<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-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:
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(4) Date Filed:
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<PAGE>
THE SABRE GROUP HOLDINGS, INC.
P.O. BOX 619615, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9615
March 30, 1999
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 Flagship Auditorium at
the American Airlines Training and Conference Center, 4501 Highway 360, Fort
Worth, Texas 76155, on Wednesday, May 19, 1999, at 1:00 P.M., Central Daylight
Saving 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, this year you may vote
over the Internet, as well as by telephone or by mailing a traditional proxy
card. Voting over the Internet, by phone or by written proxy will ensure your
representation at the annual meeting if you choose not to attend in person.
Please review the instructions on the proxy card or the information forwarded by
your bank, broker or other holder of record concerning each of these voting
options. If you plan to attend the annual meeting, please make certain that you
so indicate when voting and bring the admission ticket that is printed on the
last page of the proxy statement.
Sincerely,
/s/ DONALD J. CARTY
-------------------------------------
Donald J. Carty
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 Flagship Auditorium at the American Airlines Training and
Conference Center, 4501 Highway 360, Fort Worth, Texas 76155, on Wednesday, May
19, 1999, at 1:00 P.M., Central Daylight Saving 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 1999;
(3) amendment to the Certificate of Incorporation to change the corporate
name to Sabre Holdings Corporation;
(4) approval of Amended and Restated 1996 Long-Term Incentive Plan;
and such other matters as may properly come before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on March 22, 1999, will
be entitled to attend or to vote at the meeting.
By Order of the Board of Directors,
/s/ ANDREW B. STEINBERG
-------------------------------------
Andrew B. Steinberg
SENIOR VICE PRESIDENT, GENERAL
COUNSEL
AND CORPORATE SECRETARY
March 30, 1999
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 VOTE (1)
OVER THE INTERNET, (2) BY TOLL-FREE TELEPHONE NUMBER, OR (3) BY COMPLETING THE
ENCLOSED PROXY CARD AND RETURNING IT IN THE ACCOMPANYING ENVELOPE (THE ENVELOPE
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES). PLEASE REFER TO THE VOTING
INSTRUCTIONS INCLUDED ON YOUR PROXY CARD OR, FOR SHARES HELD IN STREET NAME, THE
VOTING INSTRUCTIONS FORWARDED BY YOUR BANK, BROKER OR NOMINEE.
<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 19, 1999
This proxy statement and the form of proxy are being mailed to stockholders
on or around March 30, 1999, in connection with a solicitation of proxies by the
Board of Directors of The SABRE Group Holdings, Inc. (the "Corporation" or
"Sabre") for use at the annual meeting of stockholders to be held on May 19,
1999. Most stockholders have a choice of voting over the Internet, by using a
toll-free telephone number or by completing a proxy card and mailing it in the
postage-paid envelope provided. Check your proxy card or the information
forwarded by your bank, broker or other holder of record to determine which
options are available to you. Please be aware that if you vote over the
Internet, you may incur costs such as telecommunication and Internet access
charges for which you will be responsible. The Internet voting facilities for
stockholders of record will close at 5:00 P.M. Central Daylight Saving Time on
the evening before the annual meeting. The telephone voting facilities for
stockholders of record will be available until the annual meeting begins at 1:00
P.M. Central Daylight Saving Time. The Internet and telephone voting procedures
are designed to authenticate stockholders by use of a control number and to
allow stockholders to confirm that their instructions have been properly
recorded.
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 proxy statement. You may revoke your proxy at any
time before it is exercised by writing to the Corporate Secretary, by timely
delivery of a properly executed, later-dated proxy (including an Internet or
telephone vote) or by voting by ballot at the annual meeting. The method by
which you vote will not limit your right to vote at the annual meeting if you
later decide to attend in person. If your shares are held in the name of a bank,
broker or other holder of record, you must obtain a proxy, executed in your
favor, from the holder of record, to be able to vote at the annual meeting.
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 banks, brokers and 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
<PAGE>
proxy solicitors, to aid in the solicitation at an estimated fee of $6,500 plus
reimbursement of normal expenses.
OUTSTANDING STOCK AND VOTING RIGHTS
The holders of record of the Corporation's common stock at the close of
business on March 22, 1999, will be entitled to vote at the meeting. On that
date, the Corporation had outstanding [ ] 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.
Directors of the Corporation who are standing for election are elected by a
plurality 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 vote, because elections of directors
are determined on the basis of votes cast, and abstentions are not counted as
votes cast.
The affirmative vote of the holders of a majority of the voting power of the
shares present in person or represented by proxy and entitled to vote is
required to approve the Amended and Restated 1996 Long-Term Incentive Plan and
to approve the appointment of auditors. Approval of the amendment to the
Certificate of Incorporation to change the corporate name requires the
affirmative vote of a majority of the outstanding voting power of the shares
entitled to vote at the meeting. An abstention is counted as a vote against all
matters other than the election of directors. A broker "non-vote" is counted as
a vote against the amendment to the Certificate of Incorporation to change the
corporate name and not counted for purposes of approving the other matters.
DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS
The Compensation/Nominating Committee of the Board of Directors will
consider recommendations by stockholders for nominees for election as directors.
Such recommendations must be submitted in writing to the Corporate Secretary of
the Corporation together with (i) the name and address (as they appear on the
Corporation's books) and stockholdings of the stockholder submitting the
nomination and the beneficial owner, if any, on whose behalf the nomination is
made and (ii) all information relating to such nominee that is required to be
disclosed in solicitations of proxies for election of directors or is otherwise
required pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 14a-11 thereunder (including such
person's written consent to being named in the proxy statement
2
<PAGE>
as a nominee and to serving as a director, if elected). Under the Corporation's
By-Laws, nominations for director generally may be made only by AMR until the
Trigger Date (as such term is defined in the Certificate of Incorporation), or
by the Board of Directors, the Chairman of the Board, or a stockholder entitled
to vote who delivers notice to the Corporation (containing the information
specified above) not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's annual meeting. For the Corporation's
meeting in the year 2000, the Corporation must receive this notice on or after
January 20, 2000, and on or before February 19, 2000.
The Corporation's By-Laws also provide that no business may be brought
before an annual meeting except as specified in the notice of the meeting or as
otherwise brought before the meeting by or at the direction of AMR until the
Trigger Date, or by the Board of Directors, the Chairman of the Board or by a
stockholder entitled to vote who has delivered notice to the Corporation
(containing certain information specified in the By-Laws) within the time limits
described above for delivering notice of a nomination for the election of a
director. These requirements apply to any matter that a stockholder wishes to
raise at an annual meeting other than pursuant to the procedures set forth in
Rule 14a-8 under the Exchange Act. Pursuant to Rule 14a-8, any stockholder
proposal must be received by the Corporation no later than December 2, 1999 to
be included in the 2000 proxy statement.
A copy of the full text of the By-Law provisions discussed above may be
obtained by writing to the Corporate Secretary of the Corporation, P.O. Box
619615, Dallas/Fort Worth International Airport, TX 75261-9615.
PROPOSAL 1--ELECTION OF DIRECTORS
The Board of Directors is divided into three classes of directors with
staggered terms. 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 1999. It
is proposed that each of those three directors, who are named below, be
re-elected at the annual meeting for a three-year term that will expire at the
annual meeting in 2002.
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 below. 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.
3
<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
MICHAEL J. DURHAM, President and Chief Executive Officer of The SABRE Group
Holdings, Inc., Fort Worth, Texas; information systems; formerly Chief Financial
Officer of AMR Corporation and American Airlines, Inc., Fort Worth, Texas; air
transportation and information systems.
Mr. Durham is 48. 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.
BOB L. MARTIN, President and Chief Executive Officer, Wal-Mart
International, Inc.; retailing.
Mr. Martin is 50. He became a director in January 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; IMC
Global, Inc.; PMI Group, Inc.; Sara Lee Corporation; Scotsman Industries, Inc.;
and Unicom Corporation.
Mr. Thomas is 68. He became a director in November 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.
VOTE REQUIRED FOR APPROVAL
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.
CONTINUING DIRECTORS
GERARD J. ARPEY, Senior Vice President and Chief Financial Officer, AMR
Corporation and Senior Vice President--Finance and Planning and Chief Financial
Officer of American Airlines, Inc., Fort Worth, Texas; air transportation and
information systems.
4
<PAGE>
Mr. Arpey is 40. He became a director in July 1996, and was re-elected
to a term expiring at the annual meeting in 2001. He is a member of the
Executive Committee.
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; Morgan Stanley Dean Witter & Co.; Minnesota Mining and
Manufacturing Company; and Unicom Corporation.
Mr. Brennan is 65. He became a director in November 1996, and was
re-elected to a term expiring at the annual meeting in 2000. He is Chairman
of the Compensation/Nominating Committee.
DONALD J. CARTY, Chairman, President and Chief Executive Officer of AMR
Corporation and American Airlines, Inc., Fort Worth, Texas; air transportation
and information systems. He is also a director of AMR Corporation; American
Airlines, Inc.; Dell Computer Corporation; and Brinker International, Inc.
Mr. Carty is 52. He became a director in May 1998, with a term expiring
at the annual meeting in 2001. He is Chairman of the Board and the Executive
Committee.
PAUL C. ELY, JR., President of Santa Cruz Yachts, Santa Cruz, California;
yacht manufacturing; former General Partner of Alpha Partners, Menlo Park,
California; venture capital. He is also a director of Parker Hannifin
Corporation and Tektronix, Inc.
Mr. Ely is 67. He became a director in January 1997, and was re-elected
to a term expiring at the annual meeting in 2001. He is a member of the
Audit Committee and 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 70. He became a director in November 1996, and was
re-elected to a term expiring at the annual meeting in 2000. 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
information systems. She is also a director of LG&E Energy Corporation;
Louisville Gas and Electric Company; and Kentucky Utilities Company.
5
<PAGE>
Mrs. McNamara is 51. She became a director in August 1996, and was
re-elected to a term expiring at the annual meeting in 2000.
GLENN W. MARSCHEL, JR., Chief Executive Officer and Co-Chairman of the Board
of Faroudja, Inc., Sunnyvale, California; video processing technology; Chairman
of the Board of Additech, Inc., Houston, Texas; petrochemicals; former President
and CEO of Paging Network, Inc.; telecommunications; former Vice Chairman of
First Financial Management Corporation; credit card processing; former Group
President of Automatic Data Processing; information systems.
Mr. Marschel is 52. He became a director in November 1996, and was
re-elected to a term expiring at the annual meeting in 2001. He is a member
of the Audit Committee and the Compensation/Nominating Committee.
BOARD COMMITTEES
The Corporation has standing Audit, Compensation/Nominating and Executive
Committees that perform the functions described below. The Board of Directors
met nine times in 1998. 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 the Corporation or AMR nor directors of AMR, met four
times during 1998 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, reviews
reports of the independent auditors, and oversees the Corporation's compliance
with legal requirements.
The Compensation/Nominating Committee, which is composed entirely of
directors who are not employees or officers of the Corporation or AMR, met five
times during 1998. 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 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.
The Executive Committee did not meet during 1998. The Executive Committee
may exercise all the power and authority of the Board in the management of the
business and affairs of the
6
<PAGE>
Corporation, with the exception of such powers and authority as are specifically
reserved to the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation/Nominating Committee consists of Messrs. Brennan, Ely,
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 nor has any interlocking relationship with any other
corporation that requires specific disclosure under this heading.
OTHER MATTERS
The law firm of Kelly, Hart & Hallman, P.C. performed legal services for the
Corporation in 1998. Mr. Kelly is a partner of the firm. The law firm of Gibson,
Dunn & Crutcher also performed legal services for the Corporation in 1998. Mrs.
McNamara's husband 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 using the
six-month London Interbank Offered Rate plus 1%. 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
fair market value 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 fair market value of the Corporation's Class A Common Stock
for the month in which the deferral period terminates.
On the first business day after the annual meeting of stockholders, each
outside director will receive options for 4,000 shares of the Corporation's
Class A Common Stock under the Amended and Restated 1996 Long-Term Incentive
Plan (the "Amended and Restated 1996 LTIP"), subject to stockholder approval of
the plan. In addition, each new outside director elected since the preceding
annual meeting of stockholders 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 one year from grant date
and will have a ten-year term.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation for the
past three years paid to the individuals who, as of December 31, 1998, were the
five most highly compensated executive officers of the Corporation (the "Named
Executive Officers").
<TABLE>
<CAPTION>
AWARDS
-------------------------------- PAYOUTS
ANNUAL COMPENSATION RESTRICTED SECURITIES -----------
--------------------------------- STOCK UNDERLYING OPTIONS/ LTIP ALL OTHER
NAME YEAR SALARY BONUS(1) AWARDS(2) SARS(3) PAYOUTS(4) COMPENSATION(5)
- ------------ --------- --------- ----------- ----------- ------------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
M.J. Durham 1998 $ 543,333 $ 460,697 $ 0 75,000 $ [TBD] 6,946
1997 459,325 255,000 0 0 636,199 6,946
1996 393,583 230,000 0 158,750 515,750 9,443
- -----------------------------------------------------------------------------------------------------------------
T.M. Cook 1998 308,833 145,000 82,626 36,450 [TBD] 8,384
1997 292,500 80,000 58,136 20,550 250,042 9,486
1996 259,499 90,000 59,940 68,200 190,850 9,176
- -----------------------------------------------------------------------------------------------------------------
T.B. Jones 1998 293,708 140,000 0 17,600 [TBD] 6,078
1997 276,175 80,000 0 1,750 215,886 8,920
1996 243,700 85,000 0 49,350 264,022 8,121
- -----------------------------------------------------------------------------------------------------------------
B.J. Boston 1998 263,000 130,000 0 30,000 [TBD] 26,116
1997 238,125 80,000 0 0 250,042 24,973
1996 132,750 85,000 197,925 40,750 135,891 28,565
- -----------------------------------------------------------------------------------------------------------------
E.J. Speck 1998 236,667 120,000 0 26,000 [TBD] 8,214
1997 185,870 60,000 117,122 57,420 160,596 24,318
1996 135,408 44,699 125,550 45,770 99,347 0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
M.J. Durham = Michael J. Durham, President and Chief Executive Officer
T.M. Cook = Thomas M. Cook, Senior Vice President-Sabre Technology
Solutions
T.B. Jones = Terrell B. Jones, Senior Vice President-Sabre Interactive
and Chief Information Officer
B.J. Boston = Bradford J. Boston, Senior Vice President-Sabre Technology
Solutions
E.J. Speck = Eric J. Speck, Senior Vice President-Sabre Travel
Information Network
- ------------------------------
(1) The amounts shown for 1998 represent payments made in 1999 pursuant to the
Corporation's Variable Compensation Plan for 1998 services. The amounts
shown for 1997 represent payments made in 1998 pursuant to the Corporation's
Variable Compensation Plan for 1997 services. The amounts shown for 1996
represent payments made in 1997 pursuant to the Corporation's Variable
Compensation Plan for 1996 services (see discussion on page 19 of this proxy
statement).
