<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AMR
- - --------------------------------------------------------------------------------
(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):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
AMR
P.O. BOX 619616, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9616
May 1, 1997
TO OUR STOCKHOLDERS,
You are cordially invited to attend the annual meeting of stockholders of
AMR Corporation, which will be held in the Park West Ballroom of The Omni Hotel
Park West at 1590 LBJ Freeway, Dallas, Texas, on Wednesday, May 21, 1997, at
10:00 A.M., Central Daylight Time. An Official Notice of the Meeting, Proxy
Statement and form of proxy are enclosed with this letter.
We hope that those of you who plan to attend the annual meeting will join us
beforehand for refreshments. If you cannot be present, please execute and return
the proxy card in the enclosed envelope so that your shares will be represented.
If you plan to attend the annual meeting, please make certain that you mark the
appropriate box on the proxy card when you return it, and bring to the annual
meeting the admission ticket that is printed on the last page of the proxy
statement.
Sincerely,
[SIGCUT]
Robert L. Crandall
CHAIRMAN OF THE BOARD
<PAGE>
AMR
P.O. BOX 619616, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9616
------------------------
OFFICIAL NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
The annual meeting of stockholders of AMR Corporation will be held in the
Park West Ballroom of The Omni Hotel Park West at 1590 LBJ Freeway, Dallas,
Texas, on Wednesday, May 21, 1997, at 10:00 A.M., Central Daylight Time, for the
purpose of considering and acting upon the following:
(1) the election of directors;
(2) ratification of the selection of Ernst & Young LLP as independent
auditors for the Corporation for the year 1997;
and such other matters as may properly come before the meeting or any
adjournments thereof.
If you plan to attend the annual meeting, please check the appropriate box
on your proxy card when you return it, and bring to the annual meeting the
admission ticket that is printed on the last page of the proxy statement. Only
stockholders of record at the close of business on March 24, 1997, will be
entitled to attend or to vote at the meeting.
By Order of the Board of Directors,
[SIGCUT]
Charles D. MarLett
CORPORATE SECRETARY
May 1, 1997
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU MUST HAVE AN ADMISSION TICKET
(PRINTED ON THE LAST PAGE OF THE PROXY STATEMENT) OR OTHER PROOF OF SHARE
OWNERSHIP (FOR EXAMPLE, A RECENT STATEMENT FROM YOUR BROKER). IF YOU DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE EXECUTE AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE SO THAT YOUR SHARES WILL BE VOTED. THE
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
AMR
P.O. BOX 619616, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9616
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1997
This statement and the form of proxy are being mailed to stockholders on or
around May 1, 1997, in connection with a solicitation of proxies by the Board of
Directors of AMR Corporation ("AMR" or the "Corporation") for use at the annual
meeting of stockholders to be held on May 21, 1997.
If the enclosed form of proxy is signed and returned, it will be voted as
specified in the proxy. However, a stockholder who executes a proxy may revoke
it at any time before it is voted.
The Corporation will bear the cost of this solicitation. In addition to
using the mails, proxies may be solicited by directors, officers and regular
employees of the Corporation or its subsidiaries, in person or by telephone. The
Corporation will also request brokers or nominees who hold common stock in their
names to forward proxy material at the Corporation's expense to the beneficial
owners of such stock, and has retained D.F. King & Co., Inc., a firm of
professional proxy solicitors, to aid in the solicitation at an estimated fee of
$13,500 plus reimbursement of normal expenses.
OUTSTANDING STOCK AND VOTING RIGHTS
The holders of record at the close of business on March 24, 1997, of the
Corporation's common stock will be entitled to vote at the meeting. On that
date, the Corporation had outstanding 91,068,286 shares of common stock. Each
stockholder will be entitled to one vote in person or by proxy for each share of
stock held.
Directors of the Corporation are elected by a plurality of the votes cast at
the annual meeting. Any other matters submitted to vote of the stockholders will
be determined by a majority of the votes cast. Abstentions from voting
(including broker non-votes) on the election of directors or on other matters
will have no effect on the outcome of such votes, since they are determined on
the basis of votes cast, and abstentions are not counted as votes cast.
<PAGE>
STOCKHOLDER PROPOSALS
From time to time, stockholders present proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
annual meeting. Proposals for inclusion in the 1998 proxy statement must be
received by the Corporation no later than December 1, 1997. Any such proposal,
as well as any questions related thereto, should be directed to the Corporate
Secretary of the Corporation.
PROPOSAL 1 -- ELECTION OF DIRECTORS
It is proposed that 12 directors be elected at the meeting, to serve until
the next annual election and until their successors are duly elected and
qualified. Directors will be elected by a plurality of the votes cast.
Unless otherwise indicated, all proxies 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 should not be available for election,
as a result of unforeseen circumstances, it is the intention of the persons
named in the proxy to vote for the election of such substitute nominee, if any,
as the Board of Directors may propose.
NOMINEES FOR ELECTION AS DIRECTORS
Each of the nominees for election as a director has furnished to the
Corporation the following information with respect to principal occupation or
employment, principal business directorships and beneficial ownership of
securities of the Corporation as of March 24, 1997, including grants, if any, of
securities under the Corporation's 1988 Long Term Incentive Plan, as amended,
1994 Directors Stock Incentive Plan, as amended, or under the Corporation's
compensation deferral plans. Each nominee is also a director of American
Airlines, Inc. ("American").
BUSINESS AFFILIATIONS AND SECURITIES OWNERSHIP
DAVID L. BOREN, President, University of Oklahoma, Norman, Oklahoma;
educational institution. He is also a director of Phillips Petroleum Company,
Texas Instruments Incorporated and Torchmark Corporation. From 1979 through
1994, he was a United States Senator for Oklahoma. From 1975 through 1979, he
was the Governor of Oklahoma.
Mr. Boren is 55 and was elected a director in 1994. He is a member of
the Audit and Compensation/Nominating Committees. On March 24, 1997, he was
the beneficial owner of 700 shares of the Corporation's common stock.
2
<PAGE>
EDWARD A. BRENNAN, retired Chairman, President and Chief Executive Officer,
Sears, Roebuck and Co., Chicago, Illinois; merchandising. He is also a director
of Allstate Corporation, Dean Witter, Discover & Company, Minnesota Mining and
Manufacturing Company, Unicom Corporation, Dean Foods Company and The SABRE
Group Holdings, Inc.
Mr. Brennan is 63 and was elected a director in 1987. He is a member of
the Executive
Committee and is Chairman of the Compensation/Nominating Committee. On March
24, 1997,
he was the beneficial owner of 6,100 shares of the Corporation's common
stock.
ARMANDO M. CODINA, Chairman of the Board and Chief Executive Officer, Codina
Group, Inc., Coral Gables, Florida; real estate investments, development,
construction, property management and brokerage services. He is also a director
of BellSouth Corporation, Winn Dixie Stores, Inc., FPL Group, Inc. and American
Bankers Insurance Group, Inc.
Mr. Codina is 50 and was elected a director in 1995. He is a member of
the Audit and Compensation/Nominating Committees. On March 24, 1997, he was
the beneficial owner of 1,000 shares of the Corporation's common stock.
ROBERT L. CRANDALL, Chairman of the Board, President and Chief Executive
Officer, AMR Corporation, and Chairman of the Board and Chief Executive Officer,
American Airlines,
Inc., Fort Worth, Texas; air transportation, information systems and diversified
services. He is Chairman of the Board of The SABRE Group Holdings, Inc. He is
also a director of Halliburton Company.
Mr. Crandall is 61. He became the Corporation's Chairman of the Board
and Chief Executive Officer on March 1, 1985. He was elected a director of
American in 1976. He is Chairman of the Executive Committee. On March 24,
1997, he was the beneficial owner of 128,500 shares of the Corporation's
common stock.
CHRISTOPHER F. EDLEY, President Emeritus and retired President and Chief
Executive Officer, United Negro College Fund, Inc., New York, New York;
non-profit fundraising organization. He is also a director of Allstate
Corporation, The Great Atlantic & Pacific Tea Company, Inc. and The Student Loan
Corporation.
Mr. Edley is 69 and was elected a director of American in 1977. He is a
member of the Audit and Compensation/Nominating Committees. On March 24,
1997, he was the beneficial owner of 1,700 shares of the Corporation's
common stock.
