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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
[x]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 2006.
[ ]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. x Yes No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of "accelerated filer" and "large
accelerated filer" in Rule 12b-2 of the Exchange Act.
x Large Accelerated Filer Accelerated Filer
Non-accelerated Filer
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). 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 - 213,015,663 shares as of July 21, 2006.
EXPLANATORY NOTE
This Form 10-Q/A (Amendment No. 1) is being filed by AMR Corporation
(the Company) to correct a clerical error in the reported number of
certain shares and stock-settled stock appreciation rights listed in
Item 5 of Part 2 of the Company's original report on Form 10-Q filed
with the Securities and Exchange Commission on July 25, 2006 (original
Form 10-Q) and in Exhibits 10.1, 10.3 and 10.4 attached to the original
Form 10-Q.
As the amendment only relates to Item 5 of Part 2, Other Information,
the previously issued condensed consolidated financial statements and
footnotes thereto are unchanged. No attempt has been made in this
Form 10-Q/A to modify or update disclosures in the original Form 10-Q
except as required to address the changes in Item 5. This Form 10-Q/A
does not reflect events occurring after the filing of the original
Form 10-Q or modify or update any related disclosures. Information
not affected by the amendment is unchanged and reflects the disclosure
made at the time of the filing of the original Form 10-Q with the
Securities and Exchange Commission on July 25, 2006. Accordingly,
this Form 10-Q/A should be read in conjunction with the original Form
10-Q and the Company's filings made with the Securities and Exchange
Commission subsequent to the filing of the original Form 10-Q,
including any amendments to those filings.
In accordance with Rule 12b-15 promulgated under the Securities and
Exchange Act of 1934, as amended, the complete text of Item 5, Other
Information, is set forth herein, including those portions of the text
that have not been amended from that set forth in the original Form 10-
Q. The only changes to the text in Item 5 of Part 2 of the original
Form 10-Q are as follows:
- The number of stock-settled Stock Appreciation Rights granted to
Gerard J. Arpey is amended to 75,000 as compared to 77,500 listed in
the original Form 10-Q.
- The number of Deferred Shares granted to Mr. Arpey is amended to
20,000 as compared to 22,000 listed in the original Form 10-Q.
- The number of Performance Shares granted to Mr. Arpey is amended
to 95,000 as compared to 100,000 listed in the original Form 10-Q.
Exhibits 10.1, 10.3 and 10.4 listed in Item 6 of Part 2 have been
amended to reflect these changes.
Item 5. Other Information
As discussed in the Company's Proxy Statement, the Compensation
Committee of the Company's Board of Directors conducts annually a
comprehensive review of compensation for the executive officers of the
Company and American with independent compensation consultants engaged
by the Committee. At the July 2006 meetings of the Compensation
Committee and the Board, the following compensation initiatives were
approved (effective July 24, 2006):
- Grants of stock-settled stock appreciation rights pursuant to the
form of Stock Appreciation Right Agreement ("SAR Agreement"), attached
as Exhibit 10.1 to this Form 10-Q/A, and the corresponding Amendment
to the AMR Corporation 1998 Long Term Incentive Plan, as Amended,
dated as of July 19, 2006, attached as Exhibit 10.2 to this Form 10-
Q/A. An attachment to the form SAR Agreement notes the stock-settled
stock appreciation right grants to the executive officers, effective
July 24, 2006.
- Grants of deferred shares pursuant to the form of Deferred Share
Award Agreement for 2006 ("Deferred Share Agreement"). The form of
the Deferred Share Agreement is attached as Exhibit 10.3 to this Form
10-Q/A, and an attachment to the form Deferred Share Agreement notes
the deferred share grants to the executive officers, effective July
24, 2006.
- Grants of performance shares pursuant to the form of Performance
Share Agreement ("Performance Share Agreement") under the 2006 - 2008
Performance Share Plan for Officers and Key Employees. The form of
the Performance Share Agreement is attached as Exhibit 10.4 to this
Form 10-Q/A, and an attachment to the form Performance Share Agreement
notes the performance share grants to the executive officers,
effective July 24, 2006.
For Gerard J. Arpey, the Committee determined that an increase of Mr.
Arpey's compensation was necessary based on several considerations,
including:
- According to the data and recommendations of the Committee's
independent compensation consultants, the adjustments were required to
begin to bring Mr. Arpey's compensation more in-line with median CEO
compensation at comparably-sized companies and other airlines.
- The need to retain Mr. Arpey over the long-term.
- Mr. Arpey declined base salary increases upon his promotion to
CEO in 2003, and in each of 2004 and 2005 (other than the 1.5% pay
increase offered to all management employees).
- Internal equity related to the market-rate salary of the
Company's new Chief Financial Officer.
At the July 2006 meetings of the Committee and the Board, the
following compensation initiatives were therefore approved for Mr.
