SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
GALILEO INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, of other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1 Amount previously paid:
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(4) Date Filed:
EDGAR REPRESENTATION OF THE COMPANY'S LOGO
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
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Notice of Annual Meeting of Common Stockholders
to be held on April 29, 1999
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To the Stockholders of Galileo International, Inc.
Notice is Hereby Given that the annual meeting of the holders of Common
Stock of Galileo International, Inc. (the "Company")will be held on Thursday,
April 29, 1999 at 9:00 A.M. (local time), in the Grand Ballroom of the Hotel
Sofitel Chicago, 5550 North River Road, Rosemont, Illinois, for the following
purposes:
1. To elect two individuals to the Board of Directors.
2. To approve the Galileo International, Inc. 1999 Equity and
Performance Incentive Plan.
3. To transact such other business as may properly come before the
meeting.
Common stockholders of record as of the close of business on Tuesday, March
2, 1999 will be entitled to notice of and to vote at the annual meeting and any
adjournments thereof. A list of stockholders entitled to vote at the annual
meeting will be available for inspection by stockholders for any purpose germane
to the annual meeting at the offices of the Company for the ten days immediately
preceding the annual meeting date.
Whether or not you plan to attend the annual meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed
envelope. Your proxy may be revoked in the manner described in the Proxy
Statement at any time before it has been voted at the annual meeting.
Galileo International, Inc.
/s/ Babetta R. Gray
Babetta R. Gray
Secretary
March 23, 1999
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
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Proxy Statement
For Annual Meeting of Common Stockholders
to be held on April 29, 1999
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GENERAL INFORMATION
This Proxy Statement is being furnished to the holders of Common Stock of
Galileo International, Inc. (the "Company") in connection with the solicitation
of proxies by the Company's Board of Directors (the "Board of Directors" or the
"Board") for use at the annual meeting of stockholders to be held in the Grand
Ballroom of the Hotel Sofitel Chicago, 5550 North River Road, Rosemont,
Illinois, at 9:00 A.M. (local time) on April 29, 1999, and any adjournments
thereof (the "Meeting"). Common stockholders of record as of March 2, 1999 (the
"Record Date") are entitled to notice of and to vote at the Meeting. This Proxy
Statement is being sent to each holder of the issued and outstanding shares of
the Company's Common Stock, par value $.01 per share ("Common Shares"), on the
Record Date in order to furnish information relating to the business to be
transacted at the Meeting. The Company's annual report to stockholders for the
fiscal year ended December 31, 1998, including financial statements, is being
mailed to stockholders, together with this Proxy Statement, beginning on or
about March 23, 1999. No part of such annual report shall be regarded as
proxy-soliciting material or as a communication by means of which any
solicitation is made.
We hope that you will be present at the Meeting. If you plan to attend the
Meeting, please bring proof of your stock ownership for identification, such as
your broker statement. Whether or not you plan to attend the Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed envelope so that your shares will be represented. The envelope is
addressed to the Company and requires no postage. Returning a proxy will not
prevent a stockholder from attending the Meeting. Stockholders have the right to
revoke their proxies at any time prior to the time their shares are actually
voted by revoking the proxy in a writing delivered to the Secretary of the
Company, by submitting another valid proxy bearing a later date which is voted
at the Meeting, or by attending the Meeting and voting in person. Attendance at
the Meeting alone will not revoke your proxy. Stockholders who receive more than
one proxy card, due to the existence of multiple ownership accounts, should sign
and return all proxies received in order that all shares so owned are properly
voted. A stockholder who wishes to designate a person or persons to act as his
or her proxy at the Meeting, other than the proxies designated by the Board of
Directors, may strike out the names appearing on the enclosed proxy card, insert
the name of any other person or persons, sign the proxy card and transmit it
directly to such other designated person or persons for use at the Meeting.
Each proxy duly executed and received prior to the Meeting with a choice
specified thereon will be voted as indicated on the proxy. If no direction as to
the manner of voting the proxy is made, the proxy will be voted by the persons
named thereon: (i) for the election of the nominees named herein as directors
(or a substitute therefore if a nominee is unable or refuses to serve); (ii)for
the approval of the Galileo International, Inc. 1999 Equity and Performance
Incentive Plan; and (iii) in the discretion of such persons, upon such other
matters not presently known or determined that properly come before the Meeting.
At the close of business on the Record Date there were 104,790,802 Common
Shares outstanding, each entitled to one vote for each matter to be considered
at the Meeting. Stockholders do not have the right to cumulate their vote for
the election of directors. A majority of the Common Shares entitled to vote that
are present, in person or by proxy, at the Meeting shall constitute a quorum. If
a quorum is present, the affirmative vote of a plurality of the Common Shares
that are present, in person or by proxy, will be sufficient to elect a director.
Therefore, abstentions and broker non-votes will have no effect on the outcome
of the election of directors. Abstentions and broker non-votes will, however, be
treated as present in person at the Meeting for purposes of establishing a
quorum.
The Company will bear the cost of soliciting proxies, including the
reasonable charges and expenses of brokerage firms or other nominees for
forwarding proxy material to beneficial owners of Common Shares. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph, or
personally, by certain officers and regular employees of the Company and its
subsidiaries without extra compensation.
VOTING RIGHTS AND STOCKHOLDERS' AGREEMENT
Voting Common Shares and Special Voting Preferred Stock
The Company has issued and outstanding two classes of voting securities:
Common Shares and Special Voting Preferred Stock. Each Common Share is entitled
to one vote in the election of directors and other matters submitted to a vote
of stockholders. The Special Voting Preferred Stock is divided into seven
series, each series consisting of one share and entitling the holder thereof to
elect one director so long as certain share ownership thresholds are maintained.
Pursuant to the provisions of the Special Voting Preferred Stock, the holders
are entitled to elect a total of seven of the 13 members of the Board of
Directors. The respective holders of the Special Voting Preferred Stock are
entitled to elect their director designee, voting as a separate class.
The Special Voting Preferred Stock is held by five entities controlled by
the following airlines (individually, an "Airline Stockholder" and,
collectively, the "Airline Stockholders"): United Air Lines, Inc. ("United"),
Koninklijke Luchtvaart Maatschappij N.V. ("KLM"), British Airways Plc ("British
Airways"), SAirGroup and US Airways, Inc. ("US Airways"). Currently, the Airline
Stockholder controlled by United (holding three shares of Special Voting
Preferred Stock and entitled to elect three directors) has elected Graham W.
Atkinson, Frederic F. Brace and David A. Coltman as directors. The Airline
Stockholders controlled by US Airways, KLM, SAirGroup and British Airways (each
holding one share of Special Voting Preferred Stock and entitled to elect one
director) have elected Thomas A. Mutryn, Frank H. Rovekamp, Georges P.
Schorderet and Derek M. Stevens, respectively, as directors.
Voting Agreement
With respect to the six remaining directors, the Airline Stockholders have
agreed, pursuant to the terms of a stockholders' agreement (the "Stockholders'
Agreement"), to vote their Common Shares in favor of the election of three
management directors (the Chief Executive Officer, the Chief Financial Officer
and the Chief Operating Officer (or the General Counsel of the Company until the
Company has appointed a Chief Operating Officer)) and three independent
directors nominated for election by the Board of Directors. See "Certain
Relationships and Related Transactionsn Stockholders' Agreement." Currently, the
management directors are James E. Barlett, Paul H. Bristow and Babetta R. Gray,
and the independent directors are Wim Dik, Mina Gouran and Kenneth Whipple.
Effect of Stockholders' Agreement at Annual Meeting
Due to the terms of the Special Voting Preferred Stock and the provisions
of the Stockholders' Agreement, as long as the Stockholders' Agreement remains
in effect and the Airline Stockholders own in the aggregate more than 50% of the
outstanding Common Shares, the Airline Stockholders will control the election of
the entire Board of Directors. The Airline Stockholders currently own
approximately 62% of the Common Shares. See "Principal Holders of Securities."
Accordingly, pursuant to the provisions of the Stockholders' Agreement, Mina
Gouran and Paul H. Bristow, the independent and management directors,
respectively, nominated for election at the Meeting, are virtually assured of
election. The Airline Stockholders controlled by United and British Airways have
indicated that they will vote their respective shares of Special Voting
Preferred Stock to elect David A. Coltman and Derek M. Stevens, respectively, at
or prior to the Meeting. Holders of Common Shares are not entitled to vote for
the director nominees designated by these Airline Stockholders.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth, as of March 2, 1999, the number of Common
Shares and shares of Special Voting Preferred Stock beneficially owned by
persons known by the Company to beneficially own more than 5% of any class of
the Company's voting securities. See "Voting Rights and Stockholders'
Agreement."
PERCENT SHARES OF
BENEFICIAL OWNER (1) COMMON OF PREFERRED
SHARES CLASS STOCK
United (2)............... 33,440,000 31.9% 3
KLM (3).................. 10,639,200 10.2% 1
British Airways (4)...... 7,000,400 6.7% 1
SAirGroup (5)............ 7,000,400 6.7% 1
US Airways (6)........... 7,000,400 6.7% 1
(1) As used in this table, the term "beneficial owner" has the meaning
given such term in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended.
(2) Shares are owned directly by Covia LLC, a wholly-owned subsidiary of
United Air Lines, Inc. The business address of Covia LLC is 1200 East Algonquin
Road, Elk Grove Township, Illinois 60007.
(3) Shares are owned directly by Travel Industry Systems B.V., a
wholly-owned subsidiary of Koninklijke Luchtvaart Maatschappij N.V. The business
address of Travel Industry Systems B.V. is Amsterdamseweg 55, 1182 GP
Amstelveen, The Netherlands.
(4) Shares are owned directly by Distribution Systems, Inc., a Delaware
corporation and an indirect wholly-owned subsidiary of British Airways Plc. The
business address of Distribution Systems, Inc. is 1105 North Market Street,
Suite 1300, P.O. Box 8985, Wilmington, Delaware 19899.
(5) Shares are owned directly by Roscor, A.G., a wholly-owned subsidiary of
SAirGroup. The business address of Roscor, A.G. is CH-8058, Zurich Airport,
Switzerland.
(6) Shares are owned directly by USAM Corp., a wholly-owned subsidiary of
US Airways, Inc. The business address of USAM Corp. is Crystal Park Four, 2345
Crystal Drive, Arlington, Virginia 22227.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors consists of 13 members and is divided into three
classes. One class of Directors is elected annually, and each Director in the
class serves a three year term. Of the Board members, seven are elected by
holders of Special Voting Preferred Stock. Of the remaining six Directors, the
Airline Stockholders have agreed to vote their Common Shares in favor of three
management Directors and three independent Directors. See "Voting Rights and
Stockholders' Agreement" and "Certain Relationships and Related
Transactions-Commercial Agreements-Stockholders' Agreement." The positions on
the Board to be served by the respective Airline Stockholder Directors, the
management Directors and the independent Directors have been distributed among
the three classes such that approximately one-third of the Company's Board of
Directors will be elected each year and only one management Director and one
independent Director will be elected each year.
The Board of Directors has nominated Mina Gouran as an independent Director
and Paul H. Bristow, the Company's Chief Financial Officer and Treasurer as a
management Director, for election to the Board of Directors at the Meeting. Ms.
Gouran and Mr. Bristow have indicated their willingness to serve in such
capacity if elected. Under the provisions of the Stockholders' Agreement, Ms.
Gouran's and Mr. Bristow's elections are virtually assured. If Ms. Gouran or Mr.
Bristow should become unwilling or unable to serve as a Director, all duly
executed proxies shall be voted for the election of such other person or persons
as shall be designated by the Board of Directors. Unless authority to vote for
Ms. Gouran or Mr. Bristow is withheld, all votes by a properly executed proxy
will be cast in favor of the nominees. Proxies may not be voted for more than
two persons in the election of Directors at the Meeting.
At or prior to the Meeting, the Airline Stockholders controlled by United
and British Airways are expected to vote their respective shares of Special
Voting Preferred Stock to elect David A. Coltman and Derek M. Stevens,
respectively, to the Board of Directors. Holders of Common Shares are not
entitled to vote for the Director nominees designated by these Airline
Stockholders.
The Board of Directors recommends a vote FOR the independent and management
nominees as Directors.
The table below contains a brief description of the business experience and
positions held by the nominees and the other incumbent Directors of the Company,
including the Directors appointed by the Airline Stockholders, the management
Directors and the independent Directors.
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DIRECTOR NOMINEES-1999
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Independent Director
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Ms. Mina Gouran Director since 1998
Ms. Gouran has led the European advanced technology practice of Korn Ferry
International since 1996. Prior to her appointment at Korn Ferry, Ms. Gouran was
a managing partner at Heidrick & Struggles International where she jointly led
its global technology practice, having joined the company in 1988. Her career
before executive search was in the management of information systems function
within the financial services and travel industry sectors. Ms. Gouran is also a
freeman of The Worshipful Company of Information Technologists. Ms. Gouran's
current term expires in 1999. She currently serves on the Compensation
Committee.
Age: 50
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Management Director
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Mr. Paul H. Bristow Director since 1997
Mr. Bristow has been Senior Vice President and Chief Financial Officer
since February 1993 and Treasurer since May 1997. Prior to joining the Company,
Mr. Bristow served as financial advisor to various companies in the United
Kingdom before which he had spent two years as a member of a buy-in group
involved in corporate finance as intermediaries, and as advisors. From 1980 to
1988 he worked for London International Group plc, a listed international
consumer products company in London, initially as Division Finance Director and
then on the Main Board as Group Finance Director. Prior to 1980, Mr. Bristow
worked for ITT in Canada, Norway and Singapore; with Philip Morris in
Switzerland and Canada; and with Arthur Andersen & Co. in Canada. Mr. Bristow's
current term expires in 1999.
Age: 56
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Airline Stockholder Directors-1999 to be elected at or prior to the Meeting by
the applicable Airline Stockholders (Holders of Common Shares are not entitled
to vote for such Directors)
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Mr. David A. Coltman Director since 1997
Mr. Coltman has been Senior Vice President-Marketing of United Air Lines,
Inc. since April 1, 1995. Prior to that, he served as Vice President-Atlantic
Division of United Air Lines, Inc. in London since January 1989. He is also
Chairman of Edinburgh Worldwide Investment Trust, an Edinburgh-based mutual
fund. Mr. Coltman was a member of the Supervisory Board of the Galileo
International Partnership from May 1995 and its Chairman beginning in September
1995 to July 30, 1997. It is anticipated that Mr. Coltman will be re-elected to
the Board of Directors by the Airline Stockholder controlled by United Air
Lines, Inc. Mr. Coltman's current term expires in 1999. He currently serves as
Chairman of the Nominating Committee.
