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, 1999
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
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) had filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
At August 6, 1999, there were 94,812,482 shares of common stock, par value $.01
per share, of the registrant outstanding.
<PAGE>
GALILEO INTERNATIONAL, INC.
QUARTER ENDED JUNE 30, 1999
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements of Galileo International, Inc.
Condensed Consolidated Balance Sheets as of June 30,
1999 (unaudited) and December 31, 1998 3
Condensed Consolidated Statements of Income for the
quarter and six months ended June 30, 1999 and 1998
(unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998
(unaudited) 5
Condensed Consolidated Statement of Stockholders' Equity
for the six months ended June 30, 1999 (unaudited) 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
June 30, December 31,
1999 1998
---------- ----------
(Unaudited)
ASSETS
------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 8,348 $ 9,828
Accounts receivable, net 227,337 177,858
Other current assets 45,188 55,841
----------- -----------
Total current assets 280,873 243,527
Property and equipment, at cost:
Land 6,470 6,470
Buildings and improvements 77,886 77,210
Equipment 404,768 392,299
----------- -----------
489,124 475,979
Less accumulated depreciation 310,864 281,010
----------- -----------
Net property and equipment 178,260 194,969
Computer software, net 175,299 189,247
Intangible assets, net 590,751 609,806
Other noncurrent assets 85,327 53,531
----------- -----------
$ 1,310,510 $ 1,291,080
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 38,140 $ 46,901
Accrued commissions 45,840 32,424
Income taxes payable 27,103 11,873
Other accrued liabilities 101,765 134,652
Capital lease obligations, current portion -- 5,976
Long-term debt, current portion 2,736 --
----------- -----------
Total current liabilities 215,584 231,826
Pension and postretirement benefits 62,652 55,982
Deferred tax liability 17,779 25,404
Other noncurrent liabilities 52,105 42,969
Capital lease obligations, less current portion -- 22,752
Long-term debt, less current portion 434,392 69,520
----------- -----------
Total liabilities 782,512 448,453
Stockholders' equity:
Special voting preferred stock: $.01 par value;
7 shares authorized; 7 shares issued; 3 and
7 shares outstanding -- --
Preferred stock: $.01 par value; 25,000,000 shares
authorized; no shares issued -- --
Common stock: $.01 par value; 250,000,000 shares
authorized; 104,994,806 and 104,930,750 shares issued;
94,787,406 and 104,761,650 shares outstanding 1,050 1,049
Additional paid-in capital 670,264 668,466
Retained earnings 307,555 184,575
Unamortized restricted stock grants (3,160) (3,559)
Accumulated other comprehensive income 273 (1,139)
Common stock held in treasury, at cost: 10,207,400
and 169,100 shares (447,984) (6,765)
----------- -----------
Total stockholders' equity 527,998 842,627
----------- -----------
$ 1,310,510 $ 1,291,080
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except share data)
<TABLE>
Quarter Six Months
Ended June 30, Ended June 30,
----------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Electronic global distribution services $ 380,213 $ 345,393 $ 765,442 $ 687,623
Information services 18,609 35,244 37,371 70,024
------------- ------------- ------------- -------------
398,822 380,637 802,813 757,647
Operating expenses:
Cost of operations 132,315 143,943 264,445 279,043
Commissions, selling and administrative 162,492 144,752 313,537 280,383
------------- ------------- ------------- -------------
294,807 288,695 577,982 559,426
------------- ------------- ------------- -------------
Operating income 104,015 91,942 224,831 198,221
Other income (expense), net:
Interest expense, net (650) (2,921) (1,440) (6,184)
Other, net 212 748 9,979 1,397
------------- ------------- ------------- -------------
Income before income taxes 103,577 89,769 233,370 193,434
Income taxes 41,328 35,818 93,115 77,180
------------- ------------- ------------- -------------
Net income $ 62,249 $ 53,951 $ 140,255 $ 116,254
============= ============= ============= =============
Weighted average number of shares outstanding 104,485,999 104,799,700 104,584,445 104,799,700
============= ============= ============= =============
Basic earnings per share $ 0.60 $ 0.51 $ 1.34 $ 1.11
============= ============= ============= =============
Diluted weighted average number of shares outstanding 105,273,706 105,218,941 105,378,846 105,141,038
============= ============= ============= =============
Diluted earnings per share $ 0.59 $ 0.51 $ 1.33 $ 1.11
============= ============= ============= =============
See accompanying notes to condensed consolidated financial statements.
4
</TABLE>
<PAGE>
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
Six Months
Ended June 30,
-----------------------
1999 1998
---- ----
Operating activities:
<S> <C> <C>
Net income $ 140,255 $ 116,254
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 82,421 85,065
(Gain) loss on sale of assets (9,498) 19
Deferred income taxes, net (2,924) 1,188
Changes in operating assets and liabilities,
net of effects from acquisition of businesses:
Increase in accounts receivable, net (49,831) (50,577)
Decrease (increase) in other current assets 4,717 (1,101)
Increase in noncurrent assets (7,779) (4,188)
Increase in accounts payable and accrued commissions 5,554 22,216
(Decrease) increase in accrued liabilities (25,207) 7,841
Increase in income taxes payable 15,472 10,733
Increase in noncurrent liabilities 16,025 3,505
--------- ---------
Net cash provided by operating activities 169,205 190,955
Investing activities:
Purchase of property and equipment (30,434) (38,452)
Purchase and capitalization of computer software (9,290) (13,465)
Proceeds on sale of assets 9,529 3,057
Acquisition of businesses, net of $3,497 cash acquired -- (33,417)
Other investing activities (22,509) --
--------- ---------
Net cash used in investing activities (52,704) (82,277)
Financing activities:
Borrowings under credit agreements 135,000 34,392
Repayments under credit agreements (75,128) (125,000)
Issuance of promissory note 307,736 --
Dividends paid to stockholders (17,275) (14,148)
Payments of capital lease obligations (27,690) (4,147)
Repurchase of common stock for treasury (441,219) --
Proceeds from exercise of employee stock options, net 1,799 --
--------- ---------
Net cash used in financing activities (116,777) (108,903)
Effect of exchange rate changes on cash (1,204) (433)
--------- ---------
Decrease in cash and cash equivalents (1,480) (658)
Cash and cash equivalents at beginning of period 9,828 19,367
--------- ---------
Cash and cash equivalents at end of period $ 8,348 $ 18,709
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands, except share data)
<TABLE>
Special
Voting Additional
Preferred Common Paid - in Retained
Stock Stock Capital Earnings
--------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ - $ 1,049 $ 668,466 $ 184,575
Comprehensive income:
Net income - - - 140,255
Other comprehensive income, net of tax:
Unrealized holding gains on securities - - - -
Foreign currency translation adjustments - - - -
Other comprehensive income
Comprehensive income
Amortization of restricted stock grants - - - -
Issuance of 64,056 shares of common stock under
employee stock option plans - 1 1,798 -
Repurchase of 10,038,300 shares of common stock
for treasury
Dividends paid ($0.165 per share) - - - (17,275)
--------- --------- ---------- -----------
Balance at June 30, 1999 $ - $ 1,050 $ 670,264 $ 307,555
========= ========= ========== ===========
</TABLE>
<TABLE>
GALILEO INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited, in thousands, except share data)
Accumulated
Unamortized Other
Restricted Comprehensive Treasury
Stock Grants Income Stock Total
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ (3,559) $ (1,139) $ (6,765) $ 842,627
Comprehensive income:
Net income -- -- -- 140,255
Other comprehensive income, net of tax:
Unrealized holding gains on securities -- 887 -- 887
Foreign currency translation adjustments -- 525 -- 525
---------
Other comprehensive income 1,412
---------
Comprehensive income 141,667
Amortization of restricted stock grants 399 -- -- 399
Issuance of 64,056 shares of common stock under
employee stock option plans -- -- -- 1,799
Repurchase of 10,038,300 shares of common stock
for treasury (441,219) (441,219)
Dividends paid ($0.165 per share) -- -- -- (17,275)
--------- --------- --------- ---------
Balance at June 30, 1999 $ (3,160) $ 273 $(447,984) $ 527,998
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
6
<PAGE>
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. (the "Company") 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 the interim periods presented.
The results of operations for the quarter ended June 30, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999.
These financial statements should be read in conjunction with the audited
financial statements and notes to the audited financial statements for the year
ended December 31, 1998 included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 22, 1999.
NOTE 2 - BUSINESS ACQUISITIONS AND INVESTMENTS
On November 19, 1998, the Company acquired S. D. Shepherd Systems, Inc.
("Shepherd Systems"), an airline information systems company, for $16.7 million.
The Company also acquired two national distribution companies ("NDCs") during
1998. On June 1, 1998, Galileo Canada Distributions Systems, Inc. ("Galileo
Canada") was purchased for $34.4 million and on January 1, 1998, Galileo
Nordiska AB was purchased for $2.1 million. In connection with these
acquisitions, the Company also incurred expenses of $0.8 million, which have
been accounted for as part of the purchase prices. The Company accounted for
these acquisitions using the purchase method of accounting. Accordingly, the
costs of the acquisitions were allocated to the assets acquired and liabilities
assumed based on their respective fair values. Goodwill and other intangible
assets related to the cost of the acquisitions are being amortized over 6 to 25
years and are included in cost of operations expenses. The results of operations
and cash flows of the acquired companies have been consolidated with those of
the Company from the date of each acquisition. In connection with the
acquisition of Galileo Canada, the Company incurred $34.4 million of debt under
a five-year term loan agreement.
7
<PAGE>
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share for the quarter and six months ended June 30, 1999
and 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 the beginning of the year or the date
of grant for all dilutive stock options, net of assumed repurchased shares using
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, 1999
of 787,707 and 794,401, respectively. The increase in the weighted average
number of shares outstanding for the quarter and six months ended June 30, 1998
was 419,241 and 341,338, respectively.
NOTE 4 - SPECIAL CHARGES
The Company recorded special charges of $26.4 million ($15.9 million after
tax) during the quarter ended December 31, 1998 related to a strategic
realignment of the Company's operations in the United Kingdom and, to a lesser
degree, other realignments within the Company. These special charges were
comprised primarily of $15.0 million in severance costs related to the
termination of 399 employees, primarily in the development and marketing groups,
and $11.4 million of other costs, principally related to the closing of the
remaining Swindon, United Kingdom facilities. As of June 30, 1999, $12.1 million
of severance related costs have been paid and charged against the liability and
276 employees have been terminated. The Company expects the realignment
activities to be substantially complete in 1999. Also related to the closing of
Swindon, United Kingdom facilities, in 1993, the Company, formerly Covia
Partnership, combined with The Galileo Company Ltd. and consolidated its two
data center facilities resulting in the closure of the Swindon, United Kingdom
data center. In connection therewith, the estimated cost of the consolidation
was charged to expense. At June 30, 1999 and December 31, 1998, the estimated
remaining liabilities for all of the above mentioned restructuring activities
were $23.3 million and $44.1 million, respectively, and are included in the
accompanying condensed consolidated balance sheets.
The Company recorded special charges of $20.1 million ($12.1 million after
tax) during the year ended December 31, 1997 related to the integration of NDCs
acquired in 1997 into the Company's operations. These special charges were
comprised primarily of $12.3 million in severance costs related to the
termination of 202 employees and $7.8 million of other integration costs,
principally related to the closing of duplicate facilities. As of June 30, 1999,
$9.8 million of severance related costs have been paid and charged against the
liability and 135 employees have been terminated. The Company expects the
integration activities to be complete in 1999. At June 30, 1999 and December 31,
1998, the estimated remaining liabilities related to the integration were $1.8
million and $3.4 million, respectively, and are included in the accompanying
condensed consolidated balance sheets.
8
<PAGE>
NOTE 5 - STOCKHOLDERS' EQUITY
For the six months ended June 30, 1999, the Company accounted for a $1.5
million net unrealized holding gain on available-for-sale marketable equity
securities in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
after tax effect of $0.9 million is included as a separate component of
Stockholders' Equity.
In early May 1999 the Company filed a registration statement with the
Securities and Exchange Commission for a secondary offering of 36,727,600 shares
of its common stock, including 4,790,500 shares subject to an underwriters'
over-allotment option. This filing was a result of a demand for registration
made by a subsidiary of US Airways, Inc., which was followed by the registration
of additional shares held by affiliates of United Air Lines, Inc., KLM Royal
Dutch Airlines, Alitalia, and TAP Air Portugal. On June 3, 1999, the secondary
offering of 31,937,100 shares of the Company's common stock was completed at a
price of $45 per share. The Company did not receive any proceeds from the
offering. The over-allotment option was exercised on June 29, 1999 with the
underwriters purchasing 2,000,000 shares and the Company purchasing 2,790,500
shares at a total purchase price of $122.2 million.
On June 17, 1999, the Board of Directors of the Company authorized an
increase in the size of the Company's share repurchase program to $750.0
million, a $250.0 million increase from the $500.0 million previously authorized
in April 1999. The amount, timing and price of any repurchases of the Company's
common stock depends on market conditions and other factors. Repurchased shares
are held in treasury for the purpose of providing available shares for possible
resale in future public or private offerings, and for other general corporate
purposes. Repurchases are funded through the Company's available working capital
and long-term borrowing facilities.
On June 30, 1999, the Company purchased all of the issued and outstanding
shares of a British Airways Plc subsidiary, which indirectly owned 7,000,400
shares of the Company's common stock. This purchase was funded by the issuance
of a $307.7 million one day promissory note to British Airways Plc. This note
was paid in full on July 1, 1999 using funding available under the Company's
existing credit agreements. At June 30, 1999 the promissory note was classified
as noncurrent to the extent funds were available under the Company's existing
five-year credit agreement.
The above repurchase transactions, combined with other open market
repurchases, brought the total number of shares repurchased by the Company
during the quarter ended June 30, 1999 to 10,038,300. As of June 30, 1999, the
Company held a total of 10,207,400 shares in treasury. As a result of the
secondary offering and share repurchases, the Company redeemed four shares of
its special voting preferred stock during the quarter ended June 30, 1999.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
Galileo International, Inc. is one of the world's leading providers of
electronic global distribution services for the travel industry. We provide
travel agencies at approximately 40,000 locations, as well as other subscribers,
with the ability to view schedules, availability and fare information, book
reservations and issue tickets for more than 500 airlines. We also provide our
subscriber customers with information and booking capabilities for major hotel
chains, car rental companies, cruise lines and numerous tour operators
throughout the world.
Our geographic breadth is demonstrated by the table below which shows the
approximate number of travel agency locations and terminals by region.
Travel Agency Travel Agency
Locations Terminals
at June 30, 1999 at June 30, 1999
---------------- ----------------
Region Number % Number %
- ------ ------ ----- ------ -----
United States 12,200 30.4% 57,700 35.4%
Europe 13,600 33.9% 56,800 34.8%
Asia/Pacific 5,900 14.7% 23,200 14.2%
Canada 3,100 7.8% 11,000 6.7%
Middle East/Africa 3,500 8.7% 10,100 6.2%
Latin America 1,800 4.5% 4,400 2.7%
----------------- -----------------
40,100 100.0% 163,200 100.0%
================= =================
10
<PAGE>
We generate revenue from the provision of electronic global distribution
services and information services. During the six months ended June 30, 1999, we
generated 95.3% of our revenue from electronic global distribution services and
4.7% of our revenue from information services. The following table summarizes
electronic global distribution services revenues by geographic location as a
percentage of the total, and summarizes total booking volumes for each of the
periods indicated. The location of the subscriber making the booking determines
the geographic region credited with the related revenues and bookings:
Quarter Six Months
Ended June 30, Ended June 30,
---------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
Percentage of Revenue
- ---------------------
U.S. Market 41.3 % 43.9 % 41.8 % 44.1 %
All Other Markets 58.7 56.1 58.2 55.9
---------------------- ------------------------
100.0 % 100.0 % 100.0 % 100.0 %
====================== ========================
Worldwide Bookings
- ------------------
(in millions)
U.S. Market:
Air 32.6 33.9 68.6 70.0
Car/Hotel/Leisure 6.1 5.8 11.8 11.3
------------------- ---------------------
38.7 39.7 80.4 81.3
All Other Markets:
Air 52.0 48.0 105.7 97.0
Car/Hotel/Leisure 1.5 1.4 3.0 2.8
------------------- ---------------------
53.5 49.4 108.7 99.8
Total Worldwide Bookings 92.2 89.1 189.1 181.1
=================== =====================
11
<PAGE>
SECOND QUARTER 1999 COMPARED TO SECOND QUARTER 1998
REVENUES. Revenues increased $18.2 million, or 4.8%, to $398.8 million for
the quarter ended June 30, 1999 from $380.6 million for the quarter ended June
30, 1998. Our electronic global distribution services revenues grew $34.8
million, or 10.1%. Airline booking revenue increased 8.5% over the quarter ended
June 30, 1998 primarily due to a 3.4% increase in worldwide air booking volumes
and a booking fee price increase that went into effect in March 1999.