(2) The value of the 1998 restricted stock is based on an average market price
of $37.2188 for the Corporation's Class A Common Stock on the New York Stock
Exchange ("NYSE") on the date of grant (April 24, 1998). The value of the
1997 restricted stock award to Mr. Cook is based on an average market price
of $26.1875 for the Corporation's
8
<PAGE>
Class A Common Stock on the NYSE on the date of grant (April 24, 1997). The
value of the 1997 restricted stock award to Mr. Speck is based on an average
market price of $25.1875 for the Corporation's Class A Common Stock on the
NYSE on the date of grant (April 1, 1997). The value of the 1996 restricted
stock award to Mr. Cook is based on a $27.00 initial public offering ("IPO")
price for the Corporation's Class A Common Stock on the NYSE on October 11,
1996. The value of the 1996 restricted stock award to Mr. Boston is based on
an average market price of $94.25 for AMR common stock on the NYSE on the
date of grant (June 3, 1996). The value of the 1996 phantom restricted units
award to Mr. Speck is based on an average market price of $27.00 for the
Corporation's Class A Common Stock on the NYSE on the date of grant (October
11, 1996), which were canceled in 1997. The value of grants of restricted
shares received by the Named Executive Officers in 1996 in exchange for
deferred shares of AMR common stock that vest at retirement ("AMR Career
Equity Shares") is not included in this column.
The following table sets forth certain information concerning restricted
stock awards held on December 31, 1998:
RESTRICTED STOCK; TOTAL SHARES AND VALUE
<TABLE>
<CAPTION>
AGGREGATE MARKET VALUE
TOTAL NUMBER OF OF RESTRICTED SHARES
NAME RESTRICTED SHARES (A) (B)
- ------------ --------------------- ----------------------
<S> <C> <C>
M.J. Durham 24,520 $1,084,245
T.M. Cook 65,170 2,881,739
T.B. Jones 16,620 734,916
B.J. Boston 2,000 88,438
E.J. Speck 4,650 205,617
- -----------------------------------------------------------
</TABLE>
(A) Restricted shares are shares of the Corporation's Class A Common Stock
that are subject to restrictions on disposition until vesting and that
are subject to forfeiture if the employee leaves the Corporation
("Restricted Shares"). Messrs. Durham, Jones, Boston and Speck hold
Restricted Shares that vest in 1999. Mr. Cook holds 2,220 Restricted
Shares that vest in 1999, 2,220 Restricted Shares that vest in 2000 and
2,220 Restricted Shares that vest in 2001. Mr. Cook also holds 58,510
deferred shares of the Corporation's Class A Common Stock, which vest at
retirement.
(B) Based on an average market price of $44.2188 for the Corporation's Class
A Common Stock on the NYSE on December 31, 1998.
(3) The 1998 amounts represent options granted in 1998 for shares of the
Corporation's Class A Common Stock. No option grants were received by
Messrs. Durham and Boston in 1997. Messrs. Cook and Jones were awarded
option grants during 1997, pursuant to their employment agreements. The
amount shown for Mr. Speck for 1997 includes an annual option grant and an
option grant received upon the cancellation of the phantom stock
appreciation rights. The amounts shown for Messrs. Durham, Cook, Jones and
Boston for 1996 option grants include annual grants and one-time grants made
in connection with the IPO. A portion of the one-time grants made in 1996
for Messrs. Durham, Cook, Jones and Boston was an acceleration of grants
that would otherwise have been made in 1997. The amounts shown for Messrs.
Durham, Cook, Jones and Boston for 1996 do not include options received in
the conversion of AMR options and options received in exchange for AMR
Career Equity Shares. The amount shown for Mr. Speck for 1996 includes
phantom stock appreciation rights received in the conversion of AMR options,
phantom stock appreciation rights received in exchange for AMR Career Equity
Shares and an annual grant of phantom stock appreciation rights, all of
which were canceled in 1997.
9
<PAGE>
(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 1998 $ 0 $ [TBD] $ [TBD]
1997 0 636,199 636,199
1996 77,000 438,750 515,750
- -----------------------------------------------------------------------------
T.M. Cook 1998 0 [TBD] [TBD]
1997 0 250,042 250,042
1996 23,600 167,250 190,850
- -----------------------------------------------------------------------------
T.B. Jones 1998 0 [TBD] [TBD]
1997 0 215,886 215,886
1996 23,600 240,422 264,022
- -----------------------------------------------------------------------------
B.J. Boston 1998 0 [TBD] [TBD]
1997 0 250,042 250,042
1996 0 135,891 135,891
- -----------------------------------------------------------------------------
E.J. Speck 1998 0 [TBD] [TBD]
1997 0 160,596 160,596
1996 0 99,347 99,347
- -----------------------------------------------------------------------------
</TABLE>
(A) The amount shown for 1996 represents AMR performance returns, granted by
AMR with respect to AMR deferred shares, which were payable annually in
cash and were 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 1996 represent payments made in 1997 under the AMR
1994-1996 performance share program for shares that were granted in 1994
(except for Mr. Boston who received a grant in 1996) and vested over a
three-year performance period. The amounts shown for 1997 represent
payments made in 1998 under the Sabre 1995-1997 performance shares
program for AMR performance shares that were granted in 1995 (except for
Messrs. Boston and Speck who received a grant in 1996), and vested over a
three-year performance period, which were exchanged for Sabre Performance
Shares as defined on page 21. The amounts shown for 1998 represent
payments made in 1999 under the Sabre 1996-1998 performance share program
for Sabre Performance Shares that were granted in 1996, except for Mr.
Speck who received a grant in 1997.
(5) The information shown for 1998 includes: employer contributions to a plan
under Section 401(k) of the Internal Revenue Code of 1986 (the "Code") that
is sponsored by the Corporation ("Contributions to Defined Contribution
Plan"); employer contributions to a Supplemental Executive Retirement Plan
that provides pension benefits to officers who earned compensation in excess
of qualified plan limits (currently $160,000) ("Contributions to SERP"); and
the full amount of premiums paid under a split-dollar life insurance
arrangement whereby the Corporation will recover certain premiums paid
("Insurance Premiums"). The Named Executive Officers were credited with the
following: Contributions to Defined Contribution Plan: Mr. Boston--$9,200;
Contributions to SERP: Mr. Boston-- $10,523; Insurance Premiums: Mr.
Durham--$6,946, Mr. Cook--$8,384, Mr. Jones--$6,078, Mr. Boston--$6,393, Mr.
Speck--$8,214.
10
<PAGE>
STOCK OPTIONS GRANTED
The following table sets forth information concerning stock options granted
during 1998 by the Corporation to the Named Executive Officers. The hypothetical
present values of stock options granted in 1998 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. The actual amount realized may
be higher or lower than the hypothetical present values of stock options
presented in this table.
IF THE HYPOTHETICAL PRESENT VALUES PRESENTED IN THIS TABLE WERE ACTUALLY
REALIZED UPON EXERCISE OF THE OPTIONS, THE CORRESPONDING INCREASE IN TOTAL
STOCKHOLDER VALUE WOULD BE OVER $1 BILLION.
<TABLE>
<CAPTION>
OPTIONS/SARS GRANTED IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------
% OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PER SHARE DATE(1) VALUE(2)
- ------------- ------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
M.J. Durham 75,000 5.8 $ 26.7500 1/26/08 $ 720,000
T.M. Cook 36,450 2.8 37.2188 4/24/08 490,253
T.B. Jones 17,600 1.4 37.2188 4/24/08 236,720
B.J. Boston 30,000 2.3 26.7500 1/26/08 288,000
E.J. Speck 26,000 2.0 26.7500 1/26/08 249,600
</TABLE>
- ------------------------------
(1) Options have a term of ten years and have an exercise price equal to the
average market price of the Corporation's Class A Common Stock on the NYSE
on the date of grant. Twenty percent of the options become exercisable each
year over a five-year period.
(2) 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 granted on January 26, 1998, were: stock price
volatility--32%, expected life--4.5 years, interest rate--5.53%, and
dividend yield--0%. The assumptions used in the valuation of the options
granted on April 24, 1998, were: stock price volatility--32%, expected
life--4.5 years, interest rate--5.67%, and dividend yield--0%.
11
<PAGE>
STOCK OPTION EXERCISES AND
DECEMBER 31, 1998 STOCK OPTION VALUE
The following table sets forth certain information concerning stock options
exercised during 1998 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, 1998. 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. The actual value realized upon the exercise of unexercised in-the-money
stock options (whether exercisable or unexercisable) may be higher or lower than
the values reflected in this table.
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/SAR VALUE
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END AT FY-END(1)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- --------------- ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
M.J. Durham 31,620 $ 555,589 213,780 298,380 $ 4,068,127 $ 5,209,185
T.M. Cook 89,010 1,357,366 0 112,170 0 1,693,976
T.B. Jones 19,940 320,729 61,900 96,750 1,174,989 1,543,857
B.J. Boston 0 0 19,500 59,250 323,305 1,009,021
E.J. Speck 2,850 53,297 25,120 55,450 512,636 991,190
</TABLE>
- ------------------------------
(1) Based on an average market price of $44.2188 for the Corporation's Class A
Common Stock on the NYSE on December 31, 1998.
12
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS
Under the Corporation's 1996 Long-Term Incentive Plan ("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 on page
21 of this proxy statement.
<TABLE>
<CAPTION>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, OTHER PERIOD NON-STOCK PRICE BASED PLANS
UNITS OR OTHER UNTIL MATURATION ---------------------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ----------------- ----------------- ---------------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C>
M.J. Durham 12,500 12/31/00 0 12,500 18,750
- -----------------------------------------------------------------------------------------------
T.M. Cook 6,960 12/31/00 0 6,960 10,440
- -----------------------------------------------------------------------------------------------
T.B. Jones 6,960 12/31/00 0 6,960 10,440
- -----------------------------------------------------------------------------------------------
B.J. Boston 5,000 12/31/00 0 5,000 7,500
- -----------------------------------------------------------------------------------------------
E.J. Speck 4,500 12/31/00 0 4,500 6,750
</TABLE>
- ------------------------------
(1) All awards were grants of Performance Shares.
13
<PAGE>
PENSION PLAN
Effective January 1, 1997, the Corporation established The SABRE Group
Retirement Plan (the "SGRP"), a defined contribution plan qualified under the
Code. Upon establishment, substantially all employees of the Corporation under
the age of 40 at December 31, 1996 began participating in the SGRP.
The Corporation contributes 2.75% of each participating employee's base pay
to the SGRP. Employees fully vest in the Corporation's contributions after three
years of service, including any prior service with AMR affiliates. In addition,
the Corporation matches 50 cents of each dollar contributed by participating
employees, limited to the first 6% of the employee's base pay contribution,
subject to IRS limitations. Employees are immediately vested in their own
contributions and the Corporation's matching contributions.
The obligation for benefits previously earned by employees under the age of
40 under the tax-qualified defined benefit pension plan (the "American Plan") of
American Airlines, Inc. ("American") are now the responsibility of the Legacy
Pension Plan (the "LPP"), a defined benefit plan sponsored by the Corporation
which offers benefits substantially similar to those offered by the American
Plan. These benefits are based on the credited years of service earned as of
December 31, 1996 or date of transfer to the Corporation from American or its
affiliates, if later. However, these employees will continue to earn years of
service for purposes of determining vesting and early retirement eligibility
under the LPP based on future service to the Corporation. Additionally, future
increases in compensation levels will be considered in the calculation of
retirement benefits to be paid from the LPP to these employees upon their
retirement.
Employees age 40 or over as of December 31, 1996, who were participants in
the American Plan at that date, were given the option of participating in the
SGRP or the LPP. Benefits provided by the LPP to retirees of the Corporation are
based on years of credited service and the employee's base pay for the highest
consecutive five years of the ten years preceding retirement. With the exception
noted below, the obligation for benefits previously earned by these employees
under the American Plan is now the responsibility of the LPP.
Certain employees of the Corporation meeting specified criteria have elected
to remain in the American Plan for service through December 31, 1996, and are in
the LPP for service and increases in compensation levels after that date. The
obligation for benefits earned by these employees as of December 31, 1996 under
the American Plan remained with the American Plan. Mr. Jones elected to remain
in the American Plan for service through December 31, 1996.
14
<PAGE>
Officers of the Corporation are eligible for additional retirement benefits,
to be paid by the Corporation under the Supplemental Executive Retirement Plan
(the "SERP") as an operating expense. The SERP provides 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 $130,000 on the maximum annual benefit payable
under the Employee Retirement Income Security Act of 1974 ("ERISA") and the
Code, and the limit on the maximum amount of compensation which may be taken
into account under the Corporation's retirement program ($160,000 for 1998).
The following table shows typical annual benefits payable under the LPP and
the SERP, based upon retirement in 1998 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
and benefits under other qualified and non-qualified plans provided by the
Corporation and American.
