
Customer unless the Group Member makes alternative arrangements reasonably
acceptable to Distributor. In the event that the Group Member and Distributor
fail to make such alternative arrangements, the Group Member will be free to
arrange separately for Distribution Services to such location.
C. English Language: Galileo shall provide to Distributor from
time to time in English and at no charge two copies of all product user guides
and updates produced by Galileo for use by Subscribers.
18. Training:
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<PAGE> 19
A. Galileo and Distributor shall devise a training program for
Distributor's employees engaged in the provision of Galileo's Distribution
Services and Galileo and Distributor shall provide training in accordance with
such program. Where training is provided by Galileo, the costs of the training
shall be borne by Galileo except for any travel and subsistence costs incurred
by the employees being trained, which shall be borne by Distributor.
B. Distributor shall provide at its own cost all necessary
training for its Subscriber and Vendor customers and Revenue Customers of Group
Members in the use of Galileo's Distribution Services. Galileo shall provide
Distributor with two copies in Distributor's national language(s) of all
training materials produced by Galileo for use by Subscribers and Vendors.
Distributor shall use such training materials in providing Subscriber and Vendor
training and shall comply with such other reasonable recommendations as Galileo
may make with regard to training provision and content, so long as Distributor's
training costs are not increased thereby.
19. Payments:
A. In consideration of the services provided by Distributor
pursuant to this Agreement, Galileo will pay to Distributor each month an amount
equal to a portion of the fees that it receives from Vendors (immediately upon
Galileo's receipt thereof) in respect of bookings and other transactions made in
the Galileo System by Distributor's National Subscribers, such portion to be
determined in accordance with the provision of Attachment D to this Agreement.
B. Distributor will pay to Galileo a sum equal to the Cost to
Galileo of processing transactions in the Galileo System arising out of the
provision of Distribution Services on behalf of Non-Air Vendors (including
Limited Air Charters) to National Subscribers in respect of National Products in
the National System.
C. Article 19 shall not apply to International Products which
Galileo has decided should be dealt with in the manner set out in Article 10.
20. Reporting Requirements:
A. Distributor shall provide to Galileo, unless otherwise
agreed by Distributor, on a quarterly basis (hereafter "Reasonable Basis") such
information as Galileo shall reasonably require relating to Distributor's
activities pursuant to this Agreement in a format agreed by Galileo and
Distributor. The categories of information that may be required shall include,
without limitation:
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<PAGE> 20
48. sales projections for the forth coming year;
49. Subscriber contracts entered into or renewed;
50. Subscriber contracts terminated or due to expire in the
forthcoming year;
51. staff training activities;
52. customer support activity;
53. competitor activity; and
54. achievement of system service objectives.
B. Galileo shall provide to Distributor on a Reasonable Basis
such information as Distributor shall reasonably require for the purposes of its
activities as a Galileo distributor. The categories of information which may be
required shall include without limitation:
1. all information needed by Distributor in relation to
Galileo's marketing policies and objectives;
2. vendor contract status report;
3. product delivery, development and specification status
report;
4. product prices;
5. levels of booking activity;
6. competitor activity;
7. system performance and achievement of system service
objectives;
8. hardware prices; and
9. status report listing all multinational Subscriber Override
Agreements.
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<PAGE> 21
C. Without prejudice to the generality of Articles 20.A and
20.B, Galileo shall provide to Distributor on a Reasonable Basis such details
within its knowledge of sales activity in relation to Galileo's Distribution
Services by other Galileo distributors in the Territory and Distributor shall
provide to Galileo on a Reasonable Basis details of its sales activities in
relation to Galileo's Distribution Services outside the Territory.
D. Distributor may request an audit of the books and records
of Galileo applicable to Distributor and Galileo may request an audit of the
books and records of Distributor applicable to Galileo from time to time during
normal business hours upon reasonable notice. Each audit shall be conducted by
the Person requesting the audit or that Person's authorized representative at
that Person's sole expense, including reimbursement of direct out of pocket
costs incurred by the audited party as a direct result of the audit.
21. Performance Standards:
A. After consultation with Galileo, Distributor shall produce
on an annual basis a marketing plan covering its objectives for the forthcoming
year. The marketing plan shall contain such reasonable performance objectives as
shall be agreed upon by Galileo and Distributor by November 1st of each year.
B. Distributor shall use all reasonable endeavors to meet the
performance objectives set out in its marketing plan.
C. In the event that Distributor does not meet its performance
objectives and Galileo determines in its reasonable discretion that such failure
causes the overall performance of Distributor to suffer significantly,
Distributor shall use all reasonable endeavors to comply with such reasonable
recommendations as Galileo may make with a view to improving the performance of
Distributor in respect of Galileo's Distribution Services.
D. In assessing any failure by Distributor to meet its
performance objectives, Galileo shall take into account the extent (if any) to
which such failure was caused by failure by Galileo to meet its own system
performance or marketing objectives or decisions made by Galileo pursuant to
Article 16 that certain marketing activities proposed by Distributor should not
be undertaken.
22. Term:
A. This Agreement shall remain in full force and effect and
shall apply to Distributor for so long as an Affiliate of Distributor is a
partner in Galileo provided, that, for a period of two years (the "Withdrawal
Period") following the withdrawal of an Affiliate of Distributor from Galileo (a
"Withdrawing Affiliate"), Distributor (i) shall continue to perform its
obligations in the Territory pursuant to the terms of this
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<PAGE> 22
Agreement and (ii) shall not perform Distributor Services or other services on
behalf of any other Computer Reservations Service Company in the Territory or
otherwise.
B. During the Withdrawal Period, Galileo may appoint another
distributor (the "New Distributor") for the Territory. During the Withdrawal
Period the Distributor shall: (i) not renew any existing Subscriber or National
Vendor agreements, (ii) give written notice to the New Distributor of any
Subscriber agreements or National Vendor agreements that expire during the
Withdrawal Period and (iii) transfer or assign to the New Distributor any of its
Subscriber agreements or Vendor agreements at the request of the New
Distributor.
C. At any time after the three-month period following a
Withdrawing Affiliate's withdrawal from Galileo, Distributor shall not be
obligated to abide by the obligations imposed by this Section to the extent that
the Withdrawing Affiliate compensates Galileo pursuant to the following formula:
100% of the gross booking fees for the Territory for the
previous twelve month period divided by twelve (12) and multiplied by the number
of months remaining in the Withdrawal Period (the "Compensation Figure");
provided, that, in the case where the Distributor is owned by more than one
Affiliate, the Compensation Figure shall be multiplied by the Withdrawing
Affiliate's percentage interest in Distributor to determine the "Net
Compensation Figure," which figure shall be paid to Galileo.
D. Notwithstanding the foregoing, either party shall be
entitled forthwith to terminate this Agreement by giving written notice to the
other if:
(i) that other party commits any material breach of
the provisions of this Agreement (other than the breach of an
obligation for the payment of money the amount of which is in dispute)
and fails to remedy the same within thirty days after receipt of a
written notice giving full particulars of the breach and requiring it
to be remedied; provided, however, that (a) an alleged material breach
that is contested by the other party shall be submitted to arbitration
pursuant to Clause 23 hereof and will not be grounds for termination
unless the existence of the alleged material breach has been sustained
by the arbitrator, and (b) such thirty day period shall not include any
period during which the breaching party is proceeding diligently and by
appropriate means to remedy such breach; or
(ii) the other party shall consent to the appointment
of a receiver, trustee, or liquidator of itself or of a substantial
part of its property, or shall admit in writing its inability to pay
its debts generally as they come due, or shall make a general
assignment for the benefit of creditors; or
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<PAGE> 23
(iii) the other party shall file a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking
reorganization in a proceeding under any bankruptcy laws (as now or
hereafter in effect) or an answer admitting the material allegations of
a petition filed against such other party in any such proceeding, or
shall by voluntary petition, answer, or consent seek relief under the
provisions of any other now existing or future bankruptcy or other
similar law providing for the reorganization or winding up of
corporations, or providing for an agreement, extension, or adjustment
with its creditors; or
(iv) an order, judgment, or decree shall be entered
by any court of competent jurisdiction appointing, without the consent
of the other party, a receiver, trustee, or liquidator of the other
party or of any substantial part of its property, or sequestering any
substantial part of the property of the other party, and any such
order, judgment, or decree of appointment or sequestration shall remain
in force undismissed, unstayed, or unvacated for a period of 90 days
after the date of entry thereof; or
(v) a petition against the other party in a
proceeding under the Federal bankruptcy laws or other insolvency laws,
as now or hereafter in effect shall be filed and shall not be withdrawn
or dismissed within 90 days thereafter, or, under the provisions of any
law providing for reorganization or winding-up of corporations which
may apply to the other party, any court of competent jurisdiction shall
assume jurisdiction, custody, or control of the other party or of any
substantial part of its property and such jurisdiction, custody, or
control shall remain in force unrelinquished, unstayed, or unterminated
for a period of 90 days; or
(vi) that other party ceases, or threatens to cease,
to carry on business.
E. The rights to terminate this Agreement given by this Clause
shall be without prejudice to any other right or remedy of either party in
respect of the breach concerned (if any) or any other breach.
F. The provisions of Clauses 19, with respect to services
provided prior to termination, 24 and 25(g) and (h) shall continue to bind the
parties hereto notwithstanding the termination of this Agreement.
23. Arbitration:
A. Subject to the final sentence of this Clause, any dispute
arising between the parties to this Agreement involving the subject matters
covered by this Agreement shall be submitted to arbitration under this Clause.
Either party shall notify the other party of such alleged dispute (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
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<PAGE> 24
Dispute Notice, either party may notify the other party that it wishes to
commence an arbitration proceeding under this Clause (an "Arbitration Request").
B. 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.
C. 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 Partners), 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 Article 23.
D. The arbitration proceedings shall be conducted in the
English language and shall be held at such location (within or outside the
United States) as shall, in the judgment of the Arbitrator, be least costly,
most convenient to the parties and best suited to the resolution of the matter
in dispute. The United Nations Commission on International Trade Law
("UNCITRAL") rules of commercial arbitration shall apply to any arbitration
commenced pursuant to this Article 23, 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 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.
(iii) Within 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.
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(iv) Within 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 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 the 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
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 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 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.
This Article 23 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.
24. Confidentiality:
A. Except as provided below, each party shall at all times
during the continuance of this Agreement and after its termination (a) use all
reasonable endeavors to keep all Confidential Information confidential and
accordingly shall not disclose any Confidential Information to any other Person;
and (b) not use any Restricted Information for any purpose other than the
performance of the obligations under this Agreement.
B. Any Confidential Information may be used by either party
for any purpose, or disclosed by either party to any other Person, to the extent
only that (a) it is at the date hereof, or hereafter becomes, public knowledge
through no fault of that party (provided that in doing so that party shall not
disclose any Confidential Information which is not
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<PAGE> 26
public knowledge); (b) it can be shown by that party to the reasonable
satisfaction of the other party, to have been known to it prior to its being
disclosed by the other party to the first named party; or (c) such disclosure is
required by law, any relevant stock exchange or other regulatory board or
authority or for the proper performance of any obligation under this Agreement,
provided that the party required to make such disclosure shall use all
reasonable endeavors to obtain any available exemption from such requirement.
25. Intellectual Property:
A. Galileo hereby authorizes Distributor to use Galileo's
trade marks in the Territory in relation to Galileo's Distribution Services only
for the purposes (i) of exercising the rights granted to Distributor or to an
Affiliate of Distributor by Galileo and (ii) of performing Distributor's
obligations under this Agreement. Distributor shall not use any of the trade
marks in any way that might prejudice the goodwill of Galileo therein and shall
comply with all reasonable requirements Galileo may from time to time specify in
relation to their use.
B. Distributor shall promptly and fully notify Galileo of any
actual, threatened or suspected infringement in the Territory of any
Intellectual Property of Galileo which comes to Distributor's notice, and of any
claim by any third party so coming to its notice that the provision of Galileo's
Distribution Services infringes the Intellectual Property or other rights of any
other Person, and Distributor shall at the request and expense of Galileo do all
such things as may be reasonably required to assist Galileo in taking or
resisting any proceedings in relation to any such infringement or claim.
C. Except for those rights described in paragraph A [and
pursuant to the Service Mark License Agreement, dated as of the date hereof,
between Galileo and Distributor (the "License Agreement")][FN3] above, nothing
in this Agreement shall give Distributor any other rights in respect of any
trade names or trade marks of Galileo or of the goodwill associated therewith,
and Distributor hereby acknowledges that, except as expressly provided in
paragraph A [or in the License Agreement][FN4], it shall not acquire any rights
in respect thereof and that all such rights and goodwill are, and shall remain,
vested in Galileo.
D. Distributor shall not use in the Territory in any other
trade or business other than Distribution Services any trade marks or trade
names so resembling Galileo's trade marks or trade names as to be likely to
cause confusion or deception.
E. Distributor shall at the expense of Galileo take all such
steps as Galileo may reasonably require to assist Galileo in maintaining the
validity and enforceability of the Intellectual Property of Galileo in the
Territory during the continuance of this Agreement.
F. Without prejudice to the right of Distributor or any third
party to challenge the validity of any Intellectual Property of Galileo,
Distributor shall not do or authorize any third party to do any act which would
or might invalidate or be inconsistent with the
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Intellectual Property of Galileo and shall not omit or authorize any third party
to omit to do any act which, by its omission would have that effect.
G. Distributor shall indemnify Galileo from and against any
loss or liability which may be incurred by Galileo by reason of any use by
Distributor of the Intellectual Property of Galileo otherwise than as provided
by this Agreement.
H. Galileo shall defend, indemnify, and hold harmless
Distributor from and against any loss or liability that may be incurred by
Distributor by reason of any claim or action that the Intellectual Property
infringes the patent, copyright, registered design or trade mark rights of any
third party provided that Distributor:
(i) gives notice to Galileo of any Intellectual
Property infringement forthwith upon becoming aware of the same;
(ii) gives Galileo the sole conduct of the defense
to any claim or action in respect of
an Intellectual Property Infringement and does not at any time admit
liability or otherwise attempt to settle or compromise the said claim
or action except upon the express instructions of Galileo; and
(iii) acts in accordance with the reasonable
instructions of Galileo and gives to Galileo such assistance as it
shall reasonably require in respect of the conduct of the said defense.
I. Galileo shall reimburse Distributor its reasonable costs in
complying with the provisions of this section.
26. Force Majeure and Liability:
A. No party hereto shall be liable for any failure to perform
its obligations under this Agreement if:
(i) the failure arises from one of the following
causes:
(a) acts of God, war or civil commotion;
(b) stikes or other labor disputes involving
complete or partial stoppage of work;
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(c) legislative or governmental
interference, direction or restriction; and
(ii) the party provides the other party hereto
forthwith with full details of the reason for its failure to perform
its obligations; and
(iii) the party uses its best endeavors to minimize
the duration and effect of such failure.
B. Without prejudice to the generality of paragraph A above,
neither party hereto shall be deemed to be in breach of this Agreement, or
otherwise liable to the other party for any delay in providing, or failure to
provide, Distribution Services if such delay or failure is caused by defects or
failure in communications or other facilities provided by third parties and
utilized by the first mentioned party in the provision of Distribution Services
provided that such party shall take all reasonable steps to ensure that such
delay or failure is remedied as soon as is reasonably practical.
C. Subject to Clause 25, in no event shall either party be
liable to the other for indirect, incidental or consequential loss or damage
arising out of or in connection with this Agreement or the use or performance of
Galileo's Distribution Services, whether in an action based on contract or tort
(including negligence).
D. In the event that any provision of this Agreement is found
to be void and unenforceable, the remaining provisions of this Agreement shall
remain in full force and effect and the parties shall negotiate in good faith to
replace the void and unenforceable provision with such provision as the parties
believe to be valid and enforceable and which reflects as closely as possible
the intention of the parties as stated in the provision which has proved to be
void and unenforceable.
27. Assignment:
A. Either party shall be entitled to carry out any of its
obligations under this Agreement through any Affiliate provided that any act or
omission of such Affiliate shall be deemed for the purposes of this Agreement to
be the act or omission of the party to this Agreement.
B. Except as set forth in paragraph A above, neither party may
assign, create any encumbrance over, or dispose of any of its rights hereunder,
or sub-contract or otherwise delegate any of its obligations hereunder, except
with the prior written consent of the other party, such consent not to be
unreasonably withheld.
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C. Notwithstanding paragraph B above, this Agreement may be
assigned by Galileo International Partnership to Galileo Company at any time
during the period prior to the date which is the first anniversary of the
Closing Date under the Combination Agreement. Upon cessation of the trade of
Galileo Company (for United Kingdom tax purposes) this Agreement will be
assigned back to Galileo International Partnership.
28. Relationship of the Parties: The relationship of the parties is
that of supplier and distributor of products and services. Nothing in this
Agreement creates or is intended to create any agency, partnership or joint
venture relationship between the parties. Neither party has any authority to
bind the other party, and neither party shall hold itself out as the agent of
the other party.
29. Governing Law and Jurisdiction:
A. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without regard to the
conflict of laws provisions thereof.
B. Subject to the provisions for compulsory arbitration of
disputes arising hereunder contained in Article 23 above, in relation to any
dispute arising out of or in connection with this Agreement, each party to this
Agreement hereby irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the State and United States Federal Courts sitting in Chicago,
Illinois and New York, New York, and waives any objection to proceedings with
respect to this Agreement in such Court on the grounds of venue or inconvenient
forum.
C. Nothing in this Article shall affect a party's right to
serve process in any other manner permitted by law or limit the right of such
party to commence proceedings with respect to this Agreement against another
party against which it is entitled to commence such proceedings in any
jurisdiction nor shall the commencement of proceedings with respect to this
Agreement in any jurisdiction preclude a party from commencing proceedings with
respect to this Agreement in any other jurisdiction, whether concurrently or
not.
30 Waiver and Amendment:
A. The rights of each party hereto shall not be prejudiced or
restricted by any waiver or forbearance extended to the other party (except for
consents and approvals given
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<PAGE> 30
pursuant to the terms of this Agreement) and no waiver by either party in
respect of any breach shall operate as a waiver in respect of any subsequent
breach.
B. This Agreement may only be amended if such amendment is in
writing and executed be duly authorized representatives of both parties hereto.
31. Entire Agreement: This Agreement sets out the entire agreement
between the parties hereto regarding the subject matter hereof and supersedes
all prior agreements and understandings, whether written or oral, relating
thereto. Each party acknowledges that, in entering into this Agreement, it does
not do so on the basis of, and does not rely on, any representation, warranty or
other provision except as expressly provided in this Agreement, and all
conditions, warranties or other terms implied by statute or common law are
excluded to the fullest extent permitted by law.
32. Notices: Every notice, request, demand or other communication under
this Agreement shall (i) be in writing delivered personally or sent by air mail,
telex or facsimile transmission; (ii) be deemed to have been received, subject
as otherwise provided in this Agreement, in the case of a letter personally
delivered, a telex, or a facsimile transmission at the time of delivery or
transmission (provided that if the time of delivery or transmission is not
within normal business hours in the country of the addressee it shall be deemed
to have been received at the opening of business on the next Business Day in
such country), and in the case of a letter sent by air mail three days after it
has been put into the post; and (iii) be sent to the addressee at the address
first provided below for each. Either party may change its address and related
information for notice by written notice given to the other party in accordance
with this Section.
For the Partnership:
Galileo International Partnership
9700 West Higgins Road
Suite 400
Rosemont, Illinois 60018
Attn: President
Telephone: 708/518-
Fax: 708/518-4915
For the Distributor:
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Attn:
Telephone:
Fax:
33. 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.
THEREFORE, the parties by their authorized representatives
have executed this Agreement on the date first above written.
GALILEO INTERNATIONAL DISTRIBUTOR
PARTNERSHIP
_________________________ ________________________
By: By:
Title:___________________ Title:________________________
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Attachment A
Territories
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<PAGE> 33
Attachment B
Distributor Software Licensing Agreement
AGREEMENT, effective September 16, 1993, by and between GALILEO
INTERNATIONAL PARTNERSHIP, a Delaware general partnership ("Galileo") with
offices at 9700 West Higgins Road, Rosemont, Illinois 60018, and ("Distributor")
with offices at ___________________.
WHEREAS, by an agreement dated ____, 199_, ("the Distribution
Agreement") Galileo has appointed Distributor to act as a Galileo Distributor;
and
WHEREAS, to enable Distributor to fulfill its obligations under the
Distribution Agreement it is necessary for Galileo to grant to Distributor a
license to use certain software products; and
WHEREAS, Galileo wishes to grant a license to Distributor a license to
use such software products on the terms and conditions set out in this
Agreement;
NOW THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS: IN THIS AGREEMENT:
(i) unless the context otherwise requires, expressions defined
in the Distribution Agreement have the meaning given to them in the
Distribution Agreement;
(ii) The "Licensed Programs" means those programs listed in
Parts A and B of the schedule to this Agreement;
(iii) The "Class B Permitted Programs" means those Programs
listed in Part B of the schedule to this Agreement.
Note: The only programs licensed from Galileo Shareholders or
their Associated Person to be included in Part B shall be the
programs which are Class B Permitted Programs in the Covia
version of Attachment A to Schedule 5.
<PAGE> 34
2. GRANT OF LICENSE: IN CONSIDERATION OF THE PAYMENT BY DISTRIBUTOR TO
GALILEO OF THE SUM OF $1 GALILEO HEREBY GRANTS TO DISTRIBUTOR A NON-EXCLUSIVE
LICENSE TO USE THE LICENSED PROGRAMS UNDER THE TERMS OF THIS AGREEMENT FOR THE
SOLE PURPOSE OF THE PROVISION OF GALILEO'S DISTRIBUTION SERVICES IN ACCORDANCE
WITH THE TERMS OF THE DISTRIBUTION AGREEMENT.
3. CONSENT TO GRANT OF SUB-LICENSE:
A. GALILEO HEREBY CONSENTS TO THE GRANT BY DISTRIBUTOR OF
SUB-LICENSES:
(i) of all or any of the Class B Permitted Programs
to Subscribers only to the extent necessary for, and solely for the
purpose of, the use of Galileo's Distribution Services by those
Subscribers in the Territory;
(ii) of all or any of the Class B Permitted Programs
to Vendors who have entered into a participation agreement with Galileo
and Distributor only to the extent necessary for, and for the sole
purpose of, the use, on the minimum number of, intelligent workstations
reasonably necessary for such use, of Galileo's Distribution Services
pursuant to such participation agreement; and
(iii) of all or any of the Class B Permitted Programs
to Vendors only to the extent necessary for, and for the sole purpose
of, the access by such Vendors to Galileo's Database Services.
B. ALL SUB-LICENSES OF THE CLASS B PERMITTED PROGRAMS GRANTED
BY DISTRIBUTOR SHALL BE ON TERMS WHICH ARE CONSISTENT WITH THE TERMS OF THIS
AGREEMENT AND THE TERMS OF THE DISTRIBUTION AGREEMENT, SHALL ENTITLE THE
SUB-LICENSEE TO OBTAIN THE PROGRAMS LICENSED SOLELY IN EXECUTE ONLY FORM AND NOT
IN SOURCE CODE AND SHALL CONTAIN PROVISIONS:
1
<PAGE> 35
(i) requiring the programs licensed to be used only
for the purposes specified in Clause 3.A and, subject to Clause 13.C of
the Distribution Agreement, only in conjunction with designated
equipment certified by Galileo;
(ii) prohibiting the sub-licensee from modifying,
enhancing, copying or reverse compiling the programs licensed; and
(iii) prohibiting the sub-licensee from granting any
sub-licenses.
C. DISTRIBUTOR SHALL USE ITS BEST ENDEAVORS TO ENSURE THAT ALL
PERSONS TO WHOM IT GRANTS SUB-LICENSES OF ANY OF THE CLASS B PERMITTED PROGRAMS
PURSUANT TO CLAUSE 3.A COMPLY WITH THE OBLIGATIONS WHICH DISTRIBUTOR PLACES ON
THEM PURSUANT TO CLAUSES 3.B AND 6.F.
4. TITLE AND REPRESENTATION:
A. EXCEPT FOR THOSE RIGHTS OF USE EXPRESSLY GRANTED BY GALILEO
TO DISTRIBUTOR BY THIS AGREEMENT, AS BETWEEN GALILEO AND DISTRIBUTOR GALILEO
RETAINS ALL PROPRIETARY RIGHTS OF OWNERSHIP IN THE LICENSED PROGRAMS, INCLUDING
ALL APPLICABLE COPYRIGHTS, PATENTS, TRADE MARKS, TRADE SECRETS AND ALL OTHER
INTELLECTUAL PROPERTY RIGHTS.
B. GALILEO REPRESENTS AND WARRANTS TO DISTRIBUTOR THAT IT HAS
FULL RIGHT AND POWER TO GRANT A LICENSE TO DISTRIBUTOR TO USE THE LICENSED
PROGRAMS ON THE TERMS AND CONDITIONS SET OUT IN THIS AGREEMENT.
5. DELIVERY, INSTALLATION, AND DOCUMENTATION:
A. GALILEO SHALL DELIVER AT ITS OWN EXPENSE ONE COPY OF EACH
OF THE LICENSED PROGRAMS TO DISTRIBUTOR AT DISTRIBUTOR'S PRINCIPAL PLACE OF
BUSINESS IN THE TERRITORY AS SOON AS IS REASONABLY PRACTICABLE AFTER THE DATE OF
THIS AGREEMENT.
2
<PAGE> 36
B. DISTRIBUTOR SHALL BE RESPONSIBLE FOR THE INSTALLATION AND
TESTING OF THE LICENSED PROGRAMS FOLLOWING DELIVERY. GALILEO SHALL PROVIDE TO
DISTRIBUTOR, AT DISTRIBUTOR'S COST, ALL SUCH ASSISTANCE AS DISTRIBUTOR MAY
REASONABLY REQUIRE IN CONNECTION WITH SUCH INSTALLATION AND TESTING.
C. GALILEO SHALL PROVIDE TO DISTRIBUTOR FREE OF CHARGE IN HARD
COPY OR IN COMPUTER TAPE FORMAT ONE COPY OF ANY DOCUMENTATION IN GALILEO'S
POSSESSION THAT IS NECESSARY FOR DISTRIBUTOR TO USE THE LICENSED PROGRAMS AS
CONTEMPLATED BY THIS AGREEMENT.
6. NON-DISCLOSURE: DISTRIBUTOR SHALL:
A. LIMIT ACCESS TO THE LICENSED PROGRAMS TO (I) ITS EMPLOYEES,
AGENTS AND SUB-CONTRACTORS WHO REQUIRE ACCESS IN CONJUNCTION WITH THE USE OF THE
LICENSED PROGRAMS BY DISTRIBUTOR AS CONTEMPLATED BY THIS AGREEMENT; AND (II)
SUB-LICENSEES TO WHOM DISTRIBUTOR IS PERMITTED TO GRANT SUB-LICENSES PURSUANT TO
CLAUSE 3.A;
B. NOT MAKE AVAILABLE OR DISCLOSE ANY LICENSED PROGRAM OR
OTHER PROPRIETARY INFORMATION OF GALILEO OTHER THAN IN ACCORDANCE WITH CLAUSE
6.A;
C. REPRODUCE ON ANY COPY OF THE LICENSED PROGRAMS GALILEO'S
COPYRIGHT AND TRADE MARK NOTICES;
D. MAINTAIN AN UP-TO-DATE WRITTEN RECORD OF THE NUMBER OF
COPIES IT HAS MADE OF THE LICENSED PROGRAMS AND THEIR LOCATION AND UPON REQUEST
FORTHWITH PRODUCE SUCH RECORD TO GALILEO;
E. INFORM ALL EMPLOYEES, AGENTS AND SUB-CONTRACTORS HAVING
ACCESS TO THE LICENSED PROGRAMS THAT THE LICENSED PROGRAMS CONTAIN PROPRIETARY
INFORMATION OF GALILEO AND THAT ALL INTELLECTUAL PROPERTY RIGHTS IN THE LICENSED
PROGRAMS ARE THE PROPERTY OF GALILEO; AND
F. ENSURE THAT ALL ITS SUB-LICENSEES ENTER INTO NON-DISCLOSURE
AGREEMENTS PROVIDING SUBSTANTIALLY THE SAME PROTECTION AS THE NON-DISCLOSURE
PROVISION OF THIS AGREEMENT.
7. COPYING AND MODIFICATION:
A. DISTRIBUTOR MAY MAKE SUCH NUMBER OF COPIES OF THE LICENSED
PROGRAMS AS IS NECESSARY TO ENABLE OR FACILITATE THE PROPER USE AND PROVISION
OF GALILEO'S DISTRIBUTION SERVICES AS CONTEMPLATED BY THIS AGREEMENT AND THE
DISTRIBUTION AGREEMENT.
B. IF DISTRIBUTOR WISHES TO MAKE ANY MODIFICATIONS TO THE
LICENSED PROGRAMS IT SHALL REQUEST CONSENT FROM GALILEO, WHICH SHALL NOT BE
UNREASONABLY WITHHELD. IF GALILEO UNREASONABLY
3
<PAGE> 37
DELAYS CONSENT, DISTRIBUTOR MAY, HAVING GIVEN REASONABLE NOTICE TO GALILEO,
CARRY OUT THE MODIFICATIONS FOR WHICH IT HAS REQUESTED CONSENT PROVIDED THAT
DISTRIBUTOR SHALL INDEMNIFY GALILEO AGAINST ALL ACTIONS, CLAIMS, COSTS, DAMAGES
AND LOSSES (INCLUDING LOSS OF PROFIT) SUFFERED OR INCURRED BY GALILEO ARISING AS
A RESULT OF THE USE OF SUCH MODIFICATIONS EXCEPT ANY LOSS OF PROFIT ARISING
FROM BOOKINGS LOST IN RESPECT OF THE TERMINALS IN CONJUNCTION WITH WHICH THE
MODIFICATIONS ARE BEING USED.
8. INTELLECTUAL PROPERTY RIGHTS INDEMNITY:
A. GALILEO SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS
DISTRIBUTOR FROM AND AGAINST ANY ANY ALL LIABILITY, CLAIMS, COSTS, LOSSES, OR
DAMAGES ARISING FROM ANY CLAIM OR ACTION THAT THE NORMAL OPERATION, POSSESSION
OR USE OF THE LICENSED PROGRAMS BY DISTRIBUTOR INFRINGES THE PATENT, COPYRIGHT,
REGISTERED DESIGN OR TRADE MARK RIGHTS OF ANY THIRD PARTY PROVIDED THAT
DISTRIBUTOR: (I) GIVES NOTICE TO GALILEO OF ANY INTELLECTUAL PROPERTY
INFRINGEMENT FORTHWITH UPON BECOMING AWARE OF THE SAME; (II) OFFERS TO GALILEO
THE SOLE CONDUCT OF THE DEFENSE TO ANY CLAIM OR ACTION IN RESPECT OF AN
INTELLECTUAL PROPERTY INFRINGEMENT AND DOES NOT AT ANY TIME ADMIT LIABILITY OR
OTHERWISE ATTEMPT TO SETTLE OR COMPROMISE THE SAID CLAIM OR ACTION EXCEPT UPON
THE EXPRESS INSTRUCTIONS OF GALILEO; AND (III) ACTS IN ACCORDANCE WITH THE
REASONABLE INSTRUCTIONS OF GALILEO AND GIVES TO GALILEO SUCH ASSISTANCE AS IT
SHALL REASONABLY REQUIRE IN RESPECT OF THE CONDUCT OF THE SAID DEFENSE.
B. GALILEO SHALL REIMBURSE DISTRIBUTOR ITS REASONABLE COSTS IN
COMPLYING WITH THE PROVISIONS OF CLAUSE 8.A.
C. GALILEO SHALL HAVE NO LIABILITY TO DISTRIBUTOR IN RESPECT
OF AN INTELLECTUAL PROPERTY INFRINGEMENT IF THE SAME RESULTS FROM ANY BREACH OF
DISTRIBUTOR'S OBLIGATIONS UNDER THIS AGREEMENT.
D. IN THE EVENT OF AN INTELLECTUAL PROPERTY INFRINGEMENT
GALILEO SHALL AT ITS OWN EXPENSE AND OPTION TO THE EXTENT POSSIBLE EITHER: (I)
PROCURE THE RIGHT FOR LICENSEE TO CONTINUE TO USE THE LICENSED PROGRAMS; (II)
MAKE SUCH ALTERATIONS, MODIFICATIONS OR ADJUSTMENTS TO THE LICENSED PROGRAMS
THAT THEY BECOME NON-INFRINGING WITHOUT INCURRING A MATERIAL DIMINUTION IN
PERFORMANCE OR FUNCTION; OR (III) REPLACE THE LICENSED PROGRAMS WITH
NON-INFRINGING SUBSTITUTES PROVIDED THAT SUCH SUBSTITUTES DO NOT ENTAIL A
MATERIAL DIMINUTION IN PERFORMANCE OR FUNCTION.
9. WARRANTIES:
A. GALILEO WARRANTS AND REPRESENTS THAT THE COPIES OF THE
LICENSED PROGRAMS PROVIDED TO DISTRIBUTOR UNDER THIS AGREEMENT SHALL BE SIMILAR
IN ALL MATERIAL RESPECTS TO THE VERSIONS OF THE LICENSED PROGRAMS THAT GALILEO
IS USING AT THE DATE OF DELIVERY.
B. EXCEPT AS PROVIDED IN CLAUSE 9.A, GALILEO GIVES NO
WARRANTIES AND MAKES NO REPRESENTATIONS REGARDING THE LICENSED PROGRAMS AND ALL
SUCH WARRANTIES AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ARE HEREBY EXCLUDED.
4
<PAGE> 38
10. FORCE MAJEURE AND LIABILITY:
A. No party hereto shall be liable for any failure to perform
its obligations under this Agreement
(i) if the failure arises from one of the following
causes:
(a) acts of God, war or civil commotion;
(b) strikes or other labor disputes
involving complete or partial stoppage of work;
(c) legislative or governmental
interference, direction or restriction; and
(ii) the party provides the other party hereto
forthwith with full details of the reason for its failure to perform
its obligations; and
(iii) the party uses its best endeavors to minimize
the duration and effect of such failure.
11. TERMINATION:
A. GALILEO MAY TERMINATE THIS AGREEMENT IMMEDIATELY UPON
WRITTEN NOTICE TO DISTRIBUTOR IN THE EVENT THAT EITHER: (I) DISTRIBUTOR COMMITS
A MATERIAL BREACH OF THE TERMS OF THIS AGREEMENT; OR (II) DISTRIBUTOR PURPORTS
TO GRANT SUB-LICENSES OF ANY LICENSED PROGRAM OTHER THAN IN ACCORDANCE WITH THE
PROVISIONS OF THIS AGREEMENT.
B. THIS AGREEMENT SHALL IN ANY EVENT TERMINATE UPON
TERMINATION OF THE DISTRIBUTION AGREEMENT.
12. ENTIRE AGREEMENT: THIS AGREEMENT SETS OUT THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO REGARDING THE SUBJECT MATTER HEREOF AND SUPERSEDES
ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING
THERETO. EACH PARTY ACKNOWLEDGES THAT, IN ENTERING INTO THIS AGREEMENT, IT DOES
NOT DO SO ON THE BASIS OF, AND DOES NOT RELY ON, ANY REPRESENTATION, WARRANTY OR
OTHER PROVISION EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, AND ALL
CONDITIONS, WARRANTIES OR OTHER TERMS IMPLIED BY STATUTE OR COMMON LAW ARE
EXCLUDED TO THE FULLEST EXTENT PERMITTED BY LAW.
5
<PAGE> 39
13. NOTICES: EVERY NOTICE, REQUEST, DEMAND OR OTHER COMMUNICATION UNDER
THIS AGREEMENT SHALL (I) BE IN WRITING DELIVERED PERSONALLY OR SENT BY AIR MAIL,
TELEX OR FACSIMILE TRANSMISSION; (II) BE DEEMED TO HAVE BEEN RECEIVED, SUBJECT
AS OTHERWISE PROVIDED IN THIS AGREEMENT, IN THE CASE OF A LETTER PERSONALLY
DELIVERED, A TELEX, OR A FACSIMILE TRANSMISSION AT THE TIME OF DELIVERY OR
TRANSMISSION (PROVIDED THAT IF THE TIME OF DELIVERY OR TRANSMISSION IS NOT
WITHIN NORMAL BUSINESS HOURS IN THE COUNTRY OF THE ADDRESSEE IT SHALL BE DEEMED
TO HAVE BEEN RECEIVED AT THE OPENING OF BUSINESS ON THE NEXT BUSINESS DAY IN
SUCH COUNTRY), AND IN THE CASE OF A LETTER SENT BY AIR MAIL THREE DAYS AFTER IT
HAS BEEN PUT INTO THE POST; AND (III) BE SENT TO THE ADDRESSEES AT THE ADDRESSES
FIRST PROVIDED BELOW FOR EACH. ANY PARTY MAY CHANGE ITS ADDRESS AND RELATED
INFORMATION FOR NOTICE BY WRITTEN NOTICE GIVEN TO THE OTHER PARTY IN ACCORDANCE
WITH THIS SECTION.
For the Partnership:
Galileo International
Partnership
9700 West Higgins Road
Suite 400
Rosemont, Illinois 60018
Attn: President
Telephone: 708/518-
Fax: 708/518-4915
For the Distributor:
Attn:
Telephone:
Fax:
6
<PAGE> 40
DISTRIBUTOR SALES AND SERVICE AGREEMENT
THEREFORE, the parties by their authorized representatives
have executed this Agreement on the date first above written.
GALILEO INTERNATIONAL DISTRIBUTOR
PARTNERSHIP
By:________________________ By:__________________________
Title:_____________________Title:___________________________
7
<PAGE> 41
Attachment C
Service Level Objectives
[To be conformed to Integration Plan]
8
<PAGE> 42
Attachment D
Revenue Split Arrangements
[ATS Version]
1. DEFINITIONS: IN THIS ATTACHMENT THE FOLLOWING EXPRESSIONS
SHALL HAVE THE MEANINGS PROVIDED FOR EACH:
Booking Fee Revenue. "Booking Fee Revenue" means all revenue
received by Galileo from Vendors as a result of transactions
in or through the Galileo System or a National System,
including reservation bookings, cancellations, inquiries, or
other Reservations Services.
NTP Revenue. "NTP Revenue" means all Vendor Revenue arising
from computer transactions in or through the Galileo System by
Neutral Travel Providers in the Territory.
Other Customer Revenue. "Other Customer Revenue" means all
Vendor Revenue arising from computer transactions in or
through the Galileo System by Other Customers in the
Territory.
Vendor Revenue. "Vendor Revenue" means all revenue received by
Galileo from Vendors, including without limitation all Booking
Fee Revenue and other service charges or fees paid by Vendors
from services provided by or through the Galileo System
including Air and Non-Air (hotel, car, rail, ferry, cruise,
tour, charter, and leisure), Apollo Headlines (net of OAG or
similar commissions), multi-access fees, and including
cancellations, inquiries, or other services but excluding any
revenue generated from Spectrum.
2. SPLIT OF NTP REVENUE. NTP REVENUE, WHERE ANY COPY OF THE
PASSENGER NAME RECORD ("PNR") OR THE EQUIVALENT ASSOCIATED WITH SUCH TRANSACTION
RESIDES IN THE GALILEO SYSTEM, WILL BE SPLIT AS FOLLOWS. (REFERENCES TO "YEAR"
ARE TO A TWELVE MONTH PERIOD FOLLOWING THE CLOSING DATE OR ITS ANNIVERSARY.)
9
<PAGE> 43
<TABLE>
<CAPTION>
Year Galileo Distributor
<S> <C> <C>
Year 1 48% 52%
Year 2 48% 52%
Year 3 49% 51%
Year 4
and beyond 50% 50%
</TABLE>
55. SPLIT OF OTHER CUSTOMER REVENUE. OTHER CUSTOMER REVENUE
WILL BE SPLIT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 7.11 AND 8.8 OF THE
PARTNERSHIP AGREEMENT.
3
<PAGE> 44
Attachment E
Gateway Router Services
1. IN RELATION TO THE GATEWAY ROUTER DISTRIBUTOR SHALL EITHER
ITSELF OR THROUGH AN AFFILIATE:
(i) make available the necessary space and utilities
at such location as may be agreed between Galileo and Distributor;
(ii) provide such equipment and services as may be
necessary to enable the provision of Galileo's Distribution Services in
the Territory in conjunction with the Gateway Router;
(iii) operate the Gateway Router to enable the
provision of Galileo's Distribution Services in the Territory;
(iv) provide such suitably qualified staff as may be
necessary to operate the Gateway Router; and
(v) procure the provision of all necessary
maintenance and support services in relation to the operation of the
Gateway Router.
2. GALILEO SHALL PAY DISTRIBUTOR'S OR, IF APPLICABLE, ITS
AFFILIATE'S COST IN RESPECT OF THE PROVISION OF THE SERVICES SET OUT IN CLAUSE L
OF THIS ATTACHMENT.