Total international booking volumes increased 8.5% for the quarter, while
U.S. booking volumes decreased 2.5% over the same period last year. The increase
in international booking volumes for the quarter was driven by continued strong
growth in Africa and the Middle East, and solid growth in Europe, Asia, and
Latin America. The volume decline in U.S. bookings is primarily due to a small
decrease in our U.S. market share, which we believe is attributable to the
effect of our sales force transition. We have recently hired and trained a new
U.S. sales force, and have set aggressive targets to profitably gain share in
this market. (1) We may experience some decline in our U.S. market position in
the near term, after which we expect to see the positive effect of our sales
initiatives. (1)
The growth in electronic global distribution services revenues was
partially offset by a decline in information services revenues due principally
to the impact of providing fewer network services to an airline vendor. This
revenue loss was largely offset by a reduction in operating expenses directly
related to the provision of these services.
COST OF OPERATIONS. Cost of operations expenses decreased $11.6 million, or
8.1%, to $132.3 million for the quarter ended June 30, 1999 from $143.9 million
for the quarter ended June 30, 1998. The decline in cost of operations expenses
was due primarily to a $15.2 million decrease in voice communication charges
related to the decrease in network services provided to an airline vendor.
Partially offsetting this decrease was $4.6 million in additional cost of
operations expenses incurred due to the Galileo Canada and Shepherd Systems
acquisitions in 1998. These additional operating expenses, principally wages,
maintenance and installation expenses, communication costs and depreciation
expense, were largely offset by lower commissions as we no longer pay
commissions to Galileo Canada but instead incur the direct costs of distributing
our products in this market. Additionally, we now record the amortization of the
excess of the cost of these acquisitions over the fair value of net assets
acquired and also record amortization of other intangibles acquired.
The remaining slight decrease in cost of operations expenses was
attributable to net cost savings from the Swindon, UK realignment, partially
offset by increased maintenance costs on subscriber equipment at agency
locations and higher communication costs associated with growth in both new and
existing markets.
- -----------------
(1) See Statement Regarding Forward-Looking Statements on page 21.
12
<PAGE>
COMMISSIONS, SELLING AND ADMINISTRATIVE EXPENSES. Commissions, selling and
administrative expenses increased $17.7 million, or 12.3%, to $162.5 million for
the quarter ended June 30, 1999 from $144.8 million for the quarter ended June
30, 1998. NDC commissions and subscriber incentive payments increased $18.1
million, or 19.3%, to $112.0 million for the quarter ended June 30, 1999 from
$93.9 million for the quarter ended June 30, 1998. The increase in electronic
global distribution services revenues resulted in increased commissions to NDCs,
which were partially offset by the elimination of commissions to Galileo Canada
as, subsequent to this acquisition, we no longer pay commissions but instead
incur the direct costs of operating in this market. NDC commissions are
generally based on a percentage of booking revenues, and have therefore grown at
a rate consistent with the growth in booking revenues by country. Incentive
payments, which are provided to subscribers in order to maintain and expand our
travel agency customer base, increased significantly in the quarter principally
due to the initiation of new contracts with multinational and key U.S. regional
accounts in late 1998 and the first quarter of 1999, as well as the impact of
payments to subscribers previously incurred by Galileo Canada.
Remaining commissions, selling and administrative expenses decreased
primarily due to lower selling expenses in the U.S. as we continue to transition
to our internal sales force in 1999, partially offset by the accrual of
estimated payments required under services agreements with the sellers of
certain NDCs acquired in 1997 and 1998.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense net of interest income, foreign exchange gains or losses, and other
non-operating items. Other expense, net decreased $1.8 million to $0.4 million
in expense for the quarter ended June 30, 1999 from $2.2 million in expense for
the quarter ended June 30, 1998. This decrease was primarily the result of lower
interest expense arising from lower average debt levels in 1999.
INCOME TAXES. Income taxes increased $5.5 million, or 15.4%, to $41.3
million for the quarter ended June 30, 1999 from $35.8 million for the quarter
ended June 30, 1998. The increase was a result of higher income before income
taxes for the quarter ended June 30, 1999 compared to the quarter ended June 30,
1998. Our effective tax rate was approximately 40% in both periods.
NET INCOME. Net income increased $8.3 million, or 15.4%, to $62.3 million
for the quarter ended June 30, 1999, from $54.0 million for the quarter ended
June 30, 1998. Net income as a percentage of revenues increased to 15.6% from
14.2% over the same period and our operating margin expanded 1.9 percentage
points to 26.1% for the quarter ended June 30, 1999 from 24.2% for the quarter
ended June 30, 1998.
13
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
REVENUES. Revenues increased $45.2 million, or 6.0%, to $802.8 million for
the six months ended June 30, 1999 from $757.6 million for the six months ended
June 30, 1998. Our electronic global distribution services revenues grew $77.8
million, or 11.3%. Airline booking revenue increased 10.2% over the six months
ended June 30, 1998 primarily due to a 4.4% increase in worldwide air booking
volumes and a booking fee price increase that went into effect in March 1999.
Total international booking volumes increased 8.9% for the six months ended
June 30, 1999 compared to the six months ended June 30, 1998, while U.S. booking
volumes decreased 1.1% over the same period last year. The increase in
international booking volumes for the period was driven by strong growth in
Africa, the Middle East and Southeast Asia. The decrease in U.S. booking volumes
is partially due to a new fee structure we introduced in North America in March
1998 under which we no longer charge airline vendors for passive bookings unless
they are ticketed. We report only those bookings for which we receive a fee.
Excluding passive bookings, the decline in U.S. booking volumes for the six
months ended June 30, 1999 was 0.2%. This decline is primarily due to a small
decrease in our U.S. market share, which we believe is attributable to the
effect of our sales force transition. We have recently hired and trained a new
U.S. sales force, and have set aggressive targets to profitably gain share in
this market. (1) We may experience some decline in our U.S. market position in
the near term, after which we expect to see the positive effect of our sales
initiatives. (1)
The growth in electronic global distribution services revenues was
partially offset by a decline in information services revenues due principally
to the impact of providing fewer network services to an airline vendor. This
revenue loss was largely offset by a reduction in operating expenses directly
related to the provision of these services.
COST OF OPERATIONS. Costs of operations expenses decreased $14.6 million,
or 5.2 %, to $264.4 million for the six months ended June 30, 1999 from $279.0
million for the six months ended June 30, 1998. The decline in cost of
operations expenses was due primarily to a $29.1 million decrease in voice
communication charges related to the decrease in network services provided to an
airline vendor. Partially offsetting this decrease was $11.3 million in
additional cost of operations expenses incurred due to the Galileo Canada and
Shepherd Systems acquisitions in 1998. These additional operating expenses,
principally wages, maintenance and installation expenses, communication costs
and depreciation expense, were largely offset by lower commissions as we no
longer pay commissions to Galileo Canada but instead incur the direct costs of
distributing our products in this market. Additionally, we now record the
amortization of the excess of the cost of these acquisitions over the fair value
of net assets acquired and also record amortization of other intangibles
acquired.
- ------------------
(1) See Statement Regarding Forward-Looking Statements on page 21.
14
<PAGE>
Remaining cost of operations expenses increased primarily due to increased
maintenance costs on subscriber equipment at agency locations and higher
communication costs associated with growth in both new and existing markets.
COMMISSIONS, SELLING AND ADMINISTRATIVE EXPENSES. Commissions, selling and
administrative expenses increased $33.1 million, or 11.8%, to $313.5 million for
the six months ended June 30, 1999 from $280.4 million for the six months ended
June 30, 1998. NDC commissions and subscriber incentive payments increased $32.9
million, or 17.9%, to $217.0 million for the six months ended June 30, 1999 from
$184.1 million for the six months ended June 30, 1998. The increase in
electronic global distribution services revenues resulted in increased
commissions to NDCs, which were partially offset by the elimination of
commissions to Galileo Canada as, subsequent to this acquisition, we no longer
pay commissions but instead incur the direct costs of operating in this market.
Incentive payments increased significantly in this period principally due to the
initiation of new contracts with multinational and key U.S. regional accounts in
late 1998 and the first quarter of 1999, as well as the impact of payments to
subscribers previously incurred by Galileo Canada.
The remaining increase in commissions, selling and administrative expenses
was primarily attributable to the accrual of estimated payments required under
services agreements with the sellers of certain NDCs acquired in 1997 and 1998,
partially offset by decreased selling expenses in the U.S. as we transition to
our internal sales force in 1999.
OTHER INCOME (EXPENSE), NET. Other income (expense), net includes interest
expense net of interest income, foreign exchange gains or losses, and other
non-operating items. Other income, net increased $13.3 million to $8.5 in income
for the six months ended June 30, 1999 from $4.8 million in expense for the six
months ended June 30, 1998. This increase was primarily the result of a $9.4
million gain recognized from the sale of 12% of the shares we owned in Equant,
N.V., a telecommunications company. The remainder of this increase was primarily
the result of lower interest expense arising from lower average debt levels in
1999.
INCOME TAXES. Income taxes increased $15.9 million, or 20.6 %, to $93.1
million for the six months ended June 30, 1999 from $77.2 million for the six
months ended June 30, 1998. The increase was a result of higher income before
income taxes for the six months ended June 30, 1999 compared to the six months
ended June 30, 1998. Our effective tax rate was approximately 40% in both
periods.
NET INCOME. Net income increased $24.0 million, or 20.6%, to $140.3 million
for the six months ended June 30, 1999 from $116.3 million for the six months
ended June 30, 1998. Net income as a percentage of revenues increased to 17.5%
from 15.3% over the same period and our operating margin expanded 1.8 percentage
points to 28.0% for the six months ended June 30, 1999 from 26.2% for the six
months ended June 30, 1998.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $8.3 million and working capital totaled
$65.3 million at June 30, 1999. At December 31, 1998, cash and cash equivalents
totaled $9.8 million and working capital totaled $11.7 million. Cash and cash
equivalents decreased slightly as cash generated from strong operating results
was used for investing and financing activities.
Cash flow used in investing activities principally relates to purchases of
mainframe data processing and network equipment and purchases of computer
equipment provided to our travel agency subscribers. Capital expenditures,
excluding the capitalization of internally developed software, were $33.3
million for the six months ended June 30, 1999 compared to $42.9 million for the
six months ended June 30, 1998. In addition, we used $22.5 million to acquire
minority ownership equity positions in four technology-related companies during
the six months ended June 30, 1999. Proceeds from the sale of assets were $9.5
million for the six months ended June 30, 1999 primarily from the sale of shares
we owned in Equant, N.V.
Cash flow used in financing activities includes repurchases of common stock
for treasury totaling $441.2 million and $17.3 million in dividends paid to our
stockholders. We paid a $0.075 per share cash dividend on February 19, 1999 to
stockholders of record as of February 5, 1999, as well as a $0.09 per share cash
dividend on May 21, 1999 to stockholders of record as of May 7, 1999. We also
paid $25.5 million to terminate two equipment leases related to Swindon data
center assets pursuant to advantageous early termination provisions allowed
within the leases. During the six months ended June 30, 1999, net borrowings
under our credit facilities totaled $59.9 million and we have $505.0 million
available under our revolving credit facilities at June 30, 1999. In connection
with the purchase of a British Airways Plc subsidiary, we issued a $307.7
million promissory note on June 30, 1999 which was paid in full on July 1, 1999
using funds available under our existing credit facilities.
We expect that future cash requirements will principally be for capital
expenditures, repayments of indebtedness, strategic acquisitions and
investments, and share repurchases. We believe that cash generated by operating
activities will be sufficient to fund our future cash requirements, except that
significant acquisitions, investments or share repurchases may require
additional borrowings or other financing alternatives. (1)
In addition to reinvesting a substantial portion of earnings in our
business, we currently intend to pay regular quarterly dividends and to
repurchase additional shares of our common stock. On July 16, 1999, we declared
a cash dividend of $0.09 per share to be paid on August 20, 1999 to stockholders
of record as of August 6, 1999. The declaration and payment of future dividends,
as well as the amount thereof, and the amount of future repurchases of our
common stock beyond the existing $750 million stock repurchase program are
subject to the discretion of our Board of Directors and will depend upon our
results of operations, financial condition, cash
- -------------------
(1) See Statement Regarding Forward-Looking Statements on page 21.
16
<PAGE>
requirements, future prospects and other factors deemed relevant by our Board of
Directors. There can be no assurance that we will continue to declare and pay
dividends or repurchase shares of our common stock in the future. (1)
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We will implement the provisions of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which is required to be adopted for financial statements issued for
the fiscal year ending December 31, 2001. Statement 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. Management believes that adoption of Statement 133 will not have
a material impact on our financial statements.
YEAR 2000 (1)
The Year 2000 issue is a result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or systems or those of our vendors and suppliers that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000.
Beginning in September 1995, we implemented a program designed to help
ensure that all hardware and software used in connection with our business,
including our software products, will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality and
without producing inaccurate results related to such dates. An internal analysis
of our hardware and software has led us to conclude that the majority of our
systems have been engineered to be Year 2000 compliant and should provide a
seamless transition to the Year 2000. In addition, we have consulted outside
experts, including attorneys and independent auditors, regarding our Year 2000
plans.
We electronically exchange information with the computer systems of our
travel vendor customers and suppliers, including air, car, hotel, cruise, rail
and other vendors. We use standardized travel industry interchange formats to
electronically exchange information with many of these vendor customers and
suppliers. Many of these formats did not require modification in order to be
Year 2000 compliant. Where required, modifications to these formats have been
completed. Our GlobalFares(TM) system began successfully processing airline
fares with Year 2000 dates in July 1998. In addition, the investigation and
assessment of our network systems is complete and remediation for such systems
is in progress and on-track for completion during the third quarter of 1999. We
completed remediation planning for most of our travel
- ------------------
(1) See Statement Regarding Forward-Looking Statements on page 21.
17
<PAGE>
agency-based software and began distribution of Year 2000 upgrades for operating
systems and package installation systems used in connection with our travel
agency-based software during the third quarter of 1998. The Year 2000
remediation for most of our travel agency-based software addresses aesthetic
modifications and is not essential for the reservation booking and ticketing
capability of these products. Remediation planning for country-specific software
solutions facilitating travel agency access to certain third party vendors is
ongoing. We continue to develop, distribute and install, where necessary,
upgrades to PC hardware and software either on a normal maintenance cycle where
it exists, or a separate implementation plan where it does not exist.
Remediation activities related to our mainframe computer systems, which
include our Galileo(R) and Apollo(R) computer reservations systems ("CRS"), were
completed on schedule in 1998. Our Galileo and Apollo systems successfully
processed the first Year 2000 airline reservation bookings on January 3, 1999
and February 4, 1999, respectively, with airlines which support Year 2000 in
their systems. Non-mainframe activities are currently on track for completion by
the end of the third quarter of 1999. Agency premise software remediation will
extend to November 1999.
Embedded systems are not an integral component in our primary business or
operations. Nevertheless, we have identified and validated as compliant or,
where necessary, are in the process of remediating embedded systems in certain
of our facilities and environmental systems. We do not anticipate any material
adverse impact to our business or operations related to Year 2000 performance of
embedded systems.
Testing is a critical component in our Year 2000 preparedness program. Our
system for Year 2000 hardware and software validation -- called the "Time
Machine"-- is essentially a copy of our production environment which performs
date-sensitive tests and supports connectivity to the systems of our vendor
customers, suppliers of data, NDCs and certain other third parties without
interrupting existing systems and without risk of contaminating "live"
production data.
Contingency plans are now in place for all mainframe and non-mainframe
activities. We will continue to review and revise contingency plans to address
possible Year 2000 failures of our internal systems and business processes or
those of vendor customers, critical service suppliers, other suppliers of data
and our NDCs, on whose systems we are dependent. Our contingency plans identify
the interruption of local services provided by third parties, such as
telecommunication firms and power supply companies, as the events that would be
most likely to occur. However, should a problem occur, it would generally be
localized and we do not anticipate that it would have a material adverse effect
on our business, financial condition or results of operations. Our contingency
planning involved risk assessment for all of our business functions and
operating and staff departments, including the identification of assumptions and
dependencies. The contingency plans for each business function and operating and
staff department provide for proactive preparation for Year 2000 challenges,
checklists of activities to perform for validation of possible failures and
reactive planning to address any actual Year 2000 failures. The contingency
plans also address on-site staff coverage on January 1, 2000 for all
18
<PAGE>
operating and staff departments, and include support personnel from our critical
hardware and software suppliers.
As an electronic global distribution services company, our products are
dependent upon data provided by our air, car, hotel and tour vendor customers
and other suppliers of data. We are also dependent on critical service
providers, such as telecommunications firms for worldwide product distribution.
We are continuing to assess Year 2000 issues arising from our relationships with
third parties, including our NDCs, to determine the extent to which our
interface systems are vulnerable to failure by these parties to remediate their
own Year 2000-sensitive systems. We have requested Year 2000 compliance status
information from all of our vendor customers, critical other suppliers of data
and our NDCs. We continue to work closely with our NDCs to provide assistance to
meet their Year 2000 challenges. While many of these third parties have reported
that they are not finding significant problems in their own systems, we cannot
guarantee that the systems of these third parties will be made Year 2000
compliant in a timely manner. Vendor customers, service providers and NDCs
continue to participate with us in Year 2000 testing.