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>
As of December 31, 1998, the Named Executive Officers had the following
credited years of service: Mr. Durham--18.5; Mr. Cook--15.5; Mr. Jones--19.7;
Mr. Boston--1.6; Mr. Speck-- 17.5. Benefits are shown in the table using a
straight-life annuity basis.
15
<PAGE>
EXECUTIVE TERMINATION BENEFITS AGREEMENTS/
EMPLOYMENT AGREEMENTS
The Corporation has executive termination benefits agreements ("Agreements")
with its officers. The benefits provided by the Agreements are triggered by the
termination of an officer: (i) within two years following a change in control of
the Corporation if the Corporation terminates the officer or if the officer
terminates his or her employment with "good reason"; (ii) within a 30 day period
immediately following the first anniversary of a change in control if the
officer terminates his or her employment for any or no reason; or (iii) within
six months prior to a change in control of the Corporation. If the officer's
employment is terminated for cause or as a consequence of death, disability, or
retirement, benefits under the Agreement are not triggered.
A change in control of the Corporation occurs: (i) if a person other than
the Corporation or a subsidiary acquires 15% or more of the combined voting
power of the Corporation's then outstanding securities; (ii) if the individuals
who constitute the Board of Directors cease for any reason to constitute at
least a majority of the Board of Directors, unless those individuals becoming
new directors are approved by a vote of at least a majority of the incumbent
Board of Directors; (iii) upon the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Corporation or the acquisition of assets of another corporation;
or (iv) approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation. A change in control would not
occur if 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 officer will receive,
in a lump sum payment: (i) three times the greater of: (A) the officer's annual
base salary at the termination date or (B) the officer's annual base salary
immediately prior to the change in control, plus; (ii) three 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.
16
<PAGE>
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 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 agreements with Mr. Cook and Mr. Jones. 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
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 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 agreement. Pursuant to the agreements, each of Mr. Cook and Mr. Jones
is entitled to receive specified amounts of incentive compensation under the
Corporation's Long Term Incentive Plan, along with other specified benefits
customarily provided to officers of the Corporation.
COMPENSATION/NOMINATING COMMITTEE REPORT
COMMITTEE ROLE IN OVERSEEING EXECUTIVE COMPENSATION POLICY
A primary role of the Compensation/Nominating Committee (the "Committee") is
to determine and oversee the administration of compensation for the executive
officers of the Corporation. 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.
17
<PAGE>
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 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 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.
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.
18
<PAGE>
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 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 February 1998 from $470,000 to
$550,000. This increase was intended to recognize: (i) Mr. Durham's individual
performance and strategic contributions; (ii) the Corporation's favorable
financial results; and (iii) the amount of Mr. Durham's compensation relative to
chief executive officers of comparator companies. In 1998, Mr. Durham actually
received base salary payments of $543,333, an increase of $84,008 (18%) over
1997 (see Summary Compensation Table for further details).
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
named 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 funded
award as calculated.
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.
19
<PAGE>
The weightings of each of these measures will vary depending upon each
individual's position and responsibilities. For 1998, the Corporation measures
were based on revenue growth and operating margin of the Corporation.
In recognition of the Corporation's performance and Mr. Durham's
performance, the Committee awarded a 1998 Variable Compensation Plan payment to
Mr. Durham of $460,697, representing 85% of his base salary as is reflected in
the Summary Compensation Table.
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 a Named Executive Officer'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 LTIP and, subject to
stockholder approval, the Amended and Restated 1996 LTIP. Under the Amended and
Restated 1996 LTIP, stock-based compensation (which may include stock options,
stock appreciation rights, restricted stock, deferred stock, stock purchase
rights, performance awards, and other stock-based awards) may be granted to
non-employee directors, officers, managers, 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.
STOCK OPTIONS
Options to purchase the Corporation's Class A Common Stock, 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 and generally vest in 20% increments over five years. This
approach is designed to provide an incentive to create stockholder value over
the long-term, because 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's: (i) current performance; (ii)
retention value; and (iii) compensation
20
<PAGE>
relative to comparator companies. The number of stock options awarded, if any,
depends upon the executive's rating with respect to these factors.
On January 26, 1998, the Committee granted Mr. Durham options to purchase
75,000 shares of the Corporation's Class A Common Stock at an exercise price of
$26.75, which represents the average market price on the NYSE of the
Corporation's Class A Common 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 Committee's subjective evaluation of: (i) Mr. Durham's service and
strategic contributions; (ii) the Corporation's favorable financial results; and
(iii) the amount of Mr. Durham's compensation relative to chief executives of
comparator companies.
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.
PERFORMANCE SHARES
Under the Corporation's 1998-2000 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 increase in the share price plus dividends
over the measurement period expressed as a percentage of the beginning share
price (total shareholder return or "TSR") performance relative to the TSR of S&P
500 companies over a three-year "performance period." The percentage of the
conditional shares granted which will vest ranges from 0% to 150% based upon the
Corporation's TSR ranking relative to the S&P 500 companies over the performance
period. If the Corporation fails to achieve a certain level of TSR relative to
S&P 500 companies, no Performance Shares will be earned.
Performance share grants are based on the subjective evaluation of the
executive's: (i) current performance; (ii) retention value; and (iii)
compensation relative to comparator companies. On March 23, 1998, the
Corporation granted Mr. Durham 12,500 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 and the amount of
Mr. Durham's compensation
21
<PAGE>
relative to chief executives of comparator companies. Mr. Durham's total
compensation was below the 50(th) percentile of the market for 1998.
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 due to regulatory limits.
INTERNAL REVENUE CODE 162(M) CONSIDERATIONS
Section 162(m) of the 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 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) of the Code with respect to the deductibility of compensation paid.
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.
The Committee will continue to monitor the effectiveness of the
Corporation's total compensation program to meet the current needs of the
Corporation.
COMPENSATION/NOMINATING COMMITTEE
Edward A. Brennan, Chairman Dee J. Kelly Bob L. Martin
Paul C. Ely, Jr. Glenn W. Marschel, Jr. Richard L. Thomas
22
<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 October 11, 1996 to December 31, 1998. 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 RETURN*
ON $100 INVESTMENT MADE IN 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 $106.08 $86.81
December 31, 1997 $106.95 $141.42 $93.82
December 31, 1998 $164.81 $181.75 $117.80
</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: American Management Systems, Inc.; Automatic
Data Processing, Inc.; Ceridian Corporation; Computer Sciences Corporation;
Electronic Data Systems, Inc.; Equifax, Inc.; First Data Corporation;
Fiserv, Inc. and Galileo International Inc.
23
<PAGE>
OWNERSHIP OF SECURITIES
SECURITIES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
As of March 22, 1999, the directors and officers of the Corporation owned,
or had been granted, securities or rights equivalent to the shares of Class A
Common Stock of the Corporation or common stock of AMR indicated in the table
below:
<TABLE>
<CAPTION>
SABRE CLASS A PERCENT OF AMR COMMON PERCENT OF
NAME OF BENEFICIAL OWNER COMMON STOCK CLASS STOCK CLASS
- ------------------------------------------------- -------------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Donald J. Carty(1) 2,500 * 874,300 *
Gerard J. Arpey(2) 500 * 139,000 *
Edward A. Brennan(3)(4) 20,991 * 14,892 *
Paul C. Ely, Jr.(3) 17,273 * 0 *
Dee J. Kelly(3)(4) 18,800 * 4,600 *
Glenn W. Marschel, Jr.(3) 33,049 * 0 *
Bob L. Martin(3) 19,035 * 0 *
Anne H. McNamara(5) 500 * 112,000 *
Richard L. Thomas(3) 32,999 * 0 *
Michael J. Durham(6) 626,964 * 0 *
Thomas M. Cook(7) 191,260 * 0 *
Terrell B. Jones(8) 190,544 * 100 *
Bradford J. Boston(9) 94,570 * 0 *
Eric J. Speck(10) 120,900 * 538 *
Directors and Officers as a group 1,665,985 1.95% 1,145,378 *
</TABLE>
* Percentage does not exceed 1% of the total outstanding class.
- ------------------------------
(1) AMR amount includes AMR stock options for 625,600 shares of AMR common stock
and 228,500 shares of AMR deferred stock granted under the AMR 1998 LTIP.
AMR stock options representing 202,800 shares of AMR common stock are vested
and currently exercisable. The remaining AMR stock options will vest during
the period from July 1999 through July 2003. The AMR deferred shares granted
under the 1998 LTIP are comprised of: (i) 58,500 AMR performance shares that
are scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2000, and (ii) 170,000 AMR Career
Equity shares that are scheduled to vest at age 60 (with pro rata vesting in
the event of death, disability or termination not for cause before attaining
age 60). AMR amount also includes 20,200 shares of AMR common stock.
(2) AMR amount includes AMR stock options for 76,000 shares of AMR common stock
and 63,000 shares of AMR deferred stock granted under the AMR 1998 LTIP. AMR
stock options representing 40,400 shares of AMR common stock are vested and
currently exercisable. The remaining AMR stock options will vest during the
period from
24
<PAGE>
July 1999 through July 2003. The AMR deferred shares granted under the 1998
LTIP are comprised of: (i) 21,000 AMR performance shares that are scheduled
to vest (subject to the attainment of specified performance criteria) during
the period 1999 through 2000, and (ii) 42,000 AMR Career Equity shares that
are scheduled to vest at age 60 (with pro rata vesting in the event of
death, disability or termination not for cause before attaining age 60).
(3) Sabre amount includes 2,991, 273, 3,049, 2,835, and 2,999 Sabre stock
equivalent units (which are the economic equivalent of a share of stock)
granted to Messrs. Brennan, Ely, Marschel, Martin and Thomas, respectively,
which are deferred pursuant to the fee deferral plan (see Compensation of
Directors on page 7). Sabre amount also includes grants to each of Messrs.
Brennan, Ely, Kelly, Marschel, Martin and Thomas of Sabre stock options for
13,000 shares in 1997 and 3,000 shares in 1998, of the Corporation's Class A
Common Stock. For each of Messrs. Brennan, Ely, Kelly, Marschel, Martin and
Thomas, 2,600 shares of the Corporation's Class A Common Stock is vested and
currently exercisable and 3,200 shares of the Corporation's Class A Common
Stock will vest and become exercisable in May 1999. The remaining Sabre
options for each of Messrs. Brennan, Ely, Kelly, Marschel, Martin and Thomas
will vest during the period from May 2000 through May 2003. Sabre amount
also includes 2,000, 1,000, 2,800, 14,000, 200 and 14,000 shares of Sabre
common stock owned by Messrs. Brennan, Ely, Kelly, Marschel, Martin and
Thomas, respectively.
(4) AMR amount includes 2,600 AMR deferred shares granted under the AMR 1994
Directors Stock Incentive Plan to each of Messrs. Brennan and Kelly. Such
shares will be delivered to the director within six months after the
director ceases to be a member of the Board. AMR amount for Mr. Kelly also
includes 2,000 shares of AMR common stock held by Kelly Group Investors. Mr.
Kelly disclaims any beneficial interest in 1,072 of such shares. In
addition, AMR amount for Mr. Brennan includes 10,292 AMR stock equivalent
units (which are the economic equivalent of a share of stock) and 2,000
shares of AMR common stock.
(5) AMR amount includes AMR stock options for 37,000 shares of AMR common stock
and 75,000 shares of AMR deferred stock granted under the AMR 1998 LTIP. AMR
stock options representing 5,800 shares of AMR common stock are vested and
currently exercisable. The remaining AMR stock options will vest during the
period from July 1999 through July 2003. The AMR deferred shares granted
under the 1998 LTIP are comprised of: (i) 15,000 AMR performance shares that
are scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2000, and (ii) 60,000 AMR Career
Equity shares that are scheduled to vest at age 60 (with pro rata vesting in
the event of death, disability or termination not for cause before attaining
age 60).
(6) Sabre amount includes Sabre stock options for 561,350 shares of the
Corporation's Class A Common Stock, 39,070 shares of Sabre deferred stock
and 24,520 shares of Sabre restricted stock, all granted under the LTIP
except for 65,000 stock options and 11,000 shares of deferred stock granted
under the Amended and Restated 1996 LTIP, subject to stockholders approval.
Stock options representing 212,970 shares of common stock are vested and
currently exercisable. The remaining stock options will vest during the
period from July 1999 through January 2004. The deferred shares are Sabre
Performance Shares that are scheduled to vest (subject to the attainment of
specified performance criteria) during the period 1999 through 2001.
Restrictions lapse on Sabre restricted stock in 1999. Sabre amount also
includes 1,250 shares of Sabre common stock and 774 shares of stock
purchased under Sabre Employee Stock Purchase Plan.
(7) Sabre amount includes Sabre stock options for 112,170 shares of the
Corporation's Class A Common Stock, 72,430 shares of Sabre deferred stock
and 6,660 shares of Sabre restricted stock, all granted under the LTIP.
Stock options representing 19,630 shares of the Corporation's Class A Common
Stock will vest within the next sixty days. The
25
<PAGE>
remaining stock options will vest during the period from July 1999 through
April 2003. Sabre deferred shares are comprised of: (i) 13,920 Sabre
Performance Shares that are scheduled to vest (subject to the attainment of
specified performance criteria) during the period 1999 through 2000, and
(ii) 58,510 Sabre Career Equity Shares that are scheduled to vest at age 60
(with pro rata vesting in the event of death, disability or termination not
for cause before attaining age 60). Restrictions lapse on 2,220 shares of
Sabre restricted stock in April 1999 and the remaining restricted stock
restrictions lapse in 2000 through 2001.
(8) Sabre amount includes Sabre stock options for 158,650 shares of the
Corporation's Class A Common Stock, 13,920 shares of Sabre deferred stock
and 16,620 shares of Sabre restricted stock, all granted under the LTIP.
Stock options representing 61,900 shares of the Corporation's Class A Common
Stock are vested and currently exercisable and an additional 7,040 shares of
the Corporation's Class A Common Stock will vest within the next sixty days.
