def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
AMR Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing. |
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April 17, 2009
Dear Stockholder,
You are invited to attend AMR Corporations annual meeting
of stockholders to be held at the American Airlines
Training & Conference Center in Fort Worth,
Texas, on Wednesday, May 20, 2009, at 8:00 a.m.,
Central Daylight Saving Time.
Details of the business to be conducted at the meeting are set
forth in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement. In addition, enclosed is our
2008 Annual Report to Stockholders. Directors and officers of
the company will be present at the meeting to answer questions
that you and other stockholders may have.
Your vote is important. Please read the attached Proxy Statement
carefully and submit your proxy as soon as possible. You have a
choice of submitting your proxy by using the Internet, by
telephone, or by completing and returning by mail the enclosed
proxy card or voting instruction form.
The Board of Directors and management look forward to seeing you
at the meeting.
Sincerely,
Gerard J. Arpey
Chairman, President
and Chief Executive Officer
Important notice regarding the availability of proxy
materials for the annual meeting to be held on May 20,
2009: Our official Notice of Annual Meeting of Stockholders,
Proxy Statement and 2008 Annual Report to Stockholders are also
available at our website located at
www.aa.com/investorrelations.
P.O. Box
619616, MD 5675, Dallas/Fort Worth International Airport, TX
75261-9616
2009
ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
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Exhibit A-1
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Back Cover
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P.O. Box 619616,
MD 5675, Dallas/Fort Worth International Airport, TX
75261-9616
OFFICIAL
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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DATE |
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Wednesday, May 20, 2009 |
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TIME |
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Registration Begins: 7:15 a.m., Central Daylight
Saving Time
Meeting Begins: 8:00 a.m., Central Daylight Saving
Time |
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PLACE |
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American Airlines Training & Conference Center
Flagship Auditorium
4501 Highway 360 South
Fort Worth, Texas 76155 |
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ITEMS OF BUSINESS |
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(1) to elect thirteen directors;
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(2) to ratify the selection by the Audit Committee of
Ernst & Young LLP as our independent auditors for the
year ending December 31, 2009;
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(3) to approve the AMR Corporation 2009 Long Term Incentive
Plan;
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(4) to consider two stockholder proposals; and
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(5) to transact such other matters as may properly come
before the annual meeting or any adjournments or postponements
thereof.
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RECORD DATE |
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You are entitled to vote at the annual meeting only if you were
a stockholder of record at the close of business on Monday,
March 23, 2009. |
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FINANCIAL
STATEMENTS |
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Audited financial statements for the year ended
December 31, 2008 and the related Managements
Discussion and Analysis of Financial Condition and Results of
Operations are included in our Annual Report on
Form 10-K,
which is contained in the 2008 Annual Report to Stockholders
included in this mailing. |
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ANNUAL MEETING ADMISSION |
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To attend the annual meeting, you must have an admission ticket
(printed on, or included with, the proxy card or voting
instruction form) or other proof of beneficial ownership of AMR
Corporation shares as of March 23, 2009 that is acceptable
to us (such as a statement from your broker reflecting your
stock ownership as of March 23, 2009). We may ask each
stockholder to present valid governmentally-issued picture
identification, such as a drivers license or passport. For
security reasons, all bags are subject to search, and all
persons who attend the meeting may be subject to a metal
detector and/or a hand wand search. The use of cameras or other
recording devices at the annual meeting is prohibited. If you do
not have valid picture identification and either an admission
ticket or appropriate documentation verifying that you owned our
stock on March 23, 2009, or you do not comply with our
security measures, you will not be admitted to the annual
meeting. |
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VOTING BY PROXY |
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Your vote is important. Please vote by using the Internet, by
telephone, or by signing and returning the enclosed proxy card
or voting instruction form as soon as possible to ensure your
representation at the annual meeting. The proxy card or voting
instruction form contains instructions for each of these voting
options. |
By Order of the Board of Directors,
Kenneth W. Wimberly
Corporate Secretary
April 17, 2009
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P.O. Box 619616,
MD 5675, Dallas/Fort Worth International Airport, TX
75261-9616
PROXY
STATEMENT
Annual
Meeting of Stockholders
May 20, 2009
We are mailing this Proxy Statement and the form of proxy to
stockholders on or around April 17, 2009 in connection with
a solicitation of proxies by the Board of Directors of AMR
Corporation (the Company, we or
us) for use at the annual meeting of stockholders
that we are holding on May 20, 2009. This Proxy Statement
also includes information regarding our wholly-owned and
principal subsidiary, American Airlines, Inc. The annual meeting
of stockholders will be held at the American Airlines
Training & Conference Center, Flagship Auditorium,
4501 Highway 360 South, Fort Worth, Texas 76155, on
Wednesday, May 20, 2009, at 8:00 a.m., Central
Daylight Saving Time. You can find a map of the area and
directions to the American Airlines Training &
Conference Center on the back cover of this Proxy Statement and
on the admission ticket. The physical address of our principal
executive offices is AMR Corporation, 4333 Amon Carter
Boulevard, MD 5675, Fort Worth, Texas 76155. Our mailing
address is set forth above.
INTERNET AVAILABILITY AND ELECTRONIC DELIVERY OF PROXY
DOCUMENTS
Important Notice Regarding the Availability of Proxy
Materials for the Stockholder Meeting to be held on May 20,
2009. Our official Notice of Annual Meeting of Stockholders,
Proxy Statement and 2008 Annual Report to Stockholders are
available on our website located at
www.aa.com/investorrelations.
As an alternative to receiving printed copies of these materials
in future years, you may elect to receive and access future
annual meeting materials electronically. If your shares are
registered directly in your name with American Stock
Transfer & Trust Company, our stock registrar and
transfer agent, you can choose to receive and access future
annual meeting materials electronically by going to American
Stock Transfer & Trust Companys website
(www.amstock.com) and clicking on Shareholder
Services or by following the instructions provided when
voting via the Internet.
If you hold your shares of our stock in a brokerage account or
through some other third party in street name, please refer to
the information provided by your bank, broker or nominee for
instructions on how to elect to receive and view future annual
meeting materials over the Internet.
ABOUT THE ANNUAL MEETING
What
is the purpose of the annual meeting?
The purpose of the annual meeting of stockholders is to allow
you to vote upon matters, which we outline in this Proxy
Statement. These matters include (a) election of directors,
(b) ratification of the Audit Committees selection of
our independent auditors for 2009, (c) approval of the AMR
Corporation 2009 Long Term Incentive Plan and
(d) consideration of two stockholder proposals. In
addition, management will report on our performance during 2008.
Where
is the annual meeting?
The annual meeting of stockholders will be held at the American
Airlines Training & Conference Center, Flagship
Auditorium, 4501 Highway 360 South, Fort Worth, Texas
76155, on Wednesday, May 20, 2009, at
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8:00 a.m. (Central Daylight Saving Time). You can find a
map of the area and directions on the back cover of this Proxy
Statement and on the admission ticket.
Who
can attend the annual meeting?
Stockholders of record as of the close of business on
March 23, 2009, or their duly appointed proxies, may attend
the annual meeting. The Flagship Auditorium (which is the site
of the annual meeting) can accommodate 275 people.
Admission to the annual meeting will be on a first-come,
first-served basis. Registration will begin at 7:15 a.m.
(Central Daylight Saving Time), on May 20, 2009, in the
reception area outside the Flagship Auditorium. The doors to the
Flagship Auditorium will open at 7:45 a.m. (Central
Daylight Saving Time).
If you plan to attend the annual meeting, you must have an
admission ticket. We have included this ticket on the proxy card
or with the voting instruction form. If you do not have an
admission ticket, you will need to bring other proof of
beneficial ownership of our stock as of March 23, 2009 that
is acceptable to us, such as a copy of a statement from your
broker reflecting your stock ownership. In addition, we may ask
stockholders for valid governmentally-issued picture
identification, such as a drivers license or passport. For
security reasons, all bags are subject to search, and all
persons who attend the annual meeting may be subject to a metal
detector
and/or a
hand wand search. The use of cameras or other recording devices
at the annual meeting is prohibited. If you do not have valid
picture identification and either an admission ticket or
appropriate documentation verifying that you owned our stock on
March 23, 2009, or you do not comply with our security
measures, you will not be admitted to the annual meeting. All
stockholders will be required to check-in at the registration
desk.
What
is the quorum for the annual meeting?
The presence, in person or by proxy, of the holders of at least
one-third of the issued and outstanding shares entitled to vote
at the annual meeting is necessary to constitute a quorum at the
annual meeting, except with respect to proposal 3. We will
count abstentions and broker non-votes as present for
determining whether a quorum exists. In order for
proposal 3 to be approved, the total votes cast on the
proposal must represent over 50 percent of the voting power
of the issued and outstanding shares entitled to vote at the
annual meeting. In accordance with the voting procedures of the
New York Stock Exchange (NYSE), we will count
abstentions but not broker non-votes as present for determining
whether a quorum exists. If a quorum is not present in person or
represented by proxies at the annual meeting, the holders of
shares entitled to vote at the annual meeting who are present in
person or represented by proxies will have the power to adjourn
the annual meeting from time to time until a quorum is present
in person or represented by proxies. At any such adjourned and
reconvened meeting at which a quorum is present in person or
represented by proxies, any business may be transacted that
might have been transacted at the original meeting.
What
is the difference between a stockholder of record and a
street name holder?
If your shares are registered directly in your name with
American Stock Transfer & Trust Company, our
stock transfer agent, you are considered the stockholder of
record with respect to those shares. If you are a stockholder of
record, we have sent the proxy statement, annual report and
proxy card directly to you. If you hold your shares in a stock
brokerage account or your shares are held by a bank or other
nominee, you are considered the beneficial owner of these
shares, and your shares are held in street name. The
proxy statement, annual report and proxy card have been
forwarded to you by your broker, bank or nominee who is
considered, with respect to those shares, the stockholder of
record. As the beneficial owner, you have the right to direct
your broker, bank or nominee how to vote your shares by using
the voting instructions included in the mailing or by following
their instructions for voting by telephone or the Internet.
Who is
entitled to vote at the annual meeting?
Only stockholders of record at the close of business on
March 23, 2009 are entitled to receive notice of the annual
meeting and to vote the shares of common stock that they held on
that date at the annual meeting. If you were a stockholder of
record on March 23, 2009, you will be entitled to vote all
of the shares that you held on that date at the annual meeting
or any postponements or adjournments of the meeting. If your
shares are held in street name, you
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may vote your shares in person at the annual meeting only if you
obtain a legal proxy from the broker or nominee that held your
shares on March 23, 2009. On March 23, 2009, we had
279,011,993 shares of common stock outstanding. Each
stockholder of record on March 23, 2009 will be entitled to
one vote in person or by proxy for each share of stock held.
If you are an employee/participant holding shares of our common
stock as an investment option under the $uper $aver 401(k) Plan,
you will receive one proxy card for all the shares that you own
through the $uper $aver 401(k) Plan. The proxy card will serve
as your voting instructions for the investment manager of the
$uper $aver 401(k) Plan (Bank of America, National Association).
To allow sufficient time for the investment manager to vote your
$uper $aver 401(k) Plan shares, the investment manager must
receive your voting instructions by 11:59 p.m., Eastern
Daylight Saving Time, on May 15, 2009. The number of shares
you are eligible to vote is based on your unit balance in the
$uper $aver 401(k) Plan on March 23, 2009. If the
investment manager does not receive your instructions by that
date, it will vote your $uper $aver 401(k) Plan shares in the
same proportion as shares for which instructions were received
from other employee/participants in the $uper $aver 401(k) Plan.
As of March 23, 2009, the $uper $aver 401(k) Plan held an
aggregate 567,400 shares of our common stock on behalf of
employees/participants.
Please note that having unexercised stock options, in and
of itself, is not sufficient to entitle the holder of such
options to vote at or attend the annual meeting. You must be a
stockholder of record or a street name holder at the close of
business on March 23, 2009 to vote the shares of common
stock you held on that date at the annual meeting.
How do
I vote before the annual meeting?
Stockholders of record on March 23, 2009 may vote
before the annual meeting, as explained in the detailed
instructions on the proxy card or voting instruction form. In
summary, you may vote before the annual meeting by any one of
the following methods:
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By Internet. If you are a record holder, you
can vote on the Internet at the website address shown on the
proxy card. The Internet voting procedure allows you to
authenticate your identity and vote your shares. In addition, it
will confirm that we have properly recorded your instructions.
If you hold your shares in street name, the availability of
Internet voting will depend on the voting process of your bank
or broker. Please follow the Internet voting instructions found
on the voting instruction form you receive from your bank or
broker. If you elect to vote using the Internet, you may
incur telecommunication
and/or
Internet access charges for which you are responsible.
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By telephone. If you are a record holder, you
can vote by telephone using the telephone number shown on the
proxy card. The telephone voting procedure allows you to
authenticate your identity and vote your shares. In addition, it
will confirm that we have properly recorded your instructions.
If you hold your shares in street name, the availability of
telephone voting will depend on the voting process of your bank
or broker. Please follow the telephone voting instructions found
on the voting instruction form you receive from your bank or
broker.
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By mail. If you are a record holder, you can
vote by mail by completing, signing and returning the enclosed
proxy card in the postage paid envelope provided. The proxies
will vote your shares in accordance with your directions
provided on the card. If you hold your shares in street name,
please follow the mail voting instructions found on the voting
instruction form you receive from your bank or broker.
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When
will Internet and telephone voting facilities
close?
For stockholders of record, the Internet and telephone voting
facilities will close at 11:59 p.m. (Central Daylight
Saving Time) on May 19, 2009. If your shares are held in
street name, please refer to the information provided by your
bank, broker or nominee for information on when voting will end.
3
Can I
change my vote after I have voted?
Yes. If you are a record holder on March 23, 2009, you may
change your vote or revoke your proxy at any time before the
annual meeting begins by filing a notice of revocation and a
properly executed, later-dated proxy with our Corporate
Secretary. Whether you are a record holder or hold your shares
in street name, you may also change your vote or revoke your
proxy by attending and voting your shares at the annual meeting,
subject to requirements for attending and voting at the annual
meeting.
How
are votes counted?
With respect to the election of directors (proposal 1), you
may either vote FOR all or less than all of the
nominated directors or your vote may be WITHHELD as
to one or more of them. Stockholders elect the nominated
directors by a plurality of the votes cast at the annual
meeting. This means that the stockholders will elect the
thirteen persons receiving the highest number of FOR
votes at the annual meeting. See Corporate
Governance Majority Voting, on page 9 of
this Proxy Statement, for further details regarding the election
of directors.
With respect to proposals 2, 4 and 5, a majority of the
votes cast at the annual meeting is required for approval. With
respect to these three proposals, you may vote FOR,
AGAINST or ABSTAIN. If you
ABSTAIN, it will not have an effect on the approval
of these three proposals.
With respect to proposal 3, a majority of the votes cast on
the proposal at the annual meeting is required for approval,
provided that the total votes cast on the proposal represent
over 50 percent of the voting power of all the shares of
common stock outstanding and entitled to vote on proposal 3
at the annual meeting. With respect to proposal 3, you may
vote FOR, AGAINST, or
ABSTAIN. In accordance with the voting procedures of
the NYSE, if you ABSTAIN, it will count as a vote
against the proposal, and will count towards the requirement
that the votes cast represent over 50 percent of the voting
power of all outstanding shares of common stock.
If you are a record holder, you may vote your shares in person
at the annual meeting, through the mail, by telephone or over
the Internet, each as described on the proxy card (see also
How do I vote before the annual meeting? for more
information). If you sign your proxy card and provide no further
instructions, the proxies will vote your shares FOR
proposals 1 (as to all nominated directors), 2 and 3; and
AGAINST proposals 4 and 5. With respect to any
additional matters that properly come before the annual meeting,
the vote will be determined by our proxies, Gerard J. Arpey,
David L. Boren and Ann M. Korologos, each with full power to act
without the others and with full power of substitution, to vote
in their discretion.
If you hold your shares in street name, follow the instructions
on the voting instruction form you receive from your broker (see
also How do I vote before the annual meeting? for
more information). With respect to any additional matters that
properly come before the annual meeting, the vote will be
determined in the discretion of our proxies.
Please note that the election of directors and the ratification
of appointment of our independent auditors (proposals 1 and
2, respectively) are discretionary items under the voting
procedures of the NYSE. Member brokers of the NYSE who do not
receive voting instructions from the beneficial owners may vote
such shares in their discretion with respect to these two
proposals. Proposals 3, 4 and 5 are non-discretionary items
and NYSE member brokers do not have discretion to vote on these
proposals. If you do not submit voting instructions and if your
broker does not have discretion to vote your shares on a
proposal (a broker non-vote), we will not count your shares in
determining the outcome of the vote on proposals 3, 4 and
5. Such broker non-votes will have no effect on the
approval of proposals 3, 4 and 5, except that, because a
broker non-vote does not count as a vote cast, it will not be
counted towards the requirement that the votes cast on
proposal 3 represent over 50 percent of the voting
power of all outstanding shares of common stock. If you hold
your shares in street name, you may vote your shares in person
at the annual meeting only if you obtain a legal proxy from the
broker or nominee that held your shares on March 23, 2009.
4
What
are the Board of Directors recommendations?
The Board of Directors recommendations are included with
the description of each item in this Proxy Statement. In
summary, the Board of Directors recommends a vote:
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FOR the election of the nominated slate of
directors (proposal 1);
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FOR the ratification of the selection by the Audit
Committee of Ernst & Young LLP as our independent
auditors for 2009 (proposal 2);
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FOR approval of the AMR Corporation 2009 Long Term
Incentive Plan (proposal 3); and
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AGAINST approval of stockholder proposals 4
and 5.
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What
happens if additional matters are presented at the annual
meeting?
Other than the five proposals described in this Proxy Statement,
we are not aware of any other business to be presented at the
annual meeting. If you sign and return the proxy card or the
voting instruction form, our proxies will have discretion to
vote your shares on any additional matters presented at the
annual meeting. If for any reason any director nominee cannot
stand for election at the annual meeting, our proxies will vote
your shares for a substitute nominee, if any, that the Board of
Directors may nominate. We note that our bylaws provide that any
stockholder wishing to nominate a director at or bring any other
item before the annual meeting, other than proposals intended to
be included in the proxy materials pursuant to
Rule 14a-8
(Rule 14a-8)
of Regulation 14A of the Securities Exchange Act of 1934,
as amended (the Exchange Act), must have notified
the Corporate Secretary of such fact not less than 90 nor more
than 120 days before May 21, 2009.
Who
will bear the cost of soliciting proxies for the annual
meeting?
We will pay the cost of this solicitation. In
addition to using regular mail, we may use directors, officers,
employees or agents of us or our subsidiaries to solicit
proxies, in person or by telephone, facsimile,
e-mail or
other means of electronic communication. We will also request
brokers or nominees who hold common stock in their names to
forward proxy materials to the beneficial owners of such stock
at our expense. To aid in the solicitation of proxies, we have
retained Laurel Hill Advisory Group, LLC, a firm of professional
proxy solicitors, at an estimated fee of $15,500, plus
reimbursement of normal expenses.
When
and where can I find the voting results of the annual
meeting?
We intend to post the official voting results of the annual
meeting at the Investor Relations section of our website
(www.aa.com/investorrelations) as soon as possible. In
addition, the official results will be published in our
quarterly report on
Form 10-Q
for the second quarter of fiscal year 2009.
PROPOSAL 1ELECTION OF DIRECTORS
The Board of Directors proposes that stockholders elect at the
annual meeting the following thirteen director candidates, all
of whom currently serve as our directors, to serve until the
next annual meeting. Each of the nominees for election as a
director has indicated that he or she will serve if elected by
the stockholders and has furnished the following information to
us with respect to his or her principal occupation or employment
and business directorships as of March 23, 2009.
Unless otherwise indicated, all proxy cards and voting
instruction forms that authorize the persons named therein to
vote for the election of directors will be voted for the
election of the nominees listed below. If any nominee is not
available for election because of unforeseen circumstances, the
proxies designated by the Board of Directors intend to vote for
the election of a substitute nominee, if any, that the Board of
Directors may nominate. Although we will attempt to provide
advance notice of such a substitute nominee, we may be unable to
do so in certain circumstances.
5
NOMINEES FOR ELECTION AS DIRECTORS
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Gerard J. Arpey (Age 50)
First elected a director in 2003
Chairman, President and Chief
Executive Officer of AMR Corporation and American Airlines,
Inc., Fort Worth, Texas, since May 2004; air
transportation. Previously, Mr. Arpey held the following
positions with AMR Corporation and with American Airlines:
President and Chief Executive Officer from April 2003 to May
2004; President and Chief Operating Officer from April 2002 to
April 2003; Executive Vice President Operations from January
2000 to April 2002; and Senior Vice President Finance and
Planning and Chief Financial Officer from March 1995 to January
2000.
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John W. Bachmann (Age 70)
First elected a director in 2001
Senior Partner, Edward Jones,
St. Louis, Missouri, since January 2004, and Managing
Partner from 1980 to December 2003; financial services. Mr.
Bachmann began his career at Edward Jones in 1959. He is also a
director of the Monsanto Company.
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David L. Boren (Age 67)
First elected a director in 1994
President, The University of
Oklahoma, Norman, Oklahoma, since November 1994; educational
institution. From 1979 through 1994, Mr. Boren was a United
States Senator for Oklahoma. From 1975 through 1979, he was the
Governor of Oklahoma. He is also a director of Continental
Resources, Inc., Texas Instruments Incorporated and Torchmark
Corporation.
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Armando M. Codina (Age 62)
First elected a director in 1995
Chairman, Flagler Development
Group, Inc., Coral Gables, Florida, since September 2008, and
President and Chief Executive Officer from May 2006 to September
2008; commercial real estate. From 1979 to April 2006, Mr.
Codina served as Chairman and Chief Executive Officer of Codina
Group, Inc. until its merger with Flagler Development Group in
May 2006. He is also a director of General Motors Corporation
and The Home Depot, Inc.
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Rajat K. Gupta (Age 60)
First elected a director in 2008
Senior Partner Emeritus, McKinsey
& Company, Stamford, Connecticut, since January 2008;
management consulting services. Mr. Gupta served as McKinsey
& Companys Senior Partner from 2003 until his
retirement and as Worldwide Managing Director from 1994 until
2003. Prior to that, he held a variety of positions at McKinsey
& Company since 1973. Mr. Gupta is also a director of
Genpact Limited, Goldman Sachs Group, Inc., Harman International
Industries, Incorporated, and The Procter & Gamble Company.
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6
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Alberto Ibargüen (Age 65)
First elected a director in 2008
President and Chief Executive
Officer of the John S. and James L. Knight Foundation, Miami,
Florida, since July 2005; non-profit foundation dedicated to
promoting journalism and community development. Previously, Mr.
Ibargüen served as Chairman of Miami Herald Publishing Co.
from 1998 to 2005, a Knight Ridder subsidiary, and as publisher
of The Miami Herald and of El Nuevo Herald. He is
Chairman of the Board of the Newseum in Washington, D.C.
He is also a director of PepsiCo, Inc.
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Ann M. Korologos (Age 67)
First elected a director in 1990
Chairman, RAND Corporation Board
of Trustees, Santa Monica, California, since April 2004;
international public policy research organization. Mrs.
Korologos has served as Chairman Emeritus of The Aspen Institute
since August 2004 and has served on its Board of Trustees since
1989. Previously, she served as Senior Advisor for Benedetto,
Gartland & Company from 1996 to 2005 and served as United
States Secretary of Labor from 1987 to 1989. Mrs. Korologos is
also a director of Harman International Industries,
Incorporated, Host Hotels & Resorts, Inc., Vulcan Materials
Company and Kellogg Company.
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Michael A. Miles (Age 69)
First elected a director in 2000
Mr. Miles is a Special Limited
Partner of Forstmann Little & Co., New York, New York, and
a member of its Advisory Board since 1995; investment banking.
Previously, he was Chairman and Chief Executive Officer of
Philip Morris Companies Inc. from 1991 until his retirement in
1994. Mr. Miles is also a director of Citadel Broadcasting
Corporation, Time Warner Inc. and Dell Inc.
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Philip J. Purcell
(Age 65)
First elected a director in 2000
President, Continental Investors,
LLC, Chicago, Illinois, since January 2006; private equity
investing. He served as Chairman and Chief Executive Officer of
Morgan Stanley from 1997 until his retirement in July 2005. Mr.
Purcell became President and Chief Operating Officer of Dean
Witter in 1982, and was Chairman and Chief Executive Officer of
Dean Witter Discover & Co. from 1986 until it acquired
Morgan Stanley in 1997.
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Ray M. Robinson (Age 61)
First elected a director in 2005
Chairman of Citizens Trust Bank,
Atlanta, Georgia, since 2003; banking. Mr. Robinson has been
Vice Chairman of the East Lake Community Foundation since
November 2003, and is President Emeritus of the East Lake Golf
Club. He served AT&T Corporation as its President of the
Southern Region from 1996 to May 2003 and as its Vice President,
Corporate Relations from 1994 to 1996. Mr. Robinson is also a
director of Aaron Rents, Inc., Acuity Brands, Inc. and Avnet,
Inc.
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7
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Dr. Judith Rodin (Age 64)
First elected a director in 1997
President, The Rockefeller
Foundation, New York, New York, since March 2005; private
philanthropic institution. From 1994 to 2004, Dr. Rodin was
President of the University of Pennsylvania. Dr. Rodin is
also a director of Citigroup Inc. and Comcast Corporation.
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Matthew K. Rose (Age 50)
First elected a director in 2004
Chairman, President and Chief
Executive Officer, Burlington Northern Santa Fe Corporation,
Fort Worth, Texas, since 2002; rail transportation.
Previously, Mr. Rose held the following positions at Burlington
Northern Santa Fe Corporation or its predecessors: President and
Chief Executive Officer from December 2000 to March 2002;
President and Chief Operating Officer from June 1999 to December
2000; and Senior Vice President and Chief Operations Officer
from August 1997 to June 1999. He is also a director of Centex
Corporation.
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Roger T. Staubach (Age 67)
First elected a director in 2001
Executive Chairman, Americas,
Jones Lang LaSalle Incorporated, Addison, Texas, since July
2008; global commercial real estate strategy and services firm.
He served as Executive Chairman of The Staubach Company from
July 2007 to July 2008 and Chairman and Chief Executive Officer
from 1982 to June 2007. After graduating from the United States
Naval Academy in 1965, Mr. Staubach served four years as an
officer in the U.S. Navy. He played professional football from
1969 to 1979 with the Dallas Cowboys. Mr. Staubach is also a
director of Cinemark Holdings, Inc.
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A plurality of the votes cast is necessary for the election of
each director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
NOMINEES LISTED ABOVE.
8
CORPORATE GOVERNANCE
Majority
Voting
In 2006, the Board of Directors revised the Board of Directors
Governance Policies so that any nominee for director who
receives a greater number of votes WITHHELD than
votes FOR in an uncontested election will be
required to tender his or her resignation promptly to the
Nominating/Corporate Governance Committee of the Board of
Directors. The Nominating/Corporate Governance Committee will
consider our best interests and the best interests of the
stockholders and recommend to a special committee of independent
directors of the Board of Directors whether to accept the
tendered resignation or to take some other action. This special
committee of the Board of Directors will be composed of only
those independent directors who did not receive a majority of
withheld votes and will consider the Nominating/Corporate
Governance Committees recommendation. Within 90 days
following the uncontested election, this special committee will
determine whether to accept the tendered resignation or take
some other action. Thereafter, we will publicly disclose the
special committees decision.
If one or more members of the Nominating/Corporate Governance
Committee receive a majority of withheld votes, then the Board
of Directors will create a special committee of independent
directors who did not receive a majority of withheld votes to
consider the resignation offers of all directors receiving a
majority of withheld votes. The special committee of the Board
of Directors will determine whether to accept the tendered
resignation or to take some other action and promptly disclose
their decision. Any director who receives a majority of withheld
votes and tenders his or her resignation will not participate in
the committee determination. However, if there are three or
fewer independent directors who did not receive a majority of
withheld votes in the same election, then all independent
directors may participate in the committee action regarding
whether to accept the resignation or take some other action. The
foregoing is a summary of the director resignation procedure.
The entire procedure is set forth in Section 18 of the
Board of Directors Governance Policies, which are available on
the Investor Relations section of our website located at
www.aa.com/investorrelations by clicking on the
Corporate Governance link. The Board of Directors
Governance Policies are also available free of charge in print
to any stockholder who sends a request to the Corporate
Secretary at the address on page 69 of this Proxy Statement.
Stockholder
Right to Call a Special Meeting
In 2008, the Board of Directors amended our bylaws to provide
that a special meeting of stockholders shall be called, subject
to certain advance notice and information requirements, upon
receipt of written requests from holders of shares representing
at least 25 percent of our outstanding common stock. Under
our current bylaws, a special meeting is not required to be
called if (a) the request relates solely to a matter or
matters not a proper subject for stockholder action under
applicable law, (b) the request is received during the
period commencing 90 days prior to the first anniversary of
the previous years annual meeting of stockholders and
ending on the date of the next annual meeting, (c) an
annual or special meeting at which an identical or substantially
similar item or items was presented has been called but not yet
held or will be held within 120 days, (d) an identical
or substantially similar item or items was presented at the most
recent annual meeting, (e) an identical or substantially
similar item or items was presented at a special meeting held
not more than 90 days before the delivery of such request,
or (f) the request was made in a manner that involved a
violation of Regulation 14A under the Exchange Act or other
applicable law. Our bylaws also provide that our Board of
Directors, Chairman of the Board of Directors or President may
call a special meeting of the stockholders. Our bylaws are
available on the Investor Relations section of our website
located at www.aa.com/investorrelations by clicking on
the Corporate Governance link. Our bylaws are also
available free of charge in print to any stockholder who sends a
request to the Corporate Secretary at the address on
page 69 of this Proxy Statement.
Number of
Board of Directors Meetings; Attendance at Board of Directors,
Committee and Annual Meetings
We generally hold eight regular meetings of the Board of
Directors per year, and schedule special meetings when required.
The Board of Directors held eight regular meetings in 2008, two
of which were by telephone conference, and ten special meetings,
four of which were by telephone conference. During 2008, each
director attended at least 75% of the sum of the total number of
meetings of the Board of Directors and each committee of which
he or she was a
9
member with the exception of Mrs. Korologos, who attended
74% of such meetings. Mrs. Korologos was not able to attend
at least 75% of the meetings in 2008 due to the illness of an
immediate family member. We encourage each director to attend
the annual meeting. Last year, 12 directors attended the
annual meeting of stockholders.
Self-Assessment
In January of each year, the Board of Directors and its standing
committees each conduct a self-assessment of the effectiveness
of the Board and each standing committee.
Standards
of Business Conduct for Employees and Directors
We have written standards for business conduct that are
applicable to all our employees. We designed our Standards of
Business Conduct to help employees resolve ethical issues in an
increasingly complex business environment. The Standards of
Business Conduct apply to all our employees, including without
limitation, the Chief Executive Officer, the Chief Financial
Officer, the General Counsel and Chief Compliance Officer, the
Controller, the Treasurer, the Corporate Secretary and the
General Auditor. The Standards of Business Conduct cover several
topics including, without limitation, conflicts of interest;
full, fair, accurate, timely and understandable disclosure in
Securities and Exchange Commission (SEC) filings;
confidentiality of information and accountability for adherence
to the Standards of Business Conduct; prompt internal reporting
of violations of the Standards of Business Conduct; and
compliance with laws and regulations. A copy of the Standards of
Business Conduct is available on the Investor Relations section
of our website located at www.aa.com/investorrelations by
clicking on the Corporate Governance link.
The Board of Directors has adopted a Code of Ethics and
Conflicts of Interest Policy for the Board of Directors. We
designed our Code of Ethics and Conflicts of Interest Policy to,
among other things, assist the directors in recognizing and
resolving ethical issues and identifying and avoiding conflicts
of interest. A copy of the Code of Ethics and Conflicts of
Interest Policy is available on the Investor Relations section
of our website located at www.aa.com/investorrelations by
clicking on the Corporate Governance link. We may
post amendments to, or waivers of, the provisions of the
Standards of Business Conduct and the Code of Ethics and
Conflicts of Interest Policy with respect to any director or
executive officer on the foregoing website. The Standards of
Business Conduct and the Code of Ethics and Conflicts of
Interest Policy are available free of charge in print to any
stockholder who sends a request to the Corporate Secretary at
the address on page 69 of this Proxy Statement.
Executive
Sessions and the Lead Director
Non-employee directors meet regularly throughout the year
without the Chief Executive Officer or other management
employees. We hold these executive sessions at least
twice per year. In 2008, the non-employee directors held
executive sessions in January, February March, May, July,
September and November. The Board of Directors appoints a Lead
Director from among the independent directors to chair these
executive sessions. Mr. Codina has served as the Lead
Director of the Board of Directors since April 1, 2007.
The Lead Director has frequent contact with Mr. Arpey and
the other members of our senior management throughout the year.
The Lead Director or the Chairman of the Nominating/Corporate
Governance Committee may schedule executive sessions. In
addition, such sessions may be scheduled at the request of the
Board of Directors.