The interruption of services provided by critical service providers, such
as telecommunications firms and power supply companies, due to their own Year
2000 difficulties, could have a material adverse effect on our business and
operations. With respect to bookings for travel after January 1, 2000, any
failure on our part or on the part of our vendor customers, other suppliers of
data or NDCs to ensure that systems are Year 2000 compliant, regardless of when
such bookings occur, could have a material adverse effect on our business,
financial condition or results of operations.
We incurred $3.6 million of expenses in the first six months of 1999, $8.0
million of expenses in 1998 and $4.4 million of expenses in 1997 related to Year
2000 remediation. We expect future expenditures to total approximately $5.4
million. All of these costs are expected to be expensed as incurred. Further, we
expect to incur additional costs after 1999 to remediate and replace less
critical software applications and embedded systems; however, we do not expect
these expenses to have a material adverse effect on our business, financial
condition or results of operations.
The cost of our Year 2000 project and the dates on which we plan to
complete our Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, third
parties' Year 2000 readiness and other factors.
Based on our current schedule for completion of our Year 2000 project, we
believe that our planning is adequate to secure Year 2000 readiness of our
critical systems. Nevertheless, achieving Year 2000 readiness is subject to
various risks and uncertainties, many of which are described above. We are not
able to predict all of the factors that could cause actual results to differ
materially from our current expectations about our Year 2000 readiness. At this
time, we believe the major risks associated with Year 2000 processing are a
system failure or miscalculation causing an inability to process bookings or
engage in other normal business activities. Our failure, or the failure of third
parties with whom we have significant business
19
<PAGE>
relationships, to achieve Year 2000 readiness with respect to critical systems
could have a material adverse effect on our business, financial condition or
results of operations.
NEW EUROPEAN CURRENCY
In January 1999, certain European countries introduced a new currency unit
called the "euro". We planned, developed and successfully implemented a project
to ensure that hardware and software systems operated or licensed in our
business, including systems provided to our travel agency subscriber and travel
vendor customers, are designed to properly process reservations denominated in
euros. We completed the necessary development and successfully issued tickets in
euros on the first official trading day, January 4, 1999. We estimate that the
introduction of the euro, including the total costs for the euro project, will
not have a material effect on our business, financial condition, or results of
operations. (1)
- --------------------
(1) See Statement Regarding Forward-Looking Statements on page 21.
20
<PAGE>
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
These statements are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.
We have based these forward-looking statements on our current expectations
and projections about future events. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. These forward-looking statements are
subject to risks and uncertainties that could cause actual events or results to
differ materially from the events or results expressed or implied by the
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements.
Risks and uncertainties associated with our forward-looking statements
include, but are not limited to:
o the loss and inability to replace the bookings generated by one or more
of our five largest travel agency customers,
o our sensitivity to general economic conditions and events that affect
airline travel and the airlines that participate in our Apollo and
Galileo systems,
o circumstances relating to our investment in technology, including our
ability to timely develop and achieve market acceptance of new products,
or our failure or the failure of our customers and other third parties
to achieve Year 2000 compliance in a timely and cost-effective manner,
o the results of our international operations and expansion into
developing and new CRS markets, governmental approvals, trade and tariff
barriers, and political risks,
o new or different legal or regulatory requirements governing the CRS
industry; and
o natural disasters or other calamities that may cause significant damage
to our Data Centre facility.
21
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Certain of our expenses are subject to fluctuations in currency values and
interest rates. We address these risks through a controlled program of risk
management that includes the use of derivative financial instruments. To some
degree, we are exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments, but management does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. (1) We do not hold or issue financial instruments for trading purposes.
We enter into foreign exchange forward contracts to manage exposure to
fluctuations in foreign exchange rates related to the funding of our United
Kingdom and Canadian operations. At June 30, 1999, we had entered into foreign
exchange forward contracts which provide for purchases of GBP 9.5 million and
CAD 15.0 million at various dates throughout 1999. At June 30, 1999 and December
31, 1998, the notional principal amounts of outstanding forward contracts were
$25.0 million and $31.3 million, respectively. The fair value of outstanding
forward contracts at June 30, 1999 and December 31, 1998 was $0.2 million and
$0.8 million, respectively.
We have also entered into interest rate swap agreements to convert portions
of our variable rate debt to fixed rate. We account for our interest rate swap
agreements as a hedge of our interest rate exposure. At June 30, 1999 and
December 31, 1998, we had an outstanding interest rate swap agreement with a
notional value of $34.4 million and a fixed interest rate of 5.87%. The fair
value of the outstanding swap agreement at June 30, 1999 and December 31, 1998
was $0.3 million and ($1.0) million, respectively.
- -----------------
(1) See Statement Regarding Forward-Looking Statements on page 21.
22
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on April 29,
1999. The Company 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. As of April 29, 1999 the
special voting preferred stock was 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 as of
April 29, 1999, the holders were entitled to elect a total of seven of the
thirteen 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 two directors, and prior to the Annual Meeting, the
Series B and Series D preferred stockholders elected one director,
respectively, as set forth in (c) below. All such elections were effective
April 29, 1999.
(b) Common Stock Special Voting Preferred Stock
Election of Directors Election of Directors
--------------------- ---------------------
Paul H. Bristow David A. Coltman
Mina Gouran Derek M. Stevens
Continuing Directors Continuing Directors
-------------------- --------------------
James E. Barlett Graham W. Atkinson
Wim Dik Frederic F. Brace
Babetta R. Gray Thomas A. Mutryn
Kenneth Whipple Frank H. Rovekamp
Georges P. Schorderet
(c) Set forth below is the tabulation of the votes on each nominee for election
as a director:
Name For Withheld Authority
---- --- ------------------
Common Stock Paul H. Bristow 87,373,482 377,998
Mina Gouran 87,443,782 307,698
Special Voting
Preferred Stock David A. Coltman 33,400,000 0
Derek M. Stevens 7,000,400 0
23
<PAGE>
(d) Set forth below is the tabulation of the votes to approve the Galileo
International, Inc. 1999 Equity and Performance Incentive Plan:
For Against Withheld Broker Non-Vote
--- ------- -------- ---------------
75,170,173 9,431,345 13,078 3,136,884
ITEM 5. OTHER INFORMATION
In connection with the secondary offering of our common stock described in
Note 5 to the Condensed Consolidated Financial Statements found in Part I, Item
1 above, a stockholder controlled by US Airways sold all of the shares of our
common stock it held. In that same offering, a stockholder controlled by KLM
Royal Dutch Airlines reduced its ownership of our common stock to below 5% of
the total number of shares of our common stock then outstanding and a
stockholder controlled by United Airlines, Inc. reduced its ownership of our
common stock to below 25% of the total number of shares of our common stock then
outstanding. As a result of these sales, we redeemed our Series G, F and C
special voting preferred stock shares held by the stockholders controlled by US
Airways, KLM Royal Dutch Airlines and United Airlines, respectively, resulting
in the resignations of their respective nominees to our board of directors,
Messrs. Thomas A. Mutryn, Frank H. Rovekamp and David A. Coltman.
In connection with our purchase of all of the issued and outstanding shares
of a British Airways Plc subsidiary, which indirectly owned 7,000,400 shares of
our common stock as described in Note 5 to the Condensed Consolidated Financial
Statements found in Part I, Item 1 above, British Airways Plc sold all of the
shares of our common stock it held. As a result of this sale, we redeemed the
Series D share of our special voting preferred stock held indirectly by British
Airways and the British Airways nominee to our board of directors, Derek M.
Stevens, resigned following the sale.
24
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
10.1 Windsor, England Office Agreement for Lease, dated June 2, 1999
10.2 Amendment No. 1 to Galileo International, Inc. Guaranty Agreement
10.3 Amendment No. 2 to Galileo International, Inc. Guaranty Agreement
10.4 Amendment No. 2 to Amended and Restated $200,000,000 364-Day Credit
Agreement
10.5 Amendment No. 4 to the $400,000,000 Five Year Credit Agreement
*10.6 Form of Senior Vice President Employment Agreement
27.1 Financial Data Schedule
*Management contract or compensatory plan or arrangement.
(b) Exhibits and Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1999.
25
<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 9, 1999 By: /s/ Paul H. Bristow
-------------------
Paul H. Bristow
Senior Vice President, Chief
Financial Officer, Treasurer and
Director (Principal Financial and
Accounting Officer)
26
<PAGE>
GALILEO INTERNATIONAL, INC.
Exhibit Index
Exhibit
Number Description
------ -----------
10.1 Windsor, England Office Agreement for Lease, dated June 2, 1999
10.2 Amendment No. 1 to Galileo International, Inc. Guaranty Agreement
10.3 Amendment No. 2 to Galileo International, Inc. Guaranty Agreement
10.4 Amendment No. 2 to Amended and Restated $200,000,000 364-Day Credit
Agreement
10.5 Amendment No. 4 to the $400,000,000 Five Year Credit Agreement
*10.6 Form of Senior Vice President Employment Agreement
27.1 Financial Data Schedule
*Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit 10.1
NB: THIS CONFORMED COPY INCORPORATES AMENDMENTS MADE TO THE ACTUAL AGREEMENT
IN MANUSCRIPT AT EXCHANGE
DATED 2nd June 1999
HELICAL BAR DEVELOPMENTS (SOUTH EAST) LIMITED (1)
GLASGOW CITY COUNCIL as administering
authority for THE STRATHCLYDE PENSION FUND (2)
THE GALILEO COMPANY (3)
GALILEO INTERNATIONAL Inc (4)
HELICAL BAR PLC (5)
AGREEMENT FOR LEASE
of
2 Windsor Dials, Windsor
Norton Rose
London
<PAGE>
CONTENTS
Clause Heading Page
1 Interpretation..................................................1
2 Developer's Building Obligations................................7
3 Programme......................................................11
4 Variations.....................................................14
5 Site Visits By and Supply of Information to the Tenant.........14
6 Issue of Certificates of Sectional Completion..................16
7 Tenant's Occupation as Licensee................................19
8 Insurance......................................................21
9 Defects........................................................22
10 CDM Regulations................................................23
11 Title..........................................................24
12 Grant of Lease.................................................25
13 Rent and Service Charge........................................27
14 Determination..................................................28
15 No Demise......................................................29
16 Alienation.....................................................29
17 Declaration of Non-Merger......................................29
18 Resolution of Disputes.........................................29
19 Notices/Applications for approvals.............................30
20 Value Added Tax................................................31
21 Legal Costs....................................................32
22 No Representations.............................................32
23 Liability of Landlord..........................................32
24 Guarantor's Guarantee..........................................32
25 Surety's Guarantee.............................................32
26 Proper Law.....................................................33
Annexures
A Lease (with plans)
B Plans and Specifications for Works C Warranties (x 14) D Plan 1 showing
Reception hatched red
E Plan 2 showing Third Floor of the Building edged red F Plan 3 showing
designated area of Car Park edged red and hatched black G Licence for
Alterations H Legal opinion letter
I Latest form of draft Substation Lease
K Form of Restrictive Covenant Insurance Policy
L Form of Environmental Consultant's Certificate
M Latest draft of the Car Park Management Agreement
<PAGE>
13
THIS AGREEMENT is dated 2nd June 1999 and is made BETWEEN:
(1) HELICAL BAR DEVELOPMENTS (SOUTH EAST) LIMITED (Company No 2089935) whose
registered office is at 11-15 Farm Street London W1X 8NP (the "Developer")
(2) GLASGOW CITY COUNCIL of City Chambers Glasgow G2 (acting as administering
authority of THE STRATHCLYDE PENSION FUND) pursuant to the powers
conferred on it by the Local Government Superannuation (Scotland)
Regulations 1987 (as amended) (the "Landlord")
(3) THE GALILEO COMPANY (Company No 2143570) whose registered office is at
Galileo Centre Europe Windmill Hill Swindon SN5 6PH (the "Tenant")
(4) GALILEO INTERNATIONAL Inc Delaware file No. 2742539 of 9700 West Higgins
Road Suite 400 Rosemont IL 60018-479 6 USA (the "Guarantor")
(5) HELICAL BAR PLC (Company No. 156663) whose registered office is at 11-15
Farm Street London W1X 8NP (the "Surety")
NOW IT IS HEREBY AGREED as follows:
1 Interpretation
1.1 In this Agreement unless the context otherwise requires:
(a) Words importing any gender include every gender
(b) Words importing the singular number only shall include the plural
number and vice versa
(c) Words importing persons include firms companies and corporations and
vice versa
(d) Any reference to any statute (whether or not specifically named)
shall include any statutory modification or re-enactment of it for
the time being in force and any order instrument plan regulation
permission and direction made or issued under it or under any
statute replaced by it or deriving validity from it
(e) References to clauses schedules and annexures are references to the
relevant clause in or schedule or annexure to this Agreement
(f) Where any obligation is undertaken by two or more persons jointly
those persons shall be jointly and severally liable in respect of
that obligation
(g) Any obligation on a party not to do or omit to do anything shall be
deemed to include an obligation not to allow that thing to be done
or omitted to be done by any person under its control
(h) the headings to the clauses and schedules shall not affect the
interpretation
1.2 In this Agreement unless the context otherwise requires the following
expressions shall have the following meanings
(a) "Arbitrator" means an independent chartered surveyor agreed upon
between the parties to the relevant dispute or nominated on the
application of any such party by the President for the time being of
the Royal Institution of Chartered Surveyors or his duly appointed
deputy
(b) "Architects" Hamilton Associates of 2 Jubilee Place London SW3 3TQ
and/or or such other firm of architects as the Developer may from
time to time appoint in connection with the Works
(c) "Building" means the building to be erected on the Estate and let to
the Tenant in accordance with the terms of this Agreement and
intended to be known as 2 Windsor Dials or by such other name as the
Tenant may agree with the appropriate authorities and the Landlord
(provided that the Landlord hereby agrees to the use by the Tenant
of the name "Galileo Centre Europe" should that name be chosen by
the Tenant)
(d) "Building 1" means the building to be erected on the Estate and
intended to be known as 1 Windsor Dials
(e) "Building Contract" means the contract dated 2nd March 1999 entered
into by the Developer with the Building Contractor for works on the
Estate including the Works and including any replacement contract
for the Works
(f) "Building Contractor" means Bryant Construction Southern Limited
and/or such other building contractor as the Developer may appoint
in connection with the Works
(g) "Car Park" means the car park to be constructed as part of the Works
(h) "CDM Regulations" means The Construction (Design and Management)
Regulations 1994
(i) "Certificate of Sectional Completion" means the Certificate of
Sectional Completion of the Building or the Car Park and Common
Parts as the case may be issued under the Building Contract
(j) "Common Parts" has the meaning attributed to it by the Lease
(k) "Council Agreement" means the agreement dated 13th March 1997 made
between The Royal Borough of Windsor and Maidenhead (1) and BG Land
Investments Limited (2) as the same was assigned to the Landlord
pursuant to a Deed of Assignment dated 24th December 1997 made
between the Developer (1) the Landlord (2) the Developer's Guarantor
(3) and BG Land Investments Limited (4)
(l) "Council Properties" means the properties known as numbers 3 9 11
and 13 Arthur Road registered at HM Land Registry under title
numbers BK122648 BK119337 BK134697 and BK165738 (respectively)
(m) "Council Transfer" means the transfer to be entered into by The
Royal Borough of Windsor and Maidenhead (1) and the Landlord (2) in
respect of the Council Properties
(n) "Environmental Consultant" means Mott MacDonald of St. Anne House
20/26 Wellesley Road Croydon Surrey CR9 2UL and/or such other firm
of environmental consultants as may from time to time be appointed
in relation to the Environmental Works
(o) "Environmental Consultant's Certificate" means a certificate to be
issued by the Environmental Consultant in the form attached.
