<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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
The SABRE Group Holdings, Inc.
- - - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
THE SABRE GROUP HOLDINGS, INC.
P.O. BOX 619615, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9615
March 31, 1997
TO OUR STOCKHOLDERS,
You are cordially invited to attend the annual meeting of stockholders of
The SABRE Group Holdings, Inc., which will be held in the Park West Ballroom of
The Omni Hotel Park West at 1590 LBJ Freeway, Dallas, Texas 75234, on Wednesday,
May 21, 1997, at 1:00 P.M., Central Daylight Time. An Official Notice of the
Meeting, Proxy Statement and form of proxy are enclosed with this letter.
We hope that those of you who plan to attend the annual meeting will join us
beforehand for refreshments. If you cannot be present, please execute and return
the proxy card in the enclosed envelope so that your shares will be represented.
If you plan to attend the annual meeting, please make certain that you mark the
appropriate box on the proxy card when you return it, and bring to the annual
meeting the admission ticket that is printed on the last page of the proxy
statement.
Sincerely,
[SIGCUT]
Robert L. Crandall
CHAIRMAN OF THE BOARD
<PAGE>
THE SABRE GROUP HOLDINGS, INC.
P.O. BOX 619615, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9615
------------------------
OFFICIAL NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
The annual meeting of stockholders of The SABRE Group Holdings, Inc., will
be held in the Park West Ballroom of The Omni Hotel Park West at 1590 LBJ
Freeway, Dallas, Texas 75234, on Wednesday, May 21, 1997, at 1:00 P.M., Central
Daylight Time, for the purpose of considering and acting upon the following:
(1) election of directors;
(2) ratification of the selection of Ernst & Young LLP as independent
auditors for the year 1997;
(3) approval of an Employee Stock Purchase Plan;
and such other matters as may properly come before the meeting or any
adjournments thereof.
If you plan to attend the annual meeting, please check the appropriate box
on your proxy card when you return it, and bring to the annual meeting the
admission ticket that is printed on the last page of the proxy statement. Only
stockholders of record at the close of business on March 24, 1997, will be
entitled to attend or to vote at the meeting.
By Order of the Board of Directors,
Andrew B. Steinberg
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
March 31, 1997
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU MUST HAVE AN ADMISSION TICKET
(PRINTED ON THE LAST PAGE OF THE PROXY STATEMENT) OR OTHER PROOF OF SHARE
OWNERSHIP. IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE EXECUTE
AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE SO THAT YOUR
SHARES WILL BE VOTED. THE ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
<PAGE>
THE SABRE GROUP HOLDINGS, INC.
P.O. BOX 619615, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9615
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1997
This statement and the form of proxy are being mailed to stockholders on or
around March 31, 1997, in connection with a solicitation of proxies by the Board
of Directors of The SABRE Group Holdings, Inc. (the "Corporation") for use at
the annual meeting of stockholders to be held on May 21, 1997.
If the enclosed form of proxy is signed and returned, it will be voted as
specified in the proxy, or if no vote is specified, it will be voted FOR each of
the matters described in this statement, and as to any other matters, it will be
voted in the discretion of the proxy holder. A stockholder who executes a proxy
may revoke it at any time before it is voted.
The Corporation will bear the cost of this solicitation. In addition to
using the mails, proxies may be solicited by directors, officers and regular
employees of the Corporation or its subsidiaries, in person or by telephone. The
Corporation will also request brokers or nominees who hold common stock in their
names to forward proxy material at the Corporation's expense to the beneficial
owners of such stock, and has retained D.F. King & Co., Inc., a firm of
professional proxy solicitors, to aid in the solicitation at an estimated fee of
$6,000 plus reimbursement of normal expenses.
OUTSTANDING STOCK AND VOTING RIGHTS
The holders of record at the close of business on March 24, 1997, of the
Corporation's common stock will be entitled to vote at the meeting. On that
date, the Corporation had outstanding 23,409,217 shares of Class A Common Stock
and 107,374,000 shares of Class B Common Stock. Each holder of Class A Common
Stock will be entitled to one vote in person or by proxy for each share of Class
A Common Stock held. Each holder of Class B Common Stock will be entitled to 10
votes in person or by proxy for each share of Class B Common Stock held. AMR
Corporation ("AMR") owns 100% of the Class B Common Stock.
<PAGE>
Directors of the Corporation are elected by a plurality of the votes cast at
the annual meeting. Any other matters submitted to vote of the stockholders will
be determined by a majority of the votes cast at the annual meeting. Abstentions
from voting (including broker non-votes) on the election of directors or on
other matters will have no effect on the outcome of such votes, because they are
determined on the basis of votes cast, and abstentions are not counted as votes
cast.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
From time to time, stockholders present proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
annual meeting. In addition, the Compensation/Nominating Committee of the Board
of Directors will consider recommendations by stockholders for nominees for
election as directors. Such recommendations should be submitted in writing to
the Corporate Secretary of the Corporation with a suitable description of the
nominee's qualifications and evidence of his or her consent to serve. Proposals
for inclusion in the 1998 proxy statement, and director nominations, must be
received by the Corporation no later than December 1, 1997. Proposals and
nominations must be made by a stockholder entitled to vote at the 1998 annual
meeting and must comply with the notice requirements in the Corporation's
by-laws. Proposals and nominations, as well as any questions related thereto,
should be directed to the Corporate Secretary of the Corporation.
PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors with
staggered terms. Each director was elected to an initial term which expires on
the annual meeting date occurring one, two or three years after the director was
first elected. Thereafter, directors are elected to terms which expire on the
annual meeting date three years following the annual meeting at which they are
elected.
The terms of three directors will expire at the annual meeting in 1997. It
is proposed that those three directors, who are named on the next page, be
re-elected at the annual meeting for three-year terms that will expire at the
annual meeting in 2000. Directors will be elected by a plurality of the votes
cast.
Unless otherwise indicated, all proxies that authorize the proxy holder to
vote for the election of directors will be voted FOR the election of the
nominees listed on the next page. If any nominee becomes unavailable for
election as a result of unforeseen circumstances, it is the intention of the
proxy holder to vote for the election of such substitute nominee, if any, as the
Board of Directors may propose.
2
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
Each of the nominees for election as a director has furnished to the
Corporation the following information with respect to principal occupation or
employment and principal business directorships.
BUSINESS AFFILIATIONS
EDWARD A. BRENNAN, retired Chairman, President and Chief Executive Officer,
Sears, Roebuck and Co., Chicago, Illinois; merchandising. He is also a director
of The Allstate Corporation, AMR Corporation, American Airlines, Inc., Dean
Foods Company, Dean Witter, Discover & Company, Minnesota Mining and
Manufacturing Company, and Unicom Corporation.
Mr. Brennan is 63. He became a director on November 18, 1996, with a
term expiring at the annual meeting in 1997. He is Chairman of the
Compensation/Nominating Committee.
DEE J. KELLY, Senior Founding Partner, Kelly, Hart & Hallman, P.C., Fort
Worth, Texas; law firm. He is also a director of AMR Corporation, American
Airlines, Inc. and Justin Industries, Inc.
Mr. Kelly is 68. He became a director on November 18, 1996, with a term
expiring at the annual meeting in 1997. He is a member of the Executive
Committee and the Compensation/ Nominating Committee.
ANNE H. MCNAMARA, Senior Vice President and General Counsel, AMR Corporation
and American Airlines, Inc., Fort Worth, Texas; air transportation and
diversified services. She is also a director of LG&E Energy Corporation and
Louisville Gas and Electric Company.
Mrs. McNamara is 49. She became a director on August 7, 1996, with a
term expiring at the annual meeting in 1997.
A plurality of the votes cast is necessary for the election of a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
3
<PAGE>
CONTINUING DIRECTORS
GERARD J. ARPEY, Senior Vice President and Chief Financial Officer of AMR
Corporation and Senior Vice President-Finance and Planning and Chief Financial
Officer of American Airlines, Inc., Fort Worth, Texas; air transportation and
diversified services.
Mr. Arpey is 38. He became a director in July, 1996, with a term
expiring at the annual meeting in 1998. He is a member of the Executive
Committee.
ROBERT L. CRANDALL, Chairman of the Board, President and Chief Executive
Officer of AMR Corporation and Chairman of the Board and Chief Executive Officer
of American Airlines, Inc., Fort Worth, Texas; air transportation and
diversified services. He is also a director of AMR Corporation, American
Airlines, Inc. and Halliburton Company.
Mr. Crandall is 61. He became a director in July 1996, with a term
expiring at the annual meeting in 1999. He is Chairman of the Board and the
Executive Committee.
MICHAEL J. DURHAM, President and Chief Executive Officer of The SABRE Group
Holdings, Inc., Fort Worth, Texas; information systems.
Mr. Durham is 46. He became a director in July 1996, with a term
expiring at the annual meeting in 1999. He is a member of the Executive
Committee.
PAUL C. ELY, JR., General Partner of Alpha Partners, Menlo Park, California;
venture capital; and President of Santa Cruz Yachts, Santa Cruz, California;
yacht manufacturing. He is also a director of Parker Hannifin Corporation and
Tektronix, Inc.
Mr. Ely is 65. He became a director on January 14, 1997, with a term
expiring at the annual meeting in 1998. He is a member of the Audit
Committee and the Compensation/ Nominating Committee.
GLENN W. MARSCHEL, JR., President and Chief Executive Officer of Paging
Network, Inc., Plano, Texas; telecommunications. He is also a director of Paging
Network, Inc.
Mr. Marschel is 50. He became a director on November 18, 1996, with a
term expiring at the annual meeting in 1998. He is a member of the Audit
Committee and the Compensation/ Nominating Committee.
4
<PAGE>
BOB L. MARTIN, President and Chief Executive Officer of Wal-Mart
International, Inc.; retailing.
Mr. Martin is 48. He became a director on January 14, 1997, with a term
expiring at the annual meeting in 1999. He is a member of the Audit
Committee and the Compensation/ Nominating Committee.
RICHARD L. THOMAS, retired Chairman of First Chicago NBD Corporation;
financial services. He is also a director of CNA Financial Corporation, First
Chicago NBD Corporation, IMC Global, Inc., PMI Group, Inc. and Sara Lee
Corporation.
Mr. Thomas is 66. He became a director on November 18, 1996, with a term
expiring at the annual meeting in 1999. He is Chairman of the Audit
Committee and a member of the Compensation/Nominating Committee.
BOARD COMMITTEES
The Corporation has standing Audit, Executive and Compensation/Nominating
Committees which perform the functions described below. The Board of Directors
held one meeting in 1996 following the Corporation's initial public offering
("IPO") of Class A Common Stock. All of the directors listed above attended at
least 75% of the meetings of the Board of Directors and committees held during
the periods in which they served on the Board of Directors or such committees.
The Audit Committee, which is composed entirely of directors who are neither
employees or officers of AMR or the Corporation nor directors of AMR, met once
during 1996 with the Corporation's independent auditors, representatives of
management, and the internal audit staff. The Audit Committee recommends the
selection of independent auditors, reviews the scope and results of the annual
audit, reviews the Corporation's consolidated financial statements, reviews the
scope of non-audit services provided by the independent auditors, and reviews
reports of the independent auditors.
The Executive Committee did not meet during 1996. The Executive Committee
may exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, with the exception of such powers and
authority as are specifically reserved to the Board.
The Compensation/Nominating Committee, which is composed entirely of
directors who are not employees or officers of the Corporation or AMR, did not
meet during 1996. The Compensation/Nominating Committee makes recommendations
with respect to compensation and benefit programs for the officers and directors
of the Corporation and its subsidiaries. It also
5
<PAGE>
makes recommendations with respect to assignments to committees of the Board of
Directors and promotions, changes and succession among the senior management of
the Corporation and its subsidiaries, and recommends suitable candidates for
election to the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation/Nominating Committee consists of Messrs. Brennan, Ely, D.J.
Kelly, Marschel, Martin and Thomas. No member of the Compensation/Nominating
Committee is a current or former employee or officer of the Corporation or any
of its affiliates or has any interlocking relationship with any other
corporation that requires specific disclosure under this heading.
The law firm of Kelly, Hart & Hallman, P.C. performed legal services for the
Corporation in 1996. Mr. D.J. Kelly is a partner of the firm.