The remaining stock options will vest during the period from July 1999
through April 2003. Sabre deferred shares are Sabre Performance Shares that
are scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2000. Restrictions lapse on Sabre
restricted stock in 1999. Sabre amount also includes 1,000 shares of Sabre
common stock and 354 shares of stock purchased under Sabre Employee Stock
Purchase Plan.
(9) Sabre amount includes Sabre stock options for 78,250 shares of the
Corporation's Class A Common Stock, 14,320 shares of Sabre deferred stock
and 2,000 shares of Sabre restricted stock, all granted under the LTIP
except for 25,000 stock options and 3,200 shares of deferred stock granted
under the Amended and Restated 1996 LTIP, subject to stockholders approval.
The stock options will vest during the period from June 1999 through January
2004. Sabre deferred shares are Sabre Performance Shares that are scheduled
to vest (subject to the attainment of specified performance criteria) during
the period 1999 through 2001. Restrictions lapse on Sabre restricted stock
in 1999.
(10) Sabre amount includes Sabre stock options for 102,570 shares of the
Corporation's Class A Common Stock, 13,680 shares of Sabre deferred stock
and 4,650 shares of Sabre restricted stock, all granted under the LTIP
except for 22,000 stock options and 2,900 shares of deferred stock granted
under the Amended and Restated 1996 LTIP, subject to stockholders approval.
Stock options representing 30,320 shares of the Corporation's Class A Common
Stock are vested and currently exercisable and an additional 2,330 shares of
the Corporation's Class A Common Stock will vest within the next sixty days.
The remaining stock options will vest during the period from April 1999
through January 2003. The deferred shares are Sabre Performance Shares that
are scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2001. Restrictions lapse on Sabre
restricted stock in 1999.
26
<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 Class A or Class B
Common Stock at March 15, 1999.
<TABLE>
<CAPTION>
CLASS OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK AMOUNT HELD CLASS
- --------------------------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
AMR Corporation ................................... Class B 107,374,000(1) 100.00%
4333 Amon Carter Boulevard
Fort Worth, TX 76155
FMR Corp. ......................................... Class A 3,277,410(2) 13.81%
82 Devonshire Street
Boston, MA 02109
Vanguard/Primecap Fund, Inc. ...................... Class A 2,309,200(3) 9.73%
P.O. Box 2600
Valley Forge, PA 19482
Oppenheimer Capital ............................... Class A 1,569,168(4) 6.61%
Oppenheimer Tower, World Financial Center
New York, NY 10281
Scudder Kemper Investments, Inc. .................. Class A 2,074,678(5) 8.74%
Two International Place
Boston, MA 02110
Jurika & Voyles LP ................................ Class A 1,453,214(6) 6.12%
1999 Harrison Street, Suite 700
Oakland, CA 94612
KR Capital Advisors, Inc. ......................... Class A 1,366,573(7) 5.76%
450 Park Avenue
New York, NY 10022
</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 97.9% of the total voting power of
the Corporation's stockholders. If fully converted, the Class B Common Stock
owned by AMR would represent 82.7% of all outstanding shares of Class A
Common Stock as of the record date.
27
<PAGE>
(2) Based on Schedule 13G filed on March 10, 1999 by FMR Corp., Abigail P.
Johnson and Edward C. Johnson 3d: FMR Corp. had sole voting power over
871,630 shares, and sole dispositive power over and beneficial ownership of
3,277,410 shares, of Class A Common Stock. Fidelity Management & Research
Company, a wholly-owned subsidiary of FMR Corp. and an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940
("Fidelity"), is the beneficial owner of 2,354,380 shares of the Class A
Common Stock as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940, and as a result of acting as sub-adviser to Fidelity American
Special Situations Trust ("FASST"). FASST is a unit trust established and
authorized by the Department of Trade and Industry under the laws of
England. The investment adviser of FASST is Fidelity Investment Services
Limited, an English company and a subsidiary of Fidelity International
Limited ("FIL"). Mr. Johnson, FMR Corp., through its control of Fidelity,
and the Fidelity funds each has sole dispositive power over 2,335,180 shares
owned by the Fidelity funds. Fidelity Management Trust Company, a wholly-
owned subsidiary of FMR Corp. and a bank as defined in Section 3(a)(6) of
the Securities Exchange Act of 1934 ("Fidelity Trust"), is the beneficial
owner of 777,600 shares of the Class A Common Stock as a result of its
serving as investment manager of the institutional account(s). Mr. Johnson
and FMR Corp., through its control of Fidelity Trust, each has sole
dispositive power over 777,600 shares, and sole power to vote or direct the
voting of 707,000 shares, of Class A Common Stock owned by the institutional
accounts.
(3) Based on Schedule 13G filed on February 10, 1999 by Vanguard/Primecap Fund,
Inc.: Vanguard/Primecap Fund Inc. had sole voting power and shared
dispositive power over, and beneficial ownership of, 2,309,200 shares of
Class A Common Stock. Vanguard/Primecap Fund, Inc. is an investment company
registered under Section 8 of the Investment Company Act.
(4) Based on Schedule 13G filed on February 12, 1999 by Oppenheimer Capital:
Oppenheimer Capital has shared voting power and shared dispositive power
over, and beneficial ownership of, 1,569,168 shares of Class A Common Stock.
Oppenheimer Capital is a Delaware general partnership and an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940.
(5) Based on Schedule 13G filed on February 11, 1999 by Scudder Kemper
Investments, Inc.: Scudder Kemper Investments, Inc., had sole voting power
over 312,600 shares, shared voting power over 490,893 shares, and sole
dispositive power over and beneficial ownership of 2,074,678 shares, of
Class A Common Stock. Scudder Kemper Investments, Inc. is an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940.
(6) Based on Schedule 13G filed on February 12, 1999 by Jurika & Voyles LP:
Jurika & Voyles LP had shared voting power over 1,280,789 shares, and shared
dispositive power over and beneficial ownership of 1,453,214 shares, of
Class A Common Stock. Jurika & Voyles LP is an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940.
(7) Based on Schedule 13G filed on February 11, 1999 by KR Capital Advisors,
Inc. and Edward D. Klein: KR Capital Advisors, Inc. had sole voting power
over 1,281,173 shares, and sole dispositive power over and beneficial
ownership of 1,366,573 shares, of Class A Common Stock. KR Capital Advisors,
Inc. is an investment adviser registered under Section 203 of the Investment
Advisors Act of 1940.
28
<PAGE>
RELATIONSHIPS WITH AMR CORPORATION AND AFFILIATES
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.
DEBENTURE PAYABLE TO AMR
On July 2, 1996, in connection with the Reorganization, American transferred
to the Corporation 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.
The interest rate on the Debenture is based on the sum of the London
Interbank Offered Rate ("LIBOR") plus a margin 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 was 6.1% and 6.2% for 1998 and
1997, respectively. The Corporation may prepay the principal balance,
approximately $318 million at December 31, 1998, in whole or in part at any
interest payment date.
AFFILIATE AGREEMENTS
In connection with the Reorganization, the Corporation or its principal
operating subsidiary, The SABRE Group, Inc. ("Operating Company") has entered
into certain agreements with AMR and its affiliates (the "Affiliate
Agreements"), which are discussed below.
INFORMATION TECHNOLOGY SERVICES AGREEMENT. The Operating Company is party
to the Information Technology Services Agreement with American dated July 1,
1996 (the "Technology Services Agreement"), 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. For example,
the Operating Company will provide: (i) Data Center services, data network
services, application development and existing application maintenance
enhancement services until June 30, 2006;
29
<PAGE>
(ii) services relating to existing client server operations until June 30, 2001;
(iii) distributed systems services until June 30, 2002; and (iv) voice network
services until June 30, 2001. In 1998, the Operating Company earned
approximately $397 million for services rendered under the Technology Services
Agreement.
The Technology Services Agreement provides for annual price adjustments. For
certain prices, adjustments are made according to formulas which 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.
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 corporation (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.
In addition, Airline Management Services, 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
30
<PAGE>
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 unrecovered
deferred costs associated with the installation and implementation of certain
systems. As permitted by the terms of the Canadian Subcontract, in December
1996, American paid the Operating Company approximately $40 million,
representing unrecovered deferred costs. Approximately $5 million of these
deferred costs were charged to operations in 1996.
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 Operating Company that American has historically provided to
the Operating Company. American also manages the Operating Company's cash
balances under the terms of the Management Services Agreement. Transactions with
American 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 this 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 July 1, 1996 (the
"Marketing Cooperation Agreement"), pursuant to which American will provide
marketing support for 10 years for the Operating Company's professional Sabre
products targeted to travel agencies and for five years for SABRE Business
Travel Solutions ("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
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 a fee for its marketing support for professional Sabre,
the amount of which may increase or decrease, depending on total Sabre booking
volumes generated
31
<PAGE>
by certain professional Sabre subscribers in the U.S., the Caribbean and
elsewhere and on Sabre's market share of travel agency bookings in those areas.
That fee was approximately $17 million in 1998. 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. As of December 31, 1998,
the Operating Company had recorded a liability of approximately $7 million for
this guarantee.
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. 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 makes a lump sum payment to American each year, for each employee
retiring in that year. The payment per retiree is 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
32
<PAGE>
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, 1998 and ending June 30, 2001 (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 and July 1,
1998, respectively.
CREDIT AGREEMENT. On July 1, 1996, the Corporation and American entered
into a Credit Agreement pursuant to which the Corporation is required to borrow
from American, and American is required to lend to the Corporation, amounts
required by the Corporation to fund its daily cash requirements. In addition,
American may, but is not required to, borrow from the Corporation to fund its
daily cash requirements. The maximum amount the Corporation 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 Corporation under the
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 Corporation, the
interest rate to be charged to the Corporation 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 Corporation under the Credit
Agreement, plus (b) an additional spread based upon the Corporation'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 Corporation, the interest rate to be charged to
the Corporation 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 Corporation's credit risk, or (b) the sum
of (i) the cost at which the Corporation 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
33
<PAGE>
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 Corporation. No borrowings have
occurred by either the Corporation or American as of December 31, 1998.
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
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 to 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.
SERVICES AGREEMENTS. The Operating Company is party to Services Agreements
with AMR Services Corporation, AMR Combs, Inc. and TeleService Resources, Inc.
("TSR"), each effective as of July 1, 1996 (the "Services Agreements"). Under
the Services Agreements, the Operating Company will be the provider to each of
the companies of certain information technology services, including data center
services, connectivity services and network services. The base term of the
Services Agreements have a scheduled expiration date of December 31, 2002. In
1998, the Operating Company earned approximately $3 million for services
rendered under the Services Agreements.
INFORMATION TECHNOLOGY SERVICES AGREEMENT. The Operating Company is party
to an Information Technology Services Agreement (the "ITS Agreement") with TSR,
effective as of July 1, 1998. Under the ITS Agreement, the Operating Company
will provide certain information technology services and license certain
applications to TSR with respect to the SPIRIT Multihost System ("SPIRIT") owned
by the Hyatt Corporation and marketed by the Operating Company. The parties also
agreed to jointly market SPIRIT. The ITS Agreement has a stated term of seven
(7) years, however, either party may terminate the ITS Agreement for convenience
on or after
34
<PAGE>
January 1, 2003. In 1998, the Operating Company earned approximately $1 million
for services rendered under the ITS Agreement.
REVENUES FROM AFFILIATES
The Corporation's revenues from American and other subsidiaries of AMR were
$574 million in 1998.
OPERATING EXPENSES
Operating expenses are charged to the Corporation by American and other
subsidiaries of AMR to cover certain employee benefits, facilities rental,
marketing services, management services, legal fees and certain other
administrative costs based on employee headcount or actual usage of facilities
and services. The Corporation believes amounts charged to the Corporation for
these expenses approximate the cost of such services provided by third parties.
Travel service costs for travel by the Corporation's employees for personal and
business travel are charged to the Corporation based on rates negotiated with
American. If the Corporation were not affiliated with American, the personal
travel flight privilege would most likely not be available to employees. The
rates negotiated with American for 1998 under the Corporate Travel Agreement
approximates corporate travel rates offered by American to similar companies.
Expenses charged to the Corporation by affiliates for the year ended December
31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Employee benefits........................................................ $ 41,348
Facilities rental........................................................ 2,706
Marketing cooperation.................................................... 24,619
Management services...................................................... 10,069
Other administrative costs............................................... 12,732
Travel services.......................................................... 45,433
----------
$ 136,907
----------
----------
</TABLE>
PROPOSAL 2--SELECTION OF AUDITORS
Based upon the recommendation of the 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, 1999. 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
35
<PAGE>
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--CHANGE OF CORPORATE NAME
On March 16, 1999, the Board of Directors declared it advisable and proposed
that Article I of the Certificate of Incorporation be amended to change the
Corporation's name to "Sabre Holdings Corporation." The Corporation is adopting
a worldwide branding strategy that emphasizes Sabre's identity as a single
company, rather than continuing to highlight the separate status of the
electronic travel distribution and information technology solutions divisions or
regional units. The Board of Directors believes that referring to the
Corporation as a "group" incorrectly suggests that the Corporation is a
collection of companies, rather than a single company, and dilutes the Sabre
brand. Accordingly, the Board of Directors recommends that the Corporation's
name be changed to "Sabre Holdings Corporation."
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the voting power of the outstanding
shares entitled to vote is required to approve the adoption of the amendment to
the Certificate of Incorporation to change the corporate name.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
PROPOSAL 4--APPROVAL OF AMENDED AND RESTATED
1996 LONG-TERM INCENTIVE PLAN
In 1996, the Board of Directors adopted and the sole stockholder approved a
LTIP. The purpose of the plan was to attract, retain and reward key employees of
the Corporation, its
36
<PAGE>
subsidiaries and affiliates and to strengthen the mutuality of interests between
these key employees and stockholders. The LTIP will terminate in 2006. Although
the LTIP has worked well, several changes have occurred in the law applicable to
such plans and in executive compensation practices. Therefore, and in order to
ensure continued alignment between the interests of key employees and the
Corporation's stockholders, the Board of Directors has adopted, subject to
stockholder approval, an Amended and Restated 1996 LTIP. The Corporation is
seeking stockholder approval of the Amended and Restated 1996 LTIP in order to
qualify payments made to certain officers of the Corporation as deductible for
federal income tax purposes.
