Exhibit 10.6
CAREER PERFORMANCE SHARES
DEFERRED STOCK AWARD AGREEMENT
This AGREEMENT made as of July 25, 2005 (the "Grant Date"),
by and between AMR Corporation, a Delaware corporation (the
"Corporation"), and Gerard J. Arpey ("Arpey").
WHEREAS, the 1998 Long Term Incentive Plan was approved by
the shareholders of the Corporation at the Corporation's annual
meeting held on May 20, 1998 (such Plan, as may be amended from
time to time, is referenced the "1998 Plan"); and
WHEREAS, the Board of Directors of the Corporation
(the "Board") and the Board's Compensation Committee has
determined that it is in the best interests of the Corporation
and its stockholders to align Arpey's long term interests with
those of the Corporation's stockholders and to provide incentives
for Arpey to remain with the Corporation as its Chairman,
President and/or Chief Executive Officer (collectively, the
"CEO"); and
WHEREAS, the Committee has determined to make initial
grants to Arpey of deferred stock (subject to the terms of the
1998 Plan and this Agreement), as the first steps to induce Arpey
to remain as the CEO and to motivate him during his tenure as the
CEO.
NOW, THEREFORE, the Corporation and Arpey hereby agree as
follows:
1. Grant of Award (a) As of the date hereof Arpey is granted
58,000 deferred shares of the Corporation's Common Stock, $1.00
par value (such shares to be referenced as "Deferred Shares" and
the grant to be referenced as the "2005 Award"). The 2005 Award
and the Subsequent Awards (as later defined in this Agreement)
will be collectively referenced as the "Awards" and may be
individually referenced as an "Award".
(b) Any Award will vest in accordance with Sections 2 and 4 of
this Agreement.
2. Performance Period/Vesting The Awards will vest, if at
all, on July 25, 2015 (the "Vesting Date")(subject to earlier
vesting as detailed in Sections 3 and 4 of this Agreement).
Prior to any vesting of the Awards pursuant to this Section 2,
but as soon as feasible after the Vesting Date, the Committee
will determine that the performance criteria (the "Criteria")
established for the Awards have been satisfied, in whole or in
part. Based upon the foregoing determination, the number of
Deferred Shares for each Award will vest on a percentage basis
from 0% to 175%. The Criteria to be used by the Committee in
determining the vesting of each Award are set forth in Appendix A
to this Agreement. Provided Arpey has paid all applicable taxes
with respect to each Award, the shares of Common Stock that vest
pursuant to this Section 2 will be issued and delivered to Arpey
as soon as feasible following the determination of the Committee
as to satisfaction of the Criteria. Upon delivery of the Common
Stock to Arpey, this Agreement will terminate.
3. Early Termination (a) For purposes of this Agreement, an
Early Termination is the occurrence of one of the following
events prior to the Vesting Date:
(i) Arpey ceases to be the Corporation's CEO due to an
approved Early Retirement (which is defined as retirement from
employment with the Corporation, or a Subsidiary or Affiliate
thereof, at or after age 55 but before the age of 60 and with the
express approval of the then existing Board);
(ii) Arpey ceases to be the Corporation's CEO due to his
death or Disability (as Disability is defined in section
401A(a)(2)(C) of the Internal Revenue Code of 1986, as amended,
(the "IRC");
(iii) The Board replaces Arpey as the Corporation's CEO for
reasons other than for Cause;
(iv) Arpey resigns as CEO for Good Reason (as such term
is defined in this Section 3); or
(v) A Change in Control (as such term is defined in Section 10
of this Agreement) of the Corporation.