COMPENSATION OF DIRECTORS
Outside directors of the Corporation receive a semi-annual retainer of
$12,500 for service on the Board of Directors and $1,000 for each day of Board
or Committee meetings attended. Directors may defer payment of all or any part
of these fees pursuant to two deferral plans. Under the first of these deferral
plans, the Corporation will pay interest on the amount deferred at the prime
rate from time to time in effect at The Chase Manhattan Bank, N.A. Under the
second deferral plan, compensation deferred during any calendar month is
converted into stock equivalent units by dividing the total amount of deferred
compensation by the average fair market value (as defined in the Corporation's
1996 Long Term Incentive Plan (the "LTIP")) of the Corporation's Class A Common
Stock for such month. At the end of the deferral period, the Corporation will
pay to the director an amount in cash equal to the number of accumulated stock
equivalent units multiplied by the average fair market value of the
Corporation's Class A Common Stock for the month in which the deferral period
terminates.
Pursuant to the Corporation's 1996 Directors Stock Incentive Plan (the
"SIP"), on the first business day after the annual meeting of shareholders, each
outside director who has been elected to serve for the following year will
receive options for 3,000 shares of the Corporation's Class A Common Stock. In
addition, each new outside director elected since the preceding annual meeting
of shareholders will receive a one-time award of options for 10,000 shares of
the Corporation's Class A Common Stock. Options will have an exercise price
equal to the fair market value of the Corporation's Class A Common Stock on the
date of grant, will generally vest in 20% increments over five years and will
expire three years after the Director's retirement from the Board. No options
were awarded during 1996 under the SIP.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation for the
past two years paid to the individuals who, as of December 31, 1996, were the
five most highly compensated executive officers of the Corporation (the "named
executive officers").
<TABLE>
<CAPTION>
AWARDS
ANNUAL COMPENSATION ------------------------------------ PAYOUTS
------------------------------------------------------ RESTRICTED -----------
OTHER ANNUAL STOCK SECURITIES UNDERLYING LTIP
NAME YEAR SALARY BONUS(1) COMPENSATION AWARDS(2) OPTIONS/ SARS(#)(3) PAYOUTS(4)
- - - -------------- --------- --------- ----------- ------------------- ------------- --------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
M.J. Durham 1996 $ 393,583 $ 230,000 $0 $ 0 158,750 $
1995 360,417 239,672 0 0 17,400 321,800
- - - -------------------------------------------------------------------------------------------------------------------------
T.M. Cook 1996 259,499 90,000 0 59,940 68,200
1995 239,944 110,000 0 45,544 41,150 109,700
- - - -------------------------------------------------------------------------------------------------------------------------
T.B. Jones 1996 243,700 85,000 0 0 49,350
1995 224,583 119,000 0 48,797 15,850 81,650
- - - -------------------------------------------------------------------------------------------------------------------------
J.G. Katz 1996 187,243 0 0 0 47,650
1995 166,402 73,000 0 0 9,500 81,650
- - - -------------------------------------------------------------------------------------------------------------------------
T.P. Kelly 1996 186,883 85,000 0 0 47,650
1995 167,142 77,015 0 0 9,500 107,000
- - - -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ALL OTHER
NAME COMPENSATION(5)
- - - -------------- -------------------
<S> <C>
M.J. Durham $ 9,443
9,443
- - - --------------
T.M. Cook 9,176
9,181
- - - --------------
T.B. Jones 8,121
8,133
- - - --------------
J.G. Katz 3,266
3,266
- - - --------------
T.P. Kelly 2,551
2,551
- - - --------------
</TABLE>
Durham = Michael J. Durham, President and Chief Executive Officer
Cook = Thomas M. Cook, Senior Vice President-SABRE Decision Technologies
Jones = Terrell B. Jones, Senior Vice President-SABRE Interactive and Chief
Information Officer
Katz = Jeffrey G. Katz, Senior Vice President-SABRE Travel Information Network
(resigned from the Corporation on March 31, 1997)
Kelly = T. Patrick Kelly, Senior Vice President, Chief Financial Officer and
Treasurer
- - - ----------------------------------
(1) The amounts shown for 1996 represent payments made in 1997 pursuant to the
Corporation's Variable Compensation Plan for 1996 services. The amounts
shown for 1995 represent payments made in 1996 pursuant to the Corporation's
Variable Compensation Plan for 1995 services. (See discussion on page 20 of
this proxy statement.)
(2) The value of the 1996 restricted stock award disclosed in this column of the
Summary Compensation Table is based on the IPO price of the Corporation's
Class A Common Stock of $27.00 and does not include the value of grants of
restricted shares received in the conversion of deferred shares of AMR
common stock that vest at retirement ("AMR Career Equity"). The value of the
1995 restricted stock award is based on the average market price of AMR
common stock of $65.063 on the New York Stock Exchange ("NYSE") on the date
of grant (April 24, 1995).
(SEE NEXT PAGE FOR ADDITIONAL NOTES.)
7
<PAGE>
The following table sets forth certain information concerning restricted
stock awards:
RESTRICTED STOCK; TOTAL SHARES AND VALUE
<TABLE>
<CAPTION>
TOTAL NUMBER OF AGGREGATE MARKET VALUE
RESTRICTED SHARES OF RESTRICTED SHARES
NAME HELD AT FY-END(A) HELD AT FY-END(B)
- - - -------------- --------------------------- -----------------------
<S> <C> <C>
M.J. Durham 2,000 AMR 24,520 TSG $ 861,871
T.M. Cook 1,100 AMR 60,730 TSG 1,790,956
T.B. Jones 1,350 AMR 16,620 TSG 583,686
J.G. Katz 400 AMR 5,630 TSG 192,611
T.P. Kelly 600 AMR 4,440 TSG 177,278
- - - --------------------------------------------------------------------
</TABLE>
(A) AMR restricted shares consists of shares awarded under AMR's restricted
stock plan which vest in years 1997 and 1998 and which were not converted
to the Corporation's restricted shares at the IPO. Except for Mr. Cook,
the Corporation's restricted shares consist of restricted shares of the
Corporation's Class A Common Stock which vest in 1999, which were
received along with options to purchase the Corporation's Class A Common
Stock in the conversion of AMR Career Equity. The Corporation's
restricted shares shown for Mr. Cook consist of deferred shares of the
Corporation's Class A Common Stock, which vest at retirement ("TSGH
Career Equity") that were received in exchange for AMR Career Equity and
of the Corporation's restricted shares received in 1996 that vest in
April 1999, in accordance with his employment agreement.
The following table sets forth certain information concerning TSG stock
awards received in conversion of AMR stock awards.
<TABLE>
<CAPTION>
AWARDS RECEIVED IN CONVERSION
OF AMR CAREER EQUITY(1)
-----------------------------------
RESTRICTED STOCK CAREER STOCK OPTIONS 1995-1997 PERFORMANCE
NAME SHARES OPTIONS EQUITY CONVERTED SHARES CONVERTED
- - - -------------- ----------- --------- ----------- --------------- ---------------------
<S> <C> <C> <C> <C> <C>
M.J. Durham 24,520 196,150 0 113,880 17,710
T.M. Cook 0 0 58,510 75,980 6,960
T.B. Jones 16,620 66,500 0 43,390 6,010
J.G. Katz 5,630 45,000 0 26,920 6,330
T.P. Kelly 4,440 35,450 0 41,160 9,170
- - - -------------------------------------------------------------------------------------------
</TABLE>
(1) The present value of outstanding AMR Career Equity held by the named
executive officers prior to the Corporation's IPO, except for Mr. Cook,
was converted to a combination of the Corporation's restricted shares
and stock options. The number of restricted shares and stock options
received was dependent on an election by the executive between different
preset combinations of restricted shares and stock options that included
up to a 10% premium over the AMR Career Equity present value.
(B) Based on the average market price of AMR common stock of $89.188 and of
the Corporation's Class A Common Stock of $27.875 on the NYSE on December
31, 1996.
(SEE NEXT PAGE FOR ADDITIONAL NOTES.)
8
<PAGE>
(3) The amounts shown for 1996 option grants include annual grants and one-time
grants made in connection with the IPO. A portion of each of the one-time
grants is an acceleration of grants that would otherwise have been made in
1997. The amounts shown for 1996 do not include options received in the
conversion of AMR options and options received in the conversion of AMR
Career Equity. The amounts shown for 1995 grants of options represent
options received at the IPO in the conversion of 1995 AMR options.
(4) The following table sets forth information concerning LTIP payouts:
<TABLE>
<CAPTION>
LTIP PAYOUT
- - - --------------------------------------------------------------------------------
PERFORMANCE RETURN PERFORMANCE SHARE
NAME YEAR PAYMENT(A) PROGRAM PAYOUT(B) TOTAL
- - - -------------- --------- --------------------- ------------------- ---------
<S> <C> <C> <C> <C>
M.J. Durham 1996 $ 77,000 $ $
1995 60,000 261,800 321,800
- - - --------------------------------------------------------------------------------
T.M. Cook 1996 23,600
1995 16,200 93,500 109,700
- - - --------------------------------------------------------------------------------
T.B. Jones 1996 23,600
1995 16,200 65,450 81,650
- - - --------------------------------------------------------------------------------
J.G. Katz 1996 39,300
1995 16,200 65,450 81,650
- - - --------------------------------------------------------------------------------
T.P. Kelly 1996 32,700
1995 13,500 93,500 107,000
- - - --------------------------------------------------------------------------------
</TABLE>
(A) The amounts shown for 1996 and 1995 represent AMR performance returns,
granted by AMR with respect to AMR deferred shares, which are payable
annually in cash, and are based, in part, on AMR's prior five-year
average return on investment. The Corporation discontinued performance
returns effective with its IPO.
(B) The amounts shown for 1995 represent payments made in 1996 under the AMR
1993-1995 performance share program for shares that were granted in 1993
and vested over a three-year performance period. It is expected that
there will be payments in 1997 pursuant to the AMR 1994-1996 performance
share program for shares that were granted in 1994 and vested over a
three-year performance period. The amounts of these payments had not been
determined as of the date of this proxy statement.
(SEE NEXT PAGE FOR ADDITIONAL NOTES.)
9
<PAGE>
(5) The following table sets forth information concerning all other
compensation:
<TABLE>
<CAPTION>
ALL OTHER COMPENSATION
--------------------------------------------------------------------
CONTRIBUTIONS TO
INTEREST DEFINED CONTRIBUTION INSURANCE
NAME YEAR DIFFERENTIAL(A) PLANS PREMIUMS(B) TOTAL
- - - -------------- --------- --------------- ----------------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
M.J. Durham 1996 $ 0 $ 0 $ 9,443 $ 9,443
1995 0 0 9,443 9,443
- - - -----------------------------------------------------------------------------------------------
T.M. Cook 1996 792 0 8,384 9,176
1995 797 0 8,384 9,181
- - - -----------------------------------------------------------------------------------------------
T.B. Jones 1996 2,043 0 6,078 8,121
1995 2,055 0 6,078 8,133
- - - -----------------------------------------------------------------------------------------------
J.G. Katz 1996 0 0 3,266 3,266
1995 0 0 3,266 3,266
- - - -----------------------------------------------------------------------------------------------
T.P. Kelly 1996 0 0 2,551 2,551
1995 0 0 2,551 2,551
- - - -----------------------------------------------------------------------------------------------
</TABLE>
(A) Represents amounts credited but not paid in the current fiscal year and
consists of the above-market portion of interest (defined as a rate of
interest exceeding 120% of the applicable federal long-term rate, with
compounding) on deferred compensation.
(B) Represents the full amount of premiums paid under a split-dollar life
insurance arrangement whereby the Corporation will recover certain
premiums paid.
10
<PAGE>
STOCK OPTIONS GRANTED
The following table sets forth information concerning stock options granted
during 1996 by the Corporation to the named executive officers. The hypothetical
present values of stock options granted in 1996 are calculated under a modified
Black-Scholes model, a mathematical formula used to value options. The actual
amount, if any, realized upon the exercise of stock options will depend upon the
amount by which the market price of the Corporation's Class A Common Stock on
the date of exercise exceeds the exercise price. There is no assurance that the
hypothetical present values of stock options reflected in this table will
actually be realized.
IF THE HYPOTHETICAL PRESENT VALUES PRESENTED IN THIS TABLE REPRESENT THE
AMOUNTS ACTUALLY REALIZED UPON EXERCISE OF THE OPTIONS, THE CORRESPONDING
INCREASE IN TOTAL STOCKHOLDER VALUE WOULD BE OVER $1.0 BILLION.