As provided in the Board of Directors Governance Policies, the
responsibilities of the Lead Director are determined by the
independent directors from time to time. Those responsibilities
include:
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presiding at meetings of the Board of Directors when the
Chairman is not present, including executive sessions of the
independent directors;
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serving as a liaison between the Chairman and the independent
directors (although the independent directors are encouraged to
communicate freely with the Chairman);
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in collaboration with the Chairman and with input from the other
directors, approving Board of Directors meeting agendas and
schedules; and
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the ability to call meetings of the independent directors.
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10
Evaluation
of the Chief Executive Officer
Each year, the Chair of the Nominating/Corporate Governance
Committee leads the independent directors in an executive
session to assess the Chief Executive Officers
performance. The results of this review are discussed with the
Chief Executive Officer.
Continuing
Education
We encourage and afford our directors the opportunity to attend
seminars, conferences and external director education programs
relating to, among other things, board governance practices and
the functioning of the Board of Directors principal
committees. We also conduct a comprehensive orientation process
for new directors. In addition, directors receive ongoing
continuing education through educational sessions at meetings
and periodic mailings between meetings. We hold periodic
training sessions for the Audit Committee and invite the other
directors and executive officers to these sessions. We reimburse
the directors for any costs associated with these seminars and
conferences, including related travel expenses.
Director
Access to Management and Independent Advisers
Independent directors have direct access to members of
management whenever they deem it necessary. In accordance with
NYSE listing standards, each of the Audit Committee, the
Compensation Committee and the Nominating/Corporate Governance
Committee has the authority to retain its own independent
advisers at our expense. The independent directors and the
Diversity Committee are also free to retain their own
independent advisers at any time and at our expense.
Contacting
the Board of Directors
The Board of Directors has approved procedures to facilitate
communications between the directors and employees, stockholders
and other interested third parties. Pursuant to these
procedures, a person who desires to contact the Lead Director, a
standing committee of the Board of Directors, the Board of
Directors as a whole or any individual director may do so in
writing to the following address:
AMR Corporation
The Board of Directors
P.O. Box 619616, MD 5675
Dallas/Fort Worth International Airport, Texas
75261-9616
These procedures are available on the Investor Relations section
of our website located at
www.aa.com/investorrelations
by clicking on the Corporate Governance link.
Upon receipt of any communication to the Board of Directors, we
will distribute the communication to the Lead Director, to
another director or to an executive officer as appropriate, in
each case depending on the facts and circumstances outlined in
the communication. For example, a letter concerning a
stockholder nominee would be sent to the Chairman of the
Nominating/Corporate Governance Committee; a complaint regarding
accounting or internal accounting controls would be forwarded to
the Chairman of the Audit Committee and the General Auditor; and
a complaint regarding passenger service would be sent to the
executive officer responsible for customer service. The
Corporate Secretary and the Nominating/Corporate Governance
Committee review data about the number and types of stockholder
communications received; the nature of the communications; to
whom the communication was directed; the responses sent; and, as
applicable, the ultimate disposition of any communication. The
Board of Directors has approved this process.
11
BOARD COMMITTEES
The Board of Directors has standing Audit, Compensation,
Diversity and Nominating/Corporate Governance committees. All
members of the Audit Committee are independent in accordance
with the listing standards of the NYSE, the requirements of the
SEC, and the Board of Directors independence criteria. In
addition, all members of the Compensation Committee, the
Diversity Committee and the Nominating/Corporate Governance
Committee are independent in accordance with the NYSE listing
standards and our independence criteria. No member of the Audit
Committee, the Compensation Committee, the Diversity Committee
or the Nominating/Corporate Governance Committee is a current or
former employee or officer of us or any of our affiliates. The
committees on which the members of the Board of Directors (other
than Mr. Arpey) serve as of April 1, 2009 are
identified below.
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Audit
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Compensation
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Diversity
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Nominating / Corporate
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Director
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Committee
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Committee
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Committee
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Governance Committee
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John W. Bachmann
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ü(Chair)
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David L. Boren
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ü(Chair)
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Armando M. Codina
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ü
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Rajat K. Gupta
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ü
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Alberto Ibargüen
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ü
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ü
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Ann M. Korologos
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ü
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Michael A. Miles
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ü(Chair)
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Philip J. Purcell
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ü
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ü
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Ray M. Robinson
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ü
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ü
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Judith Rodin
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Matthew K. Rose
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Roger T. Staubach
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ü(Chair)
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Number of
Committee Meetings
in 2008:
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9
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6
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5
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6
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Each of the Audit, Compensation, Diversity and
Nominating/Corporate Governance Committees has a charter that
details the committees responsibilities. The charters for
all the standing committees of the Board of Directors are
available on the Investor Relations section of our website
located at www.aa.com/investorrelations by clicking on
the Corporate Governance link. The charters are also
available in print and free of charge to any stockholder who
sends a written request to the Corporate Secretary at the
address on page 69 of this Proxy Statement.
Nominating/Corporate
Governance Committee Matters
Functions
The functions of the Nominating/Corporate Governance Committee
include:
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Establishing and implementing appropriate processes for the
Board of Directors and the standing committees of the Board of
Directors;
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Recommending candidates for officer positions and, along with
the Chief Executive Officer, reviewing our succession planning;
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Proposing a slate of directors for election by the stockholders
at the annual meeting;
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Nominating candidates to fill any vacancies on the Board of
Directors;
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Determining the optimal size of the Board of Directors;
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Reviewing and setting the compensation of directors;
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12
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Considering the qualifications of stockholder and self-nominated
director nominees in accordance with pre-established guidelines;
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Developing and reviewing the Board of Directors Governance
Policies;
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Monitoring and reviewing succession planning for the Chief
Executive Officer;
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Reviewing any proposed changes to our Certificate of
Incorporation, bylaws and the charters of the standing
committees;
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Reviewing stockholder proposals for the annual meeting and our
responses thereto;
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Reviewing transactions with related persons; and
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Determining director independence under applicable rules and the
Board of Directors Governance Policies.
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Director
Nominees
As noted above, the Nominating/Corporate Governance Committee is
responsible for recommending director nominees for election to
the Board of Directors. To fulfill this role, the
Nominating/Corporate Governance Committee annually reviews the
optimal size of the Board of Directors and its composition to
determine the qualifications and areas of expertise needed to
enhance the composition of the Board of Directors. To be
considered, a candidate must:
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have unquestioned integrity;
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have a well established record in business, finance, government
relations, academics or the sciences;
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have the ability to devote substantial time to the Board of
Directors and at least one of the standing committees of the
Board of Directors; and
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contribute to the diversity, in the broadest sense, of the Board
of Directors.
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Among other things, when assessing a candidates
qualifications (including a self-nominee or a candidate
nominated by a stockholder), the Nominating/Corporate Governance
Committee considers:
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the number of other boards on which the candidate serves,
including public and private company boards as well as
not-for-profit
boards;
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other business and professional commitments of the candidate;
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the Board of Directors need at that time for directors
having certain skills and experience;
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the potential for any conflicts between our interests and the
interests of the candidate;
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the candidates ability to fulfill the independence
standards required of directors;
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the candidates ability to add value to the work of the
standing committees of the Board of Directors; and
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the diversity, in the broadest sense, of the directors then
comprising the Board of Directors.
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In addition, all directors are expected to exercise their best
business judgment when acting on our behalf; to represent the
interests of all of our stockholders; to act ethically; and to
adhere to the ethical standards applicable to the directors (see
Standards of Business Conduct for Employees and
Directors, on page 10 of this Proxy Statement, for
further details regarding our standards of conduct).
The Nominating/Corporate Governance Committee considers all of
these factors when determining whether to recommend a candidate
for a director position. The Nominating/Corporate Governance
Committee from time to time has used a search firm to assist it
in identifying suitable candidates for director positions,
although one is not retained at present.
13
Stockholder
Nominees
The Nominating/Corporate Governance Committee will consider
stockholder nominees for election to the Board of Directors at
an annual meeting or in the event a vacancy exists on the Board
of Directors. In 2008, no individuals self-nominated themselves
for election to the Board of Directors. See Other
Information, beginning on page 68 of this Proxy
Statement, for further details regarding submitting nominations
for director positions.
Director
Independence; Board of Directors Governance Policies
The Board of Directors has approved the Board of Directors
Governance Policies (the Governance Policies), which
govern certain of the Board of Directors procedures and
protocols. The Governance Policies are available on the Investor
Relations section of our website located at
www.aa.com/investorrelations by clicking on the
Corporate Governance link. The Governance Policies
are also available free of charge in print to any stockholder
who sends a written request to the Corporate Secretary at the
address on page 69 of this Proxy Statement.
Among other things, the Governance Policies establish the
standards to determine the independence of the directors. In
general, the Governance Policies provide that a director is
independent if the director has no direct or indirect material
relationship with us. A relationship is material if
it would interfere with the directors independent
judgment. To assist the Nominating/Corporate Governance
Committee in determining whether a relationship is material, the
Board of Directors has established guidelines in the Governance
Policies. In general, the guidelines provide that a director is
not independent if, within certain time parameters:
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We have employed the director or an immediate family member of
the director as an executive officer;
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The director is a current partner or employee of a firm that is
the Companys internal or external auditor;
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The director has an immediate family member who is a current
partner of a firm that is the Companys internal or
external auditor;
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The director has an immediate family member who is a current
employee of a firm that is the Companys internal or
external auditor and personally works on the Companys
audit;
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The director has received, or has an immediate family member who
has received, during any twelve-month period within the last
three years, more than $120,000 in direct compensation from the
Company, other than those retainers, fees and benefits for
service as a director of the Company;
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The director or a member of the directors immediate family
is, or has been within the last three years, employed as an
executive officer of another company where any of the
Companys present executive officers at the same time
serves or served on that other companys compensation
committee; or
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The director is a current employee, or an immediate family
member is a current executive officer, of a company that has
made payments to, or received payments from, the Company for
property or services in an amount which, in any of the last
three fiscal years, exceeds the greater of $1 million, or
2% of such other companys consolidated gross revenues.
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This is only a summary of the Board of Directors
independence guidelines, which also incorporate any additional
requirements of the SEC and the NYSE. A complete list of the
guidelines and principles are set forth in the Governance
Policies.
In order to determine each directors independence, the
Nominating/Corporate Governance Committee reviews transactions
between us or our subsidiaries and companies that employ one of
our directors (or one of his or her immediate family members).
For example, we have corporate travel arrangements with certain
companies at which some of our independent directors also serve
as officers or employees. Each such company, along with the
director and his or her position at such company, are Edward
Jones (John W. Bachmann, senior partner); The University of
Oklahoma (David L. Boren, President); Flagler Development Group,
Inc. (Armando M. Codina, Chairman); the John S. and James L.
Knight Foundation (Alberto Ibargüen, President and Chief
Executive Officer); The Rockefeller Foundation (Dr. Judith
Rodin, President); and Burlington Northern Santa Fe
Corporation (Matthew K. Rose, Chairman, President and CEO).
Pursuant to these agreements, American Airlines
and/or
American Eagle provide air transportation to those companies. We
believe that the terms of these arrangements are at least as
favorable to us as
14
those we would have in a similar arrangement with an
unaffiliated third party. The Nominating/Corporate Governance
Committee determined that such arrangements do not affect the
independence of Messrs. Bachmann, Boren, Codina,
Ibargüen and Rose, and Dr. Rodin. In making these
determinations, the Nominating/Corporate Governance Committee
considered that the payments made by each participating company
were less than the greater of $1 million or 2% of the other
companys consolidated gross revenues in each of the last
three years.
Pursuant to the Governance Policies, the Nominating/Corporate
Governance Committee has determined, and the Board of Directors
has agreed, that Mrs. Korologos, Dr. Rodin and
Messrs. Bachmann, Boren, Codina, Gupta, Ibargüen,
Miles, Purcell, Robinson, Rose and Staubach are all independent
in accordance with the Governance Policies. In addition, the
Nominating/Corporate Governance Committee has previously
determined, and the Board of Directors agreed, that
Mr. Graves, who retired from the Board of Directors in
March 2008, was independent in accordance with the Governance
Policies during his term. Since Mr. Arpey is one of our
employees, he is not independent.
Transactions
with Related Persons
In addition to the independence requirements of the Governance
Policies and the obligations of the directors under our Code of
Ethics and Conflicts of Interest Policy described on
page 10 of this Proxy Statement, the Board of Directors has
adopted a written policy with respect to the review, approval or
ratification of related party transactions. Our policy defines
related party transactions generally as transactions or series
of related transactions in excess of $120,000 involving us or
our subsidiaries in which any (a) of our directors or
nominees for director, (b) of our executive officers,
(c) persons owning five percent or more of our outstanding
stock at the time of the transaction, or (d) of the
immediate family members of our directors, nominees for
director, executive officers, or five percent stockholders, has
a direct or indirect material interest. In addition, the Board
of Directors has determined that certain interests and
transactions are by their nature not material and are not
subject to the policy.
The policy requires that the Nominating/Corporate Governance
Committee, with the assistance of our General Counsel
and/or
Corporate Secretary, review and approve related party
transactions. In its review of a proposed related party
transaction, the Nominating/Corporate Governance Committee
considers, among other factors: (a) whether the terms of
the proposed transaction are at least as favorable as those we
would have in a similar agreement with an unaffiliated third
party; (b) the size of the transaction and the amount of
consideration payable to or receivable by a related party;
(c) the nature of the interest of the related party; and
(d) whether the transaction may involve a conflict of
interest.
During 2008, American Airlines advertised in, and sponsored
events hosted by, Black Enterprise magazine.
Mr. Graves, who was a member of our Board of Directors
until March 31, 2008, is the Chairman of Earl G. Graves,
Ltd., which publishes that magazine. During 2008, the payments
made to Earl G. Graves, Ltd. and its affiliates totaled
approximately $411,000. The Nominating/Corporate Governance
Committee reviewed and ratified these transactions under our
Related Party Transaction Policy.
Audit
Committee Matters
Functions
The functions of the Audit Committee include:
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Selecting, retaining, compensating and overseeing our
independent auditors;
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Approving in advance the services rendered by, and the fees paid
to, our independent auditors;
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Monitoring compliance with our Standards of Business Conduct;
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Periodically reviewing the organization and structure of our
Internal Audit department;
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Reviewing:
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the scope and results of the annual audit, including our
independent auditors assessment of internal controls
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15
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quarterly financial information with representatives of
management and the independent auditors
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our consolidated financial statements
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the scope of non-audit services provided by our independent
auditors
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our periodic filings
(Forms 10-K
and 10-Q)
filed with the SEC, including the section regarding
Managements Discussion and Analysis of Financial Condition
and Results of Operations
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our risk management policies
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other aspects of our relationship with our independent auditors,
including a letter on the independence of our auditors; and
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Establishing procedures to deal with complaints or concerns
regarding accounting or auditing matters.
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During 2008, the Audit Committee met nine times. The Audit
Committee reviewed, among other things, the quality and
integrity of our financial statements; our compliance with legal
and regulatory requirements; periodic filings on
Form 10-K
and
Form 10-Q;
the qualifications and independence of Ernst & Young
LLP; the performance of our internal audit function; the status
of the internal controls audit required by Section 404 of
the Sarbanes-Oxley Act of 2002; the performance of the
independent auditors; and other significant financial matters.
Each member of the Audit Committee satisfies the definition of
independent director as established in the NYSE
listing standards and the rules and regulations of the SEC.
Also, each member of the Audit Committee fulfills the
independence standards established under the Governance Policies
and has been determined to be financially literate. The Board of
Directors has concluded that Mr. Bachmann qualifies as an
audit committee financial expert under SEC rules and regulations
and has the requisite financial management expertise as
specified under the NYSE listing standards. The Board believes
that other members of the committee may also meet these
qualifications.
Audit
Committee Report
Throughout 2008, the Audit Committee met and held discussions
with our management, as well as with Ernst & Young.
Several of the discussions between the Audit Committee and
Ernst & Young were in private, with no members of our
management present. The Audit Committee also met privately (with
no other members of our management present) with our General
Auditor several times during 2008. Among other things, the Audit
Committee reviewed and discussed our audited consolidated
financial statements with management, our General Auditor, and
Ernst & Young during these meetings.
The Audit Committee has also discussed with Ernst &
Young the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communication with
Audit Committees).
The Audit Committee has received and reviewed the written
disclosures and the letter from Ernst & Young required
by the applicable requirements of the Public Company Accounting
Oversight Board, and the Audit Committee has discussed with
Ernst & Young the firms independence.
In reliance upon the reviews and discussions noted above, the
Audit Committee recommended to the Board of Directors that our
audited consolidated financial statements be included in our
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008. Subject to
stockholder approval at the 2009 annual meeting, the Audit
Committee has also selected Ernst & Young as our
independent auditors for 2009 (see proposal 2).
Audit Committee of AMR Corporation:
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John W. Bachmann, Chairman
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Rajat K. Gupta
Alberto Ibargüen
Ray M. Robinson
16
Independent
Auditors Fees
The following table reflects the aggregate fees paid to
Ernst & Young for audit services rendered in
connection with the consolidated financial statements, reports
for fiscal years 2007 and 2008, and for other services rendered
during fiscal years 2007 and 2008 on our behalf and on behalf of
our subsidiaries:
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(amounts in thousands)
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2008
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2007
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Audit Fees
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$
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2,578
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$
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2,489
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Audit-Related Fees
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819
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890
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Tax Fees
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171
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74
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All Other Fees
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0
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0
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Total Fees
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$
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3,568
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$
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3,453
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Audit Fees: Consists of fees billed for
professional services rendered for (a) the audit of our
consolidated financial statements; (b) the audit of
internal control over financial reporting; (c) the review
of the interim condensed consolidated financial statements
included in quarterly reports; (d) services that are
normally provided by Ernst & Young in connection with
statutory and regulatory filings or engagements and attest
services, except those not required by statute or regulation;
and (e) consultations concerning financial accounting and
reporting standards.
Audit-Related Fees: Consists of fees billed
for assurance and related services that are reasonably related
to the performance of the audit or review of our consolidated
financial statements and are not reported under Audit
Fees. These services include (a) employee benefit
plan audits; (b) auditing work on proposed transactions;
(c) attest services that are not required by statute or
regulation; and (d) consultations concerning financial
accounting and reporting standards that do not impact the annual
audit.
Tax Fees: Consists of tax
compliance/preparation and other tax services. Tax
compliance/preparation consists of fees billed for professional
services related to federal, state and international tax
compliance; assistance with tax audits and appeals; expatriate
tax services; and assistance related to the impact of mergers,
acquisitions and divestitures on tax return preparation. Other
tax services consist of fees billed for other miscellaneous tax
consulting and planning.
All Other Fees: There were no fees for other
services not included above.
In selecting Ernst & Young as our independent auditors
for the fiscal year ending December 31, 2009, the Audit
Committee has considered whether services other than audit and
audit-related services provided by Ernst & Young are
compatible with maintaining the firms independence.
The Audit Committee pre-approves all audit and permissible
non-audit services provided by Ernst & Young,
including audit services, audit-related services, tax services
and other services. Pre-approval is generally provided for up to
one year, and any pre-approval is detailed as to the particular
service or category of services and includes an anticipated
budget. In addition, the Audit Committee may also pre-approve
particular services on a
case-by-case
basis. The Audit Committee has delegated pre-approval authority
to the Chairman of the Audit Committee. Pursuant to this
delegation, the Chairman of the Audit Committee must report any
pre-approval decision by him to the Audit Committee. The Audit
Committee pre-approved all such audit, audit-related and
permissible non-audit services in 2007 and 2008 in accordance
with these procedures.
17
Diversity
Committee Matters
Functions
The functions of the Diversity Committee include:
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Providing oversight, counsel and guidance to senior management
at American Airlines, our other subsidiaries and the Board of
Directors on issues related to diversity and inclusion,
including:
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Equal employment opportunity policies
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Hiring practices
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Employee retention issues
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Corporate procurement decisions, including our Supplier
Diversity Program
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Work environment;
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Monitoring and overseeing the development and implementation of
diversity policies, programs and procedures to ensure that they
are appropriate to, and assist in the fulfillment of, our
responsibilities to our internal and external minority
constituencies; and
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Exploring a wide spectrum of our operations to assist us in
promoting our diversity efforts.
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Compensation
Committee Matters
Functions
The functions of the Compensation Committee include:
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Formulating and approving the compensation and benefit programs
for our officers and the officers of our subsidiaries;
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Approving the compensation of our Chief Executive Officer based
on an evaluation of his performance;
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Approving and monitoring our annual incentive program and our
stock-based and other compensation programs;
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Determining performance measures under our various compensation
programs;
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Determining amounts to be paid under our compensation and
benefits programs; and
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Retaining compensation consultants to perform an annual review
of executive compensation.
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Processes
and Procedures
The Compensation Committee acts on behalf of the Board of
Directors and has the responsibility for approving the
compensation of all of our officers, including the named
executive officers. This responsibility includes establishing
and implementing our executive compensation objectives,
including linking each named executive officers
compensation to our short-term and long-term strategic,
financial and operational goals. The Compensation Committee also
determines: (a) the performance measures established for
performance-based awards for our officers; and (b) where
the performance measures are subjective, the achievement of
those performance measures and the amounts payable with respect
to those awards. The Compensation Committee reviews and has the
authority to adopt employment and change in control agreements
with our officers and incentive plans for our officers,
including those pertaining to performance shares, deferred
shares, stock-settled stock appreciation rights and career
performance shares.
The Compensation Committee is responsible for the administration
of our executive compensation program. The Compensation
Committee delegates authority for the
day-to-day
administration of our executive compensation program to our
Senior Vice President Human Resources and Human
Resources department, but the Compensation Committee does not
delegate compensation determinations for our officers.
The Compensation Committee meets regularly throughout the year
to review general compensation issues and to monitor the
compensation of our officers. In fulfilling its
responsibilities, the Compensation Committee has the
18
authority to retain, and establish the duties and compensation
of, external compensation consultants. During 2008, the
Compensation Committee retained Hewitt Associates LLC to
evaluate the competitiveness and reasonableness of our executive
compensation relative to other public corporations employing
similar executive talent. The Compensation Committee also
engaged Deloitte Consulting LLP to advise the Compensation
Committee on the Chief Executive Officers compensation
package, incentive plan design and other executive compensation
matters. Deloitte Consulting and certain of its affiliates and
Hewitt Associates have also provided other services to us, such
as tax and consulting services; however, the employees providing
those services are not the employees who advise the Compensation
Committee, and the Compensation Committee believes that these
relationships do not impair the independence of these firms or
their advisors.
With respect to executives other than the Chief Executive
Officer, the Compensation Committee makes compensation decisions
with, and frequently based upon the recommendation of, the Chief
Executive Officer and our Senior Vice President
Human Resources. The Compensation Committee also reviews and
considers comparative market data provided by Hewitt Associates.
The Compensation Committee makes all determinations with respect
to the Chief Executive Officers compensation with the
assistance, when appropriate, of our Lead Director, Hewitt
Associates and Deloitte Consulting.
The Nominating/Corporate Governance Committee is responsible for
determining compensation for the Board of Directors. See
Director Compensation, beginning on page 51 of
this Proxy Statement, for further details regarding the
Nominating/Corporate Governance Committees role in this
determination.
The Compensation Discussion and Analysis below
provides further details regarding our compensation objectives
and programs, including information regarding the Compensation
Committees annual compensation review, the types of
compensation awards it uses, and the manner in which the
Compensation Committee determines the size and terms of such
awards.
Compensation
Committee Interlocks and Insider Participation
Dr. Rodin, Messrs. Boren, Miles and Purcell, and,
beginning in July 2008, Mr. Rose, were the members of the
Compensation Committee during 2008. None of the members of the
Compensation Committee was at any time during 2008, or at any
other time, one of our officers or employees. None of our
executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more
executive officers serving as a member of our Board of Directors
or our Compensation Committee.
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion provides an overview and analysis of
the material elements and objectives of our executive
compensation program. We provide information relating to the
following, who were our named executive officers in 2008:
Gerard J. Arpey, Chairman, President and Chief Executive
Officer of AMR Corporation and American Airlines;
Thomas W. Horton, Executive Vice President
Finance and Planning and Chief Financial Officer of AMR
Corporation and American Airlines;
Daniel P. Garton, Executive Vice President
Marketing of AMR Corporation and American Airlines;
Robert W. Reding, Executive Vice President
Operations of AMR Corporation and American Airlines; and
Gary F. Kennedy, Senior Vice President, General Counsel
and Chief Compliance Officer of AMR Corporation and American
Airlines.
This discussion should be read in conjunction with
Executive Compensation beginning on page 32 of
this Proxy Statement.
19
Administration
of Executive Compensation Program
The Board of Directors delegates oversight of our executive
compensation program to the Compensation Committee, although the
Compensation Committee discusses executive compensation matters
and shares materials from the Compensation Committee meetings
with the entire Board of Directors. The Compensation Committee
is responsible for establishing our executive compensation
objectives, approving the corporate objectives against which the
committee measures performance in setting certain elements of
our executive compensation packages, and determining the
compensation of all of our officers, including the named
executive officers. The Compensation Committee meets regularly
throughout the year to review general compensation issues. See
Processes and Procedures, beginning on page 18
of this Proxy Statement, for further details regarding
administration of our executive compensation program.
Role of
the Compensation Consultants
The Compensation Committee utilizes the advice of two external
consultants, Hewitt Associates LLC and Deloitte Consulting LLP.
The Compensation Committee retains Hewitt Associates to evaluate
the competitiveness and reasonableness of our executive
compensation relative to other public corporations employing
similar executive talent. The Compensation Committee also
engages Deloitte Consulting to advise the Compensation Committee
on the Chief Executive Officers compensation package,
incentive plan design and other executive compensation matters.
The compensation consultants meet with the Compensation
Committee during its annual review of executive compensation,
including in executive session without any members of management
present. At the direction of the Compensation Committee, the
compensation consultants collaborate with and assist
Mr. Arpey and other members of management, including the
Senior Vice President of Human Resources, in obtaining
information necessary for them to form their recommendations
regarding compensation.
Role of
the Chief Executive Officer in Setting Compensation
Mr. Arpey regularly attends Compensation Committee
meetings, including the committees annual review of
executive compensation. At these meetings, he provides his
perspective on the performance of our officers, including the
other named executive officers, and other subjective
considerations that may influence the Compensation
Committees compensation decisions, such as retention,
succession planning, and critical personnel and business needs.
He also presents his views on compensation recommendations for
the other named executive officers. The Compensation Committee
gives considerable weight to Mr. Arpeys evaluation of
the other named executive officers because he has direct
knowledge of each officers performance and contributions
since they report directly to him. Mr. Arpey does not
participate in the Compensation Committees deliberations
or decisions with regard to his compensation, although he
discusses his compensation with the Compensation Committee and
its consultants.
Process
to Determine Compensation
Annually, the Compensation Committee, with the participation of
our Lead Director, conducts a comprehensive review of our
executive compensation program. Prior to 2008, the annual
compensation review was conducted in July of each year. In 2008,
the annual compensation review took place in May in order to
grant long-term equity awards prior to the expiration of our
1998 Long Term Incentive Plan (as amended, the 1998
LTIP) on May 21, 2008. The compensation review
includes a review of: (a) a report prepared by our Human
Resources department evaluating our executive compensation to
ensure that we are achieving our compensation objectives and a
review of the compensation paid at eight other major
U.S. passenger airlines, and (b) a comprehensive
report from Hewitt Associates evaluating the competitiveness of
our executive compensation program relative to the programs at
companies in a cross-industry comparator group. Since we compete
for our executive talent with companies both within and outside
our industry, the Committee reviewed market data from a peer
group of our major U.S. passenger airline competitors and
Hewitts report, which included 26 public companies that
have certain similar characteristics to us, such as
(a) comparable revenue size (with our revenue approximately
at the median of the revenues of the companies in the comparator
group), (b) operations in multiple locations across the
United States, (c) similar labor requirements,
(d) headquarters in the Dallas-Fort Worth area,
and/or
(e) comparable management structures so that job
comparisons are meaningful. In addition, at the time of this
review and with the participation of our Lead Director, the
Compensation Committee evaluates the Chief Executive
Officers compensation.
20
For the 2008 compensation review, the Compensation Committee
reviewed (a) data for the following eight major
U.S. passenger airlines: AirTran Airways, Continental
Airlines, Delta Air Lines, JetBlue Airways, Northwest Airlines,
Southwest Airlines, United Airlines, and US Airways, and
(b) Hewitts report comprised of the following
26 companies (the Comparator Group):
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3M Company
Alcoa Inc.
The Boeing Company
Burlington Northern Santa Fe
Corporation
Caterpillar Inc.
The Coca Cola Company
Deere & Company
FedEx Corporation
General Dynamics Corporation
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The Goodyear Tire & Rubber Company
H.J. Heinz Company
Honeywell International, Inc.
J.C. Penney Corporation, Inc.
Johnson Controls, Inc.
Kimberly-Clark Corporation
Lockheed Martin Corporation
Motorola, Inc.
Northrop Grumman Corporation
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Raytheon Company
Sara Lee Corporation
Target Corporation
United Parcel Service, Inc.
United Technologies Corporation
Weyerhaeuser Company
Whirlpool Corporation
Xerox Corporation
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The Compensation Committee reviews data comparing total
compensation and each element of compensation provided to our
named executive officers to executive compensation at the
companies comprising the Comparator Group. While the
Compensation Committee has the ability to exercise discretion
with respect to the total compensation provided to our named
executive officers and consider other factors, its policy,
except as described below, is to establish a compensation
package that provides to each such officer total compensation
that is approximately equal to the median total compensation of
persons holding comparable positions or responsibilities at the
companies comprising the Comparator Group and generally
consistent with the compensation provided to our other named
executive officers with similar levels of responsibility. The
Compensation Committee generally believes that the median
reflects competitive market compensation for our named executive
officers, and in 2008, the Compensation Committee approved total
compensation packages for our named executive officers that
generally were consistent with this policy. However, during 2008
and in prior years, Mr. Arpeys total compensation was
below the median of the chief executive officers in the
Comparator Group. While it remains the Compensation
Committees intent to increase Mr. Arpeys
compensation to be closer to the median of chief executives in
the Comparator Group, in light of the industrys and our
current financial situation, the Compensation Committee
determined that his total compensation for 2008 should have the
same value as his 2007 compensation, except for a 1.5% increase
to his base salary that was awarded to all of our employees in
2008. In addition, the Compensation Committee included in the
group against which Mr. Gartons compensation was
benchmarked the compensation of persons serving in the role of
chief financial officer at the companies in the Comparator
Group. The Compensation Committee made this determination due to
Mr. Gartons (a) contributions and broad skill
set, (b) oversight of a large operating group, our flight
attendants, in addition to his marketing responsibilities, and
(c) prior experience as a chief financial officer of a
company in the airline industry.
In addition to reviewing competitive market data, the
Compensation Committee considered:
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the need to retain our current named executive officers and
motivate them to achieve sustained profitability under our
Turnaround Plan described under Compensation
Objectives below;
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the absence of short-term incentive awards since 2001 due to the
difficulty in achieving the pre-tax earnings margin levels
required under our Annual Incentive Plan and its predecessor
incentive compensation plan;
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the fact that for the ten years 1998 through 2007, only
approximately 67% of the total compensation we granted to our
named executive officers has actually been realized; and
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the projections of potential total compensation for the next two
years under our compensation plans.
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To better understand the impact of its decisions on the total
compensation for our named executive officers, the Compensation
Committee also analyzes tally sheets. The tally sheets quantify
all material components of compensation for the named executive
officers during the preceding five years. These include
(a) annual base salary and bonuses, (b) outstanding
equity awards and their value, (c) compensation actually
realized, (d) retirement benefits, (e) potential
termination of employment benefits (or payments), and
(f) change in control payments under
21
certain scenarios. Based on its review of the tally sheets and
other items described above in 2008, the Compensation Committee
concluded that the total compensation amounts for prior years
and for 2008 remained reasonable and consistent with our overall
compensation objectives, and the Compensation Committee did not
make any material changes to the compensation of our named
executive officers or our existing programs and policies for
2008 as a result of such review.
Compensation
Objectives
The principal objectives of our executive compensation program
are to:
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create stockholder value by linking our executives
compensation programs with the interests of our stockholders
through stock-based compensation;
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provide compensation that enables us to attract, motivate,
reward and retain talented executives;
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reward achievement of the strategic goals set forth in our
Turnaround Plan (as described below); and
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sustain a pay for performance approach in which variable or
at risk compensation comprises a substantial portion
of each executives compensation.
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We believe that our executive compensation program should be
considered in the context of the business environment in which
we have operated during the last several years. In 2003, we
implemented our Turnaround Plan in response to the challenges we
faced resulting from the September 11th attacks and
the subsequent economic downturn. The plans four tenets
include: (a) lowering costs; (b) increasing our focus
on what customers value; (c) increasing union and employee
involvement in our operations; and (d) improving our
balance sheet and financial structure.