Arpey:
- Base salary increase to $650,000.
- Long-term incentive grants (effective July 24, 2006), comprised of:
- 75,000 stock-settled Stock Appreciation Rights
- 20,000 Deferred Shares
- 95,000 Performance Shares
- 58,000 career performance shares (pursuant to the terms of the
Career Performance Shares, Deferred Stock Award Agreement between
the Company and Mr. Arpey, dated as of July 25, 2005. The form
of this agreement is attached as Exhibit 10.6 to the Company's
report on Form 10-Q for the quarterly period ended June 30, 2005.)
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Item 6. Exhibits
The following exhibits are included herein:
10.1 Form of Stock Appreciation Right Agreement under the 1998 Long
Term Incentive Plan, as Amended (with awards to executive officers
noted)
10.2 Amendment to the 1998 Long Term Incentive Plan, as Amended, dated
as of July 19, 2006
10.3 Form of 2006 Deferred Share Award Agreement (with awards to
executive officers noted)
10.4 Form of Performance Share Agreement under the 2006 - 2008
Performance Share Plan for Officers and Key Employees (with awards
to executive officers noted)
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMR CORPORATION
Date: July 28, 2006 BY: /s/ Thomas W. Horton
Thomas W. Horton
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
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Exhibit 10.1
STOCK APPRECIATION RIGHT AGREEMENT UNDER THE
AMR CORPORATION 1998 LONG TERM INCENTIVE PLAN, AS AMENDED
STOCK APPRECIATION RIGHT AGREEMENT (this "Agreement")
granted effective as of July 24, 2006, by AMR Corporation, a
Delaware corporation (the "Corporation"), to
______________________, employee number 000000, an employee
of the Corporation or one of its Subsidiaries or Affiliates
(the "Grantee").
W I T N E S S E T H:
WHEREAS, the stockholders of the Corporation approved
the AMR Corporation 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 stock
appreciation rights in respect of shares of the
Corporation's Common Stock (as later defined) to those
individuals selected by the Compensation Committee or, in
lieu thereof, the Board of Directors of the Corporation (the
"Board"); and
WHEREAS, the Board has determined that the Grantee is
eligible under the 1998 Plan and that it is to the advantage
and interest of the Corporation to grant the stock
appreciation right provided for herein to the Grantee as an
incentive for Grantee to remain in the employ of the
Corporation or one of its Subsidiaries or Affiliates, and to
provide Grantee an incentive to increase the value of the
Corporation's Common Stock, $1 par value (the "Common
Stock").
NOW, THEREFORE:
1. Stock Appreciation Right Grant. The Corporation hereby
grants to the Grantee effective the date of this Agreement a
stock appreciation right, subject to the terms and
conditions hereinafter set forth, in respect of an aggregate
of xx,000 shares of Common Stock. The base price ("Base
Price") of each such stock appreciation right is $23.21 per
share (which is the Fair Market Value of the Common Stock on
the date hereof). The stock appreciation right granted
hereby is 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 Aggregate Number of Shares
First Anniversary of Grant Date 20% of total award
Second Anniversary of Grant Date 40% of total award
Third Anniversary of Grant Date 60% of total award
Fourth Anniversary of Grant Date 80% of total award
Fifth Anniversary of Grant Date 100% of total award
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provided, that in no event shall this stock appreciation
right be exercisable in whole or in part ten years from the
date hereof. The right to exercise this stock appreciation
right 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 Grantee's rights hereunder.
2. Restriction on Exercise. Notwithstanding any other
provision hereof, this stock appreciation right 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. Exercise. This stock appreciation right may be
exercised with respect to all or any part of the shares of
Common Stock then subject to such exercise in accordance
with Section 1 pursuant to whatever procedures may be
adopted from time to time by the Corporation. Upon the
exercise of this stock appreciation right, in whole or in
part, the Grantee shall be entitled to receive from the
Corporation a number of shares of Stock equal in value to
the excess of the Fair Market Value (on the date of
exercise) of one share of Stock over the Base Price,
multiplied by the number of shares in respect of which the
stock appreciation right is being exercised. The number of
shares to be issued shall be calculated on the basis of the
Fair Market Value of the shares on the date of exercise,
with any fractional share being payable in cash based on the
Fair Market Value on the date of exercise. Notwithstanding
the foregoing, the Committee may elect, at any time and from
time to time, in lieu of issuing all or any portion of the
shares of Stock otherwise issuable upon any exercise of any
portion of this stock appreciation right, to pay the Grantee
an amount in cash or other marketable property of a value
equivalent to the aggregate Fair Market Value on the date of
exercise of the number of shares of Stock that the Committee
is electing to settle in cash or other marketable property.