<TABLE>
<CAPTION>
OPTIONS/SARS GRANTED IN LAST FISCAL YEAR
- - - ----------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- - - ----------------------------------------------------------------------------------------
% OF TOTAL HYPOTHETICAL
SECURITIES OPTIONS/SARS PRESENT
UNDERLYING GRANTED TO EXERCISE OR VALUE AT
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION DATE OF
NAME GRANTED(#)(1) FISCAL YEAR PER SHARE DATE(2) GRANT(3)
- - - ---------------- ------------- --------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
M.J. Durham 158,750 18.6 $ 27.00 10/11/06 $ 1,466,850
T.M. Cook 68,200 8.0 27.00 10/11/06 630,168
T.B. Jones 49,350 5.8 27.00 10/11/06 455,994
J.G. Katz 47,650 5.6 27.00 10/11/06 440,286
T.P. Kelly 47,650 5.6 27.00 10/11/06 440,286
</TABLE>
- - - ------------------------
(1) The amounts shown do not include stock options received by the named
executive officers in the conversion of their outstanding AMR stock options
or AMR Career Equity at the consummation of the Corporation's IPO. Further
information concerning conversion of AMR Stock Awards can be found in Note
2(A) on page 8 of this proxy statement.
(2) Options have a term of ten years, have an exercise price equal to the IPO
price of the Corporation's Class A Common Stock and become exercisable at
the rate of 20% per year over a five-year period.
(3) The modified Black-Scholes model used to calculate the hypothetical values
at date of grant considers a number of factors to estimate the option's
present value, including the volatility factor of the expected market price
of the Corporation's Class A Common Stock, the weighted average expected
life of the option, and interest rates. The assumptions used in the
valuation of the options were: stock price volatility-28%, expected life-4.5
years, interest rate-6.07%, and dividend yield-0.0%.
11
<PAGE>
STOCK OPTION EXERCISES AND
DECEMBER 31, 1996 STOCK OPTION VALUE
The following table sets forth certain information concerning AMR stock
options exercised during 1996 by the named executive officers and the number and
value of unexercised in-the-money options for the Corporation's Class A Common
Stock at December 31, 1996. The actual amount, if any, realized upon exercise of
stock options will depend upon the amount by which the market price of the
Corporation's Class A Common Stock on the date of exercise exceeds the exercise
price. There is no assurance that the values of unexercised in-the-money stock
options (whether exercisable or unexercisable) reflected in this table will
actually be realized.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUE
- - - ----------------------------------------------------------------------------------------------------
NUMBER OF TSG SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT TSG OPTIONS/SARS AT
AMR SHARES FY-END(#)(2) FY-END(3)
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE(#)(1) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - --------------- ------------- ------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
M.J. Durham 12,000 $ 400,505 80,010 388,770 $578,313 $522,274
T.M. Cook 0 0 33,550 110,630 238,669 375,098
T.B. Jones 3,100 76,357 19,310 139,930 142,526 287,829
J.G. Katz 6,400 172,129 7,920 111,650 56,218 207,316
T.P. Kelly 1,500 72,001 22,160 102,100 166,226 198,960
</TABLE>
- - - ------------------------
(1) Options shown represent AMR common shares acquired on exercise of AMR
options prior to the Corporation's IPO. All outstanding AMR options for the
named executive officers were converted at the time of the Corporation's IPO
into options for the Corporation's Class A Common Stock.
(2) Exercisable options shown are options for the Corporation's Class A Common
Stock received in conversion of AMR options at the time of the Corporation's
IPO. Unexercisable options shown include options for the Corporation's Class
A Common Stock received in conversion of AMR options at the time of the
Corporation's IPO, options for the Corporation's Class A Common Stock
received in conversion of AMR Career Equity and options for the
Corporation's Class A Common Stock granted in connection with the
Corporation's IPO and the 1996 annual grants.
(3) Based on the average market price of the Corporation's Class A Common Stock
of $27.875 on December 31, 1996.
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<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Under the LTIP, deferred shares of the Corporation's Class A Common Stock
("Performance Shares") may be awarded to officers and other key employees,
including the named executive
officers. Further information concerning Performance Shares can be found in the
Compensation/
Nominating Committee Report on page 17 of this proxy statement.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- - - -----------------------------------------------------------------------------------------------------------
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, UNITS PERIOD UNTIL UNDER NON-STOCK PRICE BASED PLANS
OR MATURATION OR -----------------------------------------------
NAME OTHER RIGHTS(#)(1) PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- - - ---------------- ------------------------- ------------- ------------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
M.J. Durham 14,170 Performance 12/31/98 0 14,170 42,510
Shares
- - - -----------------------------------------------------------------------------------------------------------
T.M. Cook 6,960 Performance 12/31/98 0 6,960 20,880
Shares
- - - -----------------------------------------------------------------------------------------------------------
T.B. Jones 6,960 Performance 12/31/98 0 6,960 20,880
Shares
- - - -----------------------------------------------------------------------------------------------------------
J.G. Katz 7,100 Performance 12/31/98 0 7,100 21,300
Shares
- - - -----------------------------------------------------------------------------------------------------------
T.P. Kelly 6,970 Performance 12/31/98 0 6,970 20,910
Shares
</TABLE>
- - - ------------------------------
(1) Performance Shares were granted pursuant to the Corporation's LTIP under the
Performance Share program. This program is discussed in more detail on page
23 of this proxy statement. Amounts shown represent 1996 Performance Shares
awarded. The amounts shown do not include Performance Shares received in the
conversion of 1995 AMR performance shares that vest in 1997 or 1994 AMR
performance shares that fully vested in 1996.
13
<PAGE>
PENSION PLAN
Until December 31, 1996, each employee of the Corporation participated in
the Retirement Benefit Plan of American Airlines, Inc. for Officer, Management
and Specialist, and Non-Management Salaried Personnel ("Fixed Benefit Retirement
Plan"), and officers of the Corporation were eligible for additional retirement
benefits under the AMR Supplemental Executive Retirement Plan ("AMR SERP"). The
AMR SERP provided pension benefits (calculated upon the basis of final average
base salary, incentive compensation payments and performance returns) to which
officers of the Corporation would be entitled, but for the limit of $120,000 on
the maximum annual benefit payable under the Employee Retirement Income Security
Act of 1974 ("ERISA") and the Internal Revenue Code of 1986 ("Code") and the
limit on the maximum amount of compensation which may be taken into account
under American's basic pension program ($150,000 for 1996).
The following table shows typical annual benefits payable under American's
Fixed Benefit Retirement Plan and the AMR SERP, based upon retirement in 1996 at
age 65, to persons in specified remuneration and credited years-of-service
classifications. Annual retirement benefits set forth below are subject to
reduction for Social Security benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
-----------------------------------------------------
FINAL
AVERAGE CREDITED YEARS OF SERVICE
EARNINGS 15 20 25 30 35
- - - ---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 250,000 $ 75,000 $ 100,000 $ 125,000 $ 150,000 $ 175,000
300,000 90,000 120,000 150,000 180,000 210,000
400,000 120,000 160,000 200,000 240,000 280,000
500,000 150,000 200,000 250,000 300,000 350,000
600,000 180,000 240,000 300,000 360,000 420,000
700,000 210,000 280,000 350,000 420,000 490,000
800,000 240,000 320,000 400,000 480,000 560,000
900,000 270,000 360,000 450,000 540,000 630,000
1,000,000 300,000 400,000 500,000 600,000 700,000
1,100,000 330,000 440,000 550,000 660,000 770,000
</TABLE>
14
<PAGE>
As of December 31, 1996, the named executive officers had the following
credited years of service: Mr. Durham - 16.5; Mr. Cook - 13.5; Mr. Jones - 17.0;
Mr. Katz - 15.5; Mr. Kelly - 11.5. Benefits are shown in the table on the
previous page using a straight-life annuity basis.
Effective January 1, 1997, the Corporation established The SABRE Group
Retirement Plan (the "SGRP"). Commencing January 1, 1997, employees of the
Corporation who were under the age of 40 as of December 31, 1996 will
participate in the SGRP. Employees who were age 40 or over as of December 31,
1996 and who were participants in American's Fixed Benefit Retirement Plan had
the option of participating in either the SGRP or the Legacy Pension Plan (the
"LPP"). The LPP is similar to American's Fixed Benefit Retirement Plan. Upon
retirement, benefits under the LPP will be calculated based upon the employee's
base pay for the highest consecutive five years of the ten years preceding
retirement. Benefits earned by employees of the Corporation under American's
Fixed Benefit Retirement Plan will be transferred to the LPP. The SGRP is a
defined contribution plan qualified under Section 401(k) of the Code. For
employees who participate in the SGRP, benefits payable under the LPP will be
based upon credited years of service as of December 31, 1996. However, employees
in the SGRP will continue to earn years of service for purposes of determining
vesting and early retirement benefits under the LPP and growth in base pay will
be considered for purposes of determining retirement benefits under the LPP.
Pursuant to the SGRP, the Corporation will contribute 2.75% of each employee's
base pay to the SGRP. The employee will vest in the Corporation's 2.75%
contributions after three years of service with the Corporation, including prior
service with AMR affiliates. In addition, the Corporation will match 50 cents of
each dollar contributed by an employee, up to 6% of the employee's base pay,
subject to IRS limits. The employee is immediately vested in his or her own
contributions and in the Corporation's matching contributions.
The Corporation adopted a supplemental executive retirement plan ("TSGH
SERP") for its officers. The benefits payable under the TSGH SERP are similar to
those payable under the AMR SERP. As such, typical annual benefits payable to
officers who participate in the TSGH SERP and the LPP or SGRP will be similar to
American's and AMR's equivalent plans.
EXECUTIVE TERMINATION BENEFITS AGREEMENTS/EMPLOYMENT AGREEMENTS
The Corporation has executive termination benefits agreements (the
"Agreements") with its officers, including all of the named executive officers.
The benefits provided by the Agreements are triggered by the termination of the
individual who is a party to an Agreement (i) within three years following a
change in control of the Corporation, if the individual's employment with the
Corporation is terminated other than for cause, or if the individual terminates
his or her
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<PAGE>
employment with "good reason"; or (ii) within one year following a change in
control of the Corporation, if the individual terminates his or her employment
with the Corporation. If the individual's employment is terminated for cause or
as a consequence of death or disability, benefits under the Agreement are not
triggered. Under the terms of the Agreements, a change in control of the
Corporation is deemed to occur (i) if a third party, other than AMR or an
affiliate thereof, acquires 20% or more of the combined voting power of the
Corporation's then outstanding securities with respect to election of directors
of the Corporation; (ii) upon the occurrence of a transaction which requires
stockholder approval and involves the acquisition of the Corporation (through
the purchase of assets or by merger or otherwise) by an entity other than the
Corporation, a subsidiary thereof, AMR or an affiliate thereof; or (iii) if
during any 24-month period the individuals who, at the beginning of such period,
constitute the Board of Directors of the Corporation, cease for any reason other
than death to constitute at least a majority thereof, and the new directors of
the Corporation were not elected with the approval of the individuals who, at
the beginning of such period, constitute the Board of Directors. A change in
control would not occur in the event that AMR distributes its Class B Common
Stock (or upon conversion of such Class B Common Stock, the resulting Class A
Common Stock) to its stockholders or sells such common stock to the public in an
underwritten public offering. The Agreements provide that upon such termination,
the individual will receive, in a lump sum payment, (i) two times the greater of
(A) the individual's annual base salary at the termination date or (B) the
individual's annual base salary immediately prior to the change in control, plus
(ii) two times the greater of (x) the median annual bonus awarded to the
executive under the LTIP or any other bonus plan or (y) 50% of the highest
median target bonus rate applicable to the executive for any period during such
prior three-year period, multiplied by the annual applicable base salary
determined under (i) above, and certain other miscellaneous benefits. In
addition, upon a change in control, the vesting and exercisability of stock
awards will be accelerated (for example, deferred and restricted stock will
immediately vest, and all stock options will become immediately exercisable).
Finally, the individual will be reimbursed for excise taxes, if any, paid
pursuant to Section 280G of the Code (or its successor provision) and for
federal income tax paid on such excise tax reimbursement.
The Corporation has an executive termination agreement with Mr. Durham. This
agreement provides that Mr. Durham will be employed with the Corporation for a
term of three years beginning October 11, 1996 (the date of the Corporation's
IPO). If the Corporation were to terminate Mr. Durham's employment during the
term of the agreement without cause, Mr. Durham would receive a severance
payment equal to the greater of (i) one year's salary and target incentive
compensation, or (ii) the total amount of salary and target incentive
compensation
16
<PAGE>
remaining for the term of the agreement, and all outstanding stock awards would
continue vesting through the greater of one year or the remainder of the term of
the agreement.