Evaluation
of Corporate Performance
To implement our pay for performance objective, a substantial
portion of our executives pay is at risk,
meaning the final amount of compensation actually realized is
dependent on the achievement of certain short-term and long-term
financial and operating measures and objectives that, if
achieved, would contribute to our long-term financial stability
and success. The Compensation Committee has determined that the
corporate measures described below are critical to our success
and has linked our executives performance-based
compensation to these measures:
Measures
Utilized in Connection with Short-Term Incentive Compensation
Plans
Pre-Tax ProfitsOver the course of its more than
80 year history, the airline business has proven to be very
cyclical and vulnerable to general economic conditions and
various external factors, such as fuel prices and government
regulations in recent years. To encourage our executives to
strive to generate adequate profit levels, the Compensation
Committee has established a short-term incentive program that
requires a minimum 5% pre-tax earnings margin in order for
bonuses to be paid. Given the environment in which the airline
industry has operated since 2001, this minimum level of pre-tax
earnings is an extremely challenging hurdle for us to achieve,
and we have not made any annual bonus payments to the named
executive officers based on this performance measure since 2001.
Customer ServiceTo reinforce the tenets of the
Turnaround Plan, all employees, including the named executive
officers, are awarded cash payments under our Annual Incentive
Plan if we achieve our target for
on-time
flight arrivals or customer satisfaction scores. See the
discussion regarding the Annual Incentive Plan under
Short-Term
Incentive Compensation beginning on page 24 for more
details. We believe that by focusing all employees on customer
satisfaction, we are more likely to achieve positive pre-tax
earnings and long-term stockholder value.
Measures
Utilized in Connection with Long-Term Incentive Compensation
Plans
Stock Price GrowthWe believe that consistent
execution of our strategy over multi-year periods should lead to
an increase in our stock price over time. Stock-settled stock
appreciation rights (SSARs) are one way in which we provide our
executive officers with a stake in this potential increase. The
actual compensation
22
realized from the SSARs is entirely dependent on increases in
our stock price after the SSAR grant date. We also grant
performance shares and deferred shares that generally vest after
three years, the value of which is also dependent on our stock
price over time.
Total Shareholder ReturnIn addition to general
growth in our stock price, we believe that it is important for
our stock to perform as well as or better than other airlines
that we compete against. Thus, distributions under our
performance share plans are in part dependent on how well our
total shareholder return compares to the total shareholder
return of our competitors over three-year measurement periods.
The Compensation Committee selected the three-year total
shareholder return (TSR) measure because it is an
objective, market-based metric that directly measures
shareholder value creation over the long term. Use of a relative
TSR metric also mitigates the effect of general market or sector
performance on our stock price and, by extension, compensation
levels for our executive officers.
Corporate ObjectivesPrior to 2004, TSR was the sole
performance measure used to determine distributions, if any,
with respect to performance shares. Since the adoption of our
Turnaround Plan in 2003, Mr. Arpey and our Senior Vice
President of Human Resources have recommended to the
Compensation Committee each year, for the committees
review and approval, annual corporate objectives tied to our
Turnaround Plan. The Compensation Committee and the Board of
Directors believe that successful execution of these objectives
is important to our financial stability and long-term success.
Accordingly, starting with awards made in 2004 the Compensation
Committee determined that attainment of these objectives would
govern one-half of the final distribution of performance shares
to our senior officers, including our named executive officers.
In April 2008, however, the Compensation Committee determined
that with respect to any performance share awards granted
thereafter, the TSR objective would again be the sole
performance measure used to determine distributions for all
recipients, including our senior and named executive officers.
While the Compensation Committee believes that achieving our
corporate objectives remains important, it made this policy
change in order to more directly align executive compensation
with stockholders interests.
Primary
Components of Compensation
Our executive compensation program principally consists of the
following direct compensation components, each of which we
describe more fully below and in the accompanying tables and
footnotes:
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base salary;
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short-term incentive compensation;
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long-term incentive compensation;
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retirement benefits; and
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travel privileges and other benefits.
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In addition, we provide certain termination benefits to our
named executive officers.
We do not have a formal policy for allocating compensation
between cash or non-cash elements and short-term or long-term
incentives for our named executive officers. Rather, the
Compensation Committee determines the appropriate allocation of
cash or non-cash elements and short-term or long-term
compensation with our compensation objectives and comparative
company data in mind. At risk compensation is an
important element of our compensation program, and represents
more than 70% of the named executive officers total
compensation package in 2008. We provide at risk
compensation primarily through grants of stock-based
compensation and participation in compensation plans tied to
achieving strategic, financial and operational goals and
performance measures.
Base salary and short-term incentives are payable in cash. Base
salary is generally designed to comprise 15% of the named
executive officers total compensation package. Short-term
incentive compensation is generally designed to comprise 15% of
the named executive officers potential annual
compensation, although we have not paid annual bonuses to any of
our named executive officers since 2001. Long-term incentive
compensation is generally designed to represent 70% of the named
executive officers potential annual compensation.
23
Base
Salary
The Compensation Committee believes that it is important to pay
a base salary to each of our named executive officers to provide
them with a secure, known amount of cash compensation during the
year. The Compensation Committee considers competitive market
compensation and establishes each officers base salary
close to the median base salary of persons holding comparable
positions at the companies comprising our Comparator Group.
In April 2008, the Compensation Committee approved a uniform
1.5% increase to the named executive officers base
salaries, which is the same increase to base salaries that all
of our
U.S.-based
employees received in 2008.
Short-Term
Incentive Compensation
Annual Incentive Plan. As part of the
Turnaround Plan, we established the Annual Incentive Plan (the
AIP) to link the interests of our stockholders,
customers and employees. All
U.S.-based
employees, including the named executive officers, participate
in the AIP, which provides cash incentive payments upon the
achievement of monthly customer service goals and annual
financial goals.
Awards are earned monthly under the customer service component
of the AIP if we achieve at least one of the following two
customer service targets:
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An internal target percentage of American Airlines flights
departing early or on time; or
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A target score in the category Likelihood to
Recommend, rated by American Airlines in its customer
satisfaction survey.
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The customer service component of the AIP provides for payments
ranging from $40 to $80 per month for each employee, predicated
upon our achieving at least one of the two customer service
targets. An additional $250 is paid annually to each employee
for achieving a top six performance relative to our competitors
for on-time arrival, as determined by the U.S. Department
of Transportation. Any amounts earned under the customer service
component of the AIP will be subtracted from any amounts earned
under the financial component of the AIP. In 2008, we paid $160
under the customer service component of the AIP to each eligible
employee, including our named executive officers. In addition,
in January 2008, we made payments of $800 to each eligible
employee of American Airlines under the customer service
component of the AIP with respect to services provided in 2007,
except no such payments were made to our named executive
officers or any of our other officers.
Awards are earned annually under the financial component of the
AIP if American Airlines achieves threshold, target or maximum
pre-tax earnings margins described in the following table:
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Approximate
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Pre-Tax Earnings
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Pre-Tax
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(Based on American Airlines
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Level
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Earnings Margin
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2008 Revenue)
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Threshold
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5%
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$
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1.2 Billion
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Target
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10%
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$
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2.4 Billion
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Maximum
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15%
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$
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3.6 Billion
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The actual dollar amount of a paid award is determined as a
percentage of base salary, and the percentage of base salary
varies according to the level of responsibility and the pre-tax
earnings margin achieved. As part of its annual compensation
review in 2008, the Compensation Committee determined the
threshold, target and maximum award payout levels under the
financial component of the AIP for 2008 for each of the named
executive officers by reference to the short-term incentive
compensation awards available to persons holding comparable
positions at the companies comprising our Comparator Group.
Subject to the maximum awards established for each of the named
executive officers, the Compensation Committee has the
discretion to adjust the final awards. The percentages of base
salary that each of our named executive officers was eligible to
receive in 2008 are set forth in Non-Equity Incentive Plan
Awards on page 35 of this Proxy Statement.
24
We did not make any payments under the financial component of
the AIP for 2008, and because we have not achieved any of the
pre-tax earnings margin thresholds, we have not made any
short-term incentive compensation payments to our named
executive officers under the financial component of the AIP (or
its predecessor incentive compensation plan) since March 2001.
The Compensation Committee also has the discretion under the AIP
to award limited cash incentive payments to the named executive
officers and certain other management employees if we do not
meet the payout levels under the financial component of the AIP.
Under the terms of the AIP, any such discretionary payments can
be no more than 20% of the employees maximum bonus payable
under the AIP. We did not make any such discretionary cash
payments or pay any other forms of bonuses to any of the named
executive officers in 2008 or in any previous year.
American Airlines also maintains a Profit Sharing Plan for its
employees. Under that plan, profit sharing payments are made to
eligible employees if our annual pre-tax earnings exceed
$500 million. By its terms, our officers (including the
named executive officers) and certain other management employees
are not eligible to participate in the Profit Sharing Plan.
However, under the AIP, the Compensation Committee has the
discretion to award cash payments to these officers and
management employees if the other employees of American Airlines
receive profit sharing payments under the Profit Sharing Plan.
No such payments were made to any of the named executive
officers in 2008 or in any previous year.
Long-Term
Incentive Compensation
Long-term compensation is a critical component of our executive
compensation program because it is designed to link executive
compensation to the interests of our stockholders by motivating
executives to increase total stockholder return. We also believe
that long-term compensation is an important retention tool.
The Compensation Committee utilizes a variety of equity-based
instruments to provide long-term compensation for our named
executive officers. We generally grant awards at the time of the
Compensation Committees annual compensation review, with
interim awards made from time to time to new hires or upon
increases in responsibilities. In 2008, we granted the following
equity-based instruments:
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performance shares, which are contractual rights to receive
shares of our common stock upon the achievement of certain
performance measures over a three-year period;
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SSARs, which are contractual rights to receive shares of our
common stock over a ten-year exercise period;
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deferred shares, which are contractual rights to receive shares
of our common stock generally upon the completion of three years
of service following the grant date; and
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career performance shares, which are granted only to
Mr. Arpey and are contractual rights to receive shares of
our common stock upon the achievement of certain financial and
operating performance measures over a ten-year period.
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Our long-term incentive plans generally allow us to settle these
awards in either stock, cash, or a combination of stock and cash.
In determining the types and amounts of the long-term equity
awards granted in 2008 to each of our named executive officers,
the Compensation Committee targeted the median level of
long-term equity awards to persons holding comparable positions
at the companies comprising our Comparator Group, while keeping
such awards generally consistent with the compensation provided
to our other named executive officers with similar levels of
responsibility. However, the long-term equity awards granted in
2008 to Mr. Arpey were substantially below the comparable
median among chief executive officers in the Comparator Group.
In connection with its annual compensation review in May 2008,
the Compensation Committee determined to grant long-term equity
awards with the same value as were granted in 2007, but to
change the mix of long-term equity awards to reduce the large
swings in realized compensation that have been experienced in
the past several years by reducing performance share awards and
increasing deferred share awards. The Compensation Committee
also determined to grant a higher percentage of the total value
in the form of SSARs in order to extend the duration of the
award from three years to ten years and to place more emphasis
on absolute stock appreciation. Grants of
25
long-term equity awards were approved to the named executive
officers in approximately the following proportions: 50% in
performance shares (including, for Mr. Arpey, his career
performance shares); 30% in SSARs; and 20% in deferred shares.
As a result, approximately 80% of the named executive
officers potential long-term incentive compensation is
dependent upon our financial and operating performance,
including, in the case of SSARs, appreciation in our stock
price. We establish the value and number of performance and
deferred share awards using a standard valuation methodology
developed by Hewitt Associates that takes into account the terms
of such awards, including the applicable vesting and performance
criteria. We use a modified Black-Scholes valuation model to
determine the value and number of SSAR awards. See Fiscal
Year 2006, 2007 and 2008 Summary Compensation Table,
beginning on page 32 of this Proxy Statement and the
accompanying footnotes, for further details on long-term
compensation.
Performance Shares. The actual number of
performance shares (if any) ultimately distributed to the named
executive officers has been determined in recent years based on
(a) our TSR as compared to that of our main competitors and
(b) the Compensation Committees subjective
determination of achievement of our corporate objectives, in
each case during a three-year measurement period. As originally
designed, final distribution of the performance share awards for
the
2006-2008
measurement period could range from 0% to 175% of the
performance shares originally granted, depending on our
performance against these measures during the applicable
three-year measurement period.
TSR is defined as the rate of return reflecting stock price
appreciation plus reinvestment of dividends over the measurement
period. The average stock price at the close of trading on the
NYSE (adjusted for splits and dividends) for the three months
prior to the beginning and ending points of the measurement
period is used to smooth out market fluctuations.
The Compensation Committee selects the competing airlines
against which we will compare our TSR based on their market
capitalization, revenues and airline seat capacity. For the
2008/2010 Performance Share Plan, the Compensation Committee
determined to increase the number of airlines from six to ten in
order to encompass a broader and more objective representation
of the U.S. passenger airline industry. This group consists
of: AirTran Holdings, Inc., Alaska Air Group, Inc., AMR
Corporation, Continental Airlines, Inc., Delta Air Lines Inc.,
JetBlue Airways Corporation, Northwest Airlines Corporation,
Southwest Airlines Co., US Airways Group, Inc. and UAL
Corporation.
Distributions of performance shares related to TSR vary
according to the following schedule, where Rank is
our TSR ranking among the ten airlines and Percent of
Original Award is the percentage of the performance shares
initially granted that will be earned based on the TSR measure
of performance. In the event that one or more of the ten
airlines ceases to trade on a national securities exchange at
any point during the three year measurement period, the airline
is excluded from the calculation of the TSR, as shown in the
table below:
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Number of
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Competing
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Airlines
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Percent of Original Award (Based on Rank)
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1
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2
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3
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4
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5
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6
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7
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8
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9
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10
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10
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175
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%
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165
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%
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150
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%
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125
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%
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100
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%
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100
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%
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75
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%
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50
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%
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25
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%
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0%
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9
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175
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%
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165
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%
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150
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%
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125
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%
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100
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%
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100
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%
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75
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%
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50
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%
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0
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%
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8
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175
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%
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165
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%
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150
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%
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125
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%
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|
100
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%
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100
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%
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75
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%
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50
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%
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7
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175
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%
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165
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%
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150
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%
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125
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%
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|
|
100
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%
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100
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%
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75
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%
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6
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175
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%
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165
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%
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150
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%
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125
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%
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|
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100
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%
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100
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%
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5
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175
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%
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165
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%
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150
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%
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125
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%
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100
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%
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4
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175
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%
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165
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%
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150
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%
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125
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%
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3
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175
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%
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165
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%
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150
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%
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For performance share awards granted from 2004 to 2007, the
determination of distributions of the other half of the
performance share awards initially granted to our named
executive officers and other senior officers was
26
based upon the Compensation Committees subjective
determination of achievement of corporate objectives adopted by
the Compensation Committee each year. The corporate objectives
are consistent with the objectives of our Turnaround Plan, and
for the years 2004 through 2008 were: (a) keeping safety
our top priority; (b) raising external capital, maintaining
a minimum amount of cash and building a strong balance sheet;
(c) meeting our pension funding obligations;
(d) continuing to lower our non-fuel costs and implementing
measures to conserve fuel; (e) improving customer service
and dependability rankings; (f) continuously improving
revenues and business results through employee collaboration and
other means; (g) enhancing our image and customer loyalty;
(h) continuing to successfully advocate on industry
legislative and regulatory issues; (i) focusing on a
positive work environment and promoting diversity;
(j) promoting employee commitment to the employee standards
of conduct and compliance with laws and regulations;
(k) meeting financial goals in order to return to and
sustain profitability and create long-term shareholder value;
and (l) any other factors that the Compensation Committee
may determine are important or appropriate. In determining
attainment of the corporate objectives, the Compensation
Committee is not required to use any formula or other measure or
assign any particular weighting to any objective, and may also
consider any other factor that it considers important or
appropriate.
With respect to the performance share awards under the 2006/2008
Performance Share Plan, the Compensation Committee determined
that we had a fourth place TSR rank during the
2006-2008
measurement period, resulting in a TSR distribution percentage
of 75%. Achievement of the corporate objectives during this
measurement period was well in excess of 75%. Because TSR is the
sole performance measure used to determine performance shares
distributed to all of the other participants in that plan, our
named executive officers and other senior officers would have
received a higher distribution percentage than the other
participants in that plan if the determination of distributions
of one-half of the performance shares initially granted to the
senior officers was based on achievement of the corporate
objectives. The Compensation Committee and senior officers
believed that such an outcome was not appropriate. With the
consent of the senior officers, the Compensation Committee
therefore determined to align the distribution percentage for
all participants under the 2006/2008 Performance Share Plan by
only using the TSR metric to determine distribution of the
awards to our named executive officers and other senior
officers. As a result, on April 15, 2009, our senior
officers (including the named executive officers) received 75%
of the awards originally granted to them under the 2006/2008
Performance Share Plan.
With respect to the performance share awards to our named
executive officers under the 2005/2007 Performance Share Plan
(that were distributed in April 2008), in 2008 the Compensation
Committee determined that we had a second place TSR rank during
the
2005-2007
measurement period, resulting in a TSR distribution percentage
of 135%, and our attainment of the corporate objectives over the
same period was 133%. As a result, in April 2008, each named
executive officer received 134% of the share awards originally
granted to him under the 2005/2007 Performance Share Plan.
SSARs. SSARs provide compensation to the named
executive officers only to the extent that the market value of
our common stock appreciates from the date of grant. SSARs vest
in equal annual installments over five years, so an officer must
generally complete five years of service to receive the full
benefit of any SSAR grant. We generally grant SSARs to our
officers (including our named executive officers) at the time of
the Compensation Committees annual compensation review.
Our practice is generally to use the date the Compensation
Committee approves the grant as the effective date, unless the
grants are approved at the time of our earnings release (in
which case we use the third business day after the corresponding
earnings release). We established the exercise price of these
SSARs as the fair market value of our common stock on that date.
For 2008, the Compensation Committee conducted the compensation
review at its May meeting. The effective date of the SSARs
granted at that meeting was May 20, 2008, which was the
date the Compensation Committee approved the grant.
Deferred Shares. The Compensation Committee
believes that deferred shares are important for long-term
retention of our named executive officers since they are
intended to provide a minimum value for their continued service.
Since the deferred shares generally vest upon three years of
service from the date of grant, these awards complement our
performance share and SSAR awards, which are both contingent
upon the achievement of either specified performance objectives
or stock price appreciation.
27
Career Performance Shares. In 2005, the
Compensation Committee determined, with the assistance of
Deloitte Consulting and Hewitt Associates, that
Mr. Arpeys total compensation was substantially below
the median compensation of chief executive officers of the
companies comprising our Comparator Group. In lieu of increasing
his current compensation to more competitive levels, the
Compensation Committee entered into an agreement with
Mr. Arpey pursuant to which he would be granted a minimum
of 58,000 deferred shares of our common stock in each year from
2005 through and including 2009, that will vest, if at all, in
2015. These awards are referred to as career performance shares.
At the end of the performance period, the Compensation Committee
will determine, in its discretion, whether any distributions of
these shares will be made, based on its assessment of
achievement of the following financial and operating measures
during the performance period: (a) overall cash flow;
(b) earnings; (c) the per share price of our common
stock; (d) operating performance (including safety and
other issues concerning regulatory compliance); (e) the
rate of return achieved on our investments
and/or
equity; (f) measures of employee engagement
and/or
satisfaction; (g) the overall state of relations with our
organized labor groups; (h) our balance sheet; (i) our
overall relationships with our largest stockholders;
(j) revenues; and (k) other factors as the
Compensation Committee may, in its judgment, deem material.
Depending on this assessment, the ultimate distribution with
respect to such career performance shares could range from 0% to
175% of the shares originally granted. The Compensation
Committee is not required to use any formula or other measure or
assign any particular weighting to any objective or the
performance for any particular year in determining achievement
of these objectives. Also, the Compensation Committee may
consider any other factors it believes are material.
In addition to providing more competitive long-term compensation
for Mr. Arpey, the Career Share Performance Award Agreement
reflects our desire to retain Mr. Arpey because of his
knowledge of the airline business, his contributions to the
airlines success, and our confidence that Mr. Arpey
has the vision and managerial capability to oversee our
continued growth. The Compensation Committee has not granted
career performance shares to any other named executive officer
because their total potential compensation more closely
approximates the median for similarly situated positions with
the companies comprising our Comparator Group.
As part of its 2008 compensation review in May and pursuant to
its agreement with Mr. Arpey, the Compensation Committee
granted Mr. Arpey 58,000 career performance shares, the
minimum number of shares required to be granted by the Career
Performance Share Award Agreement. In approving such grant, the
Compensation Committee concluded that Mr. Arpeys
total compensation was still significantly below the median for
chief executive officers in the Comparator Group. Vesting of the
granted shares remains contingent on Mr. Arpeys
performance and continued service through 2015, subject to
certain exceptions discussed in Termination By Executive
For Good Reason beginning on page 46 of this Proxy
Statement.
Retirement
Retirement Benefit Plan. We provide the
Retirement Benefit Plan of American Airlines, Inc. for Agents,
Management, Specialists, Support Personnel and Officers (the
Retirement Benefit Plan) to help provide
compensation to our eligible employees during their retirement.
All of the named executive officers participate in the
Retirement Benefit Plan, which is a defined benefit plan.
Similar defined benefit plans exist for other American Airlines
employees, including those employees covered by bargained labor
agreements. We design our retirement benefits to be competitive
with overall market practices and to provide long-term financial
security for employees and, specifically for executives, to
promote retention.
The Retirement Benefit Plan complies with the Employee
Retirement Income Security Act of 1974 (ERISA) and
qualifies for an exemption from federal income taxation under
the Internal Revenue Code of 1986 (the Code). Since
the Retirement Benefit Plan is a qualified plan, it is subject
to various restrictions under the Code and ERISA with respect to
payments and benefit calculations. These restrictions limit the
maximum annual benefit payable under qualified plans (such as
the Retirement Benefit Plan). The limit was $180,000 in 2007,
$185,000 in 2008 and $195,000 in 2009. Further, the Code limits
the maximum amount of annual compensation that we may take into
account under the Retirement Benefit Plan. The limit was
$225,000 in 2007, $230,000 in 2008 and $245,000 in 2009. We pay
benefits under the Retirement Benefit Plan as monthly annuities,
which we reduce for the receipt of social security benefits.
28
See 2008 Pension Benefits Table and the accompanying
narrative discussion and footnotes that follow the table,
beginning on page 43 of this Proxy Statement, for further
details regarding the Retirement Benefit Plan.
Non-Qualified Plan. To address limitations on
benefits under the Retirement Benefit Plan, American Airlines
pays an additional retirement benefit to the named executive
officers under the Supplemental Executive Retirement Plan, a
plan that is not qualified under the Code (the
Non-Qualified Plan). The Non-Qualified Plan formulas
are the same as those applicable under the Retirement Benefit
Plan, but are not subject to the annual benefit or compensation
limits of the Code. Short-term incentive compensation is
included in the Non-Qualified Plan benefit formula because base
pay for the named executive officers generally represents a
small percentage of their total compensation potential. Income
received from long-term incentive compensation distributions
(such as stock option/SSAR exercises, performance share,
deferred share and career performance share distributions) are
not included in the Non-Qualified Plan benefit formulas. We pay
benefits under the Non-Qualified Plan in a lump sum.
The Board of Directors approved the establishment of a secular
trust in 2002 to fund defined benefits payable under the
Non-Qualified Plan. We fund the trust to provide participants in
the Non-Qualified Plan a comparable level of certainty regarding
payment of their retirement benefits under the plan to that
afforded to all eligible employees under the Retirement Benefit
Plan. Contributions of vested benefits to the secular trust are
taxable to the named executive officers and the funds are not
subject to claims from creditors in the event of bankruptcy. It
is our current policy not to fund the Non-Qualified Plans
trust to any greater extent than the funded percentage of our
least funded qualified defined benefit plan for non-officer
employees.
See 2008 Pension Benefits Table and the accompanying
narrative discussion and footnotes that follow, beginning on
page 43 of this Proxy Statement, for further details
regarding the Non-Qualified Plan.
Travel
Privileges and Other Benefits
The named executive officers participate in a variety of health
and welfare and other benefits provided to the other
U.S.-based
employees of American Airlines. The Compensation Committee has
also determined that it is important to provide a limited number
of additional perquisites and benefits to our named executive
officers to attract and retain them. As is common practice in
the industry, we provide unlimited travel privileges in any
available class of service on American Airlines and American
Eagle Airlines to our named executive officers and their
respective spouses or companions and dependent children, and
complimentary travel from time to time on other airlines on
request. Although these travel privileges are primarily
complimentary, each named executive officer is required to pay
service charges, fees and taxes for the transportation and are
subject to our travel privilege program terms and conditions.
In order to reduce costs, in 2003 we elected to eliminate a
number of perquisites frequently provided to executive officers
of public companies, such as automobile lease payments, club
memberships, financial planning fees and split dollar life
insurance. We instead provide personal allowances. We also
provide personal security services from time to time for
Mr. Arpey and his family. We describe further the
perquisites that we provide to our named executive officers
while they are employed by us in footnote (6) to the
Fiscal Year 2006, 2007 and 2008 Summary Compensation
Table on page 32 of this Proxy Statement.
Post-Termination
and Change in Control Benefits
The named executive officers are eligible for benefits,
perquisites and privileges following their employment with us
that we generally provide to all of our salaried employees.
These may vary depending upon the reason for termination or the
position or tenure of the named executive officer. In addition,
they are eligible to receive severance determined according to
prescribed policy, pro-rated incentive compensation and equity
distributions, and a limited number of other benefits,
perquisites and privileges. Subject to certain terms and
conditions, upon termination we also generally provide unlimited
air transportation on American Airlines and American Eagle
Airlines in any available class of service to our named
executive officers (and their respective spouses or companions
and dependent children). See the narrative discussion under
Post-Employment Compensation, beginning on
page 45 of this Proxy Statement, for further details
regarding these post-termination benefits, perquisites and
privileges.
29
Under the terms of our 1998 LTIP, upon the occurrence of a
change in control as defined in the 1998 LTIP, all outstanding
stock options and SSARs will become immediately exercisable, all
outstanding shares of restricted stock and deferred shares will
vest, and all performance shares (including career performance
shares) will be deemed vested at target levels of performance.
In connection with a change in control, the Compensation
Committee may elect to cash out each such outstanding award.
Also, upon a change in control each named executive officer will
receive a payment equal to the present value of the remaining
annual retirement benefit to be paid to him under the
Non-Qualified Plan.
Under the 1998 LTIP, as modified in 2008 to comply with
Section 409A of the Code (Section 409A), a
change in control of AMR Corporation is deemed to occur:
(a) if a third party acquires beneficial ownership of
thirty percent or more of our common stock over a twelve month
period; (b) if the Board of Directors or their approved
successors no longer constitute a majority of the Board of
Directors (as measured over a twelve month period); (c) if
our stockholders approve our complete liquidation or
dissolution; or (d) upon the consummation of a
reorganization, merger, consolidation, or a sale or other
disposition of all our assets, unless, immediately following
such transaction, (1) our stockholders prior to the
transaction hold at least fifty percent of the voting securities
of the successor, (2) no one person owns more than thirty
percent of the successor, and (3) the members of the Board
of Directors prior to the transaction constitute at least a
majority of the Board of Directors of the successor. However, in
no event will a change in control be deemed to have occurred
unless the event also complies with regulations issued under
Section 409A. This modified change in control definition
requires a significantly higher threshold of ownership or
control to trigger a change in control as compared to the change
in control definition it replaced.
These events were used to define change in control because each
reflects a circumstance in which, through a partys
acquisition of a significant voting block, a shift in the
control of the majority of the Board of Directors, or a
corporate transaction, a person or group would be expected to
obtain control or effective control over our policies and
direction. In those circumstances, the Compensation Committee
believes it would be appropriate to provide management the
benefit of the awards that have been conveyed prior to such
event and to waive the service and other conditions applicable
to managements rights to such awards, because such change
could reasonably be expected to materially alter our policies
and objectives,
and/or
result in a material change in the composition of management.
We have also entered into executive termination benefit
agreements or similar protections with our named executive
officers for terminations associated with a change in control.
Since 1987, it has been our practice to enter into these
agreements with our executive and senior officers. All of the
named executive officers, except Mr. Horton, are covered
under change in control agreements. These agreements were
revised in 2008 to comply with Section 409A, including
adopting the modified definition of change in control described
above. Mr. Horton has similar change in control protections
under his employment agreement. We believe that these agreements
are consistent with executive termination agreements entered
into by other companies at that time. These agreements encourage
the executive to work for the best interests of the stockholders
during a potential change in control situation by guaranteeing
the executive a specified level of financial security if the
executives employment is terminated following a change in
control. The executive termination benefit agreements also help
ensure that the executive will remain with us for a reasonable
period after the change in control, enabling a smooth transition
to new management. Further, we believe that these features
remain in common use. The airline industry is highly
competitive, has witnessed bankruptcies, and is subject to
potential future consolidation and economic contingencies due to
the current challenging economic climate. Our Compensation
Committee therefore believes that we should have these
agreements with our named executive officers. See the narrative
discussion of these agreements under Change In
Control, beginning on page 49 of this Proxy
Statement, for further details.
Extension
of Mr. Hortons Employment Agreement
In March 2006, we entered into a three-year employment agreement
with Mr. Horton in order to attract him to become our
Executive Vice President-Finance and Planning and Chief
Financial Officer. In order to continue to retain him, in July
2008, the Compensation Committee extended Mr. Hortons
employment agreement by an additional three years until
March 29, 2012. No other changes were made to
Mr. Hortons employment agreement. Additional
information regarding Mr. Hortons employment
agreement is provided in Employment Agreement with
Mr. Horton on page 35 and elsewhere in Executive
Compensation beginning on page 32.
30
Recoupment
Policy
In March 2009, the Compensation Committee approved a policy that
allows the Compensation Committee to recoup certain compensation
paid to our chief executive officer and each of his direct
reports (including each other named executive officer) if we
restate our financial statements due to that officers
intentional misconduct. The recoupment policy applies to excess
compensation that may have been realized, as a result of the
misstated financial information, by the officer engaged in the
misconduct under an annual incentive plan or equity incentive
awards to the extent the awards were predicated upon metrics
that were affected by the misstated financial information.
Consideration
of Tax Consequences in Determining Compensation
Section 162(m) of the Code limits the deductibility of
certain compensation paid to certain of our named executive
officers to $1 million. While the Compensation Committee
believes that it is important for the compensation paid to our
named executive officers to be tax deductible under
Section 162(m), it does not think this should be the
determining factor in establishing compensation. The
Compensation Committee believes that we must balance the
emphasis on maximizing deductibility against both the need to
retain executive talent and our long-term strategies and goals.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management. Based on
such review and discussions, the Compensation Committee
recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Compensation Committee of AMR Corporation:
Michael A. Miles, Chairman
David L. Boren
Philip J. Purcell
Judith Rodin
Matthew K. Rose
31
EXECUTIVE COMPENSATION
Fiscal
Year 2006, 2007 and 2008 Summary Compensation Table
The following Fiscal Year 2006, 2007 and 2008 Summary
Compensation Table contains information regarding compensation
for 2006 2008 that we paid to: (a) our Chief
Executive Officer, Gerard J. Arpey, (b) our Chief Financial
Officer, Thomas W. Horton, and (c) our three most highly
compensated executive officers (other than the Chief Executive
Officer and Chief Financial Officer) as of December 31,
2008, Daniel P. Garton, Robert W. Reding and Gary F. Kennedy.
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Change in
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Pension Value
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and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Salary1
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Bonus
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Awards2
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Awards3
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Compensation4
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Earnings5
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Compensation6
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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($)
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Gerard J.
Arpey-Chairman,
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2008
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666,348
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0
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1,784,712
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736,514
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160
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171,213
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60,293
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3,419,239
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President & CEO
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2007
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656,500
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0
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3,103,550
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550,793
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50
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254,126
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36,146
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4,601,165
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2006
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581,534
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0
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8,558,878
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851,398
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225
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|
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169,255
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39,769
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10,201,059
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Thomas W. Horton-Exec.
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2008
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615,090
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0
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682,115
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368,157
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160
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535,943
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30,413
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2,231,878
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Vice Pres.-Finance &
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2007
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606,000
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0
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2,003,474
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275,477
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50
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522,507
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30,060
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3,437,567
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Planning & CFO
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2006
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456,522
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0
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5,816,291
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165,438
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175
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484,563
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918,145
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7,841,134
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Daniel P. Garton-Exec.
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2008
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527,865
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0
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986,779
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407,517
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160
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114,744
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31,728
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2,068,792
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Vice Pres.-Marketing
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2007
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520,064
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0
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1,978,851
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363,772
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50
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169,864
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31,479
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3,064,079
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2006
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512,378
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0
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5,044,893
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544,885
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225
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169,298
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44,027
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6,315,706
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Robert W. Reding-Exec.
