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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of August 14, 1997 (the "Effective Date")
by and between Delta Air Lines, Inc., a Delaware corporation (the "Company"),
and Leo F. Mullin ("Executive").
WHEREAS, the Board of Directors of the Company (the "Board") desires to
employ Executive as President and Chief Executive Officer of the Company, and
Executive desires to accept such employment; and
WHEREAS, the Company and Executive desire to enter into an agreement
(this "Agreement") embodying the terms of such employment;
NOW THEREFORE, in consideration of the mutual covenants and agreements
of the parties set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows (certain
capitalized terms used herein being defined in Article 9):
ARTICLE 1
TERM OF AGREEMENT
SECTION 1.01. Initial Term. The term of this Agreement shall commence
on the Effective Date and shall expire on the fifth anniversary thereof (such
term, together with any extension pursuant to Sections 1.02 or 1.03, referred to
hereinafter as the "Agreement Term").
SECTION 1.02. Extensions. As of the fifth anniversary of the Effective
Date (provided Executive's employment with the Company has not been previously
terminated under Article 4), the Agreement Term shall automatically be extended
unless, at least twelve months prior to such anniversary, the Company has
provided Executive with written notice of the Company's intent that the
Agreement Term not be so extended. If such notice has not been timely provided
by the Company, the Agreement Term shall, as of such fifth anniversary, be
extended until the expiration of twelve months from the date the Company shall
have provided Executive with written notice of the Company's intent that the
Agreement Term be terminated.
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SECTION 1.03. Automatic Extension Upon Change in Control. In the event
that a Change in Control occurs during the Agreement Term as then in effect,
upon the effective date of such Change in Control the Agreement Term shall
automatically be extended by such period, if any, such that after such extension
the Agreement Term shall not be less than 36 months following the effective date
of such Change in Control (such 36-month period referred to hereinafter as the
"Change Period"). The 36-month extension described in this Section 1.03 shall
take effect regardless of whether, before or after the effective date of a
Change in Control, the Company has given written notice of intent not to extend
the Agreement Term pursuant to Section 1.02, provided the Agreement Term has not
yet expired as of such effective date.
ARTICLE 2
POSITION; DUTIES
SECTION 2.01. Position. Commencing as of the Effective Date, the
Company shall employ Executive as President and Chief Executive Officer of the
Company. In addition, the Company shall use its best efforts to ensure
Executive's election as a member of the Board. Executive shall have such duties
and authority as shall be determined from time to time by the Board; provided
that such duties shall be consistent with the positions assigned to him pursuant
to this Section 2.01.
SECTION 2.02. Performance of Duties. While Executive is employed by the
Company hereunder, Executive shall devote substantially all of his business time
and best efforts to the business and affairs of the Company and the performance
of his duties under this Agreement. Subject to the foregoing, Executive shall
not be precluded from (i) continuing to serve on such boards of directors of
business corporations and/or charitable organizations as to which the Board
shall have given its prior written consent, which consent shall not be withheld
unreasonably; provided, however, that such consent shall not be necessary with
respect to Executive's continued service on the board of directors of Inland
Steel Industries, Inc.; (ii) engaging in community affairs or charitable
activities (other than serving on the boards of directors of charitable
organizations, as to which clause (i) shall control), and (iii) managing his
personal investments and affairs.
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ARTICLE 3
COMPENSATION
SECTION 3.01. Base Salary. While Executive is employed by the Company
hereunder, the Company shall pay Executive a base salary (the "Base Salary") at
the annual rate of not less than $650,000, payable in accordance with the usual
payment practices of the Company. Executive's Base Salary shall be subject to
review for increase annually and Executive shall be entitled to such increases
in his Base Salary, if any, as may be determined from time to time in the sole
discretion of the Personnel & Compensation Committee of the Board (the
"Compensation Committee").
SECTION 3.02. Incentive Compensation Awards. (a) With respect to each
Fiscal Year beginning with the Fiscal Year ending June 30, 1998 during which
Executive is employed hereunder, Executive shall be eligible to receive in
addition to his Base Salary an annual incentive compensation award (the "Annual
Award") for services rendered during such Fiscal Year, subject to the terms and
conditions of the Company's annual incentive compensation plan as in effect from
time to time. Except as provided below, the amount of the Annual Award, if any,
with respect to any Fiscal Year shall be based upon performance targets and
award levels determined by the Compensation Committee in its sole discretion, in
accordance with the Company's annual incentive compensation plan as in effect
from time to time; provided that for each Fiscal Year the target award levels
with respect to Executive shall be established in such a manner as to provide
Executive with the opportunity to earn an award of at least 100% of his Base
Salary for such Fiscal Year, assuming performance at the target level, with a
maximum award opportunity of 125% of Base Salary for such Fiscal Year.
