1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2002.
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to .
Commission file number 1-8400.
AMR Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-1825172
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (817) 963-1234
Not Applicable
(Former name, former address and former fiscal year , if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, $1 par value - 155,688,619 as of July 15, 2002.
2
INDEX
AMR CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -- Three and six months ended
June 30, 2002 and 2001
Condensed Consolidated Balance Sheets - June 30, 2002 and December
31, 2001
Condensed Consolidated Statements of Cash Flows -- Six months ended
June 30, 2002 and 2001
Notes to Condensed Consolidated Financial Statements - June 30,
2002
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
3
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
AMR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Revenues
Passenger - American Airlines $3,747 $4,645 $7,231 $8,580
- AMR Eagle 344 409 649 763
Cargo 142 190 276 366
Other revenues 246 339 459 634
Total operating revenues 4,479 5,583 8,615 10,343
Expenses
Wages, salaries and benefits 2,126 2,126 4,206 3,872
Aircraft fuel 656 842 1,183 1,549
Depreciation and amortization 338 352 679 665
Other rentals and landing fees 306 320 595 577
Maintenance, materials and
repairs 285 298 551 578
Aircraft rentals 214 226 440 374
Food service 180 218 350 402
Commissions to agents 155 260 316 484
Special charges - 685 - 685
Other operating expenses 820 1,016 1,625 1,921
Total operating expenses 5,080 6,343 9,945 11,107
Operating Loss (601) (760) (1,330) (764)
Other Income (Expense)
Interest income 18 24 36 64
Interest expense (164) (132) (330) (251)
Interest capitalized 22 38 44 79
Miscellaneous - net 5 37 (3) 22
(119) (33) (253) (86)
Loss Before Income Taxes (720) (793) (1,583) (850)
Income tax benefit (225) (286) (513) (300)
Net Loss $ (495) $ (507) $ (1,070) $ (550)
Loss Per Share
Basic and Diluted $(3.19) $(3.29) $ (6.90) $(3.58)
The accompanying notes are an integral part of these financial statements.
1
4
AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited) (In millions)
June 30,2002 December 31,2001
Assets
Current Assets
Cash $ 195 $ 120
Short-term investments 2,368 2,872
Receivables, net 1,556 1,414
Inventories, net 743 822
Deferred income taxes 792 790
Other current assets 194 522
Total current assets 5,848 6,540
Equipment and Property
Flight equipment, net 15,556 14,980
Other equipment and property, net 2,317 2,079
Purchase deposits for flight equipment 686 929
18,559 17,988
Equipment and Property Under Capital Leases
Flight equipment, net 1,433 1,572
Other equipment and property, net 92 95
1,525 1,667
Goodwill 1,351 1,392
Route acquisition costs 829 829
Airport operating and gate lease rights, net 481 496
Other assets 4,296 3,929
$ 32,889 $ 32,841
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,559 $ 1,785
Accrued liabilities 2,344 2,192
Air traffic liability 3,059 2,763
Current maturities of long-term debt 350 556
Current obligations under capital leases 147 216
Total current liabilities 7,459 7,512
Long-term debt, less current maturities 9,172 8,310
Obligations under capital leases, less
current obligations 1,444 1,524
Deferred income taxes 1,940 1,627
Postretirement benefits 2,611 2,538
Other liabilities, deferred gains and
deferred credits 5,868 5,957
Stockholders' Equity
Preferred stock - -
Common stock 182 182
Additional paid-in capital 2,812 2,865
Treasury stock (1,645) (1,716)
Accumulated other comprehensive loss (72) (146)
Retained earnings 3,118 4,188
4,395 5,373
$ 32,889 $ 32,841
The accompanying notes are an integral part of these financial statements.
2
5
AMR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
Six Months Ended June 30,
2002 2001
Net Cash Provided by Operating Activities $ 86 $ 885
Cash Flow from Investing Activities:
Capital expenditures, including purchase
deposits for flight equipment (1,113) (2,124)
Acquisition of Trans World Airlines, Inc. - (742)
Net decrease in short-term investments 504 922
Proceeds from sale of equipment and property 162 206
Other 35 (6)
Net cash used for investing activities (412) (1,744)
Cash Flow from Financing Activities:
Payments on long-term debt and capital lease
obligations (468) (586)
Proceeds from:
Issuance of long-term debt 866 1,587
Exercise of stock options 3 34
Net cash provided by financing activities 401 1,035
Net increase in cash 75 176
Cash at beginning of period 120 89
Cash at end of period $ 195 $ 265
The accompanying notes are an integral part of these financial statements.
3
6
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, these financial
statements contain all adjustments, consisting of normal recurring
accruals and the asset impairment charge as discussed in footnote 8,
necessary to present fairly the financial position, results of
operations and cash flows for the periods indicated. The Company's
2002 results continue to be adversely impacted by the September 11,
2001 terrorist attacks and the resulting effect on the economy and the
air transportation industry. In addition, on April 9, 2001, Trans
World Airlines LLC (TWA LLC, a wholly owned subsidiary of AMR
Corporation) purchased substantially all of the assets and assumed
certain liabilities of Trans World Airlines, Inc. (TWA). Accordingly,
the operating results of TWA LLC are included in the accompanying
condensed consolidated financial statements for the three and six
month periods ended June 30, 2002 whereas for 2001 the results of TWA
LLC were included only for the period April 10, 2001 through June 30,
2001. When utilized in this report, all references to American
Airlines, Inc. include the operations of TWA LLC since April 10, 2001
(collectively, American). Results of operations for the periods
presented herein are not necessarily indicative of results of
operations for the entire year. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the AMR Corporation (AMR or the Company) Annual Report on Form 10-K
for the year ended December 31, 2001 ("2001 Form 10-K").
2.Accumulated depreciation of owned equipment and property at June
30, 2002 and December 31, 2001 was $9 billion and $8.9 billion,
respectively. Accumulated amortization of equipment and property
under capital leases at June 30, 2002 and December 31, 2001 was
approximately $1.1 billion and $1.2 billion, respectively.
3.The following table provides unaudited pro forma consolidated
results of operations, assuming the acquisition of TWA had occurred
as of January 1, 2001 (in millions, except per share amounts):
Six Months Ended
June 30, 2001
Operating revenues $ 11,210
Net loss (557)
Loss per share $ (3.62)
The unaudited pro forma consolidated results of operations have
been prepared for comparative purposes only. These amounts are not
indicative of the combined results that would have occurred had the
transaction actually been consummated on the date indicated above
and are not indicative of the consolidated results of operations
which may occur in the future.
4.As discussed in the notes to the consolidated financial
statements included in the Company's 2001 Form 10-K, Miami-Dade County
(the County) is currently investigating and remediating various
environmental conditions at the Miami International Airport (MIA) and
funding the remediation costs through landing fees and various cost
recovery methods. American and AMR Eagle have been named as
potentially responsible parties (PRPs) for the contamination at MIA.
During the second quarter of 2001, the County filed a lawsuit against
17 defendants, including American, in an attempt to recover its past
and future cleanup costs (Miami-Dade County, Florida v. Advance Cargo
Services, Inc., et al. in the Florida Circuit Court). In addition to
the 17 defendants named in the lawsuit, 243 other agencies and
companies were also named as PRPs and contributors to the
contamination. American's and AMR Eagle's portion of the cleanup
costs cannot be reasonably estimated due to various factors, including
the unknown extent of the remedial actions that may be required, the
proportion of the cost that will ultimately be recovered from the
responsible parties, and uncertainties regarding the environmental
agencies that will ultimately supervise the remedial activities and
the nature of that supervision.
4
7
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
In addition, the Company is subject to environmental issues at
various other airport and non-airport locations. Management
believes, after considering a number of factors, that the ultimate
disposition of these environmental issues is not expected to
materially affect the Company's consolidated financial position,
results of operations or cash flows. Amounts recorded for
environmental issues are based on the Company's current assessments
of the ultimate outcome and, accordingly, could increase or
decrease as these assessments change.
5.As of June 30, 2002, the Company had commitments to acquire the
following aircraft: 47 Boeing 737-800s, 11 Boeing 777-200ERs, nine
Boeing 767-300ERs, 109 Embraer regional jets and 20 Bombardier CRJ-
700s. Deliveries of these aircraft are scheduled to continue through
2008. Payments for these aircraft are expected to be approximately
$505 million during the remainder of 2002, $1.5 billion in 2003, $1.1
billion in 2004 and an aggregate of approximately $2.1 billion in 2005
through 2008.
6.During the six month period ended June 30, 2002, American and AMR
Eagle borrowed approximately $626 million under various debt
agreements which are secured by aircraft. Effective interest rates on
these agreements are based on London Interbank Offered Rate plus a
spread and mature over various periods of time through 2018.
In March 2002, the Regional Airports Improvement Corporation issued
facilities sublease revenue bonds at the Los Angeles International
Airport to provide reimbursement to American for certain facility
construction costs. The proceeds of approximately $225 million
provided to American have been recorded as long-term debt on the
condensed consolidated balance sheets. These obligations bear
interest at fixed rates, with an average rate of 7.88 percent, and
mature over various periods of time, with a final maturity in 2024.
7.Effective January 1, 2001, the Company adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended (SFAS 133). SFAS
133 required the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges are
adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair
value of derivatives are either offset against the change in fair
value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion
of a derivative's change in fair value is immediately recognized in
earnings. The adoption of SFAS 133 did not result in a cumulative
effect adjustment being recorded to net income for the change in
accounting. However, the Company recorded a transition adjustment
of approximately $64 million in Accumulated other comprehensive
loss in the first quarter of 2001.
In addition, effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS 142). SFAS 142 requires the Company
to test goodwill and indefinite-lived intangible assets (for AMR,
route acquisition costs) for impairment rather than amortize them.
During the first quarter of 2002, the Company completed its
impairment analysis for route acquisition costs in accordance with
SFAS 142. The analysis did not result in an impairment charge.
During the second quarter of 2002, the Company completed the first
step of its impairment analysis related to its $1.4 billion of
goodwill and determined the Company's net book value to be in
excess of the Company's fair market value at January 1, 2002, using
AMR as the reporting unit for purposes of the fair value
determination. As a result, the Company is in the process of
completing the second step of the impairment analysis which will
allocate the newly determined fair value of AMR to each of its
assets and liabilities. This allocation is expected to be
completed during the third or fourth quarter of 2002 and will
likely result in the Company recording a one-time, non-cash pre-tax
charge of up to $1.4 billion to write-down AMR's goodwill. Such
charge would be nonoperational in nature and would be reflected as
a cumulative effect of an accounting change in the consolidated
statements of operations.
5
8
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The following table provides information relating to the Company's
amortized intangible assets as of June 30, 2002 (in millions):
Accumulated Net Book
Cost Amortization Value
Amortized intangible assets:
Airport operating rights $ 516 $ 168 $ 348
Gate lease rights 209 76 133
Total $ 725 $ 244 $ 481
Airport operating and gate lease rights are being amortized on a
straight-line basis over 25 years to a zero residual value. For
the three and six month period ended June 30, 2002, the Company
recorded amortization expense of approximately $6 million and $15
million, respectively, related to these intangible assets. The
Company expects to record annual amortization expense of
approximately $29 million in each of the next five years related to
these intangible assets.
The pro forma effect of discontinuing amortization of goodwill and
route acquisition costs under SFAS 142 - assuming the Company had
adopted this standard as of January 1, 2001 - results in an adjusted
net loss of approximately $494 million, or $3.21 per share, and
approximately $530 million, or $3.45 per share, respectively, for the
three and six month periods ended June 30, 2001.
8.In conjunction with the acquisition of certain assets from TWA,
coupled with revisions to the Company's fleet plan to accelerate
the retirement dates of its Fokker 100, Saab 340 and ATR 42
aircraft, during the second quarter of 2001 the Company determined
these aircraft were impaired under Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS 121). As a result, during the second quarter of 2001, the
Company recorded an asset impairment charge of approximately $685
million relating to the write-down of the carrying value of 71
Fokker 100 aircraft, 74 Saab 340 aircraft and 20 ATR 42 aircraft
and related rotables to their estimated fair market values which is
included in Special charges on the accompanying consolidated
statements of operations. Management estimated the undiscounted
future cash flows utilizing models used by the Company in making
fleet and scheduling decisions. In determining the fair market
value of these aircraft, the Company considered outside third party
appraisals and recent transactions involving sales of similar
aircraft. As a result of the writedown of these aircraft to fair
market value, as well as the acceleration of the retirement dates
and changes in salvage values, depreciation and amortization will
decrease by approximately $18 million on an annualized basis.
9.The Company includes unrealized gains and losses on available-for-
sale securities, changes in minimum pension liabilities and changes in
the fair value of certain derivative financial instruments that
qualify for hedge accounting in comprehensive loss. For the three
months ended June 30, 2002 and 2001, comprehensive loss was $496
million and $511 million, respectively. In addition, for the six
months ended June 30, 2002 and 2001, comprehensive loss was $996
million and $480 million, respectively. The difference between net
loss and comprehensive loss is due primarily to the accounting for the
Company's derivative financial instruments under SFAS 133. In
addition, the six month period ended June 30, 2001 includes the
cumulative effect of the adoption of SFAS 133.
During the second quarter of 2002, the Company discontinued
entering into new foreign exchange currency put option agreements.
The fair value of the Company's remaining foreign currency put
option agreements was not material as of June 30, 2002, and all of
these agreements will expire by September 30, 2002.
6
9
AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
10.The following table sets forth the computations of basic and
diluted loss per share (in millions, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Numerator:
Net loss - numerator for basic
and diluted loss per share $ (495) $(507) $(1,070) $(550)
Denominator:
Denominator for basic and
diluted loss per share -
weighted-average shares 155 154 155 154
Basic and diluted loss per share $(3.19) $(3.29) $(6.90) $(3.58)
For the three and six months ended June 30, 2002, approximately
five million and seven million potential dilutive shares,
respectively, were not added to the denominator because inclusion
of such shares would be antidilutive as compared to approximately
14 million shares for the three and six months ended June 30, 2001.
7
10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
For the Three Months Ended June 30, 2002 and 2001
Summary AMR Corporation's (AMR or the Company) net loss during the
second quarter of 2002 was $495 million, or $3.19 per share, as
compared to a net loss of $507 million, or $3.29 per share for the
same period in 2001. AMR's operating loss of $601 million decreased
by $159 million compared to the same period in 2001. The Company's
2002 results continue to be adversely impacted by the September 11,
2001 terrorist attacks and the resulting effect on the economy and the
air transportation industry. On April 9, 2001, Trans World Airlines
LLC (TWA LLC, a wholly owned subsidiary of AMR) purchased
substantially all of the assets and assumed certain liabilities of
Trans World Airlines, Inc. (TWA). Accordingly, the operating results
of TWA LLC are included in the accompanying condensed consolidated
financial statements for the three month period ended June 30, 2002
whereas for 2001 the results of TWA LLC were included only for the period
April 10, 2001 through June 30, 2001. All references to American
Airlines, Inc. include the operations of TWA LLC since April 10, 2001
(collectively, American). AMR's second quarter 2001 results include:
(i) a $685 million charge ($430 million after-tax, or $2.79 per
share) related to the writedown of the carrying value of its Fokker
100, Saab 340 and ATR-42 aircraft and related rotables in accordance
with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (see footnote 8 to the
condensed consolidated financial statements), and (ii) a $45 million
gain ($29 million after-tax, or $0.19 per share) from the settlement
of a legal matter related to the Company's 1999 labor disruption.
Although traffic has continued to increase on significantly reduced
capacity since the events of September 11, 2001, the Company's second
quarter 2002 revenues were down significantly quarter-over-quarter.