(p) "Environmental Works" means the works described and/or referred to in
the following reports Summary of Contamination Issues
37685/EWR/01 dated November 1997 Summary of Environmental
Conditions 37685/EWR/02/C (May 1998); Addendum Report to the
Summary of Environmental Conditions 37685/EWR/03/A (March 1998)
and all environmental and geotechnical works referred to in
condition 11 of the planning permission dated 24th December 1997
(Application No. 97/75707)
(q) "Estate" means the freehold land known as Windsor Dials which is
more particularly shown edged blue on the Lease Plan
(r) "Estimated Practical Completion Date" means 28th June 1999 or as
established under clause 3
(s) "Estimated Sectional Completion Date for the Building" means 14th
June 1999 or as established under clause 3
(t) "Funding Agreement" means the Agreement dated 24th December 1997 for
the financing of the Works made between the Landlord (1) the
Developer (2) and the Surety (3)
(u) "Highways Engineer" means Buchanan Consulting Engineers Limited
and/or or such other highways engineer as may be appointed by the
Developer with the Tenant's approval (such approval not to be
unreasonably withheld or delayed)
(v) "Lease" means the Lease of the Premises to be granted by the
Landlord and accepted by the Tenant which shall be in the form of
the attached agreed draft subject to any alterations made pursuant
to this Agreement
(w) "Lease Plan" means the plans annexed to the Lease
(x) "Legal Opinion Letter" means the letter in the form annexed to be given:
(i) on the date hereof and
(ii) on the date of the grant of the Lease in accordance with clause 26.3
(y) "Licence for Alterations" means a licence in respect of the Tenant's
Works in the form of the attached draft
(z) "Necessary Consents" means planning permission and all other
consents licences permissions and approvals whether of a public or a
private nature which shall be necessary for the carrying out and
completion of the Works or the Tenant's Works (as the context
requires)
(aa) "Net Internal Area" means net internal area in square feet measured
in accordance with the Code of Measuring Practice published by the
Royal Institution of Chartered Surveyors and the Incorporated
Society of Valuers and Auctioneers (4th Edition) (November 1993
Edition)
(bb) "Plan 1" "Plan 2" and "Plan 3" means the plans attached to this
Agreement and marked as such
(cc) "Planning Agreements" means:
(i) an agreement pursuant to section 106 of the Town and Country
Planning Act 1990 dated 24th December 1997 and made between
(1) The Royal Borough of Windsor & Maidenhead (2) BG Land
Investments Limited and (3) the Developer and
(ii) an agreement pursuant to section 38 and section 278 of the
Highways Act 1980 dated 24th July 1998 and made between (1)
The Royal Borough of Windsor & Maidenhead (2) the Developer
and (3) the Landlord
(dd) "Planning Supervisor" means Mott MacDonald Limited and/or such other
planning supervisor as the Developer shall appoint with the approval
of the Tenant (such approval not to be unreasonably withheld or
delayed)
(ee) "Plans and Specifications" means the Plans and Specifications annexed
to this Agreement which describe the Works
(ff) "Practical Completion Date" means (subject to the provisions of clause
6) the latest of:
(i) the Sectional Completion Date for the Building and
(ii) the Sectional Completion Date for the Car Park and Common Parts
(gg) "Premises" means the Building and more particularly has the meaning
attributed to it by the Lease
(hh) "Project Manager" means Second London Wall Project Management
Limited (and/or such other project manager as the Developer may
appoint in relation to the Works)
(ii) "Professional Team" means the Architects the Structural Engineers
the Quantity Surveyor the Project Manager the Planning Supervisor
the Highways Engineer the Environmental Consultants and the Services
Engineers and/or any other professionals with design input appointed
after the date of this Agreement by the Developer
(jj) "Quantity Surveyor" means Gleeds and/or such other quantity surveyor
as the Developer shall appoint with the approval of the Tenant (such
approval not to be unreasonably withheld or delayed)
(kk) "Reception" means the part of the ground floor of the Building shown
hatched red on Plan 1
(ll) "Rent Commencement Date" means subject to clause 13.3 the latest of:
(i) the date six calendar months after the Sectional Completion Date for
the Building
(ii) (subject to clause 9.6) the date six calendar months after the
Tenant is able to commence and continue with carrying out its
fitting out of the Premises if the same shall not have been
possible on the Sectional Completion Date for the Building as
a consequence of any prevention thereof or impediment thereto
as a result of defects in or outstanding matters relating to
the Works at such Sectional Completion Date
(iii) the date of delivery unconditionally to the Tenant of the
completed warranties/deeds referred to in clause 2.3
(iv) the date on which there expires any period during which the
Tenant is not allowed to occupy the Premises as a result of a
failure (or allegation by the local planning or other relevant
authority of any failure) by the Developer to satisfy:
(A) conditions 3 6 and 14 of the planning permission dated
24th December 1997 (App No 97/75707); and
(B) the condition set out in clause 9.3(b) of the Planning
Agreement referred to in clause 1.2(cc)(i) hereof; and
(C) all the conditions referred to in the Notice of Passing
of Building Plans dated 13th January 1999;
(v) the Practical Completion Date; and
(vi) the date upon which any material impediment to the use of the
Car Park in accordance with the terms of the Lease is removed
PROVIDED THAT "material" for this purpose means more than 6
car parking spaces cannot be accessed or used by vehicles
(mm) "Restrictive Covenant Insurance Policy" means the insurance policy
referred to in clause 11.5
(nn) "Sectional Completion Date" means the date as at which the relevant
Certificate of Sectional Completion is issued by the Architects or
if the matter is determined pursuant to clause 18.2 the date which
the independent expert determines shall be the date as at which the
Certificate of Sectional Completion for the Building should have
been issued
(oo) "Services Engineer" means Oscar Faber of Marlborough House Upper
Marlborough Road St Albans Herts AL1 3UT and/or such other firm of
services engineers as may from time to time be appointed by the
Developer in relation to the Works
(pp) "Structural Engineers" means Mott MacDonald of St Anne House 20/26
Wellesley Road Croydon Surrey CR9 2UL and/or such other firm of
structural engineers as may from time to time be appointed by the
Developer in relation to the Works
(qq) "Tenant's Surveyor" means Richard Ellis St Quintin of Berkeley Square
House Berkeley Square London W1X 6AN (for the attention of
Stephen Fox)
(rr) "Tenant's Works" means the works to be carried out and completed by the
Tenant in accordance with clause 7.3
(ss) "Third Floor" means the third floor of the building as the same is
shown edged red on Plan 2
(tt) "Tower Room Works" means those parts of the Works comprising the
installation and associated commissioning of the fan coil unit and
the casing for such fan coil unit to the third floor of the Building
more particularly described within the Plans and Specifications
(uu) "Warranting Subcontractors" means any design consultants appointed
by the Building Contractor in relation to any part of the Works and
the subcontractors for the following elements of the Works or for
the Environmental Works (as the case may be):
Lifts: Lift and Engineering Services
Limited
M & E: Carter M & E Services Limited
Piling: Kvaerner Cementation Foundations
Limited
Steelwork (including Pring and St Hill Limited
roof steelwork):
Precast Car Park Frame: Hogaard & Schultz Limited trading
as Composite Structures
Windows: James Gibbons Limited
and/or any other subcontractors in relation to such elements of
the Works
(vv) "Works" means the construction on the Estate of the Building the Car
Park and the Common Parts in accordance with the Plans and
Specifications but excluding:
(i) the construction of Building 1
(ii) the planting of trees shrubs grass and other plants
(ww) "Working Day" means any day except Saturday and Sunday on which banks
are open for banking business generally
2 Developer's Building Obligations
2.1 The Developer shall carry out the Works and shall complete them:
(a) in a good and workmanlike manner;
(b) using only suitable good quality materials of their several kinds;
(c) in accordance with:
(i) all Necessary Consents;
(ii) all statutes from time to time in force which affect the Works; and
(iii) the terms of this Agreement the Building Contract and CDM Regulations;
(iv) all relevant British Standards and Codes of Practice from time
to time in force unless otherwise agreed or unless otherwise
provided in the Plans and Specifications; and
(v) the provisions of the Planning Agreements
2.2 In relation to the Works the Developer:
(a) Shall obtain as soon as requisite all Necessary Consents and shall
provide a copy of each such Necessary Consent to the Tenant's
Surveyor and shall give or procure there is given all notices
required to be given by statute or otherwise
(b) Shall ensure that there is not used (and warrants that none of the
same has been used) any of the following:
(i) high alumina cement in concrete elements;
(ii) woodwool slabs used as permanent shuttering or form work to
concreting or in structural elements;
(iii) calcium chloride in admixtures for use in reinforced concrete;
(iv) asbestos asbestos products asbestos substitutes crocodilite or
any naturally occurring or man-made mineral fibre (for example
rock wool or slag wool) with a thickness of 3 microns or less
and a length of 200 microns or less unless appropriately
sealed to prevent migration of fibres;
(v) unwashed sea dredged aggregates;
(vi) ready mixed concrete containing aggregate apt to cause "mundic
concrete";
(vii) aggregates for use in reinforced concrete which do not comply
with British Standard specification BS882:1992 and aggregates
for use in concrete which do not comply with the provisions of
British Standard specification BS8110:1985;
(viii) polyisocyanurate and urea formaldehyde foam or other materials
which may release formaldehyde in quantities which may be
hazardous with reference to any limits set by the Health and
Safety Executive;
(ix) Calcium silicate bricks or tiles;
(x) Slip bricks;
(xi) Vermiculite with a thickness of 3 microns or less and a length
of 200 microns or less unless appropriately sealed to prevent
migration of fibres;
(xii) Chlorofluorocarbons included in the manufacture of insulation
but except in use in refrigerant systems;
(xiii) Products containing cadmium referred to in the Environmental
Protection (Controls on Injurious Substances) (No. 2)
Regulations 1993;
(xiv) Any materials containing lead which may be ingested inhaled or
absorbed except where copper alloy fittings containing lead
are specifically required in drinking water pipework by any
relevant statutory requirements;
(xv) Timber trusses manufactured with truss plate connectors;
(xvi) Iberian slate;
(xvii) Colliery waste as fill material;
(xviii) PTFE fabrics (but the use of PTFE as jointing tape in plumbing
installations is permitted);
(xix) Lindane;
(xx) Tributlynoxide;
(xxi) Proprietary open web lattice joists or beams (available type);
(xxii) Pentachlorophenol;
(xxiii) Resin coated blocks;
(xxiv) Lightweight or air entrained concrete blocks;
(xxv) Any other substances generally known to be deleterious
including but not limited to substances not in accordance with
British Standards and Codes of Practice or which are published
in the Building Research Establishment Digests;
and for the purpose of determining what is a deleterious material
the matter shall be determined as at the date that the relevant
work is contracted for
2.3 The Developer shall at its own expense procure that there shall be
delivered to the Tenant as soon as reasonably practicable following the
Sectional Completion Date for the Building (but in any event prior to the
Practical Completion Date) warranties/deeds from the Building Contractor
the Parent Company Guarantor (which expression has the meaning given to it
in the Building Contract) the Professional Team and the Warranting
Subcontractors in the form of the relevant drafts annexed to this
Agreement with such amendments to the warranties from the Warranting
Subcontractors (other than the Warranties from the Warranting
Sub-Contractors named in clause 1.2(uu)) as may be made by the
professional indemnity insurers of the relevant warranting subcontractor
or in response thereto by the Landlord (acting reasonably)
2.4 No approval or inspection or testing by or on behalf of the Tenant shall
in any way relieve the Developer or the Building Contractor or the members
of the Professional Team or the Warranting Subcontractors or the said
Parent Company Guarantor (or any one or more of them) from their
respective obligations in respect of the design supervision and execution
of the construction of the Works
The Developer shall at its own expense procure that there shall be delivered
to the Tenant as soon as reasonably practicable (but not before the
commissioning of the relevant mechanical installation) all manufacturers'
guarantees ordinarily or usually available from the relevant manufacturers
of those parts of the Works relating solely to the Building comprising
mechanical installations or other fittings or fixtures in respect of which
the same are ordinarily or usually issued by the relevant manufactures or
suppliers
2.6 The Developer shall at its own cost procure that all landscaping planting
of trees hedgerows shrubs grass and other plants required to be carried
out pursuant to condition 8 of the planning permission dated 24th December
1997 (App. No: 97/75706) shall be carried out in conformity with that
condition and that any trees hedgerows or shrubs forming part of the
landscaping scheme referred to in such condition which are removed or
become seriously damaged or diseased within 12 months of the Practical
Completion Date (or if later within 12 months of initial completion of the
said landscaping and planting) shall be replaced in the next planting
season with others of a similar size and species
2.7 The Developer shall at its own cost procure that all works pursuant to
paragraph 11 of the Second Schedule to the Planning Agreement referred to
in clause 1.2(cc)(ii) hereof are complied with to enable the relevant
adoption to take place
2.8 The Developer shall indemnify the Tenant against all sums costs losses
claims and expenses incurred by the Tenant as a result of the local
planning or other relevant authority not allowing the Tenant to occupy the
Premises because of the failure by the Developer (or allegation by the
local planning or other relevant authority of any such failure) to satisfy
(to the satisfaction of the local planning or other relevant authority)
the conditions set out in clause 1.2(ll)(iv)(A)-(C) such sums costs losses
claims and expenses including (but not by way of limitation):
(a) all rents outgoings and other sums due to the Landlord and other
parties arising from the Tenant's interest in the Premises and
obligations relating thereto pursuant to this Agreement or the Lease
or otherwise for the period during which the Tenant is not allowed
to occupy the Premises;
(b) all costs losses and expenses (such costs to include relocation
costs business interruption costs and all ancillary expenditure)
arising from the Tenant seeking and obtaining reasonable alternative
accommodation as a consequence of any such prevention;
(c) all costs losses expenses and damages arising from any action claims
or proceedings relating thereto
2.9 The Developer shall pay to the Tenant within 15 Working Days of a written
demand all sums due from the Developer to the Tenant pursuant to clause
2.8 (together with interest at the rate of 3 per cent. over the Base Rate
of Lloyds Bank Plc calculated on a daily basis in respect of any sum so
demanded which remains unpaid at the expiration of 15 Working Days
following such demand for the period from the date of demand to the date
of payment)
Provided that:
(a) the Tenant shall be subject to the duty to mitigate such amounts
arising under clause 2.8(b) or (c)
(b) the Tenant shall (at the Developer's cost) join the Developer in
resisting any such allegation by the local planning or other
relevant authority and the Developer shall use all reasonable
endeavours to resist any such allegation
(c) the Tenant shall keep the Developer promptly informed of all amounts
incurred by the Tenant or to be incurred by the Tenant that will or
may become the subject of a claim by the Tenant against the
Developer arising under clause 2.8(b) or (c)
2.10 For the purposes only of the provisions of this Agreement relating to
Sectional Completion for the Building the Tower Room Works shall subject
to the provisions of (a) and (b) of this sub-clause be treated as if they
do not form part of the Works relating to the Building provided that:
(a) the Developer shall procure that the Tower Room Works are completed
to such a standard as would have rendered them complete works at the
Sectional Completion Date for the Building (but for the completion
of the Tower Room Works)
(b) if the Tower Room Works are not so completed to such a standard
within two weeks of the Sectional Completion Date for the Building
then for the purposes of clause 3.2 the Sectional Completion Date of
the Building shall not be deemed to have arisen until the Tower Room
Works are so completed and if there shall be any dispute about
whether the same have been so completed the issue shall be
determined by an independent expert pursuant to clause 18.2
(c) the Tenant acknowledges that access to the Building by the Developer
the Building Contractor or members of the Professional Team may be
