27 Exhibit 10.1
AMERICAN AIRLINES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM, AS AMENDED
EFFECTIVE JANUARY 1, 1985
Amended April 1998
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TABLE OF CONTENTS
Article Subject
I Definitions
II Benefits
III Payments of Benefits
IV Amendment and
Termination
V General Conditions
VI Funding
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PURPOSE
This Plan provides supplemental pension benefits to the
elected officers of American Airlines, Inc. and other key
employees (as designated by the Chairman of American
Airlines, Inc.). The supplemental benefits consist of
amounts in excess of the maximum pension benefits payable
under a Participant's Base Plan and a retirement benefit
based on a Participant's Incentive Compensation and
Performance Returns.
ARTICLE I
DEFINITIONS
1.1 Act - The Employee Retirement Income Security Act of
1974, as amended, and any successor thereto.
1.2 Average Incentive Compensation - An amount calculated as
follows:
(a) The sum of a Participant's five highest annual
Incentive Compensation awards (or the sum of all
awards if a Participant has fewer than five such
awards) paid to a participant during the time
period beginning on or after January 1, 1985, and
ending the earlier of: i) the Participant's actual
retirement under the Base Plan, ii) the
Participant's death, or iii) the Participant's
retirement. If an individual earns less than a
full year of Credited Service as a Participant in
any year in which Incentive Compensation is paid,
that portion of the Incentive Compensation taken
into account will be prorated based on the number
of months in which the individual earns any
Credited Service while a Participant.
(b) Divide the sum determined in (a), above, by 5.
1.3 Average Performance Returns - An amount calculated as
follows:
(a) The sum of a Participant's five highest annual
Performance Return awards (or the sum of all awards
if a Participant has fewer than five such awards)
paid in the ten calendar years preceding the first
to occur of: i) the Participant's actual retirement
under the Base Plan, ii) the Participant's death,
or iii) the Participant's retirement.
(b) Divide the sum determined in (a), above, by 5.
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1.4 Base Plan - The Retirement Benefit Plan(s) of the
Company which qualify under Section 401 of the Code (or
its successor provision) and under which a Participant
is eligible to receive benefits.
1.5 Base Plan Benefit - The annual benefit which a
Participant or beneficiary is entitled to receive from
the Base Plan upon retirement, disability, death or
termination of employment, subject to Base Plan
provisions which limit such benefit to the maximum
amount permitted by the Code.
1.6 Code - The Internal Revenue Code of 1986, as amended.
1.7 Committee - The administrative committee appointed to
manage and administer the Plan.
1.8 Company - American Airlines, Inc. and any subsidiary
thereof or of AMR Corporation ("AMR") which is
designated for inclusion in the Plan as determined by
the Board of Directors of AMR.
1.9 Credited Service - Credited Service as defined and
determined under the Participant's Base Plan.
1.10 Excess Retirement Benefit - The amount by which the
Participant's Total Benefit exceeds the corresponding
Base Plan Benefit, if any.
1.11 Incentive Compensation - Compensation paid to a
participant on or after January 1, 1985, in accordance
with one of the incentive compensation plans adopted by
the Board of Directors of the Company, whether paid
currently or deferred. For purposes of this definition,
long-term, multi-year incentive compensation plans are
not included.
1.12 Participant - An elected officer of American Airlines,
Inc. (or designated officers of another Company) who is
a participant in a Base Plan or an individual who has
been designated as being a Participant in a writing
signed by the Chairman of the Company.
1.13 Performance Returns - Compensation paid to a
Participant, on a specified portion of career equity
shares granted to a Participant, as determined by the
Board of Directors of the Company.
1.14 Plan - The Supplemental Executive Retirement Program of
American Airlines, Inc.
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1.15 Supplemental Incentive Compensation Retirement Benefit -
The amount determined by multiplying the Average
Incentive Compensation by 2% for each year of Credited
Service.
1.16 Supplemental Performance Return Retirement Benefit - The
amount determined by multiplying the Average Performance
Return by 2% for each year of Credited Service.
1.17 Total Benefit - The annual amount of a Participant's or
a beneficiary's benefit under the Base Plan computed
without regard to Base Plan provisions which limit the
benefit to the maximum amount permitted by the Code.