The Corporation has assumed the obligations of American under agreements
originally entered into by American with Mr. Cook and Mr. Jones (the "Officer
Agreements"). Mr. Cook's agreement provides that Mr. Cook will be employed by
the Corporation as an officer until October 31, 2000. Mr. Jones' agreement
provides that Mr. Jones will be employed by the Corporation as an officer until
April 18, 2000, subject to extension by the Corporation to no later than April
18, 2004. Pursuant to the Officer Agreements, the Corporation reserves the right
to remove Mr. Cook or Mr. Jones as an officer and to retain him as an employee
for consulting services during the remainder of the term of the applicable
Officer Agreement. Such officer's base salary as a consultant would be the rate
in effect at the time of his removal as an officer, and such salary would
continue for the remainder of the term of the applicable Officer Agreement.
Pursuant to the Officer Agreements, each of Mr. Cook and Mr. Jones is entitled
to receive specified amounts of incentive compensation under AMR's Long Term
Incentive Plan, along with other specified benefits customarily provided to
officers of the Corporation. Each of Mr. Cook and Mr. Jones has agreed that the
incentive compensation to be awarded under AMR's Long Term Incentive Plan will
instead be granted in awards of Class A Common Stock pursuant to the LTIP.
COMPENSATION/NOMINATING COMMITTEE REPORT
To Our Stockholders,
On July 2, 1996, AMR completed a reorganization (the "Reorganization"),
pursuant to which the Corporation became the successor to the businesses of The
SABRE Group which were formerly operated as divisions or subsidiaries of AMR or
American Airlines, Inc. ("American"). On October 11, 1996, the Corporation
became a separate, public company upon an initial public offering of its Class A
Common Stock (the "IPO"). Prior to the IPO, all compensation matters that
pertained to the executive officers of the Corporation were considered by the
AMR Compensation/Nominating Committee and, where required, by the full Board of
Directors of AMR. As a result, until October 1996, compensation decisions
affecting the Corporation's senior executives were made in the context of the
compensation policies followed by AMR.
The current members of the Corporation's Compensation/Nominating Committee
(the "Committee") were appointed upon their election to the Board of Directors.
Since its inception, the Committee has reviewed and approved certain
compensation actions relating to the Corporation's 1996 fiscal period, which are
described in this report. The Committee also
17
<PAGE>
considered and approved a philosophy for executive compensation, which is
explained herein. The purpose of the report is to inform stockholders of the
Committee's compensation policies for executive officers and the rationale for
compensation paid to the Chief Executive Officer (CEO). This report, submitted
by the Committee, follows:
The Compensation/Nominating Committee of AMR made compensation decisions
regarding Mr. Durham until October 11, 1996, the date of the IPO. Decisions on
and after October 11, 1996, regarding Mr. Durham's compensation were made by the
Committee or the Corporation's Board of Directors.
COMMITTEE ROLE IN OVERSEEING EXECUTIVE COMPENSATION POLICY
A primary role of the Committee is to determine and oversee the
administration of compensation for the Corporation's executive officers. In this
capacity, the Committee is dedicated to ensuring that the Corporation's
compensation policies and practices are used effectively to support the
achievement of the Corporation's short-term and long-term business objectives.
It is the Committee's overall goal to develop executive compensation
policies that are consistent with, and linked to, strategic business objectives
and the Corporation's values. The Committee approves the design of, assesses the
effectiveness of, and administers executive compensation programs in support of
compensation policies. The Committee also reviews and approves all salary
arrangements and other remuneration for executives, evaluates executive
performance, and considers related matters.
COMPENSATION PHILOSOPHY
The Corporation's primary business objective is to maximize stockholder
value over the long term. The Corporation's strategy is to maintain its
leadership positions and to pursue growth in revenue and earnings by expanding
its product offerings in electronic travel distribution and information
technology solutions. The Corporation's compensation policies are intended to
facilitate the achievement of its business strategy.
Compensation opportunities should enhance the Corporation's ability to
attract, retain, and encourage the development of exceptionally knowledgeable
and experienced executive officers upon whom, in large part, the successful
operation and management of the Corporation depends. An integrated total
compensation program should be structured to appropriately balance short-term
and long-term business and financial strategic goals. A significant amount of
pay for
18
<PAGE>
executive officers should be comprised of long-term, at-risk pay to align
executive interests with stockholder interests. Salary and annual incentive
should be sufficient to be competitive for retention purposes. Each program
element should target compensation levels at rates that are reflective of
current market practices, allowing the Corporation to maintain a stable,
successful management team.
As part of its overall compensation philosophy, the Committee has determined
appropriate target levels for base salary, annual incentives, long-term
compensation, and total compensation. In general, the Committee has determined
that total compensation should be targeted at the 50th percentile of the market
but individual pay determinations will be based on individual responsibilities
and contributions. To the extent the Committee determines that individual
compensation levels fall below the targeted levels, the Committee will adjust
these compensation levels as appropriate.
Competitive market data is provided by an independent compensation
consultant. The data provided compares the Corporation's compensation practices
to a group of comparator companies. The Corporation's market, for compensation
comparison purposes, is comprised of a group of companies who tend to have
national and international business operations and similar sales volumes, market
capitalizations, employment levels, and lines of business. The Committee reviews
and approves the selection of companies used for compensation comparison
purposes.
The companies chosen for the comparator group used for compensation purposes
generally are not the same companies which comprise the peer group index in the
Performance Graph included in this proxy statement. The Committee believes that
the Corporation's most direct competitors for executive talent are not
necessarily the same companies that would be included in a peer group
established for comparing stockholder returns.
The key elements of the Corporation's executive compensation are base
salary, annual incentives, long-term compensation, and benefits. These key
elements are addressed separately below. In determining compensation, the
Committee considers all elements of an executive officer's total compensation
package, including severance plans, insurance, and other benefits.
BASE SALARIES
The Committee regularly reviews each executive officer's base salary. Base
salaries for executive officers are initially determined by evaluating
executives' levels of responsibility, prior experience, breadth of knowledge,
internal equity issues, and external pay practices. Base salaries
19
<PAGE>
offer security to executives and allow the Corporation to attract competent
executive talent and maintain a stable management team.
Mr. Durham's base salary was increased in August 1996 from $375,000 to
$388,800 and on September 1, 1996, from $388,800 to $427,300. These increases
were intended to recognize Mr. Durham's increased responsibilities associated
with the transition of the Corporation from a wholly-owned subsidiary of AMR to
a separate, public company, considering the appropriateness of the Corporation's
financial performance for the year and Mr. Durham's individual performance, and
to partially compensate Mr. Durham for the loss of annual cash payments related
to "performance returns" for which Mr. Durham was eligible while an employee of
American. In 1996, Mr. Durham actually received base salary payments of
$393,583, an increase of $33,166 (9%) over 1995. (See Summary Compensation Table
for further details.)
The Committee also compared Mr. Durham's base salary to the base salaries of
CEOs at comparator companies. Mr. Durham's base salary was below the 50th
percentile of CEOs at the comparator companies.
VARIABLE COMPENSATION PLAN
The Corporation has an annual incentive compensation plan (the "Variable
Compensation Plan") which provides that participants, including each of the
named executive officers, will be eligible to receive annual cash bonus awards
only if specified financial performance goals are met by the Corporation. Annual
bonus opportunities allow the Corporation to communicate specific goals that are
of primary importance during the coming year and motivate executives to achieve
these goals.
Each year, the Committee will establish specific goals relating to each
executive's bonus opportunity. While target bonus payments to a participant
under the Variable Compensation Plan are based upon an individual's job
classification level at the Corporation relative to similar levels at the
comparator group, the actual amount of the award is based on a subjective
evaluation of each individual's performance. In recognition of superior
performance, the Committee may award additional amounts in excess of the target
bonus payments, except that no bonus payment may exceed 100% of the individual's
base salary.
The Committee has determined that bonus opportunities will be based on a
combination of performance measures reflecting the performance of the
Corporation and individual performance. The weightings of each of these measures
will vary depending upon each individual's position and responsibilities. For
1996, the Corporation and business unit performance measures were
20
<PAGE>
generally based on total shareholder return concepts applied at both the
Corporation and business unit levels.
As a result of The SABRE Group's transition to a separate, public company,
Mr. Durham's 1996 annual incentive was based two-thirds ( 2/3) on the
Corporation's measures, and one-third ( 1/3) on AMR's measures. The Corporation
component of Mr. Durham's annual incentive was based on a combination of the
performance of the Corporation and his individual performance. Mr. Durham was
the only named executive officer of the Corporation whose annual incentive took
into account AMR's performance.
In recognition of the Corporation's performance and Mr. Durham's
performance, the Committee awarded a 1996 Variable Compensation Plan payment to
Mr. Durham of $230,000, representing 58% of his base salary as is reflected in
the Summary Compensation Table on page 7. Mr. Durham's annual variable
compensation is below the median of annual incentive compensation paid other
CEOs at the comparator companies.
LONG-TERM INCENTIVES
In keeping with the Corporation's desire to provide a total compensation
package which favors at-risk components of pay, long-term incentives comprise
the largest portion of an executive's total compensation package. The
Committee's objective is to provide executives with long-term incentive award
opportunities that are competitive with the market.
When awarding long-term incentives, the Committee considers executives'
levels of responsibility, prior experience, historical award data, various
performance criteria, and compensation practices at comparator companies.
Long-term incentives are provided pursuant to the Corporation's 1996
Long-Term Incentive Plan (the "LTIP"). Under the LTIP, stock-based compensation
(which may include stock options, stock appreciation rights, restricted stock,
deferred stock, stock purchase rights, and other stock-based awards) may be
granted to officers and key employees of the Corporation, its subsidiaries, and
its affiliates. The purpose of equity participation is to align the interests of
the Corporation's executive officers with the interests of the Corporation's
stockholders and the Corporation's growth in real value over the long term.
21
<PAGE>
STOCK OPTIONS
Options to purchase the Corporation's Class A Common Stock, which are
exercisable for ten years from the date of grant, have an exercise price equal
to the average market price on the NYSE of the Corporation's Class A Common
Stock on the date of grant (options to purchase the Corporation's Class A Common
Stock granted in 1996 have an exercise price equal to the IPO price) and vest in
20% increments over five years. This approach is designed to provide an
incentive to create stockholder value over the long term, since the full benefit
of the stock option compensation package cannot be realized unless stock
appreciation occurs over a number of years.
The Committee determines the number of options to be granted based upon a
subjective evaluation of the executive with respect to two factors, individual
performance and the executive's retention value to the Corporation. The number
of stock options awarded, if any, depends upon the executive's rating with
respect to these factors.
In 1996, the Board of Directors determined the number of stock options to be
granted to the Corporation's executive officers. On October 11, 1996, the
Corporation granted Mr. Durham options to purchase 158,750 shares of the
Corporation's Class A Common Stock at an exercise price of $27, which represents
the IPO price of the Corporation's stock on the date of grant. These options
become exercisable at the rate of 20% per year over a five-year period. This
grant was based on the Board's subjective evaluation of Mr. Durham's service and
strategic contributions, the Corporation's favorable financial results, and the
amount of Mr. Durham's compensation relative to CEOs of comparator companies. In
determining the size of Mr. Durham's stock option grant, the Board also took
into consideration Mr. Durham's efforts in connection with the Corporation's IPO
and the Board's desire to further align Mr. Durham's interests with the
Corporation's stockholders during the Corporation's transition into a separate,
public company. Mr. Durham will forego a grant of options in 1997.
RESTRICTED STOCK
Restricted stock awards are grants of the Corporation's Class A Common Stock
which carry full stockholder privileges, including the right to vote and the
right to receive any declared dividends in respect of such shares. The shares
are held by the Corporation with vesting based on the satisfaction of future
service requirements. The shares are nontransferable and are subject to risk of
forfeiture. Restricted stock awards are designed to retain the services of key
executives and, therefore, do not vest, generally, until a minimum of two years
has passed since the date of grant.
22
<PAGE>
PERFORMANCE SHARES
Under the Corporation's 1996-1998 Performance Share Program, the Corporation
may grant performance shares to key employees of the Corporation, which awards
consist of deferred shares of the Corporation's Class A Common Stock issued
pursuant to the LTIP (the "Performance Shares"). These shares are granted
contingent upon the Corporation's attainment of predetermined total shareholder
return objectives over a three-year "performance period." The total shareholder
return objective is based on the increase in business value and the amount of
free cash flow generated by the Corporation over the performance period. The
percentage of the shares granted which will vest ranges from 0% to 300% based
upon varying levels of total shareholder returns over the performance period. If
the Corporation fails to achieve a certain level of total shareholder return, no
Performance Shares will be earned. Performance share grants within the
Corporation are based upon a subjective evaluation of the executive's current
performance and retention value.