(b) Notwithstanding the foregoing, with respect to the Fiscal Year
ending June 30, 1998, Executive shall receive an Annual Award of not less than
$650,000 payable at the same date as annual awards are paid to the senior
executives of the Company in accordance with the practices of the Company in
effect for such Fiscal Year, unless Executive's employment hereunder shall have
been terminated by the Company for Cause prior to such date; provided, that if
Executive's employment terminates for any other reason prior to June 30, 1998,
such minimum amount shall be reduced by multiplication by a fraction, the
numerator of which is the number of days from August 14, 1997 through the date
of termination of Executive's employment, and the denominator of which is the
number of days from August 14, 1997 through June 30, 1998.
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(c) In addition to the Annual Awards described above, Executive shall
be eligible to receive such additional bonuses as may be awarded by the
Compensation Committee in its sole discretion.
SECTION 3.03. Employee Benefits. While Executive is employed by the
Company hereunder, Executive (and, to the extent applicable, his eligible family
members, as defined in the applicable plan or policy) shall be entitled to
participate (or to receive benefits equivalent to such participation), on terms
no less favorable than the terms offered to other senior executives of the
Company, in any group and/or executive life, hospitalization or disability
insurance plan, health program, vacation policy, pension, profit sharing, ESOP,
401(k) and similar benefit plans (qualified, non-qualified and supplemental) and
other fringe benefits of the Company, including free and reduced-rate travel,
automobile allowance, club memberships and dues, and similar programs as in
effect from time to time. The Company shall reimburse Executive for (A) the cost
of premiums paid by him to obtain health insurance coverage from his former
employer under COBRA during any applicable waiting period or preexisting
condition limitation period under the Company's medical benefit plans, plus (B)
an additional amount such that after payment by Executive of Executive's
applicable Federal, state and local taxes imposed on such additional amount,
Executive will retain an amount sufficient to pay the total of Executive's
applicable Federal, state and local taxes arising due to the payments made
pursuant to clause (A) above.
SECTION 3.04. Supplemental Pension Benefits. Executive shall be
entitled to receive from the Company a supplemental retirement benefit (the
"Supplemental Retirement Benefit") as described in Section 3 of the Senior
Officer Excess Benefit Agreement (the "Excess Benefit Agreement") attached as
Exhibit A to this Agreement, payable upon the terms and conditions set forth in
such Excess Benefit Agreement. All benefits provided under the Excess Benefit
Agreement shall be taken into account in determining the Company's compliance
with the requirements of this Agreement.
SECTION 3.05. Relocation Benefits. The Company will pay all costs of
relocation of Executive and his family to the Atlanta metropolitan area in
accordance with the Company's relocation policy, supplemented as follows:
(a) The Company will reimburse Executive for reasonable temporary
living expenses for Executive and his family in the Atlanta metropolitan area
for a period not to exceed one year from the date hereof;
(b) At the election of Executive prior to August 14, 1998, the
Company will purchase from Executive his primary residence as of the date hereof
(the "Current Residence"). If Executive so elects, the purchase price will be
equal to the average of the estimates of the fair market value of the Current
Residence as determined, within thirty days of such election, by two reputable
and independent professional real estate appraisers (one of which appraisers
shall be selected by Executive, and one of which shall be selected by the
Company);
(c) The Company will reimburse Executive for architectural fees
incurred and paid to Konstant Architecture in connection with proposed
improvements to the Current Residence; and
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(d) The Company will pay Executive, in addition to all relocation
payments otherwise required pursuant to this Section 3.05, an amount such that
after payment by Executive of all of Executive's applicable Federal, state and
local taxes on such additional amount, Executive will retain an amount
sufficient to pay the total of Executive's applicable Federal, state and local
taxes arising due to the payments under this Section 3.05.
SECTION 3.06. Business Expenses. The Company shall reimburse promptly
such of Executive's travel, entertainment and other business expenses as are
reasonably and necessarily incurred by Executive in the performance of his
duties while employed hereunder, in accordance with the Company's policies as in
effect from time to time.
SECTION 3.07. Stock Incentive Awards. In addition to the initial awards
of stock options and restricted stock which are described in the respective
award agreements attached hereto as Exhibits B and C, Executive shall be
eligible to receive such additional equity-based incentive awards, including
additional options and restricted stock awards, as may be granted by the
Compensation Committee in its sole discretion.
