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
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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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/ / 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.
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<PAGE>
LOGO
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Notice of Annual Meeting of Common Stockholders
to be held on May 18, 2000
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,
May 18, 2000 at 9:00 A.M. (local time), in the Grand South Ballroom of the
Radisson Hotel O'Hare, 6810 North Mannheim Road, Rosemont, Illinois, for the
following purposes:
1. To elect two individuals to the Board of Directors.
2. To approve the Galileo International, Inc. Employee Stock Purchase Plan.
3. To transact such other business as properly may come before the meeting.
Common stockholders of record as of the close of business on Wednesday,
March 22, 2000 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.
Your vote is important. Please vote now by proxy even if you plan to attend
the meeting, by signing, dating, and mailing your proxy card in the enclosed
envelope. In addition, for the 2000 annual meeting we have added two new means
of voting. For your convenience you also may vote by calling the toll-free
telephone number indicated on the enclosed proxy card or by accessing the
Website indicated on the enclosed proxy card. Please note that if you vote your
shares by phone or through the Internet you will need the control number that is
imprinted on your personalized proxy card. Whether or not you plan to attend the
annual meeting, please vote your proxy via one of the three described methods.
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/ Anthony C. Swanagan
Anthony C. Swanagan
Secretary
April 3, 2000
<PAGE>
Galileo International, Inc.
9700 West Higgins Road, Suite 400
Rosemont, Illinois 60018
Proxy Statement
For Annual Meeting of Common Stockholders
to be held on May 18, 2000
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
South Ballroom of the Radisson Hotel O'Hare, 6810 North Mannheim Road, Rosemont,
Illinois, at 9:00 A.M. (local time) on May 18, 2000, and any adjournments
thereof (the "Meeting"). Common stockholders of record as of March 22, 2000 (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, 1999, including financial statements, is being
mailed to stockholders, together with this Proxy Statement, beginning on or
about April 3, 2000. 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
vote your Common Shares by calling the toll-free telephone number indicated on
the proxy card, by using the Internet at http://www.harrisbank.com/wproxy, or by
signing, dating and mailing the enclosed proxy card 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. Please be advised that if you vote your proxy by calling
the toll-free telephone number or by using the Internet, the deadline for voting
and for revoking your proxy by telephone or the Internet is 5:00 p.m. (Chicago
time) on May 15, 2000. 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 effect 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, must do so by striking out the
names appearing on the enclosed proxy card, inserting the name of any other
person or persons, signing the proxy card and transmitting it directly to such
other designated person or persons for use at the Meeting. Telephone and
Internet voting provide convenient, cost effective alternatives to returning
your card by mail. However, they do not provide for the substitution of proxies,
which must be done on the enclosed proxy card. If your Common Shares are held in
the name of a broker or other custodian, you must obtain a proxy, executed in
your favor, from the holder of record to be able to vote at the Meeting. Please
check the voting form used by that firm to see if it offers telephone or
Internet voting.
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 therefor if a nominee is unable or refuses to serve); (ii) for
the approval of the Galileo International, Inc. Employee Stock Purchase Plan;
and (iii) in the discretion of such persons, upon such other matters that
properly come before the Meeting.
At the close of business on the Record Date there were 93,729,416 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. In order for business to be conducted at the meeting,
a majority of the Common Shares entitled to vote must be present at the Meeting,
in person or by proxy, and 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.
If you are the beneficial owner of shares held in "street name" by a
broker, the broker, as the record holder of the shares, is required to vote
those shares in accordance with your instructions. If you do not give
instructions to the broker, the broker nevertheless will be entitled to vote the
shares with respect to "discretionary" items but will not be permitted to vote
the shares with respect to "non-discretionary" items (in which case, the shares
will be treated as "broker non-votes").
The affirmative vote of a majority of the Common Shares represented in
person or by proxy is required to approve the Galileo International, Inc.
Employee Stock Purchase Plan. If you abstain from voting on Proposal 2 or your
shares are treated as a broker non-vote for purposes of Proposal 2, your shares
will be included in the number of shares voting on the proposal and consequently
your abstention will have the same effect as a vote against the proposal.
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 electronically, by telephone,
telegraph, or personally, by certain officers and regular employees of the
Company and its subsidiaries without extra compensation.
VOTING RIGHTS
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 outstanding Special Voting Preferred Stock is divided into
three series, each series consisting of one share and entitling the holder
thereof to elect one director (and replace such director upon his vacancy) so
long as certain Common Share ownership thresholds are maintained. Based upon the
number of shares of Special Voting Preferred Stock outstanding and related
Common Share ownership, the Special Voting Preferred Stock holders are entitled
to elect a total of three members of the Board of Directors. The respective
holders of the Special Voting Preferred Stock are entitled to elect their
director designee (and replace such director upon his vacancy), voting as a
separate class.
The outstanding Special Voting Preferred Stock currently is held by two
entities that are respectively controlled by United Air Lines, Inc. ("United")
and SAirGroup (individually an "Airline Stockholder" and collectively the
"Airline Stockholders"). Currently, the Airline Stockholder controlled by United
(holding two shares of Special Voting Preferred Stock and entitled to elect two
directors) has appointed Graham W. Atkinson and Andrew P. Studdert as directors
to replace its elected directors, James Goodwin and Frederic F. Brace,
respectively. The Airline Stockholder controlled by SAirGroup (holding one share
of Special Voting Preferred Stock and entitled to elect one director) has
elected Georges P. Schorderet as director. The Airline Stockholder controlled by
United has indicated that it will vote its respective shares of Special Voting
Preferred Stock to elect Graham W. Atkinson at or prior to the Meeting. Holders
of Common Shares are not entitled to vote for the director nominee designated by
this Airline Stockholder.
Voting Agreement
With respect to the 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 the independent directors
nominated for election by the Board of Directors. See "Certain Relationships and
Related Transactions--Stockholders' Agreement." Currently, the management
directors are Messrs. James E. Barlett and Anthony C. Swanagan, and the
independent directors are Ms. Mina Gouran and Messrs. Wim Dik and Kenneth
Whipple. Mr. Paul H. Bristow, Chief Financial Officer, resigned from the Board
of Directors as of March 15, 2000. The vacancy created by Mr. Bristow's
resignation will be filled by his successor pursuant to the terms of the
Stockholders' Agreement.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth, as of March 22, 2000, 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
Common of Preferred
Beneficial Owner (1) Shares Class Stock
- -------------------- -------- ------- -----
United Air Lines, Inc. (2).................. 15,940,000 17.0% 2
Capital Research & Management Co. (3)....... 7,150,000 7.6% 0
SAirGroup (4)............................... 7,000,400 7.5% 1
Barclays Global Investors, N.A. (5)......... 5,696,802 6.1% 0
(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 Capital Research & Management Co. The business
address of Capital Research & Management Co. is 333 South Hope Street, Los
Angeles, California 90071. The share holdings reported above are as of
December 31, 1999, as reported on the Schedule 13G most recently filed by
Capital Research & Management Co.
(4) 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.
(5) Consists of 4,961,284 shares beneficially owned directly by Barclays Global
Investors, N.A., 311,577 shares beneficially owned directly by Barclays
Global Fund Advisors, 143,500 shares beneficially owned by Barclays Bank
Plc, 32,100 shares beneficially owned by Barclays Funds Limited, 219,335
shares beneficially owned directly by Barclays Global Investors, Ltd. and
29,006 shares beneficially owned directly by Barclays Trust and Banking
Company (Japan) Ltd. The business address of Barclays Global Investors,
N.A. and Barclays Global Fund Advisors is 45 Fremont Street, San Francisco,
California 94105. The business address of Barclays Bank Plc is 54 Lombard
Street, London, England EC3P 3AH. The business address of Barclays Funds
Limited is Gredley House, 11 The Broadway, Stratford, England E15 4BJ. The
business address of Barclays Global Investors, Ltd. is Murray House, 1
Royal Mint Court, London, England EC3 NHH. The business address of Barclays
Trust and Banking Company (Japan) Ltd. is Ebisu Prime Square Tower, 8th
Floor, 1-1-39 Hiroo, Shibuya-Ku, Tokyo, Japan 150-0012. The share holdings
reported above are as of December 31, 1999, as reported on the Schedule 13G
most recently filed by the above stockholders.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is set at nine 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, three 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." 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 Kenneth Whipple as an independent
director and James E. Barlett, the Company's Chairman, President and Chief
Executive Officer, as a management director, for election to the Board of
Directors at the Meeting. Messrs. Whipple and Barlett have indicated their
willingness to serve in such capacity if elected. If Messrs. Whipple or Barlett
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 Messrs.
Whipple or Barlett 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 Stockholder controlled by United is
expected to vote its share of Special Voting Preferred Stock to elect Graham W.