In addition to the residual effects of September 11, the Company's
revenues continue to be negatively impacted by the economic slowdown,
seen largely in business travel declines, the geographic distribution
of the Company's network and reduced fares. In total, the Company's
revenues decreased $1,104 million, or 19.8 percent, in the second
quarter of 2002 as compared to the same period last year. American's
passenger revenues decreased by 19.3 percent, or $898 million in the
second quarter of 2002 from the same period in 2001. American's
domestic revenue per available seat mile (RASM) decreased 11.9
percent, to 8.47 cents, on a capacity decrease of 8 percent, to 32
billion available seat miles (ASMs). International RASM decreased to
8.67 cents, or 5 percent, on a capacity decrease of 16.2 percent. The
decrease in international RASM was due to an 8.6 percent and 3.1
percent decrease in Latin American and European RASM, respectively,
slightly offset by a 3.2 percent increase in Pacific RASM. The
decrease in international capacity was driven by a 33.9 percent, 16.2
percent and 12.3 percent reduction in Pacific, European and Latin
American ASMs, respectively.
AMR Eagle's passenger revenues decreased 15.9 percent, or $65 million.
AMR Eagle's traffic increased 2.8 percent while capacity decreased 5
percent, to approximately 1.6 billion ASMs. As with American, the
decrease in AMR Eagle's revenues was due primarily to the continued
impact of the September 11, 2001 terrorist attacks and the economic
slowdown.
Cargo revenues decreased $48 million, or 25.3 percent, primarily due
to the same reasons as noted above.
Other revenues decreased 27.4 percent, or $93 million, due primarily
to decreases in contract maintenance work that American performs for
other airlines, and decreases in codeshare revenue and employee travel
service charges.
8
11
RESULTS OF OPERATIONS (Continued)
The Company's operating expenses decreased 19.9 percent, or $1,263
million. American's cost per ASM increased 0.5 percent to 10.78
cents, excluding the impact of the second quarter 2001 asset
impairment charge. Wages, salaries and benefits remained flat quarter-
over-quarter, reflecting (i) a decrease in the average number of equivalent
employees, somewhat offset by higher salaries, and (ii) increases in the
Company's pension and health insurance costs, the latter reflecting rapidly
rising medical care and prescription drug costs. Aircraft fuel expense
decreased 22.1 percent, or $186 million, due primarily to an 11.6 percent
decrease in the Company's fuel consumption and a 9.4 percent decrease in
the Company's average price per gallon of fuel. Food service decreased
17.4 percent, or $38 million, due primarily to the Company's reduced
operating schedule and change in level of food service. Commissions
to agents decreased 40.4 percent, or $105 million, due primarily to a
19.1 percent decrease in passenger revenues and commission structure
changes implemented in March 2002. Special charges of $685 million related
to the writedown of the carrying value of the Company's Fokker 100,
Saab 340 and ATR-42 aircraft and related rotables during the second
quarter of 2001 (see footnote 8 to the condensed consolidated
financial statements). Other operating expenses decreased 19.3
percent, or $196 million, due primarily to decreases in
contract maintenance work that American performs for other airlines,
and decreases in travel and incidental costs, credit card and booking
fees, advertising and promotion costs, and data processing expenses,
which were partially offset by higher insurance and security costs.
Other income (expense) increased $86 million due to the following:
Interest income decreased 25 percent, or $6 million, due primarily to
decreases in interest rates. Interest expense increased $32 million,
or 24.2 percent, resulting primarily from the increase in the
Company's long-term debt. Interest capitalized decreased $16 million,
or 42.1 percent, due primarily to a decrease in purchase deposits for
flight equipment. Miscellaneous-net decreased 86.5 percent, or $32
million, due primarily to a $45 million gain recorded during the
second quarter of 2001 from the settlement of a legal matter related
to the Company's 1999 labor disruption.
The effective tax rate for the three months ended June 30, 2002 was
impacted by a $30 million charge resulting from a provision in
Congress' economic stimulus package that changes the period for
carrybacks of net operating losses (NOLs). This change allows the
Company to carry back 2001 and 2002 NOLs for five years, rather than
two years under the existing law, allowing the Company to more quickly
recover its NOLs. The extended NOL carryback did however, result in
the displacement of foreign tax credits taken in prior years. These
credits are now expected to expire before being utilized by the
Company, resulting in this charge.
9
12
RESULTS OF OPERATIONS (Continued)
OPERATING STATISTICS Three Months Ended June 30,
2002 2001
American Airlines
Revenue passenger miles (millions) 31,379 35,188
Available seat miles (millions) 43,958 49,044
Cargo ton miles (millions) 518 610
Passenger load factor 71.4% 71.7%
Breakeven load factor (*) 86.4% 74.0%
Passenger revenue yield per passenger mile (cents) 11.94 13.20
Passenger revenue per available seat mile (cents) 8.52 9.47
Cargo revenue yield per ton mile (cents) 27.21 30.89
Operating expenses per available seat mile (cents)(*) 10.78 10.73
Fuel consumption (gallons, in millions) 808 922
Fuel price per gallon (cents) 75.5 83.3
Fuel price per gallon, excluding fuel taxes (cents) 70.0 78.0
Operating aircraft at period-end 828 904
AMR Eagle
Revenue passenger miles (millions) 1,059 1,030
Available seat miles (millions) 1,596 1,680
Passenger load factor 66.4% 61.3%
Operating aircraft at period-end 281 271
(*) Excludes the impact of Special charges
Operating aircraft at June 30, 2002, included:
American Airlines Aircraft AMR Eagle Aircraft
Airbus A300-600R 34 ATR 42 28
Boeing 737-800 77 Bombardier CRJ-700 5
Boeing 757-200 151 Embraer 135 40
Boeing 767-200 8 Embraer 140 30
Boeing 767-200 Extended Range 21 Embraer 145 56
Boeing 767-300 Extended Range 58 Super ATR 42
Boeing 777-200 Extended Range 43 Saab 340B 55
Fokker 100 74 Saab 340B Plus 25
McDonnell Douglas MD-80 362 Total 281
Total 828
The average aircraft age for American's aircraft is 10 years and 6.6
years for AMR Eagle aircraft.
In addition, the following owned and leased aircraft were not operated
by the Company as of June 30, 2002: 29 owned Boeing 727-200s, 24
operating leased Boeing 717-200s, 13 operating leased McDonnell
Douglas DC-9s, eight owned McDonnell Douglas DC-10-10s, four operating
leased McDonnell Douglas MD-80s, and 15 capital leased and two owned
Saab 340Bs.
10
13
RESULTS OF OPERATIONS (Continued)
For the Six Months Ended June 30, 2002 and 2001
Summary AMR's net loss for the six months ended June 30, 2002 was
$1,070 million, or $6.90 per share, as compared to a net loss of $550
million, or $3.58 per share, for the same period in 2001. AMR's
operating loss for the six months ended June 30, 2002 was $1,330
million, compared to an operating loss of $764 million for the same
period in 2001. The Company's 2002 results continue to be adversely
impacted by the September 11, 2001 terrorist attacks and the
resulting effect on the economy and the air transportation industry.
On April 9, 2001, TWA LLC purchased substantially all of the assets
and assumed certain liabilities of TWA. Accordingly, the operating
results of TWA LLC are included in the accompanying condensed
consolidated financial statements for the six month period ended June
30, 2002 whereas for 2001 the results of TWA LLC were included only
for the period April 10, 2001 through June 30, 2001. In addition, AMR's
2001 results include: (i) a $685 million charge ($430 million after-tax,
or $2.79 per share) related to the writedown of the carrying value
of its Fokker 100, Saab 340 and ATR-42 aircraft and related rotables,
and (ii) a $45 million gain ($29 million after-tax, or $0.19 per
share) from the settlement of a legal matter related to the
Company's 1999 labor disruption.
Although traffic has continued to increase on significantly reduced
capacity since the events of September 11, 2001, the Company's 2002
revenues were down significantly year-over-year. In addition to the
residual effects of September 11, the Company's revenues continue to
be negatively impacted by the economic slowdown, seen largely in
business travel declines, the geographic distribution of the Company's
network and reduced fares. In total, the Company's revenues decreased
$1,728 million, or 16.7 percent, in 2002 versus the same period in
2001. American's passenger revenues decreased by 15.7 percent, or
$1,349 million in 2002 as compared to the same period in 2001.
American's domestic RASM decreased 13.4 percent, to 8.58 cents, on a
capacity decrease of 0.4 percent, to 61.3 billion ASMs. International
RASM decreased to 8.67 cents, or 7.7 percent, on a capacity decrease
of 14 percent. The decrease in international RASM was due to a 10.2
percent and 7.9 percent decrease in Latin American and European RASM,
respectively, slightly offset by a 5.6 percent increase in Pacific
RASM. The decrease in international capacity was driven by a 36.4
percent, 15.2 percent and 8.2 percent reduction in Pacific, European
and Latin American ASMs, respectively.
AMR Eagle's passenger revenues decreased 14.9 percent, or $114
million. AMR Eagle's traffic increased 4.7 percent while capacity
decreased 3.2 percent, to approximately 3.2 billion ASMs. As with
American, the decrease in AMR Eagle's revenues was due primarily to
the continued impact of the September 11, 2001 terrorist attacks and
the economic slowdown.
Cargo revenues decreased $90 million, or 24.6 percent, primarily due
to the same reasons as noted above.
Other revenues decreased 27.6 percent, or $175 million, due primarily
to decreases in contract maintenance work that American performs for
other airlines, and decreases in codeshare revenue and employee travel
service charges.
11
14
RESULTS OF OPERATIONS (Continued)
The Company's operating expenses decreased 10.5 percent, or
approximately $1,162 million. American's cost per ASM increased by
0.5 percent to 11.03 cents, excluding the impact of the second quarter
2001 asset impairment charge. Wages, salaries and benefits increased
8.6 percent, or $334 million, reflecting (i) a decrease in the average
number of equivalent employees, somewhat offset by higher average
salaries, and (ii) increases in the Company's pension and health insurance
costs, the latter reflecting rapidly rising medical care and
prescription drug costs. Aircraft fuel expense decreased 23.6 percent,
or $366 million, due primarily to a 16.1 percent decrease in the
Company's average price per gallon of fuel and a 6.1 percent decrease
in the Company's fuel consumption. Aircraft rentals increased $66 million,
or 17.6 percent, due primarily the addition of TWA aircraft. Food service
decreased 12.9 percent, or $52 million, due primarily to the Company's
reduced operating schedule and change in level of food service.
Commissions to agents decreased 34.7 percent, or $168 million, due primarily
to a 15.7 percent decrease in passenger revenues and commission structure
changes implemented in March 2002. Special charges of $685 million related
to the writedown of the carrying value of the Company's Fokker 100,
Saab 340 and ATR-42 aircraft and related rotables during the second
quarter of 2001. Other operating expenses decreased 15.4 percent, or
$296 million, due primarily to decreases in contract
maintenance work that American performs for other airlines, and
decreases in travel and incidental costs, credit card and booking
fees, advertising and promotion costs, and data processing expenses,
which were partially offset by higher insurance and security costs.
Other income (expense) increased $167 million due to the following:
Interest income decreased 43.8 percent, or $28 million, due primarily
to decreases in interest rates. Interest expense increased $79
million, or 31.5 percent, resulting primarily from the increase in the
Company's long-term debt. Interest capitalized decreased $35 million,
or 44.3 percent, due primarily to a decrease in purchase deposits for
flight equipment. Miscellaneous-net decreased $25 million due
primarily to a $45 million gain recorded during the second quarter of
2001 from the settlement of a legal matter related to the Company's
1999 labor disruption and the write-down of certain investments held
by the Company during the first quarter of 2001.
The effective tax rate for the six months ended June 30, 2002 was
impacted by a $57 million charge resulting from a provision in
Congress' economic stimulus package that changes the period for
carrybacks of NOLs. This change allows the Company to carry back 2001
and 2002 NOLs for five years, rather than two years under the existing
law, allowing the Company to more quickly recover its NOLs. The extended
NOL carryback did however, result in the displacement of foreign tax
credits taken in prior years. These credits are now expected to expire
before being utilized by the Company, resulting in this charge.
12
15
RESULTS OF OPERATIONS (Continued)
OPERATING STATISTICS Six Months Ended June 30,
2002 2001
American Airlines
Revenue passenger miles (millions) 59,197 61,640
Available seat miles (millions) 84,047 88,021
Cargo ton miles (millions) 981 1,159
Passenger load factor 70.4% 70.0%
Breakeven load factor (*) 86.9% 71.3%
Passenger revenue yield per passenger mile (cents) 12.22 13.92
Passenger revenue per available seat mile (cents) 8.60 9.75
Cargo revenue yield per ton mile (cents) 27.93 31.27
Operating expenses per available seat mile (cents)(*) 11.03 10.97
Fuel consumption (gallons, in millions) 1,553 1,664
Fuel price per gallon (cents) 71.5 85.2
Fuel price per gallon, excluding fuel taxes (cents) 66.0 79.8
AMR Eagle
Revenue passenger miles (millions) 1,978 1,890
Available seat miles (millions) 3,163 3,268
Passenger load factor 62.5% 57.8%
(*) Excludes the impact of Special charges
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the six month period
ended June 30, 2002 was $86 million, a decrease of $799 million over
the same period in 2001, due primarily to an increase in the Company's
net loss. Included in net cash provided by operating activities during
the first six months of 2002 was approximately $658 million received
by the Company as a result of the utilization of its 2001 NOL's.
Capital expenditures for the first six months of 2002 were $1,113
million, and included the acquisition of seven Boeing 757-200s, three
Boeing 777-200ERs, 15 Embraer 140s and four Bombardier CRJ-700
aircraft. These capital expenditures were financed primarily through
secured mortgage and debt agreements. Proceeds from the sale of
equipment and property of $162 million include the proceeds received
upon delivery of three McDonnell Douglas MD-11 aircraft to FedEx.
As of June 30, 2002, the Company had commitments to acquire the
following aircraft: 47 Boeing 737-800s, 11 Boeing 777-200ERs, nine
Boeing 767-300ERs, 109 Embraer regional jets and 20 Bombardier CRJ-
700s. Deliveries of these aircraft are scheduled to continue through
2008. Payments for these aircraft are expected to be approximately
$505 million during the remainder of 2002, $1.5 billion in 2003, $1.1
billion in 2004 and an aggregate of approximately $2.1 billion in 2005
through 2008.
In June 2002, Standard & Poor's downgraded the credit ratings of AMR
and American, and the credit ratings of a number of other major
airlines. The long-term credit ratings of AMR and American were
removed from Standand & Poor's Credit Watch with negative implications
and were given a negative outlook. Any additional reductions in AMR's
or American's credit ratings could result in increased borrowing costs
to the Company and might limit the availability of future financing
needs.
13
16
In addition to the Company's approximately $2.6 billion in cash and
short-term investments as of June 30, 2002, the Company has available
a variety of future financing sources, including, but not limited to:
(i) the receipt of the remainder of the U.S. Government grant
authorized by the Air Transportation Safety and System Stabilization
Act (the Act), which is estimated to be in excess of $40 million, (ii)
additional secured aircraft debt, (iii) the availability of the
Company's $1 billion credit facility, (iv) sale-leaseback transactions
of owned property, including aircraft and real estate, (v) the
recovery of past federal income taxes paid as a result of a provision
in the recently passed economic stimulus package regarding NOL
carrybacks, (vi) tax-exempt borrowings for airport facilities, (vii)
securitization of future operating receipts, and (viii) unsecured
borrowings. No assurance can be given that any of these financing
sources will be available on terms acceptable to the Company.
However, the Company believes it will meet its current financing
needs.
Pursuant to the Act, the Government made available to air carriers,
subject to certain conditions, up to $10 billion in federal government
guarantees of certain loans. American did not seek such loan
guarantees.
OTHER INFORMATION
As a result of the September 11, 2001 events, aviation insurers have
significantly reduced the maximum amount of insurance coverage
available to commercial air carriers for liability to persons other
than employees or passengers for claims resulting from acts of
terrorism, war or similar events (war-risk coverage). At the same
time, they significantly increased the premiums for such coverage as
well as for aviation insurance in general. Pursuant to authority
granted in the Act, the Government has supplemented the commercial war-
risk insurance until August 17, 2002 with a third party liability
policy to cover losses to persons other than employees or passengers
for renewable 60-day periods. In the event the insurance carriers
reduce further the amount of insurance coverage available or the
Government fails to renew war-risk insurance, the Company's operations
and/or financial position, results of operations or cash flows would
be adversely impacted.