In 1996, the Board of Directors determined the number of Performance Shares
to be granted to the Corporation's executive officers. On October 11, 1996, the
Corporation granted Mr. Durham 14,170 Performance Shares. The grant was based on
the Board's subjective evaluation of Mr. Durham's service and strategic
contributions, the Corporation's favorable financial results, the amount of Mr.
Durham's compensation relative to CEOs of comparator companies, and to partially
compensate Mr. Durham for the loss of annual cash payments related to
"performance returns" for which Mr. Durham was eligible while an employee of
AMR. The amount of Performance Shares awarded to other named executive officers
was based on comparable criteria for each executive's respective position. The
value of stock options and Performance Shares were both taken into consideration
in determining the long-term incentive opportunity provided to the Corporation's
executive officers in 1996.
CONVERSION OF AMR EQUITY COMPENSATION TO CLASS A COMMON STOCK
Upon consummation of the Corporation's IPO, except as noted below, each
employee had an opportunity to have all unexercised or unvested stock awards
from AMR then held by such employee converted into awards of the Corporation's
Class A Common Stock which vest under the original time schedule applicable with
respect to such AMR awards. Each of the officers of the Corporation elected to
convert his AMR awards into awards payable in the Corporation's Class A Common
Stock. Stock options to purchase AMR common stock were exchanged on the date of
the Corporation's IPO for options to purchase Class A Common Stock of equal
in-the-money value. Performance shares of AMR common stock that will be issued
in the first quarter of 1998
23
<PAGE>
based upon the Corporation's attainment of predetermined cash flow objectives
over the period from January 1, 1995 to December 31, 1997 will vest according to
their original performance metric and time frame. However, at the Board's
discretion, upon vesting, payment will be made using either cash or shares of
Class A Common Stock.
From time to time, the Corporation's named executive officers also were
granted shares of deferred AMR common stock that vest at retirement ("AMR Career
Equity") through the AMR Career Equity Program. AMR Career Equity for Mr. Cook
was converted to deferred shares of the Corporation's Class A Common Stock that
vest at retirement ("TSGH Career Equity"). All of the other shares of AMR Career
Equity held by the named executive officers were converted, on the date of
consummation of the Corporation's IPO, into some combination of restricted
shares of Class A Common Stock and options to purchase Class A Common Stock.
The AMR Career Equity Program also provided for the annual cash payment of
"performance returns" tied to AMR's financial performance. To partially
compensate the Corporation's executives for the lost opportunity to earn
"performance returns," one-time adjustments were made to their base salaries and
certain additional grants of performance shares were made.
Two forms of AMR stock awards were not altered in connection with the IPO.
Performance shares of AMR common stock relating to the period from January 1,
1994 through December 31, 1996 (issuable in 1997) will be paid in shares of AMR
common stock when and if payment is due. These shares are granted contingent
upon AMR's attainment of pre-determined cash flow objectives over a three-year
"performance period." The cash flow objective is based on AMR's cumulative
operating cash flow relative to adjusted net assets over the performance period.
The percentage of the shares granted which will vest range from 0% to 175% based
upon varying levels of cumulative operating cash flow relative to adjusted net
assets over the three-year period, as well as AMR's standing (on the same basis)
relative to four major competitors (United, Delta, Southwest and USAirways). If
each competitor outperforms AMR with respect to this measurement, or if AMR
fails to achieve a certain level of cumulative operating cash flow relative to
adjusted net assets, no performance shares will be earned. In addition to
performance shares of AMR, each share of AMR restricted stock held by each named
executive officer, will complete its vesting according to its original vesting
schedule and will not be converted to restricted shares of the Corporation's
Class A Common Stock.
24
<PAGE>
BENEFITS
Benefits offered to key executives serve a different purpose than other
elements of compensation. In general, they provide a safety net of protection
against financial catastrophes that can result from illness, disability, or
death. Benefits offered to key executives are generally those offered to the
general employee population with some variation to promote tax efficiency and
replacement of benefit opportunities lost to regulatory limits.
INTERNAL REVENUE CODE 162(M) CONSIDERATIONS
Section 162(m) of the Internal Revenue Code provides that executive
compensation in excess of $1 million will not be deductible for purposes of
corporate income taxes unless it is performance-based compensation and is paid
pursuant to a plan meeting certain requirements of the Code. To satisfy these
requirements, and to preserve objectivity, a separate committee composed of
independent, non-employee directors approves such plans. The Committee intends
to continue increased reliance on performance-based compensation programs. Such
programs will be designed to fulfill, in the best possible manner, future
corporate business objectives. To the extent consistent with this goal, the
Committee currently anticipates that such programs will also be designed to
satisfy the requirements of Section 162(m) with respect to the deductibility of
compensation paid. The Committee believes that compensation actually paid with
respect to 1996 was deductible.
CONCLUSION
The Committee believes these executive compensation policies and programs
serve the interests of stockholders and the Corporation effectively. The various
pay vehicles offered are appropriately balanced to provide increased motivation
for executives to contribute to the Corporation's overall future successes,
thereby enhancing the value of the Corporation for the stockholders' benefit. In
1996, 73% of executive compensation opportunities consisted of variable,
performance-based opportunities.
We will continue to monitor the effectiveness of the Corporation's total
compensation program to meet the current needs of the Corporation.
COMPENSATION/NOMINATING COMMITTEE
<TABLE>
<S> <C> <C>
Edward A. Brennan, Chairman Dee J. Kelly Bob L. Martin
Paul C. Ely, Jr. Glenn W. Marschel, Richard L. Thomas
Jr.
</TABLE>
25
<PAGE>
CORPORATE PERFORMANCE
The following graph compares the change in the Corporation's cumulative
total stockholder return on its Class A Common Stock with the cumulative total
return on the published Standard & Poor's 500 Stock Index and the cumulative
total return on an index of peer companies calculated by the Corporation, in
each case over the period from the Corporation's IPO of its Class A Common Stock
to December 31, 1996. The Corporation believes that although total stockholder
return is an indicator of corporate performance, it is subject to the vagaries
of the market.
CUMULATIVE TOTAL RETURNS*
ON $100 INVESTMENT MADE ON OCTOBER 11, 1996
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE SABRE GROUP S&P 500 PEER GROUP**
<S> <C> <C> <C>
October 11, 1996 $ 100.00 $ 100.00 $ 100.00
December 31, 1996 103.24 106.64 84.96
</TABLE>
- - - ------------------------
* Defined as stock price appreciation plus dividends paid, assuming
reinvestment of dividends.
** Publicly held companies in the electronic data processing and/or information
technology business included: Electronic Data Systems, Inc.; First Data
Corporation; Automatic Data Processing, Inc.; Computer Sciences Corporation;
Equifax, Inc.; Ceridian Corporation; American Management Systems, Inc.;
Fiserv, Inc.; and BDM International, Inc.
26
<PAGE>
OWNERSHIP OF SECURITIES
SECURITIES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
As of March 24, 1997, the directors and officers of the Corporation owned,
or had been granted, rights under the stock-based compensation plans of the
Corporation or AMR equivalent to the shares of Class A Common Stock or stock
equivalent units of the Corporation or common stock of AMR indicated in the
table below:
<TABLE>
<CAPTION>
TSG CLASS A AMR COMMON
COMMON STOCK STOCK AND/OR
AND/OR STOCK STOCK
EQUIVALENT PERCENT OF EQUIVALENT PERCENT OF
NAME OF BENEFICIAL OWNER UNITS (1) CLASS UNITS (2) CLASS
- - - ---------------------------------------------------------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Robert L. Crandall 2,550.0 * 128,500.0 *
Gerard J. Arpey 500.0 * 54,500.0 *
Edward A. Brennan 2,572.7 * 6,100.0 *
Paul C. Ely, Jr. 1,000.0 * 0.0 *
Dee J. Kelly 2,800.0 * 2,700.0 *
Glenn W. Marschel, Jr. 572.7 * 0.0 *
Bob L. Martin 772.7 * 0.0 *
Anne H. McNamara 500.0 * 55,300.0 *
Richard L. Thomas 9,072.7 * 0.0 *
Michael J. Durham 140,830.0 * 5,600.0 *
Thomas M. Cook 117,700.0 * 2,700.0 *
Terrell B. Jones 53,070.0 * 3,750.0 *
Jeffrey G. Katz 19,060.0 * 2,000.0 *
T. Patrick Kelly 43,990.0 * 2,900.0 *
Directors and Officers as a group 438,090.8 1.1% 266,050.0 *
</TABLE>
* Percentage does not exceed 1% of the total outstanding class.
- - - ------------------------
(1) The above table includes the following options for the Corporation's Class A
Common Stock: M.J. Durham - 83,180; T.M. Cook - 43,050; T.B. Jones - 22,480;
T.P. Kelly - 22,160; and includes 572.7 stock equivalent units owned by each
of Messrs. Brennan, Marschel, Martin and Thomas. If those options and units
are included in calculating the Percent of Class, Directors and Officers as
a group own 1.8% of the class.
(2) The above table includes the following options for AMR Corporation Class A
common stock: R.L. Crandall - 60,000; G.J. Arpey - 18,800; A.H. McNamara -
9,100; and includes 700 deferred shares for each of Messrs. Brennan and
Kelly and 4,400 deferred stock equivalent units for Mr. Brennan.
27
<PAGE>
SECURITIES OWNED BY CERTAIN BENEFICIAL OWNERS
The following firms have informed the Corporation they were the beneficial
owners of more than 5% of the Corporation's outstanding common stock at December
31, 1996.
<TABLE>
<CAPTION>
PERCENT
CLASS OF OF
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK AMOUNT HELD CLASS
- - - -------------------------------------------------------------- ------------- ---------------- ---------
<S> <C> <C> <C>
AMR Corporation .............................................. Class B 107,374,000(1) 100%
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
FMR Corp. .................................................... Class A 2,576,000(2) 12.8%
82 Devonshire Street
Boston, Massachusetts 02109
KR Capital Advisors, Inc. .................................... Class A 1,487,973(3) 6.4%
450 Park Avenue
New York, New York 10022
Sirach Capital Management, Inc. .............................. Class A 1,106,800(4) 5.2%
3323 One Union Square
600 University Street
Seattle, Washington 98101
</TABLE>
- - - ------------------------------
(1) Shares represent 100% of the outstanding Class B Common Stock, which are
convertible at AMR's option into 107,374,000 shares of Class A Common Stock.
Class B Common Stock is entitled to 10 votes per share. The Class B Common
Stock held by AMR Corporation represents 97.8% of the total voting power of
the Corporation's stockholders. If fully converted, the Class B Common Stock
owned by AMR would represent 82.1% of all outstanding shares of Class A
Common Stock.
(SEE NEXT PAGE FOR ADDITIONAL NOTE.)
28
<PAGE>
(2) Based on Schedule 13G filed on February 10, 1997 by FMR Corp., Edward C.
Johnson 3d and Abigail P. Johnson: Fidelity Management & Research Company
("Fidelity"), 82 Devonshire Street, Boston, Massachusetts 02109, a
wholly-owned subsidiary of FMR Corp. and an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is the beneficial
owner of 2,301,300 shares or 11.39% of the Class A Common stock outstanding
of the Company as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the
Funds each has sole power to dispose of the 2,301,300 shares owned by the
Funds.
Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the
sole power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Funds' Boards of Trustees.
Fidelity carries out the voting of the shares under written guidelines
established by the Funds' Boards of Trustees.
Fidelity Management Trust Company, 82 Devonshire Street, Boston,
Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is the
beneficial owner of 274,700 shares or 1.36% of the common stock outstanding
of the Company as a result of its serving as investment manager of the
institutional account(s).
Edward C. Johnson 3d and FMR Corp., through its control of Fidelity
Management Trust Company, each has sole dispositive power over 274,700
shares and sole power to vote or to direct the voting of 189,600 shares, and
no power to vote or to direct the voting of 85,100 shares of Class A Common
Stock owned by the institutional account(s) as reported above.
Members of the Edward C. Johnson 3d family and trusts for their benefit are
the predominant owners of Class B shares of common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr. Johnson
3d owns 12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group and
all other Class B shareholders have entered into a shareholders' voting
agreement under which all Class B shares will be voted in accordance with
the majority vote of Class B shares. Accordingly, through their ownership of
voting common stock and the execution of the shareholders' voting agreement,
members of the Johnson family may be deemed, under the Investment Company
Act of 1940, to form a controlling group with respect to FMR Corp.
(SEE NEXT PAGE FOR ADDITIONAL NOTES.)
29
<PAGE>
(3) Based on Schedule 13G filed on February 14, 1997 by KR Capital Advisors,
Inc. and Edward D. Klein: KR Capital Advisors, Inc. had sole voting power
over 1,453,673 shares of Class A Common Stock and sole dispositive power
over 1,487,973 shares of Class A Common Stock.