Atkinson to the Board of Directors. Holders of Common Shares are not entitled to
vote for the director nominee designated by this Airline Stockholder.
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.
DIRECTOR NOMINEES--2000
Independent Director
Mr. Kenneth Whipple Director since 1997 Age: 65
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.
Management Director
Mr. James E. Barlett Chairman and Director since 1997 Age: 56
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.
AIRLINE STOCKHOLDER DIRECTOR--2000
to be elected at or prior to the Meeting by the applicable Airline Stockholder
(Holders of Common Shares are not entitled to vote for this director)
Mr. Graham W. Atkinson Director since 1999 Age: 48
Since August 1, 1999, Mr. Atkinson has been Senior Vice President-Marketing
at United Air Lines, Inc. Prior to that, he was Vice President-Atlantic for
United Air Lines, Inc. since July 1995. Mr. Atkinson's current term expires in
2000. Pursuant to the terms of the Special Voting Preferred Stock and the
Stockholders' Agreement, Mr. Atkinson replaced James Goodwin as the
representative of the Airline Stockholder controlled by United on the Company's
Board of Directors in March 1999.
INCUMBENT DIRECTORS--2000
Independent Director
Mr. Wim Dik Director since 1998 Age: 61
Mr. Dik served as Chairman of the Board of Management and Chief Executive
Officer of KPN, Royal Dutch Telecom from 1989 until his retirement in 2000. 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.
Independent Director
Ms. Mina Gouran Director since 1998 Age: 51
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 2002. She currently chairs the Compensation Committee
and serves on the Audit Committee.
Airline Stockholder Director
Mr. Georges P. Schorderet Director since 1997 Age: 47
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 Sabena S.A.,
Crossair AG for Regional European Air Transport, Air Europe SA, Air Littoral SA,
Swissport International Ltd., AOM Minerve S.A., Avireal AG, LTU gmbH,
Flightlease AG and Flughafen-Immobilien-Gesellschaft (the Zurich Airport real
estate company). 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 currently chairs the Nominating
Committee and serves as a member of the Compensation Committee.
Airline Stockholder Director
Mr. Andrew P. Studdert Director since 2000 Age: 43
Mr. Studdert has been Executive Vice President and Chief Operating Officer
of United Air Lines since July 1999. Prior to that he served as Senior Vice
President--Fleet Operations from 1997 and Senior Vice President--Information
Services Division and Chief Information Officer from 1995. Pursuant to the terms
of the Special Voting Preferred Stock and the Stockholders' Agreement, Mr.
Studdert replaced Frederic F. Brace as the representative of the Airline
Stockholder controlled by United on the Company's Board of Directors in January
2000.
Management Director
Mr. Anthony C. Swanagan Director since 1999 Age: 40
Mr. Swanagan has been Senior Vice President, General Counsel and Secretary
since August 1999. Prior to that he was Vice President, Legal since 1998 and
joined the Company as Counsel in 1991. Before joining the Company, Mr. Swanagan
was associated with the Chicago law firm of Jones, Ware & Grenard. Mr.
Swanagan's current term expires in 2001. Pursuant to the terms of the
Stockholders' Agreement, Mr. Swanagan replaced Babetta R. Gray as a management
director on the Company's Board of Directors in August 1999.
Committees of the Board of Directors
The Board of Directors of the Company has three standing committees,
consisting 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 delegated specifically 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 1999. The members of the Audit Committee are Messrs. Dik and
Whipple and Ms. Gouran.
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 1999 Equity and
Performance 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 1999. The members of the
Compensation Committee are Messrs. Schorderet 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 four times during 1999. The members of the Nominating
Committee are Messrs. Barlett, Dik and Schorderet.
During 1999, the Board of Directors met twelve 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 Mr.
Dik who attended 67% of such Board meetings, 33% of the Audit Committee meetings
and 50% of the Nominating Committee 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 also 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 is 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 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
vest 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 also may 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 22, 2000:
o there were no phantom shares credited to directors pursuant to
the deferred compensation arrangement under the Director Plan;
o Messrs. Dik's and Whipple's and Ms. Gouran's accounts were credited
in 1999 with 1,000, 1,000 and 10,000 Common Shares, respectively,
under the stock option arrangement of the Director Plan; and
o the Airline Directors' employees received the following cash
payments in 1999 in lieu of stock options as provided under the
Director Plan: $13,000 to Mr. Atkinson and $13,000 to Mr. Schorderet.
<PAGE>
OWNERSHIP OF COMMON STOCK BY
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 22, 2000, the number of Common
Shares beneficially owned by (i) each director (including those owned by James
E. Bartlett and Anthony C. Swanagan who also serve as Executive Officers of the
Company) and Paul H. Bristow, who served as a director and an Executive Officer
of the Company until March 15, 2000, (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 Swanagan, the following also serve as
executive officers of the Company (collectively, the "Executive Officers"): Lyn
Bulman, Michael G. Foliot, Babetta R. Gray, James E. Lubinski and David A. Near.
Name of Individual and No. of Shares
No. of Persons in Group Beneficially Percent of
Owned(1) Class(2)
Directors
James E. Barlett.................. 222,084(3) *
Graham W. Atkinson................ 0 *
Paul H. Bristow................... 74,951(4) *
Wim Dik........................... 11,000 *
Mina Gouran....................... 14,000 *
Georges P. Schorderet............. 1,500 *
Andrew P. Studdert................ 0 *
Anthony C. Swanagan............... 1,518 *
Kenneth Whipple................... 14,000 *
Executive Officers
Babetta R. Gray................... 53,918 *
James E. Lubinski................. 75,384 *
David A. Near..................... 59,951 *
All Directors and Executive Officers
as a Group (14 persons)..... 634,874(4) *
(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, and Ms. Bulman, 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 restricted stock award of 97,900 shares, which was
granted in two equal annual installments of 48,950 shares each on June 18,
1998 and June 18, 1999 for which Mr. Barlett has voting and investment
power.
(4) Includes the Common Shares owned by Mr. Bristow, who served as Executive
Vice President, Chief Financial Officer and Treasurer until March 15, 2000.
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, 1999.
<PAGE>
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 1999 and (ii) the Company's four most highly paid Executive
Officers during 1999 other than the Chairman, President and Chief Executive
Officer (collectively, the "Named Executive Officers").
<TABLE>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other All
Annual Restricted Securities Other
Compen- Stock Underlying LTIP Compen-
Name and Principal Position Year Salary Bonus sation Awards Options Payouts sation(5)
($) ($) ($) ($) (#) ($) ($)
- ---------------------------------------------- --- --- --- --- ----- --- --- ---
James E. Barlett 1999 $591,273 $ 726,000 -- $1,996,181(2) 101,000 -- $ 9,700
Chairman, President and 1998 $528,770 $ 801,310 -- $1,996,181(2) 256,150 $396,923(3)$ 9,700
Chief Executive Officer 1997 459,000 360,480 -- -- 216,200 119,456(4) 9,018
Paul H. Bristow(6) 1999 261,313 265,975 -- -- 33,000 -- 9,700
Executive Vice President, 1998 242,629 247,500 -- -- 155,150 184,855(3) 9,307
Chief Financial Officer 1997 217,360 132,484 $42,962(1) -- 62,200 56,047(4) 7,057
and Treasurer
Babetta R. Gray 1999 215,276 214,200 -- -- 26,000 -- 8,925
Executive Vice President, 1998 184,947 184,275 -- -- 121,150 87,125(3) 8,322
Subscriber Sales & Marketing 1997 152,570 100,671 -- -- 44,200 16,927(4) 8,056
James E. Lubinski 1999 289,454 270,000 -- -- 36,000 -- 9,700
Executive Vice President, 1998 259,614 284,625 -- -- 171,150 155,944(3) 9,201
Operations 1997 206,458 109,165 -- -- 60,200 40,479(4) 5,254
David A. Near 1999 226,609 205,920 150,248(1) -- 29,000 -- 9,300
Senior Vice President, 1998 202,382 198,000 90,997(1) -- 137,150 80,074(3) 8,243
Internet and E-Commerce 1997 144,625 76,470 43,186(1) -- 42,200 15,072(4) 6,556
</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 transportation expenses in 1999 and 1998, for
Mr. Near.
(2) Effective April 1, 1998, Mr. Barlett was granted restricted stock in two
equal annual installments of 48,950 shares each on June 18, 1998 and 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 1999,
1998 and 1997 of $4,800, $4,800 and $4,750, respectively, under the
Company's 401(k) Savings Plan for each of the Named Executive Officers; and
(ii) payments made in fiscal 1999, 1998 and 1997 representing money
allocated to, but unused for, benefit programs for Mr. Barlett ($4,900,
$4,900 and $4,268); Mr. Bristow ($4,900, $4,507 and $2,307); Ms. Gray
($4,125, $3,522 and $3,306); Mr. Lubinski ($4,900, $4,401 and $504); and
Mr. Near ($4,500, $3,443 and $1,806).