4
<PAGE> 45
ATTACHMENT F
ASSOCIATE DISTRIBUTOR TERRITORIES
A. ARABI
ALGERIA
Bahrain
Djibouti
Egypt
Jordan
Kuwait
Lebanon
Lybia
Mauritania
Morocco
Oman
Qatar
Saudi Arabia
Somalia
Sudan
Syria
Tunisia
United Arab Emirates
Yemen
B OPTIONAL TERRITORIES (UNTIL 20 OCTOBER 1993)
Angola
Bangladesh
Burundi
Cameroon
Chad
Equatorial Guinea
Gabon
Ghana
India
Iran
Kenya
Madagascar
Malawi
5
<PAGE> 46
Mali
Mauritius
Mozambique
Nigeria
Pakistan
Rwanda
Sri Lanka
Tanzania
Uganda
Zaire
Zimbabwe
Zambia
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
Finland
Iceland
Norway
Sweden
4. MALEV
Hungary
5. SAA
South Africa
Independent Homelands
Namibia
6
<PAGE> 47
Botswana
Lenotho
Swaziland
6. AVENSA
Venezuela
3
<PAGE> 1
Exhibit 10.38
[LOGO]
_____________________________________
GLOBAL AIRLINE DISTRIBUTION AGREEMENT
_____________________________________
____________________________________________________
(c) Copyright Galileo International Partnership 1993
<PAGE> 2
GALILEO INTERNATIONAL GLOBAL AIRLINE DISTRIBUTION AGREEMENT
GUIDELINES FOR PARTICIPANTS
The details given below are designed to make it as easy as possible for you to
fill in the relevant parts of the new Galileo International Global Airline
Distribution Agreement. In the event of any doubt, please do not hesitate to
contact a member of the Galileo International Airline Sales and Marketing team
using the contact names and numbers attached.
Please remember that both copies of the agreement must be filled in, signed and
returned to the address provided at the end of this document.
The agreement will become effective only when both copies of the agreement are
counter-signed by Galileo International Partnership. At this stage, one complete
document will be returned to you for your records. The commencement date will be
the date of counter-signature.
MAIN AGREEMENT
PAGE 1
i) Please do not fill in the date on the agreement - this will be
completed by Galileo International after receipt of the returned
contract.
ii) Please complete or make any necessary corrections to:
- Your full legal company name
- The nationality of your company
- The full address of your Head Office
Please do not use P.O. Box numbers if this can be avoided.
Example:
This Agreement is made as of the _________ day of ____________________,
19 _____ among GALILEO INTERNATIONAL PARTNERSHIP, a Delaware general
partnership whose principal place of business is located at 9700 West
Higgins Road, Rosemont, Illinois 60018, USA ("Galileo International
Partnership"), GALILEO INTERNATIONAL, LTD. a company organized under
the laws of England and Wales, whose principal place of business is
located at Windmill Hill, Swindon, England, SN5 6PH ("The Galileo
Company") and ZZ AIRLINES LIMITED , a RURITANIAN company whose
principal place of business is located at SOMEWHERE STREET, SOMEWHERE
TOWN, SOMEWHERE POSTAL CODE, SOMEWHERE COUNTRY ("Participant").
Galileo International Global Airline Distribution Agreement Page 1
Guidelines for Participants
<PAGE> 3
PAGE 18 ARTICLE 23 NOTICES
Please complete the title and address of the person in your organization to whom
any of the legal notices required under this Agreement should sent. This will
normally be your Company Secretary. We advise that you do not use actual names
but job titles since, during the course of this agreement, personnel may change.
PAGE 20 SIGNATURES
Signatures should be in ink with the full name, job title and date of signature
clearly written in capital letters.
Upon return, both copies of the agreement will be counter-signed both by The
Galileo Company and by the Galileo International Partnership.
SCHEDULES
SCHEDULE 1 BASIC STANDARD SERVICES
PAGE 21 CLAUSE 1 AVAILABILITY STATUS ("AVS") MESSAGES
You must select one of the four options A-D listed whether or not you also
select one of the Galileo International optional display services in Schedule 4
on page 29.
Galileo International can accept all alpha AVS message formats as defined in
Chapter 4 of the IATA Reservations Interline Message Procedures - Passenger,
17th Edition.
OPTION A SEGMENT LIMIT SALES
Selection of this option will result in the System interpreting your
AVS messages as affecting only the points stated in such AVS messages.
These AVS messages will not affect sales into, out of, or through the
points stated (i.e. 'L' status codes such as 'LR', 'LL', 'LC', 'LN'
etc. are used).
OPTION B FULL SEGMENT AVAILABILITY
Selection of this option will result in the System interpreting your
AVS messages as applying to all segments affected by the pair of points
stated in such AVS messages, including all points into, out of and
through the points stated.
Galileo International Global Airline Distribution Agreement Page 2
Guidelines for Participants
<PAGE> 4
OPTION C FIRST CLOSING AVAILABILITY
Selection of this option will result in the System operating in the
same way as Full Segment Availability except that once an AVS message
is sent to close out a direct flight, your host reservation system will
not send a subsequent AVS message to reopen the flight if seats have
subsequently become available.
The exception to this is shown under Clause 2B whereby Galileo
International will reopen your direct flights for sale on receipt of an
'AS' message from your host reservation system.
OPTION D NO AVAILABILITY STATUS
This option will cause only your schedules and classes to be displayed
but with no availability shown. Therefore, no AVS messages will be sent
from your host reservation system to Galileo International.
Galileo International recommends that you select either Option A or B since
these provide the best opportunity for your airline to maximize sales from
Galileo International Subscribers.
PAGE 22 CLAUSE 3 QUOTASALE
Please fill in your desired quotasale level by class. This will determine the
maximum number of seats which Galileo International will allow an individual
Galileo International Subscriber to book on one of your services in one single
transaction.
The normal levels are either 9, 7 or 4 depending on class (e.g. 4 seats in
Business Class, 7 seats in all others) and depending on the average size of
aircraft operated by your airline.
Note: If no details are provided by you in Clause 3, Galileo International
will assume a quotasale level in all classes of four seats.
Galileo International Global Airline Distribution Agreement Page 3
Guidelines for Participants
<PAGE> 5
PAGE 22 CLAUSE 4 BASIC BOOKING SERVICE SELECTION
As a Participant you must select one of the options (i), (ii) or (iii) listed
whether or not you also select one of the Galileo International optional
services detailed in Schedules 6, 7, 11 and/or 12.
Galileo International recommends Option (i) - Standard Sell basis 'SS' or 'NN'.
Your reporting address for your host reservation system should be entered in
order that all booking messages from Galileo International are correctly sent to
your host reservation system. An example might be HDQRMZZ where ZZ is the
airline two-letter code.
SCHEDULE 4 OPTIONAL SERVICES
PAGE 29
This Schedule outlines all of the Optional Services currently available to
Participants. Each Optional Service listed has a corresponding Schedule
outlining in further detail the service and the unique terms and conditions on
which it is provided. Of course, all of the terms and conditions within the main
body of the agreement also apply to Optional Services.
In order to make your selection of Optional Services, PLEASE INITIAL IN THE
SPACE PROVIDED NEXT TO YOUR CHOSEN SERVICE. Please note that in certain cases
for technical reasons, the selection of one optional service requires selection
of another and this is clearly indicated on the Schedule.
This Schedule 4 must also be signed in ink with the date, full name and job
title of the signatory clearly written in capital letters.
Galileo International Global Airline Distribution Agreement Page 4
Guidelines for Participants
<PAGE> 6
CHECK LIST/NEXT STEPS
Before despatching the two copies of the agreement, please check that the
following pages in both copies have been completed correctly and have been
signed or initialed as appropriate.
Page 1 Company Legal Name and Address
Page 18 Title and Address for Legal Notices
Page 20 Signature, Name, Title and Date
Page 21 Schedule 1 - Clause 1 -Selling Agreement Basis
Page 22 Schedule 1 - Clause 3 -Quotasale Level(s)
Page 22 Schedule 1 - Clause 4 -Booking Basis
Page 23 - Reporting Address
Page 29 Schedule 4 - Optional Services required
Signature, Name, Title and Date
Please initial next to each Optional Service required in the
box provided.
Please send BOTH completed copies by registered mail or courier to:
Steve Diffley
General Manager, Airline Sales and Marketing
Galileo International
9700 W. Higgins-COVBP
Suite 400
Rosemont, Illinois 60018
USA
Galileo International Global Airline Distribution Agreement Page 5
Guidelines for Participants
<PAGE> 7
-----------------------------------------------
GALILEO INTERNATIONAL
GLOBAL AIRLINE DISTRIBUTION AGREEMENT
---------------------------------------------
- - -------------------------------------------------------------
(C) Copyright Galileo International Partnership 1993 and 1996
270296
<PAGE> 8
- - -------------------------------------------------------------
(C) Copyright Galileo International Partnership 1993 and 1996
270296
<PAGE> 9
INDEX OF ARTICLES AND SCHEDULES
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
Introduction 1
1. Definitions 1
2. Duties of Galileo International 4
3. Duties of Participant 5
4. Charges 8
5. Payment 8
6. Taxes 9
7. Proprietary Rights 10
8. Confidentiality 11
9. Duration and Termination 11
10. Bankruptcy 13
11. Indemnification 14
12. Representations and Warranties 14
13. Force Majeure 15
14. Headings 15
15. Waiver 15
16. Invalidity 16
17. Assignment 16
18. Non-Exclusivity 16
19. Expenses 16
</TABLE>
- - -------------------------------------------------------------
(C) Copyright Galileo International Partnership 1993 and 1996
270296
<PAGE> 10
<TABLE>
<S> <C>
20. Governing Law 16
21. Independent Contractors 17
22. Entire Agreement 17
23. Notices 17
24. Non-English Versions 18
25. Counterparts 18
26. Contingent Services 19
SCHEDULE PAGE
1. Basic Standard Services 21
2. Charges for Basic Standard Services 25
3. Territory 1 Geographical Locations 27
4. Optional Services 29
5. Charges for Optional Services 33
6. Interactive Display 37
7. Numeric Availability Status (NAVS) 39
8. Class Selection 43
9. Point Of Sale 45
10. Inside Availability 47
11. Interactive Sell 49
12. Positive Acknowledgement 51
13. Seat Assignment 55
14. Boarding Pass 57
</TABLE>
- - -------------------------------------------------------------
(C) Copyright Galileo International Partnership 1993 and 1996
270296
<PAGE> 11
<TABLE>
<S> <C>
15. Servicing Facility via Airline Servicing Terminal 59
16. Servicing Facility via Borrow Booking File 61
17. Claim PNR 63
18. Complete Booking Record 65
19. Booking Information 67
20. Ticketing Information 69
21. Participant Briefing 71
22. GlobalFares 73
23. Drop Through - Limited Access 77
24. Drop Through - Full Access 81
25. Ticketing Facility 85
26. Migration 87
27. Europe 91
</TABLE>
- - -------------------------------------------------------------
(C) Copyright Galileo International Partnership 1993 and 1996
270296
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GALILEO INTERNATIONAL
GLOBAL AIRLINE DISTRIBUTION AGREEMENT
This Agreement is made as of the _________ day of ____________________, 19 _____
among GALILEO INTERNATIONAL PARTNERSHIP, a Delaware general partnership whose
principal place of business is located at 9700 West Higgins Road, Rosemont,
Illinois 60018, USA ("Galileo International"), GALILEO INTERNATIONAL LIMITED, a
company organised under the laws of England and Wales, whose principal place of
business is located at Windmill Hill, Swindon, England, SN5 6PH ("Limited") and
Americana de Aviacion a ___________________ company whose principal place of
business is located at 345 Larco Avenue 5th Floor, Lima Peru ("Participant").
INTRODUCTION
WHEREAS, Galileo International provides computerised reservations and ticketing
and other services.
WHEREAS, Participant wishes to purchase services from Galileo International, and
Galileo International is willing to allow Participant to do so under the terms
and conditions of this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual obligations set
forth below, Galileo International, Limited and Participant hereby agree to
abide by the terms and conditions of this Agreement.
1. DEFINITIONS
As used in this Agreement, the terms listed below shall be defined as follows:
"Active Confirmed Segment" means a Direct Flight Segment that has a filed status
code of HK in the System and for which a message has been transmitted from the
System.
"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.
"Agreement" means this Agreement and its Schedules, as amended or supplemented
from time to time.
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"AIRIMP" means the ATA/IATA Reservations Interline Message Procedures.
"ARINC" means Aeronautical Radio, Inc.
"ATA" means the Air Traffic Association of America.
"AVS" means Availability Status.
"Booking File" means a record stored in the System that relates to a booking.
"Cancel" means any entry by a Galileo International Subscriber in the System
that causes a Direct Flight Segment to be deleted from a Booking File. Cancels
shall be counted on a per passenger, per Direct Flight basis.
"CRS" means a computerised reservation system or computerised reservation
systems, as applicable, except that the term "CRS" shall not refer to a system
to the extent that it is used solely as an internal reservations system.
"Direct Flight" means a flight, either non-stop or stopping, operated by a
single aircraft between two locations.
"Direct Flight Segment" means an entry by or on behalf of a Galileo
International Subscriber which results in a segment in a Booking File from which
can be determined desired travel of a passenger or passengers for a flight of
Participant, either non-stop or stopping, operated by a single aircraft between
two locations, counted on a per passenger per segment basis.
"Equipment" means any computer equipment and/or any software that Galileo
International has authorised Participant to connect either directly or
indirectly to the System for the purposes of the service described in Schedule
15.
"Galileo International Software" means the software used in or with the System
that is owned or licensed, in whole or in part, directly or indirectly by
Galileo International or its predecessors (including but not limited to all
software supplied by Galileo International or its predecessors for use by
Participant in conjunction with the System, including any such software modified
by Participant with the consent of Galileo International or its predecessors).
"Galileo International Subscriber" means any Person that is authorised to use
the System.
"IATA" means the International Air Transport Association.
"Input" means any entry by a Galileo International Subscriber in the System
whereby a Direct Flight Segment is added in a new or an existing Booking File,
or whereby the status code is changed in an existing Booking File, counted on a
per passenger, per Direct Flight basis, except that it shall not include a
Cancel.
"Marks" means the names "Galileo International", "Galileo", "Apollo",
"Focalpoint", "GlobalFares", and such other trade or service marks that are
owned by Galileo International or any of its Affiliates or distributors.
"Net Passenger Segment" means all Active Confirmed Segments, Passive Segments
and Other Segments less any Cancels.
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"Numeric AVS Message" means an AVS message that indicates the actual number of
seats available for sale.
"Other Segment" means a Direct Flight Segment that is neither an Active
Confirmed Segment nor a Passive Segment, including for example a Direct Flight
Segment requesting space and a Direct Flight segment waitlisting space.
"Participant's CRS" means any CRS that is, either in whole or in part, owned,
operated, or marketed by or on behalf of Participant or any of its Affiliates.
"Participant's System" means the internal reservations system used by
Participant.
"Participating Carrier" means any airline that has entered into a Global Airline
Distribution Agreement with Galileo International.
"Passive Segment" means a Direct Flight Segment that is created in the System
using a "passive" status code, including but not limited to, AK, AL, AN, BK, BL,
BN, GK, GL, GN, or HK, and for which a message has not been transmitted from the
System to Participant's System.
"PNR" means a Passenger Name Record stored in Participant's System.
"Person" means any individual, corporation, partnership, firm, joint venture,
association, joint-stock company, trust, estate, unincorporated organisation,
governmental or regulatory body or other entity.
"Quotasale" means the maximum number of seats that may be sold on a particular
flight/class/date in one transaction as indicated by Participant in Schedule 1.
"Record Locator" means the file reference of a PNR stored in Participant's
System.
"Request" means any request made for work relating to a Booking File to be
carried out by Participant, including but not limited to ticket issuance,
pre-paid ticketing, fare quote and medical assistance.
"Restricted Information" means all data, documentation and materials, either
oral or written, obtained by one party to this Agreement from another party to
this Agreement pursuant to or in connection with this Agreement that relate to
that other party or its customers, that have been designated as confidential by
the other party, and that are in fact confidential in nature; provided, however,
"Restricted Information" does not include: (i) information that has been filed
with, and made public and generally available by, any governmental agency, or
which has otherwise been publicly disclosed; (ii) information already in the
other party's possession; (iii) information made available to the other party by
third parties not known by the other party to be in breach of a confidentiality
obligation; or (iv) any data that is provided by Participant for purposes of
display in the System or that has been generated by or is contained in the
System.
"Schedules" means the schedules attached hereto, as they may be modified or
supplemented by Galileo International from time to time.
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"Shared Designator Carrier" means an air carrier other than Participant, but
only to the extent that it uses Participant's airline designator code.
"SITA" means Societe Internationale de Telecommunications Aeronautiques.
"System" means any CRS operated by Galileo International, not including the
Apollo by Gemini CRS.
"Territory 1" refers to the geographical locations listed in Schedule 3.
"Territory 2" refers to all geographical locations other than those listed in
Schedule 3.
2. DUTIES OF GALILEO INTERNATIONAL
A. Galileo International shall maintain and operate the System and shall
provide to Participant various standard services at the charges set out
in Schedule 2, as it may be amended by Galileo International from time
to time. Depending on the options selected by Participant under
Schedule 1, these services may include, among other things, display of
schedules and fares, building of connections, display of flight
availability status, and provision of booking capability. The scope of
the standard services provided shall be determined, and may be amended
from time to time, by Galileo International. Such standard services
shall not include the optional services listed in Schedule 4.
B. Galileo International shall offer to Participant the optional services
listed in Schedule 4, as it may be amended by Galileo International
from time to time, at the charges set out in Schedule 5, as it may be
amended by Galileo International from time to time. Subject to Article
9.I below, Galileo International may add, modify or delete optional
services offered to Participant at any time. Subject to that right,
Galileo International shall provide Participant with those optional
services selected by Participant on Schedule 4.
C. Subject to Article 9.I, Galileo International shall have the right to
make, at Galileo International's sole discretion, any adjustments,
modifications, or changes to the System or its services. Galileo
International shall give Participant reasonable notice of any
modifications to the System that, in the reasonable judgement of
Galileo International, are likely to have a material adverse impact on
Participant's ability to communicate with or utilise the System.
D. Galileo International shall take reasonable steps to ensure that
service is not interrupted. However, Galileo International reserves the
right to interrupt the operation of the System for technical or
operational reasons; provided, that, Galileo International shall use
reasonable efforts to keep such interruptions as short and infrequent
as practicable.
E. Galileo International shall make available to Participant documentation
and/or information to assist Participant in making modifications as
necessary to enable Participant's System to interface with the System
for the purpose of implementing any optional service selected by
Participant under this Agreement.
F. Galileo International shall pay Type B teletype communications costs
relating to messages generated by the System and sent to Participant's
System that are incurred in connection with the services provided under
this Agreement; provided, that, such communications are supplied by
SITA or ARINC, as selected by Galileo International.
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G. Where Participant uses a computer to computer communications link
between the System and Participant's System, Galileo International
shall offer certain point(s) of entry into the System communications
network and will specify the connectivity parameters that must be used
in order that Participant's System can send and receive Type A and/or
unsecured Type B messages. Subject to Articles 3.F and 3.G. below,
Galileo International will pay all costs of communication between
Participant's point of entry, as specified by Galileo International,
and the System.
H. Upon receipt of documented evidence from Participant of speculative
bookings or other abusive practices by a Galileo International
Subscriber involving the sale of Participant's air transportation
services, Galileo International shall assist efforts by Participant to
initiate appropriate, timely and reasonable remedial measures against
such Galileo International Subscriber.
I. Galileo International shall have no obligation to provide and shall not
provide any services that, in the reasonable opinion of Galileo
International, are inconsistent with or in violation of any act or
order of a governmental authority applicable to Galileo International,
its distributors, Galileo International Subscribers, or Participant.
J. Galileo International shall be entitled to amend the list of
geographical locations contained in Schedule 3.
K. Galileo International shall be entitled to perform any or all of its
obligations under this Agreement and to exercise any or all rights
granted to it under this Agreement through any other Person.
3. DUTIES OF PARTICIPANT
A. Participant shall indicate all appropriate choices, and shall provide
any requested information, on the applicable Schedules below, including
at a minimum Schedules 1 and 4.
B. Participant, at its own cost, shall provide Galileo International with
data that are at least as complete, timely, accurate, and advantageous,
and that are delivered in as favourable a manner, as those it provides
to any other CRS, including Participant's CRS. Participant shall
provide any such data in a format and through a supplier (if a supplier
is used) that are acceptable to Galileo International.
C. Participant shall participate in every CRS in which Galileo
International has a direct or indirect ownership interest in every
country in which services of such a CRS are offered, to the extent that
(i) the display of services does not discriminate against Participant
and (ii) any charges to Participant are not discriminatory.
D. Participant shall ensure that Participant's CRS offers services to all
air carriers with an ownership interest in Galileo International to the
same extent and on terms and conditions that are at least as favourable
as those on which Participant's CRS offers those services to other air
carriers, including Participant.
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E. Participant shall, at its own cost, ensure that any work that is
necessary in order to provide both the standard services and any
optional services selected by Participant (unless it is stated in this
Agreement to be a responsibility of Galileo International) is carried
out in a manner that is at least as complete, timely, accurate and
favourable to Galileo International as the manner in which work is
carried out by or on behalf of Participant with any other CRS,
including Participant's CRS.
F. Participant shall pay all costs and charges relating to communication
between Participant's System and the point of entry, as specified by
Galileo International, to the System communications network, including
but not limited to costs of hardware required at the point of entry and
charges for installation, connection, line rental, usage and
deinstallation.
G. Participant shall pay Type B teletype communications costs relating to
messages generated by Participant's System and sent to the System that
are incurred in connection with the services provided under this
Agreement.
H. Participant shall cause all Galileo International messages from the
System to Participant's System to be processed at no less speed and
priority than equivalent messages from any other CRS, including
Participant's CRS.
I. Participant shall not reject a booking that has been made through the
System where Participant's System has not responded to the System
within twelve (12) hours of the message origination, even though
overbooking may result therefrom and denied boarding compensation may
be required.
J. Participant shall not reject a booking for a passenger that has been
made in the System where that booking has been made via an optional
service described in Schedule 6, 7, 11, or 12.
K. Participant shall accept for transportation any passenger presenting a
ticket that bears an "OK" status and that has been issued as a result
of a booking made through the System, consistent with data in the
System and otherwise in accordance with this Agreement, even though no
record of that booking may exist in Participant's System, overbooking
may result therefrom, and denied boarding compensation may be required.
L. Participant shall accept a ticket for transportation at the fare shown
on that ticket provided that the ticket was automatically issued by a
Galileo International Subscriber location outside Europe (as defined in
Schedule 27) at a fare consistent with the data in the System at the
time of its automatic issuance, so long as the booking related to that
ticket has not been altered in any material respect so as to affect
directly the fare quotation since the date of the automatic issuance.
Participant acknowledges that Galileo International and Galileo
International Subscribers shall have no liability to Participant (and
Participant hereby waives any rights and remedies against Galileo
International and Galileo International Subscribers) for any
inaccuracies in the fares data shown on such a ticket.
M. Participant shall accept a ticket for transportation at the fare shown
on the ticket provided that the ticket was automatically issued by a
Galileo International Subscriber location in Europe (as defined in
Schedule 27) at a fare consistent with the data in the System at the
time of its automatic quotation, and not more than seven days after the
automatic quotation of the fare was made by the System, so long as the
booking related to that ticket has not been altered in any material
respect so as to affect directly the fare quotation since the date of
the automatic quotation. Participant acknowledges that Galileo
International and Galileo International Subscribers shall have no
liability to Participant (and Participant hereby waives any rights and
remedies against Galileo International and Galileo
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International Subscribers) for any inaccuracies in the fares data shown
in the System on the date on which the automatic quotation was made,
unless Participant has notified Galileo International of any change to
that data more than seven days prior to that date. The provisions of
this Article 3.M. may be cancelled at any time by Galileo International
upon ten days written notice provided by Galileo International to
Participant, such that the provisions of Article 3.L shall apply to
tickets issued by Galileo International Subscribers located anywhere in
the world.
N. Participant hereby grants ticketing authority to issue Participant's
transportation documents through the System to Galileo International
and all Galileo International Subscribers that hold validation approval
to issue transportation documents on Participant's behalf in each
territory in which Participant is, at the subject time, a member of any
authorised ticketing arrangement and in which the System is authorised
to operate in the capacity of a "System Provider" or in another
comparable capacity. Participant expressly agrees to execute promptly
all agreements and other authorisations specified by the local
settlement plan or any other operator of an authorised ticketing
arrangement that Galileo International reasonably believes are
necessary to implement such authority for the System.
O. Participant shall develop or modify at its own cost any computer
software for use within Participant's System that is necessary to
implement any standard or optional service selected by Participant
under this Agreement.
P. In the event Participant makes any change in Participant's System that
may impact on any standard or optional service provided under this
Agreement, Participant shall give at least sixty (60) days advance
written notice to Galileo International. Participant shall provide
reasonable assistance to Galileo International to develop any necessary
changes to the System. All reasonable expenses and costs incurred by
Galileo International in excess of eight (8) person-hours of work with
respect to such change will be charged to Participant at Galileo
International's then prevailing rates.
Q. Participant shall not provide any services through the System
inconsistent with any act or order of a governmental authority
applicable to Galileo International, its distributors, Galileo
International Subscribers, or Participant.
R. Participant shall provide any services through the System to the extent
it is required to do so by any act or order of a governmental authority
applicable to Galileo International or Participant.
S. Participant shall not use the System for any fraudulent or unlawful
purpose or in any manner or for any purpose contrary to any reasonable
instruction issued by Galileo International.
T. Except with respect to its Shared Designator Carriers, Participant
shall not make available to any other party either directly or
indirectly any of the services obtained by Participant from the System
or from Galileo International without the prior written consent of
Galileo International.
U. Participant shall grant to Galileo International employees or
authorised representatives travelling to and from places where meetings
between Galileo International and Participant are due to be held free
travel on appropriate flights of Participant when such travel is
undertaken at the request of Participant.
V. Participant shall ensure that each of its Shared Designator Carriers,
other than those Shared Designator Carriers that have entered into a
Global Airline Distribution Agreement with Galileo International,
complies with the terms and conditions of this Agreement.
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4. CHARGES
A. Participant shall pay to Galileo International (or such other Person as
Galileo International shall direct) on a monthly basis the charges for
use of the System and other services rendered under this Agreement, as
specified in the Schedules.
B. Participant shall be responsible for all charges related to services
provided to any of its Shared Designator Carriers, other than those
Shared Designator Carriers that have entered into a Global Airline
Distribution Agreement with Galileo International.
C. In the case of transactions relating to Participant's operations that
are made available for sale under a different Participating Carrier's
airline designator code, Participant shall pay charges at rates
corresponding to the selection of services made by the other carrier
under the Global Airline Distribution Agreement entered into by that
carrier and Galileo International.
D. Galileo International reserves the right to increase or decrease the
charge for any service provided pursuant to this Agreement upon thirty
(30) days prior written notice to Participant. Among other things, this
includes the right to introduce charges for existing or new services
provided pursuant to this Agreement and the right to change the method
by which charges are calculated or assessed.
5. PAYMENT
A. Galileo International shall submit monthly invoices to Participant for
all charges and other sums due from Participant under this Agreement.
B. Where Participant is a member of the Airlines Clearing House or the
IATA Clearing House or any similar payment settlement system, Galileo
International may at its discretion effect settlement of an invoice
through one of these systems. Invoices will be rendered and payment
will be made in the currency that Participant has elected to use for
clearing in the settlement system elected by Galileo International.
C. Where Participant is not a member of any settlement system used by
Galileo International, invoices will be submitted to Participant by
Galileo International for settlement on a monthly basis, but only until
such time as Participant becomes a member of any such settlement
system. Participant shall notify Galileo International of the currency
in which invoices will be rendered and payment made, provided that
Participant's choice will be limited to U.S. Dollars, UK Sterling,
European Currency Units (ECU), or such other currency as Galileo
International may approve from time to time. If Participant provides no
notification of its choice of currency for invoices and payment,
Galileo International will determine the currency for these purposes.
D. If the currency chosen for invoicing differs from the currency used by
Galileo International for pricing, the exchange rate used will be the
prevailing rate charged by National Westminster Bank PLC at the close
of business in London on the business day immediately preceding the
date of Galileo International's invoice.
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E. Where Participant disputes any invoice submitted by Galileo
International, Participant may reject that part of the invoice that it
disputes, but only if it does so as soon as practicable after it
becomes aware of the problem and in any event within twelve (12) months
of the date of the invoice. Participant shall explain to Galileo
International in writing the circumstances surrounding the disputed
billing and the reasons behind the rejection of the disputed amount and
shall co-operate with Galileo International in efforts to resolve the
dispute. Notwithstanding any such dispute, Participant shall pay
promptly any invoiced amount, or portion thereof, that is not in
dispute, according to the other terms of this Article. In the event
Participant and Galileo International are unable to resolve the dispute
within a reasonable period of time, Galileo International may invoke
any remedy available to it.
F. Subject to the second sentence of this paragraph, if any sum payable
under this Agreement is not paid by the due date shown on the invoice,
which due date shall be no earlier than thirty (30) days after the
invoice date (or, if no due date is shown, the due date shall be thirty
(30) days after the invoice date), Galileo International shall be
entitled (without prejudice to any other right or remedy it may have)
to charge Participant interest on such sum, both before and after
judgement, if any, at the rate of one and one-half percent (1.5%) per
month compounded or the maximum rate permitted by law, whichever is
less, from and including the date of the invoice until and including
the date actual payment is received. If, pursuant to the terms of this
Agreement, Participant makes payments to Galileo International through
a clearing house process, and the payment cycle used by that clearing
house is longer than 30 days, then interest shall not begin to accrue
until the end of the payment cycle following issuance of the invoice by
Galileo International.
6. TAXES
A. In addition to any other charges or sums payable to Galileo
International under this Agreement, Participant shall pay when due, or,
at Galileo International's election, reimburse and indemnify and hold
Galileo International and its owners harmless from and against, all
sales, use, excise, franchise, withholding, real property, and other
taxes and any and all domestic and foreign duties or import, export or
license fees, howsoever designated (together with any related interest
or penalties not arising from fault on the part of Galileo
International), now or hereafter imposed by any local or foreign taxing
authority, or governmental agency or other similar bodies arising out
of or in connection with this Agreement. Participant shall reimburse
Galileo International for all such taxes, fees and charges within
thirty (30) days of the date of Galileo International's invoice
therefor. Notwithstanding the foregoing, Participant shall not be
responsible for any taxes payable or based on Galileo International's
net income.
B. Notwithstanding Article 6.A above, unless otherwise agreed in writing
in advance by the parties hereto, Galileo International shall be
responsible for the filing of all personal property tax returns and
shall pay all taxes indicated thereon. Participant shall reimburse
Galileo International for all such taxes, fees and charges within
thirty (30) days of the date of Galileo International's invoice
therefor.
C. Upon the request of Galileo International, Participant shall provide
reasonable assistance to Galileo International in the filing of any
documents or the making of any statement in connection with the
recovery of any taxes referred to in this Article.
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7. PROPRIETARY RIGHTS
A. Participant may use the Marks in promotional materials, provided that
Participant obtains the prior written consent of Galileo International
for each such use and Participant complies with any and all conditions
Galileo International may impose to protect the use of the Marks.
Participant must state in all such promotional materials that the Mark
being used is a trademark or service mark of Galileo International or
of the applicable Affiliate or distributor.
B. Participant acknowledges that Galileo International owns the System
database and that Galileo International has sole discretion concerning
the use of information from that database, provided, however, that
nothing in this Agreement shall affect any confidentiality obligation
contained in any separate agreement entered into between Galileo
International and Participant.
C. Nothing in this Agreement shall give Participant any right in respect
of any Galileo International Software or the reference materials
relating to the System that Galileo International may provide to
Participant (or the copyright or other intellectual property rights of
whatever nature in respect thereof), and Participant hereby
acknowledges that, except as expressly provided in this Agreement, it
shall not acquire any rights in respect thereof, and that all such
rights are, and shall remain, vested in Galileo International or its
licensor, including any right, title and interest in and to any
software resulting from work undertaken by or on behalf of Participant
as envisaged by Article 7D.
D. Participant may not without the prior written consent of Galileo
International:
(i) modify, enhance, alter, decompile, recompile, disassemble, or
reverse engineer the whole or any part of the Galileo
International Software;
(ii) permit the whole or any part of the Galileo International
Software to be combined with or incorporated in any computer
program or software;
(iii) make any copy of the Galileo International Software or any
part thereof except that Participant may make any copies as
are reasonably necessary for operational security and use,
provided that Participant reproduces and includes on all such
copies any copyright or trademark notices or any other
indication of the property rights of Galileo International or
its licensor. Such copies and the media on which they are
stored shall be the property of Galileo International, and
this Agreement shall apply to all such copies as it applies to
the Galileo International Software; or
(iv) make any copy of the reference materials relating to the
System or any part thereof except that Participant may make
such copies as are reasonably necessary for operational
security and use.
E. Unless Participant has obtained the prior written consent of Galileo
International, Participant shall not provide or otherwise make
available the Galileo International Software or the reference materials
relating to the System to any Person other than Participant's
directors, officers, employees, advisers, agents, representatives, or
consultants who require access to the same for the purposes of this
Agreement.
F. Participant shall treat as confidential and keep secret all information
contained or embodied in the Galileo International Software and the
reference materials relating to the System and further agrees that the
provisions of Article 8 shall apply accordingly. In addition,
Participant shall ensure that the Persons who are permitted to have
access to Galileo International Software or the reference materials
relating to the System, or any part thereof, pursuant to Article 7.E
above are made aware prior to the disclosure that the
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same is confidential and that they owe a duty of confidence in respect
thereof to Galileo International.
G. Participant shall indemnify Galileo International in respect of all
loss or damage, monetary or otherwise, that Galileo International may
sustain or incur as a result of any unauthorised disclosure or any
other failure of Participant to comply with this Article or Article 8.
8. CONFIDENTIALITY
A. All parties hereto shall treat as confidential all Restricted
Information.
B. Except with the prior written consent of the relevant party or as
provided in this Article, each party shall, at all times:
(i) not divulge, sell, transfer, exchange, or otherwise provide
any Restricted Information to any third Person;
(ii) not make any use of any Restricted Information other than for
the purposes of performing its obligations hereunder; and
(iii) ensure that none of its directors, officers, employees,
advisers, agents, representatives, or consultants does any act
which, if done by that party, would be a breach of the
provisions of subparagraphs (i) or (ii) above.
Any party may disclose any Restricted Information to any governmental,
judicial or other competent authority or competent regulatory body or
any employee thereof to such extent only as is necessary for the
purposes contemplated by this Agreement or as required by law,
provided, however, that before disclosing such Restricted Information
to any such Person, that party shall use its best efforts to
immediately notify the party that provided the Restricted Information
of the intended disclosure and shall use its best efforts to permit the
other party a reasonable period of time to intervene and contest
disclosure or production at the other party's own expense if the other
party so wishes.
C. The provisions of this Article shall continue in force in accordance
with their terms, notwithstanding the termination of this Agreement for
any reason.
9. DURATION AND TERMINATION
A. This Agreement shall commence on
________________________________________ (the "Commencement Date") and,
subject to the provisions of this Article, shall continue in full force
and effect for an initial period of one (1) year from the Commencement
Date. Thereafter, this Agreement shall continue in full force and
effect, unless and until terminated by any party by written notice to
the other parties at least ninety (90) days in advance of termination.
Such a termination may take effect no earlier than one (1) year from
the Commencement Date.
B. Notwithstanding Article 9.A above, if Participant does not agree to pay
any charge for standard services stated in Schedule 2 that is to be
increased in accordance with Article 4.D above, it may terminate this
Agreement by giving written notice to Galileo International at least
fifteen (15) days prior to the effective date of the price increase.
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C. Any party to this Agreement shall be entitled to terminate the
Agreement immediately upon giving written notice to the other parties
if:
(i) another party (other than Limited) becomes insolvent;
(ii) another party (other than Limited) is generally not paying its
bills when they became due;
(iii) another party (other than Limited) takes any step leading to
its cessation as a going concern;
(iv) another party (other than Limited) either ceases or suspends
operations for reasons other than a strike;
(v) voluntary or involuntary liquidation proceedings are commenced
with respect to another party (other than Limited) except for
the purpose of amalgamation or reconstruction;
(vi) a receiver or a judicial manager is appointed in respect of
the whole or part of the assets of another party(other than
Limited);
(vii) another party (other than Limited) makes an assignment for the
benefit of its creditors; (viii) another party (other than
Limited) voluntarily or involuntarily becomes subject to any
proceeding under the bankruptcy or insolvency laws of any
jurisdiction; or
(ix) anything analogous to any of the foregoing events described in
(v), (vi), (vii) or (viii) occurs under the laws of any
jurisdiction in respect of another party (other than Limited);
unless the defaulting party, before such termination, immediately gives
adequate assurance of the future performance of this Agreement by
establishing an irrevocable letter of credit that may be drawn upon by
the insecure party or parties. Such letter of credit must be issued by
a bank acceptable to the insecure party or parties, on terms and
conditions acceptable to the insecure party or parties, and in an
amount sufficient to cover all amounts potentially due from the
defaulting party under this Agreement.
D. In the event of material breach of any of the terms or conditions of
this Agreement by any party to the Agreement (other than Limited), any
non-breaching party may terminate this Agreement, without further
liability or prejudice to any other of its rights or remedies, upon
prior written notice to the breaching party; provided, however, that
the breaching party shall have thirty (30) days to correct such breach
following receipt of such notice (except in the case of any payments
due, where the period to cure such non-payment shall be ten (10) days
after notice). Notwithstanding anything to the contrary herein, in the
event Participant is the breaching party, then Galileo International
may, at its sole option and without prejudice to any other of its
rights or remedies, reduce or restrict the provision of services
provided under this Agreement without termination of the Agreement.
E. Any termination of this Agreement shall not affect any liabilities or
rights accruing prior to the effective date of such termination, or
that are of a continuing nature.
F. Upon termination of this Agreement for whatever reason Participant
shall forthwith
(i) return at Participant's expense all equipment and materials
supplied by or on behalf of Galileo International to
Participant relating to the System (including, without
limitation, the Galileo International Software, any
documentation and associated information in a tangible form
and all copies of the whole or any part thereof) in good
order, repair and condition to Galileo International, which
shall for the purpose of recovering such equipment, materials
and information have access to any premises of Participant and
Participant hereby irrevocably licenses Galileo International,
its employees and agents to enter at Galileo International's
convenience any such premises for such purpose; and
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(ii) pay all sums owed by Participant to Galileo International at
the date of termination notwithstanding any period of credit
that might otherwise have existed in favour of Participant
under this Agreement; and
(iii) pay Galileo International for any data extraction agreed to be
supplied by Galileo International as part of the termination
process.
G. Galileo International shall be entitled to suspend this Agreement or
withhold certain services thereunder immediately if the supply of such
services would directly or indirectly contravene any governmental act
or order applicable to Galileo International, its distributors, Galileo
International Subscribers, or Participant.
H. Participant shall participate in all optional services elected on
Schedule 4 for a minimum of one (1) year. After one (1) year has
passed, Participant shall continue to participate in an optional
service unless and until Participant terminates its participation in
that optional service by written notice delivered to Galileo
International at least ninety (90) days prior to termination. Such
termination may take effect no earlier than one (1) year after
Participant has first received such optional service.
I. Notwithstanding Article 9.H above, (i) if Galileo International makes a
material modification to an optional service that significantly
interferes with the operation of Participant's System, Participant may
terminate its participation in that service by written notice delivered
to Galileo International at least thirty (30) days or if applicable
such lesser number of days as coincides with the date of implementation
of the service modification prior to termination of such optional
service; and (ii) if Galileo International increases the price for an
optional service, Participant may terminate its participation in that
service by written notice delivered to Galileo International at least
fifteen (15) days prior to the effective date of the price increase.
10. BANKRUPTCY
A. If Participant voluntarily or involuntarily becomes subject to any
proceeding under the bankruptcy or insolvency laws of any jurisdiction,
Participant shall not assume or assign this Agreement (if applicable
bankruptcy or insolvency law confers such right) unless and until
Participant provides to Galileo International a deposit or irrevocable
letter of credit equal to the total of the charges for which
Participant became liable during the two months prior to initiation of
the proceeding.
B. Participant and Galileo International specifically acknowledge that the
provision of security in accordance with Article 10.A above is the
minimum security necessary to afford Galileo International adequate
assurance of future performance under this Agreement.
C. Participant and Galileo International agree that the provision of
security in accordance with Article 10.A above is essential to and an
integral part of this Agreement. In the event Participant does not
provide that security, Galileo International shall, at its option, have
the right to terminate this Agreement immediately.
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11. INDEMNIFICATION
A. Participant shall indemnify and hold harmless Galileo International and
Limited and their owners, officers, directors, employees, and agents
from all liabilities, damages, losses, claims, suits, judgements,
costs, and expenses, including costs and reasonable attorneys' fees,
directly or indirectly suffered by, accrued against, charged to or
recoverable from Galileo International, Limited, their owners,
officers, directors, employees, and agents, by reason of or in
connection with Participant's non-performance or improper performance
of its obligations under this Agreement.