As discussed in the Company's 2001 Form 10-K, a provision in the
current Allied Pilots Association (APA) contract freezes the number of
ASMs and block hours flown on American's two letter marketing code by
American's regional carrier partners when American pilots are on
furlough (the ASM cap). As AMR Eagle continues to accept previously
ordered regional jets, this ASM cap would be reached sometime in 2002,
necessitating actions to insure compliance with the ASM cap. American
is working with its regional partners to accomplish this. Actions
currently being taken and considered by AMR Eagle to reduce its
capacity are discussed in the Company's 2001 Form 10-K. In addition,
American is removing its code from flights of the AmericanConnection
carriers, which are independent carriers that provide feed to
American's St. Louis hub. American believes that the combination of
these actions will enable it to comply with this ASM cap through 2002
and for sometime beyond.
In addition, another provision in the current APA contract limits the
total number of regional jets with more than 44 seats flown under the
American code by American's regional carrier partners to 67 aircraft.
Similar to the above, as AMR Eagle continues to accept previously
ordered Bombardier CRJ aircraft, this cap would be reached in early
2003. In order to ensure American remains in compliance with this
provision, AMR Eagle has reached an agreement in principle to dispose
of 14 Embraer 145 aircraft. Ultimately, these airplanes will be
acquired by Trans States Airlines, an AmericanConnection carrier.
Trans States Airlines will operate these aircraft under its two letter
airline code and expects to deploy these aircraft at its St. Louis hub
where it feeds American. The potential transaction still requires the
consent of certain third parties, including the companies financing these
aircraft, and is subject to the negotiation of final documentation.
Effective January 1, 2002, the Company adopted Statement
of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). SFAS 142 requires the Company to test
goodwill and indefinite-lived intangible assets (for AMR, route
acquisition costs) for impairment rather than amortize them. During
the first quarter of 2002, the Company completed its impairment
analysis for route acquisition costs in accordance with SFAS 142. The
analysis did not result in an impairment charge. During the second
quarter of 2002, the Company completed the first step of its
impairment analysis related to its $1.4 billion of goodwill and
determined the Company's net book value to be in excess of the
Company's fair market value at January 1, 2002, using AMR as the
reporting unit for purposes of the fair value determination. As a
result, the Company is in the process of completing the second step of
the impairment analysis which will allocate the newly determined fair
value of AMR to each of its assets and liabilities. This allocation
is expected to be completed during the third or fourth quarter of 2002
and will likely result in the Company recording a one-time, non-cash
pre-tax charge of up to $1.4 billion to write-down AMR's goodwill.
Such charge would be nonoperational in nature and would be reflected
as a cumulative effect of an accounting change in the consolidated
statements of operations.
14
17
OUTLOOK
Capacity for American is expected to be down approximately two percent
in the third quarter of 2002 compared to last year's third quarter
levels. AMR Eagle's third quarter capacity will be down about one
percent from last year's levels. For the third quarter of 2002, the
Company expects traffic to be about flat as compared to last year's
third quarter levels. Pressure to reduce costs will continue,
although the Company will continue to see higher benefit and security
costs, increased insurance premiums, and greater interest expense.
However, the Company expects to see a slight decrease in fuel prices
as compared to the third quarter of 2001 and the continued decline in
commission expense due to the commission changes implemented earlier
in 2002. In total, American's unit costs, excluding special charges,
for the third quarter of 2002 are expected to be down approximately
3.5 percent from last year's third quarter level. Notwithstanding the
expected decrease in unit costs however, given the revenue pressures
seen in the first half of the year and expected to continue into the
third quarter, the Company expects to incur a sizable loss in the
third quarter and a significant loss for 2002.
In response to these financial challenges, the Company has undertaken
a comprehensive review of its business to better align its cost
structure with the current revenue environment, aimed at improving
productivity, simplifying operations and reducing costs. The Company
has begun to implement certain of these changes, including a fleet
simplification program, adjustments to its operating schedule and
increased airport automation, and will continue to refine its business
throughout the coming months.
FORWARD-LOOKING INFORMATION
Statements in this report contain various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs
concerning future events. When used in this document and in documents
incorporated herein by reference, the words "expects," "plans,"
"anticipates," "believes," and similar expressions are intended to
identify forward-looking statements. Other forward-looking statements
include statements which do not relate solely to historical facts,
such as, without limitation, statements which discuss the possible
future effects of current known trends or uncertainties, or which
indicate that the future effects of known trends or uncertainties
cannot be predicted, guaranteed or assured. All forward-looking
statements in this report are based upon information available to the
Company on the date of this report. The Company undertakes no
obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Forward-looking statements are subject to a number of factors that
could cause actual results to differ materially from our expectations.
Additional information concerning these and other factors is contained
in the Company's Securities and Exchange Commission filings, including
but not limited to the 2001 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in market risk from the
information provided in Item 7A. Quantitative and Qualitative
Disclosures About Market Risk of the 2001 Form 10-K.
15
18
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On July 26, 1999, a class action lawsuit was filed, and in November
1999 an amended complaint was filed, against AMR Corporation, American
Airlines, Inc., AMR Eagle Holding Corporation, Airlines Reporting
Corporation, and the Sabre Group Holdings, Inc. in the United States
District Court for the Central District of California, Western
Division (Westways World Travel, Inc. v. AMR Corp., et al.). The
lawsuit alleges that requiring travel agencies to pay debit memos to
American for violations of American's fare rules (by customers of the
agencies) (1) breaches the Agent Reporting Agreement between American
and AMR Eagle and the plaintiffs, (2) constitutes unjust enrichment,
and (3) violates the Racketeer Influenced and Corrupt Organizations
Act of 1970 (RICO). The as yet uncertified class includes all travel
agencies who have been or will be required to pay monies to American
for debit memos for fare rules violations from July 26, 1995 to the
present. The plaintiffs seek to enjoin American from enforcing the
pricing rules in question and to recover the amounts paid for debit
memos, plus treble damages, attorneys' fees, and costs. The Company
intends to vigorously defend the lawsuit. Although the Company
believes that the litigation is without merit, an adverse court
decision could impose restrictions on the Company's relationships with
travel agencies which restrictions could have an adverse impact on the
Company.
On May 13, 1999, the United States (through the Antitrust Division of
the Department of Justice) sued AMR Corporation, American Airlines,
Inc., and AMR Eagle Holding Corporation in federal court in Wichita,
Kansas. The lawsuit alleges that American unlawfully monopolized or
attempted to monopolize airline passenger service to and from
Dallas/Fort Worth International Airport (DFW) by increasing service
when new competitors began flying to DFW, and by matching these new
competitors' fares. The Department of Justice seeks to enjoin
American from engaging in the alleged improper conduct and to impose
restraints on American to remedy the alleged effects of its past
conduct. On April 27, 2001, the U.S. District Court for the District
of Kansas granted American's motion for summary judgment. On June 26,
2001, the U.S. Department of Justice appealed the granting of
American's motion for summary judgment. The parties have submitted
briefs to the 10th Circuit Court of Appeals, which has scheduled the
case for oral argument on September 23, 2002. The Company intends to
defend the lawsuit vigorously. A final adverse court decision
imposing restrictions on the Company's ability to respond to
competitors would have an adverse impact on the Company.
Between May 14, 1999 and June 7, 1999, seven class action lawsuits
were filed against AMR Corporation, American Airlines, Inc., and AMR
Eagle Holding Corporation in the United States District Court in
Wichita, Kansas seeking treble damages under federal and state
antitrust laws, as well as injunctive relief and attorneys' fees (King
v. AMR Corp., et al.; Smith v. AMR Corp., et al.; Team Electric v. AMR
Corp., et al.; Warren v. AMR Corp., et al.; Whittier v. AMR Corp., et
al.; Wright v. AMR Corp., et al.; and Youngdahl v. AMR Corp., et al.).
Collectively, these lawsuits allege that American unlawfully
monopolized or attempted to monopolize airline passenger service to
and from DFW by increasing service when new competitors began flying
to DFW, and by matching these new competitors' fares. Two of the
suits (Smith and Wright) also allege that American unlawfully
monopolized or attempted to monopolize airline passenger service to
and from DFW by offering discounted fares to corporate purchasers, by
offering a frequent flyer program, by imposing certain conditions on
the use and availability of certain fares, and by offering override
commissions to travel agents. The suits propose to certify several
classes of consumers, the broadest of which is all persons who
purchased tickets for air travel on American into or out of DFW from
1995 to the present. On November 10, 1999, the District Court stayed
all of these actions pending developments in the case brought by the
Department of Justice. As a result, to date no class has been
certified. The Company intends to defend these lawsuits vigorously.
One or more final adverse court decisions imposing restrictions on the
Company's ability to respond to competitors or awarding substantial
money damages would have an adverse impact on the Company.
On May 17, 2002, the named plaintiffs in Hall, et al. v. United
Airlines, et al., No. 7:00 CV 123-BR(1), pending in the United States
District Court for the Eastern District of North Carolina, filed an
amended complaint alleging that between 1995 and the present, American
and the other defendant airlines conspired to reduce commissions paid
to U.S.-based travel agents in violation of Section 1 of the Sherman
Act. The named plaintiffs seek to certify a nationwide class of
travel agents, but no class has yet been certified. American is
vigorously defending the lawsuit. Trial is set for April 29, 2003. A
final adverse court decision awarding substantial money damages or
placing restrictions on the Company's commission policies or practices
would have an adverse impact on the Company.
16
19
Item 1. Legal Proceedings (Continued)
On April 26, 2002, six travel agencies filed an action in the United
States District Court for the Central District of California against
American, United Air Lines, Delta Air Lines, and Orbitz, LLC, alleging
that American and the other defendants: (i) conspired to prevent
travel agents from acting as effective competitors in the distribution
of airline tickets to passengers in violation of Section 1 of the
Sherman Act; and (ii) conspired to monopolize the distribution of
common carrier air travel between airports in the United States in
violation of Section 2 of the Sherman Act. The named plaintiffs seek
to certify a nationwide class of travel agents, but no class has yet
been certified. American is vigorously defending the lawsuit, which
is styled Albany Travel Co., et al. v. Orbitz, LLC, et al., No. 02-
3459 (ER) (AJW)x. A final adverse court decision awarding substantial
money damages or placing restrictions on the Company's distribution
practices would have an adverse impact on the Company.
On May 13, 2002, the named plaintiffs in Always Travel, et. al. v. Air
Canada, et. al., No. T757-027, pending in the Federal Court of Canada,
Trial Division, Montreal, filed a statement of claim alleging that
between 1995 and the present, American, the other defendant airlines,
and the International Air Transport Association conspired to reduce
commissions paid to Canada-based travel agents in violation of
Section 45 of the Competition Act of Canada. The named plaintiffs
seek to certify a nationwide class of travel agents, but no class has
yet been certified. American is vigorously defending the lawsuit. A
final adverse court decision awarding substantial money damages or
placing restrictions on the Company's commission policies would have
an adverse impact on the Company.
Miami-Dade County (the County) is currently investigating and
remediating various environmental conditions at the Miami
International Airport (MIA) and funding the remediation costs through
landing fees and various cost recovery methods. American Airlines,
Inc. and AMR Eagle have been named as potentially responsible parties
(PRPs) for the contamination at MIA. During the second quarter of
2001, the County filed a lawsuit against 17 defendants, including
American Airlines, Inc., in an attempt to recover its past and future
cleanup costs (Miami-Dade County, Florida v. Advance Cargo Services,
Inc., et al. in the Florida Circuit Court). In addition to the 17
defendants named in the lawsuit, 243 other agencies and companies were
also named as PRPs and contributors to the contamination. American's
and AMR Eagle's portion of the cleanup costs cannot be reasonably
estimated due to various factors, including the unknown extent of the
remedial actions that may be required, the proportion of the cost that
will ultimately be recovered from the responsible parties, and
uncertainties regarding the environmental agencies that will
ultimately supervise the remedial activities and the nature of that
supervision. The Company is vigorously defending the lawsuit.
17
20
Item 4. Submission of Matters to a Vote of Security Holders
The owners of 138,215,811 shares of common stock, or 89 percent of
shares outstanding, were represented at the annual meeting of
stockholders on May 15, 2002 at the American Airlines Training &
Conference Center, Flagship Auditorium, 4501 Highway 360 South, Fort
Worth, Texas.
Elected as directors of the Corporation, each receiving a minimum of
135,637,573 votes were:
John W. Bachmann Ann McLaughlin Korologos
David L. Boren Michael A. Miles
Edward A. Brennan Philip J. Purcell
Donald J. Carty Joe M. Rodgers
Armando M. Codina Judith Rodin
Earl G. Graves Roger T. Staubach
Stockholders ratified the appointment of Ernst & Young LLP as
independent auditors for the Corporation for 2002. The vote was
132,769,970 in favor; 4,927,896 against; and 517,945 abstaining.
A stockholder proposal to recommend that the Company affirm its
political non-partisanship - submitted by Mrs. Evelyn Y. Davis - was
defeated. The vote was 18,069,575 in favor; 95,602,793 against;
2,449,216 abstaining; and 22,094,227 non-voting.
A stockholder proposal relating to increasing the Board of Directors
independence by nominating only independent directors to key board
committees - submitted by Mr. John Chevedden - was defeated. The
vote was 11,207,257 in favor; 102,829,057 against; 2,085,270
abstaining; and 22,094,227 non-voting.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
3.1 Bylaws of AMR Corporation, amended as of April 2, 2002.
10.1 Deferred Compensation Agreement, dated as of December 18, 2001
between AMR and Roger T. Staubach.
10.2 Deferred Compensation Agreement, dated as of December 18, 2001
between AMR and Edward A. Brennan.
10.3 Deferred Compensation Agreement, dated as of January 14, 2002
between AMR and Joe M. Rodgers.
10.4 Deferred Compensation Agreement, dated as of December 18, 2001
between AMR and Judith Rodin.
10.5 Deferred Compensation Agreement, dated as of December 18, 2001
between AMR and John W. Bachmann.
10.6 Deferred Compensation Agreement, dated as of December 18, 2001
between AMR and Armando M. Codina.
10.7 Deferred Compensation Agreement, dated as of December 18, 2001
between AMR and Philip J. Purcell.
10.8 American Airlines, Inc. 2002 Employee Profit Sharing Plan.
10.9 American Airlines, Inc. 2002 Incentive Compensation Plan for
Officers and Key Employees.
10.10 AMR Corporation 2002-2004 Performance Share Plan for Officers and
Key Employees under the 1998 Long-Term Incentive Plan, as amended.
18
21
Item 6. Exhibits and Reports on Form 8-K (continued)
10.11 AMR Corporation 2002-2004 Performance Share Program Deferred Stock
Award Agreement under the 1998 Long-Term Incentive Plan, as amended.
10.12 Current form of Stock Option Agreement under the 1998
Long-Term Incentive Plan, as amended.
12 Computation of ratio of earnings to fixed charges for the three
and six months ended June 30, 2002 and 2001.
Form 8-Ks filed under Item 5 - Other Events
On June 13, 2002, AMR filed a report on Form 8-K relating to a
press release issued by American to announce the appointment of
Jeffrey C. Campbell as Senior Vice President and Chief Financial
Officer of the Company.
On June 19, 2002, AMR filed a report on Form 8-K to provide updated
monthly guidance on unit cost, fuel, traffic and capacity for the
months of May through August 2002.
Form 8-Ks furnished under Item 9 - Regulation FD Disclosure
On April 4, 2002, AMR furnished a report on Form 8-K to announce
AMR's intent to host a conference call on April 17, 2002 with the
financial community relating to its first quarter 2002 earnings.
On May 31, 2002, AMR furnished a report on Form 8-K to provide
updated monthly guidance on unit cost, fuel, traffic and capacity for
the months of March through July 2002.
On June 5, 2002, AMR furnished a report on Form 8-K to provide
information regarding a presentation by Don Carty, Chairman and CEO of
AMR, at the Merrill Lynch Global Transportation Conference.