4. Termination of Stock Appreciation Right. This stock
appreciation right shall terminate and may no longer be
exercised if (i) the Grantee ceases to be an employee of the
Corporation or one of its Subsidiaries or Affiliates; or
(ii) the Grantee becomes an employee of a Subsidiary that is
not wholly owned, directly or indirectly, by the
Corporation; or (iii) the Grantee takes a leave of absence
without reinstatement rights, unless otherwise agreed in
writing between the Corporation (or one of its Subsidiaries
or Affiliates) and the Grantee; except that
(a) If the Grantee's employment by the Corporation (or
any Subsidiary or Affiliate) terminates by reason of
death, the vesting of the stock appreciation right will
be accelerated and the stock appreciation right will
remain exercisable until its expiration;
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(b) If the Grantee's employment by the Corporation (or
any Subsidiary or Affiliate) terminates by reason of
Disability, the stock appreciation right will continue
to vest in accordance with its terms and may be
exercised until its expiration; provided, however, that
if the Grantee dies after such Disability the vesting
of the stock appreciation right will be accelerated and
the stock appreciation right will remain exercisable
until its expiration;
(c) Subject to Section 7(c), if the Grantee's
employment by the Corporation (or any Subsidiary or
Affiliate) terminates by reason of Normal or Early
Retirement, the stock appreciation right will continue
to vest in accordance with its terms and may be
exercised until its expiration; provided, however, that
if the Grantee dies after Retirement the vesting of the
stock appreciation right will be accelerated and the
stock appreciation right will remain exercisable until
its expiration;
(d) If the Grantee's employment by the Corporation (or
any Subsidiary or Affiliate) is involuntarily
terminated by the Corporation or a Subsidiary or
Affiliate (as the case may be) without Cause, the stock
appreciation right 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 stock appreciation right, whichever period is
shorter; and
(e) In the event of a Change in Control or a Potential
Change in Control of the Corporation, this stock
appreciation right shall become exercisable in
accordance with the 1998 Plan, or its successor.
5. Adjustments in Common Stock. In the event of a 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 base price per share applicable in
respect to the stock appreciation rights subject to this
Agreement.
6. Non-Transferability of Stock Appreciation Right.
Unless the Board shall permit (on such terms and conditions
as it shall establish), a stock appreciation right may not
be transferred except by will or the laws of descent and
distribution to the extent provided herein. During the
lifetime of the Grantee this stock appreciation right may be
exercised only by him or her (unless otherwise determined by
the Board).
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7. Miscellaneous.
(a) This stock appreciation right (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 without the written consent of both
the Corporation and the Grantee. Notwithstanding the
foregoing, this Agreement may be amended from time to time
without the written consent of the Grantee pursuant to
Section 10 below and as permitted by the 1998 Plan (or its
successor). No contract or right of employment shall be
implied by this stock appreciation right.
(b) If this stock appreciation right is assumed or a
new stock appreciation right is substituted therefor in
any corporate reorganization (including, but not
limited to, any transaction of the type referred to in
Section 424(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
stock appreciation right to be employment by the
Corporation.
(c) In the event the Grantee's employment is
terminated by reason of Early or Normal Retirement and
the Grantee subsequently is employed by a competitor of
the Corporation, the Corporation reserves the right,
upon notice to the Grantee, to declare the stock
appreciation right forfeited and of no further
validity.
(d) In consideration of the Grantee's privilege to
participate in the 1998 Plan, the Grantee agrees (i)
not to disclose any trade secrets of, or other
confidential/restricted information of, American
Airlines, Inc. ("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
then current employees of American or any other
subsidiaries of the Corporation to join the Grantee at
his or her new place of employment after his or her
employment with American or its Affiliates is
terminated.
8. Securities Law Requirements. The Corporation shall not
be required to issue shares upon the exercise of this stock
appreciation right 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 Grantee to furnish to the Corporation, prior to
the issuance of any shares of Stock in connection with the
exercise of this stock appreciation right, an agreement, in
such form as the Board may from time to time deem
appropriate, in which the Grantee 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.
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9. Stock Appreciation Right Subject to 1998 Plan. This
stock appreciation right shall be subject to all the terms
and provisions of the 1998 Plan and the Grantee 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.
10. American Jobs Creation Act. In addition to amendments
permitted by Section 7(a) above, amendments to this
Agreement may be made by the Corporation, without the
Grantee's consent, in order to ensure compliance with the
American Jobs Creation Act of 2004. And, further, amendments
may be made to the 1998 Plan to ensure such compliance,
which amendments may impact this Agreement.
IN WITNESS WHEREOF, the Corporation has executed this
stock appreciation right as of the day and year first above
written.