required in order to complete the Tower Room Works even though such
access may be during the carrying out of the Tenant's Works
2.11 Without prejudice to the Developer's obligations to comply inter alia with
Necessary Consents (including the continuing water monitoring pursuant to
condition 11 of the planning permission dated 24th December 1997 (App No
97/75707) and the taking of any required appropriate action to protect
groundwater) the Developer shall procure that the Environmental Works are
carried out in accordance with all recommendations in the Reports
2.12 The Developer shall procure that on or before the grant of the Lease the
Environmental Consultant's Certificate shall be delivered to the Tenant
2.13 Without prejudice to the generality of clause 2.1(c) the Developer shall
comply (at its own cost) with all its obligations contained in the
Planning Agreements
3 Programme
3.1 The Developer shall use reasonable endeavours to procure respectively that
the Sectional Completion Date for the Building and the Practical
Completion Date each occur on or before the Estimated Sectional Completion
Date for the Building and the Estimated Practical Completion Date (as the
case may be) provided that the Estimated Sectional Completion Date for the
Building and/or (as the case may be) the Estimated Practical Completion
Date shall be extended by such extensions of time (if any) as may be
certified by the Architects under the Building Contract save for those
which are the result of the Developer's or the Landlord's or the
Professional Team's (or any of them) own delay or default or wrongful or
negligent instructions
3.2 ((a)) The Developer shall notify the Tenant's Surveyor immediately in
writing of any likely delays in the execution of the Works and in
the event that any extensions of time are certified in accordance
with clause 3.1 the Developer shall procure that the Architect
shall provide to the Tenant's Surveyor a copy of any certificate
issued pursuant to the Building Contract certifying the cause and
extent of such extensions of time and the consequential revised
Estimated Practical Completion Date and/or the Estimated
Sectional Completion Date for the Building (as the case may be)
((b)) ((i)) If for any reason the Sectional Completion Date for the
Building has not arisen in accordance with this Agreement by
the 28th July 1999 and/or the Practical Completion Date has
not arisen in accordance with this Agreement by 28th August
1999 (or such respective later dates as may be fixed by any
extensions of time certified by the Architects referred to in
clause 3.1 (save as aforesaid as therein set out)) the
Developer shall pay to the Tenant liquidated damages
calculated in accordance with clause 3.2(c)(i) or (ii) as the
case may be
(ii) If for any reason following the expiration of 28 days from the
Practical Completion Date any of the 105 car parking spaces
for the use of the Tenant referred to in the lease are not
freely available to be accessed and used by the Tenant the
Developer shall pay to the Tenant liquidated damages
calculated in accordance with clause 3.2(c)(iii) Provided
That the Developer shall not be liable for such liquidated
damages in respect of any such car parking spaces which are
not so freely available as a consequence of an act of a
third party not involved with the carrying out of the Works
or outside the control of the Developer
(c) The said liquidated damages shall accrue:
(i) in relation to any delay in the Sectional Completion Date for the
Building during the period commencing on 28th July 1999 (or
such relevant later date as referred to in clause 3.2(b))
and ending on the Sectional Completion Date for the
Building or such earlier date upon which this Agreement is
rescinded by the Tenant in accordance with clause 3.3 at
the rate of(pound)1,425 per day inclusive and/or (as the
case may be)
(ii) in relation to any delay in the Practical Completion Date
during the period commencing on 28th August 1999 (or such
relevant later date as referred to in clause 3.2(b)) and
ending on the Practical Completion Date or such earlier date
upon which this Agreement is rescinded by the Tenant in
accordance with clause 3.3 at the rate of (pound)1,000 per
Working Day inclusive
(iii) at the rate of (pound)9.52 per Working Day or part of a
Working Day in respect of each car parking space which is not
freely available to be accessed and used as referred to in
clause 3.2(b)(ii) during the period commencing on the 29th day
following the Practical Completion Date until the same are
freely available to be accessed and used by the Tenant
and shall be paid to the Tenant within 15 Working Days of a written
demand (together with interest at the rate of 3 per cent over the
Base Rate of Lloyds Bank Plc calculated on a daily basis in respect
of any sum so demanded which remains unpaid at the expiration of 15
Working Days following such demand for the period from the date of
demand to the date of payment)
3.3 If in any event the Sectional Completion Date for the Building has not
occurred within 6 months calculated from and including 14th June 1999 the
Tenant may thereafter but not after the Sectional Completion Date for the
Building determine this Agreement by giving written notice to the
Developer to that effect whereupon this Agreement shall determine but
without prejudice to any claim by any party against the other in relation
to any antecedent breach
4 Variations
4.1 The Developer shall not make any material variation or addition to that
part of the Works consisting of the construction of the Building without
the prior written consent of the Tenant which shall not be unreasonably
withheld or delayed
4.2 The Developer may vary or add to the remainder of the Works but where such
variation or addition will have a material adverse effect upon the
Premises or the Tenant the Developer shall first obtain the written
consent of the Tenant which shall not be unreasonably withheld where
reasonable and proper provisions are made to meet the Tenant's concerns
4.3 The Developer shall procure that a copy of every architects instruction
relating to the Building and issued by the Architects pursuant to the
Building Contract is promptly supplied to the Tenant's Surveyor
4.4 Notwithstanding clauses 4.1 and 4.2 the Developer may without any consent
from the Tenant make variations or additions to the Works where such are
required in order to comply with any statutes or Necessary Consents
4.5 If any materials specified in the Plans and Specification cannot be
obtained or if their delivery at the appropriate time or at reasonable
cost cannot be procured then (notwithstanding clauses 4.1 and 4.2) the
Developer may without any consent from the Tenant use alternative
materials of no less quality or performance and of equivalent appearance
4.6 The Developer shall use all reasonable endeavours to give the Tenant's
Surveyor advance notice of all variations or additions to the Works and
procure that as soon as practicable there shall be delivered to the
Tenant's Surveyor full details and plans of any variations additions or
alternative materials made or used under this clause 4
5 Site Visits By and Supply of Information to the Tenant
5.1 The Landlord and the Developer shall permit the Tenant or the Tenant's
Surveyor and other persons authorised by them at their own risk and
subject to the Tenant making good any physical damage caused by such
parties (which the Tenant covenants to do) whenever reasonably required on
giving the Project Manager not less than two Working Days prior notice and
subject to complying with the proper requirements of the Project Manager
as to numbers safety or otherwise having regard to the progress of the
Works to enter onto the Premises (accompanied by a representative of the
Developer if the Developer shall so require) to view the progress and
state of the Works and the materials used or intended for use in them and
to prepare drawings for the Tenant's fitting out of the Premises
5.2 In relation to the arrangements in clause 5.1 the Tenant and the Tenant's
Surveyor shall not (and shall procure that those authorised by it to enter
the Premises under clause 5.1 do not) interfere with the progress of the
Works or address any comments on the Works to the Building Contractor or
the Professional Team but all such comments shall be addressed in writing
to the Developer or the Project Manager
5.3 The Tenant and the Tenant's Surveyor shall observe the copyright and other
intellectual property rights attaching to any item provided to the Tenant
and the Tenant's Surveyor by the Developer provided that the Tenant is
hereby irrevocably granted by the Developer or the Developer will procure
(in each case with full title guarantee to the extent that it is legally
able to) a royalty free licence to use in connection with the Premises (so
that such licence ceases on the termination of this Agreement for any
reason in circumstances where the Tenant is not entitled to have the Lease
granted to it) the documents file plans and operating manuals to be
provided to the Tenant under this Agreement
5.4 ((a)) The Developer shall arrange project and site meetings to
discuss the progress of the Works at which appropriate
representatives of the Developer the Project Manager the Tenant's
Surveyor the Building Contractor and the Professional Team may be
present;
(b) The Tenant's Surveyor shall not make any comments or representations
at the meetings referred to in sub-clause (a) above but following
such meetings the Tenant's Surveyor shall address any comments it
has arising from such meetings in writing to the Project Manager and
the Developer shall have proper regard to the reasonable and proper
written representations so made as the result of such meetings
5.5 The Developer shall give to the Tenant's Surveyor not less than two
Working Days' notice of and copies of the agenda for and minutes of all
the meetings referred to in clause 5.4(a)
5.6 For the purpose of enabling the Tenant to plan its fitting out works in
relation to the Premises the Developer shall within 10 Working Days of the
date of this Agreement supply to the Tenant's Surveyor at no charge to the
Tenant complete copies of the Health and Safety Plan and the Health and
Safety Files (as such may exist at the time) maintained in relation to
those parts of the Works relating to the Premises and its services
pursuant to the CDM Regulations and without request thereafter from time
to time upon amendments being made copies of all subsequent amendments to
the said plan and file
5.7 Within the period of two months after the Practical Completion Date the
Developer shall provide the Tenant with a complete detailed "as built"
specification and related drawings in respect of the Premises plus (if
available) one copy of any CAD discs containing that specification and
those drawings
6 Issue of Certificates of Sectional Completion
6.1 In relation to the issue of the Certificates of Sectional Completion for
the Works the Developer shall procure that
(a) the Architects give to the Tenant's Surveyor at least ten Working
Days' written notice of their proposal to issue any such certificate
and of the date on which it is proposed to carry out the inspection
of the Works for that purpose
(b) the Architects permit the Tenant and persons authorised by it to
accompany the Architects in that inspection of the Works
(c) the Architects permit the Tenant and those authorised by it to
discuss fully with them their proposal to issue the relevant
certificate and in particular the date to be specified in it and the
contents of any list of defects or outstanding matters which the
Architects propose to incorporate in such certificate
6.2 Where the Architects shall have given at least ten Working Days notice
under clause 6.1(a) and the anticipated Sectional Completion Date is
subsequently postponed the Architects shall not be obliged to give a
further ten Working Days' notice but shall nevertheless keep the Tenant
informed of their proposals and as often as may be necessary shall repeat
the process referred to in clause 6.1(a)-(c) save that under clause 6.1(a)
the period shall be not less than one Working Day's notice in relation to
giving the Tenant's Surveyor written notice
6.3 Forthwith upon the issue of any Certificate of Sectional Completion the
Developer shall supply a copy (including any such list of defects or
outstanding matters incorporated in it) to the Tenant
6.4 In the event that there shall be any dispute as to whether the Certificate
of Sectional Completion in respect of the Building has been correctly
issued for the purposes of this Agreement the issue (including the date
which shall be deemed to be the Sectional Completion Date of the Building
for the purposes of this Agreement and consequently if relevant the Rent
Commencement Date) shall be determined by an independent expert pursuant
to the provisions of clause 18.2 Provided that for the purposes of this
Agreement (and notwithstanding that such Certificate of Sectional
Completion may have been correctly issued for the purposes of the Building
Contract) the Certificate of Sectional Completion of the Building shall be
deemed to have been correctly issued for the purposes of this Agreement
and the Sectional Completion Date of the Building arise as a result
thereof only if any list of defects or outstanding matters to be referred
to in or annexed to such Certificate are only of a minor snagging nature
and which will not prevent or impede the ability of the Tenant to commence
and continue its fitting out works of the Premises
6.5 If in accordance with 6.4 there is a referral to the independent expert
pursuant to clause 18.2 on the issue of whether or not any Sectional
Completion Certificate should have been issued the consequences set out in
clause 6.7 shall apply
6.6 The Developer shall procure that the Tenant's Surveyor is given at least 5
Working Days' written notice of the commencement of the commissioning of
the mechanical and electrical installations in the Building and at least
one clear Working Day's notice before the final commissioning works
certificate is issued and shall procure that the Tenant and persons
authorised by it are given an opportunity for the Tenant's Surveyor to
attend all such commissioning works
6.7 ((a)) In this clause 6.7:
(i) "Actual Rent Commencement Date" means (disregarding clause
1.2(ll)(ii)) the date on which the Rent would first be payable
by the Tenant had there not been a Referral;
(ii) "Actual Sectional Completion Date" means the date specified by
the Architects as the date of the Certificate of Sectional
Completion of the Building;
(iii) "Interest" means interest calculated on the same basis as the
Lease as if the relevant amount was Rent in arrears;
(iv) "Payment" means Interest on the proportion of the Rent payable
for the period from the Actual Rent Commencement Date until
the date on which such proportion of the Rent is actually paid
by the Tenant provided that such period shall be reduced by
any period that exists between and including the Actual
Sectional Completion Date and the Revised Completion Date;
(v) "Referral" means a referral to the independent expert pursuant
to clause 6.5;
(vi) "Rent" means the rent firstly reserved under the Lease;
(vii) "Resolution Date" means (following a Referral) the date on
which the Sectional Completion Date in respect of the Building
is agreed or determined;
(viii) "Revised Sectional Completion Date" means the date on which
(following a Referral) the independent expert appointed
pursuant to clause 18.2 determines (or the Developer and
the Tenant agree) that the Certificate of Sectional
Completion of the Building should have been issued by the
Architects assuming (if they have been invoked by the
Architects) that the Building Contract did not contain the
Special Provisions
(ix) "Special Provisions" means the amendments contained in clauses
17.6 17.7 17.8 and 17.9 of the Building Contract
(b) If there is a Referral and the Architects have not relied on the
powers given to them under pursuant to and/or by the Special
Provisions then:
(i) until the Resolution Date the provisions of clause 7.1 shall not apply;
(ii) on the completion of the Lease (or if later the Rent
Commencement Date) the Tenant shall pay the Payment to the
Developer;
(iii) the Rent Commencement Date shall be postponed by any period
between and including the Actual Sectional Completion Date and
the Revised Sectional Completion Date; and
(iv) the provisions of clause 1.2(ll)(ii) shall be disregarded
(c) if there is a Referral and the Architects have relied on the powers
given to them under pursuant to and/or by the Special Provisions
then on the completion of the Lease (or if later the Rent
Commencement Date) the Tenant shall pay to the Developer the Payment
(d) the Developer shall procure that the Architects endorse the
Certificate of Sectional Completion of the Building with a statement
stating whether or not in issuing the Certificate of Sectional
Completion of the Building the Architects have relied on the powers
given to them under pursuant to and/or by the Special Provisions
7 Tenant's Occupation as Licensee
7.1 During the period from the Sectional Completion Date for the Building
until the grant of the Lease the Tenant shall have licence at all times to
enter into and upon and to remain in the Premises but as licensee only on
the terms of this clause
7.2 Such licensed occupation shall be with the benefit of all the rights
covenants conditions and other provisions and subject to the same
exceptions and reservations covenants conditions and other provisions as
those contained in the Lease and the Developer shall procure that until
the Practical Completion Date there is uninterrupted access to the
Building (and to the area cross hatched black on Plan 3 for inter alia
loading/unloading materials and equipment and for retention of a skip for
refuse or otherwise relating to carrying out fitting out works to enable
the Tenant to carry out its fitting out thereof.)
