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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|x| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-13153
Galileo International, Inc.
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-4156005
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(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
9700 West Higgins Road, Suite 400, Rosemont, Illinois 60018
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(847) 518-4000
- ------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- ------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) had filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |x| No | |
At August 4, 1998, there were 104,905,238 shares of Common Stock, par value $.01
per share, of the registrant outstanding.
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GALILEO INTERNATIONAL, INC.
QUARTER ENDED JUNE 30, 1998
INDEX
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<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Historical Financial Statements of Galileo International, Inc.
(Formerly Galileo International Partnership through July 30, 1997)
Condensed Consolidated Balance Sheets as of June 30,1998
(unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Income for the quarter
and six months ended June 30, 1998 and 1997 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1997 (unaudited) 5
Condensed Consolidated Statement of Stockholders' Equity
for the six months ended June 30, 1998 (unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information - Galileo International, Inc. 20
Condensed Consolidated Statements of Income (1998) and Pro Forma
Condensed Combined Statements of Income (1997) for the quarter and six
months ended June 30, 1998 and 1997 (unaudited) 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 23
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2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- ---------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 18,709 $ 19,367
Accounts receivable, net 217,076 165,407
Other current assets 44,745 39,501
------------- ---------------
Total current assets 280,530 224,275
Property and equipment, at cost:
Land 6,470 6,470
Buildings and improvements 76,975 74,038
Equipment 361,294 330,112
------------- ---------------
444,739 410,620
Less accumulated depreciation 260,690 221,439
------------- ---------------
Net property and equipment 184,049 189,181
Computer software, net 208,178 224,575
Intangible assets, net 614,235 606,187
Other noncurrent assets 27,695 24,279
------------- ---------------
$ 1,314,687 $ 1,268,497
============= ===============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 55,400 $ 56,954
Accrued commissions 42,730 31,175
Income taxes payable 12,454 1,721
Other current liabilities 115,302 103,595
Capital lease obligations, current portion 6,743 7,918
------------- ---------------
Total current liabilities 232,629 201,363
Pension and postretirement benefits 50,076 44,399
Capital lease obligations 25,143 27,776
Long-term debt 159,392 250,000
Other noncurrent liabilities 63,136 61,263
------------- ---------------
Total liabilities 530,376 584,801
Stockholders' equity:
Special voting preferred stock: $.01 par value;
7 shares authorized; 7 shares issued and
outstanding --- ---
Preferred stock: $.01 par value; 25,000,000 shares
authorized; no shares issued --- ---
Common stock: $.01 par value; 250,000,000 shares
authorized; 104,897,600 and 104,799,700 shares issued
and outstanding, respectively 1,049 1,048
Additional paid-in capital 667,679 663,688
Retained earnings 120,938 18,832
Unamortized restricted stock grants (3,992) ---
Accumulated other comprehensive income (1,363) 128
------------- ---------------
Total stockholders' equity 784,311 683,696
============= ===============
$ 1,314,687 $ 1,268,497
============= ===============
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See accompanying notes to condensed consolidated financial statements.
3
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<TABLE>
<CAPTION>
GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share data)
Quarter Six Months
Ended June 30, Ended June 30,
---------------------------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Electronic global distribution services $ 345,393 $ 298,038 $ 687,623 $ 595,384
Information services 35,244 9,162 70,024 19,462
--------------- -------------- --------------- --------------
380,637 307,200 757,647 614,846
Operating expenses:
Cost of operations 143,943 65,533 279,043 127,631
Commissions, selling and administrative 144,752 188,101 280,383 367,338
--------------- -------------- --------------- --------------
288,695 253,634 559,426 494,969
--------------- -------------- --------------- --------------
Operating income 91,942 53,566 198,221 119,877
Other income (expense), net:
Interest expense, net (2,921) (136) (6,184) (1,910)
Other, net 748 546 1,397 1,916
--------------- -------------- --------------- --------------
Income before income taxes 89,769 53,976 193,434 119,883
Income taxes 35,818 875 77,180 1,290
--------------- -------------- --------------- --------------
Net income $ 53,951 $ 53,101 $ 116,254 $ 118,593
=============== ============== =============== ==============
Weighted average number of shares outstanding 104,799,700 104,799,700
=============== ===============
Basic earnings per share $ 0.51 $ 1.11
=============== ===============
Diluted weighted average number of shares
outstanding 105,218,941 105,141,038
=============== ===============
Diluted earnings per share $ 0.51 $ 1.11
=============== ===============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
GALILEO INTERNATIONAL, INC.
(FORMERLY GALILEO INTERNATIONAL PARTNERSHIP THROUGH JULY 30, 1997)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months
Ended June 30,
---------------------------------------
1998 1997
---- ----
<S> <C> <C>
Operating activities:
Net income $ 116,254 $ 118,593
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 85,065 42,097
Loss (gain) on disposal of property and equipment 19 (45)
Deferred income taxes, net 1,188 ---
(Increase) decrease in noncurrent assets (4,188) 302
Increase in noncurrent liabilities 3,505 736
Changes in operating assets and liabilities,
net of effects from purchases of NDCs:
Increase in accounts receivable, net (50,577) (51,833)
Increase in other current assets (1,101) (2,325)
Increase in accounts payable and accrued commissions 22,216 17,497
Increase in other current liabilities 7,841 9,071
Increase in income taxes payable 10,733 691
-------------- ----------------
Net cash provided by operating activities 190,955 134,784
Investing activities:
Purchase of property and equipment (38,452) (24,633)
Purchase and capitalization of computer software (13,465) (14,645)
Proceeds on disposal of property and equipment 3,057 88
Purchase of NDCs, net of $3,497 cash acquired (33,417) ---
---------------- ----------------
Net cash used in investing activities (82,277) (39,190)
Financing activities:
Borrowings under credit agreements 34,392 ---
Repayments under credit agreements (125,000) (50,000)
(Payments of) increase in capital lease obligations (4,147) 56
Distributions to partners --- (16,383)
Dividends paid to stockholders (14,148) ---
---------------- ----------------
Net cash used in financing activities (108,903) (66,327)
Effect of exchange rate changes on cash (433) (73)
---------------- ----------------
(Decrease) increase in cash and cash equivalents (658) 29,194
Cash and cash equivalents at beginning of period 19,367 78,196
---------------- ----------------
Cash and cash equivalents at end of period $ 18,709 $ 107,390
================ ================
See accompanying notes to condensed consolidated financial statements.
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5
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<CAPTION>
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands, except share data)
Special Additional
Voting Paid - In
Preferred Stock Common Stock Capital
--------------- ----------------------- -------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 .............. 7 $ 0 104,799,700 $ 1,048 $ 663,688
Comprehensive income:
Net income ............................. 0 0 0 0 0
Foreign currency translation adjustments 0 0 0 0 0
Comprehensive income ......................
Issuance of restricted stock grants ....... 0 0 97,900 1 3,991
Dividends paid ($0.135 per share) ......... 0 0 0 0 0
====== =========== =========== =========== ===========
Balance at June 30, 1998 .................. 7 $ 0 104,897,600 $ 1,049 $ 667,679
====== =========== =========== =========== ===========
Accumulated
Unamortized Other
Retained Restricted Comprehensive
Earnings Stock Grants Income Total
------------------------------------------------------
Balance at December 31, 1997 .............. $ 18,832 0 $ 128 $ 683,696
Comprehensive income:
Net income ............................. 116,254 0 0 116,254
Foreign currency translation adjustments 0 0 (1,491) (1,491)
---------
Comprehensive income ...................... 114,763
Issuance of restricted stock grants ....... 0 (3,992) 0 0
Dividends paid ($0.135 per share) ......... (14,148) 0 0 (14,148)
=========== =========== =========== ===========
Balance at June 30, 1998 .................. $ 120,938 $ (3,992) $ (1,363) $ 784,311
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
6
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GALILEO INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial
statements of Galileo International, Inc. have been prepared pursuant to the
rules of the Securities and Exchange Commission for quarterly reports on Form
10-Q and do not include all of the information and note disclosures required by
generally accepted accounting principles. The information furnished herein
includes all adjustments, consisting of normal recurring adjustments, which are,
in the opinion of management, necessary for a fair presentation of results for
these interim periods.
Effective July 30, 1997, Galileo International Partnership merged into a
wholly owned limited liability company subsidiary of Galileo International, Inc.
(the "Merger"). Unless otherwise indicated, references to the "Company" mean, at
all times prior to the time of the Merger, Galileo International Partnership and
its consolidated subsidiaries and, at all times thereafter, Galileo
International, Inc. and its consolidated subsidiaries. In connection with the
Merger, the Company effected an initial public offering of its common stock at
an initial public offering price of $24.50 per share resulting in net proceeds
to the Company, after exercise of the underwriters over-allotment, of $390.0
million after deducting underwriting discounts and commissions (the "Offering").
The results of operations for the quarter ended June 30, 1998 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998.
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" beginning with the quarter ended March 31,
1998. Required changes are reflected in the Condensed Consolidated Statement of
Stockholders' Equity.
These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997,
included in the Galileo International, Inc. Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 17, 1998.
NOTE 2 - NDC ACQUISITIONS
During the quarter ended September 30, 1997, the Company acquired three
distribution companies (the "NDC Acquisitions"): Apollo Travel Services
Partnership ("ATS"), Traviswiss AG ("Traviswiss") and Galileo Nederland BV
("Galileo Nederland"), at purchase prices of $700.0 million, $8.5 million and
$2.0 million, respectively. In connection with the NDC
7
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Acquisitions, the Company also incurred expenses of approximately $4.2 million
which have been accounted for as part of the purchase prices.
The Company accounted for the NDC Acquisitions using the purchase method
of accounting. Accordingly, the costs of the NDC Acquisitions were allocated to
the assets acquired and liabilities assumed based upon their respective fair
values. Of the total ATS purchase price, $405.6 million and $19.3 million was
attributed to the customer list and assembled workforce, respectively, and such
amounts are being amortized over 17 years and 8 years, respectively. The excess
of the cost of the NDC Acquisitions over the fair value of the net assets
acquired, $157.3 million, is being amortized over 25 years. The results of
operations and cash flows of the acquired NDCs have been consolidated with those
of the Company from the date of each acquisition.
In connection with the acquisitions of Traviswiss and Galileo Nederland,
the Company terminated certain revenue sharing obligations in exchange for
agreements to pay SAirGroup and KLM, in four annual installments beginning on
the acquisition dates, a total of $22.4 million and $14.8 million, respectively.
The total intangible asset of $37.2 million is being amortized over 17 years.
On April 22, 1998, the Company finalized the purchase of a distribution
company serving markets in Sweden, Norway and Finland (the "Nordiska
Acquisition"), Galileo Nordiska AB ("Galileo Nordiska"), at a price of $2.1
million. The Company accounted for the acquisition using the purchase method of
accounting.
Effective June 1, 1998, the Company acquired its Canadian distribution
company (the "Canada Acquisition"), Galileo Canada Distributions Systems Inc.
("Galileo Canada"), at a purchase price of $34.4 million. In connection with the
Canada Acquisition, the Company also incurred expenses of $.4 million, which
have been accounted for as part of the purchase price.
The Company accounted for the Canada Acquisition using the purchase method
of accounting. Accordingly, the costs of the Canada Acquisition were allocated
to the assets acquired and liabilities assumed based on their respective fair
values. The excess of the cost of the Canada Acquisition over the fair value of
the net assets acquired of $23.9 million is being amortized over 25 years. The
purchase price allocation is subject to adjustment. The results of operations
and cash flows of Galileo Canada have been consolidated with those of the
Company from the date of acquisition. In connection with the Canada Acquisition,
the Company incurred $34.4 million of debt under a five-year term loan
agreement.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share data for the quarter and six months ended June 30,
1998 is calculated based on the weighted average shares outstanding for the
period. Diluted earnings per share is calculated as if the Company had
additional common stock outstanding from January 1, 1998 or the date of grant
for all dilutive stock options, net of assumed repurchased shares using
8
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the treasury stock method. This resulted in an increase in the weighted average
number of shares outstanding for the quarter and six months ended June 30, 1998
of 419,241 and 341,338, respectively.
NOTE 4 - STOCKHOLDERS' EQUITY
During the quarter ended June 30, 1998, the Company granted each employee
employed by the Company on the date of grant, options to purchase 150 shares of
the Company's Common Stock. In addition, the Company granted senior management
and other key employees options to purchase the Company's Common Stock.
Approximately 1,900,000 stock options were issued under the above grants. All of
the foregoing options were granted pursuant to the Galileo International 1997
Stock Incentive Plan (the "Plan"), vest in equal installments over a three-year
period measured from the date of grant and have a ten-year term.
Also during the quarter and pursuant to the Plan, the Company's Board of
Directors approved the issuance of 97,900 shares of restricted Common Stock to
the Company's President and Chief Executive Officer. Half of these shares vest
in equal installments over a five-year period from the date of grant and the
remaining shares vest in equal installments over a four-year period beginning
one year from the date of grant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GALILEO INTERNATIONAL, INC.
(Formerly Galileo International Partnership through July 30, 1997)
SUMMARY
Prior to the consummation of the Offering, the Company conducted its
business through Galileo International Partnership. Immediately prior to the
consummation of the Offering, Galileo International Partnership was merged into
a wholly owned limited liability company subsidiary of Galileo International,
Inc. As a result of the Merger, (i) the Company became subject to U.S. federal
and state income taxes that were previously borne by the partners of Galileo
International Partnership, (ii) the Company recorded a $15.3 million
nonrecurring charge to income tax expense to reflect the establishment of
deferred tax assets and liabilities arising at the time of the Merger and (iii)
the Company's $200.0 million revolving credit facility was terminated and
replaced by a $200.0 million 364-day credit agreement and a $400.0 million
five-year credit agreement (collectively, the "Credit Agreements"). Upon the
Merger, the partnership interests of each airline partner were replaced with
common stock of the Company in the same proportion as that of their respective
partnership interests in Galileo International Partnership.
9
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SECOND QUARTER 1998 COMPARED TO SECOND QUARTER 1997
REVENUES. Revenues increased $73.4 million, or 23.9%, to $380.6 million for
the quarter ended June 30, 1998 from $307.2 million for the quarter ended June
30, 1997. Second quarter 1998 revenues include the impact of national
distribution company ("NDC") acquisitions whereas second quarter 1997 revenues
represent Galileo International Partnership revenues. The NDC acquisitions
resulted in $46.9 million of additional revenues for the quarter. The remaining
revenue growth resulted principally from increased booking volumes and from a
booking fee price increase that went into effect in March 1998.
OPERATING EXPENSES. Operating expenses increased $35.1 million, or 13.8%,
to $288.7 million for the quarter ended June 30, 1998 from $253.6 million for
the quarter ended June 30, 1997. The NDC acquisitions resulted in additional
operating expenses which were partially offset by lower commissions as the
Company no longer pays commissions, but instead incurs the direct costs of
distributing its products in these markets.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense net of interest income, and foreign exchange gains or losses. Other
income (expense), net increased $2.6 million, to $2.2 million expense, net for
the quarter ended June 30, 1998 from $0.4 million income, net for the quarter
ended June 30, 1997. This increase was primarily the result of higher interest
expense arising from higher average debt levels due to the NDC acquisitions, and
lower interest income arising from lower cash and cash equivalents.
INCOME TAXES. No provision for U.S. federal and state income taxes was
recorded in the quarter ended June 30, 1997 as such liability was the
responsibility of the partners of Galileo International Partnership, rather than
of the Company. Income taxes for 1997 represents certain of the Company's
non-U.S. subsidiaries which are subject to income taxes. The Company's effective
tax rate in 1998 is approximately 40%.
NET INCOME. Net income was $53.9 million for the quarter ended June 30,
1998. Net income was $53.1 million for the quarter ended June 30, 1997. Net
income in 1998 reflects the recognition of U.S. federal and state income taxes.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
REVENUES. Revenues increased $142.8 million, or 23.2%, to $757.6 million
for the six months ended June 30, 1998 from $614.8 million for the six months
ended June 30, 1997. In 1998 revenues include the impact of NDC acquisitions
whereas 1997 revenues represent Galileo International Partnership revenues. The
NDC acquisitions resulted in $93.7 million of additional revenues for the six
months. The remaining revenue growth resulted principally from increased booking
volumes and from a booking fee price increase that went into effect in March
1998.
10
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OPERATING EXPENSES. Operating expenses increased $64.4 million, or 13.0%,
to $559.4 million for the six months ended June 30, 1998 from $495.0 million for
the six months ended June 30, 1997. The NDC acquisitions resulted in additional
operating expenses which were partially offset by lower commissions as the
Company no longer pays commissions, but instead incurs the direct costs of
distributing its products in these markets.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense net of interest income, and foreign exchange gains or losses. Other
income (expense), net increased $4.8 million, to $4.8 million expense for the
six months ended June 30, 1998 from $0.0 million for the six months ended June
30, 1997. This increase was primarily the result of higher interest expense
arising from higher average debt levels due to the NDC acquisitions, and lower
interest income arising from lower cash and cash equivalents.
INCOME TAXES. No provision for U.S. federal and state income taxes was
recorded in the six months ended June 30, 1997 as such liability was the
responsibility of the partners of Galileo International Partnership, rather than
of the Company. Income taxes for 1997 represents certain of the Company's
non-U.S. subsidiaries which are subject to income taxes. The Company's effective
tax rate in 1998 is approximately 40%.
NET INCOME. Net income was $116.2 million for the six months ended June 30,
1998. Net income was $118.6 million for the six months ended June 30, 1997. Net
income in 1998 reflects the recognition of U.S. federal and state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $18.7 million and working capital totaled
$47.9 million at June 30, 1998. At December 31, 1997, cash and cash equivalents
totaled $19.4 million and working capital totaled $22.9 million. Cash and cash
equivalents decreased by only $0.7 million despite the net repayment of $90.6
million of indebtedness under the Company's credit agreements and $14.1 million
in dividends paid to stockholders, due principally to strong operating results.
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. Capital
expenditures, excluding the capitalization of internally developed software,
were $42.9 million for the six months ended June 30, 1998 compared to $26.9
million for the six months ended June 30, 1997.
Cash flow used in financing activities includes repayments of $125.0
million under the Credit Agreements and $14.1 million in dividends paid to
stockholders. The Company paid a $.06 per share cash dividend on February 20,
1998 to stockholders of record as of February 6, 1998 as well as a $.075 per
share cash dividend on May 22, 1998 to stockholders of record as of May 8, 1998.
On June 5, 1998, the Company incurred additional borrowings of $34.4 million
under a five-year term loan agreement, which were used to fund the acquisition
of Galileo Canada.
11
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The Company expects that future cash requirements will principally be for
capital expenditures, repayments of indebtedness, acquisitions of additional
NDCs and other potential acquisitions that are aligned with the Company's
strategic direction. The Company believes that cash generated by operating
activities will be sufficient to fund its future cash requirements, except that
significant acquisitions may require additional borrowings or other financing
alternatives. (1)
In addition to reinvesting a substantial portion of earnings in its
business, the Company currently intends to pay regular quarterly dividends. On
July 17, 1998, the Company declared a cash dividend of $.075 per share to be
paid on August 21, 1998 to stockholders of record as of August 7, 1998. 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 future
dividends.