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2008
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527,865
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0
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669,543
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|
481,084
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|
|
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|
160
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|
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|
217,796
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31,821
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1,928,269
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|
Vice Pres.-Operations
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2007
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|
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478,530
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0
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1,138,206
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325,514
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50
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247,380
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|
31,751
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|
2,221,431
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2006
|
|
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|
457,728
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0
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|
3,508,384
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|
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309,167
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225
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|
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212,900
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36,788
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4,525,192
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Gary F. Kennedy-Sr. Vice
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|
|
2008
|
|
|
|
486,238
|
|
|
|
0
|
|
|
|
456,763
|
|
|
|
|
334,237
|
|
|
|
|
160
|
|
|
|
|
125,154
|
|
|
|
|
28,194
|
|
|
|
|
1,430,746
|
|
Pres., General Counsel &
|
|
|
2007
|
|
|
|
479,053
|
|
|
|
0
|
|
|
|
1,124,822
|
|
|
|
|
278,586
|
|
|
|
|
50
|
|
|
|
|
236,567
|
|
|
|
|
31,209
|
|
|
|
|
2,150,286
|
|
Chief Compliance Officer
|
|
|
2006
|
|
|
|
471,973
|
|
|
|
0
|
|
|
|
3,554,333
|
|
|
|
|
290,647
|
|
|
|
|
225
|
|
|
|
|
252,889
|
|
|
|
|
37,045
|
|
|
|
|
4,607,112
|
|
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(1) |
|
The Compensation Committee determined the base salaries listed
in the Fiscal Year 2006, 2007 and 2008 Summary Compensation
Table for each of the named executive officers by applying the
principles set forth in the Compensation Discussion and
Analysis, beginning on page 19 of this Proxy
Statement. Mr. Hortons base salary is determined
pursuant to the terms of his employment agreement entered into
in connection with his recommencement of employment on
March 29, 2006. |
|
|
|
In May 2008, we granted each of Messrs. Arpey, Horton,
Garton, Reding and Kennedy a 1.5% increase in annual base
salary, which is the same increase to base salaries that all of
the
U.S.-based
employees of American Airlines received in 2008. We granted no
other base salary increases to any of the named executive
officers in 2008. |
|
(2) |
|
Amounts shown do not reflect compensation actually received by
the named executive officers. Rather, as required by the rules
of the SEC, the amounts represent the compensation expense for
financial statement reporting purposes recognized in 2006, 2007
and 2008, as determined pursuant to Financial Accounting
Standards Board Statement No. 123 (revised 2004),
Share-Based Payment (FAS 123(R)), of
performance shares, deferred shares and career performance
shares granted to the named executive officers in 2006, 2007 and
2008, as well as compensation expense for such grants made in
prior years. These amounts do not include any reduction in the
value of such grants for the possibility of forfeiture. See
footnote 9 to our financial statements included in our
Form 10-K
for the fiscal year ended December 31, 2008 for the
assumptions made in determining the FAS 123(R) values for
2006, 2007 and 2008. |
|
(3) |
|
Amounts shown do not reflect compensation actually received by
the named executive officers. Rather, as required by the rules
of the SEC, the amounts represent the compensation expense for
financial statement reporting purposes recognized in 2006, 2007
and 2008, as determined pursuant to FAS 123(R), of stock
options |
32
|
|
|
|
|
and SSARs granted to each of the named executive officers in
2006, 2007 and 2008, as well as compensation costs for grants
made in prior years. These amounts do not include any reduction
in the value of such grants for the possibility of forfeiture.
See footnote 9 to our financial statements included in our
Form 10-K
for the fiscal year ended December 31, 2008 for the
assumptions made in determining the FAS 123(R) values for 2006,
2007 and 2008. |
|
(4) |
|
Amounts shown for each year were earned under the customer
service component of the AIP. We made no payments in 2006, 2007
or 2008 under the financial component of the AIP because we did
not achieve the threshold pre-tax earnings margin required. See
Compensation Discussion and Analysis, beginning on
page 19 and Annual Incentive Plan beginning on
page 24 of this Proxy Statement, for further details
regarding these payments. |
|
(5) |
|
Amounts shown represent the change in the actuarial present
value of the accumulated benefit under both the Retirement
Benefit Plan and the Non-Qualified Plan from January 1 to
December 31 of each year. For Messrs. Horton and Reding,
the amounts also reflect additional years of credited service
under the Non-Qualified Plan pursuant to Mr. Hortons
employment agreement and a letter of agreement with
Mr. Reding. For a more detailed discussion of the manner in
which the value of the benefits under the Retirement Benefit
Plan and Non-Qualified Plan are determined, see Discussion
Regarding 2008 Pension Benefits Table, beginning on
page 44 of this Proxy Statement. The amounts in this column
do not include any above-market or preferential earnings on
non-qualified deferred compensation. |
|
(6) |
|
Amounts shown include a personal allowance paid in each of 2006,
2007 and 2008 to each of the named executive officers,
determined based upon their positions, in the following amounts:
Mr. Arpey ($33,000), Mr. Horton ($27,000),
Mr. Garton ($27,000), Mr. Reding ($27,000), and
Mr. Kennedy ($27,000). In order to reduce costs, in 2003 we
elected to provide these personal allowances and to eliminate
many of the perquisites commonly provided to executive officers
of other public companies, including automobile lease payments,
club memberships, financial/estate planning fees and split
dollar life insurance. |
|
|
|
Amounts shown also include the estimated aggregate incremental
cost to us of providing perquisites and other personal benefits
to our named executive officers. These include the estimated
aggregate incremental cost to us of the air transportation
provided by us to each of the named executive officers and his
or family members in each year shown, including the estimated
cost of incremental fuel, catering, insurance, and reservation
and ticketing costs, but excluding fees and taxes paid by the
named executive officer with respect to that air transportation.
These also include reimbursement by us for: (a) the cost of
one annual medical exam, (b) the premium for a term life
insurance policy (with a policy amount equal to the base salary
of the named executive officer), (c) a portion of the
premium for long-term disability insurance, and (d) broker
fees associated with the exercise of stock options/SSARs by the
named executive officer during prescribed trading windows. Each
current named executive officer and his or her spouse were also
provided an Admirals
Club®
membership (American Airlines travel clubs located at
American Airlines large U.S. and international airports),
airport parking, and on occasion certain of them were provided
access to events or venues sponsored by us or received reduced
cost air transportation on other airlines, at no incremental
cost to us. For Mr. Arpey, the amount shown for 2008
includes $23,021, which is the estimated incremental cost to us
of personal security services provided from time to time to him
and his family. The amount reported is the allocated portion of
the total cost paid by us for security services, based on
estimates of the percentage of time security personnel spent in
activities we believe would be characterized under applicable
rules as personal to Mr. Arpey and his family. Except as
otherwise specifically noted above, the amount of, or
incremental cost to us with respect to, any of the perquisites
or other personal benefits included in this column for 2008
did not exceed the greater of $25,000 or 10% of the total amount
of perquisites and personal benefits to any named executive
officer. |
33
Fiscal
Year 2008 Grants of Plan-Based Awards Table
The table below lists each grant or award made in 2008 to our
named executive officers under our equity and non-equity
incentive plans.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
|
|
Estimated Future Payouts Under
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
Awards1
|
|
Incentive Plan
Awards2
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
or Base
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
of Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
and Option
|
|
|
Grant
|
|
Threshold
|
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date3
|
|
($)
|
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
($/Sh)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arpey
|
|
|
|
|
|
|
613,040
|
|
|
|
|
932,887
|
|
|
|
1,332,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
230,0004
|
|
|
|
402,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,886,000
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
58,0005
|
|
|
|
101,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475,600
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,0006
|
|
|
|
|
|
|
|
|
|
|
|
951,200
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
286,0007
|
|
|
|
8.20
|
|
|
|
1,078,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
|
|
|
|
332,149
|
|
|
|
|
664,297
|
|
|
|
1,230,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
108,0004
|
|
|
|
189,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
885,600
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,8506
|
|
|
|
|
|
|
|
|
|
|
|
367,770
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,5507
|
|
|
|
8.20
|
|
|
|
416,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garton
|
|
|
|
|
|
|
285,047
|
|
|
|
|
570,094
|
|
|
|
1,055,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
108,0004
|
|
|
|
189,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
885,600
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,5906
|
|
|
|
|
|
|
|
|
|
|
|
447,638
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,5507
|
|
|
|
8.20
|
|
|
|
416,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
|
|
|
|
285,047
|
|
|
|
|
570,094
|
|
|
|
1,055,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
108,0004
|
|
|
|
189,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
885,600
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,8506
|
|
|
|
|
|
|
|
|
|
|
|
367,770
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,5507
|
|
|
|
8.20
|
|
|
|
416,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennedy
|
|
|
|
|
|
|
243,119
|
|
|
|
|
364,679
|
|
|
|
972,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
61,5004
|
|
|
|
107,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
504,300
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,5506
|
|
|
|
|
|
|
|
|
|
|
|
209,510
|
|
|
|
|
05/20/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,9507
|
|
|
|
8.20
|
|
|
|
237,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts shown in the table under the column Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
reflect payments under the AIP that we would have made to each
of our current named executive officers if we had achieved the
pre-tax earnings margin thresholds of the financial component of
the AIP. Any amounts paid under the customer service component
of the AIP are subtracted from any amounts earned under the
financial component of the AIP, so no amounts are included in
the table under the customer service component of the AIP. Since
we did not meet the threshold for payment under the financial
component of the AIP in 2008, the actual amounts earned in 2008
under the AIP consisted of a $160 payment to each named
executive officer under the AIPs customer service
component (which are reported in the Fiscal Year 2006,
2007 and 2008 Summary Compensation Table above in the
column Non-Equity Incentive Plan Compensation). See
Compensation Discussion and Analysis beginning on
page 19 of this Proxy Statement for more details regarding
the AIP. |
|
(2) |
|
The amounts shown in the table under the column Estimated
Future Payouts Under Equity Incentive Plan Awards reflect
potential distributions of performance share awards to all the
named executive officers and potential distributions of career
performance share awards to Mr. Arpey. Final distributions
of these awards can range from 0% to 175% of the shares
originally granted, depending on our performance against certain
measures during the applicable measurement period. See
Compensation Discussion and Analysis beginning on
page 19 of this Proxy Statement for more details regarding
these awards and the performance criteria. |
|
(3) |
|
The annual performance shares, deferred shares and SSARs grants
to our named executive officers were approved at the meeting of
the Compensation Committee on May 20, 2008, which was also
the effective date of such awards. The exercise price of these
SSARs was the fair market value of our common stock on that
date, which was determined based on the last reported sales
price of our stock on such date. |
|
(4) |
|
These are performance shares granted under the 2008/2010
Performance Share Plan. |
|
(5) |
|
These are deferred shares granted pursuant to the 2005 Career
Performance Share Award Agreement with Mr. Arpey. |
34
|
|
|
(6) |
|
These are deferred shares granted pursuant to the 2008 Deferred
Share Award Agreements. |
|
(7) |
|
These are SSARs granted pursuant to the 2008 Stock Appreciation
Rights Agreements. |
Discussion
Regarding Fiscal Year 2006, 2007 and 2008 Summary Compensation
Table and Fiscal Year 2008 Grants of Plan-Based Awards
Table
General
Base salary and short-term incentives are payable in cash. Base
salary is generally designed to comprise 15% of the named
executive officers total compensation package. Short-term
incentive compensation is generally designed to comprise 15% of
the named executive officers potential annual
compensation, although we have not paid annual bonuses to any of
our named executive officers since 2001. Long-term incentive
compensation is generally designed to represent 70% of the named
executive officers potential annual compensation.
Employment
Agreement with Mr. Horton
In March 2006, we entered into an employment agreement with
Mr. Horton, which in July 2008 was extended until
March 29, 2012. Pursuant to the agreement, Mr. Horton
is entitled to receive an annual base salary of $600,000, which
is reviewed annually and may not be reduced after any increase,
and an annual target bonus equal to 108% of his salary.
Mr. Horton is eligible to participate in our management
employee and executive benefit programs, including the
Retirement Benefit Plan and the Non-Qualified Plan, and to
receive an annual personal allowance of at least $27,000 per
year. The agreement grants Mr. Horton additional years of
credited service under the Non-Qualified Plan, as described
under 2008 Pension Benefits Table, beginning on
page 43 of this Proxy Statement, and certain
post-employment and change in control benefits, as described
under Post-Employment Compensation, beginning on
page 45 of this Proxy Statement and Change In
Control, beginning on page 49 of this Proxy
Statement. Except as described above, we are not a party to any
currently effective employment agreement with any of our named
executive officers.
Non-Equity
Incentive Plan Awards
In 2003, we agreed that all
U.S.-based
employees, including the named executive officers, would
participate in a new cash incentive plan, called the Annual
Incentive Plan. Awards under the AIP are based on a customer
service component and a financial component. The customer
service component of the AIP contemplates payments ranging from
$40 to $80 per month for each employee, predicated upon American
Airlines achieving at least one of two customer service targets.
With respect to the customer service component, in
2008 monthly payments of $40 were earned in each of
September, October, November and December.
The financial component of the AIP provides for payments if
American Airlines achieves certain pre-tax earnings margin
levels. The actual dollar amount of a paid award is determined
as a percentage of base salary, and the percentage of base
salary varies according to the level of responsibility and the
pre-tax earnings margin achieved. The percentages of base salary
that each of our named executive officers was eligible to
receive in 2008, based upon our achievement of the threshold,
target or maximum performance levels, are set forth below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Base Salary
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Arpey
|
|
|
|
|
92
|
%
|
|
|
|
140
|
%
|
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
|
|
54
|
%
|
|
|
|
108
|
%
|
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garton
|
|
|
|
|
54
|
%
|
|
|
|
108
|
%
|
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
|
|
54
|
%
|
|
|
|
108
|
%
|
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennedy
|
|
|
|
|
50
|
%
|
|
|
|
75
|
%
|
|
|
|
200
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Airlines pre-tax earnings margin did not reach
the 5% threshold (approximately $1.2 billion dollars based
upon American Airlines 2008 revenue), and therefore no
payments were made under the financial component of the AIP in
2008. See Compensation Discussion and Analysis,
beginning on page 19 of this Proxy Statement, for further
details regarding the AIP.
35
Equity
Incentive Plan Awards
During its annual compensation review conducted in May 2008, the
Compensation Committee approved the annual grants of performance
shares, career performance shares, deferred shares and SSARs to
the named executive officers as described below.
Performance Shares. Performance shares are
grants of stock-based compensation that vest after the
completion of a three-year measurement period. The Fiscal
Year 2008 Grants of Plan-Based Awards Table reflects the
number of performance shares granted in 2008 under the 2008/2010
Performance Share Plan to each of our named executive officers.
Except as provided below, vesting of these performance shares is
also generally contingent upon continued employment with us
through April 20, 2011. In the event of death, disability,
termination other than for cause, or early retirement of one of
our named executive officers, the performance shares previously
granted will vest on a pro-rata basis, based on the number of
months that have elapsed since the award date and our
achievement of the performance criteria. In the event of a
change in control, distributions with respect to the performance
shares will be at the target level, or 100%, of the shares
initially granted. See Compensation Discussion and
Analysis, beginning on page 19 of this Proxy
Statement, for further details regarding the performance shares.
Career Performance Shares. In 2005, we entered
into a Career Performance Share Award Agreement with
Mr. Arpey. Pursuant to the terms of that agreement, in
2008, we granted Mr. Arpey an award of 58,000 career
performance shares that generally vest and become payable in
2015 (listed in the above Fiscal Year 2008 Grants of
Plan-Based Awards Table). However, in the event of
Mr. Arpeys death, disability, termination other than
for cause or early retirement; if Mr. Arpey resigns for
good reason (as defined below); or in the event of a change in
control, the career performance shares previously granted will
vest. Upon vesting, the Compensation Committee will determine
whether any distributions of these shares will be made, based on
its assessment of achievement of various financial and operating
measures described in Compensation Discussion and
Analysis, beginning on page 19 of this Proxy
Statement. Depending on this assessment, the ultimate
distribution with respect to such career performance shares
could range from 0% to 175% of the shares originally granted.
Under the Career Performance Share Award Agreement,
Mr. Arpey is also entitled to receive additional grants of
at least 58,000 career performance shares in 2009. In the Career
Performance Share Award Agreement, good reason
includes the occurrence of any of the following without
Mr. Arpeys consent: (a) a reduction in his
salary (other than a reduction pursuant to a salary reduction
program including other senior officers); (b) a significant
reduction in his authority, duties or responsibilities such that
he believes he can no longer perform his duties; or (c) a
material reduction in the benefits we provide him. See
Compensation Discussion and Analysis, beginning on
page 19 of this Proxy Statement, for further details
regarding career performance shares and the performance criteria.
Deferred Shares. The deferred shares granted
in 2008 to each of our named executive officers vest on
May 20, 2011, the third anniversary of the grant date,
subject to the named executive officers continued
employment with us through that date. In the event of death,
disability, termination other than for cause, or early
retirement of one of our named executive officers, the deferred
shares will vest on a pro-rata basis, based on the number of
months that have elapsed since the award date. In the event of a
change in control, deferred shares previously awarded will vest.
See Compensation Discussion and Analysis, beginning
on page 19 of this Proxy Statement, for further details
regarding the deferred shares.
SSARs. The Fiscal Year 2008 Grants of
Plan-Based Awards Table lists the number of shares granted
in 2008 in respect of SSARs. Upon their exercise, we pay the
value of the appreciation in an equivalent number of shares of
our stock. SSARs are exercisable for ten years from the date of
grant and vest in 20% increments over five years. In the event
of death or a change in control, vesting is accelerated; and in
the event of early retirement or disability, unexercised options
and SSARs continue to vest and remain exercisable until
expiration. The effective date of the SSARs granted in 2008 was
May 20, 2008. We established the exercise price of these
SSARs as the fair market value of our common stock on that date,
which was the last reported sales price of our stock at the time
of grant as defined by our 1998 LTIP.
36
2008
Outstanding Equity Awards At Fiscal Year-End Table
The following table lists all of the outstanding stock and stock
option/SSAR awards held on December 31, 2008 by each of our
named executive officers. The table also includes, where
applicable, the value of these awards based on the closing price
of our common stock on December 31, 2008, which was $10.67.
Each award listed in the Number of Securities Underlying
Unexercised Options Unexercisable column with an
expiration date prior to July 24, 2016 is a stock option
with a tandem SSAR. The other awards listed in this column are
SSARs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option/SSAR Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
of Stock
|
|
|
Stock
|
|
|
Other Rights
|
|
|
Other Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
Name
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
Arpey
|
|
|
|
|
52,140
|
|
|
|
|
|
|
|
|
|
28.86
|
|
|
|
|
07/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,000
|
|
|
|
|
|
|
|
|
|
24.39
|
|
|
|
|
01/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
33.38
|
|
|
|
|
07/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
36.18
|
|
|
|
|
07/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,000
|
|
|
|
|
|
|
|
|
|
26.71
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
24.47
|
|
|
|
|
04/02/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,800
|
|
|
|
|
34,4001
|
|
|
|
|
8.88
|
|
|
|
|
07/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,000
|
|
|
|
|
38,0002
|
|
|
|
|
13.67
|
|
|
|
|
07/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
45,0003
|
|
|
|
|
23.21
|
|
|
|
|
07/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
60,0004
|
|
|
|
|
28.59
|
|
|
|
|
07/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
286,0007
|
|
|
|
|
8.20
|
|
|
|
|
05/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,2508
|
|
|
|
|
760,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,0009
|
|
|
|
|
213,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,00010
|
|
|
|
|
213,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,00011
|
|
|
|
|
1,237,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,54012
|
|
|
|
|
1,062,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,00014
|
|
|
|
|
1,013,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230,00015
|
|
|
|
|
2,454,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232,00016
|
|
|
|
|
2,475,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
|
|
23,680
|
|
|
|
|
35,5205
|
|
|
|
|
26.70
|
|
|
|
|
03/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,400
|
|
|
|
|
23,1003
|
|
|
|
|
23.21
|
|
|
|
|
07/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,960
|
|
|
|
|
27,8404
|
|
|
|
|
28.59
|
|
|
|
|
07/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
110,5507
|
|
|
|
|
8.20
|
|
|
|
|
05/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,7508
|
|
|
|
|
488,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,4009
|
|
|
|
|
89,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,50010
|
|
|
|
|
80,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,85011
|
|
|
|
|
478,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,00014
|
|
|
|
|
554,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,00015
|
|
|
|
|
1,152,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option/SSAR Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
of Stock
|
|
|
Stock
|
|
|
Other Rights
|
|
|
Other Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
Name
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
Garton
|
|
|
|
|
52,140
|
|
|
|
|
|
|
|
|
|
28.86
|
|
|
|
|
07/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237,000
|
|
|
|
|
|
|
|
|
|
24.39
|
|
|
|
|
01/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
33.38
|
|
|
|
|
07/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
36.18
|
|
|
|
|
07/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84,000
|
|
|
|
|
|
|
|
|
|
26.71
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,800
|
|
|
|
|
|
|
|
|
|
10.68
|
|
|
|
|
07/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
15,0001
|
|
|
|
|
8.88
|
|
|
|
|
07/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,840
|
|
|
|
|
23,6802
|
|
|
|
|
13.67
|
|
|
|
|
07/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,400
|
|
|
|
|
23,1003
|
|
|
|
|
23.21
|
|
|
|
|
07/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,960
|
|
|
|
|
27,8404
|
|
|
|
|
28.59
|
|
|
|
|
07/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
110,5507
|
|
|
|
|
8.20
|
|
|
|
|
05/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,7508
|
|
|
|
|
488,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,9509
|
|
|
|
|
127,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,70010
|
|
|
|
|
114,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,59011
|
|
|
|
|
582,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,54012
|
|
|
|
|
1,062,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,00014
|
|
|
|
|
554,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,00015
|
|
|
|
|
1,152,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
|
|
35,550
|
|
|
|
|
|
|
|
|
|
29.53
|
|
|
|
|
03/20/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
33.38
|
|
|
|
|
07/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
36.18
|
|
|
|
|
07/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
26.71
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
6.50
|
|
|
|
|
05/27/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,800
|
|
|
|
|
|
|
|
|
|
10.68
|
|
|
|
|
07/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,200
|
|
|
|
|
11,6001
|
|
|
|
|
8.88
|
|
|
|
|
07/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,100
|
|
|
|
|
15,4002
|
|
|
|
|
13.67
|
|
|
|
|
07/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,720
|
|
|
|
|
13,0803
|
|
|
|
|
23.21
|
|
|
|
|
07/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,960
|
|
|
|
|
15,8404
|
|
|
|
|
28.59
|
|
|
|
|
07/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
|
12,0006
|
|
|
|
|
24.62
|
|
|
|
|
09/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
110,5507
|
|
|
|
|
8.20
|
|
|
|
|
05/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,2508
|
|
|
|
|
280,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,7009
|
|
|
|
|
50,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,25010
|
|
|
|
|
45,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,25013
|
|
|
|
|
34,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,85011
|
|
|
|
|
478,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,00014
|
|
|
|
|
554,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,00015
|
|
|
|
|
1,152,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option/SSAR Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number of
|
|
|
Value of
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
of Stock
|
|
|
Stock
|
|
|
Other Rights
|
|
|
Other Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price
|
|
|
Expiration
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
Name
|
|
|
(#)
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
Kennedy
|
|
|
|
|
22,278
|
|
|
|
|
|
|
|
|
|
28.86
|
|
|
|
|
07/26/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000
|
|
|
|
|
|
|
|
|
|
33.38
|
|
|
|
|
07/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
36.18
|
|
|
|
|
07/23/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000
|
|
|
|
|
|
|
|
|
|
26.71
|
|
|
|
|
02/27/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,0000
|
|
|
|
|
|
|
|
|
|
3.26
|
|
|
|
|
01/27/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,800
|
|
|
|
|
|
|
|
|
|
10.68
|
|
|
|
|
07/21/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,200
|
|
|
|
|
11,6001
|
|
|
|
|
8.88
|
|
|
|
|
07/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,700
|
|
|
|
|
15,4002
|
|
|
|
|
13.67
|
|
|
|
|
07/25/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,720
|
|
|
|
|
13,0803
|
|
|
|
|
23.21
|
|
|
|
|
07/24/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,960
|
|
|
|
|
15,8404
|
|
|
|
|
28.59
|
|
|
|
|
07/23/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
62,9507
|
|
|
|
|
8.20
|
|
|
|
|
05/20/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,2508
|
|
|
|
|
280,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,7009
|
|
|
|
|
50,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,25010
|
|
|
|
|
45,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,55011
|
|
|
|
|
272,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,66012
|
|
|
|
|
455,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,60014
|
|
|
|
|
315,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,50015
|
|
|
|
|
656,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Award becomes exercisable on
July 26th
of 2009. |
|
(2) |
|
Award becomes exercisable in two equal installments on
July 25th
of 2009 and 2010. The number of shares in each installment is:
Mr. Arpey, 19,000; Mr. Garton, 11,840;
Mr. Reding, 7,700; and Mr. Kennedy, 7,700. |
|
(3) |
|
Award becomes exercisable in three equal installments on
July 24th
of 2009, 2010 and 2011. The number of shares in each
installment is: Mr. Arpey, 15,000; Mr. Horton, 7,700;
Mr. Garton, 7,700; Mr. Reding, 4,360; and
Mr. Kennedy, 4,360. |
|
(4) |
|
Award becomes exercisable in four equal installments on
July 23rd
of 2009, 2010, 2011 and 2012. The number of shares in each
installment is: Mr. Arpey, 15,000; Mr. Horton, 6,960;
Mr. Garton, 6,960; Mr. Reding, 3,960; and
Mr. Kennedy, 3,960. |
|
(5) |
|
Award becomes exercisable in three equal installments of 11,840.
The first installment became exercisable on March 29, 2009.
The other two installments become exercisable on
March 29th
of 2010 and 2011. |
|
(6) |
|
Award becomes exercisable in four equal installments on
September 19th of 2009, 2010, 2011 and 2012. The number of
shares in each installment is 3,000. |
|
(7) |
|
Award becomes exercisable in five equal installments on
May 20th
of 2009, 2010, 2011, 2012, and 2013. The number of shares in
each installment is: Mr. Arpey, 57,200; Mr. Horton,
22,110; Mr. Garton, 22,110; Mr. Reding, 22,110; and
Mr. Kennedy, 12,590. |
|
(8) |
|
These performance shares were granted under the 2006/2008
Performance Share Plan and vested on April 15, 2009. We
earned a fourth place TSR rank under the 2006/2008 Performance
Share Plan and, therefore, one-half of the performance shares
initially granted to the named executive officers would, under
the terms of such plan, have been distributed at 75% of the
initial grant. Under the terms of the plan, the other half would
have been distributed based upon the Compensation
Committees assessment of achievement of the corporate
objectives for the years
2006-2008.
However, as discussed under Compensation Discussion and
Analysis, the Compensation Committee determined the final
distribution of the 2006/2008 performance shares would instead
be determined solely based on TSR. As a result, each named
executive officer received 75% of the awards originally granted
under the 2006/2008 Performance Share Plan. See
Performance Shares, |
39
|
|
|
|
|
beginning on page 26 of this Proxy Statement, for further
details regarding the 2006/2008 Performance Share Plan. |
|
(9) |
|
These deferred shares vest on July 24, 2009, generally
subject to the recipients continued employment through
that date. We granted the number of shares shown pursuant to a
2006 Deferred Share Award Agreement with each of the named
executive officers. |
|
(10) |
|
These deferred shares vest on July 23, 2010, generally
subject to the recipients continued employment through
that date. We granted the number of shares shown pursuant to a
2007 Deferred Share Award Agreement with each of the named
executive officers. |
|
(11) |
|
These deferred shares vest on May 20, 2011, generally
subject to the recipients continued employment through
that date. We granted the number of shares shown pursuant to a
2008 Deferred Share Award Agreement with each of the named
executive officers. |
|
(12) |
|
These career equity shares will vest upon retirement after the
attainment of age 60, or upon a qualifying early retirement
under the Retirement Benefit Plan (with a 3% reduction of the
total number of shares for each year by which the
participants early retirement date precedes age 60),
in each case generally subject to the recipients continued
employment through that date. We granted the number of shares
shown pursuant to career equity share agreements with each of
Messrs. Arpey, Garton and Kennedy. |
|
(13) |
|
We granted these deferred shares in connection with
Mr. Redings promotion on September 19, 2007.
They will vest on September 19, 2010, generally subject to
Mr. Redings continued employment through that date. |
|
(14) |
|
These performance shares were granted under the 2007/2009
Performance Share Plan and will vest, if at all, on
April 21, 2010, subject to the satisfaction of the
applicable performance criteria and generally subject to the
recipients continued employment through such date. As
required by the SECs disclosure rules, the number of
performance shares shown assumes that target levels of
performance (100%) will be achieved. In 2010, the Compensation
Committee will determine the actual levels of performance
achieved. |
|
(15) |
|
These performance shares were granted under the 2008/2010
Performance Share Plan and will vest, if at all, on
April 20, 2011, subject to the satisfaction of the
applicable performance criteria and generally subject to the
recipients continued employment through such date. As
required by the SECs disclosure rules, the number of
performance shares shown assumes that target levels of
performance (100%) will be achieved. In 2011, the Compensation
Committee will determine the actual levels of performance
achieved. |
|
(16) |
|
These career performance shares were granted to Mr. Arpey
under the Career Performance Share Agreement and will vest, if
at all, on July 25, 2015, subject to the satisfaction of
the applicable performance criteria and generally subject to
Mr. Arpeys continued employment through such date. As
required by the SECs disclosure rules, the career
performance shares shown assumes that target levels of
performance (100%) will be achieved. |
40
Discussion
Regarding 2008 Outstanding Equity Awards at Fiscal Year End
Table
In addition to vesting on the respective vesting dates reflected
in the footnotes to the above table, upon normal or early
retirement under the Retirement Benefit Plan, all unexercised
stock options and SSARs listed in the table continue to vest and
remain exercisable at any time until expiration of their stated
terms. If the recipient dies, or there is a change in control,
vesting of options and SSARs is accelerated. The performance and
deferred shares listed in the table will vest in the event of
death, disability, or termination other than for cause of one of
our named executive officers on a pro-rata basis, based on the
number of months that have elapsed since the award date and, in
the case of performance shares, the achievement of the
applicable performance criteria. In the event of a change in
control, the performance shares and deferred shares will vest
and distributions with respect to the performance shares will be
at the target level, or 100%, of the shares initially granted.
Mr. Arpeys career performance shares reflected in the
table will vest in the event of his death, disability or
termination other than for cause, upon a change in control, or
if he resigns for good reason. Distributions with respect to
such career performance shares will be determined by the
Compensation Committee based upon achievement of the applicable
performance criteria described in the Career Performance Share
Agreement. See Discussion Regarding Fiscal Year 2006, 2007
and 2008 Summary Compensation Table and Fiscal Year 2008 Grants
of Plan-Based Awards Table, beginning on page 35 of
this Proxy Statement, for further details.
Messrs. Arpey, Garton and Kennedy hold outstanding career
equity shares listed in the above table. In 1988, we established
the Career Equity Program as a long-term compensation vehicle to
encourage retention and stock ownership. We made no grants under
this program in 2008. Career equity shares are deferred share
grants of our common stock that vest at age 60. There is
pro-rata vesting in the event of death, disability, termination
other than for cause, or early retirement of a named executive
officer prior to full vesting at age 60. A participant who
qualifies for and elects early retirement will become vested in
the number of shares subject to such an award, reduced by 3% for
each year by which the participants early retirement date
precedes age 60. For Mr. Arpey, the program guarantees
that the value of his career equity shares at retirement will be
at least equal to three and one-half times his final average
salary as determined for purposes of the Non-Qualified Plan. As
of December 31, 2008, none of the named executive officers
had become eligible for early retirement status. The awards vest
following a change in control.
41
2008
Option Exercises and Stock Vested Table
The following table summarizes stock option exercises and stock
awards that vested for the named executive officers in 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
|
|
On Exercise
|
|
|
On Exercise
|
|
|
On Vesting1
|
|
|
On Vesting2
|
Name
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
Arpey
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
211,600
|
|
|
|
|
1,878,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
103,984
|
|
|
|
|
927,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garton
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
120,484
|
|
|
|
|
1,068,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
86,380
|
|
|
|
|
766,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennedy
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
86,380
|
|
|
|
|
766,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts shown represent the number of shares that vested under
the 2005/2007 Performance Share Plan in April 2008 and, for each
named executive officer except Mr. Horton, the number of
deferred shares that vested under the applicable deferred share
agreements. |
|
(2) |
|
Amounts shown are based on the fair market value (as determined
in accordance with the 1998 LTIP) of our stock on the date of
vesting, multiplied by the number of shares shown in the column
entitled Number of Shares Acquired on Vesting for
the named executive officer. |
Discussion
Regarding 2008 Option Exercises and Stock Vested Table
The 2005/2007 Performance Share Plan distributed shares of our
common stock on April 16, 2008. As described above,
one-half of the distributions under the 2005/2007 Performance
Share Plan were based on our TSR during the three-year
measurement period (2005 2007), and the other half
of the distributions were based on the Compensation
Committees determination of our achievement of the annual
corporate objectives for the measurement period. During the
measurement period, our stock appreciated 138%, which meant that
we ranked second in TSR as compared to our competitor group. As
required by the 2005/2007 Performance Share Plan, with respect
to the half of the awards based on TSR, this resulted in a
distribution of 135% of this half of the shares originally
granted. With respect to the other half of the performance share
awards, the Compensation Committee, in its discretion, assessed
our attainment of the corporate objectives during the
measurement period, and in its judgment determined that a
distribution of 133% of this half of the performance share grant
was appropriate. As a result, our named executive officers
received 134% of the performance shares originally granted to
them.