(6) Mr. Bristow served as Executive Vice President, Chief Financial Officer
and Treasurer of the Company until March 15, 2000.
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 1999.
Individual Grants
---------------
Percent of
Total
Number of Options/SARs
Securities Granted to
Underlying Employees Exercise Grant Date
Options/SARs in Fiscal or Base Expiration Present
Name Granted (1) Year Price Date Value (2)
- ---- ---- ----- ------- --------- ---------
James E. Barlett... 101,000 22.37 $48.03 17 Jun 09 $1,971,823
Paul H. Bristow(3). 33,000 7.31 48.03 17 Jun 09(3) 644,259
Babetta R. Gray.... 26,000 5.76 48.03 17 Jun 09 507,598
James E. Lubinski... 36,000 7.97 48.03 17 Jun 09 702,828
David A. Near....... 29,000 6.42 48.03 17 Jun 09 566,167
(1) All options granted at $48.03 vest in equal annual installments over a
three-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 6.00%; and estimated future volatility of
40.00%. The option values shown are based on the model and actual value, if
any, will depend on stock price change.
(3) Mr. Bristow served as Executive Vice President, Chief Financial Officer and
Treasurer of the Company until his resignation effective March 15, 2000.
Pursuant to Mr. Bristow's 1999 stock option grant, such options are
exercisable, to the extent they were exercisable on the date of his
resignation, within either 90 days or six months following such resignation
depending on the terms of the relevant grant.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Options Values
<TABLE>
Number of Value of
Securities Underlying Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
at Fiscal Year-End at Fiscal Year-End (1)
____________________________ ____________________________
<S> <C> <C> <C> <C> <C> <C>
Shares
Acquired Value ---------- ------------ ----------- -------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
James E. Barlett 0 0 116,184 457,166 273,699 504,989
Paul H. Bristow(2) 0 0 70,451 179,899 79,081 145,206
Babetta R. Gray 0 0 53,718 137,632 56,334 103,154
James E. Lubinski 0 0 75,184 192,166 76,554 140,534
David A. Near 0 0 58,451 149,899 53,806 98,481
</TABLE>
(1) The value of "in-the-money" options represents the difference between the
exercise price of such options and $29.9375, the closing price of the
Common Shares on the New York Stock Exchange on December 31, 1999. No SARs
were granted to the Named Executive Officers.
(2) Mr. Bristow served as Executive Vice President, Chief Financial Officer and
Treasurer of the Company until his resignation effective March 15, 2000.
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
(as hereinafter defined) in the remuneration and years of service
classifications indicated (without regard to the offsets described below).
Pension Plan Table
------------------
Years of Service
15 25 20 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
The basic monthly payment under the Pension Plan determined as a single
life annuity payable at age 65 is 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. Retirement benefits are subject to the annual pension
limitations imposed under Section 415(d) and 401(a)(17) of the Internal Revenue
Code of 1986, 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,
2000, Ms. Gray and Messrs. Barlett, Bristow, Lubinski and Near had 86, 51, 73,
43 and 92 months of qualified service, respectively, under the Pension Plan. Mr.
Bristow served as Executive Vice President, Chief Financial Officer and
Treasurer of the Company until his resignation effective March 15, 2000.
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 Agreements
Chairman, President and Chief Executive Officer
James E. Barlett is a party to an employment agreement with the Company
dated February 23, 2000 (the "Agreement"). The term of the Agreement continues
for three years, but is automatically renewed every February 23 for an
additional year, such that there is always three years remaining in the term of
the Agreement on each February 23. The Agreement provides for a salary of
$605,000 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 for "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, within 30 days after termination, the Company must pay
Mr. Barlett (i) a lump sum equal to the sum of Mr. Barlett's annual salary at
the rate in effect at the time of termination through the termination date, to
extent not theretofore paid, plus an amount equal to the annual incentive
compensation Mr. Barlett would have received under the Management Incentive Plan
("MIP") attributable to the year in which termination occurred, assuming 100%
target achievement, multiplied by a fraction, the numerator of which is the
number of days in such year through the termination date and the denominator of
which is 365, and (ii) a lump sum equal to Mr. Barlett's annual salary at its
rate in effect at the termination date, for a period of 12 months or the
remaining term of the Agreement, whichever is less, plus an amount equal to the
annual incentive compensation Mr. Barlett would have received under the MIP
attributable to the year in which termination occurred, assuming 100% target
achievement. In addition, commencing 12 months after the date of termination,
and for a period of 24 months or the remaining term of the Agreement following
the date that is 12 months after the termination date, whichever is less, the
Company must pay Mr. Barlett an additional amount equal to Mr. Barlett's annual
salary, payable on a monthly basis, plus a monthly amount equal to one-twelfth
of the amount Mr. Barlett would have earned under the MIP for that year,
assuming a 100% target achievement. The monthly payments will be decreased to
reflect income generated by Mr. Barlett from any other employment or business
activities, other than income from personal investments. The Company also will
provide group insurance benefits to Mr. Barlett for a 24-month period following
a termination without Cause or a resignation for Good Reason, or until Mr.
Barlett becomes entitled to receive benefits from another employer.
If the Agreement is terminated by the Company without Cause prior to a
"Change in Control" (as such term is defined in the Agreement) as a condition of
the agreement to which the Change in Control occurs, or if the Company
terminates the Agreement without Cause within two years following a Change in
Control, or if Mr. Barlett terminates the Agreement with Good Reason within two
years following a Change in Control, within 30 days after termination, the
Company must pay Mr. Barlett (i) a lump sum equal to the sum of Mr. Barlett's
annual salary at the rate in effect at the time of termination through the
termination date, to the extent not theretofore paid, plus an amount equal to
the annual incentive compensation Mr. Barlett would have received under the MIP
attributable to the year in which termination occurred, assuming 100% target
achievement, multiplied by a fraction, the numerator of which is the number of
days in such year through the termination date and the denominator of which is
365, and (ii) a lump sum equal to the sum of Mr. Barlett's annual salary at the
rate in effect at the time of termination, plus an amount equal to the annual
incentive compensation Mr. Barlett would have received under the MIP
attributable to the 12-month period following the date of termination, assuming
100% target achievement, multiplied by the number three. The Company also will
provide group insurance benefits to Mr. Barlett for three years following a
termination without Cause or a resignation for Good Reason within the applicable
Change in Control time periods or until Mr. Barlett becomes entitled to receive
benefits from another employer.
The Agreement also contains a confidentiality provision.
Named Executive Officers
Ms. Gray and Messrs. Bristow, Lubinski and Near (collectively, the
"Executive" or "Executives") are each parties to an employment agreement with
the Company dated June 1999 (the "Agreements"), respectively. The Agreements
provide for a base salary per annum reviewed by the Compensation Committee and
increased at its discretion. The Agreements provide for participation in the
Company's incentive and benefit plans as well as a car allowance. The term of
each of these Agreements continues indefinitely until terminated by the Company
or Executive. Each of the Agreements may be terminated immediately by the
Company with "Cause" or by the Executive with "Good Reason" (as such terms are
defined in the Agreement).
If any of the Agreements is terminated by the Company without Cause or by
the Executive for Good Reason, within 30 days after termination, the Company
must pay the Executive (i) a lump sum equal to the sum of the Executive's annual
salary at the rate in effect at the time of termination through the termination
date, to the extent not theretofore paid, plus an amount equal to the annual
incentive compensation the Executive would have received under the MIP
attributable to the year in which termination occurred, assuming 100% target
achievement, multiplied by a fraction, the numerator of which is the number of
days in such year through the termination date and the denominator of which is
365, and (ii) a lump sum equal to the Executive's annual salary at its rate in
effect at the termination date as well as an amount equal to the amount of
annual compensation the Executive would have received under the MIP for that 12
month period assuming a 100% target achievement. In addition, commencing 12
months after the date of termination and for 12 months thereafter, the Company
must pay the Executive an additional amount equal to the Executive's annual
salary at the rate in effect at the time of termination on a monthly basis, plus
a monthly amount equal to one-twelfth of the amount the Executive would have
earned under the MIP for that year, assuming a 100% target achievement. Such
monthly payments are decreased to reflect income generated by Executive from any
other employment or business activities, other than income from personal
investments. The Company also will provide group insurance benefits to the
Executive for the lesser of a 24-month period or until Executive becomes
entitled to receive benefits from another employer.