YEAR 2000 (1)
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. The Company is
also continuing to assess Year 2000 issues concerning its relationships with
third parties, including air, car, and hotel vendors as well as significant
NDCs, to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues. There can be no guarantee that the systems of other companies on which
the Company's systems rely will be converted in a timely manner, but the Company
is currently working with its vendors and NDCs to address Year 2000 issues. 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
required software is Year 2000 ready, regardless of when such bookings occur,
could have a material adverse effect on the business, financial condition and
results of operations of the Company. The Company has incurred $4.1 million of
expenses in the first six months of 1998 and $4.4 million of expenses in 1997
related to Year 2000 conversions, and expects future expenditures to total
approximately $13.0 million. Management believes that Year 2000 activities
related to the Company's mainframe systems will be completed in 1998 and
remaining activities are on track for completion in 1999.
- ---------
(1) See Statement Regarding Forward-Looking Statements on page 18.
12
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PRO FORMA RESULTS OF OPERATIONS
GALILEO INTERNATIONAL, INC.
This discussion of pro forma results of operations is based on the
condensed consolidated statements of income (1998) and the pro forma condensed
combined statements of income (1997) presented in "Part II --- Other
Information, Item 5. Other Information".
SUMMARY
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 38,400 locations, as well as other
subscribers, with the ability to access schedule and fare information, book
reservations and issue tickets for approximately 500 airlines. Galileo
International also provides subscribers with information and booking
capabilities covering all the major hotel chains, car rental companies, cruise
lines and numerous tour operators throughout the world.
The geographic breadth of the Company is demonstrated by the table below
which shows the approximate number of travel agency locations and terminals by
region.
Travel Agency
Locations Terminals at
at June 30, 1998 June 30, 1998
-------------------------- -------------------------
Region Number % Number %
- ------ ------- - ------- -
United States 12,600 32.8% 61,900 38.8%
Europe 12,900 33.6% 54,000 33.8%
Asia/Pacific 5,200 13.5% 20,200 12.7%
Canada 3,200 8.3% 10,900 6.8%
Middle East/Africa 2,900 7.6% 8,800 5.5%
Latin America 1,600 4.2% 3,900 2.4%
-------------------------- -------------------------
38,400 100.0% 159,700 100.0%
========================== =========================
The Company generates its revenue from the provision of electronic global
distribution services and information services. During the six months ended June
30, 1998, the Company generated approximately 90.8% of its revenue from
electronic global distribution services and approximately 9.2% of its revenue
from information services. The following table summarizes pro forma electronic
global distribution services revenues by geographic location as a percentage of
total revenues and summarizes total booking volumes for each of the periods
indicated:
13
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Quarter Six Months
Ended June 30, Ended June 30,
------------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
Percent of Revenue
- ------------------
United States (1) 43.9% 45.1% 44.1% 46.2%
International (1) 56.1 54.9 55.9 53.8
------------------- --------------------
100.0% 100.0% 100.0% 100.0%
=================== ====================
Worldwide Bookings
(in millions)
- ------------------
Air 81.9 81.4 167.0 163.9
Car/Hotel/Leisure 7.2 6.9 14.1 13.1
-------------------- -------------------
89.1 88.3 181.1 177.0
==================== ===================
United States (1) 39.7 40.6 81.3 83.2
International (1) 49.4 47.7 99.8 93.8
-------------------- -------------------
89.1 88.3 181.1 177.0
==================== ===================
- --------
(1)The location of the travel agent making the booking determines the geographic
region credited with the related revenues and bookings.
SECOND QUARTER 1998 COMPARED TO PRO FORMA SECOND QUARTER 1997
REVENUES. Revenues increased $32.3 million, or 9.3%, to $380.6 million for
the quarter ended June 30, 1998 from $348.3 million in pro forma revenues for
the quarter ended June 30, 1997.
Growth in electronic global distribution services revenues resulted from an
increase in airline booking volumes of 0.6% and an increase in car, hotel and
leisure booking volumes of 4.7% during the quarter ended June 30, 1998 as
compared to the quarter ended June 30, 1997. Total international booking volumes
increased 3.6% for the quarter, while domestic booking volumes declined 2.2%
over the same period last year. This decrease in domestic bookings is due to a
new fee structure the Company introduced in North America in March 1998 that
only charges airline vendors for passive bookings that are ticketed. The Company
reports only those bookings for which it receives a fee. Excluding passive
airline bookings, domestic growth in active bookings for the quarter was 1.9%.
Revenue growth was also driven by an air booking fee
14
<PAGE>
price increase that went into effect March 1, 1998 as well as improvements in
yield and increases in other electronic global distribution revenues. In
addition, the resolution of an airline vendor billing issue in the second
quarter of 1997, which was disclosed in the Company's prospectus for the
Offering, reduced revenue in that quarter resulting in two percentage points of
additional revenue growth in 1998.
COST OF OPERATIONS. Cost of operations expenses increased $11.4 million, or
8.6%, to $143.9 million for the quarter ended June 30, 1998 from $132.5 million
in pro forma expenses for the quarter ended June 30, 1997. The Canada
Acquisition and Nordiska Acquisition resulted in $2.7 million of the increase in
cost of operations expenses as the Company has begun to incur the direct cost of
operating in these markets. The remaining increase was primarily attributable to
higher wages for technical personnel, increased communication costs due to
market expansion and increased maintenance costs on subscriber equipment at
agency locations. Cost of operations expense growth is lower than revenue growth
due to management's continued focus on operating efficiency and savings realized
from the integration of the acquired NDCs. The Company continues to take
advantage of decreasing technology costs on Data Center equipment and has
negotiated favorable supplier contracts for subscriber equipment.
COMMISSIONS, SELLING AND ADMINISTRATIVE EXPENSES. Commissions, selling and
administrative expenses increased $5.9 million, or 4.2%, to $144.8 million for
the quarter ended June 30, 1998 from $138.9 million in pro forma expenses for
the quarter ended June 30, 1997. NDC commissions and subscriber incentive
payments increased $1.2 million, or 1.3%, to $93.9 million for the quarter ended
June 30, 1998 from $92.7 million for the quarter ended June 30, 1997. The
increase in electronic global distribution services revenues resulted in
increased commissions to non-owned NDCs which were partially offset by lower
commissions to Galileo Canada and Galileo Nordiska as, subsequent to these
acquisitions, the Company no longer pays commissions, but instead incurs the
direct cost of operating in these markets. 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. Incentive payments are
provided to subscribers in order to maintain and expand the Company's travel
agency customer base. Remaining commissions, selling and administrative expenses
increased $4.7 million, or 10.2%, to $50.9 million from $46.2 million over the
same periods. The Galileo Canada and Galileo Nordiska acquisitions resulted in
$1.3 million of the increase in remaining commissions, selling and
administrative expenses for the quarter. The remaining increase is principally
related to accruals for a new employee profit sharing program which was approved
by the Company's Board of Directors during the quarter.
OPERATING INCOME. Operating income increased $15.0 million, or 19.6%, to
$91.9 million for the quarter ended June 30, 1998 from $76.9 million in pro
forma operating income for the quarter ended June 30, 1997, resulting in an
improvement in operating margin to 24.2% for the quarter ended June 30, 1998
from 22.1% for the quarter ended June 30, 1997.
OTHER INCOME (EXPENSE), NET. Other income (expense), net include interest
expense, net of interest income, and foreign exchange gains or losses. Other
income (expense), net decreased $3.1 million, or 59.2%, to $2.2 million for the
quarter ended June 30, 1998 from $5.3 million in
15
<PAGE>
pro forma other income (expense), net for the quarter ended June 30, 1997. This
decrease was primarily the result of lower interest expense arising from lower
debt levels and interest rates, partially offset by lower interest income
arising from lower cash and cash equivalents.
INCOME TAXES. Income taxes increased $7.4 million, or 26.0%, to $35.8
million for the quarter ended June 30, 1998 from $28.4 million in pro forma
income taxes for the quarter ended June 30, 1997. The increase in income taxes
was due to higher operating income. The Company's effective tax rate is
approximately 40%.
NET INCOME. Net income increased $10.8 million, or 25.1%, to $53.9 million
for the quarter ended June 30, 1998 from $43.1 million in pro forma net income
for the quarter ended June 30, 1997. Net income as a percentage of revenues
increased to 14.2% from 12.4% over the same period.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO PRO FORMA SIX MONTHS ENDED JUNE
30, 1997
REVENUES. Revenues increased $62.4 million, or 9.0%, to $757.6 million for
the six months ended June 30, 1998 from $695.2 million in pro forma revenues for
the six months ended June 30, 1997.
Growth in electronic global distribution services revenues resulted from an
increase in airline booking volumes of 1.9% and an increase in car, hotel and
leisure booking volumes of 7.3% during the six months ended June 30, 1998 as
compared to the six months ended June 30, 1997. Total international booking
volumes increased 6.5% for the six months ended June 30, 1998, while domestic
booking volumes declined 2.3% over the same period last year. This decrease in
domestic bookings is due to a new fee structure the Company introduced in North
America in March 1998 that only charges airline vendors for passive bookings
that are ticketed. The Company reports only those bookings for which it receives
a fee. Excluding passive airline bookings, growth in active bookings for the six
months ended June 30, 1998 was 1.3% in the United States. Revenue growth was
also driven by an air booking fee price increase that went into effect March 1,
1998 as well as improvements in yield and increases in other electronic global
distribution revenues. In addition, the resolution of an airline vendor billing
issue in the second quarter of 1997, which was disclosed in the Company's
prospectus for the Offering, reduced revenue for the six months ended June 30,
1997 causing one percentage point of additional revenue growth in 1998.
COST OF OPERATIONS. Cost of operations expenses increased $17.9 million, or
6.9%, to $279.0 million for the six months ended June 30, 1998 from $261.1
million in pro forma expenses for the six months ended June 30, 1997. The Canada
Acquisition and Nordiska Acquisition resulted in $2.7 million of the increase in
cost of operations expenses as the Company has begun to incur the direct cost of
operating in these markets. The remaining increase was primarily attributable to
higher wages for technical personnel, increased communication costs due to
market expansion and increased maintenance costs on subscriber equipment at
agency locations. Cost of operations expense growth is lower than revenue growth
16
<PAGE>
due to management's continued focus on operating efficiency and savings realized
from the integration of the acquired NDCs. The Company continues to take
advantage of decreasing technology costs on Data Center equipment and has
negotiated favorable supplier contracts for subscriber equipment.
COMMISSIONS, SELLING AND ADMINISTRATIVE EXPENSES. Commissions, selling and
administrative expenses increased $12.0 million, or 4.5%, to $280.4 million for
the six months ended June 30, 1998 from $268.4 million in pro forma expenses for
the six months ended June 30, 1997. NDC commissions and subscriber incentive
payments increased $6.9 million, or 3.9%, to $184.1 million for the six months
ended June 30, 1998 from $177.2 million for the six months ended June 30, 1997.
The increase in electronic global distribution services revenues resulted in
increased commissions to non-owned NDCs partially offset by lower commissions to
Galileo Canada and Galileo Nordiska as, subsequent to these acquisitions, the
Company no longer pays commissions, but instead incurs the direct costs of
operating in these markets. 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. Incentive payments are provided to
subscribers in order to maintain and expand the Company's travel agency customer
base. Remaining commissions, selling and administrative expenses increased $5.1
million, or 5.6%, to $96.3 million from $91.2 million over the same periods. The
Galileo Canada and Galileo Nordiska acquisitions resulted in $1.3 million of
increased selling and administrative expenses. The remaining increase is
principally related to accruals for a new employee profit sharing program which
was approved by the Company's Board of Directors in the second quarter.
OPERATING INCOME. Operating income increased $32.6 million, or 19.6%, to
$198.2 million for the six months ended June 30, 1998 from $165.6 million in pro
forma operating income for the six months ended June 30, 1997, resulting in an
improvement in operating margin to 26.2% for the six months ended June 30, 1998
from 23.8% for the six months ended June 30, 1997.
OTHER INCOME (EXPENSE), NET. Other income (expense), net include interest
expense, net of interest income, and foreign exchange gains or losses. Other
income (expense), net decreased $6.6 million, or 58.2%, to $4.8 million for the
six months ended June 30, 1998 from $11.4 million in pro forma other income
(expense), net for the six months ended June 30, 1997. This decrease was
primarily the result of lower interest expense arising from lower debt levels
and interest rates, partially offset by lower interest income arising from lower
cash and cash equivalents.
INCOME TAXES. Income taxes increased $15.9 million, or 25.9%, to $77.2
million for the six months ended June 30, 1998 from $61.3 million in pro forma
income taxes for the six months ended June 30, 1997. The increase in income
taxes was due to higher operating income. The Company's effective tax rate is
approximately 40%.
NET INCOME. Net income increased $23.3 million, or 25.1%, to $116.2 million
for the six months ended June 30, 1998 from $92.9 million in pro forma net
income for the six months
17
<PAGE>
ended June 30, 1997. Net income as a percentage of revenues increased to 15.3%
from 13.4% over the same period.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
These statements are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements in this report are based upon information available
to the Company on the date of this report. The Company undertakes no obligation
to publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. Any forward-looking statements
involve risks and uncertainties that could cause actual events or results to
differ materially from the events or results described in the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements.
Risks associated with the Company's forward-looking statements include, but
are not limited to: risks related to the loss and inability to replace the
bookings generated by one or more of its five largest travel agency customers;
risks associated with the competition and technological innovation by
competitors, which could require the Company to reduce prices, to change billing
practices, to increase spending or marketing or product development or otherwise
to take actions that might adversely affect its operations or earnings; risks of
the Company's sensitivity to general economic conditions and events that affect
airline travel and the airlines that participate in the Company's Apollo and
Galileo systems; and risks of a natural disaster or other calamity that may
cause significant damage to the Company's Data Center facility.
18
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Registrant was held on April
23, 1998. The Registrant has issued and outstanding two classes of
voting securities: Common Stock and Special Voting Preferred Stock.
Each Common Stock share is entitled to one vote in the election of
directors and other matters submitted to a vote of stockholders. The
Special Voting Preferred Stock is divided into seven series, each
series consisting of one share and entitling the holder thereof to
elect one director so long as certain share ownership thresholds are
maintained. Pursuant to the provisions of the Special Voting Preferred
Stock, the holders are entitled to elect a total of seven of the 13
members of the Board of Directors. The respective holders of the
Special Voting Preferred Stock are entitled to elect their director
designee, voting as a separate class. At the Annual Meeting, the
Common Stock holders elected one director, and prior to the Annual
Meeting, the Series A Preferred Stock holders elected two directors as
set forth in (c) below. All such elections were effective April 23, 1998.
(b) COMMON STOCK SPECIAL VOTING PREFERRED STOCK
Election of Director Election of Directors
-------------------- ---------------------
Babetta R. Gray Frederic F. Brace
Georges P. Schorderet
Continuing Directors Continuing Directors
-------------------- --------------------
James E. Barlett David A. Coltman
Paul H. Bristow James E. Goodwin
Kenneth Whipple Terry L. Hall
Frank H. Rovekamp
Derek M. Stevens
(c) Set forth below is the tabulation of the votes on each nominee for
election as a director:
Name For Withheld Authority
COMMON STOCK Babetta R. Gray 99,486,616 238,795
SPECIAL VOTING
PREFERRED STOCK Frederic F. Brace 33,440,000 0
Georges P. Schorderet 7,000,400 0
(d) Not Applicable
19
<PAGE>
ITEM 5. OTHER INFORMATION
The accompanying 1997 pro forma condensed combined statements of income are
based on the historical financial statements of Galileo International
Partnership, ATS, Traviswiss and Galileo Nederland. The pro forma statements of
income give pro forma effect to (i) the Merger; (ii) the Offering; (iii) the
incurrence of $328.7 million of indebtedness under the Credit Agreements; (iv)
the acquisition of ATS, Traviswiss, and Galileo Nederland; and (v) the
termination of certain revenue sharing obligations. Such transactions were
assumed to be consummated on January 1, 1997.
The accompanying 1997 pro forma combined statements of income do not
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 1997 pro forma condensed combined statements of income should be read
in conjunction with the condensed consolidated financial statements of Galileo
International, Inc. (formerly Galileo International Partnership through July 30,
1997) included elsewhere herein as well as the Financial Statements and Pro
Forma Condensed Combined Financial Information included in the Galileo
International, Inc. Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 17, 1998.
20
<PAGE>
<TABLE>
<CAPTION>
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (1998) AND
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME (1997)
(Unaudited, in thousands, except share data)
Quarter Six Months
Ended June 30, Ended June 30,
------------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Electronic global distribution services $ 345,393 $ 316,341 $ 687,623 $ 629,363
Information services 35,244 31,978 70,024 65,831
------------- --------------- -------------- ------------
380,637 348,319 757,647 695,194
Operating expenses:
Cost of operations 143,943 132,558 279,043 261,125
Commissions, selling and administrative 144,752 138,874 280,383 268,425
------------- --------------- -------------- ------------
288,695 271,432 559,426 529,550
------------- --------------- --------------- ------------
Operating income 91,942 76,887 198,221 165,644
Other income (expense), net:
Interest expense, net (2,921) (5,932) (6,184) (13,525)
Other, net 748 600 1,397 2,084
------------- --------------- -------------- ------------
Income before income taxes 89,769 71,555 193,434 154,203
Income taxes 35,818 28,429 77,180 61,306
============= =============== ============== ============
Net income $ 53,951 $ 43,126 $ 116,254 $ 92,897
============= =============== ============== ============
Weighted average number of shares outstanding 104,799,700 104,799,700 104,799,700 104,799,700
============= =============== ============== ============
Basic earnings per share (pro forma 1997) $ 0.51 $ 0.41 $ 1.11 $ 0.89
============= =============== ============== ============
Diluted weighted average number of shares
outstanding 105,218,941 104,799,700 105,141,038 104,799,700
============= =============== ============== ============
Diluted earnings per share (pro forma 1997) $ 0.51 $ 0.41 $ 1.11 $ 0.89
============= =============== ============== ============
</TABLE>
21
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Exhibits
Exhibit
Number Description
------- -----------
10.1 Amendment No. 2 to the $200,000,000 364-Day Credit Agreement
("364-Day Agreement") which 364-Day Agreement is incorporated
by reference to Exhibit 10.10(a) to the Company's Annual
Report on Form 10-K for the year ended 1997 (the "1997 Form
10-K")
10.2 Amendment No. 2 to the $400,000,000 Five-Year Credit Agreement
("Five-Year Agreement") which Five-Year Agreement is
incorporated by reference to Exhibit 10.10(b) to the 1997
Form 10-K
10.3 AT&T Contract Tariff Order
10.4 Galileo Canada ULC $34,391,917 Credit Agreement
10.5 Galileo International, Inc. Guaranty
10.6 Galileo International Management Incentive Plan 1998 Plan Summary
10.7 Non-Qualified Stock Option Agreement [Standard Form - Executive Group]
10.8 Non-Qualified Stock Option Agreement [Standard Form - Non-Employee
Directors]
27.1 Financial Data Schedule
</TABLE>
- -------------------------------------------
(b) Reports on Form 8-K - No current reports on Form 8-K were filed for the
quarter ended June 30, 1998.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Galileo International, Inc.