19
22
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amended report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMR CORPORATION
Date: July 19, 2002 BY: /s/ Jeffrey C. Campbell
Jeffrey C. Campbell
Senior Vice President and Chief
Financial Officer
20
1
Exhibit 3.1
AMR CORPORATION
BYLAWS
(As amended April 2, 2002)
ARTICLE I
Offices
The registered office of the corporation in the State of
Delaware is to be located in the City of Wilmington, County of New
Castle. The corporation may have other offices within and without
the State of Delaware.
ARTICLE II
Meetings of Stockholders
Section l. Annual Meetings. An annual meeting of
stockholders to elect directors and to take action upon such other
matters as may properly come before the meeting shall be held on
the third Wednesday in May of each year, or on such other day, and
at such time and at such place, within or without the State of
Delaware, as the board of directors or the chairman of the board
may from time to time fix.
Any stockholder wishing to bring a matter before an
annual meeting must notify the secretary of the corporation of
such fact not less than sixty nor more than ninety days before the
date of the meeting. Such notice shall be in writing and shall
set forth the business proposed to be brought before the meeting,
shall identify the stockholder and shall disclose the
stockholder's interest in the proposed business.
2
Section 2. Special Meetings. A special meeting of
stockholders shall be called by the secretary upon receipt of a
request in writing of the board of directors, the chairman of the
board or the president. Any such meeting shall be held at the
principal business office of the corporation unless the board
shall name another place therefor, at the time specified by the
body or persons calling such meeting.
Section 3. Nominees For Election As Director.
Nominations for election as director, other than those made by or
at the direction of the board of directors, must be made by timely
notice to the secretary, setting forth as to each nominee the
information required to be included in a proxy statement under the
proxy rules of the Securities and Exchange Commission. If such
election is to occur at an annual meeting of stockholders, notice
shall be timely if it meets the requirements of such proxy rules
for proposals of security holders to be presented at an annual
meeting. If such election is to occur at a special meeting of
stockholders, notice shall be timely if received not less than
ninety days prior to such meeting.
Section 4. Notice of Meetings. Written notice of
each meeting of stockholders shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, such notice shall be mailed,
postage prepaid, to each stockholder entitled to vote at such
meeting, at his address as it appears on the records of the
corporation, not less than ten nor more than sixty days before the
date of the meeting. When a meeting is adjourned to another time
or place, notice need not
2
3
be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken,
unless the adjournment is for more than thirty days or a new
record date is fixed for the adjourned meeting, in which case a
notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 5. Chairman and Secretary at Meetings. At
any meeting of stockholders the chairman of the board, or in his
absence, the president, or if neither such person is available,
then a person designated by the board of directors, shall preside
at and act as chairman of the meeting. The secretary, or in his
absence a person designated by the chairman of the meeting, shall
act as secretary of the meeting.
Section 6. Proxies. Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted
or acted upon after three years from its date, unless the proxy
provides for a longer period.
Section 7. Quorum. At all meetings of the
stockholders the holders of one-third of the number of shares of
the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a
quorum requisite for the election of directors and the transaction
of other business, except as otherwise provided by law or by the
certificate of incorporation or by any resolution of the board of
directors creating any series of Preferred Stock.
If holders of the requisite number of shares to consti
tute a quorum shall not be present in person or represented by
proxy at any meeting of stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall
have the power to adjourn the meeting from
3
4
time to time until a quorum shall be present or represented. At
any such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8. Voting. At any meeting of stockholders,
except as otherwise provided by law or by the certificate of
incorporation or by any resolution of the board of directors
creating any series of Preferred Stock:
(a) Each holder of record of a share or shares of stock
on the record date for determining stockholders entitled to vote
at such meeting shall be entitled to one vote in person or by
proxy for each share of stock so held.
(b) Directors shall be elected by a plurality of the
votes cast by the holders of Common Stock, present in person or by
proxy.
(c) Each other question properly presented to any
meeting of stockholders shall be decided by a majority of the
votes cast on the question entitled to vote thereon.
(d) Elections of directors shall be by ballot but the
vote upon any other question shall be by ballot only if so ordered
by the chairman of the meeting or if so requested by stockholders,
present in person or represented by proxy, entitled to vote on the
question and holding at least l0% of the shares so entitled to
vote.
Section 9. Action By Written Consent. Any stockholder
seeking to act by written consent of stockholders shall notify the
secretary in writing of such intent and shall request the board of
directors to fix a record date for determining the stockholders
entitled to vote by consent. The notice shall specify the actions
sought to be taken and, if the election of one or more individuals
4
5
as director is sought, shall include as to each nominee the
information required to be included in a proxy statement under the
proxy rules of the Securities and Exchange Commission. Such
record date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the
board of directors.
The board of directors shall promptly, but in all events
within ten (10) days after the date on which the written request
for fixing a record date was received by the secretary, adopt a
resolution fixing the record date. If no record date has been
fixed by the board of directors within ten (10) days of the date
on which such a request is received, the record date for
determining stockholders entitled to vote by consent, when no
prior action by the board of directors is required by applicable
law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken was
delivered to the corporation by delivery to its registered office
in the State of Delaware, its principal place of business, or any
officer or agent of the corporation having custody of the book in
which proceedings of meetings of stockholders are recorded.
Delivery made to the corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and
prior action by the board of directors is required by applicable
law, the record date for determining stockholders entitled to vote
by consent shall be at the close of business on the date on which
the board of directors adopts the resolution taking such prior
action.
Section l0. List of Stockholders. At least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the
5
6
name of each stockholder shall be prepared. Such list shall be
open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours for a
period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder
who is present.
Section ll. Judges of Election. Whenever a vote at a
meeting of stockholders shall be by ballot, or whenever written
consent to action is sought, the proxies and ballots or consents
shall be received and taken charge of, and all questions touching
on the qualification of voters and the validity of proxies and
consents and the acceptance and rejection of votes shall be
decided by two judges of election. In the case of a meeting of
stockholders, such judges of election shall be appointed by the
board of directors before or at the meeting, and if no such
appointment shall have been made, then by the stockholders at the
meeting. In the case of a solicitation of consents, such judges
of election shall be appointed by the board of directors on or
before the record date for determining the stockholders entitled
to vote by consent, and if no such appointment shall have been
made, then by the chairman of the board or the president. If for
any reason either of the judges of election previously appointed
shall fail to attend or refuse or be unable to serve, a judge of
election in place of any so failing to attend or refusing or
unable to serve, shall be appointed by the board of directors, the
stockholders at the meeting, the chairman of the board or the
president.
6
7
ARTICLE III
Directors: Number, Election, Etc.
Section l. Number. The board of directors shall
consist of such number of members, not less than three, as the
board of directors may from time to time determine by resolution,
plus such additional persons as the holders of the Preferred Stock
may be entitled from time to time,
pursuant to the provisions of any resolution of the board of
directors creating any series of Preferred Stock, to elect to the
board of directors.
Section 2. Election, Term, Vacancies. Directors
shall be elected each year at the annual meeting of stockholders,
except as hereinafter provided, and shall hold office until the
next annual election and until their successors are duly elected
and qualified. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office,
although less than a quorum.
Section 3. Resignation. Any director may resign at
any time by giving written notice of such resignation to the board
of directors, the chairman of the board, the president or the
secretary. Any such resignation shall take effect at the time
specified therein or, if no time be specified, upon the receipt
thereof by the board of directors or one of the above-named
officers and, unless specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4. Removal. Any director may be removed
from office at any time, with or without cause, by a vote of a
majority of a quorum of the stockholders entitled to vote at any
regular meeting or at any special meeting called for the purpose.
Section 5. Fees and Expenses. Directors shall
receive such fees and expenses as the board of directors shall
from time to time prescribe.
7
8
ARTICLE IV
Meetings of Directors
Section l. Regular Meetings. Regular meetings of
the board of directors shall be held at the principal office of
the corporation, or at such other place (within or without the
State of Delaware), and at such time, as may from time to time be
prescribed by the board of directors or stockholders. A regular
annual meeting of the board of directors for the election of
officers and the transaction of other business shall be held on
the same day as the annual meeting of the stockholders or on such
other day and at such time and place as the board of directors
shall determine. No notice need be given of any regular meeting.
Section 2. Special Meetings. Special meetings of
the board of directors may be held at such place (within or
without the State of Delaware) and at such time as may from time
to time be determined by the board of directors or as may be
specified in the call and notice of any meeting. Any such meeting
shall be held at the call of the chairman of the board, the
president, a vice president, the secretary, or two or more
directors. Notice of a special meeting of directors shall be
mailed to each director at least three days prior to the meeting
date, provided that in lieu thereof, notice may be given to each
director personally or by telephone, or dispatched by telegraph,
at least one day prior to the meeting date.
Section 3. Waiver of Notice. In lieu of notice of
meeting, a waiver thereof in writing, signed by the person or
persons entitled to said notice whether before or after the time
stated therein, shall be deemed equivalent thereto. Any director
present in person at a meeting of the board of directors shall be
deemed to have waived notice of the time and place of meeting.
Section 4. Action Without Meeting. Unless otherwise
restricted by the certificate of incorporation, any action
required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a
meeting if all members of the board of directors or of such
committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings
of the board of directors or of such committee.
8
9
Section 5. Quorum. At all meetings of the board,
one-third of the total number of directors shall constitute a
quorum for the transaction of business. The act of a majority of
the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be
otherwise specifically provided by law.
If at any meeting there is less than a quorum present, a
majority of those present (or if only one be present, then that
one), may adjourn the meeting from time to time without further
notice other than announced at the meeting until a quorum is
present. At such adjourned meeting at which a quorum is present,
any business may be transacted which might have been transacted at
the meeting as originally scheduled.
Section 6. Business Transacted. Unless otherwise
indicated in the notice of meeting or required by law, the
certificate of incorporation or bylaws of the corporation, any and
all business may be transacted at any directors' meeting.
ARTICLE V
Powers of the Board of Directors
The management of all the property and business of the
corporation and the regulation and government of its affairs shall
be vested in the board of directors. In addition to the powers
and authorities by these bylaws and the certificate of
incorporation expressly conferred on them, the board of directors
may exercise all such powers of the corporation and do all such
lawful acts and things as are not by law, or by the certificate of
incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
9
10
ARTICLE VI
Committees
Section l. Executive Committee. The board of
directors may, by resolution passed by a majority of the whole
board, designate an executive committee, to consist of three or
more members. The chief executive officer plus one other member
of the executive committee shall constitute a quorum.
The executive committee shall have and may exercise all
the powers and authority of the board of directors in the manage
ment of the business and affairs of the corporation, with the
exception of such powers and authority as may be specifically
reserved to the board of directors by law or by resolution adopted
by the board of directors.
Section 2. Audit Committee. The board of directors may,
by resolution passed by a majority of the whole board, designate
an audit committee, to consist of three or more members,
none of the members of which shall be employees or officers of the
corporation. A majority of the members of the audit committee
shall constitute a quorum.
The audit committee shall from time to time review and
make recommendations to the board of directors with respect to the
selection of independent auditors, the fees to be paid such
auditors, the adequacy of the audit and accounting procedures of
the corporation, and such other matters as may be specifically
delegated to the committee by the board of directors. In this
connection the audit committee shall, at its request, meet with
representatives of the independent auditors and with the financial
officers of the corporation separately or jointly.
Section 3. Compensation/Nominating Committee. The
board of directors may, by resolution passed by a majority of the
10
11
whole board, designate a compensation/nominating committee, to
consist of three or more members of the board of directors, except
that no member of the compensation/nominating committee may (i) be
an employee or officer of the corporation or (ii) maintain a
relationship with the Corporation that would cause such member to
be ineligible for membership on the compensation/nominating
committee pursuant to rules or regulations adopted by the
Securities and Exchange Commission, the Internal Revenue Service
or any other governmental agency. A majority of the members of
the compensation/nominating committee shall constitute a quorum.
The compensation/nominating committee shall from time to
time review and make recommendations to the board of directors with
respect to the management remuneration policies of the corporation
including but not limited to salary rates and fringe benefits of
elected officers, other remuneration plans such as incentive
compensation, deferred compensation and stock option plans,
directors' compensation and benefits. The compensation/nominating
committee shall also make recommendations to the board of
directors (i) concerning suitable candidates for election to the
board, (ii) regarding assignments to board committees, and (iii)
with respect to promotions, changes and succession among the
senior management of the corporation and such other matters as may
be specifically delegated to the committee by the board of
directors.
Section 4. Governance Committee. The board of
directors may, by resolution passed by a majority of the whole
board, designate a governance committee, to consist of three or
more members, none of the members of which shall be employees or
officers of the corporation. A majority of the members of the
nominating and governance committee shall constitute a quorum.
The governance committee shall make recommendations to
the board of directors concerning the practices and procedures
11
12
for the proper and efficient management of the board of directors
as determined by the committee. The governance committee shall
perform such other duties as may be specifically delegated to the
committee by the board of directors.
Section 5. Committee Procedure, Seal.
(a) The executive, compensation/nominating, governance,
and audit committees shall keep regular minutes of their meetings,
which shall be reported to the board of directors, and shall fix
their own rules of procedures.
(b) The executive, compensation/nominating, governance,
and audit committees may each authorize the seal of the corpora
tion to be affixed to all papers which may require it.
(c) In the absence, or disqualification, of a member of any
committee, the members of that committee present at any meeting
and not disqualified from voting, whether or not constituting
a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of such absent or
disqualified member.
Section 6. Special Committees. The board of
directors may, from time to time, by resolution passed by a
majority of the whole board, designate one or more special
committees. Each such committee shall have such duties and may
exercise such powers as are granted to it in the resolution
designating the members thereof. Each such committee shall fix
its own rules of procedure.
ARTICLE VII
Indemnification
Section l. Nature of Indemnity. The corporation shall
indemnify any person who was or is a party or is threatened to be
12
13
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was or has
agreed to become a director or officer of the corporation, or is
or was serving or has agreed to serve at the request of the
corporation as a director or officer, of another corporation,
partnership, joint venture, trust or other enterprise, or by
reason of any action alleged to have been taken or omitted in such
capacity, and may indemnify any person who was or is a party or is
threatened to be made a party to such an action by reason of the
fact that he is or was or has agreed to become an employee or
agent of the corporation, or is or was serving or has agreed to
serve at the request of the corporation as an employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred
by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action
or proceeding had no reasonable cause to believe his conduct was
unlawful; except that in the case of an action or suit by or in
the right of the corporation to procure a judgment in its favor
(l) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person
in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery
or such other court shall deem proper.
13
14
The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
Section 2. Successful Defense. To the extent that a
director, officer, employee or agent of the corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section l hereof or in defense
of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 3. Determination That Indemnification Is Proper.
(a) Any indemnification of a director or officer of the
corporation under Section l hereof (unless ordered by a court)
shall be made by the corporation unless a determination is made
that indemnification of the director or officer is not proper in
the circumstances because he has not met the applicable standard
of conduct set forth in Section l hereof. Such determination
shall be made, with respect to a director or officer, (1) by a
majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by a majority vote of such
directors, even though less than a quorum, or (3) if there are no
such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (4) by the stockholders.
(b) Any indemnification of an employee or agent of the
corporation (who is not also a director or officer of the
14
15
corporation) under Section l hereof (unless ordered by a court)
may be made by the corporation upon a determination that
indemnification of the employee or agent is proper in the
circumstances because such person has met the applicable standard
of conduct set forth in Section l hereof. Such determination, in
the case of an employee or agent, may be made (1) in accordance with
the procedures outlined in the second sentence of Section 3(a),
or (2) by an officer of the corporation, upon delegation of such
authority by a majority of the Board of Directors.
Section 4. Advance Payment of Expenses. Expenses
(including attorneys' fees) incurred by a director or officer in
defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
corporation as authorized in this Article. Such expenses
(including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate. The board of directors may
authorize the corporation's counsel to represent a director,
officer, employee or agent in any action, suit or proceeding,
whether or not the corporation is a party to such action, suit or
proceeding.