If any of the Agreements is terminated by the Company without Cause prior
to a "Change in Control" (as such term is defined in the Agreement) as a
condition of the agreement to which the Change in Control occurs, or if the
Company terminates any of the Agreements without Cause within two years
following a Change in Control, or if an Executive terminates his or her
respective Agreement with Good Reason within two years following a Change in
Control, within 30 days after termination, the Company must pay the Executive
(i) a lump sum equal to the sum of the Executive's annual salary at the rate in
effect at the time of termination through the termination date, to the extent
not theretofore paid, plus an amount equal to the annual incentive compensation
the Executive would have received under the MIP attributable to the year in
which termination occurred, assuming 100% target achievement, multiplied by a
fraction, the numerator of which is the number of days in such year through the
termination date and the denominator of which is 365, and (ii) a lump sum equal
to two times the Executive's salary, at its rate in effect at the Termination
Date, plus an amount equal to two times the annual incentive compensation the
Executive would have received under the MIP, assuming 100% target achievement.
The Company also will provide group insurance benefits to the Executive for a
period of 24 months, or until the Executive becomes entitled to receive benefits
from another employer.
The Agreements contain a confidentiality provision. Mr. Bristow terminated
his Agreement without Good Reason effective March 15, 2000.
Stock Option Agreements
Ms. Gray and Messrs. Barlett, Bristow, Lubinski and Near (collectively, the
"Executive" or "Executives") are each parties to a Non-Qualified Stock Option
Agreement issued under the Company's 1997 Stock Incentive Plan, as amended and
the 1999 Equity and Performance Incentive Plan (the "Agreements"), respectively.
The Agreements provide for the grant of a stock option (the "Option") to
purchase Common Shares at a price determined by the Compensation Committee on
the date of grant. The term of each Option commences on the date of grant and
unless earlier terminated, expires on a date determined by the Compensation
Committee. Subject to the expiration or earlier termination of the Option, the
vesting of the Option also is determined by the Compensation Committee. If the
Executive ceases to be employed by the Company pursuant to a "Change of Control"
(as such term is defined in the Agreements), the ability to exercise the Option
granted is accelerated. However the Option is not exercisable at any time after
the date of expiration of the Option.
Compensation Committee Report on Executive Compensation
Executive Compensation Philosophy
The Compensation Committee provides direction to the Company's Board of
Directors 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 reflect appropriately
comparisons with peer company performance.s20
The Compensation Committee advises, recommends and approves compensation
strategies, policies, and pay levels necessary to support the business. Subject
to the approval of the Board, the Compensation Committee determines the
remuneration of 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, 1999, the Compensation
committee consisted of two Airline Stockholder representatives and two
independent directors. Following a secondary offering of the Company's stock in
June 1999, the Company redeemed KLM's share of Special Voting Preferred Stock
and Mr. Frank Rovekamp, the Airline Stockholder representative from KLM, left
the Committee. Mr. Rovekamp was replaced by Mr. Georges Schorderet, the Airline
Stockholder representative from SAirGroup. Ms. Gouran, an independent director,
assumed the Chair of the Committee.
Executive Compensation
To determine appropriate levels of compensation, competitive market data is
provided to the Compensation Committee by independent compensation consultants.
In general, the Company's compensation levels are compared to a group of peer
companies although the Compensation Committee also takes into account the
specialist functional expertise and experience of the executives whose salaries
are reviewed. The Compensation Committee approves the selection of companies
used as a peer group, which are selected based on similar types of volume data
processing businesses as the Company.
The Company's executive remuneration consists of base salary, annual bonus,
long term compensation and benefits. Subject to the approval of the Board, the
Compensation Committee determines all elements of compensation for the
President, Chairman & Chief Executive Officer. For the Executive Officers, the
Compensation Committee makes determinations based on relevant data and
recommendations made by the President, Chairman & Chief Executive Officer. Each
component of Executive Officer compensation is reviewed further below.
o 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.
o Annual Bonus
The annual bonus program provides annual cash bonuses to the corporate
officer group as well as to other managers within the company. The target
bonus ranges from 60% to 80% of annual base income for the Executive
Officers, including the President, Chairman & Chief Executive Officer.
Annual bonus awards are based on corporate financial performance for the
Executive Officers.
o Long Term Incentive Compensation
Prior to July 1997, the company had a Long Term Incentive Plan (the "LTIP")
that was intended to reward executives for superior performance in
achieving long term goals. 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 of common stock. 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 shares of Common
Stock under the same schedule as applied to the LTIP. Currently, only the
final payment from the 1997 award cycle remains to be made.
In 1997 the Company replaced the LTIP with the Galileo International, Inc.
1997 Stock Incentive Plan as a means to reward long-term planning
and to encourage retention. The Galileo International, Inc. 1997 Stock
Incentive Plan was subsequently replaced with the Galileo International,
Inc. 1999 Equity and Performance Incentive Plan. The Compensation Committee
administers both plans. The primary award under this plan is stock options
but in special circumstances the use of common shares and performance
shares is permitted.
o Chairman, President and Chief Executive Officer Compensation
The Compensation Committee reviews the base salary of the Chairman,
President and Chief Executive Officer annually and recommends any
adjustment based on a subjective assessment of his contribution as well as
the overall performance of the Company. The Compensation Committee reviewed
the Chairman, President and Chief Executive Officer's duties and objectives
with respect to its compensation determination. Such duties and objectives
included preparation of the Company for the Year 2000 date change; the
improvement of network services; the identification of and action taken
with respect to targets for investment; the Chairman, President and Chief
Executive Officer's communication with key audiences and the Board; the
development, implementation and oversight of the business strategy for the
Company; employee development and communication with employees; the
development of a transition plan to a new U.S. sales force; and oversight
of customer satisfaction and market development programs. In April 1999,
the Chairman, President and Chief Executive Officer's salary was increased
to $605,000. His annual bonus for 1998, which was paid in 1999, was
determined based on a formula relating to the Company's financial
performance. As part of a compensation review in 1998, the President,
Chairman and Chief Executive Officer was granted a special equity incentive
reward in addition to his annual stock option grant. This restricted stock
grant of 97,900 shares was awarded in two equal annual installments in 1998
and 1999. Vesting on this grant is at 20% per year for the first
installment and 25% per year for the second.
o $1,000,000 Compensation Limit on Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended, restricts
corporate tax deductions on amounts paid in excess of $1,000,000 to the
Chairman, President and Chief Executive Officer and the other Executive
Officers. The Compensation Committee will make reasonable efforts to ensure
the tax deductibility of all amounts paid to such Executive Officers in its
compensation decisions consistent, however, with sound executive
compensation policy and the needs of the Company.
Compensation Committee
Mina Gouran, Chair
Kenneth Whipple
Georges Schorderet
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Mina Gouran, Georges
Schorderet and Kenneth Whipple. No member of the Compensation Committee is a
current or former employee or officer of the Company or any of its subsidiaries.
Ms. Gouran has been Managing Partner of Korn/Ferry International since 1996. Mr.
Schorderet has been Executive Vice President and Chief Financial Officer of
SAirGroup since 1996. Mr. Whipple retired from Ford Motor Company on January 1,
1999. The Company has entered into commercial agreements and other arrangements
with each of Korn/Ferry International and SAirGroup which contemplate certain
services and payments between the companies. See "Certain Relationships and
Related Transactions."
Mr. Barlett, the Company's Chairman, President and Chief Executive Officer,
was elected to the Board of Directors of Korn/Ferry International in 1999. Mr.
Barlett also serves on Korn/Ferry International's Nominating and Audit
Committees. The Company has entered into certain commercial agreements and
arrangements with Korn/Ferry International and certain of its affiliated
companies (collectively "Korn/Ferry ") that 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, 1999 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.
PERFORMANCE GRAPH
Galileo S&P 500 Peer Group
International
July 25, 1997.......... 100.00 100.00 100.00
December 31, 1997...... 113.01 103.97 96.64
December 31, 1998...... 179.27 134.16 124.77
December 31, 1999...... 124.40 162.64 161.16
(1) The peer group consists of Automatic Data Processing, Inc., Ceridian
Corporation, DST Systems, Inc., First Data Corporation, National Data
Corporation, National Processing, Inc., Paychex, Inc., and Sabre Holdings
Corporation. During 1999, two of the components of the Company's Self-Determined
Peer Group, BA Merchant Services, Inc. and Paymentech, Inc., were acquired. BA
Merchant Services became a wholly owned subsidiary of Bank of America National
Trust and Savings Association on April 28, 1999 and on July 26, 1999, First Data
Corporation acquired the publicly-traded outstanding shares of Paymentech, Inc.
As a result of these acquisitions, these companies are no longer components of
the Company's Peer Group.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into various commercial and other agreements with
the airline affiliates of the Airline Stockholders and with Korn/Ferry. Three of
the Company's directors are affiliated with the Airline Stockholders and one
director is affiliated with Korn/Ferry. See "Proposal 1: Election of Directors."