ARTICLE 4
TERMINATION OF EMPLOYMENT
SECTION 4.01. Without Cause; For Good Reason. In the event that
Executive's employment is terminated during the Agreement Term, other than by
reason of death, (i) by the Company other than for Cause or Disability or (ii)
by Executive with Good Reason, Executive shall be entitled to receive from the
Company the benefits described in Paragraphs (a) through (f) below (the
"Severance Benefits"):
(a) The Company shall pay Executive a lump sum, in cash, equal to
Executive's earned but unpaid Base Salary and other earned but unpaid cash
entitlements for the period through and including the date of termination of
Executive's employment, including unused earned and accrued vacation pay and
unreimbursed business expenses. In addition, with respect to the period through
and including the date of termination of Executive's employment, Executive shall
be entitled to any other benefits earned or accrued and payable under any other
employee benefit plans and arrangements maintained by the Company, in accordance
with the terms of such plans and arrangements, except as modified
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herein (such amounts and benefits described in this Paragraph (a) referred to
hereinafter as the "Accrued Benefits").
(b) The Company shall pay Executive a lump sum, in cash, equal to two
times the sum of Executive's Reference Salary and Reference Incentive
Compensation Award.
(c) The Company shall pay Executive a lump sum, in cash, equal to the
amount of his Annual Award payable for the Fiscal Year in which occurs the
termination of his employment, calculated assuming performance at the target
level and prorated to reflect the portion of such Fiscal Year elapsed through
the date of termination of his employment. The amount of the payment under this
Paragraph (c) shall be reduced by the amount, if any, previously paid with
respect to such Fiscal Year under 5.02(i).
(d) Executive (and, to the extent applicable, his eligible family
members) shall continue to be eligible, for 24 months from the date of such
termination of Executive's employment, to participate in the benefit plans and
fringe benefits (other than any qualified or nonqualified retirement plans) in
which Executive and his eligible family members were entitled to participate
under Section 3.03 immediately prior to termination of Executive's employment.
If such continued participation is not permitted under the terms of one or more
of the applicable benefit plans and programs, the Company shall, in lieu of
continued participation as to those benefits, pay Executive a lump sum, in cash,
equal to the present value (as of the date of the termination of his employment)
of such continued participation. In determining present value for this purpose,
all terms applicable to Executive under such benefit plans and fringe benefits
immediately prior to the date of termination of his employment (including the
level of premiums, if any, payable by Executive) shall be taken into account.
(e) On and after the second anniversary of such termination of
Executive's employment, he shall be treated as a retired senior executive of the
Company for purposes of all benefit plans and arrangements of the Company (other
than retirement plans) providing for retiree benefits. For purposes of
determining any service-related premiums owed by Executive with respect to any
such retiree benefits, all years of service with which Executive is credited for
purposes of calculating the Supplemental Retirement Benefit shall be taken into
account. If such participation is not permitted under the terms of one or more
of the applicable benefit plans and programs, the Company shall, in lieu of such
participation as to those benefits, pay Executive a lump sum, in cash, equal to
the present value (as of the second anniversary of the termination of his
employment) of such participation. In determining present value for this
purpose, all terms
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applicable to Executive under such retiree benefit plans (including the level of
premiums, if any, payable by Executive) shall be taken into account.
(f) Executive's right to the Supplemental Retirement Benefit shall
become fully vested as of the date of termination of his employment. In
addition, Executive shall be credited with two additional years of service
credit (beyond those otherwise required to be credited under the Excess Benefit
Agreement) for purposes of calculating the Supplemental Retirement Benefit.
The Severance Benefits (other than those described in Paragraph (f) and the
first sentence of each of Paragraphs (d) and (e) above) shall be paid or
provided to Executive as soon as practicable following the date of termination
of Executive's employment, but in no event later than 30 days from the date of
such termination of employment.
SECTION 4.02. For Cause; Without Good Reason. In the event Executive's
employment shall be terminated by the Company for Cause or by Executive other
than for Good Reason, the Company shall have no further obligations to Executive
hereunder, other than (i) for Accrued Benefits and (ii) as set forth in Section
5.01. Notwithstanding any other provision of this Agreement to the contrary,
Executive shall not be liable to the Company for breach of this Agreement as a
result of termination of his employment other than for Good Reason, provided
Executive has furnished the Company at least 60 days prior written notice of
such termination.
SECTION 4.03. Death or Disability. In the event of Executive's death or
termination by the Company for Disability during the Agreement Term, the Company
shall have no further obligations to Executive or his legal representatives
hereunder, other than (i) for Accrued Benefits and (ii) as set forth in Section
5.01.
SECTION 4.04. Return of Materials. Executive agrees that upon
termination of his employment hereunder for any reason, he shall return to the
Company immediately all memoranda, books, papers, plans, information, letters
and other data, and all copies thereof or therefrom, in any way relating to the
business of the Company or any of its affiliates, except that he may retain
personal notes, notebooks and diaries. Executive further agrees that he shall
not retain or use for his account at any time any trade name, trademark, service
mark or other proprietary business designation used or owned in connection with
the business of the Company or any of its affiliates.
