Exhibit
10.42


 


2003 EMPLOYEE PROFIT
SHARING PLAN


 


Purpose


 


The purpose of the 2003
American Airlines Employee Profit Sharing Plan (“Plan”) is to provide
participating employees with a sense of commitment to, and direct financial
interest in, the success of American Airlines, Inc.


 


Definitions


 


Capitalized terms not
otherwise defined in the Plan will have the meanings set forth in the 1998 Long
Term Incentive Plan, as amended (the “LTIP”).


 


“AMR” is defined as AMR
Corporation.


 


“Adjusted Investment” is
defined as the sum of American’s notes payable, current maturities of long-term
debt and capital leases, long-term debt, capital leases, Present Value of
Operating Leases, and stockholders’ equity, and any accounting adjustments or
extraordinary or unusual items which may be added or deducted at the discretion
of the Committee and are approved by the Board of Directors of AMR.


 


“Affiliate” is defined as
a subsidiary of AMR or any entity that is designated by the Committee as a
participating employer under the Plan, provided that AMR directly or indirectly
owns at least 20% of the combined voting power of all classes of stock of such
entity.


 


“American” is defined as
AMR less AMR subsidiaries other than American Airlines, Inc. and its
subsidiaries.


 


“Average Adjusted
Investment” is defined as the sum of Adjusted Investment as of 12/31/02,
3/31/03, 6/30/03, and 9/30/03, divided by four.


 


“Calculated Amortization
of Operating Leases” is defined as the amortization expense associated with the
Capitalized Value of Operating Leases as if such leases were accounted for as
capital leases, and is determined by the straight-line method over the lease
term.


 


“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.


 


“Committee” is defined as
the AMR Incentive Compensation Committee.


 


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“Fund” is defined as the
profit sharing fund, if any, accumulated in accordance with this Plan.


 


“Plan Earnings” is
defined as the sum of American’s pre-tax income, interest expense, aircraft
rental expense, and any accruals for American’s Pilot Variable Compensation
Plan, Employee Profit Sharing Plan, Incentive Compensation Plan, and any other
plan that might be created, at the discretion of the Committee, less Calculated
Amortization of Operating Leases and any accounting adjustments or
extraordinary or unusual items which may be added or deducted at the discretion
of the Committee and approved by the Board of Directors of AMR.


 


“Present Value of
Operating Leases” is defined as the present value of the lease payments
required under American’s aircraft operating leases over the remaining lease
term, calculated using the discount rate of Prime plus one percent.  Amounts for 3/31/03, 6/30/03, and 9/30/03
are computed by determining the difference between the Present Value of
Operating Leases as of 12/31/03 and 12/31/02 and allocating that difference
evenly over the four quarters of 2003.


 


“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.


 


“Qualified Earnings” is
defined as base salaries paid during the Plan year, overtime, holiday pay,
skill premiums, longevity pay, sick pay, vacation pay, shift differential,
overrides and license premiums and does not include payments such as travel and
incidental expenses, moving expenses, relocation allowance (COLA), payouts from
any retirement plan, disability payments, workers compensation payments,
imputed income from certain travel service charges or life insurance, or other
benefits provided by American, nor does it include any special one-time
monetary awards or allowances, lump sum payments, or incentive compensation or
profit sharing payments.


 


“Return on Investment” or
“ROI” is defined as Plan Earnings divided by Average Adjusted Investment,
stated as a percentage.


 


Eligibility for
Participation


 


In order to be eligible
for a profit sharing award, the individual must:


 


•                  Have worked during the Plan year as a
regular full-time or part-time employee at American in a participating
workgroup (flight attendant, reservations, coordinator/planner, airport agent,
sky cap, support staff, management levels 04 and below).


 


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•                  Have an adjusted seniority date prior
to July 1st of the Plan year. 
An individual’s Qualified Earnings from the time worked at American will
be included in the award calculation.


 


•                  Be employed at American or an
Affiliate at the time awards are paid. 
If at the time awards are paid under the Plan, an individual has retired
from American or an Affiliate, has been laid off, is on a leave of absence with
re-instatement rights, is disabled or has died, the award which the individual
otherwise would have received under the Plan but for such retirement, lay-off,
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.


 


Notwithstanding the
foregoing, however, an employee will not be eligible to participate in the Plan
if such employee is, at the same time, eligible to participate in:


 


i)                 the
2003 American Airlines Incentive Compensation Plan for Officers and Key
Employees,


ii)              the
Pilot Profit Sharing Plan (as implemented in 1997),


iii)           any
incentive compensation, profit sharing, commission or other bonus plan for
employees of any division of American, or


iv)          any
incentive compensation, profit sharing, commission or other bonus plan
sponsored by an Affiliate.


 


Awards under the Plan
will be determined on a proportionate basis for participation in more than one
plan during a Plan year.  Employees who
transfer from/to Affiliates or any other plan described above during a Plan
year, and satisfy eligibility requirements, will receive awards from each plan
on a proportionate basis.


 


The Profit Sharing Fund
Accumulation


 


Performance will be measured
by ROI and the Fund will accumulate based on that performance.  The Fund is established at 1% of Qualified
Earnings when ROI is equal to 6.4%.  The
fund will accumulate on a straight-line basis at the rate of 0.583% of
qualified earnings for each additional point of ROI.


 


The profit sharing fund
will not exceed an amount equal to 8% of Qualified Earnings at levels of ROI
above 18.4%.


 


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Award Distribution


 


For eligible domestic
employees (where domestic means the United States, Puerto Rico and the U.S.
Virgin Islands), individual awards will be distributed based on an employee’s
Qualified Earnings for the Plan year multiplied by the appropriate percentage
of Qualified Earnings based upon the ROI achieved for the Plan year. The
percent of Qualified Earnings used for Fund accumulation and award distribution
will be the same.


 


A portion of the Fund
will be allocated for eligible international employees (employees other than
those in the United States, Puerto Rico and the U.S. Virgin Islands) based on
the aggregate of all eligible international employees’ Qualified Earnings as a
percentage of the aggregate of all eligible employees’ total Qualified
Earnings.  This portion of the Fund will
be set aside for distribution at the discretion of the American officer(s)
responsible for such international employees, subject only to the Committee’s
approval.


 


Administration


 


The Plan will be
administered by the Committee which is comprised of officers of American
appointed by the Board of Directors of AMR. 
The Committee will have authority to administer and interpret the Plan,
establish administrative rules, determine eligibility and take any other action
necessary for the proper and efficient operation of the Plan.  The amount, if any, of the Fund shall be
based on a certification of ROI by AMR’s General Auditor.  A summary of awards under the Plan shall be
provided to the Board of Directors of AMR at the first regular meeting following
determination of the awards.


 


Method of Payment


 


The Committee shall
determine the method of payment of awards. 
Subject to the terms of the Plan, awards shall be paid as soon as
practicable after audited financial statements for the year 2003 are available.


 


General


 


Neither this Plan nor any
action taken hereunder shall be construed as giving to 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 


 


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receive payment of such
award as may have been expressly determined 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 Committee, in its sole discretion, may (i) terminate or (ii)
suspend, delay, defer (for such period of time as the Committee may deem
necessary), or substitute any 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 or its Affiliates to any unauthorized party (ii) not to make any unauthorized
use of such trade secrets or confidential or restricted information during his
or her employment with American or its Affiliates or after such employment is
terminated, and (iii) not to solicit any current employees of American or any
subsidiaries of AMR to join the employee at his or her new place of employment
after his or her employment with American or its Affiliates is terminated.


 


The Committee may amend,
suspend, or terminate the Plan at any time.


 


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