42
2008
Pension Benefits Table
The following table summarizes the present value of the
accumulated pension benefits of the named executive officers as
of December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
of Credited
|
|
|
Present Value of
|
|
|
Payments During
|
|
|
|
|
|
|
Service
|
|
|
Accumulated Benefit
|
|
|
Last Fiscal Year
|
Name
|
|
|
Plan Name
|
|
|
(#)
|
|
|
($)1,
2
|
|
|
($)
|
Arpey
|
|
|
Retirement Benefit Plan
|
|
|
|
25.274
|
|
|
|
|
570,542
|
|
|
|
|
0
|
|
|
|
|
Non-Qualified Plan
|
|
|
|
25.274
|
|
|
|
|
2,511,555
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
Retirement Benefit Plan
|
|
|
|
18.655
|
3
|
|
|
|
408,140
|
|
|
|
|
0
|
|
|
|
|
Non-Qualified Plan
|
|
|
|
22.322
|
3
|
|
|
|
1,707,764
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garton
|
|
|
Retirement Benefit Plan
|
|
|
|
21.368
|
|
|
|
|
520,563
|
|
|
|
|
0
|
|
|
|
|
Non-Qualified Plan
|
|
|
|
21.368
|
|
|
|
|
2,036,829
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
Retirement Benefit Plan
|
|
|
|
7.912
|
4
|
|
|
|
231,338
|
|
|
|
|
0
|
|
|
|
|
Non-Qualified Plan
|
|
|
|
15.824
|
4
|
|
|
|
988,555
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennedy
|
|
|
Retirement Benefit Plan
|
|
|
|
23.547
|
|
|
|
|
650,643
|
|
|
|
|
0
|
|
|
|
|
Non-Qualified Plan
|
|
|
|
23.547
|
|
|
|
|
1,299,203
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We have partially funded the benefits under the Non-Qualified
Plan into a trust according to the funding policy described in
Non-Qualified Plan on page 29 of this Proxy
Statement. Assets in the trust are separate from our operating
assets and become payable to the named executive officer only
upon normal or early retirement. The amounts listed in this
column for the Non-Qualified Plan reflect the present value of
the total benefit payable under the Non-Qualified Plan to each
of the named executive officers, without any reduction for
amounts contributed to the trust. |
|
(2) |
|
Tax laws treat the contributions made to the trust under the
Non-Qualified Plan as taxable income to the named executive
officers, which requires them to pay (through tax withholding)
applicable federal, state and local income taxes. We did not
reduce the Non-Qualified Plan amounts shown in this column to
reflect the contributions to the trust or the tax liabilities
since we will not know the impact of the tax liabilities until
normal or early retirement. Therefore, we do not consider such
amounts as paid from the Non-Qualified Plan until that time. The
amounts contributed to the Non-Qualified Plan trust in 2008 for
the named executive officers were made in accordance with the
funding policy described in Non-Qualified Plan on
page 29 of this Proxy Statement. For 2008, the gross
benefit amounts and the applicable tax liability are identified
in the table below. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Benefit
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Tax Liability
|
|
|
Net Amount
|
Name
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
Arpey
|
|
|
|
17,900
|
|
|
|
|
6,525
|
|
|
|
|
11,375
|
|
Horton
|
|
|
|
433,145
|
|
|
|
|
157,881
|
|
|
|
|
275,264
|
|
Garton
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Reding
|
|
|
|
177,130
|
|
|
|
|
65,186
|
|
|
|
|
111,944
|
|
Kennedy
|
|
|
|
139,698
|
|
|
|
|
51,957
|
|
|
|
|
87,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
As of December 31, 2008, Mr. Horton had
18.655 years of credited service under the Retirement
Benefit Plan and 22.322 years of credited service under the
Non-Qualified Plan. Mr. Horton left our company in 2002 and
rejoined us in 2006. Under the terms of the Retirement Benefit
Plan and the Non-Qualified Plan, Mr. Hortons prior
credited service in each respective plan was reinstated. In
addition, based on his employment contract, Mr. Horton
accrues an additional one and one-third years of age and service
credit, up to a maximum of 3.9 years of additional age and
service credit, in the Non-Qualified Plan for each year he works
under his employment agreement. The purpose of this adjustment
is to create the effect that he will be deemed to have
continuously served with us since he first joined us in August
1985. As of December 31, 2008, Mr. Horton had earned
an additional 3.667 years of age and service credit under
the Non-Qualified Plan with an estimated value of $730,535. |
43
|
|
|
(4) |
|
As of December 31, 2008, Mr. Reding had
7.912 years of credited service under the Retirement
Benefit Plan and 15.824 years of credited service under the
Non-Qualified Plan. Pursuant to an agreement with
Mr. Reding, he earns two years of credited service in the
Non-Qualified Plan for each year of credited service earned in
the Retirement Benefit Plan, up to a maximum of 10 years of
additional service credit. As of December 31, 2008,
Mr. Reding had earned 7.912 additional years of service
credit under the Non-Qualified Plan with an estimated value of
$632,449. |
Discussion
Regarding 2008 Pension Benefits Table
Retirement
Benefit Plan
We provide the Retirement Benefit Plan to assist our agents,
management, specialists, support personnel and officers
(including the named executive officers) financially during
their retirement. The Retirement Benefit Plan is only available
to employees hired prior to January 1, 2002 that have
completed 1,000 hours of eligible service in one year. To
vest in the benefits provided under the Retirement Benefit Plan,
a participant must: (a) complete at least five years of
eligible service, (b) reach age 65, or (c) be
permanently and totally disabled. After becoming a member of the
Retirement Benefit Plan, each participant earns one year of
credited service for each plan year in which at least
1,900 hours of service are completed.
We base the benefits payable to each participant under the
Retirement Benefit Plan and the Non-Qualified Plan on the four
formulas described below. For each participant, we use the
formula that provides the participant the greatest benefit. For
purposes of the above table, we have therefore assumed that
Messrs. Arpey, Horton, Garton and Kennedy will each receive
benefits under the Retirement Benefit Plan pursuant to the Final
Average Retirement Benefit Formula and under the Non-Qualified
Plan pursuant to the Social Security Offset Formula. For
Mr. Reding, we have assumed he will receive benefits under
the Retirement Benefit Plan pursuant to the Career Average
Benefit Formula and under the Non-Qualified Plan pursuant to the
Social Security Offset Formula.
Final Average Retirement Benefit Formula. A
participants annual benefit at normal retirement will
equal the product of 1.667% of his or her final average
compensation times his or her years of credited service. Final
average compensation is the average of the participants
pensionable pay during the four highest paid consecutive years
during the last ten years of employment. Pensionable pay
includes regular pay, but excludes bonuses, expenses and
equity-based compensation.
Career Average Benefit Formula. A
participants annual benefit at normal retirement will
equal the sum of the following amounts, determined for each year
the participant is a member of the Retirement Benefit Plan:
(a) 1.25% times the participants pensionable pay (as
described above) for each year up to $6,600 and (b) 2%
times the participants pensionable pay for each such year
over $6,600.
Social Security Offset Formula. A
participants annual benefit at normal retirement will
equal the difference between (a) the product of (1) 2%
of the participants final average compensation (as
described above) and (2) their years of credited service,
and (b) the product of (1) 1.5% of the
participants estimated annual Social Security benefit and
(2) their years of credited service, subject to a maximum
offset of 50% of the participants estimated Social
Security benefit.
Minimum Retirement Benefit Formula. A
participants annual benefit at normal retirement will
equal the product of (a) 12, (b) $23.50 for
participants whose final average compensation (as described
above) is less than $15,000 or $24.00 for participants whose
final average compensation is at least $15,000 and (c) the
number of years of the participants credited service.
Under the Retirement Benefit Plan, normal retirement age is
age 65. Under its early retirement provisions, participants
with at least 10 years of retirement eligible service may
retire and receive unreduced benefits at age 60, and
participants with at least 15 years of retirement eligible
service may retire and receive reduced benefits at age 55
(reduced by 3% for each year below age 60). Participants
who retire prior to age 60 with at least 10 years (but
less than 15 years) of retirement eligible service may
receive retirement benefits starting at age 60 (reduced by
3% for each year below age 65). Retirement Benefit Plan
benefits are paid as a monthly annuity and the participant may
elect the form of annuity payments (single life, joint and
survivor, guaranteed period or level income). As of
December 31, 2008, none of the named executive officers had
become eligible for retirement or early retirement status.
44
The Retirement Benefit Plan complies with ERISA and qualifies
for a federal income tax exemption under the Code. Since it is a
qualified plan, it is subject to various restrictions under the
Code and ERISA with respect to payments and benefit
calculations. ERISA and the Code limit the maximum annual
benefit payable under a qualified plan. Further, ERISA and the
Code limit the maximum amount of annual compensation that we may
take into account under the Retirement Benefit Plan. In 2008,
the maximum amount of annual compensation that we could take
into account under the Retirement Benefit Plan was limited to
$230,000.
Non-Qualified
Plan
We also maintain the Non-Qualified Plan to address limitations
on the benefits under the Retirement Benefit Plan. The
Non-Qualified Plan provides retirement benefits to our named
executive officers whose compensation exceeds the maximum
recognizable compensation limit allowed under the Code, which
was $230,000 in 2008.
The formulas used to calculate benefits under the Non-Qualified
Plan are the same as those applicable under the Retirement
Benefit Plan, except that with respect to the Non-Qualified
Plan, benefit calculations for the named executive officers also
include: (a) the average of the four highest short-term
incentive payments made since 1985; (b) any additional
years of credited service that may have been granted to the
named executive officer; and (c) the average of the four
highest performance return payments made since 1989. Performance
returns are dividend equivalent payments made between 1989 and
1999 on outstanding career equity shares. They were calculated
using the following criteria: (a) the number of shares
granted; (b) the grant price; (c) individual
performance; and (d) a rolling three-year return on
investment. We granted additional years of credited service for
Messrs. Horton and Reding as reflected in the footnotes to
the above 2008 Pension Benefits Table.
In 2002, the Board of Directors established a trust to fund
benefits payable under the Non-Qualified Plan. We fund the trust
to provide participants in the Non-Qualified Plan a comparable
level of certainty as to the payment of their retirement
benefits under that plan as is afforded to all eligible
employees under the Retirement Benefit Plan (including
protection from creditors in bankruptcy). Contributions to the
trust in respect of vested retirement benefits result in the
recognition of taxable income to the participants. The
2008 Pension Benefits Table above reflects amounts
credited to the named executive officers under the Non-Qualified
Plan (whether or not funded under the trust). Benefits payable
in respect of the Non-Qualified Plan, including those
distributable from the trust, are payable solely in the form of
a lump sum payment.
Present
Value Calculations
The present value is the amount needed today, with interest, in
order to provide the employees accrued retirement benefit
at retirement. The values of accrued benefits under the
Retirement Benefit Plan, payable at the earliest unreduced
retirement age, are determined using a 6.5% interest rate and
the sex-distinct RP2000 Mortality Tables projected to 2006. The
lump sums payable under the Non-Qualified Plan are calculated
using the December 2008 segment rates and the unisex mortality
table prescribed by the IRS in the Pension Protection Act of
2006. Retirement benefits for both plans are then discounted to
December 31, 2008 using an interest only discount of 6.5%.
At December 31, 2007, the same assumptions were used except
that the lump sums under the Non-Qualified Plan were calculated
using the sex-distinct 1983 group Annuity Mortality Tables and a
4.53% interest rate.
The present values generally assume retirement at age 60
(the age when unreduced benefits may be available). As of
December 31, 2008, Mr. Hortons employment
agreement provides an unreduced Non-Qualified Plan benefit when
he reaches age 56 and 4 months.
See Post-Employment CompensationRetirement
below for further details.
Post-Employment
Compensation
This section describes the payments, benefits and perquisites we
may provide to the named executive officers following their
employment. Except as otherwise shown in the table and described
below, these are in addition to the payments, benefits and
perquisites that we generally provide to all of our salaried
employees following termination of their employment.
45
Retirement. As described in the narrative
following the 2008 Pension Benefits Table above, we
provide retirement benefits to our employees (including the
named executive officers) who retire after they reach normal
retirement or meet the above-specified requirements for early
retirement. As of December 31, 2008, none of the named
executive officers was eligible for retirement status.
In addition, upon normal retirement at age 65 or early
retirement at age 60 or 55, our long-term incentive plans
generally contemplate pro-rata distributions of awards to
participants. These awards are described in Discussion
Regarding Fiscal Year 2006, 2007 and 2008 Summary Compensation
Table and Fiscal Year 2008 Grants of Plan-Based Awards
Table, beginning on page 35 of this Proxy Statement.
Since the named executive officers were not eligible for
retirement status as of December 31, 2008, they were not
eligible for any such distributions as of that date.
Upon their retirement, we will provide lifetime Admirals
Club®
memberships for each named executive officer and his or her
spouse or companion (at no incremental cost to us). We will also
provide unlimited complimentary air transportation on American
Airlines and American Eagle Airlines in any available class of
service for each named executive officer and his spouse or
companion and dependent children, including reimbursement for
related taxes. Under our current retirement air transportation
policy, Mr. Kennedy is eligible to receive the
complimentary air transportation and related tax reimbursements
described above following retirement, but not until he turns
age 55. Mr. Reding will be eligible to receive the
complimentary air transportation (including related tax
reimbursements), but only if he is employed by us through
February 2010. Under a policy that we discontinued for officers
elected after 1996, Messrs. Arpey, Horton and Garton will
receive the complimentary air transportation described above
(including reimbursement for any related taxes) upon retirement
or other separation. The named executive officers who were
either entitled to, or vested in, this complimentary air
transportation as of December 31, 2008 are
Messrs. Arpey, Horton, Garton and Kennedy, and the
estimated aggregate incremental cost to us of providing this
perquisite to each of them is listed in the table below under
the heading Voluntary Separation.
Voluntary Separation and Termination For
Cause. In the event that a named executive
officer resigns or voluntarily terminates his employment (other
than a normal or early retirement or as noted in
Termination By Executive For Good Reason below) or
we terminate his employment for cause, then the named executive
officer will forfeit all outstanding stock-based awards. We will
discontinue salary, perquisites and benefits upon separation,
except for benefits under the Retirement Benefit and
Non-Qualified Plans. To the extent a named executive officer is
vested in the Retirement Benefit and Non-Qualified Plans, he is
entitled to benefits under these plans based on the number of
years of credited service earned by the named executive officer
as of the date of separation, as described above. Assuming a
separation as of December 31, 2008, Messrs. Arpey,
Horton, Garton and Kennedy would be vested in or eligible to
receive the complimentary air transportation (and related tax
reimbursements) described above under Retirement.
For these purposes, for cause means a felony
conviction of a participant or the failure of a participant to
contest prosecution for a felony, or a participants
willful misconduct or dishonesty, any of which is directly and
materially harmful to our business or reputation.
Termination By Executive For Good Reason. As
stated in Career Performance Shares, on page 36
of this Proxy Statement, if Mr. Arpey terminates his
employment for good reason, all of the career performance shares
previously awarded to him would vest, and would be distributed
based upon a determination by the Compensation Committee of
achievement of the applicable performance criteria. Pursuant to
his employment agreement, if Mr. Horton resigns for good
reason, he would be entitled to receive: (a) his accrued
base salary, vacation and short-term incentive bonus (if such
bonus had been determined but not paid as of the termination
date); and (b) two times his annual salary and target
bonus. In addition, all of his outstanding stock options and
SSARs and deferred and performance shares would vest and become
free of all restrictions, although the number of performance
shares that he would receive, if any, would be subject to a
determination by the Compensation Committee of achievement of
the performance criteria under the performance share plans.
Mr. Hortons employment agreement also requires that
we credit him with the additional age and credited service that
otherwise would have been credited to him under the
Non-Qualified Plan from the date of termination through
March 29, 2009 (the third anniversary of his date of hire).
As of December 31, 2008, the estimated value of this
additional age and credited service was $57,940. We would also
pay for COBRA coverage for Mr. Horton and his dependents
for the maximum period allowed as required by his employment
agreement at a total estimated cost to us of $1,689 (based on
2009 cost information).
46
Involuntary Termination Other Than For
Cause. For each named executive officer except
Mr. Horton, under our currently effective practices and
policies for all salaried
U.S.-based
employees, if we terminate his employment other than for cause,
the named executive officer is eligible to receive a cash
payment of up to one years annual salary. The amount
actually payable is based on the named executive officers
number of years of service with us. Mr. Hortons
severance benefits pursuant to his employment agreement are
described below. For a period of two years following the
termination of employment other than for cause, each of the
named executive officers is also entitled to unlimited travel
privileges for himself and his spouse or companion and dependent
children on American Airlines and American Eagle Airlines
(although under this policy each such named executive officer
would be required to pay all related taxes, fees and charges for
the transportation). Messrs. Arpey, Horton, Garton and
Kennedy would be vested in or eligible to receive the
complimentary air transportation (including related tax
reimbursements) described under Retirement on
page 46 of this Proxy Statement.
Upon an involuntary termination other than for cause,
performance shares and deferred shares would vest on a pro-rata
basis using the same distribution formula employed upon
retirement. The named executive officer would immediately
forfeit unvested stock options and SSARs, and he would have
ninety days to exercise vested stock options and SSARs. Career
equity awards previously awarded would immediately vest (at a
rate of 10% per year for each year of service following the date
of grant), and would become payable following the separation.
All of the career performance shares previously awarded to
Mr. Arpey would vest and would be distributed based upon a
determination by the Compensation Committee of achievement of
the applicable performance criteria.
Pursuant to his employment agreement, if Mr. Horton were
terminated not for cause, he would be entitled to receive the
same benefits as if he had resigned for good reason, described
above.
Termination Due to Death or
Disability. Pursuant to the terms of the 1998
LTIP, upon the death or disability of a named executive officer,
all performance shares and deferred shares awarded to the named
executive officer would vest on a pro-rata basis, and stock
options and SSARs would continue to be exercisable. All of the
career performance shares previously awarded to Mr. Arpey
would vest and would be distributed based upon a determination
by the Compensation Committee of achievement of the applicable
performance criteria. Career equity awards previously awarded
would immediately vest (at a rate of 20% per year for each year
of service following the date of grant), and would become
payable following the separation. In the event of death,
unvested stock options and SSARs would immediately vest.
Messrs. Arpey, Horton, Garton and Kennedy, or their
respective surviving spouses and dependent children, would also
be vested in or eligible to receive the complimentary air
transportation and related tax reimbursements described under
Retirement above.
47
The following table quantifies the payments and long-term
incentive values each of our named executive officers would have
received had there been a termination of his employment on
December 31, 2008 in the situations described above other
than retirement. As of December 31, 2008, none of the named
executive officers was eligible for retirement. See Change
In Control, beginning on page 49 of this Proxy
Statement, for further details regarding payments to our named
executive officers upon a change in control of us. We based the
stock distribution values on a $10.67 per share stock price,
which was the closing price of our common stock on
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Than For
|
|
|
|
|
|
|
Voluntary Separation
|
|
|
Good Reason3
|
|
|
Death
|
|
|
Disability
|
|
|
Cause
|
Name
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Arpey
|
|
|
|
Cash Severance Benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
669,646
|
|
|
|
|
|
Long Term Incentives
|
|
|
0
|
|
|
2,475,4404
|
|
|
6,781,367
|
|
|
6,013,268
|
|
|
6,013,268
|
|
|
|
|
|
Pension
Benefits1
|
|
|
3,082,098
|
|
|
3,082,098
|
|
|
3,082,098
|
|
|
3,082,098
|
|
|
3,082,098
|
|
|
|
|
|
Airline Travel
Benefits2
|
|
|
80,016
|
|
|
80,016
|
|
|
80,016
|
|
|
80,016
|
|
|
80,016
|
|
|
|
|
|
Total
|
|
|
3,162,114
|
|
|
5,637,554
|
|
|
9,943,482
|
|
|
9,175,382
|
|
|
9,845,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
|
Cash Severance Benefits
|
|
|
-
|
|
|
2,630,878
|
|
|
-
|
|
|
-
|
|
|
2,630,878
|
|
|
|
|
|
Long Term Incentives
|
|
|
0
|
|
|
2,839,194
|
|
|
1,551,325
|
|
|
1,278,266
|
|
|
2,566,135
|
|
|
|
|
|
Pension
Benefits1
|
|
|
2,115,904
|
|
|
2,178,136
|
|
|
2,115,904
|
|
|
2,115,904
|
|
|
2,178,136
|
|
|
|
|
|
Airline Travel
Benefits2
|
|
|
82,439
|
|
|
82,439
|
|
|
82,439
|
|
|
82,439
|
|
|
82,439
|
|
|
|
|
|
Total
|
|
|
2,198,344
|
|
|
7,730,646
|
|
|
3,749,668
|
|
|
3,476,610
|
|
|
7,457,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garton
|
|
|
|
Cash Severance Benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
530,479
|
|
|
|
|
|
Long Term Incentives
|
|
|
0
|
|
|
-
|
|
|
2,712,043
|
|
|
2,412,090
|
|
|
2,400,783
|
|
|
|
|
|
Pension
Benefits1
|
|
|
2,557,392
|
|
|
-
|
|
|
2,557,392
|
|
|
2,557,392
|
|
|
2,557,392
|
|
|
|
|
|
Airline Travel
Benefits2
|
|
|
78,868
|
|
|
-
|
|
|
78,868
|
|
|
78,868
|
|
|
78,868
|
|
|
|
|
|
Total
|
|
|
2,636,260
|
|
|
0
|
|
|
5,348,303
|
|
|
5,048,350
|
|
|
5,567,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
|
Cash Severance Benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
326,449
|
|
|
|
|
|
Long Term Incentives
|
|
|
0
|
|
|
-
|
|
|
1,329,233
|
|
|
1,035,375
|
|
|
1,035,375
|
|
|
|
|
|
Pension
Benefits1
|
|
|
1,219,894
|
|
|
-
|
|
|
1,219,894
|
|
|
1,219,894
|
|
|
1,219,894
|
|
|
|
|
|
Airline Travel
Benefits2
|
|
|
0
|
|
|
-
|
|
|
10,751
|
|
|
0
|
|
|
10,751
|
|
|
|
|
|
Total
|
|
|
1,219,894
|
|
|
0
|
|
|
2,559,877
|
|
|
2,255,269
|
|
|
2,592,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennedy
|
|
|
|
Cash Severance Benefits
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
488,646
|
|
|
|
|
|
Long Term Incentives
|
|
|
0
|
|
|
-
|
|
|
1,633,232
|
|
|
1,456,947
|
|
|
1,455,430
|
|
|
|
|
|
Pension
Benefits1
|
|
|
1,949,846
|
|
|
-
|
|
|
1,949,846
|
|
|
1,949,846
|
|
|
1,949,846
|
|
|
|
|
|
Airline Travel
Benefits2
|
|
|
69,229
|
|
|
-
|
|
|
76,817
|
|
|
76,817
|
|
|
76,817
|
|
|
|
|
|
Total
|
|
|
2,019,075
|
|
|
0
|
|
|
3,659,896
|
|
|
3,483,610
|
|
|
3,970,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
These amounts for each named executive officer are also reported
in the 2008 Pension Benefits Table on page 43
of this Proxy Statement and are paid at retirement age. |
|
(2) |
|
These amounts are based on figures that include the estimated
average aggregate incremental cost to us of providing the air
transportation and related tax reimbursements described above to
our named executive officers generally in 2008. For each named
executive officer, we have estimated these costs by using the
average of the estimated annual incremental cost to us of
providing this air transportation for the named executive
officers for the number of years of the named executive
officers projected life expectancy (according to the
mortality tables we used to determine the present value of his
retirement benefits in the 2008 Pension Benefits
Table). |
|
(3) |
|
Messrs. Garton, Reding and Kennedy are not parties to any
agreements with us that contemplate a termination for good
reason. As such, no amounts are shown in this column for
Messrs. Garton, Reding and Kennedy. Each would have been
entitled to receive the amounts shown in the Voluntary
Separation column had they terminated their employment
with us for any reason on December 31, 2008. |
|
(4) |
|
This amount represents career performance shares that were
previously granted to Mr. Arpey under the Career
Performance Share Agreement. The amount shown is calculated
based on achieving target levels of performance (100%). |
Effect of
Section 409A
Section 409A applies to a number of compensation awards and
practices described in this Proxy Statement. Section 409A,
which became effective as of 2005, imposes early taxable income
inclusion, additional taxes and
48
penalties on non-compliant grants and payments. In those cases
where Section 409A is applicable, payments and grants
described in this Proxy Statement have been issued in compliance
with, or timely amended to comply with, the requirements of
Section 409A. As described in the discussion under
Post-Termination and Change in Control Benefits,
beginning on page 29 of this Proxy Statement, relevant
agreements and equity plans and awards have been revised to
contain a Section 409A compliant change of control
definition. Among the other effects of Section 409A is that
certain payments to named executive officers, directors, and
certain other employees described in this Proxy Statement made
on account of employment separation must be delayed for a period
of six months following the date of separation, including, for
example, payments of deferred stock, career equity awards,
performance shares and payments under the Non-Qualified Plan.
Change In
Control
As described above, upon the occurrence of a change in control
under the terms of our equity plans and agreements, all
outstanding stock options and SSARs become immediately
exercisable, all outstanding career equity and deferred shares
vest, and all performance shares will be deemed vested and will
be distributed at target levels (100%). Mr. Arpeys
career performance shares granted prior to the change in control
will vest, and will be distributed based upon a determination by
the Compensation Committee of achievement of the applicable
performance criteria. Also, upon a change in control, each named
executive officer will receive a payment equal to the present
value of the accrued annual retirement benefit to be paid to him
under the Non-Qualified Plan. See the Compensation
Discussion and Analysis, beginning on page 19 of this
Proxy Statement, and Discussion Regarding Fiscal Year
2006, 2007 and 2008 Summary Compensation Table and Fiscal Year
2008 Grants of Plan-Based Awards Table, beginning on
page 35 of this Proxy Statement for further details
regarding the definitions and discussion of change in control
under our equity programs and the Non-Qualified Plan.
As described in the Compensation Discussion and
Analysis, we also have agreements with each of the named
executive officers that provide compensation and other benefits
following their separation from us subsequent to a change in
control. The termination benefits under these agreements would
become payable if: (a) within two years following a change
in control, we (or any successor in interest to us) terminate
the named executive officers employment for any reason
(other than due to his death, disability, felony conviction, or
willful misconduct or dishonesty that materially harms our
business or reputation); (b) within two years following a
change in control, the named executive officer voluntarily
terminates his employment for good reason;
(c) the named executive officer terminates employment for
any reason during the thirty days following the first
anniversary of the change in control; or (d) the named
executive officers employment is terminated following the
commencement of discussions between us and a third party that
result in a change in control, and the change of control occurs
within 180 days thereafter.
For purposes of these agreements, a change in control of AMR
Corporation is deemed to occur: (a) when during any twelve
month period, a third party (including persons acting as a
group) acquires beneficial ownership of thirty percent or more
of our common stock; (b) when during any twelve month
period, as of the beginning of such period, the Board of
Directors or their approved successors cease to constitute a
majority of the Board of Directors; (c) if our stockholders
approve our complete liquidation or dissolution; or
(d) upon the consummation of a reorganization, merger,
consolidation, sale or other disposition of all our assets,
unless, immediately following such transaction, (1) our
stockholders prior to the transaction hold at least fifty
percent of the voting securities of the successor, (2) no
one person owns more than thirty percent of the successor, and
(3) the members of the Board of Directors prior to the
transaction constitute at least a majority of the Board of
Directors of the successor. In no event will a change in control
be deemed to have occurred unless the event also constitutes a
change in control under Section 409A. Good
reason includes the occurrence of any of the following
after the change in control: (u) a failure to maintain the
executive in a substantially equivalent position; (v) a
significant adverse change in the nature or scope of his
position; (w) a reduction in his salary or incentive
compensation target or a reduction of his benefits; (x) a
change in his employment circumstances, such as a change in
responsibilities that hinder his ability to perform his duties;
(y) the successor company breaches the termination benefits
agreement or does not assume our obligations under it; or
(z) we relocate our headquarters or require the executive
to relocate more than 50 miles from our current
headquarters location.
49
If an event triggers the payment of the benefits under the
agreements after a change in control, the named executive
officer would be entitled to the following benefits:
|
|
|
|
|
We would pay the named executive officer a cash payment of three
times (two times in the case of Mr. Horton) the sum of the
annual base salary and the target annual award paid under our
incentive compensation plan (or the largest incentive award paid
during the prior three years, if greater);
|
|
|
|
For three years following the change in control and related
payment triggering event, we would provide all perquisites and
benefits provided to the named executive officer prior to the
change in control, including health and welfare, insurance and
other perquisites and benefits described above;
|
|
|
|
We would provide a one-time reimbursement for relocation
expenses and outplacement services;
|
|
|
|
All unvested stock-based awards would immediately vest, with
performance shares distributed at target levels;
|
|
|
|
We would provide the named executive officer, spouse or
companion and dependent children unlimited complimentary air
transportation on American Airlines or American Eagle Airlines
in any available class of service until age 55 on the same
basis as is applicable to our non-employee directors (see
Other Compensation on page 52 of this Proxy
Statement for further details). After age 55, we would
provide the named executive officer complimentary air
transportation (including related tax reimbursements) as is
provided upon retirement as described in Retirement,
beginning on page 46 of this Proxy Statement;
|
|
|
|
We would reimburse the named executive officer for any excise
taxes that are payable by the named executive officer pursuant
to Sections 280G and 4999 of the Code (or its successor
provision) as a result of the change in control and related
payment triggering event for any federal income, employment or
excise taxes payable on such excise tax reimbursement;
|
|
|
|
With respect to our retirement plans, we would treat each named
executive officer as though fully vested in his or her currently
accrued benefits under the Retirement Benefit Plan and the
Non-Qualified Plan. We would calculate benefits under the
Retirement Benefit Plan and the Non-Qualified Plan as though the
named executive officers compensation rate equaled the sum
of the executives base pay and incentive pay and crediting
the named executive officer with three additional years of
service; and
|
|
|
|
We would pay the named executive officers legal fees if
there was a disagreement following the change in control and
related payment triggering event related to the agreement. To
assure payment, we would establish a trust for the sole purpose
of funding these legal fees upon a change in control and related
payment triggering event.
|
The following table lists the estimated total payments and
values, as well as each component of compensation outlined
above, that would have been due to each named executive officer
had a change in control occurred on December 31, 2008 and
the named executive officers employment was terminated on
such date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Vesting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
of Non-
|
|
|
Acceleration
|
|
|
|
|
|
Outplacement,
|
|
|
|
|
|
Gross-up
|
|
|
|
|
|
|
|
|
|
of Vesting of
|
|
|
Performance
|
|
|
of Vesting of
|
|
|
Value of
|
|
|
Relocation and
|
|
|
|
|
|
Payment
|
|
|
Total
|
|
|
|
Cash
|
|
|
Stock
|
|
|
-Based
|
|
|
Performance
|
|
|
Additional
|
|
|
Continuing
|
|
|
|
|
|
for 280G
|
|
|
Change in
|
|
|
|
Severance
|
|
|
Option/SSAR
|
|
|
Stock
|
|
|
-Based Stock
|
|
|
Pension
|
|
|
Perquisites and
|
|
|
Travel
|
|
|
Excise
|
|
|
Control
|
|
|
|
Benefits
|
|
|
Vesting
|
|
|
Awards
|
|
|
Awards
|
|
|
Benefits
|
|
|
Benefits
|
|
|
Perquisites
|
|
|
Taxes
|
|
|
Benefits
|
Name
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arpey
|
|
|
|
4,821,453
|
|
|
|
1,615,686
|
|
|
|
|
2,726,612
|
|
|
|
|
5,943,190
|
|
|
|
|
4,448,655
|
|
|
|
|
470,548
|
|
|
|
|
0
|
|
|
|
|
6,162,069
|
|
|
|
|
26,188,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horton
|
|
|
|
2,571,442
|
|
|
|
585,640
|
|
|
|
|
648,203
|
|
|
|
|
1,707,200
|
|
|
|
|
3,995,899
|
|
|
|
|
441,702
|
|
|
|
|
0
|
|
|
|
|
2,295,389
|
|
|
|
|
12,245,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garton
|
|
|
|
3,310,182
|
|
|
|
657,045
|
|
|
|
|
1,886,243
|
|
|
|
|
1,707,200
|
|
|
|
|
1,618,454
|
|
|
|
|
427,484
|
|
|
|
|
0
|
|
|
|
|
2,673,445
|
|
|
|
|
12,280,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reding
|
|
|
|
3,310,186
|
|
|
|
619,315
|
|
|
|
|
608,724
|
|
|
|
|
1,707,200
|
|
|
|
|
2,188,557
|
|
|
|
|
376,062
|
|
|
|
|
69,756
|
|
|
|
|
2,551,735
|
|
|
|
|
11,431,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kennedy
|
|
|
|
2,565,389
|
|
|
|
388,864
|
|
|
|
|
823,297
|
|
|
|
|
972,037
|
|
|
|
|
2,214,793
|
|
|
|
|
420,331
|
|
|
|
|
7,956
|
|
|
|
|
2,250,795
|
|
|
|
|
9,643,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We based the stock distribution values in the above table on a
$10.67 per share stock price, which was the closing price of our
common stock on December 31, 2008. The value of the
incremental pension benefits estimated in the table was
determined using the same actuarial assumptions and mortality
tables used to determine the present
50
value of retirement benefits illustrated in the 2008
Pension Benefits Table on page 43 of this Proxy
Statement. These figures assume all payments are made at the
time provided under Section 409A.
