EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of September 18, 1998 between United Air
Lines, Inc. ("United") and UAL Corporation ("UAL", UA and
UAL sometimes collectively referred to as "United") and John
A. Edwardson residing at 747 Sheridan Road, Wilmette,
Illinois 60091 (sometimes referred to as "Executive").
WHEREAS, Executive has served and is presently serving
as President and Chief Operating Officer (hereinafter
referred to as "Executive Position"); and as a Director of
UAL, a Director of UA and holds various other positions and
directorships with subsidiaries and affiliates of UA or UAL
(hereinafter collectively referred to as "Executive Positions");
WHEREAS, Executive is desirous of pursuing interests
outside of United; and
WHEREAS, United wishes to facilitate Executive's
desires as stated above but also to retain Executive's
services on the basis described herein; and
WHEREAS, Executive has agreed in this Agreement to
provide such services and to release United from any
liability arising out of his hire and employment with United
and his resignation from his Executive Positions;
NOW, THEREFORE, it is agreed by and between United and
Executive as follows:
1. Resignation; Continued Employment: Executive hereby
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resigns from his Executive Positions all effective September
18, 1998 and this Agreement otherwise shall become effective
as of September 25, 1998 (the "Effective Date"). Thereafter,
Executive will be employed by United, and he will perform
services for United by being "on call", including testifying
on behalf of United, and such assignments consistent with
Executive's experience as may be reasonably requested by
United's Chairman and reasonably acceptable to Executive.
2. Time Period of Employment: United agrees to
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employ Executive and Executive agrees to be employed by
United on the basis stated in Paragraph 1 from the Effective
Date through September 24, 2001, subject to sooner
termination pursuant to Paragraph 5 (such period, as it may
be shortened pursuant to Paragraph 5, being herein called
the "Term").
3. Compensation:
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A. United will pay Executive a salary of
$41,348.67 per month beginning with the Effective
Date and continuing through December 31, 1998.
B. United will pay Executive a salary of
$2,500.00 per month beginning January 1, 1999 and
continuing for the Term.
C. On January 4, 1999 United will pay Executive
a lump sum severance payment in the amount of
$2,501,816.13. Such lump sum payment will not be
considered earnings for any employee benefit plan
except as specified in Paragraph 4.H.
D. The salary payments provided for in
Paragraphs 3.A and 3.B will be made on the same
schedule as actively employed officers of United
from time to time, currently the 15th and last day
of each month. Any amounts will be prorated for
any partial month. All payments, including the
lump sum payment in paragraph 3.C., will be
subject to withholding for taxes and other
purposes as required by applicable law. During
the Term, Executive will not be entitled to any
increase nor subject to any decrease in such payments.
4. Benefits: Notwithstanding what may be provided to
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other active employees of United from time to time,
Executive shall be entitled to the following benefits, and
only the following benefits, during the Term as follows:
A. Free and Reduced Rate Transportation: United
shall provide to Executive and his eligibles free
and reduced rate transportation of the type
granted to active officers in accordance with
company regulations as revised from time to time.
At the regular September, 1998 UAL board of
directors meeting, United shall also seek the
designation Director Emeritus for Executive from
the UAL board of directors, to confer upon
Executive the travel and cargo privileges accorded
a Director Emeritus. If Executive is designated
Director Emeritus at any time during the Term,
Executive and his eligibles will thereafter no
longer be entitled to the free and reduced rate
transportation granted to active officers. United
shall have no responsibility to Executive with
respect to transportation after the Term if the
UAL board of directors does not approve such
designation.
B. United Air Lines, Inc. Management and Salaried
Employees' Retirement Plan:
Executive's participation in (i) the United Air Lines,
Inc. Management and Salaried Employees' Retirement Plan
(the "Qualified Retirement Plan") and (ii) the United
Air Lines, Inc. Supplemental Retirement Plan (the
"Supplemental Plan") shall be in accordance with their
terms (collectively, the "Retirement Plan") and the
provisions of this Agreement.