Date: August 11, 1998 By: /s/ Paul H. Bristow
------------------ -------------------
Paul H. Bristow
Senior Vice President, Chief
Financial Officer, Treasurer and
Director (Principal Financial and
Accounting Officer)
23
<PAGE>
Galileo International, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.1 Amendment No. 2 to the $200,000,000 364-Day Credit Agreement
("364-Day Agreement") which 364-Day Agreement is incorporated
by reference to Exhibit 10.10(a) to the Company's Annual
Report on Form 10-K for the year ended 1997 (the "1997 Form
10-K")
10.2 Amendment No. 2 to the $400,000,000 Five-Year Credit Agreement
("Five-Year Agreement") which Five-Year Agreement is
incorporated by reference to Exhibit 10.10(b) to the 1997
Form 10-K
10.3 AT&T Contract Tariff Order
10.4 Galileo Canada ULC $34,391,917 Credit Agreement
10.5 Galileo International, Inc. Guaranty
10.6 Galileo International Management Incentive Plan 1998 Plan Summary
10.7 Non-Qualified Stock Option Agreement [Standard Form - Executive Group]
10.8 Non-Qualified Stock Option Agreement [Standard Form - Non-Employee
Directors]
27.1 Financial Data Schedule
</TABLE>
Exhibit 10.1
CONFORMED COPY
AMENDMENT NO. 2 TO 364-DAY CREDIT AGREEMENT
AMENDMENT dated as of April 28, 1998 to the 364-Day Credit Agreement dated
as of July 23, 1997 (as heretofore amended, the "Credit Agreement") among
GALILEO INTERNATIONAL, INC. (the "Borrower"), the BANKS party thereto (the
"Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit
Agreement to modify the limitation on Debt of Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Amendment to Section 5.13 of the Credit Agreement.
The parenthetical phrase appearing in Section 5.13 is amended to
read in its entirety as follows:
(excluding (i) Debt of a Subsidiary to the Borrower or to a
wholly-owned Subsidiary and (ii) Debt of GC ULC or a Subsidiary
thereof in an aggregate principal amount not to exceed $35,000,000
existing at the time of or incurred in connection with the
acquisition by the Borrower of Galileo Canada Distribution Systems,
Inc.).
SECTION 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
<PAGE>
2
SECTION 4. Counterparts. This Amendment 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.
SECTION 5. Effectiveness. This Amendment shall become effective on the
date when the Agent shall have received from each of the Borrower and the
Required Banks a counterpart hereof signed by such party or facsimile or other
written confirmation (in form satisfactory to the Agent) that such party has
signed a counterpart hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
GALILEO INTERNATIONAL, INC.
By: /s/ Paul H. Bristow
Title: Senior Vice President and
Chief Financial Officer
AGENT
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Douglas Maher
Title: Vice Preisdent
CO-ARRANGERS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Nelson D. Albrecht
Title: Vice President
BANK OF MONTREAL
By: /s/ Lynn Durning
Title: Portfolio Manager
CO-AGENTS
MIDLAND BANK PLC
<PAGE>
By: /s/ Christopher M. Samms
Title: Corporate Banking Manager
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By: /s/ Hajime Watanabe
Title: Deputy General Manager
THE SUMITOMO BANK, LIMITED
CHICAGO BRANCH
By: /s/ John H. Kemper
Title: Senior Vice President
ABN AMRO BANK N.V.
By: /s/ John L. Church
Title: Vice President
By: /s/ David H. Hannah
Title: Group Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT-
NEW YORK BRANCH
By: /s/ J. Anthony Seay
Title: First Vice President
By: /s/ Karen L. Jill
Title: Assistant Vice President
PARTICIPANTS
CREDIT LYONNAIS
NEW YORK BRANCH
<PAGE>
By: /s/ Philippe Soustra
Title: Senior Vice President
ROYAL BANK OF CANADA
By: /s/ Michael Madnick
Title: Senior Manager
SOCIETE GENERALE
CHICAGO BRANCH
By: /s/ Jose A. Moreno
Title: Director
SWISS BANK CORPORATION,
STAMFORD BRANCH
By: /s/ Reto Jenal
Title: Director
Banking Finance
By: /s/ Dorothy McKinley
Title: Associate Director
Loan Portfolio Support, US
THE NORTHERN TRUST COMPANY
By: /s/ Sidney R. Dillard
Title: Vice President
<PAGE>
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Gordon R. Holtby
Title: Vice President & Manager
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Lisa Walker
Title: Vice President
By: /s/ Elisabeth R. Wilds
Title: Associate
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ Armund J. Schoen Jr.
Title: Senior Vice Presisdent
<PAGE>
Exhibit 10.2
CONFORMED COPY
AMENDMENT NO. 2 TO FIVE-YEAR CREDIT AGREEMENT
AMENDMENT dated as of April 28, 1998 to the Five-Year Credit Agreement
dated as of July 23, 1997 (as heretofore amended, the "Credit Agreement") among
GALILEO INTERNATIONAL, INC. (the "Borrower"), the BANKS party thereto (the
"Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto desire to amend the Credit
Agreement to modify the limitation on Debt of Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
'hereof", "hereunder", "herein" and 'hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
SECTION 2. Amendment to Section 5.13 of the Credit Agreement.
The parenthetical phrase appearing in Section 5.13 is amended to
read in its entirety as follows:
(excluding (i) Debt of a Subsidiary to the Borrower or to a
wholly-owned Subsidiary and (ii) Debt of GC ULC or a Subsidiary
thereof in an aggregate principal amount not to exceed $35,000,000
existing at the time of or incurred in connection with the
acquisition by the Borrower of Galileo Canada Distribution Systems,
Inc.).
SECTION 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
<PAGE>
2
SECTION 4. Counterparts. This Amendment 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.
SECTION 5. Effectiveness. This Amendment shall become effective on the
date when the Agent shall have received from each of the Borrower and the
Required Banks a counterpart hereof signed by such party or facsimile or other
written confirmation (in form satisfactory to the Agent) that such party has
signed a counterpart hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
GALILEO INTERNATIONAL, INC.
By: /s/ Paul H. Bristow
Title: Senior Vice President and
Chief Financial Officer
AGENT
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Douglas Maher
Title: Vice Preisdent
CO-ARRANGERS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Nelson D. Albrecht
Title: Vice President
BANK OF MONTREAL
By: /s/ Lynn Durning
Title: Portfolio Manager
CO-AGENTS
MIDLAND BANK PLC
<PAGE>
By: /s/ Christopher M. Samms
Title: Corporate Banking Manager
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By: /s/ Hajime Watanabe
Title: Deputy General Manager
THE SUMITOMO BANK, LIMITED
CHICAGO BRANCH
By: /s/ John H. Kemper
Title: Senior Vice President
ABN AMRO BANK N.V.
By: /s/ John L. Church
Title: Vice President
By: /s/ David H. Hannah
Title: Group Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT-
NEW YORK BRANCH
By: /s/ J. Anthony Seay
Title: First Vice President
By: /s/ Karen L. Jill
Title: Assistant Vice President
PARTICIPANTS
CREDIT LYONNAIS
NEW YORK BRANCH
<PAGE>
By: /s/ Philippe Soustra
Title: Senior Vice President
ROYAL BANK OF CANADA
By: /s/ Michael Madnick
Title: Senior Manager
SOCIETE GENERALE
CHICAGO BRANCH
By: /s/ Jose A. Moreno
Title: Director
SWISS BANK CORPORATION,
STAMFORD BRANCH
By: /s/ Reto Jenal
Title: Director
Banking Finance
By: /s/ Dorothy McKinley
Title: Associate Director
Loan Portfolio Support, US
THE NORTHERN TRUST COMPANY
By: /s/ Sidney R. Dillard
Title: Vice President
<PAGE>
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Gordon R. Holtby
Title: Vice President & Manager
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Lisa Walker
Title: Vice President
By: /s/ Elisabeth R. Wilds
Title: Associate
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ Armund J. Schoen Jr.
Title: Senior Vice Presisdent
<PAGE>
Exhibit 10.3
AT&T Contract Tariff Order Form
Galileo International, L.L.C. AT&T Corp. AT&T Contact Name:
5350 S. Valentia Way 7979 F. Tufts Avenue, Suite 300 William T. Sarge
Englewood, CO 80111 Denver, CO 80237 (303) 265-8330
Customer hereby places an order for:
X New AT&T Contract Tariff Existing AT&T Contract Tariff No.
(attachment required) (attachment required)
Existing Pricing Plan Replacement/Discontinuance:
X Check here and identify below any AT&T CT or other AT&T pricing plan being
discontinued in conjunction with this order. Also specify the CT No., Plan
ID No. or Main Billed Account No. (Note: Charges may apply as specified in
the plan being discontinued.)
AT&T Interspan Frame Relay Service Agreement, September 13, 1995
1. Services will be provided under the Contract Tariff ("CT") ordered hereunder,
subject to the rates, terms and conditions in the CT as well as the AT&T
tariffs (if any) referenced in the CT ("Applicable Tariffs"), as those
Applicable Tariffs may be modified from time to time.
2. This form (including its addenda, if any), the CT and the Applicable Tariffs
constitute the entire agreement (collectively the "Agreement") between
Customer and AT&T with respect to the services provided under the CT and
supersede any and all prior agreements, proposals, representations,
statements, or understandings, whether written or oral, concerning such
services or the rights and obligations relating to such services. In the
event of any inconsistency between the terms of this Form (including its
addenda, if any) and the CT of Applicable Tariffs, the terms of the
Applicable Tariffs and CT shall prevail. Except for changes to rates (to the
extent permitted under the CT) and changes to the Applicable Tariffs, no
change, modification or waiver of any of the terms of this Agreement shall be
binding unless reduced to writing and signed by authorized representatives of
both parties and, to the extent required by law, filed with the FCC.
3. Except to the extent that federal law applies, the construction,
interpretation and performance of this Agreement shall be governed by the
substantive law of the State of New York, excluding its choice of law rules.
4. EXCEPT FOR ANY WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, AT&T EXCLUDES ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. AT&T DOES
NOT AUTHORIZE ANYONE TO MAKE A WARRANTY OF ANY KIND ON ITS BEHALF AND
CUSTOMER SHOULD NOT RELY ON ANYONE MAKING SUCH STATEMENTS.
5. As to new CTs, Customer may, as its sole remedy, cancel this order for the CT
without liability before the CT becomes effective if, without Customer's
consent: (a) AT&T fails to file the CT with the FCC within 30 days after the
date this Form is signed by both parties; (b) the CT as filed is not
consistent with the attached illustrative copy; or (c) the CT does not go
into effect within 30 days after filing.
6. Orders for existing CTs will be accepted and implemented by AT&T only if the
specified CT is available when ordered and Customer is eligible for the CT.
7. Customer shall provide installation instructions and other information as
required by AT&T.
YOUR SIGNATURE ACKNOWLEDGES THAT YOU HAVE READ, UNDERSTAND AND AGREE TO THE
PROVISIONS OF THIS AGREEMENT AND THAT YOU ARE DULY AUTHORIZED TO SIGN THIS
AGREEMENT.
Customer AT&T Corp.
Full Legal Name: Galileo International, L.L.C.
By: Paul Bristow By: Paula M. Dawning
Title: Chief Financial Officer Title: General Manager
Date: May 1, 1998 Date: May 6, 1998
AT&T Proprietary
<PAGE>
Addendum
to
AT&T Contract Tariff Order
Between AT&T Corp.
and
Galileo International, L.L.C.
The above referenced AT&T Contract Tariff Order dated contemporaneously herewith
("Agreement"), between AT&T Corp. ("AT&T") and Galileo International, L.L.C.
("Customer") is hereby revised by adding a new Section 9., as follows:
Section 9. In the event of a corporate divestiture, merger or acquisition, a
business downturn beyond the control of CUSTOMER, or a network optimization
using other AT&T services, that significantly reduces the volume of network
services required by the CUSTOMER, with the result that CUSTOMER will be unable
to meet its revenue and/or volume commitments under this Agreement
(notwithstanding CUSTOMER'S best efforts to avoid such a shortfall), AT&T and
CUSTOMER will cooperate in efforts to develop a mutually agreeable alternative
proposal that will satisfy the concerns of both parties and comply with all
applicable legal and regulatory requirements. By way of example and not
limitation, such alternative proposals may include changes in rates,
nonrecurring charges, revenue and/or volume commitments, discounts, the
multi-year service period and other provisions. If the parties reach mutual
agreement on an alternative, AT&T will prepare and file any necessary tariff
revisions and/or the parties will sign a contractual amendment to implement any
mutually agreeable alternative proposal, subject to all applicable legal and
regulatory requirements. This provision shall not apply to a change resulting
from a decision by CUSTOMER: (i) to reduce its overall use of
telecommunications; or (ii) to transfer portions of its traffic or projected
growth to carriers other than AT&T. The CUSTOMER must give AT&T written notice
of the conditions it believes will require the application of this provision.
This provision does not constitute a waiver of any charges, including shortfall
charges, incurred by the CUSTOMER prior to the time the parties mutually agree
to amend or replace this Contract.
For purposes of this Paragraph, a business downturn may result if after the date
of this Agreement a significant global outage in the AT&T Frame Relay Network
occurs and such outage is the sole reason that clients of CUSTOMER with a
significant volume of Frame Relay traffic will not purchase new Frame Relay
Service from CUSTOMER. CUSTOMER must demonstrate to AT&T's satisfaction that
such outage is the sole reason for such clients' unwillingness to purchase AT&T
Frame Relay Service from CUSTOMER. All other requirements of this paragraph must
be met.
Galileo International, L.L.C AT&T Corp.
By: Paul Bristow By: Paula M. Dawning
Title: CFO Title: General Manager
Date: May 1, 1998 Date: May 6, 1998
AT&T Proprietary
Use Pursuant to AT&T Instructions
<PAGE>
Addendum
To
AT&T Contract Tariff Order
Between AT&T Corp.
And
Galileo International, L.L.C.
The above referenced AT&T Contract Tariff Order dated contemporaneously
herewith between AT&T Corp. ("AT&T") and Galileo International ("CUSTOMER")
is hereby revised by adding a new Section 8. as follows:
Section 8. The parties acknowledge that federal and state regulatory and
legislative actions may introduce new competitive alternatives into the
telecommunications marketplace, which may affect the continued competitiveness
of the Agreement. Accordingly the parties agree to meet one-time on or about the
third anniversary of the Customer Initial Service Date, to discuss such
competitive service alternatives and other technological or marketplace
developments. AT&T and CUSTOMER will cooperate in efforts to develop a mutually
agreeable proposal that will satisfy the concerns of both parties and comply
with all applicable legal regulatory requirements. By way of example and not
limitation, alternative proposals may include changes in rates, nonrecurring
charges, revenue and/or volume commitments, discounts, the multi-year service
period and other provisions. If the parties reach mutual agreement on an
alternative, AT&T will prepare and file any necessary tariff revisions and/or
the parties will sign a contractual amendment to implement any mutually
agreeable alternative proposal, subject to all applicable legal and regulatory
requirements. This provision does not constitute a waiver of any charges,
including shortfall charges, or any terms and conditions applicable to the
customer, prior to the time the parties mutually agree to amend or replace this
Agreement.
Galileo International, L.L.C AT&T Corp.
By: Paul Bristow By: Paula M. Dawning
Title: CFO Title: General Manager
Date: May 1, 1998 Date: May 6, 1998
<PAGE>
Addendum
To
AT&T Contract Tariff Order
Between AT&T Corp.
And
Galileo International, L.L.C.
The above referenced AT&T Contract Tariff Order dated contemporaneously herewith
between AT&T Corp. ("AT&T") and Galileo International, L.L.C. ("CUSTOMER") is
hereby revised by adding a new section 10., as follows:
Section 10. If, as a result of the date change from year 1999 to year 2000,
the Services provided hereunder fail to perform in accordance with AT&T's
published Technical Publications, in a way that is material and adverse to
CUSTOMER, AT&T will take reasonable steps to correct any such failure, at no
additional cost to CUSTOMER.
Galileo International, L.L.C AT&T Corp.
By: Paul Bristow By: Paula M. Dawning
Title: CFO Title: General Manager
Date: May 1, 1998 Date: May 6, 1998
<PAGE>
Galileo 4/16/98 - 2:59 PM
AT&T COMMUNICATIONS CONTRACT TARIFF NO. WK-13498
Adm. Rates and Tariffs Original Title Page
Bridgewater, NJ 08807
Issued: Iii Effective: Eee
* * All material on this page is new. * *
CONTRACT TARIFF NO. WK-13498
TITLE PAGE
This Contract Tariff applies to AT&T Switched Digital Services consisting of:
Domestic InterSpan Frame Relay Service and to AT&T Switched Digital Services
consisting of: AT&T International InterSpan Frame Relay Service for interstate
or foreign communications in accordance with the Communication Act of 1934, as
amended.
Telecommunication services provided under this Contract Tariff are furnished by
means of wire, radio, satellite, fiber optics or any suitable technology or
combination of technologies.
<PAGE>
CHECK SHEET
The Title Page and Pages 1 through 6 inclusive of this tariff are effective
as of the date shown.
TABLE OF CONTENTS
Page
Check Sheet.................................................................1
List of Concurring, connecting and Other Participating Carriers.............1
Explanation of Symbols - Coding of Tariff Revisions.........................1
Trademarks and Service Marks................................................2
Explanation of Abbreviations................................................2
Contract Summary............................................................3
LIST OF CONCURRING, CONNECTING AND OTHER PARTICIPATING CARRIERS
Concurring Carriers - NONE
Connecting Carriers - NONE
Other Participating Carriers - NONE
EXPLANATION OF SYMBOLS - Coding of Tariff Revisions
Revisions to this tariff are coded through the use of symbols. These symbols
appear in the right margin of the page. The symbols and their meanings are:
R - to signify reduction. I - to signify increase. C - to signify
changed regulation. T - to signify a change in text but no change in
text or regulation. S - to signify reissued matter. M - to signify
matter relocated without change. N - to signify new rate or
regulation. D - to signify discontinued rate or regulation. Z - to
signify a correction.
Other marginal codes are used to direct the tariff reader to a footnote for
specific information. Codes used for this purpose are lower case letters of the
alphabet, e.g., x, y and z. These codes may appear beside the page revision
number in the page header or in the right margin opposite specific text.
TRADEMARKS AND SERVICE MARKS - The following marks, to the extent, if any, used
throughout this tariff, are trademarks and service marks of AT&T Corp.
TRADEMARKS SERVICE MARKS
InterSpan
<PAGE>
EXPLANATION OF ABBREVIATIONS
Adm. - Administrator
IOCs - Inter Office Channels
kbps - kilobits per second
Mbps - Megabits per second
GENERAL PROVISIONS
Detariffing - If during the term of this Contract Tariff, the AT&T Tariffs
referenced herein ("Applicable AT&T Tariffs") are detariffed in whole or in part
pursuant to a statutory change, order or requirement of a governmental or
judicial authority of competent jurisdiction, then following such detariffing:
(i) the terms and conditions for the Services Provided will remain the same as
those in this Contract Tariff, except that the relevant terms and
conditions contained in the Applicable AT&T Tariffs will remain the same
as those in effect as of the date AT&T detariffs in whole or in part those
Applicable AT&T Tariff provisions, and will be incorporated as part of
this Contract Tariff, and
(ii) the rates for the services Provided will be:
a) to the extent Applicable AT&T Tariff provisions remain filed and
effective, those rates specified in such Applicable AT&T Tariff
provisions, as amended from time to time; and
b) to the extent that this Contract Tariff contains specific rates or rate
schedules that would apply in lieu of (or in addition to) the rates or
rate schedules in Applicable AT&T Tariffs, such specific Contract
Tariff rates and rate schedules; and
c) to the extent Applicable AT&T Tariff provisions are detariffed, and (b)
preceding does not apply, those rates specified in the applicable At&T
Price Lists, as amended from time to time.