Section 5. Procedure for Indemnification of Directors or
Officers. Any indemnification of a director or officer of the
corporation under Sections l and 2, or advance of costs, charges
and expenses of a director or officer under Section 4 of this
Article, shall be made promptly, and in any event within 60 days,
upon the written request of the director or officer. If the
corporation fails to respond within 60 days, then the request for
indemnification shall be deemed to be approved. The right to
indemnification or advances as granted by this Article shall be
enforceable by the director or officer in any court of competent
jurisdiction if the corporation denies such request, in whole or
15
16
in part. Such person's costs and expenses incurred in connection
with successfully establishing his right to indemnification, in
whole or in part, in any such action shall also be indemnified by
the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs,
charges and expenses under Section 4 of this Article where the required
undertaking, if any, has been received by the corporation) that
the claimant has not met the standard of conduct set forth in
Section l of this Article, but the burden of proving such defense
shall be on the corporation. Neither the failure of the
corporation (including its board of directors or a committee
thereof, its independent legal counsel, and its stockholders) to
have made a determination prior to the commencement of such action
that indemnification of the claimant is proper in the
circumstances because he has met the applicable standard of
conduct set forth in Section l of this Article, nor the fact that
there has been an actual determination by the corporation
(including its board of directors or a committee thereof, its
independent legal counsel, and its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant
has not met the applicable standard of conduct.
Section 6. Survival; Preservation of Other Rights.
The foregoing indemnification provisions shall be deemed to be a
contract between the corporation and each director, officer,
employee and agent who serves in such capacity at any time while
these provisions as well as the relevant provisions of the
Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then
existing with respect to any state of facts then or previously
existing or any action, suit, or proceeding previously or
thereafter brought or threatened based in whole or in part upon
any such state of facts. Such a Acontract right@ may not be
modified retroactively without the consent of such director,
officer, employee or agent.
16
17
The indemnification provided by this Article VII shall
not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 7. Insurance. The corporation shall
purchase and maintain insurance on behalf of any person who is or
was or has agreed to become a director or officer of the corpo
ration, or is or was serving at the request of the corporation as
a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against him and incurred by him or on his behalf in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this Article, provided that such
insurance is available on acceptable terms, which determination
shall be made by a vote of a majority of the entire board of
directors.
Section 8. Savings Clause. If this Article or any portion
hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the corporation shall nevertheless
indemnify each director or officer and may indemnify each employee
or agent of the corporation as to costs, charges and expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an
action by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall not
have been invalidated and to the full extent permitted by
applicable law.
17
18
ARTICLE VIII
Officers
Section l. General. The officers of the corporation
shall be the chairman of the board, a vice-chairman, president, a
chief operating officer, one or more vice presidents (including
executive vice presidents and senior vice presidents), a
secretary, a controller, a treasurer, and such other subordinate
officers as may from time to time be designated and elected by the
board of directors.
Section 2. Other Offices. The chairman of the board
shall be chosen by the board of directors from among their own
number. The other officers of the corporation may or may not be
directors.
Section 3. Term. Officers of the corporation shall
be elected by the board of directors and shall hold their respec
tive offices during the pleasure of the board and any officer may
be removed at any time, with or without cause, by a vote of the
majority of the directors. Each officer shall hold office from
the time of his appointment and qualification until the next
annual election of officers or until his earlier resignation or
removal except that upon election thereof a shorter term may be
designated by the board of directors. Any officer may resign at
any time upon written notice to the corporation.
Section 4. Compensation. The compensation of
officers of the corporation shall be fixed, from time to time, by
the board of directors.
Section 5. Vacancy. In case any office becomes
vacant by death, resignation, retirement, disqualification,
18
19
removal from office, or any other cause, the board of directors
may abolish the office (except that of president, secretary and
treasurer), elect an officer to fill such vacancy or allow the
office to remain vacant for such time as the board of directors
deems appropriate.
ARTICLE IX
Duties of Officers
Section l. Chairman of the Board, Vice-Chairman,
President, Chief Operating Officer. The chairman of the board
shall be the chief executive officer of the corporation. He shall
have general supervisory powers over all other officers, employees
and agents of the corporation for the proper performance of their
duties and shall otherwise have the general powers and duties of
supervision and management usually vested in the chief executive
officer of a corporation. The vice-chairman and the chief
operating officer shall perform such duties as shall be assigned
to each by the board of directors or the chairman of the board.
The president shall have the general powers and duties of
supervision and management of the corporation as the chairman
shall assign. The chairman of the board shall preside at and act
as chairman of all meetings of the board of directors. The
president shall preside at any meeting of the board of directors
in the event of the absence of the chairman of the board. The
offices of (a) chairman of the board and president or (b)
president and chief operating officer may be filled by the same
individual.
Section 2. Vice Presidents. Each vice president
(including executive vice presidents and senior vice presidents)
shall perform such duties as shall be assigned to him by the board
of directors, the chairman of the board or the president.
Section 3. Secretary. The secretary shall record
all proceedings of the meetings of the corporation, its stock
19
20
holders and the board of directors and shall perform such other
duties as shall be assigned to him by the board of directors, the
chairman of the board, or the president. Any part or all of the
duties of the secretary may be delegated to one or more assistant
secretaries.
Section 4. Controller. The controller shall perform
such duties as shall be assigned to him by the chairman of the
board, the president or such vice president as may be responsible
for financial matters. Any or all of the duties of the controller
may be delegated to one or more assistant controllers.
Section 5. Treasurer. The treasurer shall, under
the direction of the chairman of the board, the president or such
vice president as may be responsible for financial matters, have
the custody of the funds and securities of the corporation,
subject to such regulations as may be imposed by the board of
directors. He shall deposit, or have deposited, all monies and
other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board
of directors or as may be designated by the appropriate officers
pursuant to a resolution of the board of directors. He shall
disburse, or have disbursed, the funds of the corporation as may
be ordered by the board of directors or properly authorized
officers, taking proper vouchers therefor. If required by the
board of directors he shall give the corporation bond in such sum
and in such form and with such security as may be satisfactory to
the board of directors, for the faithful performance of the duties
of his office. He shall perform such other duties as shall be
assigned to him by the board of directors, the chairman of the
board, the president or such vice president as may be responsible
for financial matters. Any or all of the duties of the treasurer
may be delegated to one or more assistant treasurers.
Section 6. Other Officers' Duties. Each other
officer shall perform such duties and have such responsibilities
as may be delegated to him by the superior officer to whom he is
made responsible by designation of the chairman of the board or
the president.
20
21
Section 7. Absence or Disability. The board of
directors or the chairman of the board may delegate the powers and
duties of any absent or disabled officer to any other officer or
to any director for the time being. In the event of the absence
or temporary disability of the chairman of the board, the
president shall assume his powers and duties while he is absent or
so disabled.
ARTICLE X
Stock
Section l. Certificates. Certificates of stock of
the corporation shall be signed by, or in the name of the corpo
ration by, the chairman of the board, the president or a vice
president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of the corporation. If such
certificate is countersigned, (l) by a transfer agent other than
the corporation or its employee, or (2) by a registrar other than
the corporation or its employee, then any other signature on the
certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the
date of issue.
Section 2. Transfers. Shares of stock shall be
transferable on the books of the corporation by the holder of record
thereof in person or by his attorney upon surrender of such certificate
with an assignment endorsed thereon or attached thereto duly executed and
with such proof of authenticity of signatures as the corporation may
reasonably require. The board of directors may from time to time
appoint such transfer agents or registrars as it may deem advisable
and may define their powers and duties. Any such transfer agent or
registrar need not be an employee of the corporation.
21
22
Section 3. Record Holder. The corporation may treat
the holder of record of any shares of stock as the complete owner
thereof entitled to receive dividends and vote such shares, and
accordingly shall not be bound to recognize any interest in such
shares on the part of any other person, whether or not it shall
have notice thereof.
Section 4. Lost and Damaged Certificates. The
corporation may issue a new certificate of stock to replace a
certificate alleged to have been lost, stolen, destroyed or
mutilated upon such terms and conditions as the board of directors
may from time to time prescribe.
Section 5. Fixing Record Date. In order that the
corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other
action
ARTICLE XI
Miscellaneous
Section l. Fiscal Year. The fiscal year of the
corporation shall begin upon the first day of January and
terminate upon the 3lst day of December, in each year.
Section 2. Stockholder Inspection of Books and
Records. The board of directors from time to time shall determine
whether and to what extent and at what times and places and under
22
23
what conditions and regulations the accounts and books of the
corporation, or any of them, shall be open to the inspection of a
stockholder and no stockholder shall have any right to inspect any
account, book or document of the corporation except as conferred
by statute or authorized by resolution of the board of directors.
Section 3. Seal. The corporate seal shall be
circular in form and have inscribed thereon the name of the
corporation and the words "Corporate Seal, Delaware."
ARTICLE XII
Amendments to Bylaws
Subject to the provisions of any resolution of the board
of directors creating any series of Preferred Stock, the board of
directors shall have power from time to time to make, alter or
repeal bylaws, but any bylaws made by the board of directors may
be altered, amended or repealed by the stockholders at any annual
meeting of stockholders, or at any special meeting provided that
notice of such proposed alteration, amendment or repeal is
included in the notice of such special meeting.
23
1
Exhibit 10.1
December 18, 2001
Mr. Roger T. Staubach
Chairman & CEO
The Staubach Company
15601 Dallas Parkway
Suite 400
Addison, TX 75001
Dear Mr. Staubach:
This will confirm the following agreement relating to
the deferral of your director's fees in 2002.
1. All director's fees and retainers ("Fees")
payable to you in connection with your service on the boards of
directors (including committees of such boards) of AMR
Corporation and American Airlines, Inc. for the period January 1,
2002 through December 31, 2002 , will be deferred and paid to you
in accordance with this letter agreement.
2. Fees will be converted to Stock Equivalent Units
in accordance with the Directors' Stock Equivalent Purchase Plan,
a copy of which is attached hereto as Exhibit A (the "Plan").
3. Within 30 days of the date when you cease to be a
Director of AMR Corporation, the Stock Equivalent Units accrued
pursuant to the Plan will be converted to cash and paid to you by
multiplying the number of such Stock Equivalent Units by the
arithmetic mean of the high and the low of AMR stock during the
month when you ceased to be a Director of AMR Corporation.
4. AMR's obligation to make the payment pursuant to
paragraph 3 hereof will not be released or modified by reason of
your death. In such event, the cash payment contemplated by
paragraph 3 will be made to Marianne Staubach.
2
If the foregoing is satisfactory to you, please
indicate by signing one of the originals (two are enclosed) and
returning it to me.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Accepted and agreed:
Roger T. Staubach
Date
1
Exhibit 10.2
December 18, 2001
Mr. Edward A. Brennan
400 North Michigan Avenue
Suite 400
Chicago, IL 60611
Dear Ed:
You've elected to defer your retainer and meeting fees for
calendar year 2002.
In June 1998, you and the Company entered into an agreement
governing the fees you had deferred through that date. That
agreement is attached.
I'm assuming you want to continue to defer your fees in
accordance with the June 1998 letter. If so, please sign below
and return to me. If you want another agreement, please let me
know the details and we'll see what we can do.
Thank you for your cooperation and if there are questions,
please let me know.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Deferral of 2002 fees to be in accordance with June 2, 1998
letter:
AGREED: ___________________________________
Edward A. Brennan
P.S. I'm enclosing two originals - one to be returned to me and
the other for your files.
Attachment
1
Exhibit 10.3
January 14, 2002
Mr. Joe M. Rodgers
Chairman
The JMR Group
P. O. Box 158838
Nashville, Tennessee 37215-8838
Dear Joe:
This will confirm the following agreement relating to
the deferral of your director's fees in 2002.
1. All director's fees and retainers ("Fees")
payable to you in connection with your service on the boards of
directors (including committees of such boards) of AMR
Corporation and American Airlines, Inc. for the period January 1,
2002 through December 31, 2002 , will be deferred and paid to you
in accordance with this letter agreement.
2. Fees will be converted to Stock Equivalent Units
in accordance with the Directors' Stock Equivalent Purchase Plan,
a copy of which is attached hereto as Exhibit A (the "Plan").
3. On or before January 31, 2003, the Stock
Equivalent Units accrued pursuant to the Plan will be converted
to cash and paid to you by multiplying the number of such Stock
Equivalent Units by the arithmetic mean of the high and the low
of AMR stock during November 2002.
4. AMR's obligation to make the payment pursuant to
paragraph 3 hereof will not be released or modified by reason of
your death. In such event, the cash payment contemplated by
paragraph 3 will be made to your estate.
2
If the foregoing is satisfactory to you, please
indicate by signing one of the originals (two are enclosed) and
returning it to me.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Accepted and agreed:
Joe M. Rodgers
Date
1
Exhibit 10.4
December 18, 2001
Judith Rodin, PhD.
President
University of Pennsylvania
100 College Hall
Philadelphia, PA 19104
Dear Judith:
This will confirm the following agreement relating to
the deferral of your directors' fees and retainers in 2002:
1. All directors' fees and retainers ("Fees")
payable to you in connection with your service on the boards of
directors (including committees of such boards) of AMR
Corporation and American Airlines, Inc. for the period January 1,
2002 through December 31, 2002, will be deferred and paid to you
in accordance with this letter agreement:
2. Fees will be converted to Stock Equivalent Units
in accordance with the Directors' Stock Equivalent Purchase Plan,
a copy of which is attached hereto as Exhibit A (the "Plan").
3. Upon your retirement from the Board of Directors
of AMR the Stock Equivalent Units accrued pursuant to the Plan
will be converted to cash and paid to you by multiplying the
number of Stock Equivalent Units as of the date of your
retirement by the arithmetic mean of the high and low of AMR
stock ("fair market value") during the calendar month immediately
preceding such retirement date. Such payment will occur within
30 days of your retirement date.
4. AMR's obligation to make payments pursuant to
paragraph 3 hereof will not be released or modified by reason of
your death. In such event, the number of Stock Equivalent Units
as of your date of death will be multiplied by the fair market
value of AMR stock during the calendar month immediately
preceding your death, and the amount paid to the Trustees under
your Revocable Agreement of Trust, dated September 15, 1997, as
amended November 3, 1997, Judith Rodin Settlor and Trustee.
2
If the foregoing is satisfactory to you, please
indicate by signing one of the originals (two are enclosed) and
returning it to me.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Accepted and agreed:
Judith Rodin
Date
1
Exhibit 10.5
December 18, 2001
Mr. John W. Bachmann
Managing Director
Edward Jones
12555 Manchester Road
St. Louis, MO 63131-3279
Dear Mr. Bachmann:
This will confirm the following agreement relating to
the deferral of your director's fees in 2002.
1. All director's fees and retainers ("Fees")
payable to you in connection with your service on the boards of
directors (including committees of such boards) of AMR
Corporation and American Airlines, Inc. for the period January 1,
2002 through December 31, 2002, will be deferred and paid to you
in accordance with this letter agreement.
2. Fees will be converted to Stock Equivalent Units
in accordance with the Directors' Stock Equivalent Purchase Plan,
a copy of which is attached hereto as Exhibit A (the "Plan").
3. Within 30 days of the date when you cease to be a
Director of AMR Corporation, the Stock Equivalent Units accrued
pursuant to the Plan will be converted to cash and paid to you by
multiplying the number of such Stock Equivalent Units by the
arithmetic mean of the high and the low of AMR stock ("fair
market value") during the month when you ceased to be a Director
of AMR Corporation.
4. AMR's obligation to make the payment pursuant to
paragraph 3 hereof will not be released or modified by reason of
your death. In such event, the number of Stock Equivalent Units
as of your date of death will be multiplied by the fair market
value of AMR stock during the calendar month immediately
preceding your death, and the amount paid to Katharine Bachmann.
2
If the foregoing is satisfactory to you, please
indicate by signing one of the originals (two are enclosed) and
returning it to me.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Accepted and agreed:
John W. Bachmann
Date
1
Exhibit 10.6
December 18, 2001
Mr. Armando M. Codina
Chairman
Codina Group, Inc.
355 Alhambra Circle, Suite 900
Coral Gables, FL 33134
Dear Armando:
This will confirm the following agreement relating to
the deferral of, and payment of, your directors' fees in 2002:
1. All directors' fees and retainers ("Fees")
payable to you in connection with your service on the boards of
directors (including committees of such boards) of AMR
Corporation and American Airlines, Inc. for the period January
1, 2002, through December 31, 2002, will be deferred and paid to
you in accordance with this letter agreement.