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ARTICLE 5
OBLIGATIONS OF COMPANY ON CHANGE IN CONTROL
SECTION 5.01. Deferred Compensation. (a) In the event that a Change in
Control occurs during the Agreement Term, the Company shall promptly thereafter
cause to be irrevocably deposited in trust for the benefit of Executive and his
beneficiaries, on the terms set forth in Section 5.01(c), an amount equal to the
balance as of the date of such deposit of Executive's accounts under the
Deferred Compensation Plan. (Such trust is hereinafter referred to as the
"Deferred Compensation Trust.") From and after the date of such Change in
Control, the Company shall cause to be irrevocably deposited in the Deferred
Compensation Trust any additional amounts that may be deferred from time to time
by Executive under the Deferred Compensation Plan. Each such subsequent deposit
shall be made on the date the applicable deferred amount would otherwise have
been received by Executive, but for Executive's election to defer such receipt
under the Deferred Compensation Plan.
(b) The trustee of the Deferred Compensation Trust shall be a bank
that is organized under the laws of the United States of America, has assets
exceeding $500,000,000, and may validly exercise trustee powers under Georgia
state law. All trustee's fees and other expenses of administering the Deferred
Compensation Trust shall be borne by the Company.
(c) The instrument governing the Deferred Compensation Trust (the
"Trust Instrument") shall, to the extent reasonably necessary to assure that the
Deferred Compensation Plan will continue to be treated as "unfunded" for
purposes of ERISA and the Code, provide that upon insolvency of the Company the
assets of the Trust will be subject to the claims of the Company's general
creditors. The Trust Instrument shall provide that in all other respects the
assets of the Deferred Compensation Trust will be maintained for the exclusive
benefit of Executive and his beneficiaries, and will otherwise be subject to all
fiduciary and other requirements of applicable state trust law. The Trust
Instrument shall require that the trustee invest the assets of the Trust in a
manner calculated to match as closely as the trustee deems reasonably possible
the investment elections made from time to time by Executive under the Deferred
Compensation Plan, and shall provide for payment of benefits in accordance with
the terms of Executive's applicable payment elections as in effect from time to
time under the Deferred Compensation Plan.
(d) After the date of a Change in Control, the Company shall not
(other than pursuant to Section 5.04(e) hereof) take any steps to disturb or
alter Executive's (or Executive's beneficiaries') rights to receive amounts
deferred
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under the Deferred Compensation Plan in accordance with such Executive's
applicable payment elections as in effect from time to time. Nothing herein or
in the Trust Instrument shall relieve the Company of its obligation to pay
benefits under the Deferred Compensation Plan in accordance with the terms of
such Plan, to the extent such benefits are not paid from the Deferred
Compensation Trust.
SECTION 5.02. Payment of Performance-Based Awards. In the event that a
Change in Control occurs during the Agreement Term and while Executive is
employed by the Company, the Company shall promptly thereafter pay Executive the
sum of (i) the Reference Incentive Compensation Award, prorated to reflect the
portion of the Fiscal Year elapsed through the date of the Change in Control,
and (ii) the Reference Long-Term Award, for each performance period that
includes the date of the Change in Control under any long-term incentive plan
maintained by the Company, prorated to reflect the portion of such performance
period elapsed through the date of the Change in Control. The amounts referred
to in clauses (i) and (ii) above shall be paid in the form of cash or shares of
Company stock, in accordance with the terms of the applicable award agreements.
The payment under this Section 5.02 shall discharge all liabilities of the
Company to Executive under the Company's annual and long-term incentive plans
and programs, and under this Agreement, with respect to performance-based
incentive compensation (other than stock options and stock appreciation rights)
for the periods referred to in clauses (i) and (ii) above.
SECTION 5.03. Stock Options, Stock Appreciation Rights and Non-
Performance-Based Awards. In the event that a Change in Control occurs during
the Agreement Term and while Executive is employed by the Company, all
outstanding stock options, stock appreciation rights, restricted stock (if not
performance-based), and other non-performance-based awards held by Executive
pursuant to the provisions of the Stock Incentive Plan or any successor plan
shall become immediately vested, nonforfeitable and exercisable as of the date
of the Change in Control.
SECTION 5.04. Additional Severance Benefits. In the event Executive's
employment is terminated under circumstances described in clauses (i) or (ii) of
Section 4.01 either (I) during the Change Period; or (II) within one year prior
to, and in anticipation of, a Change in Control, then, as of the later of the
date of termination of Executive's employment and the Change in Control:
(a) Section 4.01(b) shall be applied by substituting the words "three
times" for "two times." The payment under this Section 5.04(a) shall be reduced,
if Executive's employment has been terminated in anticipation of a Change in
Control as described in clause (II) above, by the total amount of payments (if
any)
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made to Executive under Section 4.01(b) between the date of termination of
Executive's employment and the date of payment under this Section 5.04(a).