In all cases (a, b or c), the applicable rates shall continue to be subject to
any discounts, waivers, credits, and restrictions on rate changes that may be
contained in this Contract Tariff. Where rates and rate changes (both increases
and decreases) would have been calculated by reference to a tariff rate that has
been detariffed, rates and rate changes shall instead be calculated during the
term of this Contract Tariff by reference to applicable AT&T Price Lists and (to
the extent changes to tariff rates were permitted under this Contract Tariff)
AT&T shall have the right to change its Price Lists from time to time.
All references to the AT&T Tariffs in this contract Tariff shall be construed to
mean the AT&T Tariffs specified herein, as well as the documents which will
replace those tariffs, including the AT&T Price Lists, when AT&T cancels those
tariffs.
<PAGE>
1. Services Provided:
A. Domestic Services
1. AT&T Switched Digital Services (AT&T Tariff F.C.C. No.4)consisting of:
(a) Domestic InterSpan Frame Relay Service (FRS)
B. International Services
1. AT&T Switched Digital Services (AT&T Tariff F.C.C. No.4)consisting of:
(a) International InterSpan Frame Relay Service (FRS)
1.1.Initial Quantities - Beginning in the 1st month following the CISD, the
Initial Quantities of AT&T InterSpan Frame Relay Services components are as
follows:
A. AT&T InterSpan Frame Relay Services
620 16 kbps FRS Domestic Two-Way Permanent Virtual Circuits (PVCs) 620
56/64 kbps FRS Domestic Access Ports
2. Contract Term; Renewal Options - The term of this Contract Tariff is 5 years
beginning with the Customer's Initial Service Date (CISD). The rates and
discounts specified in this Contract Tariff will apply commencing at the
CISD. The CISD is the date that the Customer begins service under this
Contract Tariff. No renewal option is available for this Contract Tariff.
3. Minimum Commitments/Charges
A. AT&T InterSpan Frame Relay Services - The combined Minimum Annual Revenue
Commitment (MARC) for the domestic and international FRS and Domestic
Access Ports provided under this Contract Tariff will be satisfied by
undiscounted Frame Relay volume Pricing Plan (FRVPP) Eligible FRS Charges,
as specified in AT&T Tariff F.C.C. No. 4, as amended from time to time,
and by undiscounted Monthly Charges for Domestic Access Ports as specified
in Section 7., following. In year 1 the MARC is $5,500,000, in year 2 the
MARC is $10,100,000, in year 3 the MARC is $16,100,000, in years 4 and 5
the MARC is $18,738,000. If, in any year, the Customer fails to satisfy
the MARC, the Customer will be billed a shortfall charge in an amount
equal to the difference between the MARC and the sum of: (1) the actual
undiscounted FRVPP Eligible FRS Charges for the domestic and international
FRS components and (2) the undiscounted recurring Monthly Charges for the
Domestic Access Ports, in Service for that year.
<PAGE>
4. Contract Price
A. AT&T InterSpan Frame Relay Service
1. The Contract Price for AT&T InterSpan Frame Relay Service provided
under this Contract Tariff is the same as the undiscounted Recurring
and Nonrecurring Rates and Charges for FRS as specified in AT&T Tariff
F.C.C. No. 4, as amended from time to time, except for those Rates
specified in Section 7., following.
5. Discounts - The following discounts are the only discounts for the Services
Provided under this Contract Tariff. No other discounts apply. Unless
modified below, the Base Discounts listed in this section are the same
discounts as specified in the AT&T Tariffs referenced in Section 1.,
preceding, as amended from time to time.
A. AT&T InterSpan Frame Relay Services - Domestic
1. Base Discounts - The Customer will receive a discount of 45% in lieu of
the FRVPP discounts. This discount will be applied to the sum of the
Domestic Access Port Monthly Charges, and to the Domestic FRVPP
discounts as specified in AT&T Tariff F.C.C. No. 4, as amended from
time to time.
2. Additional Discounts - The Customer will receive the following
discounts in addition to the discounts specified in A.1., above.
(a)The Customer will receive the following percent discount in any
month that the Customer's total domestic and international FRVPP
Eligible FRS Charges and Domestic Access Ports Charges exceed
$2,000,000. This additional discount will be determined based on the
total amount of domestic and international FRVPP Eligible FRS
Charges as specified below and will be applied to the entire
eligible charges for that month as shown in the following example:
If the Customer's monthly domestic and international charges are
$2,500,000, and the discount to be applied is 2%, then the Customer
will receive a discount amount of $50,000 ($2,500,000 x
.02=$50,000).
FRVPP Eligible
FRS Charges Discount Applied
$2,000,000 and above 2%
B. AT&T InterSpan Frame Relay Services-International
1. Base Discounts - The Customer will receive a discount of 45% in lieu of
the FRVPP discounts. This discount will be applied to the sum of the
International FRVPP Eligible FRS Charges in the same manner as the
FRVPP discounts as specified in AT&T Tariff F.C.C. No. 4.
2. Additional Discounts - None
<PAGE>
6. Classifications, Practices and Regulations
A. Expect as otherwise provided in this Contract Tariff, the rates and
regulations that apply to the Services Provided specified in Section 1,
preceding, are as set forth in the Applicable AT&T Tariffs that are as set
forth in the Applicable AT&T Tariffs that are referenced in Section 1.,
preceding, as such tariffs are amended from time to time.
B. Monitoring Conditions - None
C. Promotions, Credits and Waivers
The Customer is ineligible for any promotions, credits or waivers for the
Services Provided under this Contract Tariff, which are filed or which may
be filed in the AT&T tariffs specified in Section 1., preceding.
The following credits and waivers will be applied to the Customer's bill.
If at the end of the contract Tariff Term the Customer has not fully used
any or all of the waiver(s) specified in this Section, the residual value
of any such waiver(s) will be set to zero and will not be applied to any
other AT&T services.
1. AT&T InterSpan Frame Relay Services
(a)AT&T will waive the nonrecurring Installation Charges for the
installation of the below listed new FRVPP Eligible service
components and/or Domestic Access Ports as specified in AT&T Tariff
F.C.C. Nos. 4, as amended from time to time and in Section 7
following, provided such new service components: (1) are installed
on or after the CISD; (2) are associated directly with the FRS
provided under this Contract Tariff; (3) have not previously been
provided by AT&T that is, service components provided by another
Interexchange carrier or new growth; (4) are not disconnected and
reconnected after the CISD; and (5) remain in service for at least
12 months. If a service component is disconnected for any reason
prior to the end of the 12 month period, the waived nonrecurring
charges will be billed at the time of disconnect. If a service
component has not been in service for the minimum period of 12
months prior to the expiration of the Contract Tariff Term, the
Customer may: (1) elect to be billed the waived nonrecurring
charges, or (2) elect to continue the services in another AT&T
Contract Tariff, or (3) include the services in either a new or
existing term plan for AT&T Tariff F.C.C. No. 4 services. If the
Customer elects to continue the services, the obligation for the
services to remain in-service for the minimum period of 12 months no
longer applies. This waiver does not apply to the nonrecurring
Installation Charges associated with: Bandwidth Manager Service
(BMS/BMS-E), Access Protection Capability (APC) and Network
Protection Capability (NPC).
I. FRVPP Eligible FRS Components and Domestic Access Ports.
AT&T will apply a credit of $89,400 in the 14th, $134,100 in the
26th, and 223,500 in the 38th, 50th and 60th billing months
following the CISD and continuing through the 60th full billing
month following the CISD, provided that all of the following
conditions are met: (1) the Customer is current in all payments
to AT&T, and (2) the customer has met the MARC each year of this
contract Tariff.
If the Customer fails to meet the MARC in any year of the term of
this Contract Tariff, the credit called for in this section will
be forfeited by the Customer and shall no longer be applied
except in the 60th month Contract Tariff Term.
AT&T will apply a credit of $NNNN in the 7th billing month
following the CISD. If the Customer discontinues this Contract
Tariff for any reason prior to the expiration of the Contract
Tariff Term and incurs a Termination Charge as specified in
Section 6.D., following, AT&T will bill the Customer, at the time
of discontinuance, the entire amount of the credit received. Any
such bill must be paid by the Customer within 30 days.
D. Discontinuance - In lieu of any Discontinuance With or Without Liability
provisions that are specified in the AT&T Tariffs referenced in Section
1., preceding, the following provisions shall apply.
The Customer may discontinue this Contract Tariff prior to the end of the
Contract Tariff Term, provided the Customer replaces this contract Tariff
with other AT&T Tariff F.C.C No. 4 Services or another AT&T Contract
Tariff for AT&T Tariff F.C.C. No. 4 Services having: (i) an equal or
greater new annual revenue commitment(s) and (ii) a new term equal to or
greater than the remaining term, but not less than 3 years.
If the Customer discontinues this Contract Tariff for any reason other
than specified above, prior to the expiration of the Contract Tariff Term,
a Termination Charge will apply. The Termination Charge will be an amount
equal 35% of the unsatisfied MARC for the year in which the Customer
discontinues this Contract Tariff and 35% of the MARC for each year
remaining in the Contract Tariff Term.
E. Other Requirements - AT&T will provision up to twenty (20) Access Ports
per month (at speeds of 64 kbps and below) within twenty-two (22) calendar
days.
AT&T will provision 95% of the remaining Access Ports (not to exceed
thirty-seven (37) Access Ports per month) within twenty-seven (27)
calendar days.
AT&T will provision Access Ports in excess of those specified above within
the standard interval of thirty (30) calendar days.
The Customer will designate each Access Port to be provisioned within the
twenty-two (22) calendar day interval, the twenty-seven (27) calendar day
interval of the standard thirty (30) calendar day interval.
F. Availability - This Contract Tariff is available only to Customers who:
(1) will order this contract Tariff only onece, either by the Customer or
any Affiliate of the Customer, which is any entity that owns a controlling
interest in either the Customer or and Affiliate of the Customer, or any
entity in which a controlling interest is owned by either the Customer or
<PAGE>
an Affiliate of the Customer; (2) order service within 30 days after the
effective date of this Contract Tariff within 60 days after the date
ordered and (3) have received an offer for substantially similar services
from another provider at an equal or lower price in which the nonrecurring
installation charges have been waived.
7. Rates
A. AT&T InterSpan Frame Relay Service - The below rates are stabilized for
the Contract Tariff Term.
7.1 (a) FRS Domestic Access Port Charges (Continued)
1. Domestic Components
(a)FRS Domestic Access Port Charges - When the service compnents
specified below are ordered together as a unit at the same location,
the Customer will be billed the following in lieu of the individual
service compnent charges:
I. Domestic Access Port (a Domestic Access Port consists of one
Domestic Port, one Access Connection, one Digital Local Channel,
and one Access Coordination Function).
Domestic Access Port Domestic Access Port
Monthly Charge Installation Charge
56/64 kbps $424.16 $800.00
Domestic Access Port
<PAGE>
Exhibit 10.4
$34,391,917
CREDIT AGREEMENT
dated as of
June 5, 1998
among
GALILEO CANADA ULC
THE BANKS PARTIES HERETO,
and
BANK OF MONTREAL,
as Agent
==============================================================================
<PAGE>
-1-
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE 1 DEFINITIONS..................................................1
Section 1.01. Definitions...............................................1
Section 1.02. Types of Borrowings.......................................8
ARTICLE-2 THE CREDIT...................................................8
Section 2.01. The Term Loans.............................................8
Section 2.02. Funding of Loans..........................................9
Section 2.03. Notes.....................................................9
Section 2.04. Maturity of Loans.........................................9
Section 2.05. Interest Rates............................................9
Section 2.06. Method of Electing Interest Rates........................12
Section 2.07. Optional Prepayments.....................................13
Section 2.08. General Provisions as to Payments........................13
Section 2.09. Funding Losses...........................................14
Section 2.10. Computation of Interest..................................14
Section 2.11. Regulation D Compensation................................14
Section 2.12. Judgment Currency........................................14
Section 2.13. Extension of Maturity Date...............................15
ARTICLE 3 CONDITIONS..................................................15
ARTICLE 4 REPRESENTATIONS AND WARRANTIES..............................16
Section 4.01. Corporate Existence and Power............................16
Section 4.02. Corporate and Governmental Authorization; No
Contravention............................................17
Section 4.03. Binding Effect...........................................17
Section 4.04. Litigation...............................................17
Section 4.05. Compliance with Laws.....................................17
Section 4.06. Environmental Matters....................................17
Section 4.07. Taxes....................................................17
Section 4.08. Subsidiaries.............................................18
Section 4.09. Regulatory Restrictions on Borrowing.....................18
Section 4.10. Full Disclosure..........................................18
ARTICLE 5 COVENANTS...................................................18
Section 5.01. Information..............................................18
Section 5.02. Payment of Obligations...................................19
Section 5.03. Maintenance of Property; Insurance.......................19
Section 5.04. Conduct of Business and Maintenance of Existence.........19
Section 5.05. Compliance with Laws.....................................19
Section 5.06. Inspection of Property, Books and Records................20
Section 5.07. Mergers and Sales of Assets..............................20
Section 5.08. Use of Proceeds..........................................20
Section 5.09. Negative Pledge..........................................20
Section 5.10. Transactions with Affiliates.............................21
ARTICLE 6 DEFAULTS....................................................21
Section 6.01. Events of Default........................................21
Section 6.02. Notice of Default........................................23
ARTICLE 7 THE AGENT...................................................23
Section 7.01. Appointment and Authorization............................23
Section 7.02. Agent and Affiliates.....................................23
Section 7.03. Action by Agent..........................................23
Section 7.04. Consultation with Experts................................23
Section 7.05. Liability of Agent.......................................23
Section 7.06. Indemnification..........................................24
Section 7.07. Credit Decision..........................................24
Section 7.08. Successor Agent..........................................24
ARTICLE 8 CHANGE IN CIRCUMSTANCES.....................................25
Section 8.01. Basis for Determining Interest Rate
Inadequate or Unfair.....................................25
Section 8.02. Illegality...............................................25
Section 8.03. Increased Cost and Reduced Return........................26
Section 8.04. Taxes....................................................27
Section 8.05. Base Rate Loans Substituted for Affected
Fixed Rate Loans.........................................28
Section 8.06. Substitution of Bank.....................................28
ARTICLE 9 MISCELLANEOUS...............................................28
Section 9.01. Notices..................................................28
Section 9.02. No Waivers...............................................29
Section 9.03. Expenses; Indemnification................................29
Section 9.04. Sharing of Set-offs......................................30
Section 9.05. Amendments and Waivers...................................30
Section 9.06. Successors and Assigns...................................30
Section 9.07. Collateral...............................................32
Section 9.08. Governing Law, Submission to Jurisdiction................32
Section 9.09. Counterparts; Integration; Effectiveness.................32
Section 9.10. Waiver of Jury Trial.....................................32
Section 9.11. Confidentiality..........................................32
Pricing Schedule A
Pricing Schedule B
Schedule I - Transaction Documents
Exhibit A - Note
Exhibit B-1 - Opinion of Counsel for the Borrower
Exhibit B-2 - Opinion of Counsel for the Guarantor
Exhibit C - Assignment and Assumption Agreement
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of June 5, 1998 among, GALILEO CANADA ULC, the
Banks from time to time parties hereto and BANK OF MONTREAL, 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:
"Adjusted CD Rate" has the meaning set forth in Section 2.05(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 Bank of Montreal in its capacity as agent for the Banks
hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.05(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, 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 Term Loan which bears interest at the Base
Rate or (ii) an overdue amount which was a Base Rate Loan immediately before it
became overdue.
"Borrower" means Galileo Canada ULC, a Nova Scotia unlimited liability
company, and its successors.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.05(b).
"CD Loan" means (i) a Term Loan which bears interest at a CD Rate 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 2.05(b)
on the basis of an Adjusted CD Rate.
"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 the Guarantor shall cease to own and control, directly or
indirectly, 100% of the voting stock of the Borrower.
"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 Assignee which becomes a Bank pursuant to
Section 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 Section 9.06(c)
or increased from time to time pursuant to Section 9.06(c).
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Guarantor in its
consolidated financial statements if such statements were prepared as of such
date.
"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.
"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.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Chicago 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.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.05(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.
"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.
"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 Term Loan which bears interest at a
Euro-Dollar Rate 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
2.05(c) on the basis of a London Interbank Offered Rate.
"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.
"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 Bank of Montreal on such day on such
transactions as determined by the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or any combination
of the foregoing.
"Group of Loans" means at any time a group of Loans consisting of (i) all
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 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.
"Guarantor" means Galileo International, Inc., a Delaware corporation.
"Guaranty" means the Guaranty Agreement dated as of June 5, 1998 executed
by the Guarantor in favor of the Agent and Banks.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, the
period commencing 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
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 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.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"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 or a Euro-Dollar Loan and "Loans" means
Domestic Loans or Euro-Dollar Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Material Adverse Effect" means any material adverse effect on (i) the
business, financial condition or results of operations of the Borrower or of the
Guarantor 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, (iii) the ability of the Guarantor to perform its
obligations under the terms of the Guaranty, or (iv) the rights and obligations
of the Agent and the Banks under this Agreement, the Guaranty and the Notes.
"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;
provided that the term "Material Debt" shall exclude Debt of the Guarantor or
any Subsidiary of the Guarantor owing to the Guarantor or to a wholly owned
Subsidiary of the Guarantor.
"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; provided that the term "Material Financial Obligations" shall
exclude any such Debt or other obligations of the Guarantor or any Subsidiary of
the Guarantor owing to the Guarantor or to a wholly owned Subsidiary of the
Guarantor. 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.
"Maturity Date" means June 6, 2003, or, if such day is not a Euro-Dollar
Business Day, the next succeeding Euro-Dollar Business Day.
"Moody's" means Moody's Investors Service, Inc.
"Notes" means promissory notes of the Borrower, substantially in the form
of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Term
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.06.
"Ordinary Voting Stock" means common stock or other voting securities of
the Borrower.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"Payment Office" means the office or account of the Agent at or to which
payments hereunder are to be made, which shall be the office of the Agent
referred to in Section 9.01.
"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.
"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 Bank of
Montreal from time to time as its Prime Rate for U.S. Dollar loans.
"Quarterly Date" means each March 31, June 30, September 30 and December
31.
"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 Term Loans.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc.
"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.
"Term 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 subdivided
pursuant to a Notice of Interest Rate Election, the term; "Term 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.
"Transaction Documents" means the documents listed on Schedule I hereto.
"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. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Term Loans of one or more Banks to be made to the Borrower
pursuant to Article 2 on the same date, all of which Term 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 by reference to the pricing of Term Loans comprising such Borrowing
(e.g., a "Fixed Rate Borrowing" is a Euro-Dollar Borrowing or a CD Borrowing,
and a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans).