Commercial Agreements
Computer Services Agreements
The Company has entered into Computer Services Agreements ("CSA") 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 SAirGroup through its
GlobalFaresTM 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 in accordance
with an amendment of the Company's CSA with United, which modified pricing and
other provisions and extended the term of the Agreement to December 31, 2004,
subject to United's right to terminate one year early or extend for an
additional year upon one year's notice.
For the year ended December 31, 1999, the Company recorded revenue of
approximately $23.9 million and $0.7 million from United 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, 1999, the Company
recorded revenue of $41.5 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 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, 1999, the Company recorded revenue of
approximately $138.4 million and $23.4 million from United and SAirGroup,
respectively, for services rendered under the Global Airline Distribution
Agreements.
Other Distribution Support
During 1999, 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, 1999, the Company
paid United approximately $2.4 million for these support services.
Termination of Revenue Sharing Obligations
During 1997, in conjunction with the acquisition of Traviswiss, the Company
terminated its obligations under the Galileo International Partnership agreement
to share with 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 SAirGroup, in four annual
installments, the aggregate amount of $22.4 million. Payments under this
agreement for the year ended December 31, 1999 were $6.6 million to SAirGroup.
Sales Representation Agreements
Until early 1999, the Company had exclusive 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. In late 1999, the Company entered
into a non-exclusive agreement with United for various sales activities in
conjunction with the Company's internal sales force. For the year ended December
31, 1999, the Company recorded expenses of approximately $1.2 million to United
for such services.
Services Agreements
In 1999, the Company recorded a special charge of $83.2 million related to
the extinguishment of a portion of its liability arising from a services
agreement with United Airlines. This services agreement was entered into at the
time of the Company's acquisition of Apollo Travel Services Partnership in July
1997. Under the agreement, United Airlines agreed to provide the Company with
marketing and other support in the U.S. and Mexico. In exchange for these
services, the Company agreed to compensate United Airlines if it achieved
specific air segment growth and price increases over a five-year period.
Although the Company was accruing for the estimated liability under the services
agreement in line with lower levels of historical and projected pricing, as a
result of the price increase in the U.S. and Mexico that became effective on
January 1, 2000, the Company now expects to owe the full price-related
obligation. In December 1999, the Company created and funded a qualified
special-purpose entity to provide for payment of this price-related obligation
to United Airlines in July 2002. The Company transferred $97.3 million in assets
to this special-purpose entity. As a result, the Company has no further payment
obligation to United Airlines related to price increases under the services
agreement.
In connection with the Company's acquisition of Traviswiss, the Company
entered into a services agreement with SAirGroup (the "Additional Services
Agreement") pursuant to which SAirGroup provides services designed to assist the
Company in growing the business of Traviswiss. During the sixth year following
the effective date of the Additional Services Agreement, the Company will pay
SAirGroup a fee of up to $6.8 million (on a present value basis) based on
improvements in the Company's air booking fee revenue over the five year period
immediately following the acquisition.
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, 1999, the
Company paid approximately $8.9 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, which was amended on June 20, 1998 and July 15, 1999. Pursuant to
this Agreement 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) consist of the number of members the Board so determines, (ii) be
divided into three classes, (iii) consist of three directors elected by the
Airline Stockholders, three management directors and the remainder as
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.
Executive Search Agreements
In 1999 the Company entered into several executive search agreements and
also commissioned other executive searches with Korn/Ferry. For the year ended
December 31, 1999, the Company paid approximately $0.2 million to Korn/Ferry for
these services.
PROPOSAL NO. 2
ADOPTION OF GALILEO INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors recommends that you approve the Galileo
International, Inc. Employee Stock Purchase Plan (the "Purchase Plan"). The
Purchase Plan is a broad-based plan intended to provide eligible employees of
the Company and certain subsidiaries with a convenient method of becoming
stockholders of the Company. The following description of the material elements
of the Purchase Plan is necessarily brief and general. A copy of the Purchase
Plan is attached hereto as Annex A and the summary description that follows is
qualified in its entirety by reference to that annex.
Summary Description
The Purchase Plan, if approved by the stockholders, provides eligible
employees with the opportunity to purchase shares of Common Stock at a discount
from fair market value pursuant to a payroll deduction program. The Purchase
Plan provides for an offering period consisting of each calendar quarter
("Offering Period"), unless the Compensation Committee of the Board of Directors
otherwise determines. Prior to the beginning of such Offering Period, eligible
employees may elect to make contributions by payroll deduction to purchase
Common Shares. On the last business day of each Offering Period (the "Purchase
Date"), Common Shares are purchased automatically at a price equal to the lesser
of 85% of the market value of the Common Shares on the first business day of the
Offering Period or 85% of the market value of the Common Shares on the last
business day of the Offering Period. "Market value" for this purpose means the
closing price per Common Share on the New York Stock Exchange Composite
Transactions as reported for the Company in The Wall Street Journal. The
Compensation Committee currently has authorized approximately 1,700 employees of
the Company and certain of its subsidiaries (a "Participating Company" or the
"Participating Companies") to participate in the Purchase Plan. The Compensation
Committee subsequently may specify that the employees of additional subsidiaries
of the Company may participate in the Purchase Plan. The closing price of a
Common Share on March 22, 2000 was 201/4. The Purchase Plan will continue in
effect until all shares of common stock available for issuance under the
Purchase Plan have been issued, unless terminated earlier in the discretion of
the Compensation Committee.
Each employee of the Company, and of such subsidiaries ("Participating
Companies") as the Board of Directors of the Company or the Compensation
Committee shall from time to time designate, may participate in the Purchase
Plan. However, an employee will not be eligible to participate if such
individual would, immediately after the grant of purchase rights, own or hold
outstanding options or other rights to purchase stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of stock
of the Company.
An eligible employee may enroll in the Purchase Plan as of the beginning of
any Offering Period. Payment for Common Shares under the Purchase Plan shall be
effected by means of the participant's authorized payroll deduction. Payroll
deductions will begin with the first business day of an Offering Period and will
(unless sooner terminated by the participant) remain in effect for successive
Offering Periods. Interest will not accrue on amounts withheld from a
participant's compensation or otherwise credited to an account established for a
participant. Fractional shares may be purchased under the Purchase Plan and
credited to the participant's account, although the Company may substitute cash
for such fractional shares.
A participant may withdraw from the Purchase Plan by filing the appropriate
form with the Compensation Committee or its designee. Any payroll deductions
previously collected from the participant and not previously applied to the
purchase of Common Shares will, at the participant's election, be refunded or
held for the purchase of Common Shares on the next Purchase Date immediately
following such termination. An employee who has withdrawn from an Offering
Period may participate in the Purchase Plan as of any subsequent Offering Period
by filing a new election form prior to the commencement of such Offering Period.
If a participant ceases to be employed by the Company or a Participating
Company before the end of any Offering Period, he or she may elect, by filing
the appropriate form as directed by the Compensation Committee or its designee,
to have the amount in his or her account at the time of termination applied to
purchase Common Shares at the applicable purchase price on the first Purchase
Date following such termination. In the absence of such an election, the amount
credited to his or her account on the date of termination will be refunded
within a reasonable time without interest. A participant may file with the
Company a written designation of beneficiary with respect to any cash or stock
payable under the Purchase Plan and may change such designation of beneficiary
at any time by written notice to the Company.
Neither payments credited to a participant's account under the Purchase
Plan nor any rights to purchase Common Shares under the Purchase Plan may be
transferred by a participant except by the laws of descent and distribution. Any
such attempted transfer will be without effect, except that the Company may
treat such act as an election by the Participant to withdraw from the Purchase
Plan. Common Shares may be purchased under the Purchase Plan only by
participants who have legal capacity as determined under applicable law, or, in
the event of the participant's legal incapacity, by his or her guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant under
applicable law or court supervision.
A participant shall have no rights as a stockholder with respect to any
Common Shares covered by his or her election until the shares are purchased as
of the end of the Offering Period. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date of
such purchase, except with respect to adjustments.
An employee may elect to have any whole dollar amount of his or her
compensation withheld and applied to the purchase of Common Shares under the
Purchase Plan. "Compensation" for this purpose means a participant's earned base
pay (including any contributions made by the Participant to a plan maintained
pursuant to Sections 401(k) or 125 of the Internal Revenue Code of 1986, as
amended (the "Code")), plus pay for overtime, doubletime, shift differential,
Holiday Rotating Day Off, Global Cash Profit Sharing Program, Holiday Worked
Rotating Day Off, commissions, retroactive pay, Lump-Sum Merit Pay, and
Management Incentive Program. However, during any calendar year, no employee is
entitled to purchase Common Shares under the Purchase Plan having a value of
more than $25,000.