The terms and conditions of the Amended and Restated 1996 LTIP are, in most
respects, similar to those of the LTIP. The Amended and Restated 1996 LTIP
amended the LTIP to limit the number of restricted shares available for grant to
an aggregate of one million, to allow greater flexibility with respect to voting
and dividend rights of restricted stock grants, to add non-employee directors as
participants and to amend the change in control provisions to lower the stock
ownership threshold to 15% from 20% and to effect other technical changes
thereto. A summary of the Amended and Restated 1996 LTIP follows, but this
summary is qualified in its entirety by reference to the full text of the
Amended and Restated 1996 LTIP, which is attached as EXHIBIT A to this proxy
statement.
SHARES
The total number of shares reserved and available for distribution under the
Amended and Restated 1996 LTIP continues to be thirteen million (13,000,000)
shares of Class A Common Stock. No more than one million (1,000,000) shares of
restricted stock can be granted under the Amended and Restated 1996 LTIP.
If shares that are subject to an option under the Amended and Restated 1996
LTIP cease to be subject to such option, or if shares awarded under the Amended
and Restated 1996 LTIP are forfeited, or otherwise terminate without a payment
being made to the participant (in the form of the Corporation's common stock)
those shares will be made available for future distribution under the Amended
and Restated 1996 LTIP. In the event of certain changes in the Corporation's
structure affecting its common stock, the Committee may make appropriate
adjustments in the number of shares that may be awarded and in the number of
shares covered by options and other awards then outstanding under the Amended
and Restated 1996 LTIP, and where applicable, the exercise price of awards under
the Amended and Restated 1996 LTIP.
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<PAGE>
PARTICIPATION
Amended and Restated 1996 LTIP awards may be made to non-employee directors,
officers, managers, and key employees of the Corporation, its subsidiaries and
affiliates. The number of non-employee directors and employees participating in
the LTIP will vary from year to year. In 1998, 353 employees (including 7
officers) participated in the LTIP. Although non-employee directors were
ineligible to participate in the LTIP, all non-employee directors (currently six
persons) will receive grants of options under the Amended and Restated 1996 LTIP
in lieu of participating in the Corporation's 1996 Director Stock Incentive
Plan.
AWARDS UNDER THE AMENDED AND RESTATED 1996 LTIP
The Amended and Restated 1996 LTIP is administered by a committee of no
fewer than two members of the Board to be appointed by the Board (the "Special
Committee"). The Special Committee has the authority to select those to whom
awards will be made and to grant the following type of awards: (1) stock options
and incentive stock options, (2) stock appreciation rights, (3) restricted
stock, (4) deferred stock, (5) stock purchase rights, (6) performance awards
(including cash bonuses), and/or (7) other stock based awards. Each of these
awards may be granted alone, in conjunction with, or in tandem with other awards
under the Amended and Restated 1996 LTIP.
STOCK OPTIONS. Incentive stock options and non-qualified stock options may
be granted for such number of shares of Class A Common Stock as the Special
Committee will determine, except that no participant may be granted more than
1,000,000 stock options in any twelve-month period.
Stock options will continue to be exercisable at such times and subject to
such terms and conditions as the Special Committee determines and over a term
(not in excess of 10 years) determined by the Special Committee. The option
price for any option will be determined by the Special Committee at the time of
grant and will be not less than 100% of the fair market value of the stock at
the time of grant. However, the option price granted to an optionee upon
cancellation of options to purchase common stock of AMR Corporation held by the
optionee may be less than 100% of the fair market value of the stock at the time
of grant so that the value of the option granted equals the value of the
canceled AMR Corporation option. In addition, the option price granted to an
optionee in replacement of a stock-equivalent award may be less than one hundred
percent (100%) of the fair market value of the stock at the time of grant,
subject to an overall limit with respect to phantom stock awards, of 250,000
shares.
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<PAGE>
Upon an employee's voluntary resignation or termination for cause, such
employee's stock options will also terminate unless otherwise determined by the
Special Committee. If the employee is involuntarily terminated without cause,
stock options will terminate, unless otherwise determined by the Special
Committee. In the case of an employee whose employment terminates due to death,
disability or retirement, stock options are exercisable in accordance with the
terms and conditions established by the Special Committee. In no event, however,
will a stock option remain exercisable past its original term.
STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs") may be
granted alone or in conjunction with all or part of a stock option. Once a SAR
has been exercised, the portion of the stock option underlying the SAR
terminates.
Upon exercise of a SAR, the Special Committee, at its discretion, will pay
the employee an amount equal to the excess of the then fair market value of the
stock over the option price, multiplied by the number of SARs being exercised.
This payment may be in cash, common stock or any combination of the two.
RESTRICTED STOCK. An award of restricted stock may be conditioned upon the
attainment of specific performance goals or such other factors as the Special
Committee may determine. The Special Committee determines the period during
which restricted stock is subject to forfeiture. The Special Committee may
provide for other awards, payable either in stock or cash, to ensure payment of
a minimum value at the time the restrictions lapse, subject to such performance,
future service, deferral, and other terms and conditions as the Special
Committee may specify.
During the restriction period, the employee may not sell, transfer, pledge
or assign the restricted stock. At the end of the restriction period, shares of
common stock equal to the number covered by the award of restricted stock will
be delivered to the employee (unless the Special Committee decides to settle the
award in cash). Upon the termination of the employee's employment for any reason
during the restriction period, all restricted stock either will vest (in whole
or in part) or be subject to forfeiture, in accordance with the terms and
conditions of the initial award as established by the Special Committee. The
Special Committee determines whether the employee will have the right to vote
the restricted stock and to receive any dividends during the restriction period.
DEFERRED STOCK. Deferred stock may be conditioned upon the attainment of
specific Performance Criteria or such other factors as the Special Committee may
determine. The Special Committee determines the periods during which the
deferred stock is subject to forfeiture. The Special Committee may provide for
other awards, payable either in stock or cash, to ensure
39
<PAGE>
payment of a minimum value at the time the deferral period lapses, subject to
such Performance Criteria, service and/or other terms and conditions as the
Special Committee may specify.
During the deferral period, the employee may not sell, transfer, pledge or
assign the deferred stock award. At the end of the deferral period, shares of
common stock equal to the number covered by the award of deferred stock will be
delivered to the employee (unless the Special Committee decides to settle the
award in cash). Upon the termination of the employee's employment for any reason
during the deferral period, all deferred stock either will vest (in whole or in
part) or be subject to forfeiture, in accordance with the terms and conditions
of the initial award as established by the Special Committee.
The Special Committee determines whether amounts equivalent to any dividends
that would have been paid on a corresponding number of shares will be paid to
the employee, or deemed reinvested in additional shares of deferred stock.
STOCK PURCHASE RIGHTS. The Special Committee may grant eligible individuals
rights to purchase the Corporation's common stock at price(s) determined by the
Special Committee. The Special Committee may condition such rights, or their
exercise, on such terms and conditions as it sees fit. Rights to purchase stock
will be exercisable for a period to be determined by the Special Committee.
CASH BONUSES. The Amended and Restated 1996 LTIP permits the Special
Committee to pay cash bonuses to any executive officer upon the achievement, in
whole or in part, of Performance Criteria established in writing by the Special
Committee. Such writing may be a plan or other arrangement approved by the
Special Committee (the "Incentive Plan"), provided such plan or arrangement sets
forth the Performance Criteria and the terms and conditions under which such
cash bonus will be paid. The maximum amount of any cash payment under an
Incentive Plan to any single officer with respect to any calendar year will not
exceed the lesser of: (i) $2,000,000; or (ii) twice the officer's annual base
salary as in effect on the last day of the preceding fiscal year.
OTHER PERFORMANCE RELATED AWARDS. Any restricted stock, deferred stock and
other stock based awards (other than those intended to vest solely on the basis
of the passage of time) granted to executive officers will vest upon achieving
performance objectives established by the Special Committee ("Performance
Awards").
Such performance objectives are limited to one or more of the following: (i)
return on equity or assets; (ii) total stockholder return; (iii) revenues; (iv)
cash flows, revenues and/or earnings
40
<PAGE>
relative to other parameters; (v) operating income; (vi) return on investment;
(vii) changes in the value of the Corporation's common stock; and (viii)
operating margin (the "Performance Criteria"). Whether these objectives are
achieved may be determined by the performance of the Corporation, a subsidiary
or an affiliate (or any business unit or division thereof) or by reference to
the performance of any of the Corporation, a subsidiary or an affiliate (or any
business unit or division thereof) relative to past performance or to other
companies. The number of shares that may be awarded to any single employee in
respect of Performance Awards may not exceed 100,000 shares in any twelve-month
period.
OTHER STOCK BASED AWARDS. The Special Committee may also grant other types
of awards that are valued, in whole or in part, by reference to, or otherwise
based on, the Corporation's common stock. Such awards will be made upon terms
and conditions as the Special Committee may in its discretion provide.
CHANGE IN CONTROL PROVISIONS
If there is a change in control or a potential change in control, any stock
options that are not then exercisable will become fully exercisable and vested.
Likewise, the restrictions and deferral limitations applicable to restricted
stock, deferred stock, stock purchase rights, other stock based awards and
performance awards will lapse and such shares and awards will be deemed fully
vested. Similarly, the Performance Criteria relative to any award of restricted
stock or deferred stock will be deemed satisfied at target performance levels
and such stock will then be fully vested. Stock options, restricted stock,
deferred stock, stock purchase rights, performance awards, and other stock based
awards may, in the sole discretion of the Special Committee, be cashed out on
the basis of the change in control price as defined in the Amended and Restated
1996 LTIP.
AMENDMENT AND TERMINATION
The Amended and Restated 1996 LTIP may be amended or terminated by the Board
of Directors at any time and for any reason.
FEDERAL INCOME TAX ASPECTS
The following is a brief summary of the federal income tax consequences of
awards made under the LTIP based upon the federal income tax laws in effect on
the date hereof. This summary is not intended to be exhaustive, and does not
describe foreign, state or local tax consequences.
41
<PAGE>
INCENTIVE STOCK OPTIONS. No income is recognized by the participant upon
the grant or exercise of an incentive stock option ("ISO"). However, for
alternative minimum tax purposes, a tax preference item would be generated upon
exercise of the ISO. If a participant does not sell the stock received upon the
exercise of an ISO ("ISO Shares") for at least two years from the date of grant
and for at least one year from the date of exercise, when the shares are sold
any gain or loss realized will be long-term capital gain or loss. In such
circumstances, no deduction will be allowed to the Corporation for federal
income tax purposes.
If ISO Shares are disposed of prior to the expiration of either of the
holding periods described above, then at the time of such disposition, the
participant generally will include in income as compensation income an amount
equal to the excess, if any, of the fair market value of the shares at exercise
(or, if less, the amount realized on the disposition of the shares) over the
price paid for such ISO Shares. Subject to certain reporting requirements, the
Corporation will be entitled to a corresponding deduction for such amount
included by the participant as compensation income. Any further gain or loss
realized by the participant will be taxed as a short-term or long-term capital
gain or loss, depending upon the length of time that the participant has held
the shares. Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non-qualified stock option.
NON-QUALIFIED STOCK OPTIONS. No income is realized by the participant at
the time a nonqualified stock option is granted. Generally, upon exercise of a
non-qualified stock option, the participant will recognize ordinary income in an
amount equal to the difference between the price paid for the shares and the
fair market value of the shares on the date of exercise, subject to certain
reporting requirements, the Corporation will be entitled to a tax deduction in
the same amount. Any appreciation (or depreciation) after the date of exercise
will be treated as either short-term or long-term capital gain or loss,
depending upon the length of time that the participant has held the shares.
STOCK APPRECIATION RIGHTS. No income will be realized by a participant in
connection with the grant of a SAR. When the SAR is exercised, the participant
will generally be required to include in income as compensation income in the
year of exercise an amount equal to the amount of cash and/or the fair market
value of any shares received. Subject to certain reporting requirements, the
Corporation will be entitled to a deduction at the time and in the amount
included in the participant's income by reason of the exercise. If the
participant receives common stock upon exercise of a SAR, the post-exercise
appreciation or depreciation will be recognized upon
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<PAGE>
disposition of such common stock as short-term or long-term capital gain or
loss, depending upon the length of time that the participant has held such
common stock.
RESTRICTED STOCK. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock becomes transferable or is no longer
subject to forfeiture, less any consideration paid for the stock. The
Corporation will be entitled to a deduction at the same time and in the same
amount. The holding period to determine whether the participant has long-term or
short-term capital gain or loss on a subsequent sale generally begins when the
stock becomes transferable or is no longer subject to forfeiture, and the
participant's tax basis for such shares will generally equal the fair market
value of such shares on such date.
However, a participant may elect, under Section 83(b) of the Code, within 30
days of the grant date of the stock, to recognize taxable ordinary income on the
date of grant equal to the excess of the fair market value of the shares of
restricted stock (determined without regard to the restrictions) on the date of
grant over the purchase price of the restricted stock. By reason of such an
election, the participant's holding period will commence on the date of grant
and the participant's tax basis will be equal to the fair market value of the
shares on that date (determined without regard to restrictions). Likewise,
subject to certain reporting requirements, the Corporation generally will be
entitled to a corresponding deduction equal to the amount included in income as
compensation income by the participant. If shares are forfeited after such an
election, the participant will be entitled to a deduction or loss in an amount
equal to the excess of the purchase price of the forfeited shares over the
amount realized upon forfeiture.