As described above, upon a change in control, the agreements
provide that each of the named executive officers would receive
the same complimentary air transportation (including related tax
reimbursements) made available to our retired executives.
However, as described above, Messrs. Arpey, Horton and
Garton will receive complimentary air transportation (including
related tax reimbursements) following their termination of
employment without regard to their age at termination or whether
a change in control has occurred. The aggregate incremental air
transportation costs for Messrs. Arpey, Horton and Garton
are therefore instead reflected in the table in
Post-Employment Compensation, on page 48 of
this Proxy Statement. Since Mr. Kennedy is entitled to
receive complimentary air transportation starting at age 55
following retirement, this table includes the estimate of the
aggregate incremental costs to us for the complimentary air
transportation (and reimbursements for any related taxes) that
he would receive upon a change of control, commencing on
December 31, 2008 until his 55th birthday.
Mr. Reding was not vested in or eligible to receive such
air transportation as of December 31, 2008. The table above
thus includes the estimate of the aggregate incremental costs to
us of the complimentary air transportation (including
reimbursement for any related taxes) for him from
December 31, 2008 through his retirement age. We have
estimated these costs by using the average of the estimated
annual incremental cost to us of providing this air
transportation for the named executive officers in 2008 for the
number of years of the named executive officers projected
life expectancy (according to the mortality tables we used to
determine the present value of his retirement benefits in the
2008 Pension Benefits Table on page 43 of this
Proxy Statement).
DIRECTOR COMPENSATION
Our Nominating/Corporate Governance Committee reviews annually,
typically in July, the overall compensation of the directors, in
consultation with the Board of Directors and with the assistance
of our management. In doing so, the Nominating/Corporate
Governance Committee has the authority to retain a compensation
consultant, although no consultant was engaged in 2008. The
Board of Directors approves any changes to director
compensation. There were no changes to our director compensation
program in 2008, other than changes made to ensure that the
director compensation arrangements comply with Section 409A
as described in Effect of Section 409A,
beginning on page 48 of this Proxy Statement, including
revising the definition of change in control in the director
compensation arrangements to comply with Section 409A.
The following is a description of our director compensation
program in 2008. Mr. Arpey does not receive any
compensation as a director or as Chairman because we compensate
him as an employee. We describe Mr. Arpeys
compensation in the Fiscal Year 2006, 2007 and 2008
Summary Compensation Table and accompanying text and
Compensation Discussion and Analysis above.
Mr. Graves retired from the Board of Directors effective
March 31, 2008, so the following narrative and tables
address his compensation through that date as well as the
compensation to which he became entitled at or after retirement,
as described below.
Elements
of Director Compensation
Retainers/Fees
Each of our non-employee directors receives: (a) an annual
retainer of $20,000 for service on the Board of Directors;
(b) an additional annual retainer of $3,000 for service as
Lead Director, if applicable, or for service on one or more
standing committees of the Board of Directors; and
(c) $1,000 for attending, or otherwise participating in, a
regular or special Board of Directors meeting or a committee
meeting. The maximum payment for meeting attendance or
participation is $1,000 per day, regardless of the number of
meetings actually attended that day.
All of our directors agreed to defer the payment of their 2008
retainers and fees until they depart from the Board of
Directors. With the exception of Dr. Rodin, pursuant to
these deferral agreements, the deferred fees and retainers are
converted into a number of deferred units equal to the amount of
such fees and retainers divided by the arithmetic mean of the
highest and the lowest quoted selling price of our common stock
during the month in which such fees were earned. We will pay the
deferred units to them in cash after they cease to be a member
of the Board of Directors in an amount equal to the number of
deferred units held by the director, multiplied by the
arithmetic mean
51
of the high and the low price of our common stock during the
month preceding the month in which such director ceases to be a
member of our Board of Directors. Pursuant to the deferral
agreements with Dr. Rodin, the deferred fees and retainers
she earned in 2008 accrue interest at a rate equal to the prime
rate in effect, from time to time, at J.P. Morgan Chase
National Bank, N.A.
Annual
Grants of Deferred Units
Pursuant to the terms of the 2004 Directors Unit Incentive
Plan, each non-employee director receives an annual award of
2,610 deferred units. Following a directors departure from
the Board of Directors, we will make a cash payment to the
former director in an amount equal to the number of deferred
units held by the director, multiplied by the mean between the
highest and lowest quoted selling prices of our common stock on
the date the director leaves the Board. In accordance with the
terms of the 2004 Directors Unit Incentive Plan, we granted
each director 2,610 deferred units in July 2008.
In addition to the annual award of deferred units under the
2004 Directors Unit Incentive Plan, we provide an
additional annual grant of 710 deferred units to non-employee
directors elected after May 15, 1996. This additional grant
is in lieu of their participation in a pension plan described
below under Pension and Other Retirement Benefits.
We will convert these additional deferred units into cash and
pay the director after the date the director leaves the Board of
Directors. Since they were elected after May 15, 1996,
Dr. Rodin and Messrs. Bachmann, Gupta, Ibargüen,
Miles, Purcell, Robinson, Rose and Staubach were each also
granted 710 deferred units in July 2008.
From 1999 to 2005, we maintained a stock appreciation rights
plan for non-employee directors. Under the
1999 Directors Stock Appreciation Rights Plan, each
non-employee director received an annual award of
1,185 stock appreciation rights (SARs). Upon
exercise of the SARs, the directors are entitled to receive in
cash the excess of the arithmetic mean of the high and the low
price of our common stock on the exercise date over the exercise
price of the SARs, which is the arithmetic mean of the high and
the low price of our common stock on the grant date of the SARs.
The SARs fully vest on the first anniversary of their grant and
expire on the tenth anniversary of their grant. Although the
1999 Directors Stock Appreciation Rights Plan was
terminated in 2005, SARs previously granted remain available for
exercise in accordance with the terms of the plan, including
following the departure of a director.
Other
Compensation
In addition to the retainers, meetings fees and equity-based
compensation described above, each non-employee director and his
or her spouse or companion and dependent children also receive
unlimited complimentary air transportation on American Airlines
and American Eagle Airlines in any available class of service,
as well as assistance while traveling and when making
reservations. We reimburse each non-employee director for the
taxes assessed on this complimentary air transportation. They
are also provided membership in our Admirals
Club®
airport lounges and receive all of the benefits and privileges
American Airlines gives to its best frequent flyers, including
class of service upgrade credits. We also provide the
non-employee directors a limited number of other perquisites and
personal benefits described in footnote (6) to the
Director Compensation Table For Fiscal Year 2008 on
page 53 of this Proxy Statement.
Pension
and Other Retirement Benefits
Each non-employee director elected to the Board of Directors on
or before May 15, 1996 that serves on the Board until
age 62 is entitled to receive a pension benefit of $20,000
per year until the later of the death of the director or the
directors spouse. Accordingly, upon retirement from the
Board of Directors, each of Messrs. Boren and Codina and
Mrs. Korologos is entitled to receive $20,000 per year
until the later of the death of the director or the
directors spouse. Mr. Graves was also entitled to
receive this benefit. Since he retired from the Board in 2008,
he started receiving this annual retirement benefit in 2008.
We also continue to provide the Admirals
Club®
membership, frequent flyer benefits and complimentary air
transportation services described above following the
non-employee directors retirement from the Board of
Directors. For each non-employee director who has served on the
Board of Directors for at least ten years and retires
52
at or following age 70, we continue to provide the
complimentary air transportation services until the later of the
death of the director or his or her spouse. For directors who
either do not serve until age 70 or do not serve for at
least ten years, we continue to provide the complimentary air
transportation for the number of years the director served on
the Board of Directors. In each case, we reimburse the
non-employee directors for any taxes assessed on this
complimentary air transportation. Mr. Graves retired
following age 70 and with more than ten years of service on
the Board, and therefore he and his spouse are entitled to
receive the complimentary air transportation and tax
reimbursements described above until the later of the death of
Mr. Graves or his spouse.
Director
Compensation Table For Fiscal Year 2008
The following table contains information regarding the
compensation for 2008 payable to all of our non-employee
directors.
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Change in
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Pension Value
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and
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Fees
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Nonqualified
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Earned or
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Non-Equity
|
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Deferred
|
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Paid
|
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Stock
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Option
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Incentive Plan
|
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Compensation
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All Other
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in Cash2
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Awards3
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Awards4
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Compensation
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Earnings5
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Compensation6
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Total
|
Name1
|
|
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($)
|
|
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($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
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($)
|
John W. Bachmann
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|
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40,000
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|
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(5,208
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)
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(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
11,019
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|
|
|
|
38,014
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|
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|
|
|
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|
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|
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|
|
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David L. Boren
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38,000
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(3,238
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
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|
4,924
|
|
|
|
|
39,686
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
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|
|
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Armando M. Codina
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40,000
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|
|
|
|
(3,238
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)
|
|
|
|
(7,797
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)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,014
|
|
|
|
|
33,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Earl G. Graves
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|
17,500
|
|
|
|
|
(48,666
|
)
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|
|
|
(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
14,134
|
|
|
|
|
(24,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajat Gupta
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38,000
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|
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|
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35,424
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|
|
|
0
|
|
|
|
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0
|
|
|
|
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0
|
|
|
|
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2,034
|
|
|
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|
75,458
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|
|
|
|
|
|
|
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|
|
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|
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|
|
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|
|
|
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|
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|
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Alberto Ibargüen
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|
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39,000
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35,424
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|
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0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
1,153
|
|
|
|
|
75,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Ann M. Korologos
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37,000
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|
|
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|
(3,238
|
)
|
|
|
|
(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,614
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|
|
|
|
31,579
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|
|
|
|
|
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|
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|
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|
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Michael A. Miles
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41,000
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(5,208
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)
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|
|
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(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
4,245
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|
|
|
|
32,240
|
|
|
|
|
|
|
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|
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|
|
|
|
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|
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|
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|
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Philip J. Purcell
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37,000
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|
|
(5,208
|
)
|
|
|
|
(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,392
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|
|
|
|
29,387
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Ray M. Robinson
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|
|
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41,000
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|
|
|
|
13,114
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
6,883
|
|
|
|
|
60,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith Rodin
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|
|
|
39,000
|
|
|
|
|
(5,208
|
)
|
|
|
|
(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
11,421
|
|
|
|
|
37,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew K. Rose
|
|
|
|
41,000
|
|
|
|
|
1,959
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
14,121
|
|
|
|
|
57,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger T. Staubach
|
|
|
|
39,000
|
|
|
|
|
(5,208
|
)
|
|
|
|
(7,797
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
5,294
|
|
|
|
|
31,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This table reflects compensation for 2008 for Mr. Graves,
who retired from the Board of Directors as of March 31,
2008. |
|
(2) |
|
The amounts represent the aggregate dollar amount of all fees
the directors earned in 2008 for service as a director,
including annual retainer, committee, meeting and Lead Director
fees. The directors agreed to defer payment of all of these
retainers and fees until they leave the Board of Directors. |
|
(3) |
|
Amounts shown do not reflect compensation actually received by
the directors. Rather, the amounts represent the compensation
expense for financial statement reporting purposes recognized in
2008, as determined pursuant to FAS 123(R), relating to
deferred units we granted to the directors in 2008 and prior
years pursuant to the 2004 Directors Unit Incentive Plan.
These amounts do not include any reduction in the value of such
grants for the possibility of forfeiture. See footnote 9 to our
financial statements included in our
Form 10-K
for the fiscal year ended December 31, 2008 for the
assumptions we made to determine the FAS 123(R) values. The
amount for some of the directors in this column is negative due
to the decrease in our stock price in 2008. Because these awards
are payable in cash, our compensation expense for financial
accounting purposes with respect to these awards fluctuates
directly with increases and decreases in our stock price. The
aggregate grant date fair values (as computed in accordance with
FAS 123(R)) of the 2008 deferred unit awards were $22,344
for Messrs. Bachmann, Gupta, Ibargüen, Miles, Purcell,
Robinson, Rose and Staubach and Dr. Rodin, and $17,565 for
Mrs. Korologos and Messrs. Boren and Codina. Due to
his retirement, Mr. Graves was not awarded any deferred
units in 2008. |
53
|
|
|
|
|
The chart below reflects the aggregate number of outstanding
stock-based compensation awards each director held as of
December 31, 2008. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1994 Directors Stock
Incentive
|
|
|
2004 Directors Unit
|
|
|
Directors Fees
|
|
|
|
Plan Shares
|
|
|
Incentive Plan Units
|
|
|
Deferred Units
|
Director
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
Bachmann
|
|
|
|
|
4,266
|
|
|
|
|
15,413
|
|
|
|
|
22,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boren
|
|
|
|
|
12,322
|
|
|
|
|
11,862
|
|
|
|
|
15,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Codina
|
|
|
|
|
12,322
|
|
|
|
|
11,862
|
|
|
|
|
28,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graves(A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gupta
|
|
|
|
|
|
|
|
|
|
3,320
|
|
|
|
|
4,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ibargüen
|
|
|
|
|
|
|
|
|
|
3,320
|
|
|
|
|
4,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Korologos
|
|
|
|
|
13,270
|
|
|
|
|
11,862
|
|
|
|
|
15,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miles
|
|
|
|
|
6,399
|
|
|
|
|
15,413
|
|
|
|
|
16,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purcell
|
|
|
|
|
8,532
|
|
|
|
|
15,413
|
|
|
|
|
22,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robinson
|
|
|
|
|
|
|
|
|
|
9,960
|
|
|
|
|
5,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodin
|
|
|
|
|
12,798
|
|
|
|
|
15,413
|
|
|
|
|
13,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rose
|
|
|
|
|
|
|
|
|
|
13,280
|
|
|
|
|
11,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staubach
|
|
|
|
|
4,266
|
|
|
|
|
15,413
|
|
|
|
|
22,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) Upon Mr. Graves retirement from the Board of
Directors as of March 31, 2008, we paid the outstanding
deferred shares and units to Mr. Graves as described above.
|
|
(4) |
|
Amounts shown do not reflect compensation actually received by
the directors. Rather, the amounts represent the compensation
expense for financial statement reporting purposes in 2008
relating to SARs we granted to each director under the
1999 Directors Stock Appreciation Rights Plan in
years prior to 2006, as determined pursuant to FAS 123(R).
See footnote 9 to our financial statements included in our
Form 10-K
for the fiscal year ended December 31, 2008 for the
assumptions we made to determine the FAS 123(R) values.
Messrs. Gupta, Ibargüen, Robinson and Rose have not
been granted any SARs. Because these awards are payable in cash,
our compensation expense for financial accounting purposes with
respect to these awards fluctuates directly with increases and
decreases in our stock price. The amount for some of the
directors in the column entitled Option Awards is
negative due to the decrease in our stock price in 2008.
Although we are required under the SECs proxy disclosure
rules to include amounts in this column for 2008, the
1999 Directors Stock Appreciation Rights Plan
terminated in 2005, and we did not grant any SARs to the
directors in 2008. |
|
|
|
The aggregate number of outstanding SARs each director held as
of December 31, 2008 were as follows: Mr. Bachmann
(3,555), Mr. Boren (3,555), Mr. Codina (7,110),
Mr. Graves (7,110), Mr. Gupta (0),
Mr. Ibargüen (0), Mrs. Korologos (7,110),
Mr. Miles (4,740), Mr. Purcell (5,925),
Mr. Robinson (0), Dr. Rodin (7,110), Mr. Rose
(0) and Mr. Staubach (3,555). |
|
(5) |
|
Since Messrs. Boren and Codina and Mrs. Korologos were
each elected prior to May 15, 1996, each is entitled to
receive $20,000 per year from the date of retirement until the
later of their death or the death of their spouse. In March
2008, Mr. Graves retired from the Board of Directors, and
he began to receive the annual $20,000 retirement benefit on a
pro rata basis in July 2008. Since 1996, we have not accrued any
additional benefits. There is no amount reflected in the column
in respect of these future benefits. The present value of each
of the directors accrued retirement benefits did not
change from December 31, 2007 to December 31, 2008
because the discount rate used to calculate our liability in
respect of retirement benefits for financial purposes as
described in footnote 10 to our
Form 10-K
for each of the fiscal years ended December 31, 2007 and
December 31, 2008 was 6.5%. |
|
(6) |
|
Amounts shown include: (a) the estimated aggregate
incremental cost to us of the complimentary air transportation
on American Airlines and American Eagle Airlines that we
provided to the directors and their respective family members in
2008; and (b) the dollar value of insurance premiums we
paid in 2008 for a $50,000 life insurance policy for the benefit
of each director. The amounts also include tax reimbursements
that we paid to our directors in 2008 for the complimentary air
transportation we provided in 2007. We paid the following tax
reimbursements in 2008: Mr. Bachmann ($9,169),
Mr. Boren ($3,185), Mr. Codina ($4,299),
Mr. Graves ($8,049), Mrs. Korologos ($4,738),
Mr. Miles ($2,653), Mr. Purcell ($4,860),
Mr. Robinson ($6,563), Dr. Rodin ($10,454),
Mr. Rose ($12,064) and Mr. Staubach ($4,364). We did
not pay any tax reimbursements to Messrs. Gupta and
Ibargüen in 2008. |
54
SECURITIES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of April 15, 2009 the
number and percentage of shares of our common stock beneficially
owned by: (a) each of our directors; (b) each of our
named executive officers; and (c) all of our directors and
executive officers as a group.
The number and percentage of shares of common stock beneficially
owned is determined under the rules of the SEC and is not
necessarily indicative of beneficial ownership for any other
purpose. To our knowledge, and except as set forth in the
footnotes to this table, each person named in the table has sole
voting and investment power with respect to the shares set forth
opposite such persons name and none of the individuals
below has pledged any shares of our common stock. The address
for each individual listed below is
c/o P.O. Box 619616,
MD 5675,
Dallas/Fort Worth
International Airport, TX
75261-9616.
|
|
|
|
|
|
|
|
|
|
|
|
AMR Corporation
|
|
|
|
|
|
|
Common Stock1,
2
|
|
|
Percent of Class
|
Name
|
|
|
(#)
|
|
|
(%)
|
Gerard J. Arpey
|
|
|
|
1,004,876
|
|
|
|
*
|
John W. Bachmann
|
|
|
|
1,500
|
|
|
|
*
|
David L. Boren
|
|
|
|
400
|
|
|
|
*
|
Armando M. Codina
|
|
|
|
1,000
|
|
|
|
*
|
Rajat K. Gupta
|
|
|
|
0
|
|
|
|
*
|
Alberto Ibargüen
|
|
|
|
9,000
|
|
|
|
*
|
Ann M. Korologos
|
|
|
|
7,800
|
|
|
|
*
|
Michael A. Miles
|
|
|
|
15,000
|
|
|
|
*
|
Philip J. Purcell
|
|
|
|
10,000
|
|
|
|
*
|
Ray M. Robinson
|
|
|
|
3,000
|
|
|
|
*
|
Judith Rodin
|
|
|
|
0
|
|
|
|
*
|
Matthew K. Rose
|
|
|
|
1,000
|
|
|
|
*
|
Roger T. Staubach
|
|
|
|
5,000
|
|
|
|
*
|
Thomas W. Horton
|
|
|
|
113,639
|
|
|
|
*
|
Daniel P. Garton
|
|
|
|
635,384
|
|
|
|
*
|
Robert W. Reding
|
|
|
|
333,159
|
|
|
|
*
|
Gary F. Kennedy
|
|
|
|
192,984
|
|
|
|
*
|
Directors and executive officers as a group
|
|
|
|
2,333,742
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
This column includes the following shares of common stock that
may be acquired pursuant to stock options/SSARs that are or will
become exercisable or vest within 60 days of April 15,
2009: 831,140 shares for Mr. Arpey; 79,990 shares
for Mr. Horton; 591,250 shares for Mr. Garton;
210,440 shares for Mr. Reding; and 167,248 shares
for Mr. Kennedy. |
|
(2) |
|
See 2008 Outstanding Equity Awards At Fiscal Year-End
Table, beginning on page 37 of this Proxy Statement,
for further outstanding equity awards for our named executive
officers that are not and will not become exercisable within
60 days of April 15, 2009. |
55
SECURITIES OWNED BY CERTAIN BENEFICIAL OWNERS
The following table presents information known to us about the
beneficial ownership of our common stock as of March 23,
2009, our record date, by all persons and entities that we
believe beneficially own more than 5% of our outstanding common
stock. The information below is based on reports filed with the
SEC by such entities, except that the percentage is based upon
calculations made in reliance upon the number of shares of
common stock reported to be beneficially owned by such entity in
such report. The percentage of beneficial ownership is based on
279,011,993 shares of our common stock outstanding on
March 23, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
Percent of Class
|
Name and Address of Beneficial
Owner
|
|
|
(#)
|
|
|
(%)
|
|
|
|
|
|
|
|
|
|
|
|
FMR LLC
82 Devonshire Street
Boston, Massachusetts 02109
|
|
|
|
41,536,742
|
1
|
|
|
|
14.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRIMECAP Management Company
225 South Lake Avenue #400
Pasadena, California 91101
|
|
|
|
31,958,846
|
2
|
|
|
|
11.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vanguard Chester Funds Vanguard Primecap Fund
100 Vanguard Blvd.
Malvern, Pennsylvania 19355
|
|
|
|
15,253,100
|
3
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on Amendment No. 2 to Schedule 13G filed
February 17, 2009, FMR LLC, a parent holding company
(FMR), Edward C. Johnson 3d, Chairman of FMR, and
FMRs direct and indirect subsidiaries report beneficially
owning 41,536,742 shares of our common stock and report
having sole voting power over 1,739,282 of such shares, sole
dispositive power over 41,536,742 shares, and shared voting
and shared dispositive power over none of such shares. |
|
(2) |
|
Based on Amendment No. 19 to Schedule 13G filed
February 11, 2009, PRIMECAP Management Company reported
that it beneficially owned and had sole dispositive power over
31,958,846 shares of our common stock, sole voting power
over 7,087,176 of such shares, and shared voting and shared
dispositive power over none of such shares. |
|
(3) |
|
Based on Amendment No. 4 to Schedule 13G filed on
February 13, 2009, Vanguard Chester Funds
Vanguard Primecap Fund reported that it beneficially owns and
has sole voting power over 15,253,100 shares of our common
stock. It did not report beneficial ownership information
regarding shared voting power or sole or shared dispositive
power over any of such shares. |
PROPOSAL 2RATIFICATION OF AUDITORS
Our Audit Committee has selected Ernst & Young LLP to
serve as our independent auditors for the year ending
December 31, 2009. We request that the stockholders ratify
the Audit Committees selection. Representatives of
Ernst & Young will be present at the annual meeting,
will have the opportunity to make a statement (if they desire),
and will be available to answer appropriate questions.
Vote
Required for Ratification
A majority of votes cast is necessary to ratify the Audit
Committees selection of the independent auditors. If the
stockholders do not ratify the selection of Ernst &
Young, the Audit Committee will reconsider the selection of the
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 2.
56
PROPOSAL 3PROPOSAL TO APPROVE THE 2009 LONG
TERM INCENTIVE PLAN
Since 1979, AMR Corporation has maintained long-term incentive
plans that have authorized the grant of equity-based incentive
compensation awards. These plans have served to attract, retain
and reward our key management employees and to align the
interests of these employees and our stockholders. The AMR
Corporation 1998 Long Term Incentive Plan, as amended (the
1998 LTIP) expired by its terms on May 21, 2008
and no further grants can be made under the 1998 LTIP.
Accordingly, the Board of Directors has adopted the 2009 Long
Term Incentive Plan (the 2009 LTIP).
Pursuant to the 2009 LTIP, the Company is seeking authorization
from stockholders to issue awards in respect of 4 million
shares of the Corporations common stock. As described
below, the 2009 LTIP would also authorize for issuance any
additional shares that related to awards granted under the 1998
LTIP that, after the date of the stockholders meeting, would
again have become available for grant under the 1998 LTIP had it
continued in effect.
As discussed in our Compensation Discussion and Analysis, our
compensation philosophy is to provide key management
compensation targeted at the median of companies with similar
size, scope and function. Because our key management employees
are responsible for the overall performance of the company, and
consistent with our pay-for-performance philosophy, a
significant portion of this compensation is at risk through our
short-term and long-term incentive programs. Approximately 10%
to 25% of our executives potential compensation is paid in
the form of salary, with the remainder tied to short-term and
long-term performance-based incentive programs. Our short-term
incentive awards are the subject of agreements with our labor
unions, and no amounts have been paid thereunder since 2001. As
a result, our overall key management compensation structure and
our ability to tie their compensation to the companys
performance are heavily dependent on long-term equity awards.
To attract and retain the best management talent, our
compensation must be competitive with the compensation programs
of our principal airline competitors and other companies with
which we compete for talented employees. Over the last several
years, four of our five largest domestic competitors and several
of our smaller competitors have filed for bankruptcy protection,
while we have not. Most of these competitors granted substantial
equity awards to their management teams following their
emergence from bankruptcy, and many of them have substantial
equity awards remaining in their post-bankruptcy plans for
future awards. Since our 1998 LTIP expired on May 21, 2008,
if the 2009 LTIP is not approved, we will be at a competitive
disadvantage with our peers, and it will be more challenging to
attract and retain our key management employees.
We also feel that the terms of the 2009 LTIP are reasonable.
Under the consensual labor restructuring in 2003, we granted
37.9 million options to more than 80,000 of our employees. None
of these options were granted to our named executive officers or
other officers. As of April 1, 2009, approximately 12.2 million
of these options remained outstanding and represent a large
portion of our outstanding equity awards. While these
outstanding options constitute a large part of our outstanding
stock awards, we believe the grants have benefited both our
stockholders and employees. Our 2009 LTIP proposal requests
authorization of only 4 million shares. This represents
approximately 1.4% of our common shares outstanding. Our share
usage rate (the number of shares granted to employees divided by
the number of our shares outstanding) for the period 2006
through 2008 was an average of 1.6% per year.
For these reasons, the Board believes the 2009 LTIP proposal is
appropriate and necessary to align the interests of our key
management employees and our stockholders, to continue to
attract and retain qualified key management employees, and to
provide an appropriate and competitive level of compensation.
Summary
of 2009 LTIP
A summary of the 2009 LTIP follows, but this summary is
qualified in its entirety by reference to the full text of the
2009 LTIP, which is attached as Exhibit A to this proxy
statement.
Shares
Authorized for Issuances
The 2009 LTIP authorizes the issuance of awards in respect of
4 million shares of the Companys common stock.
57
Shares awarded under the 2009 LTIP may consist, in whole or in
part, of authorized and unissued shares or treasury shares. In
the event of certain changes in the Companys structure
affecting the common stock, the Compensation Committee may make
appropriate adjustments in the number of shares which may be
awarded and in the number of shares covered by options and other
awards then outstanding under the 2009 LTIP, and where
applicable, in the exercise price of awards under the 2009 LTIP.
If shares subject to an option or stock appreciation right under
the 2009 LTIP or the 1998 LTIP cease to be subject to such
option, or if shares awarded under either the 1998 LTIP or 2009
LTIP are forfeited, or awards under the 2009 LTIP or 1998 LTIP
otherwise terminate or are settled, in whole or in part, without
a payment being made to the participant in the form of the
Companys common stock, such shares will again be available
for future distribution under the 2009 LTIP. Upon the exercise
of a stock appreciation right granted under either the 2009 LTIP
or the 1998 LTIP, only the number of shares of stock actually
issued in connection with such exercise (and not the
corresponding number of shares of stock related to the stock
appreciation right being exercised) will be deemed issued and
the remaining shares of stock shall again be available for
issuance under the 2009 LTIP.
Participation
Awards may be made under the 2009 LTIP to key employees,
including officers, of the Company and its subsidiaries, but may
not be granted to any director who is not also an employee of
the Company or its subsidiaries. Awards to directors who are not
also employees of the Company (all the current directors except
Mr. Arpey) are governed by separate director plans. The
number of employees participating in the 2009 LTIP will vary
from year to year. In 2008, approximately 1,169 employees
(including the named executive officers) participated in the
1998 LTIP.
Awards
Under the 2009 LTIP
The 2009 LTIP is administered by the Compensation Committee of
the Board. Under the 2009 LTIP, the Compensation Committee has
the authority to grant stock options, stock appreciation rights,
restricted stock, deferred stock, incentive awards payable in
cash and other performance related awards and stock-based
awards. Each of these awards may be granted alone, in
conjunction with, or in tandem with other awards under the 2009
LTIP and/or
cash awards outside the 2009 LTIP.
Stock Options and Stock Appreciation
Rights. The 2009 LTIP allows the Compensation
Committee to grant stock options
and/or stock
appreciation rights for such number of shares as the
Compensation Committee determines, except that no participant
may be granted rights and stock options in respect of more than
750,000 shares of the Companys stock in any calendar
year. The 2009 LTIP allows the Compensation Committee to grant
both incentive stock options and non-qualified stock options.
Stock appreciation rights may be granted in conjunction with all
or part of a stock option or on a stand alone basis. Under the
1998 LTIP, the Company had begun to use stock appreciation
rights instead of stock options, as they provide essentially the
same benefit to the recipient with less dilution of our
stockholders.
Stock appreciation rights are awards that allow the recipient,
upon exercise, to receive an amount in shares of stock (or,
solely to the extent determined by the Compensation Committee,
cash) equal in value to the excess of the fair market value (at
the time 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
Compensation Committee has determined that any stock
appreciation rights granted under the 1998 LTIP or the 2009 LTIP
should generally be settled in stock.
The exercise price for any stock option and the base price in
respect of any stock appreciation right may not be less than the
fair market value of the stock at the time the stock option or
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 at the time the related stock option was
granted). While our stock is traded on the NYSE, fair market
value will be determined based on the last sale price at the
time of the grant (or, if there are no sales on that date, the
closing price on the last prior date on which there are sales).
When payment in respect of a stock option or stock appreciation
right 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 at the time of exercise.
58
Without the approval of the Companys stockholders, the
Compensation Committee may not lower the exercise price of
outstanding stock options or the base price of outstanding stock
appreciation rights, or grant new stock options or stock
appreciation rights in substitution for outstanding stock
options or rights. The Compensation Committee also is prohibited
from granting stock options or stock appreciation rights
conditioned upon the exercise of an outstanding stock option or
stock appreciation right.
Upon the exercise of a stock option, payment of the option price
may be made: (i) in cash; (ii) in common stock of the
Company; (iii) through an arrangement with a broker
approved by the Company whereby payment is accomplished with the
proceeds of the sale of common stock of the Company; or
(iv) by any combination of the foregoing, provided that the
combined value of all cash and the fair market value of any
common stock received by the Company is equal to the option
price. The Compensation Committee may also permit any stock
option to be exercised by delivery of the number of shares of
the Companys common stock that have a value not in excess
of the excess of the then fair market value of the common stock
over the exercise price of the option, times the number of
shares as to which the Stock Option is being exercised. In such
instance, the stock option will effectively be converted into a
stock settled stock appreciation right.
Stock options and stock appreciation rights will be exercisable
at such times as the Compensation Committee determines at the
time of grant. Any stock appreciation rights granted in tandem
with a stock option (or portion thereof) must be exercisable
only at such time or times and to the extent that the stock
options to which they relate are exercisable. 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, has
been exercised. However, no stock option or stock appreciation
right may become exercisable sooner than one year after the date
of grant, except in the event of the employees death,
disability or retirement, or the occurrence of a change of
control.
Upon an employees voluntary resignation or if the employee
is involuntarily terminated without cause, any unvested stock
options or stock appreciation rights will terminate. The
Compensation Committee may permit the employee a period of up to
90 days following termination of employment to exercise any
vested stock options or stock appreciation rights. In the case
of an employee whose employment terminates due to death,
disability or retirement, the 2009 LTIP provides that stock
options and stock appreciation rights are exercisable in
accordance with the terms and conditions established by the
Compensation Committee. In no event, however, will a stock
option or stock appreciation right remain exercisable past its
original term, which may not exceed ten years.
Restricted Stock and Deferred Stock. The
Compensation Committee may grant participants awards of
restricted stock and deferred stock. An award of restricted
stock is shares of the Companys common stock that are not
transferable and are subject to forfeiture for a period
specified by the Compensation Committee in accordance with the
terms of the 2009 LTIP. Deferred stock is an award that is
economically comparable to an award of restricted stock, except
that the shares of our stock related to such award will not be
issued until the vesting criteria have been satisfied (unless
they are issued as restricted stock, which itself must continue
to vest). The number of shares which may be awarded to any
single employee in any calendar year in respect of any
performance based restricted stock awards, deferred stock or
performance awards may not exceed 750,000 shares.
The Compensation Committee will determine whether an award of
restricted stock or deferred stock will vest solely on the basis
of the passage of time or upon the achievement of performance
criteria. (The applicable performance criteria upon which such
awards may be granted are described below under the heading
Cash Incentive Awards and Performance Related
Awards.) Restricted stock and deferred stock that vest, if
at all, upon the attainment of performance criteria must have a
vesting period of at least one year. Restricted stock and
deferred stock that will vest, if at all, upon the continued
performance of service must have a vesting period of at least
three years. In either case, exceptions to these minimum periods
apply in the event of the employees death, disability or
retirement, or the occurrence of a change of control.
