Exhibit 10.5
AMENDED AND RESTATED
EXECUTIVE TERMINATION BENEFITS AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE TERMINATION BENEFITS
AGREEMENT (this "Agreement"), dated as of the 1st day of April,
2004, is among AMR CORPORATION, a Delaware corporation, AMERICAN
AIRLINES, INC., a Delaware corporation (collectively the
"Company"), and XXXXXXX X. XXXXXXXX (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company considers it essential to the best
interests of the Company and its stockholders that its management
be encouraged to remain with the Company and to continue to
devote full attention to the Company's business in the event an
effort is made to obtain control of the Company through a tender
offer or otherwise;
WHEREAS, the Company recognizes that the possibility of a
change in control and the uncertainty and questions which it may
raise among management may result in the departure or distraction
of management personnel to the detriment of the Company and its
stockholders;
WHEREAS, the Company's Board of Directors (the "Board") has
determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members
of the Company's management to their assigned duties without
distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control
of the Company;
WHEREAS, the Executive is a key Executive of the Company;
WHEREAS, the Company believes the Executive has made
valuable contributions to the productivity and profitability of
the Company;
WHEREAS, should the Company receive any proposal from a
third person concerning a possible business combination with or
acquisition of equity securities of the Company, the Board
believes it imperative that the Company and the Board be able to
rely upon the Executive to continue in his position, and that the
Company be able to receive and rely upon his advice as to the
best interests of the Company and its stockholders without
concern that he might be distracted by the personal uncertainties
and risks created by such a proposal; and
WHEREAS, should the Company receive any such proposals, in
addition to the Executive's regular duties, he may be called upon
to assist in the assessment of such proposals, advise management
and the Board as to whether such proposals would be in the best
interests of the Company and its stockholders, and to take such
other actions as the Board might determine to be appropriate.
NOW, THEREFORE, to assure the Company that it will have the
continued undivided attention and services of the Executive and
the availability of his advice and counsel notwithstanding the
possibility, threat or occurrence of a bid to take over control
of the Company, and to induce the Executive to remain in the
employ of the Company, and for other good and valuable
consideration, the Company and the Executive agree as follows:
1. Change in Control
For purposes of this Agreement, a Change in Control of the
Company shall be deemed to have taken place if:
(a) any person as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended from time to time
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(the "Exchange Act"), and as used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of the
Exchange Act (a "Person"), but excluding the Company, any
subsidiary of the Company and any employee benefit plan sponsored
or maintained by the Company or any subsidiary of the Company
(including any trustee of such plan acting as trustee), directly
or indirectly, becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act, as amended from time to time) of
securities of the Company representing 15% or more of the
combined voting power of the Company's then outstanding
securities; or
(b) individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition
of the assets of another corporation (a "Business Combination"),
in each case, unless, following such Business Combination,
(i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the then outstanding
shares of common stock of the Company and the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors
immediately prior to such Business Combination beneficially own,
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directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries), (ii) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 15% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of
the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination, and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Incumbent Board, providing for such Business Combination;
or
(d) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
2. Circumstances Triggering Receipt of Severance Benefits
(a) Subject to Section 2(c), the Company will provide
the Executive with the benefits set forth in Section 4 upon any
termination of the Executive's employment:
(i) by the Company at any time within the first
24 months after a Change in Control;
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(ii) by the Executive for "Good Reason" (as
defined in Section 2(b) below) at any time within the
first 24 months after a Change in Control;
(iii) by the Executive pursuant to Section
2(d); or
(iv) by the Company or the Executive pursuant to
Section 2(e).
