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EXHIBIT 10.26
1996-1998 PERFORMANCE SHARE PROGRAM
DEFERRED STOCK AWARD AGREEMENT
This AGREEMENT made as of October 3, 1996, by and between AMR
Corporation, a Delaware corporation (the "Corporation"), and ( ). ( ) (the
"Employee"), employee number ( ).
WHEREAS, the stockholders of the Corporation approved the 1988
Long Term Incentive Plan (the "1988 Plan") at the Corporation's annual meeting
held on May 18, 1988; and
WHEREAS, pursuant to the Performance Share Program (the
"Program") adopted by the Board of Directors of the Corporation (the "Board"),
the Board has determined to make a Program grant to the Employee of Deferred
Stock (subject to the terms of the l988 Plan and this Agreement), as an
inducement for the Employee to remain an employee of the Corporation (or a
Subsidiary or Affiliate thereof), and to retain and motivate such Employee
during such employment.
NOW, THEREFORE, the Corporation and the Employee hereby agree
as follows:
x. Xxxxx of Award. The Employee is hereby granted as of
October 3, 1996, (the "Grant Date") a Deferred Stock Award (the "Award"),
subject to the terms and conditions hereinafter set forth, with respect to
( ) shares of Common Stock, $l.00 par value, of the Corporation ("Stock").
The shares of Stock covered by the Award shall vest in accordance with Section
2.
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 of the termination of
Employee's employment with the Corporation (or a Subsidiary or Affiliate
thereof) prior to the end of three year measurement period set forth in
Schedule A (the "Measurement Period") due to the Employee's death, Disability,
Retirement or termination not for Cause (each an "Early Termination") the Award
will vest, if at all, on a prorata 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 beneficiary
designation, the Employee's estate) as soon as practicable after the end of the
Measurement Period. The prorata share will be a percentage where the
denominator is 36 and the numerator is the number of months from January 1,
1996 through the month of the Early Termination, inclusive.
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(c) In the event of the termination of Employee's employment
with the Corporation (or any Subsidiary or Affiliate thereof) for Cause, or if
the Employee terminates his employment with the Corporation (or any Subsidiary
or Affiliate thereof) prior to the distribution of any Award hereunder, the
Award shall be forfeited in its entirety.
(d) In the event of a Change in Control or Potential Change
in Control of the Corporation, the Award shall vest in accordance with the l988
Plan.
(e) If prior to the distribution of any Award hereunder, the
Employee becomes an employee of a Subsidiary that is not wholly owned, directly
or indirectly, by the Corporation, then the Award shall be forfeited in its
entirety.
3. Payment in Cash. Upon a determination by the Board,
an Award may be paid in cash or other consideration in accordance with a
formula as adopted by the Board.
4. Elective Deferrals. At any time at least 12 months prior
to the end of the Measurement Period, the Employee may elect in writing,
subject to Board approval, to voluntarily defer the receipt of the Stock for a
specified additional period beyond the end of the Measurement Period (the
"Elective Deferral Period"). Any Stock deferred pursuant to this Section 3
shall be issued to the Employee within 60 days after the end of the Elective
Deferral Period. In the event of the death of the Employee during the Elective
Deferral Period, the Stock so deferred shall be issued to the Employee's
designated Beneficiary (or to the Employee's estate, in the absence of an
effective beneficiary designation) within 60 days after the Corporation
receives written notification of death.
5. 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 Employee (or
the Employee's successor in interest after the Employee'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 Board.
6. 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 Employee. No contract or right of employment shall be
implied by this Agreement.
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7. Securities Law Requirements. The Corporation shall not be
required to issue Stock pursuant to this Award unless and until (a) such shares
have been duly listed upon each stock exchange on which the Corporation's Stock
is then registered; and (b) a registration statement under the Securities Act
of 1933 with respect to such shares is then effective.
The Board may require the Employee to furnish to the
Corporation, prior to the issuance of the Stock in connection with this Award,
an agreement, in such form as the Board may from time to time deem appropriate,
in which the Employee represents that the shares acquired by him under the
Award are being acquired for investment and not with a view to the sale or
distribution thereof.
8. Incorporation of l988 Plan Provisions. This Agreement is
made pursuant to the l988 Plan and is subject to all of the terms and
provisions of the l988 Plan as if the same were fully set forth herein.
Capitalized terms not otherwise defined herein (inclusive of Schedule A) shall
have the meanings set forth for such terms in the l988 Plan.
IN WITNESS HEREOF, the Employee and the Corporation have executed this
Performance Share Grant as of the day and year first above written.