2. Fees will be converted to Stock Equivalent Units
in accordance with the Directors' Stock Equivalent Purchase Plan,
a copy of which is attached hereto as Exhibit A (the "Plan").
3. On or before January 31, 2010, all the Stock
Equivalent Units will be converted to cash and paid to you by
multiplying the number of Stock Equivalent Units as of December
31, 2009, by the arithmetic mean of the high and low of AMR stock
("fair market value") during December 2009.
4. AMR's obligation to make payments pursuant to
paragraph 3 hereof will not be released or modified by reason of
your death. In such event, the number of Stock Equivalent Units
as of your date of death will be multiplied by the fair market
value of AMR stock during the calendar month immediately
preceding your death, and the amount paid to Margarita Codina.
2
If the foregoing is satisfactory to you, please
indicate by signing one of the originals (two are enclosed) and
returning it to me.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Accepted and agreed:
Armando M. Codina
Date
1
Exhibit 10.7
December 18, 2001
Mr. Philip J. Purcell
Morgan Stanley Dean Witter & Co.
2500 Lake Cook Road
Riverwoods, IL 60015
Dear Mr. Purcell:
This will confirm the following agreement relating to
the deferral of your director's fees in 2002.
1. All director's fees and retainers ("Fees")
payable to you in connection with your service on the boards of
directors (including committees of such boards) of AMR
Corporation and American Airlines, Inc. for the period January 1,
2002 through December 31, 2002, will be deferred and paid to you
in accordance with this letter agreement.
2. Fees will be converted to Stock Equivalent Units
in accordance with the Directors' Stock Equivalent Purchase Plan,
a copy of which is attached hereto as Exhibit A (the "Plan").
3. Within 30 days of the date when you cease to be a
Director of AMR Corporation, the Stock Equivalent Units accrued
pursuant to the Plan will be converted to cash and paid to you by
multiplying the number of such Stock Equivalent Units by the
arithmetic mean of the high and the low of AMR stock ("fair
market value") during the month when you ceased to be a Director
of AMR Corporation.
4. AMR's obligation to make the payment pursuant to
paragraph 3 hereof will not be released or modified by reason of
your death. In such event, the number of Stock Equivalent Units
as of your date of death will be multiplied by the fair market
value of AMR stock during the calendar month immediately
preceding your death, and the amount paid to Anne Purcell.
2
If the foregoing is satisfactory to you, please
indicate by signing one of the originals (two are enclosed) and
returning it to me.
Very truly yours,
Charles D. MarLett
Corporate Secretary
Accepted and agreed:
Philip J. Purcell
Date
1
Exhibit 10.8
2002 EMPLOYEE PROFIT SHARING PLAN
Purpose
The purpose of the 2002 American Airlines Employee Profit Sharing
Plan ("Plan") is to provide participating employees with a sense
of commitment to, and direct financial interest in, the success
of American Airlines, Inc.
Definitions
Capitalized terms not otherwise defined in the Plan will have the
meanings set forth in the 1998 Long Term Incentive Plan, as
amended (the "LTIP").
"AMR" is defined as AMR Corporation.
"Adjusted Investment" is defined as the sum of American's notes
payable, current maturities of long-term debt and capital leases,
long-term debt, capital leases, Present Value of Operating
Leases, and stockholders' equity, and any accounting adjustments
or extraordinary or unusual items which may be added or deducted
at the discretion of the Committee and are approved by the Board
of Directors of AMR.
"Affiliate" is defined as a subsidiary of AMR or any entity that
is designated by the Committee as a participating employer under
the Plan, provided that AMR directly or indirectly owns at least
20% of the combined voting power of all classes of stock of such
entity.
"American" is defined as AMR less AMR subsidiaries other than
American Airlines, Inc. and its subsidiaries.
"Average Adjusted Investment" is defined as the sum of Adjusted
Investment as of 12/31/01, 3/31/02, 6/30/02, and 9/30/02, divided
by four.
"Calculated Amortization of Operating Leases" is defined as the
amortization expense associated with the Capitalized Value of
Operating Leases as if such leases were accounted for as capital
leases, and is determined by the straight-line method over the
lease term.
"Capitalized Value of Operating Leases" is defined as the initial
present value of the lease payments required under American's
aircraft operating leases over the initial stated lease term,
calculated using a discount rate of Prime plus one percent.
"Committee" is defined as the AMR Incentive Compensation
Committee.
2
"Fund" is defined as the profit sharing fund, if any, accumulated
in accordance with this Plan.
"Plan Earnings" is defined as the sum of American's pre-tax
income, interest expense, aircraft rental expense, and any
accruals for American's Pilot Variable Compensation Plan,
Employee Profit Sharing Plan, Incentive Compensation Plan, and
any other plan that might be created, at the discretion of the
Committee, less Calculated Amortization of Operating Leases and
any accounting adjustments or extraordinary or unusual items
which may be added or deducted at the discretion of the Committee
and approved by the Board of Directors of AMR.
"Present Value of Operating Leases" is defined as the present
value of the lease payments required under American's aircraft
operating leases over the remaining lease term, calculated using
the discount rate of Prime plus one percent. Amounts for
3/31/02, 6/30/02, and 9/30/02 are computed by determining the
difference between the Present Value of Operating Leases as of
12/31/02 and 12/31/01 and allocating that difference evenly over
the four quarters of 2002.
"Prime" is defined as the base rate on corporate loans posted by
at least 75% of the 30 largest U.S. banks which is published
daily in the Wall Street Journal.
"Qualified Earnings" is defined as base salaries paid during the
Plan year, overtime, holiday pay, skill premiums, longevity pay,
sick pay, vacation pay, shift differential, overrides and license
premiums and does not include payments such as travel and
incidental expenses, moving expenses, relocation allowance
(COLA), payouts from any retirement plan, disability payments,
workers compensation payments, imputed income from certain travel
service charges or life insurance, or other benefits provided by
American, nor does it include any special one-time monetary
awards or allowances, lump sum payments, or incentive
compensation or profit sharing payments.
"Return on Investment" or "ROI" is defined as Plan Earnings
divided by Average Adjusted Investment, stated as a percentage.
Eligibility for Participation
In order to be eligible for a profit sharing award, the
individual must:
- Have worked during the Plan year as a regular full-time or
part-time employee at American in a participating workgroup
(flight attendant, reservations, coordinator/planner, airport
agent, sky cap, support staff, management levels 04 and below).
2
3
- Have an adjusted seniority date prior to July 1st of the
Plan year. An individual's Qualified Earnings from the time
worked at American will be included in the award calculation.
- Be employed at American or an Affiliate at the time awards
are paid. If at the time awards are paid under the Plan, an
individual has retired from American or an Affiliate, has been
laid off, is on a leave of absence with re-instatement rights, is
disabled or has died, the award which the individual otherwise
would have received under the Plan but for such retirement, lay-
off, leave, disability or death may be paid to the individual or
his/her estate in the event of death, at the discretion of the
Committee.
Notwithstanding the foregoing, however, an employee will not be
eligible to participate in the Plan if such employee is, at the
same time, eligible to participate in:
i)the 2002 American Airlines Incentive Compensation Plan for
Officers and Key Employees,
ii) the Pilot Profit Sharing Plan (as implemented in 1997),
iii) any incentive compensation, profit sharing, commission
or other bonus plan for employees of any division of
American, or
iv) any incentive compensation, profit sharing, commission
or other bonus plan sponsored by an Affiliate.
Awards under the Plan will be determined on a proportionate basis
for participation in more than one plan during a Plan year.
Employees who transfer from/to Affiliates or any other plan
described above during a Plan year, and satisfy eligibility
requirements, will receive awards from each plan on a
proportionate basis.
The Profit Sharing Fund Accumulation
Performance will be measured by ROI and the Fund will accumulate
based on that performance. The Fund is established at 1% of
Qualified Earnings when ROI is equal to 6.4%. The fund will
accumulate on a straight-line basis at the rate of 0.583% of
qualified earnings for each additional point of ROI.
The profit sharing fund will not exceed an amount equal to 8% of
Qualified Earnings at levels of ROI above 18.4%.
3
4
Award Distribution
For eligible domestic employees (where domestic means the United
States, Puerto Rico and the U.S. Virgin Islands), individual
awards will be distributed based on an employee's Qualified
Earnings for the Plan year multiplied by the appropriate
percentage of Qualified Earnings based upon the ROI achieved for
the Plan year. The percent of Qualified Earnings used for Fund
accumulation and award distribution will be the same.
A portion of the Fund will be allocated for eligible
international employees (employees other than those in the United
States, Puerto Rico and the U.S. Virgin Islands) based on the
aggregate of all eligible international employees' Qualified
Earnings as a percentage of the aggregate of all eligible
employees' total Qualified Earnings. This portion of the Fund
will be set aside for distribution at the discretion of the
American officer(s) responsible for such international employees,
subject only to the Committee's approval.
Administration
The Plan will be administered by the Committee which is comprised
of officers of American appointed by the Board of Directors of
AMR. The Committee will have authority to administer and
interpret the Plan, establish administrative rules, determine
eligibility and take any other action necessary for the proper
and efficient operation of the Plan. The amount, if any, of the
Fund shall be based on a certification of ROI by AMR's General
Auditor. A summary of awards under the Plan shall be provided to
the Board of Directors of AMR at the first regular meeting
following determination of the awards.
Method of Payment
The Committee shall determine the method of payment of awards.
Subject to the terms of the Plan, awards shall be paid as soon as
practicable after audited financial statements for the year 2002
are available.
General
Neither this Plan nor any action taken hereunder shall be
construed as giving to any employee or participant the right to
be retained in the employ of American or an Affiliate.
Nothing in the Plan shall be deemed to give any employee any
right, contractually or otherwise, to participate in the Plan or
in any benefits hereunder, other than the right to
4
5
receive payment of such award as may have been expressly
determined by the Committee.
In the event of any act of God, war, natural disaster, aircraft
grounding, revocation of operating certificate, terrorism,
strike, lockout, labor dispute, work stoppage, fire, epidemic or
quarantine restriction, act of government, critical materials
shortage, or any other act beyond the control of American,
whether similar or dissimilar, (each a "Force Majeure Event"),
which Force Majeure Event affects American or its Subsidiaries or
its Affiliates, the Committee, in its sole discretion, may (i)
terminate or (ii) suspend, delay, defer (for such period of time
as the Committee may deem necessary), or substitute any payments
due currently or in the future under the Plan, including, but not
limited to, any payments that have accrued to the benefit of
participants but have not yet been paid.
In consideration of the employee's privilege to participate in
the Plan, the employee agrees (i) not to disclose any trade
secrets of, or other confidential/restricted information of,
American or its Affiliates to any unauthorized party (ii) not to
make any unauthorized use of such trade secrets or confidential
or restricted information during his or her employment with
American or its Affiliates or after such employment is
terminated, and (iii) not to solicit any current employees of
American or any subsidiaries of AMR to join the employee at his
or her new place of employment after his or her employment with
American or its Affiliates is terminated.
The Committee may amend, suspend, or terminate the Plan at any
time.
5
1
Exhibit 10.9
2002 INCENTIVE COMPENSATION PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 2002 American Airlines Incentive Compensation
Plan ("Plan") for officers and key employees is to provide
greater incentive to officers and key employees of American
Airlines, Inc. to achieve the highest level of individual
performance and to meet or exceed specified goals which will
contribute to the success of American.
Definitions
Capitalized terms not otherwise defined in the Plan will have the
meanings set forth in the 1998 Long Term Incentive Plan, as
amended (the "LTIP").
"AMR" is defined as AMR Corporation.
"Aggregate Target Awards" is defined as the arithmetic sum of the
Target Awards for all Plan participants.
"Affiliate" is defined as a subsidiary of AMR or any entity that
is designated by the Committee as a participating employer under
the Plan, provided that AMR directly or indirectly owns at least
20% of the combined voting power of all classes of stock of such
entity.
"American" is defined as AMR less AMR subsidiaries other than
American Airlines, Inc. and its subsidiaries.
"Committee" is defined as the Compensation/Nominating Committee
of the AMR Board of Directors.
"Competitors" is defined as Continental Airlines, Delta Air
Lines, Northwest Airlines, United Air Lines and US Airways.
"DOT Rank" is defined as American's relative rank with respect to
the Competitors in the category of arrivals+14 (A+14) as
determined by the U.S. Department of Transportation (DOT). This
cumulative ranking is based on DOT's aggregated A+14 data for the
period December 1, 2001 through November 30, 2002, inclusive. To
the extent that at any point during the year a carrier ceases to
participate, it will be excluded from the entire year.
1
2
"Engagement Scores" is defined as American's overall engagement
score on the employee opinion survey and American's rating versus
the National Norm, each reported as a percent annually.
"Fund" is defined as the incentive compensation fund, if any,
accumulated in accordance with this Plan.
"Measure" is defined as Net Income, DOT Rank, Survey America
Rank, or Engagement Score.
"Named Executive Officers" is defined as the officers of American
who are named in the AMR proxy statement for the year in which
awards under the Plan are paid.
"National Norm" is defined as a national sample of employees in
firms with 1,000 or more employees.
"Net Income" is AMR net income including any accounting
adjustments or extraordinary or unusual items which may be added
or deducted by the Committee.
"Qualified Earnings" is defined as base pay as of December 31 of
the Plan year, holiday pay, sick pay, and vacation pay, but does
not include such things as travel and incidental expenses, moving
expenses, relocation allowance (COLA), payouts from any
retirement plan, disability payments, workers compensation
payments, imputed income from certain travel service charges or
life insurance, or other benefits provided by American, nor does
it include any special monetary awards or allowances, lump sum
payments, or incentive compensation or profit sharing payments.
"Survey America Rank" is defined as American's relative rank with
respect to its Competitors in the categories of "Retained
Preference", "Overall Travel Experience", "Overall Ground
Service", and "Overall On-Board Services" in the coach cabin as
reported in Plog Inc.'s Survey America. The Survey America
ranking is based on cumulative data for American and the
Competitors for the period October 1, 2001 through September 30,
2002, inclusive. To the extent that at any point during the year
a carrier ceases to participate, it will be excluded from the
entire year.
"Target Award" is defined as the award (stated as a percentage of
Qualified Earnings) for an eligible participant when target
levels are achieved on all Measures. The Target Award is
determined by the participant's job level.
Eligibility for Participation
In order to be eligible to participate in the Plan, an individual
must be an officer or key employee (as designated by American's
Chairman and CEO) of American. Additionally, the individual must
have been employed by American or an Affiliate as an
2
3
officer or key employee for at least three consecutive months
during the Plan year. The three months service requirement may
be waived in cases of retirement in accordance with American's
then applicable pension plan, prior to completing three months of
service.
During a Plan year, individuals with less than twelve months
eligibility in the Plan may be eligible to participate in the
Plan on a pro rata basis, at the discretion of the Committee. In
addition, the Committee, at its discretion, may permit
participation by officers and key employees of Affiliates who
have been so employed by the Affiliate for at least three
consecutive months during the Plan year.
Notwithstanding the forgoing, however, an officer or key employee
will not be eligible to participate in the Plan if such officer
or key employee is, at the same time, eligible to participate in
a commission, incentive, profit sharing or other bonus
compensation program sponsored by American or an Affiliate,
unless the Committee otherwise decides.
In order to receive an award under the Plan, an individual must
satisfy the aforementioned eligibility requirements and must be
an employee of American or an Affiliate at the time an award
under the Plan is paid. If at the time awards are paid under the
Plan, an individual has retired from American or an Affiliate, is
on leave of absence with reinstatement rights, is disabled, or
has died, the award which the individual otherwise would have
received under the Plan but for such retirement, leave,
disability, or death may be paid to the individual, or his/her
estate in the event of death, at the discretion of the Committee.