(b) In the event of the occurrence of a Change in
Control, the Executive may terminate employment with the Company
and/or any subsidiary for "Good Reason" with the right to
benefits set forth in Section 4 upon the occurrence of one or
more of the following events (regardless of whether any other
reason, other than Cause as provided below, for such termination
exists or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to
maintain the Executive in the office or the position,
or a substantially equivalent office or position, of or
with the Company and/or a subsidiary, as the case may
be, which the Executive held immediately prior to a
Change in Control, or the removal of the Executive as a
director of the Company and/or a subsidiary (or any
successor thereto) if the Executive shall have been a
director of the Company and/or a subsidiary immediately
prior to the Change in Control;
(ii) (A) A significant adverse change in the
nature or scope of the authorities, powers, functions,
responsibilities or duties attached to the position
with the Company and/or any subsidiary which the
Executive held immediately prior to the Change in
Control, (B) a reduction in the aggregate of the
Executive's annual base salary rate and annual
incentive compensation target to be received from the
Company and/or any subsidiary, or (C) the termination
or denial of the Executive's rights to Employee
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Benefits (as defined below) or a reduction in the scope
or value thereof, any of which is not remedied by the
Company within 10 calendar days after receipt by the
Company of written notice from the Executive of such
change, reduction or termination, as the case may be;
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the
parties hereto provided it has been made in good faith
and in all events will be presumed to have been made in
good faith unless otherwise shown by the Company by
clear and convincing evidence) that a change in
circumstances has occurred following a Change in
Control, including, without limitation, a change in the
scope of the business or other activities for which the
Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially
hindered Executive's performance of, or has caused the
Executive to suffer a substantial reduction in, any of
the authorities, powers, functions, responsibilities or
duties attached to the position held by the Executive
immediately prior to the Change in Control, which
situation is not remedied within 10 calendar days after
written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or
transfer of all or substantially all of its business
and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization,
transfer or otherwise) to which all or substantially
all of its business and/or assets have been transferred
(directly or by operation of law) assumed all duties
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and obligations of the Company under this Agreement
pursuant to Section 9(a);
(v) The Company relocates its principal executive
offices, or requires the Executive to have his
principal location of work changed, to any location
that is in excess of 50 miles from the location
thereof immediately prior to the Change in Control, or
requires the Executive to travel away from his office
in the course of discharging his responsibilities or
duties hereunder at least 20% more (in terms of
aggregate days in any calendar year or in any calendar
quarter when annualized for purposes of comparison to
any prior year) than was required of Executive in any
of the three full years immediately prior to the Change
in Control without, in either case, his prior written
consent; or
(vi) Without limiting the generality or effect of
the foregoing, any material breach of this Agreement by
the Company or any successor thereto, which breach is
not remedied within 10 calendar days after written
notice to the Company from the Executive describing the
nature of such breach.
(c) Notwithstanding Sections 2(a) and (b) above, no
benefits shall be payable by reason of this Agreement in the
event of:
(i) Termination of the Executive's employment
with the Company and its subsidiaries by reason of the
Executive's death or Disability, provided that the
Executive has not previously given a valid "Notice of
Termination" pursuant to Section 3. For purposes
hereof, "Disability" shall be defined as the inability
of Executive due to illness, accident or other physical
or mental disability to perform his duties for any
period of six consecutive months or for any period of
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eight months out of any 12-month period, as determined
by an independent physician selected by the Company and
reasonably acceptable to the Executive (or his legal
representative), provided that the Executive does not
return to work on substantially a full-time basis
within 30 days after written notice from the Company,
pursuant to Section 3, of an intent to terminate the
Executive's employment due to Disability;
(ii) Termination of the Executive's employment
with the Company and its subsidiaries on account of the
Executive's retirement at or after age 65, pursuant to
the Company's Retirement Benefit Plan; or
(iii) Termination of the Executive's
employment with the Company and its subsidiaries for
Cause. For the purposes hereof, "Cause" shall be
defined as a felony conviction of the Executive or the
failure of the Executive to contest prosecution for a
felony, or the Executive's wilful misconduct or
dishonesty, any of which is directly and materially
harmful to the business or reputation of the Company or
any subsidiary or affiliate. Notwithstanding the
foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until
there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of
not less than three quarters of the Board then in
office at a meeting of the Board called and held for
such purpose, after reasonable notice to the Executive
and an opportunity for the Executive, together with his
counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board,
the Executive had committed an act constituting "Cause"
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as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right
of the Executive or his beneficiaries to contest the
validity or propriety of any such determination.
This Section 2(c) shall not preclude the payment of any
amounts otherwise payable to the Executive under any of the
Company's employee benefit plans, stock plans, programs and
arrangements and/or under any Employment Agreement.
(d) Notwithstanding anything contained in this
Agreement to the contrary, in the event of a Change in Control,
the Executive may terminate employment with the Company and any
subsidiary for any reason, or without reason, by providing Notice
of Termination pursuant to Section 3 during the 30-day period
immediately following the first anniversary of the first
occurrence of a Change in Control with the right to the benefits
set forth in Section 4.