Age: 56
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Mr. Derek M. Stevens Director since 1997
Mr. Stevens has been a member of the Board of Directors and Chief Financial
Officer of British Airways Plc since 1989. Mr. Stevens is also a non-executive
director of CGU plc and was a member of the Supervisory Board of the Galileo
International Partnership from September 1993 to July 30, 1997. It is
anticipated that Mr. Stevens will be re-elected to the Board of Directors by the
Airline Stockholder controlled by British Airways Plc. Mr. Stevens' current term
expires in 1999.
Age: 60
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Incumbent Directors
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Mr. James E. Barlett Chairman and Director since 1997
Mr. Barlett has been President and Chief Executive Officer since November
1994 and Chairman since May 1997. Prior to joining the Company, he served as
Executive Vice President of Worldwide Operations and Systems of MasterCard
International Corporation ("MasterCard") and was a member of the MasterCard
International Operations Committee. Prior to his employment at MasterCard, Mr.
Barlett served as Executive Vice President of Operations for NBD Bancorp where
from 1979 to 1992 he managed the redevelopment of core banking systems and
directed the development, implementation and operation of the Cirrus
International automated teller switching system and served as Vice Chairman of
Cirrus Inc. Mr. Barlett's current term expires in 2000. He is currently a member
of the Nominating Committee.
Age: 55
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Mr. Graham W. Atkinson Director since 1999
Mr. Atkinson has been Vice President-Atlantic of United Air Lines, Inc.
since June 2, 1995. Prior to that, he served as General Manager-United Kingdom
of United Air Lines, Inc. since April 1991. Mr. Atkinson's current term expires
in 2000.
Age: 47
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Mr. Frederic F. Brace Director since 1997
Mr. Brace has been Vice President-Finance of United Air Lines, Inc. since
January 1998. Prior to that, he was Vice President-Financial Analysis and
Controller and he served as United Air Lines, Inc.'s Vice President-Corporate
Development and Controller from January 1994 to April 1, 1995, as its Vice
President-Corporate Development from April 1993 to January 1994 and as its Vice
President and Controller from February 1991 to April 1993. Mr. Brace was a
member of the Supervisory Board of the Galileo International Partnership from
September 1995 to July 30, 1997. Mr. Brace's term expires in 2001. He is
currently a member of the Compensation Committee.
Age: 41
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Mr. Wim Dik Director Since 1998
Mr. Dik has been Chairman of the Board of Management and CEO of KPN, Royal
Dutch Telecom since 1989. Mr. Dik is a member of the Board of Directors of ABN
AMRO-Bank, the Netherlands Board of Tourism and Nuts Ohra Insurance Group. Prior
to his appointment at KPN, Royal Dutch Telecom, Mr. Dik was Chairman of the
Board of Nederlandse Unilever Bedrijven B.V., a multi-national food and chemical
group, after holding various positions within the organization from 1964 to
1988. Mr. Dik also was State Secretary for Foreign Trade from 1981 through 1982.
Mr. Dik's term expires in 2001. He is currently a member of the Audit and
Nominating Committees.
Age: 60
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Ms. Babetta R. Gray Director since 1997
Ms. Gray has been Senior Vice President, Customer Service Delivery and
General Counsel since July 1998, and has been Secretary since May 1997. Prior to
that she was Senior Vice President, Legal and General Counsel since March 1996,
Vice President, Legal and General Counsel since September 1995 and joined the
Company as Senior Counsel in April 1990. Before joining the Company, Ms. Gray
was Counsel for Reebok International Ltd. from 1989 to 1990 and an associate
with the Boston law firm of Foley Hoag & Eliot from 1984 through 1988. Ms.
Gray's current term expires in 2001.
Age: 40
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Mr. Thomas A. Mutryn Director since 1998
Mr. Mutryn recently joined US Airways as Senior Vice President, Finance and
Chief Financial Officer. Prior to his employment with US Airways, Inc., Mr.
Mutryn was Vice President and Treasurer at United Air Lines, Inc. from 1995 to
1998 and served as United Air Lines, Inc.'s Vice President, Revenue Management
and Director, Financial Analysis from 1989 to 1995. Mr. Mutryn has also held a
variety of positions at American Airlines from 1983 to 1989. Mr. Mutryn's
current term expires in 2000.
Age: 45
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Mr. Frank H. Rovekamp Director since 1997
Mr. Rovekamp has been Senior Vice President-Marketing of Koninklijke
Luchtvaart Maatschappij N.V. (KLM) since June 1992. Mr. Rovekamp was a member of
the Supervisory Board of the Galileo International Partnership from September
1993 to July 30, 1997. Mr. Rovekamp's current term expires in 2000. He currently
serves as Chairman of the Compensation Committee.
Age: 44
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Mr. Georges P. Schorderet Director since 1997
Mr. Schorderet has been Executive Vice President and Chief Financial
Officer of SAirGroup and its predecessor since January 1996 and served as
Executive Vice President of the predecessor to SAirGroup since joining that
company in September 1995. Prior to September 1995, Mr. Schorderet held various
positions at Alusuisse-Lonza Holding AG, most recently as Chief Financial
Officer and a Member of the Executive Committee, positions he had held since
1991. Mr. Schorderet is a member of the boards of directors of Air Europe, Air
Likord, Sabena Societe Anonyme, Crossair Ltd. Co. for Regional European Air
Transport and Flughafen-Immobilien-Gesellschaft (the Zurich Airport real estate
company), LTU and UBE Ltd. Mr. Schorderet was a member of the Supervisory Board
of the Galileo International Partnership from February 1996 to July 30, 1997.
Mr. Schorderet's current term expires in 2001. He is currently a member of the
Nominating Committee.
Age: 46
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Mr. Kenneth Whipple Director since 1997
Mr. Whipple retired from Ford Motor Company on January 1, 1999, after 40
years of service. He had been President of Ford Motor Company's Financial
Services Group and Executive Vice President of Ford Motor Company since 1988. He
also served as Chairman and Chief Executive Officer of Ford Credit. Prior to
that he held various positions within the Ford Motor Company including, Vice
President-Corporate Strategy and Chairman-Ford of Europe. Mr. Whipple is also on
the boards of CMS Energy Corporation, Associates First Capital Corporation and
J.P. Morgan Series Trust II Mutual Funds. Mr. Whipple's current term expires in
2000. He currently serves as Chairman of the Audit Committee and as a member of
the Compensation Committee.
Age: 64
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has three standing committees,
comprised of an Audit Committee, Compensation Committee and Nominating
Committee.
The Audit Committee reviews and makes recommendations to the Board with
respect to the selection of independent auditors, the fees paid to such
auditors, the adequacy of the audit and accounting procedures of the Company and
such other matters as may be specifically delegated to the Audit Committee by
the Board. The Audit Committee regularly meets with representatives of the
independent auditors, the Company's internal audit manager and with the
financial officers of the Company separately or jointly. The Audit Committee met
three times during 1998. The Audit Committee is comprised of Messrs. Dik and
Whipple.
The Compensation Committee annually approves and then reviews with the
Board of Directors the compensation of the Chairman, President and Chief
Executive Officer of the Company. The Compensation Committee also reviews,
advises and consults with the Chairman, President and Chief Executive Officer on
the compensation of the other officers and key employees and as to the Company's
policy on compensation. It also administers the Company's 1997 Stock Incentive
Plan (the "Incentive Plan") which authorizes the issuance of various forms of
stock-based awards, including the grant of stock options, and it is charged with
the responsibility of interpreting the Incentive Plan. The Compensation
Committee also has general oversight responsibility with respect to the
Company's other employee benefit programs. In addition, the Compensation
Committee also renders advice and counsel to the Chairman, President and Chief
Executive Officer on the selection of executive officers of the Company and key
executives of the Company's major subsidiaries. The Compensation Committee met
six times during 1998. The Compensation Committee is comprised of Messrs. Brace,
Rovekamp and Whipple, and Ms. Gouran.
The Nominating Committee recommends nominees to the Board to fill vacancies
or as additions to the Board of Directors. Although the Nominating Committee
does not specifically solicit suggestions from stockholders as to possible
candidates, the Nominating Committee will consider stockholders'
recommendations. Suggestions, together with a description of the proposed
nominee's qualifications, stockholdings in the Company, other relevant
biographical information, and an indication of the willingness of the proposed
nominee to serve, should be sent to the Secretary of the Company in a manner
consistent with the procedures set forth in the Company's by-laws. The
Nominating Committee met seven times during 1998. The Nominating Committee is
comprised of Messrs. Barlett, Coltman, Dik and Schorderet.
During 1998, the Board of Directors met ten times. All incumbent Directors
attended at least 75% of the meetings of the Board and all committees of the
Board on which the respective Director served with the exception of Messrs.
Goodwin and Dik who attended 60% and 14%, respectively, of such meetings.
COMPENSATION OF DIRECTORS
Retainer and Fees. Each Director who is not a salaried employee of the Company
or any of its subsidiaries receives a $25,000 yearly retainer for services on
the Board of Directors. In addition to the retainer, Directors who are not
salaried employees of the Company or any of its subsidiaries receive $1,000 for
each in-person Board and committee meeting attended, and $500 for each
telephonic Board or committee meeting in which such Director participates.
The Director Plan and Fee Deferral. The Company has adopted the Galileo
International, Inc. 1997 Non-Employee Director Stock Plan (the "Director Plan").
The principal purpose of the Director Plan is to attract and retain the services
of qualified individuals who are not employees of the Company to serve as
members of the Board and to better align their interests with the interests of
the Company's stockholders. Directors who are also employees of the Company are
not entitled to participate in the Director Plan. As described below,
participants in the Director Plan may be entitled to receive options to purchase
Common Shares, phantom stock units, or cash. In the case of Directors who are
employees of the airlines who designate and elect such Directors (each an
"Airline Director"), such individuals receive the cash equivalent of such
options. The Director Plan permits independent Directors to defer payment of a
portion of their Director's fees in accordance with the terms and conditions set
forth in the Director Plan. Subject to the provisions of the Director Plan, the
maximum number of Common Shares which may be issued under the Director Plan
shall not exceed 500,000.
The Director Plan authorizes awards of options to purchase Common
Shares to independent Directors. Each option generally vests and becomes
exercisable six months after the date of grant and expires ten years from the
date of grant, subject to early vesting, exercisability, and expiration as
provided in the Director Plan. The option has a per share exercise price equal
to the fair market value of the Common Shares on the date of grant. Upon the
date of a non- employee Director's election (other than the election of a
substitute Airline Director), appointment or reelection, such Director will be
granted an option to purchase (4,000 x Y)-(1,000 x (Y-1)) Common Shares where Y
= the number of years in such Director's term. In non-election years an option
to purchase 1,000 shares of Common Shares is granted to each eligible Director.
The exercise price of a stock option may be paid in cash or previously owned
stock or a combination thereof.
Notwithstanding the foregoing, at such time that an option would
otherwise be granted under the Director Plan, an Airline Director will receive
in lieu of such option a cash payment equal to the value of the option
calculated on the basis of the Black-Scholes Option Pricing Model. Such cash
payment is transferred to such Airline Director's employer, unless the employer
has instructed the Company to make such payment directly to the Airline
Director.
Independent Directors may also elect to defer all or a specified
percentage of their Directors' fees (in multiples of five percent) under the
Director Plan. Such deferrals will be credited to a deferred compensation
account set up for that Director. All amounts in this account are nonforfeitable
at all times. The portion of the fees that the Director elects to defer is
credited in the form of phantom stock units to the deferred compensation account
as of the last business day of the fiscal quarter in which such portion of the
Director's fees would otherwise have been payable to the Director. The number of
phantom stock units to be credited to the deferred compensation account are
determined by dividing the amount of the Director's fees deferred over such
quarter by the fair market value of Common Shares as of the date of crediting.
In the event that the Company pays any cash or other dividend or makes any other
distribution in respect of the Common Shares, each phantom stock unit credited
to the deferred compensation account of such Director is credited with dividend
equivalents. The crediting of phantom stock units to such Director's deferred
compensation account does not confer on the Director any rights as a stockholder
of the Company. Payment of the deferred benefits credited in phantom stock units
is in Common Shares. As of March 2, 1999, there were no phantom shares credited
to Directors pursuant to the deferred compensation arrangement under the
Director Plan; Messrs. Dik's and Whipple's and Ms. Gouran's accounts were
credited with 10,000, 11,000 and 4,000 Common Shares, respectively, under the
stock option arrangement of the Director Plan; and the Airline Directors'
employers received the following cash payments in lieu of stock options as
provided under the Director Plan; $16,171.34 to each of Messrs. Coltman,
Rovekamp and Stevens; and $161,713.37 to each of Messrs. Brace and Schorderet.
OWNERSHIP OF COMMON STOCK BY
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 2, 1999, the number of Common
Shares beneficially owned by (i) each Director (including those owned by James
E. Bartlett, Paul H. Bristow and Babetta R. Gray who also serve as Executive
Officers of the Company), (ii) the persons named in the Summary Compensation
Table below, and (iii) all Directors and Executive Officers as a group. In
addition to Messrs. Barlett and Bristow and Ms. Gray, the following also serve
as executive officers of the Company (collectively, the "Executive Officers"):
Lyn Bulman, Michael G. Foliot, James E. Lubinski and David A. Near.
NAME OF INDIVIDUAL AND NO. OF SHARES PERCENT OF
NO. OF PERSONS IN GROUP BENEFICIALLY OWNED (1) CLASS (2)
Directors
James E. Barlett........... 78,617(3) *
Graham W. Atkinson......... 0 *
Frederic F. Brace.......... 1,000 *
Paul H. Bristow............ 10,767 *
David A. Coltman........... 2,000 *
Wim Dik.................... 10,000 *
Mina Gouran................ 4,000(4) *
Babetta R. Gray............ 4,667 *
Thomas A. Mutryn........... 0 *
Frank H. Rovekamp.......... 1,000 *
Georges P. Schorderet...... 1,500 *
Derek M. Stevens........... 2,000 *
Kenneth Whipple............ 12,000 *
Executive Officers
Michael G. Foliot.......... 7,267 *
James E. Lubinski.......... 6,267 *
David A. Near.............. 5,767 *
All Directors and Executive Officers as
as a Group (17 persons) 151,719 *
_______
(1) The Directors and Executive Officers, and all Directors and Executive
Officers as a group, have sole voting and sole investment power over the Common
Shares listed except for Mr. Foliot, Ms. Gray, Mr. Rovekamp and Ms. Bulman,
Senior Vice President, Human Resources and Corporate Relations, who each share
voting and investment power with a third party.