CHARLES T. FISHER, III, retired Chairman and President of NBD Bancorp, Inc.
and NBD Bank, Detroit, Michigan; banking. He is also a director of First Chicago
NBD Corporation, First National Bank of Chicago, NBD Bank (Michigan), General
Motors Corporation and Hughes Electronics, Inc.
3
<PAGE>
Mr. Fisher is 67 and was elected a director of American in 1968. He is a
member of the Executive and Compensation/Nominating Committees. On March 24,
1997, he was the beneficial owner of 1,700 shares of the Corporation's
common stock.
EARL G. GRAVES, Chairman and Chief Executive Officer, Earl G. Graves,
Limited,
New York, New York; communications and publishing (including publication of
BLACK ENTERPRISE magazine). He is Chairman and Chief Executive Officer of
Pepsi-Cola of Washington, D.C., L.P., a Pepsi-Cola bottling franchise. He is a
general partner of Egoli Partners, L.P., which is a general partner of New Age
Beverages, the Pepsi-Cola bottling franchise in the Republic of South Africa. He
is a director of Aetna Life and Casualty Co., Chrysler Corp., Federated
Department Stores, Inc. and Rohm and Haas Co.
Mr. Graves is 62 and was elected a director in 1995. He is a member of
the Audit and Compensation/Nominating Committees. On March 24, 1997, he was
the beneficial owner of 1,300 shares of the Corporation's common stock.
DEE J. KELLY, Partner, Kelly, Hart & Hallman, P.C., Fort Worth, Texas; law
firm. He is also a director of Justin Industries, Inc. and The SABRE Group
Holdings, Inc.
Mr. Kelly is 68 and was elected a director in 1983. He is a member of
the Executive and Compensation/Nominating Committees. On March 24, 1997, he
was the beneficial owner of 2,700 shares of the Corporation's common stock.
ANN D. MCLAUGHLIN, Chairman of The Aspen Institute, Aspen, Colorado; public
policy organization. She was President of the Federal City Council, Washington,
D.C., from 1990-1995. She was President and Chief Executive Officer of New
American Schools Development Corporation, Arlington, Virginia from 1992 through
1993. Ms. McLaughlin was visiting fellow of The Urban Institute, Washington,
D.C. from 1989 to 1992. She was Secretary of Labor from 1987 through 1989 and
Undersecretary of the Department of the Interior from 1984 through 1987. She is
also a director of General Motors Corporation, Kellogg Company, Host Marriott
Corporation, Union Camp Corporation, Potomac Electric Power Company, Vulcan
Materials Company, Nordstrom, Inc., Harman International Industries, Inc.,
Sedgwick Group, plc, Donna Karan International, Inc. and the Federal National
Mortgage Association (Fannie Mae).
Ms. McLaughlin is 55 and was elected a director in 1990. She is Chairman
of the Audit
Committee and is a member of the Compensation/Nominating Committee. On March
24, 1997,
she was the beneficial owner of 1,700 shares of the Corporation's common
stock.
4
<PAGE>
CHARLES H. PISTOR, JR., retired Vice Chair, Southern Methodist University,
Dallas, Texas; educational institution. He is a former President of the American
Bankers Association. He previously served as Chairman and Chief Executive
Officer of NorthPark National Bank, Dallas and of First RepublicBank Dallas,
N.A. He is also a director of American Brands, Inc., Centex Corporation and Oryx
Energy Company.
Mr. Pistor is 66 and was elected a director in 1982. He is a member of
the Audit and Compensation/Nominating Committees. On March 24, 1997, he was
the beneficial owner of 2,500 shares of the Corporation's common stock.
JOE M. RODGERS, Chairman, The JMR Group, Nashville, Tennessee; investment
company. From 1985 through 1989, Mr. Rodgers was the United States Ambassador to
France. He is also a director of Gaylord Entertainment Company, Gryphon Holdings
Inc., Lafarge Corporation, SunTrust Bank, Nashville, N.A., Thomas Nelson, Inc.,
Tractor Supply Company and Willis Corroon Group plc.
Mr. Rodgers is 63 and was elected a director in 1989. He is a member of
the Audit and Compensation/Nominating Committees. On March 24, 1997, he was
the beneficial owner of 1,700 shares of the Corporation's common stock.
MAURICE SEGALL, Senior Lecturer at the Massachusetts Institute of Technology
(Sloan School of Management), Boston, Massachusetts; educational institution. He
is also the retired Chairman, President and Chief Executive Officer of Zayre
Corporation, a retailing company. He is also a director of Harcourt General,
Inc.
Mr. Segall is 67 and was elected a director in 1985. He is a member of
the Executive and Compensation/Nominating Committees. On March 24, 1997, he
was the beneficial owner of 1,700 shares of the Corporation's common stock.
A plurality of the votes cast is necessary for the election of a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
BOARD COMMITTEES
AMR has standing Audit, Executive and Compensation/Nominating Committees
which perform the functions described below. The Board of Directors of AMR held
ten meetings in 1996. All the director nominees listed above who served
throughout 1996 attended at least 75% of the Board of Directors meetings held
that year.
5
<PAGE>
The Audit Committee, composed entirely of outside directors, met five times
during 1996 with the Corporation's independent auditors, representatives of
management and the internal audit staff. The Committee recommends the selection
of independent auditors, reviews the scope and results of the annual audit,
reviews the Corporation's consolidated financial statements, reviews the scope
of non-audit services provided by the independent auditors and reviews reports
of the independent auditors.
The Executive Committee met two times during 1996. The Committee may
exercise all the powers and authority of the Board in the management of the
business and affairs of the Corporation, with the exception of such powers and
authority as are specifically reserved to the Board.
The Compensation/Nominating Committee, composed entirely of outside
directors, met seven times in 1996. The Committee makes recommendations with
respect to compensation and benefit programs for the officers and directors of
the Corporation and its subsidiaries. It also makes recommendations with respect
to assignments to Board Committees and promotions, changes and succession among
the senior management of the Corporation and its subsidiaries, and recommends
suitable candidates for election to the Board. In this regard, the Committee
will consider nominees for election recommended by stockholders. Such
recommendations should be submitted in writing to the Corporate Secretary with a
suitable description of the nominee's qualifications and evidence of his or her
consent to serve.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation/Nominating Committee for 1996 were as
follows:
<TABLE>
<S> <C> <C>
Edward A. Brennan, Chairman Charles T. Fisher, Ann D. McLaughlin
III
David L. Boren Earl G. Graves Charles H. Pistor,
Jr.
Armando M. Codina Dee J. Kelly Joe M. Rodgers
Christopher F. Edley Maurice Segall
</TABLE>
No member of the Compensation/Nominating Committee is a current or former
employee or officer of the Corporation or any of its affiliates or has any
interlocking relationship with any other corporation that requires specific
disclosure under this heading. The following is a summary of certain
relationships and transactions between the Corporation and the listed members of
the Compensation/Nominating Committee in 1996:
The law firm of Kelly, Hart & Hallman, P.C. performed legal services for the
Corporation. Mr. Kelly is a partner of the firm.
6
<PAGE>
American advertised in, and sponsored an event hosted by, BLACK ENTERPRISE
magazine. Mr. Graves is Chairman of the Board and Chief Executive Officer of
Earl G. Graves, Limited, which publishes that magazine.
The Boston Consulting Group, Inc. is a management consulting firm that
performed consulting services for the Corporation. Mr. Segall is a Senior
Advisor to the firm.
The University of Oklahoma provides meteorological information services to
American. Mr. Boren is President of the University of Oklahoma.
OTHER MATTERS
During 1996, the law firm of Gibson, Dunn & Crutcher performed legal
services for American. Martin B. McNamara is a partner of the firm and is the
husband of Anne H. McNamara, Senior Vice President and General Counsel of the
Corporation.
During 1996, the law firm of Locke Purnell Rain Harrell performed legal
services for American. Russell F. Coleman is a partner of the firm and is the
son-in-law of Robert L. Crandall, Chairman of the Board, President and Chief
Executive Officer of the Corporation.
Aurora Investments, Inc. ("Aurora"), a subsidiary of the Corporation, owns
an equity interest in Canadian Airlines International Ltd. ("Canadian").