(e) Any termination of employment of the Executive,
including a termination for "Good Reason," but excluding a
termination for "Cause," or the removal of the Executive from the
office or position in the Company or any subsidiary that occurs
(i) not more than 180 days prior to the date on which a Change in
Control occurs and (ii) following the commencement of any
discussion with a third person that ultimately results in a
Change in Control shall be deemed to be a termination or removal
of the Executive after a Change in Control for purposes of this
Agreement.
3. Notice of Termination
Any termination of the Executive's employment with the
Company and its subsidiaries as contemplated by Section 2 shall
be communicated by written "Notice of Termination" to the other
party hereto. Any "Notice of Termination" shall indicate the
effective date of termination which shall not be less than 30
days or more than 60 days after the date the Notice of
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Termination is delivered (the "Termination Date"), the specific
provision in this Agreement relied upon, and, except for a
termination pursuant to Section 2(d), will set forth in
reasonable detail the facts and circumstances claimed to provide
a basis for such termination including, if applicable, the
failure after provision of written notice by the Executive to
effect a remedy pursuant to the final clause of Section 2(b)(ii),
2(b)(iii) or 2(b)(vi).
4. Termination Benefits
Subject to the conditions set forth in Section 2, the
following benefits shall be paid or provided to the Executive:
(a) Compensation
The Company shall pay to the Executive two times the
sum of (i) "Base Pay", which shall be an amount equal to the
greater of (A) the Executive's effective annual base salary at
the Termination Date or (B) the Executive's effective annual base
salary immediately prior to the Change in Control, plus (ii)
"Incentive Pay" equal to the greater of (x) the target annual
bonus payable to the Executive under the Company's Incentive
Compensation Plan or any other annual bonus plan for the fiscal
year of the Company in which the Change in Control occurred or
(y) the highest annual bonus earned by the Executive under the
Company's Incentive Compensation Plan or any other annual bonus
plan (whether paid currently or on a deferred basis) with respect
to any 12 consecutive month period during the three fiscal years
of the Company immediately preceding the fiscal year of the
Company in which the Change in Control occurred.
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(b) Welfare Benefits
For a period of 36 months following the Termination
Date (the "Continuation Period"), the Company shall arrange to
provide the Executive with benefits, including travel accident,
major medical, dental, vision care and other welfare benefit
programs in effect immediately prior to the Change in Control
("Employee Benefits") substantially similar to those that the
Executive was receiving or entitled to receive immediately prior
to the Termination Date (or, if greater, immediately prior to the
reduction, termination, or denial described in Section
2(b)(ii)(C)). If and to the extent that any benefit described in
this Section 4(b) is not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company or any
subsidiary, as the case may be, then the Company will itself pay
or provide for the payment to the Executive, his dependents and
beneficiaries, of such Employee Benefits along with, in the case
of any benefit which is subject to tax because it is not or
cannot be paid or provided under any such policy, plan, program
or arrangement of the Company or any subsidiary, an additional
amount such that after payment by the Executive, or his
dependents or beneficiaries, as the case may be, of all taxes so
imposed, the recipient retains an amount equal to such taxes.
Employee Benefits otherwise receivable by the Executive pursuant
to this Section 4(b) will be reduced to the extent comparable
welfare benefits are actually received by the Executive from
another employer during the Continuation Period, and any such
benefits actually received by the Executive shall be reported by
the Executive to the Company.
(c) Retirement Benefits
The Executive shall be deemed to be completely vested
in Executive's currently accrued benefits under the Company's
Retirement Benefit Plan and Supplemental Executive Retirement
Plan ("SERP") in effect as of the date of Change in Control
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(collectively, the "Plans"), regardless of his actual vesting
service credit thereunder. In addition, the Executive shall be
deemed to earn service credit for benefit calculation purposes
thereunder for the Continuation Period. Benefits under the Plans
will become payable at any time designated by the Executive
following termination of the Executive's employment with the
Company and its subsidiaries after the Executive reaches age 55,
subject to the terms of the Plans regarding the actuarial
adjustment of benefit payments commencing prior to normal
retirement age. The benefits to be paid pursuant to the Plans
shall be calculated as though the Executive's compensation rate
for each of the five years immediately preceding his retirement
equaled the sum of Base Pay plus Incentive Pay. Any benefits
payable pursuant to this Section 4(c) that are not payable out of
the Plans for any reason (including but not limited to any
applicable benefit limitations under the Employee Retirement
Income Security Act of 1974, as amended, or any restrictions
relating to the qualification of the Company's Retirement Benefit
Plan under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code")) shall be paid directly by the Company
out of its general assets.
