Exhibit 10.4
2006 - 2008 PERFORMANCE SHARE AGREEMENT
This 2006 - 2008 Performance Share Agreement ("Agreement")
effective as of July 24, 2006, by and between AMR Corporation, a
Delaware corporation (the "Corporation"), and an officer or key
employee of one of the Corporation's Subsidiaries (the "Employee"
or the "Recipient") as identified in the notification sent to the
Employee described below (the "Notification").
WHEREAS, pursuant to the 2006 - 2008 Performance Share Plan
for Officers and Key Employees, as adopted by the Board of
Directors of the Corporation (the "Board"), the Compensation
Committee of the Board (the "Committee") has determined to make an
award (the "Award", as set forth in the Notification) to the
Employee (subject to the terms of the Plan and this Agreement), as
an inducement for the Employee to remain an employee of one of the
Corporation's Subsidiaries during the time frame of 2006 - 2008
and to retain and motivate such Employee during his/her
employment.
This Agreement sets forth the terms and conditions attendant
to the Award under the Plan.
1. Grant of Award. Subject to the terms and conditions of
this Agreement, the Recipient is hereby granted an Award as of
July 24, 2006 (the "Grant Date"). The Award shall vest, if at
all, in accordance with Section 2 of this Agreement. On the date
the Award vests (if at all), Recipient will receive a combination
of cash and the Corporation's Common Stock. The Committee will
determine the amount of the Award to be paid in cash (the "Cash
Award") and the amount of the Award to be settled in shares of the
Corporation's Common Stock (the "Stock Distribution"). The Cash
Award will be paid on April 30, 2009 (such Cash Award will be made
pursuant to the Annual Incentive Plan). The Stock Distribution
will occur on April 16, 2009 (such Stock Distribution will be made
from and pursuant to the AMR Corporation 1998 Long Term Incentive
Plan, as amended (the "LTIP")). The sum of the Cash Award and the
Stock Distribution will equal the product of (a) the Fair Market
Value of the Common Stock on April 15, 2009, and (b) the number of
shares of Common Stock comprising the Award.
2. Vesting.
(a) The Award will vest, if at all, in accordance with
Schedule A, attached hereto and made a part of this Agreement.
(b) In the event Recipient's employment with one of the
Corporation's Subsidiaries is terminated prior to the end of the
three year measurement period set forth in Schedule A (the
"Measurement Period") due to the Recipient's death, Disability (as
defined in section 409A(a)(2)(C) of the Internal Revenue Code of
1986, as amended, (the "Code")), Retirement (subject to the second
paragraph of Section 4) or termination not for Cause (each an
"Early Termination") the Award will vest, if at all, on a pro-rata
basis and will be paid to the Employee (or, in the event of the
Employee's death, the Employee's designated beneficiary for
purposes of the Award, or in the absence of an effective
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beneficiary designation, the Employee's estate). The pro-rata
basis will be a percentage where the denominator is 36 and the
numerator is the number of months from January 1, 2006 through the
month of Early Termination, inclusive. This pro-rata basis will
be paid to the Recipient at the same time as Cash Awards and Stock
Distributions are made to then current employees who have Awards
under the Plan, subject to Section 2(f) of this Agreement.
(c) In the event Recipient's employment with one of the
Corporation's Subsidiaries is terminated for Cause, or if the
Recipient terminates his/her employment with such Subsidiary, each
occurring prior to April 15, 2009, the Award shall be forfeited in
its entirety.
(d) If prior to April 15, 2009, the Recipient becomes an employee
of a Subsidiary that is not wholly owned, directly or indirectly,
by the Corporation, or if the Recipient begins a leave of absence
without reinstatement rights, then in each case the Award shall be
forfeited in its entirety.
(e) In the event of a Change in Control of the Corporation prior
to the distribution of the Award, the Award will be paid within 60
days of the date of the Change in Control. In such event, the
vesting date will be the date of the Change in Control. The term
"Change in Control" is defined for purposes of this Agreement in
Section 7.
(f) Notwithstanding the provisions of Section 2(b), if the
Employee is a person subject to section 409A(a)(2)(B)(i) of the
Code, any payment on account of Retirement or termination not for
Cause of the Employee shall be delayed until the sixth month
anniversary of the date of separation from employment due to
Retirement or termination not for Cause.
3. 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
shall not be subject to execution, attachment or similar process.
Upon any attempt by the Recipient (or the Recipient's successor in
interest after the Recipient's death) to effect any such
disposition, or upon the levy of any such process, the Award may
immediately become null and void, at the discretion of the
Committee.