For purposes of determining the amount of the
Executive's pension benefit under the Retirement Plan,
United agrees that (a) Executive's Final Average
Earnings shall be $1,029,643.32 ($85,803.61 when
expressed as a monthly amount), which takes into
account the payments to be made to the Executive under
Paragraph 3 above, (b) Executive's years of
participation credit shall be 16.167, (c) the service
requirement for retirement is waived, and (d) no
decrement based upon the Executive's age shall be
imposed. Notwithstanding Executive's continued
employment during the Term or otherwise, in no event
shall the Executive's Final Average Earnings or years
of participation credit exceed the amounts set forth
above. Based on the foregoing, Executive is entitled
to a monthly single life annuity of $21,827.13 (.016
times 16.167 times $85,803.61 less $367.86 for the cost
of the pre-retirement survivor benefit), commencing on
the first day of the month following the Executive's
attainment of age 55. Except as provided in the last
sentence of the following paragraph, to the extent the
retirement benefit cannot be paid from the Qualified
Retirement Plan due to IRS limitations, the payment
shall be paid from the Supplemental Plan.
Executive may elect in writing prior to December 31,
1998 to receive a lump sum payment in lieu of the
portion of such benefit payable under the Supplemental
Plan. The lump sum payment will be equal to the
actuarial equivalent lump sum value of the $21,827.13
monthly life annuity described above, reduced by the
actuarial lump sum value of the portion of such annuity
expected to be paid under the Qualified Retirement
Plan. The actuarial lump sum values shall be
calculated as of January 1, 1999, using the following
assumptions: the GAM-83 unisex mortality table, the
current FAS-87 discount interest rate of 7% and by
increasing Executive's attained age as of January 1,
1999 by three (3) years. The lump sum payment shall be
made to the Executive on January 4, 1999. In the event
Executive has elected to receive the lump sum payment
and he dies prior to the payment thereof, then the lump
sum amount shall be paid to the Executive's surviving
spouse on January 4, 1999, as if the Executive had
survived to that day (or, if his spouse does not
survive to January 4, 1999, then his estate). Upon
receipt of the lump sum payment, neither Executive nor
Executive's spouse or estate shall be entitled to any
additional payments under the Supplemental Plan and the
only benefits payable shall be those under the
Qualified Retirement Plan in accordance with its terms.
United agrees to provide Executive with a calculation
of the estimated amount of the lump sum payment within
twelve (12) business days of the date of this
Agreement. Executive acknowledges that the benefits
payable hereunder will be subject to withholding for
taxes and will not be considered earnings for the
purposes of any employee benefit plan. Executive
further acknowledges that he shall not be entitled to
any additional participation credit under the
Retirement Plan with respect to employment during the
Term hereof.
C. Management Medical/Dental: Executive and his
eligible dependents shall continue to be covered
by the Management Medical/Dental Plan in the same
manner as other active employees.
D. Group Life Insurance: Executive shall continue to
be covered by Group Life Insurance including
Contributory Life Insurance (if so covered), on
the same basis as other active employees, provided
the appropriate payroll deductions are authorized
and in accordance with the terms of the policies.
E. Officer's Accidental Death and Dismemberment
Insurance/Split Dollar Life Insurance:
Executive's Officer's Accidental Death and
Dismemberment coverage of $250,000 will continue
until the termination of this Agreement as
provided in Paragraph 5 herein. Executive will
have the option of converting up to $100,000 of
this coverage to a private policy within 31 days
of termination, if Executive so chooses.
Executive will continue to be covered by the
Officer's Split Dollar Life Insurance until
termination of this Agreement. The terms of
Executive's coverage and option for continuation
of the Officer's Split Dollar Life Insurance after
termination of this Agreement will be explained in
a separate letter upon termination of this Agreement.
F. Disability Income Benefits: Executive will
continue to be covered by the Long Term Disability
plan and provided he is qualified under the terms
of the Plan, and provided he makes such payments
as may be required by the Plan Administrator, will
be eligible for any disability income benefits
from company disability insurance plans.
G. Stock: Stock grants or awards made to Executive under the
UAL, Inc. 1981 Incentive Stock Plan (the "Plan") and the 1988
Restricted Stock Plan ("1988 Plan") before the Effective Date
will immediately vest upon the Effective Date. Executive's
resignation of his employment under Paragraph 1 is an early
retirement under the Supplemental Plan within the meaning of the
Plan and the Option Agreements. Accordingly, Executive shall
have until the expiration date as originally fixed to exercise
each such option. Executive will not be eligible for any grants
made under the Plan or the 1988 Plan after the Effective Date.