DEFERRED STOCK. A participant receiving deferred stock generally will be
subject to tax at ordinary income rates on the fair market value of the deferred
stock on the date that the stock is distributed to the participant and the
capital gain or loss holding period for such stock will also commence on that
date. The Corporation generally will be entitled to a deduction in the amount
that is taxable as ordinary income to the participant. The holding period to
determine whether the participant has long-term or short-term capital gain or
loss on a subsequent sale generally begins when the stock is either transferable
or is no longer subject to forfeiture, and the participant's tax basis for such
shares will generally equal the fair market value of such shares on such same
date.
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<PAGE>
NEW PLAN BENEFITS
It is not possible to determine the number of shares that will in the future
be awarded under the Amended and Restated 1996 LTIP to any particular
individual. However, set forth below are the number of options and shares of
restricted and deferred stock that were granted to the following persons during
1998 under the terms of the LTIP:
<TABLE>
<CAPTION>
NUMBER OF RESTRICTED/DEFERRED
NAME NUMBER OF OPTIONS SHARES
- ------------------------------------------------- ------------------ ----------------------------------
<S> <C> <C>
M.J. Durham 75,000 12,500
T.M. Cook 36,450 9,180
T.B. Jones 17,600 6,960
B.J. Boston 30,000 5,000
E.J. Speck 26,000 4,500
All current executive officers as a group 342,050 77,940
Non-executive officer employee group 816,250 127,300
</TABLE>
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares represented at the meeting
and entitled to vote is required to approve the Amended and Restated 1996 LTIP.
AMR Corporation has committed in writing to vote its shares in favor of this
proposal, thereby ensuring its approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THIS PROPOSAL.
44
<PAGE>
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 that are not
specifically set forth on the proxy card and in this proxy statement, it is
intended that the persons voting the proxies will vote in accordance with their
best judgments.
By Order of the Board of Directors,
/s/ ANDREW B. STEINBERG
-------------------------------------
Andrew B. Steinberg
SENIOR VICE PRESIDENT, GENERAL
COUNSEL
AND CORPORATE SECRETARY
March 30, 1999
45
<PAGE>
EXHIBIT A
AMENDED AND RESTATED 1996 LONG-TERM INCENTIVE PLAN
The SABRE Group Holdings, Inc.
January 1999
SECTION 1. PURPOSE; DEFINITIONS
The purpose of The SABRE Group Holdings, Inc.'s Amended and Restated 1996
Long-Term Incentive Plan (the "Plan") is to enable The SABRE Group Holdings,
Inc. (the "Company") to attract, retain, and reward non-employee directors,
officers, managers, and key employees of the Company and its Subsidiaries and
Affiliates, and strengthen the mutuality of interests between such individuals
and the Company's shareholders, by offering such individuals performance-based
stock incentives and/or other equity interests or equity-based incentives in the
Company, as well as performance-based incentives payable in cash. The Plan is
intended to replace and supersede the Company's 1996 Long-Term Incentive Plan
(the "1996 Plan").
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "AFFILIATE" means any entity other than the Company and its Subsidiaries
that is designated by the Board as a participating employer under the
Plan, provided that the Company directly or indirectly owns at least
twenty percent (20%) of the combined voting power of all classes of stock
of such entity or at least twenty percent (20%) of the ownership
interests in such entity.
(b) "BOARD" means the Board of Directors of the Company.
(c) "BOOK VALUE" means, as of any given date, on a per share basis (a) the
Stockholders' Equity in the Company as of the end of the immediately
preceding fiscal year as reflected in the Company's consolidated balance
sheet, subject to such adjustments as the Committee shall specify at or
after grant, divided by (b) the number of then outstanding shares of
Stock as of such year-end date (as adjusted by the Committee for
subsequent events).
(d) "CAUSE" means, but is not limited to, any of the following actions:
theft, dishonesty or fraud, insubordination, persistent inattention to
duties or excessive absenteeism, violation of the Company's work rules,
code of conduct or policies or state or federal law, or
A-1
<PAGE>
any other conduct which would disqualify the participant from entitlement
to unemployment benefits. The determination of whether Cause exists shall
be made in the Company's sole discretion.
(e) "CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(f) "COMMITTEE" means the Committee referred to in Section 2 of the Plan. If
at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
(g) "COMPANY" means The SABRE Group Holdings, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
(h) "DEFERRED STOCK" means an award made pursuant to Section 8 below of the
right to receive Stock at the end of a specified deferral period.
(i) "DISABILITY" means disability as determined under procedures established
by the Committee for purposes of this Plan.
(j) "EARLY RETIREMENT" means retirement, with the express consent for
purposes of this Plan of the Committee at or before the time of such
retirement, from active employment with the Company and any Subsidiary or
Affiliate.
(k) "EFFECTIVE DATE" means January 19, 1999.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
(m) "FAIR MARKET VALUE" means, as of any given date, unless otherwise
determined by the Committee in good faith, the mean between the highest
and lowest quoted selling price, regular way, of the Stock on the New
York Stock Exchange or, if no such sale of Stock occurs on the New York
Stock Exchange on such date, the fair market value of the Stock as
determined by the Committee in good faith.
(n) "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section
422 of the Code.
(o) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
A-2
<PAGE>
(p) "NORMAL RETIREMENT" means, unless otherwise determined by the Committee,
retirement from active employment by or service with the Company and any
Subsidiary or Affiliate on or after age 65.
(q) "OTHER STOCK-BASED AWARD" means an award under Section 10 below that is
valued in whole or in part by reference to, or is otherwise based on,
Stock.
(r) "PARENT" means AMR Corporation.
(s) "PERFORMANCE AWARD" means an award under Section 11 below that is valued
based on the level of attainment of performance objectives related to the
performance measures set forth in Section 11.
(t) "PERSON" means "person" as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof, including a "group"
as defined in Section 13(d) of the Exchange Act but excluding the Company
and any Subsidiary and any employee benefit plan sponsored or maintained
by the Company or any Subsidiary (including any trustee of such plan
acting as trustee).
(u) "PHANTOM AWARD" means an award issued prior to the Effective Date by the
Company pursuant to a stock appreciation right agreement or a phantom
stock appreciation right agreement.
(v) "PLAN" means The SABRE Group Holdings, Inc.'s Amended and Restated 1996
Long-Term Incentive Plan, as hereinafter amended from time to time.
(w) "RESTRICTED STOCK" means an award of shares of Stock that is subject to
restrictions under Section 7 below.
(x) "RETIREMENT" means Normal or Early Retirement.
(y) "STOCK" means the Class A Common Stock, $.01 par value per share, of the
Company.
(z) "STOCK APPRECIATION RIGHT" means the right to participate in an increase
in the value of a share of Stock pursuant to an award granted under
Section 6.
(aa) "STOCK OPTION" or "OPTION" means any option to purchase shares of Stock
(including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 below.
(bb) "STOCK PURCHASE RIGHT" means the right to purchase Stock pursuant to
Section 9.
A-3
<PAGE>
(cc) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in the
chain.
In addition, the terms "Change in Control," "Potential Change in Control,"
and "Change in Control Price" shall have the meanings set forth, respectively,
in Sections 12(b), (c) and (d) below.
SECTION 2. ADMINISTRATION
The Plan shall be administered by a committee of not less than two members
of the Board, who shall be appointed by, and serve at the pleasure of, the
Board. In selecting the members of the Committee, the Board shall take into
account the requirements for the members of the Committee to be treated as
"Outside Directors" within the meaning of Section 162(m) of the Code and
"Non-Employee Directors" for purposes of Rule 16b-3, as promulgated under
Section 16 of the Exchange Act. The functions of the Committee specified in the
Plan shall be exercised by the Board, if and to the extent that no Committee
exists which has the authority to so administer the Plan or to the extent that
the Committee is not comprised solely of Non-Employee Directors for purposes of
Rule 16b-3, as promulgated under Section 16 of the Exchange Act.
The Committee shall have full authority to grant, pursuant to the terms of
the Plan, to non-employee directors, officers, managers, and key employees,
eligible under Section 4: (i) Stock Options and Incentive Stock Options; (ii)
Stock Appreciation Rights; (iii) Restricted Stock; (iv) Deferred Stock; (v)
Stock Purchase Rights; (vi) Other Stock-Based Awards; and/or (vii) Performance
Awards.
In particular the Committee shall have the authority:
(i) To select the non-employee directors, officers, managers, and key
employees of the Company and its Subsidiaries and Affiliates to whom
Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Stock Purchase Rights, Other
Stock-Based Awards, and/or Performance Awards may from time to time be
granted hereunder;
(ii) To determine whether and to what extent Incentive Stock Options,
Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Stock Purchase Rights, Other Stock Based Awards,
and/or Performance Awards or any combination
A-4
<PAGE>
thereof, are to be granted hereunder to one or more eligible employees
and non-employee directors;
(iii) Subject to the provisions of Sections 3, 5 and 11, to determine the
number of shares to be covered by each such award granted hereunder;
(iv) To determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited
to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Stock
Option or other award and/or the shares of Stock relating thereto,
based in each case on such factors as the Committee shall determine in
its sole discretion).
(v) To determine whether and under what circumstances a Stock Option may be
settled in cash, Restricted Stock and/or Deferred Stock under Section
5(l) or (m), as applicable, instead of Stock;
(vi) To determine whether and under what circumstances an award of
Restricted Stock or Deferred Stock may be settled in cash;
(vii) To determine whether, to what extent and under what circumstances
Option grants and/or other awards under the Plan and/or other cash
awards made by the Company are to be made, and operate, on a tandem
basis vis-a-vis other awards under the Plan and/or cash awards made
outside of the Plan, or on an additive basis;
(viii) To determine whether, to what extent and under what circumstances Stock
and other amounts payable with respect to an award under this Plan
shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount (if
any) of any deemed earnings on any deferred amount during any deferral
period);
(ix) To determine the terms and restrictions applicable to Stock Purchase
Rights and the Stock purchased by exercising such Rights; and
(x) To designate the Corporate Secretary of the Company, other officers or
employees of the Company or competent professional advisors to assist
the Committee in the administration of the Plan, and to grant authority
to such persons to execute agreements or other documents on its behalf.
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The Committee shall have the authority to adopt, alter, and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan.
All decisions made by the Committee pursuant to the provisions of the Plan
shall be made in the Committee's sole discretion and shall be final and binding
on all persons, including the Company and Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN
The total number of shares of Stock reserved and available for distribution
under the Plan shall continue to be the thirteen million (13,000,000) shares
reserved and available under the 1996 Plan prior to its amendment; provided,
however, that no more than one million (1,000,000) shares of Stock shall be
granted on or after the Effective Date in the form of Restricted Stock.
Subject to Section 6(b)(iv) below, if any shares of Stock that have been
optioned cease to be subject to a Stock Option or an Incentive Stock Option, or
if any such shares of Stock that are subject to any Restricted Stock or Deferred
Stock award, Stock Purchase Right, Performance Awards, or Other Stock-Based
Award granted hereunder are forfeited or any such award otherwise terminates
without a payment being made to the participant in the form of Stock, such
shares shall again be available for distribution in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation, recapitalization,
Stock dividend, Stock split or other change in corporate structure affecting the
Stock, such substitution or adjustment shall be made in the aggregate number of
shares reserved for issuance under the Plan, in the number and option price of
shares subject to outstanding Options granted under the Plan, in the number and
purchase price of shares subject to outstanding Stock Purchase Rights under the
Plan, and in the number of shares subject to other outstanding awards granted
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion, provided that the number of shares subject to any award shall
always be a whole number. Such adjusted option price shall also be used to
determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY
Non-employee directors, officers, managers, and other key employees of the
Company and its Subsidiaries and Affiliates who are responsible for or
contribute to the management, growth
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and/or profitability of the business of the Company and/or its Subsidiaries and
Affiliates are eligible to be granted awards under the Plan.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone, in addition to or in tandem with other
awards granted under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options and (ii) Nonqualified Stock Options.
The Committee shall have the authority to grant to any optionee Incentive
Stock Options, Nonqualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided that, in no event
shall the number of shares of Stock subject to any Stock Options granted to any
employee during any twelve (12) month period (determined without regard to
whether any option is cancelled) exceed one million (1,000,000) shares, as such
number may be adjusted pursuant to Section 3.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) OPTION PRICE. The Option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee at the time of grant
but shall be not less than one hundred percent (100%) of the Fair Market
Value of the Stock at grant, provided, however, that the Option price per
share of Stock purchasable under a Stock Option which is granted to an
optionee upon cancellation of any option(s) or fraction thereof to
purchase common stock of AMR Corporation ("AMR Common Stock") held by the
applicable optionee may be less than one hundred percent (100%) of the
Fair Market Value of the Stock at the time of grant if the Committee
deems it necessary so that the value of the Stock Option so granted,
equals the value of the option(s) or fraction thereof to purchase AMR
Common Stock cancelled on the date of grant; and provided further,
however, that the Option price per share of Stock purchasable under a
Stock Option that is granted to an optionee in replacement of a Phantom
Award may be less than one hundred percent (100%) of the Fair Market
Value of the Stock at the time of grant, subject to an overall limit of
two hundred fifty thousand (250,000) shares of Stock purchasable under
such Stock Options replacing Phantom Awards.
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(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10)
years after the date the Option is granted.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the
Committee at or after grant; provided, however, that, except as provided
in Section 12, or unless otherwise determined by the Committee at or
after grant, no Stock Option shall be exercisable prior to the first
anniversary date of the granting of the Option. If the Committee
provides, in its sole discretion, that any Stock Option is exercisable
only in installments, the Committee may waive such installment exercise
provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall determine, in its sole discretion.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise provisions
apply under Section 5(c), Stock Options may be exercised in whole or in
part at any time during the option period, by giving written notice of
exercise to the Company, or its designated representative, specifying the
number of shares to be purchased.