ARTICLE II
BENEFITS
2.1 The Plan will pay a Participant an annual retirement
benefit equal to the sum of a Participant's Excess
Retirement Benefit, Supplemental Incentive Compensation
Retirement Benefit, and Supplemental Performance Return
Retirement Benefit.
2.2 The benefit under Section 2.1 of this Plan will be
reduced by a Social Security offset amount, if any,
determined in accordance with the applicable provisions
of the Base Plan.
2.3 If no benefit is payable under the Base Plan, then no
benefit will be payable under this Plan.
ARTICLE III
PAYMENT OF BENEFITS
3.1 Except as provided in Sections 3.3, 3.4, 3.5 and 5.3,
benefits hereunder shall be payable at the same time and
in the same manner hereunder as under the Base Plan.
Any designation of beneficiary or contingent annuitant
or revocation in effect under the Base Plan shall be in
effect under this Plan.
3.2 All rules of the Base Plan consistent with this Plan
will apply, including but not limited to, Social
Security offset provisions, early retirement reductions,
optional forms of benefit, pre-retirement surviving
spouse's annuity, and spousal consent requirements.
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3.3 Except as provided in Sections 3.4 and 3.5, all benefits
under this Plan will be paid in monthly installments
only, unless the Committee in its sole discretion
directs payment in another form. The Participant may
elect any of the standard equity forms provided under
the Base Plan.
3.4 In lieu of monthly payments pursuant to 3.3, a
Participant may elect to claim a lump-sum, one-time
payment equal to the present value of the Benefits to be
paid pursuant to Article II of this Agreement (the "Lump-
Sum Payment"). Such claim shall i) be in writing, ii)
be in a form as prescribed by the Company, iii) be
addressed to the Company's Vice President Human
Resources, or successor, and iv) be made by a
Participant at least one year (or such lesser period as
the Committee may permit) before he or she commences
payments or one year before age 65, whichever is the
first to occur. In addition to the foregoing, the
Participant must execute a general release; submit to a
physical examination to provide medical evidence of
normal life expectancy satisfactory to the Company; and
provide consent of spouse, if married. If the
Participant's claim is denied, the Participant or the
Participant's spouse will receive a written notice. Any
appeal of a denied claim under this Section 3.4 will be
processed in accordance with the appeal procedures of
the Base Plan. In calculating the Lump-Sum Payment, the
interest rate shall be equal to the applicable interest
rate promulgated by the IRS under Code Section 417(e)(3)
for the third calendar month preceding the Participant's
retirement date. Upon acceptance of the lump-sum claim,
the Lump-Sum Payment will be paid to the Participant
within 30 days of the Participant's first receipt of
benefits under the Base Plan.
3.5 Upon a Change in Control or Potential Change in Control
(each as defined in the 1988 Long-Term Incentive Plan
(or its successor plan) of AMR) with respect to AMR, a
Participant will receive a lump-sum, one-time payment
equal to the present value of the remaining Benefits to
be paid pursuant to Article II of this Agreement (the
"Change in Control Payment"), unless the Participant
elects to continue to receive monthly payments pursuant
to Section 3.3. Such an election shall i) be in
writing, ii) be in a form as prescribed by the Company,
iii) be addressed to the Company's Vice President Human
Resources, or successor, and iv) be made by the
Participant within 30 days following the Change in
Control or the Potential Change in Control. Prior to
receiving the Change in Control Payment, the Participant
may be required to execute a general release and to
provide consent of spouse, if married. In calculating
the Change in Control Payment, the interest rate shall
be equal to the applicable interest rate promulgated by
the IRS under Code Section 417(e)(3) for the third month
preceding the Change in Control or Potential Change in
Control. The
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Change in Control Payment will be paid to the Participant
within 60 days following the Change in Control or the
Potential Change in Control.
ARTICLE IV
AMENDMENT AND TERMINATION
4.1 The Board of Directors of the Company, or such person or
persons, including the Committee, as may be designated
in writing, may amend or terminate the Plan at any time.
4.2 No such amendment or termination pursuant to Section 4.1
shall adversely affect a benefit payable under this Plan
with respect to a Participant's employment by the
Company prior to the date of such amendment or
termination unless such benefit is or becomes payable
under a successor plan or practice adopted by the Board
of Directors or its designee.