American and other subsidiaries of the Corporation also provide airline-related
services to Canadian. Douglas A. Carty is Senior Vice President and Chief
Financial Officer of Canadian and is the brother of Donald J. Carty, Executive
Vice President of the Corporation and President of American.
COMPENSATION OF DIRECTORS
Outside directors of the Corporation receive an annual retainer of $20,000
for service on the Board of Directors, an annual retainer of $1,500 for service
on a standing Committee of the Board and $1,000 for each Board or Committee
meeting attended. Directors may defer payment of all or any part of these fees
pursuant to two deferral plans. Under the first of these deferral plans, the
Corporation will pay interest on the amount deferred at the prime rate from time
to time in effect at The Chase Manhattan Bank, N.A. Under the second deferral
plan, compensation deferred during any calendar month is converted into stock
equivalent units by dividing the total amount of deferred compensation by the
average fair market value (as defined in the Corporation's 1988 Long Term
Incentive Plan, as amended (the "LTIP")) of the Corporation's common stock
during such month. At the end of the deferral period, the Corporation will pay
to the director an amount in cash equal to the number of accumulated stock
equivalent units multiplied by the average fair market value of the
Corporation's common stock during the month in which the deferral period
terminates.
7
<PAGE>
A director, a director's spouse or companion, and a director's dependent
children are provided transportation on American and reimbursement for federal
income taxes incurred thereon. During 1996, the average value of this
transportation and tax reimbursement was approximately $33,657 per director.
Pursuant to the Corporation's 1994 Directors Stock Incentive Plan, as
amended (the "SIP"), outside directors each receive an annual award of 300
deferred shares of the Corporation's common stock. Generally, these shares will
be delivered to the director within six months after the director ceases to be a
member of the Board.
The Corporation provides directors, who were elected on or before May 15,
1996, a pension benefit equal to 10% of the director's fees and retainers from
the Corporation for his or her last twelve months of service on the Board,
multiplied by the number of years of service on the Board, up to a maximum of
$20,000 per year. The Corporation provides directors, who were elected after May
15, 1996, an annual grant of 150 deferred shares of the Corporation's common
stock. This grant is in lieu of their participation in the foregoing pension
plan and is in addition to any other grants that are authorized under the SIP.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Prior to July 2, 1996, the Corporation conducted its information technology
business through various subsidiaries, divisions and operating units. On July 2,
1996, the Corporation reorganized those entities into The SABRE Group, Inc., a
separate, wholly-owned subsidiary of the Corporation. On October 11, 1996, The
SABRE Group Holdings, Inc. ("TSGH"), the parent corporation of The SABRE Group,
Inc., made an initial public offering (the "TSGH IPO") of
its Class A Common Stock (the "TSGH Stock"). After the TSGH IPO, TSGH remained a
majority-owned subsidiary of the Corporation.
The following Summary Compensation Table sets forth the compensation for the
past three years paid to the individuals who, as of December 31, 1996, were the
five most highly compensated directors or executive officers of the Corporation
whose aggregate current remuneration exceeded $100,000 (the "named executive
officers"). Michael J. Durham, President and Chief Executive Officer of TSGH, is
a named executive officer. He received part of his 1996 compensation from TSGH.
Accordingly, the Summary Compensation Table contains various references to TSGH
in connection with Mr. Durham's compensation.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
AWARDS
--------------------------
NAME ANNUAL COMPENSATION SECURITIES PAYOUTS
AND ---------------------------------------------------- RESTRICTED UNDERLYING -----------
PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) SARS(#)(4) PAYOUTS(5) COMPENSATION(6)
- - ----------- --------- --------- ----------- ----------------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crandall 1996 $ 750,000 $ $ 36,590 $ 0 30,000 $ $ 86,588
1995 662,500 678,400 36,311 0 50,000 1,702,500 86,282
1994 600,000 395,000 35,629 0 0 300,000 79,732
- - -----------------------------------------------------------------------------------------------------------------------------
Carty 1996 615,000 0 0 25,000 13,381
1995 565,000 433,835 0 0 25,000 757,000 13,381
1994 540,000 225,000 0 176,625 18,000 186,000 13,381
- - -----------------------------------------------------------------------------------------------------------------------------
Baker 1996 546,750 0 0 15,000 16,241
1995 540,000 331,711 0 0 18,000 747,000 16,253
1994 540,000 194,400 0 176,625 18,000 186,000 15,673
- - -----------------------------------------------------------------------------------------------------------------------------
Gunn 1996 420,750 0 0 4,500 15,106
1995 406,250 228,755 0 0 5,500 321,800 15,106
1994 400,000 132,000 0 117,750 5,500 50,000 15,106
- - -----------------------------------------------------------------------------------------------------------------------------
Durham 1996 393,583 230,000 0 0 158,750 9,443
1995 360,417 239,672 0 0 5,500 321,800 9,443
1994 350,000 116,000 0 117,750 5,500 50,000 9,443
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Crandall = Robert L. Crandall: Chairman, President and Chief Executive Officer of
the Corporation; Chairman and Chief Executive Officer of American;
Chairman of TSGH
Carty = Donald J. Carty: Executive Vice President of the Corporation; President
of American
Baker = Robert W. Baker: Executive Vice President-Operations of American
Gunn = Michael W. Gunn: Senior Vice President-Marketing of American
Durham = Michael J. Durham: President and Chief Executive Officer of TSGH
(SEE NEXT 3 PAGES FOR FOOTNOTES.)
</TABLE>
9
<PAGE>
- - ------------------------
(1) Amounts shown for 1995 represent payments made in 1996 for 1995 services.
Amounts shown for 1994 represent payments made in 1995 for 1994 services.
Such payments were made pursuant to American's Incentive Compensation Plan.
It is expected that there will be payments in 1997, pursuant to such plan,
to the named executive officers (other than Mr. Durham) for 1996 services;
however, the amount of these payments had not been determined as of the date
of this proxy statement. The amount shown for Mr. Durham for 1996 represents
payment made in 1997 for services rendered in 1996. Such payment was made
pursuant to the Variable Compensation Plan of TSGH. See the related
discussion under Compensation/Nominating Committee Report.
(2) These amounts represent reimbursement for taxes related to the payment of
insurance premiums.
(3) The value of 1994 restricted stock awards disclosed in this column of the
Summary Compensation Table is based on an average market price of AMR common
stock of $58.875 on the NYSE on the date of grant (July 25, 1994). This
restricted stock is subject to forfeiture and is held by the Corporation for
a minimum of two years. In individual instances, the restriction period may
be longer. Dividends may be paid on restricted stock; however, no dividends
were paid in 1996.
The following table sets forth certain information concerning restricted
stock awards:
RESTRICTED STOCK; TOTAL SHARES AND VALUE
<TABLE>
<CAPTION>
TOTAL NUMBER OF AGGREGATE MARKET VALUE
RESTRICTED SHARES OF RESTRICTED SHARES
NAME HELD AT FY-END(A) HELD AT FY-END(B)
- - --------- ------------------- -----------------------
<S> <C> <C>
Crandall 67,500 $ 6,020,190
Carty 133,000 11,862,004
Baker 114,500 10,212,026
Gunn 54,700 4,878,584
Durham 62,000(C) 2,071,603(D)
- - -------------------------------------------------------
</TABLE>
(A) Except for Mr. Durham, these amounts consist of: (i) shares awarded
under the Corporation's restricted stock plan which vest in years 1997
and 1998; (ii) shares of deferred common stock issued under the LTIP
which vest at retirement (Career Equity Shares); and (iii) shares of
deferred common stock issued under the LTIP which vest upon the
Corporation's attainment of predetermined cash flow objectives over a
three-year performance period (Performance Shares). See the related
discussion of Performance Shares under LTIP awards (p.27). The amount for
Mr. Durham is discussed in footnote (C) below.
(B) Except for Mr. Durham, these amounts are based on the average market
price of the Corporation's common stock of $89.188 on the NYSE on
December 31, 1996. The amount for Mr. Durham is discussed in footnote
(D).
(C) For Mr. Durham, this amount consists of: (i) 2,000 shares of restricted
stock of the Corporation; (ii) 3,600 Performance Shares of the
Corporation; (iii) 24,520 restricted shares of TSGH Stock, issued to Mr.