AMR Corporation
- --------------------------- ----------------------------
Grantee Kenneth W. Wimberly
Corporate Secretary
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Grant of Stock Appreciation Rights
July 24, 2006
# of Stock
Appreciation
Officer Name Rights
G. J. Arpey 75,000
D.P. Garton 38,500
T.W. Horton 38,500
G.F. Kennedy 21,800
R.W. Reding 21,800
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Exhibit 10.2
AMENDMENT TO THE
AMR CORPORATION 1998 LONG TERM INCENTIVE PLAN, AS AMENDED
WHEREAS, AMR Corporation (the "Corporation") adopted
the AMR Corporation 1998 Long Term Incentive Plan, as
Amended (the "LTIP") to foster and promote the long-term
financial success of the Company;
WHEREAS, when the LTIP was initially adopted, the grant
of stock appreciation rights would have resulted in adverse
financial accounting charges for the Corporation as compared
to the grant of stock options;
WHEREAS, such stock appreciation rights had
historically been used primarily in connection with stock
options grants to executive officers subject to the
reporting requirements under Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), who prior
to amendments to the rules under such Section 16 of the 1934
Act adopted in the 1990s, were generally required to hold
the stock received upon the exercise of an option for a
period of at least six months to avoid being subject to the
disgorgement requirements under the short-swing profit
provisions of such Section 16;
1
WHEREAS, for the above reasons, the LTIP currently
permits the grant of stock appreciation rights in tandem
with a grant of stock options, such that an employee may be
granted a stock appreciation right to the extent that the
employee has also been granted a corresponding stock option;
WHEREAS, due to changes in the financial accounting
rules that took effect as of January 1, 2006, there is no
longer any difference between the accounting treatment of a
stock option and a stock appreciation right settled in
shares of stock;
WHEREAS, because the use of stock settled stock
appreciation rights would convey a substantially comparable
incentive for the recipient of a stock option award, the
Corporation believes that affording the Compensation
Committee of the Board of Directors the right to award stock
appreciation rights independently of any stock option would
be in the best interests of the Corporation, its
shareholders and its employees; and
WHEREAS, the Company has reserved the right to amend
the LTIP under Section 13 thereof.
NOW, THEREFORE, the Plan is hereby amended in the
manner set forth below:
1. Section 1(v) of the LTIP is amended to delete the
definition of Stock Appreciation Right, and to insert in
lieu thereof a new definition of such term, to read as
follows:
"Stock Appreciation Right" means the right pursuant to
an award granted under Section 6 below which entitles
the grantee to receive, upon the exercise thereof in
whole or in part, an amount in shares of Stock equal in
value to the excess of the Fair Market Value (on the
date of exercise) of one share of Stock over the base
price per share specified with respect to the Stock
Appreciation Right, multiplied by the number of shares
in respect of which the Stock Appreciation Right shall
have been exercised. The number of shares to be issued
shall be calculated on the basis of the Fair Market
Value of the shares on the date of exercise, with any
fractional share being payable in cash based on the
Fair Market Value on the date of exercise.
Notwithstanding the foregoing, the Committee may elect,
at any time and from time to time, in lieu of issuing
all or any portion of the shares of Stock otherwise
issuable upon any exercise of any such Stock
Appreciation Right, to pay the grantee an amount in
cash or other marketable property of a value equivalent
to the aggregate Fair Market Value on the date of
exercise of the number of shares of Stock that the
Committee is electing to settle in cash or other
marketable property.
2. Section 6 of the LTIP is amended to delete such
section in its entirety, and to insert in lieu thereof a new
Section 6, to read as follows:
Section 6. Stock Appreciation Rights.
(a) Stock Appreciation Rights may be granted
alone, in addition to, or in tandem with, other awards
granted under the Plan. Any Stock Appreciation Right
granted under the Plan shall be in such form as the
Committee may from time to time approve. Stock
Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under the Plan.
In the case of a Non-Qualified Stock Option, such
rights may be granted either at or after the time of
the grant of such Stock Option. In the case of an
Incentive Stock Option, such rights may be granted only
at the time of grant of such Stock Option.
2
A Stock Appreciation Right or applicable portion
thereof granted with respect to a given Stock Option
shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify
at grant where a Stock Appreciation Right is granted
with respect to less than the full number of shares
covered by a related Stock Option.
A Stock Appreciation Right may be exercised by a
grantee, subject to Section 6(b), in accordance with
the procedures established by the Committee from time
to time for such purposes. Upon such exercise, the
grantee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b).
Stock Options relating to exercised Stock Appreciation
Rights, and Stock Appreciation Rights related to any
exercised Stock Option, shall no longer be exercisable
to the extent that the related Stock Appreciation
Rights or Stock Option, as the case may be, have been
exercised.