(d) Relocation Benefits
If the Executive moves his residence in order to pursue
other business or employment opportunities during the
Continuation Period and requests in writing that the Company
provide relocation services, he will be reimbursed for any
expenses incurred in that initial relocation (including taxes
payable on the reimbursement) which are not reimbursed by another
employer. Benefits under this provision will include assistance
in selling the Executive's home and all other assistance and
benefits which were customarily provided by the Company to
transferred executives prior to the Change in Control.
(e) Executive Outplacement Counseling
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At the request of the Executive made in writing during
the Continuation Period, the Company shall engage an outplacement
counseling service of national reputation to assist the Executive
in obtaining employment.
(f) Stock Based Compensation Plans
(i) Any issued and outstanding Stock Options (to
the extent they have not already become exercisable)
shall become exercisable as of the date on which the
Change in Control occurs, unless otherwise specifically
provided at the time such options are granted.
(ii) The Company's right to rescind any award of
stock to the Executive under the Company's 1988 Long
Term Incentive Plan or the Company=s 1998 Long Term
Incentive Plan (or any successor plan) shall terminate
upon a Change in Control, and all restrictions on the
sale, pledge, hypothecation or other disposition of
shares of stock awarded pursuant to such plan shall be
removed at the Termination Date, unless otherwise
specifically provided at the time such award(s) are
made.
(iii) The Executive's rights under any other
stock based compensation plan shall vest (to the extent
they have not already vested) and any performance
criteria shall be deemed met at target as of the date
on which a Change in Control occurs, unless otherwise
specifically provided at the time such right(s) are
granted.
(g) Split Dollar Life Insurance
The Company shall pay to the Executive a lump sum equal
to the cost on the Termination Date of purchasing, at standard
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independent insurance premium rates, an individual paid up
insurance policy providing benefits equal to the benefits
provided by the Company's Split Dollar Life Insurance coverage
immediately prior to the date of the Change in Control.
(h) Other Benefits
(i) The Executive shall have all flight
privileges provided by the Company to Directors as of
the date of Change in Control until the Executive
reaches age 55, at which time he shall have all flight
privileges provided by the Company to its retirees who
held the same or similar position as the Executive
immediately prior to the Change in Control.
(ii) The Executive, at the Executive's option,
shall be entitled to continue the use of the
Executive's Company-provided automobile during the
Continuation Period under the same terms that applied
to the automobile immediately prior to the Change in
Control, or to purchase the automobile at its book
value as of the Termination Date.
(iii) The Company shall pay to the Executive
an amount equal to the cost to the Company of providing
any other perquisites and benefits of the Company in
effect immediately prior to the Change in Control,
calculated as if such benefits were continued during
the Continuation Period.
(i) Accrued Amounts
The Company shall pay to the Executive all other
amounts accrued or earned by the Executive through the
Termination Date and amounts otherwise owing under the then
existing plans and policies of the Company, including but not
limited to all amounts of compensation previously deferred by the
Executive (together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay not yet
paid by the Company.
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(j) The Company shall pay to the Executive the amounts
due pursuant to Sections 4(a), 4(g) and 4(h)(iii) in a lump sum
on the first business day of the month following the Termination
Date. The Company shall pay to the Executive the amounts due
pursuant to Section 4(i) in accordance with the terms and
conditions of the existing plans and policies of the Company.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, but subject to Section 5(h), in the event that
this Agreement shall become operative and it shall be determined
(as hereafter provided) that any payment (other than the Gross-Up
payments provided for in this Section 5) or distribution by the
Company or any of its subsidiaries to or for the benefit of the
Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without
limitation any stock option, stock appreciation right or similar
right, restricted stock, deferred stock or the lapse or
termination of any restriction on, deferral period or the vesting
or exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or
any successor provision thereto) by reason of being considered
"contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or
local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and
penalties, being hereafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an
additional payment or payments (collectively, a "Gross-Up
Payment"). The Gross-Up Payment shall be in an amount such that,
after payment by the Executive of all taxes (including any
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interest or penalties imposed with respect to such taxes),
including any Excise Tax and any income tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all
determinations required to be made under this Section 5,
including whether an Excise Tax is payable by the Executive and
the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, shall be made by a
nationally recognized accounting firm (the "Accounting Firm")
selected by the Executive in his sole discretion. The Executive
shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the
Executive within 30 calendar days after the Change in Control
Date, the Termination Date, if applicable, and any such other
time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax
is payable by the Executive, the Company shall pay the required
Gross-Up Payment to the Executive within five business days after
receipt of such determination and calculations with respect to
any Payment to the Executive. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall, at the
same time as it makes such determination, furnish the Company and
the Executive an opinion that the Executive has substantial
authority not to report any Excise Tax on his federal, state or
local income or other tax return. As a result of the uncertainty
in the application of Section 4999 of the Code (or any successor
provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made (an "Underpayment"), consistent
with the calculations required to be made hereunder. In the
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event that the Company exhausts or fails to pursue its remedies
pursuant to Section 5(f) and the Executive thereafter is required
to make a payment of any Excise Tax, the Executive shall direct
the Accounting Firm to determine the amount of the Underpayment
that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment shall be promptly
paid by the Company to, or for the benefit of, the Executive
within five business days after receipt of such determination and
calculations.