The Incentive Compensation Fund
The Fund is comprised of three components: financial, employee
and customer. The employee and customer components have various
Measures (see below). Each Measure has a threshold (performance
below this level earns no award), target and maximum percentage
of Aggregate Target Awards that may be earned, as follows:
Component Threshold Target Maximum
Financial 16.50% 66% 132%
Employee 8.50% 17% 34%
Customer 12.75% 17% 34%
Total 37.75% 100% 200%
For each Measure, the Fund will accumulate on a linear basis
between each of the points defined in the following tables.
3
4
Financial Measure:
The financial measure is based on Net Income. At a threshold Net
Income of $125 million, the Fund will accumulate 16.50% of
Aggregate Target Awards. Higher Net Incomes will result in
higher percentages of Aggregate Target Awards as follows:
Net Income % of Target Awards Earned
$ 125 16.50%
$ 310 33.00%
$ 495 49.50%
$ 680 66.00%
$ 935 99.00%
$1,190 132.00% (Max)
Employee Measures:
The employee measures will depend on Engagement Scores.
Threshold Target Maximum
Engagement Score 5% 10% 20%
Engagement versus National Norm 3.5% 7% 14%
Total 8.5% 17% 34%
At a threshold Engagement Score of 72%, the Fund will accumulate
5% of Aggregate Target Awards. Higher scores will result in
higher percentages of Aggregate Target Awards, as follows:
Engagement Score % of Target Awards Earned
72% 5.00%
73% 7.50%
74% 10.00%
75% 15.00%
76% 20.00% (Max)
At a threshold Engagement Score of 7% below National Norm, the
Fund will accumulate 3.5% of Aggregate Target Awards. Higher
scores will result in higher percentages of Aggregate Target
Awards, as follows:
Percent below National Norm % of Target Awards Earned
7% 3.50%
6% 5.25%
5% 7.00%
4% 10.50%
3% 14.00% (Max)
4
5
In the event the Employee Opinion Survey is not conducted during
the plan year measured, AA's Engagement Score and Engagement
versus the National Norm will be calculated at target.
Customer Measures:
Customer Measures will depend on DOT Rank and Survey America
Rank. Each of the five components (retained preference, overall
travel experience, overall ground service, overall on-board
service and DOT A+14 rankings) is measured separately. For each
Measure, at a threshold rank of fourth, the fund will accumulate
2.55% of Aggregate Target Awards. A higher rank will result in
higher percentages of Aggregate Target Awards, as follows:
Rank % of Target Awards Earned
Fourth 2.55%
Third 3.40%
Second 5.10%
First 6.80% (Max)
The following scorecard illustrates this.
2002 Incentive Plan
Scorecard
Threshold Target Maximum Example
Measures Weight 25% 50% 75% 100% 150% 200% Score 1/
Shareholder
- - AMR net income 66% $125M $310M $495M $680M $935M $1,190M 66.00%
Threshold Target Maximum Example
Weight 25% 50% 75% 100% 150% 200% Score
Employee
- - engagement score
on opinion survey 10% n/a 72% 73% 74% 75% 76% 5.00%
- - AA engagement vs.
national norm 7% n/a 7% below 6% below 5% below 4% below 3% below 5.25%
17% 10.25%
Threshold Target Maximum Example
Weight 25% 50% 75% 100% 150% 200% Score
Customer
- -retained preference 3.4% n/a n/a 4th 3rd 2nd 1st 3.40%
- -overall travel
experience 3.4% n/a n/a 4th 3rd 2nd 1st 2.55%
- -overall ground service 3.4% n/a n/a 4th 3rd 2nd 1st 2.55%
- -overall on-board
services 3.4% n/a n/a 4th 3rd 2nd 1st 5.10%
- -DOT A+14 ratings 3.4% n/a n/a 4th 3rd 2nd 1st 3.40%
17% 17.00%
Fund as a % of Target 93.25%
1/ Based on performance results in shaded areas
5
6
Allocation of Individual Awards
The Chairman and CEO of American, in consultation with the Vice-
Chairman, executive and senior vice presidents of American, will
determine awards for non-officer eligible employees based upon
the eligible employee's performance. Unless otherwise determined
by the Chairman, an award under the Plan to a non-officer
eligible employee, when combined with any other award for the
Plan year whether such other award is under an incentive
compensation, commission, profit sharing or other bonus
compensation plan, may not exceed 100% of such eligible
employee's base salary.
The Committee, in consultation with the Chairman and CEO of
American, will determine awards for officers of American,
including the Named Executive Officers. The awards for officers
(other than the Named Executive Officers) will be equal to the
appropriate Target Award, plus or minus any adjustments for
individual performance. To the extent that an award to a Named
Executive Officer includes a partial payment relating to a
Measure (other than Net Income), such partial payment will be
paid from the general operating funds of American. An award
under the Plan to an officer may not exceed the amount set forth
in Section 11 of the LTIP.
The aggregate of all awards paid hereunder will not exceed the
lesser of: (2.0 times the Fund at Aggregate Target Awards) or
(50% of the total base salaries of all eligible participants in
the Plan). In the discretion of the Committee, the Fund may
not be fully distributed.
Administration
The Committee shall have authority to administer and interpret
the Plan, establish administrative rules, approve eligible
participants, and take any other action necessary for the proper
and efficient operation of the Plan. For participants other than
the Named Executive Officers, the Committee reserves the right to
adjust the calculation of each Measure at its discretion.
Notwithstanding anything to the contrary contained herein, no
awards will be made under the Plan unless awards are also made
under the 2002 American Airlines Employee Profit Sharing Plan and
the 2002 Pilot Variable Compensation Plan for members of the
Allied Pilots Association. The amount, if any, of
the Fund shall be audited by the General Auditor of American
based on a certification of Net Income by AMR's independent
auditors. A summary of awards under the Plan shall be provided
to the Committee at the first regular meeting following
determination of the awards. To the extent a Measure is no
longer compiled by the DOT, Survey America, or American as
applicable, during a Plan year, the Committee will substitute a
comparable performance measure for the remainder of the Plan
year.
6
7
Method of Payment
The Committee will determine the method of payment of awards.
Except as provided herein, awards shall be paid as soon as
practicable after audited financial statements for the year 2002
are available. Individuals, except retirees, may elect to defer
their awards into a deferred compensation program, if any,
administered by American or AMR.
General
Neither this Plan nor any action taken hereunder shall be
construed as giving any employee or participant the right to be
retained in the employ of American or an Affiliate.
Nothing in the Plan shall be deemed to give any employee any
right, contractually or otherwise, to participate in the Plan or
in any benefits hereunder, other than the right to receive
payment of such incentive compensation as may have been expressly
awarded by the Committee.
In the event of any act of God, war, natural disaster, aircraft
grounding, revocation of operating certificate, terrorism,
strike, lockout, labor dispute, work stoppage, fire, epidemic or
quarantine restriction, act of government, critical materials
shortage, or any other act beyond the control of American,
whether similar or dissimilar, (each a "Force Majeure Event"),
which Force Majeure Event affects American or its subsidiaries or
its Affiliates, the Committee in its sole discretion, may (i)
terminate or (ii) suspend, delay, defer (for such period of time
as the Committee may deem necessary), or substitute any payments
due currently or in the future under the Plan, including, but not
limited to, any payments that have accrued to the benefit of
participants but have not yet been paid.
In consideration of the employee's privilege to participate in
the Plan, the employee agrees (i) not to disclose any trade
secrets of, or other confidential/restricted information of,
American or its Affiliates to any unauthorized party and (ii) not
to make any unauthorized use of such trade secrets or
confidential or restricted information during his or her
employment with American or its Affiliates or after such
employment is terminated, and (iii) not to solicit any current
employees of American or any subsidiaries
of AMR to join the employee at his or her new place of employment
after his or her employment with American or its Affiliates is
terminated.
The Committee may amend, suspend, or terminate the Plan at any
time.
7
1
Exhibit 10.10
2002 - 2004 PERFORMANCE SHARE PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 2002 - 2004 AMR Corporation Performance Share
Plan ("Plan") for Officers and Key Employees is to provide
greater incentive to officers and key employees of the
subsidiaries and affiliates of AMR Corporation ("AMR" or "the
Corporation") to achieve the highest level of individual
performance and to meet or exceed specified goals which will
contribute to the success of the Corporation. This Plan is
adopted pursuant to the 1998 Long Term Incentive Plan, as amended
("LTIP").
Definitions
Capitalized terms not otherwise defined in the Plan or the award
agreement for performance shares between the Corporation and the
employee, will have the meanings set forth in the LTIP.
For purposes of the Plan, the following definitions will control:
"Affiliate" is defined as a subsidiary of AMR or any entity that
is designated by the Committee as a participating employer under
the Plan, provided that AMR directly or indirectly owns at least
20% of the combined voting power of all classes of stock of such
entity.
"Committee" is defined as the Compensation / Nominating
Committee, or its successor, of the AMR Board of Directors.
"Comparator Group" is defined as the seven major U.S. based
carriers including AMR Corporation, Continental Airlines, Inc.,
Delta Air Lines, Inc., Northwest Airlines Corp., Southwest
Airlines Co., UAL Corporation, and US Airways Group, Inc.
"Measurement Period" is defined as the three year period
beginning January 1, 2002 and ending December 31, 2004.
"Total Shareholder Return (TSR)" is defined as the rate of return
reflecting stock price appreciation plus reinvestment of
dividends over the Measurement Period. The average Daily Closing
Stock Price (adjusted for splits and dividends) for the three
months prior to the beginning and ending points of the
Measurement Period will be used to smooth out market
fluctuations.
"Daily Closing Stock Price" is defined as the stock price at the
close of trading (4:00 PM EST) of the National Exchange on which
the stock is traded.
1
2
"National Exchange" is defined as either the New York Stock
Exchange (NYSE), the National Association of Stock Dealers and
Quotes (NASDAQ), or the American Stock Exchange (AMEX).
Accumulation of Shares
The number of shares under the Plan to be distributed to
individual participants is determined by (i) the Corporation's
TSR rank within the Comparator Group and (ii) the terms and
conditions of the award agreement between the Corporation and the
employee. The distribution percentage of target shares, based on
rank, is specified below:
Granted Shares - Percent of Target Based on Rank
Rank 7 6 5 4 3 2 1
Payout% 0% 25% 50% 75% 100% 135% 175%
In the event that a carrier (or carriers) in the Comparator Group
ceases to trade on a National Exchange at any point in the
Measurement Period, the following distribution percentage of
target shares, based on rank and the number of remaining
comparators, will be used accordingly.
6 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 6 5 4 3 2 1
Payout% 0% 50% 75% 100% 135% 175%
5 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 5 4 3 2 1
Payout% 50% 75% 100% 135% 175%
4 Comparators
Granted Shares - Percent of Target Based
on Rank
Rank 4 3 2 1
Payout% 75% 100% 135% 175%
2
3
3 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 3 2 1
Payout % 50% 135% 175%
Administration
The Committee shall have authority to administer and interpret
the Plan, establish administrative rules, approve eligible
participants, and take any other action necessary for the proper
and efficient operation of the Plan. The distribution percentage
of shares, if any, will be determined based on an audit of AMR's
TSR Rank by the General Auditor of American Airlines, Inc. A
summary of awards under the Plan shall be provided to the Board
of Directors at the first regular meeting following determination
of the awards. The Committee may determine to pay a cash
equivalent in lieu of the stock award.
General
Neither this Plan nor any action taken hereunder shall be
construed as giving any employee or participant the right to be
retained in the employ of American Airlines, Inc. or an
Affiliate.
Nothing in the Plan shall be deemed to give any employee any
right, contractually or otherwise, to participate in the Plan or
in any benefits hereunder, other than the right to receive an
award as may have been expressly awarded by the Committee subject
to the terms and conditions of the award agreement between the
Corporation and the employee.
In the event of any act of God, war, natural disaster, aircraft
grounding, revocation of operating certificate, terrorism,
strike, lockout, labor dispute, work stoppage, fire, epidemic or
quarantine restriction, act of government, critical materials
shortage, or any other act beyond the control of the Corporation,
whether similar or dissimilar, (each a "Force Majeure Event"),
which Force Majeure Event affects the Corporation or its
subsidiaries or its Affiliates, the Committee, in its sole
discretion, may (i) terminate or (ii) suspend, delay, defer (for
such period of time as the Committee may deem necessary), or
substitute any awards due currently or in the future under the
Plan, including, but not limited to, any awards that have accrued
to the benefit of participants but have not yet been paid.
In consideration of the employee's privilege to participate in
the Plan, the employee agrees (i) not to disclose any trade
secrets of, or other confidential/restricted information of,
American Airlines, Inc. or its Affiliates to any unauthorized
party and, (ii) not to make any unauthorized use of such trade
secrets or confidential or restricted
3
4
information during his or her employment with American Airlines,
Inc. or its Affiliates or after such employment is terminated,
and (iii) not to solicit any current employees of American
Airlines, Inc. or any subsidiaries of AMR to join the employee at
his or her new place of employment after his or her employment
with American Airlines, Inc. is terminated.
The Committee may amend, suspend, or terminate the Plan at any
time.
4
1 Exhibit 10.11
2002 - 2004 PERFORMANCE SHARE PROGRAM
DEFERRED STOCK AWARD AGREEMENT
This AGREEMENT made as of Date, by and between AMR
Corporation, a Delaware corporation (the "Corporation"), and First
Last (the "Employee"), employee number 999999.
WHEREAS, the stockholders of the Corporation approved the
1998 Long Term Incentive Plan at the Corporation's annual meeting
held on May 20, 1998 (such plan, as may be amended from time to
time, to be referenced the "1998 Plan"); and
WHEREAS, pursuant to the Performance Share Program (the
"Program") adopted by the Board of Directors of the Corporation
(the "Board"), the Board has determined to make a Program grant to
the Employee of Deferred Stock (subject to the terms of the 1998
Plan and this Agreement), as an inducement for the Employee to
remain an employee of the Corporation (or a Subsidiary or
Affiliate thereof), and to retain and motivate such Employee
during such employment.
NOW, THEREFORE, the Corporation and the Employee hereby agree
as follows:
1. Grant of Award. The Employee is hereby granted as of
Date, (the "Grant Date") a Deferred Stock Award (the "Award"),
subject to the terms and conditions hereinafter set forth, with
respect to shares shares of Common Stock, $1.00 par value, of the
Corporation ("Stock"). The shares of Stock covered by the Award
shall vest, if at all, in accordance with Section 2.
2. Vesting.
(a) The Award will vest, if at all, in accordance with
Schedule A, attached hereto and made a part of this Agreement.
(b) In the event of the termination of Employee's employment
with the Corporation (or a Subsidiary or Affiliate thereof) prior
to the end of three year measurement period set forth in Schedule
A (the "Measurement Period") due to the Employee's death,
Disability, Retirement or termination not for Cause (each an
"Early Termination") the Award will vest, if at all, on a prorata
basis and will be paid to the Employee (or, in the event of the
Employee's death, the Employee's designated beneficiary for
purposes of the Award, or in the absence of an effective
beneficiary designation, the Employee's estate) as soon as
practicable after the end of the Measurement Period. The prorata
share will be a percentage where the denominator is 36 and the
numerator is the number of months from January 1, 2002 through the
month of the Early Termination, inclusive.
1
2
(c) In the event of the termination of Employee's employment
with the Corporation (or any Subsidiary or Affiliate thereof) for
Cause, or if the Employee terminates his/her employment with the
Corporation (or any Subsidiary or Affiliate thereof) prior to the
distribution of any Award hereunder, the Award shall be forfeited
in its entirety.
(d) In the event of a Change in Control or Potential Change
in Control of the Corporation, the Award shall vest in accordance
with the 1998 Plan, or its successor.
(e) If prior to the distribution of any Award hereunder, the
Employee becomes an employee of a Subsidiary that is not wholly
owned, directly or indirectly, by the Corporation, then the Award
shall be forfeited in its entirety.
(f) If prior to the distribution of any Award hereunder, the
Employee takes a leave of absence without reinstatement rights,
and unless otherwise agreed in writing between the Corporation and
the Employee, then the Award shall be forfeited in its entirety.
3. Payment in Cash. Upon a determination by the Board, an
Award may be paid in cash or other consideration in accordance
with a formula as adopted by the Board.