B. Except in the case of wilful misconduct by Galileo International,
Limited, their owners, officers, directors, employees, or agents,
Participant shall indemnify and hold harmless Galileo International and
Limited and their owners, officers, directors, employees, and agents
from all liabilities, damages, losses, claims, suits, judgements,
costs, and expenses, including costs and reasonable attorneys' fees,
directly or indirectly suffered by, accrued against, charged to, or
recoverable from Galileo International, Limited, their owners,
officers, directors, employees, and agents, by reason of or in
connection with Participant's services or products supplied in
connection with this Agreement.
12. REPRESENTATIONS AND WARRANTIES
A. GALILEO INTERNATIONAL HEREBY REPRESENTS AND WARRANTS THAT:
(i) GALILEO INTERNATIONAL IS THE OWNER OR LICENSEE OF THE GALILEO
INTERNATIONAL SOFTWARE; AND
(ii) GALILEO INTERNATIONAL HAS THE RIGHT TO PROVIDE THE SERVICES
OFFERED BY THE SYSTEM TO PARTICIPANT USING GALILEO
INTERNATIONAL SOFTWARE.
B. PARTICIPANT'S REMEDIES FOR BREACH OF THE REPRESENTATIONS AND WARRANTIES
SET FORTH IN ARTICLE 12.A ABOVE SHALL BE LIMITED SOLELY TO REPLACEMENT
OF THE GALILEO INTERNATIONAL SOFTWARE CAUSING THE BREACH OF WARRANTY.
C. EACH PARTY HERETO REPRESENTS THAT (i) THE INDIVIDUAL SIGNING THIS
AGREEMENT OR ANY AMENDMENT TO THIS AGREEMENT, ON BEHALF OF PARTICIPANT,
GALILEO INTERNATIONAL, OR LIMITED, AS THE CASE MAY BE, IS, OR AT THE
MATERIAL TIME WILL BE, DULY AUTHORISED TO EXECUTE THIS AGREEMENT OR
AMENDMENT ON BEHALF OF PARTICIPANT, GALILEO INTERNATIONAL , OR LIMITED,
AS THE CASE MAY BE, AND HAS FULL POWER AND AUTHORITY TO BIND
PARTICIPANT, GALILEO INTERNATIONAL, OR LIMITED, AS THE CASE MAY BE, TO
THE TERMS AND CONDITIONS HEREOF; AND (ii) THIS AGREEMENT CONSTITUTES A
LEGAL, VALID, AND BINDING AGREEMENT OF PARTICIPANT, GALILEO
INTERNATIONAL , OR LIMITED, AS THE CASE MAY BE, ENFORCEABLE IN
ACCORDANCE WITH ITS TERMS.
D. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLES 12.A AND 12.C
ABOVE, IN CLAUSE 2.H OF SCHEDULE 10, IN CLAUSE 3.B OF SCHEDULE 22, IN
CLAUSE 3.F OF SCHEDULE 23, IN CLAUSE 3.F OF SCHEDULE 24 AND IN CLAUSE
3.E OF SCHEDULE 25 ARE EXCLUSIVE, AND EACH OF GALILEO INTERNATIONAL ,
LIMITED, AND PARTICIPANT MAKES NO OTHER REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO
GALILEO
______________________________________________________________________________
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INTERNATIONAL AND LIMITED, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SYSTEM OR THE
GALILEO INTERNATIONAL SOFTWARE.
E. EXCEPT FOR A BREACH OF THE EXCLUSIVE WARRANTIES SPECIFIED IN ARTICLES
12.A AND 12.C ABOVE, IN CLAUSE 2.H OF SCHEDULE 10, AND IN CLAUSE 3.B.
OF SCHEDULE 22, AND EXCEPT FOR THE RIGHT TO RECEIVE THE EXCLUSIVE
REMEDIES SPECIFIED IN ARTICLE 12.B ABOVE, IN ARTICLE 2.H OF SCHEDULE
10, IN CLAUSES 2.G AND 2.H OF SCHEDULE 19, AND IN CLAUSE 2.G OF
SCHEDULE 20, PARTICIPANT HEREBY WAIVES AND RELEASES GALILEO
INTERNATIONAL AND LIMITED AND THEIR OWNERS FROM ANY AND ALL OTHER
OBLIGATIONS, LIABILITIES, RIGHTS, CLAIMS AND REMEDIES OF PARTICIPANT
AGAINST GALILEO INTERNATIONAL AND LIMITED AND THEIR OWNERS, OFFICERS,
DIRECTORS, EMPLOYEES, AND AGENTS, EXPRESS OR IMPLIED, ARISING BY LAW OR
OTHERWISE, DUE TO ANY DEFECTS, ERRORS, MALFUNCTIONS OR INTERRUPTIONS OF
SERVICE IN OR TO THE SYSTEM OR THE GALILEO INTERNATIONAL SOFTWARE,
INCLUDING ANY LIABILITY, OBLIGATION, RIGHT, CLAIM OR REMEDY FOR LOSS OF
REVENUE OR PROFIT OR ANY OTHER DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES.
F. EACH PARTY ACKNOWLEDGES THAT, IN ENTERING INTO THIS AGREEMENT, IT DOES
NOT DO SO ON THE BASIS OF, AND DOES NOT RELY ON, ANY REPRESENTATION,
WARRANTY OR OTHER PROVISION EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT.
13. FORCE MAJEURE
Except for any payment obligations, no party shall be deemed to be in default
hereunder or liable for any delays in or failure of performance caused by any
act of God, public enemy, war, civil disorder, fire, flood, explosion, riot,
labour disputes, work stoppage or strike, unavailability of equipment or
software, any act or order of any governmental authority, or any other cause,
whether similar or dissimilar, beyond its control, provided that the affected
party notifies the other parties as soon as practicable.
14. HEADINGS
The headings appearing in this Agreement have been inserted as a matter of
convenience and in no way define, limit or enlarge the scope of this Agreement
or any of the provisions thereof.
15. WAIVER
No waiver by any party of any breach of this Agreement shall constitute a waiver
of any other breach of the same or any other provision hereof, and no waiver
shall be effective unless made in writing. The right of any party to require
strict performance and observance of any obligation hereunder shall not be
affected in any way by any previous waiver, forbearance or course of dealing.
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16. INVALIDITY
In the event that any material provision in this Agreement is or is about to be
prohibited or declared unenforceable in any jurisdiction, or becomes impractical
or uneconomical to perform as a result of any impending or actual change in any
applicable law, Galileo International shall, at its option, have the right to
terminate this Agreement, or to amend, supersede, or delete the prohibited,
unenforceable, impracticable or uneconomical provision or provisions, upon
written notice to Participant.
17. ASSIGNMENT
A. Participant shall not assign or otherwise transfer any of its rights,
interests or obligations under this Agreement to any third party
without the prior written consent of Galileo International, which
consent shall not be unreasonably withheld.
B. Subject to Article 26 hereof, at any time during the term of this
Agreement, Galileo International may, upon giving ten (10) days'
written notice to Participant, assign or otherwise transfer its rights
and obligations under this Agreement, whether in whole or in part, to
any Affiliate, successor, or third party that accepts all obligations
of Galileo International hereunder and agrees with Galileo
International to be bound thereby.
C. Any violation of this Article shall be cause for immediate termination
of this Agreement by the non-assigning party or, at the option of the
non-assigning party, the non-assigning party may declare the assignment
of any of the rights or obligations under the Agreement null and void
ab initio.
18. NON-EXCLUSIVITY
Galileo International, Limited and Participant acknowledge that this Agreement
is a non-exclusive agreement, and any party to the Agreement may enter into
similar agreements with any other party.
19. EXPENSES
Participant shall be liable for and agrees to reimburse Galileo International
and Limited for all attorneys' fees and court costs and related costs incurred
by Galileo International or Limited to enforce this Agreement or to seek
remedies for breach of this Agreement by Participant.
20. GOVERNING LAW
This Agreement and all disputes arising under or in connection with this
Agreement, including actions in tort, shall be governed by the internal laws of
the State of Illinois, USA without regard to its conflicts of laws principles.
All actions brought to enforce or arising out of this Agreement shall be brought
in federal or state courts located within the County of Cook, State of Illinois,
USA, the parties hereby consenting to personal jurisdiction and venue therein.
Any party shall be entitled to take such steps as it may consider necessary or
desirable in order to enforce any judgement or order against any other party
with respect to this Agreement in any jurisdiction where that other party trades
or has assets.
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21. INDEPENDENT CONTRACTORS
Nothing in this Agreement is intended or shall be construed to create or
establish an agency, partnership or joint venture relationship among the parties
hereto.
22. ENTIRE AGREEMENT
A. Except as expressly stated herein, this Agreement constitutes the
entire agreement among the parties with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements, whether
written or oral, between Participant and Galileo International or any
of its predecessors concerning the subject matter hereof, excluding
amounts due Galileo International or any of its predecessors that may
have accrued under a prior agreement between the parties.
B. This Agreement may be modified only by a written amendment duly
executed by the parties, except as provided in Articles 2.A, 2.B, 2.C,
2.J, and 4.D above or otherwise expressly provided herein. In
connection with changes Galileo International may make to the standard
or optional services provided under this Agreement, or to any of the
charges for such services, or to any other provisions of the Schedules,
Galileo International from time to time may provide Participant with
additional Schedules or replacement Schedules that will supersede the
original Schedules.
23. NOTICES
All notices, requests, demands or other communications given or required
hereunder shall be in writing in the English language, and shall be sent by
first class, registered or certified mail, postage prepaid, or by overnight or
express mail, facsimile or telex to the relevant party at its address as set
forth below or to such other address as such party shall designate in writing
for that purpose.
If to Participant:
- - -----------------------------
- - -----------------------------
- - -----------------------------
- - -----------------------------
If to Galileo International :
Attn: COVBP - Vice President, Airline Sales and Marketing
Galileo International Partnership
9700 West Higgins Road
Rosemont, Illinois 60018
U.S.A.
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If to Limited:
Attn: Company Secretary
Galileo International Limited
Galileo Centre Europe
Windmill Hill
Swindon, England, SN5 6PH
Notices sent via electronic means (e.g. telex, facsimile) shall be effective
immediately if sent on a business day prior to 5:00 p.m. local time of
recipient. All other notices shall be effective the first business day after
posting.
24. NON-ENGLISH VERSIONS
If any non-English versions of this Agreement are created, then in the event of
a conflict between this English version and any non-English version, this
English version shall prevail.
25. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
agreement.
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26. CONTINGENT SERVICES
A. To ensure compliance with outstanding contractual obligations to third
parties, or for other reasons, Limited may, in its sole discretion, in
the event United States legal constraints should limit or preclude the
rendition of U.S.-sourced booking or ticketing services by Galileo
International, provide or arrange for another party to provide
substitute services from a source outside the United States.
B. To the extent Limited provides or arranges for another to provide
substitute services to Participant in accordance with Article 26.A
above, Participant agrees to make payments in respect thereof to or at
the direction of Limited in amounts equal to those that would have been
payable under other provisions of this Agreement (including the
Schedules thereto) to Galileo International in respect of booking and
ticketing services rendered by it.
C. Limited makes no commitment to Participant to provide or arrange to
provide such substitute services, and makes no representations with
regard to the comparability thereof to services rendered under this
Agreement by Galileo International.
D. The provisions of this Article constitute an independent agreement
between Limited and Participant. To the extent they are relevant and
appropriate to the implementation of this Article, other provisions of
this Agreement are incorporated by reference in this Article and shall
be applied in determining the rights and obligations of Limited, as
substitute service provider in lieu of Galileo International, and
Participant, as the recipient of substitute services, under this
Article.
E. Limited and Participant are the only parties to this Article. Galileo
International is not a party to this Article and has no rights or
obligations in respect thereof. Limited may assign its rights and
obligations under this Article to a wholly-owned Affiliate of Limited,
and the provisions of Article 17.B of this Agreement shall not apply to
the rights and obligations of Limited under this Article. This Article
is governed by and shall be construed in all respects in accordance
with the laws of England, and Limited, any assignee thereof, and
Participant each submit to the exclusive jurisdiction of the English
courts.
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IN WITNESS WHEREOF, Galileo International, Limited, and Participant have
executed this Agreement as of the day and year first above written.
For and on behalf of For and on behalf of
_____________________________ GALILEO INTERNATIONAL PARTNERSHIP
(PARTICIPANT)
By _______________________ By ____________________________
Name _______________________ Name ____________________________
Title _______________________ Title ____________________________
Date _______________________ Date ____________________________
For and on behalf of
GALILEO INTERNATIONAL LIMITED
By ____________________________
Name ____________________________
Title ____________________________
Date ____________________________
______________________________________________________________________________
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SCHEDULE 1
BASIC STANDARD SERVICES
This Schedule describes the basic standard services provided to Participant and
forms part of the Galileo International Global Airline Distribution Agreement.
1. AVAILABILITY STATUS ("AVS") MESSAGES
A. Participant hereby agrees to grant to Galileo International the
following AVS facilities (initial appropriate option):
[ ] Option A - Segment Limit Sales status on all direct flights
[ ] Option B - Full Segment Availability status on all direct
flights
[ ] Option C - First Closing Availability status for all direct
flights
[ ] Option D - No availability status
(See Schedules 6-10 for optional display services.)
B. All AVS messages for any of the Options A, B, or C under Clause 1.A of
this Schedule will be sent by Participant's System in accordance with
AIRIMP format and will be addressed to both SWIRI1G and HDQRI1V.
2. MAINTENANCE OF AVAILABILITY
A. The System shall display availability for flights with scheduled
departures for a period of up to 331 days.
B. For First Closing Availability (Option C under Clause 1.A of this
Schedule), the System will re-open flights on the receipt of an 'AS'
status message.
C. New flights added to the System will be displayed as open for sale
until closed by an AVS message from Participant's System.
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41093 Schedule 1- Basic Standard Services
<PAGE> 34
3. QUOTASALE
Unless otherwise specified below, sales will be limited to a maximum of four (4)
seats on any available flight/class segment. Space for a greater number of
passengers than specified for a particular class can be obtained only by a
request message to Participant.
Indicate the specific class code and applicable quota (O through 9):
e.g. 9 seats/J class
___seats/___class ___seats/___class ___seats/___class ___seats/___class
___seats/___class ___seats/___class ___seats/___class ___seats/___class
___seats/___class ___seats/___class ___seats/___class ___seats/___class
___seats/___class ___seats/___class ___seats/___class ___seats/___class
___seats/___class ___seats/___class ___seats/___class ___seats/___class
___seats/___class ___seats/___class ___seats/___class ___seats/___class
Additional options may be available (e.g., for Shared Designator Carriers and
optional display services). Quotasale choices may be changed by written notice
provided to Galileo International.
4. BASIC BOOKING SERVICE SELECTION
Basic booking service will be on the following basis (initial one):
[ ] (i) Standard Sell basis 'SS' or 'NN'
[ ] (ii) Request only 'NN'
[ ] (iii) No booking messages
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Where Participant has selected one of Options A, B, or C under Clause 1.A of
this Schedule, Participant shall select option (i) under this paragraph. Where
Participant has selected Option D under Clause 1.A of this Schedule, Participant
shall select one of options (ii) or (iii) under this paragraph. Communications
from the System to Participant's System in connection with operations under this
Clause shall be made in accordance with AIRIMP format and addressed to the
following reporting address:
(Please indicate one teletype communications address for receiving all booking
messages, e.g., HDQRMZZ).
(See Schedules 6, 7, 11 and 12 for optional selling services.)
5. CREDIT CARD AUTHORIZATION
Whenever a Galileo International Subscriber issues an accountable document with
a form of payment designated as a credit card number of a card issuer with which
Galileo International has established credit check arrangements via a
communications link, the System will automatically seek a card payment
authorization for the issuer. The System will print any payment authorization
reference received on accountable documents issued by the System and plated to
Participant.
6. USE OF BASIC STANDARD SERVICES WITH OPTIONAL SERVICES
Where Participant has selected one or more of the optional services in Schedule
6, 7, 10, 11 and/or 12, and in the event that any such optional service is
either unavailable or is not being used by a Galileo International Subscriber,
the System will offer the basic standard services as selected by Participant in
this Schedule 1.
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SCHEDULE 2
CHARGES FOR STANDARD SERVICES
This Schedule describes the charges for segments created through the use of
basic standard services provided to Participant and forms part of the Galileo
International Global Airline Distribution Agreement.
TYPE OF DIRECT FLIGHT SEGMENT CHARGE*
<TABLE>
<CAPTION>
TERRITORY 1 PER PER
- - ------------ INPUT CANCEL
--------- -----------
<S> <C> <C>
Active Confirmed Segment USD 1.195 USD 0.27
Passive Segment USD 1.00 USD 0.27
Other Segment USD 0.53 USD 0.27
</TABLE>
TERRITORY 2 PER NET PASSENGER SEGMENT
Net Passenger Segment USD 3.12
Schedule Level Participants (i.e. those Participants choosing in Schedule 1,
Option D of paragraph 1A - 'No Availability Status' - and Option iii of
paragraph 4 - 'No Booking Messages') will pay USD 1.90 per Net Passenger
Segment. Notwithstanding Article 2.B of this agreement, Schedule Level
Participants may not select any of the optional services in Schedule(s) 6, 7, 8,
9, 10, 11, 12, 13, 14, 16, 17, 18, 23, 24, 25 and 28.
*For purposes of this Schedule, Territory 1 and Territory 2 refer to the
location of the Galileo International Subscriber that performs the activity that
generates a charge. All charges are stated in U.S. Dollars (USD). These charges
do not apply to any transaction that occurs only through use of the System as an
internal airline reservations system. In addition, these charges do not apply to
transactions generated in connection with training activities conducted by
employees of Galileo International or its distributors or by agents authorised
by Galileo International to provide such training on behalf of Galileo
International. These charges do apply to any Net Passenger Segments which are
created by use of the Claim PNR, Drop Through - Limited Access and/or Ticketing
Facility service(s).
There is no charge for Open Segments ('NO' status code) and there is no charge
for Credit Card Authorisation.
- - -------------------------------------------------------------------------------
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<PAGE> 38
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- - -------------------------------------------------------------------------------
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SCHEDULE 3
TERRITORY 1 GEOGRAPHICAL LOCATIONS
This Schedule lists the geographical locations included in Territory 1 and forms
part of the Galileo International Global Airline Distribution Agreement:
American Samoa
Canada
Guam
Japan
Northern Mariana Islands
Mexico
United States of America
(including its overseas territories,
commonwealths, trust territories and protectorates)
- - --------------------------------------------------------------------------------
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<PAGE> 40
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- - --------------------------------------------------------------------------------
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<PAGE> 41
SCHEDULE 4
OPTIONAL SERVICES
This Schedule lists optional services that may be selected by Participant and
forms part of the Galileo International Global Airline Distribution Agreement.
With effect from the date of signature of this Schedule by Galileo International
and Limited, this Schedule 4 will replace any previous Schedule 4 to the Galileo
International Global Airline Distribution Agreement between Galileo
International, Limited and Participant.
For and on behalf of For and on behalf of
GALILEO INTERNATIONAL PARTNERSHIP
________________________________
(PARTICIPANT)
By _______________________ By ____________________________
Name _______________________ Name ____________________________
Title _______________________ Title ____________________________
Date _______________________ Date ____________________________
For and on behalf of
GALILEO INTERNATIONAL LIMITED
By ____________________________
Name ____________________________
Title ____________________________
Date ____________________________
Please INITIAL in the space provided all optional services in which Participant
elects to participate:
[ ] (i) Interactive Display. See Schedule 6.
[ ] (ii) Numeric Availability Status (NAVS). See Schedule 7.
[ ] (iii) Class Selection. See Schedule 8.
- - --------------------------------------------------------------------------------
(C)Copyright Galileo International Partnership 1996 Page 29
270296 Schedule 4 - Optional Services
<PAGE> 42
[ ] (iv) Point of Sale. See Schedule 9.
[ ] (v) Inside Availability. See Schedule 10.
[ ] (vi) Interactive Sell. See Schedule 11.
[ ] (vii) Positive Acknowledgement. See Schedule 12.
[ ] (viii) Seat Assignment. See Schedule 13.
[ ] (ix) Boarding Pass. See Schedule 14.(This requires selection of (viii)
as well.)
[ ] (x) Servicing Facility via Airline Servicing Terminal. See Schedule
15.
[ ] (xi) Servicing Facility via Borrow Booking File. See Schedule 16.
[ ] (xii) Claim PNR. See Schedule 17. (This requires selection of (vi) as
well)
[ ] (xiii) Complete Booking Record. See Schedule 18.
[ ] (xiv) Booking Information. See Schedule 19. (Please initial desired
Options below.)
a [ ] Billing Information Data Transfer ("BIDT")
b [ ] Marketing Information Data Transfer-U.S. ("MIDT-US")
c [ ] Marketing Information Data Transfer-Rest of the World
("MIDT-ROW")
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(Please initial one option:)
[ ] Territory 1
[ ] Territory 2
[ ] Territories 1 and 2
[ ] (xv) Ticketing Information. See Schedule 20. (Please initial below.)
a [ ] Sales Interface Record Data-US ("SIR-US")
b [ ] Sales Interface Record Data-Rest of the World ("SIR-ROW")
(Please initial one Option:
[ ] Territory 1
[ ] Territory 2
[ ] Territories 1 and 2
[ ] (xvi) Participant Briefing. See Schedule 21. (Please Initial desired
Option(s) below).
[ ] Participant Briefing Pages for display in Territory 1.
[ ] Participant Briefing Pages for display in Territory 2.
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<PAGE> 44
[ ] (xvii) GlobalFares. See Schedule 22.(Please initial desired Options below.)
a [ ] On-Line Fares Update. (Please initial one below)
[ ] 100 free Fare Updates per day, plus charge for each
Fare Update over 100.
[ ] Charge per Fare Update, plus charge per hour or
portion thereof required for input.
b [ ] Direct Batch Fares Update.
[ ] (xviii) Drop Through - Limited Access. See Schedule 23.
[ ] (xix) Drop Through - Full Access. See Schedule 24.
[ ] (xx) Ticketing Facility. See Schedule 25.
[ ] (xxi) Marriage Logic. See Schedule 28.
See Article 9 of this Agreement for provisions concerning duration and
termination of optional services.
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SCHEDULE 5
CHARGES FOR OPTIONAL SERVICES
This Schedule describes the charges for optional services offered to Participant
and forms part of the Galileo International Global Airline Distribution
Agreement.
PART I - CHARGES THAT VARY BY TERRITORY
---------------------------------------
<TABLE>
TERRITORY 1* TERRITORY 2*
------------ ------------
<S> <C> <C>
1. Interactive Display USD 0.2625 premium 10% premium over Net
over Input charge for Passenger Segment charge.
each Active Confirmed Segment
using this
service; no additional charge
for this service where
Interactive Sell is used.
2. Numeric Availability Status (NAVS)N/A 5% premium over Net
Passenger Segment charge.
3. Class Selection N/A 5% premium over Net
Passenger Segment charge.
4. Point of Sale N/A 5% premium over Net
Passenger Segment charge.
5a Inside Availability - less USD 0.0500 premium USD 0.12 premium over
than 50% polling over Input charge for charge for each Net
each Active Confirmed Segment Passenger Segment using
using Interactive Sell.
Interactive Sell.
</TABLE>
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<TABLE>
<S> <C> <C>
5b. Inside Availability - 50% USD 0.0800 premium USD 0.18 premium over
or more polling over Input charge for charge for each Net
each Active Confirmed Segment Passenger Segment using
using Interactive Sell; no
Interactive Sell. separate charge for NAVS,
Class Selection and Point
of Sale.
5c. Inside Availability with Marriage USD 0.1000 premium USD 0.23 premium over
Logic. over Input charge for charge for each Net
each Active Confirmed Segment Passenger Segment using
using Interactive Sell; no
Interactive Sell. separate charge for NAVS,
Class Selection and Point
of Sale.
6. Interactive Sell. USD 0.2625 premium 10% premium over each Net
over Input charge for Passenger Segment charge.
each Active Confirmed
Segment using this
service.
7. Positive Acknowledgement USD 0.15 premium 10% premium over Net
over Input charge for Passenger Segment charge;
each Active Confirmed Segment no separate charge for this
using this service where Interactive
service; no separate Sell or used.
charge for this service where
Interactive
Display or Interactive
Sell is used.
8. Servicing Facility via USD 25.00 per terminal USD 35.00 per terminal
Airline Servicing identification address, per identification address, per
Terminal (AST) month. month.
9. Servicing Facility via Borrow N/A No separate charge.
Booking File
</TABLE>
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<TABLE>
<S> <C> <C>
10a. Marketing Information USD 10,000.00 per N/A
Data Transfer-US month.
10b. Marketing Information USD 5,000.00 per USD 2,075.00 per tape, per
Data Transfer-Rest of month. month.
the World
11a. Sales Interface Record USD 10,000.00 per N/A
Data - US month.
11b. Sales Interface Record USD 5,000.00 per USD 260.00 per tape.
Data - Rest of World month: no separate
charge if Participant subscribes
to SIR
Data - US.
12. Participant Briefing USD 2,500.00 per Set-up charge - up to ten
month for fifty (50) (10) pages (of up to ninety
topic pages. nine (99) lines each)
free. Thereafter USD 21.00
per page per month or part
month.
13. Drop Through - Limited Access N/A Schedule 2 segment charges
will apply.
14. Drop Through - Full N/A USD 3.24 per Net Passenger
Access Segment.
15. Ticketing Facility N/A Schedule 2 segment charges
will apply.
16. Marriage Logic USD 0.0800 premium USD 0.18 premium over Net
over Input charge for Passenger Segment charge.
each Active Confirmed Segment
using Interactive Sell.
</TABLE>
* For purposes of this Schedule, Territory 1 and Territory 2 refer to the
location of the Galileo International Subscriber that performs the activity
that generates the charge. All charges are stated in U.S. dollars (USD). All
Territory 2 premium charges are cumulative, except where otherwise stated.
The charges listed in this Schedule do not apply to any activity that occurs
only through use of the System as an internal airline reservations
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system. In addition, the charges do not apply to transactions generated in
connection with training activities conducted by employees of Galileo
International or its distributors or by agents authorised by Galileo
International to provide such training on behalf of Galileo International.
Territory 2 premiums listed under item 1 above are only charged where that
functionality is used as part of the booking process. Territory 2 premiums
listed under items 2, 3, 4, 5, 6, 7 and 16 above apply in respect of all Net
Passenger Segments, except for Passive Segments, which are not billed in
accordance with Schedule 26 and except for Open segments ('NO' status code),
for which no charge is made.
PART II - OTHER CHARGES
-----------------------
<TABLE>
<S> <C>
1. Seat Assignment No separate charge.
2. Boarding Pass No separate charge.
3. Claim PNR Schedule 2 charge (including the premiums
listed in item 6 of Part I of this Schedule)
will apply.
4. Complete Booking Record (CBR) USD 0.014 per copy provided. No separate
charge where Interactive Sell is used.
5a. Billing Information Data Transfer USD 250.00 per month.
6a. On-Line Fares Update 100 free Fare Updates per day, plus
USD 50.00 for each Fare Update over 100, OR
USD 0.07 per Fare Update, plus USD 46.00
per hour or portion thereof required for input.
6b. Direct Batch Fares Update USD 15,000.00 for implementation, plus USD
1,500.00 per month.
</TABLE>
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SCHEDULE 6
INTERACTIVE DISPLAY
This Schedule describes the Interactive Display service offered in Schedule 4
and forms part of the Galileo International Global Airline Distribution
Agreement.
This service is marketed in Territory 1 as Inside Link - Display Option and in
Territory 2 as Carrier Specific Display.
1. GENERAL
Interactive Display refers to the functionality whereby Galileo
International, via a computer-to-computer display capability between the
System and Participant's System, enables Galileo International Subscribers,
upon request, to view the flight specific availability, flight schedules and
related information of Participant (including but not limited to information
concerning availability, fares, fare rules, flights, and seat maps) and to
sell guaranteed bookings from Participant's display, or from data returned
by Participant's System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will optionally provide to Participant's System, information to
facilitate the identification of the Galileo International Subscriber when
this service is used.
B. Upon request by a Galileo International Subscriber through a primary or
secondary 'follow-up' entry, the System will interrogate Participant's
System in order that the Subscriber may view certain information stored in
Participant's System.
C. Galileo International may at its option cause the System to reformat the
data obtained from Participant's System into a standard Galileo
International output format. Where reformatting is done, the System will
preserve the flight selections, routings, sequence, and header information
as supplied by Participant's System. The numeric or other status data
supplied by Participant's System for Participant's flights will also be
preserved, except if it is higher than the Quotasale authorised by
Participant, where it will be reduced by the System to the Quotasale level
in the displayed or overlaid availability. Availability status and booking
information for all other carriers' flights appearing on the Interactive
Displays received from Participant's System will be determined from data
contained in the System. It will not be possible for a Participant to return
other carriers flights in a Flight Specific Availability Request.
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D. Where a Direct Flight Segment is made from an availability display
containing data taken from Participant's System via the direct
communications link, the System will send to Participant's System a message
with the "LK" action/advice code for a guaranteed booking, unless a
different action/advice code is required in connection with another optional
service selected by Participant under this Agreement.
E. Where a Direct Flight Segment is made in Territory 2 without specific
reference to an availability display and Participant has not selected one of
the optional booking services described in Schedule 11 or 12, the System
will interrogate Participant's System and, subject to seats being available,
will send an "LK" or other applicable message to Participant's System as if
the sell had been made with reference to an availability display received
from Participant's System.
3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will ensure that Participant's System is able to accept "LK"
messages from the System in connection with any bookings made in accordance
with this Schedule, unless a different action/advice code is required in
connection with another optional service selected by Participant under this
Agreement.
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SCHEDULE 7
NUMERIC AVAILABILITY STATUS (NAVS)
This Schedule describes the Numeric Availability Status service offered in
Schedule 4 and forms part of the Galileo International Global Airline
Distribution Agreement. Available only in Territory 2; may be extended to
Territory 1 at a later date.
1. GENERAL
NAVS refers to the functionality whereby Galileo International enables
Participant to display actual numeric availability status for Participant's
flights within primary and subsequent screen displays in the System, through
transmission of Numeric AVS (NAVS) messages from Participant's System to the
System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Galileo International and Participant will agree on the format of Numeric
AVS Messages to be sent from Participant's System to the System.
B. The System will store the content of Numeric AVS Messages sent by
Participant's System in the availability status tables.
C. The System will automatically display to Galileo International Subscribers
in the primary availability display or in any subsequent Interactive Display
returned by the system of any other Participant, a numeric value equal to
the Quotasale authorised by Participant as stated in Clause 3 of Schedule 1,
or such lower value as may be stored in the System availability status
tables as a result of Numeric AVS Messages received from Participant's
System.
D. Where Participant has also selected the Interactive Display service
described in Schedule 6 and a Galileo International Subscriber makes a
request for availability via the direct communications link to Participant's
System, the information returned from Participant's System will take
precedence over any data stored in the System availability status tables
subject to the Quotasale authorised by Participant.
E. The System will process any standard AVS messages initiated by Participant's
System for situations that cannot be reflected as a numeric value.
F. Where Galileo International Subscribers sell from an availability display
containing Numeric AVS data, the System will send to Participant's System a
message with the "LK" action/advice code unless a different action/advice
code is required in connection with another optional service selected by
Participant under this Agreement.
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<PAGE> 52
3. RESPONSIBILITIES OF PARTICIPANT
A. Where Participant selects the Numeric AVS Message Procedure for displaying
last seat availability, Participant will develop a capability within
Participant's System to send NAVS Messages to the System according to a
format agreed on by Galileo International and Participant.
B. Participant will ensure that Participant's System is able to accept "LK"
messages from the System in connection with any bookings made in accordance
with this Schedule, unless a different action/advice code is required in
connection with another optional service selected by Participant under this
Agreement.
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SCHEDULE 8
CLASS SELECTION
This Schedule describes the Class Selection service offered in Schedule 4 and
forms part of the Galileo International Global Airline Distribution Agreement.
Available only for Territory 2; may be extended to Territory 1 later.
1. GENERAL
Class Selection refers to the functionality whereby Galileo International makes
available to Participant a Class Selection table within the System to enable
Participant to determine the locations where its products, as identified by
booking class, may be sold through the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Upon receipt of an availability inquiry from a Galileo International
Subscriber, the System will interrogate both the availability status table
contained in the System and a Class Selection table provided for Participant
by Galileo International.
B. By comparison of the location of the Galileo International Subscriber with
the data contained in Participant's Class Selection table, the System will
cause either all or certain of the booking classes stored in the System
database for Participant's flights to be displayed to the Galileo
International Subscriber.
C. The data stored in Participant's Class Selection table will be under the
control of Participant and may, at Participant's option, take precedence
over any data stored in the System or returned to the System via a direct
link from Participant's System.
D. Notwithstanding Clause 2.C of this Schedule, and at its sole discretion,
Galileo International may, at the request of and the expense of Participant,
undertake the creation and/or amendment of Participant's Class Selection
table on such terms and conditions as may be agreed between Participant and
Galileo International.
E. Galileo International will make available to Participant documentation on
the Class Selection functionality.
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<PAGE> 56
3. RESPONSIBILITIES OF PARTICIPANT
A. It will be the sole responsibility of Participant to create, amend and
maintain the data stored in Participant's Class Selection table.
B. Participant will be responsible for ensuring that its employees who use the
Class Selection service have been adequately trained in use of that
functionality.
C. Participant accepts that Class Selection is offered to assist Participant in
obtaining the optimum financial return from the sale of its products or
services offered for sale in the System and that the application of this
functionality is the sole responsibility of Participant.
D. Where, in the reasonable opinion of Galileo International, Participant is
using Class Selection in a manner that operates to the disadvantage of
Galileo International Subscribers in any geographical area, Galileo
International reserves the right to determine whether the operation of Class
Selection for such geographical area should be continued.
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SCHEDULE 9
POINT OF SALE
This Schedule describes the Point of Sale service offered in Schedule 4 and
forms part of the Galileo International Global Airline Distribution Agreement.
Available only for Territory 2; may be extended to Territory 1 later.
1. GENERAL
Point of Sale refers to the functionality whereby Galileo International makes
available to Participant a Point of Sale table within the System to enable
Participant to establish a series of rules by which the availability status of
its products shown on the primary Galileo International availability displays
can be controlled according to a number of factors, which shall include but not
be limited to the geographical location, region or individual Galileo
International Subscriber requesting availability for Participant's products.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Galileo International will prescribe an AVS message format that will enable
Participant to cause the System to refer to Participant's Point of Sale
table for Participant's flights and to apply the rules contained therein for
the availability status of those flights prior to their inclusion in the
primary availability displays of the System.
B. The rules stored in the Point of Sale table will be under the control of
Participant and, when invoked through the procedure described in Clause 2.A
of this Schedule, will take precedence over any data stored in the System.
C. Galileo International will make available to Participant documentation on
the Point of Sale functionality.
3. RESPONSIBILITIES OF PARTICIPANT
A. It will be the sole responsibility of Participant to create, amend and
maintain the rules stored in Participant's Point of Sale table.
B. Participant will be responsible for ensuring that its employees who use the
Point of Sale service have been adequately trained in use of that
functionality.
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C. Participant accepts that Point of Sale is offered to assist Participant in
obtaining the optimum financial return from the sale of its products or
services offered for sale in the System and that the application of this
functionality is the sole responsibility of Participant.
D. Where, in the reasonable opinion of Galileo International, Participant is
using Point of Sale in a manner that operates to the disadvantage of Galileo
International Subscribers in any geographical area, Galileo International
reserves the right to determine whether the operation of Participant's Point
of Sale table for such geographical area should be continued.
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SCHEDULE 10
INSIDE AVAILABILITY
This Schedule describes the Inside Availability service offered in Schedule and
forms part of the Galileo International Global Airline Distribution Agreement.
1. GENERAL
Inside Availability refers to the functionality whereby, via a
computer-to-computer capability between the System and Participant's System,
Galileo International enables Participant to display real time flight
availability information directly from Participant's System within availability
displays generated by the System, where flights of the Participant appear in the
journey requested by the Galileo International Subscriber.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Subject to Clause 2J of this Schedule and at the request of Participant, the
System will interrogate Participant's System for availability for one or
more of Participant's flights shown in primary availability displays of the
System.
B. The System will send to Participant's System information to facilitate the
identification of each Galileo International Subscriber seeking an
availability that involves one or more of Participant's flights together
with the city pair requested by the Galileo International Subscriber.
C. The System will display availability data returned from Participant's System
in preference to the data stored in the System availability status tables,
provided that Participant returns this information to the System within an
agreed period of time from the point at which the initial interrogation
request leaves the System.
D. If Participant's System does not return an availability in response to the
interrogation of Participant's System within an agreed period of time, the
System will default to the availability stored for Participant's flights
within the System availability status tables.
E. Where Participant has instructed the System not to interrogate Participant's
System for particular flights and/or dates and/or segments, the System will
display availability for such flights/dates/segments according to the data
stored within the System availability status tables.
F. Galileo International will provide to Participant documentation regarding
the message formats and operational requirements of Inside Availability.
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<PAGE> 60
G. Galileo International reserves the right to reduce the number of times the
System interrogates Participant's System where this is, in the reasonable
opinion of Galileo International, necessary in order to protect the System
from excessive transaction activity and/or to maintain the reliability of
operation of the System for Galileo International Subscribers.
H. Galileo International will maintain an operational performance level of not
less than ninety-eight percent (98%) in any calendar month for the Inside
Availability application. This level is the total number of interrogations
initiated by the Inside Availability application divided by the total number
of interrogations that should have been initiated, expressed as a
percentage. If in any given month the operational performance level falls
below ninety-eight percent (98%), Galileo International will credit
Participant with an amount equal to the charges made for Inside Availability
within the month multiplied by the difference between the ninety-eight
percent (98%) operational performance level and the actual operational
performance level (rounded to the nearest 0.01%). Such credit will be
applied to Participant's invoice for the following invoice month. The final
determination of the operational performance level and the calculation of
the credit will be based solely on the records of Galileo International. Any
warranties and remedies set forth in this paragraph are exclusive and
Galileo International makes no other warranty express or implied with
respect to Inside Availability, including without limitation any implied
warranty of merchantability or fitness for a particular purpose.
I. The credit provisions of Clause 2.H of this Schedule will not apply in the
event of a total System outage, such as where there is no booking activity
possible for part of any month.
J. The System will not invoke Inside Availability where the interrogation of
Participant's System results from Galileo International Subscribers using
the Interactive Display service described in Schedule 6 of this Agreement.
Similarly, where flights of Participant appear in the Interactive Display
availability display offered to Galileo International Subscribers by any
other Participant, the System will not invoke Inside Availability for such
flights but will display availability for Participant's flights according to
the data stored within the System.
3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will develop software for use within Participant's System in
order that Participant's System can comply with the requirements and message
formats detailed in the documentation referred to in Clause 2.F of this
Schedule.
B. If less than 100% of Participant's flights are to be polled, Participant
will notify Galileo International, using the message formats described in
the documentation referred to in Clause 2.F of this Schedule, of those
flights and/or dates and/or segments for which it seeks to use Inside
Availability.
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SCHEDULE 11
INTERACTIVE SELL
This Schedule describes the Interactive Sell service offered in Schedule 4 and
forms part of the Galileo International Global Airline Distribution Agreement.
This service is marketed in Territory 1 as Inside Link - Last Seat and in
Territory 2 as Secured Booking.
1. GENERAL
Interactive Sell refers to the functionality whereby, when a sell transaction is
being made for Participant's services using the System, a real time query of
Participant's inventory is simultaneously transmitted by the System via a
computer-to-computer communications capability between the System and
Participant's System, with immediate confirmation or response required from
Participant's System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will provide to Participant's System, at Participant's
option, information to facilitate the identification of the Galileo
International Subscriber when this service is used.
B. When a flight of Participant is sold by a Galileo International
Subscriber, the System will interrogate Participant's System at the
moment of sell to hold space temporarily on a specific
flight/class/date of Participant.
C. Upon completion of the Booking File, the System will send a message
containing a unique action/advice code and further data to
Participant's System in order to complete creation of a PNR for which
space has been temporarily held, using a unique action/advice code for
all such sales.
3. RESPONSIBILITIES OF PARTICIPANT
A. Immediately following a sell request, Participant's System will send to
the System either a confirmation of any space that has been temporarily
reserved in Participant's System or another appropriate response.
B. Upon completion of the PNR as described in Clause 2.C of this Schedule,
Participant's System will supply to the System a confirmation in the
form of its Record Locator in a format determined by Galileo
International.
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SCHEDULE 12
POSITIVE ACKNOWLEDGEMENT
This Schedule describes the Positive Acknowledgement service offered in Schedule
4 and forms part of the Galileo International Global Airline Distribution
Agreement.