Durham in connection with the TSGH IPO in exchange for Career Equity
Shares of the Corporation; (iv) 17,710 performance shares of TSGH issued
to Mr. Durham in connection with the conversion of Performance Shares of
the Corporation; and (v) 14,170 performance shares of TSGH.
10
<PAGE>
(D) For Mr. Durham, this amount is based on: (i) the average market price of
the Corporation's common stock of $89.188 on the NYSE on December 31,
1996; and (ii) the average market price of TSGH Stock of $27.875 on the
NYSE on December 31, 1996. Of this amount, $499,453 is attributable to
the Corporation's common stock and $1,572,150 is attributable to the TSGH
Stock.
(4) Except for Mr. Durham, these amounts represent options for shares of the
Corporation's common stock. For Mr. Durham, amounts for 1995 and 1994
represent options for shares of the Corporation's common stock, and the
amount for 1996 represents options for shares of TSGH Stock. The 1996 amount
for Mr. Durham includes a one-time grant made in connection with the TSGH
IPO. The 1996 amount for Mr. Durham also includes an annual grant of options
for shares of TSGH Stock. Mr. Durham will forego an annual grant of options
for shares of TSGH Stock in 1997.
(5) For 1994, these amounts represent performance returns, granted with respect
to deferred shares, which are payable annually in cash and are based, in
part, on the Corporation's prior five-year average return on investment. For
1995, these amounts represent performance returns and a payout of cash in
exchange for Performance Shares of the Corporation (issued pursuant to the
Corporation's 1993-1995 Performance Share Plan). For 1996, these amounts
will represent performance returns and an anticipated distribution of
Performance Shares issued under the Corporation's 1994-1996 Performance
Share Plan. The amount of such distribution had not been determined as of
the date of this proxy statement. The following table sets forth information
concerning LTIP payouts:
<TABLE>
<CAPTION>
LTIP PAYOUTS
- - --------------------------------------------------------------------------
NAME YEAR PERFORMANCE RETURNS PERFORMANCE SHARES TOTAL
- - --------- --------- ------------------- ------------------ -----------
<S> <C> <C> <C> <C>
Crandall 1996 $ 422,750 $ $
1995 300,000 1,402,500 1,702,500
1994 300,000 0 300,000
- - --------------------------------------------------------------------------
Carty 1996 276,500
1995 196,000 561,000 757,000
1994 186,000 0 186,000
- - --------------------------------------------------------------------------
Baker 1996 235,000
1995 186,000 561,000 747,000
1994 186,000 0 186,000
- - --------------------------------------------------------------------------
Gunn 1996 77,500
1995 60,000 261,800 321,800
1994 50,000 0 50,000
- - --------------------------------------------------------------------------
Durham 1996 77,000
1995 60,000 261,800 321,800
1994 50,000 0 50,000
- - --------------------------------------------------------------------------
</TABLE>
11
<PAGE>
(6) The following table sets forth information concerning all other
compensation:
<TABLE>
<CAPTION>
ALL OTHER COMPENSATION
--------------------------------------------------------------------
INTEREST CONTRIBUTIONS TO DEFINED INSURANCE
NAME YEAR DIFFERENTIAL(A) CONTRIBUTION PLANS PREMIUMS(B) TOTAL
- - --------- --------- ------------- --------------------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Crandall 1996 $ 18,882 $ 0 $ 67,706 $ 86,588
1995 18,995 0 67,287 86,282
1994 13,468 0 66,264 79,732
- - ------------------------------------------------------------------------------------------
Carty 1996 0 0 13,381 13,381
1995 0 0 13,381 13,381
1994 0 0 13,381 13,381
- - ------------------------------------------------------------------------------------------
Baker 1996 1,981 0 14,260 16,241
1995 1,993 0 14,260 16,253
1994 1,413 0 14,260 15,673
- - ------------------------------------------------------------------------------------------
Gunn 1996 0 0 15,106 15,106
1995 0 0 15,106 15,106
1994 0 0 15,106 15,106
- - ------------------------------------------------------------------------------------------
Durham 1996 0 0 9,443 9,443
1995 0 0 9,443 9,443
1994 0 0 9,443 9,443
- - ------------------------------------------------------------------------------------------
</TABLE>
(A) Represents amounts credited but not paid in the current fiscal year and
consists of the above-market portion of interest (defined as a rate of
interest exceeding 120% of the applicable federal long-term rate, with
compounding) on deferred compensation.
(B) Represents the full amount of premiums paid under a split-dollar life
insurance arrangement whereby the Corporation will recover certain
premiums paid, except with respect to Mr. Crandall, for whom such amount
also includes premiums paid on certain long-term disability policies
($16,869) and a supplemental whole life insurance policy ($38,016).
12
<PAGE>
STOCK OPTIONS GRANTED
The following table sets forth information concerning stock options granted
during 1996 by the Corporation to the named executive officers. The hypothetical
present values of stock options granted in 1996 are calculated under a
Black-Scholes model, a mathematical formula used to value options. The actual
amount, if any, realized upon the exercise of stock options will depend upon the
amount by which the market price of the Corporation's common stock (NYSE) on the
date of exercise exceeds the exercise price. There is no assurance that the
hypothetical present values of stock options reflected in this table will
actually be realized.
IF THE HYPOTHETICAL PRESENT VALUES PRESENTED IN THIS TABLE REPRESENT THE
AMOUNTS ACTUALLY REALIZED UPON EXERCISE OF THE OPTIONS, THE CORRESPONDING
INCREASE IN TOTAL STOCKHOLDER VALUE WOULD BE NEARLY $4.0 BILLION.
<TABLE>
<CAPTION>
OPTIONS/SARS GRANTED IN LAST FISCAL YEAR
- - -------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- - -------------------------------------------------------------------------------------
% OF TOTAL HYPOTHETICAL
SECURITIES OPTIONS/SARS PRESENT
UNDERLYING GRANTED TO EXERCISE OR VALUE AT
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION DATE OF
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE(7) GRANT(8)
- - ------------- ------------- --------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Crandall 30,000 7.8 $ 76.688 7/22/06 $ 1,226,700
Carty 25,000 6.5 76.688 7/22/06 1,022,250
Baker 15,000 3.9 76.688 7/22/06 613,350
Gunn 4,500 1.2 76.688 7/22/06 184,005
Durham(9) 158,750 18.6 27.000 10/11/06 2,360,613
</TABLE>
- - ------------------------
(SEE NEXT PAGE FOR FOOTNOTES.)
13
<PAGE>
- - ------------------------
(7) Options have a term of ten years and have an exercise price equal to the
average market price of the Corporation's common stock on the date of grant.
They become exercisable at the rate of 20% per year over a five-year period.
(8) The Black-Scholes model used to calculate the hypothetical values of options
for the Corporation's common stock and for the TSGH Stock at the date of
grant considers a number of factors to estimate the option's present value.
These factors include: (i) the stock's volatility prior to the grant date;
(ii) the exercise period of the option; (iii) interest rates; and (iv) the
stock's expected dividend yield. The assumptions used in the valuation of
the options for the Corporation's common stock and the TSGH Stock were:
stock price volatility--25.4% (for the Corporation's common stock) and 28.0%
(for the TSGH Stock); exercise period--
10 years; interest rate--6.40% (for the Corporation's interest rate) and
6.42% (for TSGH's interest rate); and dividend yield--0.0%.
(9) The amounts shown for Mr. Durham represent: (i) 31,750 options for shares of
TSGH Stock as part of an annual grant on October 11, 1996 (Mr. Durham will
forego an annual grant of options for shares of TSGH Stock in 1997); and
(ii) 127,000 options for shares of TSGH Stock issued to Mr. Durham on
October 11, 1996, in connection with the TSGH IPO. The percentage in the
third column represents the percentage of total options for TSGH Stock
granted to Mr. Durham compared to the total options for TSGH Stock granted
to all employees of TSGH.