ARTICLE 2
THE CREDIT
Section 2.01. The Term Loans. (a) Subject to the terms and conditions hereof,
each Bank severally agrees to make a loan in Dollars (each, a "Term Loan" and
collectively, the "Term Loans") to the Borrower on the Effective Date. The
aggregate principal amount of all Term Loans made hereunder shall not exceed the
Commitments and the principal amount of each Bank's Term Loan shall not exceed
such Bank's Commitment. The Term Loans shall only be available for borrowing on
the Effective Date.
(b) The Term Loans may from time to time be (i) Euro-Dollar Loans, (ii) CD
Loans, (iii) Base Rate Loans or (iv) a combination thereof, as determined by the
Borrower and notified to the Agent in accordance with Section 2.06.
Section 2.02. Funding of Loans. Not later than 11:00 A.M. (Chicago time) on
the Effective Date, each Bank shall make available its share of the Term Loans
in Dollars, in Federal or other funds immediately available in Chicago. 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.
Section 2.03. Notes. (a) The Term 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 Term Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request that
its Term Loans of a particular type be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such Term 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 Term Loans of the
relevant type. 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(a)(i), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount and type of each Term 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 Term 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 to so
endorse its Note and to attach to and make a part of its Note a continuation of
any such schedule as and when required.
Section 2.04. Maturity of Loans. Each Term Loan shall mature, and the
principal amount thereof shall be due and payable, together with accrued
interest thereon, on the Maturity Date.
Section 2.05. Interest Rates. (a) Each Base Rate Loan shall bear interest on
the outstanding principal amount thereof, for each day from and including the
date such Loan is made to but excluding the date on which such Loan becomes due,
at a rate per annum equal to the Base Rate for such day. Such interest shall be
payable quarterly in arrears on each Quarterly Date and, with respect to the
principal amount of any Base Rate Loan converted to a CD Loan or a Euro-Dollar
Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or
interest on any Base Rate Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the rate
otherwise applicable to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during each Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the Adjusted CD
Rate applicable to such Interest Period, provided that if any CD Loan shall, as
a result of clause (2)(b) of the definition of the term "Interest Period," have
an Interest Period of less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate Loans during such
period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at intervals of 90
days after the first day thereof. Any overdue principal of or interest on any CD
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the higher of (i) the rate applicable to
Base Rate Loans for such day and (ii) the sum of the CD Margin plus the Adjusted
CD Rate applicable to such Loan at the date such payment was due.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
[CDBR ]*
ACDR = [__________] + AR
[1.00 - DRP]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
- ---------------
*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 9:00 A.M. (Chicago 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 Bank of
Montreal of its certificates of deposit in an amount comparable to the principal
amount of the CD Loan of Bank of Montreal 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.
327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the United States. The
Adjusted CD Rate shall be adjusted automatically on and as of the effective date
of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the London Interbank Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/32 of 1%)
of the respective rates per annum at which deposits in Dollars are offered to
Bank of Montreal 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 Bank of Montreal 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 1/32 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 Bank of Montreal are offered to Bank of Montreal 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) 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.
Section 2.06. Method of Electing Interest Rates. (a) The Term Loans made on
the Effective Date shall bear interest initially at the Base Rate. 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 Term Loans are Base Rate Loans, the Borrower may elect
to convert such Term Loans to CD Loans as of any Domestic Business Day or
to Euro-Dollar Loans as of any Euro-Dollar Business Day; and
(ii) if such Term Loans are CD Loans, the Borrower may elect to
convert such Term Loans to Base Rate Loans or Euro-Dollar Loans or elect
to continue such Term Loans as CD Loans for an additional Interest Period,
subject to Section 2.09 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 Term Loans are Euro-Dollar Loans, the Borrower may elect
to convert such Term 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 2.09 in the case of any such conversion or
continuation effective on any day other than the last day of the then
current Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent not later than 9:30 A.M. (Chicago time) on the
third Euro-Dollar Business Day before the conversion or continuation selected in
such notice is to be effective (unless the relevant Term 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 9:30 A.M. (Chicago 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 Term 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 2.06(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 2.06(a) above, the Agent shall promptly notify each Bank
of the contents thereof and such notice shall not thereafter be revocable by the
Borrower. If no Notice of Interest Rate Election is timely received prior to the
end of an Interest Period for any Group of Loans, the Borrower shall be deemed
to have elected that such Group of Loans be converted to Base Rate Loans as of
the last day of such Interest Period.
Section 2.07. Optional Prepayments. (a) Subject in the case of any Fixed
Rate Loan to Section 2.09, the Borrower may, upon at least one Domestic Business
Day's notice to the Agent, prepay any Group of Domestic Loans 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 $5,000,000 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 Term Loans of the Banks included in such Group. No amount of
the Term Loans prepaid may be reborrowed.
(b) 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 of such prepayment and such notice shall not thereafter be
revocable by the Borrower.
Section 2.08. General Provisions as to Payments. (a) The Borrower shall make
each payment of principal of, and interest on, the Term Loans, not later than
11:00 a.m. (Chicago time) on the date when due in Federal or other funds
immediately available in Chicago, to the Agent at the Payment Office. The Agent
will promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans 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. 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.
Section 2.09. 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 2.05(b), or if the Borrower fails to prepay,
convert or continue any Fixed Rate Loans after notice has been given to any Bank
in accordance with Section 2.06(c) or 2.07, 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 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 2.10. Computation of Interest. 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 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 2.11. 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 2.12. 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 Chicago 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 2.13. Extension of Maturity Date. (a) The Borrower may, by written
request (an "Extension Request") to the Agent delivered at any time during the
60-day period preceding each anniversary of the Effective Date, request that the
Banks extend the Maturity Date then in effect by one year, provided, that, in
the case of each Extension Request other than the first Extension Request made
hereunder, an Extension Request shall have been made and approved in accordance
with this Section 2.13 prior to each previous anniversary of the Effective Date.
(b) Upon receipt of an Extension Request, the Agent shall promptly notify
each Bank thereof, and each Bank shall notify the Agent in writing by the
deadline (the "Extension Request Deadline") specified in such Extension Request,
which deadline shall in any case not be later than 4:00 P.M., Chicago time, on
the date which is 30 days after delivery of such Extension Request, of such
Bank's election, in its sole discretion, (i) to extend the Maturity Date by one
year or (ii) not to extend the Maturity Date by one year (any Bank not electing
to extend, a "Non-Extending Bank"). Any Bank that fails to notify the Agent in
writing of its election by the Extension Request Deadline shall be deemed to be
a Non-Extending Bank. If all the Banks consent to such extension of the Maturity
Date then the Maturity Date shall be extended for one year. If any Bank is a
Non-Extending Bank the Maturity Date shall not be extended.
ARTICLE 3
CONDITIONS
The obligation of any Bank to make a Term Loan on the Effective Date is
subject to the satisfaction of the following conditions:
(a) Receipt by the Agent of the following documents, each dated the
Effective Date unless otherwise indicated:
(i) a duly executed Note for the account of each Bank dated on or
before the Effective Date complying with the provisions of Section 2.03;
(ii) an opinion of Stewart McKelvey Stirling & Scales, substantially
in the form of Exhibit B-1 hereto and covering such additional matters
relating to the transactions contemplated hereby as the Required Banks may
reasonably request;
(iii) 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;
(iv) the duly executed and delivered Guaranty;
(v) an opinion of Babetta R. Gray, Senior Vice President and General
Counsel of the Guarantor, substantially in the form of Exhibit B-2 hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(vi) all documents the Agent may reasonably request relating to the
existence of the Guarantor, the authority for and the validity of the
Guaranty, and any other matters relevant thereto, all in form and
substance satisfactory to the Agent.
(b) the fact that, immediately before and after such Borrowing, no Default
shall have occurred and be continuing; and
(c) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true and correct on and as of the Effective
Date.
The occurrence of the Effective Date and the making of the Term Loans 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(b) and 3(c) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 4.01. Corporate Existence and Power. The Borrower is an unlimited
liability company duly incorporated, validly existing and in good standing under
the laws of the Province of Nova Scotia, 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 memorandum or articles of association 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. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which could reasonably be expected to result in a
Material Adverse Effect or which in any manner draws into question the validity
or enforceability of this Agreement or the Notes.
Section 4.05. 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 4.06. 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 4.07. Taxes. The Borrower and its Subsidiaries have filed all
Canadian income tax returns and all other material tax returns which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Subsidiary. The charges, accruals and reserves on the books of the Borrower and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
Section 4.08. Subsidiaries. The Borrower has no Subsidiaries.
Section 4.09. 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 4.10. 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 or the ability of the Borrower
to perform its obligations under this Agreement.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder
or any amount payable under any Note remains unpaid:
Section 5.01. Information. The Borrower will deliver, or cause to be
delivered, to each of the Banks:
(a) within 30 days after the end of each fiscal quarter of the
Borrower a certificate of the chief financial officer or the chief
accounting officer of the Borrower 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;
(b) 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; and
(c) 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 and equipment useful
and necessary in its business in good working order and condition to the extent
required by sound business practices, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all its
respective properties and equipment in at least such amounts, against at least
such risks and with such risk retention as are usually maintained, insured
against or retained, as the case may be, in the same general area by companies
of established repute engaged in the same or a similar business; and will
furnish to the Banks, upon request from the Agent, information presented in
reasonable detail as to the insurance so carried.
Section 5.04. Conduct of Business and Maintenance of Existence. The Borrower
will preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect its respective
existence and its respective rights, privileges and franchises material to the
normal conduct of business, provided that nothing in this Section 5.04 shall
prohibit (i) the merger of a Subsidiary into the Borrower or the merger or
consolidation of a Subsidiary with or into another Person if the entity
surviving such consolidation or merger is a Subsidiary and if, in each case,
after giving effect thereto, no Default shall have occurred and be continuing,
(ii) any transaction not prohibited by Section 5.07 or (iii) the termination of
the existence of any Subsidiary if the Borrower in good faith determines that
such termination is not materially disadvantageous to the Banks.
Section 5.05. Compliance with Laws. The Borrower will comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws) 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 Term Loans made under
this Agreement will be used by the Borrower for general corporate purposes,
including acquisitions. None of such proceeds will be used, directly or
indirectly, for any purpose, whether immediate, incidental or ultimate, that
entails a violation of the provisions of Regulation 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) 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;
(b) 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;
(c) 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;
(d) 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;
(e) 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;
(f) 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;
(g) 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
Section 5.10. 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 that 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) 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 or (ii) the Borrower and each Subsidiary from
entering into and/or performing their respective obligations under the
Transaction Documents.
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
Term Loan or (ii) fail to pay any interest on any Term Loan 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;
(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) 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;
(j) the Borrower shall be dissolved or terminated; or
(k) a Change in Ownership or Control shall have occurred;
(l) the Guaranty shall cease, for any reason, to be in full force
and effect or the Guarantor, or any Person acting on behalf of the
Guarantor, shall so assert; or
(m) an "Event of Default" (as defined in the Guaranty) shall have
occurred and be continuing under the Guaranty.
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 Term Loans, by notice to the Borrower declare the Term Loans (together with
accrued interest thereon) to be, and the Term Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower, provided that in
the case of any of the Events of Default specified in clause 6.01 (g) or 6.01
(h) above with respect to the Borrower, without any notice to the Borrower or
any other act by the Agent or the Banks, the Commitments shall thereupon
terminate and the Term 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.
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. Bank of Montreal 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 Bank of
Montreal and its affiliates may accept deposits from, lend money to, and
generally engage in any kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Agent.
Section 7.03. Action by Agent. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as expressly provided in Article 6.
Section 7.04. Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for the Borrower or Guarantor), 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 or the Guarantor; (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, the Guaranty 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 (or, if the Commitments have terminated, ratably in accordance
with the aggregate unpaid principal amount of the Term Loans held by such Bank),
indemnify the Agent, its affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Borrower) against any
reasonable and customary out-of-pocket costs or expenses (including counsel fees
and disbursements), or any other claim, demand, action, loss or liability
(except such as result from such indemnities' 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 and the Guaranty.
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.
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 or Euro-Dollar Loan:
(a) the Agent is advised by Bank of Montreal that deposits in
Dollars (in the applicable amounts) are not being offered to it in the
relevant market for such Interest Period, or
(b) Banks having 50% or more of the aggregate principal amount of
the affected Term 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 Term 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, such
Borrowing shall instead be made as a Base Rate Borrowing.
Section 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Agent that the circumstances giving rise to such suspension
no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to
convert outstanding Term 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 Term Loan to such day or (b) immediately if such Bank shall determine that
it may not lawfully continue to maintain and fund such Term Loan to such day.
Section 8.03. Increased Cost and Reduced Return. (a) If on or after the date
hereof, 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 2.11), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in an
applicable Assessment Rate) or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Bank (or its Applicable
Lending Office) or shall impose on any Bank (or its Applicable Lending Office)
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans, its Note or
its obligation to make Fixed Rate Loans 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 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 has or would have the effect of reducing the rate of return on capital of
such Bank (or its Parent) as a consequence of such Bank's obligations hereunder
to a level below that which such Bank (or its Parent) could have achieved but
for such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand by such Bank
(with a copy to the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its Parent) for such
reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any event
of which it has knowledge, occurring after the date hereof, which will entitle
such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section shall set forth the additional amount
or amounts to be paid to it hereunder, shall set forth the method of determining
such additional amount or amounts in reasonable detail and shall be conclusive
in the absence of manifest error. In determining such amount, such Bank may use
any reasonable averaging and attribution methods.
Section 8.04. Taxes. (a) For the purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment
by the Borrower pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, excluding (i) in the case of each Bank
and the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the laws of which such Bank or the
Agent (as the case may be) is organized or in which its principal
executive office is located or, in the case of each Bank, in which its
Applicable Lending Office is located and (ii) in the case of each Bank,
any United States withholding tax imposed on such payments but only to the
extent that such Bank is subject to United States withholding tax at the
time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any
Note or from the execution or delivery of, or otherwise with respect to,
this Agreement or any Note.
(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 deduction been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Agent, at its address referred to
in Section 9.01, the original or a certified copy of a receipt evidencing
payment thereof.
(c) The Borrower agrees to indemnify each Bank and the Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Bank or the Agent (as the case may be) makes demand therefor.
(d) 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 convert outstanding Term Loans to, Euro-Dollar
Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03 or 8.04 with respect to its CD Loans or
Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until such
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for compensation no longer exist:
(a) all Loans which would otherwise be continued as or converted
into CD Loans or Euro-Dollar Loans, as the case may be, by such Bank 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 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 Term 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, to seek a mutually
satisfactory bank or banks (which may be one or more of the Banks) to purchase
the outstanding Term Loans of such Bank.
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (a) in the
case of the Borrower or the Agent, at its address, facsimile number or telex
number set forth on the signature pages hereof, (b) in the case of any Bank, 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 under
Article 2 or Article 8 and notices to the Borrower under Section 9.06(c) shall
not be effective until received.
Section 9.02. No Waivers. No failure or delay by the Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnification. (a) The Borrower shall pay (without
duplication of any such amounts paid by the Guarantor) (i) all reasonable and
customary out-of-pocket expenses of the Agent, including fees and disbursements
of special counsel for the Agent, in connection with the preparation and
administration of this Agreement, any waiver or consent hereunder or any
amendment hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all reasonable and customary out-of-pocket expenses
incurred by the Agent and each Bank, including (without duplication) the fees
and disbursements of outside counsel and the allocated cost of inside counsel,
in connection with any collection, bankruptcy, insolvency and other enforcement
proceedings resulting from such Event of Default.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder, provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction; and provided
further that any such indemnification hereunder shall only be to the extent that
such Indemnitee has not received such payment from the Guarantor.
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
Term Loans 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
Term Loans held by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Term Loans 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 Term Loans 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 Term Loan, 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 are affected thereby, by it), provided that no such
amendment or waiver shall (i) increase or decrease the Commitment of any Bank
(except 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 Term Loan or any interest
thereon without the written consent of each Bank affected thereby, (iii)
postpone the date fixed for any payment of principal of or interest on any Term
Loan or for any scheduled reduction or termination of any Commitment without the
written consent of each Bank, (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 or (v) release the Guarantor from its obligations under the
Guaranty or postpone the payment of any amounts owing under the Guaranty 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 Term Loans. 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 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), (iii), (iv) or (v) 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 2.11 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 of all, but not
in an amount of less than $10,000,000, of its rights and obligations under this
Agreement and the Notes and such Assignee shall assume such rights and
obligations, pursuant to an Assignment and Assumption Agreement in substantially
the form of Exhibit C hereto executed by such Assignee and such transferor Bank,
with (and subject to) the subscribed consent of the Borrower (which shall not be
unreasonably withheld so long as (i) the Assignee is a commercial bank and (ii)
the transferor Bank has given the Agent and the Borrower not less than three
Domestic Business Days' prior written notice of such proposed assignment and the
identity of the proposed Assignee) and the Agent, 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 or the Agent 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 and the Notes, the part
retained by such transferor Bank shall be not less than $10,000,000. 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.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
Section 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
Section 9.08. Governing Law, Submission to Jurisdiction. This Agreement and
each Note shall be governed by and construed in accordance with the laws of the
State of Illinois. The Borrower and each of the Banks hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Northern
District of Illinois and of any Illinois court sitting in the City of Chicago
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 telex, facsimile or other written confirmation
from such party of execution of a counterpart hereof by such party) and
satisfaction of the conditions precedent contained in Article 3.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE
BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. The Agent and each Bank agree to keep any
information delivered or made available by the Borrower pursuant to this
Agreement confidential from anyone other than persons employed or retained by
such Bank and its affiliates, provided that nothing herein shall prevent the
Agent or any Bank from disclosing such information (i) to any other Bank or to
the Agent, (ii) to such Bank's or Agent's legal counsel and independent
auditors, (iii) upon the order of any court or administrative agency, (iv) upon
the request or demand of any regulatory agency or authority, (v) which had been
publicly disclosed other than as a result of a disclosure by the Agent or any
Bank prohibited by this Agreement, (vi) in connection with any litigation to
which the Agent, any Bank or its subsidiaries or Parent may be a party, (vii) to
the extent necessary in connection with the exercise of any remedy hereunder,
(viii) subject to provisions substantially similar to those contained in this
Section, to any other Person if reasonably incidental to the administration of
the credit facility contemplated hereby and (ix) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed Participant or Assignee.
<PAGE>
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 CANADA ULC
By:_______________________________
Title:__________________________
Address: _______________________
Attention: ________________
Telephone: _______________
Telecopy: ________________
COMMITMENT
$34,391,917 BANK OF MONTREAL, individually
and as Agent
By:_________________________________________
Title:___________________________________
Address for Notices:
Bank of Montreal
115 South LaSalle Street - 13
West
Chicago, Illinois 60603
Attention: Cecily Mistarz
Telephone: (312) 750-4354
Telecopy: (312) 750-4314
<PAGE>
PRICING SCHEDULE A
Each of the terms "Euro-Dollar Margin" and "CD Margin" 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:
- -------------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CD Margin 0.250% 0.300% 0.350% 0.425% 0.750%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Euro-Dollar 0.250% 0.300% 0.350% 0.425% 0.750%
Margin
- --------------------------------------------------------------------------------
For purposes of this Schedule, the following terms have the following
meanings:
"Applicable Cash Flow Ratio" means, on any day, the Cash Flow Ratio
(as defined in the Guaranty) on the last day of the most recently ended
fiscal quarter of the Guarantor for which the Guarantor has delivered
financial statements pursuant to Section 3.01(a) or 3.01(b) of the
Guaranty, as the case may be, provided that at any time a Default exists
under Section 3.01(a), 3.01(b) or 3.01(c) of the Guaranty, 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.