Each participant will be granted a separate purchase right for each
Offering Period in which the individual participates. The purchase right will be
granted as of the first business day of such Offering Period and will be
exercised automatically on the Purchase Date.
There will be 500,000 Common Shares available for issuance under the
Purchase Plan. The Compensation Committee may make or provide for such
adjustments in the purchase price and in the number or kind of shares of common
stock or other securities covered by participant elections or in determining the
number of shares authorized under the Purchase Plan, as the Compensation
Committee in its sole discretion exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
participants, resulting from any change in the capital structure of the Company,
merger, consolidation, spin-off, reorganization, liquidation, distribution of
assets or similar corporate transaction (collectively "Adjustments"). The
Compensation Committee is also authorized under the Purchase Plan, in the event
of any such event or transaction, to provide alternative consideration in
substitution for any outstanding purchase elections under the Plan.
Because the purchase of Common Shares under the Purchase Plan is
discretionary with all eligible employees, it would not be meaningful to include
information as the number of Common Shares which would have been distributable
during fiscal 1999 to all employees, or to groups of employees, or to any
particular employee of the Company or any Participating Company had the Purchase
Plan been in effect during the year.
The Compensation Committee may amend, suspend, or discontinue the Purchase
Plan with respect to any shares of Common Shares at any time not subject to
purchase rights. However, no such action may, without the approval of
stockholders of the Company, increase the number of shares of Common Stock
subject to the Purchase Plan (other than for the permitted adjustments described
above) or materially modify the requirements as to eligibility for participation
in the Purchase Plan.
Administration
The Purchase Plan will be administered by the Compensation Committee of the
Company's Board of Directors or its designee. The Compensation Committee will
have full authority to interpret and construe any provision of the Purchase Plan
and to adopt such rules and regulations for administering the Purchase Plan as
it may deem necessary. Decisions of the Compensation Committee will be final and
binding on all parties who have an interest therein.
United States Federal Income Tax Consequences
The Purchase Plan and the right of eligible employees to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and 423
of the Code. Amounts withheld from an eligible employee's pay to purchase Common
Shares under the Purchase Plan are taxable as part of the employee's
compensation. However, no income will be taxable to a participant as a result of
the grant of a purchase right as of the commencement of the Offering Period or
upon the purchase of Common Shares on the Purchase Date. As summarized below, a
participant may be taxed upon the sale or other disposition of shares of common
stock acquired under the Purchase Plan. The tax consequences of the disposition
will depend upon how long the participant has held the Common Shares prior to
disposition.
If a participants disposes of the Common Shares at least two years after
the date of granting of the purchase right and at least one year after the
Common Shares are purchased under the Purchase Plan (the "Holding Period"), the
following United States federal income tax consequences will apply. The lesser
of (a) the excess of the fair market value of the Common Shares at the time
granted over the exercise price of the Common Shares if exercised on the date of
grant or (b) the excess of the fair market value of the Common Shares at the
time such shares are disposed of over the purchase price of the Common Shares
will be treated as ordinary income. Any further gain upon such sale will be
treated as a capital gain. If the Common Shares are sold and the sale price is
less than the purchase price, there is no ordinary income and the participant
has a capital loss equal to the difference. If a participant holds the Common
Shares for the Holding Period, no deduction in respect of the disposition of
such Common Shares will be allowed to the Company.
Example 1--An employee is granted a purchase right at $17.00 per share at the
beginning of the Offering Period when the market value of a share is $20.00. On
the Purchase Date, the employee pays $17.00 for the share when the market price
is still $20.00
If the share is sold after the Holding Period at:.
$22.00 $20.00 $18.00 $16.00
Ordinary income would be:.................... $3.00 $3.00 $1.00 $0.00
Long-term capital gain would be:............. $2.00 $0.00 $0.00 $ (1.00)
If a participant disposes of the Common Shares before the expiration of the
Holding Period (a "Disqualifying Disposition"), the following United States
federal income tax consequences will apply. The excess of the fair market value
of the Common Shares at the Purchase Date over the purchase price will be
treated as ordinary income to the employee. This excess will constitute ordinary
income in the year of sale or other disposition even if no gain is realized on
the sale. Any further gain upon such sale will be treated as a capital gain. If
the Common Shares are sold for less than their fair market value on the Purchase
Date, the same amount of ordinary income is attributed to the employee and a
capital loss will be recognized equal to the difference between the sale price
and the fair market value of the Common Shares on such Purchase Date. To the
extent the employee recognizes ordinary income by reason of a Disqualifying
Disposition, the Company will be entitled to a corresponding tax deduction for
compensation in the tax year in which the disposition occurs.
Example 2--As in Example 1, an employee is granted a purchase right at $17.00
per share at the beginning of the Offering Period when the market value of a
share if $20.00, and, at the Purchase Date, the employee pays $17.00 for the
share when the market price is still $20.00
If the share is sold during the Holding Period at:..
$22.00 $20.00 $18.00 $16.00
Ordinary income would be:............... $3.00 $3.00 $3.00 $3.00
Long-term capital gain would be:........ $2.00 $0.00 $ (2.00) $ (4.00)
Upon the death of a participant prior to disposing of shares purchased
under the Purchase Plan, the tax return for the year of death must include as
ordinary income the lesser of (i) the amount by which the fair market value of
the stock upon grant exceeds the exercise price if exercised on the date of
grant, or (ii) the amount by which the fair market value of the stock at the
time of death exceeds the purchase price. If such an amount is required to be
included on the tax return in the year of death, an estate tax deduction may be
available to the estate of the deceased participant.
The foregoing discussion is merely a summary of the more significant
effects of the federal income tax on an employee of the Company or a
Participating Company with respect to shares of common stock purchased under the
Purchase Plan and does not purport to be a complete analysis of the tax laws
dealing with this subject. Reference should be made to the applicable provisions
of the Code and the regulations promulgated thereunder. In addition, this
summary does not discuss the provisions of the income tax laws of any state or
foreign country in which an employee may reside. Each employee should consult
his or her own tax advisor concerning the federal, state, local and foreign
income tax consequences of participation in the Purchase Plan.
The first Offering Period under the Purchase Plan begins July 1, 2000,
provided, however, that no purchase rights will be granted and no purchases will
be made under the Purchase Plan unless the Purchase Plan is approved by a vote
of a majority of the total number of outstanding shares of voting stock of the
Company present in person or by proxy at the 2000 Annual Meeting and at which a
quorum is present in person or by proxy occurring at least 12 months before or
after the date the Plan is adopted by the Board of Directors. The Purchase Plan
was unanimously approved and adopted by the Board of Directors on February 24,
2000. If you abstain from voting on this Proposal 2 or your shares are treated
as a broker non-vote for purposes of this Proposal 2, your shares will be
included in the number of shares voting on the proposal and consequently your
abstention will have the same effect as a vote against the proposal.
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.
AVAILABILITY OF 10-K REPORT
The Company filed its Annual Report on Form 10-K for the year ended
December 31, 1999 with the Securities and Exchange Commission on March 10, 2000.
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, 1999. The Company also engaged KPMG to prepare
certain tax filings for the Company and its subsidiaries for 1999 and to conduct
financial due diligence on behalf of the Company in connection with certain
business investments and acquisitions undertaken by the Company during 1999. 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, 2000.
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
Future Stockholder Proposals--Deadline for Inclusion in Proxy
Any stockholder proposal to be considered by the Company for inclusion in
the Proxy Statement and form of proxy for next year's Annual Meeting of
Stockholders, expected to be held in May 2001, must be received by the Secretary
of the Company at the Company's principal executive offices located at the
address found at the top of page 1, no later than December 3, 2000.
Other Stockholder Proposals/Director Nominations--Deadline for Consideration
Stockholder proposals not included in a proxy statement for an annual
meeting as well as proposed stockholder nominations for the election of
directors at an annual meeting must each comply with advance notice procedures
set forth in the By-Laws of the Company in order to be brought properly before
that annual meeting of stockholders. In general, written notice of a stockholder
proposal or a director nomination must be delivered to the Secretary of the
Company not less than 60 days nor more than 90 days prior to the anniversary
date of the preceding annual meeting of stockholders. With regard to next year's
annual meeting of stockholders, expected to be held in May 2001, the written
notice must be received between February 18, 2001 and no later than March 19,
2001, inclusive.
In addition to timing requirements, the advance notice provisions of the
By-Laws contain informational content requirements that also must be met. A copy
of the By-Law provisions governing these timing procedures and content
requirements may be obtained by writing to the Secretary of the Company.
If the presiding officer of the annual meeting of stockholders determines
that business, or a nomination, was not brought before the meeting in accordance
with the By-Law provisions, such business shall not be transacted or such
defective nomination shall not be accepted.