(b) In lieu of the benefits otherwise payable in accordance with the
Excess Benefit Agreement, the Company shall pay Executive a lump sum, in cash,
equal to the actuarial present value of the Supplemental Retirement Benefit
(calculated crediting Executive with three additional years of service credit
beyond those otherwise provided for under the Excess Benefit Agreement),
assuming that retirement benefits will be payable to Executive and his spouse
under the Qualified Pension Plan in the form of a monthly annuity commencing as
of Executive's Earliest Retirement Date, calculated in accordance with the terms
of such Plan, and that as of Executive's annuity starting date Executive will
have a spouse who meets the requirements set forth in the Qualified Pension Plan
for entitlement to automatic joint and survivor annuity benefits. For purposes
of this Section 5.04(b), "actuarial present value" shall be calculated using the
assumptions in effect, immediately prior to the events giving rise to the right
to benefits under this Section 5.04(b), for purposes of calculating actuarial
equivalence under the Qualified Pension Plan. The payment under this Section
5.04(b) shall be reduced, if Executive's employment has been terminated in
anticipation of a Change in Control as described in clause (II) above, by the
total amount of payments (if any) made to Executive and his spouse under the
Excess Benefit Agreement between the date of termination of Executive's
employment and the date of payment under this Section 5.04(b).
(c) Section 4.01(d) shall be applied: (i) substituting the words "36
months" for "24 months" and (ii) eliminating the reference to life insurance or
survivor benefits coverage and any free or reduced rate flight or other travel
benefits or privileges to which Executive would otherwise be entitled under
Section 4.01(d) (which are dealt with in paragraphs (d) and (f) below). For
purposes of computing amounts payable under Section 4.01(d) (as modified by the
foregoing sentence), the present value referred to in such Section shall be
determined by Northern Trust Retirement Consulting Inc. (the "Actuarial Firm")
on the basis of such assumptions as the Actuarial Firm determines to be
reasonable. In the event that the Actuarial Firm is serving as actuary for the
Person effecting the Change in Control or is otherwise unavailable, Executive
may appoint another nationally recognized actuarial firm to make the
determinations required hereunder (which actuarial firm shall then be referred
to as the Actuarial Firm hereunder). The Actuarial Firm shall provide its
determination and detailed supporting calculations to both the Company and
Executive within fifteen business days of the receipt of notice from Executive
that a termination, or (if later) a Change in Control, has occurred giving rise
to the right to benefits under this Section 5.04, or such earlier time as is
requested by the Company. All fees and expenses of the Actuarial Firm shall be
borne solely by
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the Company. If Executive's employment has been terminated in anticipation of a
Change in Control as described in clause (II) above, and the Company has paid
Executive the cash present value of any coverage or benefits (other than life
insurance or survivor benefits coverage, or free or reduced rate flight or other
travel benefits or privileges) to which Executive or his eligible family members
would otherwise have been entitled under Section 4.01(d), the payments otherwise
due Executive under this Section 5.04(c) shall be reduced by the total amount of
such cash present value so paid to Executive.
(d) The Company shall provide Executive with the more valuable (based
on the present value of the premium cost therefor under commercially available
policies) of (i) any life insurance or survivor benefits coverage to which
Executive would otherwise be entitled under Section 4.01(d), or (ii) a fully
paid-up term life insurance policy (with premiums pre-paid for the remainder of
Executive's life) on Executive's life, providing Executive's beneficiaries with
a death benefit of $50,000. In addition, if Executive is eligible for early or
normal retirement benefits under the Qualified Pension Plan as of the date of
termination of Executive's employment, the Company shall provide Executive a
fully paid-up term life insurance policy (with premiums pre-paid for the
remainder of Executive's life) on Executive's life providing Executive's
beneficiaries with a death benefit of two times Executive's Reference Salary.
For purposes of determining Executive's entitlement to the life insurance policy
described in the preceding sentence, Executive shall be credited with three
extra years of age and service. If Executive's employment has been terminated in
anticipation of a Change in Control as described in clause (II) above and the
Company has paid Executive the cash present value of any life insurance or
survivor benefits coverage to which Executive or his eligible family members
became entitled under Section 4.01(d), any payments otherwise due Executive
under this Section 5.04(d) shall be reduced by the total amount of such cash
present value so paid to Executive.
(e) The Company shall pay (or cause the Deferred Compensation Trust to
pay) to Executive a lump sum, in cash, equal to the balance of Executive's
accounts under the Deferred Compensation Plan.
