Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Form 10-K for Fiscal Year End December 31, 1998 73 391K
2: EX-3.2 Bylaws of Amr, Amended November 18, 1998 23 57K
4: EX-10.15 Deferred Compensation Agreement - Edward Brennan 3 16K
5: EX-10.19 Deferred Compensation Agreement - Armando Codina 2 14K
6: EX-10.23 Deferred Compensation Agreement - Charles Fisher 2 15K
7: EX-10.27 Deferred Compensation Agreement - Charles Pistor 2 15K
3: EX-10.3 Compensation & Benefit Agreement 9 38K
8: EX-10.30 Deferred Compensation Agreement - Judith Rodin 2 14K
9: EX-10.34 1998 Long-Term Incentive Plan 19 77K
10: EX-10.37 Current Form of Stock Option Agreement 5 23K
11: EX-10.41 Current Form of Career Equity Program 8 29K
12: EX-10.42 Current Form of Career Equity Program-Non Officers 5 24K
13: EX-10.42(A) Current Form of Career Equity Program-Sr. 8 30K
Officers
14: EX-10.50 Performance Share Program for the Years 1999-2001 4 23K
15: EX-10.52 Amr Corporation 1987 Executive Deferral Plan 12 39K
16: EX-10.56 1999 Employee Profit Sharing Plan 5 22K
17: EX-10.60 American Airlines, Inc. 1999 Incentive Comp. Plan 6 26K
18: EX-10.61 Termination Benefits Agreement - Gerard J. Arpey 29 85K
19: EX-10.62 Termination Benefits Agreement - Robert W. Baker 29 85K
20: EX-10.63 Termination Benefits Agreement - Peter M. Bowler 29 85K
21: EX-10.64 Termination Benefits Agreement - Donald J. Carty 29 84K
22: EX-10.65 Termination Benefits Agreement - Peter J. Dolara 29 85K
23: EX-10.66 Termination Benefits Agreement - Daniel P. Garton 29 85K
24: EX-10.67 Termination Benefits Agreement - Michael W. Gunn 29 84K
25: EX-10.68 Termination Benefits Agreement - Thomas J. Kiernan 29 85K
26: EX-10.69 Termination Benefits Agreement - David L. Kruse 29 85K
27: EX-10.70 Termination Benefits Agreement - Charles Marlett 29 85K
28: EX-10.71 Termination Benefits Agreement - Anne McNamara 29 85K
29: EX-10.76 Aircraft Purchase Agreement 44 93K
30: EX-12 Computation of Ratio of Earnings to Fixed Charges 1 11K
31: EX-21 Subsidiaries of the Registrant 3 25K
32: EX-23 Consent of Independent Auditors 1 12K
33: EX-27.1 Financial Data Schedule 1 12K
34: EX-27.2 Restated Financial Data Schedule 1 12K
35: EX-27.3 Restated Financial Data Schedule 1 12K
EX-10.60 — American Airlines, Inc. 1999 Incentive Comp. Plan
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EXHIBIT 10.60
AMERICAN AIRLINES, INC.
1999 INCENTIVE COMPENSATION PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 1999 American Airlines Incentive Compensation Plan ("Plan")
for Officers and Key Employees is to provide greater incentive to officers and
key employees of American Airlines, Inc. ("American"), to achieve the highest
level of individual performance, and to meet or exceed specified goals which
will contribute to the success of American.
Definitions
This Plan has been approved by the Committee under the terms and conditions of
the 1998 Long Term Incentive Plan, as amended ("LTIP"). Capitalized terms not
otherwise defined in the Plan will have the meanings set forth in the LTIP.
For purposes of the Plan, the following definitions will control:
"AMR" is defined as AMR Corporation.
"American" is defined as AMR Corporation less AMR subsidiaries other than
American Airlines, Inc.
"Committee" is defined as the Compensation Committee of the AMR Board of
Directors.
"Fund" is defined as the incentive compensation fund, if any, accumulated in
accordance with this Plan.
"Qualified Earnings" is defined as base pay, overtime, holiday pay, skill
premiums, longevity pay, sick pay, vacation pay, shift differential, market rate
differential, overrides and license premiums and does not include such things as
travel and incidental expenses, moving expenses, relocation allowance (COLA),
payouts from any retirement plan, disability payments, Workers Compensation
payments, imputed income from D-3 service charges or Company provided life
insurance, nor does it include any special monetary awards or allowances such as
IdeAAs in Action payments, lump sum payments, or incentive compensation or
profit sharing payments.
1
"Target Award" is defined as the award (stated as a percentage of Qualified
Earnings) for an eligible participant when Target CFROGA is achieved; subject,
however, to adjustment by the Committee or senior management, as the case may
be, based upon the participant's individual performance.