This service is marketed in Territory 1 as Positive Acknowledgement and in
Territory 2 as Super Guaranteed Booking.
1. GENERAL
Positive Acknowledgement refers to the functionality by which, upon completion
of a Booking File, Participant's System will return its Record Locator to the
System in order to confirm that a booking or change to a booking has been
received and recorded in Participant's System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will, upon completion of a new or amended Booking File
containing Participant's flights, send a message to Participant's
System using an action/advice code agreed upon by Participant and
Galileo International.
B. Where, after a pre-determined period, the System still has not received
the Record Locator response from Participant's System, the System may
send an automatic message to Participant's System requesting the Record
Locator.
3. RESPONSIBILITIES OF PARTICIPANT
A. Upon completion of a new or amended PNR, resulting from a message
received from the System, Participant's System will transmit to the
System a confirmation in the form of Participant's Record Locator in a
format determined by Galileo International.
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SCHEDULE 13
SEAT ASSIGNMENT
This Schedule describes the Seat Assignment service offered in Schedule 4 and
forms part of the Galileo International Global Airline Distribution Agreement.
1. GENERAL
Seat Assignment refers to the functionality whereby Galileo International
enables a Galileo International Subscriber to request the reservation of a
particular seat(s) on a flight operated by Participant or its Shared Designator
Carrier(s). Participant may select between two methods of providing Seat
Assignment:
(a) through real time query of Participant's System via a computer-to-computer
capability between the System and Participant's System ("Interactive Seat
Assignment"); or
(b) through a special services request via the AIRIMP teletype SSRSEAT procedure
on completion of a Booking File ("SSRSEAT").
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Interactive Seat Assignment
(i) The System will provide to Participant's System, at Participant's
option, information to facilitate the identification of the Galileo
International Subscriber when this service is used.
(ii) Where a confirmed flight operated by Participant is held in a Booking
File, Galileo International will enable a Galileo International
Subscriber to generate a real-time request to Participant's System for
a particular seat(s) or seat characteristic for that flight.
(iii) Upon request from a Galileo International Subscriber, the System will
interrogate Participant's System to seek a particular seat(s) or seat
characteristic on a specific flight.
(iv) Upon completion of the Booking File, the System will send a message to
Participant's System in order to confirm the seat reservation.
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B. SSRSEAT
(i) Where a confirmed flight operated by Participant is held in a Booking
File, Galileo International will enable a Galileo International
Subscriber to generate a request to Participant's System for a
particular seat(s) or seat characteristic for that flight via AIRIMP
teletype SSRSEAT procedure.
(ii) The System will receive, store, and make available to the requesting
Galileo International Subscriber any valid response from Participant's
System to an SSRSEAT request.
3. RESPONSIBILITIES OF PARTICIPANT
A. Following receipt of a seat request made through Interactive Seat
Assignment, Participant's System will send to the System in real time a
confirmation that the seat has been temporarily reserved and assigned in
Participant's System or other appropriate response.
B. Participant's System will respond to a seat reservation request with a
specific seat number unless Participant's System is unable to allocate a
seat number, in which case a generic seat characteristic confirmation can be
sent as a default.
C. Subject to Clause 3.D of this Schedule, where Participant's System has
assigned a seat pursuant to this Schedule, Participant will use its best
efforts to honour that assignment, unless such seat has been conditionally
assigned and Participant so indicated prior to or at the time of assignment.
D. Where, having performed Seat Assignment for one of its flights, Participant
changes the aircraft or the configuration of the aircraft to be used for
such a flight, Participant will use its best efforts to inform Galileo
International Subscribers of any changes made to any seat assignments.
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SCHEDULE 14
BOARDING PASS
This Schedule describes the Boarding Pass service offered in Schedule 4 and
forms part of the Galileo International Global Airline Distribution Agreement.
Available only in Territory 1; may be offered in Territory 2 at a later date.
1. GENERAL
Boarding Pass refers to the functionality whereby Galileo International enables
a Galileo International Subscriber that has requested the reservation of a
particular seat(s) for a confirmed flight(s) of Participant to issue a boarding
pass through the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Where a confirmed flight(s) operated by Participant or one of its Shared
Designator Carriers is held in a Booking File, and where a seat
reservation(s) has been made for such flight(s), and subject to appropriate
authorisation from Participant, the System will enable a Galileo
International Subscriber to issue boarding pass document(s) for use by
passengers seeking to travel on the flight(s) of Participant or its Shared
Designator Carrier.
B. Where a boarding pass document has been issued through the System in
accordance with Clause 2.A of this Schedule, the System will generate a
message to Participant's System in order to notify Participant's System that
such boarding pass document has been issued.
3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will accept, and will use reasonable efforts to ensure that its
Shared Designator Carrier accepts, any boarding pass document issued through
the System under this Schedule, provided the seat to which the boarding pass
refers is still assigned to the relevant passenger in Participant's System
at the time the document is presented.
B. Participant will select the Seat Assignment service on Schedule 4.
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SCHEDULE 15
SERVICING FACILITY VIA AIRLINE SERVICING TERMINAL
This Schedule describes the Servicing Facility via Airline Servicing Terminal
service offered in Schedule 4 and forms part of the Galileo International Global
Airline Distribution Agreement.
1. GENERAL
Servicing Facility via Airline Servicing Terminal refers to the functionality
whereby Galileo International makes available to Participant access to the
System, via a terminal that Galileo International has authorised for such use,
for the purposes of servicing Requests and checking certain quality aspects of
the service provided by the System.
2. DUTIES OF GALILEO INTERNATIONAL
A. Galileo International will provide to Participant, and replace as Galileo
International considers necessary, a security sign-on code or codes allowing
access to the System and appropriate documentation.
B. The System will enable a Galileo International Subscriber to queue Requests
for access by Participant through the Equipment.
C. The System will enable Participant to queue any response to a Request to the
requesting Galileo International Subscriber through the Equipment.
D. Galileo International will provide Participant with the ability to view
displays in the System that are available to Galileo International
Subscribers for the purpose of checking certain quality aspects of the
service provided by the System, subject to the requirement that any third
party Equipment be certified by Galileo International.
E. At Participant's request, Galileo International will sell or rent to
Participant Equipment needed for the purposes of this Schedule in accordance
with a separate agreement between Galileo International and Participant.
3. DUTIES OF PARTICIPANT
A. Participant will be responsible for ensuring that those employees who use
the Servicing Facility via Airline Servicing Terminal service have been
adequately trained in use of the functionality.
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B. Participant will not allow any equipment or software to be connected to or
used with the Equipment where such equipment or software may adversely
affect compatibility of the Equipment with the System.
C. Participant will ensure that the Equipment meets any requirements that
Galileo International communicates to Participant from time to time and
acknowledges that Galileo International has the right to control the level
of transaction activity processed by the System for that Equipment if
Galileo International in its reasonable opinion believes such actions are
necessary to protect the integrity of the System.
D. Participant will not use any software that automatically makes entries in
the System without the prior written consent of Galileo International.
E. Participant at all times will keep confidential the security sign-on code(s)
supplied to Participant by Galileo International and will not disclose any
such code to any unauthorised Person.
F. Participant agrees to take action in response to any Request queued for
Participant within a reasonable time of the Request being made in the
System, which will normally be within eight (8) business hours but within
four (4) business hours if the Request is marked "urgent." For these
purposes a "business hour" will be any hour between 09:00 hours - 17:00
hours local time Monday to Friday excluding public holidays in the area(s)
where the Equipment is located.
G. Participant agrees that any Requests queued for Participant by Galileo
International Subscribers will not be treated less favourably than requests
queued for Participant by subscribers in any other CRS, including
Participant's CRS.
H. Participant agrees to pay for all costs and charges associated with the
Equipment and communications relating to connection to the System under this
Schedule, including but not limited to charges for installation, connection,
line rental, usage, and deinstallation.
I. Participant will use the Servicing Facility via Airline Servicing Terminal
service, including any data obtained through use of the service, only for
the purposes described in this Schedule. Among other things, Participant
will not make any copy of data obtained through use of the service except
for the purposes described in this Schedule.
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SCHEDULE 16
SERVICING FACILITY VIA BORROW BOOKING FILE
This Schedule describes the Servicing Facility via Borrow Booking File service
offered in Schedule 4 and forms part of the Galileo International Global Airline
Distribution Agreement.
Available only in Territory 2; may be offered in Territory 1 at a later date
1. GENERAL
Servicing Facility via Borrow Booking File refers to the functionality whereby
Galileo International permits Participant, via a computer-to-computer
communications capability between the System and Participant's System, for the
purpose of servicing Requests made by Galileo International Subscribers, to
obtain certain information stored in a Booking File that contains a segment
booked on the services of Participant and to copy this information into the
existing PNR.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Subject to Participant using either Interactive Sell or Positive
Acknowledgement, where a Galileo International Subscriber has made a
Request, Galileo International will enable Participant's System to access
the System for the purpose of obtaining certain data resident in a Booking
File.
B. After a Request is stored in a Booking File, the System will send a
notification message to Participant's System in a format determined by
Galileo International.
C. Upon receipt of a request from Participant's System, the System will,
subject to security constraints, send to Participant's System the
appropriate information resident in the Booking File to enable Participant
to take action in response to the Request.
D. Galileo International will make available to Participant documentation
outlining the message formats and procedures to be used under this Schedule.
E. Upon receipt from Participant's System of a response to a Request made by a
Galileo International Subscriber, the System will relay the response to the
Galileo International Subscriber location that initiated the Request.
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F. Subject to the agreement of a particular Galileo International Subscriber,
Galileo International will permit Participant to obtain certain information
stored in a Booking File(s) created by that Galileo International
Subscriber, provided that Booking File contains at least one segment booked
on the services of Participant, even if no Request has been made.
3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will develop software that will enable Participant's System to
comply with the requirements and message formats described in the
documentation supplied to Participant by Galileo International under Clause
2.D of this Schedule.
B. Participant will respond to any Request within a reasonable time of receipt
of notification from the System, which will normally be within eight (8)
business hours, but within four (4) business hours if the Request is marked
"urgent." For these purposes, a "business hour", except where otherwise
agreed, will be deemed to be any hour between 09:00 hours - 17:00 hours
local time Monday to Friday excluding public holidays in the area(s) where
Participant uses the Servicing Facility via Borrow Booking File.
C. Any Requests generated by Galileo International Subscribers will be treated
no less favourably than requests for servicing generated by subscribers of
any other CRS, including Participant's CRS.
D. Participant will use the Servicing Facility via Borrow Booking File service,
including any data obtained through use of the service, only for the
purposes described in this Schedule. Among other things, Participant will
not make any copy of data obtained through use of this service except for
the purposes described in this Schedule.
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SCHEDULE 17
CLAIM PNR
This Schedule describes the Claim PNR service offered in Schedule 4 and forms
part of the Galileo International Global Airline Distribution Agreement.
1. GENERAL
Claim PNR refers to the functionality whereby Galileo International enables a
Galileo International Subscriber, via a computer-to-computer communications
capability between the System and Participant's System, to retrieve a PNR
created in Participant's System and transmit the data in that PNR to the System,
so that a Booking File is created and control is transferred from Participant's
System to the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will provide to Participant's System, at Participant's option,
information to facilitate the identification of the Galileo International
Subscriber seeking to perform Claim PNR.
B. The System will provide to Participant's System information to facilitate
the identification of the PNR resident in Participant's System that is the
subject of the Claim PNR request, in accordance with the option chosen by
Participant pursuant to Clause 3.A of this Schedule.
C. Galileo International will provide to Participant documentation regarding
the message formats and mandatory and optional data items that are to be
used for the Claim PNR service.
D. After each successful Claim PNR, the System will transmit an NRL ("New
Record Locator") message to Participant's System and to the system of any
other Participating Carrier whose segments form part of the Claim PNR.
E. Where the PNR requested by a Galileo International Subscriber contains
segments booked on airlines that are not Participating Carriers, the System
will, as part of the Claim PNR process, alter the status of the segments
involving such airlines to the appropriate status in the System, such that
no messages will be sent to such airlines.
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3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will be solely responsible for the access to and transfer of
PNRs resident in Participant's System. Participant will notify Galileo
International of the method by which Galileo International Subscribers will
be permitted to access PNRs resident in Participant's System, i.e. (i)
Record Locator assigned to the PNR by Participant's System; and/or (ii)
flight number, date and passenger name.
In the case of option (ii), where there exists more than one PNR within
Participant's System that matches the information received from the System,
Participant will send the System a name list in order that the Galileo
International Subscriber may select the individual PNR that is to be the
subject of the Claim PNR service.
B. Participant will be solely responsible for determining which PNRs will be
subject to the Claim PNR service and making any changes to Participant's
System that are necessary to implement such determination.
C. Where Participant has permitted a Galileo International Subscriber to access
a PNR for the purpose of the Claim PNR service, upon receipt of the
appropriate message from the System, Participant's System will transmit the
appropriate data in the PNR to the System.
D. Where a PNR stored in Participant's System has been subjected to the Claim
PNR service, Participant will relinquish control of the PNR to the System
and will forward to the System any messages relating to such PNR that are
received by Participant's System.
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SCHEDULE 18
COMPLETE BOOKING RECORD
This Schedule describes the Complete Booking Record service offered in Schedule
4 and forms part of the Galileo International Global Airline Distribution
Agreement. Available only for Territory 2; may be extended to Territory 1 later.
1. GENERAL
Complete Booking Record refers to the functionality whereby Galileo
International makes available to Participant certain elements of data stored in
a Booking File that are directly related to an air journey involving one or more
of Participant's flights. This data will be in addition to the data supplied to
Participant in the standard AIRIMP message transmitted by the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. At Participant's option, upon creation of a Booking File that contains a
Direct Flight Segment(s) booked on Participant, the System will transmit to
Participant's System all the following data elements, provided they reside
in the Booking File.
- Galileo International Booking File reference
- Passenger name(s)
- All airline segments (in date order)
- Auxiliary segments requiring action by the addressee (in date order)
- Contact data (first two contact fields)
- Ticketing time limit information
- Any relevant supplementary information, e.g. OSI, SSR
B. At Participant's option, when a booking made in the System is initially
ticketed or subsequently is re-ticketed through the System, the System will
transmit to Participant's System the following data elements, in addition to
those listed in Clause 2.A of this Schedule, provided they reside in the
Booking File.
- Ticket Control Number, as generated by the System.
- Fares data as it will appear on the face of the ticket in linear format.
- Current itinerary containing all action/advice codes.
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C. The System will continue to provide Complete Booking Records regarding the
aforementioned data elements only during such time as Participant has a
Direct Flight Segment that is either in the live itinerary or in the flown
portion of the Booking File.
3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will notify Galileo International whether it selects the
Complete Booking Records outlined in Clauses 2.A and/or 2.B of this
Schedule.
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SCHEDULE 19
BOOKING INFORMATION
This Schedule describes the Booking Information services offered in Schedule 4
and forms part of the Galileo International Global Airline Distribution
Agreement.
1. GENERAL
Booking Information refers to the functionality whereby Galileo International
provides, at Participant's option, various collections of data relating to
booking activity within the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Galileo International will, at the request of Participant, provide to
Participant documentation regarding the data elements provided in, and
the formats used for, some or all of the products described in this
Schedule.
B. Where Participant has chosen the option called Billing Information Data
Transfer ("BIDT"), Galileo International will provide to Participant on
a monthly basis data that relate only to those transactions made in the
System by Galileo International Subscribers for Direct Flight Segments
billable to Participant.
C. Where Participant has United States of America citizenship and has
chosen the option called Marketing Information Data Transfer - US
("MIDT-US"), Galileo International will provide to Participant data
that relate to those transactions made in the System by Galileo
International Subscribers in Territory 1 for transportation wholly
within the United States of America and its possessions, to the extent
permitted by applicable law and regulation.
D. Where Participant has chosen the option called Marketing Information
Data Transfer - Rest of the World ("MIDT-ROW"), Galileo International
will provide to Participant data that relate to those transactions made
in the System by Galileo International Subscribers for transportation
either wholly or partially outside the United States of America and its
possessions, to the extent permitted by applicable law and regulation.
E. Where Participant has chosen MIDT-ROW, Galileo International will
offer, to the extent permitted by applicable law and regulation, the
following options:
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(i) transactions made in the System by Galileo International
Subscribers located in Territory 1; or
(ii) transactions made in the System by Galileo International
Subscribers located in Territory 2; or
(iii) transactions made in the System by Galileo International
Subscribers located in both Territory 1 and Territory 2.
Galileo International will offer each of these options on a
monthly basis or at such other frequency as may be agreed from
time to time between Galileo International and Participant.
F. At Participant's option, Galileo International will supply BIDT or MIDT
by (i) magnetic tape(s), either in reel or 3480 cartridge format; or
(ii) such other method as may be agreed upon by Galileo International
and Participant.
G. Where Participant has selected BIDT or MIDT on a monthly basis, Galileo
International will attempt to effect the delivery of the data within
fourteen (14) days after the end of each month. Should delivery be
delayed for any reason whatsoever, Galileo International's sole
obligation will be to use reasonable efforts to effect delivery within
a reasonable time.
H. If any delivery of data described in this Schedule is not in the format
or does not contain the elements of data referred to in the
documentation described in Clause 2.A of this Schedule, Galileo
International's sole obligation will be to use reasonable efforts to
arrange another delivery of the same data in the correct format or
containing the correct data elements.
3. RESPONSIBILITIES OF PARTICIPANT
A. For any of the services covered by this Schedule, Participant will be
entitled to use the services of a third party for the purpose only of
processing such data on behalf of Participant and only on the condition
that the third party agrees to keep such data confidential. Participant
may also disclose to its Shared Designator Carrier data pertaining to
Participant's code share flights involving that Shared Designator
Carrier. In addition, Participant may disclose specific data to a
Galileo International Subscriber that generated the transaction
associated with that data. The tapes or other medium provided under
this Schedule and the information contained therein may not be resold
or otherwise disclosed to any other third party without the prior
written consent of Galileo International.
B. In selecting any service covered by this Schedule, if Participant does
not have United States of America citizenship, Participant represents
and warrants that it satisfies the applicable U.S. Department of
Transportation requirements for reciprocity.
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SCHEDULE 20
TICKETING INFORMATION
This Schedule describes the Ticketing Information services offered in Schedule 4
and forms part of the Galileo International Global Airline Distribution
Agreement.
1. GENERAL
Ticketing Information refers to the functionality whereby Galileo International
provides, at Participant's option, various collections of data relating to
ticketing activity within the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Galileo International will, at the request of Participant, provide to
Participant documentation regarding the data elements provided in and
the formats used for some or all of the products described in this
Schedule
B. Where Participant has United States of America citizenship and has
chosen the option called Sales Interface Record Data-US ("SIR-US"),
Galileo International will provide to Participant data for ticketing
transactions generated through the System by Galileo International
Subscribers in Territory 1 for travel contained wholly within the
United States of America and its possessions, to the extent permitted
by applicable law and regulation.
C. Where Participant has chosen the option called Sales Interface Record
Data - Rest of the World ("SIR-ROW"), Galileo International will
provide to Participant data for ticketing transactions generated
through the System by Galileo International Subscribers for travel in
whole or in part outside the United States of America and its
possessions, to the extent permitted by applicable law and regulation.
D. Galileo International will offer, to the extent permitted by applicable
law and regulation, the following options in connection with SIR-ROW:
(i) ticketing transactions of Galileo International Subscribers
located in Territory 1; or
(ii) ticketing transactions of Galileo International Subscribers
located in Territory 2; or
(iii) ticketing transactions of Galileo International Subscribers
located in both Territory 1 and Territory 2.
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E. At Participant's option, Galileo International will supply SIR data by
(i) magnetic tape(s), either in reel or 3480 cartridge format; or (ii)
such other method as may be agreed upon by Galileo International and
Participant.
F. Galileo International will provide Participant with data under this
Schedule at a frequency to be agreed on from time to time between
Galileo International and Participant.
G. If any delivery of data described in this Schedule is not in the format
or does not contain the elements of data referred to in the
documentation described in Clause 2.A. of this Schedule, Galileo
International's sole obligation will be to use reasonable efforts to
arrange another delivery of the same data in the correct format or
containing the correct data elements.
3. Responsibilities of Participant
A. For any of the services covered by this Schedule, Participant will be
entitled to use the services of a third party for the purpose only of
processing such data on behalf of Participant and only on the condition
that the third party agrees to keep such data confidential. Participant
may also disclose to its Shared Designator Carrier data pertaining to
Participant's code share flights involving that Shared Designator
Carrier. In addition, Participant may disclose specific data to a
Galileo International Subscriber that generated the transactions
associated with that data. The tapes or other medium provided under
this Schedule and the information contained therein may not be resold
or otherwise disclosed to any other third party without the prior
written consent of Galileo International.
B. In electing any service covered by this Schedule, if Participant does
not have United States of America citizenship, Participant represents
and warrants that it satisfies the applicable U.S. Department of
Transportation requirements for reciprocity.
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SCHEDULE 21
PARTICIPANT BRIEFING
This Schedule describes the Participant Briefing service offered in Schedule 4
and forms part of the Galileo International Global Airline Distribution
Agreement.
1. GENERAL
Participant Briefing refers to the functionality whereby Galileo International
makes available to Participant information pages in the System viewable by
Galileo International Subscribers that Participant may use to communicate
marketing and other information about Participant's services.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. Galileo International will make available to Participant information
pages in the System, consisting of not less than ninety-nine (99) lines
each. The pages will be viewable by Galileo International Subscribers
located either in Territory 1 or in Territory 2, as designated by
Participant.
B. Galileo International will define travel-related topics for use by
Participant and will provide a topic index of the Participant Briefing
pages.
C. Galileo International reserves the right, upon giving notice to
Participant, to delete without liability, any subject matter entered
into Participant Briefing that Galileo International, in its sole
discretion, considers to be inappropriate, misleading or defamatory.
D. Galileo International will apply security procedures in order to ensure
that only authorised terminal locations may create or amend
Participant's pages contained within Participant Briefing.
E. In exceptional circumstances, Galileo International may undertake to
amend and/or create Participant Briefing pages at the request of and on
behalf of Participant, on such terms and conditions as may be agreed on
by Galileo International and Participant.
F. Galileo International will provide Participant with the ability to
restrict access to its Participant Briefing pages by Galileo
International Subscribers located in certain geographical areas within
Territory 2.
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3. RESPONSIBILITIES OF PARTICIPANT
A. Unless otherwise agreed by Participant and Galileo International,
Participant will be responsible for the creation and update of its
information stored and displayed in Participant Briefing.
B. Participant accepts that Participant Briefing is offered to assist
Participant in the marketing of its products through the System and
that it is the responsibility of Participant to ensure that Galileo
International Subscribers are made aware of the existence of
Participant's pages within Participant Briefing.
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SCHEDULE 22
GLOBALFARES
This Schedule describes the GlobalFares service offered in Schedule 4 and forms
part of the Galileo International Global Airline Distribution Agreement.
1. GENERAL
GlobalFares refers to the functionality whereby Galileo International makes
available to Participant services relating to the fares database owned and
operated by Galileo International. GlobalFares includes two options, On-Line
Fares Update and Direct Batch Fares Update.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. On-Line Fares Update
(i) Galileo International will provide at the request of
Participant a service to maintain existing fares data specific
to Participant stored or to be stored in GlobalFares for an
existing city pair in the System ("Fares Update"). Galileo
International will also provide a service to add new fares
data specific to Participant for city pairs and routings
involving two cities located in the United States and/or
Canada ("New Fares").
(ii) Subject to the functional capabilities of GlobalFares, and the
then-existing programming, the System will display and
validate fares and add-ons based on the fares provided by
Participant and based on Participant's then-existing fare
footnotes, fare rules and routings ("Fare Supplements")
contained in the System.
(iii) Galileo International will not be liable if fares are not
displayed and validated, or are displayed and validated
inaccurately, due to Fare Supplements being inaccurate,
outdated and/or incompatible with those fares.
(iv) Pursuant to Article 12 of this Agreement, Galileo
International will not be liable to Participant for any
defects, errors, system overloads, operational incapabilities,
malfunctions or interruptions of service in or to the System
or GlobalFares that prevent Galileo International from
performing fares maintenance, provided however that Galileo
International will use
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reasonable efforts to perform such fares maintenance and will
notify Participant if it is unable to perform such service.
(v) Where, at Participant's request, Galileo International has
performed fares maintenance for Participant, Galileo
International will bear no liability to Participant in the
event of any erroneously input data.
(vi) Where, at Participant's request, Galileo International has
performed fares maintenance and a subsequent fare update or
new fare is received from a fares data supplier used by the
System for Participant for the same fare(s), this
latter-received data will supersede the fares data entered by
Galileo International.
(vii) For the purpose of calculating the charges for the On-Line
Fares Update service, the determination of the number of
individual Fare Updates and/or New Fares will be based solely
on the records of Galileo International.
B. Direct Batch Fares Update
(i) Galileo International will, subject to Clause 3.D of this
Schedule, arrange installation and maintenance of a
communication line between Participant's System and the System
for the purpose of receiving fare update information directly
from Participant's System for fares data for flights between
cities located in the United States and/or Canada.
(ii) Galileo International will process Direct Batch Fares Update
data only if such data is received by Galileo International
from Participant before 21:00 hours Central Time (USA) Monday
through Friday or before 16:00 hours Central Time (USA) on
Saturday or Sunday. Galileo will make reasonable efforts to
make such data available to Galileo International Subscribers
on the day after the Direct Batch Fares Update data is
received by Galileo International.
(iii) Where Participant has supplied Direct Batch Fares Update data
in the time frames described in Clause 2.B(ii) of this
Schedule, such data will supersede any previously stored or
received fares data. Where Galileo International receives
fares data for Participant from a fares data supplier after
the Direct Batch Fares Update data has been processed in the
GlobalFares system, the data received from the fares data
supplier will supersede Participant's Direct Batch Fares
Update data. Where Participant provides Direct Batch Fares
Update data to Galileo International outside the time frames
described in
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Clause 2.B(ii) of this Schedule, such data will be disregarded
by Galileo International.
(iv) Where Galileo International has received more than one supply
of Direct Batch Fares Update data from Participant, Galileo
International will process the data in order of receipt.
(v) Subject to the functional capabilities of the GlobalFares
system, and the then-existing programming, the System will
display and validate fares based on the Direct Batch Fares
Update data provided by Participant based on Participant's
then-existing Fare Supplements contained in the System.
(vi) Galileo International will not be liable if Direct Batch Fares
Update data is not displayed and validated, or is displayed
and validated inaccurately, due to Fare Supplements being
incompatible with such data, inaccurate or outdated.
(vii) Pursuant to Article 12 of this Agreement, Galileo
International will not be liable to Participant for any
defects, errors, system overloads, operational incapabilities,
malfunctions or interruptions of service in or to the System
or GlobalFares that prevent Galileo International from
performing the Direct Batch Fares Update service. However,
Galileo International will use reasonable efforts to perform
such Direct Batch Fares Update service, and Galileo
International will notify Participant if it is unable to
perform such service.
(viii) Where, at Participant's request, Galileo International has
performed the Direct Batch Fares Update service, Galileo
International will bear no liability to Participant in the
event of any erroneously input data.
3. DUTIES OF PARTICIPANT
A. Where Participant has elected the On-Line Fares Update service,
Participant will provide Galileo International with written notice that
includes full details of the data that Participant wishes Galileo
International to input into the GlobalFares system and will specify the
order and priority in which Participant wishes Galileo International to
perform each individual Fare Update and/or New Fare.
B. Participant warrants that Galileo International will be entitled to
rely upon the accuracy of any fares data supplied by Participant and
received by Galileo International as part of either the On-Line Fares
Update and/or the Direct Batch Fares Update services under this
Schedule.
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C. Where Participant has chosen the Direct Batch Fares Update service,
Participant will transmit data in the same standard format as is used
by the Airline Tariff Publishing Company ("ATPCO").
D. Participant will pay for all costs and charges associated with the
communications links required in connection with services under this
Schedule, including but not limited to charges for installation,
connection, maintenance, line rental, usage, and deinstallation.
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SCHEDULE 23
DROP THROUGH - LIMITED ACCESS
This Schedule describes the Drop Through - Limited Access service offered in
Schedule 4 and forms part of the Galileo International Global Airline
Distribution Agreement. Available only for Territory 2; may be extended to
Territory 1 later.
1. GENERAL
Drop Through - Limited Access refers to the functionality whereby Galileo
International enables a Galileo International Subscriber, via a
computer-to-computer communications capability between the System and
Participant's System, to access the Participant's System for the purpose of
creating and/or amending:
a) a single PNR that contains a booking for ten or more passengers travelling
on a Direct Flight(s) of Participating Carrier(s) that may have been created
originally by Participant or by a Galileo International Subscriber and/or
b) ground arrangement requests, such as stop-overs and ministays and/or
c) Requests
and whereby the Participant's System will send the necessary data to the System
in order that a new Booking File is created or an existing Booking File is
amended, so that the Booking File contains data comparable to data stored in the
PNR held in Participant's System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will provide to Participant's System at the time of access,
information to facilitate the identification of the Galileo International
Subscriber seeking to use Drop Through - Limited Access.
B. Where Participant permits access to Participant's System by the Galileo
International Subscriber, the System will facilitate such access for one or
more of the purposes outlined in Clause 1 of this Schedule as notified to
Galileo International by Participant in accordance with Clause 3A of this
Schedule.
C. The System may validate certain of the messages to be sent to Participant's
System by Galileo International Subscribers.
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D. Galileo International will provide to Participant documentation regarding
the message formats and mandatory and optional data items that are to be
used for the Drop Through - Limited Access service.
E. Where Drop Through - Limited Access is used, the System will create and/or
amend a Booking File in accordance with Clause 3D of this Schedule. Such a
Booking File may be completed or ignored by the Galileo International
Subscriber.
F. Those segments contained in a Booking File that have been created and/or
amended by the Drop Through Limited Access service will be Passive Segments
in the System.
3. RESPONSIBILITIES OF THE PARTICIPANT
A. Participant will notify Galileo International which of the purposes outlined
in Clause 1 of this Schedule it desires to make available to Galileo
International Subscribers.
B. Participant will limit the activity of Galileo International Subscribers in
Participant's System to facilitate one or more of such purposes only.
C. Subject to Clauses 3A and 2C of this Schedule, Participant is solely
responsible for limiting within Participant's System access to and the
creation and/or amendment of PNRs. Participant will make any changes to
Participant's System necessary to implement Drop Through - Limited Access.
D. Where Participant has permitted a Galileo International Subscriber either
to:
i) complete the creation and/or amendment of a PNR, or
ii) place a PNR in Participant's System on a queue in Participant's System
Participant's System will send the System all data items contained within
Participant's PNR to enable the System to create and/or amend a Booking File
and Participant's System shall send the System a message that the Drop
Through - Limited Access session is ended for the Galileo International
Subscriber.
E. Where Participant has permitted a Galileo International Subscriber to ignore
a PNR, or where a time period agreed between Galileo International and
Participant has expired following initial access to Participant's System by
a Galileo International Subscriber, Participant's System will send the
System a message that the Drop Through - Limited Access session is ended for
the Galileo International Subscriber.
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F. Participant warrants that it is authorised to permit bookings in accordance
with the Drop Through Limited Access service by any carrier whose services
are made available in Participant's System in accordance with this Schedule.
G. Where a booking has been made in Participant's System for any carrier which
is not a Participating Carrier and without prejudice to any of Galileo
International's rights and remedies under this Agreement, Participant agrees
to pay all charges relating to use of the Drop Through - Limited Access
service as though that booking had been made for Participant.
H. Except in the case of wilful misconduct by Galileo International, its
owners, officers, directors, employees, or agents, Participant shall
indemnify and hold harmless Galileo International, and its owners, officers,
directors, employees, and agents from all liabilities, damages, losses,
claims, suits, judgements, costs, and expenses, including costs and
reasonable attorneys' fees, directly or indirectly suffered by, accrued
against, charged to, or recoverable from Galileo International, its owners,
officers, directors, employees, and agents, by reason of or, in connection
with, any claim by any carrier for whom a booking has been created by use of
the Drop Through - Limited Access service via Participant's System.
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SCHEDULE 24
DROP THROUGH - FULL ACCESS
This Schedule describes the Drop Through - Full Access service offered in
Schedule 4 and forms part of the Galileo International Global Airline
Distribution Agreement. Available only for Territory 2; may be extended to
Territory 1 later.
1. GENERAL
Drop Through - Full Access refers to the functionality whereby Galileo
International enables a Galileo International Subscriber, via a
computer-to-computer communications capability between the System and
Participant's System, to access and work in Participant's System. While working
in Drop Through - Full Access a Galileo International Subscriber can make
bookings and create a PNR in Participant's System and Participant's System will
send the necessary data to the System in order that a new Booking File is
created or an existing Booking File is amended, so that the Booking File
contains data comparable to data stored in the PNR held in Participant's System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will provide to Participant's System, at the time of access,
information to facilitate the identification of the Galileo International
Subscriber seeking to use Drop Through - Full Access.
B. The System may validate certain of the messages to be sent to Participant's
System by Galileo International Subscribers.
C. Galileo International will provide to Participant documentation regarding
the message formats and mandatory and optional data items that are to be
used for the Drop Through - Full Access service.
D. Subject to Clause 3C of this Schedule the System will create and/or amend a
Booking File which must be completed by the Galileo International
Subscriber.
E. Those segments contained in a Booking File that have been created and/or
amended by the Drop Through Full Access service will be charged on a Net
Passenger Segment basis in accordance with Schedule 5.
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3. RESPONSIBILITIES OF THE PARTICIPANT
A. Participant is solely responsible for creating and maintaining processes
within Participant's System to control access to and the creation and/or
amendment of PNRs. Participant will make any changes to Participant's System
to implement Drop Through - Full Access.
B. Where Participant has permitted a Galileo International Subscriber to
either:
i) complete the creation and/or amendment of a PNR, or
ii) place a PNR in Participant's System on a queue in Participant's
System
Participant's System will send the System all data items contained within
Participant's PNR to enable the System to create and/or amend a Booking File
and Participant's System shall send the System a message that the Drop
Through - Full Access session is ended for the Galileo International
Subscriber.
C. Where Participant has permitted a Galileo International Subscriber to ignore
a PNR, or where a time period agreed between Galileo International and
Participant has expired following initial access to Participant's System by
a Galileo International Subscriber, Participant's System will send the
System a message that the Drop Through - Full Access session is ended for
the Galileo International Subscriber.
D. Participant will ensure that all segments created in the System as a result
of the Drop Through - Full Access service are segments which reflect
bookings made in the Participant's System for the Direct Flights of
Participant, its airline Affiliates and/or one or more of up to ten airlines
nominated by Participant with which Participant has a marketing agreement.
E. For the purposes of this Schedule Participant will provide Galileo
International with formal notification of the identity of those airlines
referred to in Clause 3D of this Schedule. Participant will give Galileo
International 30 days notice of any changes to such notification.
F. Participant warrants that it is authorised to permit bookings in accordance
with the Drop Through - Full Access service by its airline Affiliates and
any airlines nominated in accordance with Clause 3D of this Schedule.
G. Participant agrees to pay all charges relating to use of the Drop Through -
Full Access service, where a booking has been made in Participant's System,
as though that booking has been made for Participant.
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H. Except in the case of wilful misconduct by Galileo International, its
owners, officers, directors, employees, or agents, Participant shall
indemnify and hold harmless Galileo International, and its owners, officers,
directors, employees, and agents from all liabilities, damages, losses,
claims, suits, judgements, costs, and expenses, including costs and
reasonable attorneys' fees, directly or indirectly suffered by, accrued
against, charged to, or recoverable from Galileo International, its owners,
officers, directors, employees, and agents, by reason of or, in connection
with, any claim by any carrier for whom a booking has been created by use of
the Drop Through - Full Access service via Participant's System.
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SCHEDULE 25
TICKETING FACILITY
This Schedule describes the Ticketing Facility service offered in Schedule 4 and
forms part of the Galileo International Global Airline Distribution Agreement.
Available only for Territory 2; may be extended to Territory 1 later.
1. General
Ticketing Facility refers to the functionality whereby Galileo International
enables a Galileo International Subscriber, via a computer-to-computer
communications capability between the System and Participant's System, to
retrieve a PNR created in Participant's System and transmit the data in that PNR
to the System, so that a Booking File is created and a ticket for the PNR can be
issued through the System.
2. RESPONSIBILITIES OF GALILEO INTERNATIONAL
A. The System will provide to Participant the relevant Record Locator for that
PNR that is the subject of the Ticketing Facility request.
B. Galileo International will provide to Participant documentation regarding
the message formats and mandatory and optional data items that are to be
used for the Ticketing Facility service.
C. The segments contained in a Booking File which has been created by the
Ticketing Facility service will be Passive Segments in the System.
3. RESPONSIBILITIES OF PARTICIPANT
A. Participant will be solely responsible for the access to and transmission of
data from PNRs resident in Participant's System.
B. Participant will be solely responsible for determining which PNRs will be
subject to the Ticketing Facility service and make any changes to
Participant's System that are necessary to implement such determination.
C. Where Participant has permitted a Galileo International Subscriber to access
a PNR for the purpose of the Ticketing Facility service, upon receipt of the
appropriate message from the System, Participant's System will transmit the
appropriate data in the PNR to the System.
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D. Where a booking has been made in Participant's System for any carrier which
is not a Participating Carrier and without prejudice to any of Galileo
International's rights and remedies under this Agreement, Participant agrees
to pay all charges relating to use of the Ticketing Facility service as
though that booking had been made for Participant.
E. Participant warrants that it is authorised to permit bookings in accordance
with the Ticketing Facility service by any carrier whose services are made
available in Participant's System in accordance with this Schedule.
F. Except in the case of wilful misconduct by Galileo International, its
owners, officers, directors, employees, or agents, Participant shall
indemnify and hold harmless Galileo International, and its owners, officers,
directors, employees, and agents from all liabilities, damages, losses,
claims, suits, judgements, costs, and expenses, including costs and
reasonable attorneys' fees, directly or indirectly suffered by, accrued
against, charged to, or recoverable from Galileo International, its owners,
officers, directors, employees, and agents, by reason of or, in connection
with, any claim by any carrier for whom a booking has been created by use of
the Ticketing Facility service via Participant's System.
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SCHEDULE 26
MIGRATION
This Schedule forms part of the Galileo International Global Airline
Distribution Agreement.
1. INTRODUCTION
Participant hereby acknowledges that, until such time as Galileo International
Subscribers obtain the services contracted for under this Agreement exclusively
from and/or via the System:
(a) the services provided by Galileo International under this Agreement
will comprise functionality provided through the System and/or one or
more of the systems operated by the Interim Providers;
(b) where the services provided by Galileo International under this
Agreement are being provided in whole or in part by one or more of the
systems operated by the Interim Providers, then the full functionality
described in the Agreement may not be available to Participant; and
(c) where there are any inconsistencies between this Schedule and the
remainder of this Agreement, the former will prevail.
2. DEFINITIONS
In this Schedule, unless the context otherwise requires:
"Interim Provider" means any one or more of the following organisations commonly
known as: Aer Lingus, Air Canada, Alitalia, Austrian Airlines, British Airways,
KLM Royal Dutch Airlines, Olympic Airlines, SIGMA, Swissair, TAP Air Portugal,
TIMAS, Travicom, Covia Corporation, and USAir.
"Participant's Partition" means Participant's System when accessed by the
multi-access systems operated by SIGMA and/or TIMAS and/or Travicom.
"SIGMA" means SIGMA Travel System S.p.a.
"TIMAS" means Travel Industry Multi-Access System Limited.
"Travicom" means Travel Automation Services Limited.
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3. MIGRATION CONDITIONS
Participant hereby acknowledges that:
A. Where a Galileo International Subscriber that is not connected to the
System is connected directly to a system operated by one of the Interim
Providers, that Galileo International Subscriber will be provided with
such displays as may be provided by that system.
B. In the case of Clause 3.A of this Schedule, the relevant Interim
Provider will, for the purpose of transactions made in the system
operated by that Interim Provider, as agent for Galileo International,
provide the ability for Galileo International Subscribers to make
bookings for Participant's flights and will use whatever bilateral
booking method and sell agreement is in force between that Interim
Provider and Participant at the time of the booking until Galileo
International Subscribers are connected to the System for the purposes
of such booking transactions. These bookings made in the system of an
Interim Provider will appear in Participant's System as bookings made
by that Interim Provider.
C. Where a Galileo International Subscriber is connected to the System and
one or more of the systems operated by an Interim Provider, certain
availability displays will be provided from the System. Where a booking
is made from such displays, the Interim Provider will, as agent for
Galileo International, use whatever bilateral booking method and sell
agreement is in force between that Interim Provider and Participant at
the time of booking. However, where Participant has selected Last Seat
Availability and/or Interactive Display and/or Inside Availability and
a Galileo International Subscriber makes a booking from such an
availability display, Participant will accept such bookings with an
"LK" action/advice code from the Interim Provider and operate the same
booking guarantee as if that booking had been made in the System.