"Pricing Level" refers to the determination of which of Level I
Pricing, Level II Pricing, Level III Pricing, Level IV Pricing or Level V
Pricing applies at any date.
<PAGE>
PRICING SCHEDULE B
Each of the terms "Euro-Dollar Margin" and "CD Margin" 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:
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LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
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CD Margin 0.250% 0.300% 0.350% 0.425% 0.750%
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Euro-Dollar 0.250% 0.300% 0.350% 0.425% 0.750%
Margin
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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
Guarantor'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
Guarantor'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
Guarantor'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
Guarantor's long-term debt is rated BBB- or higher by S&P and Baa3 or
higher by Moody's and (ii) none of Level I Pricing, Level II Pricing and
Level III Pricing applies.
"Level V Pricing" applies at any date if, at such date, no other
Pricing Level applies.
"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 Guarantor
without third-party credit enhancement, and any rating assigned to any other
debt security of the Guarantor 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 Guarantor's long-term debt is
rated at least BBB by S&P and at least Baa2 by Moody's, the rating to be used to
determine the applicable Pricing Level is the higher of the two (e.g., BBB+/A3
results in Level I Pricing).
<PAGE>
SCHEDULE I
TRANSACTION DOCUMENTS
Galileo Canada Distribution
Systems, Inc. Share Purchase Agreement
and all related agreements
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 Guarantor's common stock.
<PAGE>
D-1
EXHIBIT A
NOTE
Chicago, Illinois
----------------
For value received, Galileo Canada ULC, a Nova Scotia unlimited liability
company (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 Term 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 Term 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 Term Loans made by the Bank, the respective types 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 Term
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 Credit Agreement dated as
of June 5, 1998 among Galileo Canada ULC, the Banks parties thereto and Bank of
Montreal, as Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
GALILEO CANADA ULC
By
Name:
Title:
<PAGE>
D-1
LOANS AND PAYMENTS OF PRINCIPAL
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AMOUNT OF
AMOUNT TYPE OF LOAN PRINCIPAL NOTATION MADE
DATE OF LOAN REPAID BY
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<PAGE>
B-2-1
EXHIBIT B-2
OPINION OF COUNSEL FOR THE BORROWER
AND GUARANTOR
June 5,1998
To the Banks, and the Agent
Referred to Below
c/o Bank of Montreal, as Agent
115 South LaSalle Street
Chicago. Illinois 60603
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of Galileo
International, Inc. (the "Guarantor") and have acted as counsel for the
Guarantor in connection with the Guaranty Agreement (the "Guaranty") dated as of
June 5, 1998 executed by the Guarantor and as counsel for Galileo Canada ULC
(the "Borrower") in connection with the Credit Agreement (the "Credit
Agreement") dated as of June 5, 1998 among the Borrower, the banks party thereto
and Bank of Montreal, as Agent. Terms defined in the Guaranty Agreement are used
herein as therein defined. This opinion is being rendered to you at the request
of the Borrower pursuant to Section 3(a)(v) 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, the Guarantor and its Subsidiaries and examined such certificates of
public officials, and corporate documents and records of the Borrower, the
Guarantor 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 Guaranty and Credit Agreement by each of the
parties thereto (other than the Guarantor and Borrower, as applicable), (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:
1. The Guarantor 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 Guarantor of the
Guaranty are (a) within the corporate powers of the Guarantor, (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 Guarantor or of any indenture or other
agreement or instrument evidencing Debt of the Guarantor or of any other
material agreement, judgment, injunction, order, decree or other
instrument known to me and binding upon the Guarantor or any of its
Subsidiaries or result in the creation or imposition of any Lien on any
asset of the Guarantor or any of its Subsidiaries.
3. The Guaranty constitutes a valid and binding agreement of the
Guarantor enforceable in accordance with its terms and the Credit
Agreement and each Note constitute valid and binding agreements of the
Borrower enforceable in accordance with their terms except, in each case
(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
Guaranty provide for indemnification, the enforcement thereof may be
limited by public policy considerations, and (iii) I express no opinion as
to the effect of the law of any jurisdiction (other than the States of
Illinois and Colorado) wherein any Bank may be located or wherein
enforcement of the Guaranty 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 Illinois
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 Guarantor 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 Guarantor and its Consolidated
Subsidiaries, considered as a whole, or which in any manner draws into
question the validity or enforceability of the Guaranty.
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 6.07 of the
Guaranty) without my prior written consent.
Very truly yours,
Babetta R. Gray
<PAGE>
C-1
EXHIBIT C
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ___________________, ____ among [NAME OF Assignor]
(the "Assignor"), [NAME OF ASSIGNEE] (the "Assignee"), GALILEO CANADA ULC (the
"Borrower") and BANK OF MONTREAL, as Agent (the "Agent").
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of June 5, 1998 among the Borrower, the
Assignor and the other Banks parties thereto, as Banks, and the Agent (as
amended from time to time, the "Credit Agreement");
WHEREAS, the Assignor has outstanding Term Loans in an aggregate
principal amount of $_________;
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 Term
Loans thereunder in a principal amount equal to $________________ (the "Assigned
Amount"), 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:
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. Upon the execution and
delivery hereof by the Assignor, the Assignee, [the Borrower, and the Agent] 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
and the Guaranty, and (ii) the Assignor shall be 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. 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 and the Agent. This Agreement is
conditioned upon the consent of the Borrower and the Agent pursuant to Section
9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower
and the Agent is evidence of this consent. Pursuant to Section 9.06(c), the
Borrower agrees to 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
Guarantor, or the validity and enforceability of the obligations of the (i)
Borrower in respect of the Credit Agreement or any Note or (ii) Guarantor in
respect of the Guaranty. 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 and Guarantor.
Section 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
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.
<PAGE>
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:
[CONSENTED TO:
GALILEO CANADA ULC
By:_________________________________________
Name:
Title:
CONSENTED TO:
BANK OF MONTREAL, as Agent
By:_________________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.5
GALILEO INTERNATIONAL, INC.
GUARANTY AGREEMENT
dated as of
June 5, 1998
=============================================================================
<PAGE>
<TABLE>
<CAPTION>
-1-
TABLE OF CONTENTS
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE 1 THE GUARANTY..........................................................1
Section 1.01. The Guaranty.......................................................1
Section 1.02. Guarantee Unconditional............................................2
Section 1.03. Discharge Only Upon Payment in Full;
Reinstatement in Certain Circumstances.............................2
Section 1.04. Waivers............................................................3
Section 1.05. Stay of Acceleration...............................................3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES........................................3
Section 2.01. Corporate Existence and Power......................................3
Section 2.02. Corporate and Governmental Authorization; No
Contravention......................................................3
Section 2.03. Binding Effect.....................................................3
Section 2.04. Financial Information..............................................4
Section 2.05. Litigation.........................................................4
Section 2.06. Compliance with ERISA..............................................4
Section 2.07. Compliance with Laws...............................................4
Section 2.08. Environmental Matters..............................................4
Section 2.09. Taxes..............................................................5
Section 2.10. Subsidiaries.......................................................5
Section 2.11. Regulatory Restrictions on Borrowing...............................5
Section 2.12. Full Disclosure....................................................5
ARTICLE 3 COVENANTS.............................................................6
Section 3.01. Information........................................................6
Section 3.02. Payment of Obligations.............................................7
Section 3.03. Maintenance of Property; Insurance.................................8
Section 3.04. Conduct of Business and Maintenance of
Existence..........................................................8
Section 3.05. Compliance with Laws...............................................8
Section 3.06. Inspection of Property, Books and Records..........................8
Section 3.07. Mergers and Sales of Assets........................................9
Section 3.08. Use of Proceeds....................................................9
Section 3.09. Negative Pledge....................................................9
Section 3.10. Interest Coverage Ratio...........................................10
Section 3.11. Restricted Payments...............................................10
Section 3.12. Transactions with Affiliates......................................10
Section 3.13. Debt of Subsidiaries.............................................10
Section 3.14. Cash Flow Ratio...................................................10
ARTICLE 4 DEFAULTS.............................................................11
Section 4.01. Events of Default.................................................11
ARTICLE 5 DEFINITIONS..........................................................12
Section 5.01. Definitions.......................................................12
Section 5.02. Additional Terms; Accounting Terms and
Determinations....................................................18
ARTICLE 6 MISCELLANEOUS........................................................18
Section 6.01. Notices...........................................................18
Section 6.02. Waivers and Amendments............................................19
Section 6.03. Expenses; Indemnification.........................................19
Section 6.04. Successors and Assigns............................................20
Section 6.05. Governing Law, Submission to Jurisdiction.........................20
Section 6.06. Waiver of Jury Trial..............................................20
Section 6.07. Confidentiality...................................................20
Schedule I -- Existing Capital Leases
Schedule II -- Existing Ownership Group
Schedule III -- Transaction Documents
</TABLE>
<PAGE>
-1-
GUARANTY AGREEMENT
WHEREAS, Galileo Canada ULC, a Nova Scotia unlimited liability company
(the "Borrower"), Bank of Montreal, individually and as Agent, and the lenders
party thereto, have entered into a Credit Agreement dated as of June 5, 1998
(such Credit Agreement as the same may from time to time be modified and amended
being hereinafter referred to as the "Credit Agreement" and Bank of Montreal,
acting as such agent and any successor or successors to Bank of Montreal in the
capacity of Agent being hereinafter referred to as the "Agent") pursuant to
which Bank of Montreal and other lenders which are or may from time to time
become parties thereto (Bank of Montreal and such other lenders which are or
become "Banks" under the Credit Agreement being hereinafter referred to
collectively as the "Banks" and individually as a "Bank", and the Agent and the
Banks being hereinafter referred to collectively as the "Guaranteed Creditors"
and individually as a "Guaranteed Creditor") will make loans to the Borrower;
and
WHEREAS, the Borrower is a direct wholly-owned subsidiary of Galileo
International, Inc., a Delaware corporation (the "Guarantor"); and
WHEREAS, the Banks are unwilling to extend credit accommodations to the
Borrower unless the Guarantor is prepared to guarantee the indebtedness,
obligations and liabilities of the Borrower to the Guaranteed Creditors; and
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing and to accrue to the Guarantor, the receipt and sufficiency of which
are hereby acknowledged, the Guarantor agrees as follows:
ARTICLE 1
THE GUARANTY
Section 1.01. The Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees to the Guaranteed Creditors, the due and punctual payment
of all present and future indebtedness of the Borrower evidenced by or arising
out of the Credit Agreement, including, but not limited to, the due and punctual
payment of principal of and interest on the Notes and the due and punctual
payment of all other obligations now or hereafter owed by the Borrower under the
Credit Agreement as and when the same shall become due and payable, whether at
stated maturity, by acceleration or otherwise, according to the terms hereof and
thereof (collectively, the "Guaranteed Obligations"). In case of failure by the
Borrower punctually to pay any part of the Guaranted Obligations, the Guarantor
hereby unconditionally agrees to make such payment as and when the same shall
become due and payable, whether at stated maturity, by acceleration or
otherwise, and as if such payment were made by the Borrower.
Section 1.02. Guarantee Unconditional. The obligations of the
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any Guaranteed Obligation under the Credit Agreement
or by operation of law or otherwise (other than an express accord and
satisfaction between a Bank or Agent and the Guarantor or Borrower in so
far as it expressly discharges a Guaranteed Obligation owing such Agent or
Bank, as the case may be);
(b) any modification or amendment of or supplement to the
Credit Agreement or any other document;
(c) any change in the corporate existence, structure or ownership
of, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting, the Borrower, or any of its assets, or any resulting
release or discharge of any Guaranteed Obligation;
(d) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Agent, any Bank or any other
Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand
or any exercise of, or failure to exercise, any rights or remedies against
the Borrower or any other Person or property;
(f) any application in accordance with the terms of the Credit
Agreement of any sums by whomsoever paid or howsoever realized to any
obligation of the Borrower, regardless of what obligations of the Borrower
remain unpaid; or
(g) any invalidity or unenforceability relating to or against the
Borrower for any reason of the Credit Agreement, the Notes or any other
document executed in connection therewith or any provision of applicable
law or regulation purporting to prohibit the payment by the Borrower of
any Guaranteed Obligation, including the payment of the principal of or
interest on any Note or any other amount payable by the Borrower under the
Credit Agreement.
Section 1.03. Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. The Guarantor's obligations hereunder shall remain in full force
and effect until the Commitments are terminated and the principal of and
interest on the Notes and all Guaranteed Obligations shall have been paid in
full. If at any time any payment of the principal of or interest on any Note or
any other Guaranteed Obligation is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, the Guarantor's obligations hereunder with respect to such payment
shall be reinstated at such time as though such payment had become due but had
not been made at such time.
Section 1.04. Waivers. (a) General. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided
for herein, as well as any requirement that at any time any action be taken
by the Agent, any Bank or any other Person against the Borrower or any other
Person.
(b) Subrogation and Contribution. Unless and until the Guaranteed
Obligations have been fully paid and satisfied and the Commitments have
terminated, the Guarantor hereby irrevocably waives any claim or other right it
may now or hereafter acquire against the Borrower that arises from the
existence, payment, performance or enforcement of the Guarantor's obligations
hereunder, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, or any right to
participate in any claim or remedy of the Agent, any Bank or any other holder of
a Guaranteed Obligation against the Borrower whether or not such claim, remedy
or right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from the Borrower directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other right.
Section 1.05. Stay of Acceleration. If acceleration of the time for payment
of any Guaranteed Obligation is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement shall nonetheless be
payable by the Guarantor hereunder forthwith on demand by the Agent.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
The Guarantor represents and warrants that:
Section 2.01. Corporate Existence and Power. The Guarantor 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 2.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Guarantor of this Agreement is
within the Guarantor'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 Guarantor or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Guarantor or any of its Subsidiaries or result in the creation or imposition
of any Lien on any asset of the Guarantor or any of its Subsidiaries.
Section 2.03. Binding Effect. This Agreement constitutes a valid and binding
agreement of the Guarantor 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 2.04. Financial Information. (a) The consolidated balance sheet of
the Guarantor and its Consolidated Subsidiaries as of December 31, 1997 and the
related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by KPMG Peat Marwick LLP, copies of which have been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Guarantor and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) Since December 31, 1997 there has been no material adverse change in
the business, financial position or results of operations of the Guarantor and
its Consolidated Subsidiaries, considered as a whole.
Section 2.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Guarantor threatened against or affecting,
the Guarantor 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, the Credit Agreement or the Notes.
Section 2.06. 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 2.07. Compliance with Laws. The Guarantor 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 2.08. 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 Guarantor and its Subsidiaries,
including, without limitation, (i) any requirement under the Environmental Laws
that the Guarantor 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 Guarantor or its Subsidiaries, the Guarantor has
reasonably concluded that any liabilities and costs that the Guarantor 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 2.09. Taxes. The Guarantor 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 Guarantor or any
Subsidiary, except to the extent payment of any such taxes is being contested in
good faith by appropriate proceedings diligently conducted. The charges,
accruals and reserves on the books of the Guarantor and its Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Guarantor, adequate.
Section 2.10. Subsidiaries. Each of the Guarantor'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 2.11. Regulatory Restrictions on Borrowing. The Guarantor 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 2.12. Full Disclosure. All information (other than any estimates and
projections) heretofore furnished by the Guarantor 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 Guarantor 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 Guarantor
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 Guarantor to the Agent or any Bank will be, prepared
by the Guarantor in good faith utilizing the best information available to the
Guarantor at the time of preparation thereof. The Guarantor has disclosed to the
Banks in writing any and all facts which materially and adversely affect or may
affect (to the extent the Guarantor can now reasonably foresee) the business,
operations or financial condition of the Guarantor and its Consolidated
Subsidiaries, taken as a whole, or the ability of the Guarantor to perform its
obligations under this Agreement.
ARTICLE 3
COVENANTS
The Guarantor agrees that, so long as any Bank has any Commitment under
the Credit Agreement or any Guaranteed Obligation remains unpaid:
Section 3.01. Information. The Guarantor will deliver to each of the
Guaranteed Creditors:
(a) within 100 days after the end of each fiscal year of the
Guarantor, a consolidated balance sheet of the Guarantor 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 50 days after the end of each of the first three quarters
of each fiscal year of the Guarantor, a consolidated balance sheet of the
Guarantor 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 Guarantor'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 Guarantor's
previous fiscal year, all certified (subject to nominal 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 Guarantor;
(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 Guarantor
(i) setting forth in reasonable detail the calculations required to
establish (x) whether the Guarantor was in compliance with the
requirements of Sections 3.10 and 3.14 on the date of such financial
statements and (y) for so long, as Pricing Schedule A is the Pricing
Schedule under the Credit Agreement, 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 Guarantor is taking or proposes to take
with respect thereto;
(d) within five Domestic Business Days after any officer of the
Guarantor 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 Guarantor setting forth the details thereof and
the action which the Guarantor is taking or proposes to take with respect
thereto;
(e) promptly upon the mailing thereof to the shareholders of the
Guarantor generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) 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 Guarantor shall have filed with
the Securities and Exchange Commission;
(g) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Material Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Material Plan has given or is
required to give notice of any such reportable event, a copy of the notice
of such reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives
notice from the PBGC under Title IV of ERISA of an intent to terminate,
impose material liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy
of such notice; (iv) applies for a waiver of the minimum funding standard
under Section 412 of the Internal Revenue Code, a copy of such
application; (v) gives notice of intent to terminate any Material Plan
under Section 4041 (c) of ERISA, a copy of such notice and other
information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii)
fails to make any payment or contribution to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement or makes any amendment to
any Plan or Benefit Arrangement which has resulted or could result in the
imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer
of the Guarantor setting forth details as to such occurrence and action,
if any, which the Guarantor or applicable member of the ERISA Group is
required or proposes to take; and
(h) from time to time such additional information regarding the
financial position or business of the Guarantor and its Subsidiaries as
the Agent, at the request of any Bank, may reasonably request.
Section 3.02. Payment of Obligations. The Guarantor 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 3.03. Maintenance of Property; Insurance. (a) The Guarantor will
keep, and will cause each Subsidiary to keep, all property and equipment useful
and necessary in its business in good working order and condition to the extent
required by sound business practices, ordinary wear and tear excepted.
(b) The Guarantor will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Guarantor or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all its
respective properties and equipment in at least such amounts, against at least
such risks and with such risk retention as are usually maintained, insured
against or retained, as the case may be, in the same general area by companies
of established repute engaged in the same or a similar business; and will
furnish to the Banks, upon request from the Agent, information presented in
reasonable detail as to the insurance so carried.