Such notice shall be accompanied by payment in full of the purchase
price, either by check, note or such other instrument as the Committee
may accept. As determined by the Committee, in its sole discretion, at or
after grant, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the
exercise of a Nonqualified Stock Option, in the form of Restricted Stock,
or Deferred Stock subject to an award hereunder (based, in each case, on
the Fair Market Value of the Stock on the date the Option is exercised).
If payment of the option exercise price of a Nonqualified Stock Option is
made in whole or in part in the form of Restricted Stock or Deferred
Stock, such Restricted Stock or Deferred Stock (and any replacement
shares relating thereto) shall remain (or be) restricted or deferred, as
the case may be, in accordance with the original terms of the Restricted
Stock award or Deferred Stock award in question, and any additional Stock
received upon the exercise shall be subject to the same forfeiture
restrictions or deferral limitations, unless otherwise determined by the
Committee, in its sole discretion, at or after grant.
No shares of Stock shall be issued until full payment therefore has been
made. An optionee shall generally have the rights to dividends or other
rights of a shareholder with respect to the shares subject to the Option
when the optionee has given written notice of
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exercise, has paid in full for such shares, and, if requested, has given
the representation described in Section 15(a).
(e) TRANSFERABILITY OF OPTIONS. Unless the Committee shall permit (on such
terms and conditions as it shall establish) an Option to be transferred
to a member of the participant's immediate family or to a trust or
similar vehicle for the benefit of such immediate family members, no
Option shall be assignable or transferable except by will or the laws of
descent and distribution, and except to the extent required by law, no
right or interest of any participants shall be subject to any lien,
obligation or liability of the participant.
(f) TERMINATION BY DEATH. Subject to Section 5(k), if an optionee's
employment by or service with the Company and any Subsidiary or Affiliate
terminates by reason of death, any Stock Option held by such optionee may
thereafter be exercised in accordance with the terms and conditions
established by the Committee.
(g) TERMINATION BY REASON OF DISABILITY. Subject to Section 5(k), if an
optionee's employment by or service with the Company and any Subsidiary
terminates by reason of Disability, any Stock Option held by such
optionee may thereafter be exercised by the optionee in accordance with
the terms and conditions established by the Committee. In the event of
termination of employment or service by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Nonqualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. Subject to Section 5(k), if an
optionee's employment by or service with the Company and any Subsidiary
or Affiliate terminates by reason of Normal or Early Retirement, any
Stock Option held by such optionee may thereafter be exercised by the
optionee, in accordance with the terms and conditions established by the
Committee. In the event of termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422
of the Code, such Stock Option will thereafter be treated as Nonqualified
Stock Option.
(i) TERMINATION FOR CAUSE. Subject to Section 5(k), if an optionee's
employment by the Company or any Subsidiary or Affiliate is terminated
for Cause, the Stock Option shall thereupon terminate, whether or not
exercisable at that time.
(j) OTHER TERMINATION. Unless otherwise determined by the Committee, if an
optionee's employment by or service with the Company or any Subsidiary or
Affiliate terminates for
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any reason other than death, Disability or Normal or Early Retirement,
the Stock Option shall thereupon terminate.
(k) INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422 of the Code, or, without the consent of the
optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422.
(l) BUYOUT PROVISIONS. The Committee may at any time offer to buy out for
payment in cash, Stock, Deferred Stock or Restricted Stock, an Option
previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the participant at the time that such
offer is made.
(m) SETTLEMENT PROVISIONS. If the option agreement so provides at grant or
is amended after grant but prior to the exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the spread value of an exercised
Option take the form of Deferred or Restricted Stock, which shall be
valued on the date of exercise on the basis of the Fair Market Value (as
determined by the Committee) of such Deferred or Restricted Stock
determined without regard to the deferral limitations and/or forfeiture
restrictions involved.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted alone or in
conjunction with all or part of any Stock Option granted under the Plan;
provided that, in no event shall the number of shares of Stock
Appreciation Rights granted to any employee during any twelve (12) month
period exceed one million (1,000,000) shares, as such number may be
adjusted pursuant to Section 3. In the case of a Nonqualified Stock
Option, such rights may be granted either at or after the time of the
grant of such Stock Option. In the case of an Incentive Stock Option,
such rights may be granted only at the time of grant of such Stock
Option.
The term of each Stock Appreciation Right granted independent of a Stock
Option shall be fixed by the Committee, but no Stock Appreciation Right
shall be exercisable more than ten (10) years after the date the Stock
Appreciation Right is granted. A Stock Appreciation Right or applicable
portion thereof granted with respect to a given Stock Option shall
terminate and no longer be exercisable upon the termination or exercise
of
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the related Stock Option, subject to such provisions as the Committee may
specify at grant where a Stock Appreciation Right is granted with respect
to less than the full number of shares covered by a related Stock Option.
A Stock Appreciation Right may be exercised by an optionee, subject to
Section 6(b), in accordance with the procedures established by the
Committee for such purposes. Upon such exercise, the optionee shall be
entitled to receive an amount determined in the manner prescribed in
Section 6(b). Stock Options relating to exercised Stock Appreciation
Rights shall no longer be exercisable to the extent that the related
Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable at such time or times
as shall be determined by the Committee at or after grant; provided,
however, that Stock Appreciation Rights granted in conjunction with
Stock Options shall be exercisable only at such time or times and to
the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this
Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall
be entitled to receive an amount in cash and/or shares of Stock
equal in value to the excess of the Fair Market Value on the date
of exercise of one share of Stock over the exercise price per share
determined by the Committee at the time of grant multiplied by the
number of shares in respect of which the Stock Appreciation Right
shall have been exercised, with the Committee having the right to
determine the form of payment. When payment is to be made, the
amount and/or number of shares (when payment is to be made in
shares) to be paid shall be calculated on the basis of the Fair
Market Value of the shares on the date of exercise.
(iii) Except to the extent the Committee may authorize or permit Stock
Appreciation Rights to be transferred to, or for the benefit of,
members of the participant's family, no Stock Appreciation Right
shall be transferable by the participant otherwise than by will or
by the laws of descent and distribution, and all Stock Appreciation
Rights shall be exercisable, during the participant's lifetime only
by the participant.
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(iv) Upon the exercise of a Stock Appreciation Right granted in
conjunction with a Stock Option under the Plan, the number of
shares issued under such Stock Appreciation Right based on the
value of the Stock Appreciation Right at the time of exercise shall
be deemed to be issued for purposes of the share authorization set
forth in Section 3 of the Plan.
SECTION 7. RESTRICTED STOCK
(a) ADMINISTRATION. Subject to the limitations set forth in Section 3,
shares of Restricted Stock may be issued either alone or, in addition to,
or in tandem with, other awards granted under the Plan and/or cash awards
made outside of the Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if
any) to be paid by the recipient of Restricted Stock (subject to Section
7(b)), the time or times within which such awards may be subject to
forfeiture, and all other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors as the
Committee may determine, in its sole discretion.
The provisions of Restricted Stock awards need not be the same with respect
to each recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of a Restricted Stock
award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and
has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such
award.
(i) The purchase price for shares of Restricted Stock shall be equal to
or less than their par value and may be zero.
(ii) Awards of Restricted Stock must be accepted within a reasonable
period (or such specific period as the Committee may specify at
grant) after the award date, by executing an award agreement and
paying whatever price (if any) is required under Section 7(b)(i).
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(c) TERMS AND CONDITIONS. The shares of Restricted Stock awarded pursuant to
this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of
such award (the "Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted
Stock awarded under the Plan. Within these limits, the Committee, in
its sole discretion, may provide for the lapse of such restrictions
in installments and may accelerate or waive such restrictions in
whole or in part, based on service, performance and/or such other
factors or criteria as the Committee may determine, in its sole
discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i), the
Committee, in its sole discretion, as determined at the time of the
award, may permit the participant to have, with respect to the
shares of Restricted Stock, all of the rights of a shareholder of
the Company, including the right to vote the shares, and the right
to receive any cash dividends. The Committee, in its sole
discretion, as determined at the time of award, may permit or
require the payment of cash dividends and may permit or require
such cash dividends to be deferred and, if the Committee so
determines, reinvested, subject to Section 15(e), in additional
Restricted Stock to the extent shares are available under Section
3, or otherwise reinvested. Pursuant to Section 3 above, Stock
dividends issued with respect to Restricted Stock shall be treated
as additional shares of Restricted Stock that are subject to the
same restrictions and other terms and conditions that apply to the
shares with respect to which such dividends are issued.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a participant's employment or
service with the Company and any Subsidiary or Affiliate for any
reason during the Restriction Period, all shares still subject to
restriction will vest, or be forfeited, in accordance with the
terms and conditions established by the Committee at or after
grant.
(iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, certificates for an appropriate number of unrestricted
shares shall be delivered to the participant promptly (unless the
Committee decides pursuant to Section 2(vi) to settle the award in
cash).
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(d) MINIMUM VALUE PROVISIONS. In order to better ensure that award payments
actually reflect the performance of the Company, Subsidiaries, Affiliates
and service of the participant, the Committee may provide, in its sole
discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Stock to the recipient of a
restricted stock award, subject to such performance, future service,
deferral and other terms and conditions as may be specified by the
Committee.
SECTION 8. DEFERRED STOCK
(a) ADMINISTRATION. Deferred Stock may be awarded either alone, in addition
to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the
eligible persons to whom and the time or times at which Deferred Stock
shall be awarded, the number of shares of Deferred Stock to be awarded to
any person, the duration of the period (the "Deferral Period") during
which, and the conditions under which, receipt of the Stock will be
deferred, and the other terms and conditions of the award in addition to
those set forth in Section 8(b).
The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals or such other factors or
criteria as the Committee shall determine, in its sole discretion.
The provisions of Deferred Stock awards need not be the same with respect
to each recipient.
(b) TERMS AND CONDITIONS. The shares of Deferred Stock awarded pursuant to
this Section 8(b) shall be subject to the following terms and conditions:
(i) Subject to the provision of this Plan and the award agreement
referred to in Section 8(b)(vi) below, Deferred Stock awards may not
be sold, assigned, transferred, pledged or otherwise encumbered
during the Deferral Period. At the expiration of the Deferral Period
(or the Elective Deferral Period referred to in Section 8(b)(v),
where applicable), share certificates shall be delivered to the
participant, or his legal representative, in a number equal to the
shares covered by the Deferred Stock award (unless the Committee
decides pursuant to Section 2(vi) to settle the award in cash).
(ii) Unless otherwise determined by the Committee at grant, amounts
equal to any dividends declared during the Deferral Period with
respect to the number of shares
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covered by a Deferred Stock award will be paid to the participant
currently, or deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as determined at or
after the time of the award by the Committee, in its sole
discretion.
(iii) Subject to the provisions of the award agreement and this Section
8, upon termination of a participant's employment or service with
the Company and any Subsidiary or Affiliate for any reason during
the Deferral Period for a given award, the Deferred Stock in
question will vest, or be forfeited, in accordance with the terms
and conditions established by the Committee at or after grant.
(iv) Based on service, performance, and/or such other factors or
criteria as the Committee may determine, the Committee may, at or
after grant, accelerate the vesting of all or any part of any
Deferred Stock award and/or waive the deferral limitations for all
or any part of such award.
(v) A participant may elect to further defer receipt of an award (or an
installment of an award) for a specified period or until a specified
event (the "Elective Deferral Period"), subject to the Committee's
approval and to such terms as are determined by the Committee, all
in its sole discretion. Subject to any exceptions adopted by the
Committee, such election must generally be made at least twelve (12)
months prior to completion of the Deferral Period of such Deferred
Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the terms of, a
Deferred Stock agreement executed by the Company and the
participant.
(c) MINIMUM VALUE PROVISIONS. In order to better ensure that award payments
actually reflect the performance of the Company, Subsidiaries, Affiliates
and service of the participant, the Committee may provide, in its sole
discretion, for a tandem performance-based or other award designed to
guarantee a minimum value, payable in cash or Stock to the recipient of a
Deferred Stock award, subject to such performance, future service,
deferral and other terms and conditions as may be specified by the
Committee.
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SECTION 9. STOCK PURCHASE RIGHTS
(a) AWARDS AND ADMINISTRATION. The Committee may grant eligible participants
Stock Purchase Rights which shall enable such participants to purchase
Stock (including Deferred Stock and Restricted Stock) at price(s)
determined by the Committee at or after grant.
The Committee shall also impose such deferral, forfeiture, and/or other
terms and conditions as it shall determine, in its sole discretion, on
such Stock Purchase Rights or the exercise thereof.
The terms of Stock Purchase Rights awards need not be the same with
respect to each participant.
Each Stock Purchase Right award shall be confirmed by, and be subject to
the terms of, a Stock Purchase Rights agreement.
(b) EXERCISABILITY. Stock Purchase Rights shall be exercisable for such
period after grant as is determined by the Committee.
SECTION 10. OTHER STOCK-BASED AWARDS
(a) ADMINISTRATION. Other awards of Stock and other awards that are valued
in whole or in part by reference to, or are otherwise based on, Stock
("Other Stock-Based Awards"), including, without limitation, stock
purchase rights, performance shares, convertible preferred stock,
convertible debentures, exchangeable securities and Stock awards or
options valued by reference to Book Value or subsidiary performance, may
be granted either along with, or in addition to, or in tandem with, Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, or
Stock Purchase Rights granted under the Plan and/or cash awards made
outside of the Plan.
Subject to the provisions of the Plan, the Committee shall have authority
to determine the persons to whom and the time or times at which such
awards shall be made, the number of shares of Stock to be awarded
pursuant to such awards, and all other conditions of the awards. The
Committee may also provide for the grant of Stock upon the completion of
a specified performance period.
The provision of Other Stock-Based Awards need not be the same in respect
to each recipient.
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(b) TERMS AND CONDITIONS. Other Stock-Based Awards made pursuant to this
Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award agreement
referred to in Section 10(b)(v) below, shares subject to awards made
under this Section 10 may not be sold, assigned, transferred,
pledged, or otherwise encumbered prior to the date on which the
shares are issued, or, if later, the date on which any applicable
restriction, performance, or deferral period lapses.