(2) An asterisk indicates that the percentage of shares beneficially owned
by the named individual does not exceed one percent (1%) of the Common Shares.
(3) Includes Mr. Barlett's 48,950 share restricted stock award granted on June
18, 1998 for which Mr. Barlett has voting and investment power.
(4) Represents shares which Ms. Gouran has the right to acquire pursuant to
stock options which will become exercisable within 60 days following March 23,
1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended ("Section
16"), requires that reports of beneficial ownership of Common Shares and changes
in such ownership be filed with the Securities and Exchange Commission by the
Company's Directors, officers and persons who own more than 10 percent of a
registered class of the Company's equity securities. The Company is required to
conduct a review and to identify in its proxy statement each Director, officer
or person who owns more than 10 percent of a registered class of the Company's
equity securities who failed to file a required report under Section 16 on a
timely basis. Based upon that review, the Company has determined that all
required reports were filed on a timely basis for the fiscal year ended December
31, 1998.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid for services
rendered to the Company during the Company's last three fiscal years in all
capacities and received by (i) the Company's Chairman, President and Chief
Executive Officer during 1998 and (ii) the Company's four most highly paid
Executive Officers during 1998 other than the Chairman, President and Chief
Executive Officer (the "Named Executive Officers").
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - LONG TERM COMPENSATION
- - ----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- - OTHER ALL
ANNUAL RESTRICTED SECURITIES LTIP OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPEN- STOCK UNDERLYING PAYOUTS COMPEN-
($) ($) SATION AWARDS OPTIONS ($) SATION(5)
($) ($) (#) ($)
James E. Barlett........... 1998 $528,770 $801,310 - $1,996,181(2) 256,150 $396,923(3) $9,700
Chairman, President, 1997 459,000 360,480 - - 216,200 119,456(4) 9,018
Chief Executive Officer 1996 435,750 357,210 - - - 50,000(4) 8,820
and Director
Paul H. Bristow............ 1998 242,629 247,500 - - 155,150 184,855(3) 9,307
Senior Vice President, 1997 217,360 132,484 $42,962(1) - 62,200 56,047(4) 7,057
Chief Financial Officer, 1996 207,333 121,680 - - - 25,372(4) 6,992
Treasurer and Director
Michael G. Foliot.......... 1998 214,986 195,300 - - 135,150 177,967(3) 9,128
Senior Vice President, 1997 206,546 104,564 - - 58,200 55,114(4) 6,945
Global Vendor Marketing 1996 197,013 115,054 - - - 26,184(4) 6,591
James E. Lubinski.......... 1998 259,614 284,625 - - 171,150 155,944(3) 9,201
Senior Vice President, 1997 206,458 109,165 - - 60,200 40,479(4) 5,254
Information Services 1996 182,790 112,740 - - - 11,651(4) 5,288
and Operations
David A. Near.............. 1998 202,382 198,000 90,997(1) - 137,150 80,074(3) 8,243
Senior Vice President, 1997 144,625 76,470 43,186(1) - 42,200 15,072(4) 6,556
Subscriber Marketing 1996 128,020 77,513 - - - - 5,934
</TABLE>
- -----
(1) Represents non-cash benefits which must be disclosed because they are in
excess of the lesser of either $50,000 or 10 percent of the total of annual
salary and bonus related to personal travel and spousal travel on business trips
for Mr. Bristow; and relocation expenses and personal travel in 1997, and
housing, car, storage and airline club expenses in 1998, for Mr. Near.
(2) Effective April 1, 1998, Mr. Barlett was granted restricted stock in two
equal awards of 48,950 shares each; the first award was granted on June 18, 1998
and the Company is obligated to issue the second award on June 18, 1999.
(3) Represents payments made in 1998 based on phantom shares that entitled the
holder to cash in the amount of the fair market value of the Common Shares plus
dividend equivalents. Phantom shares were granted to the Named Executive
Officers in 1997 in exchange for awards previously granted in 1995 through 1997
under the Company's Long Term Incentive Plan, which has been discontinued.
(4) Represents payments made under the Company's Long-Term Incentive Plan, which
was discontinued during 1997.
(5) All Other Compensation consists of (i) amounts contributed for fiscal 1998,
1997 and 1996 of $4,800, $4,750 and $4,500, respectively, under the Company's
401(k) Savings Plan for each of the Named Executive Officers; and (ii) payments
made in fiscal 1998, 1997 and 1996 representing money allocated to, but unused
for, benefit programs for Mr. Barlett ($4,900, $4,268 and $4,320); Mr. Bristow
($4,507, $2,307 and $2,492); Mr. Foliot ($4,328, $2,195 and $2,091); Mr.
Lubinski ($4,401, $504 and $788); and Mr. Near ($3,443, $1,806 and $1,434).
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during 1998.
<TABLE>
<S> <C> <C> <C> <C> <C>
Individual Grants
-----------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs Exercise Grant Date
Underlying Granted to Employees or Base Expiration Date Present Value
Name Options/SARs in Fiscal Year Price --------------- (2)
----------------- Granted (1) -------------------- -------- -------------
-----------
James E. Barlett... 256,000 13.65 $40.78 17 Jun 07 $3,722,240
150 0.01 40.78 17 Jun 08 2,181
Paul H. Bristow.... 155,150 8.28 40.78 17 Jun 08 2,255,881
Michael G. Foliot.. 135,150 7.21 40.78 17 Jun 08 1,965,081
James E. Lubinski.. 171,150 9.13 40.78 17 Jun 08 2,488,521
David A. Near...... 137,150 7.32 40.78 17 Jun 08 1,994,161
</TABLE>
- -----
(1) All options granted at $40.78 vest in equal annual installments over a
three-year period beginning on the first anniversary of the date of grant, with
the exception of the 256,000 shares granted to Mr. Barlett, which vest over a
five year period beginning on the first anniversary of the date of grant. No
SARs were granted during the last fiscal year.
(2) Present value calculated assuming the stock options are valued using the
Black-Scholes Option Pricing Model. Assumptions used in the model are: estimated
future yield of 1.00%; expected option term of five years; risk-free rate for
option term of 5.00%; and estimated future volatility of 35.00%. The option
values shown are based on the model and actual value, if any, will depend on
stock price change.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTIONS VALUES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
at Fiscal Year-End at Fiscal Year-End (1)
------------------------------- -------------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ----------- --------- ----------- ------------- ----------- -------------
James E. Barlett....... 0 0 21,667 450,683 $411,673 $3,995,955
Paul H. Bristow........ 0 0 6,267 211,083 119,073 1,370,810
Michael G. Foliot...... 0 0 5,867 187,483 111,473 1,255,360
James E. Lubinski...... 0 0 6,067 225,283 115,273 1,383,805
David A. Near.......... 0 0 4,267 175,083 81,073 1,016,600
</TABLE>
- -----
(1) The value of "in-the-money" options represents the difference between the
exercise price of such options and $43.50, the closing price of the Common
Shares on the New York Stock Exchange on December 31, 1998. No SARs were granted
to the Named Executive Officers.
PENSION PLAN
The Company sponsors the Galileo International Employees Pension Plan
(the "Pension Plan"), which is a non-integrated qualified defined benefit
pension plan covering most U.S. full time employees of the Company. The
following table shows the estimated annual pension benefits under the Pension
Plan and the SERP in the remuneration and years of service classifications
indicated (without regard to the offsets described below).
Pension Plan Table
<TABLE>
<S> <C> <C> <C> <C> <C>
Years of Service
---------------------------------------------------------------
Remuneration 15 20 25 30 35
$200,000............................... $48,000 $64,000 $80,000 $96,000 $112,000
$250,000............................... 60,000 80,000 100,000 120,000 140,000
$300,000............................... 72,000 96,000 120,000 144,000 168,000
$350,000............................... 84,000 112,000 140,000 168,000 196,000
$400,000............................... 96,000 128,000 160,000 192,000 224,000
$450,000............................... 108,000 144,000 180,000 216,000 252,000
$500,000............................... 120,000 160,000 200,000 240,000 280,000
$550,000............................... 132,000 176,000 220,000 264,000 308,000
$600,000............................... 144,000 192,000 240,000 288,000 336,000
$650,000............................... 156,000 208,000 260,000 312,000 364,000
$700,000............................... 168,000 224,000 280,000 336,000 392,000
$750,000............................... 180,000 240,000 300,000 360,000 420,000
$800,000............................... 192,000 256,000 320,000 384,000 448,000
$850,000 or more....................... 204,000 272,000 340,000 408,000 476,000
</TABLE>
The basic monthly payment under the Pension Plan is a single life
annuity equal to 1.6% of the participant's final average compensation multiplied
by the number of his/her months of qualified service divided by 12. However, the
basic monthly payment for a participant whose accrued benefit as of January 1,
1994 is based on compensation exceeding $150,000 will be based on the greater of
(i) the accrued benefit as determined above with respect to the benefit formula
in effect for the plan year beginning on or after January 1, 1994 as applied to
the participant's total amount of qualified service, or (ii) the sum of the
participant's accrued benefit as of January 1, 1994, frozen in accordance with
Section 1.401(a)(4)-13 of the United States Treasury Regulations, and the
participant's accrued benefit determined under the benefit formula applicable
for the plan year beginning on or after January 1, 1994, as applied to the
participant's months of benefit service credited for plan years beginning on or
after January 1, 1994. Retirement benefits are subject to the annual pension
limitations imposed under Section 415(d) and 401(a)(17) of the Internal Revenue
Code, as amended (the "Code"), for which limitations vary annually. The Covia
Supplemental Retirement Plan (the "SERP"), a nonqualified plan, provides
benefits over the applicable Code limitations.
The benefits under the Pension Plan and the SERP shown above are
calculated on a single life annuity basis and assume retirement at age 65. As of
March 1, 1999, Messrs. Barlett, Bristow, Foliot, Lubinski and Near had 39, 61,
55, 31 and 80 months of qualified service, respectively, under the Pension Plan.
For purposes of the Pension Plan, "final average compensation" means
the highest monthly average of a participant's compensation attributable to the
60 consecutive months of service occurring during the last 120 months of service
of employment (unless the participant has fewer than 60 months of service with
the employer). "Compensation" means amounts paid to the participant for base
pay, overtime, double shift, shift differentials, lump sum merit pay, holiday
rotating day off, holiday worked rotating day off, commissions, retroactive pay,
management incentive bonuses and special incentives for certain retirees paid
prior to September 1, 1993. Generally, only those items reflected as either
salary or bonus in the Summary Compensation Table are considered in determining
benefits under the Pension Plan and the SERP. Benefits under the Pension Plan
and the SERP are not subject to reduction for social security benefits.
EMPLOYMENT AGREEMENT
James E. Barlett is a party to an employment agreement with the Company
dated June 18, 1998 (the "Agreement"). The term of the Agreement will continue
until June 17, 2003. The Agreement provides for a base salary of $550,000 per
annum, reviewed by the Compensation Committee and increased at its discretion.
The Agreement also provides for Mr. Barlett's participation in the Company's
incentive and benefit plans as well as an airfare and car allowance. The
Agreement may be terminated immediately by the Company with "Cause" or by Mr.
Barlett with "Good Reason" (as such terms are defined in the Agreement). If the
Agreement is terminated by the Company without Cause or by Mr. Barlett for Good
Reason, the Company must pay Mr. Barlett a lump sum equal to the balance of his
base salary at the rate in effect at the time of termination for a 12 month
period or the remaining term of the Agreement, whichever is less, as well as an
amount equal to a reasonable estimate of the amount of annual compensation he
would have received under the Management Incentive Plan ("MIP") for that 12
month period assuming a 100% target achievement by him. In addition, commencing
12 months after the date of termination, the Company must pay Mr. Barlett an
amount equal to his monthly salary as well as the amount he would have earned
under the MIP for that month, assuming a 100% target achievement, each month for
the ensuing 24 month period or the remaining term of the Agreement, whichever is
less. These monthly payments will be decreased to reflect compensation from any
other employment which Mr. Barlett obtains. The Company will also provide group
health insurance and other welfare and pension benefits to Mr. Barlett for a 12
month period or the remaining term of the Agreement, whichever is less,
following a termination without Cause or a resignation for Good Reason. The
Agreement contains a confidentiality provision and a non-competition clause that
remains in effect during the term of this Agreement and for the longer of 12
months after the termination date or until the date Mr. Barlett ceases receiving
compensation from the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation Philosophy
The Compensation Committee provides direction to the directors of the
Company in maintaining a compensation program that is consistent with the
Company's overall compensation philosophy. The compensation philosophy supported
by the Compensation Committee recognizes the need to attract and retain high
caliber staff to meet the Company's business requirements. In doing so, however,
the Compensation Committee is mindful of overall stockholder return and believes
that incentive program design and payments should appropriately reflect
comparisons with peer company performance.
The Compensation Committee develops and approves compensation
strategies and policies intended to support the Company's strategic business
objectives and enhance shareholder value creation. The Compensation Committee
also approves compensation levels and reviews its decisions with the Board for
the Chairman, President, and Chief Executive Officer and other corporate
executives. Only Directors who are not employees of the company may serve on the
Compensation Committee. As of December 31, 1998, the Compensation Committee
consisted of two Airline Stockholder representatives and two independent
Directors.
Executive Compensation
In determining compensation levels, the Compensation Committee
considers competitive market data provided by an independent compensation
consultant as well as the specific skills and experience of each incumbent. The
Compensation Committee approves the peer companies, which are selected based on
similarity of business and size relative to the Company.
The Company's Executive Officers' remuneration consists of base salary,
annual bonus and long term compensation. Each component of compensation is
reviewed further below.
Base Salaries
Base salaries are reviewed annually by the Compensation Committee and
changes are determined based on a subjective assessment of a range of factors,
including the individual's performance, the responsibilities of the position,
competitive practice and the experience of the executive filling the position.
Annual Bonus
The annual bonus program provides annual cash bonuses to the Executive
Officers as well as to other managers within the Company. For 1998, the
Compensation Committee determined payments based on a combination of individual
and/or corporate performance, weighted appropriately. Individual performance was
subjectively assessed based on detailed written information on achievements
against the objectives for the year. Corporate performance was determined
through a formula based on results against the predetermined financial plan for
the fiscal year. Going forward, however, it is intended that annual bonus awards
will be based solely on the Company's financial performance for the Executive
Officers.