Discretionary Voting
As of the date of this Proxy Statement, the Board of Directors and
management know of no other matters to be brought before the meeting in addition
to those described herein. Should any other matters properly come before the
meeting that call for a vote of the stockholders, the persons named in the
accompanying Proxy will have discretionary authority to vote all Proxies with
respect to such matters in accordance with their best judgment.
Please exercise your right to vote by toll-free telephone or by Internet as
explained on your proxy card, or sign, date, and mail your proxy card and return
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/ Anthony C. Swanagan
Anthony C. Swanagan
Secretary
Dated: April 3, 2000
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GALILEO INTERNATIONAL, INC. PROXY
Proxy Solicited on Behalf of The Board of Directors
For the Annual Meeting of Stockholders - May 18, 2000
The stockholder(s) identified on the reverse of this card appoints James E.
Barlett and Anthony C. Swanagan 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 had 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 May 18, 2000 or at
any adjournement thereof.
Unless otherrwise marked, this proxy will be voted FOR the election of the
nominees named and FOR the approval of the Employee Stock Purchase 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 COMPANY'S LOGO
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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
All All Except
Nominees: 01-James E. Barlett / / / / / /
02-Kenneth Whipple
___________________________________________
(INSTRUCTION: To withhold authority to vote for any such
nominee(s), write the name(s) of the nominees in the space
provided above.)
2. The proposal to approve the Galileo For Against Abstain
International, Inc. Employee Stock Purchase / / / / / /
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: ______________________, 2000
Signature(s)_____________________________
_____________________________________________
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.
- ------------------------------------------------------------------------------
CONTROL NUMBER o FOLD AND DETACH HERE o
YOUR VOTE IS IMPORTANT.
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK o EASY o IMMEDIATE o AVAILABLE 24 HOURS A DAY o 7 DAYS A WEEK
TO VOTE BY PHONE Call toll free 1-877-291-2190 any time on a touch tone
telephone. There is NO CHARGE to you for the call.
Enter the 6-digit Control Number located above.
Option #1: To vote FOR ALL proposals: Press 1.
When asked, please confirm your vote by pressing 1.
Option #2: If you choose to vote on each proposal
separately, press 0 and follow the simple recorded
instructions.
TO VOTE BY INTERNET Go to the following website:
www.harrisbank.com/wproxy
Enter the information requested on your computer screen,
including your 6-digit Control Number located above.
Follow the simple instructions on the screen.
If you vote by telephone or the Internet, it is not necessary to mail back the
proxy card.
THANK YOU FOR VOTING!
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<PAGE>
Annex A
GALILEO INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE.
This Employee Stock Purchase Plan (the "Plan") is intended to advance the
interests of Galileo International, Inc. (the "Company") and its stockholders by
allowing employees of the Company and those subsidiaries of the Company that
participate in the Plan the opportunity to purchase shares of the Company's
common stock, par value $.01 per share ("Common Stock"). It is intended that the
Plan will constitute an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 2. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Company (the "Board") or its
designee. The majority of the Committee shall constitute a quorum, and the
action of (i) a majority of the members of the Committee present at any meeting
at which a quorum is present or (ii) all members acting unanimously by written
consent, shall be the acts of the Committee.
(b) The interpretation and construction by the Committee of any provision
of the Plan or of any subscription to purchase shares of Common Stock under the
Plan shall be final. The Committee may establish any policies or procedures
which in the discretion of the Committee are relevant to the operation and
administration of the Plan and may adopt rules for the administration of the
Plan. The Committee will, from time to time, designate the subsidiaries (as
defined below) of the Company whose employees will be eligible to participate in
the Plan. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any subscription to
purchase shares of Common Stock under the Plan. For purposes of this Plan, the
term "subsidiary" has the meaning given to such term under Section 424(f) of the
Code.
SECTION 3. ELIGIBILITY.
Each employee of the Company or of a participating subsidiary of the
Company who has completed any minimum service requirement (not to exceed two
years) that may be specified by the Committee from time to time (an "Eligible
Employee") may subscribe to purchase shares of Common Stock under the terms of
the Plan. Notwithstanding the preceding sentence, no employee may subscribe to
purchase shares of Common Stock on the immediately following Purchase Date (as
defined below) if, immediately after the immediately preceding Subscription Date
(as defined below), such employee would own stock possessing 5 percent or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company. For purposes of this paragraph,
stock ownership of an individual shall be determined under the rules of Section
424(d) of the Code.
For purposes of the Plan:
(a) The term "Subscription Date" means the first business day of each
calendar quarter of the Company during which the Plan is effective. The first
Subscription Date under the Plan will be July 1, 2000.
(b) The term "Purchase Date" means the last business day of the calendar
quarter in which the related Subscription Date occurs.
(c) The term "Participant" means an Eligible Employee who has a
Subscription and Authorization Form (as defined below) in effect. Subject to
Section 6(e), once an Eligible Employee has filed a Subscription and
Authorization Form as directed by the Committee, he or she shall continue to be
a Participant in the Plan on the terms provided in such form until he or she
modifies his or her election on a subsequently filed Subscription and
Authorization Form or until he or she withdraws from the Plan.
SECTION 4. PARTICIPATION.
(a) An Eligible Employee shall evidence his or her agreement to subscribe
for shares of Common Stock by completing a written agreement (the "Subscription
and Authorization Form") provided by the Committee and filing it as directed by
the Committee. A Subscription and Authorization Form shall take effect as of the
Subscription Date immediately following the date such Form is filed with the
Company in accordance with procedures established by the Committee.
(b) In the Subscription and Authorization Form, an Eligible Employee shall
designate any whole dollar amount to be withheld from such Eligible Employee's
compensation in each pay period and used to purchase shares of Common Stock on
the next Purchase Date, provided that the Committee may establish from time to
time uniform minimum and maximum payroll deductions as a percentage of
compensation (as hereinafter defined) or as a flat amount. For purposes of this
Plan, the term "compensation" means a Participant's earned base pay (including
any contributions made by the Participant to a plan maintained pursuant to Code
Section 401(k) or Section 125), plus pay for overtime, doubletime, shift
differential, Holiday Rotating Day Off, Global Cash Profit Sharing Program,
Holiday Worked Rotating Day Off, commissions, retroactive pay, Lump-Sum Merit
Pay, and Management Incentive Program.
(c) A Participant who withdraws from the Plan may resume subscriptions for
shares of Common Stock under the Plan as of any succeeding Subscription Date,
provided that the Participant completes a new Subscription and Authorization
Form prior to such Subscription Date in accordance with procedures established
by the Committee and is then an Eligible Employee.
SECTION 5. COMMON STOCK.
The stock purchased under the Plan shall be shares of authorized but
unissued Common Stock or shares of Common Stock acquired on the open market.
Subject to the provisions of Section 6(h), the aggregate number of shares which
may be purchased under the Plan shall not exceed 500,000 shares of Common Stock.
In the event that the amount of shares of Common Stock subscribed for in any
quarter exceeds the number of shares of Common Stock available to be purchased
under the Plan, the shares of Common Stock available to be purchased shall be
allocated on a pro rata basis among the subscriptions.
SECTION 6. TERMS AND CONDITIONS OF SUBSCRIPTIONS.
Subscriptions shall be evidenced by a Subscription and Authorization Form
in such form as the Committee shall from time to time approve, provided that all
Participants subscribing to purchase shares of Common Stock shall have the same
rights and privileges (except as otherwise provided in Section 4(b) and Section
6(d)), and provided further that such subscriptions shall comply with and be
subject to the following terms and conditions:
(a) Purchase Price. The purchase price per share of Common Stock shall be
an amount equal to the lower of (i) eighty-five percent (85%) of the fair market
value per share of the Common Stock on the Subscription Date and (ii)
eighty-five percent (85%) of the fair market value per share of the Common Stock
on the Purchase Date. During such time as the Common Stock is traded on the New
York Stock Exchange, the fair market value per share of Common Stock on any day
shall be the closing price of the Common Stock (as reported in the record of
Composite Transactions for New York Stock Exchange listed securities and printed
in the Wall Street Journal) on such day, or on the next regular business day on
which shares of the Common Stock of the Company shall be traded in the event
that no shares of the Common Stock shall have been traded on the relevant day.
Subject to the foregoing, the Committee shall have full authority and discretion
in fixing the purchase price.
(b) Medium and Time of Payment. The purchase price shall be payable in
cash, pursuant to uniform policies and procedures established by the Committee.