H. Employee Stock Ownership Plan: Executive will
continue to be eligible to participate in the
current ESOP and to receive future stock
allocations in accordance with the terms of the
plan. For the purpose of determining the amount of
stock to be allocated to Executive's ESOP account
for the 1999 and 2000 plan years, the compensation
described in Paragraph 3.B will be excluded and
the lump sum payment provided in Paragraph 3.C.
will be deemed to have been paid as follows:
Executive's monthly salary will be deemed to be
$41,348.67 and a bonus deemed to have been
received as follows - $362,596 paid March, 1999
and $421,756 paid March, 2000. Such stock
allocation will be made to the Supplemental ESOP.
I. Financial Planning Services: Executive will be
eligible to utilize financial planning services on
the same basis as an actively employed senior
officer of United as of the Effective Date.
Annual allocations of $4,000 each will be made in
the years 1999, 2000 and 2001.
J. Club Fees: United will continue to reimburse
Executive for club membership fees for each year
during the Term up to the annual amount United
reimburses Executive as of the Effective Date.
K. Other Fees: United will reimburse Executive for
expenses for office space and secretarial support
for up to one year following the Effective Date of
this Agreement. United will also reimburse
Executive for legal, accounting and advisor fees
and expenses reasonably incurred by the Executive
in connection with the negotiation and preparation
of this Agreement and media communications
concerning Executive's resignation of his
Executive Positions. The maximum amount United
will reimburse for all expenses described in this
Paragraph 4.K. is $75,000.
L. Automobile: Executive will dispose of the vehicle
United currently leases for Executive in
accordance with directions provided by United.
United will pay to Executive an annual car
allowance of $7,500. Such allowance shall be
payable no later than January 15 of each year and
will be subject to withholding for taxes and other
purposes as required by applicable law.
M. Other Benefits: Executive will continue to be
eligible to participate in the stock purchase
plan, 401(k) plan, Flexible Spending Account, and
be eligible for payroll savings bonds on the same
basis as other active employees. Executive will
also be eligible to utilize the Credit Union
subject to its rules.
N. Vacation and Holidays: Executive will be paid for
any accrued but unused vacation time accrued as of
the Effective Date. Such payment will be made
within 30 days of the Effective Date of this Agreement.
O. Each of the benefits enumerated in Paragraph 4 is
subject to the practices, rules, and regulations
of United, as in effect from time to time.
5. Termination of Employment Under Agreement:
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A. Non-Election of Executive: Executive's employment
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under this Agreement shall terminate and Executive will no
longer have the status of an active employee of United and,
except as specifically provided in this Agreement, will no
longer be entitled to any of the benefits of this Agreement
(including the entitlement to the payment and benefits
described in Paragraph 4, other than those required by law
or otherwise vested), on the happening of the earliest of
the following events:
(i) Executive's death;
(ii) 11:59 p.m. on September 24, 2001.
Notwithstanding such termination, Executive shall
continue to be bound by the provisions of Paragraphs 6
through 20 of this Agreement.
B. Election of Executive: During the Term, if
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Executive elects to terminate his employment for any reason,
Executive will receive a one time lump sum payment (subject
to withholding for taxes and other purposes as required by
applicable laws) in an amount equal to the sum of the
remaining payments payable under Paragraph 3 of this
Agreement between the effective date of Executive's election
to terminate his employment under this Agreement and
September 24, 2001. Such payment will be made promptly
following Executive's termination of employment, but not
earlier than January 1, 1999. Before Executive's election
to terminate under this paragraph can become effective,
Executive must have provided United seven (7) days' written
notice of his election by registered mail addressed to the
Chairman of United at its principal World Headquarters
offices. Executive's termination of employment will be as
of the seventh (7th) day after receipt by United of such
notice, at which time he will no longer have the status of
an active employee of United (including the entitlement to
benefits described in Paragraph 4, other than those required
by law or otherwise vested).