14
<PAGE>
STOCK OPTION EXERCISES AND
DECEMBER 31, 1996 STOCK OPTION VALUE
The following table sets forth certain information concerning stock options
exercised during 1996 by the named executive officers and the number and value
of unexercised in-the-money options at December 31, 1996. The actual amount, if
any, realized upon exercise of stock options will depend upon the amount by
which the market price of the Corporation's common stock (NYSE) on the date of
exercise exceeds the exercise price. There is no assurance that the values of
unexercised in-the-money stock options (whether exercisable or unexercisable)
reflected in this table will actually be realized.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUE
- - -----------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END(10)
SHARES ------------------------ ------------------------
ACQUIRED ON VALUE EXERCISABLE / EXERCISABLE /
NAME EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE
- - --------------- ----------- ------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Crandall 0 $ 0 60,000 / 70,000 $1,826,280 / 955,020
Carty 15,000 445,320 84,200 / 63,800 2,177,480 / 1,095,394
Baker 15,000 479,063 72,800 / 48,200 1,820,924 / 889,192
Gunn 20,100 509,620 6,100 / 15,200 84,328 / 278,962
Durham(11) 12,000 400,505 80,010 / 388,770 578,313 / 522,274
</TABLE>
- - ------------------------
(10) Except with respect to Mr. Durham, these amounts are based on the average
market price of AMR common stock of $89.188 on the NYSE on December 31,
1996.
(11) The amounts shown in the second and third columns for Mr. Durham relate to
the Corporation's common stock. The amounts shown in the fourth and fifth
columns for Mr. Durham relate to TSGH Stock. All exercisable options listed
in the fourth column were issued to Mr. Durham in connection with the
conversion of options for the Corporation's common stock into options for
TSGH Stock. Of the unexercisable options listed in the fourth column: (i)
33,870 were issued to Mr. Durham on October 11, 1996, in connection with the
conversion of options for the Corporation's common stock into options for
TSGH Stock; (ii) 127,000 were issued to Mr. Durham on October 11, 1996, in
connection with the TSGH IPO; (iii) 31,750 were issued to Mr. Durham on
October 11, 1996, as an annual grant of options (Mr. Durham will forego an
annual grant of options for shares of TSGH Stock in 1997); and (iv) 196,150
were issued to Mr. Durham on October 11, 1996, in connection with the
conversion of his Career Equity Shares of the Corporation into options for
TSGH Stock. The amounts shown in the fifth column for Mr. Durham are based
on the average market price of TSGH Stock of $27.875 on the NYSE on December
31, 1996.
15
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Under the LTIP, deferred shares of the Corporation's common stock
(Performance Shares) may be awarded to officers and other key employees,
including the named executive officers. Further information concerning
Performance Shares can be found in the Compensation/Nominating Committee Report
and in the Summary Compensation Table.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- - -------------------------------------------------------------------------------------------------
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, UNITS PERIOD UNTIL UNDER NON-STOCK PRICE BASED PLANS
OR MATURATION OR -------------------------------------------
NAME OTHER RIGHTS(#)(12) PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- - ---------- ------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Crandall 22,500 Performance 12/31/98 0 22,500 39,375
Shares
- - -------------------------------------------------------------------------------------------------
Carty 18,000 Performance 12/31/98 0 18,000 31,500
Shares
- - -------------------------------------------------------------------------------------------------
Baker 10,500 Performance 12/31/98 0 10,500 18,375
Shares
- - -------------------------------------------------------------------------------------------------
Gunn 5,000 Performance 12/31/98 0 5,000 8,750
Shares
- - -------------------------------------------------------------------------------------------------
Durham 14,170 Performance 12/31/98 0 14,170 42,510
Shares
</TABLE>
- - ------------------------
(12) Performance Shares awarded to Messrs. Crandall, Carty, Baker and Gunn in
1996 were for shares of the Corporation's common stock and were granted,
pursuant to the LTIP, under American's Performance Share program.
Performance Shares awarded to Mr. Durham in 1996 were for shares of TSGH
Stock, and were granted pursuant to the 1996 Long Term Incentive Plan of
TSGH. These programs are discussed in more detail on pages 27 and 28 of this
proxy statement.
16
<PAGE>
PENSION PLAN
American's basic pension program for management personnel consists of a
fixed benefit retirement plan which complies with the Employee Retirement Income
Security Act of 1974 ("ERISA") and qualifies for federal exemption under the
Internal Revenue Code ("Code"). Officers of American are eligible for additional
retirement benefits, to be paid by American under the Supplemental Executive
Retirement Plan (the "SERP") as an operating expense. The SERP provides pension
benefits (calculated upon the basis of final average base salary, incentive
compensation payments and performance returns) to which officers of American
would be entitled, but for the limit of $120,000 on the maximum annual benefit
payable under ERISA and the Code and the limit on the maximum amount of
compensation which may be taken into account under American's basic pension
program ($150,000 for 1996).
The following table shows typical annual benefits payable under the basic
pension program and the SERP, based upon retirement in 1996 at age 65, to
persons in specified remuneration and credited years-of-service classifications.
Annual retirement benefits set forth below are subject to reduction for Social
Security benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
---------------------------------------------------------------
FINAL
AVERAGE CREDITED YEARS OF SERVICE
EARNINGS 15 20 25 30 35
- - ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 300,000 $ 90,000 $ 120,000 $ 150,000 $ 180,000 $ 210,000
400,000 120,000 160,000 200,000 240,000 280,000
500,000 150,000 200,000 250,000 300,000 350,000
600,000 180,000 240,000 300,000 360,000 420,000
700,000 210,000 280,000 350,000 420,000 490,000
800,000 240,000 320,000 400,000 480,000 560,000
900,000 270,000 360,000 450,000 540,000 630,000
</TABLE>
As of December 31, 1996, the named executive officers had the following
credited years
of service: Mr. Crandall - 22.5; Mr. Carty - 17.5; Mr. Baker - 27.5; Mr.
Gunn - 25.5;
Mr. Durham - 16.5. Benefits are shown in the above table on a straight-life
annuity basis.
To provide an incentive for Mr. Crandall to continue his services as
Chairman of the Board and Chief Executive Officer, Mr. Crandall is provided with
additional years of credited service under American's pension plan for services
rendered after 1994. The number of additional credited years will range from two
years to ten years, depending on the number of years (or portions thereof)
beyond 1995 during which Mr. Crandall continues to serve as Chairman of the
Board and Chief Executive Officer (with pro rata credit for partial years).
17
<PAGE>
CORPORATE PERFORMANCE
The following graph compares the yearly change in the Corporation's
cumulative total stockholder return on its common stock with the cumulative
total return on the published Standard & Poor's 500 Stock Index and the
cumulative total return on an index of airlines published by Standard & Poor's,
in each case over the preceding five-year period. The Corporation believes that
while total stockholder return is AN INDICATOR OF CORPORATE PERFORMANCE, it is
subject to the vagaries of the market.
CUMULATIVE TOTAL RETURNS*
ON $100 INVESTMENT ON DECEMBER 31, 1991
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AMR S&P 500 S&P AIRLINES**
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 95.74 107.62 88.87
1993 95.03 118.45 93.24
1994 75.53 120.01 64.98
1995 105.32 165.16 91.90
1996 123.54 201.51 99.20
</TABLE>
- - ------------------------
* Defined as stock price appreciation plus dividends paid assuming
reinvestment of dividends.
** Standard & Poor's Airline Index included: (i) for 12/31/91-6/30/94, American
Airlines, Delta Air Lines, United Airlines, USAirways; and (ii) for
7/1/94-12/31/96, American Airlines, Delta Air Lines, Southwest Airlines,
USAirways.
OWNERSHIP OF SECURITIES
On December 31, 1996, directors and officers of the Corporation and
American, as a group, owned, or had been granted rights to acquire under the
stock-based compensation plans of the Corporation, 2,497,291 shares of common
stock of the Corporation (approximately 2.7% of the common stock outstanding as
of that date). Each director or officer separately, and all directors and
officers as a group, beneficially owned less than 1% of any class of equity
securities of the Corporation as of such date.
