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AMR - Executive Termination Benefits Agreement
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 JEFFREY J. BRUNDAGE (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 be...
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