6. [Reserved]
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7. Assent and Release: A. In consideration for the
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payments and benefits provided in this Agreement, Executive
hereby voluntarily, knowingly, willingly, irrevocably, and
unconditionally releases UA and UAL together with their
respective parents, subsidiaries and affiliates, and each of
their respective officers, directors, employees,
representatives, attorneys and agents, and each of their
respective predecessors, successors and assigns
(collectively, the "Releasees") from any and all charges,
complaints, claims, liabilities, obligations, promises,
agreements, causes of action, rights, costs, losses, debts,
and expenses of any nature whatsoever, known or unknown,
which against them Executive or his successors or assigns
ever had, now have or hereafter can, shall or may have
(either directly, indirectly, derivatively or in any other
representative capacity) by reason of any matter, fact or
cause whatsoever arising from the beginning of time to the
date of this Agreement, including without limitation all
claims arising under Title VII of the Civil Rights Act of
1964, the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"), and all other federal, state or
local laws, rules, regulations, judicial decisions or public
policies now or hereafter recognized. This release by
Executive of the Releasees also includes, without
limitation, all claims arising under each employee pension,
employee welfare, and executive compensation plan of United
now in effect or hereafter adopted, except for any benefits
to be provided to Executive under this Agreement or
resulting, in the normal course, from Executive's employment
through the Effective Date. It is agreed that this
paragraph shall survive termination of this Agreement.
B. Executive expressly acknowledges and agrees that,
by entering into this Agreement, Executive is waiving any
and all rights or claims that he may have arising under the
Age Discrimination in Employment Act of 1967, as amended,
which have arisen on or before the date of execution of this
Agreement. Executive further expressly acknowledges and
agrees that:
(i) In return for this Agreement, Executive will
receive compensation beyond that which he was already
entitled to receive before entering into this Agreement;
(ii) Executive has been advised by United to
consult with an attorney before signing this Agreement;
(iii) Executive was given a copy of this
Agreement on September 12, 1998 and informed that
Executive had twenty-one (21) days within which to
consider the Agreement and, if Executive considers this
Agreement for fewer than 21 days, then Executive agrees
that he has had a reasonable period of time to consider
the Agreement; and
(iv) Executive was informed that Executive had
seven (7) days following the date of execution of the
Agreement in which to revoke the Agreement. After
seven (7) days this Agreement will become effective,
enforceable and irrevocable unless written revocation
is received by the undersigned from Executive on or
before the close of business on the seventh (7th) day
after Executive executed this Agreement. If Executive
revokes this Agreement it shall not be effective or
enforceable and Executive will not receive the
compensation or benefits described in this Agreement,
other than those required by law or otherwise vested.
8. Non-Assignability: This Agreement and the
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benefits hereunder are not assignable or transferable by
Executive.
9. Binding of Successors. United will be required to have
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any successor to all or substantially all of its business and/or
assets expressly assume and agree to perform this Agreement in
the same manner and to the same extent that United would be
required to perform if no such succession had taken place.
10. Paragraph Reference: Any reference to paragraphs
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or subparagraphs shall be references to paragraphs or
subparagraphs of this Agreement unless expressly stated otherwise.
11. Severability: If any provision of this Agreement
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or the application thereof is held invalid, the invalidity
shall not affect other provisions or applications of this
Agreement which can be given effect without the invalid
provisions or application in accordance with the essential
intent and purpose of this Agreement, and to this end the
provisions of this Agreement are declared to be severable.
12. Gross-Up Payment for Golden Parachute Taxes.
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If it is determined that any payment by United to or for the benefit
of the Executive, under the Agreement or otherwise, would be subject
to the federal excise taxes imposed on golden parachute payments,
United will make an additional payment to the Executive (the
"Gross-Up Payment") in amount sufficient to cover:
(a) Any golden parachute excise tax payable by the Executive,
(b) All taxes on the Gross-Up Payment, and
(c) All interest and/or penalties imposed with respect to
such taxes.
13. Withholding. Anything in this Agreement to the
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contrary notwithstanding, all payments required to be made by the
Employer hereunder to the Executive shall be subject to
withholding of such amounts, at the time payments are actually
made to the Executive and received by him, relating to taxes as
United may reasonably determine it should withhold pursuant to
any applicable law or regulation. In lieu of withholding such
amounts, in whole or in part, United may, in its sole discretion,
accept other provision for payment of taxes as required by law,
provided that it is satisfied that all requirements of law
affecting its responsibilities to withhold such taxes have been
satisfied.
14. No Duty to Mitigate. After termination of
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employment, the Executive will not be obligated to mitigate
damages by seeking other comparable employment, and any severance
benefits payable to the Executive will not be subject to
reduction for any compensation received from other employment.