(b) As used in this Agreement, "Good Reason" means one of the
following has occurred without Arpey's consent prior to the
Vesting Date: (i) his base salary in effect as of the Grant
Date is reduced (provided, a reduction in Arpey's base salary
that is part of a salary reduction program that affects the other
senior officers of the Corporation, will not qualify as Good
Reason); (ii) Arpey suffers a significant reduction in the
authority, duties and responsibilities as CEO and he concludes in
good faith that he can no longer perform the duties of CEO as was
contemplated on the Grant Date; and (iii) the material
benefits provided Arpey as of the Grant Date are materially
reduced. Upon an event of Good Reason occurring, Arpey will
provide the Board with written notice of such occurrence. If the
Board has not taken action to cure such an event of Good Reason
within 30 days following its receipt of Arpey's written notice,
then Arpey's subsequent resignation (provided it occurs with 60
days of his written notice to the Board), will be deemed
conclusively to be for Good Reason. Any notice to the Board as
contemplated by this paragraph, will be sent to the Board via the
Corporation's Corporate Secretary.
(c) Upon the occurrence of an Early Termination, the Early
Termination Date will be deemed to be, as appropriate: the date
of Early Retirement; the date of death; the date of Disability;
the date Arpey is replaced as CEO;or the date of his resignation
for Good Reason; or the date of the Change in Control of the
Corporation. Notwithstanding the foregoing, the determination
by the Board of the Early Termination Date will in all cases be
determinative.
4. Vesting for Early Termination (a) Upon the occurrence
of an Early Termination, an Award that has been granted to Arpey
prior to the Early Termination Date will be deemed to have vested
as of such Early Termination Date. Thereafter, the Committee will
review the Criteria to determine whether and to what extent the
Criteria have been satisfied as of the Early Termination Date.
Based upon the foregoing determination, the Committee may, in its
sole discretion, adjust the number of Deferred Shares vesting
for each such Award by a percentage factor between 0% and 175%
(the vested portion of each such Award as so determined by the
Committee will, in the aggregate, be referenced as the "Vested
Award").
(b) In the event of an Early Termination on account of Early
Retirement (Section 3(a)(i)), replacement without Cause (Section
3(a)(iii)) or termination for Good Reason (Section
3(a)(iv)), and provided that Arpey has paid all applicable
taxes with respect to the Vested Award, shares of the
Corporation's Common Stock, $1.00 par value, in an amount equal
to the Vested Award, will be delivered to Arpey on or after the
sixth month anniversary of the date of Arpey's separation from
employment as a result of such Early Termination. Upon delivery
of the Common Stock to Arpey, this Agreement will terminate.
(c) In the event of an Early Termination on account of death or
Disability (Section 3(a)(ii)) or Change in Control of the
Corporation (Section 3(a)(v)), and provided that Arpey has
paid all applicable taxes with respect to the Vested Award,
shares of the Corporation's Common Stock, $1.00 par value, in an
amount equal to the Vested Award, will be delivered to Arpey within
30 days of such Early Termination Date. Upon delivery of the Common
Stock to Arpey, this Agreement will terminate.
5. Subsequent Awards Provided Arpey remains an employee
of the Corporation, he will receive a minimum of 58,000 Deferred
Shares in each of the succeeding four years after 2005
(collectively, the "Subsequent Awards" and individually a
"Subsequent Award"). The grant date for each Subsequent Award
will be the first Monday following the regular meeting of the
Board in July of such succeeding year. In the event the Board
does not meet in July of any succeeding year, the grant date for
the Subsequent Award in that year will be deemed to be the last
business day of July. Vesting of a Subsequent Award will be in
accordance with Sections 2, 3 and 4 of this Agreement and the
number of Deferred Shares vesting for each Subsequent Award may
range from 0% to 175%.
6. Termination for Cause; Other If prior to the Vesting
Date and provided there has been no event of Early Termination,
then in the event (a) the Board decides to replace Arpey as the
Corporation's CEO for reasons of Cause or (b) Arpey resigns as
CEO for reasons other than Good Reason, each Award made prior to
such replacement or resignation will be forfeited in its entirety
and this Agreement will terminate immediately.
