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EXHIBIT 10.64
AMENDED AND RESTATED
EXECUTIVE TERMINATION BENEFITS AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE TERMINATION BENEFITS AGREEMENT (this
"Agreement"), dated as of the 21st day of May, 1998 is among AMR CORPORATION, a
Delaware corporation, AMERICAN AIRLINES, INC., a Delaware corporation
(collectively the "Company"), and XXXXXX X. XXXXX (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;
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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 (the "Exchange Act"), and as used in
Sections 13(d) and
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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
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beneficially own, 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 Benefits (as defined below) or a reduction in the
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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
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law) assumed all duties 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 eight
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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
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"Cause" 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 three 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, plus (iii) "Performance Returns" equal to the highest annual
payment of performance returns paid to the Executive 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 (collectively, the
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"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 plus Performance Returns. 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.
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(e) Executive Outplacement Counseling
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 independent insurance premium
rates, an individual
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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
interest or
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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 relevant, the Accounting
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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 request in writing from time to time,
including without
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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 aggregate "present value" of the "parachute
payments" to be paid or provided
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to the Executive under this Agreement or otherwise does not exceed 1.15
multiplied by three 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 or
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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
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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 such as FedEx, UPS,
or Purolator, 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
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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 occurs. Upon the
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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 Agreements by and among Company and
the Executive.
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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/ Xxxx X. XxXxxxxx
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AMERICAN AIRLINES, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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XXXXXX X. XXXXX
/s/ Xxxxxx X. Xxxxx
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