Awards of restricted stock are outstanding shares of the
Companys common stock and entitle the holder to all rights
as a shareholder, including the right to vote and to receive
dividends. With respect to deferred shares, the Compensation
Committee determines whether amounts equivalent to any dividends
that would have been paid on a corresponding number of shares of
our common stock will be paid to the employee or deemed
reinvested in
59
additional shares of deferred stock. However, in no event may
such dividend equivalents be permitted to be credited or paid in
respect of performance related stock awards that have not vested.
During the restriction period, the employee may not sell,
transfer, pledge or assign restricted stock or deferred stock.
At the end of the restriction period, shares of common stock
equal to the number covered by the award of restricted stock or
deferred stock will be delivered to the employee (unless the
Compensation Committee decides to settle the award in cash).
Upon the termination of the employees employment for any
reason during the restriction period, all restricted stock or
deferred stock awarded to that employee either will vest (in
whole or in part) or be subject to forfeiture, in accordance
with the terms and conditions of the award as established by the
Compensation Committee.
Cash Incentive Awards and Performance Related
Awards. The 2009 LTIP permits the Compensation
Committee to grant awards that become payable upon the
achievement, in whole or in part, of certain performance
criteria established in writing by the Compensation Committee.
These awards may take the form of dollar denominated awards or
awards of restricted stock
and/or
deferred stock that will vest upon achieving performance
objectives established by the Compensation Committee. The
Compensation Committee may establish these performance criteria
from among the following measures of performance:
(i) return on equity, (ii) total shareholder return,
(iii) primary and fully diluted earnings per share,
(iv) EBITDA, (v) cash flows, revenues
and/or
earnings by themselves or relative to other parameters (e.g.,
net or gross assets), (vi) operating income,
(vii) return on investment, (viii) changes in the
value of the stock, (ix) return on assets,
(x) operational performance (including on time
performance), (xi) customer satisfaction and
(xii) employee survey results. Whether these objectives are
achieved may be determined by the performance of the Company, a
subsidiary or an affiliate (or any business unit or division
thereof) or by reference to the performance of any of the
Company or a subsidiary (or any business unit or division
thereof) relative to other companies. The Compensation Committee
may also impose one or more additional performance conditions.
Any performance related award made to any participant in the
form of restricted stock or deferred stock in any calendar year
may not exceed 750,000 shares, based on the number of
shares initially granted. Any dollar denominated performance
award made to any participant in any calendar year may not have
an initial value in excess of $3,000,000. However, with respect
to a performance related share award or dollar denominated
performance award, the actual number of shares or amount payable
may be up to twice the initial grant limits depending on the
level of achievement of the performance criteria.
The 2009 LTIP also allows the Compensation Committee to make
annual cash incentive awards to our executive officers based on
the same performance criteria that are applicable with respect
to performance related awards. Any such annual incentive award
to any single officer in any calendar year may not exceed
$3,000,000.
With respect to the Companys executive officers, the
performance related awards and the annual incentive awards
described above are specifically designed to qualify as
performance-based compensation exempt from the application of
the deduction limitation imposed under Section 162(m) of
the Code.
Stock Based Awards. The Compensation Committee
may grant other types of equity-based or equity-related awards
not otherwise described by the terms of the 2009 LTIP (including
the grant or offer for sale of unrestricted shares) in such
amounts and subject to such terms and conditions as the
Compensation Committee determines, although the aggregate number
of such stock-based awards may not exceed five percent of the
stock available for issuance under the 2009 LTIP. Such
stock-based awards may be granted as an inducement to enter the
employ of the Company or any subsidiary, in satisfaction of any
obligation of the Company or any subsidiary to a participant
that would otherwise have been payable in cash, or such other
purposes as the Compensation Committee shall determine necessary
or appropriate. Such stock based awards may entail the transfer
of actual shares, or payment in cash or otherwise of amounts
based on the value of shares and may include, without
limitation, awards designed to comply with or take advantage of
the applicable local laws of jurisdictions other than the United
States. The Compensation Committee shall specify the extent to
which a recipient may receive stock-based awards following
termination of employment.
60
Change In
Control Provisions
If there is a change in control, unless otherwise provided in
the applicable award agreement, any stock options or stock
appreciation rights which are not then exercisable will become
fully exercisable and vested. Likewise, unless otherwise
provided in the applicable award agreement, the restrictions and
deferral limitations applicable to restricted stock, deferred
stock, stock based awards and performance related awards will
lapse and such shares and awards will be deemed fully vested and
payable. Similarly, the performance criteria relative to any
award of restricted stock or deferred stock will be deemed
satisfied at target and such stock will then be fully vested.
Any and all of these awards may be paid in cash upon such a
change in control, as determined in the sole discretion of the
Compensation Committee.
Change in control is defined as the occurrence of any one or
more of the following events:
(i) the acquisition by any person, in any 12 month
period, of beneficial ownership of securities of the Company
representing thirty percent (30%) or more of the combined voting
power of the Companys then outstanding securities;
(ii) a change within any 12 month period in the
composition of the persons constituting a majority of the
Companys board of directors at the beginning of such
period (the Incumbent Board), except that,
generally, any individual whose election, or nomination for
election by the Companys stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board will be treated as though such individual were a
member of the Incumbent Board; or
(iii) consummation of any reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets of another corporation (a Business
Combination), in each case, unless, following such
Business Combination:
(A) the persons who were the beneficial owners of the
Companys stock immediately prior to the transaction
beneficially own, directly or indirectly, more than fifty
percent (50%) of both the then outstanding shares of common
stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of its assets, either directly or through one
or more subsidiaries);
(B) no person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, thirty percent (30%) or more of the combined voting
power of the then outstanding voting securities of such
corporation, but disregarding any beneficial ownership acquired
more than 12 months prior to such Business
Combination; and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Companys board of
directors who qualified as incumbent members under the standard
specified above at the time of the execution of the initial
agreement, or of the action of the Board, providing for such
Business Combination.
This definition is intended to meet the requirements to be a
change in ownership, change in effective control or change in a
substantial portion of the Companys assets, in each case,
within the meaning of Section 409A, and no event shall be
treated as a change in control for purposes of the 2009 LTIP
unless it qualifies as such an event under such provision of the
Code.
Amendment
The Company may amend, alter, or discontinue the 2009 LTIP, but
no amendment, alteration, or discontinuation shall be made which
would (i) without shareholder approval, (A) increase
the number of shares available for issuance under the 2009 LTIP,
(B) modify the requirements for participation under the
2009 LTIP, (C) otherwise enhance the benefits that may be
provided to participants under the 2009 LTIP, including by
enhancing the ability of the Compensation Committee to waive
restrictions on restricted stock and deferred stock, or
(D) authorize the repricing of outstanding stock options
and stock appreciation rights or (ii) impair the rights of
a participant under an award theretofore granted, without the
participants consent. In addition, any
61
amendment of the 2009 LTIP shall also be subject to stockholder
approval to the extent required under applicable law or the
applicable rules of any exchange or trading system on which the
stock is listed to trade. To the extent such action is otherwise
permitted under the 2009 LTIP, the Compensation Committee may
amend the terms of any stock option or other award theretofore
granted, prospectively or retroactively, but no such amendment
shall impair the rights of any holder without the holders
consent.
Federal
Income Tax Aspects
The following is a brief summary of the federal income tax
consequences of awards made under the 2009 LTIP based upon the
federal income tax laws in effect on the date hereof. This
summary is not intended to be exhaustive, and does not describe
state or local tax consequences.
Stock Appreciation Rights. No income will be
realized by a participant in connection with the grant of a
stock appreciation right. When the stock appreciation right is
exercised, the participant will generally be required to include
as taxable ordinary income in the year of exercise an amount
equal to the amount of cash
and/or the
fair market value of any shares received. The Company will be
entitled to a deduction at the time and in the amount included
in the participants income by reason of the exercise. If
the participant receives common stock upon exercise of a stock
appreciation right, the post-exercise appreciation or
depreciation will be treated in the same manner discussed below
under Non-Qualified Stock Options. All grants of
stock options and stock appreciation rights have been designed
in a manner to be exempt from the application of
Section 409A.
Incentive Stock Options. No regular taxable
income will be realized by the participant upon the grant or
exercise of an incentive stock option (ISO).
However, for purpose of determining whether the employee is
subject to the alternative minimum tax, a tax preference item
would be generated upon exercise of the ISO. If a participant
does not sell the stock received upon the exercise of an ISO
(ISO Shares) for at least two years from the date of
grant and within one year from the date of exercise, when the
shares are sold any gain or loss realized will be long term
capital gain or loss. In such circumstances, no deduction will
be allowed to the Company for federal income tax purposes.
If ISO Shares are disposed of prior to the expiration of either
of the holding periods described above, the participant
generally will realize ordinary income at that time equal to the
excess, if any, of the fair market value of the shares at
exercise (or, if less, the amount realized on the disposition of
the shares) over the price paid for such ISO Shares. The Company
will be entitled to deduct any such recognized amount. Any
further gain or loss realized by the participant will be taxed
as short term or long term capital gain or loss. Subject to
certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of
the participants employment, the option will generally be
taxed as a non-qualified stock option.
Non-Qualified Stock Options. No income will be
realized by the participant at the time a non-qualified stock
option is granted. Generally upon exercise of a non-qualified
stock option, the participant will realize ordinary income in an
amount equal to the difference between the price paid for the
shares and the fair market value of the shares on the date of
exercise. The Company will be entitled to a tax deduction in the
same amount. Any appreciation (or depreciation) after the date
of exercise will be either short term or long term capital gain
(or loss), depending upon the length of time that the
participant has held the shares.
Restricted Stock. A participant receiving
restricted stock generally will recognize ordinary income in the
amount of the fair market value of the restricted stock at the
time the stock is no longer subject to forfeiture, less any
consideration paid for the stock. The Company will be entitled
to a deduction at the same time and in the same amount. The
holding period to determine whether the participant has long
term or short term capital gain or loss on a subsequent sale
generally begins when the stock is no longer subject to
forfeiture, and the participants tax basis for such shares
will generally equal the fair market value of such shares on
such date. Restricted stock is generally not subject to the
provisions of Section 409A.
However, a participant may elect, under Section 83(b) of
the Code, within 30 days of the grant of the stock, to
recognize taxable ordinary income on the date of grant equal to
the excess of the fair market value of the shares of restricted
stock (determined without regard to the restrictions) over the
purchase price of the restricted stock. By reason of such an
election, the participants holding period will commence on
the date of grant and the participants
62
tax basis will be equal to the fair market value of the shares
on that date (determined without regard to restrictions).
Likewise, the Company generally will be entitled to a deduction
at that time in the amount that is taxable as ordinary income to
the participant. If shares are forfeited after making such an
election, the participant will be entitled to a deduction,
refund, or loss for tax purposes only in an amount equal to the
purchase price of the forfeited shares regardless of whether he
made a Section 83(b) election.
Deferred Stock. A participant receiving
deferred stock generally will be subject to tax at ordinary
income rates on the fair market value of the deferred stock on
the date that the stock is distributed to the participant and
the capital gain or loss holding measurement period for such
stock will also commence on that date. The Company generally
will be entitled to a deduction in the amount that is taxable as
ordinary income to the participant. The holding period to
determine whether the participant has long term or short term
capital gain or loss on a subsequent sale generally begins when
the stock is distributed, and the participants tax basis
for such shares will generally equal the fair market value of
such shares on such date. Deferred stock may constitute deferred
compensation subject to the additional requirements of
Section 409A. It is expected that deferred stock awards
will be designed to comply with these requirements. If these
requirements are not met, the recipient of any such award will
be deemed to have received the value of such award in income at
the time at which it is no longer subject to a substantial risk
of forfeiture and will be taxed on the amount included in his or
her income at a federal tax rate that is at least 20% higher
than the rate that would otherwise have been applicable without
the application of such Section 409A.
New Plan
Benefits
It is not possible to determine the number of shares that will
in the future be awarded under the 2009 LTIP to any particular
individual. However, set forth below are the number of
stock-settled stock appreciation rights and shares of deferred
stock (including deferred shares, performance shares, and career
performance shares) that were granted to the persons listed
below during 2008 under the terms of the 1998 LTIP, which
generally provided for the same types of awards as are available
under the 2009 LTIP on substantially the same terms and
conditions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Stock
|
|
|
Number of
|
Name and Position
|
|
|
Appreciation Rights
|
|
|
Deferred Shares
|
Gerard J. Arpey
|
|
|
|
286,000
|
|
|
|
|
404,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas W. Horton
|
|
|
|
110,550
|
|
|
|
|
152,850
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel P. Garton
|
|
|
|
110,550
|
|
|
|
|
162,590
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert W. Reding
|
|
|
|
110,550
|
|
|
|
|
152,850
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary F. Kennedy
|
|
|
|
62,950
|
|
|
|
|
87,050
|
|
|
|
|
|
|
|
|
|
|
|
|
All executive officers as a group
|
|
|
|
680,600
|
|
|
|
|
959,340
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-executive officer employee group
|
|
|
|
2,042,140
|
|
|
|
|
2,900,178
|
|
|
|
|
|
|
|
|
|
|
|
|
Outside directors are not eligible for participation in the 2009
LTIP.
Vote
Required for Approval
The affirmative vote of a majority of the votes cast on the
proposal at the annual meeting is required to approve the 2009
LTIP, provided that the total votes cast on the proposal
represent over 50% of the voting power of all of the shares of
common stock outstanding and entitled to vote on the subject
matter.
63
Security
Ownership of Certain Beneficial Owners and Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
remaining available for
|
|
|
|
Number of securities to
|
|
|
Weighted-average
|
|
|
future issuance under equity
|
|
|
|
be issued upon exercise
|
|
|
exercise price of
|
|
|
compensation plans
|
|
|
|
of outstanding options,
|
|
|
outstanding options,
|
|
|
(excluding securities reflected
|
|
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
in the first column)
|
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
Equity compensation plans approved by security holders
|
|
|
|
13,805,948
|
|
|
|
|
23.88
|
|
|
|
**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
|
13,809,992
|
*
|
|
|
|
5.66
|
|
|
|
614,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
27,615,940
|
|
|
|
|
14.77
|
|
|
|
614,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Represents 13,809,992 options granted under the 2003 Employee
Stock Incentive Plan (the ESIP). The ESIP was implemented in
accordance with the rules of the New York Stock Exchange. |
|
** |
|
Additional shares may become available for future use as certain
stock appreciation rights are exercised and settled in stock and
other awards are settled without the issuance of stock as
described above. |
See Note 9 to the consolidated financial statements in our
Annual Report on
Form 10-K
for additional information regarding the equity compensation
plans included above.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSAL 3.
STOCKHOLDER PROPOSALS
We expect certain of our stockholders to present the following
proposals (items 4 and 5 on the proxy card and voting
instruction form) at the annual meeting. Some of the proposals
contain assertions that we believe are incorrect. We have not
attempted to refute all these inaccuracies. However, the Board
of Directors recommends a vote against each of these proposals
for the reasons following each proposal.
PROPOSAL 4STOCKHOLDER PROPOSAL
Mrs. Evelyn Y. Davis, The Watergate Office Building, 2600
Virginia Ave., N.W., Suite 215, Washington, D.C.
20037, who owns 1,000 shares of our common stock, has given
notice that she will propose the following resolution from the
floor. The proposed resolution and statement in support thereof
are set forth below. A majority of votes cast is necessary for
approval of the proposal.
RESOLVED: That the stockholders of AMR, assembled in
Annual Meeting in person and by proxy, hereby request the Board
of Directors to take the necessary steps to provide for
cumulative voting in the election of directors, which means each
stockholder shall be entitled to as many votes as shall equal
the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such
votes for a single candidate, or any two or more of them as he
or she may see fit.
REASONS: Many states have mandatory cumulative
voting, so do National Banks.
In addition, many corporations have adopted cumulative voting.
Last year the owners of 52,617,777 shares, representing
approximately 31% of shares voting, voted FOR this proposal.
64
If you AGREE, please mark your proxy FOR this resolution.
End of Stockholder Proposal
The Board of Directors Position
FOR THE
REASONS STATED BELOW, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 4.
The Company, like most large public companies, does not elect
directors using cumulative voting. It is the Board of
Directors opinion that cumulative voting could enable
groups of stockholders with less than a majority of the shares
to elect directors who would represent special interests rather
than the best interests of all stockholders. It is also the
Boards opinion that cumulative voting could give
special-interest stockholder groups a voice in director
elections disproportionate to their economic investment. The
Board believes that no director should represent or favor the
interests of any one stockholder or a limited group of
stockholders. Rather, every director must represent the
stockholders as a whole. The Board of Directors feels strongly
that it is the duty of each director to administer our business
and affairs for the benefit of all stockholders.
The Board also believes that cumulative voting is not necessary
in light of our strong corporate governance practices and
philosophy. For example, our Board is predominantly comprised of
independent, non-management directors, and the
Nominating/Corporate Governance Committee of the Board, which is
responsible for identifying and recommending qualified
individuals for director positions, consists solely of
independent, non-management directors. This ensures that the
Board will continue to exercise independent business judgment
and remain accountable to all of our stockholders, rather than
to a particular special-interest stockholder group.
The Board further notes that our present system of electing
directors, where each share of common stock is allowed to have
one vote for each Board seat, is crucial to minimize the risks
of Board divisiveness, which can impair the ability of the Board
to operate effectively. The Board believes that our current
method of director election ensures that each director acts in
the best interests of all the Companys stockholders and
reduces the risk of divisiveness on the Board.
The Board of Directors believes that changing the present method
of electing directors would not be in the best interests of all
stockholders.
FOR THESE
REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 4.
PROPOSAL 5STOCKHOLDER PROPOSAL
Mr. John Chevedden, 2215 Nelson Avenue, No. 205,
Redondo Beach, California 90278, the beneficial owner of
100 shares of stock, and Ms. Patricia Kennedy,
487 S. Bayview Avenue, Freeport, New York 11520, the
beneficial owner of 90 shares of stock, with
Mr. Chevedden acting as her proxy, have given notice that
they will propose the following resolution from the floor. The
proposed resolution and statements in support thereof are set
forth below. A majority of votes cast is necessary for approval
of the proposal.
5
Special Shareowner Meetings
RESOLVED, Shareowners ask our board to take the steps necessary
to amend our bylaws and each appropriate governing document to
give holders of 10% of our outstanding common stock (or the
lowest percentage allowed by law above 10%) the power to call
special shareowner meetings. This includes that such bylaw
and/or
charter text will take steps to avoid exception or exclusion
conditions (consistent with state law) that apply only to
shareowners but not to management
and/or the
board.
Special meetings allow shareowners to vote on important matters,
such as electing new directors, that can arise between annual
meetings. This proposal does not affect our board in maintaining
its current power to call a special
65
meeting and does not affect the rights that members of
management
and/or the
board have as individual shareholders.
Statement
of John Chevedden
Fidelity and Vanguard supported a shareholder right to call a
special meeting. The Corporate Library and Governance Metrics
International have taken special meeting rights into
consideration when assigning company ratings.
This proposal topic won impressive 2008 support:
|
|
|
|
|
|
|
Occidental Petroleum (OXY)
|
|
|
66
|
%
|
|
Emil Rossi (Sponsor)
|
FirstEnergy (FE)
|
|
|
67
|
%
|
|
Chris Rossi
|
Marathon Oil (MRO)
|
|
|
69
|
%
|
|
Nick Rossi
|
The merits of this Special Shareowner Meetings proposal should
also be considered in the context of the need for further
improvements in our companys corporate governance and in
individual director performance. In 2008 the following
governance and performance issues were identified:
|
|
|
Armando Codina, our Lead Director, was even on
the Merrill Lynch executive pay committee as Merrills
Stanley ONeal collected $161 million after acquiring
subprime assets that contributed to $40 billion in
write-downs.
|
|
Ray Robinson, on our audit and nomination
committees, was designated a Problem Director by The
Corporate Library www.thecorporatelibrary.com, an
independent investment research firm, due to his involvement
with the Mirant Corporation bankruptcy.
|
|
Our directors also served on 15 boards rated
D or lower by The Corporate Library:
|
|
|
|
Armando Codina
|
|
General Motors (GM)
Merrill Lynch (MER)
|
Ann McLaughlin Korologos
|
|
Vulcan Materials (VMC)
Harman International (HAR)
|
Rajat Gupta
|
|
Genpact (G)
Goldman Sachs (GS)
|
Ray Robinson
|
|
Aaron Rents (RNT)
Acuity Brands (AYI)
|
Michael Miles
|
|
Time Warner (TWX)
Citadel Broadcasting (CDL)
|
Judith Rodin
|
|
Comcast (CMCSA)
Citigroup (C)
|
Matthew Rose
|
|
Centex (CTX)
|
John Bachmann
|
|
Monsanto (MON)
|
Alberto Ibarguen
|
|
PepsiCo (PEP)
|
|
|
|
Each of our directors received more than 14%
in withheld (no) votes with Ann Korologos receiving the most
withheld votes.
|
|
Two directors were designated
Accelerated Vesting directors by The Corporate
Library:
|
Judith Rodin
Michael Miles
|
|
|
Two directors held zero stock:
|
Gerard Arpey
Judith Rodin
|
|
|
Four directors held 4 or 5 board seats
each Over-extension concern.
|
Armando Codina
Ann McLaughlin Korologos
Michael Miles
66
|
|
|
We had no shareholder right to:
|
Cumulative voting.
An independent Board Chairman.
Vote on executive pay.
The above concerns shows there is need for improvement. Please
encourage our board to respond positively to this proposal:
Special
Shareowner Meetings
Yes on 5
End
of Stockholder Proposal
The
Board of Directors Position
FOR THE
REASONS STATED BELOW, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 5.
The Board of Directors believes this proposal is unnecessary
because our stockholders already have the ability to call
special meetings, among other significant ways they can
influence action by the Company. Furthermore, approval of
proposal 5 could result in costly disruptions from multiple
special meetings that only serve the narrow interests of a small
percentage of our stockholders.
Our stockholders already have a meaningful right to call special
meetings. Our bylaws currently require the Company to call a
special meeting if it is requested by 25% of the Companys
outstanding common stock entitled to vote at that meeting. If
stockholders owning a meaningful 25% of our outstanding common
stock consider a matter to be of sufficient importance for the
Company to bear the expense and disruption of a special meeting,
then those stockholders can cause the Company to call a special
meeting on that matter. Reducing to 10% the ownership percentage
required to call a special meeting would add little to these
rights. To the contrary, proposal 5 would empower a very
small group of stockholders to cause the Company to bear the
significant expense and distraction of organizing an unlimited
number of special meetings to address matters that may not
benefit the majority of stockholders or even interest a
significant percentage of other stockholders.
In addition, Stockholders have the right to cause the Company to
act by written consent, without the need for a special meeting.
The Companys bylaws permit any action that could be taken
at a stockholder meeting to be taken by written consent, upon
the approval of the number of shares that would be needed to
authorize that action at a meeting at which all shares entitled
to vote were present and voted.
Furthermore, as evidenced by the submission of proposal 5,
stockholders holding a very small ownership stake in the Company
already have the ability to submit proposals for a vote by
stockholders at the Companys annual meeting.
Moreover, through the election of all of the Companys
directors each year, stockholders are able to influence the
Board to make changes in the Companys policies.
Stockholders also can recommend director nominees to the
Nominating/Corporate Governance Committee at any time without
the need for a special meeting (see Stockholder
Nominees on page 14 of this Proxy Statement and
Director Nominating Policies available at
www.aa.com/investorrelations).
In addition, stockholders and other interested parties are able
to communicate directly with Board at any time about any
concerns that arise between annual meetings (see
Contacting the Board of Directors on page 11 of
this Proxy Statement and Procedures to Facilitate
Communications between the Directors and Employees, Shareholders
and Other Interested Third Parties available at
www.aa.com/investorrelations).
The Board is committed to good corporate governance, as
evidenced by its responsiveness to stockholder proposals (see
our website www.aa.com/investorrelations), and the
inclusion of significant stockholder accountability mechanisms
in our corporate governance system. The Board does not support
proposal 5 because it unnecessarily empowers a small
minority of stockholders to cause the Company to hold disruptive
and costly special meetings when there already are multiple
means for stockholders to influence action by the Company.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
AGAINST PROPOSAL 5.
67
OTHER MATTERS
If any other matters properly come before, or are otherwise
voted on at, the annual meeting, or any adjournment or
postponement thereof, the proxies identified on page 4 of
this Proxy Statement will use their discretion to vote in
accordance with their best judgment, except as otherwise
provided in this section.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires our directors
and executive officers to file statements of beneficial
ownership and changes in beneficial ownership of our common
stock with the SEC and the NYSE, and to furnish us with copies
of such statements. Based solely on a review of the copies of
such statements furnished to us and written representations that
no other such statements were required, we believe that our
directors and executive officers complied with all such
requirements during fiscal year 2008, except for one Form 4
filed on behalf of Mr. Ibargüen on July 18, 2008
for one transaction. Based upon our review of their filings on
Schedule 13G, we believe that the beneficial owners of more
than 10 percent of our common stock are not required to
file reports pursuant to Section 16(a) of the Exchange Act.
OTHER INFORMATION
From time to time stockholders submit proposals that may be
proper subjects for inclusion in the Companys proxy
statement and for consideration at the annual meeting. We must
receive proposals for inclusion in the 2010 proxy statement no
later than December 18, 2009. All stockholders submitting
proposals must meet the stockholder eligibility requirements of
Rule 14a-8
(available on the SEC website). Please direct any such proposal,
as well as any related questions, to our Corporate Secretary at
the address on page 69.
Our bylaws provide that any stockholder wishing to nominate a
director at or bring any other item before an annual meeting,
other than proposals intended to be included in the proxy
materials pursuant to
Rule 14a-8,
must provide timely and compliant written notice. To be timely
for the 2010 annual meeting, such notice must be delivered to
our Corporate Secretary at the address on page 69 not
before January 20, 2010 or after February 19, 2010.
However, if the 2010 annual meeting is advanced by more than
30 days or delayed more than 60 days from May 20,
2010, then our bylaws provide a different deadline for such
notice. The notice must contain and be accompanied by certain
information as specified in our bylaws. We recommend that any
stockholder wishing to nominate a director at or bring any other
item before an annual meeting review a copy of our bylaws, which
are available on the Investor Relations section of our website
located at www.aa.com/investorrelations by clicking on
the Corporate Governance link or, without charge,
from our Corporate Secretary at the address on page 69.
The Nominating/Corporate Governance Committee has adopted a
policy whereby it will consider qualified candidates for
director suggested by our stockholders. Stockholders can suggest
qualified candidates for director by writing to the address on
page 69. We will forward submissions of candidates that
meet the criteria for director nominees approved by the Board of
Directors that we receive pursuant to this process to the
Chairman of the Nominating/Corporate Governance Committee for
further review and consideration. The criteria for director
nominees are described in Director Nominees on
page 13 of this Proxy Statement and are also available on
the Investor
68
Relations section of our website located at
www.aa.com/investorrelations by clicking on the
Corporate Governance link.
|
|
|
Via U.S. Mail:
|
|
Via Courier:
|
AMR Corporation
Corporate Secretary
P.O. Box 619616, MD 5675
Dallas/Fort Worth International Airport, Texas
75261-9616
|
|
AMR Corporation
Corporate Secretary
4333 Amon Carter Blvd., MD 5675
Fort Worth, Texas 76155
|
In certain sections of this Proxy Statement, references are made
to documents that may be found at our website
www.aa.com/investorrelations by clicking on the
Corporate Governance link. All summaries of
documents in this Proxy Statement are qualified in their
entirety by reference to the actual text of the documents on our
website.
AMR CORPORATION
April 17, 2009
69
EXHIBIT A
AMR
CORPORATION
2009 LONG TERM INCENTIVE PLAN
SECTION 1 Purpose,
Definitions.
The purpose of the AMR Corporation 2009 Long Term Incentive Plan
(the Plan) is to enable AMR Corporation (the
Company) to attract, retain and reward key employees
of the Company and its Subsidiaries, and strengthen the
mutuality of interests between such key employees and the
Companys stockholders, by offering such key employees
performance-based stock incentives
and/or other
equity interests or equity-based incentives in the Company, as
well as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(a) Award means any award of
a Stock Option, Stock Appreciation Right, Restricted Stock,
Deferred Stock, Performance Related Award or Stock Based Award
made pursuant to the Plan. Award shall also include a cash
incentive award payable in accordance with Section 8(b).
(b) Board means the Board of
Directors of the Company.
(c) Cause means a felony
conviction of a Participant or the failure of a Participant to
contest prosecution for a felony, or a Participants
willful misconduct or dishonesty, any of which is directly and
materially harmful to the business or reputation of the Company
or any Subsidiary.
(d) Change in Control means,
unless otherwise defined, the happening of any of the following:
(i) When during any 12 month period
any person as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d)
thereof, including any group within the meaning of
both Section 13(d) of the Exchange Act and Treas. Reg.
§ 1.409A-3(i)(5)(v)(B), but excluding the Company, any
Subsidiary or any employee benefit plan sponsored or maintained
by the Company or any Subsidiary (including any trustee of such
plan acting as trustee), directly or indirectly, becomes the
beneficial owner (as defined in
Rule 13d-3
under the Exchange Act, as amended from time to time), of
securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Companys then
outstanding securities;
(ii) When during any 12 month period
the individuals who, as of the beginning of such period,
constitute the Board (the Incumbent Board) cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the effective date of the Plan whose election, or
nomination for election by the Companys stockholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual (x)
whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
other than the Board and (y) who is a nominee or other
representative of the person(s) who conducted or threatened such
contest or solution or an affiliate thereof; or
(iii) Consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets of another corporation (a Business
Combination); provided; however, that a Business
Combination will not constitute a Change in Control if each of
the following three conditions are satisfied following such
Business Combination:
(A) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the then outstanding shares of Stock of the
Company and the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in
the election of directors immediately prior to such Business
Combination beneficially own, directly or indirectly,
Exhibit A-1
more than fifty percent (50%) of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all
of the Companys assets either directly or through one or
more subsidiaries);
(B) no person (excluding any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) becomes,
by reason of such Business Combination, the beneficial owner,
directly or indirectly, of thirty percent (30%) or more of the
combined voting power of the then outstanding voting securities
of such corporation, but disregarding for this purpose any
beneficial ownership held more than 12 months prior to the
effective time of such Business Combination; and
(C) at least a majority of the members of
the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination.
Without limiting the generality of the foregoing, the above
definition is intended to constitute a change in the ownership,
a change in effective control or a change in the ownership of a
substantial portion of the assets of the Company, in each case
as defined in Treasury
Regulation 1.409A-3(i)(5)
or any successor guidance thereto (a 409A Change
Event) and no event, change in ownership or occurrence
shall be a Change in Control under this Plan unless it is also a
409A Change Event.
(e) Code means the Internal
Revenue Code of 1986, as amended from time to time, and any
successor thereto.
(f) Committee means the
committee referred to in Section 2 of the Plan.
(g) Company means AMR
Corporation, a corporation organized under the laws of the State
of Delaware, or any successor corporation.
(h) Deferred Stock means a
right granted pursuant to Section 7 to receive Stock at the
end of a specified Restriction Period or, if so specified by the
Committee, Restricted Stock prior to the end of the specified
Restriction Period.
(i) Disability, for awards
not subject to Section 409A of the Code, means disability
as determined under procedures established by the Committee for
purposes of this Plan. For awards subject to Section 409A
of the Code, Disability shall have the meaning given
in Section 409A(a)(2)(C) of the Code; determination of such
Disability shall be made by the Committee consistently with
Treasury
Regulation 1.409A-3(i)(4)(i)
or successor guidance thereto.
(j) Early Retirement means
retirement from active employment with the Company and any
Subsidiary at or after (i) attaining age 55 with
10 years of service or (ii) having satisfied the
conditions for early retirement under any pension plan of the
Company or any Subsidiary in which the Participant is a
participant.
(k) Exchange Act means the
Securities Exchange Act of 1934, as amended from time to time,
and any successor thereto.
(l) Fair Market Value means,
as of any given date, the last sale price of the Stock on the
New York Stock Exchange (or such other exchange or automated
trading system on which the Stock is then principally traded) at
the time of such grant or exercise, as applicable or, if no such
sale of Stock occurs on such date, the last sale price on the
immediately prior business day on which sales occurred occur.
If, at any time, the Stock is not traded on an exchange or
automated trading system, Fair Market Value shall be the fair
market value of the Stock as determined by the Committee in good
faith.
(m) Incentive Stock Option
means any Stock Option intended to be and designated as an
Incentive Stock Option within the meaning of
Section 422 of the Code.
Exhibit A-2
(n) Non-Qualified Stock
Option means any Stock Option that is not an Incentive
Stock Option.
(o) Normal Retirement means
retirement from active employment with the Company and any
Subsidiary pursuant to the applicable retirement provisions of
the applicable pension plan of such entity.
(p) Participant means any
officer or key employee of the Company or any Subsidiary who has
been granted an Award under the Plan.
(q) Performance Criteria
shall have the meaning ascribed thereto in Section 8.
(r) Performance Related Award
means any Performance Related Incentive Award or Performance
Related Stock Award made pursuant to Section 8, the vesting
of which is contingent upon the determination by the Committee
that performance objectives established by the Committee have
been attained, in whole or in part.
(s) Performance Related Incentive
Award shall have the meaning ascribed thereto in
Section 8.