4. Miscellaneous. This Agreement (a) shall be binding upon and
inure to the benefit of any successor of the Corporation, (b)
shall 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 the
Recipient. Notwithstanding the foregoing, this Agreement may be
amended from time to time without the written consent of the
Grantee pursuant to Section 8 below and pursuant to the Plan. No
contract or right of employment shall be implied by this
Agreement.
In the event the Employee's employment is terminated by
reason of Early or Normal Retirement and the Employee is
subsequently employed by a competitor of the Corporation, the
Corporation reserves the right, upon notice to the Employee, to
declare the Award forfeited and of no further validity.
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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 Airlines, Inc. ("American") or its Affiliates to any
unauthorized party and (ii) not to make any unauthorized use of
such trade secrets or confidential or restricted information
during his or her employment with American or its Affiliates or
after such employment is terminated, and (iii) not to solicit any
then current employees of American or any other Subsidiaries of
the Corporation 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 failure by the Employee to abide by
the foregoing obligations shall result in the Award being
forfeited in its entirety.
The Employee shall not have the right to defer any of
the Cash Payment or the Stock Distribution. Except as provided in
this Agreement, the Committee and Corporation shall not accelerate
the Cash Payment or the Stock Distribution.
Any Cash Award will be net of applicable withholding and
social security taxes. The Employee will pay to the Corporation
timely any and all such taxes on account of the Stock
Distribution. The failure by the Employee to pay timely such taxes
will result in a withholding from any and all payments from the
Corporation or any Subsidiary to the Employee in order to satisfy
such taxes.
Notwithstanding anything in this Agreement to the
contrary, the Committee may elect, at any time and from time to
time, in lieu of issuing all or any portion of the stock
comprising the Stock Distribution, to make substitutions for such
stock, all to the effect that the employee will receive cash or
other marketable property of a value equivalent to what the
Employee would have received in a stock distribution.
5. [Intentionally Omitted]
6. Adjustments in Awards. In the event of a Stock
dividend, Stock split, merger, consolidation, re-organization, re-
capitalization or other change in the corporate structure of the
Corporation, appropriate adjustments may be made by the Board of
Directors to the Award.
7. Incorporation of LTIP Provisions. Capitalized terms not
otherwise defined herein (inclusive of Schedule A) shall have the
meanings set forth for such terms in the LTIP. For purposes of
Section 2(e), the term "Change in Control" will mean a "change in
ownership" or "change in effective control" or "change in
ownership of the assets" of the Corporation, as determined
pursuant to Internal Revenue Service Notice 2005-1 (or successor
guidance thereto under section 409A of the Code).
8. American Jobs Creation Act. In addition to amendments
permitted by Section 4 above, amendments to this Agreement may be
made by the Corporation, without the Employee's consent, in order
to ensure compliance with the American Jobs Creation Act of 2004.
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IN WITNESS HEREOF, the Recipient and the Corporation
have executed this Performance Share Agreement as of the day,
month and year set forth above.
RECIPIENT AMR CORPORATION
_____________________________ _____________________
Kenneth W. Wimberly
Corporate Secretary
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Schedule A
2006 - 2008 PERFORMANCE SHARE PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 2006 - 2008 AMR Corporation Performance Share
Plan ("Plan") for Officers and Key Employees is to provide greater
incentive to officers and key employees of the subsidiaries and
affiliates of AMR Corporation ("AMR" or "the Corporation") to
achieve the highest level of individual performance and to meet or
exceed specified goals which will contribute to the success of the
Corporation.
Definitions
For purposes of the Plan, the following definitions will control:
"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.
"Committee" is defined as the Compensation Committee, or its
successor, of the AMR Board of Directors.
"Comparator Group" is defined as the following seven U.S. based
carriers including, AirTran Airways, Alaska Airlines, AMR
Corporation, Continental Airlines, Inc., JetBlue Airways,
Southwest Airlines Co. and US Airways, Inc.
"Corporate Objectives" is defined as being the objectives
established by the Committee at the beginning of each fiscal year
during the Measurement Period.
"Measurement Period" is defined as the three year period beginning
January 1, 2006 and ending December 31, 2008.
"Total Shareholder Return (TSR)" is defined as the rate of return
reflecting stock price appreciation plus reinvestment of dividends
over the Measurement Period. The average Daily Closing Stock
Price (adjusted for splits and dividends) for the three months
prior to the beginning and ending points of the Measurement Period
will be used to smooth out market fluctuations.
"Daily Closing Stock Price" is defined as the stock price at the
close of trading (4:00 PM EST) of the National Exchange on which
the stock is traded.