18
<PAGE>
The following firms have informed the Corporation that they were the
beneficial owners of more than 5% of the Corporation's outstanding common stock
at December 31, 1996:
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENT
OF BENEFICIAL OWNER AMOUNT HELD OF CLASS
------------------------------------ -------------- ------------
<S> <C> <C>
Tiger Management, L.L.C. ....................................................... 5,910,100(13) 6.5%
101 Park Avenue
New York, New York 10178
Oppenheimer Group, Inc. ........................................................ 5,354,091(14) 5.89%
Oppenheimer Tower
World Financial Center
New York, New York 10281
FMR Corp. ...................................................................... 5,012,957(15) 5.51%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- - ------------------------
(13) Tiger Management, L.L.C. ("TM"), Tiger Performance, L.L.C. ("TP"), Panther
Partners, L.P. ("Panther"), Panther Management Company, L.P. ("PMC"), and
Julian H. Robertson, Jr. filed a Schedule 13G. This schedule indicates that
Mr. Robertson is the ultimate controlling person of TM, TP and PMC and that
PMC is the general partner of Panther. The schedule also indicates that: (i)
TM beneficially owns, and has shared voting and dispositive power over,
3,596,000 shares of the Corporation's common stock; (ii) TP beneficially
owns, and has shared voting and dispositive power over, 2,034,900 shares;
(iii) Panther and PMC, jointly, beneficially own, and have shared voting and
dispositive power over, 256,700 shares; and (iv) Mr. Robertson, in addition
to the shares referenced in clauses (i) through (iii) above, beneficially
owns 31,500 shares. Of these shares, he has shared voting and dispositive
power over 22,500 shares and sole voting and dispositive power over 9,000
shares.
(14) Oppenheimer Group, Inc. filed a Schedule 13G which indicates that it
beneficially owns, and has shared voting and dispositive power over,
5,354,091 shares of the Corporation's common stock. The schedule also
indicates that Oppenheimer Capital, a subsidiary of Oppenheimer Group, Inc.,
beneficially owns, and has shared voting and dispositive power over,
5,315,331 of such 5,354,091 shares.
(15) FMR Corp. filed a Schedule 13G which indicates that it beneficially owns
5,012,957 shares of the Corporation's common stock. The schedule also
indicates that FMR Corp. has sole dispositive power over all of these shares
and sole voting power over 847,283 of these shares.
19
<PAGE>
EXECUTIVE TERMINATION BENEFITS AGREEMENTS/EMPLOYMENT AGREEMENTS
The Corporation has executive termination benefits agreements (the
"Agreements") with 12 officers of American, including all of the named executive
officers (other than Mr. Durham, who has a similar agreement with TSGH,
described below). The benefits provided by the Agreements are triggered by the
termination of the individual who is a party to an Agreement: (i) within three
years following a change in control of the Corporation, if the individual's
employment with the Corporation is terminated other than for cause or if the
individual terminates his or her employment with "good reason"; or (ii) within
one year following a change in control of the Corporation, if the individual
terminates his or her employment with the Corporation. If the individual's
employment is terminated for cause or as a consequence of death or disability,
the Agreement is not triggered. Under the terms of the Agreements, a change in
control of the Corporation is deemed to occur: (i) if a third party acquires 20%
or more of the Corporation's common stock; (ii) upon the occurrence of a
transaction that requires stockholder approval and involves the acquisition of
the Corporation (through the purchase of assets or by merger or otherwise) by an
entity other than the Corporation or a subsidiary thereof; or (iii) if during
any 24-month period the individuals who, at the beginning of such period,
constitute the Board of Directors of the Corporation cease for any reason (other
than death) to constitute at least a majority thereof. The Agreements provide
that upon such termination the individual will receive, in a lump sum payment:
(i) two times each of the individual's annual base salary; (ii) the annual award
paid under American's incentive compensation plan; and (iii) the annual
performance return payments and certain other miscellaneous benefits. In
addition, upon a change in control, the vesting and exercisability of stock
awards will be accelerated (for example, deferred and restricted stock will
immediately vest and all stock options will become immediately exercisable).
Finally, the individual will be reimbursed for excise taxes, if any, paid
pursuant to Section 280G of the Code (or its successor provision) and for
federal income tax paid on such excise tax reimbursement.
TSGH has an executive termination agreement with Mr. Durham. This agreement
provides that Mr. Durham will be employed by TSGH for a term of three years
beginning October 11, 1996. If TSGH were to terminate Mr. Durham's employment
during the term of the agreement without cause, Mr. Durham would receive a
severance payment equal to the greater of: (i) one year's salary and target
incentive compensation; or (ii) the total amount of salary and target incentive
compensation remaining for the term of the agreement (and, in either case, all
outstanding stock awards would continue vesting through the greater of one year
or the remainder of the term of the agreement).
20
<PAGE>
TSGH also has a change in control agreement with Mr. Durham. The benefits
provided by this agreement will be triggered by Mr. Durham's termination: (i)
within three years following a change in control of TSGH, if his employment with
TSGH is terminated other than for cause or if he terminates his employment with
"good reason"; or (ii) within one year following a change in control of TSGH, if
Mr. Durham terminates his employment with TSGH. If Mr. Durham's employment is
terminated for cause or as a consequence of his death or disability, the
benefits of this agreement are not triggered. Under this agreement, a change in
control of TSGH is deemed to occur: (i) if a third party, other than AMR or an
affiliate, acquires 20% or more of the combined voting power of TSGH's then
outstanding securities which vote in an election of directors of TSGH; (ii) upon
the occurrence of a transaction that requires stockholder approval and involves
the acquisition of TSGH (through the purchase of assets or by merger or
otherwise) by an entity other than TSGH, a subsidiary thereof, AMR or an
affiliate thereof; or (iii) if during any 24-month period the individuals who,
at the beginning of such period, constitute the Board of Directors of TSGH cease
for any reason (other than death) to constitute at least a majority thereof and
the new directors of TSGH were not elected with the approval of the individuals
who, at the beginning of such period, constitute the Board of Directors of TSGH.
A change in control would not occur in the event that AMR distributes its Class
B Common Stock, par value $.01 per share, of TSGH (or upon conversion of such
Class B Common Stock, the resulting TSGH Stock) to its stockholders or sells
such common stock to the public in an underwritten public offering. The change
in control agreement provides that, upon Mr. Durham's termination pursuant to a
change in control, he would receive, in a lump sum payment equal to the sum of:
(i) two times the greater of (A) his annual base salary at the termination date,
or (B) his effective annual base salary immediately prior to the change in
control; plus (ii) two times the greater of (x) the median annual bonus awarded
to him under the 1996 Long Term Incentive Plan of TSGH or any other bonus plan,
or (y) 50% of the highest median target bonus rate applicable to him for any
period during such prior three-year period, multiplied by the annual applicable
base salary determined under (i) above, and certain other miscellaneous
benefits. In addition, upon a change in control, the vesting and exercisability
of stock awards will be accelerated (for example, deferred and restricted stock
will immediately vest and all stock options will become immediately
exercisable). Finally, Mr. Durham will be reimbursed for excise taxes, if any,
paid pursuant to Section 280G of the Code (or its successor provision) and for
federal income tax paid on such excise tax reimbursement.
21
<PAGE>
COMPENSATION/NOMINATING COMMITTEE REPORT
(1) OVERALL POLICY
The objectives of the Corporation's compensation policies are: (i) to
attract and retain the best possible executive talent; (ii) to motivate its
executives to achieve the Corporation's goals; (iii) to link executive and
stockholder interests through equity based compensation; and (iv) to provide a
compensation package that appropriately recognizes both individual and corporate
contributions. With these objectives in mind, the Corporation has developed an
overall compensation strategy that links a very large portion of executive
compensation to the Corporation's financial success. The Corporation expects
that compensation payable in 1996 to the named executive officers will be fully
deductible for U.S. income tax purposes.
The Compensation/Nominating Committee (the "Compensation Committee" or the
"Committee") is composed entirely of disinterested members of the Board of
Directors. No member of the Committee is a current or former employee or officer
of the Corporation or any of its affiliates. The Committee meets regularly
throughout the year to review general compensation issues and determines the
compensation of all of the officers of American (five of whom are also officers
of the Corporation)--including all of the named executive officers. The
Committee made compensation decisions regarding Mr. Durham until October 11,
1996, the date of the TSGH IPO. Decisions on and after October 11, 1996
regarding Mr. Durham's compensation were made by the Compensation/Nominating
Committee of the Board of Directors of TSGH.(16)
Once a year, the Compensation Committee conducts a comprehensive review of
the Corporation's executive compensation program. This review includes: (i) an
internal report evaluating executive compensation throughout the Corporation to
ensure consistency and program effectiveness, including the relationship of
executive pay to performance; and (ii) a comprehensive report from an
independent compensation consultant (retained by the Committee) evaluating the
competitiveness of executive compensation at the Corporation relative to other
major public corporations employing similar executive talent.