KR Capital Advisors, Inc. is deemed to be the beneficial owner of 1,487,973
shares for purposes of Rule 13d-1 since it has the power to make investment
decisions over such shares for its clients. KR Capital Advisors, Inc. does
not, however, have any economic interest in the securities of those clients.
The clients are the actual owners of the securities and have the right to
receive and the power to direct the receipt of dividends from, or the
proceeds from the sale of, such securities. No client has an interest that
relates to more than five percent of the class.
Edward D. Klein, a principal stockholder of KR Capital Advisors, Inc., owns
directly 52,500 shares, which is approximately 0.2% of the class. In
addition, by reason of his ownership interest in KR Capital Advisors, Inc.,
Mr. Klein may be deemed to be the indirect beneficial owner of the 1,487,973
shares which KR Capital Advisors, Inc. is deemed to own beneficially.
Martin E. Kaplan, a stockholder and the President of KR Capital Advisors,
Inc. owns directly 36,500 shares, which is approximately 0.2% of the class.
Of the 1,487,973 shares deemed to be beneficially owned by KR Capital
Advisors, Inc., 7,000 shares, which is less than 0.1% of the class, are
owned by the KR Capital Advisors, Inc. Profit Sharing Plan and 100,000
shares, which is approximately 0.4% of the class, are held by KR Capital
Partners Fund I, L.P., a registered investment adviser (the general partner
of which is KR Capital Advisors, Inc.). Edward D. Klein and Martin E. Kaplan
(and/or members of their immediate families or trusts for the benefit of
such family members) have economic interest in the KR Capital Advisors, Inc.
Profit Sharing Plan and KR Capital Partners Fund I, L.P.
(4) Based on Schedule 13G filed on February 14, 1997 by Sirach Capital
Management, Inc.: Sirach Capital Management, Inc. had sole voting power over
1,106,800 shares of Class A Common Stock and sole dispositive power over
1,106,800 shares of Class A Common Stock.
30
<PAGE>
RELATIONSHIPS WITH AMR CORPORATION AND AFFILIATES
INTEREST ON CASH EQUIVALENTS
Prior to the Reorganization, American allocated interest income or expense
monthly to The SABRE Group, based on the net balance of cash equivalents and the
amounts payable to AMR at the average rate earned by American's portfolio of
short-term marketable securities. The allocation may not be representative of
what the Corporation would have earned or paid if its cash were held by an
unrelated third party.
DEBENTURE PAYABLE TO AMR
On July 2, 1996, in connection with the Reorganization, American transferred
to The SABRE Group, Inc. (the "Operating Company") certain divisions and
subsidiaries of American through which AMR previously conducted its information
technology businesses, and in return the Corporation issued to American a
floating rate subordinated debenture due September 30, 2004, with a principal
amount of $850 million (the "Debenture"), and common stock representing 100% of
the equity ownership interest in the Corporation. American subsequently prepaid
a portion of its note payable to AMR with the Debenture. Because the assets and
liabilities of the divisions and subsidiaries of American transferred to the
Operating Company are included in the historical financial statements of the
Corporation, issuing the Debenture resulted in a reduction of stockholders'
equity.
The Corporation used approximately $532 million of the net proceeds from the
IPO to repay a portion of the Debenture held by AMR.
The interest rate on the Debenture is based on the sum of the London
Interbank Offered Rate (LIBOR rate) plus a margin determined based upon the
Corporation's senior unsecured long-term debt rating or, if such debt rating is
not available, upon the Corporation's ratio of net debt to total capital. The
interest rate is determined monthly, and accrued interest is payable each
September 30 and March 31. The average interest rate on the Debenture for 1996
was 7.1%. The Corporation may prepay the principal balance in whole or in part
at any interest payment date.
PROPERTY AND EQUIPMENT
On July 1, 1996, American contributed buildings, furniture and fixtures in
addition to those discussed above to the Operating Company with an original cost
of approximately $298 million and a net book value of $193 million.
31
<PAGE>
INFORMATION TECHNOLOGY SERVICES AGREEMENT
The Operating Company is party to the Information Technology Services
Agreement, dated July 1, 1996 (the "Technology Services Agreement") with
American to provide American with certain information technology services. The
parties agreed to apply the financial terms of the Technology Services Agreement
as of January 1, 1996. The base term of the Technology Services Agreement
expires June 30, 2006. The terms of the services to be provided by the Operating
Company to American, however, vary. The Operating Company will provide (i) data
center services, data network services, application development and existing
application maintenance enhancement services until June 30, 2006; (ii) services
relating to existing client server operations until June 30, 2001; and (iii)
device support, distributed systems services, radio services and reservations
and flight information network services until June 30, 1999.
In addition, Airline Management Services Holding, Inc., a subsidiary of AMR,
and Canadian Airlines International Ltd. ("Canadian") have entered into an
agreement pursuant to which AMR and American supply to Canadian various
services, including technology services. The Operating Company is a principal
provider of data processing and network distributed systems services to Canadian
under the terms of the Canadian Technical Services Subcontract (the "Canadian
Subcontract") with American, which expires in 2006. Under the terms of the
Canadian Subcontract, American guaranteed full payment for services actually
performed by the Operating Company and deferred costs associated with the
installation and implementation of certain systems.
The Technology Services Agreement provides for annual price adjustments. For
certain prices, adjustments are made according to formulas which, commencing in
1998, are reset every two years and which may take into account the market for
similar services provided by other companies. The resulting rates may reflect an
increase or decrease over the previous rates.
With limited exceptions, under the Technology Services Agreement, the
Operating Company will continue to be the exclusive provider of all information
technology services provided by the Operating Company to American immediately
prior to the execution of the Technology Services Agreement. Any new information
technology services, including most new application development services,
requested by American can be outsourced pursuant to competitive bidding by
American or performed by American on its own behalf. With limited exceptions,
the Operating Company has the right to bid on all new services for which
American solicits bids. Additionally, American may continue to perform
development and enhancement work that it is currently performing on its own
behalf.
32
<PAGE>
After July 1, 2000, American may terminate the Technology Services Agreement
for convenience. If it does so, American will be required to pay a termination
fee equal to the sum of all amounts then due under the Technology Services
Agreement, including wind-down costs, net book value of dedicated assets and a
significant percentage of estimated lost profits. American may also terminate
the Technology Services Agreement without penalty, in whole or in part,
depending upon circumstances, for egregious breach by the Operating Company of
its obligations or for serious failure to perform critical or significant
services. If the Operating Company is acquired by another company (other than
AMR or American) with more than $1 billion in annual airline transportation
revenue, then American may terminate the Technology Services Agreement without
paying any termination fee. Additionally, if American were to dispose of any
portion of its businesses or any affiliate accounting for more than 10% of the
Operating Company's fees from American, then American shall either cause such
divested business or affiliate to be obligated to use the Operating Company's
services in accordance with the Technology Services Agreement or pay a
proportionate termination fee.
MANAGEMENT SERVICES AGREEMENT
The Operating Company and American are parties to a Management Services
Agreement dated July 1, 1996 (the "Management Services Agreement"), pursuant to
which American performs various management services for the Corporation,
including treasury, risk management and tax, and similar administrative
services, that American has historically provided to The SABRE Group. American
also manages the Corporation's cash balances under the terms of the Management
Services Agreement. Transactions with American no longer result in the recording
of cash equivalents, but are settled through monthly billings, with payment due
in 30 days. The Management Services Agreement will expire on June 30, 1999,
unless terminated earlier, if American and the Operating Company are no longer
under common control or if the Technology Services Agreement is terminated
early. Amounts charged to the Operating Company under the Management Services
Agreement approximate American's cost of providing the services plus a margin.
The parties agreed to apply the financial terms of the Management Services
Agreement as of January 1, 1996.
MARKETING COOPERATION AGREEMENT
The Operating Company and American are parties to the Marketing Cooperation
Agreement dated as of July 1, 1996 (the "Marketing Cooperation Agreement"),
pursuant to which American will provide marketing support for ten years for the
Operating Company's Professional SABRE products targeted to travel agencies and
for five years for SABRE Business Travel Solutions
33
<PAGE>
("SABRE BTS"), Travelocity and easySABRE. The parties agreed to apply the
financial terms of the Marketing Cooperation Agreement as of January 1, 1996.
The Marketing Cooperation Agreement may be terminated by either party prior to
June 30, 2006 only if the other party fails to perform its obligations
thereunder.
Under the Marketing Cooperation Agreement, American's marketing efforts will
include ongoing promotional programs to assist in the sale of those SABRE
products, development with the Operating Company of an annual sales plan,
sponsorship of sales/promotional events and the targeting of potential
customers. Under the terms of the Marketing Cooperation Agreement, the Operating
Company pays American for its marketing support for Professional SABRE a fee,
the amount of which may increase or decrease, depending on total SABRE booking
volumes generated by certain Professional SABRE subscribers in the U.S., the
Caribbean and elsewhere on SABRE's market share of travel agency bookings in
those areas. That fee was approximately $20 million in 1996 and will range
between $10 million and $30 million thereafter. As payment for American's
support of the Operating Company's promotion of SABRE BTS, Travelocity and
easySABRE, the Operating Company pays American a marketing fee based upon
booking volume. Additionally, the Operating Company has guaranteed to American
certain cost savings in the fifth year of the Marketing Cooperation Agreement.
If American does not achieve those savings, the Operating Company will pay
American any shortfall, up to a maximum of $50 million.
NON-COMPETITION AGREEMENT
The Corporation, Operating Company, AMR and American have entered into a
Non-Competition Agreement dated July 1, 1996 (the "Non-Competition Agreement"),
pursuant to which AMR and American, on behalf of themselves and certain of their
subsidiaries, have agreed to limit their competition with the Operating
Company's businesses of (i) electronic travel distribution; (ii) development,
maintenance, marketing and licensing of software for travel agency, travel,
transportation and logistics management; (iii) computer system integration; (iv)
development, maintenance and operation of a data processing center providing
data processing services to third parties; and (v) travel industry,
transportation and logistics consulting services relating primarily to computer
technology and automation. Under the Non-Competition Agreement, American and AMR
may develop, operate, market and provide in compliance with all applicable laws
an American Airlines branded electronic travel distribution system that gives a
display preference to American's flights. The Non-Competition Agreement
prohibits American or AMR, however, from providing such system to any travel
agency that generated 25% or more of its bookings through SABRE during the
preceding six calendar months. Additionally, in the event any airline competing
with American engages in an activity in connection with such airline's
34
<PAGE>
transportation business, and if the restrictions imposed by the Non-Competition
Agreement would prevent American from engaging in the same activity and place
American at a disadvantage, then American may engage in such activity, subject
to American and the Operating Company consulting about means to mitigate the
effect on the Operating Company of American's engaging in such activity. The
Non-Competition Agreement expires on December 31, 2001. American may terminate
the Non-Competition Agreement, however, as to the activities described in
clauses (ii) though (v) of this paragraph upon 90 days' notice to the Operating
Company if the Technology Services Agreement is terminated as a result of an
egregious breach thereof by the Operating Company.
TRAVEL AGREEMENTS
The Operating Company and American are parties to a Travel Privileges
Agreement dated July 1, 1996 (the "Travel Privileges Agreement"), pursuant to
which the Operating Company is entitled to purchase personal travel for its
employees and retirees at reduced fares. The Travel Privileges Agreement will
expire on June 30, 2008. To pay for the provision of flight privileges to
certain of its future retired employees, the Operating Company will make a lump
sum payment to American beginning in 1997 for each employee retiring in that
year. The payment per retiree will be based on the number of years of service
with the Operating Company and AMR over the prior ten years of service. Service
years accrue for the Operating Company beginning on January 1, 1993. AMR will
retain the obligation for the portion of benefits attributable to service years
prior to January 1, 1993. The accumulated benefit obligation for post-retirement
travel privileges assumed by the Operating Company at July 1, 1996 of
approximately $8 million, net of deferred taxes of approximately $3 million, was
recorded as a reduction to stockholders' equity. The remaining cost of providing
this privilege is being accrued over the estimated service lives of the
employees eligible for the privilege.
The Operating Company and American are also parties to a Corporate Travel
Agreement dated July 1, 1996 and ending June 30, 1998 (the "Corporate Travel
Agreement"), pursuant to which the Operating Company receives discounts for
certain flights purchased on American. In exchange, the Operating Company must
fly a certain percentage of its travel on American as compared to all other air
carriers combined. If the Operating Company fails to meet the applicable
percentage on an average basis over any calendar quarter, American may terminate
the agreement upon 60 days' notice.