7. Transfer Restrictions This Award is non-transferable
otherwise than by will or by the laws of descent and
distribution, and may not otherwise be assigned, pledged or
hypothecated and will not be subject to execution, attachment or
similar process. Upon any attempt by Arpey (or his successor in
interest after his death) to effect any such disposition, or upon
the commencement of any such process, the Award will
immediately become null and void, at the discretion of the
Committee.
8. Miscellaneous This Agreement (a) will be binding upon
and inure to the benefit of any successor of the Corporation, (b)
will be governed by the laws of the State of Texas and any
applicable laws of the United States, and (c) may not be amended
without the written consent of both the Corporation and Arpey.
No contract or right of employment will be implied by this
Agreement. If Arpey does not forward to the Corporation, within
the applicable period, required taxes with respect to any shares
of Common Stock which have vested pursuant to this Agreement, the
Corporation may withhold from any payments to be made to him by
the Corporation (or any Subsidiary or Affiliate thereof), an
amount(s) equal to such taxes or it may withhold the delivery of
any shares of the Common Stock, $1.00 par value, as contemplated
by Sections 2 or 4, until such time as such required taxes have
been paid.
9. Securities Law Requirements (a) The Corporation
will not be required to issue shares pursuant to this Award
unless and until (i) such shares have been duly listed upon each
stock exchange on which the Corporation's Stock is then
registered; and (ii) a registration statement under the
Securities Act of 1933 with respect to such shares is then
effective.
(b) The Board may require Arpey to furnish to the Corporation,
prior to the issuance of any shares of Common Stock, $1.00 par
value, in connection with this Agreement, an agreement, in such
form as the Board may from time to time deem appropriate, in
which he represents that the shares acquired by him are being
acquired for investment and not with a view to the sale or
distribution thereof.
10. Incorporation of 1998 Plan Provisions This Agreement is
made pursuant to the 1998 Plan and is subject to all of the terms
and provisions of the 1998 Plan as if the same were fully set
forth herein. Capitalized terms not otherwise defined herein
will have the meanings set forth for such terms in the 1998 Plan.
For purposes of this Agreement, (a) the term "Change in Control"
will mean a "change in ownership or effective control", or a
"change in ownership of assets" of the Corporation as determined
pursuant to Internal Revenue Service Notice 2005-1 (or successor
guidance thereto under Section 409A of the IRC) and (b) "Cause"
will have the meaning set forth in the 1998 Plan.
Plan. Notwithstanding the provisions of the 1998 Plan, (y) Arpey
cannot defer payment of an Award and (z) the payment of an Award
cannot be accelerated by the Committee or the Corporation, except
as provided in this Agreement.
GERARD J. ARPEY AMR CORPORATION
_____________________________ ____________________________
C. D. MarLett
Corporate Secretary
Appendix A to that CAREER PERFORMANCE SHARE PROGRAM DEFERRED
STOCK AWARD AGREEMENT dated July 25, 2005, between AMR
Corporation and Gerard J. Arpey (the "Agreement")
The Agreement, Sections 2 and 4, contemplates the existence of
performance criteria that will be considered by the Committee
when determining the vesting of Award.
In making its vesting determination the Committee will consider
the following performance criteria:
1. The Corporation's overall cash flow;
2. The Corporation's earnings (operating, net or otherwise);
3. The per share price of the Common Stock;
4. The operating performance of the Corporation and its
Subsidiaries (including safety and other issues concerning
regulatory compliance);
5. The rate of return on investment and/or equity;
6. Measures of employee engagement and/ or satisfaction;
7. The overall state of relations between the Corporation and
the representatives of organized labor groups;
8. The Corporation's balance sheet;
9. The overall state of relations between the Corporation and
its largest shareholders;
10. The Corporation's revenues; and
11. Such other factors as the Committee may in its discretion
deem material.
In making its vesting determination, the Committee may, in its
discretion, consider the foregoing factors (a) on a relative
basis vis-a-vis the Corporation's major competitors or (b) on a
stand-alone basis. Furthermore, the Committee may, in its
discretion, consider each criterion equally or may assign greater
significance to certain criterion.