4.3 Notwithstanding Sections 4.1 and 4.2 of the Plan, no
changes or amendments (including termination) to the
Plan will be permitted after a Change in Control or
Potential Change in Control (each as defined in the 1988
Long Term Incentive Plan (or its successor plan) of
AMR).
ARTICLE V
GENERAL CONDITIONS
5.1 The right to receive benefits under the Plan may not be
anticipated, alienated, sold, transferred, assigned,
pledged, encumbered or subjected to any charge or legal
process, and if any attempt is made to do so or a person
eligible for any benefit becomes bankrupt, the interest
under the Plan of the person affected may be terminated
by the Committee and the Committee may in its sole
discretion cause the same to be held or applied for the
benefit of one or more of the dependents of such person.
5.2 All questions pertaining to the construction, validity
and effect of the Plan shall be determined in accordance
with the laws of the United States and the State of
Texas.
5.3 In the event of any act of God, war, natural disaster,
aircraft grounding, revocation of operating certificate,
terrorism, strike, lockout, labor dispute, work
stoppage, fire, epidemic or quarantine restriction, act
of government, critical materials shortage, or any other
act, whether similar or dissimilar,
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beyond the control of the Company (each, a "Force
Majeure Event"), which Force Majeure Event affects the
Company or its Subsidiaries or its Affiliates, the Board
of Directors of the Company, at its sole discretion, may
suspend, delay, defer or substitute (for such period of
time as the Board of Directors of the Company may deem
necessary) any payments due currently or in the future
under the Plan, including, but not limited to, any
payments that have accrued to the benefit of Participant
but have not yet been paid.
5.4 This non-qualified plan shall be a plan that is unfunded
and maintained by Company to provide deferred
compensation to a select group of management or highly-
compensated employees (a "top-hat" plan) as defined in
sections 201(2), 301(a)(3), and 401(a)(1) of the Act.
ARTICLE VI
FUNDING
The Company will pay the entire cost of the Plan. It is the
intent of the Company to pay benefits as they become payable
from its general assets.
ARTICLE VII
TRUST
7.1 To assist in the payment of benefits following a Change
in Control or Potential Change in Control (each as
defined in the 1988 Long-Term Incentive Plan (or its
successor plan) of AMR) with respect to AMR, the Board
of Directors of the Company or its General Counsel or
its Corporate Secretary may establish a trust.
7.2 The trust which may be established pursuant to Section
7.1 will be: i) with a nationally recognized banking
institution with experience in serving as a trustee for
such matters, ii) pursuant to such documentation as
recommended by outside counsel to the Company, and iii)
funded so as to enable the trust to pay the benefits
contemplated under the Plan as may be determined by the
Company's independent compensation consultant. In
addition, the Company's Board of Directors, its General
Counsel or its Corporate Secretary, may take those
additional actions deemed reasonably necessary to
accomplish the stated purpose of Section 7.1.
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SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM (SERP)
LUMP-SUM PAYMENT
EXAMPLE CALCULATION
OFFICER AGE 61
AGE 61
GENDER MALE
RETIREMENT DATE May-98
ANNUAL SERP BENEFIT (1) $75,000
INTEREST RATE (2) 5.89%
PAYMENT TIME (3) IMMEDIATE
LUMP-SUM FACTOR (4) 11.0916
ANNUAL SERP BENEFIT $75,000
LUMP-SUM FACTOR X 11.0916
LUMP-SUM PAYMENT $831,870
(Annual SERP Benefit x
Lump-Sum Factor)
Notes:
(1) The Annual SERP Benefit is calculated using current SERP
policy and a Single Life Annuity. Single Life Annuity yields
the greatest benefit as there is no survivor benefit for a
spouse.
(2) The interest rate is the rate promulgated by the IRS
under Code Section 417 (e)(3) for the third month prior to
retirement (average February rate for May retirement). The
Pilot Plan utilizes 120% of the PBGC for the second month
prior to retirement. PBGC is a beginning of the month rate.
(March 1 rate for May retirement).
(3) Assumed immediate distribution of the Lump-Sum Payment.
(4) The Lump-Sum Factor is based on four variables: gender
and age of officer, interest rate and mortality table. Lump-
Sum Tables (one male/one female) are created each month based
on the 1983 Group Annuity Mortality Table and the applicable
IRS Code Section 417(e)(3) interest rate The Lump-Sum Tables
are a list of ages and present value factors.
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