7.3 The Tenant's Works
(a) The Tenant shall as soon as practicable and in any event within 8 weeks
of the date hereof at its expense prepare detailed plans drawings
and specifications of its proposals for the Tenant's Works and
such other documents and information as the Landlord may
reasonably require to satisfy itself as to the extent of the
Tenant's Works and shall submit them to the Landlord in
quadruplicate for its written approval in so far as such approval
therefor is required in accordance with the terms of the Lease
(b) Immediately following such approval the Tenant shall at its expense
apply for and use all reasonable endeavours to obtain all Necessary
Consents (in so far as may be relevant if at all) as soon as
practicable
((c))The Tenant shall not be liable to pay any costs in respect of any
approval required from the Landlord pursuant to this clause or
otherwise in connection with the Tenant's Works
(d) The Landlord shall respond promptly to any application for approval
of such fitting out works
(e) The Tenant shall at its expense and risk carry out the Tenant's Works:
(i) in compliance with all the provisions of the Licence for Alterations
(ii) employing a reputable building contractor
(iii) in compliance with any relevant Necessary Consents
(f) None of the provisions of this Agreement relating to the carrying
out of the Tenant's Works shall be construed as an obligation to the
Landlord to carry out any works for the purposes of the provisions
of the Lease relating to the review of rent
7.4 Indemnity
The Tenant shall indemnify the Developer and the Landlord and keep them
indemnified against all claims damages costs and losses in relation to the
Works caused by the execution of the Tenant's Works PROVIDED THAT this
clause shall not apply to the extent that the Tenant is carrying out or
has carried out the Tenant's Works in accordance with this Agreement and
the Licence for Alterations
7.5 No Nuisance or Interference
(a) Following the Sectional Completion Date for the Building the Works and
the Tenant's Works shall be carried out by the Developer and the
Tenant respectively in such a manner that shall not prevent or
materially interfere with the due execution of the Tenant's Works
and the Works respectively and the Developer and the Tenant shall
not do or permit to be done in the execution of the Works or the
Tenant's Works respectively anything which results in nuisance to
the other
(b) The Tenant in carrying out the Tenant's Works shall not do or permit
anything to be done which prevents or materially interferes with the
fitting out of Building 1
(c) The Developer shall procure that the tenant of Building 1 in
carrying out its fitting out of Building 1 does not do or permit to
be done anything which prevents or materially interferes with the
carrying out of the Tenant's Works
(d) where there is any dispute relating to the obligations in
sub-clauses (a) (b) or (c) above:
(i) the matter shall be referred to the Project Manager (whose
reasonable decision shall be final and binding on the
parties); and
(ii) on issues of safety the parties shall comply with whatever
instructions or orders are made by the Project Manager
(e) The Developer and the Tenant (in the case of the Tenant via the
Tenant's Surveyor) shall liaise with each other so they are
respectively kept informed with the intention of anticipating and
minimising any potential impact the carrying out of the Works may
have on the carrying out of the Tenant's Works or as the case may
be vice versa or on the works being carried out by the tenant of
Building 1 and the Developer shall use all reasonable endeavours
to procure that the tenant of Building 1 complies with similar
arrangements
(f) The provisions of this clause 7.5 shall not affect the provisions of
clauses 1.2(ll)(ii) 2.10 or 6.4
(g) To the extent any of the Works (including but not limited to those
to be carried out pursuant to clause 9 in relation to making good
defects or completing outstanding or incomplete works etc) are to be
carried out on or within the Premises following the Sectional
Completion Date of the Building the Developer shall procure that the
reasonable requirements of the Tenant or the Tenant's Surveyor shall
be complied with
<PAGE>
8 Insurance
8.1 The Developer shall until each Sectional Completion Date keep insured or
cause to be kept insured the relevant part of the Works and all other
fixtures fittings plant machinery and apparatus from time to time in and
upon the site of that part of the Works in an amount not less than the
full reinstatement cost for the time being of the relevant part of the
Works (including professional fees the cost of debris removal and Value
Added Tax where applicable and taking account of inflation during the
period of insurance from the period from the date of damage or destruction
to the likely date of reinstatement) against loss or damage by such risks
as may from time to time be usually covered by a contractors comprehensive
policy (including without limitation such of the Insured Risks (as defined
in the Lease) as are usually so covered)
8.2 The Developer shall maintain public liability insurance in an appropriate
sum in respect of the Works
8.3 From the relevant Sectional Completion Date the provisions in the Lease
relating to insurance shall apply and be complied with by the Landlord and
the Tenant in respect of the relevant part of the Works for which the
Building Contractor is no longer responsible for insuring
8.4 The Developer shall at the request of the Tenant from time to time supply
to the Tenant a copy of the insurance policy maintained under clauses 8.1
and 8.2 or full details of such insurance and satisfactory evidence of
payment of premiums and will use all reasonable endeavours to procure that
a note of the Tenant's interest is noted thereon (either specifically or
generally)
9 Defects
9.1 The Developer will make good and complete or procure to be made good and
completed in accordance with the defects liability provisions in the
Building Contract all defects shrinkages incomplete or outstanding works
referred to in or annexed to the relevant Certificate of Sectional
Completion or other faults in the Works which are due to materials or
workmanship not in accordance with the Building Contract or to frost
occurring before the relevant Sectional Completion Date or other failure
of the Building Contractor to comply with its obligations under the
Building Contract and which shall appear (and in so far as they relate to
the Building (including those which shall be notified from time to time in
writing by the Tenant to the Developer)) within one year from the relevant
Sectional Completion Date (as to which notice time shall be of the
essence) (Provided that no such notice from the Tenant shall be required
in relation to any incomplete or outstanding works referred to in or
annexed to the relevant Certificate of Sectional Completion) Provided
further that the Developer shall instruct the Architects to instruct the
Building Contractor to remedy any defects referred to in a notice from the
Tenant to the Developer within a reasonable period given the nature of the
defects
9.2 In relation to the issue of the Certificates of Making Good Defects for
the Works the Developer shall procure that:
(a) the Architects give to the Tenant's Surveyor at least ten Working
Days' written notice of their proposal to issue any such certificate
and of the date on which it is proposed to carry out the inspection
of the Works for that purpose
(b) the Architects permit the Tenant and persons authorised by it to
accompany the Architects in that inspection of the Works
(c) the Architects permit the Tenant and those authorised by it to
discuss fully with them their proposal to issue the relevant
certificate and in particular the date to be specified in it
9.3 Where the Architects shall have given at least ten Working Days notice
under clause 9.2 and the anticipated Certificate of Making Good Defects is
not issued the Architects shall not be obliged to give a further ten
Working Days' notice but shall nevertheless keep the Tenant informed of
their proposals and as often as may be necessary shall repeat the process
referred to in clause 9.2(a)-(c) save that under clause 9.2(a) the period
shall be not less than one Working Day's notice in relation to giving the
Tenant's Surveyor written notice
9.4 Forthwith upon the issue of any Certificate of Making Good Defects
Developer shall supply a copy to the Tenant
9.5 The Tenant shall allow the Developer and those authorised by it to have
access to the Premises upon reasonable prior notice and at reasonable
times agreed with the Tenant both during the operation of this clause and
after the Lease is granted for the purpose of complying with any
outstanding provisions of this Agreement and shall not (save by the proper
exercise of its rights under this Agreement or as the case may be the
Lease (including in relation to the carrying out in a proper manner of the
fitting out of the Premises)) interfere with or impede the completion of
the Works and the Tower Room Works Provided that in so entering the
Premises the Developer and those authorised by it will cause as little
disruption and inconvenience to the Tenant and the Tenant's business as
reasonably possible and will make good all physical damage caused by such
entry
9.6 The Tenant acknowledges that access to the Building by the Developer and
others pursuant to clauses 9.1 and 9.2 may be required whether during the
carrying out of the Tenant's Works or thereafter
<PAGE>
10 CDM Regulations
10.1 For the purposes of the CDM Regulations the Tenant appoints the Developer
to act as the only client in respect of the Works
10.2 In relation to the Works the Developer:
(a) warrants to the Tenant that it has the competence to perform the
duties imposed on a client by the CDM Regulations
(b) shall forthwith make a declaration in respect of the appointment at
clause 10.1 and send it to the Health and Safety Executive in
accordance with paragraph 4(4) of the CDM Regulations
(c) shall send to the Tenant a copy of the Health and Safety Executive's
notice in acknowledgement of the relevant declaration promptly on
receipt
10.3 The Developer shall within two months after the Practical Completion Date
deliver to the Tenant a copy of the health and safety file referred to in
paragraph 12 of the CDM Regulations but from the date of delivery the
Tenant shall ensure that the health and safety file is available for
inspection by any person who may need information on the file within the
meaning of paragraph 12(1) of the CDM Regulations
11 Title
11.1 The Landlord has already deduced to the Tenant its title to the Estate
which is registered under title numbers BK290702 BK325323 BK72200 BK342999
BK165738 BK343891 BK322021 BK122648 BK119337 and BK134697 and the Tenant
shall raise no objection to or requisition on matters already deduced to
it save in relation to matters arising after the date of this Agreement
other than the form of:
(a) a car park management agreement to be entered into by the Landlord (1)
and The Royal Borough of Windsor and Maidenhead (2) pursuant to
the Planning Agreement referred to in clause 1.2(cc) if in the
form of the annexed draft or such draft is subject only to
amendments which (i) do not adversely affect the Tenant or (ii)
adversely affect the Tenant's use and enjoyment of the Building
but are approved by the Tenant in writing (such approval not to
be unreasonably withheld);
(b) a lease of the electricity substation for the Estate to be entered
into by the Landlord (1) and Southern Electric plc (2) if in the
form of the annexed draft
11.2 The Landlord undertakes with the Tenant to place its Land Certificates or
cause its Charge Certificates to be placed on deposit at HM Land Registry
within 28 days after the date hereof to enable the Tenant to register a
note of its interest pursuant to this Agreement and again within 28 days
after completion of the Lease to meet the Tenant's application for
registration of the Lease and to notify the Tenant's solicitors as soon as
practicable of the deposit numbers allocated
11.3 To the extent that the draft sub-station lease (in the form annexed
hereto) grants rights to the tenant therein named over and above the
rights excepted and reserved in favour of the Landlord under the terms of
the Lease (the "Rights") the sub-station lease shall not be completed
prior to the Tenant giving its written approval to the terms of Rights
(such approval not to be unreasonably withheld or delayed)
11.4 Completion of the draft Sub-Station Lease shall be in the form annexed
hereto save that variations to such drafts may be permitted provided that
the Tenant's written approval is first obtained in respect of such
variations that adversely affect the Tenant's use and enjoyment of the
Building (such approval not to be unreasonably withheld or delayed)
11.5 The Developer shall obtain a restrictive covenant indemnity policy in all
material respects in the form attached for a sum of not less than
(pound)11,000,000 in respect of the following restrictive covenants:
(a) entry number 1 of the Charges Register of title number BK119337 as
evidenced by office copy entries dated 19th March 1999
(b) entry number 1 of the Charges Register for title number BK134697 as
evidenced by office copy entries dated 19th March 1999
(c) entry number 1 of the Charges Register for title number BK122648 as
evidenced by office copy entries dated 19th March 1999
12 Grant of Lease
12.1 The Landlord shall procure that its solicitors prepare the engrossments of
the Lease and counterpart and deliver the counterpart to the Tenant or its
solicitors within ten Working Days of either the Net Internal Area of the
Building being ascertained under clause 13 or the date of this Agreement
(whichever the later)
12.2 The Landlord will grant or cause to be granted with limited title
guarantee to the Tenant and the Tenant will itself accept and the Tenant
and the Guarantor will in their respective capacities execute and deliver
to the Landlord a counterpart of the Lease and the Licence for Alterations
on the latest of:
(a) ten Working Days after the Practical Completion Date and
(b) ten Working Days after delivery of the engrossment of the
counterpart Lease and (if agreed) the Licence for Alterations to the
Tenant or its solicitors and
(c) five Working Days after the Tenant has received unconditionally the
warranties/deeds referred to in clause 2.3 (other than the
Warranting Subcontractor warranties)
(d) five Working Days after the Landlord's solicitors have produced to
the Tenant's solicitors certified copies of completed transfers to
the Landlord of the unencumbered freehold interests in the whole of
the land registered in each of title numbers BK122648 BK119337
BK134697 and BK165738
(e) five Working Days after the Rent has been agreed (following the
agreement or determination of the measuring of the Building)
(f) five Working Days after the Tenant or the Tenant's Solicitors have
received the Environmental Consultant's Certificate
(g) (at the Landlord's discretion) the delivery of the Legal Opinion
Letter referred to in clause 26.3
(h) the provision to the Tenant of a copy (certified as true and
complete by the solicitors for the Developer) of the Restrictive
Covenant Insurance Policy on risk
Provided that on completion of the Lease the Landlord shall deliver to the
Tenant:
(i) a certificate from the solicitors for the Landlord certifying that the
Lease is made in accordance with the Local Government
Superannuation (Scotland) Regulations 1987 (as amended) or
some other act or authority as required by the restriction
set out in entries 2 of the Proprietorship Registers for
Title Numbers BK322021 BK72200 BK342999 BK290702
BK325323 and BK343891 (including if relevant all other
titles within the Estate of which the Landlord may become
registered as proprietor prior to completion and in which
an identical restriction has been entered in the
Proprietorship Register) as evidenced by office copy
entries of these titles dated 10th March 1999
(ii) a letter of consent from BG Land Investments Limited of 100
Thames Valley Park Drive Reading to the grant of the Lease
pursuant to entry 4 of the Proprietorship Register for Title
Number BK290702 as evidenced by office copy entries dated 10th
March 1999
Completion of the Lease shall take place at the offices of the Landlord's
solicitors or at such other place in Greater London as they shall require
12.4 The term of the Lease shall commence on the Practical Completion Date
12.5 Following the completion of the Lease and if and to the extent that the
Tenant is denied the exercise of its rights over any part of the Estate
granted by the Landlord under clause 4 (rights granted) of the Lease by
reason of a failure by the Landlord to be registered at HM Land Registry
as proprietor of title numbers BK122648 BK119337 BK134697 and/or BK165738
then for the period of such denial the provisions of clause 10.4.1
(suspension of rent) of the Lease shall apply as if such denial was caused
by damage to the relevant part of the Estate by an Insured Risk
12.6 The Landlord undertakes to apply to HM Land Registry for the registration
of the Council Transfer as soon as practicable following its completion
and to use best endeavours to reply to all requisitions (if any) raised by
HM Land Registry in relation to such application
12.7 ((a)) The Landlord shall use all reasonable endeavours to ensure
that the Council Transfer is completed within three months of the
Practical Completion Date and take all reasonable steps required to
enforce the obligations of The Royal Borough of Windsor and
Maidenhead in the Council Agreement
(b) the Landlord shall comply with all its obligations in the Council
Agreement which are still subsisting and are pre-conditions to the
completion of the Council Transfer Provided That insofar as such
obligations relate to the Works they shall be the sole
responsibility of the Developer
13 Rent and Service Charge
13.1 As soon as practicable but in any event within five Working Days before
the date on which the Sectional Completion Date for the Building the
Landlord the Developer and the Tenant or their respective nominated
representatives shall jointly measure the Net Internal Area of the
Reception and separately of the remainder of the Building and seek to
agree it In the event of any failure to agree any measurement such
measurement shall be determined by an independent expert pursuant to the
provisions of clause 18.2
13.2 The Rent payable under the Lease and to be written into the definition of
"Rent" in the Lease shall be the aggregate of:
(a) (pound)14.50 per square foot of Net Internal Area of the Reception
(b) (pound)29.00 per square foot of Net Internal Area of the remainder
of the Building (except the Third Floor) and
(c) (pound)29.00 per square foot of Net Internal Area of the Third Floor
subject to a maximum aggregate figure of (pound)706,192.00
13.3 ((a)) The Rent shall commence to be payable on the date specified in
clause 13.3(b) the Insurance Rent and the Service Charge shall
commence to be payable on the Sectional Completion Date of the
Building and the blank spaces in the Lease shall be completed
accordingly In the event of any failure to agree the Rent
Commencement Date the issue shall be determined by an independent
expert pursuant to the provisions of clause 18.2
(b) On the completion of the Lease the date to be inserted as the Rent
Commencement Date shall be the date that is six months after the
Sectional Completion Date for the Building but if and to the
extent that the Tenant would not by virtue of clause 1.2(ll) of
this Agreement be liable to pay Rent until a later date the
Developer shall reimburse to the Tenant such rent (plus VAT (if
any) on the amount to be reimbursed) for the period commencing on
the date from which it is payable under the Lease and ending on
the date on which Rent would have been due to commence under
clause 1.2(ll) such reimbursement to be made by the Developer
(together with any irrecoverable VAT paid by the Tenant) within
five Working Days of written demand by the Tenant provided that:
(i) in the case of dispute the matter shall be referred for
resolution to the Independent Expert pursuant to clause 18
(ii) clause 27 shall apply to any late payments by the Developer
pursuant to this sub-clause 13.3(b)
13.4 The Landlord shall procure that the Tenant shall not pursuant to the
service charge provisions of the Lease or otherwise be required to
contribute towards any costs in connection with the carrying out of the
Works by the Developer
14 Determination
14.1 The Developer or (in circumstances where the Funding Agreement has been
lawfully terminated the Landlord) may determine this Agreement by written
notice to the Tenant if both:
(a) the Tenant or the Guarantor fails to take up the Lease when due or
if any event occurs which had the Lease been granted would have
entitled the Landlord to re-enter the Premises and
(b) either such failure or event is incapable of remedy or it is capable
of remedy and the Developer has served on the Tenant written notice
specifying the failure or event and requiring it to be remedied
within a reasonable time (and which in the case of failure to take
up the Lease shall be fifteen Working Days) and the Tenant has
failed so to do
14.2 If this Agreement is determined under clause 14.1 the Tenant shall forfeit
all interest in the Premises and in any fixtures or works installed in
them without the Landlord or the Developer making to the Tenant any
compensation or allowance whatsoever and shall apply to cancel any notice
or caution registered on its behalf at HM Land Registry
14.3 Termination shall not prejudice any rights or remedies which any party may
have in respect of antecedent breach of this Agreement by another
14.4 To the intent that the Tenant shall be protected against undue loss by
reason of the exercise of the right of determination under this clause the
parties acknowledge the right of the Tenant to apply to the Court for
relief against determination and in relation thereto to the operation of
the principles upon which the Court would grant or withhold relief if it
were exercising jurisdiction under section 146 of the Law of Property Act
1925
15 No Demise
15.1 Until the actual grant of the Lease this Agreement shall not operate or be
deemed to operate as a demise of the Premises nor shall the Tenant have or
be entitled to any estate right or interest in the Premises or any part of
them or in any materials in or upon them other than such equitable
interest as is created by and such rights as are granted by this Agreement
16 Alienation
16.1 The Tenant shall not assign mortgage charge or in any way deal or part
with this Agreement or any interest under it
17 Declaration of Non-Merger
17.1 The obligations of the parties under this Agreement shall continue
notwithstanding the grant of the Lease insofar as they remain to be
performed and observed
18 Resolution of Disputes
18.1 Subject to clause 18.2 if there shall be any dispute between the parties