(f) In lieu of any free or reduced rate flight or other travel
benefits or privileges to which Executive would otherwise be entitled under
Section 4.01(d), but without limitation upon any retiree flight privileges for
which Executive may otherwise qualify, Executive and Executive's spouse, for the
remainder of their respective lives, and Executive's dependent children, for so
long as they are under age 18 (or under age 23 if a full-time student), shall be
entitled to free system- wide flight privileges on Company flights to any
location which the Company serves. Such privileges shall entitle Executive,
Executive's spouse and Executive's dependent children to unlimited positive
space (or space available, at Executive's option) first-class tickets, but
Executive's dependent children shall
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not be entitled to first-class privileges if under age 8; provided further that
all of such flight privileges shall otherwise be subject to the same conditions
and restrictions as pertain from time to time to the flight privileges generally
provided by the Company to its retirees. If Executive's employment has been
terminated in anticipation of a Change in Control as described in clause (II)
above and the Company has paid Executive the cash present value of any free or
reduced rate flight or other benefits or privileges to which Executive or his
eligible family members became entitled under Section 4.01(d), any payments
otherwise due Executive under this Section 5.04 shall be reduced by the total
amount of such cash present value so paid to Executive.
(g) Section 4.01(e) shall be applied (i) substituting "third
anniversary" for "second anniversary" and (ii) if Executive has earned at least
ten years of continuous service under the Qualified Pension Plan as of the date
of termination of employment (after crediting Executive with three additional
years of service credit) the Company shall pay Executive a lump sum, in cash,
equal to the present value (as of the date of the termination of employment) of
any premium imposed solely because of early retirement.
(h) If Executive's employment has terminated in anticipation of a
Change in Control as described in clause (II), above, the Company shall pay
Executive the amount that would have been payable to him under Section 5.02 had
the Change in Control occurred as of the date of termination of his employment;
provided, however, that the payment under this Section 5.04(h) shall be reduced
by any payments previously made to Executive under the Company's annual and
long-term incentive plans and programs, and under this Agreement, with respect
to performance-based incentive compensation (other than stock options and stock
appreciation rights) for the periods referred to in clauses (i) and (ii) of
Section 5.02.
SECTION 5.05. Definition of Disability. After the occurrence of a
Change in Control, the term "Disability," as used in Article 4, shall mean
Long-Term Disability, as such term is defined in the Disability Plan.
ARTICLE 6
CERTAIN TAX PAYMENTS
SECTION 6.01. Gross-Up Payment. In the event Executive becomes
entitled to benefits under Section 4.01 or Article 5 hereof, the Company shall
pay
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to Executive an additional lump sum payment (the "Gross-Up Payment"), in cash,
equal to the sum of the amounts, if any, described in paragraphs A and B below:
A. Executive shall be entitled under this paragraph to the sum of (i)
the present value of all of Executive's applicable Federal, state and local
taxes arising due to payments or coverage provided under Sections 4.01(d) or
4.01(e), to the extent such payments or coverage are provided in respect of
benefits or coverage which, if provided to Executive while employed by the
Company, would not have been taxable to Executive, and (ii) an additional amount
such that after payment by Executive of all of Executive's applicable Federal,
state and local taxes on such additional amount, Executive will retain an amount
sufficient to pay the total of Executive's applicable Federal, state and local
taxes arising due to the payment required pursuant to clause (i) above. For
purposes of clause (i) above, present value shall be determined using the
appropriate "applicable federal rate" promulgated by the Treasury Department
under Code Section 1274(d) for the month in which the Gross-Up Payment is made,
assuming that all taxes will be paid on the due date therefor (without regard to
extensions).
B. If any portion of the Severance Benefits or any other payment
under this Agreement, or under any other agreement with or plan of the Company,
including but not limited to stock options and other long-term incentives (in
the aggregate "Total Payments") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then Executive shall
be entitled under this paragraph to an additional amount such that after payment
by Executive of all of Executive's applicable Federal, state and local taxes,
including any Excise Tax, imposed upon such additional amount, Executive will
retain an amount sufficient to pay the Excise Tax imposed on the Total Payments.
The amounts payable under this Section 6.01 shall be paid by the Company as soon
as practicable (but in no event more than 30 days) after the occurrence of the
events giving rise to Executive's right to benefits under Section 4.01 or
Article 5.