Long Term Incentive Compensation
Prior to July 1997, the Company had a Long Term Incentive Plan (the
"LTIP") which was intended to reward executives for superior performance in
achieving long term goals. At the time of the Company's initial public offering
in July 1997, the LTIP was discontinued and deferred compensation arrangements
were put in place to convert existing awards under the LTIP into phantom shares.
Outstanding awards from the remaining 1995, 1996 and 1997 award cycles were
converted into phantom shares to be paid at the fair market value of Common
Shares under the same schedule as applied to the LTIP. Currently, only the final
payment from the 1997 award cycle remains to be made.
In July 1997, the Company adopted the Galileo International, Inc. 1997
Stock Incentive Plan to replace the LTIP as a means to establish commonality of
interest between management and shareholders, focus executives on long-term
shareholder value creation and to encourage retention. The Compensation
Committee administers this plan. The primary award under this plan is stock
options, although restricted stock and performance shares are granted under
special circumstances.
In mid-1998, the Compensation Committee requested that an external
adviser make a comprehensive study of the compensation arrangements for
corporate officers. The objectives of this study were to enhance the incentive
and retention value of the program, to bring it more in line with competitive
practices and to ensure that it properly supported the objective of enhancing
shareholder value. As a result of this study and in conjunction with the signing
of a new five-year employment contract, a special one-time equity grant was
awarded to the President, Chairman and Chief Executive Officer. This award
consisted of a combination of stock options and restricted stock, which vest
over a five-year period. In addition, special one-time stock option grants that
vest ratably over three years were awarded to other Executive Officers.
If the 1999 Equity and Performance Incentive Plan (the "Plan") set
forth in Proposal No. 2 is adopted by the Company's stockholders, it will
authorize, among other things, stock options, stock appreciation rights,
restricted stock and performance shares. The Plan would supercede and replace
the 1997 Stock Incentive Plan and would provide the Company with the means to
attract and retain management employees, among others, and provide such persons
with incentives and rewards for superior performance.
Chairman, President and Chief Executive Officer Compensation
The Compensation Committee reviews the base salary of the Chairman,
President and Chief Executive Officer annually and makes adjustments based on a
subjective assessment of his contribution and the overall performance of the
Company. In April 1998, the Chairman, President and Chief Executive Officer's
salary was increased to $550,000. His annual bonus for 1997, which was paid in
1998, was determined based on an equally weighted combination of achievement
against personal goals and a formula relating to the Company's financial
performance. As with the other Executive Officers, his annual bonus will be
based entirely on the achievement of the corporate financial target in the
future. As part of the compensation review described in the "Long Term Incentive
Compensation" section above, the President, Chairman and Chief Executive Officer
was granted a special equity incentive award in addition to the remainder of his
long-term incentive grant. This award consists of stock options and restricted
stock, with a portion of the restricted stock granted in 1998 and the remainder
to be granted in 1999. These grants were made in recognition of the President,
Chairman and Chief Executive Officer's continued leadership and importance to
the Company and in recognition of the renewal of his employment agreement for
five years. The options vest ratably over a five year period and the restricted
stock awards vest at the rate of 20% per year for the first installment and 25%
per year for the second.
$1 Million Compensation Limit on Deductibility
Section 162(m) of the Internal Revenue Code restricts corporate tax
deductions on amounts paid in excess of $1 million to the Chairman, President
and Chief Executive Officer and the other Executive Officers listed in the
Summary Compensation Table. The Committee has determined that it will make every
reasonable effort, consistent with sound executive compensation policy and the
needs of the Company, to ensure the continued tax deductibility of all amounts
paid to the Executive Officers. If adopted, certain awards under the Plan would
be intended to qualify as performance-based compensation under Section 162(m).
See Proposal No. 2.
Compensation Committee
Frank H. Rovekamp (Chairman)
Frederic F. Brace
Mina Gouran
Kenneth Whipple
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee include Frank H. Rovekamp and
Frederic F. Brace. No member of the Compensation Committee is a current or
former employee or officer of the Company or any of its subsidiaries. Mr.
Rovekamp has been Senior Vice PresidentnMarketing of KLM since June 1992. Mr.
Brace has been Vice PresidentnFinance of United since January 1998. The Company
has entered into commercial agreements and other arrangements with each of KLM
and United which contemplate certain services and payments between the
companies. See "Certain Relationships and Related Transactions."
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
The graph below compares the percentage changes in the Company's
cumulative total stockholder return from July 25, 1997 (the first trading date
of the Company's Common Shares) through December 31, 1998 with the cumulative
total return of the S&P 500 Index and the Peer Group (1) for the same period.
The graph assumes the investment of $100 and the reinvestment of all dividends.
The stock performance shown on the graph below is not necessarily indicative of
future stock price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Galileo International S&P 500 Peer Group
--------------------- ------- ----------
July 25, 1997...... 100.00 100.00 100.00
December 31, 1997.. 113.01 103.96 95.52
December 31, 1998.. 179.27 133.90 123.22
- -----
(1) The peer group consists of: Automatic Data Processing, Inc., BA Merchant
Services, Inc., Ceridian Corporation, DST Systems, Inc., First Data Corporation,
National Data Corporation, National Processing, Inc., Paychex, Inc., Paymentech,
Inc. and The Sabre Group Holdings, Inc.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into various commercial and other agreements with
the airline affiliates of the Airline Stockholders. Seven of the Company's
Directors are affiliated with the Airline Stockholders. See "Proposal 1:
Election of Directors."
COMMERCIAL AGREEMENTS
Computer Services Agreements
The Company has entered into Computer Services Agreements with the
airline affiliates of the Airline Stockholders. Under the Computer Services
Agreements, the Company provides certain fares quotation services, internal
reservation services, other internal management services and software
development services. The Computer Services Agreements, other than with respect
to fares quotation services and services to United, each discussed below, are
generally cancelable by either party upon six months' prior written notice,
except the Company may not cancel any such agreement prior to the third
anniversary of the Company's initial public offering in July 1997 ("IPO"). The
Computer Services Agreements generally require the Company to provide the
services thereunder at prices based upon a fully allocated cost methodology for
a period of up to three years following the IPO, after which pricing will be
determined on an arm's-length basis.
The Company also provides fares quotation services to United, British
Airways, SAirGroup, KLM and US Airways through its GlobalFaresJ fares quotation
system. The Company provides such fares quotation services under pricing
arrangements that were in effect prior to the IPO, and will continue to provide
such service at such pricing for a period of approximately five years following
the Company's IPO after which pricing will be determined on an arm's-length
basis. These services may be canceled by either party upon six months' prior
written notice (except the Company may not cancel the provision of such services
prior to the end of the existing pricing period).
The Company also provides internal reservation services, other internal
management services and software development services to United. Internal
reservation services are provided for a minimum period of four years following
the IPO at fixed prices based upon a fully allocated cost methodology. Other
internal management services are generally provided to United for a minimum of
six years following the IPO at fixed prices based upon a fully allocated cost
methodology. Software development services are generally provided to United for
a minimum of six years following the IPO at prices based upon a fully allocated
cost methodology.
For the year ended December 31, 1998, the Company recorded revenue of
approximately $23.1 million; $1.8 million; $1.6 million; $0.3 million; and $0.6
million from United, British Airways, US Airways, KLM and SAirGroup,
respectively, for services rendered under the Computer Services Agreements.
Network Services Agreement
The Company is a party to a Network Services Agreement with United
pursuant to which the Company provides United the use of the Company's network
for communication services and manages such communication services. The Network
Services Agreement continues in effect until terminated by either party upon two
years prior written notice. For the year ended December 31, 1998, the Company
recorded revenue of $105.5 million from United for such services.
Global Airline Distribution Agreements
The Company has entered into Global Airline Distribution Agreements with
the airline affiliates of the Airline Stockholders as well as with each of its
airline travel vendor customers. Under the Global Airline Distribution
Agreements, travel vendors store, display, manage and sell their services
through the Company's Apollo(R)and Galileo(R)systems. Airlines are offered
varying levels of functionality at which they can participate in the Company's
systems. The Company also provides travel vendors marketing data generated from
reservation activity in the Company's systems for fees that vary based on the
type and amount of information provided. This information assists travel vendors
in the management of their inventory and yields.
For the year ended December 31, 1998, the Company recorded revenue of
approximately $141.4 million; $55.5 million; $42.2 million; $28.9 million and
$20.1 million from United, British Airways, US Airways, KLM and SAirGroup,
respectively, for services rendered under the Global Airline Distribution
Agreements.
Distributor Sales and Service Agreements
During 1998, the Company was a party to Distributor Sales and Service
Agreements with the national distribution company affiliates (the "NDC") of
certain Airline Stockholders. In exchange for its efforts to sell the Company's
products to travel agencies in its territory, the NDC receives a percentage of
the booking fees generated by travel agency use of the Company's computer
reservation systems within its territory. In the absence of material breach,
these arrangements cannot be terminated by either party so long as an affiliate
of the relevant NDC retains an interest in the Company.
With respect to Galileo United Kingdom, an NDC which is wholly-owned by
British Airways, the Company paid approximately $39.4 million for such services
through December 31, 1998.
Other Distribution Support
During 1998, the Company had an arrangement with United pursuant to
which United provided support for the Company's distribution efforts in certain
countries in Latin America. For the year ended December 31, 1998, the Company
paid United approximately $4.2 million for these support services.
Termination of Revenue Sharing Obligations
During 1997, in conjunction with the acquisitions of Galileo Nederland
and Traviswiss, the Company terminated its obligations under the Galileo
International Partnership agreement to share with KLM and SAirGroup a portion of
the booking fee revenue generated in certain European territories. In
consideration of the termination of such revenue sharing obligations, the
Company agreed to pay KLM and SAirGroup, in four annual installments, the
aggregate amounts of $14.8 million and $22.4 million, respectively. Payments
under these agreements for the year ended December 31, 1998 were $4.0 million to
KLM and $6.6 million to SAirGroup.
Sales Representation Agreements
During 1998, the Company had sales representation agreements with United
and US Airways pursuant to which these airlines provided the personnel to sell
the Company's Apollo(R) brand reservations products to subscribers in the United
States and Mexico. Employees of the airlines were responsible for the sales
function, while employees of the Company were fully responsible for all aspects
of customer service and support. Each sales representation agreement provided
base and incentive compensation, based upon achievement of revenue goals
established annually. The sales representation agreements were terminated during
1998, subject to a transitional period. Through December 31, 1998, the Company
recorded expenses of approximately $11.3 million to United and approximately
$3.1 million to US Airways for such services.
Services Agreements
In connection with the Company's acquisition of ATS, the Company
entered into a services agreement (the "ATS Services Agreement") with United, US
Airways and Air Canada (collectively, the "ATS Services Providers") pursuant to
which the ATS Services Providers will provide certain marketing and other
services designed to assist the Company in growing the business of ATS. During
the sixth year following the consummation of the IPO, the Company will pay the
ATS Services Providers a fee of up to $200.0 million (on a present value basis),
based on improvements in the Company's air booking fee revenue over the five-
year period immediately following the acquisition of ATS, as measured by the
weighted average annual air segment growth rate and the weighted average annual
price increase rate over such period.
In connection with the Company's acquisitions of Traviswiss and Galileo
Nederland, the Company entered into a services agreement with each of SAirGroup
and KLM (collectively, the "Additional Services Agreements") pursuant to which
SAirGroup and KLM provide services designed to assist the Company in growing the
business of Traviswiss and Galileo Nederland, respectively. During the sixth
year following the effective dates of the Additional Services Agreements, the
Company will pay SAirGroup a fee of up to $6.8 million (on a present value
basis) and will pay KLM a fee of up to $4.7 million (on a present value basis),
in each case based on improvements in the Company's air booking fee revenue over
the five year period immediately following such acquisitions, measured in a
manner similar to that provided in the ATS Services Agreement.
Other Services
In the ordinary course of business, the Company purchases airline
related business travel services and communication services from United. The
Company also rents facilities from United. For the year ended December 31, 1998,
the Company paid approximately $9.0 million to United related to these services.
Stockholders' Agreement
Simultaneously with the consummation of the IPO, the Company and the
Airline Stockholders and certain affiliates entered into the Stockholders'
Agreement pursuant to which the Airline Stockholders agreed to vote their shares
and take such other actions as are necessary to cause the Board of Directors of
the Company to (i) with limited exceptions, consist of 13 members, (ii) be
divided into three classes, (iii) consist of seven directors elected by the
Airline Stockholders, three management directors and three independent directors
and (iv) designate nominating, audit and compensation committees. The
Stockholders' Agreement contains certain limitations on the transfer of shares
of the Special Voting Preferred Stock and the Common Shares, including
provisions granting the Airline Stockholders, their affiliates and certain
transferees (collectively, the "Original Owners") the right of first refusal in
the event that an Original Owner proposes to sell or transfer its Common Shares
to another Original Owner or an affiliate thereof. In addition, the
Stockholders' Agreement prohibits an Original Owner from transferring its Common
Shares to any of its affiliates without such affiliate executing a counterpart
of the Stockholders' Agreement. The Stockholders' Agreement also restricts the
ability of an Original Owner to acquire more than 50% of the capital stock of
the Company entitled to vote in the election of directors. The Stockholders'
Agreement will terminate on the tenth anniversary of the IPO.
PROPOSAL NO. 2:
ADOPTION OF GALILEO INTERNATIONAL, INC.
1999 EQUITY AND PERFORMANCE INCENTIVE PLAN
On February 18, 1999, the Board of Directors unanimously approved and
adopted, subject to the approval of the Company's stockholders at the 1999
Annual Meeting, the Galileo International, Inc. 1999 Equity and Performance
Incentive Plan (the "Plan"). The Plan would supercede and replace the 1997 Stock
Incentive Plan. The Plan affords the Board the ability to design compensatory
awards that are responsive to the Company's needs, and includes authorization
for stock options, appreciation rights, restricted shares, deferred shares,
stock payments, performance shares and performance units. The Plan will
supplement the Company's current compensation programs available to eligible
employees.
The affirmative vote of a majority of the Common Shares represented in
person or by proxy is required for approval of the Plan. The following summary
of the principal provisions of the Plan is not intended to be exhaustive and is
qualified in its entirety by the terms of such Plan, a copy of which is set
forth as Exhibit A to this Proxy Statement. Capitalized terms not otherwise
defined herein shall have the same meanings as defined in the Plan.
Principal Purposes of the Plan
The principal purposes of the Plan are to attract and retain
consultants, officers and other employees of the Company and its subsidiaries
and to provide to such persons incentives and rewards for superior performance.