(t) Performance Related Stock
Award shall have the meaning ascribed thereto in
Section 8.
(u) Plan means this AMR
Corporation 2009 Long Term Incentive Plan, as it may be amended
from time to time.
(v) Prior Plan means the
1998 AMR Corporation Long Term Incentive Plan, as in effect
immediately prior to the effective date hereof, or as the same
may be amended from time to time.
(w) Restricted Stock means
shares of Stock that are subject to restrictions under
Section 7 below.
(x) Retirement means Normal
Retirement or Early Retirement.
(y) Stock means the Common
Stock, $1.00 par value per share, of the Company.
(z) Stock Appreciation Right
means the right 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 (at the time 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 at the time 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 at the time of exercise of the number of
shares of Stock that the Committee is electing to settle in cash
or other marketable property.
(aa) Stock-Based Award shall
have the meaning ascribed thereto in Section 9.
(bb) Stock Option or
Option means any option to purchase shares of Stock
granted pursuant to Section 5 below.
(cc) Subsidiary means any
corporation (other than the Company) or other business entity in
an unbroken chain beginning with the Company if each of the
corporations or business entities (other than the last
corporation or entity in the unbroken chain) owns (i)
stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the
other corporations in the chain or (ii) capital and
profits interests representing fifty percent (50%) or more of
all the capital and profits interests in one of the business
entities (other than a corporation) in the chain.
SECTION 2 Administration.
(a) Appointment of
Committee. The Plan shall be administered by
a committee of not less than two members of the Board, who shall
be appointed by, and serve at the pleasure of, the Board. In
selecting the members of the Committee, the Board shall take
into account the requirements for the members of the Committee
to be treated as Outside Directors within the
meaning of Section 162(m) of the Code and
Non-Employee Directors for purposes of
Rule 16b-3,
as promulgated under Section 16 of the Exchange Act. The
functions of the Committee specified in the Plan shall be
exercised by the Board, if and to the extent that no Committee
exists which has the
Exhibit A-3
authority to so administer the Plan, or to the extent that, at
the time the action is to be taken, it is known that the
Committee is not comprised solely of Non-Employee Directors for
purposes of
Rule 16b-3,
as promulgated under Section 16 of the Exchange Act.
(b) Powers Related to
Awards. The Committee shall have full
authority to grant, pursuant to the terms of the Plan, Awards to
officers and other key employees eligible under Section 4.
In addition to any other authority that may be afforded to the
Committee under the Plan, the Committee shall have the authority:
(i) to select the officers and other key
employees of the Company and its Subsidiaries to whom Awards may
from time to time be granted hereunder and, subject to the
provisions of Sections 3, 5 and 8, to determine the number
of shares to be covered by each such Award granted hereunder;
(ii) to determine the terms and
conditions, not inconsistent with the terms of the Plan, of any
Award granted hereunder (including, but not limited to, the
share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions, regarding any
Stock Option or other Award
and/or the
shares of Stock relating thereto, based in each case on such
factors as the Committee shall determine in its sole discretion);
(iii) to determine whether, to what
extent and under what circumstances Awards are to be made, and
operate, on a tandem basis
vis-a-vis
other Awards under the Plan
and/or
awards outside of the Plan;
(iv) to determine the terms and
conditions pursuant to which an Award may vest on a pro rata
basis or be terminated; and
(v) to impose conditions that may require
the repayment, in whole or in part, of the compensation or other
benefit received by a Participant with respect to any Award or
Awards, to the extent that the compensation or benefit was
derived from the misconduct of the Participant or inaccuracies
in the financial or performance-related data upon which payment
of any Award was made.
(c) Interpretative
Powers. The Committee shall have the
authority: to adopt and modify such rules, guidelines and
practices governing the Plan which are not inconsistent with the
terms of the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the
Plan. Section 409A of the Code applies to certain Awards
under this Plan, and it is intended that all such Awards shall
be issued, administered, exercised and paid or transferred in
conformance therewith. All decisions made by the Committee
pursuant to the provisions of the Plan shall be made in the
Committees sole discretion and shall be final and binding
on all persons, including the Company and Participants.
Accordingly, notwithstanding anything in Section 11 to the
contrary, the Committee shall have authority to amend or restate
the terms of a grant or award to preclude violation of
Section 409A of the Code, without the consent of the
recipient thereof.
(d) Delegation. The
Committee may appoint in writing such person or persons as it
may deem necessary or desirable to carry out any of the duties
and responsibilities of the Committee hereunder and may delegate
to such person or persons in writing such duties, and confer
upon such person or persons in writing, such powers,
discretionary or otherwise, as the Committee may deem
appropriate. Without limiting the generality of the foregoing,
but subject to applicable law, the Committee may authorize from
time to time the Chief Executive Officer
and/or a
member of the Board or a committee of directors or officers of
the Company or its Subsidiaries or a subcommittee of members of
the Committee to grant Awards under this Plan to officers and
other key employees of the Company or its Subsidiaries
authorized or approved by the Committee (including grants of
individual Awards to officers and other key employees authorized
or approved by the Committee in a pool of Awards for a group of
officers
and/or other
key employees), subject to any conditions or limitations as the
Committee may establish; provided that all Awards to
executive officers of the Company shall be approved by the
Committee or a subcommittee thereof.
SECTION 3 Stock
Subject to Plan.
(a) Initial Share
Authorization. The total number of shares of
Stock reserved and available for distribution under the Plan
shall be 4,000,000 shares. Shares issued under this Plan
may consist, in whole or in part, of
Exhibit A-4
authorized and unissued shares or treasury shares. As otherwise
expressly provided in this Plan, Awards granted hereunder may be
payable in shares of Stock, cash or other property, or any
combination thereof, as determined by the Committee.
(b) Effect of Forfeitures and Other
Settlements. Any shares of Stock subject to a
Stock Option or Stock Appreciation Right, or to any Restricted
Stock, Deferred Stock or Performance Related Award, or a
comparable award granted under the Prior Plan, that, in either
case, after the date this Plan is adopted, is forfeited or
otherwise terminated or settled, in whole or in part, without a
payment being made to the Participant in the form of Stock shall
again be available for distribution in connection with future
Awards under the Plan. Without limiting the generality of the
preceding sentence, 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 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.
(c) Adjustments. In
the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary
cash dividend, other change in corporate structure affecting the
Stock, or other event or transaction of a similar nature that
results in a material change in the value of the Stock, such
substitution or adjustment shall be made in the aggregate number
of shares reserved for issuance under the Plan, in the number
and option price or base price of shares subject to outstanding
Stock Options or Stock Appreciation Rights granted under the
Plan, and in the number of shares subject to other outstanding
Awards granted under the Plan as may be determined to be
appropriate by the Committee, in its sole discretion and in
compliance with Section 409A of the Code, to prevent the
enhancement or diminution of the rights of any Participant
hereunder or in the benefits collectively available under the
Plan for all Participants and all persons eligible to be
Participants, provided that the number of shares subject to any
Award shall always be a whole number.
SECTION 4 Eligibility.
Officers and other key employees of the Company and its
Subsidiaries (but excluding members of the Committee and any
person who serves only as a director) who are responsible for,
or contribute to, the management, growth
and/or
profitability of the business of the Company
and/or its
Subsidiaries are eligible for Awards under the Plan.
SECTION 5 Stock
Options.
Stock Options may be granted alone, in addition to, or in tandem
with, other Awards granted under the Plan. Any Stock Option
granted under the Plan shall be in such form as the Committee
may from time to time approve. The Committee shall have the
authority to grant to any optionee Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options (in
each case with or without Stock Appreciation Rights); provided
that, in no event shall the number of shares of Stock subject to
any Stock Options
and/or Stock
Appreciation Rights granted to any employee during any calendar
year exceed 750,000 shares, as such number may be adjusted
pursuant to Section 3(c). In no event may any Stock Option
or Stock Appreciation Rights be granted in connection with, or
conditioned upon, the exercise of any previously granted Stock
Option or Stock Appreciation Rights. Options granted under the
Plan shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
(a) Option
Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the
Committee at the time of grant; provided, that such option price
may not be less than the Fair Market Value of the Stock at the
time the Stock Option is granted. Without the express approval
of the Companys stockholders, except as otherwise provided
in Section 3(c), the Committee shall not be entitled to
amend or otherwise modify any Stock Option to lower the option
price per share below the Fair Market Value on the date of
grant, or to issue any replacement Stock Option or similar Award
in exchange for a Stock Option with a higher exercise price.
Exhibit A-5
(b) Option
Term. The term of each Stock Option shall be
fixed by the Committee, but no Stock Option shall be exercisable
more than ten (10) years after the date the Option is
granted.
(c) Exercisability. Stock
Options shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the
Committee at the time of grant; provided, however, that
(i) except as otherwise expressly provided in the Plan, no
Stock Option shall be exercisable prior to the first anniversary
date of the granting of the Option and (ii) after the date
any Stock Option is granted, such Stock Option may only become
exercisable on a accelerated basis in the event of a Change in
Control or the Participants death, Disability or
Retirement, as provided in the Plan or otherwise determined by
the Committee.
(d) Method of
Exercise. Subject to whatever installment
exercise provisions apply under Section 5(c) and subject to
whatever restrictions may be imposed by the Company, Stock
Options may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the
Company specifying the number of shares as to which the Stock
Option is being exercised. Without limiting the generality of
the foregoing, payment of the option price may be made:
(i) in cash or its equivalent; (ii) by exchanging
shares of Stock owned by the optionee (which are not the subject
of any pledge or other security interest); (iii) through an
arrangement with a broker approved by the Company whereby
payment of the exercise price is accomplished with the proceeds
of the sale of Stock; or (iv) by any combination of the
foregoing, provided that the combined value of all cash and cash
equivalents paid and the Fair Market Value of any such Stock so
tendered to the Company, valued as of the time of such tender,
is at least equal to such option price. In addition, the
Committee may permit any Stock Option to be exercised without
payment of the purchase price, in which case the Companys
sole obligation shall be to issue to the optionee the same
number of shares of Stock as would have been issued had such
Stock Option been Stock Appreciation Rights in respect of an
identical number of shares of Stock. An optionee shall not have
any rights to dividends or other rights of a stockholder with
respect to shares subject to the Option until the optionee has
exercised such Stock Option by paying for the shares being
exercised (or the Company has elected to net settle such Stock
Option) in accordance with this Section 5(d).
(e) Transferability of
Options. Unless the Committee shall permit
(on such terms and conditions as it shall establish) an Option
(other than an Incentive Stock Option) to be transferred to a
member of the Participants immediate family or to a trust
or similar vehicle solely for the benefit of the Participant
and/or such
immediate family members, no Option shall be assignable or
transferable except by will or the laws of descent and
distribution, and except to the extent required by law, no right
or interest of any Participant shall be subject to any lien,
obligation or liability of the Participant.
(f) Termination by Death,
Disability and Retirement. Subject to
Section 5(g), if an optionees employment by the
Company and any Subsidiary terminates by reason of death,
Disability or Retirement, any Stock Option held by such optionee
may thereafter be exercised in accordance with the terms and
conditions established by the Committee. In the event of
termination of employment by reason of death, Disability or
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter
be treated as a Non-Qualified Stock Option.
(g) Cause. Upon
a Participants termination for Cause, any Stock Options
held by such Participant shall be immediately cancelled and may
not thereafter be exercised, even if exercisable on the date of
such termination.
(h) Other
Termination. If an optionees employment
by the Company or any Subsidiary terminates for any reason other
than Cause, death, Disability or Normal or Early Retirement, any
unvested Stock Option shall thereupon terminate and the
Committee may permit an optionee up to 90 days following
such termination to exercise any Stock Options that are
exercisable as of the date of such termination.
(i) Incentive Stock
Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive
Stock Options shall be interpreted, amended or altered, nor
shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of the optionee(s)
affected, to disqualify any Incentive Stock Option under such
Section 422.
Exhibit A-6
SECTION 6 Stock
Appreciation Rights.
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, unless the Participant
otherwise consents, such rights may be granted only at the time
of grant of such Stock Option. 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:
(a) Exercisability. 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, including in the event
of the termination of the Participants employment, in
accordance with the provisions of Section 5 of the Plan.
Any Stock Appreciation Right granted on a stand-alone basis
shall be subject to the same rules regarding exercisability
(including those pertaining to the impact of termination of
employment and the periods following termination of employment)
that apply to Stock Options under Section 5.
(b) Shares Delivered on
Exercise. A grantee of a Stock Appreciation
Right shall not have any rights to dividends or other rights of
a stockholder with respect to shares subject to the Stock
Appreciation Right until the grantee has exercised the Stock
Appreciation Right. 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 (at the time 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 at the time of exercise.
Notwithstanding anything in this Section 6(b) 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
at the time 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 at the time the related
Stock Option was granted. Without the express approval of the
Companys stockholders, except as otherwise provided in
Section 3(c), the Committee shall not be entitled to amend
or otherwise modify any Stock Appreciation Right to lower the
exercise price below the Fair Market Value applicable at the
date of grant, or to issue any replacement Stock Appreciation
Right or similar award in exchange for a Stock Appreciation
Right with a higher exercise price.
(c) Exercise of
SARs. 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).
(d) Exercise of Tandem
Option. 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 (and
similarly the related Stock Option shall no longer be
exercisable upon the exercise or termination of the related
Stock Appreciation Right), 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.
(e) Transferability. Stock
Appreciation Rights shall be transferable only to the extent
that Stock Options may be transferable under Section 5(e)
of the Plan.
SECTION 7 Restricted
Stock and Deferred Stock.
(a) Administration. Restricted
Stock or Deferred Stock may be issued either alone, in addition
to, or in tandem with, other Awards granted under the Plan
and/or
awards made outside of the Plan. The Committee shall
Exhibit A-7
determine the eligible persons to whom, and the time or times at
which, grants of Restricted Stock or Deferred Stock will be
made, the number of shares to be awarded, the price (if any) to
be paid by the recipient, the time or times within which such
Awards may be subject to forfeiture, and all other terms and
conditions of the Awards. The Committee may condition the grant
of Restricted Stock or Deferred Stock upon the attainment of
specified Performance Criteria or such other factors as the
Committee may determine, in its sole discretion. The provisions
of Restricted Stock or Deferred Stock Awards need not be the
same with respect to each recipient. The shares of Restricted
Stock and any Deferred Stock awarded pursuant to this
Section 7 shall be subject to the following terms and
conditions:
(b) Restriction
Period. Subject to the provisions of this
Plan and the Award agreement, during a period set by the
Committee commencing with the date of such Award (the
Restriction Period), the Participant shall not be
permitted to sell, transfer, pledge or assign shares of
Restricted Stock or Deferred Stock awarded under the Plan. Where
the Restriction Period will lapse or expire based on service,
the Restriction Period shall be at least three (3) years,
provided that such Restriction Period may lapse ratably over
such minimum three-year period and may be waived in the event of
death, Disability, Retirement or a Change in Control. Where the
Restriction Period will lapse or expire based on Performance
Criteria, as provided in Section 8, the Restriction Period
shall be at least one (1) year, but may be waived in the
event of death, Disability, Retirement or a Change in Control.
Subject to the two immediately preceding sentences, the
Committee, in its sole discretion, may provide for the lapse of
any restrictions imposed on any Restricted Stock or Deferred
Stock Award in installments and may accelerate or waive such
restrictions in whole or in part, based on service, Performance
Criteria
and/or such
other factors as the Committee may determine, in its sole
discretion.
(c) Dividend Equivalents on
Deferred Stock. The Committee shall determine
whether an amount equivalent to any dividends declared on a
share of Stock will be credited with respect to an Award of
Deferred Stock and, if so, when such dividend equivalents will
be paid and whether they will be paid in (or valued by reference
to) cash, Restricted Stock or additional Deferred Stock, in any
case in compliance with Section 409A of the Code.
Notwithstanding the foregoing, except to the extent that a
stock, property or extraordinary dividend would require an
adjustment to such an Award pursuant to Section 3(c), no
dividend equivalents shall be payable in respect of any
Performance Related Stock Award that has not become vested as of
the record date of the corresponding dividend payable on the
Stock.
(d) Delivery. Promptly
after the lapse of the Restriction Period (unless and to the
extent that the Committee decides to settle the Award in cash),
if and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, the Company shall record on its books and records, in a
manner generally consistent with its then current procedures for
recording stock ownership, the Participants ownership of
an appropriate number of unrestricted shares of Stock. At the
expiration of the Restriction Period with respect to any Award
of Deferred Stock, the Company shall record on its books and
records, in a manner generally consistent with its then current
procedures for recording stock ownership, the Participants
ownership of a number of shares of Stock equal to the shares
covered by the Deferred Stock Award; provided, that, the
Committee may determine, at or after grant, whether, and to what
extent, to settle Deferred Stock in cash.
SECTION 8 Performance
Related Awards.
(a) Performance
Objectives. Notwithstanding anything else
contained in the Plan to the contrary, the Committee may, at the
time of grant, provide that any Award of Restricted Stock or
Deferred Stock shall become vested, if at all, upon the
determination by the Committee that performance objectives
established by the Committee have been attained, in whole or in
part (a Performance Related Stock Award). In
addition, the Committee may grant dollar denominated awards to
any Participant, the vesting of which shall be subject to the
determination by the Committee that performance objectives
established by the Committee shall have been satisfied, in whole
or in part (a Performance Related Incentive Award).
The performance objectives upon which any Performance Related
Award shall be based shall be determined over a measurement
period or periods established by the Committee (which period or
periods shall not be less than one (1) year). The Committee
shall determine the performance objectives that must be
satisfied with respect to any Performance Related Award from
among the following criteria, which may be determined solely by
reference to the performance of: (i) the Company;
(ii) a Subsidiary; or (iii) a
Exhibit A-8
division or unit of any of the foregoing or based on comparative
performance of any of the foregoing relative to past performance
or to other companies: (A) return on equity; (B) total
shareholder return; (C) primary or fully diluted earnings
per share; (D) EBITDA; (E) revenues; (F) cash
flows, revenues
and/or
earnings relative to other parameters (e.g., net or gross
assets); (G) operating income; (H) return on
investment; (I) changes in the value of the Stock;
(J) return on assets; (K) operational performance
(including on-time performance); (L) customer satisfaction;
and (M) employee surveys (the Performance
Criteria). In addition to the performance conditions
established pursuant to the immediately preceding sentence, the
Committee may further condition the vesting of any Performance
Related Award on achieving such additional performance
conditions of whatever nature that the Committee deems
appropriate. Excluding Stock Options
and/or Stock
Appreciation Rights granted hereunder, the maximum number of
shares of Stock that may be subject to any such Performance
Related Stock Award granted to any key employee in any calendar
year shall not exceed 750,000 shares, as such number may be
adjusted pursuant to Section 3(c); provided that, based on
the level of achievement of the performance objectives, the
number of shares of Stock issuable in respect of any Performance
Related Stock Award upon achievement of the applicable
performance conditions may be up to twice the number of shares
initially granted. The maximum initial dollar value of any
Performance Related Incentive Award granted to any key employee
may not exceed $3,000,000; provided that, based on the level of
achievement of the performance objectives, the actual amount
payable in respect of such Performance Related Stock Award upon
achievement of the applicable performance conditions may be
twice the initial dollar value.
(b) Annual Incentive
Compensation. The Committee may, in addition
to the Performance Related Awards described above, pay cash
amounts under the Plan or any other plan or arrangement approved
by the Committee and designated as complying with this
Section 8(b), provided such other plan or arrangement is in
conformity with the provisions of this Section 8(b), to any
officer of the Company or any Subsidiary who is subject to the
reporting requirements of Section 16(a) of the Exchange Act
upon the achievement, in whole or in part, of performance goals
or objectives established in writing by the Committee with
respect to such performance periods as the Committee shall
determine. Any such goals or objectives shall be based on one or
more of the Performance Criteria. Notwithstanding anything else
contained herein to the contrary, the maximum amount of any such
cash payment to any single officer with respect to any calendar
year shall not exceed $3,000,000.
(c) Interpretation. Notwithstanding
anything else contained in the Plan to the contrary, to the
extent required to so qualify any Performance Related Award to
any officer who is subject to the reporting requirements of
Section 16(a) of the Exchange Act as other performance
based compensation within the meaning of
Section 162(m)(4)(C) of the Code, the Committee shall not
be entitled to exercise any discretion otherwise authorized
under the Plan (such as the right to accelerate vesting without
regard to the achievement of the relevant performance
objectives) with respect to such Performance Related Award if
the ability to exercise such discretion (as opposed to the
exercise of such discretion) would cause such Award to fail to
qualify as other performance based compensation.
SECTION 9 Stock
Based Awards.
(a) Stock Based
Awards. The Committee may grant other types
of equity-based or equity-related awards (Stock-Based
Awards) not otherwise described by the terms of this Plan
(including the grant or offer for sale of unrestricted Stock) in
such amounts and subject to such terms and conditions as the
Committee shall determine; provided, however, that in no event
may the aggregate number of shares subject to Stock-Based Awards
granted under the Plan exceed five percent of the Shares
available for issuance under Section 3(a). Such Stock-Based
Awards may be granted as an inducement to enter the employ of
the Company or any Subsidiary or in satisfaction of any
obligation of the Company or any Subsidiary to an officer or
other key employee, whether pursuant to this Plan, the Prior
Plan or otherwise, that would otherwise have been payable in
cash or in respect of any award under the Prior Plan. Such
Stock-Based Awards may entail the transfer of actual Stock, or
payment in cash or otherwise of amounts based on the value of
Stock and may include, without limitation, Awards designed to
comply with or take advantage of the applicable local laws of
jurisdictions other than the United States.
(b) Termination of
Service. The Committee shall specify the
extent to which the Participant shall have the right to receive
Stock-Based Awards following termination of the
Participants employment with the Company and
Exhibit A-9
its Subsidiaries. Such provisions need not be uniform among all
Stock-Based Awards, and may reflect distinctions based on the
reasons for such termination.
(c) Transferability. Except
as the Committee shall otherwise specify at or after grant,
Stock-Based Awards may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution, and during the
Participants lifetime only by the Participant.
SECTION 10 Change
in Control Provisions.
Notwithstanding the provisions of Sections 5, 6, 7, 8 and
9, unless otherwise specified in an Award agreement, in the
event of a Change in Control:
(a) Any Stock Options and Stock
Appreciation Rights awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested;
(b) The restrictions and deferral
limitations applicable to any Restricted Stock, Deferred Stock,
Performance Related Awards or Stock-Based Awards, in each case
to the extent not already vested under the Plan, shall lapse and
such shares and Awards shall be deemed fully vested, with any
Performance Criteria shall be deemed met at target; and
(c) The value of all outstanding Awards
to the extent vested may at the sole discretion of the Committee
at or after grant but prior to any Change in Control, be cashed
out, based on the then current Fair Market Value, as of the date
such Change in Control is determined to have occurred or such
other date prior to the Change in Control as the Committee may
determine.
SECTION 11 Amendments
and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which
would (i) without stockholder approval, (A) increase
the number of shares available for issuance under the Plan,
(B) modify the requirements for participation under the
Plan, (C) otherwise enhance the benefits that may be
provided to Participants under the Plan, including by enhancing
the ability of the Committee to waive restrictions on Restricted
Stock and Deferred Stock, or (D) authorize the repricing of
outstanding Stock Options or Stock Appreciation Rights, or
(ii) impair the rights of a Participant under an Award
theretofore granted, without the Participants consent. Any
amendment of the Plan shall be subject to stockholder approval
to extent required under the immediately preceding sentence,
applicable law or the applicable rules of any exchange or
trading system on which the Stock is listed to trade. Subject to
the express terms and conditions of the Plan, the Committee may
amend the terms of any Stock Option or other Award theretofore
granted, prospectively or retroactively, provided that no such
amendment shall impair the rights of any holder without the
holders consent.
SECTION 12 General
Provisions.
(a) Compliance with Securities
Laws. The Committee may require each person
purchasing shares pursuant to a Stock Option or other Award
under the Plan to represent to and agree with the Company in
writing that such person is acquiring the shares without a view
to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to
reflect any restrictions on transfer. All certificates for
shares of Stock or other securities delivered under the Plan
shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable federal or state securities law,
and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(b) Other Compensation
Arrangements. Nothing contained in this Plan
shall prevent the Board from adopting other or additional
compensation arrangements, subject to stockholder approval if
such approval is required, and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) No Right to
Employment. The adoption of the Plan shall
not confer upon any employee of the Company or any Subsidiary
any right to continued employment with the Company or a
Subsidiary, as the case may
Exhibit A-10
be, nor shall it interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any of
its employees at any time.
(d) Tax
Withholding. Except as the Participant and
the Company may otherwise agree, no later than the date as of
which an amount first becomes includible in the gross income of
the Participant for federal income tax purposes with respect to
any Award under the Plan, the Participant shall pay to the
Company, or make arrangements satisfactory to the Committee
regarding the payment of, any federal, state, or local taxes of
any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee,
withholding obligations may be satisfied by settling an Award,
in relevant part, by the payment of cash to the relevant tax
authorities in lieu of issuing (or in cancellation of) Stock,
including Stock that is part of the Award that gives rise to the
withholding requirement. The obligations of the Company under
the Plan shall be conditional on such payment or arrangements,
and the Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct any such taxes from
any payment of any kind otherwise due to the Participant.
(e) Deferral of
Compensation. Subject to compliance with the
applicable requirements of Section 409A of the Code, the
Committee may, in its sole discretion, permit a Participant to
postpone the delivery of Stock under any Award under the Plan
upon such terms and conditions as the Committee shall determine.
(f) Governing
Law. The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in
accordance with the laws of the State of Delaware.
SECTION 13 Term
of Plan.
Subject to stockholder approval of the Plan at the annual
meeting of the Corporations stockholders in 2009, the Plan
shall be effective as of May 20, 2009. No Award shall be
granted pursuant to the Plan on or after the tenth anniversary
of the date of stockholder approval, but Awards granted prior to
such tenth anniversary may extend beyond that date, in
accordance with the terms of such Awards.
Exhibit A-11
AMR
CORPORATION
2009 ANNUAL MEETING OF STOCKHOLDERS
American Airlines Training & Conference Center
Flagship Auditorium
4501 Highway 360 South, Fort Worth, Texas 76155
Wednesday, May 20, 2009
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Registration Begins:
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7:15 a.m. (Central Daylight Saving Time)
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Meeting Begins:
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8:00 a.m. (Central Daylight Saving Time)
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AMR Corporation
stockholders as of the close of business on March 23, 2009
are entitled to attend the annual meeting on May 20, 2009.
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To attend the annual
meeting, you must have an admission ticket (printed on, or
included with, the proxy card or voting instruction form) or
other proof of beneficial ownership of AMR Corporation shares as
of March 23, 2009 that is acceptable to us (such as a
statement from your broker reflecting your stock ownership as of
March 23, 2009). We may ask each stockholder to present
valid governmentally-issued picture identification, such as a
drivers license or passport. For security reasons, all
bags are subject to search, and all persons who attend the
annual meeting may be subject to a metal detector
and/or a
hand wand search. The use of cameras or other recording devices
at the annual meeting is prohibited. If you do not have valid
picture identification and either an admission ticket or
appropriate documentation verifying that you owned AMR
Corporation stock on March 23, 2009, or you do not comply
with our security measures, you will not be admitted to the
annual meeting. All stockholders will be required to check-in at
the registration desk.
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Persons acting as
proxies must bring a valid proxy from a record holder who owns
shares as of the close of business on March 23, 2009.
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Please allow ample
time for check-in.
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Thank you for your
interest and support your vote is important!
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ADMISSION TICKET
AMR CORPORATION
The 2009 Annual Meeting of Stockholders will be held at 8:00 a.m., Central Daylight Saving
Time, on
Wednesday, May 20, 2009, at the American Airlines Training & Conference Center, Flagship
Auditorium
4501 Highway 360 South, Fort Worth, Texas 76155
TO ATTEND THIS MEETING YOU MUST
PRESENT THIS ADMISSION TICKET OR OTHER
PROOF OF SHARE OWNERSHIP.
Stockholders may be asked for a valid
picture identification. For security
reasons, all bags are subject to
search, and all persons who attend the
meeting may be subject to a metal
detector and/or hand wand search.
Registration begins at 7:15 a.m.
NOTE: Cameras, tape recorders or other similar recording devices
will not be allowed in the meeting room.
PROXY/VOTING INSTRUCTION CARD
AMR CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF AMR CORPORATION
The undersigned hereby appoints Gerard J. Arpey, David L. Boren and Ann M. Korologos, or any of
them, proxies, each with full power of substitution, to vote the shares of the undersigned at the
Annual Meeting of Stockholders of AMR Corporation on May 20, 2009, and any adjournments thereof,
upon all matters as may properly come before the meeting. Without otherwise limiting the foregoing
general authorization, the proxies are instructed to vote as indicated herein.
Employees/Participants Holding Shares of AMR Corporations Stock as an Investment Option Under the
$uper $aver 401(k) Plan (the Option): This card also constitutes your voting instructions to the
appointed investment manager for those shares held in the Option. Consistent with its fiduciary
duties under the Employee Retirement Income Security Act of 1974, Bank of America, National
Association (BANA) as investment manager of the Option, will vote the shares held in the Option
for which timely voting instructions are received as instructed by you. Your voting instructions to
BANA are confidential. In order for your vote to be counted, BANA must receive your voting
instructions by 11:59 p.m., Eastern Daylight Saving Time, on May 15, 2009. Any shares for which
timely instructions are not received by BANA will be voted in the same manner and proportion as
those shares for which timely instructions are received. The number of shares you are eligible to
vote is based on your unit balance in the Option on March 23, 2009, the record date for the
determination of stockholders eligible to vote. If you have any questions regarding your voting
rights under the Option, this voting instruction card or the confidentiality of your vote, please
contact BANA between the hours of 9:00 a.m. and 4:00 p.m., Pacific Daylight Saving Time, at
1-800-535-3093.
You are encouraged to specify your choices by marking the appropriate boxes. SEE REVERSE SIDE. You
need not mark any boxes if you wish to vote in accordance with the Board of Directors
recommendations. The proxies cannot vote your shares unless you vote your shares using the
Internet, vote by telephone or sign and return this card.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
AMR CORPORATION
May 20,
2009
PROXY VOTING INSTRUCTIONS
THREE WAYS TO VOTE:
As a stockholder, you can help AMR Corporation save both time
and expense by voting this proxy over the Internet or by
touch-tone telephone.
INTERNET Access www.voteproxy.com and follow the on-screen
instructions. Have your proxy card available when you access
the web page, and use the Company Number and Account Number
shown on your proxy card.
TELEPHONE Call toll-free 1-800-PROXIES (1-800-776-9437) in
the United States or 1-718-921-8500 from foreign countries
from any touch-tone telephone and follow the instructions.
Have your proxy card available when you call and use the
Company Number and Account Number shown on your proxy card.
Vote online/telephone until 11:59 p.m. Eastern Daylight Saving
Time the day before the meeting.
MAIL Sign, date and mail your proxy card in the envelope
provided as soon as possible.
If you vote your proxy by Internet or telephone, you do NOT
need to mail back your proxy card. THANK YOU FOR VOTING!
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COMPANY NUMBER |
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ACCOUNT NUMBER |
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS:
Our Official Notice of Annual Meeting of
Stockholders, Proxy
Statement and 2008 Annual Report to Stockholders are available
on our website located at www.aa.com/investorrelations
â Please detach along perforated line and mail in the
envelope provided IF you are not voting via telephone or the Internet.â
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2 1 3 3
3 3 3 0 0 0 0 0 0 0 0 0 1 0 0 0 4 |
0 5 2 0 0 9 |
The Board of Directors recommends a vote FOR proposals 1, 2 and 3; and AGAINST
proposals 4 and 5.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE
x
1. |
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Election of Directors: |
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NOMINEES: |
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FOR ALL NOMINEES |
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O O
O O O O O
O O O O
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Gerard J. Arpey John W. Bachmann David L. Boren
Armando M. Codina Rajat K. Gupta Alberto Ibargüen Ann M. Korologos Michael A. Miles Philip J. Purcell Ray M. Robinson
Judith Rodin Matthew K. Rose Roger T. Staubach |
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WITHHOLD
AUTHORITY FOR ALL NOMINEES |
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FOR ALL NOMINEES EXCEPT (See instructions below) |
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INSTRUCTIONS:
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To withhold authority to vote for any individual
nominee(s), mark FOR ALL NOMINEES EXCEPT and fill in the circle next to
each nominee you wish to WITHHOLD, as shown here:
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To change the address on your account,
please check the box at right and indicate your new address in the address
space above. Please note that changes to the registered name(s) on the
account may not be submitted via this method. |
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FOR |
AGAINST |
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ABSTAIN |
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Ratification of the selection by the Audit Committee of Ernst &
Young LLP as independent auditors for the year 2009
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3. |
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Proposal to approve the 2009 Long Term Incentive Plan
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Stockholder Proposal Relating to Cumulative Voting for the Election of Directors
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Stockholder Proposal Relating to Special Shareholder Meetings
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This proxy, when properly signed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR all of
the Board of Directors nominees; FOR proposals 2 and 3; and AGAINST proposals 4 and 5.
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if you plane to attend the Annual Meeting, please mark this box: |
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Signature of Stockholder |
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Date: |
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Signature of Stockholder |
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Date: |
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Note: |
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Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person. |
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