SECTION 6.02. Determinations. In the event of a Change in Control, all
determinations required to be made under this Article 6, including the amount of
the Gross-Up Payment, whether a payment is required under Paragraph B of Section
6.01, and the assumptions to be used in determining the Gross-Up Payment, shall
be made by Arthur Andersen LLP (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within twenty
business days of the receipt of notice from Executive that there has been an
event giving rise to the right to benefits under Article 5, or such earlier
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time as is requested by the Company. In the event that the Accounting Firm is
serving as accountant or auditor for a Person effecting the Change in Control or
is otherwise unavailable, Executive may appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
SECTION 6.03. Subsequent Redeterminations. Executive agrees (unless
requested otherwise by the Company) to use reasonable efforts to contest in good
faith any subsequent determination by the Internal Revenue Service that
Executive owes an amount of Excise Tax greater than the amount previously
determined under this Article 6; provided, that Executive shall be entitled to
reimbursement by the Company of all fees and expenses reasonably incurred by
Executive in contesting such determination. In the event the Internal Revenue
Service or any court of competent jurisdiction determines that Executive owes an
amount of Excise Tax that is either greater or less than the amount previously
taken into account and paid under this Article 6, the Company shall promptly pay
to Executive, or Executive shall promptly repay to the Company, as the case may
be, the amount of such excess or shortfall. In the case of any payment that the
Company is required to make to Executive pursuant to the preceding sentence (a
"Later Payment"), the Company shall also pay to Executive an additional amount
such that after payment by Executive of all of Executive's applicable Federal,
state and local taxes on such additional amount, Executive will retain an amount
sufficient to pay the total of Executive's applicable Federal, state and local
taxes arising due to the Later Payment. In the case of any repayment of Excise
Tax that Executive is required to make to the Company pursuant to the second
sentence of this Section 6.03, Executive shall also repay to the Company the
amount of any additional payment received by Executive from the Company in
respect of applicable Federal, state and local taxes on such repaid Excise Tax,
to the extent Executive is entitled to a refund of (or has not yet paid) such
Federal, state or local taxes.
ARTICLE 7
SUCCESSORS AND ASSIGNMENTS
SECTION 7.01. Successors. The Company will require any successor
(whether by reason of a Change in Control, direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform the
obligations under this Agreement in the same manner and to the same extent that
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the Company would be required to perform them if no such succession had taken
place.
SECTION 7.02. Assignment by Executive. This Agreement shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If Executive should die while any amount is owed but
unpaid to Executive hereunder, all such amounts, unless otherwise provided
herein, shall be paid to Executive's devisee, legatee, or other designee, or if
there is no such designee, to Executive's estate. Executive's rights hereunder
shall not otherwise be assignable.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. Notices. Any notice required to be delivered hereunder
shall be in writing and shall be addressed
if to the Company, to:
Delta Air Lines, Inc.
Hartsfield Atlanta International Airport
Post Office Box 20706
Atlanta, GA 30320-2534
Attn: General Counsel;
if to Executive, to Executive's last known address as reflected on the
books and records of the Company, with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street, Suite 2600
Chicago, Illinois 60601
Attention: Robert J. Stucker
or such other address as such party may hereafter specify for the purpose by
written notice to the other party hereto. Any such notice shall be deemed
received on the date of receipt by the recipient thereof if received prior to
5 p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise,
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any such notice shall be deemed not to have been received until the next
succeeding business day in the place of receipt.
SECTION 8.02. Legal Fees and Expenses. The Company shall pay all legal
fees, costs of litigation, prejudgment interest, and other expenses which are
reasonably incurred by Executive in connection with the negotiation and
preparation of this Agreement or as a result of (i) the Company's refusal to
provide benefits or other amounts in accordance herewith, (ii) the Company's (or
any third party's) contesting the validity, enforceability, or interpretation of
the Agreement, (iii) any conflict between the parties pertaining to this
Agreement, (iv) Executive's contesting any determination by the Internal Revenue
Service pursuant to Section 6.03, or (v) Executive's pursuing any claim under
Section 8.18 hereof. Notwithstanding the foregoing, in the case of any such
fees, costs, interest or other expenses incurred prior to a Change in Control,
Executive shall be entitled to payment hereunder only if Executive is successful
to a material degree in the contest or dispute giving rise thereto.
SECTION 8.03. Calculation of Taxes. For purposes of any provision of
this Agreement requiring the payment by the Company of Executive's applicable
Federal, state and local taxes with respect to any benefit or payment provided
for hereunder, such Federal, state and local taxes shall be computed at the
maximum marginal rates, taking into account the effect of any loss of personal
exemptions resulting from receipt by Executive of such benefit or payment.
SECTION 8.04. Arbitration. Executive and, unless a Change in Control
shall have occurred, the Company shall have the right and option to elect (in
lieu of litigation) to have any dispute or controversy arising under or in
connection with this Agreement settled by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Executive within 50 miles
from the location of his job with the Company, in accordance with the rules of
the American Arbitration Association then in effect. Executive's or the
Company's election to arbitrate, as herein provided, and the decision of the
arbitrators in that proceeding, shall be binding on the Company and Executive.
Judgment may be entered on the award of the arbitrator in any court having
jurisdiction. All expenses of such arbitration, including the fees and expenses
reasonably incurred by Executive, shall be borne by the Company.