D. In the case of Clauses 3.A and 3.C of this Schedule, fares displays,
accountable document issuance and all other information displays and
functionality will be provided to the Galileo International Subscriber
in accordance with any existing bilateral arrangement between the
Interim Provider and Participant in respect of any activity performed
in the Interim Provider's system. Where, in relation to accountable
document issuance, there are no existing arrangements between the
Interim Provider and Participant, Participant agrees that each Interim
Provider may issue Participant's transportation documents in Territory
2 as agent for Galileo International in accordance with Article 3.N of
the Agreement as if that Interim Provider had been granted ticketing
authority directly.
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E. Where the services provided under this Agreement are being provided in
whole or in part by SIGMA and/or TIMAS and/or Travicom, Galileo
International Subscribers will be provided with such displays and
booking functionality as may be provided by Participant's Partition.
4. BILLING DATA AND CHARGES
A. Where Galileo International or an Interim Provider cannot identify Net
Passenger Segments for bookings that are made in Participant's
Partition, these will be calculated according to the following
formulae, which, in the absence of manifest error, will be deemed to be
conclusive and binding:
(i) formula applicable to Travicom:
Net Passenger Segments = (P - (P x 16%)) x 1.8
where P is the total number of PNRs shown in Travicom's
records as having been created during the relevant period;
(ii) formula applicable to SIGMA and TIMAS:
Net Passenger Segments = (M - (M x 16%)) / 8
where M is the total number of messages transmitted to
Participant's System by the system of either SIGMA or TIMAS.
B. Participant accepts that where it has maintained a Participant's
Partition then the premiums for the Last Seat Availability and/or
Interactive Display optional services will apply in respect of all Net
Passenger Segments that are booked through that Participant's Partition
and will be calculated in accordance with the formulae set out in
Clause 4.A of this Schedule.
C. Where Galileo International Subscribers are connected to the System and
one or more of the systems operated by an Interim Provider, Participant
will be charged for those optional services selected by Participant to
the extent those Galileo International Subscribers have access to such
optional services.
D. Where Participant has a direct link from Participant's System to one or
more of the systems operated by an Interim Provider to provide real
time booking transactions, Participant accepts that it will be charged
for all Net Passenger Segments made in the Interim Provider system to
which such a direct link exists on the same basis as an Interactive
Sell made in the System.
E. Galileo International will charge Participant for Net Passenger
Segments made by Galileo International Subscribers in a system operated
by an Interim Provider in accordance with the charges set out in
Schedules 2 and 5 based on data supplied by the Interim Provider.
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SCHEDULE 27
EUROPE
For the purposes of Articles 3L and 3M of this Agreement, the word 'Europe'
shall mean the following:
Albania Liechtenstein
Algeria Lithuania
Andorra Luxembourg
Armenia Malta
Austria Monaco
Azerbaijan Moldavia
Belorussia Morocco
Belgium Netherlands
Boznia Herzegovina Norway
Bulgaria Poland
Croatia Portugal (including the Azores and Madeira)
Czech Republic Romania
Denmark San Marino
Estonia Slovakia
Finland Slovenia
France Spain (including Canary Islands)
Georgia Sweden
Germany Switzerland
Gibraltar Tunisia
Greece Turkey
Hungary Ukraine
Iceland United Kingdom
Italy The former Yugoslavia
Latvia
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Exhibit 10.39
AGREEMENT FOR THE PROVISION OF SERVICES
THIS AGREEMENT is made the day of 1996
BETWEEN
(1) THE GALILEO COMPANY a company incorporated under the laws of England
and Wales whose registered office is at Galileo Centre Europe, Windmill
Hill, Swindon, SN5 6PH ("TGC"), and
(2) GALILEO INTERNATIONAL PARTNERSHIP a Delaware general partnership, whose
principal offices are at 9700 West Higgins Road, Rosemont, Illinois
60018 ("GIP")
1. INTRODUCTION
1.1 On the 16th day of September 1993 the parties entered into a
Miscellaneous Services Agreement ("the MSA") which they required to
reflect Arm's Length Rates of mark-up on cost according to current
general business practice.
1.2 Following a review of the MSA the parties wish to amend certain of the
terms of the MSA and the rates originally used.
1.3 The parties also desire to make certain amendments to the terms of the
MSA, as certain provisions of the MSA are no longer applicable due to
the passage of time. The MSA is therefore hereby terminated forthwith,
both parties hereby waiving their right to notice thereunder, and is
replaced by this agreement.
NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS
2. DEFINITIONS
2.1 In this agreement :-
"Arm's Length Rate" means the rate which would be charged in an
independent transaction between unrelated parties under the same or
similar circumstances considering all the relevant facts;
"CRS" means computerised reservation system;
<PAGE> 2
"Employee" means any employee of either party or anybody in an
analogous position such as but not limited to officers, secondees,
consultants or subcontractors;
"Intellectual Property Rights" means copyright, patent, design and all
other analogous rights, whether or not registrable;
"Marketing Services" means services other than the development of
software which GIP shall require TGC to perform, including, but not
limited to, marketing and administrative services, which are more
particularly detailed in the schedule to this agreement;
"Restricted Information" means all data, documentation and materials,
either oral or written, obtained by one party to this agreement from
another party to the agreement pursuant to or in connection with the
agreement that relates to that party or its customers or suppliers,
that has been designated as confidential by the other party, and that
is in fact confidential in nature, and
"Software" means such computer programs as GIP shall require TGC to
develop and supply to GIP in connection with GIP's CRS business and for
the avoidance of doubt shall include any routine, sub-routine,
sub-program, algorithm and any specification, operating manual or other
documentation relating to such computer programs, and any information
or data contained therein, whether or not reduced to a tangible medium.
2.2 The headings in this agreement are for convenience only and do not
affect its interpretation.
3. OBLIGATIONS OF TGC
3.1 TGC shall carry out upon GIP's instructions the development of the
Software. TGC shall ensure that it has adequate resources to perform
its obligations under this clause 3.1, and its headcount of Software
development staff for 1995 is estimated to be one hundred and sixty-six
(166). Such headcount may be varied annually or from time to time to
reflect current development schedules as the circumstances require.
3.2 TGC shall carry out upon GIP's instructions Marketing Services and
shall ensure that it has adequate resources to perform its obligations
under this clause 3.2. The headcount for 1995 of staff required to
perform Marketing Services is contained in the schedule hereto. Such
headcount may be varied annually or from time to time to reflect
appropriate resources to discharge Marketing Services as the
circumstances require. TGC will conduct Marketing Services with all due
care
<PAGE> 3
and diligence, and TGC shall use its best efforts to cultivate and
maintain good relations with GIP's vendors and distributors in
accordance with sound commercial principles.
3.3 The services to be provided hereunder by TGC will be provided during
normal United Kingdom working hours.
3.4 The services to be provided hereunder will in terms of both quality and
quantity be at least comparable to and not less than similar services
being provided by TGC to any other person.
3.5 TGC shall ensure that its Employees comply in all respects with the
terms of this agreement and that, in particular, it makes its Employees
aware that they have no authority to bind GIP, nor to hold themselves
out as Employees or agents of GIP.
3.6 TGC shall further ensure that its Employees obtain specific authority
from GIP for any marketing proposal which may commit GIP to any
contract or course of action in the course of GIP's business as a
provider of CRS services.
3.7 TGC shall as GIP from time to time may direct act as a recipient of
notices to GIP under any agreement entered into by GIP. Such direction
may be accomplished by the insertion of the following or similar clause
in any such agreement and notification of such clause to TGC:-
"Any notice to be given to Galileo International Partnership hereunder
and any legal proceedings concerning or arising out of this agreement
shall be delivered or sent to Galileo International Partnership c/o The
Galileo Company, whose registered office is at Galileo Centre Europe,
Windmill Hill, Swindon, SN5 6PH, United Kingdom, marked for the
attention of the Company Secretary (fax no 44-793-886190)."
In the event of receipt of any such notice as specified in this clause,
TGC shall forward the same forthwith to GIP, marked for the attention
of the General Counsel.
4. FINANCIAL ARRANGEMENTS
4.1 Upon receipt of invoices from TGC, GIP will remit to TGC fees equal to
TGC's costs incurred in the development of the Software plus eight per
cent (8%) of such costs.
4.2 Upon receipt of invoices from TGC, GIP will remit to TGC fees equal to
TGC's costs incurred in the performance of Marketing Services plus six
point five per cent (6.5%) of such costs.
<PAGE> 4
4.3 The respective percentage mark-ups stipulated in clauses 4.1 and 4.2
which have been arrived at on an Arm's Length Basis shall be effective
during 1995 and thereafter subject to annual review by both parties
during the month of March in each year who may agree to vary such
percentages as they deem fit in order to reflect then current market
practice provided always that the transactions hereunder shall be
charged at an Arm's Length Rate. Notwithstanding clause 10.2, in the
event that one party shall propose a variation to one or both of such
percentages which is not accepted by the other party within thirty (30)
days of such proposal, the parties shall refer such proposal to
arbitration. Such reference shall be to a single arbitrator appointed
by the President for the time being of the Institute of Chartered
Accountants. The decision of such arbitrator shall be final and binding
upon the parties.
4.4 The percentage mark-ups specified in clauses 3A and 3B of the
Miscellaneous Services Agreement have been adjusted for 1994 by
agreement between the parties to eight per cent (8%) and six point five
per cent (6.5%) respectively and TGC's statutory accounts have been
amended accordingly.
4.5 For the avoidance of doubt, due to outstanding contractual arrangements
TGC has in the past borne certain costs, such as communications costs,
which should properly have been borne by GIP, and has billed these on
to GIP at cost. Whilst the parties have made every effort to put in
place the appropriate contractual arrangements to ensure that such
costs are borne directly by GIP, it is hereby agreed that TGC shall, in
the event that the parties may deem it necessary or expedient, continue
to bear such costs and bill them back to GIP at cost.
4.6 Nothing in this agreement requires GIP to purchase any particular
quantity or level of any service provided under this agreement.
5. INTELLECTUAL PROPERTY RIGHTS
5.1 The Intellectual Property Rights in the Software shall belong to GIP.
5.2 TGC will do all such things at the request and expense of GIP, as GIP
reasonably may require, to assist GIP to secure or perfect good title
to the Intellectual Property Rights in the Software and (without
limitation) will execute any document or do any act or make any
declaration reasonably required by GIP in support of any application to
register, renew or defend any of the Intellectual Property Rights in
the Software anywhere in the world
<PAGE> 5
6. TERM
6.1 This agreement may be terminated by either TGC or GIP giving not less
than one year's prior written notice to the other party.
6.2 Notwithstanding Clause 6.1, either TGC or GIP may terminate this
agreement immediately upon giving written notice to the other party if:
(a) the other party commits a material breach of any of the terms
or conditions of this agreement provided, however, that the
breaching party shall have thirty (30) days to correct such
breach following receipt of such notice;
(b) the other party becomes insolvent;
(c) the other party is generally not paying its bills when they
become due;
(d) an encumbrancer takes possession of or a receiver is appointed
over all or any substantial part of the property or assets of
the other party;
(e) the other party makes an assignment for the benefit of its
creditors;
(f) the other party goes into liquidation (except for the purposes
of amalgamation or reconstruction and in such manner that the
company resulting therefrom effectively agrees to be bound by
or assume the obligations imposed on that other party under
this agreement);
(g) anything similar to any of the foregoing under the law of any
jurisdiction occurs in relation to the other party, or
(h) the other party ceases to carry on business.
6.3 Any termination of this agreement shall not affect any liabilities or
rights accruing prior to the effective date of termination or that are
of a continuing nature.
6.4 Any waiver by either party of a breach of any provision of this
agreement shall not be considered as a waiver of any subsequent breach
of the same or any other provision of this agreement.
6.5 The rights to terminate this agreement given by this Clause shall be
without prejudice to any other right or remedy of either party in
respect of the breach concerned (if any) or any other breach.
<PAGE> 6
7. CONFIDENTIALITY
7.1 Except as provided in Clause 7.2, each party at all times during the
continuance of this agreement and after its termination shall:
(a) use all its reasonable endeavours to keep all Restricted
Information confidential;
(b) not disclose any Restricted Information to any other person
without the prior written consent of the relevant party;
(c) not use any Restricted Information for any purpose other than
the performance of the obligations under this agreement; and
(d) ensure that none of its directors, officers, employees,
advisers, agents, representatives, or consultants does any act
which if done by that party would be a breach of the
provisions of (a), (b) or (c) above.
7.2 Any Restricted Information may be disclosed by either party :
(a) in response to any legally enforceable demand by a
governmental or other authority or regulatory body; or
(b) to any Employee of either party or of any of the
aforementioned persons,
to such extent only as is necessary for the purposes contemplated by
this agreement, or as is required by law, provided however, that the
party shall use all reasonable endeavours to ensure that the person in
question keeps the Restricted Information confidential and does not use
the same except for the purposes for which the disclosure is made, and
provided that before disclosing the Restricted Information to any such
person, that party shall notify the party that provided the Restricted
Information of the intended disclosure and shall use its best efforts
to permit the other party a reasonable period of time to intervene and
contest disclosure or production at its own expense if the other party
so wishes.
8. FORCE MAJEURE
8.1 Except for any payment obligations, a party shall not be deemed to be
in breach of this agreement, nor otherwise be liable to the other for
any delays in or failure of performance caused by any natural disaster,
public enemy, war, civil disorder, fire, flood, explosion, riot, labour
disputes, work stoppage or strike, unavailability of equipment or
software, any act or order of any governmental authority, or any other
cause, whether similar or dissimilar, beyond its control provided that:
<PAGE> 7
(a) as soon as practicable after becoming aware of such delay or
failure it gives the other party written notice of such delay
or failure and the reasons for it; and
(b) it uses all reasonable endeavours to circumvent the causes of
such delay and to mitigate their effects; and
(c) it remains liable to perform its obligations as soon as the
cause of delay is lifted.
9. RELATIONSHIP OF THE PARTIES
9.1 The relationship of the parties is that of customer and service
provider. Nothing in this agreement creates or is intended to create
any agency, partnership or joint venture relationship between the
parties.
9.2 Neither party has any authority to bind the other party, and neither
party shall hold itself out as the agent of the other party.
10. GOVERNING LAW AND JURISDICTION
10.1 This agreement shall be governed by, and be construed in accordance
with, English law.
10.2 In relation to any dispute arising out of or in connection with this
agreement, the parties to this agreement hereby unconditionally and
irrevocably submit to the exclusive jurisdiction of the High Court of
Justice in England and waive any objection to proceedings with respect
to this agreement in such Court on the grounds of venue or inconvenient
forum.
10.3 Either party shall be entitled to take such steps as it shall consider
necessary or desirable in order to enforce any judgment or order
against the other party in any jurisdiction where that other party
trades or has assets.
11. AMENDMENT
This agreement may be amended only if such amendment is in writing and
executed by duly authorised representatives of both parties hereto.
<PAGE> 8
12. ENTIRE AGREEMENT
12.1 This agreement sets out the entire agreement between the parties hereto
regarding the subject matter hereof and supersedes all prior agreements
and understandings, whether written or oral, between the parties or any
predecessors relating to the subject matter hereof.
12.2 Each party acknowledges that, in entering into this agreement, it does
not do so on the basis of, and does not rely on, any representation,
warranty or other provision except as expressly provided in this
agreement, and all conditions, warranties or other terms implied by
statute or common law are excluded to the fullest extent permitted by
law.
13. NOTICES
13.1 Every notice, request, demand or other communication affecting notice
under this agreement:
(a) shall be in writing in the English language; and
(b) shall be sent by first class, registered or certified mail,
postage prepaid, or by overnight or express mail, courier,
facsimile or telex; and
(c) shall be effective:
(i) immediately, in the case of a telex or facsimile, if
sent on a business day prior to 5:00 p.m. local time
of recipient; or
(ii) on the first business day after transmission, for all
other notices.
13.2 Every communication given under Clause 11.1 above and any legal
proceedings concerning or arising out of this agreement shall be
delivered or sent to the Company Secretary of TGC, at its registered
office as set out above, or to the President of GIP at the address set
out above or such other address as either party shall designate in
writing for that purpose.
14. REPRESENTATIONS AND WARRANTIES
14.1 EACH PARTY HERETO REPRESENTS THAT (I) THE INDIVIDUAL SIGNING THIS
AGREEMENT OR ANY AMENDMENT TO THIS AGREEMENT, ON BEHALF OF GIP OR TGC
AS THE CASE MAY BE, IS, OR AT THE MATERIAL TIME WILL BE, DULY
AUTHORISED TO EXECUTE THIS AGREEMENT OR AMENDMENT ON BEHALF OF GIP OR
<PAGE> 9
TGC, AS THE CASE MAY BE, AND HAS FULL POWER AND AUTHORITY TO BIND GIP
OR TGC, AS THE CASE MAY BE, TO THE TERMS AND CONDITIONS HEREOF; AND
(II) THIS AGREEMENT CONSTITUTES A LEGAL, VALID, AND BINDING AGREEMENT
OF GIP OR TGC, AS THE CASE MAY BE, ENFORCEABLE IN ACCORDANCE WITH ITS
TERMS.
14.2 THE REPRESENTATIONS AND WARRANTIES SET FORTH IN CLAUSE 14.1 ABOVE ARE
EXCLUSIVE AND TGC MAKES NO OTHER REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE SOFTWARE OR
THE OTHER SERVICES.
14.3 EXCEPT FOR A BREACH OF THE EXCLUSIVE WARRANTIES SPECIFIED IN CLAUSE
14.1 ABOVE, GIP HEREBY WAIVES AND RELEASES TGC AND ITS OWNERS FROM ANY
AND ALL OTHER OBLIGATIONS, LIABILITIES, RIGHTS, CLAIMS AND REMEDIES OF
GIP AGAINST TGC AND ITS OWNERS, OFFICERS, DIRECTORS, EMPLOYEES, AND
AGENTS, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, DUE TO ANY
DEFECTS OR ERRORS IN THE SOFTWARE OR IN THE PERFORMANCE OF THE OTHER
SERVICES, INCLUDING ANY LIABILITY, OBLIGATION, RIGHT, CLAIM OR REMEDY
FOR LOSS OF REVENUE OR PROFIT OR ANY OTHER DIRECT, INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES.
14.4 EACH PARTY ACKNOWLEDGES THAT, IN ENTERING INTO THIS AGREEMENT, IT DOES
NOT DO SO ON THE BASIS OF, AND DOES NOT RELY ON, ANY REPRESENTATION,
WARRANTY OR OTHER PROVISION EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT.
15. INDEMNITY
15.1 In further consideration for the provision of services hereunder by TGC
to GIP, GIP hereby indemnifies TGC and agrees to reimburse TGC without
limitation in respect of all TGC's future operating costs during the
term of this agreement including any costs associated with the leasing
of premises or termination of any such lease, any costs associated with
the redundancy of any employee of TGC, any costs associate with
exchange rate fluctuations, and any costs which may be incurred by TGC
as a result of termination of this agreement.
<PAGE> 10
15.2 For the avoidance of doubt the costs specified in clause 15.1
specifically exclude any costs associated with TGC's former business of
the provision of CRS services such as costs associated with TGC's
former Data Centre and Energy Centre. However, the parties recognise
the likelihood that the Data Centre will in the future be used for the
operation of TGC's current business, and at such time as such use
occurs costs associated with the Data Centre will fall under clause
15.1.
16. ASSIGNMENT
16.1 TGC may assign or otherwise transfer any of its rights, interests, or
obligations under this agreement to any third party only upon the prior
written consent of GIP, which consent shall not be unreasonably
withheld.
16.2 GIP may assign or otherwise transfer its rights and obligations under
this agreement, whether in whole or in part, to any affiliate,
successor, or third party that accepts all obligations of GIP hereunder
and agrees with GIP to be bound thereby.
16.3 Any violation of this clause shall be cause for immediate termination
of this agreement by the non-assigning party or, at the option of the
non-assigning party the non-assigning party may declare the assignment
of any of the rights or obligations under the agreement null and void
ab initio.
<PAGE> 11
SCHEDULE
MARKETING SERVICES
The functions performed by TGC, together with 1995 headcounts, are, by
department, as follows :-
TECHNICAL OPERATIONS
Headcount - 60
The role of TGC technical operations is to support GIP's operations in Europe,
the Middle East and Africa, Asia and Pacific, and Latin America.
VENDOR AND PRODUCT MANAGEMENT
Headcount - 65
The role of these personnel entails co-ordination of product development,
exploration of new product opportunities, and day to day administration of air
and non-air vendors headquartered primarily in Europe, the Middle East and
Africa.
EUROPE AND APA REGIONS
Headcount - 235
European regional staff are responsible for the co-ordination of the activities
of GIP's distributors in the Europe, Middle East and Africa, Asia and Pacific,
and Latin America, multinational subscribers headquartered primarily in the
Europe, Middle East and Africa region, as well as for the provision of Marketing
Services and Customer Services within Europe, Middle East and Africa, Asia and
Pacific Region and Latin America.
OVERHEAD DEPARTMENTS
Headcount - 70
<PAGE> 12
These comprise Human Resources, Finance and Administration and Legal. The role
of these departments is to perform an administrative function within TGC and for
GIP and other companies in the Galileo group as required.
Total headcount - 430
AS WITNESS the hands of the duly authorised representatives of the parties on
the date first above written.
SIGNED BY ..........................................................
for and on behalf of
THE GALILEO COMPANY
SIGNED BY ..........................................................
for and on behalf of
GALILEO INTERNATIONAL PARTNERSHIP
<PAGE> 1
Exhibit 10.40
GALILEO INTERNATIONAL
RETIREE MEDICAL PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - ESTABLISHMENT OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.01 Adoption and Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 Purpose of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.04 Applicability of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.05 Carryover of Plan Year or Calendar Year Limitations on Health
Care Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.06 Summary Plan Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - CONSTRUCTION AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III - PLAN PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.01 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.02 Enrollment and Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.03 Re-enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.04 Enrollment of Medicaid Eligible Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV - PAYMENT OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.01 Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.02 Employer and Retiree Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.03 Amounts of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE V - COVERED EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.01 Benefits Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.02 Special Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.03 Alcohol/Substance Abuse Care Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.04 Psychiatric Benefits Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VI - BENEFIT LIMITS AND EXCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.01 General Limitations and Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.02 Pre-Existing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII - COORDINATION OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.01 Definitions of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.02 Nonduplication of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.03 Coordination Among Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.04 Excess Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.05 Information Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.06 Payment Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.07 Right of Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII - COORDINATION WITH MEDICARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.01 Secondary Coverage to Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.02 Primary Coverage to Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.03 Medicare Coverage Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 8.04 Eligibility for Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX - CLAIMS PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.01 Application for Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.02 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.03 Appeal Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.04 Exhaustion of Administrative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.05 Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.06 Assignment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.07 Missing Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.08 Recovery of Overpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE X - SUBROGATION AND REIMBURSEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.01 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.02 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.03 Subrogation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XI - TERMINATION AND CONTINUATION OF PLAN COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.01 Cancellation of Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.02 Change in Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.03 Continuation of Coverage To Eligible Dependents . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.04 Election of Continued Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 11.05 Contributions for Continued Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 11.06 Duration of Continued Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 11.07 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.08 Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XII - ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.01 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.02 Powers and Duties of the Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 12.03 Expenses of Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.04 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 12.05 Liability of the Board, Officers and Employees . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE XIII - AMENDMENT OR TERMINATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.01 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.02 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.03 No Vesting of Plan Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE XIV - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.01 Conformity with Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.02 Limitation of Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.03 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.04 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.05 Disclaimer of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.06 Entire Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 14.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
SCHEDULE OF BENEFITS
iii
<PAGE> 5
GALILEO INTERNATIONAL
RETIREE MEDICAL PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994)
ARTICLE I
ESTABLISHMENT OF PLAN
Section 1.01 Adoption and Effective Date. Effective September 16,
1993, Galileo International Partnership ("Galileo") adopted the Galileo
International Retiree Medical Plan (the "Plan") in order to provide health care
benefits for the eligible retirees of Galileo and any other Affiliated Employer
which adopts the Plan with the written consent of the Supervisory Board of
Galileo. Galileo hereby amends and restates the Plan effective January 1, 1994
(the "Effective Date") to incorporate the requirements of the Omnibus Budget
Reconciliation Act of 1993 and to make certain changes to the Plan.
Section 1.02 History. Prior to Galileo adopting the Plan, the Plan
was called the Covia Partnership Retiree Medical Plan which was originally
established effective January 1, 1993, by Covia Partnership ("Covia").
Effective September 16, 1993, pursuant to a combination of the operations of
Covia, certain of the assets and business of Covia were assumed by Apollo
Travel Services, a general partnership, and Covia was renamed as Galileo
International Partnership. Accordingly, effective September 16, 1993, the Plan
was renamed the Galileo International Retiree Medical Plan.
Section 1.03 Purpose of Plan. The Plan is a retiree health care
benefit plan under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and is intended (i) to qualify as a nondiscriminatory
self-funded medical expense reimbursement plan under Section 105(e) of the
Internal Revenue Code of 1986, as amended (the "Code"); and (ii) to set forth
the terms and conditions for the payment or reimbursement of all or a portion
of specified Covered Expenses for health care.
Section 1.04 Applicability of Plan. The Plan as amended and restated
shall apply to eligible individuals who are Retirees, or enrolled Dependents of
such Retirees, on or after January 1, 1994. The rights and benefits, if any,
of an eligible individual shall be determined by the provisions of the Plan in
effect for that individual at the time the charge that comprises the health
care benefits claim is Incurred.
Section 1.05 Carryover of Plan Year or Calendar Year Limitations on
Health Care Benefits. Any Plan Year or calendar year limitations, including
but not limited to, annual Deductibles, Copayments, and specific benefit
limitations that have been satisfied for the Plan Year or the calendar year
under the Galileo International Medical, Dental and Vision Care Plan, during
the Plan Year in which an eligible employee or his eligible dependents cease
<PAGE> 6
participation in the Galileo Medical, Dental and Vision Care Plan and begin
participation in this Plan, shall be carried over from the Galileo Medical,
Dental and Vision Care Plan for that Plan Year or calendar year and applied to
this Plan for the remainder of that Plan Year or calendar year.
Section 1.06 Summary Plan Description. Summary Plan Description
booklets shall be furnished by the Plan Administrator to each Retiree setting
forth, in summary form, the essential features of the Plan. In the event of
any inconsistency between the summary plan description booklet and the specific
provisions of this Plan or other contracts maintained in conjunction with this
Plan, this Plan document or other contracts shall govern.
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ARTICLE II
CONSTRUCTION AND DEFINITIONS
Section 2.01 Definitions. Whenever used in the Plan, the following
words and phrases shall have the respective meanings specified in this Article
unless the context plainly requires a different meaning, and when the defined
meaning is intended the term shall be capitalized in the Plan.
(a) "Accident" means a sudden, unforeseen and unintended event
which results in bodily injury sustained independently of all other causes.
(b) "Affiliated Employer" means any partner of the Employer and
any other entity owned in whole or in part by the Employer or by any such
partner, but only for such period of time, if any, as such partner or other
entity adopts and maintains the Plan for the benefit of its eligible Retirees.
(c) "Applicant" means a Participant by whom or on whose behalf a
claim for Benefits under the Plan has been filed.
(d) "Benefit(s)" means that amount payable under the Plan with
regard to Covered Expenses as set out herein. All Benefits offered under the
Plan are available to Early Retirees who elect to participate, provided they
satisfy the eligibility criteria specified for the particular Benefit.
Medicare Retirees who elect to participate are eligible for the same Benefits
as Early Retirees, except such Benefits are available to them solely on a basis
secondary to Medicare, pursuant to Section 4.03(b) and Article VIII.
Dependents who have not yet attained age 65 (unless otherwise eligible
for Medicare) shall be eligible for the same Benefits for which Early Retirees
are eligible, regardless of whether the Retiree who enrolled that Dependent is
an Early Retiree or Medicare Retiree. However, upon attainment of age 65 (or
earlier Medicare eligibility) by any Dependent, that Medicare Dependent shall
only be eligible for the same Benefits for which Medicare Retirees are eligible
(i.e., Coverage secondary to Medicare).
(e) "Birthing Center" means a facility which provides a homelike
setting for the purpose of childbirth, and which meets all of the following
requirements:
1. It is licensed as a Birthing Center in accordance with the
laws of the state in which the facility is located;
2. It is primarily staffed, equipped and operated for the purpose
of providing antepartum (before labor), intrapartum (during
labor) and postpartum (after labor) care, as well as care of
the newborn child;
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<PAGE> 8
3. It is operated under the direct supervision of a Physician
specializing in obstetrics and gynecology who is directly
responsible for the care of the patient and newborn child;
4. It provides 24-hour nursing service by Nurses or Nurse
Midwives;
5. A Physician specializing in obstetrics or a Nurse Midwife must
be present at childbirth;
6. It must provide life supporting equipment and capability
pending transfer to a Hospital;
7. It must have a written agreement with a Hospital to accept
complicated or life-threatening cases involving the mother or
child;
8. It must provide education to the Participant to prepare for
the delivery; and
9. It must maintain written records of all pertinent facts
regarding the care of both the mother and the newborn child.
(f) "Board" means the Supervisory Board of Galileo.
(g) "COBRA" means the Consolidated Omnibus Budget Reconciliation
Act of 1985, Public Law 99-272, Title X, as amended from time to time.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the applicable regulations promulgated thereunder.
(i) "Confinement" means the period beginning on the day a
Participant enters a Hospital or similar health care institution as a
registered bed patient upon the recommendation of a Physician and ending on the
day the Participant leaves the respective Hospital or similar health care
institution or, if the Participant is transferred from one Hospital or similar
health care institution to another respective facility, the day on which the
Participant leaves the last Hospital or similar health care institution.
Successive Hospital confinements shall be deemed to be continuous and shall
constitute a single confinement if discharge from and re-admission to a
Hospital or similar health care institution occurs within a ninety (90) day
period.
(j) "Contribution" means the amount, if any, as established by
Galileo from time to time which must be paid by or on behalf of Retirees and
Dependents in order to obtain Coverage under the Plan.
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<PAGE> 9
(k) "Copayment" means that portion of Covered Expenses
paid by the Participant as compared to the portion of Covered Expenses paid by
the Plan, as set out in the Schedule of Benefits.
(l) "Cosmetic Surgery" means any type of plastic, reconstructive
or cosmetic surgical procedure which does not substantially improve function
and is performed primarily to improve, enhance or alter appearance.
(m) "Coverage" means those Benefits provided by this Plan or
participation in this Plan with respect to a Retiree or an enrolled Dependent.
(n) "Covered Expenses" means the Reasonable and Customary charges
that are Medically Necessary for the care and treatment of an Injury or Illness
of a Participant, as determined by the Plan Administrator in its sole
discretion. If a charge is not specified in the Plan, it is not a Covered
Expense. Covered Expenses shall be adjusted according to the applicable
provisions of the Plan.
(o) "Custodial Care" means care consisting of services and
supplies provided to a Participant, in or out of an institution, whether or not
the Participant is disabled, and no matter by whom recommended or furnished,
primarily to train or assist the Participant in daily living activities, or to
maintain rather than improve a level of function and which is not reasonably
expected to substantially improve the Participant's medical condition.
(p) "Deductible" means a specific amount of Covered Expenses that
must be paid by a Participant before Benefits are payable under the Plan with
respect to any applicable period prescribed in the Plan and as set forth in the
Schedule of Benefits.
(q) "Dependent" means:
1. The legal spouse, if any, to whom the Retiree was married at
the time of his retirement, unless then legally separated;
2. Unmarried children of a Retiree who were born prior to the
Retiree's retirement, are primarily dependent upon the Retiree
for financial support and are:
(A) Younger than nineteen (19) years of age; or
(B) At least nineteen (19) but younger than twenty-five
(25) years of age and are registered, full-time
students at an accredited educational institution; or
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<PAGE> 10
(C) Physically or mentally incapacitated without regard
to age, so as to be incapable of supporting
themselves, provided that satisfactory proof of the
disability is submitted to the Employer:
(i) within thirty-one (31) days after the date
coverage would terminate under (A) or (B),
and
(ii) at the Employer's request, periodically (but
not more frequently than once in each
calendar year) thereafter.
Children means natural children and legally adopted children,
including children placed with a Retiree for adoption at the
time of the Retiree's retirement, which means the assumption
and retention by the Retiree of a legal obligation for total
or partial support of such child in anticipation of the
adoption of such child. Children also includes step-children
of a Retiree and children related to the Retiree by blood or
marriage for whom the Retiree (or Retiree's spouse) is the
legal guardian and who live with the Retiree in a normal
parent-child relationship and depend on the Retiree for
primary support. Children does not include any other children
residing with the Retiree; including, but not limited to,
foster children, children over whom the Retiree has a power of
attorney, children being cared for by the Retiree under
temporary court order, and children from a prior marriage who
do not reside with the Retiree unless the Retiree is required
to provide medical coverage pursuant to a qualified medical
child support order as defined in ERISA Section 609.
"Dependent" does not mean
1. A former spouse of a Retiree;
2. A spouse or child of a Retiree on active duty in any branch of
military service;
3. A Retiree or employee of the Employer;
4. Grandchildren, parents, grandparents, or any other relations
not specifically set forth above.
5. A spouse to whom a Retiree becomes married after his
retirement commences; or
6. A person who first becomes a Retiree's child after the
Retiree's retirement commences unless the Retiree is required
to provide medical coverage pursuant to a qualified medical
child support order as defined in ERISA Section 609.
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A Dependent shall be eligible to participate in only one group health
care plan maintained by an Employer and shall be considered a Dependent of only
one Retiree.
(r) "Durable Medical Equipment" means equipment that is:
1. Made to withstand prolonged use;
2. Made for and mainly used in the treatment of Illness or
Injury;
3. Suited for use in the home; and
4. Not normally of use to persons who do not have a Illness or
Injury.
(s) "Effective Date" means January 1, 1994, the date on which the
provisions of this amended and restated Plan became effective.
(t) "Employer" means Galileo and any Affiliated Employer that
adopts the Plan with the written approval of the Board.
(u) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
(v) "Experimental" means that the medical use of a service or
supply is still under study and that it is not yet recognized throughout the
medical profession in the United States as safe and effective for diagnosis or
treatment under the accepted standards of medical practice as determined by the
Food and Drug Administration (FDA) and for the American Medical Association's
Council of Medical Specialty Societies (AMA). This includes, but is not
limited to, all phases of clinical trials; all treatment protocols based upon
or similar to those used in clinical trials; any drugs approved by the FDA
under its Treatment Investigational New Drug regulation; and Federal Food and
Drug Administration-approved drugs used for unrecognized treatment indications.
If a drug, service, or supply is not rated by the FDA and/or AMA, the
Plan Administrator shall rely on the prevailing medical opinion regarding the
Experimental, or medical standards status of the drug, service, or supply as
found in the commissioned studies, opinions, or references of the medical
associations or federal government agencies that have the authority to approve
medical testing of the drug, service, or supply.
(w) "Family" means the Retiree and all his Dependents covered,
from time to time, under the Plan.
(x) "Free-Standing Surgical Center" means an institution which
meets all of the following requirements:
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<PAGE> 12
1. It has a medical staff of Physicians and Nurses;
2. It maintains at least two operating rooms and one recovery
room;
3. It maintains diagnostic laboratory and x-ray facilities;
4. It has equipment for emergency care;
5. It has a blood supply;
6. It maintains medical records;
7. It has agreements with Hospitals for immediate acceptance of
patients who need Hospital Confinement on an inpatient basis;
and
8. It is licensed in accordance with the law of the state in
which the facility is located.
(y) "Galileo" means Galileo International Partnership, which prior
to September 16, 1993, was known as Covia Partnership.
(z) "Galileo International Medical, Dental and Vision Care Plan"
means the Galileo International Partnership medical plan for active employees,
as amended from time to time.
(aa) "Geographic Area" means the general locality in which the
services or supplies are actually provided or such greater area as is necessary
to obtain a representative cross-section of charges for a like service or
supply, but in no event shall such area be less than the area defined by the
first three digits of the postal zip code.
(bb) "Home Health Aide" means an individual employed by a Home
Health Care Agency who has been trained to perform procedures that are an
extension of professional nursing and therapy services. The assignment of a
Home Health Aide to a Participant must be made in accordance with a plan of
treatment which indicates that the services of the Aide are needed to achieve
the medically desired results.
(cc) "Home Health Care Agency" means a public or private
organization specializing in providing medical care and treatment in the home
that meets the following requirements:
1. It is primarily engaged in providing skilled nursing and other
therapeutic services;
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<PAGE> 13
2. It has policies established by a professional group, including
at least one Physician and one registered graduate nurse
associated with the organization;
3. It maintains complete medical records on each patient;
4. It has a full-time administrator; and
5. It is licensed in accordance with the laws of the state in
which the facility is located.
(dd) "Hospice" is a facility or program of care that
provides counseling and medical services, and may provide Room and Board, to a
Terminally Ill Participant and that also meets all of the following tests:
1. It is licensed in accordance with the laws of the state in
which the facility is located;
2. It provides service 24 hours a day, 7 days a week;
3. It is under the direct supervision of a Physician;
4. It has a nurse coordinator who is a Registered Nurse (R.N.);
5. It provides counseling services by a licensed social worker or
a licensed pastoral counselor;
6. It has a full-time administrator;
7. It maintains written records of services provided to patients;
and
8. Its primary purpose is to provide hospice services.
(ee) "Hospital" means a legally operated institution that is
accredited by the Joint Commission on Accreditation of Hospitals, or by the
American Osteopathic Association and provides inpatient diagnostic and
therapeutic facilities on the premises for surgical and medical diagnosis,
treatment, and care of injured and sick persons under the supervision of a
staff of Physicians and with 24-hour nursing service. Hospital does not
include Skilled Nursing Facilities, Treatment Facilities, rest homes, homes for
the aged or other facilities providing Custodial Care.
(ff) "Household" means persons sharing a common abode with the
Participant as part of a single family unit, including those related by blood,
marriage or adoption, domestic
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<PAGE> 14
employees and others who live as part of a family unit, including unmarried
children away from the common abode who are regularly attending school on a
full-time basis.
(gg) "Illness" means a condition, sickness or disease that is not
due to an Injury, requires treatment by a Physician or other health care
provider whose services are covered by the Plan, and results in an expense
Incurred by a Participant while covered under this Plan. Any condition,
sickness or disease arising from an occupational Illness is excluded from
coverage under the Plan.
(hh) "Incurred" or "Incurs" means the date, on or after the
Effective Date, on which a service or supply was rendered or furnished and not
when a Participant or individual is formally billed or charged for, or pays for
the service or supply. In the absence of due proof to the contrary, when a
single charge is made for a series of identical services, each service shall be
considered to bear a pro rata share of the charge.
(ii) "Injury" means trauma or damage to the body occurring as a
result of an Accident, either directly or indirectly, along with other related
conditions sustained by a Participant while covered under this Plan. Any
condition arising from an occupational Injury or Accident is excluded from
coverage under the Plan.
(jj) "Intensive Care/Coronary Care Unit" means a special ward in a
Hospital that:
l. Has been designated as a special care unit by the Hospital;
2. Is maintained on a 24-hour basis;
3. Is operating solely for the accommodation of acutely ill
patients; and
4. Is equipped to provide those nursing and medical services
which are not available in the Hospital's surgical recovery
room or regular public, semi-private or private wards;
provided the patient's Confinement in the Intensive
Care/Coronary Care Unit is Medically Necessary.
(kk) "Maximum Benefit" means the maximum amount of Covered Expenses
per Participant that the Plan shall pay as set forth in the Schedule of
Benefits.
(ll) "Out-of-Pocket Expense" means the amount each Participant
shall pay in Copayments each Plan Year, after satisfying any applicable
Deductible amounts, as set forth in the Schedule of Benefits.
(mm) "Medical Emergency" means a sudden Illness or Injury in which
severe symptoms occur unexpectedly and which in the absence of immediate
medical attention, could reasonably be expected to result in death or total and
permanent disability.
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(nn) "Medically Necessary" means those services and supplies that
are reasonable and necessary for the diagnosis and treatment of an Illness or
Injury and that could not have been omitted without adversely affecting the
Participant's medical condition or the quality of the health care rendered
under generally accepted professional standards of medical practice at the time
and place the expense is Incurred. The fact that a procedure or level of care
is prescribed by a Physician does not mean that it is medically reasonable or
necessary or that it is covered under this Plan. Diagnostic testing or
procedures for preventive purposes only are not considered Medically Necessary.
The final determination as to whether a service or supply is Medically
Necessary shall be made by the Plan Administrator in its sole discretion.
Services or treatments which are not Medically Necessary shall
include, but not be limited to, the following:
1. Procedures that are Experimental or of unproven value or of
questionable current usefulness;
2. Procedures that tend to be redundant when performed in
combination with other procedures;
3. Diagnostic procedures that are unlikely to provide a Physician
with additional information when they are used repeatedly;
4. Procedures that are not ordered by a Physician or that are not
documented in the patient's medical records;
5. Procedures that are not commonly or broadly accepted
professionally in the United States as effective, appropriate
and essential, based upon recognized standards of the health
care specialty involved;
6. Procedures that can be performed with equal efficiency at a
lower level of care; or
7. Services and supplies furnished for the personal comfort or
convenience of the patient.