"Adjusted Earnings/(Loss)" is defined as the sum of American's net
earnings/(loss), aircraft rental expense - net of the Related Tax Impact, Net
Interest Expense - net of the Related Tax Impact, and AMR Minority Interest
Expense - net of Related Tax Impact, less: Calculated Amortization on Operating
Leases - net of the Related Tax Impact .
"Net Interest Expense" is defined as interest expense less interest income.
"Calculated Amortization on Operating Leases" is defined as the amortization
expense associated with Capitalized Value of Operating Leases and is determined
by the straight line method of amortization over the lease term.
"Net Cash Flow" is defined as the sum of Adjusted Earnings/(Loss), depreciation
and amortization expense, Calculated Amortization on Operating Leases, and any
accounting adjustments or extraordinary or unusual items (net of the Related Tax
Impact) or other non-cash items which may be added or deducted at the discretion
of the AMR Incentive Compensation Committee and approved by the AMR Board of
Directors.
"Adjusted Gross Assets" is defined as the sum of American's total assets, the
Capitalized Value of Operating Leases, Accumulated Depreciation on Equipment and
Property, and Accumulated Amortization on Equipment and Property under Capital
Leases, less cash and short-term investments, less Accident Receivables, and
other assets which may be added or deducted at the discretion of the AMR
Incentive Compensation Committee and approved by the AMR Board of Directors.
"Accident Receivables" is defined as amounts recorded as receivables from
insurance carriers related to significant accident losses, and for which an
offsetting liability has been recorded.
"Capitalized Value of Operating Leases" is defined as the initial present value
of the lease payments required under American's aircraft operating leases over
the initial stated lease term, calculated using a discount rate of Prime plus
one percent.
"AMR Minority Interest Expense" is defined as outside stockholder's ownership in
AMR subsidiaries other than American Airlines, Inc.
"Prime" is defined as the base rate on Corporate Loans posted by at least 75% of
the 30 largest U.S. banks which is published daily in the Wall Street Journal.
2
"Related Tax Impact" of an adjustment made in determining Adjusted Net
Earnings/(Loss) or Net Cash Flow is defined as the amount of that adjustment
multiplied by American's estimated marginal tax rate for the relevant year, as
determined by American's Tax Department.
"Average Adjusted Gross Assets" is defined as the sum of Adjusted Gross Assets
as of 12/31/98, 3/31/99, 6/30/99, and 9/30/99, divided by four.
"Cash Flow Return on Gross Assets" or "CFROGA" is defined as Net Cash Flow
divided by Average Adjusted Gross Assets, stated as a percentage.
"Comparison Airlines" shall consist of UAL Corp., Delta Air Lines, Inc.,
Southwest Airlines, Inc., and US Airways, Inc.
"Affiliate" is defined as a subsidiary of AMR or any entity that is designated
by the Board as a participating employer under the Plan, provided that AMR
directly or indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity.
"Threshold CFROGA" is defined as 6.7%.
Eligibility for Participation
In order to be eligible to participate in the Plan, an individual must be an
officer or key employee (as designated by American's Chairman and CEO) of
American. Additionally, the individual must have been employed by American or an
Affiliate as an officer or key employee for at least three consecutive months
during the Plan year. The three months service requirement may be waived in
cases of mandatory retirement prior to completing three months of service.
During a Plan year, individuals with less than twelve months eligibility in the
Plan may be eligible to participate in the Plan on a pro rata basis, at the
discretion of the Committee. In addition, the Committee, in its discretion, may
permit participation by officers and key employees of Affiliates who have been
so employed by the Affiliate for at least three consecutive months during the
Plan year.
Notwithstanding the forgoing, however, an officer or key employee will not be
eligible to participate in the Plan if such officer or key employee is, at the
same time, eligible to participate in a commission, incentive, profit sharing or
other bonus compensation program sponsored by American or an Affiliate, unless
the Committee otherwise decides.
3
In order to receive an award under the Plan, an individual must satisfy the
aforementioned eligibility requirements and must be an employee of American or
an Affiliate at the time an award under the Plan is paid. If at the time awards
are paid under the Plan, an individual has retired from American or an
Affiliate, is on leave of absence with reinstatement rights, is disabled, or has
died, the award which the individual otherwise would have received under the
Plan but for such retirement, leave, disability, or death may be paid to the
individual, or his/her estate in the event of death, at the discretion of the
Committee.