The parties agreed to apply the financial terms of the Travel Privileges
Agreement and the Corporate Travel Agreement as of January 1, 1996.
35
<PAGE>
CREDIT AGREEMENT
On July 1, 1996, the Operating Company and American entered into a Credit
Agreement (the "Credit Agreement"), pursuant to which the Operating Company is
required to borrow from American, and American is required to lend to the
Operating Company, amounts required by the Operating Company to fund its daily
cash requirements. In addition, American may, but is not required to, borrow
from the Operating Company to fund its daily cash requirements. The maximum
amount the Operating Company may borrow at any time from American under the
Credit Agreement is $300 million. The maximum amount that American may borrow at
any time from the Operating Company under Credit Agreement is $100 million.
Loans under the Credit Agreement are not intended as long term financing. If the
Corporation's credit rating is better than "B" on the Standard & Poor's Rating
Service Scale (or an equivalent thereof) or American has excess cash (as
defined) to lend the Operating Company, the interest rate to be charged to the
Operating Company is the sum of (a) the higher of (i) American's average rate of
return on short-term investments for the month in which the borrowing occurred,
or (ii) the actual rate of interest paid by American to borrow funds to make the
loan to the Operating Company under the Credit Agreement, plus (b) an additional
spread based upon the Operating Company's credit risk. If the Corporation's
credit rating is "B" or below on the Standard & Poor's Rating Service Scale (or
an equivalent thereof) and American does not have excess cash to lend to the
Operating Company, the interest rate to be charged to the Operating Company is
the lower of (a) the sum of (i) the borrowing cost incurred by American to draw
on its revolving credit facility to make the advance, plus (ii) an additional
spread based on the Operating Company's credit risk, or (b) the sum of (i) the
cost at which the Operating Company could borrow funds from an independent
party, plus (ii) one-half of the margin American pays to borrow under its
revolving credit facility. The Corporation believes that the interest rate it
will be charged by American could, at times, be slightly above the rate at which
the Corporation could borrow externally; however, no standby fees for the line
of credit will be required to be paid by either party. The interest rate to be
charged to American is the Corporation's average portfolio rate for the months
in which borrowing occurred, plus an additional spread based upon American's
credit risk. At the end of each quarter, American must pay all amounts owing
under the Credit Agreement to the Operating Company. No borrowings have occurred
by either the Operating Company or American as of December 31, 1996.
INDEMNIFICATION AGREEMENT
In connection with the Reorganization, the Operating Company and American
entered into an intercompany agreement (the "Indemnification Agreement"),
pursuant to which each party indemnified the other for certain obligations
relating to the Reorganization. Pursuant to the
36
<PAGE>
Indemnification Agreement, the Operating Company indemnified American for
liabilities assumed in the Reorganization, against third party claims asserted
against American as a result of American's prior ownership of assets or
operation of businesses contributed to the Operating Company and for losses
arising from or in connection with the Operating Company's lease of property
from American. In exchange, American indemnified the Operating Company for
specified liabilities retained by it in the Reorganization, against third party
claims against the Operating Company relating American's businesses and asserted
against the Operating Company as a result of the ownership or possession by
American prior to the Reorganization of any asset contributed to the Operating
Company in the Reorganization and for losses arising from or in connection with
American's lease of property from the Operating Company.
TAX SHARING AGREEMENT
The Corporation and AMR entered into a new tax sharing agreement effective
July 1, 1996 (the "Tax Sharing Agreement") which provides for the allocation of
tax liabilities during the tax periods the Corporation is part of the
consolidated federal, state and local income tax returns filed by AMR. The Tax
Sharing Agreement generally requires the Corporation to pay to AMR the amount of
federal, state, and local income taxes that the Corporation would have paid had
it ceased to be a member of the AMR consolidated tax group for periods after the
Reorganization. AMR has agreed, however, to indemnify the Corporation for any
liability for taxes reported or required to be reported on a consolidated
return.
Except for certain items specified in the Tax Sharing Agreement, AMR
generally retains any potential tax benefit carryforwards and remains obligated
to pay all taxes attributable to periods before the Reorganization. The Tax
Sharing Agreement also grants the Corporation certain limited participation
rights in any disputes with tax authorities.
The Corporation computes its provision for deferred income taxes using the
liability method as if it were a separate taxpayer. Under the liability method,
deferred income tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities and
are measured using the enacted tax rates and laws. The measurement of deferred
tax assets is adjusted by a valuation allowance, if necessary, to recognize the
extent to which, based on available evidence, future tax benefits more likely
than not will be realized.
37
<PAGE>
PROPOSAL 2--SELECTION OF AUDITORS
Based upon the recommendation of the Corporation's Audit Committee, the
Board of Directors has selected Ernst & Young LLP to serve as the Corporation's
independent auditors for the year ending December 31, 1997. The stockholders
will be requested to ratify the Board's selection. Representatives of Ernst &
Young LLP will be present at the annual meeting, will have the opportunity to
make a statement, if they desire to do so, and will be available to answer
appropriate questions.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares represented and entitled to
vote is required to approve the Board's selection of auditors. If the
stockholders do not ratify the selection of Ernst & Young LLP, the selection of
independent auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
PROPOSAL 3--APPROVAL OF AN EMPLOYEE STOCK PURCHASE PLAN
At the annual meeting, the stockholders will be requested to approve the
Employee Stock Purchase Plan (the "Purchase Plan"). The purpose of the Purchase
Plan is to allow the Corporation to offer its and certain of its subsidiaries'
employees the ability to invest in the Corporation's Class A Common Stock at an
attractive price, thereby giving them an incentive for individual creativity and
contribution to ensure the future growth of the Corporation. The Purchase Plan
is intended to be an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
DESCRIPTION OF THE PLAN
The Purchase Plan will allow all employees of the Corporation and designated
subsidiaries to authorize payroll deductions at a rate of 1% or 2% of base pay
to be applied monthly toward the purchase of shares of the Common Stock at a
discount. One million (1,000,000) shares of the Common Stock will be reserved
for issuance under the Purchase Plan (subject to adjustment in the event of
certain capital events affecting the Common Stock). Shares subject to the
Purchase Plan may be shares now or hereafter authorized but unissued, or
reacquired shares. As of January 1, 1997, there were approximately 7,500
employees eligible to participate in the Purchase Plan. The Purchase Plan will
be administered by the Compensation/Nominating Committee. Subject to the express
provisions of the Purchase Plan, the committee shall have authority to interpret
the
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Purchase Plan, to prescribe, amend and rescind rules and regulations relating to
it, and to make all other determinations necessary or advisable in administering
the Purchase Plan, all of which determinations shall be final and binding upon
all persons. The Purchase Plan will terminate in the event all shares reserved
under the Purchase Plan have been purchased, or earlier, at the discretion of
the Board of Directors.
On the last business day of each month, each participating employee shall,
without further action on his or her part, purchase a number of whole and
fractional shares of the Common Stock determined by dividing that employee's
amount of payroll deductions not already invested under the Purchase Plan by 85%
of the lesser of the Fair Market Value of such stock on the first business day
of such month and the Fair Market Value of such stock on the last business day
of such month. To purchase stock on the last business day of a month an employee
must authorize payroll deductions prior to the first day of that month, and such
deductions shall begin as of the first day of such month. The maximum number of
shares of the Common Stock that a participating employee may purchase during any
month shall not exceed 600 shares. "Fair Market Value" is the mean of the high
and low sales prices of the Common Stock on the NYSE on the applicable date or,
if the Common Stock shall not have been traded on the NYSE on such date, the
mean of the high and low sales prices on such exchange on the first day prior
thereto on which the stock was so traded. The closing price of the Common Stock
as reported on the NYSE on March 24, 1997 was $26.50.
An employee may withdraw from participation in the Purchase Plan at any
time. The amount of the employee's account balance at that time will be applied
to the purchase of shares. An employee who has so withdrawn may again
participate in the Purchase Plan at any time.
No employee shall be permitted to purchase any shares under the Purchase
Plan if such employee, immediately after such purchase, owns shares possessing
5% or more of the total combined voting power or value of all classes of stock
of the Corporation or its parent or subsidiary corporations. No employee shall
be permitted to purchase any shares under the Purchase Plan (and any other
employee stock purchase plans of the Corporation or any of its subsidiaries) at
a rate in excess of $25,000 of Fair Market Value for any calendar year.
Benefits under the Purchase Plan are based on voluntary participation. The
number of participants can vary each month.
The Board of Directors may at any time amend or terminate the Purchase Plan,
provided that the Purchase Plan may not be amended in any way that will cause
rights issued under it to fail to
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meet the requirements for employee stock purchase plans as defined in Section
423 of the Code. The rights to purchase shares under the Purchase Plan may not
be assigned or transferred.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PURCHASE PLAN
The following discussion is a general summary of the federal income tax
rules that would be applicable to the Purchase Plan if it were approved by the
Corporation's stockholders. Employees should consult their own tax advisors
since a taxpayer's particular situation may be such that some variation of the
rules described below will apply.
The Purchase Plan and the right of participants to make purchases thereunder
are intended to qualify under the provisions of Sections 421 and 423 of the
Code. Under those provisions, no income will be recognized by a participant at
the time of grant of the option to purchase shares or the purchase of shares. A
participant may become liable for tax upon the disposition of shares acquired
under the Purchase Plan (or if he or she dies owning such shares), and the tax
consequences will depend on how long a participant has held the shares prior to
disposition.
If the employee holds shares acquired under the Purchase Plan until a date
that is more than two years from the first day of the month in which the shares
were purchased, or dies owning shares, the employee must report as ordinary
income in the year of disposition (or death) the lesser of (a) the excess of the
Fair Market Value of the shares at the time of such disposition (or death) over
the purchase price of the shares, and (b) 15% of the Fair Market Value of the
shares on the first day of the month in which the shares were purchased. The
excess, if any, of the sales price over the sum of the purchase price for the
shares and the amount of ordinary income recognized is treated as long-term
capital gain. If the sales price of the shares is less than the purchase price,
there is no ordinary income and the participant has a long-term capital loss
equal to the difference. If an employee holds the shares for this period, the
Corporation is not entitled to any deduction for federal income tax purposes.
If the employee does not meet the holding period requirements, the employee
recognizes at the time of disposition of the shares ordinary income equal to the
difference between the price paid for the shares and their Fair Market Value on
the date of purchase. The excess, if any, of the sales price over the Fair
Market Value of the shares on the purchase date will be treated as capital gain
and will qualify for long-term capital gain treatment if the shares have been
held for more than one year. If the shares are sold for less than their Fair
Market Value on the date of purchase, the same amount of ordinary income is
included by a participant, and a capital loss is allowed equal to the difference
between the sales price and the Fair Market Value of the shares on the purchase
date. Such loss will be a long-term loss if the shares were held for more than
one year. In
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the event of an early disposition, the Corporation generally will be allowed a
deduction for federal income tax purposes equal to the ordinary income realized
by the employee.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of a majority of the shares represented and
entitled to vote is required to approve the Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon at the
meeting, but if any such matters properly come before the meeting, it is
intended that the persons voting the proxies will vote in accordance with their
best judgments.
By Order of the Board of Directors,
Andrew B. Steinberg
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
March 31, 1997
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APPENDIX A
THE SABRE GROUP HOLDINGS, INC.
EMPLOYEE STOCK PURCHASE PLAN
WHEREAS, the Board of Directors of The SABRE Group Holdings, Inc. ("TSGH")
established the Employee Stock Purchase Plan dated December 27, 1996 as a plan
for the employees of The SABRE Group, Inc. and certain of its Subsidiaries to
purchase at a discount under the requirements of Section 423 of the Internal
Revenue Code shares of Class A Common Stock, $.01 par value.
WHEREAS, the Board of Directors of TSGH hereby amends, supercedes, replaces
and restates in its entirety the Plan dated December 27, 1996 with this Employee
Stock Purchase Plan.
NOW, THEREFORE, effective as of January 1, 1997, the TSGH Board of Directors
adopts and establishes this Employee Stock Purchase Plan.
ARTICLE I
INTRODUCTION
1.1 PURPOSE OF PLAN. The purpose of the Plan is to provide employees of
The SABRE Group, Inc., a Delaware Corporation ("TSG"), and certain of its
Subsidiaries (collectively, the "Company") with an incentive for individual
creativity and contribution to ensure the future growth of the Company by
enabling such employees to acquire shares of Class A Common Stock, $.01 par
value per share of TSGH (the "TSGH Stock"), in the manner contemplated by the
Plan. Rights to purchase TSGH Stock offered pursuant to the Plan are a matter of
separate inducement and not in lieu of any salary or other compensation for the
services of any employee. The Plan is intended to qualify as an employee stock
purchase plan within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code").