(c) The Company and the Executive shall each provide
the Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the Executive,
as the case may be, reasonably requested by the Accounting Firm,
and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and
calculations contemplated by Section 5(b). Any determination by
the Accounting Firm as to the amount of the Gross-Up Payment
shall be binding upon the Company and the Executive.
(d) The federal, state and local income or other tax
returns filed by the Executive shall be prepared and filed on a
consistent basis with the determination of the Accounting Firm
with respect to the Excise Tax payable by the Executive. The
Executive shall make proper payment of the amount of any Excise
Payment, and at the request of the Company, provide to the
Company true and correct copies (with any amendments) of his
federal income tax return as filed with the Internal Revenue
Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing
such payment. If prior to the filing of the Executive's federal
income tax return, or corresponding state or local tax return, if
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relevant, the Accounting Firm determines that the amount of the
Gross-Up Payment should be reduced, the Executive shall within
five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for
its services in connection with the determinations and
calculations contemplated by Section 5(b) shall be borne by the
Company. If such fees and expenses are initially paid by the
Executive, the Company shall reimburse the Executive the full
amount of such fees and expenses within five business days after
receipt from the Executive of a statement therefor and reasonable
evidence of his payment thereof.
(f) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service or any other taxing
authority that, if successful, would require the payment by the
Company of a Gross-Up Payment or any additional Gross-Up Payment.
Such notification shall be given as promptly as practicable but
no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the
extent known by the Executive). The Executive shall not pay such
claim prior to the earlier of (x) the expiration of the
30-calendar-day period following the date on which he gives such
notice to the Company and (y) the date that any payment of amount
with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) provide the Company with any written records
or documents in his possession relating to such claim
reasonably requested by the Company;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
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request in writing from time to time, including without
limitation accepting legal representation with respect
to such claim by an attorney competent in respect of
the subject matter and reasonably selected by the
Company;
(iii) cooperate with the Company in good faith
in order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including interest and penalties)
incurred in connection with such contest and shall indemnify and
hold harmless the Executive, on an after-tax basis, for and
against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
contest and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 5(f), the Company shall
control all proceedings taken in connection with the contest of
any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority
in respect of such claim (provided, however, that the Executive
may participate therein at his own cost and expense) and may, at
its option, either direct the Executive to pay the tax claimed
and xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay the tax claimed and xxx for a
refund, the Company shall advance the amount of such payment to
the Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any
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Excise Tax or income or other tax, including interest or
penalties with respect thereto, imposed with respect to such
advance; and provided further, however, that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which the contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(g) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 5(f), the
Executive receives any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 5(f)) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company
pursuant to Section 5(f), a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial or refund prior to
the expiration of 30 calendar days after such determination, then
such advance shall be forgiven and shall not be required to be
repaid and the amount of any such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid by the Company to the Executive pursuant to this Section 5.