The funds required for such payment will be derived from amounts withheld from a
Participant's compensation and credited to an account established on behalf of
the Participant. A Participant shall have the right at any time to terminate the
withholding from his or her compensation of amounts to be paid toward the
purchase price by filing a Subscription and Authorization Form as directed by
the Committee. Any termination of such withholding will constitute a withdrawal
under Section 3(c) of the Plan. A Participant shall have the right to elect to
obtain a refund (within a reasonable time) of amounts withheld from his or her
compensation prior to such termination, or to have such amounts applied to
purchase shares of Common Stock as of the immediately following Purchase Date,
by filing a Subscription and Authorization Form as directed by the Committee. A
Participant shall have the right to change the amount so withheld, to be
effective as of the immediately following Subscription Date, by filing a
Subscription and Authorization Form as directed by the Committee.
(c) No Interest on Employee Funds. No interest shall accrue on any amounts
withheld from a Participant's compensation.
(d) Accrual Limitation. No subscription shall permit the rights of a
Participant to purchase stock under all "employee stock purchase plans" (as
defined in the Code) of the Company to accrue, under the rules set forth in
Section 423(b)(8) of the Code, at a rate which exceeds $25,000 of fair market
value of such stock (determined at the time of subscription) for each calendar
year.
(e) Termination of Employment. If a Participant ceases to be employed by
the Company or a participating subsidiary before any applicable Purchase Date,
he or she may elect, by filing a Subscription and Authorization Form as directed
by the Committee, to have the amount in his or her account at the time of
termination applied to purchase shares of Common Stock at the applicable
purchase price on the first Purchase Date following such termination. In the
absence of such an election, the amount credited to his or her account on the
date of termination will be refunded within a reasonable time without interest.
(f) Transferability. Neither payments credited to a Participant's account
nor any rights to subscribe to purchase shares of Common Stock under the Plan
may be transferred by a Participant except by the laws of descent and
distribution. Any such attempted transfer will be without effect, except that
the Company may treat such act as an election by the Participant to withdraw in
accordance with Section 6(b). Shares of Common Stock may be purchased under the
Plan only by Participants who have legal capacity as determined under applicable
law or, in the event of the Participant's legal incapacity, by his or her
guardian or legal representative acting in a fiduciary capacity on behalf of the
Participant under applicable law or court supervision.
(g) Death and Designation of Beneficiary. A Participant may file with the
Company a written designation of beneficiary with respect to any cash or stock
payable under the Plan and may change such designation of beneficiary at any
time by written notice to the Company.
(h) Adjustments. The Committee may make or provide for such adjustments in
the purchase price and in the number or kind of shares of the Common Stock or
other securities covered by outstanding subscriptions, or specified in the
second sentence of Section 5 of the Plan, as the Committee in its sole
discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of Participants that would
otherwise result from (i) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company; (ii) any merger, consolidation, spin-off, split-off, spin-out,
split-up, separation, reorganization, partial or complete liquidation, or other
distribution of assets, issuance of rights or warrants to purchase stock; or
(iii) any other corporate transaction or event having an effect similar to any
of the foregoing. Moreover, in the event of any such transaction or event, the
Committee, in its discretion, may provide in substitution for any or all
outstanding subscriptions under this Plan such alternative consideration as it,
in good faith, may determine to be equitable in the circumstances.
(i) Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to any Common Stock covered by his or her subscription
until the Purchase Date following payment in full. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date of such purchase, except as provided in Section 6(h) of the Plan.
(j) Fractional Shares. Fractional shares of Common Stock may be purchased
under the Plan and credited to an account for the Participant. The Company,
however, shall have the right to pay cash in lieu of any fractional shares of
Common Stock to be distributed from a Participant's account under the Plan.
(k) Other Provisions. The Subscription and Authorization Form authorized
under the Plan shall contain such other provisions as the Committee may deem
advisable, including the requirement that a Participant complete and file a
Stock Purchase Agreement as directed by the Committee, provided that no such
provisions may in any way be in conflict with the terms of the Plan.
SECTION 7. EFFECTIVE DATE AND TERM OF PLAN.
(a) Effective Date; Approval of Shareholders. The Plan shall take effect
upon adoption by the Board; provided, however, that any subscriptions and
purchases under the Plan shall be null and void unless the Plan is approved by a
vote of the holders of a majority of the total number of outstanding shares of
voting stock of the Company present in person or by proxy at a meeting at which
a quorum is present in person or by proxy, which approval must occur within the
period of 12 months before and 12 months after the date the Plan is adopted by
the Board.
(b) Termination of Plan. The Plan shall continue in effect until the date
on which all shares of Common Stock available for issuance under the Plan shall
have been issued unless earlier terminated pursuant to Section 8 of the Plan.
SECTION 8. AMENDMENT OF THE PLAN.
The Plan may be amended, suspended or discontinued from time to time by the
Committee, but without further approval of the stockholders, no such amendment
shall (a) increase the aggregate number of shares of Common Stock that may be
issued and sold under the Plan (except that adjustments authorized by Section
6(h) of the Plan shall not be limited by this provision) or (b) materially
modify the requirements as to eligibility for participation in the Plan.
<PAGE>
Exhibit A
Participating Subsidiaries
Galileo International, Inc. Employee Stock Purchase Plan
Galileo International, Inc., effective July 1, 2000
Galileo International, L.L.C., effective July 1, 2000
Apollo Galileo USA Partnership, effective July 1, 2000
<PAGE>
GALILEO INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
STOCK PURCHASE AGREEMENT
I hereby elect to participate in the Galileo International, Inc. Employee
Stock Purchase Plan (the "Plan") beginning with the offering period specified in
my attached Subscription and Authorization Form, and I accordingly subscribe to
purchase shares of common stock of Galileo International, Inc. ("Common Stock")
in accordance with the provisions of this Agreement and the Plan. I hereby
authorize payroll deductions from each of my paychecks during the offering
period in the dollar amount specified in my attached Subscription and
Authorization Form.
I understand that subsequent offering periods will begin on the first
business day of each calendar quarter of each year and that my participation
will automatically remain in effect from offering period to offering period in
accordance with my payroll deduction authorization, unless I withdraw from the
Plan, change the rate of my payroll deduction or terminate my employment.
I understand that my payroll deductions will be accumulated for the
purchase of shares of Common Stock on the last business day of each offering
period during which I participate in the Plan. The purchase price per share will
be the lower of (i) 85% of the fair market value of one share of Common Stock on
the first business day of the offering period or (ii) 85% of the fair market
value of one share of Common Stock on the last business day of the offering
period. The fair market value of one share of Common Stock on any relevant day
will be the closing price on that day as recorded by the Wall Street Journal in
the New York Stock Exchange Composite Transactions, or on the next regular
business day on which shares of the Common Stock are traded in the event that no
shares of the Common Stock have been traded on the relevant day.
I understand that I can withdraw from the Plan at any time. The withdrawal
will become effective on the first day of the next full payroll period after
giving notice of my withdrawal. I may elect either to have the Company refund
all of my payroll deductions for that offering period or to have such payroll
deductions applied to the purchase of Common Stock at the end of such offering
period. Upon my termination of employment for any reason, including death, or
change to ineligible employee status, payroll deductions will automatically
cease on my behalf and I, or my personal representative in the event of my
death, may elect either to have the Company refund my payroll deductions for the
offering period in which such termination or change occurs or to have such
payroll deductions applied to the purchase of Common Stock at the end of that
offering period. If I, or my personal representative in the event of my death,
do not make such election, my payroll deductions will be returned to me or to my
personal representative. I further understand that I may either increase or
decrease my payroll deductions to become effective at the start of any
subsequent offering period.
I understand that the Compensation Committee of the Board of Directors of
Galileo International, Inc. (the "Committee") has the right, exercisable in its
sole discretion and at any time, to terminate the Plan or, subject to certain
restrictions, to amend the Plan. Should the Committee elect to terminate the
Plan, I will have no further rights to purchase shares of Common Stock pursuant
to this Agreement.
I understand that the Committee may impose from time to time minimum and
maximum payroll deduction amounts and that the Plan sets forth restrictions (i)
prohibiting me from purchasing more than $25,000 worth of Common Stock per
calendar year (determined on the date of grant of the purchase right) and (ii)
prohibiting participation by 5% stockholders.
I acknowledge that I have received a copy of the official Plan Summary and
Prospectus summarizing the operation of the Plan. I have read this Agreement and
the Prospectus and hereby agree to be bound by the terms of both this Agreement
and the Plan. The effectiveness of this Agreement is dependent upon my
eligibility to participate in the Plan.
______________________ __________________________ _____________
Signature of Employee Printed Name Date
<PAGE>
LOGO
Galileo International, Inc.
Notice of
Annual Meeting of Stockholders
and Proxy Statement
Radisson Hotel O'Hare
6810 North Mannheim Road
Rosemont, Illinois
May 18, 2000 at 9:00 A.M.
Apollo, Galileo, the Globe Device and GlobalFares are registered trademarks or
trademarks of Galileo International.
PRINTED IN U.S.A.