15. Confidentiality. The Executive shall hold in fiduciary
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capacity for the benefit of United all secret or confidential
information, knowledge or data relating to United, or its
subsidiaries, affiliates and businesses, which shall have been
obtained by the Executive pursuant to his employment by United or
any of its subsidiaries and affiliates and which shall not have
become public knowledge (other than by acts by the Executive or
his representatives in violation of this Agreement). After
termination of the Executive's employment with United, the
Executive shall not, without the prior written consent of United,
communicate or divulge any such information, knowledge or data to
anyone other than United and those designated by it. In no event
shall an asserted violation of the provisions of this Paragraph
15 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement. The
Executive acknowledges and agrees that due to the confidential
and proprietary nature of the Confidential Information he
possesses, a breach or threatened breach by him of any of the
provisions contained in this Paragraph 15 will cause United
irreparable injury. Therefore, in addition to any other rights
or remedies, the Executive agrees that United shall be entitled
to a temporary, preliminary, and permanent injunction enjoining
or restraining the Executive from any such violation or
threatened violation, with the necessity of proving inadequacy of
monetary damages or the posting of any bond or security.
16. Public Relations: United agrees to reasonably
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cooperate with Executive regarding internal and media
communications concerning Executive's resignation of his
Executive Positions, it being understood that United ultimately
shall have sole and complete discretion regarding the timing,
content, and other aspects of its internal and media
communication. The initial media communication regarding
Executive's resignation will be substantially in the form of
Exhibit A attached hereto.
17. Indemnification. To the fullest extent permitted by
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law, United will indemnify the Executive (including the
advancement of expenses) for any judgments, fines, amounts paid
in settlement and reasonable expenses, including attorney's fees,
incurred by the Executive in connection with the defense of any
lawsuit or other claim to which he is made a party by reason of
being or having been an officer, director or employee of UAL,
United Airlines or any of their subsidiaries. In addition,
United will maintain, with coverage for the Executive, director
and officer liability insurance at least as comprehensive as, and
in an amount at least equal to, that maintained by United on
September 1, 1998.
18. Payment of Legal and other Fees. If either party is
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required to seek enforcement of this Agreement, each party will
be responsible for paying its own attorneys' fees and expenses.
19. Arbitration. Any controversy or claim relating to this
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Agreement (except for court action initiated by United to enforce
the Executive's covenants as to confidentiality) will be settled
exclusively by arbitration in Chicago, Illinois in accordance
with the rules of the American Arbitration Association then in
effect. Any arbitration award will be binding on the parties and
may be enforced in any court having jurisdiction; provided,
however, that the Executive shall be entitled to seek specific
performance of his right to be paid during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
20. Supersedes Prior Agreement. This Agreement supersedes
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and voids any prior oral or written agreement relating in any way
to the Executive's employment with United Airlines or UAL which
may have been entered into between parties hereto. Any change to
the Agreement after its Effective Date must be in writing and
must be executed by United Airlines, UAL and the Executive.
21. Miscellaneous.
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(a) This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, without
reference to principles of conflict of laws. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Mr. John A. Edwardson
747 Sheridan Road
Wilmette, Illinois 60091
with a copy to:
Robert J. Stucker
Vedder, Price, Kaufman, and Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
If to United:
1200 East Algonquin Road
Elk Grove Township, Illinois 60007
Attn: General Counsel
or to such other address as any of the parties shall have
furnished to the other in writing in accordance herewith. Notice
and communications shall be effective when actually received by
the addressee.
(c) None of the provisions of the Agreement shall be
deemed to be a penalty.
(d) The invalidity or unenforceablity of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(e) Either party's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision hereof.
(f) This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
(g) United and Executive, having read and understood
this Agreement and having consulted with others as appropriate,
hereby agree to be bound by its terms.
IN WITNESS WHEREOF, the parties have executed the Agreement as of
September 18, 1998 at the World Headquarters of United Air Lines,
Inc., 1200 East Algonquin Road, Elk Grove Twp., Illinois 60007.
United Air Lines, Inc., UAL Corporation Executive
By:/s/ G. Greenwald By:/s/ G. Greenwald By:/s/ John Edwardson
Its: Chairman and Its: Chairman and John A. Edwardson
Chief Executive Officer Chief Executive Officer