The key elements of an executive's compensation consist of: (i) base salary;
(ii) an incentive compensation award (in years when corporate performance
warrants such an award); (iii) performance returns; and (iv) stock compensation,
which may include deferred stock (career equity shares and/or performance
shares), restricted stock and/or stock options. The Committee also regularly
reviews data on the competitive marketplace, comparing total compensation
and each element thereof with compensation opportunities at comparable positions
at other
- - ------------------------
(16) The members of the Compensation/Nominating Committee of the Board of
Directors of TSGH were: Edward A. Brennan, Chairman; Paul C. Ely, Jr.; Dee
J. Kelly; Glenn W. Marschel, Jr.; Bob L. Martin; and Richard L. Thomas.
22
<PAGE>
companies. The Committee's policy is to establish compensation ranges that are
approximately at the median of those found at a comparator group made up of
Fortune 500 companies across industries with whom the Corporation and American
compete for talent (the "Comparator Group") for comparable positions.
(2) DISCUSSION
(A) BASE SALARY
The Committee reviews officers' salaries, including Mr. Crandall's, annually
and makes adjustments based on its subjective evaluation of the performance of
American and the individual. In the case of an officer with responsibility for
business units other than American, the financial results of those units are
also considered.
In 1996, Mr. Crandall asked the Committee not to consider any increase in
his salary. In accordance with his request, he received no increase in salary.
(B) INCENTIVE COMPENSATION PLANS
AMERICAN
American's incentive compensation plan was approved by the stockholders in
1989 and is reviewed annually by the Committee. The Committee also reviews the
incentive compensation plans of the Corporation's other subsidiaries.
In 1996, the American incentive compensation plan provided that participants
would be eligible to receive awards only if the following four performance goals
were met: (i) American's cash flow return on gross assets exceeded 6.7%; (ii)
the profit sharing plan for employees represented by the Transport Workers Union
made a distribution; (iii) the variable compensation plan for pilots made a
distribution; and (iv) American's general profit sharing plan for
non-incentive compensation eligible employees made a distribution.
While target bonus payments to a participant under the incentive
compensation plan are based upon an individual's job classification level at
American relative to similar levels at the Comparator Group, the actual amount
of the award is based on a subjective evaluation of each individual's
performance. For Mr. Crandall, the target bonus payment is 100% of base salary.
For Mr. Carty, the target bonus payment is 75% of base salary; for Mr. Baker,
the target bonus payment is 60% of base salary; for Mr. Gunn, the target bonus
payment is 55% of base salary.
In recognition of superior performance, the Committee may award additional
amounts in excess of the target bonus payments; however, unless otherwise
determined by the Committee, no bonus payment may exceed 100% of the
individual's annualized base salary at the time of
23
<PAGE>
payment. Moreover, unless the Committee otherwise decides, the combination of an
incentive compensation award and performance return payments (described below)
for any given year may not exceed 100% of an individual's base salary. As of the
date of this proxy statement, the Committee has not reviewed the individual
performance of Messrs. Crandall, Carty, Baker and Gunn for 1996. Therefore, the
Committee has not yet determined whether any bonus will be payable to each such
officer and, if so, the amount that will be payable as a bonus. Based on
American's performance in 1996, the Committee expects that, after reviewing and
thoroughly evaluating the performance of these named executive officers, it will
approve the payment of a bonus to each such officer.
TSGH
TSGH's incentive compensation plan is known as the "Variable Compensation
Plan." This plan is reviewed annually by the Compensation/Nominating Committee
of TSGH. The Variable Compensation Plan of TSGH provided that participants would
be eligible to receive awards only if TSGH achieved a consolidated total
shareholder return of 6.5%. For Mr. Durham, the target bonus payment under the
Variable Compensation Plan is 55% of base salary.
(C) STOCK BASED COMPENSATION
Under the LTIP, stock based compensation (which may include stock options,
restricted stock and deferred stock) may be granted to officers and key
employees of the Corporation and its affiliates. The purpose of equity
participation is to align further the interests between executive officers and
the Corporation's stockholders in the Corporation's growth in real value over
the long term.
STOCK OPTIONS
AMERICAN
Stock options issuable to key employees of American are options for common
stock of the Corporation. They are exercisable for ten years from the date of
grant, have an exercise price equal to the average market price on the NYSE of
the Corporation's common stock on the date of grant and vest in 20% increments
over five years. This approach is designed to provide an incentive to create
stockholder value over the long term, since the full benefit of the stock option
compensation package cannot be realized unless stock appreciation occurs over a
number of years.
The Committee determines the number of options to be granted based upon a
subjective evaluation of the executive with respect to three factors: (i)
individual performance; (ii) the executive's ability to perform multiple
functions; and (iii) the executive's retention value to the
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Corporation. The number of stock options awarded, if any, depends upon the
executive's rating with respect to these factors.(17)
On July 22, 1996, the Committee granted Mr. Crandall options to purchase
30,000 shares of the Corporation's common stock at an exercise price of $76.688,
which represents the average market price (NYSE) of the Corporation's common
stock on the date of grant. These options become exercisable at the rate of 20%
per year over a five-year period. This grant was based on: (i) the Committee's
subjective evaluation of Mr. Crandall's service and strategic contributions;
(ii) the Corporation's improved financial results; and (iii) the amount of Mr.
Crandall's compensation relative to chief executives of Comparator Group
companies.
TSGH
Stock options for key employees of TSGH are options for TSGH Stock. They are
exercisable for ten years from the date of grant, have an exercise price equal
to the average market price on the NYSE (except for options granted in 1996,
which have an exercise price equal to the offering price) of TSGH Stock on the
date of grant and vest in 20% increments over five years. This approach is
designed to provide an incentive to create stockholder value over the long term,
since the full benefit of the stock option compensation package cannot be
realized unless stock appreciation occurs over a number of years.
The Compensation/Nominating Committee of TSGH determines the number of
options to be granted based upon a subjective evaluation of the executive with
respect to three factors: (i) individual performance; (ii) the executive's
ability to perform multiple functions; and (iii) the executive's retention value
to TSGH. The number of stock options awarded, if any, depends upon the
executive's rating with respect to these factors.(18)
CAREER EQUITY SHARES
Shares of deferred common stock have been granted, from time to time, to the
officers and key employees of the Corporation and its affiliates through the
career equity program (the "Program") to retain and compensate these individuals
and to give these individuals a stake in the long-term performance of the
Corporation through stock ownership. Career equity shares are also granted to
provide retirement income competitive with the median of the Comparator Group.
- - ------------------------
(17) See the Summary Compensation Table for information regarding the number of
stock options awarded to the named executive officers in 1996.
(18) See the Summary Compensation Table for information regarding the number of
stock options awarded to Mr. Durham by TSGH in 1996.
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The Program provides that career equity shares vest generally upon the
executive's retirement.
In order to assure the Corporation of the executive's services for his or her
career and to provide appropriate levels of retirement income, the Corporation
has agreements with each named executive officer (except Mr. Crandall) which
guarantee that the value of the individual's career equity holdings will be
equal to three and one-half times the individual's final average salary at
retirement.
The Committee determines the number of career equity shares to be granted
based upon a subjective evaluation of the executive with respect to four
factors: (i) current performance; (ii) the executive's ability to perform
multiple functions; (iii) the executive's retention value to the Corporation;
and (iv) the executive's level of retirement income. The actual number of career
equity shares awarded, if any, depends upon the executive's rating with respect
to these factors.
In 1996, Mr. Crandall requested that he not be awarded any career equity
shares. In accordance with his request, no career equity shares were awarded to
him.