(b) Terms and Conditions. Stock Appreciation
Rights shall be subject to such terms and conditions,
not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee,
including the following:
(i) Stock Appreciation Rights shall be
exercisable at such time and subject to such
conditions as the Committee shall specify, except
that any Stock Appreciation Right granted in
tandem with a Stock Option (or portion thereof)
shall be exercisable only at such time or times
and to the extent that the Stock Options to which
they relate shall be exercisable in accordance
with the provisions of Section 5 and this
Section 6 of the Plan.
(ii) Upon the exercise of a Stock
Appreciation Right, a grantee shall be entitled to
receive an amount in shares of Stock (or, solely
to the extent determined by the Committee, cash)
equal in value to the excess of the Fair Market
Value (on the date of exercise) of one share of
Stock over the base price per share specified with
respect to the Stock Appreciation Right,
multiplied by the number of shares in respect of
which the Stock Appreciation Right shall have been
exercised. When payment is to be made in shares,
the number of shares to be paid shall be
calculated on the basis of the Fair Market Value
of the shares on the date of exercise, with any
fractional share being payable in cash based on
the Fair Market Value on the date of exercise.
Notwithstanding anything in this Section 6(b)(ii)
to the contrary, the base price in respect of any
Stock Appreciation Right shall not be less than
the Fair Market Value of the Stock on the date the
Stock Appreciation Right is granted, or in the
case of a Stock Appreciation Right granted in
tandem with a Stock Option, the Fair Market Value
on the date the related Stock Option was granted.
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(iii) Stock Appreciation Rights shall be
transferable only to the extent that Stock Options
may be transferable under Section 5(e) of the
Plan.
(iv) Upon the exercise of a Stock
Appreciation Right, regardless of whether granted
on a stand-alone basis or in tandem with any Stock
Option, only the number of shares of Stock
actually issued in connection with the exercise of
such Stock Appreciation Right (and not the
corresponding number of shares of Stock related to
the Stock Appreciation Right (or portion thereof)
being exercised) shall be treated as issued under
the Plan and, for the purpose of the limitation
set forth in Section 3 of the Plan on the number
of shares of Stock issuable under the Plan, the
remaining number of shares of Stock related to
such exercised Stock Appreciation Right (or
portion thereof), including the corresponding
number of shares related to any tandem Stock
Option cancelled upon such exercise, shall again
be available for issuance under the Plan.
3. The amendment made hereby shall be effective as of
July 19, 2006. Except as otherwise modified herein, the
provisions of the LTIP shall continue in full force and
effect, without amendment.
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Exhibit 10.3
DEFERRED SHARE AWARD AGREEMENT
This Deferred Share Award Agreement (this "Agreement")
is effective as of July 24, 2006, and is by and between AMR
Corporation, a Delaware corporation (the "Corporation") and
an officer or a key employee of one of the Corporation's
Subsidiaries (the "Employee") as identified in the
notification sent to the Employee described below (the
"Notification").
WHEREAS, pursuant to the AMR Corporation 1998 Long Term
Incentive Plan, as amended (the "LTIP"), the Compensation
Committee of the Board of Directors (the "Committee") has
determined that the Employee is an officer or key employee
and has further determined to make an award of Deferred
Shares from and pursuant to the LTIP to the Employee as an
inducement for the Employee to remain with one of the
Corporation's Subsidiaries and to motivate the Employee
during such employment.
NOW, THEREFORE, the Corporation and the Employee hereby
agree as follows:
1. Grant of Award.
The Employee is hereby granted effective as of July 24,
2006 (the "Grant Date") a deferred share award (the
"Award"), subject to the terms and conditions of this
Agreement, with respect to the number of shares of Common
Stock set forth in the Notification (the "Shares"). Subject
to the terms and conditions of this Agreement, the Shares
covered by the Award will vest, if at all, in accordance
with Section 2 hereof, on July 24, 2009 (such date hereby
established as the "Vesting Date" of the Award).
2. Distribution of Award.
Distribution with respect to the Award, on the Vesting
Date, will occur, if at all, in accordance with the
following terms and conditions:
(a) If the Employee is on the payroll of a Subsidiary
that is wholly owned by the Corporation as of the Vesting
Date, the Shares will be distributed to the Employee on July
24, 2009.
(b) In the event the Employee's employment with a
Subsidiary of the Corporation is terminated prior to the
Vesting Date due to the Employee's death, Disability (as
defined in section 409A(a)(2)(C) of the Internal Revenue
Code of 1986, as amended, (the "Code")), Retirement or
termination not for Cause (each an "Early Termination"), the
Shares covered by the Award will vest on a pro-rata basis
and will be paid to the Employee (or, in the event of the
Employee's death, the Employee's designated beneficiary for
the purposes of the Award, or in the absence of an effective
beneficiary designation, the Employee's estate). The pro-
1
rata basis will be a percentage where the denominator is 36
and the numerator is the number of months from the Grant
Date through the month of Early Termination, inclusive. The
pro-rata Award will be paid (subject to Section 2(e) hereof)
to the Employee (or, in the event of the Employee's death,
the Employee's designated beneficiary for the purposes of
the Award, or in the absence of an effective beneficiary
designation, the Employee's estate) within 60 days after the
Employee's death, Disability, Retirement or termination not
for Cause.