Section 3.04. Conduct of Business and Maintenance of Existence. The
Guarantor 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 3.04 shall prohibit (i) the merger of a Subsidiary into the Guarantor or
the merger or consolidation of a Subsidiary with or into another Person if the
entity surviving such consolidation or merger is a Subsidiary and if, in each
case, after giving effect thereto, no Default shall have occurred and be
continuing, (ii) any transaction not prohibited by Section 3.07 or (iii) the
termination of the existence of any Subsidiary if the Guarantor in good faith
determines that such termination is not materially disadvantageous to the Banks.
Section 3.05. Compliance with Laws. The Guarantor 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 3.06. Inspection of Property, Books and Records. The Guarantor 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 3.07. Mergers and Sales of Assets. The Guarantor 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
Guarantor and its Subsidiaries, taken as a whole, to any other Person or
Persons, provided that the Guarantor may merge with another Person if (x) the
Guarantor is the corporation surviving such merger and (y) after giving effect
to such merger, no Default shall have occurred and be continuing.
Section 3.08. Use of Proceeds. The proceeds of the Loans made under the
Credit Agreement will be used by the Borrower for general corporate purposes,
including acquisitions. None of such proceeds will be used, directly or
indirectly, for any purpose, whether immediate, incidental or ultimate, that
entails a violation of the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
Section 3.09. Negative Pledge. Neither the Guarantor 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 date hereof securing (i) Debt in
connection with the Existing Capital Leases and (ii) other Debt
outstanding on the date hereof 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 Guarantor 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 Guarantor or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Debt is not
increased and is not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i)
do not secure Debt or Derivatives Obligations, (ii) do not secure any
obligation in an amount exceeding $10,000,000 and (iii) do not in the
aggregate materially detract from the value of its assets or materially
impair the use thereof in the operation of its business;
(h) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $10,000,000; and
(i) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal or face amount not
exceeding, on the date of incurrence of any portion of such Debt, an
aggregate of 10% of Consolidated Tangible Net Worth at such date.
Section 3.10. Interest Coverage Ratio. As of the last day of each
fiscal quarter of the Guarantor, the Interest Coverage Ratio at such last day
will not be less than 2.5 to 1.
Section 3.11. Restricted Payments. Neither the Guarantor 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 3.12. Transactions with Affiliates. The Guarantor 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 Guarantor or such Subsidiary that 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 Guarantor and each Subsidiary from entering
into and/or 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 3.13. Debt of Subsidiaries. Total Debt of all Subsidiaries
(excluding (i) Debt of a Subsidiary to the Guarantor or to a wholly owned
Subsidiary and (ii) the Guaranteed Obligations) will not, on the date of
incurrence of any portion of such Debt, exceed the greater of (x) $50,000,000 or
(y) 10% of Consolidated Tangible Net Worth at such date.
Section 3.14. Cash Flow Ratio. As of the last day of each fiscal
quarter of the Guarantor, the Cash Flow Ratio at such last day will not be
greater than 2.0 to 1.
ARTICLE 4
DEFAULTS
Section 4.01. Events of Default. Each of the following events shall be
an "Event of Default":
(a) the Guarantor shall fail to observe or perform any covenant
contained in Article 3, other than those contained in Sections 3.01
through 3.06;
(b) the Guarantor shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
4.01(a) above) for 30 days after notice thereof has been given to the
Guarantor by any Guaranteed Creditor;
(c) any representation, warranty, certification or statement made by
the Guarantor 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);
(d) the Guarantor or any Subsidiary shall fail to make any payment
in respect of any Material Financial Obligations when due or within any
applicable grace period;
(e) 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;
(f) the Guarantor 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;
(g) an involuntary case or other proceeding shall be commenced
against the Guarantor 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 Guarantor or any Subsidiary under the federal bankruptcy laws
as now or hereafter in effect;
(h) 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;
(i) judgments or orders for the payment of money in excess of
$10,000,000 in the aggregate shall be rendered against the Guarantor or
any Subsidiary and such judgments or orders shall continue unsatisfied and
unstayed for a period of 10 days;
(j) the Guarantor shall be dissolved or terminated; or
(k) a Change in Ownership or Control shall have occurred.
ARTICLE 5
DEFINITIONS
Section 5.01. Definitions. The following terms, as used herein, have
the following meanings:
"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 Guarantor or (iii) any Person (other than
the Guarantor or a Subsidiary) which is controlled by or is under common control
with a Person described in clause (i) or (ii).
"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.
"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 Guarantor and its Consolidated Subsidiaries ending on such date.
"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 Guarantor at such time.
"Consolidated Debt" means at any date the Debt of the Guarantor 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 Guarantor 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 Guarantor 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 Guarantor 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 Guarantor 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 Guarantor and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. For
purposes of this definition, the term "Intangible Assets" means the amount (to
the extent reflected in determining such consolidated stockholders' equity) of
(i) all write-ups (other than write-ups resulting from foreign currency
translations and write-ups of tangible assets of a going business concern made
within twelve months after the acquisition of such business) subsequent to
December 31, 1997 in the book value of any asset owned by the Guarantor 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 Guarantor 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 3.09 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.
"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.
"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 Guarantor, 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 Guarantor 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.
"Event of Default" has the meaning set forth in Section 4.01.
"Existing Capital Leases" means the capital leases described on Schedule I
hereto.
"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 Guarantor or a Subsidiary) which is controlled by or is
under common control with a Person listed on Schedule II hereto.
"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 and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 6.03(b).
"Interest Coverage Ratio" means at any date the ratio of (i) Consolidated
EBIT for the four consecutive fiscal quarters of the Guarantor and its
Consolidated Subsidiaries ending on such date to (ii) Consolidated Interest
Expense for such period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"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
Guarantor 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.
"Material Adverse Effect" means any material adverse effect on (i) the
business, financial condition or results of operations of the Guarantor and its
Consolidated Subsidiaries, considered as a whole, (ii) the ability of the
Guarantor 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 hereunder
or under the Credit Agreement and the Notes.
"Material Debt" means Debt of the Guarantor 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; provided that the term
"Material Debt" shall exclude Debt of the Guarantor or any Subsidiary of the
Guarantor owing to the Guarantor or to a wholly owned Subsidiary of the
Guarantor.
"Material Financial Obligations" means a principal or face amount of Debt
and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Guarantor and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, exceeding in the aggregate
$25,000,000; provided that the term "Material Financial Obligations" shall
exclude any such Debt or other obligations of the Guarantor or any Subsidiary of
the Guarantor owing to the Guarantor or to a wholly owned Subsidiary of the
Guarantor. For purposes of determining Material Financial Obligations at any
time, the "principal or face amount" of the obligations of the Guarantor 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
Guarantor 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.
"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 Guarantor and its
Subsidiaries of the assets of the NDCs.
"NDCs" means collectively Apollo Travel Services Partnership,
Traviswiss AG and Galilee Nederland B.V.
"Ordinary Voting Stock" means common stock or other voting securities of
the Guarantor (other than the Special Voting Preferred Stock).
"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.
"Registration Statement" means the Guarantor's Registration Statement on
Form S-1, filed on May 20, 1997, with the Securities and Exchange Commission
under the Securities Act of 1933.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Restricted Payment" means (a) any dividend or other distribution on any
shares of the Guarantor'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 Guarantor's capital stock or (ii) any
option, warrant or other right to acquire shares of the Guarantor'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).
"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 Guarantor.
"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 5.02. Additional Terms; Accounting Terms and Determinations. Any
capitalized term not defined herein shall have the same meaning herein as used
in the Credit Agreement. 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 Guarantor's independent public accountants) with the most
recent audited consolidated financial statements of the Guarantor and its
Consolidated Subsidiaries delivered to the Banks, provided that, if the
Guarantor notifies the Agent that the Guarantor wishes to amend any covenant in
Article 3 to eliminate the effect of any change in generally accepted accounting
principles on the operation of such covenant (or if the Agent notifies the
Guarantor that the Required Banks wish to amend Article 3 for such purpose),
then the Guarantor'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 Guarantor and the Required Banks.
ARTICLE 6
MISCELLANEOUS
Section 6.01. 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 Guarantor, at its address, facsimile number or telex number set
forth on the signature pages hereof, (b) in the case of any Bank or the Agent,
at its address, facsimile number or telex number provided for in the Credit
Agreement 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 Guarantor. 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.
Section 6.02. Waivers and Amendments. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Guaranteed Obligation 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 Any provision of this Agreement may be amended, but only if such
amendment is in writing and is signed by the Guarantor and the Required Banks;
provided however, that no such amendment shall release the Guarantor from its
obligations hereunder or postpone the payment of any amounts owing hereunder
without the written consent of each Bank.
Section 6.03. Expenses; Indemnification. (a) The Guarantor shall pay
(without duplication of any such amounts paid by the Borrower) (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 Guarantor agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder, provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction; and provided
further that any such indemnification hereunder shall only be to the extent that
such Indemnitee has not received such payment from the Borrower.
Section 6.04. 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 Guarantor may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of the Banks.
Section 6.05. Governing Law, Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois. The Guarantor and each of the Banks hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Northern District of
Illinois and of any Illinois court sitting in the City of Chicago for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Guarantor 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 6.06. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR, 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 6.07.Confidentiality. The Agent and each Bank agree to keep any
information delivered or made available by the Guarantor pursuant to this
Agreement confidential from anyone other than persons employed or retained by
such Bank and its affiliates, provided that nothing herein shall prevent the
Agent or any Bank from disclosing such information (i) to any other Bank or to
the Agent, (ii) to such Bank's or Agent's legal counsel and independent
auditors, (iii) upon the order of any court or administrative agency, (iv) upon
the request or demand of any regulatory agency or authority, (v) which had been
publicly disclosed other than as a result of a disclosure by the Agent or any
Bank prohibited by this Agreement, (vi) in connection with any litigation to
which the Agent, any Bank or its subsidiaries or Parent may be a party, (vii) to
the extent necessary in connection with the exercise of any remedy hereunder,
(viii) subject to provisions substantially similar to those contained in this
Section, to any other Person if reasonably incidental to the administration of
the credit facility contemplated hereby and (ix) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of this 5th day of
June, 1998.
GALILEO INTERNATIONAL, INC.
By:
Title: Senior Vice President & CFO
Address: 9700 West Higgins Road,
Suite 400
Rosemont, IL 60018
Attn: Chief Financial Officer
Facsimile: (847) 518-4201
Agreed and Accepted:
BANK OF MONTREAL, as Agent
By:
Title:_____________________
<PAGE>
-1-
SCHEDULE I
EXISTING CAPITAL LEASES
The Galileo Company Ltd. Letter of Credit
Collateralized Capital Leases
- --------------------------------------------------------------------------------
BALANCE SHEET
OBLIGATION/AMOUNT
AVAILABLE CURRENCY MAXIMUM AVAILABLE OUTSTANDING AT JUNE 30,
DESCRIPTION 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MCC (No. 15) Ltd GBP 26,000,000.00 18,744,196.00
Lease Schd. Nos.
52/5050/ 4933-3 25,518,137.80
52/5050/ 4437-4 Drawn
- --------------------------------------------------------------------------------
<PAGE>
-1-
SCHEDULE II
EXISTING OWNERSHIP GROUP
Covia LLC
Distribution Systems, Inc.
Roscor, A.G.
Travel Industry Systems B.V.
USAM Corp.
<PAGE>
SCHEDULE III
TRANSACTION DOCUMENTS
Galileo Canada Distribution
Systems, Inc. Share Purchase Agreement
and all related agreements
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 Guarantor's common stock
<PAGE>
Exhibit 10.6
Galileo International
1998 Management Incentive Plan (MIP)
The Plan's Objectives
To attract, retain and motivate a top quality management team. Focus
management's attention and energy on Company financial goals. Create a strong
and direct link between cash compensation and both individual and corporate
annual performance.
Plan Overview
Plan Period
The plan period is January 1, 1998 through December 31, 1998.
Eligibility
Individuals are eligible to participate in the Management Incentive Plan based
upon the duties and responsibilities of their positions and ability to impact
the overall results of Galileo International. Individuals with Galileo
International assigned grade of M3 and above or T9 are eligible.
Employees participating in another incentive plan, e.g. Corporate Profit Sharing
Plan, are not eligible. If an employee becomes eligible for the Management
Incentive Program, participation in the other incentive plan ends. The payment
terms for each plan will apply and payment in both plans will be prorated as
appropriate. New hires or new participants in the Plan during the year are
eligible to receive prorated awards.
Individuals must be participants prior to September 1st to be eligible for an
award.
The Company and/or Compensation Committee of the Board reserves the right to
remove individual participants from the Plan permanently or during any given
year due to absence, individual performance issues or other reasons affecting
their ability to contribute to corporate results.
Incentive Opportunities
Corporate Target and Award Levels
The Chief Executive Officer and the Compensation Committee of the Board
determine the corporate performance measure and targets.
<PAGE>
Bonus payments are based on achievement of both individual and corporate
objectives as shown in Table 1. Corporate results determine the percentage of
target award potentially payable to each participant as illustrated in Table 2.
The maximum payout for both corporate and individual ratings is 150% of the
target incentive potential.
Individual Target and Award Potential
The target incentive potential is based on your salary grade. The salary grade
and local competitive and Galileo International practice determine the targets.
Awards are calculated using the applicable year's base pay on December 31st of
the year.
The Chief Executive Officer, through his senior executives, is responsible for
developing appropriate individual goals for participants.
These goals should be established early in the first quarter of the year
and documented. Each objective should be weighted to represent its
importance to the other objectives. The total of assigned weights must
equal 100.
During the year, and as needed, these goals should be reviewed and
modified to continue to support business needs. The manager and employee
should agree as to the status of the objectives.
Significant changes in the goals initially established should be
discussed. To ensure thorough and accurate communication, these changes
should be documented.
Incentive opportunities vary by individual and/or job level and are determined
primarily by local country incentive pay practices.
Table 1 is used to determine the award payable to each participant in the year.
A portion of this award is based on corporate results and the remainder is
based on the achievement of individual performance goals.
The proportion of the award attributable to either corporate or individual
results is intended to reflect the relative ability of individuals at each
level to directly affect each set of results.
<PAGE>
Table 1
Portion of Awards Attributable to
Title Level & Grade Corporate Results Individual Results
Chief Executive Officer - M7 100% 0%
Senior Vice President - M6 100% 0%
Vice President - M5 75% 25%
Director - M5 50% 50%
Director - M4 50% 50%
Sr Manager - M3 25% 75%
Principal Engineer - T9 25% 75%
Performance Measures and Standards
Corporate financial performance measures are the same for all participants.
Individual performance measures will vary by individual.
1998 corporate financial performance for the 1998 Management Incentive Plan is
measured on Earnings Per Share (EPS). Threshold, target and maximum award levels
are shown below.
Table 2
Performance vs 1998 MIP Target Potential Target Award
92.5% 50%
100.0% 100%
107.5% 150%
Performance between levels can be interpolated or estimated as appropriate.
The Company reserves the right to exclude unusual profit or expense events from
the calculation of EPS for this Plan. These events are unusual items not related
to operating performance.
Award Determination
Incentive awards are determined as soon as practicable after the close of the
fiscal year and paid as soon as soon as possible following the Compensation
Committee's and/or Board's approval, as described below.
<PAGE>
Approval Process
Bonuses, based on either corporate or individual results, are not paid if the
Company does not meet the threshold level of corporate financial performance.
Company Performance
The Board approves the Company's financial performance based on the audited
results.
Individual Performance
The Board approves the total award payout amount.
The Board requires detailed review and approval of award payments for the
Corporate Officers and those individuals with base pay of $150,000 (USD) or
more.
Calculating Individual Awards
As soon as practicable after the Plan year, the manager and participant review
the level of achievement of each of the objectives. A rating is assigned to each
objective. Based on the weighting and rating, an overall rating is assigned.
The results are summarized and approved by the Senior Vice President. A
finalized version documenting the individual and overall results is signed and
sent to Human Resources.
Human Resources calculates the payout amounts and implements award payment.
The following example illustrates the calculation of an award paid to a
participant with a prior year's December 31st base pay of $100,000 and a target
bonus of 35%. Additional assumptions are that the individual was in the Plan for
the entire year, the Company's performance is slightly above target and is paid
out at 103.85 and the individual receives a rating of 90% against individual
objectives.
<PAGE>
Table 3
Bonus Payment Calculation
$100,000 Prior Year's Base 12/31
35% Target Level
$ 35,000 Award payment based on Target Level of 100% for both Corporate
and Individual ($17,500 for Corporate results and $17,500 for
individual results)
$ 33,923 Award payment based on above Target Level result of 103.85% and
Individual results of 90% ($18.173.75 for corporate results and
$15,750 for individual results)
Participants included for part of the year receive prorated payments.
Participants promoted during the year receive prorated payments based on the
time spent at each of the one or more target levels for which they were
eligible. The individual's base pay for each bonus target is used to calculate
the award potential. The base pay's currency remains in effect for each
calculation.
Award Payment
Participants who leave Galileo International employment for any reason at any
time prior to payment being made will forfeit any award which may have been
available under this Plan.
Plan Provisions
The Company retains the right to, at its sole discretion, amend, modify or
terminate this Plan at any time.
Participants in any one year do not automatically participate in a management
incentive plan in subsequent years, nor is the level of participation
guaranteed.
<PAGE>
Exhibit 10.7
DRAFT OF JULY 30, 1998
[Standard Form-Executive Group]
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of ____________ (the "Date of
Grant") by and between Galileo International, Inc., a Delaware corporation (the
"Company"), and __________________ (the "Optionee"). The execution of a stock
option agreement in the form hereof has been authorized by a resolution of the
Compensation Committee (the "Committee") of the Board of Directors of the
Company that was duly adopted on ____________, 199_.
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Company's 1997 Equity Incentive
Plan (Established Effective July 30, 1997) (As Revised May 1, 1998) (the
"Plan").
2. Grant of Stock Option. Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Plan, the Company hereby
grants to the Optionee as of the Date of Grant a stock option (the "Option") to
purchase _____________ shares of Common Stock (the "Optioned Shares"). The
Option may be exercised from time to time in accordance with the terms of this
Agreement. The price at which the Optioned Shares may be purchased pursuant to
this Option shall be _____________ per share, subject to adjustment as
hereinafter provided (the "Option Price"). The Option is intended to be a
non-qualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Code, or any
successor provision thereto.
3. Term of Option. The term of the Option shall commence on the Date
of Grant and, unless earlier terminated in accordance with Section 7 hereof,
shall expire ten (10) years from the Date of Grant.
4. Vesting of Option. Subject to the expiration or earlier
termination of the Option, the Optioned Shares granted hereby shall become
exercisable as follows:
(i) after one year from the Date of Grant, the Optionee may purchase up
to ____________ percent of the Optioned Shares;
(ii) after two years from the Date of Grant, the Optionee may purchase up
to ____________ percent of the Optioned Shares; and
(iii) after three years from the Date of Grant, the Optionee may purchase
up to ____________ percent of the Optioned Shares.
<PAGE>
6
To the extent the Option is exercisable, it may be exercised in whole or in
part. In no event shall the Optionee be entitled to acquire a fraction of one
Optioned Share pursuant to this Option.