Available Shares
Subject to adjustment as provided in the Plan, the number of Common
Shares that may be issued or transferred under the Plan shall not in the
aggregate exceed 13,000,000 Common Shares, plus any shares relating to awards
that expire, are forfeited or are transferred, surrendered or relinquished upon
the payment of any Option Price or upon satisfaction of any withholding amount.
Such shares may be shares of original issuance or treasury shares or a
combination thereof.
Notwithstanding anything else in the Plan to the contrary and subject
to adjustment as provided under the Plan, (i) the aggregate number of Common
Shares actually issued or transferred by the Company upon the exercise of
Incentive Stock Options ("ISOs") shall not exceed 10,000,000 Common Shares, (ii)
no Participant (as defined below) shall be granted Option Rights and
Appreciation Rights for more than an aggregate of 2,000,000 Common Shares during
any five-year period under the Plan; and (iii) the number of Common Shares
issued as Restricted Shares shall not in the aggregate exceed 2,500,000 Common
Shares. In no event shall any Participant in any calendar year receive an award
of Performance Shares or Performance Units having an aggregate maximum value as
of their respective Dates of Grant in excess of $5,000,000.
As of March 15, 1999, the closing price per Common Share on the New
York Stock Exchange was $48.56.
Eligibility
Consultants, officers and employees of the Company and its subsidiaries
may be selected by the Board to receive awards under the Plan (each, a
"Participant"). As of March 15, 1999, the Company had approximately 3,000
employees.
Option Rights
Option Rights may be granted under the Plan that entitle the
Participant to purchase Common Shares at a price which may be less than the
Market Value per Share on the Date of Grant. Each grant of Option Rights shall
be evidenced by an agreement between the Company and the Participant containing
such terms and provisions, consistent with the Plan, as the Board may approve.
Each grant of Option Rights shall specify whether the Option Price is
payable (i) in cash or by check acceptable to the Company; (ii) by the tender to
the Company of Common Shares owned by the Participant for at least six months
having a value at the time of exercise equal to the Option Price; (iii) by
delivery of irrevocable instructions to a financial institution or broker to
deliver promptly to the Company sale or loan proceeds with respect to the shares
sufficient to pay the total Option Price; or (iv) by any combination of such
payment methods.
On or after the Date of Grant of any Option Rights, the Board may
provide for the automatic grant of Reload Option Rights to a Participant upon
the exercise of Option Rights (including Reload Option Rights) using Common
Shares or other consideration specified in the Plan. Reload Option Rights shall
cover up to the number of Common Shares, Deferred Shares, Stock Payments, Option
Rights or Performance Shares (or the number of Common Shares having a value
equal to the value of any Performance Units), surrendered to the Company upon
any such exercise in payment of the Option Price or to meet any withholding
obligations. Reload Options may have an Option Price that is less than the
applicable Market Value per Share at the time the Reload Option is granted and
shall be on such other terms as may be specified by the Board, which may be the
same as or different from those of the original Option Rights.
Option Rights granted under the Plan may be options that are intended
to qualify as ISOs, options that are not intended to so qualify, or combinations
of the foregoing.
The Board may, on or after the Date of Grant of any Option Rights
(other than the grant of an ISO), provide for the payment of dividend
equivalents to the Participant on a current, deferred or contingent basis or may
provide that any such equivalents be credited against the Option Price.
No Option Right shall be exercisable more than ten years from the Date
of Grant. Each grant shall specify the period of continuous service with the
Company or any subsidiary, if any, or other conditions (including the
achievement of Management Objectives) that must be satisfied before the Option
Rights will become exercisable and may provide for the earlier exercise of such
Option Rights in the case of a Change in Control or other events. A definition
of "Change in Control" has been specifically included in the Plan, which can be
found in the full text of the Plan attached hereto as Exhibit A. Successive
grants may be made to the same Participant whether or not Option Rights
previously granted to such Participant remain unexercised.
Appreciation Rights
An Appreciation Right is a right, exercisable either by surrender of
the related Option Right (if granted in tandem with an Option Right, so long as
the Option Right has not been exercised or terminated) or by itself (if granted
as a Free-Standing Appreciation Right), to receive from the Company an amount
determined by the Board, which shall be expressed as a percentage of the amount
(not to exceed 100 percent) at the time of exercise. Any grant may specify that
the amount payable upon exercise of an Appreciation Right may be paid by the
Company in cash, in Common Shares or in any combination thereof, and may grant
either to the Participant or the Board the right to elect among those
alternatives.
Any grant may specify that the amount payable upon exercise of an
Appreciation Right may not exceed a maximum specified by the Board at the Date
of Grant. Any grant may specify waiting periods before exercise and permissible
exercise dates or periods.
Any grant may specify that such Appreciation Right may be exercised
only in the event of, or earlier in the event of, a Change in Control or other
event. Any grant may provide for the payment to the Participant of dividend
equivalents thereon in cash or Common Shares on a current, deferred or
contingent basis. Any grant of Appreciation Rights may specify Management
Objectives that must be achieved as a condition to exercise such rights.
Any grant of Tandem Appreciation Rights shall provide that the Tandem
Appreciation Rights may be exercised only at a time when the related Option
Rights are also exercisable and the Spread is positive and by surrender of the
related Option Rights for cancellation.
Each grant shall specify in respect of each Free-Standing Appreciation
Right a Base Price, which shall be equal to or greater or less than the Market
Value per Share on the Date of Grant. Successive grants may be made to the same
Participant regardless of whether any Free-Standing Appreciation Rights
previously granted to the Participant remain unexercised. No Free-Standing
Appreciation Right granted under this Plan may be exercised more than 10 years
from the Date of Grant.
Each grant of Appreciation Rights shall be evidenced by an agreement
between the Company and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
Restricted Shares
A grant of Restricted Shares involves the immediate transfer by the
Company to a Participant of ownership of a specific number of Common Shares in
consideration of the performance of services. The Participant is immediately
entitled to voting, dividend and other ownership rights in such shares. The
transfer may be made without additional consideration or in consideration of a
payment by the Participant that is at or less than the Market Value per Share at
the Date of Grant; provided, however, that any grant of Restricted Shares made
for consideration paid at the time of grant (including the foregoing of
compensation owed by the Company to a Participant) shall not be counted for
purposes of the limit on the permitted number of Restricted Shares.
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code"), for a period to be determined by the Board at the Date of
Grant. An example would be a provision that the Restricted Shares would be
forfeited if the Participant ceased to serve the Company as an officer or key
employee during a specified period of years. In order to enforce these
forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the Board
at the Date of Grant. The Board may provide for a shorter period during which
the forfeiture provisions apply in the case of a Change in Control or other
events.
Any grant of Restricted Shares may specify Management Objectives that,
if achieved, will result in termination or early termination of the restrictions
applicable to such shares. See "Management Objectives" described below. Each
such grant may specify in respect of such Management Objectives a minimum
acceptable level of achievement and may set forth a formula for determining the
number of Restricted Shares on which restrictions will terminate if performance
is at or above the minimum level, but below full achievement of the specified
Management Objectives.
Any such grant or sale of Restricted Shares may require that any or all
dividends or other distributions paid on the Restricted Shares during the period
of a risk of forfeiture and restrictions on transfer be automatically deferred
and reinvested in additional Restricted Shares, which may be subject to the same
restrictions as the underlying award.
Each grant of Restricted Shares shall be evidenced by an agreement
between the Company and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
Deferred Shares
A grant of Deferred Shares constitutes an agreement by the Company to
deliver Common Shares to the Participant in the future in consideration of the
performance of services and subject to the fulfillment of such conditions, if
any, as the Board may specify during the Deferral Period. The Board may provide
for a shorter Deferral Period in the case of a Change in Control or other event.
During the Deferral Period, the Participant has no rights of ownership in the
Deferred Shares, no right to vote such shares and, except as provided under the
Plan, no right to transfer any rights under the award, but the Board may, at or
after the Date of Grant, authorize the payment of dividend equivalents on such
shares on a current, deferred or contingent basis, in either cash or in
additional Common Shares. Awards of Deferred Shares may be made without
additional consideration or in consideration of a payment by the Participant
that is at or less than the Market Value per Share at the Date of Grant;
provided, however, that any grant of Deferred Shares made for consideration paid
at the time of grant (including the foregoing of compensation owed by the
Company to a Participant) shall not be counted for purposes of the limit on the
allowable number of Deferred Shares.
Each grant of Deferred Shares shall be evidenced by an agreement
between the Company and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
Stock Payments
A Stock Payment is an agreement by the Company to (i) deliver Common
Shares to the Participant as payment, or (ii) permit a Participant to exercise
an election or other right to receive or purchase Common Shares, in lieu of, or
in addition to, all or any portion of the compensation (including, without
limitation, salary, bonuses, incentive compensation, commissions and deferred
compensation), that would otherwise become payable to a Participant in the form
of cash. A Stock Payment may consist of the transfer by the Company to a
Participant of Common Shares as additional compensation for services to the
Company, without other payment for the Stock Payment. The number of shares to be
issued pursuant to Stock Payments shall be determined by the Board, and may be
based upon criteria determined to be appropriate by the Board on the date such
Stock Payment is granted or on any date thereafter.
Prior to the receipt of Common Shares in satisfaction of a Stock
Payment, a Participant shall not have any rights of ownership in such shares,
shall not have any right to vote such shares and, except as otherwise provided
by the Plan, shall not have any right to transfer any rights under his or her
award. At or after the date of grant, the Board may, however, authorize the
payment of dividend equivalents with respect to the Stock Payment on a current,
deferred or contingent basis, in either cash or Common Shares.
Each Stock Payment shall be evidenced by an agreement executed between
the Company and the Participant containing such terms and provisions, consistent
with the Plan, as the Board may approve.
Performance Shares and Performance Units
A Performance Share is a bookkeeping unit that records the equivalent
of one Common Share and a Performance Unit is a bookkeeping unit that records
the equivalent of $1.00. Any grant of Performance Shares or Performance Units
shall specify Management Objectives which, if achieved during a specified
Performance Period, will result in payment or early payment of the award, and
each grant may specify in respect of such specified Management Objectives a
minimum acceptable level of achievement and a formula for determining the number
of Performance Shares or Performance Units that will be earned if performance is
at or above the minimum level, but falls short of full achievement of the
specified Management Objectives. Each grant of Performance Shares or Performance
Units must specify that, before the Performance Shares or Performance Units are
deemed earned and paid, the Company or a committee of outside directors must
certify that the Management Objectives have been satisfied.
In addition, any grant of Performance Shares or Performance Units may
specify that the amount payable with respect thereto may not exceed a maximum
specified by the Board at the Date of Grant. To the extent earned, the
Performance Shares and Performance Units will be paid to the Participant at the
time and in the manner determined by the Board in cash, Common Shares or any
combination thereof. The grant may provide for the payment of dividend
equivalents thereon in cash or in Common Shares on a current, deferred or
contingent basis.
Each grant of Performance Shares or Performance Units shall be
evidenced by an agreement between the Company and the Participant containing
such terms and provisions, consistent with the Plan, as the Board may approve.
Management Objectives
The Plan requires that the Board establish "Management Objectives" for
purposes of Performance Shares and Performance Units. When so determined by the
Board, Option Rights, Appreciation Rights, Restricted Shares and dividend
credits may also specify Management Objectives. Management Objectives may be
described in terms of either Company-wide objectives or objectives that are
related to the performance of the individual Participant or the subsidiary,
division, department, region or function within the Company or a subsidiary in
which the Participant is employed. Management Objectives may be made relative to
the performance of other corporations. Management Objectives applicable to any
award to a Participant who is, or is determined by the Board likely to become, a
"covered employee" within the meaning of Section 162(m) of the Code shall be
limited to specified levels of, or growth in, the following criteria: market
value; book value; earnings per share; market share; operating profit; net
income; cash flow; return on capital; return on assets; return on equity;
margins; product volume growth; earnings, including earnings before interest,
taxes, depreciation and other non-cash items; debt/capital ratio; costs or
expenses; net assets; revenues; total return to shareholders; and customer
satisfaction.
Except where a modification would result in an award to a "covered
employee" no longer qualifying as performance-based compensation within the
meaning of Section 162(m) of the Code, the Committee may modify such Management
Objectives or the related minimum acceptable level of achievement, in whole or
in part, as the Committee deems appropriate and equitable in light of certain
events and circumstances (such as changes in the Company's business, operations,
corporate structure or capital structure).
Transferability
Except as otherwise determined by the Board but subject to the
provisions of the Plan, no Option Right, Appreciation Right or other derivative
security granted under the Plan is transferable by a Participant other than by
will or the laws of descent and distribution. Except as otherwise determined by
the Board, Option Rights and Appreciation Rights are exercisable during the
Participant's lifetime only by the Participant or the Participant's guardian or
legal representative. Notwithstanding the foregoing, but subject to the prior
Board authorization thereof, Option Rights (other than ISOs), Appreciation
Rights and other awards granted under the Plan may be transferred by a
Participant, without payment of consideration therefor, to certain members of
such Participant's immediate family (or trusts for the benefit of, or entities
consisting solely of, members of such immediate family), provided that no such
transfer shall be effective unless (i) the Participant has provided the Company
with reasonable notice thereof, (ii) the transfer is thereafter effected in
accordance with any terms and conditions that have been made applicable by the
Company or the Board, and (iii) the transferee has agreed to be subject to the
same terms and conditions under the Plan as the Participant.
The Board may specify at the Date of Grant that part or all of the
Common Shares that are to be issued or transferred by the Company upon exercise
of Option Rights or Appreciation Rights, upon termination of the Deferral Period
applicable to Deferred Shares or upon payment under any grant of Performance
Shares, Performance Units or Stock Payments are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in the
Plan, shall be subject to further restrictions on transfer.
Adjustments
The Board shall make or provide for such adjustments in the numbers of
Common Shares covered by outstanding Option Rights, Appreciation Rights,
Deferred Shares, Stock Payments and Performance Shares, the prices per share
applicable thereto, and the kind of shares or other securities covered thereby,
as the Board in its sole discretion and in good faith determines is required to
prevent dilution or expansion of Participants' rights that otherwise would
result in the event of stock dividends, stock splits, combinations of shares,
recapitalizations, mergers, consolidations, spin-offs, reorganizations,
liquidations, issuances of rights or warrants, and similar events. In the event
of any such transaction or event, the Board, at its discretion, may provide in
substitution for any or all outstanding awards under the Plan such alternative
consideration as it, in good faith, may determine to be equitable in the
circumstances and may require the surrender of all awards so replaced. The Board
shall also make or provide for such adjustments in the numbers of shares
available for issuance under the Plan as the Board may determine appropriate to
reflect any transaction or event described above.
