American Airlines 2002 Annual Report Download - page 79

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11. Stock Awards and Options (Continued)
In March 2003, the Board of Directors of AMR approved the issuance of additional shares of AMR
common stock of up to 30 percent of the 156,359,955 outstanding shares of AMR common stock to employees
and vendors, lessors and suppliers in connection with ongoing negotiations about concessions. Also in March
2003, the Compensation Committee of the AMR Board of Directors adopted the 2003 Employee Stock Incentive
Plan (2003 Plan) to provide equity awards to employees in connection with wage, benefit and work rule
concessions. Under the 2003 Plan, all employees of AMR and its subsidiaries are eligible to be granted awards
which may include stock options, restricted stock and deferred stock. On March 31, 2003, the Company reached
agreements with the leaders of the three major unions representing American employees (the Labor Agreements).
In connection with the changes in wages, benefits and work rules, the Labor Agreements provide for the issuance
of up to 38 million shares of AMR stock in the form of stock options which will be granted under the 2003 Plan if
the Labor Agreements are ratified. These shares will generally vest over a three year period, will be granted at an
exercise price equal to the fair market value of the stock on the grant date (the day following the ratification date)
and will expire no later than 10 years after the date of grant. The remaining shares approved by the AMR Board of
Directors are available for future issuance to employees, vendors, lessors and suppliers.
12. Retirement Benefits
All regular employees of the Company are eligible to participate in pension plans. The defined benefit
plans provide benefits for participating employees based on years of service and average compensation for a
specified period of time before retirement. Airline pilots also participate in a defined contribution plan for which
Company contributions are determined as a percentage of participant compensation.
Effective January 1, 2001, American established a defined contribution plan for non-contract employees in
which the Company will contribute a match up to 5.5 percent on employee contributions of pensionable earnings to
the Company’s existing 401(k) plan. During 2000, American provided a one-time election for current non-contract
employees to remain in the defined benefit plan or discontinue accruing future credited service in the defined
benefit plan as of January 1, 2001 and begin participation in the defined contribution plan. Effective January 1,
2002, all new non-contract employees of the Company will become members of the defined contribution plan.
In addition to pension benefits, other postretirement benefits, including certain health care and life
insurance benefits, are also provided to retired employees. The amount of health care benefits is limited to
lifetime maximums as outlined in the plan. Substantially all regular employees of American and employees of
certain other subsidiaries may become eligible for these benefits if they satisfy eligibility requirements during their
working lives.
Certain employee groups make contributions toward funding a portion of their retiree health care benefits
during their working lives. AMR funds benefits as incurred and makes contributions to match employee
prefunding.
In connection with the acquisition of TWA in April 2001 (see Note 17), the Company assumed certain
retiree benefit plan liabilities of TWA, primarily its postretirement benefit obligation. As such, the following
information reflects the inclusion of these obligations from the date of acquisition. In addition, effective January 1,
2002, TWA LLC employees were eligible to begin participation in American’s pension plans. However, these
employees were not granted prior credited service.