(oo) "Medicare" means the program of medical care benefits provided
under Part A and Part B of Title XVIII of the Social Security Act of 1965, as
amended from time to time.
(pp) "Nurse" means a Registered Graduate Nurse (RN), or a Licensed
Practical Nurse (LPN) who is licensed to perform nursing services by the state
in which the person performs such service and is performing within the scope of
that license at the time and place services are rendered, other than a person
who ordinarily resides in the Participant's home, or who is the spouse, child
or parent of the Participant or the Participant's spouse.
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(qq) "Nurse Midwife" means a person who is licensed as a Nurse
Midwife in accordance with the laws of the state in which the person performs
midwifery services, and who is acting within the scope of that license while
providing such services.
(rr) "Participant" means a Retiree or a Dependent who is eligible
to participate and who is receiving Coverage under the Plan. A Dependent of a
Retiree shall be a Participant only if Dependent coverage for him has been
elected by the participating Retiree.
(ss) "Physician" means a person who is a doctor of medicine or
doctor of osteopathy who is legally qualified and licensed to practice
medicine, surgery or obstetrics at the time and place services are rendered,
other than a person who ordinarily resides in the Participant's home, or who is
the spouse, child or parent of the Participant or the Participant's spouse.
(tt) "Plan" means the Galileo International Retiree Medical Plan,
as set forth in this document including the Schedule of Benefits that is
incorporated into the Plan by this reference, and as it may be amended from
time to time.
(uu) "Plan Administrator" means Galileo, or such persons or
committee appointed as such from time to time by the Board in accordance with
Article XII.
(vv) "Plan Year" means the twelve (12) month calendar year period
beginning January 1 and ending on the next December 31.
(ww) "Reasonable and Customary" means the charges made by a
Physician or other health care provider that are not in excess of the general
level of charges made by others rendering or furnishing such services or
supplies within the same Geographic Area in which the charge is Incurred for
Illness or Injury comparable in nature and severity to the Illness or Injury
being treated. If the Reasonable and Customary charge for a service or supply
cannot be readily determined because of the unusual nature of the service or
supply, the following factors will determine to what extent the charge is
reasonable:
1. The complexity involved;
2. The degree of professional skill required; and
3. Other pertinent factors as determined by the Plan
Administrator in its sole discretion, based on criteria
uniformly applied.
The determination of whether a charge is Reasonable and Customary
shall be made by the Plan Administrator in its sole discretion, based on
criteria uniformly applied.
(xx) "Retiree" means an eligible former regular full-time or
regular part-time employee of the Employer (excluding any employee whose terms
of employment with the
12
<PAGE> 17
Employer were governed by a collective bargaining agreement that does not
provide for Coverage under the Plan) who:
1. Was participating in the Galileo International Medical, Dental
and Vision Care Plan as an eligible employee on the date
immediately preceding the employee's retirement date;
[CONFIRM] and
2. Has retired by terminating employment with the Employer at any
time after:
(i) having attained age 55 and completed 10 years of
service (determined by using the individual's years
of vesting service standing to the individual's
credit under the tax-qualified defined benefit
pension plan maintained by the individual's
Employer); or
(ii) incurring a permanent and total disability
(determined under the tax-qualified defined benefit
pension plan maintained by the individual's Employer)
after having attained age 50 and completed 10 years
of service.
The Plan covers two classes of Retirees, and the word Retiree shall
refer to both classes unless otherwise specified in the Plan. An "Early
Retiree" is a Retiree who has not yet attained age 65 or earlier Medicare
eligibility. A "Medicare Retiree" is a Retiree who is eligible for Medicare by
age or condition.
(yy) "Room and Board" means all charges commonly made by a Hospital
or Treatment Facility at a daily or weekly rate for room and meals and for all
general services and activities for essential to the care of registered bed
patients.
(zz) "Schedule of Benefits" means the schedule(s) established by
Galileo, attached hereto, and incorporated herein, as amended from time to
time, and which provide further explanation and terms of the Benefits offered
under the Plan from time to time.
(aaa) "Skilled Nursing Facility" means an institution that:
1. Is operated primarily to provide skilled nursing care and
treatment for patients convalescing from Illness or Injury;
2. Provides 24-hour nursing services under the full-time
supervision of a Physician or Registered Graduate Nurse;
3. Maintains daily clinical records on each patient;
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<PAGE> 18
4. Provides appropriate methods for dispensing and administering
drugs and medicines;
5. Has a written agreement with a Hospital to accept patients
requiring inpatient treatment; and
6. Is licensed in accordance with the laws of the state in which
the facility is located.
Skilled Nursing Facility does not include Treatment Facilities, clinics, rest
homes, homes for the aged, or other facilities providing Custodial Care.
(bbb) "Terminally Ill" means a Participant with a life expectancy of
six (6) months or less, as certified by a Physician.
(ccc) "Treatment Facility" means, as applied to the treatment of
alcoholism or drug abuse, an institution, or a distinct part of an institution
that:
1. Is operated primarily to provide a program for diagnosis,
evaluation, and effective treatment of alcoholism or drug
abuse;
2. Meets any applicable licensing standards established by the
jurisdiction in which the facility is located;
3. In regard to inpatient residential treatment, is licensed as
an intermediate residential facility rather than a long-term
care facility; and
4. Is JCAH (Joint Commission on Accreditation of Hospitals)
accredited.
Section 2.02 Gender and Number. Except as otherwise clearly
indicated by the context, whenever used in the Plan a masculine pronoun shall
be deemed to include the feminine and neuter genders, words used in the
singular shall be deemed to include the plural and words used in the plural
shall be deemed to include the singular, as circumstances make such meanings
applicable.
Section 2.03 Headings. All headings and captions used in this Plan
are used as a matter of convenience and for reference only, and in no way shall
they be considered in determining the scope or intent of the Plan or in
interpreting or construing any Plan provisions.
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ARTICLE III
PLAN PARTICIPATION
Section 3.01 Eligibility.
(a) Retirees. Each Retiree shall be eligible to participate in
the Plan commencing as of the later of (i) the Plan's Effective Date, or (ii)
the date the individual becomes a Retiree.
(b) Dependents. Each Dependent shall be eligible to participate
in the Plan commencing as of the later of (i) the Plan's Effective Date, (ii)
the date the Retiree becomes a Participant, or (iii) the date the individual
becomes a Dependent.
Section 3.02 Enrollment and Effective Date.
(a) Retirees. Participation by a Retiree shall be voluntary and
shall depend upon the Retiree timely making the required Contribution for
Coverage under the Plan. To participate in the Plan, each Retiree must
complete and submit to the Plan Administrator an enrollment form, and furnish
to the Plan Administrator such other information that it shall require, within
thirty-one (31) days of the date the Retiree satisfies the eligibility
requirements set forth in Section 3.01(a) above. Upon proper enrollment,
Coverage shall become effective for the Retiree on the date described in
Section 3.01(a).
A Retiree who does not enroll for Coverage within the thirty-one (31)
day period after the Retiree first becomes eligible to participate in the Plan,
shall be permitted to enroll for Retiree Coverage prospectively only as of the
first day of any calendar month after submitting a proper enrollment form and
such other information as the Plan Administrator may require, and subject to
the pre-existing condition limitations under Section 6.02, if applicable.
(b) Dependents. A Retiree must enroll his Dependents in the Plan
for Dependent Coverage to become effective. Coverage becomes effective for any
Dependent on the date described in Section 3.01(b) provided the Plan
Administrator receives a properly completed enrollment form, and such other
information as the Plan Administrator may require, on behalf of the Dependent
within thirty-one (31) calendar days of the date the Dependent first becomes
eligible for Coverage.
A Retiree who does not enroll a Dependent for Coverage within the
thirty-one (31) day period after the Dependent first becomes eligible to
participate in the Plan, shall be permitted to enroll such Dependent for
Coverage under the Plan prospectively only as of the first day of any Plan Year
after submitting a proper enrollment form and such other information as the
Plan Administrator may require, and subject to the pre-existing condition
limitations under Section 6.02, if applicable.
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<PAGE> 20
Notwithstanding the foregoing, Coverage for a Dependent, other than a
newborn, who is confined to a Hospital or other health care institution when
Coverage under the Plan would otherwise become effective, shall begin on the
date the Dependent is released from the Hospital or other health care
institution.
Section 3.03 Re-enrollment.
(a) Retirees. A Retiree whose Coverage under the Plan is
cancelled may later prospectively re-enroll for Coverage one time only, as of
the first day of any calendar month, by submitting a proper enrollment form and
such other information as the Plan Administrator may require, and subject to
the pre-existing condition limitations under Section 6.02, if applicable.
Any Retiree who is not participating in the Plan at the time he
attains Medicare eligible age or incurs an involuntary termination of group
health plan coverage under a different plan, shall be permitted to enroll in
this Plan effective as of the date the Retiree either attains Medicare eligible
age or incurs said termination of other coverage, as the case may be, provided
the Retiree submits a proper enrollment form and such other information as the
Plan Administrator may require, and subject to the pre-existing condition
limitations under Section 6.02, if applicable. Any enrollment by a Retiree
under this paragraph shall not count against the one time limit on voluntary
re-enrollment under the preceding paragraph.
(b) Dependents. A Retiree who cancels Coverage for a Dependent
shall not be permitted to re-enroll that Dependent for Coverage earlier than
the start of any Plan Year that commences at least six (6) months after the
date as of which the Coverage was cancelled. Any Dependent for whom Coverage
is cancelled by the Retiree may not be re-enrolled for Coverage more than one
time, and shall be subject to the pre-existing condition limitations under
Section 6.02, if applicable.
Section 3.04 Enrollment of Medicaid Eligible Persons. In enrolling a
Retiree or Dependent or in determining or making any payments for benefits of a
Participant, the fact that the individual is eligible for or is provided
medical assistance under a state plan for medical assistance approved under
Title XIX of the Social Security Act shall not be taken into account. Payment
for benefits with respect to a Participant under the Plan shall be made in
accordance with any assignment of rights made by or on behalf of such
Participant as required by a state plan for medical assistance approved under
Section 1912(a)(1)(A) of Title XIX of the Social Security Act ("Medicaid"). To
the extent payment has been made under Medicaid medical assistance, in any case
in which the Plan has a legal liability to pay for items or services
constituting such assistance, payment for benefits under the Plan shall be made
in accordance with any state law that provides that the state has acquired the
rights with respect to the Participant to such payment for items or services.
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ARTICLE IV
PAYMENT OF BENEFITS
Section 4.01 Unfunded Plan. Unless otherwise authorized in this
Section, benefits under the Plan shall be paid solely by Galileo from any
available general assets. No other person, including any Plan fiduciary, any
Employer, and any officer, director, partner, employee or agent of any
Employer, shall have any responsibility or liability to provide any benefits
payable under the Plan, even if Galileo's general assets become insufficient.
No Participant shall acquire by reason of the Plan any right in or title to any
assets, funds, or property of any Employer. No officer, director, partner,
employee or agent of any Employer guarantees in any manner the payment of Plan
benefits. In addition, all of the terms of the Plan, as the same may be
amended from time to time, shall be applicable to a Participant who exercises
his COBRA rights to continue Plan Coverage.
Section 4.02 Employer and Retiree Contributions.
(a) Employer Contributions. Each Employer shall make
Contributions to the Plan provided, however, such Contributions may be
suspended, increased or decreased at any time for any reason as determined by
Galileo in its sole discretion.
(b) Retiree Contributions. A Retiree as a condition of Coverage
under this Plan, shall be required to agree in writing, prior to becoming
covered under the Plan, to make Contributions to the Plan; provided, however,
Galileo reserves the right to increase or decrease such Retiree Contributions
at any time for any reason.
The Retiree's share of such cost may be identified by Galileo as a
dollar amount or percentage of such cost, and that share may vary from year to
year in the discretion of Galileo unless otherwise specified herein.
Contributions are due monthly in advance.
Retiree Contributions shall become general assets of Galileo as
collected and no contributing Retiree (nor his Dependents) shall have any claim
or right to such Contributions once made or to any earnings thereon.
Contributions shall be aggregated and made available for all Plan liabilities,
so any Participant's Benefits shall not be limited by the amount of
Contributions made on his behalf for the Plan Year.
Section 4.03 Amounts of Benefits.
(a) Subject to all of the provisions and limitations of the Plan,
the Plan will pay Covered Expenses for an Injury or Illness Incurred by a
Participant during a Plan Year. The Covered Expenses payable under the Plan
are solely for services or supplies described in the Plan, and are subject to
the limitations described in the Plan.
(b) All the Benefits available to Early Retirees and non-Medicare
Dependents shall be available (subject to the further provisions of the Plan)
to Medicare Retirees and Medicare Dependents, except such Benefits shall be
secondary to Medicare as provided in Article VIII. In no event shall the
Benefits payable to a Participant for a calendar year exceed the amount that
would have been paid by the Plan in the absence of Medicare.
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ARTICLE V
COVERED EXPENSES
Section 5.01 Benefits Payable. If a Participant Incurs Covered
Expenses for medical services, treatment or supplies as set forth herein, the
Plan shall pay the appropriate percentage of the Reasonable and Customary
charges as specified in the Schedule of Benefits after any applicable
Deductible amount is satisfied by the Participant; subject, however, to the
further provisions of this Plan. Covered Expenses shall only include the
following types of medical services performed by or under the direction of a
Physician and which are Medically Necessary:
1. Hospital Room and Board charges:
(a) limited to the Hospital's charge for the most common
semi-private room accommodations;
(b) in the event of Confinement in a private room,
Benefits shall be determined on the basis of the
Hospital's most common semi-private room allowance,
but up to the Hospital's most common charge for
private room accommodations shall be covered if the
private room is prescribed as Medically Necessary by
the Physician; and
(c) including the Hospital's charge for Confinement in an
Intensive Care/Coronary Care Unit, modified care or
other similar special care facilities when such
confinement is Medically Necessary for the treatment
of an Illness or Injury.
2. Miscellaneous Hospital charges (excluding professional fees
unless otherwise specified) for services or supplies which are
Medically Necessary for the diagnosis and treatment of an
Illness or Injury and which normally would not (and are not)
otherwise included in the Hospital's Room and Board charge:
(a) general nursing services;
(b) use of operating room, delivery room, treatment rooms
and equipment;
(c) all drugs and medicines used during hospitalization
which are listed in the official formularies at the
time of use and which are commercially available for
purchase by the Hospital;
(d) dressings, ordinary splints, and plaster casts;
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(e) the following services when rendered as a regular
Hospital service customarily provided by the
Hospital, including laboratory examinations, x-ray
examinations, electrocardiograms, basal metabolism
tests, speech or physical therapy, oxygen, or other
gasses (including their administration), anesthesia,
including anesthesia administration by a Physician
or certified registered nurse anesthetist,
administration of blood and blood plasma,
intravenous injections and solutions, therapeutic
services; and
(f) nursery charges and professional fees for a well
baby while the Retiree or Dependant spouse is
confined in a Hospital for maternity care due to
pregnancy, resulting in child birth, or related
complications.
3. Professional ambulance charges from a Hospital or a licensed
ambulance service, including air-ambulance to transport the
Participant to or from a Hospital.
4. Surgical services, subject to (d) below, consisting of:
(a) operative and cutting procedures (including necessary
pre- and post-operative care) which are Medically
Necessary for the treatment of an Illness or Injury,
and which are performed by a Physician in or out of a
Hospital;
(b) the following types of organ transplants:
(i) cornea;
(ii) kidney;
(iii) bone marrow;
(iv) heart valve;
(v) muscular-skeletal;
(vi) parathyroid;
(vii) liver; and
(viii) additional organ transplants as approved by
the Plan Administrator in its sole
discretion; and
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<PAGE> 24
(c) dental and/or orthodontic surgery, including surgery
for temporomandibular joint dysfunction (TMJ);
provided, however, that
(d) if two or more surgical procedures are performed
through the same incision, the major procedure will
be payable at 100% of the Reasonable and Customary
charge for such procedure and all other procedures
will be payable at 50% of the Reasonable and
Customary charge for those procedures, and when an
incidental procedure is performed through the same
incision, a benefit will be payable only for the
major surgical procedure.
5. The fee for one visit each day by a Physician in charge of the
case to a Participant who is confined to a Hospital because of
an Illness or Injury; provided such visit is Medically
Necessary for the treatment of the Participant's medical
condition, but no benefit is payable for any treatment given
on or after the date a surgical operation is performed on the
Participant, if such treatment is provided by the surgeon.
6. Diagnostic x-ray and laboratory services:
(a) when Medically Necessary to diagnose an Illness or
Injury for which definite symptoms are present;
(b) to start, maintain or change a treatment plan when
performed in the outpatient department of a Hospital;
or
(c) when performed by a Physician elsewhere than in a
Hospital, as follows:
(i) diagnostic x-ray and imaging procedures,
including but not limited to:
(A) ultrasound;
(B) chest x-ray;
(C) CT studies; and
(D) upper GI series.
(ii) clinical laboratory procedures, including but
not limited to:
(A) blood and urine analysis;
(B) electrocardiograms;
(C) allergy testing; and
(D) routine pap smears.
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7. If a Participant is receiving care through a recognized
Hospice Care Program in lieu of hospitalization, Benefits
shall be provided for Medically Necessary care (both on an
inpatient and outpatient basis) and supportive services
during the final stages of Illness for a Participant who has
been diagnosed as Terminally Ill.
(a) Hospice Benefits shall include the Reasonable and
Customary charges for the following medical
services:
(i) inpatient expenses for services and supplies
during Confinement which is part of the Hospice
program;
(ii) medication and supplies which would have been
provided in the Hospital;
(iii) services of a Physician or Nurse in developing a
Hospice Care program;
(iv) Physician calls in the office, home, clinic,
outpatient department or elsewhere;
(v) services of a Nurse;
(vi) rental of Durable Medical Equipment, or purchase
if cost-effective; and
(vii) Home Health Aide services providing supportive
services in the home under the supervision of a
Nurse or licensed therapist.
(b) Hospice Benefits shall not include:
(i) any volunteer services which would normally be
provided free of charge;
(ii) legal and/or financial planning;
(iii) counseling by clergy or any volunteer group;
(iv) bereavement counseling;
(v) services of an immediate relative or member of
the Participant's Household;
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<PAGE> 26
(vi) charges not made or ordered by the attending
Physician; and
(vii) charges for which the family would not legally have
to pay if there were no Coverage.
8. If a Participant receives medical services from an approved
Home Health Care Agency which are determined to be Medically
Necessary for the treatment of an Illness or Injury, and are
recommended by a Physician and provided in lieu of
hospitalization, Home Health Care Benefits shall be provided,
for up to thirty (30) days per confinement, subject to the
limitations set forth below.
(a) Home Health Care Benefits shall be limited to
Reasonable and Customary charges for the following
medical services:
(i) medication and supplies which would have
been provided in the Hospital;
(ii) services of a Physician or Nurse in
developing a Home Health Care plan;
(iii) Physician calls in the office, home,
clinic or out-patient department;
(iv) services of a Nurse;
(v) services of therapist performing physical,
occupational, speech or psycho-social
therapy;
(vi) rental of Durable Medical Equipment, or
purchase if cost-effective; and
(vii) supportive services of a Home Health Aide
in the Participant's home under the
supervision of a Nurse or licensed
therapist.
(b) Home Health Care Benefits shall not include:
(i) any volunteer services which would normally
be provided free of charge;
(ii) legal and/or financial planning;
(iii) counseling clergy or any volunteer group;
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<PAGE> 27
(iv) services of an immediate relative or member of the
Participant's Household;
(v) charges not made or ordered by the attending
Physician; and
(vi) charges for which the family would not legally have
to pay if there were no Coverage.
9. Professional services by a Physician.
10. Services of a Nurse (who is not a member of the Participant's
Household) for professional nursing services.
11. Medical supplies, including casts, bandages, splints, trusses,
crutches, dressings and orthopedic shoes (limited to one pair
per calendar year).
12. Rental of Durable Medical Equipment, such as an artificial
respirator, oxygen, hospital bed or wheelchair, if Medically
Necessary and recommended by a Physician. Purchase will be
made if more cost-effective. Charges for more than one item
of equipment for the same or similar purpose will not be
covered. Charges for repair of purchased equipment will be
covered if there is a change in the patient's medical
condition or, if it is more cost effective to replace the
equipment rather than repair or rent like-equipment, charges
for the replacement of purchased equipment will be covered.
13. Diabetic supplies, such as insulin, syringes and test tabs.
14. Injections prescribed by a Physician, including allergy shots.
15. Drugs and medicines (excluding vitamins) which require a
written prescription by a Physician and which are dispensed by
a licensed pharmacist.
16. Charges for the first prosthetic devices furnished to replace
all or part of any internal body organ or external body part
that is lost or impaired as the result of disease or Injury,
including but not limited to artificial limbs, eyes, contact
lenses following cataract surgery, an external-breast
prosthesis (and the first bra made solely for use therewith),
or a breast implant furnished after a mastectomy, and other
prosthetic devices including necessary adjustments, repairs
and replacements (excluding adjustments, repairs and
replacements to dental appliances and excluding replacement of
cataract lenses with no prescription change); however,
replacement will be covered only if it is required because of
a change in the patient's physical condition, it will cost
less to replace than to repair, or the existing prosthesis
cannot be made serviceable.
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17. Blood and other fluids injected into the circulatory system,
and not donated or replaced.
18. Therapeutic services when Medically Necessary for the
diagnosis or treatment of a medical condition when performed
in the outpatient department of a Hospital or by a Physician
elsewhere than in a Hospital, including but not limited to:
(a) therapeutic x-ray treatment utilizing any form of
radiant energy such as x-ray, radium, radon,
radioactive isotopes, etc.; and
(b) chemotherapy for proven malignancies.
19. Physical therapy rendered by a licensed physical or
occupational therapist but only for medical rehabilitation
that is expected to improve the Participant's condition or
prevent further deterioration and is Medically Necessary.
20. Speech therapy, when prescribed by a Physician and provided by
a licensed or certified speech therapist, for medical
rehabilitation that is expected to restore speech to an
individual who has lost speech function (the ability to
express thoughts, speak words and form sentences) as the
result of an Illness or Injury. The following limitations
apply:
(a) Hospital inpatient benefits will not be paid if
speech therapy is the sole reason for admission;
(b) outpatient speech therapy sessions are limited to
thirty (30) per calendar year per Participant.
Additional sessions may be covered for a Participant,
if documentation of such sessions being Medically
Necessary is provided; and
(c) speech therapy benefits will not be paid for
treatment of psycho-social speech delay, behavior
problems, attention disorder, conceptual handicap, or
mental retardation.
21. Vision therapy which is Medically Necessary.
22. The services of a Physician who actively assists the operating
surgeon in the performance of such surgical services when:
(a) the Participant is Confined as an inpatient in a
Hospital;
(b) the nature of the surgical procedure requires such
assistance; and
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<PAGE> 29
(c) the assistant surgeon does not receive remuneration
from the Hospital due to his being a surgical
resident or house staff Physician;
provided, however, that the assistant surgeon's reimbursement
shall not exceed 20% of the primary surgeon's maximum
allowance.
23. Skilled Nursing Facility medical services from an approved
Skilled Nursing Facility which are determined to be Medically
Necessary for the treatment of an Illness or Injury, and are
recommended by a Physician. Skilled Nursing Facility Benefits
shall be provided, subject to the limitations set forth below:
(a) Skilled Nursing Facility Benefits shall include the
Reasonable and Customary charges for the following
medical services:
(i) the daily semi-private Room and Board
charge for each day of Confinement; and
(ii) the facility's other charges Incurred for
the service provided.
(b) Skilled Nursing Facility Benefits will be payable for
up to ninety (90) days of Confinement, for charges
Incurred during the period of Confinement, if the
period of Confinement:
(i) begins within fourteen (14) days after
discharge from the Hospital for the same or a
related cause; and
(ii) ends on the ninetieth (90th) day after the
Confinement ends or, if earlier, on the date
the Employee returns to work.
(c) Skilled Nursing Facility benefits shall not include:
(i) any charges not ordered by the attending
Physician;
(ii) any charges for Custodial Care, including
care for tuberculosis, senile deterioration,
mental deficiency or mental retardation;
(iii) charges relating to Confinement for alcohol
or substance abuse rehabilitation; and
(iv) charges relating to Confinement for
psychiatric treatment.
24. Services for or related to artificial insemination or
in-vitro fertilization limited to 50% of Reasonable and
Customary charges.
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<PAGE> 30
Section 5.02 Special Benefits.
(a) Second Opinion for Elective Surgery. If a Participant is
advised by a Physician to undergo an elective, non-emergency surgical
procedure, benefits shall be paid at 100% of the Reasonable and Customary
charge for an examination and consultation necessary for the Participant to
obtain a second opinion from a specialist in the area of medical competence
required by the diagnosed condition. This benefit is available without regard
to whether the applicable Deductible limit has yet been reached for the
calendar year.
The Plan will not cover second surgical opinions that are given by the
Physician who eventually performs the surgery.
(b) Pre-Admission Testing. The Plan covers diagnostic laboratory
x-ray tests performed on an outpatient basis solely for diagnostic purposes,
provided such tests:
(i) are accepted by the Hospital in which the scheduled inpatient
Confinement is to take place;
(ii) are performed in place of tests that would normally have been
performed during the scheduled inpatient Confinement;
(iii) are prescribed by the Physician who scheduled the inpatient
Confinement or the Physician attending the Participant during
the scheduled inpatient Confinement; and
(iv) are performed within the seven (7) day period preceding the
inpatient Confinement.
The Plan will pay benefits for such tests at 100% of the Reasonable and
Customary charge without regard to whether the applicable Deductible limit has
yet been reached for the calendar year.
(c) Pre-Admission Certification. Advance review and certification
of in-patient Hospital admissions is required of Participants as a condition
for the Plan providing Benefits in connection with any such admission at the
level stated in the Schedule of Benefits. If at least 24 hours advance
certification of the Hospital admission is not obtained, then the Plan will pay
benefits at a level of only 50% of the Reasonable and Customary charges for
Covered Expenses Incurred in excess of applicable Deductible limits in
connection with such Hospital stay, without regard to the Participant's Maximum
Out-of-Pocket Expense limit. Such reduced level of benefits will apply as well
to Covered Expenses Incurred during any portion of the
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<PAGE> 31
Hospital stay that exceeds the length of stay certified in advance as
appropriate. The treating Physician has the right to appeal to the Plan's
certification service any denial of certification as to all or any portion of
the Hospital stay which he prescribed in accordance with procedures established
by the Plan Administrator.
The pre-admission certification and appeal processes shall operate
under such procedures as the certification service shall require. Galileo
shall select and appoint, from time to time, the person or entity to provide
such certification services for the Plan; provided that such person or entity
shall serve the Plan as an independent contractor and not as an agent, employee
or representative of any Employer, the Plan Administrator, or the Plan.
Advance certification shall not be required for emergency in-patient
Hospital admissions, but certification of such admissions is required and must
be sought by or on behalf of the Participant by notifying the certification
service within 24 hours after the emergency admission. The same conditions and
limits on the Plan's benefit obligations shall apply with respect to such
required post-admission certification of emergency Hospital admissions as
applies above to non-emergency admissions.
A certification provided by the person or entity providing
certification services for the Plan pertains only to the appropriateness of the
medical care a Participant receives. A decision made to allow hospitalization,
a certain procedure, treatment, or additional care does not automatically mean
an expense shall be covered under the Plan or that a claim for benefits under
the Plan shall be approved. Any decisions made by the person or entity
providing certification services for the Plan shall not constitute an approval
by the Employer of the quality of care provided by a Physician or other health
care provider.
Section 5.03 Alcohol/Substance Abuse Care Benefits.
(a) Subject to satisfaction of the applicable Deductible and
Copayment requirements and limits set forth in the Schedule of Benefits, and to
the limits and exclusions set forth in Article VI, the Plan will pay for the
following expenses Incurred in connection with the diagnosis and treatment of a
Participant by or under the direction of a psychiatrist or a fully licensed
clinical psychologist:
1. covered inpatient services and supplies in a Hospital;
2. covered inpatient services and supplies in an intermediate
residential Treatment Facility. For purposes of these
benefits, Day Treatment (treatment rendered approximately 8
hours per day in a defined treatment program at a Treatment
Facility) will constitute inpatient care and be subject to
inpatient benefits;
3. covered outpatient therapy and testing; and
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<PAGE> 32
4. professional fees as rendered by a psychiatrist or fully
licensed psychologist. If working under the direct
supervision of a psychiatrist or fully licensed psychologist,
the Plan will also cover the fees for services rendered by a
certified social worker, limited license psychologist or
clinical psychiatric nurse specialist.
(b) Exclusions. The following alcohol/substance abuse expenses
are not covered by the Plan:
1. expenses Incurred in connection with outpatient treatment of
alcohol or substance abuse;
3. any expenses Incurred in a long-term residential care
facility, including but not limited to half-way houses; and
4. expenses Incurred for other than the Participant's initial
treatment program; Benefits will not be paid for expenses
Incurred on or after the date of the Participant's initial
treatment program for renewed or repeated treatment.
Section 5.04 Psychiatric Benefits Provision.
(a) Subject to satisfaction of the applicable Deductible and
Copayment requirements and limits set forth in the Schedule of Benefits, and to
the limits and exclusions set forth in Article VI, the Plan will pay for the
following expenses Incurred in connection with the diagnosis and treatment of a
Participant by or under the direction of a psychiatrist or a fully licensed
clinical psychologist:
1. covered inpatient services and supplies in a Hospital. For
purposes of these benefits, Day Treatment (treatment rendered
approximately 8 hours per day in a defined Hospital program)
will constitute inpatient care and be subject to inpatient
benefits;
2. covered outpatient therapy and testing; and
3. professional fees as rendered by a psychiatrist or fully
licensed psychologist. If working under the direct
supervision of a psychiatrist or fully licensed psychologist,
the Plan will also cover the fees for services rendered by a
certified social worker, limited license psychologist or
clinical psychiatric nurse specialist.
(b) Exclusions. The following expenses are not covered by the
Plan:
1. any expenses excluded under Article VI; and
2. any expenses Incurred in connection with more than the maximum
covered period of confinement set out in the Schedule of
Benefits.
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ARTICLE VI
BENEFIT LIMITS AND EXCLUSIONS
Section 6.01 General Limitations and Exclusions. The following are
general limits and exclusions for which no Benefits are payable under the
provisions of the Plan:
1. Charges for Covered Expenses Incurred by a Participant prior
to the date that Participant becomes covered under this Plan.
2. Charges in excess of Reasonable and Customary, or in excess of
any other limits (including charges which cause the
Participant to exceed aggregate lifetime benefit limits) set
forth in the Schedule of Benefits or elsewhere in the Plan.
3. Charges for any service or supply which is not Medically
Necessary for the treatment of the Participant's Illness or
Injury.
4. Charges in connection with any treatment or service not
prescribed by a Physician.
5. Charges for accrued interest on a claim payable or
Contribution made under this Plan.
6. Charges for completion of claim forms required or requested by
a Hospital or Physician.
7. Charges made by a Physician for telephone calls, interviews,
or consultations in which the Participant is not seen for
treatment.
8. Charges for a Hospital when hospitalized primarily for
diagnostic studies or physical therapy.
9. Charges in connection with hospitalization for surgical
procedures for which no Benefits are payable.
10. Charges for travel to and from the Physician's office and/or
Hospital and any other travel whether or not prescribed by a
Physician, except for Medically Necessary ambulance service.
11. Charges made by a Physician for in-Hospital medical visits in
excess of one each day to a Participant who is confined
because of an Illness or Injury which does not require
surgery.
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<PAGE> 34
12. Charges for or in connection with Experimental procedures or
treatment methods.
13. Charges for Experimental devices.
14. Charges for or related to sex change surgery or any treatment
related to gender identity.
15. Charges for routine physical or gynecological examinations.
16. Charges for routine immunizations, annual booster shots or
other preventive medicines, except routine pap smears.
17. Charges for digestive aids, vitamins, minerals, or other
dietary supplements, whether taken orally or injected,
regardless of whether such items are prescribed by a
Physician.
18. Charges in connection with acupuncture, hypnosis or
biofeedback.
19. Charges for well baby care, except routine Hospital nursery
charges made while the baby is Hospital confined, provided the
mother is also Hospital confined.
20. Charges in connection with normal maternity, complication or
otherwise, for a Dependent other than a spouse.
21. Charges for services, medication or devices utilized for the
prevention of pregnancy.
22. Charges in connection with sterilization, reversal of
sterilization procedures, abortions or vasectomies.
23. Charges in connection with child adoption, including health
examinations and testing as required.
24. Charges in connection with infertility treatment to the extent
not related to a diagnosed medical disorder.
25. Charges in connection with Cosmetic Surgery or other services
and supplies which improve, alter or enhance appearance,
whether or not for psychological or emotional reasons; except
to the extent needed to repair a part of the body that is
malformed as the result of:
(a) Injury which occurs while the person is covered for
these Benefits;
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<PAGE> 35
(b) necessary surgery for which subsequent reconstructive
surgery is recommended; or
(c) a congenital anomaly in an enrolled Dependent child
provided the surgery is performed before the child
attains age 16.
26. Charges for or related to treatment, including surgery, for
diet or weight control.
27. Charges in connection with marriage, pastoral, career, or
financial counseling services.
28. Charges in connection with alopecia (loss of hair).
29. Charges for Hospital services of Physicians, surgeons or
technicians who are employed by the Hospital.
30. Charges resulting from commission of an assault or felony.
31. Charges for accidental bodily Injury or Illness caused by war,
declared or undeclared, riot, or by any act of war, service in
the military, naval or air forces or any country or any
civilian non-combatant unit serving with such forces.
32. Charges the Participant is not legally obligated to pay,
including amounts in excess of discount rates separately
negotiated between any Employer and health care provider.
33. Charges made by a Hospital owned or run by the United States
Government, or by a nursing home.
34. Charges for which the Participant is entitled to payment or
reimbursement, in whole or in part, by or through a public
program.
35. Charges in connection with medical services provided for by
the Employer.
36. Charges that would not have been made if coverage under this
Plan had not existed.
37. Charges covered under no-fault laws or no-fault insurance
policies without regard to any coordination, limitation,
exception or exclusion of coverage thereunder due to the
existence of this Plan.
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<PAGE> 36
38. Charges to the extent that payment is unlawful where the
person resides when the expenses are Incurred.
39. Expenses Incurred as a result of accidental bodily Injury
related to employment, or covered by applicable workers
compensation statutes.
40. Charges for services rendered or supplies obtained after the
date the Coverage is terminated.
41. Occupational therapy, such as job rehabilitation.
42. Shoe modifications, including insoles, arch supports, and
orthotics.
43. Preventive treatment, diagnosis, and/or testing for
Participants who are asymptomatic but are considered to be at
risk of developing an Illness in the future.
44. Charges for or related to any eye surgery mainly to correct
refractive errors, including but not limited to radial
keratotomy; also charges for eyeglasses, contact lenses,
hearing aids and examinations for prescribing or fitting such
items.
45. Charges for educational services, programs, or supplies,
including specialty camps, regardless of whether the provider
is covered by this Plan.
46. Charges for services or supplies required by governmental
agencies or educational institutions.
47. Charges for services of a physician, physical therapist,
occupational therapist, speech therapist or audiologist
rendered to a covered Dependent child who is physically or
mentally impaired or learning disabled and which any school
system is required to provide under any law mainly to help him
to benefit from special education.
48. Charges for hearing examinations and hearing aids, except that
the Reasonable and Customary charges of an audiologist will be
covered for performing an evaluation that is requested by a
Physician so as to identify the location of disease or Injury
to the auditory system when definite symptoms indicate that
such disease or Injury may exist.
49. Any charges or services not specifically listed as a Covered
Expense.
50. Any charges or services Incurred at a time when this Plan is
not in effect.
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51. Charges for treatment of teeth, gums and bone surrounding the
teeth, including treatment of temporomandibular syndrome
(TMJ), unless the charges are for:
(i) dental work performed by a licensed dentist to repair
an Injury to sound natural teeth, if the Injury
occurred while the Participant was enrolled in the
Plan, or
(ii) Hospital services covered by Article V and not
otherwise excluded under this Article VI.
Section 6.02 Pre-Existing Conditions. The Plan limits Coverage for
pre-existing conditions as described in this Section 6.02. A pre-existing
condition is an Injury or Illness for which a person receives treatment, Incurs
expenses or receives a diagnosis from a Physician during the ninety (90) days
prior to the date the person becomes a Participant in the Plan. The term
"pre-existing condition" will also include any condition which is related to
any such Injury or Illness. The Plan does not cover charges for or in
connection with an Injury or Illness which is a pre-existing condition after
Benefits equal to $750 have become payable, unless those charges are Incurred
after the earlier of: (a) a ninety (90) day period, which ends while an
individual is a Participant in the Plan, during which he receives no treatment,
Incurs no expenses and receives no diagnosis from a Physician in connection
with that Injury or Illness; or (b) a one-year period during which an
individual is continuously covered under the Plan.
The foregoing limitation on Coverage for pre-existing conditions shall
not apply to a Retiree and his Dependents who are enrolled for Coverage
effective as of the date the Retiree first becomes eligible to participate in
this Plan, having just retired from employment with the Employer. The
pre-existing conditions limitation also shall not apply to any Retiree who
elects to enroll in this Plan immediately following and as a result of an
involuntary loss of coverage under any other group health plan not maintained
by the Employer; provided that the Plan Administrator finds, in its sole
discretion based on the available evidence, that the Retiree's loss of such
other coverage was not due to events within the control of the Retiree (nor due
to the Retiree reaching the maximum benefit limits under such other plan) and
that the Retiree has demonstrated that he had no reasonable prospect of
obtaining available group health plan coverage for the foreseeable future.
The pre-existing conditions limitation also shall not apply to any
child adopted by or placed for adoption with a Retiree, if the adoption or
placement for adoption occurs while the Retiree is eligible for Coverage under
the Plan.
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ARTICLE VII
COORDINATION OF BENEFITS
Section 7.01 Definitions of Terms.
(a) "Other Plan" means any benefit plan providing medical benefits
of any type also provided under this Plan, which benefits are provided by one
of the following:
1. Group insurance or any other arrangement of coverage for
individuals in a group, whether on an insured, reinsured or
uninsured basis, including student coverage obtained through
an educational institution above the secondary school level.
2. Coverage under a governmental program provided or required by
statute, including no-fault coverage to the extent required in
policies or contracts by a motor vehicle insurance statute or
similar legislation, but excluding a state plan under Medicaid
(Title XIX, Grants to States for Medical Assistance Programs,
of the United States Social Security Act, as amended from time
to time) and any plan when, by law, its benefits are excess to
those of any private insurance program or other non-
governmental program.
"Other Plan" will not include, however, benefits payable under any income
replacement coverage.
The term "Other Plan" will be construed separately with respect to
each policy, contract, or other arrangement for benefits or services and
separately with respect to that portion of any such policy, contract, or other
arrangement which reserves the right to take the benefits or services of other
plans into consideration in determining its benefits and that portion which
does not.
(b) "Allowable Expense" means any Medically Necessary, Reasonable
and Customary item of medical or health expense, at least a portion of which is
covered under this Plan; provided, however, that in the case of any Other Plan
that provides benefits in the form of services rather than cash payments, the
reasonable cash value of each service rendered shall be deemed to be both an
Allowable Expense and a benefit paid.
(c) A "Primary" plan is one that pays its benefits without regard
to any other plans.
(d) A "Secondary" plan is one that adjusts its benefits so that
the total benefits available from any plans that are Primary to it are offset
against the benefits payable by the Secondary plan, so that the aggregate
benefits payable from all plans will not exceed the Allowable Expenses.
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Section 7.02 Nonduplication of Benefits. This Plan shall never be
required to pay benefits with respect to any portion of an Allowable Expense
that is not a Covered Expense under this Plan. This Plan also shall never be
required to pay more than would otherwise be payable from it in the absence of
this Article VII or without regard to any Other Plan. This Plan shall not be
required to pay any portion of a benefit which would, when aggregated with
benefits payable under Other Plan(s), cause the sum of benefits payable under
this Plan and all Other Plan(s) for the same Allowable Expense to exceed 100%
of that Allowable Expense.
Section 7.03 Coordination Among Plans. If coverage under any Other
Plan is involved, then:
(a) If this Plan is the Primary payor, benefits under all Other
Plans will not be taken into account for purposes of
determining Benefits under this Plan; and
(b) If this Plan is a Secondary payor, the benefits payable under
the Primary Other Plan(s) will be aggregated and subtracted
from the benefits otherwise payable under this Plan.