(h) Notwithstanding any provision of this Agreement to
the contrary, if (i) but for this sentence, the Company would be
obligated to make a Gross-Up Payment to the Executive, (ii) the
20
aggregate "present value" of the "parachute payments" to be paid
or provided to the Executive under this Agreement or otherwise
does not exceed 1.15 multiplied by two times the Executive's
"base amount," and (iii) but for this sentence, the net after-tax
benefit to the Executive of the Gross-Up Payment would not exceed
$50,000 (taking into account both income taxes and any Excise
Tax), then the payments and benefits to be paid or provided under
this Agreement (including any stock based compensation pursuant
to Section 4(f)) will be reduced to the minimum extent necessary
(but in no event to less than zero) so that no portion of any
payment or benefit to the Executive, as so reduced, constitutes
an "excess parachute payment." For purposes of this Section
5(h), the terms "excess parachute payment," "present value,"
"parachute payment," and "base amount" will have the meanings
assigned to them by Section 280G of the Code. The determination
of whether any reduction in such payments or benefits to be
provided under this Agreement is required pursuant to the
preceding sentence will be made at the expense of the Company, if
requested by the Executive or the Company, by the Accounting
Firm. The fact that the Executive's right to payments or
benefits may be reduced by reason of the limitations contained in
this Section 5(h) will not of itself limit or otherwise affect
any other rights of the Executive other than pursuant to this
Agreement. In the event that any payment or benefit intended to
be provided under this Agreement or otherwise is required to be
reduced pursuant to this Section 5(h), the Executive will be
entitled to designate the payments and/or benefits to be so
reduced in order to give effect to this Section 5(h). The
Company will provide the Executive with all information
reasonably requested by the Executive to permit the Executive to
make such designation. In the event that the Executive fails to
make such designation within 10 business days of the Termination
Date, the Company may effect such reduction in any manner it
deems appropriate.
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6. No Mitigation Obligation. The Company hereby
acknowledges that it will be difficult and may be impossible for
the Executive to find reasonably comparable employment following
the Termination Date. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with
the terms of this Agreement is hereby acknowledged by the Company
to be reasonable, and the Executive will not be required to
mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation
on the part of the Executive hereunder or otherwise, except as
expressly provided in the last sentence of Section 4(b).
7. Legal Fees and Expenses.
(a) It is the intent of the Company that the Executive
not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or
otherwise because the cost and expense thereof would
substantially detract from the benefits intended to be extended
to the Executive hereunder. Accordingly, if it should appear to
the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the
Company or any other person takes or threatens to take any action
to declare this Agreement void or unenforceable, or institutes
any litigation or other action or proceeding designed to deny, or
to recover from, the Executive any or all of the benefits
provided or intended to be provided to the Executive hereunder,
the Company irrevocably authorizes the Executive from time to
time to retain counsel of Executive's choice, at the expense of
the Company as hereafter provided, to advise and represent the
Executive in connection with any such interpretation, enforcement
22
or defense, including without limitation the initiation or
defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or
other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an
attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and
such counsel. Without respect to whether the Executive prevails,
in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the
Executive in connection with any of the foregoing.
(b) Without limiting the obligations of the Company
pursuant to Section 7(a) hereof, in the event a Change in Control
occurs, the performance of the Company's obligations under this
Section 7 shall be secured by amounts deposited or to be
deposited in trust pursuant to certain trust agreements to which
the Company shall be a party, which amounts deposited shall in
the aggregate be not less than $2,000,000, providing that the
fees and expenses of counsel selected from time to time by the
Executive pursuant to Section 7(a) shall be paid, or reimbursed
to the Executive if paid by the Executive, either in accordance
with the terms of such trust agreements, or, if not so provided,
on a regular, periodic basis upon presentation by the Executive
to the trustee of a statement or statements prepared by such
counsel in accordance with its customary practices. Any failure
by the Company to satisfy any of its obligations under this
Section 7(b) shall not limit the rights of the Executive
hereunder. Subject to the foregoing, the Executive shall have
the status of a general unsecured creditor of the Company and
shall have no right to, or security interest in, any assets of
the Company or any subsidiary.
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8. Continuing Obligations
(a) The Executive hereby agrees that all documents,
records, techniques, business secrets and other information which
have come into his possession from time to time during his
employment with the Company shall be deemed to be confidential
and proprietary to the Company and, except for personal documents
and records of the Executive, shall be returned to the Company.
The Executive further agrees to retain in confidence any
confidential information known to him concerning the Company and
its subsidiaries and their respective businesses so long as such
information is not publicly disclosed, except that Executive may
disclose any such information required to be disclosed in the
normal course of his employment with the Company or pursuant to
any court order or other legal process.
(b) The Executive hereby agrees that during the
Continuation Period, he will not directly or indirectly solicit
any employee of the Company or any of its subsidiaries or
affiliated companies to join the employ of any entity that
competes with the Company or any of its subsidiaries or
affiliated companies.