(ii) Subject to the provision of this Plan and the award agreement and
unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 10 shall be entitled to
receive, currently, or on a deferred basis, interest or dividends
or interest or dividend equivalents with respect to the number of
shares covered by the award, as determined at the time of the award
by the Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have been
reinvested in additional Stock or otherwise reinvested.
(iii) Any award under Section 10 and any Stock covered by any such award
shall vest or be forfeited to the extent so provided in the award
agreement as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement, Disability or death,
or in cases of special circumstances, the Committee may, in its
sole discretion, waive in whole or in part any or all of the
remaining limitations imposed hereunder (if any) with respect to
any or all of an award under this Section 10.
(v) Each award under this Section 10 shall be confirmed by, and subject
to the terms of, an agreement or other instrument by the Company and
by the participant.
(vi) Stock (including securities convertible into Stock) issued on a
bonus basis under this Section 10 may be issued for no cash
consideration. Stock (including securities convertible into Stock)
purchased pursuant to a purchase right awarded under this Section
10 shall be priced at least fifty percent (50%) of the Fair Market
Value of the Stock on the date of grant.
SECTION 11. PERFORMANCE RELATED AWARDS
(a) PERFORMANCE OBJECTIVES. Notwithstanding anything else contained in the
Plan to the contrary, unless the Committee otherwise determines at the
time of grant, a cash-based
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award or any award of Restricted Stock, Deferred Stock, or Other
Stock-Based Awards to an officer who is subject to the reporting
requirements of Section 16(a) of the Exchange Act, as amended, other than
an award which will vest solely on the basis of the passage of time,
shall become vested, if at all, upon the determination by the Committee
that performance objectives established by the Committee have been
attained, in whole or in part (a "Performance Award"). Such performance
objectives shall be determined over a measurement period or periods
established by the Committee and related to at least one of the following
criteria, which may be determined solely by reference to the performance
of (i) the Company, (ii) a Subsidiary, (iii) an Affiliate, (iv) a
division or unit of any of the foregoing, or based on comparison
performance of any of the foregoing relative to other companies: (A)
return on assets; (B) return on equity; (C) total shareholder return; (D)
revenues; (E) cash flows, revenues, and/or earnings relative to other
parameters; (F) operating income; (G) return on investment; (H) changes
in the value of the Company's common stock; and (I) operating margin (the
"Performance Criteria"). Excluding Stock Options and/or Stock
Appreciation Rights granted hereunder, the maximum number of shares of
Stock that may be awarded to any one participant and that may be subject
to any such Performance Award in any twelve (12) month period shall not
exceed 100,000 shares, as such number may be adjusted pursuant to Section
3.
(b) ANNUAL INCENTIVE COMPENSATION. The Committee may, in addition to the
Performance Awards described above, pay cash amounts under the Plan to
any officer of the Company or any Subsidiary who is subject to the
reporting requirements of Section 16(a) of the Exchange Act upon the
achievement, in whole or in part, of performance goals or objectives
established in writing by the Committee with respect to such performance
periods as the Committee shall determine. Any such goals or objectives
shall be based on one or more of the Performance Criteria.
Notwithstanding anything else contained herein to the contrary, the
maximum amount of any such cash payment to any single officer with
respect to any calendar year shall not exceed the lesser of (A)
$2,000,000 and (B) twice the officer's annual base salary as in effect on
the last day of the preceding fiscal year.
(c) INTERPRETATION. Notwithstanding anything else in the Plan to the
contrary, to the extent a Performance Related Award is intended to
qualify as performance-based compensation within the meaning of Section
162(m)(4)(C) of the Code, the Committee shall not be entitled to exercise
any discretion if the exercise of such discretion would cause such award
to fail to qualify as performance-based compensation.
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SECTION 12. CHANGE IN CONTROL PROVISIONS
(a) IMPACT OF EVENT. In the event of:
(1) a "Change in Control" as defined in Section 12(b), or
(2) a "Potential Change in Control" as defined in Section 12(c), but only
if and to the extent so determined by the Committee or the Board at
or after grant subject to any right of approval expressly reserved
by the Committee or the Board at the time of such determination, the
following shall occur:
(i) Any Stock Appreciation Rights and any Stock Options awarded
under the Plan not previously exercisable and vested shall
become fully exercisable and vested.
(ii) The restrictions or deferral limitations applicable to any
Restricted Stock, Deferred Stock, Stock Purchase Rights, Other
Stock-Based Awards, and Performance Awards in each case to the
extent not already vested under the Plan, shall lapse and such
shares and awards shall be deemed fully vested and any
Performance Criteria shall be deemed met at target.
(iii) The value of all outstanding Stock Options, Stock Appreciation
Rights, Restricted Stock, Deferred Stock, Stock Purchase
Rights, Other Stock-Based Awards, and Performance Awards in
each case to the extent vested, shall, unless determined
otherwise by the Committee in its sole discretion at or after
grant but prior to any Change in Control, be cashed out on the
basis of the "Change in Control Price" as defined in Section
12(d) as of the date such Change in Control or such Potential
Change in Control is determined to have occurred or such other
date as the Committee may determine prior to the Change in
Control.
(b) DEFINITION OF "CHANGE IN CONTROL". For purposes of Section 12(a), a
"Change in Control" means the happening of any of the following:
(i) When any Person, directly or indirectly, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, as amended
from time to time) of securities of the Company representing fifteen
percent (15%) or more of the combined voting power of the Company's
then outstanding securities;
(ii) The individuals who, as of the Effective Date of this Plan,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the
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Board; provided, however, that any individual becoming a director
subsequent to the Effective Date of the Plan whose election, or
nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
the Company or the acquisition of assets of another corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the then outstanding share of Stock of the Company
(the "Outstanding Company Stock") and the combined voting power of
the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities") immediately prior to such Business
Combination beneficially own, directly or indirectly, more than
sixty percent (60%) of, respectively, the then outstanding shares
of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's
assets either directly or throughout one or more subsidiaries), (B)
no Person (excluding any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, fifteen
percent (15%) or more of respectively, the then outstanding shares
of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (C)
at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination; or
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(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(v) Notwithstanding anything else contained herein to the contrary, in
no event shall a Change in Control be deemed to occur solely by
reason of (1) a distribution to the Parent's shareholders, whether
as dividend or otherwise, of all or any portion of the Stock or any
other voting securities of the Company held, directly or indirectly,
by the Parent, or (2) a sale of all or any portion of the Stock or
any other voting securities of the Company held, directly or
indirectly, by the Parent in an underwritten public offering.
(c) DEFINITION OF POTENTIAL CHANGE IN CONTROL. For purposes of Section
12(a), a "Potential Change in Control" means the happening of any one of
the following:
(i) The approval by shareholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the
Company as defined in Section 12(b); or
(ii) The acquisition of beneficial ownership, directly or indirectly, by
any entity, person or group (other than the Company or a Subsidiary
or any Company employee benefit plan (including any trustee of such
plan acting as such trustee)) of securities of the Company
representing five percent (5%) or more of the combined voting power
of the Company's outstanding securities and the adoption by the
Board of Directors of a resolution to the effect that a Potential
Change in Control of the Company has occurred for purposes of this
Plan.
(d) CHANGE IN CONTROL PRICE. For the purposes of the Section 12, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the New York Stock Exchange Composite Index, or paid or
offered in any bona fide transaction related to a potential or actual
Change in Control of the Company at any time during the sixty (60) day
period immediately preceding the occurrence of the Change in Control (or,
where applicable, the occurrence of the Potential Change in Control
event), in each case as determined by the Committee except that, in the
case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, such price shall be based only on transactions
reported for the date on which the optionee exercises such Stock
Appreciation Rights or, where applicable, the date on which a cashout
occurs under Section 12(a)(iii).
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<PAGE>
SECTION 13. AMENDMENTS AND TERMINATION
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of an
optionee or participant under a Stock Option, Incentive Stock Option, Stock
Appreciation Right, Restricted or Deferred Stock award, Stock Purchase Right,
Other Stock-Based Award, or Performance Award theretofore granted, without the
optionee's or participant's consent.
The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but subject to Section 3
above, no such amendment shall impair the rights of any holder without the
holder's consent.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take in to account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
SECTION 14. UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder; provided, however, that unless the Committee otherwise determines
with the consent of the affected participant, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 15. GENERAL PROVISIONS
(a) The Committee may require each person purchasing shares pursuant to a
Stock Option or other award under the Plan to represent to and agree with
the Company in writing that the optionee or participant is acquiring the
shares without a view to distribution thereof. The certificates for such
shares may include any legend, which the Committee deems appropriate to
reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered under
the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and
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<PAGE>
Exchange Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder
approval if such approval is required, and such arrangements may be
either generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or any Subsidiary or Affiliate any right to continued employment
or service as a director with the Company or a Subsidiary or Affiliate,
as the case may be, nor shall it interfere in any way with the right of
the Company or a Subsidiary or Affiliate to terminate the employment of
any of its employees or service of a director at any time.
(d) Except as the participant and the Company may otherwise agree, no later
than the date as of which an amount first becomes includible in the gross
income of the participant for federal income tax purposes with respect to
any award under the Plan, the participant shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of
any federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Stock, including
Stock that is part of the award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditional on such payment of arrangements and the Company and its
Subsidiaries or Affiliates shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment of any kind otherwise
due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend equivalents
in additional Restricted Stock (or in Deferred Stock or other types of
Plan awards) at the time of any dividend payment shall only be
permissible if sufficient shares of Stock are available under Section 3
for such reinvestment (taking into account then outstanding Stock
Options, Stock Purchase Rights, and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware.
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<PAGE>
SECTION 16. TERM OF PLAN
No Stock Option, Incentive Stock Option, Stock Appreciation Right,
Restricted Stock award, Deferred Stock award, Stock Purchase Right, Other
Stock-Based Award, or Performance Award shall be granted pursuant to the Plan on
or after the tenth (10th) anniversary of the date of shareholder approval, but
awards granted prior to such tenth (10th) anniversary may extend beyond that
date.
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<PAGE>
If you are planning to attend the annual meeting in person, you must bring
with you the admission ticket printed on this page. 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)
................................................................................
THE SABRE GROUP HOLDINGS, INC.
1999 ANNUAL MEETING ADMISSION TICKET
The Annual Meeting of Stockholders of The SABRE Group Holdings, Inc.
will be held at 1:00 P.M., Central Daylight Saving Time, on Wednesday, May 19,
1999,
in the Flagship Auditorium at the American Airlines Training and Conference
Center,
4501 Highway 360, Fort Worth, Texas 76155.
TO ATTEND THIS MEETING YOU MUST PRESENT
THIS TICKET OR OTHER PROOF OF SHARE OWNERSHIP
(Doors will open at 12:00 noon. NOTE: Cameras, tape recorders or other recording
devices will not be allowed in the meeting room.)
<PAGE>
Back Cover
[Sabre Logo]
<PAGE>
PROXY PROXY
THE SABRE GROUP HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE SABRE GROUP HOLDINGS,INC.
The undersigned hereby appoints Donald J. Carty, Michael J. Durham and Glenn
W. Marschel, Jr., or any of them, proxies, each with full power of
substitution, to vote the shares of the undersigned at the Annual Meeting of
Stockholders of The SABRE Group Holdings, Inc. on May 19, 1999, and any
adjournments thereof, upon all matters as may properly come before the
meeting. Without otherwise limiting the foregoing general authorization, the
proxies are instructed to vote as indicated herein.
ELECTION OF DIRECTORS, NOMINEES:
Michael J. Durham, Bob L. Martin, and Richard L. Thomas
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES.
SEE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE SIDE
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
2406
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
This proxy, when properly signed, will be voted in the manner directed
herein. If no direction is made, this proxy will be voted for all of the
Board of Directors' nominees, Proposal 2, Proposal 3 and Proposal 4.
FOR WITHHELD
1. Election of Directors / / / /
(see reverse).
For, except vote
withheld from the
following nominee(s):
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, PROPOSAL 2, PROPOSAL 3
AND PROPOSAL 4.
FOR AGAINST ABSTAIN
2. Ratification of the selection of / / / / / /
Ernst & Young LLP as independent
auditors for the year 1999.
FOR AGAINST ABSTAIN
3. Approval of the amendment to the / / / / / /
Certificate of Incorporation to
change the corporate name to
Sabre Holdings Corporation.
FOR AGAINST ABSTAIN
4. Approval of Amended and Restated / / / / / /
1996 Long-Term Incentive Plan.
Transact such other matters as may properly come before the meeting.
If you plan to attend the Annual / / Will Attend
Meeting, please mark this box.
SIGNATURE(S) DATE
-------------------------------------- ---------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE IF YOU ARE RETURNING YOUR VOTED PROXY CARD BY MAIL -
NAME & ADDRESS
PRINT HERE
#
Dear Stockholder:
The SABRE Group Holdings, Inc. encourages you to take advantage of new and
convenient ways by which you can vote your shares. You can vote your shares
electronically through the Internet or by telephone. This eliminates the
need for you to return the proxy card.
To vote your shares electronically you must use the control number printed
above, just below the perforation. The series of numbers that appear above
must be used to access the system.
1. To vote over the Internet:
- Log on to the Internet and go to the web site
HTTP://WWW.VOTE-BY-NET.COM 24 hours a day, 7 days a week. Polls
will close Tuesday, May 18, 1999 at 5:00 P.M. Central Daylight
Saving Time.
2. To vote over the telephone:
- On a touch-tone telephone call 1-800-OK2-VOTE (1-800-652-8683)
24 hours a day, 7 days a week. Polls will close Wednesday, May 19,
1999 at 1:00 P.M. Central Daylight Saving Time.
Your electronic vote authorizes the named proxies in the same manner as if
you marked, signed, dated and returned the proxy card.
THANK YOU FOR VOTING.