The basis for establishing the relative order of Primary and Secondary status
among plans shall be as follows:
(a) A plan that does not contain a coordination of benefits or
nonduplication provision is deemed to be the Primary plan;
(b) The benefits of a plan covering the person on whom a claim is
based other than as a dependent shall be determined before the
benefits of a plan covering such person as a dependent;
(c) The benefits of a plan that covers a person as an active
employee or as a dependent of that employee are determined
before those of a plan covering that person as a laid-off or
retired employee or as a dependent of such a person; except
that if the Other Plan does not have this provision and if, as
a result, the plans do not agree on the order of benefits,
this rule (c) shall be ignored;
(d) Except as provided in (e) or (f) below, if two or more plans
cover an individual in the same respect, the Primary payor of
benefits shall be the plan that has covered the individual for
the longest period of time;
(e) The Primary payor of benefits for a dependent child for whom
claim is based shall be the plan of the parent whose birthday,
counting only month and day and excluding year of birth, falls
earlier in a calendar year. But, if both parents have the
same birthday, the Primary payor shall be the plan that has
covered the dependent child on whom claim is based for a
longer period of time;
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If a plan subject to this "birthday" rule coordinates with a
plan that maintains that the benefits of a plan covering the
dependent of a male are determined before those of a plan
covering the dependent of a female, then the plans do not
agree on the order of benefits and the coordination provisions
of the Other Plan shall determine the order of benefits.
(f) If two or more plans cover a dependent child of divorced or
separated parents, benefits for the child are determined as
follows:
1. If there is no court decree that sets financial
responsibility for the health care expenses of the
child, benefits for the child are determined in this
order:
(i) First, the plan of the parent with custody of
the child;
(ii) Second, the plan of the spouse of the parent
with custody of the child; and
(iii) Third, the plan of the parent not having
custody of the child;
2. If there is a court decree that establishes which
parent has financial responsibility for the health
care expenses of the child, the plan that covers the
child as a dependent of that parent is Primary.
Section 7.04 Excess Coverage. If an Other Plan contains provisions
under which the coverage is declared to be "excess" to all other coverages, and
it has been determined by benefits coordination and determination provisions
that such plan should be Primary, this Plan shall maintain its Secondary
position and pay benefits accordingly.
Section 7.05 Information Rights. For the purposes of determining the
applicability of and implementation of the nonduplication of benefits and
coordination of benefits provisions of the Plan or any provision of similar
purpose in any Other Plan, the Plan Administrator may, without the consent of
or notice to any person, release to or obtain from any insurance company or
other organization or person any information that the Plan deems to be
necessary for such purposes. Any Participant by enrollment in the Plan shall
automatically be deemed to consent to the preceding sentence, and any person
claiming benefits under the Plan shall, as a condition precedent thereto,
furnish to the Plan any information necessary to implement this provision.
Section 7.06 Payment Adjustments. Whenever payments that should have
been made under the Plan have been made under any Other Plan, the Plan
Administrator shall have the right, exercisable alone and in its sole
discretion, to pay over to any organization making such other payments any
amount it shall determine to be warranted in order to satisfy the intent of
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the Plan. Any amounts so paid shall be considered Benefits under the Plan and,
to the extent of such payments, the Plan, the Employer and the Plan
Administrator shall be fully discharged from liability. The term "payments"
includes providing benefits in the form of services, in which case "payments"
means reasonable cash value of the benefits provided in the form of services.
Section 7.07 Right of Recovery. If the amount of the payments made
by the Plan is more than the Plan should have paid under these coordination of
benefit rules, the Plan may recover the excess from one or more of the
following as the Plan Administrator shall determine in its sole discretion:
(a) The person it has paid or for whom it has paid;
(b) Insurance companies; or
(c) Other organizations.
The amount of "payments" made includes the reasonable cash value of
any benefits provided in the form of services.
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ARTICLE VIII
COORDINATION WITH MEDICARE
Section 8.01 Secondary Coverage to Medicare. To the greatest extent
allowable under applicable law, coverage under the Plan for a Participant who
is eligible to be covered under Medicare shall be secondary to coverage of such
Participant under Medicare.
Section 8.02 Primary Coverage to Medicare. If this Plan is primary
to Medicare and a Participant who is eligible to be covered by Medicare Incurs
a Covered Expense, the Plan shall pay for Covered Expenses, subject to any
applicable Deductible amount and any applicable Copayment and Maximum Lifetime
Limit, exclusions, and any other limits as set forth in the Plan.
Section 8.03 Medicare Coverage Election. Notwithstanding any
provision in this Article, if the Retiree or his Dependent chooses not to be
covered by the Plan and elects in writing to be covered by Medicare, Medicare
shall provide the coverage for such individual and coverage for Benefits under
the Plan shall terminate.
Section 8.04 Eligibility for Medicare. A Participant is considered
eligible for Medicare for the purposes of the Plan during any period such
Participant has coverage under Medicare or, while otherwise qualifying for
coverage under Medicare, does not have such coverage solely because such
Participant has refused, discontinued, or failed to make any necessary
application for Medicare coverage.
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ARTICLE IX
CLAIMS PROCEDURES
Section 9.01 Application for Benefits. (a) Claims for Benefits
under the Plan shall be filed with the Plan Administrator on forms provided for
that purpose. Claims must be filed within twelve (12) months from the date the
expense was Incurred, but in no event later than three (3) months after the
close of the calendar year in which the expense was Incurred. Claims received
later than three months after the end of the calendar year in which the expense
was Incurred shall not be honored, unless it shall be shown to the satisfaction
of the Plan Administrator not to have been reasonably possible to furnish such
proof within the required time and that proof was furnished as soon as was
reasonably possible.
(b) The Plan Administrator shall have the right and opportunity to
have a Physician, who is chosen by the Plan Administrator, examine any
Applicant whose Injury or Illness is the basis of the claim. The costs of any
physical examination required under this provision shall be paid by the Plan.
Further, the Plan Administrator shall have the right to orally question the
health care provider or other professional person whose services are the basis
of a claim under this Plan. These rights shall be exercisable by the Plan
Administrator as often as is reasonably necessary during the pendency of any
claim.
(c) An Applicant shall furnish to the Plan Administrator such
documents, data, or other information as the Plan Administrator considers
necessary or desirable for the purpose of administering the Plan. The benefits
payable under the Plan to or on behalf of an Applicant are conditioned on the
Applicant's furnishing full, true, and complete documents, data, or other
information reasonably related to the administration of the Plan requested by
the Plan Administrator.
Section 9.02 Claims Procedure. If a claim for Benefits under the
Plan is approved, the Applicant will be notified in writing of such approval.
In the event a claim for Benefits is denied, the Plan Administrator or its
delegatee shall send prompt written notice to the Applicant within ninety (90)
days of receipt of the application, or within one hundred eighty (180) days if
circumstances so require. The notice shall include:
(a) Specific reasons for denial;
(b) Specific references to pertinent Plan provisions on which the
denial is based;
(c) A description of any additional material or information
necessary to approve the claim; and
(d) An explanation of the Plan's appeal procedure.
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Section 9.03 Appeal Procedure. If a claim for Benefits is denied,
the Applicant or the Applicant's legal representative may submit a written
request for review to the Plan Administrator. The request shall be made on
forms provided for that purpose and shall be filed with the Plan Administrator
within sixty (60) days from the date of receipt of notice of denial of the
claim. If such written request is not made in a timely manner, the decision of
the Plan Administrator shall be final and binding.
Each request for review of a denied claim under the Plan shall state
all the reasons the Applicant believes the denial was improper. The Applicant
or the Applicant's legal representative may submit any additional information
he considers appropriate and may review any documents related to the claim.
The Plan Administrator shall send prompt written notice of its
decision to the Applicant within sixty (60) days after receipt of the request
for review. However, such sixty (60) day period may be extended when special
circumstances, such as necessity for physical examinations, exist. If such
special circumstances necessitate the delay, the Plan Administrator shall
provide the Applicant a written explanation of the delay within such sixty (60)
day period and shall render a decision within the period of one hundred twenty
(120) days following the receipt of the written request for review. If the
Plan Administrator fails to furnish a written explanation of the decision on
review within this time frame, the claim shall be deemed denied for the
purposes of the appeals procedure. The written explanation of the decision on
review shall set forth, in a manner intended and designed to be understood by
the Applicant, the following information:
(a) Specific reasons for the decision; and
(b) Specific references to pertinent Plan provisions on which the
decision is based.
All decisions of the Plan Administrator shall be final and binding. The Plan
Administrator may delegate any portion or all of its duties under this Article
from time to time to an independent, professional claims administrator.
Section 9.04 Exhaustion of Administrative Remedies. No legal or
equitable action for benefits under the Plan may be brought until the Applicant
has:
(a) Filed a claim for benefits as required by this Article;
(b) Received a written notice of denial of the claims;
(c) Filed a written request for review pursuant to Section 9.03;
(d) Received written notice that the denial of the claim has been
affirmed; and
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(e) Otherwise exhausted all appeals and remedies under the Plan.
Section 9.05 Facility of Payment. Upon receipt of a valid claim, any
Benefits due will be paid to the Participant, the estate of the Participant in
the event of the Participant's death, or the person(s) or institution to whom
the Benefits were duly assigned by the Participant (provided a copy or
acceptable written notice of such assignment is previously filed with the Plan
Administrator).
If, in the sole discretion of the Plan Administrator, a valid release
cannot be rendered by a Participant for the payment of any Benefit under the
Plan, such payment may be made directly to a health care provider, the guardian
or conservator, the parents of a minor child or an individual or individuals as
have custody or provide care and principal support of the Participant. In the
event of the death of a Participant, payment shall be made by the Plan
Administrator in good faith pursuant to this provision and shall fully
discharge all liability to the extent of such payment.
Section 9.06 Assignment of Benefits. To the extent permitted by law,
no Benefit payable under this Plan, nor any Benefit payment under this Plan,
shall be subject in any way to debt, liability, contract or engagement or tort
of any Participant or his beneficiary, nor subject to anticipation, alienation,
sale, transfer, assignment, pledge, attachment, garnishment, execution or
encumbrance of any kind, and any attempt to accomplish the same shall be void.
Notwithstanding the foregoing, Benefits under the Plan may be assigned by the
Participant to the provider of the services or supplies for which Benefits are
payable. No such assignment, however, shall be binding on the Plan unless the
Plan Administrator is notified in writing of the assignment prior to payment
hereunder. The Plan Administrator shall not be required to inquire into the
validity of any such assignment, and any payment made in accordance with any
such assignment and in good faith by the Employer shall discharge the
obligation of the Plan to the extent of such payment.
Assignment of Benefits under this provision shall in no way relieve
the Participant of ultimate responsibility for full payment to any provider of
services or supplies.
Section 9.07 Missing Person. If, by the first anniversary date of
the receipt of a claim for payment under the Plan, the Plan is unable to locate
the Participant or assignee, the amount payable shall be forfeited and shall
cease to be a liability of the Plan. The Plan shall exercise due and proper
care in attempting to locate the Participant or assignee.
Section 9.08 Recovery of Overpayments. If the Employer makes any
payment that, according to the terms of this Plan, should not have been made,
it may recover that incorrect payment, whether or not it was made due to the
Employer's or Plan Administrator's own error, from the person to whom it was
made or from any other appropriate party. If any such incorrect payment is
made directly to a Participant, repayment shall be in the form of a lump sum
payment, reduction in future Benefits under the Plan, or such other method as
the Employer may require. The Employer also reserves the right to recover any
such overpayments by appropriate legal action.
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ARTICLE X
SUBROGATION AND REIMBURSEMENT
Section 10.01 Subrogation. If a Participant, or his heirs,
guardians, executors, or other representatives, may have a claim to recover
money from a third party arising out of or relating to an Injury for which the
Plan provides benefits, the Plan and the Employer shall be subrogated to the
Participant's rights, and to the rights of his heirs, guardians, executors, or
other representatives, to recover from the third party as a condition to
receipt of Plan benefits. If the Plan or the Employer is precluded from
exercising its right of subrogation or chooses not to exercise that right, the
Plan or the Employer nonetheless may choose in its discretion to pay benefits
under the Plan. Also, the Plan or the Employer may choose in its discretion to
exercise only its right of reimbursement.
Section 10.02 Reimbursement. If a Participant is injured as a result
of the act of a third party and he or his heirs, guardians, executors, or other
representatives files a claim for benefits under this Plan, he or his heirs,
guardians, executors, or other representatives must, as a condition of receipt
of Plan benefits, reimburse the Plan and the Employer from money received from
the third party, or its insurer, to the extent of the amount paid by the Plan
on the claim.
Section 10.03 Subrogation and Reimbursement. Each Participant, or
his heirs, guardians, executors, or other representatives, must do whatever is
requested by the Plan Administrator with respect to the Plan's and the
Employer's exercise of their subrogation and reimbursement rights and shall do
nothing to prejudice those rights. In addition, each Participant, or his
heirs, guardians, executors, or other representatives, at the time of making a
claim for Plan benefits must inform the Plan Administrator in writing, whether
the Participant was injured by a third party, and must provide the following
information in a timely, prompt fashion as a condition to receipt of Plan
benefits:
(a) The name, address, and telephone number of the third party
that in any way caused the Injury, and of the attorney
representing the third party;
(b) The name, address, and telephone number of the third party's
insurer;
(c) The name, address, and telephone number of the Participant's
attorney with respect to the third party's act;
(d) Prior to the meeting, the date, time and location of any
meeting between the third party or his attorney and the
Participant, or his attorney;
(e) All terms of any settlement offer made by the third party or
his insurer;
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(f) All information discovered by the Participant, or his
attorney, concerning the insurance coverage of the
third party;
(g) The amount and location of any funds that are recovered from
the third party or his insurer by the Participant, and the
date that the funds were received;
(h) All information related to any oral or written settlement
agreement entered between the Participant and the third party
or his insurer;
(i) All information regarding any legal action that has been
brought on behalf of a Participant against the third party or
his insurer; and
(j) All other information requested by the Plan Administrator.
A Participant who Incurs medical expenses as a result of the act of a
third party, or his heirs, guardians, executors, or other representatives, is
not eligible to receive benefits under this Plan until he, or his heirs,
guardians, executors, or other representatives, signs and returns a written
agreement to subrogate or reimburse the Plan and the Employer, and complies
with the subrogation and reimbursement terms of the Plan. If the agreement is
not executed and delivered to the Plan Administrator, benefits shall not be
paid. If any benefits have been paid prior to the provision of the written
agreement to subrogate or reimburse or prior to compliance with the subrogation
and reimbursement terms of the Plan, the Plan shall have both the right to
discontinue payments and the right to bring legal action against the
Participant, or his heirs, guardians, executors, or other representatives, to
recover benefits already paid.
If benefits are paid under the Plan to a Participant, or his heirs,
guardians, executors, or other representatives, who recovers from a third party
or his insurer by settlement, judgment or otherwise, the Plan and the Employer
shall have a right to recover from the Participant, or his heirs, guardians,
executors, or other representatives, an amount equal to the amount the Plan
paid with interest at five percent (5%) per annum, or whatever lesser amount is
recovered by the Participant. Any funds recovered by a Participant, or his
heirs, guardians, executors, or other representatives, from a third party or
his insurer must and is deemed to be held in trust for the benefit of the Plan
and the Employer, to the extent of the amount of Plan benefits until
reimbursement, with the Participant, or his heirs, guardians, executors, or
other representatives, as trustee and fiduciary within the meaning of ERISA.
No Participant, or his heirs, guardians, executors, or other
representatives, may retain an attorney with respect to the third party without
the prior agreement of the Plan Administrator. Each Participant, or his heirs,
guardians, executors, or other representatives, hereby waives, as a condition
of receiving benefits under the Plan, the assertion of any attorney/client
privilege with regard to the third party.
Neither the Plan nor the Employer will be responsible for any expenses
or fees incurred in connection with any sums recovered by the Participant, or
his heirs, guardians, executors, or other representatives, from the third
party.
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ARTICLE XI
TERMINATION AND CONTINUATION OF PLAN COVERAGE
Section 11.01 Cancellation of Coverage.
(a) Retirees. A Retiree's Coverage under the Plan shall terminate
on the earliest of the following dates:
1. The date the Participant ceases to be classified as a Retiree
as defined by the Plan (due to circumstances or Plan
amendment);
2. The date the Retiree reaches the Maximum Lifetime Limit set
forth in the Schedule of Benefits;
3. The date this Plan terminates;
4. The date the Retiree dies;
5. The date the Participant fails to timely pay the required
Contribution, to the Plan; or
6. The date the Retiree requests in writing that termination of
Coverage occur.
(b) Dependents. A Dependent's Coverage under the Plan shall
terminate on the earliest of the following dates, subject to the "Continuation
of Coverage" provisions set forth in Sections 11.03 through 11.08:
1. The date the Retiree's Coverage ends;
2. The date the Participant ceases to be classified as a
Dependent as defined by the Plan (due to circumstances or Plan
amendment);
3. The date the Dependent dies;
4. The date the Participant fails to timely pay the required
Contribution, to the Plan;
5. The date Dependent Coverage under the Plan is terminated;
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6. The date the Dependent reaches the Maximum Lifetime Limit set
forth in the Schedule of Benefits; or
7. The date the Dependent requests in writing that termination of
Coverage occur.
Section 11.02 Change in Status. Each Participant is required to
notify the Plan Administrator of any change in his address, or any other change
in status which might affect his Coverage under the Plan. Except as otherwise
provided in the "Continuation of Coverage" provisions set forth in Sections
11.03 through 11.08 below, notice must be given within thirty (30) days of the
date the change in status occurs.
Section 11.03 Continuation of Coverage To Eligible Dependents. If a
Dependent ceases to be eligible for Coverage under the Plan due to one of the
following "qualifying events":
(a) Divorce or legal separation of the Retiree;
(b) The Retiree becoming entitled to Medicare (i.e., attaining age
65);
(c) The Dependent ceasing to be classified as a Dependent as
defined by the Plan (due to circumstances or Plan amendment);
or
(d) The Retiree's death;
the Dependent may elect to continue or maintain Plan Coverage (subject to Plan
provisions and amendments taking effect thereafter) on a self-pay basis subject
to the provisions of this Article XI.
Section 11.04 Election of Continued Coverage. The eligible Dependent
must notify the Plan Administrator in writing within sixty (60) days after a
divorce or legal separation or the cessation of Dependent classification under
the Plan. All rights to continue Plan Coverage shall be lost by the failure to
timely give this required written notice to the Plan Administrator.
The Plan Administrator shall, within fourteen (14) days of being
notified of such qualifying event, advise the eligible Dependent of the right
to continue Plan Coverage. Plan Coverage must be elected within sixty (60)
days of the latest of the following:
(a) the qualifying event; or
(b) the date the eligible Dependent is advised by the Plan
Administrator of the right to continue Plan Coverage.
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Section 11.05 Contributions for Continued Coverage. The eligible
Dependent shall be required to contribute an amount equal to the total amount
of the cost of Plan Coverage, plus two percent (2%) determined by the Plan
Administrator, as follows:
(a) The cost of Coverage shall be either the reasonable estimate
of the cost of providing Coverage for similarly situated
Dependents, determined on an actuarial basis or as may be
required by COBRA regulations issued by the Internal Revenue
Service; or
(b) The cost to the Plan of providing Coverage to similarly
situated Dependents for the same month during the preceding
Plan Year, adjusted by the increase or decrease in the
implicit price deflator of the gross national product for the
twelve (12) month period ending on the last day of the sixth
month of the preceding Plan Year. This method of determining
the cost of Coverage may not be used if there has been a
significant change in Coverage under the Plan since the
preceding Plan Year.
The eligible Dependent shall pay the required Contributions for Plan
Coverage before the first day of each calendar month. Except for the initial
Contribution, any Plan provision for a grace period for payment of the required
Contributions shall also apply to Plan Coverage being continued.
If an eligible Dependent elects continued Plan Coverage after the
qualifying event, then the eligible Dependent will have forty-five (45) days
from the date of the election to make the required Contribution. The initial
Contribution must be sufficient to pay for Coverage for every full month from
the date Plan Coverage was lost due to the qualifying event up to and including
the date of the initial Contribution. There is no grace period for the initial
Contribution.
If the entire first payment is not received within forty-five (45)
days after the eligible Dependent's election was received, then the eligible
Dependent shall be deemed to have forfeited his right to continue Plan Coverage
with respect to the qualifying event to which his election pertained. If the
entire amount of any subsequent payment is not received within thirty (30) days
after the first day of the calendar month for which such payment is due, then
as of the first day of such calendar month the individual's Coverage under the
Plan shall be canceled and no longer in effect for expenses Incurred on and
after that date.
Section 11.06 Duration of Continued Coverage. If elected, the
maximum period for continued Plan Coverage for a "qualifying event" involving
the divorce or legal separation of the Retiree, the Retiree becoming eligible
for Medicare, the death of the Retiree or the Dependent ceasing to meet the
requirements for Dependent Coverage is 36 months.
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Other events will cause continued Plan Coverage to end sooner.
Continued Plan Coverage will end short of the maximum period on the earliest of
the following:
(a) the date the Employer ceases to provide any group medical plan
coverage for all employees;
(b) the date the eligible Dependent fails to make any required
contribution;
(c) the date on which the eligible Dependent becomes covered under
any other group health plan; or
(d) the date on which the eligible Dependent becomes entitled to
Medicare.
Notwithstanding the foregoing, if the eligible Dependent becomes
covered by another group health plan and has a pre-existing condition which is
not covered by that other plan, the continued Plan Coverage (at least for that
pre-existing condition) will not be terminated due to that other coverage.
Section 11.07 Limitations. This Article shall apply only for such
period as the continued coverage rights conferred under COBRA shall be
applicable to this Plan. This Article is intended and shall be construed to
satisfy the minimum requirements of COBRA, but not to create any rights in
excess of such minimum requirements. Continuation Coverage is provided subject
to a Participant's eligibility under the law. The Plan Administrator reserves
the right to terminate continuation Coverage retroactively if a Participant
shall be determined to be ineligible for continuation Coverage.
Section 11.08 Rules. The Plan Administrator shall adopt such rules
for the administration of this Article XI as it shall deem necessary and
appropriate from time to time.
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ARTICLE XII
ADMINISTRATION
Section 12.01 Plan Administrator. Galileo shall be responsible for
the general management and administration of the Plan and shall be designated
as Plan Administrator within the meaning of ERISA; provided, however, that such
responsibility may be delegated, from time to time, by action of Galileo's
Board to any employee, officer, committee or independent entity as Galileo
shall deem suitable in its sole discretion. The Plan Administrator shall be
responsible for compliance by the Plan with all of the reporting and disclosure
requirements of Part I of Subtitle B of Title I of ERISA. The Plan
Administrator shall have the sole discretionary authority to control and manage
the operation and administration of the Plan and shall be "named fiduciary" of
the Plan for purposes of Section 402(a)(1) of ERISA. The Plan Administrator
shall have all power necessary or convenient to enable it to exercise such
authority. In connection therewith, the Plan Administrator may provide rules
and regulations, not inconsistent with the provisions hereof, for the operation
and management of the Plan, and may from time to time amend or rescind such
rules and regulations. The Plan Administrator is authorized to accept service
of legal process for the Plan, and shall have the full discretion, power, and
the duty to take all action necessary or proper to carry out the duties
required under ERISA.
Section 12.02 Powers and Duties of the Plan Administrator. The Plan
Administrator shall have the sole discretionary powers and duties to control
and manage the operation and administration of this Plan, including, but not
limited to, the power:
(a) To employ one (1) or more persons or entities to render advice
with respect to any responsibility the Plan Administrator has
under this Plan;
(b) To construe and interpret the Plan and to determine all
questions arising under or in connection with the Plan,
including (i) all questions of eligibility to participate and
obtain benefits under the Plan; and (ii) factual questions
about all Plan matters, its interpretation thereof in good
faith to be final and binding on all parties;
(c) To adopt such rules, regulations, forms and procedures,
including, but not limited to cost containment procedures, as
from time to time it deems advisable and appropriate in the
proper administration of this Plan;
(d) To prescribe procedures to be followed by any person in
applying for any benefits under this Plan and to designate the
forms or documents, evidence and such other information as the
Plan Administrator may reasonably deem necessary, to support
an application for any benefits under this Plan;
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<PAGE> 53
(e) To authorize, in its discretion, payments of benefits properly
payable pursuant to the provisions of this Plan;
(f) To prepare and to distribute, in such manner as the Plan
Administrator or Galileo deems appropriate, information
explaining this Plan;
(g) To apply consistently and uniformly the rules, regulations,
determinations and decisions to all Participants in similar
circumstances;
(h) To prepare and file such reports and to complete and to
distribute such other documents as may be required to comply
fully with the provisions of ERISA, and of all regulations;
(i) To retain counsel (who may, but need not, be counsel to
Galileo), to employ agents and to provide for such clerical,
medical, accounting, auditing and other services as it may
require in carrying out the provisions of this Plan and to
rely upon the information and advice furnished by such
delegatees and experts, unless actually knowing such
information and advice to be inaccurate or unlawful;
(j) To request of and obtain from any Participant or the Employer
such information and records as deemed necessary and proper;
and
(k) To correct any defect, supply any information or reconcile any
inconsistency to carry out the purpose of the Plan; provided,
however, that any interpretation or construction shall be done
in a non-discriminatory manner and shall be consistent with
the intent of the Plan.
Any determination made or action taken by the Plan Administrator shall be
deemed to be final and binding with respect to any Participant or other party
to whom that determination or action relates, and any such determination or
action may be reversed by a court of competent jurisdiction only upon a finding
by the court that such determination or action was arbitrary and capricious.
Section 12.03 Expenses of Administration. All expenses of Plan
administration shall be paid by the Employer, to the extent such expenses are
reasonable.
Section 12.04 Indemnification. A Plan fiduciary shall be personally
liable to make good to the Plan losses to the Plan resulting from each breach
by the fiduciary of the responsibilities, obligations, or duties imposed upon
fiduciaries by ERISA and to restore to the Plan any profits made by such
fiduciary through such fiduciary's use of Plan assets. A Plan fiduciary may
purchase fiduciary liability insurance to cover such liability.
49
<PAGE> 54
Galileo shall fully protect and indemnify each Employer's director,
officer, and employee serving as a Plan fiduciary at the request of Galileo for
any liability, loss, cost, or damage suffered at any time by reason of his or
her service as a fiduciary of the Plan (if the fiduciary did not act
dishonestly or in willful or grossly negligent violation of the law or
regulation under which such liability, loss, cost, damage or expense arose) or
expense incurred (including reasonable legal fees and expenses), and in
furtherance hereof the Employer may, at its election, participate by being a
party plaintiff or defendant to any suit in law or in equity brought by or
against such fiduciary for any cause other than his or her own dishonest,
willful, or grossly negligent acts.
Section 12.05 Liability of the Board, Officers and Employees. To the
extent permitted by law, no member of the Board, officer, or employee of the
Employer shall incur any personal liability of any nature for any act done or
omitted to be done in good faith in connection with his or her duties relative
to the Plan, except in cases of dishonesty, gross negligence or willful
misconduct. Such Board members, officers, and employees shall be indemnified
and saved harmless by Galileo from and against any liability, including
reasonable attorneys' fees, to which any of them may be subjected by reason of
any such good faith act or conduct in their director, officer, or employee
capacity. Any indemnification payments made by reason of this paragraph shall
not be made from the assets of the Plan nor from any trust established in
conjunction with the Plan.
50
<PAGE> 55
ARTICLE XIII
AMENDMENT OR TERMINATION OF PLAN
Section 13.01 Amendment. Galileo shall have the sole discretionary
right from time to time to modify, amend, or terminate the Plan, at any time,
for any reason, prospectively or retroactively, to any extent, by either (i)
written action duly executed on behalf of Galileo by [Galileo's Vice President
of Human Resources]; or (ii) written action duly executed on behalf of Galileo
by an officer of Galileo duly authorized by the Board.
Section 13.02 Termination. Galileo shall have the sole discretionary
authority to discontinue or terminate the Plan, at any time without any
liability whatsoever for such discontinuance or termination as designated by
either (i) written action duly executed on behalf of Galileo by [Galileo's Vice
President of Human Resources]; or (ii) written action duly executed on behalf
of Galileo by an officer of Galileo duly authorized by the Board.
Section 13.03 No Vesting of Plan Benefits. No eligible employee or
retired employee, eligible dependent, or other person shall have any guaranteed
or vested right at any time in or to any of the benefits provided by the Plan.
If the Plan is modified, amended, or terminated, Participants shall be notified
of the effect of such change on their Plan Benefits or Coverage. No consent of
any eligible employee or retired employee, eligible dependent, or other person
shall be necessary for Galileo to modify, amend, terminate the Plan. In the
event of a Plan termination, the rights of Participants covered by the Plan at
that time shall be limited to Benefit claims Incurred as of the date of Plan
termination.
51
<PAGE> 56
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 14.01 Conformity with Statutes. The Plan is intended to
provide benefits which may or may not be subject to the requirements of
applicable federal law, including ERISA. To the extent that the Plan is
governed by ERISA, state law shall be preempted to the fullest extent permitted
by law. To the extent not preempted by applicable federal law, including
ERISA, the Plan shall be governed by the laws of the state of Illinois.
Section 14.02 Limitation of Rights and Obligations. Neither the
establishment, nor the maintenance of this Plan, nor any amendment thereof, nor
the purchase of any insurance contract, nor any act or omission under this Plan
or resulting from the operation of the Plan shall be construed:
(a) As conferring upon any Participant, beneficiary or any other
person, a right or claim against an Employer or the Plan Administrator, except
to the extent that such right of claim shall be specifically expressed and
provided in the Plan or provided under ERISA.
(b) As creating any responsibility or liability of the Plan
Administrator for the validity or effect of the Plan.
(c) To give any Retiree the right to be retained in the service of
any Employer.
Section 14.03 Notice. Any notice given under this Plan shall be
sufficient if given to the Plan Administrator when addressed to it at its
office, or if given to a Participant when addressed to the Participant at his
address as it appears on the records of the Plan Administrator.
Section 14.04 Misrepresentation. Any material misrepresentation on
the part of the Participant in making application for Coverage, or any
application for a reclassification thereof or for service thereunder shall
render the Coverage null and void.
Section 14.05 Disclaimer of Liability. Nothing contained herein
shall confer upon a Participant any claim, right or cause of action, either at
law or at equity, against the Plan, Plan Administrator, or Employer for the
acts or omissions of any health care provider from whom a Participant receives
care, or for the acts or omissions of any Physician from whom the Participant
receives service under this Plan, or for any acts or omissions of any provider
of services or supplies under this Plan.
Section 14.06 Entire Plan. This Plan document shall constitute the
governing document for the Plan. No person has the authority to make any
verbal statements of any kind at any time which (i) are legally binding on the
Plan, the Plan Administrator or the
52
<PAGE> 57
Employer, or (ii) alter the actual Plan document and contracts maintained in
conjunction with the Plan.
Section 14.07 Severability. Any provision of the Plan shall be
severable, so that if any Plan provision is held invalid or unenforceable such
invalid or unenforceable provision shall be severed from the Plan and the Plan
shall operate without regard to such severed provision. In such event, the
Plan shall be construed and enforced as if such severed provision had not been
included herein, to the extent necessary to preserve the status of the Plan, as
applicable, as qualified accident and health plan under Section 105 of the
Code.
IN WITNESS WHEREOF, GALILEO INTERNATIONAL PARTNERSHIP has caused this
amended and restated Plan to be executed below by duly authorized officers, on
this ___________ day of__________________ , 1997, to be effective as of
January 1, 1994.
GALILEO INTERNATIONAL PARTNERSHIP
By:
--------------------------------------
Its:
-------------------------------------
ATTEST:
-------------------------
Name and Title
53
<PAGE> 58
SCHEDULE OF BENEFITS
GALILEO INTERNATIONAL
RETIREE MEDICAL PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994)
PURPOSE
The purpose of this Schedule of Benefits is to provide further explanation and
terms of the Benefits provided under the Plan from time to time. This Schedule
of Benefits together with the Plan comprises the Plan with respect to Plan
Participants. Except where the context indicates otherwise, terms used and
defined in the Plan shall have the same respective meanings for the purposes of
this Schedule of Benefits.
DEFINITIONS
As used in this Schedule of Benefits, the terms "Benefit Percentage,"
"Comprehensive Medical Deductible," "Maximum Benefit Provision," and
"Out-of-Pocket Expense" are described below in the sections numbered one
through five.
In addition, the terms "Participating Provider" and "Non-Participating
Provider" are defined as follows:
"Participating Provider" means:
any institution, facility or agency which has
entered into a contract with a Preferred Provider
Organization (referred to as "PPO") to provide
medical services at a predetermined cost in
accordance with the agreement between the Insurer
and that PPO; and
any health care professional who has entered into a
contract with a PPO to provide medical services at
predetermined fees as negotiated by the Insurer and
that PPO.
"Non-Participating Provider" means an institution, facility, agency or
health care professional who has not entered into a contract with a
PPO and the Insurer.
"Insurer" means the entity with which Galileo contracts from time to
time to provide one or more PPOs and other services for the Plan.
1. MAXIMUM BENEFIT PROVISION
Covered Expenses under the Plan shall be limited as follows for Plan
Participants:
<PAGE> 59
<TABLE>
<S> <C>
LIFETIME MAXIMUM BENEFIT(S) $2,000,000 per Participant
Home Health Care Maximum Benefits Up to 40 visits per calendar year per Participant
Artificial insemination and in-vitro
fertilization $25,000 per Participant (effective January 1, 1997, 4
cycles during Participant's lifetime)
COVERED EXPENSE DAILY LIMIT
Participating Provider Hospital The Hospital's negotiated rate
Non-Participating Provider Hospital The Hospital's most common daily rate for a semiprivate room
Skilled Nursing Facility The Skilled Nursing Facility's most common daily rate for a
semiprivate room, for up to 60 days in a calendar year per
Participant
</TABLE>
2. DEDUCTIBLES (including "Comprehensive Medical Deductibles")
The Deductibles listed below are charges to be paid by a Participant for the
services rendered under the Plan. These Deductibles are in addition to any
other expenses Incurred for which no Benefits are payable because of the
Participant's required office visit copay expense:
Participating Provider
office visit copay expense
<TABLE>
<S> <C>
Maternity $5 for first visit, then 100% Coverage of Covered Expenses
for remaining visits and delivery
Immunizations, Allergy Injections $5 per visit or the actual charge, whichever is less, then
100% Coverage of any balance
All other Office Visits $5, then 100% Coverage (except for routine physicals)
Maintenance Prescription Drug Deductible $8 per prescription
Comprehensive Medical Deductibles
(waived for Participating Provider
charges) $400
</TABLE>
2
<PAGE> 60
Family Deductible $1,200
After Comprehensive Medical Deductibles totaling $1,200 have been applied in a
calendar year for either: (a) a Retiree and of his Dependents; or (b) the
Retiree's Dependents, the Retiree's Family need not satisfy any further
Comprehensive Medical Deductibles for the rest of that calendar year.
3. BENEFIT PERCENTAGE
The Benefit Percentage for Covered Expenses Incurred under the Plan for charges
made by a Participating or a Non-Participating Provider is as follows:
<TABLE>
<CAPTION>
PARTICIPATING NON-PARTICIPATING
PROVIDER PROVIDER
<S> <C> <C>
Emergency Services 90% 90%*
Pathologists, Radiologists, and 90% 90%*
Anesthesiologists Services
Well-Baby Care 100% Not Covered
Prescription Drugs 80% 80%*
All Other Covered Expenses 90% 80%
*This is the same Benefit Percentage as for Participating Provider charges.
</TABLE>
If a Retiree or the Retiree's Dependents, while insured for Benefits under the
Plan Incurs Covered Expenses, the Plan will pay an amount determined as
follows:
The Benefit Percentage of Covered Expenses Incurred as shown in this Schedule
of Benefits, after deducting any Comprehensive Medical Deductible shown in this
Schedule of Benefits from the Covered Expenses first Incurred for a Participant
in each calendar year.
Payment of any Benefits will be subject to: (a) any applicable Deductibles and
maximum benefits shown in this Schedule of Benefits; and (b) the Maximum
Benefit Provision. The portion of the Benefit Percentage that is not paid by
the Plan is the Participant's Copayment.
4. PAYMENT OF PARTICIPATING PROVIDER AND NON-PARTICIPATING PROVIDER
EXPENSES
As explained below, the Plan pays Covered Expenses based on whether the
services provided to a Participant are Participating Provider expenses or
Non-Participating Provider expenses.
3
<PAGE> 61
FOR PARTICIPATING PROVIDER EXPENSES
When a Participant has Incurred Out-of-Pocket Expenses of $1,500 in a calendar
year, Benefits for that Participant for Covered Expenses Incurred for charges
made by a Participating Provider during the rest of that calendar year will be
payable at the rate of 100%.
When a Retiree and at least two of the Retiree's Dependents or at least three
of the Retiree's Dependents have Incurred a combined amount of Out-of-Pocket
Expenses of $4,500 in a calendar year, Benefits for that Retiree's Family for
Covered Expenses Incurred for charges made by a Participating Provider during
the rest of that calendar year will become payable at the rate of 100%.
All Benefit Deductibles will continue to apply. Any Comprehensive Medical
Deductible, if not yet satisfied, will continue to apply until it is satisfied.
FOR NON-PARTICIPATING PROVIDER EXPENSES
When a Participant has Incurred Out-of-Pocket Expenses of $3,000 in a calendar
year, Benefits for that Participant for Covered Expenses Incurred for charges
made by a non-Participating Provider during the rest of that calendar year will
be payable at the rate of 100%.
When a Retiree and at least two of the Retiree's Dependents or at least three
of the Retiree's Dependents have Incurred a combined amount of Out-of-Pocket
Expenses of $9,000 in a calendar year, Benefits for that Retiree's Family for
Covered Expenses Incurred for charges made by a non-Participating Provider
during the rest of that calendar year will become payable at the rate of 100%.
All Benefit Deductibles will continue to apply. Any Comprehensive Medical
Deductible, if not yet satisfied, will continue to apply until it is satisfied.
5. OUT-OF-POCKET EXPENSES
Out-of-Pocket Expenses are Covered Expenses Incurred by a Participant for
charges made by both Participating and non-Participating Providers for which
no Plan payment is provided because of any Copayments or any Comprehensive
Medical Deductible (excluding any other Benefit Deductibles or copay expenses
for office visits).
4
<PAGE> 1
Exhibit 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.
<PAGE> 2
2
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 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
<PAGE> 3
3
(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.
"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.
<PAGE> 4
4
"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.
"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.
<PAGE> 5
5
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 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
<PAGE> 6
6
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.
(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:
<PAGE> 7
7
(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.
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
<PAGE> 8
8
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 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
<PAGE> 9
9
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 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.
<PAGE> 10
10
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 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
<PAGE> 11
11
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.
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
<PAGE> 12
12
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
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
<PAGE> 13
13
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.
(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 __________,
1997 [DATE IMMEDIATELY PRECEDING EFFECTIVENESS OF IPO] (the "Effective
Date". No Incentive Stock Option may be granted under the Plan after
__________, 2007 [TENTH ANNIVERSARY OF SHAREHOLDER APPROVAL DATE].
<PAGE> 1
Exhibit 10.42
GALILEO INTERNATIONAL, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK PLAN
(Effective [ ])
<PAGE> 2
GALILEO INTERNATIONAL, INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. Purposes. The purposes of the Plan are (i) to retain the
services of qualified individuals who are not employees of the Company to serve
as members of the Board and to secure for the Company the benefits of the
incentives inherent in increased Common Stock ownership by such individuals by
granting such individuals Options to purchase shares of Common Stock and (ii) to
provide such individuals an opportunity to defer payment of a portion of their
Director's Fees in accordance with the terms and conditions set forth herein.
2. Administration. The Administrator shall be responsible for
administering the Plan. The Administrator shall have authority to adopt such
rules as it may deem appropriate to carry out the purposes of the Plan, and
shall have authority to interpret and construe the provisions of the Plan and
any agreements and notices under the Plan and to make determinations pursuant to
any Plan provision. Each interpretation, determination or other action made or
taken by the Administrator pursuant to the Plan shall be final and binding on
all persons. The Administrator shall not be liable for any action or
determination made in good faith, and shall be entitled to indemnification and
reimbursement in the manner provided in the Company's Articles of Incorporation
and By-Laws as such documents may be amended from time to time.
3. Shares Available.
Subject to the provisions of Section 8(b) of the Plan, the
maximum number of shares of Common Stock which may be issued under the Plan
shall not exceed 500,000 shares (the "Section 3 Limit"). Either authorized and
unissued shares of Common Stock or treasury shares may be delivered pursuant to
the Plan. 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 outstanding Phantom Stock Units and shares
of Common Stock underlying Options shall be charged against the Section
3 Limit; and
(b) the Section 3 Limit shall be increased by (A) the number
of shares subject to an Option which lapses, expires or is otherwise
terminated without the issuance of such shares, and (B) the number of
shares tendered to pay the exercise price of an Option.
4. Options. Each Non-Employee Director shall receive grants of
Options under the Plan as follows:
<PAGE> 3
2
(a) Option Grants.
(i) Initial Grant. On the date of a Non-Employee Director's
election, appointment or reelection to the Board (or, in the case of
Non-Employee Directors who were members of the Board on the Effective
Date, on the Effective Date), and provided that the policies of the
employer of such Non-Employee Director so permit, such Non-Employee
Director shall be granted an Option to purchase the number of shares
determined as follows: (4,000 x Y)-1,000 x (Y-1) where Y= the number of
years in such Non-Employee Director's term of service on the Board.