4. Elective Deferrals. At any time at least 12 months
prior to the end of the Measurement Period, the Employee may elect
in writing, subject to approval by the Corporation, to voluntarily
defer the receipt of the Stock for a specified additional period
beyond the end of the Measurement Period (the "Elective Deferral
Period"). Any Stock deferred pursuant to this Section 4 shall be
issued to the Employee within 60 days after the end of the
Elective Deferral Period. In the event of the death of the
Employee during the Elective Deferral Period, the Stock so
deferred shall be issued to the Employee's designated Beneficiary
(or to the Employee's estate, in the absence of an effective
beneficiary designation) within 60 days after the Corporation
receives written notification of death.
5. Transfer Restrictions. This Award is non-transferable
otherwise than by will or by the laws of descent and distribution,
and may not otherwise be assigned, pledged or hypothecated and
shall not be subject to execution, attachment or similar process.
Upon any attempt by the Employee (or the Employee's successor in
interest after the Employee's death) to effect any such
disposition, or upon the levy of any such process, the Award may
immediately become null and void, at the discretion of the Board.
2
3
6. Miscellaneous. This Agreement (a) shall be binding upon
and inure to the benefit of any successor of the Corporation, (b)
shall be governed by the laws of the State of Texas and any
applicable laws of the United States, and (c) may not be amended
without the written consent of both the Corporation and the
Employee. No contract or right of employment shall be implied by
this Agreement. In the event Employee does not forward to the
Corporation, within the applicable period, required taxes with
respect to any Award distributed pursuant to this Agreement, the
Corporation may withhold from any payments to be made to the
Employee by the Corporation (or any Subsidiary or Affiliate
thereof), an amount(s) equal to such taxes.
7. Securities Law Requirements. The Corporation shall not
be required to issue Stock pursuant to this Award unless and until
(a) such shares have been duly listed upon each stock exchange on
which the Corporation's Stock is then registered and (b) a
registration statement under the Securities Act of 1933 with
respect to such shares is then effective.
The Board may require the Employee to furnish to the
Corporation, prior to the issuance of the Stock in connection with
this Award, an agreement, in such form as the Board may from time
to time deem appropriate, in which the Employee represents that
the shares acquired under the Award are being acquired for
investment and not with a view to the sale or distribution
thereof.
8. Incorporation of 1998 Plan Provisions. This Agreement
is made pursuant to the 1998 Plan and is subject to all of the
terms and provisions of the 1998 Plan as if the same were fully
set forth herein. Capitalized terms not otherwise defined herein
(inclusive of Schedule A) shall have the meanings set forth for
such terms in the 1998 Plan.
IN WITNESS HEREOF, the Corporation has executed this
Performance Share Grant as of the day and year first above
written.
EMPLOYEE AMR CORPORATION
_____________________________ _____________________
Charles D. MarLett
Corporate Secretary
3
4
Schedule A
2002 - 2004 PERFORMANCE SHARE PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 2002 - 2004 AMR Corporation Performance Share
Plan ("Plan") for Officers and Key Employees is to provide greater
incentive to officers and key employees of the subsidiaries and
affiliates of AMR Corporation ("AMR" or "the Corporation") to
achieve the highest level of individual performance and to meet or
exceed specified goals which will contribute to the success of the
Corporation. This Plan is adopted pursuant to the 1998 Long Term
Incentive Plan, as amended ("LTIP").
Definitions
Capitalized terms not otherwise defined in the Plan or the award
agreement for performance shares between the Corporation and the
employee, will have the meanings set forth in the LTIP.
For purposes of the Plan, the following definitions will control:
"Affiliate" is defined as a subsidiary of AMR or any entity that
is designated by the Committee as a participating employer under
the Plan, provided that AMR directly or indirectly owns at least
20% of the combined voting power of all classes of stock of such
entity.
"Committee" is defined as the Compensation / Nominating Committee,
or its successor, of the AMR Board of Directors.
"Comparator Group" is defined as the seven major U.S. based
carriers including AMR Corporation, Continental Airlines, Inc.,
Delta Air Lines, Inc., Northwest Airlines Corp., Southwest
Airlines Co., UAL Corporation, and US Airways Group, Inc.
"Measurement Period" is defined as the three year period beginning
January 1, 2002 and ending December 31, 2004.
"Total Shareholder Return (TSR)" is defined as the rate of return
reflecting stock price appreciation plus reinvestment of dividends
over the Measurement Period. The average Daily Closing Stock
Price (adjusted for splits and dividends) for the three months
prior to the beginning and ending points of the Measurement Period
will be used to smooth out market fluctuations.
"Daily Closing Stock Price" is defined as the stock price at the
close of trading (4:00 PM EST) of the National Exchange on which
the stock is traded.
5
"National Exchange" is defined as either the New York Stock
Exchange (NYSE), the National Association of Stock Dealers and
Quotes (NASDAQ), or the American Stock Exchange (AMEX).
Accumulation of Shares
The number of shares under the Plan to be distributed to
individual participants is determined by (i) the Corporation's TSR
rank within the Comparator Group and (ii) the terms and conditions
of the award agreement between the Corporation and the employee.
The distribution percentage of target shares, based on rank, is
specified below:
Granted Shares - Percent of Target Based on Rank
Rank 7 6 5 4 3 2 1
Payout% 0% 25% 50% 75% 100% 135% 175%
In the event that a carrier (or carriers) in the Comparator Group
ceases to trade on a National Exchange at any point in the
Measurement Period, the following distribution percentage of
target shares, based on rank and the number of remaining
comparators, will be used accordingly.
6 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 6 5 4 3 2 1
Payout% 0% 50% 75% 100% 135% 175%
5 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 5 4 3 2 1
Payout% 50% 75% 100% 135% 175%
4 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 4 3 2 1
Payout% 75% 100% 135% 175%
5
6
3 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 3 2 1
Payout% 50% 135% 175%
Administration
The Committee shall have authority to administer and interpret the
Plan, establish administrative rules, approve eligible
participants, and take any other action necessary for the proper
and efficient operation of the Plan. The distribution percentage
of shares, if any, will be determined based on an audit of AMR's
TSR Rank by the General Auditor of American Airlines, Inc. A
summary of awards under the Plan shall be provided to the Board of
Directors at the first regular meeting following determination of
the awards. The Committee may determine to pay a cash equivalent
in lieu of the stock award.
General
Neither this Plan nor any action taken hereunder shall be
construed as giving any employee or participant the right to be
retained in the employ of American Airlines, Inc. or an Affiliate.
Nothing in the Plan shall be deemed to give any employee any
right, contractually or otherwise, to participate in the Plan or
in any benefits hereunder, other than the right to receive an
award as may have been expressly awarded by the Committee subject
to the terms and conditions of the award agreement between the
Corporation and the employee.
In the event of any act of God, war, natural disaster, aircraft
grounding, revocation of operating certificate, terrorism, strike,
lockout, labor dispute, work stoppage, fire, epidemic or
quarantine restriction, act of government, critical materials
shortage, or any other act beyond the control of the Corporation,
whether similar or dissimilar, (each a "Force Majeure Event"),
which Force Majeure Event affects the Corporation or its
subsidiaries or its Affiliates, the Committee, in its sole
discretion, may (i) terminate or (ii) suspend, delay, defer (for
such period of time as the Committee may deem necessary), or
substitute any awards due currently or in the future under the
Plan, including, but not limited to, any awards that have accrued
to the benefit of participants but have not yet been paid.
In consideration of the employee's privilege to participate in the
Plan, the employee agrees (i) not to disclose any trade secrets
of, or other confidential/restricted information of, American
Airlines, Inc. or its Affiliates to any unauthorized party and,
(ii) not to make any unauthorized use of such trade secrets or
confidential or restricted information during his or her
employment with American Airlines, Inc. or its Affiliates or after
such employment is terminated, and (iii) not to solicit any
current employees of American Airlines, Inc. or any subsidiaries
of AMR to join the employee at his or her new place of employment
after his or her employment with American Airlines, Inc. is
terminated.
The Committee may amend, suspend, or terminate the Plan at any
time.
1
Exhibit 10.12
STOCK OPTION
STOCK OPTION granted Date, by AMR Corporation, a Delaware
corporation (the "Corporation"), and First Last, employee number
999999, an employee of the Corporation or one of its Subsidiaries
or Affiliates (the "Optionee").
W I T N E S S E T H:
WHEREAS, the stockholders of the Corporation approved the
1998 Long Term Incentive Plan at the Corporation's annual meeting
held on May 20, 1998 (such plan, as may be amended from time to
time, to be referenced the "1998 Plan");
WHEREAS, the 1998 Plan provides for the grant of an option to
purchase shares of the Corporation's Common Stock to those
individuals selected by the Committee or, in lieu thereof, the
Board of Directors of AMR Corporation (the "Board"); and
WHEREAS, the Board has determined that the Optionee is
eligible under the Plan and that it is to the advantage and
interest of the Corporation to grant the option provided for
herein to the Optionee as an incentive for Optionee to remain in
the employ of the Corporation or one of its Subsidiaries or
Affiliates, and to encourage ownership by the Optionee of the
Corporation's Common Stock, $1 par value (the "Common Stock").
NOW, THEREFORE:
1. Option Grant. The Corporation hereby grants to the
Optionee a non-qualified stock option, subject to the terms and
conditions hereinafter set forth, to purchase all or any part of
an aggregate of xxxx shares of Common Stock at a price of
$xx.xxxx per share (being the fair market value of the Common
Stock on the date hereof), exercisable in approximately equal
installments on and after the following dates and with respect to
the following number of shares of Common Stock:
Exercisable On and After Number of Shares
07/23/2002 XXX
07/23/2003 XXX
07/23/2004 XXX
07/23/2005 XXX
07/23/2006 XXX
1
2
provided, that in no event shall this option be exercisable in
whole or in part ten years from the date hereof and that the
Corporation shall in no event be obligated to issue fractional
shares. The right to exercise this option and to purchase the
number of shares comprising each such installment shall be
cumulative, and once such right has become exercisable it may be
exercised in whole at any time and in part from time to time until
the date of termination of the Optionee's rights hereunder.
2. Restriction on Exercise. Notwithstanding any other
provision hereof, this option shall not be exercised if at such
time such exercise or the delivery of certificates representing
shares of Common Stock purchased pursuant hereto shall constitute
a violation of any rule of the Corporation, any provision of any
applicable Federal or State statute, rule or regulation, or any
rule or regulation of any securities exchange on which the Common
Stock may be listed.
3. Manner of Exercise. This option may be exercised with
respect to all or any part of the shares of Common Stock then
subject to such exercise pursuant to whatever procedures may be
adopted by the Corporation. In the event that at the time of such
exercise the shares of Common Stock as to which this option is
exercisable have not been registered under the Securities Act of
1933, the Optionee will make a representation that he is acquiring
the shares of Common Stock for investment only and not with a view
to distribution. Subject to compliance by the Optionee with all
the terms and conditions hereof, the Corporation or its agent
shall promptly thereafter deliver to the Optionee a certificate or
certificates for such shares with all requisite transfer stamps
attached. (In the event of a cashless exercise, the Corporation
or its agent will pay to the Optionee the appropriate cash amount,
less required withholdings.)
4. Termination of Option. This option shall terminate and
may no longer be exercised if (i) the Optionee ceases to be an
employee of the Corporation or one of its Subsidiaries or
Affiliates; or (ii) the Optionee becomes an employee of a
Subsidiary that is not wholly owned, directly or indirectly, by
the Corporation; or (iii) the Optionee takes a leave of absence
without reinstatement rights, unless otherwise agreed in writing
between the Corporation and the Optionee; except that
(a) If the Optionee's employment by the Corporation (and
any Subsidiary or Affiliate) terminates by reason of death, the
vesting of the option will be accelerated and the option will
remain exerciseable until its expiration;
2
3
(b) If the Optionee's employment by the Corporation (and
any Subsidiary or Affiliate) terminates by reason of Disability,
the option will continue to vest in accordance with its terms and
may be exercised until its expiration; provided, however, that if
the Optionee dies after such Disability the vesting of the option
will be accelerated and the option will remain exerciseable until
its expiration;
(c) Subject to Section 7(c), if the Optionee's employment
by the Corporation (and any Subsidiary or Affiliate) terminates
by reason of Normal or Early Retirement, the option will continue
to vest in accordance with its terms and may be exercised until
its expiration; provided, however, that if the Optionee dies
after Retirement the vesting of the option will be accelerated
and the option will remain exerciseable until its expiration;
(d) If the Optionee's employment by the Corporation (and
any Subsidiary or Affiliate) is involuntarily terminated by the
Corporation or a Subsidiary or Affiliate (as the case may be)
without Cause, the option may thereafter be exercised, to the
extent it was exercisable at the time of termination, for a
period of three months from the date of such termination of
employment or until the stated term of such option, whichever
period is shorter; and
(e) In the event of a Change in Control or a Potential
Change in Control of the Corporation, this option shall become
exercisable in accordance with the 1998 Plan, or its successor.
5. Adjustments in Common Stock. In the event of any stock
dividend, stock split, merger, consolidation, reorganization,
recapitalization or other change in the corporate structure,
appropriate adjustments may be made by the Board in the number of
shares, class or classes of securities and the price per share.
6. Non-Transferability of Option. Unless the Committee
shall permit (on such terms and conditions as it shall establish),
an option may not be transferred except by will or the laws of
descent and distribution to the extent provided herein. During the
lifetime of the Optionee this option may be exercised only by him
or her (unless otherwise determined by the Committee).
7. Miscellaneous.
(a) This option (i) shall be binding upon and inure to the
benefit of any successor of the Corporation, (ii) shall be
governed by the laws of the State of Texas, and any applicable
laws of the United States, and (iii) may not be amended except in
writing. No contract or right of employment shall be implied by
this option.
3
4
(b) If this option is assumed or a new option is substituted
therefore in any corporate reorganization (including, but not
limited to, any transaction of the type referred to in Section
425(a) of the Internal Revenue Code of 1986, as amended),
employment by such assuming or substituting corporation or by a
parent corporation or a subsidiary thereof shall be considered for
all purposes of this option to be employment by the Corporation.
(c) In the event the Optionee's employment is terminated by
reason of Early or Normal Retirement and the Optionee subsequently
is employed by a competitor of the Corporation, the Corporation
reserves the right, upon notice to the Optionee, to declare the
option forfeited and of no further validity.
8. Securities Law Requirements. The Corporation shall not
be required to issue shares upon the exercise of this option
unless and until (a) such shares have been duly listed upon each
stock exchange on which the Corporation's Stock is then
registered; and (b) a registration statement under the Securities
Act of 1933 with respect to such shares is then effective.
The Board may require the Optionee to furnish to the
Corporation, prior to the issuance of any shares of Stock in
connection with the exercise of this option, an agreement, in such
form as the Board may from time to time deem appropriate, in which
the Optionee represents that the shares acquired by him upon such
exercise are being acquired for investment and not with a view to
the sale or distribution thereof.
9. Option Subject to 1998 Plan. This option shall be
subject to all the terms and provisions of the 1998 Plan and the
Optionee shall abide by and be bound by all rules, regulations and
determinations of the Board now or hereafter made in connection
with the administration of the 1998 Plan. Capitalized terms not
otherwise defined herein shall have the meanings set forth for
such terms in the 1998 Plan.
IN WITNESS WHEREOF, the Corporation has executed this Stock
Option as of the day and year first above written.
AMR Corporation
______________________________ ____________________________
Optionee Charles D. MarLett
Corporate Secretary
4
1
Exhibit 12
AMR CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(in millions)
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
Earnings:
Loss before income taxes $(720) $ (793) $(1,583) $(850)
Add: Total fixed charges (per below) 435 423 875 754
Less: Interest capitalized 22 38 44 79
Total loss $(307) $ (408) $ (752) $(175)
Fixed charges:
Interest, including interest
capitalized $ 156 $ 126 $ 316 $ 240
Portion of rental expense
representative of the interest factor 270 290 542 502
Amortization of debt expense 9 7 17 12
Total fixed charges $ 435 $ 423 $ 875 $ 754
Coverage deficiency $ 742 $ 831 $1,627 $ 929