Administration
The Plan is to be administered by the Board, except that the Board has
the authority under the Plan to delegate any or all of its powers under the Plan
to a committee of the Board (or subcommittee thereof) consisting of not less
than two Non-Employee Directors. Notwithstanding the foregoing, the grant of any
award intended to qualify as performance-based compensation under Section 162(m)
of the Code (and any administrative determinations made in connection therewith)
must be carried out only by a committee of the Board (or subcommittee thereof)
consisting of not less than two "outside directors" (as defined under Section
162(m) of the Code) in a manner consistent with the rules governing
performance-based compensation thereunder. The Board is authorized to interpret
the Plan and related agreements and other documents.
Amendments
The Board may amend the Plan from time to time in whole or in part
without further approval by the stockholders of the Company except where
stockholder approval is otherwise required by applicable law or the rules of the
principal exchange upon which the Common Shares are then trading.
Federal Income Tax Consequences
The following is a brief summary of certain of the federal income tax
consequences of certain transactions under the Plan based on federal income tax
laws in effect on January 1, 1999. This summary is not intended to be complete
and does not describe state or local tax consequences.
Section 162(m) Considerations
Section 162(m) of the Code disallows a publicly held corporation's
deduction for compensation in excess of $1 million (per taxable year) paid to
the corporation's chief executive officer and other four most highly compensated
executives unless certain exceptions are satisfied. One of these exceptions
allows for the deduction of performance-based compensation in excess of $1
million where a number of criteria are satisfied. These criteria include (i)
payment only on satisfaction of one or more pre-established, non-discretionary,
objective performance goals; (ii) awards being granted at the discretion of a
Compensation Committee comprised of two or more "outside directors" (as defined
under Section 162(m) of the Code); (iii) stockholder approval after disclosure
of material terms; and (iv) payment of awards only after certification by the
Compensation Committee that material terms were satisfied.
Under the Plan, awards of Performance Shares and Performance Units
generally are intended to qualify, and awards of Option Rights, Appreciation
Rights and Restricted Shares may be intended to qualify, as performance-based
compensation under Section 162(m) of the Code.
Tax Consequences to Participants
Non-Qualified Stock Options. In general, (i) no income will be
recognized by a Participant at the time a non-qualified Option Right is granted;
(ii) at the time of exercise of a non-qualified Option Right, ordinary income
will be recognized by the Participant in an amount equal to the difference
between the Option Price paid for the shares and the fair market value of the
shares, if unrestricted, on the date of exercise; and (iii) at the time of sale
of shares acquired pursuant to the exercise of a non-qualified Option Right,
appreciation (or depreciation) in value of the shares after the date of exercise
will be treated as either short-term or long-term capital gain (or loss)
depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by a
Participant upon the grant or exercise of an ISO. If Common Shares are issued to
the Participant pursuant to the exercise of an ISO, and if no disqualifying
disposition of such shares is made by such Participant within two years after
the Date of Grant or within one year after the transfer of such shares to the
Participant, then upon sale of such shares, any amount realized in excess of the
Option Price generally will be taxed to the Participant as a long-term capital
gain and any loss sustained will be a long-term capital loss.
If Common Shares acquired upon the exercise of an ISO are disposed of
prior to the expiration of either holding period described above, the
Participant generally will recognize ordinary income in the year of disposition
in an amount equal to the excess (if any) of the fair market value of such
shares at the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the Option Price paid for
such shares. Any further gain (or loss) realized by the Participant generally
will be taxed as short-term or long-term capital gain (or loss) depending on the
holding period.
Appreciation Rights. No income will be recognized by a Participant in
connection with the grant of a Tandem Appreciation Right or a Free-Standing
Appreciation Right. When the Appreciation Right is exercised, the Participant
normally will be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any unrestricted Common Shares received on the exercise.
Restricted Shares. A recipient of Restricted Shares generally will be subject
to tax at ordinary income rates on the fair market value of the Restricted
Shares (reduced by any amount paid by the Participant for such Restricted
Shares) at such time as the shares are no longer subject to forfeiture or
restrictions on transfer for purposes of Section 83 of the Code
("Restrictions"). However, a recipient who so elects under Section 83(b) of the
Code within 30 days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to the excess of the
fair market value of such shares (determined without regard to the Restrictions)
over the purchase price, if any, of such Restricted Shares. If a Section 83(b)
election has not been made, any dividends received with respect to Restricted
Shares generally will be treated as compensation that is taxable as ordinary
income to the Participant.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
Common Shares on the date that such shares are transferred to the Participant
under the award (reduced by any amount paid by the Participant for such Deferred
Shares), and the capital gains/loss holding period for such shares will also
commence on such date.
Stock Payments. The recipient of a Stock Payment generally will be subject to
tax at ordinary income rates on the fair market value of unrestricted Common
Shares on the date that such shares are transferred to the Participant (reduced
by any amount paid by the Participant for the shares or previously taxable to
the Participant), and the capital gains/loss holding period for such shares will
also commence on such date.
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment in respect of the earn-out of Performance Shares or Performance Units,
the recipient generally will be required to include as taxable ordinary income
in the year of receipt an amount equal to the amount of cash received and the
fair market value of any unrestricted Common Shares received.
Tax Consequences to the Company or a Subsidiary
To the extent that a Participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
Participant performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed by
the $1,000,000 limitation on certain executive compensation under Section 162(m)
of the Code.
Plan Benefits
The types of awards which may be granted in the future under the Plan
are subject to the discretion of the Board and, therefore, cannot be determined.
It is not possible to determine all amounts that may be awarded in the future
under the Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE PLAN. PROXIES RECEIVED BY THE COMPANY WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
2000 PROPOSALS OF STOCKHOLDERS
In order to be considered for inclusion in the Proxy Statement for the
regular annual meeting of the stockholders of the Company in the year 2000 (the
"2000 Annual Meeting"), stockholder proposals pursuant to Rule 14a-8 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, must have been received by the Company no later than November 24, 1999.
All stockholder proposals submitted outside the processes of Rule 14a-8 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, must be received no sooner than January 30, 2000 and no later than
February 29, 2000 to be considered for presentation at the 2000 Annual Meeting.
In addition, any stockholder proposal must comply with the requirements
contained in the Company's By-laws in order to be presented at the 2000 Annual
Meeting. Such proposals should be sent to the Secretary of the Company at 9700
West Higgins Road, Suite 400, Rosemont, Illinois 60018.
AVAILABILITY OF 10-K REPORT
The Company will file its Annual Report on Form 10-K for the year ended
December 31, 1998 with the Securities and Exchange Commission on or before March
31, 1999. A copy of the report, including any financial statements and
schedules, and a list describing any exhibits not contained therein, may be
obtained without charge by any stockholder. The exhibits are available upon
payment of charges which approximate the Company's cost of reproduction of the
exhibits. Request for copies of the report should be sent to the Secretary of
the Company at 9700 West Higgins Road, Suite 400, Rosemont, Illinois 60018.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP ("KPMG") served as the Company's independent public
accountants for the year ended December 31, 1998. The Company also engaged KPMG
to prepare certain tax filings for the Company and its subsidiaries for 1998 and
to conduct financial due diligence on behalf of the Company in connection with
certain business investments and acquisitions undertaken by the Company during
1998. No further relationship existed between the Company and KPMG other than
the usual relationship between independent public accountants and client. The
Audit Committee is expected to make a recommendation to the Board of Directors
on the selection of the independent accountants for the year ended December 31,
1999.
The Company anticipates that a representative of KPMG will be present
at the Meeting. Such representative will be given the opportunity to make a
statement if he or she desires to do so, and is expected to be available to
respond to any questions which may be submitted at the Meeting.
OTHER MATTERS
The Board of Directors is not aware of any business to be acted upon at
the Meeting other than that which is described in this Proxy Statement. However,
if any other business should properly come before the Meeting calling for a vote
of the stockholders, the proxy holders (as indicated on the accompanying proxy
card or cards) will vote the proxies according to their best judgment.
Please exercise your right to vote by completing and signing the
enclosed proxy card and returning it promptly in the envelope enclosed for your
convenience. In the event that you attend the Meeting, you may revoke your proxy
and vote your Common Shares in person.
Galileo International, Inc.
/s/ Babetta R. Gray
Babetta R. Gray
Secretary
Dated: March 23, 1999
Apollo, Galileo, the Globe Device and GlobalFares are
registered trademarks or trademarks of Galileo International.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROXY PROXY
GALILEO INTERNATIONAL, INC.
Proxy Solicited On Behalf of the Board of Directors
for the Annual Meeting of Stockholders--April 29, 1999
The stockholder(s) identified on the reverse of this card appoints James E.
Barlett, Paul H. Bristow and Babetta R. Gray and each of them, as proxies, with
full power of substitution and revocation, to vote, as designated therein, all
the Common Stock of Galileo International, Inc. which such stockholder(s) has
the power to vote, with all powers which such stockholder(s) would possess if
personally present, at the annual meeting of stockholders to be held on April
29, 1999 or at any adjournment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named and FOR the approval of the 1999 Equity and Performance Incentive
Plan.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
EDGAR REPRESENTATION OF THE COMPANY'S LOGO
- -------------------------------------------------------------------------------
GALILEO INTERNATIONAL, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
The Board of Directors recommends that you vote
FOR all nominees and FOR Proposal 2.
1. Election of Directors: For Withheld For All
Nominees: Paul H. Bristow, Mina Gouran All All Except
(INSTRUCTION: To withhold authority to vote / / / / / /
for any such nominee(s), write the name(s) of
the nominee(s) in the space provided below.)
- ------------------------
Nominee Excepted
2. The proposal to approve the Galileo
International, Inc. 1999 Equity For Against Abstain
and Performance Plan / / / / / /
3. In their discretion, the Proxies are authorized to vote upon such other
business and matters incident to the conduct of the meeting as may properly
come before the meeting.
Dated: ________________________, 1999
_____________________________________
_____________________________________
Signature
The signature to this proxy should conform exactly to
the name as shown. When shares are held in joint
tenancy, all such tenants must sign. Corporate owners
should sign full corporate name by an authorized
person. Executors, administrators, trustees or
guardians should indicate their status when signing.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Exhibit A
GALILEO INTERNATIONAL, INC.
1999 Equity and Performance Incentive Plan
1. Purpose. The purpose of the 1999 Equity and Performance Incentive
Plan is to attract and retain consultants, officers and other key employees of
Galileo International, Inc., a Delaware corporation, and its Subsidiaries and to
provide to such persons incentives and rewards for superior performance.
2. Definitions. As used in this Plan,
"Airline Shareholder" means any of United Airlines, US Airways,
British Airways PLC, SAirGroup or KLM Royal Dutch Airlines or any of their
respective affiliates.
"Appreciation Right" means a right granted pursuant to Section 5 of
this Plan and includes both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Base Price" means the price to be used as the basis for determining
the Spread upon the exercise of a Free-Standing Appreciation Right and a
Tandem Appreciation Right.
"Board" means the Board of Directors of the Company and, to the extent
of any delegation by the Board to a committee (or subcommittee thereof)
pursuant to Section 16 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning ascribed thereto in Section
12 of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations thereunder.
"Combined Voting Power" means, at anytime, the combined voting power
of the Company's or other relevant entity's then outstanding Voting
Securities.
"Common Shares" means the shares of Common Stock, par value $.01 per
share, of the Company or any security into which such Common Shares may be
converted or exchanged by reason of any transaction or event of the type
referred to in Section 11 of this Plan.
"Company" means Galileo International, Inc., a Delaware corporation.
"Covered Employee" means a Participant who is, or is determined by the
Board to be likely to become, a covered employee within the meaning of
Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a grant
of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares, Deferred Shares or Stock
Payments shall become effective (which shall not be earlier than the date
on which the Board takes action with respect thereto).
"Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 7 of this Plan.
"Deferred Shares" means an award pursuant to Section 7 of this Plan of
the right to receive Common Shares at the end of a specified Deferral
Period.
"Director" means a member of the Board of Directors of the Company.
"Disability" means the permanent inability of a Participant, as a
result of accident or illness, to perform substantially all of the duties
pertaining to such Participant's occupation or employment for which the
Participant is suited by reason of previous training, education and
experience, as determined by the Board. A determination made under any
long-term disability benefit plan covering the Participant that the
Participant is disabled for purposes of entitlement to benefits under that
plan may be relied upon by the Board as sufficient evidence of Disability
for purposes of the Plan.
"Effective Date" shall have the meaning ascribed thereto in Section 18
of the Plan.
"Eligible Transferee" means one or more (i) members of the
Participant's immediate family (as the term "immediate family" is defined
in Rule 16a-1(e) promulgated under Section 16(a) of the Exchange Act (or
any successor rule to the same effect), as in effect from time to time),
(ii) established solely for the benefit of one or more members of the
Participant's immediate family, (iii) corporations or limited liability
companies in which the only equity holders are members of the Participant's
immediate family or (iv) partnerships in which the only partners are
members of the Participant's immediate family.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, as such statute, rules and
regulations may be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an
Option Right.
"Incentive Stock Options" means Option Rights that are intended to
qualify as incentive stock options under Section 422 of the Code or any
successor provision.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have
received grants of Performance Shares or Performance Units (or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted
Shares and dividend credits) under this Plan. Management Objectives may be
described in terms of Company- wide objectives or objectives that are
related to the performance of the individual Participant or the Subsidiary,
division, department, region or function within the Company or Subsidiary
in which the Participant is employed. The Management Objectives may be made
relative to the performance of other corporations. The Management
Objectives applicable to any award to a Covered Employee shall be based on
specified levels of, or growth in, one or more of the following criteria:
(i) market value;
(ii) book value;
(iii) market share;
(iv) operating profit;
(v) net income;
(vi) cash flow;
(vii) earnings, including earnings before interest, taxes,
depreciation and other non-cash items;
(viii) debt/capital ratio;
(ix) return on capital;
(x) return on equity;
(xi) costs or expenses;
(xii) net assets;
(xiii) return on assets;
(xiv) margins;
(xv) earnings per share;
(xvi) revenues;
(xvii) product volume growth;
(xviii) total return to shareholders; and
(xix) customer satisfaction.