The Program also provides for the annual cash payment of "performance
returns" on career equity shares. For the named executive officers, the amount
of the payment depends upon: (i) the rolling five-year average of the
Corporation's return on investment; (ii) the aggregate number of career equity
shares awarded; (iii) the percentage, if any, of the aggregate number of career
equity shares determined by the Committee to be eligible for payment of
performance returns in a given year, based upon a subjective evaluation of
individual performance; and (iv) the average market price (NYSE) of the
Corporation's common stock on the date of grant. In 1996, the percentage of
career equity shares used in the calculation for the named executive officers
ranged from 55% to 100%.(19)
In 1996, Mr. Crandall was awarded performance returns on approximately 55%
of his career equity shares based upon the Committee's subjective evaluation of
his service and strategic contributions to the Corporation and to ensure that
Mr. Crandall's total compensation remained competitive with the median for chief
executive officers in the Comparator Group.
TSGH has no program for career equity shares.
RESTRICTED STOCK
AMERICAN
Restricted stock awards are grants of common stock of the Corporation which
carry full stockholder privileges including the right to vote and the right to
receive any declared dividends in respect of such shares. The shares are held
by the Corporation with vesting based on the
- - ------------------------
(19) See the Summary Compensation Table for information regarding the payment of
performance
returns to the named executive officers in 1996.
26
<PAGE>
satisfaction of future service requirements. The shares are non-transferable and
are subject to risk of forfeiture. Restricted stock awards are designed to
retain the services of key executives and, therefore, do not vest, generally,
until a minimum of two years has passed since the date of grant. Restricted
stock grants are based upon: (i) a subjective evaluation of the executive's
current performance; (ii) retention value; and (iii) ability to perform multiple
functions.
In 1996, Mr. Crandall requested that he not be considered for any award of
restricted stock. In accordance with this request, no restricted stock award was
made to him.
TSGH
Restricted stock awards are grants of shares of TSGH Stock which carry full
stockholder privileges, including the right to vote and the right to receive any
declared dividends in respect of such shares. The shares are held by TSGH with
vesting based on the satisfaction of future service requirements. The shares are
nontransferable and are subject to risk of forfeiture. Restricted stock awards
are designed to retain the services of key executives and, therefore, do not
vest, generally, until a minimum of two years has passed since the date of
grant.
PERFORMANCE SHARES
AMERICAN
Performance shares which are issuable to key employees of American are
awards of deferred stock of the Corporation, pursuant to the LTIP, under the
performance share program applicable
to American. These shares are granted contingent upon the Corporation's
attainment of
pre-determined cash flow objectives over a three-year "performance period." The
cash flow objective is based on the Corporation's cumulative operating cash flow
relative to adjusted assets over the performance period. The percentage of the
shares granted which will vest range from 0% to 175% based upon varying levels
of cumulative operating cash flow relative to adjusted assets over the
three-year period, as well as the Corporation's standing (on the same basis)
relative to four major competitors (United, Delta, Southwest and USAirways).(20)
If each competitor outperforms the Corporation with respect to this measurement,
or if the Corporation fails to achieve a certain level of cumulative operating
cash flow relative to adjusted assets, no performance shares will be earned.
Performance share grants are based upon: (i) a subjective evaluation of the
executive's current performance; (ii) retention value; and (iii) ability to
perform multiple functions.
In 1996, Mr. Crandall was issued 22,500 performance shares based upon the
Committee's subjective evaluation of Mr. Crandall's service and strategic
contributions to the Corporation.
- - ------------------------
(20) See the Long Term Incentive Plan Award Table for the number of performance
shares granted to the named executive officers by AMR (except for Mr.
Durham, whose shares were granted by TSGH) in 1996.
27
<PAGE>
TSGH
Performance shares which are issuable to key employees of TSGH are awards of
deferred stock of TSGH under its 1996 Long Term Incentive Plan. These shares are
granted contingent upon TSGH's attainment of pre-determined total shareholder
return objectives over a three-year "performance period." The total shareholder
return objective is based on the increase in business value and the amount of
free cash flow generated by TSGH over the performance period. The percentage of
the shares granted which will vest ranges from 0% to 300% based upon varying
levels of total shareholder returns over the performance period.(21) If TSGH
fails to achieve a certain level of total shareholder return, no performance
shares will be earned. Performance share grants within TSGH are based upon: (i)
a subjective evaluation of the executive's current performance; (ii) retention
value; and (iii) ability to perform multiple functions.
COMPENSATION/NOMINATING COMMITTEE OF AMR
<TABLE>
<S> <C> <C>
Edward A. Brennan, Chairman Charles T. Fisher, Ann D. McLaughlin
David L. Boren III Charles H. Pistor,
Armando M. Codina Earl G. Graves Jr.
Christopher F. Edley Dee J. Kelly Joe M. Rodgers
Maurice Segall
</TABLE>
- - ------------------------
(21) See the Long Term Incentive Plan Award Table for the number of shares
granted to Mr. Durham by TSGH in 1996.
28
<PAGE>
PROPOSAL 2--SELECTION OF AUDITORS
Based upon the recommendation of the Corporation's Audit Committee, the
Board of Directors has selected Ernst & Young LLP to serve as the Corporation's
independent auditors for the year ending December 31, 1997. The stockholders
will be requested to ratify the Board's selection. Representatives of Ernst &
Young will be present at the annual meeting, will have the opportunity to make a
statement, if they so desire, and will be available to answer appropriate
questions. Ernst & Young's fee for accounting and audit-related services for
1996 for the Corporation and its subsidiaries was approximately $2,600,000.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares represented and entitled to
vote is required to approve the Board's selection of auditors. If the
stockholders do not ratify the selection of Ernst & Young LLP, the selection of
independent auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
29
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon at the
meeting, but if any such matters properly come before the meeting, it is
intended that the persons voting the proxies will vote in accordance with their
best judgments.
By Order of the Board of Directors,
[SIGCUT]
Charles D. MarLett
CORPORATE SECRETARY
May 1, 1997
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<PAGE>
If you are planning to attend the Annual Meeting in person, you must bring
the admission ticket printed on this page with you. You will be asked for this
ticket at the stockholder registration desk at the Annual Meeting. If you do not
have an admission ticket, other evidence of share ownership will be necessary to
obtain admission to the Annual Meeting. See "Official Notice of Annual Meeting"
for details.
(PLEASE CUT ALONG THIS LINE)
-------------------------------------------------------------------------------
AMR CORPORATION
1997 ANNUAL MEETING ADMISSION TICKET
The Annual Meeting of Stockholders of AMR Corporation will be held
at 10:00 A.M., CDT, on Wednesday, May 21, 1997,
at the Park West Ballroom of The Omni Hotel Park West,
1590 LBJ Freeway, Dallas, Texas.
TO ATTEND THIS MEETING YOU MUST PRESENT
THIS TICKET OR OTHER PROOF OF SHARE OWNERSHIP
(Doors open at 9:00 A.M. NOTE: Cameras, tape recorders or other similar
recording devices will not be allowed in the meeting room.)
<PAGE>
AMR
<PAGE>
AMR CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF AMR CORPORATION
P The undersigned hereby appoints Robert L. Crandall, Christopher F. Edley
R and Charles T. Fisher, III, or any of them, proxies, each with full
O power of substitution, to vote the shares of the undersigned at the
X Annual Meeting of Stockholders of AMR Corporation on May 21, 1997, and
Y any adjournments thereof, upon all matters as may properly come before
the meeting. Without otherwise limiting the foregoing general
authorization, the proxies are instructed to vote as indicated herein.
Election of Directors, Nominees:
David L. Boren, Edward A. Brennan, Armando M. Codina, Robert L.
Crandall, Christopher F. Edley, Charles T. Fisher, III, Earl G. Graves,
Dee J. Kelly, Ann D. McLaughlin, Charles H. Pistor, Jr., Joe M. Rodgers,
Maurice Segall.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES. SEE
REVERSE SIDE. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES
UNLESS YOU SIGN AND RETURN THIS CARD. /SEE REVERSE SIDE/
<PAGE>
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE. 0664
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 PROPOSAL 2.
The Board of Directors recommends a vote FOR proposals 1 and 2.
1. Election of FOR WITHHELD 2. Ratification of the FOR AGAINST ABSTAIN
Directors / / / / selection of Ernst & / / / / / /
(see reverse). Young LLP as
independent
auditors for the
year 1997.
For, except vote withheld from the following nominee(s):
____________________________
____________________________
Do you plan to attend the Annual Meeting? / / / /
YES NO
SIGNATURE(S)__________________________________________DATE__________________
Note: Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give
full title as such.