9. Successors
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance
satisfactory to the Executive to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. Failure of such successor entity to
enter into such agreement prior to the effective date of any such
succession (or, if later, within three business days after first
receiving a written request for such agreement) shall constitute
a breach of this Agreement and shall entitle the Executive to
24
terminate his employment pursuant to Section 2(a)(ii) and to
receive the payments and benefits provided under Section 4. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which executes and delivers the Agreement
provided for in this Section 9 or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of
law.
(b) This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive dies while
any amounts are payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to his devisee, legatee or other
designee or, if there is no such designee, to his estate.
10. Notices
For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in
writing and will be deemed to have been duly given when hand
delivered or dispatched by electronic facsimile transmission
(with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, or three
business days after having been sent by a nationally recognized
overnight courier service addressed to the Company (to the
attention of the Secretary of the Company, with a copy to the
General Counsel of the Company) at its principal executive office
and to the Executive at his principal residence, or to such other
address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of
address shall be effective only upon receipt.
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11. Governing Law
THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE
OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE.
12. Miscellaneous
No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this
Agreement (or in any employment or other written agreement
relating to the Executive). Notwithstanding any provision of
this Agreement to the contrary, the parties' respective rights
and obligations under Sections 4, 5 and 7 will survive any
termination or expiration of this Agreement or the termination of
the Executive's employment following a Change in Control for any
reason whatsoever. Nothing expressed or implied in this
Agreement will create any right or duty on the part of the
Company or the Executive to have the Executive remain in the
employment of the Company or any subsidiary prior to or following
any Change in Control. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other
taxes as the Company is required to withhold pursuant to any law
or government regulation or ruling. In the event that the
Company refuses or otherwise fails to make a payment when due and
it is ultimately decided that the Executive is entitled to such
26
payment, such payment shall be increased to reflect an interest
factor, compounded annually, equal to the prime rate in effect as
of the date the payment was first due plus two points. For this
purpose, the prime rate shall be based on the rate identified by
Chase Manhattan Bank as its prime rate.
13. Separability
The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full
force and effect.
14. Non-assignability
This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder,
except as provided in Section 9. Without limiting the foregoing,
the Executive's right to receive payments hereunder shall not be
assignable or transferable, whether by pledge, creation of a
security interest or otherwise, other than a transfer by his will
or by the laws of descent or distribution, and in the event of
any attempted assignment or transfer by Executive contrary to
this Section 14 the Company shall have no liability to pay any
amount so attempted to be assigned or transferred to any person
other than the Executive or, in the event of his death, his
designated beneficiary or, in the absence of an effective
beneficiary designation, the Executive's estate.
15. Effectiveness; Term
This Agreement will be effective and binding as of the date
first above written immediately upon its execution, but, anything
in this Agreement to the contrary notwithstanding, this Agreement
will not be operative unless and until a Change in Control
27
occurs. Upon the occurrence of a Change in Control at any time
during the Term (as defined below), without further action, this
Agreement shall become immediately operative. For purposes of
this Agreement, "Term" means the period commencing as of the date
first above written and expiring as of the later of (i) the fifth
anniversary of the date first above written or (ii) the second
anniversary of the first occurrence of a Change in Control;
provided, however, that (A) commencing on the fifth anniversary
of the date first above written and each fifth anniversary date
thereafter, the Term of this Agreement will automatically be
extended for an additional five years unless, not later than 180
days preceding each such fifth anniversary date, the Company or
the Executive shall have given notice that it or the Executive,
as the case may be, does not wish to have the Term extended and
(B) subject to Section 2(e), if, prior to a Change in Control,
the Executive ceases for any reason to be an employee of the
Company and any subsidiary, thereupon without further action the
Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect. For purposes
of this Section 15, the Executive shall not be deemed to have
ceased to be an employee of the Company and any subsidiary by
reason of the transfer of Executive's employment between the
Company and any subsidiary, or among any subsidiaries.
16 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same agreement.
17 Prior Agreement. This Agreement supersedes and
terminates any and all prior Executive Termination Benefits
28
Agreements by and among Company and the Executive.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered as of the day and year first above
set forth, thereby mutually and voluntarily agreeing that this
Agreement supersedes and replaces any prior similar agreements
for such termination benefits.
AMR CORPORATION
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
AMERICAN AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
XXXXXXX X. XXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxx
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