If the Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in
which the Company conducts its business, or other events or circumstances
render the Management Objectives unsuitable, the Committee may in its
discretion modify such Management Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee
deems appropriate and equitable; provided, however, the Committee shall not
make any modification of the Management Objectives or minimum acceptable
level of achievement in the case of a Covered Employee where such action
would result in the loss of the otherwise available exemption of the award
under Section 162(m) of the Code.
"Market Value per Share" means, as of any particular date, (i) the
mean between the highest and lowest sale price per Common Share as reported
on the principal exchange on which Common Shares are then trading, if any,
or, if applicable, the NASDAQ National Market System, on the Date of Grant,
or if there are no sales on such day, on the next preceding trading day
during which a sale occurred, or (ii) if clause (i) does not apply, the
fair market value of the Common Shares as determined by the Board.
"Non-Employee Director" means a person who is a "non-employee
director" of the Company within the meaning of Rule 16b-3.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable upon exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon exercise
of an option granted pursuant to Section 4 of this Plan.
"Outside Director" means a person who is an "outside director" of the
Company within the meaning of Section 162(m) of the Code.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time a consultant, an officer or
other employee of the Company or any one or more of its Subsidiaries or who
has agreed to commence serving in any of such capacities.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 9 of
this Plan within which the Management Objectives relating to such
Performance Share or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 9 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 (which may be expressed as a percentage of a
Participant's base salary or other compensation) awarded pursuant to
Section 9 of this Plan.
"Plan" means this Galileo International, Inc. 1999 Equity and
Performance Incentive Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(f) of this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 6 of this Plan as to which neither the substantial risk of
forfeiture nor the restrictions on transfer referred to in Section 6 of
this Plan have expired.
"Retirement" means a Participant's termination of employment with the
Company at the time such Participant is eligible for retirement or early
retirement as defined by (i) the then current Company-sponsored plan or
scheme, or (ii) the country laws and practices, applicable at the time of
such termination.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act (or
any successor rule to the same effect), as in effect from time to time.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations promulgated thereunder, as amended from time to time.
"Spread" means the excess of the Market Value per Share on the date
when an Appreciation Right is exercised, or on the date when Option Rights
are surrendered in payment of the Option Price of other Option Rights, over
the Option Price or Base Price provided for in the related Option Right or
Free- Standing Appreciation Right, respectively.
"Stock Payment" means (i) payment in the form of Common Shares, or
(ii) an election or other right to receive or purchase Common Shares, in
lieu of, or in addition to, all or any portion of the compensation
(including, without limitation, salary, bonuses, incentive compensation,
commissions and deferred compensation) that would otherwise become payable
to a Participant in the form of cash. A Stock Payment may consist of the
transfer by the Company to a Participant of Common Shares as additional
compensation for services to the Company, without other payment therefor.
"Subsidiary" means a corporation, company or other entity (i) more
than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority)
are, or (ii) which does not have outstanding shares or securities (as may
be the case in a partnership, joint venture or unincorporated association)
but more than 50 percent of whose ownership interest representing the right
generally to make decisions for such other entity is, now or hereafter,
owned or controlled, directly or indirectly, by the Company except that,
for the purposes of determining whether any person may be a Participant for
the purposes of any grant of Incentive Stock Options, "Subsidiary" means
any corporation in which the Company at the time of grant, owns or
controls, directly or indirectly, more than 50 percent of the total
combined voting power represented by all classes of stock issued by such
corporation.
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right.
"Tax-Qualified Option" means an Option Right that is intended to
qualify under particular provisions of the Code, including but not limited
to an Incentive Stock Option.
"Termination Date" means the tenth anniversary of the date on which
this Plan is first approved by the stockholders of the Company.
"Voting Securities" means securities entitled to vote generally in the
election of Directors.
3. Shares Available Under the Plan. (a) Subject to adjustment as
provided in Section 3(b) and Section 11 of this Plan, the number of Common
Shares that may be issued or transferred (i) upon the exercise of Option Rights
or Appreciation Rights, (ii) as Restricted Shares and subsequently released from
substantial risks of forfeiture, (iii) as Deferred Shares or Stock Payments,
(iv) in payment of Performance Shares or Performance Units that have been
earned, or (v) in payment of dividend equivalents paid with respect to awards
made under this Plan, shall not in the aggregate exceed 13,000,000, plus any
Common Shares described in Section 3(b). Such Common Shares may be shares of
original issuance or treasury shares or a combination thereof.
(b) The number of Common Shares available in Section 3(a)
above shall be adjusted to account for Common Shares relating to awards
that expire, are forfeited or are surrendered or relinquished upon the
payment of any Option Price by the transfer to the Company of Common
Shares or upon satisfaction of any withholding amount. Upon payment in
cash of the benefit provided by any award granted under this Plan, any
Common Shares that were covered by that award shall again be available
for issuance or transfer hereunder.
(c) Notwithstanding anything in this Section 3 or elsewhere in
this Plan to the contrary and subject to adjustment as provided in
Section 11 of this Plan, (i) the aggregate number of Common Shares
actually issued or transferred by the Company upon the exercise of
Incentive Stock Options shall not exceed 10,000,000 Common Shares; (ii)
no Participant shall be granted Option Rights and Appreciation Rights
for more than an aggregate of 2,000,000 Common Shares during the term
of the Plan; and (iii) the number of Common Shares issued as Restricted
Shares shall not in the aggregate exceed 2,500,000.
(d) Notwithstanding any other provision of this Plan to the
contrary, in no event shall any Participant in any calendar year
receive an award of Performance Shares or Performance Units having an
aggregate maximum value as of their respective Dates of Grant in excess
of $5,000,000.
4. Option Rights. The Board may from time to time authorize grants to
Participants of options to purchase Common Shares. Each such grant may utilize
any or all of the authorizations, and shall be subject to all of the
requirements, contained in the following provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains, subject to the limitations set forth in Section 3 of
this Plan.
(b) Each grant shall specify an Option Price per share, which
may be less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of
such consideration, which may include (i) cash in the form of currency
or check or other cash equivalent acceptable to the Company, (ii) by
the tender (of actual shares or through attestation) to the Company of
Common Shares owned by the Participant for at least six months and
registered in the name of the Participant having an aggregate fair
market value on the date of exercise equal to the total Option Price,
such fair market value to be determined based on the Market Value per
Share on the date of exercise, (iii) by delivery of irrevocable
instructions to a financial institution or broker to deliver promptly
to the Company sale or loan proceeds with respect to the Common Shares
sufficient to pay the total Option Price, and (iv) any combination of
the foregoing methods of payment.
(d) The Board may determine, at or after the Date of Grant,
that payment of the Option Price of any Option Right (other than an
Incentive Stock Option) may also be made in whole or in part in the
form of Restricted Shares or other Common Shares that are forfeitable
or subject to restrictions on transfer, Deferred Shares, Stock
Payments, Performance Shares (based, in each case, on the Market Value
per Share on the date of exercise), other Option Rights (based on the
Spread on the date of exercise) or Performance Units. Unless otherwise
determined by the Board at or after the Date of Grant, whenever any
Option Price is paid in whole or in part by means of any of the forms
of consideration specified in this Section 4(d), the Common Shares
received upon the exercise of the Option Rights shall be subject to
such risks of forfeiture or restrictions on transfer as may correspond
to any that apply to the consideration surrendered, but only to the
extent determined with respect to the consideration surrendered, of (i)
the number of shares or Performance Shares, (ii) the Spread of any
unexercisable portion of Option Rights, or (iii) the stated value of
Performance Units.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on a date satisfactory
to the Company of some or all of the Common Shares to which such
exercise relates.
(f) On or after the Date of Grant of any Option Rights, the
Board may provide for the automatic grant of Reload Option Rights to an
Optionee upon the exercise of Option Rights (including Reload Option
Rights) using Common Shares or other consideration specified in Section
4(d). Reload Option Rights shall cover up to the number of Common
Shares, Deferred Shares, Stock Payments, Option Rights or Performance
Shares (or the number of Common Shares having a value equal to the
value of any Performance Units) surrendered to the Company upon any
such exercise in payment of the Option Price or to meet any withholding
obligations. Reload Options may have an Option Price that is less than
the applicable Market Value per Share at the time the Reload Option is
granted and shall be on such other terms as may be specified by the
Board, which may be the same as or different from those of the original
Option Rights.
(g) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to such
Participant remain unexercised.
(h) Each grant shall specify the period or periods of
continuous service by the Optionee with the Company or any Subsidiary
or shall specify such different or additional conditions as the Board
may determine (including the achievement of Management Objectives),
that must be satisfied before the Option Rights or installments thereof
will become exercisable and may provide for the earlier exercise of
such Option Rights in the event of a Change in Control or other events.
(i) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are
intended to qualify under particular provisions of the Code, (ii)
options that are not intended so to qualify, or (iii) combinations of
the foregoing.
(j) On or after the Date of Grant of any Option Rights (other
than Incentive Stock Options), the Board may provide for the payment of
dividend equivalents to the Optionee on a current, deferred or
contingent basis or may provide that any such equivalents shall be
credited against the Option Price.
(k) The exercise of an Option Right shall result in the
cancellation on a share-for- share basis of any Tandem Appreciation
Right authorized under Section 5 of this Plan.
(l) No Option Right shall be exercisable more than 10 years
from the Date of Grant.
(m) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer thereof and
delivered to the Optionee and containing such terms and provisions as
the Board may approve consistent with this Plan.
5. Appreciation Rights. (a) The Board may authorize the granting of (i)
Tandem Appreciation Rights to any Optionee in respect of Option Rights granted
under this Plan, and (ii) Free-Standing Appreciation Rights to any Participant.
A Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Board, which shall be expressed as a percentage of the Spread
(not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights
may be granted at any time prior to the exercise or termination of the related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
respect of an Incentive Stock Option must be granted concurrently with the
Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of
the Participant to receive from the Company an amount determined by the Board,
which shall be expressed as a percentage of the Spread (not exceeding 100
percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(i) Any grant may specify that the amount payable
upon exercise of an Appreciation Right may be paid by the
Company in cash, in Common Shares or in any combination
thereof and may either grant to the Participant or retain in
the Board the right to elect among those alternatives.
(ii) Any grant may specify that the amount payable
upon exercise of an Appreciation Right may not exceed a
maximum specified by the Board at the Date of Grant.
(iii) Any grant may specify waiting periods before
exercise and permissible exercise dates or periods.
(iv) Any grant may specify that the Appreciation
Right may be exercised only in the event of, or earlier in the
event of, a Change in Control or other events.
(v) Any grant may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common
Shares on a current, deferred or contingent basis.
(vi) Any grant may specify Management Objectives that
must be achieved as a condition of the exercise of the subject
Appreciation Rights.
(vii) Each grant of Appreciation Rights shall be
evidenced by an agreement executed on behalf of the Company by
an officer thereof and delivered to the Participant, which
agreement shall describe such Appreciation Rights, identify
any related Option Rights, state that such Appreciation Rights
are subject to all of the terms and conditions of this Plan,
and contain such other terms and provisions as the Board may
approve consistent with this Plan.
(c) Any grant of Tandem Appreciation Rights shall provide that
the Tandem Appreciation Rights may be exercised only at a time when the
related Option Rights are also exercisable and the Spread is positive
and by surrender of the related Option Rights for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify in respect of each
Free-Standing Appreciation Right a Base Price, which shall be
equal to or greater or less than the Market Value per Share on
the Date of Grant;
(ii) Successive grants may be made to the same
Participant regardless of whether any Free-Standing
Appreciation Rights previously granted to the Participant
remain unexercised; and
(iii) No Free-Standing Appreciation Right granted
under this Plan may be exercised more than 10 years from the
Date of Grant.
6. Restricted Shares. The Board may authorize the granting or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate
transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, subject in
each case to the substantial risk of forfeiture and restrictions on
transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that
is less than Market Value per Share at the Date of Grant; provided,
however, that any grant of Restricted Shares made for consideration
paid at the time of grant (including the foregoing of compensation owed
by the Company to a Participant) shall not be counted for purposes of
the limit set forth in Section 3(c)(iii).
(c) Each such grant or sale shall provide that the Restricted
Shares covered by such grant or sale shall be subject to a "substantial
risk of forfeiture" within the meaning of Section 83 of the Code for a
period to be determined by the Board at the Date of Grant and may
provide for the earlier lapse of such substantial risk of forfeiture in
the event of a Change in Control or other events.
(d) Each such grant or sale of Restricted Shares shall provide
that during the period for which such substantial risk of forfeiture is
to continue, the transferability of the Restricted Shares shall be
prohibited or restricted in the manner and to the extent prescribed by
the Board at the Date of Grant (which restrictions may include, but
shall not be limited to, rights of repurchase or first refusal in the
Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management
Objectives that, if achieved, will result in termination or early
termination of the risk of forfeiture and restrictions on transfer
applicable to the subject Restricted Shares. Each grant may specify in
respect of any such Management Objectives a minimum acceptable level of
achievement and may set forth a formula for determining the number of
Restricted Shares on which restrictions will terminate if performance
is at or above such minimum level but falls short of full achievement
of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require
that any or all dividends or other distributions paid on the Restricted
Shares during the period of a risk of forfeiture and restrictions on
transfer be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced
by an agreement executed on behalf of the Company by any officer and
delivered to the Participant and shall contain such terms and
provisions as the Board may approve consistent with this Plan. Unless
otherwise directed by the Board, all certificates representing
Restricted Shares shall be held in custody by the Company, together
with a stock power or powers endorsed in blank by the Participant in
whose name such certificates are registered, until all restrictions
thereon shall have lapsed.
7. Deferred Shares. The Board may authorize the granting or sale of
Deferred Shares to Participants. Each such grant or sale may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by
the Company to deliver Common Shares to the Participant in the future
in consideration of the performance of services and subject to the
fulfillment of such conditions, if any, during the Deferral Period as
the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by the Participant that
is less than the Market Value per Share at the Date of Grant; provided,
however, that any grant of Deferred Shares made for consideration paid
at the time of grant (including the foregoing of compensation owed by
the Company to a Participant) shall not be counted for purposes of the
limit set forth in Section 3(c)(iv).
(c) Each such grant or sale shall be subject to a Deferral
Period as determined by the Board at the Date of Grant, and may provide
for the earlier lapse or other modification of such Deferral Period in
the event of a Change in Control or other event.
(d) During the Deferral Period, a Participant shall not have
any rights of ownership in the Deferred Shares, shall not have any
right to vote the Deferred Shares and, except as provided in Section
10(c) of this Plan, shall not have any right to transfer any rights
under his or her award, but at or after the Date of Grant, the Board
may authorize the payment of dividend equivalents on the Deferred
Shares on a current, deferred or contingent basis, in either cash or
additional Common Shares.