(c) In the event of a Change in Control of the
Corporation (as defined in Section 5 hereof) after the
Vesting Date but prior to the distribution of the Award, the
Award will be distributed in accordance with the terms of
the LTIP.
(d) Notwithstanding the terms of Section 2(a), (b) and
(c), the Award will be forfeited in its entirety if prior to
the Vesting Date:
(i) The Employee's employment with the
Corporation (or a Subsidiary or Affiliate
thereof) is terminated for Cause, or if the
Employee terminates his/her employment with a
Subsidiary of the Corporation;
(ii) The Employee becomes an employee of a
Subsidiary that is not wholly owned by the
Corporation; or
(iii) The Employee takes a leave of absence without
reinstatement rights, unless otherwise agreed in writing
between the Corporation and the Employee.
(e) Notwithstanding the provisions of Section 2(b) hereof,
if the Employee is a person subject to section
409A(a)(2)(B)(i) of the Code, any payment on account of
Retirement or termination not for Cause of the Employee
shall be delayed until the sixth month anniversary of the
date of separation from employment due to Retirement or
termination not for Cause.
3. Transfer Restrictions.
Unless otherwise permitted by the Corporation, the
Award is non-transferable other than by will or by the laws
of descent and distribution, and may not be assigned,
pledged or hypothecated and will 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
Corporation.
4. [Intentionally omitted]
2
5. Miscellaneous.
This Agreement (a) will be binding upon and inure to
the benefit of any successor of the Corporation, (b) will 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. Notwithstanding the foregoing, this
Agreement may be amended from time to time without the
written consent of the Grantee pursuant to Section 7 below
and as permitted by the LTIP (or its successor). No
contract or right of employment will be implied by this
Agreement.
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. ("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 then current employees of American or any other
Subsidiaries of the Corporation to join the Employee at his
or her place of employment after his or her employment with
American or its Affiliates is terminated. The failure by the
Employee to abide by the foregoing obligations shall result
in the Award being immediately forfeited in its entirety.
For purposes of Section 2(c) hereof, the term "Change
in Control" will mean a "change in ownership" or "change in
effective control", or "change in ownership of the assets"
of the Corporation, as determined pursuant to Internal
Revenue Service Notice 2005-1 (or successor guidance thereto
under section 409A of the Code).
The Employee will not have the right to defer
distribution of the Award. Except as provided in this
Agreement, the Committee and the Corporation will not
accelerate distribution of the Award.
Notwithstanding anything in this Agreement to the
contrary, the Committee may elect, at any time and from time
to time, in lieu of issuing all or any portion of the
Shares, to make substitutions for such Shares, all to the
effect that the employee will receive cash or other
marketable property of a value equivalent to what the
Employee would have received in a stock distribution.
Capitalized terms not otherwise defined herein
shall have the meanings set forth for such terms in the
LTIP.
3
6. Adjustments in Awards.
In the event of a Stock dividend, Stock split, merger,
consolidation, re-organization, re-capitalization or other
change in the corporate structure of the Corporation,
appropriate adjustments may be made by the Board of
Directors in the number of Shares awarded.
7. American Jobs Creation Act.
In addition to amendments permitted by Section 5
above, amendments to this Agreement may be made by the
Corporation, without the Employee's consent, in order to
ensure compliance with the American Jobs Creation Act of
2004.
IN WITNESS HEREOF, the Employee and the Corporation
have executed this Agreement as of the day and year first
above written.
Employee AMR CORPORATION
______________________________ __________________________
Kenneth W. Wimberly
Corporate Secretary
4
Grant of Deferred Shares
July 24, 2006
# Deferred
Shares
Officer Name Granted
G. J. Arpey 20,000
D.P. Garton 11,950
T.W. Horton 8,400
G.F. Kennedy 4,700
R.W. Reding 4,700
5
Exhibit 10.4
2006 - 2008 PERFORMANCE SHARE AGREEMENT
This 2006 - 2008 Performance Share Agreement ("Agreement")
effective as of July 24, 2006, by and between AMR Corporation, a
Delaware corporation (the "Corporation"), and an officer or key
employee of one of the Corporation's Subsidiaries (the "Employee"
or the "Recipient") as identified in the notification sent to the
Employee described below (the "Notification").
WHEREAS, pursuant to the 2006 - 2008 Performance Share Plan
for Officers and Key Employees, as adopted by the Board of
Directors of the Corporation (the "Board"), the Compensation
Committee of the Board (the "Committee") has determined to make an
award (the "Award", as set forth in the Notification) to the
Employee (subject to the terms of the Plan and this Agreement), as
an inducement for the Employee to remain an employee of one of the
Corporation's Subsidiaries during the time frame of 2006 - 2008
and to retain and motivate such Employee during his/her
employment.