Such Option shall have a per share exercise price equal to the Fair
Market Value of the Common Stock determined as of the date of grant and
shall be subject to the vesting schedule provided for in Section 4(b)
and the other terms and conditions provided for herein.
(ii) Annual Grants. At each Annual Meeting occurring after the
Effective Date and during the term of the Plan, each individual who has
continuously served as a Non-Employee Director for a period ending on
the date of such Annual Meeting whose position is not up for reelection
at such Annual Meeting and who shall continue to serve on the Board
following such Annual Meeting shall receive an Option to purchase 1,000
shares of Common Stock, provided that the policies of the employer of
such Non-Employee Director permit such a grant. The Option shall have
a per share exercise price equal to the Fair Market Value of the Common
Stock determined as of the date of grant and shall be subject to the
vesting schedule provided for in Section 4(b) and the other terms and
conditions provided for herein.
(b) Vesting Schedule of Options. Subject to the provisions of
Sections 5(c) and 7 below, options awarded pursuant to the Plan shall vest and
become exercisable six months after the date of grant of the Option.
(c) Term of Options.
(i) Ten-Year Term. Each Option shall expire ten years from
its date of grant, subject to earlier termination as provided herein.
(ii) Effect of Termination of Service Due to Retirement, Death
or Disability. If a Non-Employee Director ceases to be a member of the
Board by reason of such Non-Employee Director's retirement on or after
attaining the age of 65 (or such earlier date as such Non-Employee
Director shall be permitted under the Company's retirement policy),
death or disability (as defined in the Company's Long Term Disability
Plan), all Options previously granted to such Non-Employee Director
shall become fully and immediately vested and exercisable. Such Options
may be exercised by such Non-Employee Director or his Beneficiary at
any time within 12 months after the date of such termination of
<PAGE> 4
3
service, subject to the earlier expiration of such Options as provided
for in Section 4(c)(i) above. At the end of such 12 month period, the
Options shall expire.
(iii) Effect of Other Terminations of Service. If a
Non-Employee Director ceases to be a member of the Board for reason of
voluntary or involuntary termination, any vested Option may be
exercised by such Non-Employee Director at any time within three months
after the date of such termination of service, subject to the earlier
expiration of such Options as provided for in Section 4(c)(i) above. At
the end of such three-month period the vested portion of the Options
shall expire. The unvested portion of such Non-Employee Director's
Options shall be forfeited upon termination of service. If a Non-
Employee Director ceases to be eligible for participation in the Plan
as a result of his becoming an employee of the Company, any Option
previously granted under the Plan shall continue to vest in accordance
with the terms of the Plan.
(d) Time and Manner of Exercise of Options.
(i) Notice of Exercise. Subject to the other terms and
conditions hereof, a Non-Employee Director may exercise any Options, to
the extent such Options are vested, by giving written notice of
exercise to the Company; provided, however, that in no event shall an
Option be exercisable for a fractional share. The date of exercise of
an Option shall be the later of (A) the date on which the Company
receives such written notice and (B) the date on which the conditions
provided in Section 4(d)(ii) are satisfied.
(ii) Payment. Subject to the last three sentences of this
Section 4(d)(ii), prior to the issuance of a certificate pursuant to
Section 4(d)(v) hereof evidencing the shares of Common Stock in respect
of which all or a portion of an Option shall have been exercised, a
Non-Employee Director shall have paid to the Company the exercise price
of the Option for all such shares purchased pursuant to the exercise of
such Option. Payment may be made by personal check, bank draft or
postal or express money order (such modes of payment are collectively
referred to as "cash") payable to the order of the Company in U.S.
dollars [, or in shares of Common Stock already owned by the Non-
Employee Director for at least six months at the time of exercise
valued at their Fair Market Value as of the last business day preceding
the date of exercise, or in a combination of cash or such shares].
Payment of the exercise price in shares of Common Stock shall be made
by delivering to the Company the share certificate(s) representing the
required number of shares, with the Non-Employee Director signing his
or her name on the back, or by attaching executed stock powers (the
signature of the Non-Employee Director must be guaranteed in either
case). [In addition to the exercise methods described above, a
Non-Employee Director may exercise an Option through a "cashless
exercise" procedure whereby the Non-Employee Director delivers to the
Company an irrevocable notice of exercise in exchange for the Company
issuing the shares of
<PAGE> 5
4
Common Stock subject to the Option to a broker previously designated or
approved by the Company. Such broker shall immediately sell a
sufficient number of shares of Common Stock on behalf of the
Non-Employee Director to pay the exercise price of the Option and shall
remit the amount of the exercise price to the Company in case from the
sales proceeds and deliver the balance, if any, of the sales proceeds
(not of commissions) to such non-Employee Director. Any shares not sold
by the broker shall be delivered to the Non-Employee Director in the
manner contemplated by Section 4(d)(v) below.]
(iii) Stockholder Rights. A Non-Employee Director shall have
no rights as a stockholder with respect to any shares of Common Stock
issuable upon exercise of an Option until a certificate evidencing such
shares shall have been issued to the Non-Employee Director pursuant to
Section 4(d)(v), and no adjustment shall be made for dividends or
distributions or other rights in respect of any share for which the
record date is prior to the date upon which the Non-Employee Director
shall become the holder of record thereof.
(iv) Limitation on Exercise. No Option shall be exercisable
unless the Common Stock subject thereto has been registered under the
Securities Act and qualified under applicable state "blue sky" laws in
connection with the offer and sale thereof, or the Company has
determined that an exemption from registration under the Securities Act
and from qualification under such state "blue sky" laws is available.
(v) Issuance of Shares. Subject to the foregoing conditions,
as soon as is reasonably practicable after its receipt of a proper
notice of exercise and payment of the exercise price of the Option for
the number of shares with respect to which the Option is exercised, the
Company shall deliver to the Non-Employee Director (or following the
Non-Employee Director's death, the Beneficiary entitled to exercise the
Option), at the principal office of the Company or at such other
location as may be acceptable to the Company and the Non-Employee
Director (or such Beneficiary), one or more stock certificates for the
appropriate number of shares of Common Stock issued in connection with
such exercise. [Shares sold in connection with a "cashless exercise"
shall be delivered to the broker designated or appointed by the Company
in the time and manner described in Section 4(d)(ii) above.] Any such
shares shall be fully paid and nonassessable.
(e) Restrictions on Transfer. An Option may not be
transferred, pledged, assigned, or otherwise disposed of, except by will or by
the laws of descent and distribution; provided, however, that the Administrator
may, subject to such terms and conditions as the Administrator shall specify,
permit the transfer of an Option to a Non-Employee Director'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. The Option shall be exercisable, subject to the
provisions
<PAGE> 6
5
outlined in Section 4(c) above, during the Non-Employee Director's lifetime,
only by the Non-Employee Director or by the individual or entity to whom the
Option has been transferred in accordance with the previous sentence. No
assignment or transfer of the Option, or of the rights represented thereby,
whether voluntary or involuntary, by operation of law or otherwise, except by
will or the laws of descent and distribution, shall vest in the assignee or
transferee any interest or right in the Option, but immediately upon any attempt
to assign or transfer the Option the same shall terminate and be of no force or
effect.
5. Deferral of Director's Fees.
(a) Deferral Elections.
(i) General Provisions. Non-Employee Directors may elect to
defer all or a specified percentage of their Director's Fees (in
multiples of five percent) with respect to a Deferral Period in the
manner provided in this Section 5. A Non-Employee Director's Deferred
Benefit is at all times nonforfeitable.
(ii) Deferral Election Forms. Before the Election Date
applicable to a Deferral Period, each Non-Employee Director shall be
provided with a Deferral Election Form and a Beneficiary Designation
Form. In order for a Non-Employee Director to participate in the
deferral portion of the Plan for a given Deferral Period, a Deferral
Election Form, completed and signed by him, must be delivered to the
Company on or prior to the applicable Election Date; provided, however,
that after the initial Deferral Period election, such election will be
applied to all subsequent Deferral Periods, unless such Non-Employee
Director submits a new Deferral Election Form prior to the Election
Date of the Deferral Period for which he would like to change his
election. A Non-Employee Director electing to participate in the Plan
for a given Deferral Period shall indicate on his Deferral Election
Form:
(A) the percentage of the Director's Fees for the
Deferral Period to be deferred (in multiples of five percent);
and
(B) if the Deferral Election Form is the first such
form filed by the Non-Employee Director, the Non-Employee
Director's election, in accordance with Sections 5(f) and
5(g), as to the timing and manner of payment of the Deferred
Benefits. A Non-Employee Director's election as to the timing
and manner of payment of Deferred Benefits in the initial
Deferral Election Form shall govern the timing and manner of
payment of all subsequent deferrals under the Plan.
<PAGE> 7
6
(iii) Effect of No Deferral Election. The Deferral Election
Form governing a Non-Employee Director's previous Deferral Period will
be deemed to govern the subsequent Deferral Period if such Non-Employee
Director does not submit a completed and signed Deferral Election Form
to the Company on or prior to the applicable Election Date. If no
Deferral Election Form has been submitted by a Non-Employee Director on
or prior to the applicable Election Date, such Non-Employee Director
may not defer his Director's Fees for the Deferral Period.
(b) Establishment of Deferred Compensation Accounts. A
Non-Employee Director's deferrals shall be credited to a Deferred Compensation
Account set up for that Non-Employee Director by the Company in accordance with
the provisions of this Section 5.
(c) Crediting of Phantom Stock Units to Deferred
Compensation Accounts.
(i) Number of Phantom Stock Units. The portion of the
Director's Fees that a Non-Employee Director elects to defer in the
form of Phantom Stock Units shall be credited to the Deferred
Compensation Account as of the last business day of the fiscal quarter
in which such portion of the Director's Fees would otherwise have been
payable to the Non-Employee Director. The number of Phantom Stock Units
to be credited to the Deferred Compensation Account shall be determined
by dividing (1) the amount of the Director's Fees deferred over such
quarter by (2) the Fair Market Value of a share of Common Stock as of
the date of crediting. Any partial Phantom Stock Unit that results from
the application of the previous sentence shall be rounded up to a whole
Phantom Stock Unit.
(ii) Dividend Equivalents. In the event that the Company pays
any cash or other dividend or makes any other distribution in respect
of the Common Stock, each Phantom Stock Unit credited to the Deferred
Compensation Account of a Non-Employee Director shall be credited with
an additional number of Phantom Stock Units (including fractions
thereof) determined by dividing (A) the amount of cash, or the value
(as determined by the Administrator) of any securities or other
property, paid or distributed in respect of one outstanding share of
Common Stock by (B) the Fair Market Value of a share of Common Stock as
of the date of such payment or distribution. Any partial Phantom Stock
Unit that results from the application of the previous sentence shall
be rounded up to a whole Phantom Stock Unit. Such credit shall be made
effective as of the date of the dividend or other distribution in
respect of the Common Stock.
(iii) No Rights as a Stockholder. The crediting of Phantom
Stock Units to a Non-Employee Director's Deferred Compensation Account
shall not confer on the Non-Employee Director any rights as a
stockholder of the Company.
<PAGE> 8
7
(d) Written Statements of Account. The Company shall furnish
each Non-Employee Director with a statement setting forth the value of such
Non-Employee Director's Deferred Compensation Account current as of the end of
each Deferral Period and all credits to and payments from the Deferred
Compensation Account during the Deferral Period. Such statement shall be
furnished no later than 60 days after the end of the Deferral Period.
(e) Manner of Payment of Deferred Benefit. Payment of the
Deferred Benefits credited in Phantom Stock Units shall be in shares of Common
Stock. Payment shall be made either in a single lump sum or in a series of five
or fewer annual installments. The amount of each installment payment to a
Non-Employee Director shall be determined in accordance with the formula B/(N -
P), where "B" is the number of Phantom Stock Units as of the installment
calculation date, "N" is the number of installments elected by the Non-Employee
Director and "P" is the number of installments previously paid to the
Non-Employee Director. The number of shares distributed in each year shall be
rounded down to the nearest whole share, with any fractional share deferred
until the following year except in the last year, in which any fractional share
will be rounded up.
(f) Commencement of Payment of Deferred Benefit. Payment of a
Non- Employee Director's Deferred Benefit shall commence as soon as practicable
(but in no event more than 60 days) after the earlier to occur of:
(i) termination of service as a member of the Board; and
(ii) the date specified in the Deferral Election Form executed
by the Non-Employee Director.
(g) Death. In the event of a Non-Employee Director's death,
the Non-Employee Director's entire Deferred Benefit (including any unpaid
portion thereof corresponding to installments not yet paid at the time of
death), to the extent not distributed earlier pursuant to Section 5(f), shall be
distributed in a lump sum to the Non-Employee Director's Beneficiary as soon as
practicable after the date of death, but in no event more than six months after
the Non-Employee Director's date of death.
(h) Restrictions on Transfer. The Company shall pay all
Deferred Benefits payable under the Plan only to the Non-Employee Director or
Beneficiary designated under the Plan to receive such amounts. Neither a
Non-Employee Director nor his Beneficiary shall have any right to anticipate,
alienate, sell, transfer, assign, pledge, encumber or change any benefits to
which he may become entitled under the Plan, and any attempt to do so shall be
void. A Deferred Benefit shall not be subject to attachment, execution by levy,
garnishment, or other legal or equitable process for a Non-Employee Director's
or Beneficiary's debts or other obligations.
<PAGE> 9
8
6. Designation of Beneficiary.
(a) Beneficiary Designations. Each Non-Employee Director may
designate a Beneficiary to receive any Deferred Benefit due under the Plan or to
exercise an Option upon the Non-Employee Director's death by executing a
Beneficiary Designation Form.
(b) Change of Beneficiary Designation. A Non-Employee Director
may change an earlier Beneficiary designation by executing a later Beneficiary
Designation Form and delivering it to the Administrator. The execution of a
Beneficiary Designation Form and its receipt by the Administrator revokes and
rescinds any prior Beneficiary Designation Form.
7. Change in Control.
Anything in the Plan to the contrary notwithstanding, in the
event of a Change in Control of the Company, the following provisions shall
apply:
(a) Any Options held by a Non-Employee Director who retires
from service or who is removed from the Board within two years of the date such
a Change in Control has occurred that are not yet exercisable and vested shall
become fully exercisable and vested.
(b) All Deferred Benefits credited to the Non-Employee
Director's Deferred Compensation Account as of the date of the Change in Control
shall be paid in cash to the Non-Employee Director or, in the event of death of
the Non-Employee Director prior to payment, to the Beneficiary thereof on the
date of the Change in Control. The cash amount paid for each whole or partial
Phantom Stock Unit shall be the Change in Control Price.
[(] (c) If the Administrator shall receive an opinion from a
nationally recognized firm of accountants to the Company that the cash-out
provisions in Section 7(b) above with respect to Options or the payment of
Phantom Stock Units in cash by the Company in accordance with Section 7(b)
above will prohibit the utilization of "pooling of interests" accounting in
connection with the transaction resulting in the Change in Control of the
Company, then the following shall apply, but only to the extent necessary to
permit such accounting treatment; (i)(A) the provisions of Section 7(b) shall
not apply to the Options, (B) each such Option shall become immediately vested
and exercisable as of the date such opinion is received by the Administrator,
and (C) the Administrator shall promptly inform each Non-Employee Director of
such opinion and of the accelerated vesting and exercisability of the Option
sufficiently prior to the anticipated date of the Change in Control so as to
permit the Options to be exercised prior to the date of the Change in Control,
and (ii) the Phantom Stock Units shall be settled in shares of Common Stock on
the date that such opinion is received by the Administrator.[)]
8. Recapitalization or Reorganization.
(a) Authority of the Company and Shareholders. The existence
of the Plan 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 other
provision of the Plan, in the event of any change in the outstanding Common
Stock by reason of a stock dividend,
<PAGE> 10
9
recapitalization, reorganization, merger, consolidation, stock split,
combination, exchange of shares or any other significant corporate event
effecting the Common Stock (a "Change in Capitalization"), (i) such
proportionate adjustments as may be necessary (in the form determined by the
Administrator in its sole discretion) to reflect such change shall be made to
prevent dilution or enlargement of the rights of Non-Employee Directors under
the Plan with respect to the aggregate number of shares of Common Stock
authorized to be awarded under the Plan, the number of shares of Common Stock
covered by each outstanding Option and the exercise prices in respect thereof,
the number of shares of Common Stock covered by future Option grants and the
number of Phantom Stock Units credited to a Non-Employee Director's Deferred
Compensation Account and (ii) the Administrator may make such other adjustments,
consistent with the foregoing, as it deems appropriate in its sole discretion.
(c) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each outstanding Option shall vest
and become exercisable on a date prior to the consummation of the proposed
action that is reasonably sufficient to enable the Non-Employee Directors to
exercise their Options. All Deferred Benefits credited to the Non-Employee
Director's Deferred Compensation Account as of the date of the consummation of a
proposed dissolution or liquidation shall be paid in cash to the Non-Employee
Director or, in the event of death of the Non-Employee Director prior to
payment, to the Beneficiary thereof on the date of the consummation of such
proposed action. The cash amount paid for each whole or partial Phantom Stock
Unit shall be the Fair Market Value of a share of Common Stock as of the date of
the consummation of such proposed action.
9. Termination and Amendment of the Plan.
(a) General Power of the Board. Notwithstanding anything
herein to the contrary, 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 except as provided in Section 8(b) above.
(b) When Non-Employee Directors' Consents Required. The Board
may not alter, amend, suspend, or terminate the Plan without the consent of any
Non-Employee Director to the extent that such action would (i) adversely affect
his or her rights with respect to Options that have previously been granted or
(ii) result in the distribution to such Non-Employee Director of amounts then
credited to his Deferred Compensation Account in any manner other than as
provided in the Plan or could reasonably be expected to result in the immediate
taxation to such Non-Employee Director of Deferred Benefits.
<PAGE> 11
10
10. Miscellaneous.
(a) No Right to Reelection. Nothing in the Plan shall be
deemed to create any obligation on the part of the Board to nominate any of its
members for reelection by the Company's stockholders, nor confer upon any
Non-Employee Director the right to remain a member of the Board for any period
of time, or at any particular rate of compensation.
(b) Unfunded Plan.
(i) Generally. This Plan is unfunded. Amounts payable under
the Plan shall be satisfied solely out of the general assets of the
Company subject to the claims of the Company's creditors.
(ii) Deferred Benefits. A Deferred Benefit represents at all
times an unfunded and unsecured contractual obligation of the Company
and each Non-Employee Director or Beneficiary shall be an unsecured
creditor of the Company. No Non-Employee Director, Beneficiary or any
other person shall have any interest in any fund or in any specific
asset of the Company by reason of any amount credited to him hereunder,
nor shall any Non-Employee Director, Beneficiary or any other person
have any right to receive any distribution under the Plan except as,
and to the extent, expressly provided in the Plan. The Company shall
not segregate any funds or assets for Deferred Benefits or issue any
notes or security for the payment of any Deferred Benefits. Any reserve
or other asset that the Company may establish or acquire to assure
itself of the funds to provide benefits under the Plan shall not serve
in any way as security to any Non-Employee Director, Beneficiary or
other person for the performance of the Company under the Plan.
(c) Other Compensation Arrangements. Benefits received by a
Non-Employee Director pursuant to the provisions of the Plan shall not be
included in, nor have any effect on, the determination of benefits under any
other arrangement provided by the Company.
(d) Securities Law Restrictions. The Administrator may
require each Non-Employee Director purchasing or acquiring shares of Common
Stock pursuant to the Plan to agree with the Company in writing that such
Non-Employee Director 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 Administrator may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission or
any exchange upon which the Common Stock is then listed, and any applicable
federal or state securities law, and the Administrator 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
<PAGE> 12
11
have determined that such issuance is in compliance with, or pursuant to an
exemption from, all applicable federal and state securities laws.
(e) Expenses. The costs and expenses of administering the
Plan shall be borne by the Company.
(f) 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.
(g) Effective Date. The Plan shall be effective as of the
Effective Date.
11. Definitions.
"Administrator" means the Board or the individual appointed by
the Board to administer the Plan.
"Airline Shareholder" means any of United Airlines, US Airways
or KLM Royal Dutch Airlines.
"Annual Fees" means the cash portion of (i) any annual fee
payable to a Non-Employee Director for service on the Board, (ii) any
other fee determined on an annual basis and payable for service on, or
for acting as chairperson of, any committee of the Board and (iii) any
similar annual fee or fees payable in respect of service on the board
of directors of any Subsidiary or any committee of any such board of
directors.
"Annual Meeting" means an annual meeting of the Company's
stockholders.
"Beneficiary" or "Beneficiaries" means an individual or entity
designated by a Non-Employee Director on a Beneficiary Designation Form
to receive Deferred Benefits and to exercise Options in the event of
the Non-Employee Director's death; provided, however, that, if no such
individual or entity is designated or if no such designated individual
is alive at the time of the Non-Employee Director's death, Beneficiary
shall mean the Non-Employee Director's estate.
"Beneficiary Designation Form" means a document, in a form
approved by the Administrator to be used by Non-Employee Directors to
name their respective Beneficiaries. No Beneficiary Designation Form
shall be effective unless it is signed by the Non-Employee Director and
received by the Administrator prior to the date of death of the
Non-Employee Director.
<PAGE> 13
12
"Board" means the Board of Directors of the Company.
"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 securities under an
employee benefit plan of the Company or an Airline Shareholder
(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 for election 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
<PAGE> 14
13
(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
reincorporation 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.
"Change in Control Price" means, as determined by the
Administrator, (i) the Fair Market Value on the close of the day
immediately preceding the date of determination of the Change in
Control Price by the Administrator, or (ii) the highest price paid as
determined by the Administrator, in any bona fide transaction or bona
fide offer related to the Change in Control of the Company, at any time
within the 60-day period immediately preceding the date of
determination of the change in control price, as determined by the
Administrator.
"Code" means the Internal Revenue Code of 1986, as amended,
and the applicable rules and regulations promulgated thereunder.
"Common Stock" means the common stock of the Company, $.01 par
value per share.
"Company" means Galileo International, Inc., a Delaware
corporation, or any successor to substantially all of its business.
"Deferral Election Form" means a document, in a form approved
by the Administrator and which is attached hereto as Exhibit A,
pursuant to which a Non-Employee Director makes a deferral election
under the Plan.
"Deferral Period" means each period commencing on the date of
an Annual Meeting and ending on the date immediately preceding the next
Annual Meeting. The first Deferral Period under the Plan shall commence
on the first day of the first fiscal quarter of the Company to begin
after the Effective Date. If an individual becomes eligible to
participate in the Plan after the commencement of a Deferral Period,
the Deferral Period for the individual shall be the remainder of such
Deferral Period.
"Deferred Benefit" means an amount that will be paid on a
deferred basis under the Plan to a Non-Employee Director who has made a
deferral election pursuant to Section 5.
<PAGE> 15
14
"Deferred Compensation Account" means the bookkeeping record
established for each Non-Employee Director. A Deferred Compensation
Account is established only for purposes of measuring a Deferred
Benefit and not to segregate assets or to identify assets that may be
used to pay a Deferred Benefit.
"Director's Fees" means the aggregate of a Non-Employee
Director's Annual Fees and Meeting Fees paid in cash.
"Effective Date" means the date immediately preceding the
consummation of the Company's initial public offering of equity
securities.
"Election Date" means the day immediately preceding the
commencement of a Deferral Period. If an individual first becomes
eligible to participate in the Plan on an Annual Meeting date or after
the start of a Deferral Period, the Election Date shall be the
thirtieth day following such Annual Meeting date or initial
participation date, as the case may be. The Election Date for the first
Deferral Period shall be the last business day prior to the first
fiscal quarter of the Company to begin after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the applicable rules and regulations promulgated
thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the applicable rules and regulations promulgated
thereunder.
"Fair Market Value" means the value of Common Stock determined
as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system (including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System), its Fair Market Value shall be the closing
sales price for such stock or the closing bid if no sales were
reported, as quoted on such system or exchange (or the
exchange with the greatest volume of trading in the Common
Stock) for the last market trading day prior to the date of
determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable.
(ii) If the Common Stock is regularly quoted on the
NASDAQ System (but not on the National Market System) or
quoted by a recognized securities dealer, but selling prices
are not reported, its Fair Market Value shall
<PAGE> 16
15
be the mean between the high and low asked prices for the
Common Stock for the last day on which there are quoted prices
prior to the time of determination.
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be
determined in good faith by the Administrator.
"Meeting Fees" means (i) any meeting fee payable in respect of
attendance at or participation in meetings of the Board or any
committee of the Board or any meeting of the stockholders of the
Company and (ii) any similar meeting fee payable in respect of service
on the board of directors of any Subsidiary or any committee of any
such board of directors.
"Non-Employee Director" means a member of the Board who is not
an employee of the Company or any of its Subsidiaries.
"Option" means an option to purchase shares of Common Stock
awarded to a Non-Employee Director pursuant to the Plan.
"Phantom Stock Unit" means a bookkeeping unit representing one
share of Common Stock credited to a Deferred Compensation Account in
accordance with Section 5(c).
"Plan" means the Galileo International, Inc. 1997 Non-Employee
Director Stock Plan.
"Subsidiary" means any corporation which is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code with
respect to the Company.
<PAGE> 17
Exhibit A
Galileo International, Inc. Non-Employee Director Stock Plan
Initial Fee Deferral Election Form
<PAGE> 1
Exhibit 10.43
_____________, 1997
Dear
This letter ("Letter") sets forth the terms of the grant by Galileo
International, Inc. (the "Company") to you of phantom shares ("Phantom Shares")
relating to shares of the Company's Common Stock, par value $0.01 per share
("Common Stock").
1. Grant of Phantom Shares. Pursuant to the terms of this Letter, you are
hereby granted in exchange for awards granted but not yet paid to you
("Old Awards") under the Company's Long Term Incentive Plan (the
"Plan"), effective as of ______, 1997 (the "Date of Issuance"), the
number of Phantom Shares set forth on Exhibit A attached hereto,
divided among the 1995 Award, the 1996 Award and the 1997 Award (the
"Grant"). Each Phantom Share shall represent an unsecured contractual
right to receive, on the relevant date set forth below, cash in an
amount equal to the Fair Market Value of the Phantom Share as of such
date. By signing this Letter, you hereby waive all of your rights and
claims under and with respect to the Plan and the Old Awards.
2. Payment of the Value of Phantom Shares. On March 31, 1998, the Company
or one of its subsidiaries (the Company and its subsidiaries being
hereinafter referred to as the "Corporation") shall pay you the Fair
Market Value of (i) all of the unpaid Phantom Shares comprising your
1995 Award, (ii) one half the unpaid Phantom Shares comprising your
1996 Award, and (iii) one third of the unpaid Phantom Shares comprising
your 1997 Award. On March 31, 1999 the Corporation shall pay you the
Fair Market Value of (i) all of the unpaid Phantom Shares remaining in
your 1996 Award and (ii) one half of the Phantom Shares remaining in
your 1997 Award. On March 31, 2000 the Corporation shall pay you the
Fair Market Value of all of the Phantom Shares remaining in your 1997
Award. Notwithstanding the above, you may defer any payment by electing
to defer such payment by submitting a completed deferral form to the
Board prior to the year in which the payment is scheduled to be made.
Notwithstanding anything in this Letter to the contrary, the Board of
Directors of the Company (the "Board"), in its sole discretion, may
accelerate the payment date with respect to any or all Phantom Shares
and pay you the Fair Market Value of such shares as of such accelerated
payment date.
<PAGE> 2
2
3. Dividend Equivalents. The Corporation shall establish a notional
bookkeeping account in your name (the "Dividend Equivalent Account").
Each time a dividend is declared and paid on the Common Stock, your
Dividend Equivalent Account will be credited, effective as of the
relevant dividend payment date, with an amount equal to the dividend
payable on a share of Common Stock multiplied by the number of Phantom
Shares in the Grant at that time. The balance of your Dividend
Equivalent Account shall become payable to you in cash on the same date
the Phantom Shares with respect to which the Dividend Equivalents were
earned are paid to you.
Determination of Fair Market Value. As used herein, "Fair Market Value"
means the value of Common Stock determined as follows:
(a) If the Common Stock is listed on any established stock
exchange or a national market system (including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System), its Fair Market
Value shall be the closing sales price for such stock or the closing
bid if no sales were reported, as quoted on such system or exchange (or
the exchange with the greatest volume of trading in the Common Stock)
for the last market trading day prior to the date of determination, as
reported in The Wall Street Journal or such other source as the Board
deems reliable.
(b) If the Common Stock is regularly quoted on the NASDAQ
System (but not on the National Market System) or quoted by a
recognized securities dealer, but selling prices are not reported, its
Fair Market Value shall be the mean between the high and low asked
prices for the Common Stock for the last day on which there are quoted
prices prior to the time of determination.
(c) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
5. Termination of Employment. In the event that your employment with the
Corporation terminates on or after the date hereof for any reason other
than your retirement pursuant to the terms of the Company's retirement
policy, death or disability (as defined in the Company's Long Term
Disability Plan), or the Company's elimination of your position for
reasons unrelated to your performance, all of your unpaid Phantom
Shares and Dividend Equivalents shall be forfeited.
6. Effect of Certain Transactions. In the event of a Change in Control (as
hereinafter defined), the Change in Control Price of each Phantom Share
held by you shall automatically be paid to you in cash. As used in this
Section 6(a), a "Change of Control" shall be deemed to have occurred
if:
<PAGE> 3
3
(a) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as
amended (the "1934 Act")), other than a trustee or other fiduciary
holding 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 1934 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 Date of Issuance), 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
<PAGE> 4
EXHIBIT 10.43
4
(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.
As used in this Section 6, Change in Control Price means, as determined
by the Board, (i) the Fair Market Value on the close of the day
immediately preceding the date of determination of the Change in
Control Price by the Board, or (ii) the highest price paid, as
determined by the Board, in any bona fide transaction or bona fide
offer related to the Change in Control of the Company, at any time
within the 60-day period immediately preceding the date of
determination of the Change in Control Price, as determined by the
Board.
For the purposes of this letter, Airline Shareholders means any of
United Airlines, USA Airways or KLM Royal Dutch Airlines.
If the Board shall receive an opinion from a nationally recognized firm
of accountants to the Company that the cash-out provisions in this
Section 6 with respect to the payment of Phantom Shares in cash by the
Company in accordance with this Section 6 will prohibit the utilization
of "pooling of interests" accounting in connection with the transaction
resulting in the Change in Control of the Company, then the following
shall apply, but only to the extent necessary to permit such accounting
treatment, the Phantom Shares shall be settled in shares of Common
Stock on the date that such opinion is received by the Board.
7. Restrictions on Transfer. No Phantom Share granted hereunder shall be
sold transferred, assigned, pledged or otherwise encumbered or deposed
of, and no right or interest of your Phantom Shares, shall be subject
to any lien, obligation, liability or other such encumbrance of the
Participant, except by will or the laws of descent and distribution.
8. Stockholder Rights. The Grant shall not confer on you any rights as a
stockholder of the Company.
9. Contractual Obligation. The obligations of the Corporation to make
payments and transfers hereunder shall be contractual only, and all
such payments shall be made from the general assets of the Corporation.
You, your beneficiary and any other person or persons having or
claiming a right to payments hereunder shall rely solely on the
unsecured promise of the Corporation, and nothing herein shall be
construed to give you, your beneficiary or any other person or persons
any right, title, interest or claim in or to any specific asset, fund,
reserve, account or property of any kind whatsoever owned by the
Corporation or in which it may have any right, title or interest now or
in the future. Your rights to payment with respect to your Phantom
Shares and Dividend Equivalents shall be no greater than those of the
Corporation's unsecured, subordinated creditors. In the event of the
bankruptcy or the voluntary liquidation of the Company, your
distribution shall in no event be greater than the distribution to the
holders of shares of Common Stock.
10. Withholding. No later than the date as of which an amount first becomes
includable in your gross income for applicable income tax purposes with
respect to any award under this Letter, you shall pay to the Company or
make arrangements satisfactory to the
<PAGE> 5
5
Company regarding the payment of any federal, state or local taxes of
any kind required by law to be withheld with respect to such amount.
The obligations of the Company under this Letter 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 you.
11. No Rights to Continued Employment. Nothing in this Letter shall give
you any right to continued employment with the Corporation, as the case
may be, or interfere in any way with the right of the Corporation to
terminate the employment of any of its employees at any time, with or
without cause.
Authority of the Company and Shareholders. The existence of this Letter
and the awards granted hereunder shall not affect or restrict in any
way the right or power of the Corporation or the shareholders of the
Corporation 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 Corporation, 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 Corporation, 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.
13. Applicable Law. Except as to matter of federal law, this Letter 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.
<PAGE> 6
6
14. Miscellaneous. This Letter and the other related agreements expressly
referred to herein set forth the entire agreement and understanding
between the parties hereto and supersede all prior agreements relating
to the subject matter hereof.
GALILEO INTERNATIONAL, INC.
[ ]
__________________________________
[Participant]
<PAGE> 7
EXHIBIT A
1995 Award
Number of Phantom Shares
_____________________________
1996 Award
Number of Phantom Shares
_____________________________
1997 Award
Number of Phantom Shares
_____________________________
<PAGE> 1
Exhibit 10.19
--------------
COVIA CONTRACT
--------------
00970
--------------
COMDISCO(R) MASTER LEASE
Comdisco, Inc. -- Lessor
MASTER LEASE AGREEMENT dated as of November 11, 1988 by and between
COMDISCO, INC. (hereinafter called "Lessor") having its principal office and
place of business at 6400 Shafer Court, Rosemont, Illinois 60018 and Covia
Partnership (hereinafter called "Lessee") having its principal office and place
of business at 9700 West Higgins Road, Rosemont, IL 60018
IN CONSIDERATION of the mutual agreements hereinafter set forth and the
payment of rent as herein provided for, the parties hereto agree as follows:
1. Property Leased.
In consideration of the rent to be paid by Lessee and the covenants and
agreements of Lessee hereinafter set forth, Lessor hereby rents, demises and
lets to Lessee all of the tangible personal property listed on each Equipment
Schedule executed, from time to time, pursuant to this Master Lease (with
respect to any Equipment Schedule, hereinafter called the "Equipment"). Each
Equipment Schedule shall be substantially in the form annexed hereto as Exhibit
A and made a part hereof, shall incorporate therein all of the terms and
conditions of this Master Lease and shall contain such additional terms and
conditions as Lessor and Lessee shall agree upon.
2. Term.
The term of this Master Lease shall commence on the date set forth above
and shall continue in effect thereafter so long as any Equipment Schedule
entered into pursuant to this Master Lease remains in effect.
The lease term for each Equipment Schedule shall commence on the first to
occur of the day on which the Equipment listed on said Equipment Schedule is
installed and approved for coverage under a prime shift maintenance contract by
the manufacturer thereof or the seventh (7th) day after delivery by Lessor if a
delay of installation and approval is caused by Lessee (hereinafter called the
"Commencement Date"); provided, however, that if the Equipment is specified as
"new" in such Equipment Schedule the date of installation of such Equipment
shall constitute the Commencement Date. The lease term shall continue for the
number of full months set forth in such Equipment Schedule (hereinafter called
the "Initial Term"), commencing on the first day of the month following the
Commencement Date (or commencing on the Commencement Date if such Date is on the
first day of the month). On the Commencement Date the Lessee will execute and
deliver to the Lessor a letter, in a form to be specified by the Lessor, which
confirms such Commencement Date.
3. Rent and Payment.
Lessee shall pay to Lessor, as rental for the Equipment during each month
of the Initial Term of any Equipment Schedule, the Monthly Rent set forth in
such Equipment Schedule, which shall be due and payable in advance on the first
day of each calendar month during such Initial Term (each such date being
hereinafter called a "Monthly Rent Payment Date"). If the Commencement Date of
any Equipment Schedule shall be other than the first day of the month, Lessee
shall make rental payments ("Interim Rent") equal to one-thirtieth of the
Monthly Rent set forth in the Equipment Schedule for each day from and including
the Commencement Date through and including the last day of the month prior to
the beginning of the Initial Term. Rent shall be paid to Lessor by check or wire
transfer so as to constitute immediately available funds at the address of
Lessor set forth above or at such other place as Lessor shall designate in
writing, or, if to an assignee of Lessor, at such place as such assignee shall
designate in writing, and shall be paid free and clear of all claims, demands or
setoffs against Lessor or such assignee. Whenever any payment (of rent or
otherwise) is not made when due hereunder, Lessee shall pay interest on such
amount at the rate of 18% per annum or the maximum allowable rate of interest
permitted by the law of the state where the Equipment is located, whichever is
less (the "Overdue Rate"), to the date of payment.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges, represents and warrants that it has
made the selection of the Equipment based on its own judgment and expressly
disclaims any reliance upon statements made by the Lessor. Lessee authorizes
Lessor to insert in each Equipment Schedule the serial number and other
identifying data of the Equipment.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that,
so long as Lessee shall not be in default of any of the provisions of the
applicable Equipment Schedule, neither owner, Lessor, nor any assignee or
secured party of Lessor will disturb Lessee's quiet and peaceful possession of
the Equipment and Lessee's unrestricted use thereof for its intended purpose.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS
MERCHANTABILITY OR ITS FITNESS OR CAPACITY OR DURABILITY FOR ANY PARTICULAR
PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT OR
CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE
ORDER OR ORDERS RELATING THERETO AND, AS TO LESSOR, LESSEE LEASES THE EQUIPMENT
"AS IS". Lessor shall not be liable, to any extent whatever, for the selection,
quality, condition, merchantability, suitability, fitness, operation or
performance of the Equipment. Without limiting the generality of the foregoing,
Lessor shall not be liable to Lessee for any liability, claim, loss, damage or
expense of any kind or nature (including strict liability in tort) caused,
directly or indirectly, by the Equipment or any inadequacy thereof for any
purpose, or any deficiency or defect therein, or the use or maintenance thereof,
or any repairs, servicing or adjustments thereto; or any delay in providing or
failure to provide any part thereof, or any interruption or loss of service or
use thereof, or any loss of business, or any damage whatsoever and howsoever
caused except for any such loss or damage caused by the wilful misconduct of
Lessor, or its agents and representatives. Lessor hereby appoints Lessee as
Lessor's agent to assert, during the term of the applicable Equipment Schedule,
any right Lessor may have to enforce the manufacturer's warranties, if any;
provided, however, that Lessee shall indemnify and hold Lessor or its assignee
harmless from and against any and all claims, costs, expenses, damages, losses
and liabilities incurred or suffered by Lessor as a result of or incident to any
action by Lessee in connection therewith.
5. Title and Assignment.
5.1 Title. Nothing contained in any Equipment Schedule shall give or
convey to Lessee any right, title or interest in or to the Equipment, except as
a Lessee as set forth therein and Lessee represents and agrees that Lessee shall
hold the Equipment subject and subordinate to the rights of the owner.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Supervisory Board
Galileo International Partnership
and The Board of Directors
Galileo International, Inc.:
We consent to the use of our reports included herein and to the references to
our firm under the headings "Summary Historical and Pro Forma Consolidated
Financial and Operating Data," "Selected Historical Consolidated Financial and
Operating Data," and "Experts" in the prospectus.
KPMG Peat Marwick LLP
Chicago, Illinois
June 27, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion
in this Registration Statement of our report dated February 7, 1997, included in
the Apollo Travel Services Partnership audited consolidated financial
statements for the year ended December 31, 1996, and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
June 27, 1997
<PAGE> 1
EXHIBIT 23.5
June 27, 1997
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Ladies and Gentlemen:
The undersigned hereby consents to being designated as a person
about to become a director of Galileo International, Inc., a Delaware
corporation (the "Company"), in the Company's Registration Statement on Form S-1
(File No. 333-27495).
Very truly yours,
/s/ David A. Coltman
-------------------------------
David A. Coltman
<PAGE> 1
EXHIBIT 23.7
June 27, 1997
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Ladies and Gentlemen:
The undersigned hereby consents to being designated as a person
about to become a director of Galileo International, Inc., a Delaware
corporation (the "Company"), in the Company's Registration Statement on Form S-1
(File No. 333-27495).
Very truly yours,
/s/ Frank H. Rovekamp
-------------------------------
Frank H. Rovekamp
<PAGE> 1
EXHIBIT 23.8
June 27, 1997
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Ladies and Gentlemen:
The undersigned hereby consents to being designated as a person
about to become a director of Galileo International, Inc., a Delaware
corporation (the "Company"), in the Company's Registration Statement on Form S-1
(File No. 333-27495).
Very truly yours,
/s/ Georges P. Schorderet
-------------------------------
Georges P. Schorderet
<PAGE> 1
EXHIBIT 23.9
June 27, 1997
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Ladies and Gentlemen:
The undersigned hereby consents to being designated as a person
about to become a director of Galileo International, Inc., a Delaware
corporation (the "Company"), in the Company's Registration Statement on Form S-1
(File No. 333-27495).
Very truly yours,
/s/ Derek Stevens
-------------------------------
Derek Stevens