The Incentive Compensation Fund
a) As CFROGA exceeds the Threshold CFROGA, the Fund will begin to
accumulate.
b) Target CFROGA will vary from 7.4% - 7.8% depending upon CFROGA
rank among the Comparison Airlines. At target CFROGA, the Fund
will accumulate to a size that will allow Target Awards for
all eligible participants.
c) Maximum Payout CFROGA will vary from 9.0% to 10.2% depending
on CFROGA rank among the comparison airlines. At Maximum
Payout CFROGA, the Fund will accumulate to a size that will
allow 210% of Target Awards for all eligible participants.
d) Once Threshold CFROGA has been attained, the Fund will
accumulate on a linear basis such that at Target CFROGA, the
Fund size equals 100% of Target Awards. Following the
attainment of Target CFROGA, the Fund will accumulate on a
linear basis such that maximum awards are funded at Maximum
Payout CFROGA.
[Download Table]
American's --CFROGA-- ---------------
Competitive ----------- Comparison
Rank Threshold Target Max Payout Airlines
----------- --------- ----------- ---------- ----------
1 6.7% 7.4% 9.0% Delta
2 6.7% 7.5% 9.3% UAL
3 6.7% 7.6% 9.6% US Airways
4 6.7% 7.7% 9.9% Southwest
5 6.7% 7.8% 10.2%
---------------
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Allocation of Individual Awards
Individual awards for officers of American under the Plan will be determined by
the Committee based upon each participant's performance; provided, however, that
in no event will any award to an officer exceed the amount calculated in
accordance with Section 11 (b) of the 1998 LTIP. Individual awards for key
non-officer employees of American will be determined by the senior management of
American based upon each such employee's performance; provided, however, that in
no event will any award to a key non-officer, when combined with any other award
made under an incentive, commission, profit sharing or other bonus compensation
program sponsored by American or an Affiliate (excluding any performance return
or stock-based awards, such as performance share awards), exceed 100% of that
employee's base salary. The aggregate of all awards paid hereunder will not
exceed the lesser of 2.1 times the target fund or 50% of total base salaries of
all participants; provided, however, that if payments to any officers made
pursuant to Section 11 (b) of the LTIP exceed 100% of such officer's base
salary, the Fund amount will be increased to account for such differential. In
addition, the Committee may determine in its discretion that the Fund may not be
fully distributed.
Administration
The Committee shall have authority to administer and interpret the Plan,
establish administrative rules, approve eligible participants, and take any
other action necessary for the proper operation of the Plan. In computing the
Cash Flow Return on Gross Assets of the Comparison Airlines, the Committee may
include or exclude special or non-recurring items. Notwithstanding anything to
the contrary contained herein, no awards will be made under the Plan unless
awards are also made under the 1999 American Airlines Employee Profit Sharing
Plan, the 1999 Pilot Variable Compensation Plan for members of the Allied Pilots
Association, and the 1999 TWU Profit Sharing Plan for members of the Transport
Workers Union. The amount if any, of the Fund shall be computed by the General
Auditor of American based on a certification of CFROGA by American's independent
auditors. A summary of awards under the Plan shall be provided to the Board of
Directors at the first regular meeting following determination of the awards.
Method of Payment
The Committee will determine the method of payment of awards. Awards shall be
paid as soon as practicable after audited financial statements for the year 1999
are available. Individuals, except retirees, may elect to defer their awards
into a 401(k) plan established by American or AMR or into a deferred
compensation program, if any, administered by American or AMR.
5
General
Neither this Plan nor any action taken hereunder shall be construed as giving
any employee or participant the right to be retained in the employ of American
or an Affiliate.
Nothing in the Plan shall be deemed to give any employee any right,
contractually or otherwise, to participate in the Plan or in any benefits
hereunder, other than the right to receive payment of such incentive
compensation as may have been expressly awarded by the Committee.
In the event of any act of God, war, natural disaster, aircraft grounding,
revocation of operating certificate, terrorism, strike, lockout, labor dispute,
work stoppage, fire, epidemic or quarantine restriction, act of government,
critical materials shortage, or any other act beyond the control of American,
whether similar or dissimilar, (each a "Force Majeure Event"), which Force
Majeure Event affects American or its Subsidiaries or its Affiliates, the Board
of Directors of American, at its sole discretion, may (i) terminate or (ii)
suspend, delay, defer (for such period of time as the Board may deem necessary),
or substitute any payments due currently or in the future under the Plan,
including, but not limited to, any payments that have accrued to the benefit of
participants but have not yet been paid.
In consideration of the employee's privilege to participate in the Plan, the
employee agrees (i) not to disclose any trade secrets of, or other
confidential/restricted information of, American, to any unauthorized party and,
(ii) not to make any unauthorized use of such trade secrets or confidential or
restricted information during his or her employment with American or after such
employment is terminated, and (iii) not to solicit any current employees of
American or any subsidiaries of AMR Corporation to join the employee at his or
her new place of employment after his or her employment with American is
terminated.
The Board of Directors may amend, suspend, or terminate the Plan at any time.
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