arising out of or in connection with this Agreement it may be referred by
either party to the Arbitrator for determination and the Arbitrator shall
act as an arbitrator in accordance with the Arbitration Act 1996
18.2 In the event that there is a dispute in relation to whether there has been
correctly issued for the purposes of this Agreement the Certificate of
Sectional Completion of the Building or whether the Sectional Completion
Date of the Building has arisen for the purposes of this Agreement under
clause 6.4 or that the parties cannot agree on the measurement of the
Building under clause 13.1 or the Rent Commencement Date under clause
13.3(a) or the Tower Room Works have been completed in accordance with
clause 2.9 or the Developer's obligations under clause 13.3(b) the
question shall be determined by an Independent Expert who shall be a
suitably experienced partner or director from the firm named in the left
hand column below nominated by the senior partner (or chairman) of that
firm or if that firm or person is not available or is unwilling to act
such partner or director from the firm named in the right hand column
listed below The firms are to be approached in the order listed so that if
partner or director nominated from the first firm listed is willing to act
he shall be the relevant Expert:
First Choice Reserve
Jones Lang LaSalle FPD Savills
18.3 If an Independent Expert is appointed then:
(a) he shall be required to permit the parties no more than five Working
Days to make written representations to him
(b) he shall (if the matter referred to him is in relation to
measurement) himself measure the Net Internal Area of the Reception
and separately of the rest of the Building
(c) he shall be required to issue his determination within a period of
five Working Days after the receipt of the written representations
or submissions or if there is none after the expiry of the time
allowed for them to be made or as soon as may reasonably be
practicable afterwards
(d) in making his determination he shall be required to have regard to
such representations and submissions as have been made to him
(e) his costs and expenses shall be paid to him as he may direct after
written representations made to him to that end by a party to the
dispute
(f) if he does or becomes unwilling or unable to act then a new
Independent Expert may be appointed at the request of any party to
the dispute
18.4 The determination of the Independent Expert shall be conclusive between
and binding on the parties
19 Notices/Applications for approvals
19.1 Whenever possible any notice or application for any approval under this
Agreement shall be sent first by fax (with the hard copy also being sent
immediately thereafter) and any notice to be served on or communication to
be sent to any party to this Agreement shall be deemed to be properly
served (inter alia) if sent by Recorded Delivery post or delivery by hand
in the case of the Tenant the Landlord the Developer or the Surety to the
registered office of that party and also to that party's solicitors and in
the case of the Guarantor to the solicitors referred to in clause 26.2
19.2 Until notified of any change in writing the parties shall address
correspondence to the following fax numbers:
Surety/Developer: 0171 408 1666 (for the attention of M. Bonning-Snook
Esq)
Tenant: 01793 886170 (for the attention of Christine
Foulkes/Richard Garland) with a copy to the Tenant's
Surveyor 0171 409 7476 (for the attention of Stephen
Fox)
Landlord: 0141 566 4353 (for the attention of Chris Darroch at
Argyll Property Asset Managers)
Guarantor: 0171 274 5091 at Richards Butler (for the attention
of CHKS/99-7783)
19.3 For the purposes of this Agreement the failure to send a notice by fax
shall not affect the validity of a notice but only the timing of its
service
19.4 Where applications for approval are sent to the Tenant pursuant to clause
19.1 such applications shall be sent simultaneously to the Tenant's
Surveyor
20
<PAGE>
Value Added Tax
The parties shall subject to first receiving a valid Value Added Tax
invoice addressed to the payer in respect thereof pay to each other Value
Added Tax at the appropriate rate on all payments due from one to the
other under this Agreement and in respect of any other taxable supplies
made by one to the other
21 Legal Costs
Each party shall bear its own legal and other costs in relation to this
transaction
22 No Representations
This Agreement incorporates the entire contract between the parties and
the Tenant acknowledges that it has not entered into this Agreement in
reliance on any statements or representations made to the Tenant by or on
behalf of the Landlord or the Developer save those written statements of
the Landlord's solicitors or the Developer's solicitors made prior to the
date of this Agreement in response to written enquiries from the Tenant's
solicitors
23 Liability of Landlord
The Landlord shall not be liable to the Tenant under this Agreement for
the acts or defaults of the Developer. In particular but without limiting
the previous sentence the Landlord shall not be liable to the Tenant for
the carrying out or completion of the Works or for any defects in them
(unless the same arise as a result of the wrongful act neglect or default
of the Landlord)
24 Guarantor's Guarantee
In consideration of the Landlord and the Developer entering into this
Agreement at the request of the Guarantor the Guarantor covenants with and
guarantees to the Landlord and separately to the Developer that the Tenant
will observe and perform its obligations under this Agreement to the
intent that (mutatis mutandis) the covenants guarantees and conditions
contained in clause 22 of the Lease shall be deemed to be incorporated in
this clause
25 Surety's Guarantee
25.1 In consideration of the Tenant entering into this Agreement at the
Surety's request the Surety hereby guarantees due performance by the
Developer of all its obligations and liabilities under this Agreement and
undertakes either itself or by its successors or agents to make good
forthwith any default thereunder on the Developer's part
25.2 If the Developer shall fail to carry out and complete this Agreement in
any way whatever or shall commit any breach of any of its obligations
whether express or implied arising under this Agreement or in any way
connected therewith then the Surety will indemnify the Tenant against and
pay and make good to the Tenant any and all losses damages costs expenses
and liabilities which may be incurred by the Tenant by reason of or in
consequence of any such default or breach on the part of the Developer
25.3 The Surety shall not be discharged or released from this guarantee:
(a) by any arrangement made between the Developer and the Tenant (whether
or not involving the Landlord) nor by any amendment variation or
extension of this Agreement whether made with or without the
Surety's consent and this guarantee shall apply to any
obligations and liabilities undertaken by the Developer pursuant
to any such amendment extension or variation of this Agreement
and to any further or additional works to be carried out pursuant
thereto
(b) by any neglect delay or forbearance on the part of the Tenant in
enforcing the performance or observance of this Agreement nor by any
time consents agreements or arrangements which may be given by the
Tenant to the Developer or agreed between them
25.4 If the Developer enters into liquidation and the liquidator disclaims this
Agreement or if the Developer shall be wound up or cease to exist and the
Tenant serves upon the Surety a notice to do so the Surety will become
primarily bound by this Agreement in place of the Developer
26 Proper Law
26.1 This Agreement shall be governed and construed in accordance with English
law and the parties submit to the jurisdiction of the English Courts
26.2 The Guarantor irrevocably authorises and appoints Messrs Richards Butler
(quoting reference CHKS/99-7783) of Beaufort House 15 St Botolph Street
London EC3A 7EE (or such other firm of solicitors resident in England or
Wales as it may from time to time by written notice to the Landlord and
the Developer substitute) to accept service of all legal process arising
out of or connected with this Agreement and service on the said Messrs
Richards Butler (quoting reference CHKS/99-7783) (or such substitute)
shall be deemed to be service on the Guarantor
26.3 Immediately prior to the completion of the Lease the Tenant and the
Guarantor shall deliver the Legal Opinion Letter in favour of the Landlord
(and its successors in title) to the Landlord such Legal Opinion Letter to
be issued by Sidley & Austin or such other firm of suitably qualified
lawyers as the Landlord may reasonably require
27 Interest on Late Payment
If and so often as any sums payable hereunder by the Developer to the
Tenant or by the Tenant to the Developer shall be unpaid after becoming
due and payable the party from whom such payment shall be due shall pay on
demand interest on such sums from the due date until payment in cleared
funds at the rate of 3 per cent per annum above the base rate of Midland
Bank plc in force from time to time or if such base rate shall be
incapable of determination 3 per cent per annum above a rate reasonably
equivalent to such base rate
IN WITNESS whereof this Agreement has been duly executed as a deed (but not
delivered until) the date first above written
EXECUTED as a DEED by )
THE GALILEO COMPANY )
acting by )
Director
Director/Secretary
SIGNED as a DEED on behalf of )
GALILEO INTERNATIONAL INC )
(a company incorporated in Delaware, )
United States of America) by ................... )
...........................................
............... and ............................................ )
being persons who in accordance with )
the laws of that territory are acting under )
the authority of that company )
...........................................
EXECUTED as a DEED by )
HELICAL BAR PLC )
acting by )
Director
Director/ Secretary
<PAGE>
Exhibit 10.2
Bank of Montreal Guaranty-Amendment No.1
Amendment No. 1 to Guaranty Agreement
Amendment dated as of November 18, 1998 to the Guaranty
Agreement dated as of June 5, 1998 (the "Guaranty") executed by
Galileo International, Inc. (the "Guarantor") in favor of Bank of
Montreal, as Agent and Bank of Montreal and the other lenders which
are or may from time to time become "Banks" under the Credit
Agreement dated as of June 5, 1998 among Galileo Canada ULC, the
lenders party thereto and Bank of Montreal, as Agent.
W i t n e s s e t h
Whereas, the parties hereto desire to amend the Guaranty in
certain respects as more fully set below;
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 Guaranty has the meaning assigned to such term in the
Guaranty. 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 Guaranty
shall, after this Amendment becomes effective, refer to the Guaranty
as amended hereby.
Section 2. Amendment to the Guaranty.
The definition of Restricted Payment in Section 5.01 is amended
by the addition of the following proviso:
;provided that repurchases by the Guarantor of shares of its
common stock subsequent to October 31, 1998 shall not
constitute Restricted Payments to the extent that the aggregate
amount for such repurchases subsequent to October 31, 1998 does
not exceed $250,000,000.
Section 3. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of Illinois.
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
Guarantor 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.
Galileo International, Inc.
By: /s/ Paul H. Bristow
Title Sr. Vice President &
CFO
Bank of Montreal, individually
and as Agent
By: /s/ Patrice C. Wetzel
Title Director
<PAGE>
Exhibit 10.3
Bank of Montreal Guaranty-Amendment No. 2
1470939
Amendment No. 2
to
Guaranty Agreement
Amendment dated as of May 14, 1999 to the Guaranty Agreement dated
as of June 5, 1998 (the "Guaranty") executed by Galileo International,
Inc. (the "Guarantor") in favor of Bank of Montreal, as Agent and Bank of
Montreal and the other lenders which are or may from time to time become
"Banks" under the Credit Agreement dated as of June 5, 1998 among Galileo
Canada ULC, the lenders party thereto and Bank of Montreal, as Agent.
W i t n e s s e t h
Whereas, the parties hereto desire to amend the Guaranty as more
fully set below;
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 Guaranty has
the meaning assigned to such term in the Guaranty. 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 Guaranty shall, after this Amendment becomes
effective, refer to the Guaranty as amended hereby.
Section 2. Amendment to the Guaranty. The figure "$250,000,000" in
the definition of "Restricted Payment" in Section-5.01 is changed to
"$500,000,000".
Section 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Illinois.
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 Guarantor 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.
Galileo International, Inc.
By: /s/ Paul H. Bristow
Title Sr. Vice President & CFO
Bank of Montreal, individually and
as Agent
By: /s/ Patrice C. Wetzel
Title Director
<PAGE>
Exhibit 10.4
AMENDMENT NO. 2 TO AMENDED AND RESTATED
CREDIT AGREEMENT
AMENDMENT dated as of May 14, 1999 to the Amended and Restated
Credit Agreement dated as of July 22, 1998 (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 as
more fully set forth below;
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 the Credit Agreement. The figure
"$250,000,000" in the definition of "Restricted Payment" in Section 1.01 is
changed to "$500,000,000".
Section 3. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
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.
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
Chief Financial Officer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Robert Bottamedi
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Chas McDonell
Title: Vice President
BANK OF MONTREAL
By: /s/ Patrice C. Wetzel
Title: Director
MIDLAND BANK PLC
By: /s/ Dean Cooper
Title: Corporate Banking Manager
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By: /s/ Hisashi Miyashiro
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/ Thomas Comfort
Title: Group Vice President
By: /s/ Joann L. Holman
Title: Vice President
BANK AUSTRIA AG
By: /s/ David W. Hanni
Title: Vice President
By: /s/ Douglas B. Warren
Title: Vice President
CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Philippe Soustra
Title: Senior Vice President
SOCIETE GENERALE
CHICAGO BRANCH
By: /s/ Jose A. Moreno
Title: Director
UBS AG,
STAMFORD BRANCH
By: /s/ Philippe R. Sandmeier
Title: Director
By: /s/ Paula Mueller
Title: Director
THE NORTHERN TRUST COMPANY
By: /s/ Mark E. Taylor
Title: Second Vice President
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Kenneth C. Eichwald
Title: First Vice President and
Assistant General 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/ Richard E. Stahl
Title: Executive Vice President
<PAGE>
Exhibit 10.5
AMENDMENT NO. 4 TO FIVE-YEAR CREDIT AGREEMENT
AMENDMENT dated as of May 14, 1999 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 as more fully set forth below;
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 the Credit Agreement. The
figure "$250,000,000" in the definition of "Restricted
Payment" in Section 1.01 is changed to "$500,000,000".
Section 3. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
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.
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
Chief Financial Officer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Robert Bottamedi
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Chas McDonell
Title: Vice President
BANK OF MONTREAL
By: /s/ Patrice C. Wetzel
Title: Director
MIDLAND BANK PLC
By: /s/ Dean Cooper
Title: Corporate Banking
Manager
THE BANK OF TOKYO-MITSUBISHI,
LTD., CHICAGO BRANCH
By: /s/ Hisashi Miyashiro
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/ Thomas Comfort
Title: Group Vice President
By: /s/ Joann L. Holman
Title: Vice President
CREDIT LYONNAIS
NEW YORK BRANCH
By: /s/ Philippe Soustra
Title: Senior Vice President
ROYAL BANK OF CANADA
By:
Title:
SOCIETE GENERALE
CHICAGO BRANCH
By: /s/ Jose A. Moreno
Title: Director
UBS AG,
STAMFORD BRANCH
By: /s/ Philippe R. Sandmeier
Title: Director
By: /s/ Paula Mueller
Title: Director
THE NORTHERN TRUST COMPANY
By: /s/ Mark E. Taylor
Title: Second Vice President
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Kenneth C. Eichwald
Title: First Vice President and
Assistant General 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/ Richard E. Stahl
Title: Executive Vice President
<PAGE>
Exhibit 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of __________, 1999
between GALILEO INTERNATIONAL, L.L.C., a limited liability
company organized under the laws of the State of Delaware and
doing business at 9700 West Higgins Road, Suite 400, Rosemont,
Illinois (the "Company"), and _______________ ("Executive").
W I T N E S S E T H :
WHEREAS, the Company is a wholly-owned subsidiary
of Galileo International, Inc., a Delaware corporation (the
"Parent"), and is engaged in the travel services and computer
reservation systems business in the United States, the United
Kingdom and elsewhere in the world;
WHEREAS, Executive serves as a Senior Vice
President of the Company; and
WHEREAS, the Company wishes to continue to employ
Executive pursuant to the terms of this Agreement and
Executive wishes to continue in such employment;
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Employment; Position and Responsibilities.
The Company has recommended to the Board of Directors of the
Parent (the "Board"), and the Board has agreed, that the
Executive continue to be employed, and Executive agrees to
serve, as a Senior Vice President of the Company. In such
capacity, Executive shall have such authority and
responsibility as shall be specified by the Board of Directors
of the Parent or the President and Chief Executive Officer of
the Company (the "Company CEO") and shall exercise such
authority and fulfill such responsibility subject to the
direction and control of the Board, the Company CEO and such
other executive officer of the Company as shall be designated
by the Board or the Company CEO. Executive will be located at
the Rosemont, Illinois office of the Company or at such other
location as the Board or the Company CEO may designate.
Executive acknowledges that Executive's employment hereunder
will require substantial travel.
2. Obligations of Executive. During the Term
of this Agreement (as defined in Section 4(a) hereof)
Executive agrees that Executive will devote substantially all
of Executive's time, attention and energies to the business of
the Company, that Executive will exercise the highest degree
of loyalty and conduct in the performance of Executive's
duties and that Executive will do nothing that harms, directly
or indirectly, the business or reputation of the Company.
Executive shall at all times be subject to, observe and carry
out such rules, regulations, policies, directions and
restrictions as the Company shall from time to time establish.
3. Compensation.
(a) Executive's initial salary during the Term of
this Agreement shall be at the rate of $__________ per annum.
The Compensation Committee of the Board (the "Committee") will
review Executive's salary on an annual basis (normally on or
about April 1) and increases (if any) will be at the
discretion of the Committee taking into account Executive's
individual job performance and other factors deemed
appropriate by the Committee.
(b) Executive will participate, on a basis
comparable (except as otherwise provided in this Agreement) to
other executives of the Company, in the Company's annual
management incentive compensation plan (the "MIP"), a copy of
which has been furnished to Executive. The terms of the MIP
will apply to Executive except as otherwise provided by this
Agreement. The annual incentive compensation payment for
Executive for each year during the Term of this Agreement
shall be determined by the Committee. Nothing in this
Agreement shall prevent the Company from changing the MIP or
from reducing or terminating annual incentive compensation
payments thereunder altogether, provided that the changes,
reductions or terminations are applicable to executives of the
Company generally.
(c) The Committee shall, in its discretion and
to the extent permitted by the Galileo International, Inc.
1997 Stock Incentive Plan, the 1999 Equity and Performance
Incentive Plan or any other plan pursuant to which stock
options may be granted to Executive in accordance with this
Section 3(c), grant non-qualified stock options to Executive,
as long-term compensation, each year during the Term of this
Agreement. The actual number of shares of Common Stock subject
to each such option shall be determined by the Committee based
upon an annual assessment of Executive's performance conducted
by the Committee or the Board, or both. The terms of the
options to be granted in accordance with this Section 3(c)
shall be determined by the Committee,
(d) Executive shall be entitled to paid annual
vacation, personal leave and holidays during each calendar
year during Executive's employment in accordance with the
policies of the Company. Executive will participate in
health, welfare (including disability) and defined benefit and
defined contribution retirement plans, including but not
limited to the pension plan and 401(k) savings plan, that are
maintained by the Company on the same basis as such benefits
are generally available to employees of the Company in the
United States, and subject to the right of the Company to
change, reduce or terminate such plans or benefits in respect
of employees generally.
(e) Executive will be reimbursed for reasonable
business and travel expenses in accordance with the normal
policies of the Company. The Company will also provide
Executive with a monthly car allowance based on a three year
lease of a $36,000 automobile. The benefits and payments
described in this Section 3(e) shall not include an income tax
gross-up, and Executive will be responsible for any tax on
their value. Executive's expenses will be accounted for and
reimbursed through the Company's normal expense reporting and
approval process and Executive's expense reports will also be
reviewed annually by the Board or the Company CEO or a
committee or designee of the Board or the Company CEO.
4. Termination. (a) This Agreement shall
commence as of the date hereof and shall continue indefinitely
until terminated by the Company or Executive as provided in
Section 11(c) hereof or, in the event of a change in control,
as such term is defined in Section 12 of the Galileo
International, Inc. 1999 Equity and Performance Incentive Plan
("Change in Control"), this Agreement shall terminate on the
date which is 24 months following the date of such Change in
Control. Such term of this Agreement is referred to herein as
the "Term of this Agreement". The employment of Executive may
be terminated as provided in this Section 4 and the date of
such termination of Executive's employment is referred to
herein as the "Termination Date".