EMPLOYEE AMR CORPORATION
By:
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Xxxxxxx X. XxxXxxx
Corporate Secretary
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SCHEDULE A
AMR CORPORATION
1996 - 1998 PERFORMANCE SHARE PLAN
FOR OFFICERS AND KEY EMPLOYEES
Purpose
The purpose of the 1996 - 1998 AMR Corporation Performance Share Plan ("Plan")
for Officers and Key Employees is to provide greater incentive to officers and
key employees 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
Unless otherwise indicated in the 1988 Long Term Incentive Plan as amended or
the applicable award agreement between the Corporation and the Employee
relating to the performance shares, the following definitions will control:
"Adjusted Earnings/(Loss)" is defined as the sum of the Corporation's
Consolidated earnings/(loss) applicable to common shares, preferred dividends,
and American Airlines Inc. ("American") aircraft rental expense - net of the
Related Tax Impact, less: Calculated Interest on Operating Leases - net of the
Related Tax Impact, and Calculated Amortization of Operating Leases - net of
the Related Tax Impact.
"Net Cash Flow" is defined as the sum of Adjusted Earnings/(Loss), the
Corporation's depreciation and amortization expense, Calculated Interest on
Operating Leases - net of the Related Tax Impact, Calculated Amortization of
Operating Leases, and any accounting adjustments or extraordinary or unusual
items (net of the Related Tax Impact) or other non-cash items which may be
added or deducted at the discretion of the AMR Incentive Compensation Committee
("Committee") and approved by the AMR Board of Directors.
"Plan Average Net Cash Flow" is defined as the sum of the Net Cash Flow amounts
for all of the fiscal years in the measurement period divided by three.
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"Adjusted Gross Assets" is defined as the Corporation's consolidated total
assets plus the Capitalized Value of Operating Leases plus Accumulated
Depreciation on Equipment and Property plus Accumulated Amortization on
Equipment and Property under Capital Leases, minus cash and short-term
investments.
"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.
"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.
"Calculated Interest on Operating Leases" is defined as the interest expense
imputed in American's operating leases and is determined by applying the
interest rate used in determining the Capitalized Value of Operating Leases to
the average obligation balance of such leases (calculated as the remaining
obligation balance at the end of the fiscal year plus the remaining obligation
balance at the end of the prior fiscal year, divided by two).
"Calculated Amortization of Operating Leases" is defined as the amortization
expense associated with Capitalized Value of Operating Leases and is determined
by the straight line method of amortization over the lease term.
"Related Tax Impact" of an adjustment made in determining Adjusted
Earnings/(Loss) or Net Cash Flow is defined as the amount of that adjustment
multiplied by the Corporation's estimated marginal tax rate for the relevant
year, as determined by the Tax Department.
"Measurement Period" is defined as the three year period beginning January 1,
1996 and ending December 31, 1998.
"Average Adjusted Gross Assets" is Adjusted Gross Assets as of December 31 of a
given year during the measurement period, plus Adjusted Gross Assets as of
December 31 of the prior fiscal year, divided by two.
"Plan Average Adjusted Gross Assets" is the sum of Average Adjusted Gross
Assets for each of the years during the measurement period divided by three.
"Cash Flow Return on Gross Assets" is defined as Plan Average Net Cash Flow
divided by Plan Average Adjusted Gross Assets.
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"Comparison Airlines" shall consist of UAL Corp., Delta Airlines Inc.,
Southwest Airlines Inc., and USAir Group.
Unless otherwise indicated, the sources for all of the financial data specified
above are the applicable Annual Reports on Form 10-K filed by the Corporation.
Accumulation of Shares
The number of shares under the Plan to be distributed to individual
participants is based on the applicable award agreement between the Corporation
and the Employee and is determined by (i) the Corporation's Cash Flow Return on
Gross Assets ("CFROGA"), and (ii) the Corporation's relative rank among the
Comparison Airlines with regard to Cash Flow Return on Gross Assets. The
accumulation of shares is specified below:
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GRANTED SHARES - PERCENT OF TARGET
AMR'S CFROGA
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Greater than Greater than Greater than
or = 5.70% or = 6.80% or = 7.90%
AMR's Less than and less and less and less Greater than
Ranking 5.70% than 6.80% than 7.90% than 8.60% or = 8.60%
------- ---------- ------------ ------------ ------------ ------------
1st 75% 100% 125% 150% 175%
2nd 50% 75% 100% 125% 150%
3rd 25% 50% 75% 100% 125%
4th 0% 25% 50% 75% 100%
5th 0% 0% 0% 0% 0%
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Administration
The Compensation/Nominating Committee of the Corporation shall have authority
to administer and interpret the Plan, establish administrative rules, approve
eligible participants, and take any other action necessary for the proper
operation of the Plan. In computing the Cash Flow Return on Assets of the
Comparison Airlines, the Committee may include or exclude special or
non-recurring items. The amount, if any, of the fund shall be computed by the
General Auditor of American based on a certification of CFROGA by American's
independent auditors. 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 Committee may determine to pay a cash equivalent in lieu of
the stock award.
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General
Nothing in the Plan shall be deemed to give any employee the right,
contractually or otherwise, to participate in the Plan or in any benefits
hereunder, other than the right to receive shares as may have been expressly
awarded by the Committee.
In consideration of the employee's privilege to participate in the Plan, the
employee agrees not to disclose any trade secrets of, or other
confidential/restricted information during his or her employment with the
Corporation or any of its Affiliates or after such employment is terminated.
The Board of Directors may amend, suspend, or terminate the Plan at any time.
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