1.2 SHARES RESERVED FOR THE PLAN. There shall be reserved for issuance and
purchase by Eligible Employees under the Plan an aggregate of one million
(1,000,000) shares of TSGH Stock. TSGH Stock subject to the Plan may be shares
now or hereafter authorized but unissued, or shares that were once issued and
subsequently reacquired by TSGH. If and to the extent that any right to purchase
reserved shares shall not be exercised by any Eligible Employee for any reason
or if such right to purchase shall terminate as provided herein, shares that
have not been so purchased hereunder shall again become available for the
purposes of the Plan unless the Plan
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shall have been terminated, but such unpurchased shares shall not be deemed to
increase the aggregate number of shares specified above to be reserved for
purposes of the Plan (subject to adjustment as provided in Section 4.6).
ARTICLE II
DEFINITIONS
2.1 "Account" means a Plan account.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "Committee" means the Compensation/Nominating Committee of the Board of
Directors of TSGH.
2.4 "Company" means collectively TSGH, TSG, and every Subsidiary.
2.5 "Current Eligible Compensation" means for any pay period the gross
amount of Eligible Compensation with respect to which net amounts are actually
paid in such pay period.
2.6 "Eligible Compensation" means for any Eligible Employee his or her base
pay.
2.7 "Eligible Employee" means those individuals described in Sections 3.1
and 3.2.
2.8 "Fair Market Value" means the mean of the high and low sales prices of a
share of TSGH Stock on the New York Stock Exchange on the date in question or,
if TSGH Stock shall not have been traded on such exchange on such date, the mean
of the high and low sales prices on such exchange on the first day prior thereto
on which TSGH Stock was so traded or such other amount as may be determined by
the Committee by any fair and reasonable means.
2.9 "Investment Date" means the last business day of each month during the
period the Plan is in existence.
2.10 "Participating Employee" means an Eligible Employee (i) for whom
payroll deductions are currently being made or (ii) for whom payroll deductions
are not currently being made because he or she has reached the limitation set
forth in Section 3.5.
2.11 "Plan" means this The SABRE Group Holdings, Inc. Employee Stock
Purchase Plan.
2.12 "Plan Entry Date" means the first day of each month.
2.13 "Plan Year" means the calendar year.
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2.14 "Subsidiary" means TSG and any corporation accepted by the Committee
for participation into this Plan in which TSGH or a subsidiary owns not less
than 50% of the total combined voting power of all classes of stock.
2.15 "TSG" means The SABRE Group, Inc., a Delaware corporation.
2.16 "TSGH" means The SABRE Group Holdings, Inc., a Delaware corporation.
2.17 "TSGH Stock" means the Class A Common Stock, $.01 par value, of TSGH.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. All employees of TSGH and each Subsidiary designated by
the Board of Directors shall be eligible to participate in the Plan, provided
that such employee:
(a) is not in a group of key employees that, pursuant to Section
423(b)(4)(D) of the Code, the Committee determines to be ineligible to
participate in the Plan; and
(b) does not own, immediately after the right is granted, stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of capital stock of TSGH, TSG, or of a Subsidiary.
In determining stock ownership under this Section 3.1, the rules of Section
424(d) of the Code shall apply and TSGH Stock that the employee may purchase
under outstanding options shall be treated as TSGH Stock owned by the employee.
3.2 CESSATION OF ELIGIBILITY. An individual's status as an Eligible
Employee will cease on the earliest to occur of the following events: (a) the
individual's termination of employment from the Company; (b) the individual's
death; or (c) the date the individual ceases to satisfy any of the eligibility
criteria of Section 3.1 of the Plan.
3.3 ELECTION TO PARTICIPATE. Each Eligible Employee may elect to
participate in the Plan by completing and providing to TSG an enrollment
application. The enrollment will be effective as of the first Plan Entry Date
subsequent thereto. Each Eligible Employee may elect a payroll deduction of
either one percent (1%) or two percent (2%) of such Eligible Employee's Current
Eligible Compensation. Elections under this Section 3.3 are subject to the
limitations contained in Section 3.5. All payroll deductions shall be credited
as promptly as practicable to an Account in the name of the Participating
Employee and may be used by TSGH until so credited for any corporate purpose.
Unless he or she elects otherwise during the month, an Eligible Employee who
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is a Participating Employee will be deemed (i) to have elected to participate in
the Plan, and (ii) to have authorized payroll deductions as in effect for such
Eligible Employee on the day before the Plan Entry Date. Once an election of a
payroll deduction has been made, the Participating Employee may not change that
election until the next Plan Entry Date except as provided in Section 3.4.
3.4 CESSATION OF PARTICIPATION. A Participating Employee may at any time
cease participation in the Plan by filing with the Committee or its designee a
form specified by the Committee or its designee. The cessation will be effective
as soon as practicable, whereupon no further payroll deductions will be made,
and any payroll deductions made on the Participating Employee's behalf during
the month of cessation shall be invested in TSGH stock pursuant to the Plan on
the next following Investment Date. Any Participating Employee who ceases being
a Participating Employee may elect to participate before the next or any
subsequent Plan Entry Date, if he or she is then an Eligible Employee. A
Participating Employee ceases being a Participating Employee if he or she ceases
being an Eligible Employee.
3.5 DOLLAR AMOUNT LIMIT ON PARTICIPATION. No right to purchase shares
under this Plan shall permit an employee to purchase TSGH stock under all
employee stock purchase plans (as defined in Section 423 of the Code) of the
Company or any parent or Subsidiary of the Company, which in the aggregate
exceeds $25,000 of Fair Market Value of such stock (determined at the time the
right is granted, which, in the case of this Plan, is each Plan Entry Date) for
each calendar year in which the right is outstanding at any time. Subject to the
foregoing, no Participating Employee shall be allowed to purchase more than 600
shares of TSGH Stock on any Investment Date.
ARTICLE IV
PURCHASE OF TSGH STOCK
AND ACCOUNTS
4.1 PURCHASE PRICE. The purchase price for each share of TSGH Stock shall
be eighty-five percent (85%) of the lower of the Fair Market Value of such a
share on the first business day of a month in which shares are purchased and the
Fair Market Value of such a share on the last business day of any such month.
4.2 METHOD OF PURCHASE AND INVESTMENT ACCOUNTS. As of each Investment
Date, each Participating Employee shall be deemed without further action, to
have purchased, the number of whole and fractional shares of TSGH Stock
determined by dividing the amount of his or her payroll deductions not
theretofore invested by the purchase price as determined in Section 4.1.
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Records of such shares shall be maintained in separate Accounts for each
Participating Employee. All cash dividends paid with respect to such shares
shall be credited to each Participating Employee's Account and will
automatically be reinvested in whole or fractional shares of TSGH Stock, unless
the Participating Employee elects not to have such dividends reinvested.
4.3 TITLE OF ACCOUNTS. Each Account may be in the name of the
Participating Employee or, if he or she so indicates on the appropriate form, in
his or her name jointly with another person, with right of survivorship. A
Participating Employee who is a resident of a jurisdiction that does not
recognize such a joint tenancy may have an Account in his or her name as tenant
in common with another person, with right of survivorship.
4.4 RIGHTS AS A STOCKHOLDER. At the time funds from a Participating
Employee's payroll deduction are used to purchase TSGH Stock, he or she shall
have all of the rights and privileges of a stockholder of TSGH with respect to
whole shares purchased under the Plan whether or not certificates representing
full shares have been issued. A Participating Employee shall not have any of the
rights and privileges of a stockholder of TSGH with respect to fractional shares
purchased under the Plan.
4.5 RIGHTS NOT TRANSFERABLE. Rights granted under the Plan are not
transferable by a Participating Employee and are exercisable during his or her
lifetime only by him or her.
4.6 ADJUSTMENT IN THE CASE OF CHANGES AFFECTING TSGH STOCK. In the event
of a subdivision of outstanding shares of TSGH Stock, or the payment of a stock
dividend thereon, the number of shares reserved or authorized to be reserved
under this Plan shall be increased proportionately, and such other adjustment
shall be made as may be deemed necessary or equitable by the Board of Directors.
In the event of any other change affecting TSGH Stock, such adjustment shall be
made as deemed equitable by the Board of Directors to give proper effect to such
event, subject to the limitations of Section 424 of the Code.
ARTICLE V
AMENDMENT AND TERMINATION OF THE PLAN
5.1 AMENDMENT OF THE PLAN. The Board of Directors, or its designate, may
at any time, or from time to time, amend the Plan in any respect; provided,
however, that the Plan may not be amended in any way that will cause rights
issued under it to fail to meet the requirements for employee stock purchase
plans as defined in Section 423 of the Code, including stockholder approval if
required.
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5.2 TERMINATION OF THE PLAN. The Plan and all rights of employees
hereunder shall terminate: (a) on the Investment Date that Participating
Employees become entitled to purchase a number of shares greater than the number
of reserved shares remaining available for purchase; or (b) at any time, at the
discretion of the Board of Directors. If the Plan terminates under circumstances
described in (a) above, reserved shares remaining as of the termination date
shall be sold to Participating Employees pro rata based on the balances in the
payroll deduction accounts. Any payroll deductions remaining after termination
of the Plan and after the purchase of shares as described in the preceding
sentence shall be refunded to the Participating Employees making such payroll
deductions.
ARTICLE VI
MISCELLANEOUS
6.1 ADMINISTRATION OF THE PLAN. The Plan shall be administered, at the
expense of TSGH, by the Committee. The Committee may request advice or
assistance or employ such other persons as are necessary for proper
administration of the Plan. Subject to the express provisions of the Plan, the
Committee shall have authority to interpret the Plan, to prescribe, amend, and
rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable in administering the Plan, all of which
determinations shall be final and binding upon all persons.
6.2 GOVERNMENTAL REGULATIONS. The Plan, and the grant and exercise of the
rights to purchase shares hereunder, and TSGH's obligations to sell and deliver
shares upon exercise of rights to purchase shares shall be subject to all
applicable Federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may in the opinion of
counsel for TSGH be required.
6.3 INDEMNIFICATION OF COMMITTEE. Service on the Committee shall
constitute service as a Director of TSGH so that members of the Committee shall
be entitled to indemnification and reimbursement as Directors of TSGH pursuant
to its Certificate of Incorporation, By-Laws, or resolutions of its Board of
Directors or stockholders.
6.4 THIRD PARTY BENEFICIARIES. None of the provisions of the Plan shall be
for the benefit of or enforceable by any creditor of a Participating Employee. A
Participating Employee may not create a lien on any portion of the cash balance
accumulated in such Participating Employee's payroll deduction account or on any
shares covered by a right to purchase before a stock certificate for such shares
is issued for such Participating Employee's benefit.
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6.5 GENERAL PROVISIONS. The Plan shall neither impose any obligation on
TSG or on any Subsidiary to continue the employment of any Eligible Employee,
nor impose any obligation on any Eligible Employee to remain in the employ of
TSG or of any Subsidiary. For purposes of the Plan, an employment relationship
shall be deemed to exist between an individual and a corporation if, at the time
of the determination, the individual was an "employee" of such corporation
within the meaning of Section 423(a)(2) of the Code and the regulations and
rulings interpreting such section. For purposes of the Plan, the transfer of an
employee from employment with TSG to employment with a Subsidiary, or vice
versa, shall not be deemed a termination of employment of the employee. Subject
to the specific terms of the Plan, all employees granted rights to purchase
shares hereunder shall have the same rights and privileges.
By Order of the Board of Directors,
Andrew B. Steinberg
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
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If you are planning to attend the annual meeting in person, you must bring
the admission ticket printed on this page with you. You will be asked for this
ticket at the stockholder registration desk at the annual meeting. If you do not
have an admission ticket, other evidence of share ownership will be necessary to
obtain admission to the annual meeting. See "Official Notice of Annual Meeting"
for details.
(PLEASE CUT ALONG THIS LINE)
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THE SABRE GROUP HOLDINGS, INC.
1997 ANNUAL MEETING ADMISSION TICKET
The Annual Meeting of Stockholders of The SABRE Group Holdings, Inc.
will be held at 1:00 P.M., CDT, on Wednesday, May 21, 1997,
in the Park West Ballroom of The Omni Hotel Park West
at 1590 LBJ Freeway, Dallas, Texas 75234
TO ATTEND THIS MEETING YOU MUST PRESENT
THIS TICKET OR OTHER PROOF OF SHARE OWNERSHIP
(Doors will open at 12:00 P.M. NOTE: Cameras, tape recorders or other similar
recording devices will not be allowed in the meeting room.)
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