(b) If Executive terminates Executive's
employment under this Agreement without Good Reason as defined
in Section 4(b)(ii) hereof, or if the Company terminates
Executive's employment for Cause, as defined in Section
4(b)(i)hereof, the Company shall have no financial obligation
to Executive other than to pay Executive's base salary through
the Termination Date, and Executive's participation in
employee benefit plans of the Company shall cease as of such
Termination Date. The Company shall give Executive written
notice of a termination for Cause and the termination of the
Executive's employment shall be effective on the date that
such notice is given.
(i) For purposes of this Agreement, "Cause" shall
mean: (A) any act or omission that constitutes a material
breach by Executive of, or material misrepresentation or
omission under, this Agreement; (B) the commission by
Executive of a dishonest, illegal or wrongful act (1)
involving fraud, misrepresentation or moral turpitude, (2)
causing damage to the Company or (3) involving potential
damage to the business and reputation of the Company; (C)
Executive's willful and repeated absence from Executive's
employment; or (D) material and prolonged deficiencies in
Executive's performance of Executive's assigned duties and
responsibilities; In respect of events described in clauses
(C), and (D) above, the Company shall give Executive notice,
reasonable as to time, place and manner in the circumstances
(notwithstanding that such notice may not comply with Section
9), and an opportunity to cure the absence, failure, refusal
or disregard in question, provided that such absence, failure,
refusal or disregard is reasonably susceptible of cure in the
circumstances and, provided further, that the Executive shall
make reasonable efforts to effect such cure within 30 days and
shall have effected such cure within 90 days.
(ii) For purposes of this Agreement, "Good
Reason" shall mean the occurrence of either of the following
events, provided Executive has not given Cause for termination
or become incapable of performing Executive's duties by reason
of disability (as defined in the Company's disability plan):
(A) the Company shall have defaulted in its obligation to pay
compensation to Executive when, as and if due under the terms
of this Agreement, or (B) the Company shall have failed or
refused to appoint and maintain Executive in a job having a
compensation opportunity at least equal to that of the
position set forth in Section 1 hereof provided that a
decrease in the compensation opportunity comparable to that of
other peer executives shall not constitute Good Reason. In
respect of events described in clause (A) or (B) above,
Executive shall give the Company written notice and 30 days to
cure the default, failure or refusal. If such default,
failure or refusal is not cured during such 30-day cure
period, Executive shall give written notice to the Company of
a termination by Executive for Good Reason.
(c) Subject to Section 4(d) hereof, if the
Company terminates the employment of Executive without Cause
or Executive terminates Executive's employment with Good
Reason prior to a Change in Control, then, provided that
Executive complies with the provisions of Section 5 until such
time as such information is generally known through no fault
of the Executive and Section 6 hereof for a period of 24
months after the Termination Date, the Company shall pay
compensation and provide benefits to Executive in respect of
each of the following three periods as follows:
(i) Compensation through the Termination Date
Within 30 days after the Termination Date the Company will pay
Executive a lump sum equal to the sum of (x) Executive's
annual salary through the Termination Date, to the extent not
theretofore paid, plus (y) an amount equal to the annual
incentive compensation Executive would have received under the
MIP (assuming termination of employment had not occurred)
attributable to the year in which the Termination Date occurs,
assuming 100% target achievement, multiplied by a fraction,
the numerator of which is the number of days in such year
through the Termination Date and the denominator of which is
365.
(ii) Compensation for additional year
Within 30 days after the Termination Date the Company will pay
Executive a lump sum equal to the sum of (x) Executive's
annual salary, at its rate in effect at the Termination Date,
plus (y) an amount equal to the annual incentive compensation
Executive would have received under the MIP (assuming
termination of employment had not occurred) attributable to
the year in which the Termination Date occurs, assuming 100%
target achievement.
(iii) Compensation subject to mitigation
Commencing 12 months after the Termination Date and for a
period of 12 months following the date which is 12 months
after the Termination Date, the Company will pay Executive's
salary, at its rate in effect at the Termination Date, on a
monthly basis, plus a monthly amount equal to one-twelfth of
the annual incentive compensation Executive would have
received under the MIP (assuming termination of employment had
not occurred) attributable to the year in which the
Termination Date occurs, assuming 100% target achievement.
Such monthly payments shall be reduced by any income Executive
may generate by engaging during such period in other
employment or business activities (not including income from
personal investments). Executive shall have an affirmative
duty to seek opportunities to generate such other income in
mitigation of the Company's obligation to make monthly
payments to Executive hereunder. Executive shall have an
affirmative duty to inform the Company of the amount of any
income that Executive may earn through other employment or
business activities during this period.
(iv) The Company shall continue to provide to
Executive the group insurance benefits to Executive pursuant
to Section 3(d) hereof for a period of 24 months after the
Termination Date to the extent that such benefits are
generally available to employees of the Company in the United
States. Such benefits shall terminate on the date prior to
the expiration of such 24-month period on which Executive
shall become entitled to receive benefits from another
employer. Executive shall notify the Company in writing no
later than ten (10) days after the date on which Executive
shall be covered by the benefits of another employer. The
Company shall be under no obligation to continue to make any
such benefit or benefit plan generally available to employees
in the United States.
(d) If the Company terminates the employment of
Executive without Cause prior to a Change in Control if such
termination of employment is a condition of the agreement
pursuant to which the Change in Control occurs, or if the
Company terminates the employment of Executive without Cause
within two years following a Change in Control, or if
Executive terminates Executive's employment with Good Reason
within two years following a Change in Control, then, provided
that Executive complies with the provisions of Section 5 until
such time as such information is generally known through no
fault of the Executive and Section 6 hereof for a period of 24
months after the Termination Date, the Company shall pay
compensation and provide benefits to Executive as follows:
(i) Within 30 days after the Termination Date the
Company will pay Executive a lump sum equal to the sum of (x)
Executive's annual salary through the Termination Date, to the
extent not theretofore paid, plus (y) an amount equal to the
annual incentive compensation Executive would have received
under the MIP (assuming termination of employment had not
occurred) attributable to the year in which the Termination
Date occurs, assuming 100% target achievement on Executive's
part, multiplied by a fraction, the numerator of which is the
number of days in such year through the Termination Date and
the denominator of which is 365.
(ii) Within 30 days after the Termination Date
the Company will pay Executive a lump sum equal to the sum of
(w) two times Executive's salary, at its rate in effect at the
Termination Date, plus (x) an amount equal to two times the
annual incentive compensation Executive would have received
under the MIP (assuming termination of employment had not
occurred) attributable to the year in which the Termination
Date occurs, assuming 100% target achievement on Executive's
part.
(iii) The Company shall provide group insurance
benefits to Executive pursuant to Section 3(d) hereof for a
period of 24 months after the Termination Date; provided,
however, that such benefits shall terminate on the date prior
to the expiration of such 24-month period on which Executive
shall become entitled to receive benefits from another
employer.
(e) If the employment of Executive terminates by
reason of retirement with the approval of the Board, death or
disability, Executive shall be entitled to the benefits
applicable to Executive provided pursuant to the plans,
policies and programs of the Company then in effect, but
Executive shall not be entitled to any payment or benefit
pursuant to this Agreement except with respect to retirement
with the approval of the Board to the extent provided in
Section 3(c)(v) hereof.
(f) In the event it shall be determined by the
Company's public accounting firm that any payment or
distribution by the Company or its affiliated companies to or
for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
adjustment required under this Section 4(f)) (in the
aggregate, the "Total Payments"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended or any amendment, replacement or
similar provision thereto(the "Excise Tax"), and if it is
determined by the Company's public accounting firm that (i)
the amount remaining, after the Total Payments are reduced by
an amount equal to all applicable federal, state and local
taxes (computed at the highest applicable marginal rate),
including the Excise Tax, is less than (ii) the amount
remaining, after taking into account all applicable federal
and state taxes (computed at the highest applicable marginal
rate), after payment or distribution to or for the benefit of
Executive of the maximum amount that may be paid or
distributed to or for the benefit of Executive without
resulting in the imposition of the Excise Tax, then the
payments due hereunder shall be reduced so that the Total
Payments are One Dollar ($1) less than such maximum amount.
(g) The payments to Executive pursuant to Section
4 hereof shall be paid in lieu of any other amount of
severance relating to salary or bonus continuation to be
received by Executive upon termination of employment of
Executive under any severance plan, policy or arrangement of
the Company.
5. Confidentiality. During and after the
Term of this Agreement, Executive covenants and agrees that,
other than as required by law, Executive will not disclose to
anyone (including representatives of airlines that are
stockholders of the Parent) without the Company's written
consent, any confidential materials, documents, records or
other information of any type whatsoever concerning or
relating to the business and affairs of the Company that
Executive may have acquired in the course of Executive's
employment hereunder, including but not limited to: (i) trade
secrets of the Company; (ii) lists of customers or clients of
the Company; and (iii) information relating to methods of
doing business (including information concerning operations,
technology and systems) in use or contemplated use by the
Company and not generally known in the industries in which the
Company competes or actually or demonstrably anticipates
competing.
6. Nonsolicitation. (a) Executive covenants
and agrees that during the Term of this Agreement, and for a
period of 24 months after the Termination Date, Executive will
not personally solicit, or encourage others to solicit,
employees of the Company to leave the employ of the Company
for the purpose of engaging in any employment competitive with
the Company or otherwise.
(b) Executive and the Company recognize that, as
a result of the globalization of markets and technology
through advances in telecommunications systems and the
internationalization of the travel services and computer
reservation system business, the market for the aforedescribed
business is not susceptible to geographic definition.
Consequently, and given the nature of the position Executive
holds with the Company, Executive and the Company agree that
the restrictions contained in Section 6(a) upon the activities
of Executive are geographically unlimited and reasonable as
such.
(c) It is the desire and intent of the parties
that the provisions of Section 5 hereof, of this Section 6 and
of Section 7 hereof shall be enforced to the fullest extent
permissible under the laws and public policies of the State of
Illinois. If any particular provisions or portions of Section
5 hereof, of this Section 6 or Section 7 hereof shall be
adjudicated to be invalid or unenforceable, Section 5 hereof,
this Section 6 and Section 7 hereof shall be deemed amended to
delete therefrom such provision or portion adjudicated to be
invalid or unenforceable, such amendment to apply only in the
particular case and jurisdiction in which such adjudication is
made.
7. Systems and Technology Ownership.
Executive acknowledges and agrees that during the Term of
this Agreement Executive will disclose to the Company all
material products, ideas, processes, systems inventions and
business plans developed by Executive which relate, directly
or indirectly, to the travel services and systems business of
the Company (collectively, the "Intellectual Property").
Executive further agrees that any Intellectual Property so
developed will be the sole property of the Company and that
Executive will, at the Company's request and cost, do whatever
is necessary to secure the rights thereto by patent, copyright
or otherwise to the Company. In connection with the
foregoing, Executive represents, warrants and covenants that
any Intellectual Property or other copyrightable or patentable
subject matter that Executive delivers to the Company has been
or will be created solely by Executive or that at the time of
delivery thereof Executive will have the right to transfer
such subject matter to the Company for use in its travel
services and computer reservation systems business. Further,
and not by way of limitation, Executive hereby assigns to the
Company all of Executive's right, title and interest in and to
any Intellectual Property from the moment of creation
thereof. This Section 7 shall not apply to any Intellectual
Property or invention for which no equipment, supplies,
facility or trade secret information of the Company was used
and which was developed entirely on Executive's own time,
unless (a) the Intellectual Property or invention relates (i)
to the business of the Company, or (ii) to the Company's
actual or demonstrably anticipated research or development, or
(b) the Intellectual Property or invention results from any
work performed by Executive for the Company.
8. Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of Illinois, not including its conflict of
laws principles. If, under such law, any portion of this
Agreement is at any time deemed to be in conflict with any
applicable statute, rule, judicial interpretation binding on
the parties, regulation or ordinance, such portion shall be
deemed to be modified or altered to conform thereto or, if
that is not possible, to be omitted from this Agreement, and
the invalidity of any such portion shall not affect the force,
effect or validity of the remaining portions hereof.
9. Notices. All notices required to be given
under this Agreement shall be in writing and shall be deemed
effective when received and shall be delivered in person; or
by facsimile transmission (with confirmation of receipt); or
by mail, postage prepaid, for delivery as registered or
certified mail; or by overnight carrier service, addressed,
(a) in the case of Executive, to Executive at Executive's then
current business address with the Company, with a copy to
Executive's residential address as reflected above (or such
other residential address as Executive may notify the Company
from time to time) or, (b) in the case of the Company, to the
Company's Senior Vice President - Human Resources or to such
other person as the Company may designate in writing to
Executive.
10. Resolution of Disputes.
(a) The parties each hereby specifically submit
to the jurisdiction of any federal or state court located in
the State of Illinois and further agree that service of
process may be made within or without the State of Illinois by
giving notice in the manner provided in Section 9. Each party
hereby waives any right to a trial by jury in any dispute
between them. In the event the principal offices of the
Company are moved to a state other than Illinois, arbitration
of disputes hereunder shall take place in such state, and the
parties shall be deemed to have consented to personal
jurisdiction in such state.
(b) Executive recognizes that irreparable injury
would be caused to the Company, not adequately compensable by
money damages, by Executive's violation of any provision of
Section 5, 6 or 7 of this Agreement. Executive further agrees
that in the event of any such violation or threatened
violation the Company or any of its direct or indirect
subsidiaries or affiliates, in addition to such other rights
and remedies as may exist in its or their favor, may apply to
a court of law or equity to enforce the specific performance
of such provisions and, without notice to Executive, may apply
for an injunction or temporary restraining order against any
act which would violate any such provisions.
(c) The covenants of Executive contained in
Sections 5, 6 and 7 of this Agreement shall be construed as
independent of all other provisions contained in this
Agreement and shall survive the Term of this Agreement.
11. Miscellaneous. (a) Executive represents
and warrants to the Company that Executive has no contracts or
agreements of any nature that Executive has entered into with
any other person, firm or corporation that contain any
restraints on Executive's present or future services.
Executive further represents that Executive has brought to
Executive's employment hereunder, and will use in connection
with such employment, no customer lists or proprietary
information including computer software that was used by
Executive or to which Executive had access by reason of
Executive's prior employment and that is the property of
Executive's former employer.
(b) Executive acknowledges and agrees that this
Agreement constitutes the entire understanding between the
Company and Executive relating to the employment of Executive
by the Company, the Parent or any direct or indirect
subsidiary or affiliate of the Company, and supersedes all
prior written and oral agreements and understandings with
respect to the subject matter of this Agreement.
(c) This Agreement may be amended by a
subsequent written agreement signed by Executive and the
Company. In addition, the Company shall have the right prior
to a Change in Control, in its sole discretion, pursuant to
action by the Board, to approve the amendment or termination
of this Agreement, which amendment or termination shall not
become effective until the date fixed by the Board for such
amendment or termination, which date shall be at least 12
months after notice thereof is given by the Company to
Executive in accordance with Section 9 hereof; provided,
however, that no such action shall be taken by the Board
within 12 months after the date of this Agreement or during
any period of time when the Board has entered into discussions
relating to a Change in Control until, in the opinion of the
Board, such person has abandoned or terminated its efforts to
effect a Change in Control; and provided further, that in no
event shall this Agreement be amended or terminated without
the prior written agreement of Executive in the event of a
Change in Control. In the event that a Change in Control
occurs after a notice of amendment or termination has been
given by the Company as described in the immediately preceding
sentence and during the notice period specified in such
notice, such notice shall be of no force or effect and the
Term of this Agreement automatically shall be extended until
the date which is 24 months after the date of such Change in
Control.
(d) No waiver by either party of or failure to
assert any provision or condition of this Agreement to be
performed or right to be exercised shall be deemed a waiver of
such or similar or dissimilar provisions and conditions or
rights at the same time or any prior or subsequent time.
(e) This Agreement and all rights and
obligations of Executive are personal to Executive and shall
not be assignable and any purported assignment in violation
hereof shall not be valid or binding on the Company.
(f) This Agreement may be signed in counterpart.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the year and day first above
written.
GALILEO INTERNATIONAL, L.L.C.
By
EXECUTIVE:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27.1
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Form 10-Q for the quarter ended June 30, 1999 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-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 8,348
<SECURITIES> 0
<RECEIVABLES> 238,967
<ALLOWANCES> 11,630
<INVENTORY> 0
<CURRENT-ASSETS> 280,873
<PP&E> 489,124
<DEPRECIATION> 310,864
<TOTAL-ASSETS> 1,310,510
<CURRENT-LIABILITIES> 215,584
<BONDS> 434,392
0
0
<COMMON> 1,050
<OTHER-SE> 526,948
<TOTAL-LIABILITY-AND-EQUITY> 1,310,510
<SALES> 0
<TOTAL-REVENUES> 398,822
<CGS> 0
<TOTAL-COSTS> 294,807
<OTHER-EXPENSES> 438
<LOSS-PROVISION> 937
<INTEREST-EXPENSE> 969
<INCOME-PRETAX> 103,577
<INCOME-TAX> 41,328
<INCOME-CONTINUING> 62,249
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,249
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.59
</TABLE>