"National Exchange" is defined as either the New York Stock
Exchange (NYSE), the National Association of Stock Dealers and
Quotes (NASDAQ), or the American Stock Exchange (AMEX).
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Accumulation of Shares
Any distribution under the Plan with respect to the shares
will be determined by (i) the Corporation's TSR rank within the
Comparator Group and/or (ii) the Corporation's attainment of the
Corporate Objectives during each year of the Measurement Period
and (iii) the terms and conditions of the award agreement between
the Corporation and the employee. The distribution percentage of
shares pursuant to the TSR metric and based on rank, is specified
below:
Granted Shares - Percent of Target Based on Rank
Rank 7 6 5 4 3 2 1
Payout% 0% 25% 50% 75% 100% 135% 175%
In the event that a carrier (or carriers) in the Comparator Group
ceases to trade on a National Exchange at any point in the
Measurement Period, the following distribution percentage of
target shares, based on rank and the number of remaining
comparators, will be used accordingly.
6 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 6 5 4 3 2 1
Payout % 0% 50% 75% 100% 135% 175%
5 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 5 4 3 2 1
Payout % 50% 75% 100% 135% 175%
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4 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 4 3 2 1
Payout % 75% 100% 135% 175%
3 Comparators
Granted Shares - Percent of Target Based on Rank
Rank 3 2 1
Payout % 50% 135% 175%
At the end of each fiscal year during the Measurement Period, the
Committee will determine whether the Corporate Objectives have
been achieved. At the end of the Measurement Period the Committee
will determine the distribution of shares based upon the TSR
metric and, with respect to senior officer awards, the Corporate
Objectives. The number of shares that may vest will range from 0%
to 175% of the target award.
Administration
The Committee shall have authority to administer and interpret the
Plan, establish administrative rules, approve eligible
participants, and take any other action necessary for the proper
and efficient operation of the Plan. The TSR metric will be
determined based on an audit of AMR's TSR rank by the General
Auditor of American Airlines, Inc. A summary of awards under the
Plan shall be provided to the Board of Directors at the first
regular meeting following determination of the awards. The awards
will be distributed on April 16, 2008, or such date the award is
approved for distribution by the Committee.
The distribution of any shares under this Plan is subject to the
Corporation having sufficient stock in a stock plan to make such a
distribution. In the event the Corporation does not have
sufficient shares of stock in such a stock plan for the
distribution contemplated by this Plan, the Committee will have
the authority and discretion to make substitutions for such
shares, all to the effect that the employee will receive cash or
other marketable property of a value equivalent to what the
employee would have received in a stock distribution.
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Corporate Objectives will be used as a metric for determining the
distribution of shares only for senior officers of the Corporation
(or a Subsidiary thereof) unless the Committee determines
otherwise.
General
Neither this Plan nor any action taken hereunder shall be
construed as giving any employee or participant the right to be
retained in the employ of American Airlines, Inc. or an Affiliate.
Nothing in the Plan shall be deemed to give any employee any
right, contractually or otherwise, to participate in the Plan or
in any benefits hereunder, other than the right to receive an
award as may have been expressly awarded by the Committee subject
to the terms and conditions of the award agreement between the
Corporation and the employee.
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 the Corporation,
whether similar or dissimilar, (each a "Force Majeure Event"),
which Force Majeure Event affects the Corporation 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 awards due currently or in the future under the
Plan, including, but not limited to, any awards that have accrued
to the benefit of participants but have not yet been paid, in any
case to the extent permitted under proposed Treasury Regulation
1.409A-3(d) and/or 1.409A-3(e), or successor guidance thereto.
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
Airlines, Inc. or its Affiliates to any unauthorized party and,
(ii) not to make any unauthorized use of such trade secrets or
confidential or restricted information during his or her
employment with American Airlines, Inc. or its Affiliates or after
such employment is terminated, and (iii) not to solicit any then
current employees of American Airlines, Inc. or any other
Subsidiaries of AMR to join the employee at his or her new place
of employment after his or her employment with American Airlines,
Inc. or its Affiliates is terminated. The failure by the employee
to abide by the foregoing obligations shall result in the award
being forfeited in its entirety.
The Committee may amend, suspend, or terminate the Plan at any
time.
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Grant of 2006/2008 Performance Shares
July 24, 2006
# 2006/2008
Performance
Officer Name Shares Granted
G. J. Arpey 100,000
D.P. Garton 61,000
T.W. Horton 61,000
G.F. Kennedy 35,000
R.W. Reding 35,000
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