(e) Each grant or sale of Deferred Shares shall be evidenced
by an agreement executed on behalf of the Company by any officer and
delivered to the Participant and shall contain such terms and
provisions as the Board may approve consistent with this Plan.
8. Stock Payments. The Board may authorize the receipt of Stock
Payments by any Participant in the manner determined from time to time by the
Board. Each Stock Payment and the grant or sale of Common Shares pursuant to
Stock Payments, may utilize any or all of the authorizations, and shall be
subject to all of the requirements, contained in the following provisions:
(a) Each Stock Payment shall constitute an agreement by the
Company to (i) deliver Common Shares to the Participant as payment, or
(ii) permit a Participant to exercise an election or other right to
receive or purchase Common Shares, in lieu of, or in addition to, all
or any portion of the compensation (including, without limitation,
salary, bonuses, incentive compensation, commissions and deferred
compensation), that would otherwise become payable to a Participant in
the form of cash. A Stock Payment may consist of the transfer by the
Company to a Participant of Common Shares as additional compensation
for services to the Company, without other payment therefor. The number
of shares to be issued pursuant to Stock Payments shall be determined
by the Board, and may be based upon the Market Value per Share, book
value, net profits or other measure of the value of Common Shares or
other criteria determined appropriate by the Board, determined on the
date such Stock Payment is granted or on any date thereafter.
(b) Prior to the receipt of Common Shares in satisfaction of a
Stock Payment, a Participant shall not have any rights of ownership in
such Common Shares, shall not have any right to vote the Common Shares
subject to the Stock Payment and, except as provided in Section 10(c)
of this Plan, shall not have any right to transfer any rights under his
or her award, but at or after the date of grant, the Board may
authorize the payment of dividend equivalents with respect to the Stock
Payment on a current, deferred or contingent basis, in either cash or
additional Common Shares.
(c) Each Stock Payment shall be evidenced by an agreement
executed on behalf of the Company by any officer and delivered to the
Participant, and shall contain such terms and provisions as the Board
may approve consistent with this Plan.
9. Performance Shares and Performance Units. The Board may authorize
the granting of Performance Shares and Performance Units that will become
payable to a Participant upon achievement of specified Management Objectives.
Each such grant may utilize any or all of the authorizations, and shall be
subject to all of the requirements, contained in the following provisions:
(a) Each grant shall specify the number of Performance Shares
or Performance Units to which it pertains, which may be subject to
adjustment to reflect changes in compensation or other factors;
provided, however, that no such adjustment shall be made in the case of
a Covered Employee where such action would result in the loss of the
otherwise available exemption of the award under Section 162(m) of the
Code.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be such period of time commencing with
the Date of Grant, as shall be determined by the Board at the time of
grant, which may be subject to earlier lapse or other modification in
the event of a Change in Control or other events as set forth in the
agreement specified in Section 9(h).
(c) Each grant shall specify Management Objectives that, if
achieved, will result in payment or early payment of the award, and
each grant may specify in respect of the specified Management
Objectives a minimum acceptable level of achievement and shall set
forth a formula for determining the number of Performance Shares or
Performance Units that will be earned if performance is at or above the
minimum level but falls short of full achievement of the specified
Management Objectives. The grant shall specify that, before the
Performance Shares or Performance Units shall be earned and paid, the
Company (or, in the case of Performance Shares or Performance Units
granted to Covered Employees, a committee (or subcommittee) of Outside
Directors in accordance with Section 16(a)(ii)) must certify that the
specified Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any
grant may specify that the amount payable with respect thereto may be
paid by the Company in cash or Common Shares or any combination thereof
and may either grant to the Participant or retain in the Board the
right to elect among those alternatives.
(e) At or after the Date of Grant, any grant of Performance
Shares or Performance Units may provide for the automatic grant of
Option Rights, Appreciation Rights, Deferred Shares, Stock Payments or
Restricted Shares upon the earning of the Performance Shares or
Performance Units, and on such other terms and conditions as may be
specified by the Board; provided, however, that no amendment or
modification of any Performance Shares or Performance Units granted to
any Covered Employee shall be made where such action would result in
the loss of the otherwise available exemption of the award under
Section 162(m) of the Code.
(f) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified
by the Board at the Date of Grant. Any grant of Performance Units may
specify that the amount payable or the number of Common Shares issuable
or transferable with respect thereto may not exceed maximums specified
by the Board at the Date of Grant.
(g) At or after the Date of Grant of Performance Shares, the
Board may provide for the payment of dividend equivalents to the holder
thereof on a current, deferred or contingent basis, in either cash or
additional Common Shares.
(h) Each grant of Performance Shares or Performance Units
shall be evidenced by an agreement executed on behalf of the Company by
any officer and delivered to the Participant, which agreement shall
state that such Performance Shares or Performance Units are subject to
all the terms and conditions of this Plan and shall contain such other
terms and provisions as the Board may approve consistent with this
Plan.
10. Transferability. (a) Except as otherwise determined by the Board,
but subject to Section 10(c), no Option Right, Appreciation Right or other
derivative security granted under the Plan shall be transferable by a
Participant other than by will or the laws of descent and distribution. Except
as otherwise determined by the Board, Option Rights and Appreciation Rights
shall be exercisable during the Optionee's lifetime only by him or her or by his
or her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or
all of the Common Shares that are to be issued or transferred by the
Company upon the exercise of Option Rights or Appreciation Rights, upon
the termination of the Deferral Period applicable to Deferred Shares or
upon payment under any grant of Performance Shares, Performance Units
or Stock Payments or are no longer subject to the substantial risk of
forfeiture and restrictions on transfer referred to in Section 6 of
this Plan, shall be subject to further restrictions on transfer.
(c) Notwithstanding the provisions of Section 10(a), but
subject to prior authorization by the Board, Option Rights (other than
Incentive Stock Options), Appreciation Rights, Restricted Shares,
Deferred Shares, Stock Payments, Performance Shares and Performance
Units shall be transferable by a Participant to an Eligible Transferee,
without payment of consideration therefor; provided, however, that (i)
no such transfer shall be effective unless reasonable prior notice
thereof is delivered to the Company and such transfer is thereafter
effected in accordance with any terms and conditions that shall have
been made applicable thereto by the Company or the Board and (ii) any
such transferee shall be subject to the same terms and conditions
hereunder as the Participant.
11. Adjustments. The Board shall make or provide for such adjustments
in the numbers of Common Shares covered by outstanding Option Rights,
Appreciation Rights, Deferred Shares, Stock Payments and Performance Shares
granted hereunder, in the Option Price and Base Price provided in outstanding
Option Rights and Appreciation Rights, and in the kind of shares or other
securities covered thereby, as the Board, in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or expansion
of the rights of Participants or Optionees that otherwise would result from (a)
any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of rights or
warrants to purchase securities, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Board, in its discretion, may provide in substitution
for any or all outstanding awards under this Plan such alternative consideration
as it, in good faith, may determine to be equitable in the circumstances and may
require in connection therewith the surrender of all awards so replaced. The
Board shall also make or provide for such adjustments in the numbers of shares
specified in Section 3 of this Plan as the Board in its sole discretion,
exercised in good faith, may determine is appropriate to reflect any transaction
or event described in this Section 11; provided, however, that any such
adjustment to the number specified in Section 3(c)(i) shall be made only if and
to the extent that such adjustment would not cause any Option Right intended to
qualify as an Incentive Stock Option to fail so to qualify.
12. Change in Control. For the purposes of this Plan, except as may be
otherwise prescribed by the Board in an agreement evidencing a grant or award
made under the Plan, a Change in Control shall mean if at any time any of the
following events shall have occurred:
(a) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of the Airline Shareholders (an "Acquiring Person"), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of more than 33% of the then
outstanding voting stock of the Company (49% of the then outstanding
voting stock of the Company if such person or group includes any of the
Airline Shareholders);
(b) the stockholders of the Company and a majority of the
non-employee directors of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 66% of the combined voting
power of the voting securities of the Company, such surviving entity or
the parent of such surviving entity outstanding immediately after such
merger or consolidation;
(c) the stockholders of the Company approve a plan of
reorganization (other than a reorganization or liquidation under the
United States Bankruptcy Code or complete liquidation of the Company)
or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets;
(d) during any period of two consecutive years (beginning on
or after the effective date of the Plan), individuals who at the
beginning of such period constitute the Board and any new Director
(other than a director who is a representative or nominee of an
acquiring person) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least a majority of the Directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, no longer
constitute a majority of the Board; provided, however, that a change in
control shall not be deemed to have occurred in the event of:
(i) a sale or conveyance in which the Company
continues as a holding company of an entity or entities that
conduct the business or businesses formerly conducted by the
Company if such sale or conveyance does not materially affect
the beneficial ownership of the Company's Common Shares; or
(ii) any transaction undertaken for the purpose of
reincorporating the Company under the laws of another
jurisdiction, if such sale or conveyance does not materially
affect the beneficial ownership of the Company's Common
Shares.
13. Fractional Shares. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
14. Withholding Taxes. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. The Company and a Participant or such other person
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
15. Foreign Employees. In order to facilitate the making of any grant
or combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the stockholders of the Company.
16. Administration of the Plan. (a) (i) Subject to subsection (ii) of
this Section 16(a), this Plan shall be administered by the Board, which may from
time to time delegate all or any part of its authority under this Plan to a
committee of the Board (or subcommittee thereof) consisting of not less than two
Non-Employee Directors appointed by the Board.
(ii) Awards of Option Rights and Appreciation Rights
are, and certain awards of Restricted Shares, Performance
Shares and Performance Units may be, intended to qualify as
performance-based compensation under Section 162(m) of the
Code. The grant of such awards, and the administration thereof
and any determinations to be made in connection therewith,
shall be carried out only by a committee of the Board (or
subcommittee thereof) consisting of not less than two Outside
Directors appointed by the Board. Such committee shall grant
such awards in a manner consistent with the rules governing
performance-based compensation under Section 162(m) of the
Code.
(b) To the extent of any such delegation, references in this
Plan to the Board shall be deemed to be references to any such
committee (or subcommittee). The interpretation and construction by the
Board of any provision of this Plan or of any agreement, notification
or document evidencing the grant of Option Rights, Appreciation Rights,
Restricted Shares, Deferred Shares, Performance Shares or Performance
Units and any determination by the Board pursuant to any provision of
this Plan or of any such agreement, notification or document shall be
final and conclusive. No member of the Board shall be liable for any
such action or determination made in good faith.
17. Amendments, Etc. (a) The Board may at any time and from time to
time amend this Plan in whole or in part; provided, however, any amendment that
must be approved by the stockholders of the Corporation in order to comply with
applicable law or the rules of the principal exchange on which the Common Shares
are then trading (or, if applicable, the NASDAQ National Market System) shall
not be effective unless and until such approval shall have been obtained. The
submission of this Plan or any amendment hereto for stockholder approval shall
not be construed to limit the Company's authority to offer similar or dissimilar
benefits under other plans without stockholder approval.
(b) With the concurrence of the affected Optionee, the Board
may cancel any agreement evidencing Option Rights granted under this
Plan. In the event of any such cancellation, the Board may authorize
the granting of new Option Rights hereunder, which may or may not cover
the same number of Common Shares as had been covered by the canceled
Option Rights, at such Option Price, in such manner and subject to such
other terms, conditions and discretion as would have been permitted
under this Plan had the canceled Option Rights not been granted.
(c) The Board also may permit Participants to elect to defer
the issuance of Common Shares or the settlement of awards in cash under
the Plan pursuant to such rules, procedures or programs as it may
establish for the purposes of this Plan. The Board may also provide
that deferred issuances and settlements include the payment or
crediting of dividend equivalents or interest on the deferral amounts.
(d) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or
deferral by the Participant of his or her right to receive a cash bonus
or other compensation otherwise payable by the Company or a Subsidiary
to the Participant.
(e) In the event of termination of employment by reason of
death, disability or normal or early retirement, or in the case of
hardship or other special circumstances, of a Participant who holds an
Option Right or Appreciation Right not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the restrictions on transfer have not lapsed, any
Deferred Shares as to which the Deferral Period has not been completed,
any rights with respect to Stock Payments that have not been satisfied,
any Performance Shares or Performance Units that have not been fully
earned, or Common Shares subject to any transfer restriction imposed
pursuant to Section 10(b) of this Plan, the Board may in its sole
discretion accelerate the time at which such Option Right or
Appreciation Right may be exercised, the time at which such substantial
risk of forfeiture or restrictions on transfer will lapse, the time
when such Deferral Period will end, the time at which rights with
respect to Stock Payments will be satisfied, the time at which such
Performance Shares or Performance Units will be deemed to have been
fully earned, or the time when such transfer restriction will
terminate, or may waive any other limitation or requirement under any
such award.
(f) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the
Company or any Subsidiary and shall not interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate
any Participant's employment or other service at any time.
(g) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as an Incentive
Stock Option from qualifying as such, such provision shall be null and
void with respect to such Option Right; provided, however, that such
provision shall remain in effect for other Option Rights, and there
shall be no further effect on any provision of this Plan.
18. Effective Date, Approval of Plan by Stockholders and Termination.
(a) The effective date of this Plan (the "Effective Date") shall be
the date of its adoption by the Board. This Plan will be submitted for the
approval of the Company's stockholders within 12 months following such
date. Options, Appreciation Rights, Performance Shares, Performance Units,
Restricted Shares, Deferred Shares and Stock Payments may be awarded prior
to such stockholder approval, provided that (i) such Options and
Appreciation Rights shall not be exercisable, and such Performance Shares,
Performance Units, Restricted Shares, Deferred Shares and Stock Payments
shall not vest or be paid, prior to receipt of such stockholder approval,
and (ii) if such approval has not been obtained by the end of such 12-month
period, all Options, Appreciation Rights, Performance Shares, Performance
Units, Restricted Shares, Deferred Shares and Stock Payments previously
awarded under this Plan shall thereupon be canceled and become null and
void.
(b) No grant shall be made under this Plan after the Termination Date,
but all grants made on or before the Termination Date shall continue in
effect thereafter subject to the terms thereof and the terms of this Plan.
EDGAR REPRESENTATION OF THE COMPANY'S LOGO
GALILEO INTERNATIONAL, INC.
Notice of
Annual Meeting of Stockholders
and Proxy Statement
Hotel Sofitel Chicago
5550 North River Road
Rosemont, Illinois
April 29, 1999 at 9:00 A.M.