5. Transferability of Option. The Option granted hereby shall be
neither transferable nor assignable by the Optionee other than by will or by the
laws of descent and distribution and may be exercised, during the lifetime of
the Optionee, only by the Optionee, or in the event of his or her legal
incapacity, by his or her guardian or legal representative acting on behalf of
the Optionee in a fiduciary capacity under state law and court supervision. Any
purported transfer or encumbrance in violation of the provisions of this Section
5 shall be void, and the other party to any such purported transaction shall not
obtain any rights to or interest in the Option. [NOTE: Current version of Plan
does not permit transferrable options.]
6. Notice of Exercise; Payment. To the extent then exercisable, the
Option may be exercised by written notice to the Company [or by telephone
authorization pursuant to prescribed procedures to the third party administrator
approved by the Company] stating the number of Optioned Shares for which the
Option is being exercised and the intended manner of payment. The date of such
notice shall be the exercise date. Payment equal to the aggregate Option Price
of the Optioned Shares being exercised shall be tendered in full with the notice
of exercise to the Company either (i) in cash or by check acceptable to the
Company, (ii) by the tender to the Company of shares of Common Stock owned by
the Optionee for at least 6 months having an aggregate fair market value on the
date of exercise equal to the total Option Price, such fair market value to be
determined based on the closing sales price for the last business day preceding
the date of exercise or (iii) by any combination of the payment methods
specified in clauses (i) and (ii) hereof. With the agreement of the Company, the
requirement of payment in cash shall be deemed satisfied if the Optionee makes
arrangements that are satisfactory to the Company with a broker that is a member
of the National Association of Securities Dealers, Inc. to sell a sufficient
number of Optioned Shares which are being purchased pursuant to the exercise, so
that the net proceeds of the sale transaction will at least equal the amount of
the aggregate Option Price[, plus interest at the "applicable Federal rate"
within the meaning of that term under Section 1274 of the Code, or any successor
provision thereto, for the period from the date of exercise to the date of
payment, and pursuant to which the broker undertakes to deliver to the Company
the amount of the aggregate Option Price, plus such interest, not later than the
date on which the sale transaction will settle in the ordinary course of
business].1 As a further condition precedent to the exercise of this Option, the
Optionee shall comply with all regulations and the requirements of any
regulatory authority having control of, or supervision over, the issuance of
shares of Common Stock and in connection therewith shall execute any documents
that the Committee shall in its sole discretion deem necessary or advisable.
[The Optionee hereby authorizes the third party administrator approved by the
Company to pay any proceeds of sales of shares of Common Stock acquired by
exercise to the Company for remittance to the Optionee in the applicable
currency, net of any required taxes or other proper charges.]
<PAGE>
7. Conditions and Limitations on Right to Exercise Option.
Notwithstanding the provisions of Sections 3 and 4 hereof,
(a) Except as otherwise provided in Section 7(b) hereof, this Option may
not be exercised unless the Optionee is, at the time of exercise, an employee of
the Company or a Subsidiary (as defined in the Plan) and has been employed by
the Company or a Subsidiary continuously since the Date of Grant. [If the
Optionee returns to active employment with the Company or a Subsidiary after
having been on an approved leave of absence from the Company or a Subsidiary,
the Optionee shall be treated as if continuously employed during the period of
such leave of absence. This Option may not, however, be exercised by the
Optionee while on a leave of absence from active employment with the Company or
a Subsidiary, unless such exercise is expressly approved in writing by the
Committee;] and
(b) (i) If the Optionee ceases to be employed by the Company or a
Subsidiary (other than by reason of death, or total disability (as defined in
the Plan), the Option granted hereby, to the extent the Optionee was entitled to
exercise it at the date of termination of employment, may be exercised at any
time within 90 days after such termination but not after the date of termination
of the Option. Any part of the Option not so exercised shall expire.
[Notwithstanding the foregoing, if Optionee's employment is terminated for Cause
(as defined below), then this Option shall thereupon terminate and thereafter be
unexercisable.]
(ii) If the Optionee's employment is terminated by reason of death
or total disability (as defined in the Plan), all or any part of the Option
which has not yet been exercised, whether otherwise eligible for immediate
exercise by the terms of this Agreement or not, may be exercised at any time
within one year after such termination but not after the date of expiration of
the Option.
[As used in this Agreement, "Cause" means (i) the Optionee's willful or
repeated failure substantially to perform the duties of his or her position with
the Company (other than any such failure resulting from his or her total
disability (as defined in the Plan)), which failure is not or cannot be cured
within five business days after the Company has given written notice thereof to
the Optionee specifying in detail the particulars of the acts or omissions
deemed to constitute such failure; (ii) the engaging by the Optionee in willful
misconduct which is materially injurious to the Company; (iii) the engaging by
the Optionee in any act of moral turpitude that is reasonably likely to
materially and adversely affect the Company or its business; or (iv) the
Optionee's conviction of, or entry of a plea of nolo contendere with respect to,
any felony. For purposes of this definition, no act, or failure to act, on the
Optionee's part shall be considered "willful" unless done, or omitted to be
done, by the Optionee in bad faith and without reasonable belief that the
Optionee's action or omission was in the best interests of the Company. The
Optionee shall not be deemed to have been terminated for Cause unless and until
the Committee finds that the Optionee's termination for Cause is justified and
has given the Optionee written notice of termination, specifying in detail the
particulars of the Optionee's conduct found by the Committee to justify such
termination for Cause.]
The Option shall not be exercisable for any number of Optioned Shares in
excess of the number of Optioned Shares for which the Option is then
exercisable, pursuant to Sections 4 and 8 hereof, on the date of termination of
employment.
<PAGE>
8. Acceleration of Option. Notwithstanding the provisions of Section
4, the Option granted hereby shall become immediately exercisable in full in the
event of (i) the Optionee's death of the Option if such death occurs while the
Optionee is an employee of the Company or a Subsidiary, (ii) the Optionee's
retirement (on reaching age 65 or earlier if permitted by the Company's
retirement policy, or (iii) total disability (as defined in the Plan) of the
Optionee if the Optionee becomes totally disabled while an employee of the
Company or a Subsidiary, or (iv) termination by the Company without Cause [(as
defined above)] within two years following a Change of Control (as defined in
the Plan) of the Company.
9. No Employment Contract. Nothing contained in this Agreement shall
confer upon the Optionee any right with respect to continuance of employment by
the Company or a Subsidiary, nor limit or affect in any manner the right of the
Company or a Subsidiary to terminate the employment or adjust the compensation
of the Optionee.
10. Taxes and Withholding. If the Company or any Subsidiary shall be
required to withhold any federal, state, local or foreign tax in connection with
the exercise of the Option, and the amounts available to the Company or such
Subsidiary for such withholding are insufficient, the Optionee shall pay the tax
or make provisions that are satisfactory to the Company or such Subsidiary for
the payment thereof. [The Optionee may elect to satisfy all or any part of any
such withholding obligation by surrendering to the Company a portion of the
Optioned Shares that are issued or transferred to the Optionee upon the exercise
of the Option, and the Optioned Shares so surrendered by the Optionee shall be
credited against any such withholding obligation at the Market Value per Share
of such shares on the date of such surrender.] The Company will pay any and all
issue and other taxes in the nature thereof which may be payable by the Company
in respect of any issue or delivery upon a purchase pursuant to this Option.
11. Compliance with Law. The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
however, that notwithstanding any other provision of this Agreement, the Option
shall not be exercisable if the exercise thereof would result in a violation of
any such law.
12. Adjustments. The Committee shall make or provide for such
adjustments in the number of Optioned Shares covered by this Option, in the
Option Price applicable to such Option, and in the kind of shares covered
thereby, pursuant to Article IX of the Plan.
13. Available Shares. The Company shall at all times until the
expiration of the Option reserve and keep available, either in its treasury or
out of its authorized but unissued shares of Common Stock, the full number of
Optioned Shares deliverable upon the exercise of this Option.
14. Relation to Other Benefits. Any economic or other benefit to the
Optionee under this Agreement shall not be taken into account in determining any
benefits to which the Optionee may be entitled under any profit-sharing,
retirement or other benefit or compensation plan maintained by the Company or a
Subsidiary and shall not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of
the Company or a Subsidiary.
<PAGE>
15. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
16. Rights as a Stockholder. The Optionee shall have none of the
rights of a stockholder with respect to the shares of Common Stock subject to
this Option until such shares are issued to the Optionee upon exercise of the
Option.
17. Severability. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
18. Relation to Plan. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between this
Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to
the Plan, as constituted from time to time, shall, except as expressly provided
otherwise herein, have the right to determine any questions that arise in
connection with this Option or its exercise.
19. Successors and Assigns. Without limiting Section 5 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
20. Notices. Any notice to the Company provided for herein shall be
in writing to the Company, marked Attention: [Corporate Secretary] at Galileo
International, Inc., 9700 West Higgins Road, Suite 400, Rosemont, Illinois
60018, and any notice to the Optionee shall be addressed to said Optionee at his
or her address currently on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when hand
delivered, or five (5) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or
three (3) business days after having been sent by a nationally recognized
overnight courier service such as Federal Express, UPS or Purolator, addressed
as aforesaid. Any party may change the address to which notices are to be given
hereunder by written notice to the other party as herein specified, except that
notices of changes of address shall be effective only upon receipt.
21. Governing Law. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officer as of the day and year first above
written.
GALILEO INTERNATIONAL, INC.
By:_________________________________
Its:_______________________________
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Agreement and accepts the Option granted hereunder, subject to
the terms and conditions of the Plan and the terms and conditions hereinabove
set forth.
Optionee
Date:
- --------
1 For executives subject to the one million dollar cap under 162(m).
<PAGE>
Exhibit 10.8
DRAFT OF JULY 30, 1998
[Standard Form-Non-Employee Directors]
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (this "Agreement") is made as of ____________ (the "Date of
Grant") by and between Galileo International, Inc., a Delaware corporation (the
"Company"), and __________________ (the "Optionee"). The execution of a stock
option agreement in the form hereof has been authorized by a resolution of the
Compensation Committee (the "Committee") of the Board of Directors of the
Company that was duly adopted on ____________, 199_.
1. Definitions. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Company's 1997 Non-Employee
Director Stock Plan (the "Plan").
2. Grant of Stock Option. Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Plan, the Company hereby
grants to the Optionee as of the Date of Grant a stock option (the "Option") to
purchase _____________ shares of Common Stock (the "Optioned Shares"). The
Option may be exercised from time to time in accordance with the terms of this
Agreement. The price at which the Optioned Shares may be purchased pursuant to
this Option shall be _____________ per share, subject to adjustment as
hereinafter provided (the "Option Price"). The Option is intended to be a
non-qualified stock option and shall not be treated as an "incentive stock
option" within the meaning of that term under Section 422 of the Code, or any
successor provision thereto.
3. Term of Option. The term of the Option shall commence on the Date
of Grant and, unless earlier terminated in accordance with Section 7 hereof,
shall expire ten (10) years from the Date of Grant.
4. Vesting of Option. Subject to the expiration or earlier
termination of the Option, the Optioned Shares granted hereby shall become
exercisable six months from the Date of Grant. To the extent the Option is
exercisable, it may be exercised in whole or in part. In no event shall the
Optionee be entitled to acquire a fraction of one Optioned Share pursuant to
this Option.
5. Transferability of Option. [(a) Except as provided in Section
5(b) below,] the Option granted hereby shall be neither transferable nor
assignable by the Optionee other than by will or by the laws of descent and
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee, or in the event of his or her legal incapacity, by his or her
guardian or legal representative acting on behalf of the Optionee in a fiduciary
capacity under state law and court supervision. Any purported transfer or
encumbrance in violation of the provisions of this Section 5 shall be void, and
the other party to any such purported transaction shall not obtain any rights to
or interest in the Option.
<PAGE>
5
[(b) Notwithstanding Section 5(a) above, the Option may be transferable by
the Optionee, without payment of consideration therefor, to any one or more
members of the immediate family of Optionee (as defined in Rule 16a-1(e) under
the Securities Exchange Act of 1934), or to one or more trusts established
solely for the benefit of such members of the immediate family or to
partnerships in which the only partners are such members of the immediate family
of the Optionee; provided, however, that (i) such transfer will not be effective
until notice of such transfer is delivered to the Company and such transfer is
thereafter effected in accordance with any terms and conditions that shall have
been made applicable thereto by the Company or the Committee and (ii) that any
such transferee is subject to the same terms and conditions hereunder as the
Optionee.]
6. Notice of Exercise; Payment. To the extent then exercisable, the
Option may be exercised by written notice to the Company [or by telephone
authorization pursuant to prescribed procedures to the third party administrator
approved by the Company] stating the number of Optioned Shares for which the
Option is being exercised and the intended manner of payment. The date of such
notice shall be the exercise date. Payment equal to the aggregate Option Price
of the Optioned Shares being exercised shall be tendered in full with the notice
of exercise to the Company either (i) in cash or by check acceptable to the
Company, (ii) by the tender to the Company of shares of Common Stock owned by
the Optionee for at least 6 months having an aggregate fair market value on the
date of exercise equal to the total Option Price, such fair market value to be
determined based on the Fair Market Value as of the last business day preceding
the date of exercise or (iii) by any combination of the payment methods
specified in clauses (i) and (ii) hereof. With the agreement of the Company, the
requirement of payment in cash shall be deemed satisfied if the Optionee makes
arrangements that are satisfactory to the Company with a broker that is a member
of the National Association of Securities Dealers, Inc. to sell a sufficient
number of Optioned Shares which are being purchased pursuant to the exercise, so
that the net proceeds of the sale transaction will at least equal the amount of
the aggregate Option Price. As a further condition precedent to the exercise of
this Option, the Optionee shall comply with all regulations and the requirements
of any regulatory authority having control of, or supervision over, the issuance
of shares of Common Stock and in connection therewith shall execute any
documents that the Committee shall in its sole discretion deem necessary or
advisable. [The Optionee hereby authorizes the third party administrator
approved by the Company to pay any proceeds of sales of shares of Common Stock
acquired by exercise to the Company for remittance to the Optionee in the
applicable currency, net of any required taxes or other proper charges.]
7. Conditions and Limitations on Right to Exercise Option.
Notwithstanding the provisions of Sections 3 and 4 hereof,
(a) Except as otherwise provided in Section 7(b) hereof, this Option may
not be exercised unless the Optionee is, at the time of exercise, a Non-Employee
Director of the Company and has served as a Non-Employee Director of the Company
continuously since the Date of Grant; and
<PAGE>
(b) (i) If the Optionee ceases to serve as a Non-Employee Director of the
Company (other than by reason of the Optionee's retirement on or after attaining
the age of 65 (or such earlier date as such Optionee is permitted under the
Company's retirement policy), death, or disability (as defined in the Company's
Long-Term Disability Plan), the Option granted hereby, to the extent the
Optionee was entitled to exercise it at the date of termination, may be
exercised at any time within 3 months after such termination but not after the
date of termination of the Option. Any part of the Option not so exercised shall
expire.
(ii) If the Optionee's service on the Board of Directors is
terminated by reason of death or disability (as defined in the Company's
Long-Term Disability Plan), all or any part of the Option which has not yet been
exercised, whether otherwise eligible for immediate exercise by the terms of
this Agreement or not, may be exercised at any time within 12 months after such
termination but not after the date of expiration of the Option.
The Option shall not be exercisable for any number of Optioned Shares in
excess of the number of Optioned Shares for which the Option is then
exercisable, pursuant to Sections 4 and 8 hereof, on the date of termination of
employment.
8. Acceleration of Option. Notwithstanding the provisions of Section
4, the Option granted hereby shall become immediately exercisable in full in the
event of (i) the Optionee's death if such death occurs while the Optionee is an
employee of the Company or a Subsidiary, (ii) the Optionee's retirement (on
reaching age 65 or earlier if permitted by the Company's retirement policy, or
(iii) disability (as defined in the Company's Long Term Disability Plan) of the
Optionee if the Optionee becomes disabled while serving as a Non-Employee
Director of the Company.
9. Compliance with Law. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
that notwithstanding any other provision of this Agreement, the Option shall not
be exercisable if the exercise thereof would result in a violation of any such
law.
10. Adjustments. The Committee shall make or provide for such
adjustments in the number of Optioned Shares covered by this Option, in the
Option Price applicable to such Option, and in the kind of shares covered
thereby, pursuant to Section 8(b) of the Plan.
11. Available Shares. The Company shall at all times until the
expiration of the Option reserve and keep available, either in its treasury or
out of its authorized but unissued shares of Common Stock, the full number of
Optioned Shares deliverable upon the exercise of this Option.
12. Amendments. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee under this Agreement without the Optionee's consent.
13. Rights as a Stockholder. The Optionee shall have none of the
rights of a stockholder with respect to the shares of Common Stock subject to
this Option until such shares are issued to the Optionee upon exercise of the
Option.
<PAGE>
14. Severability. In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
15. Relation to Plan. This Agreement is subject to the terms and
conditions of the Plan. In the event of any inconsistent provisions between this
Agreement and the Plan, the Plan shall govern. The Committee acting pursuant to
the Plan, as constituted from time to time, shall, except as expressly provided
otherwise herein, have the right to determine any questions that arise in
connection with this Option or its exercise.
16. Successors and Assigns. Without limiting Section 5 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of the
Optionee, and the successors and assigns of the Company.
17. Notices. Any notice to the Company provided for herein shall be
in writing to the Company, marked Attention: [Corporate Secretary] at Galileo
International, Inc., 9700 West Higgins Road, Suite 400, Rosemont, Illinois
60018, and any notice to the Optionee shall be addressed to said Optionee at his
or her address currently on file with the Company. Except as otherwise provided
herein, any written notice shall be deemed to be duly given if and when hand
delivered, or five (5) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or
three (3) business days after having been sent by a nationally recognized
overnight courier service such as Federal Express, UPS or Purolator, addressed
as aforesaid. Any party may change the address to which notices are to be given
hereunder by written notice to the other party as herein specified, except that
notices of changes of address shall be effective only upon receipt.
18. Governing Law. The interpretation, performance, and enforcement
of this Agreement shall be governed by the laws of the State of Delaware,
without giving effect to the principles of conflict of laws thereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officer as of the day and year first above
written.
GALILEO INTERNATIONAL, INC.
By:_________________________________
Its:_______________________________
<PAGE>
The undersigned Optionee hereby acknowledges receipt of an executed
original of this Agreement and accepts the Option granted hereunder, subject to
the terms and conditions of the Plan and the terms and conditions hereinabove
set forth.
Optionee
Date:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Form 10-Q for the quarter ended June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001039300
<NAME> Galileo International, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 18,709
<SECURITIES> 0
<RECEIVABLES> 239,715
<ALLOWANCES> 22,639
<INVENTORY> 0
<CURRENT-ASSETS> 280,530
<PP&E> 444,739
<DEPRECIATION> 260,690
<TOTAL-ASSETS> 1,314,687
<CURRENT-LIABILITIES> 232,629
<BONDS> 184,535
0
0
<COMMON> 1,049
<OTHER-SE> 783,262
<TOTAL-LIABILITY-AND-EQUITY> 1,314,687
<SALES> 0
<TOTAL-REVENUES> 380,637
<CGS> 0
<TOTAL-COSTS> 288,695
<OTHER-EXPENSES> 2,173
<LOSS-PROVISION> 769
<INTEREST-EXPENSE> 3,750
<INCOME-PRETAX> 89,769
<INCOME-TAX> 35,818
<INCOME-CONTINUING> 53,951
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,951
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