This Agreement sets forth the terms and conditions attendant
to the Award under the Plan.
1. Grant of Award. Subject to the terms and conditions of
this Agreement, the Recipient is hereby granted an Award as of
July 24, 2006 (the "Grant Date"). The Award shall vest, if at
all, in accordance with Section 2 of this Agreement. On the date
the Award vests (if at all), Recipient will receive a combination
of cash and the Corporation's Common Stock. The Committee will
determine the amount of the Award to be paid in cash (the "Cash
Award") and the amount of the Award to be settled in shares of the
Corporation's Common Stock (the "Stock Distribution"). The Cash
Award will be paid on April 30, 2009 (such Cash Award will be made
pursuant to the Annual Incentive Plan). The Stock Distribution
will occur on April 16, 2009 (such Stock Distribution will be made
from and pursuant to the AMR Corporation 1998 Long Term Incentive
Plan, as amended (the "LTIP")). The sum of the Cash Award and the
Stock Distribution will equal the product of (a) the Fair Market
Value of the Common Stock on April 15, 2009, and (b) the number of
shares of Common Stock comprising the Award.
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 Recipient's employment with one of the
Corporation's Subsidiaries is terminated prior to the end of the
three year measurement period set forth in Schedule A (the
"Measurement Period") due to the Recipient's death, Disability (as
defined in section 409A(a)(2)(C) of the Internal Revenue Code of
1986, as amended, (the "Code")), Retirement (subject to the second
paragraph of Section 4) or termination not for Cause (each an
"Early Termination") the Award will vest, if at all, on a pro-rata
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
1
beneficiary designation, the Employee's estate). The pro-rata
basis will be a percentage where the denominator is 36 and the
numerator is the number of months from January 1, 2006 through the
month of Early Termination, inclusive. This pro-rata basis will
be paid to the Recipient at the same time as Cash Awards and Stock
Distributions are made to then current employees who have Awards
under the Plan, subject to Section 2(f) of this Agreement.
(c) In the event Recipient's employment with one of the
Corporation's Subsidiaries is terminated for Cause, or if the
Recipient terminates his/her employment with such Subsidiary, each
occurring prior to April 15, 2009, the Award shall be forfeited in
its entirety.
(d) If prior to April 15, 2009, the Recipient becomes an employee
of a Subsidiary that is not wholly owned, directly or indirectly,
by the Corporation, or if the Recipient begins a leave of absence
without reinstatement rights, then in each case the Award shall be
forfeited in its entirety.
(e) In the event of a Change in Control of the Corporation prior
to the distribution of the Award, the Award will be paid within 60
days of the date of the Change in Control. In such event, the
vesting date will be the date of the Change in Control. The term
"Change in Control" is defined for purposes of this Agreement in
Section 7.
(f) Notwithstanding the provisions of Section 2(b), if the
Employee is a person subject to section 409A(a)(2)(B)(i) of the
Code, any payment on account of Retirement or termination not for
Cause of the Employee shall be delayed until the sixth month
anniversary of the date of separation from employment due to
Retirement or termination not for Cause.
3. 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 Recipient (or the Recipient's successor in
interest after the Recipient'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
Committee.
4. 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
Recipient. Notwithstanding the foregoing, this Agreement may be
amended from time to time without the written consent of the
Grantee pursuant to Section 8 below and pursuant to the Plan. No
contract or right of employment shall be implied by this
Agreement.
In the event the Employee's employment is terminated by
reason of Early or Normal Retirement and the Employee is
subsequently employed by a competitor of the Corporation, the
Corporation reserves the right, upon notice to the Employee, to
declare the Award forfeited and of no further validity.
2
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. ("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
then current employees of American or any other Subsidiaries of
the Corporation 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 failure by the Employee to abide by
the foregoing obligations shall result in the Award being
forfeited in its entirety.
The Employee shall not have the right to defer any of
the Cash Payment or the Stock Distribution. Except as provided in
this Agreement, the Committee and Corporation shall not accelerate
the Cash Payment or the Stock Distribution.
Any Cash Award will be net of applicable withholding and
social security taxes. The Employee will pay to the Corporation
timely any and all such taxes on account of the Stock
Distribution. The failure by the Employee to pay timely such taxes
will result in a withholding from any and all payments from the
Corporation or any Subsidiary to the Employee in order to satisfy
such taxes.
Notwithstanding anything in this Agreement to the
contrary, the Committee may elect, at any time and from time to
time, in lieu of issuing all or any portion of the stock
comprising the Stock Distribution, to make substitutions for such
stock, all to the effect that the employee will receive cash or
other marketable property of a value equivalent to what the
Employee would have received in a stock distribution.
5. [Intentionally Omitted]
6. Adjustments in Awards. In the event of a Stock
dividend, Stock split, merger, consolidation, re-organization, re-
capitalization or other change in the corporate structure of the
Corporation, appropriate adjustments may be made by the Board of
Directors to the Award.
7. Incorporation of LTIP Provisions. Capitalized terms not
otherwise defined herein (inclusive of Schedule A) shall have the
meanings set forth for such terms in the LTIP. For purposes of
Section 2(e), the term "Change in Control" will mean a "change in
ownership" or "change in effective control" or "change in
ownership of the assets" of the Corporation, as determined
pursuant to Internal Revenue Service Notice 2005-1 (or successor
guidance thereto under section 409A of the Code).
8. American Jobs Creation Act. In addition to amendments
permitted by Section 4 above, amendments to this Agreement may be
made by the Corporation, without the Employee's consent, in order
to ensure compliance with the American Jobs Creation Act of 2004.
3
IN WITNESS HEREOF, the Recipient and the Corporation
have executed this Performance Share Agreement as of the day,
month and year set forth above.
RECIPIENT AMR CORPORATION
_____________________________ _____________________
Kenneth W. Wimberly
Corporate Secretary
4
Schedule A
2006 - 2008 PERFORMANCE SHARE PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 2006 - 2008 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.
Definitions
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 Committee, or its
successor, of the AMR Board of Directors.
"Comparator Group" is defined as the following seven U.S. based
carriers including, AirTran Airways, Alaska Airlines, AMR
Corporation, Continental Airlines, Inc., JetBlue Airways,
Southwest Airlines Co. and US Airways, Inc.
"Corporate Objectives" is defined as being the objectives
established by the Committee at the beginning of each fiscal year
during the Measurement Period.
"Measurement Period" is defined as the three year period beginning
January 1, 2006 and ending December 31, 2008.
"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.
"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).
5
Accumulation of Shares
Any distribution under the Plan with respect to the shares
will be determined by (i) the Corporation's TSR rank within the
Comparator Group and/or (ii) the Corporation's attainment of the
Corporate Objectives during each year of the Measurement Period
and (iii) the terms and conditions of the award agreement between
the Corporation and the employee. The distribution percentage of
shares pursuant to the TSR metric and 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%
6
4 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 4 3 2 1
Payout % 75% 100% 135% 175%
3 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 3 2 1
Payout % 50% 135% 175%
At the end of each fiscal year during the Measurement Period, the
Committee will determine whether the Corporate Objectives have
been achieved. At the end of the Measurement Period the Committee
will determine the distribution of shares based upon the TSR
metric and, with respect to senior officer awards, the Corporate
Objectives. The number of shares that may vest will range from 0%
to 175% of the target award.
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 TSR metric 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 awards
will be distributed on April 16, 2008, or such date the award is
approved for distribution by the Committee.
The distribution of any shares under this Plan is subject to the
Corporation having sufficient stock in a stock plan to make such a
distribution. In the event the Corporation does not have
sufficient shares of stock in such a stock plan for the
distribution contemplated by this Plan, the Committee will have
the authority and discretion to make substitutions for such
shares, all to the effect that the employee will receive cash or
other marketable property of a value equivalent to what the
employee would have received in a stock distribution.
7
Corporate Objectives will be used as a metric for determining the
distribution of shares only for senior officers of the Corporation
(or a Subsidiary thereof) unless the Committee determines
otherwise.
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 any
case to the extent permitted under proposed Treasury Regulation
1.409A-3(d) and/or 1.409A-3(e), or successor guidance thereto.
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 then
current employees of American Airlines, Inc. or any other
Subsidiaries of AMR to join the employee at his or her new place
of employment after his or her employment with American Airlines,
Inc. or its Affiliates is terminated. The failure by the employee
to abide by the foregoing obligations shall result in the award
being forfeited in its entirety.
The Committee may amend, suspend, or terminate the Plan at any
time.
8
Grant of 2006/2008 Performance Shares
July 24, 2006
# 2006/2008
Performance
Officer Name Shares Granted
G. J. Arpey 95,000
D.P. Garton 61,000
T.W. Horton 61,000
G.F. Kennedy 35,000
R.W. Reding 35,000
9
Exhibit 31.1
I, Gerard J. Arpey, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of AMR
Corporation; and
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report.
Date: July 28, 2006 /s/ Gerard J. Arpey
Gerard J. Arpey
Chairman, President and Chief
Executive Officer
Exhibit 31.2
I, Thomas W. Horton, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of AMR
Corporation; and
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report.
Date: July 28, 2006 /s/ Thomas W. Horton
Thomas W. Horton
Executive Vice President and Chief
Financial Officer