SECTION 8.05. Unfunded Agreement. Except to the extent otherwise
provided in Article 5, the obligations of the Company under this Agreement
represent an unsecured, unfunded promise to pay benefits to Executive and/or
Executive's beneficiaries, and shall not entitle Executive or such beneficiaries
to a preferential claim to any asset of the Company.
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SECTION 8.06. Confidential Information. Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company, or any of its
subsidiaries, affiliates and businesses, which shall have been obtained by
Executive pursuant to his employment by the Company or any of its subsidiaries
and affiliates and which shall not have become public knowledge (other than by
acts by Executive or his representatives in violation of this Agreement). After
termination of Executive's employment with the Company, Executive shall not,
without the prior written consent of the Company, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. After the occurrence of a Change in Control, in no event shall
an asserted violation of the provisions of this Section 8.06 constitute a basis
for deferring or withholding any amounts otherwise payable to Executive under
this Agreement.
SECTION 8.07. Non-Exclusivity of Benefits. Unless specifically provided
herein, neither the provisions of this Agreement nor the benefits provided
hereunder shall reduce any amounts otherwise payable, or in any way diminish
Executive's rights as an employee of the Company, whether existing now or
hereafter, under any compensation and/or benefit plans (qualified or
nonqualified), programs, policies, or practices provided by the Company, for
which Executive may qualify. Vested benefits or other amounts which Executive is
otherwise entitled to receive under any plan, policy, practice, or program of
the Company (i.e., including, but not limited to, vested benefits under the
Qualified Pension Plan), at or subsequent to the date of termination of
Executive's employment shall be payable in accordance with such plan, policy,
practice, or program except as expressly modified by this Agreement.
SECTION 8.08. Compensation Taken Into Account. Severance Benefits
provided hereunder (other than, to the extent applicable, amounts payable
pursuant to Sections 4.01(a), 4.01(c) and 5.02) shall not be considered for
purposes of determining Executive's benefits under any other plan or program of
the Company (including without limitation the Qualified Pension Plan and the
Excess Benefit Agreement).
SECTION 8.09. Employment Status. Nothing herein contained shall
interfere with the Company's right to terminate Executive's employment with the
Company at any time, with or without Cause, subject to the Company's obligation
to provide such Severance Benefits and other amounts as may be required
hereunder.
SECTION 8.10. Mitigation. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
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amounts payable to Executive under any of the provisions of this Agreement, nor
shall the amount of any payment hereunder be reduced by any compensation earned
by Executive as a result of employment by another employer.
SECTION 8.11. No Set-Off. The Company's obligations to make all
payments and honor all commitments under this Agreement shall be absolute and
unconditional and shall not be affected by any circumstances including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against Executive, except that offsets for amounts
previously paid shall be permitted to the extent expressly provided in Sections
4.01(c) and 5.04.
SECTION 8.12. Entire Agreement. This Agreement, together with the
Exhibits hereto, represents the entire agreement between the parties with
respect to Executive's employment and/or severance rights upon a Change in
Control, and supersedes all prior discussions, negotiations, and agreements
concerning such rights, including, but not limited to, any prior severance
agreement made between Executive and the Company.
SECTION 8.13. Tax Withholding. Notwithstanding anything in this
Agreement to the contrary, the Company shall withhold from any amounts payable
under this Agreement all federal, state, city, or other taxes as are legally
required to be withheld.
SECTION 8.14. Waiver of Rights. The waiver by either party of a breach
of any provision of this Agreement shall not operate or be construed as a
continuing waiver or as a consent to or waiver of any subsequent breach hereof.
SECTION 8.15. Severability. In the event any provision of this
Agreement shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of this Agreement, and this
Agreement shall be construed and enforced as if the illegal or invalid provision
had not been included.
SECTION 8.16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia without reference
to principles of conflict of laws.
SECTION 8.17. Counterparts. This Agreement may be signed in several
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were on the same instrument.
SECTION 8.18. Claim Review Procedure. If Executive is denied benefits
under this Agreement, Executive may request, in writing, a review of the denial
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by the Company or its designee within 60 days of receiving written notice of the
denial. The Company shall respond in writing to a written request for review
within 90 days of receipt of such request. Neither the claim procedure set forth
in this Section 8.18 nor Executive's failure to adhere to such procedure shall
derogate from Executive's right to enforce this Agreement through legal action,
including arbitration as provided in Section 8.04.
SECTION 8.19. Indemnification. The Company shall indemnify Executive
(and Executive's legal representatives or other successors) to the fullest
extent permitted by the Certificate of Incorporation and By-Laws of the Company,
as in effect at such time or on the Effective Date, or by the terms of any
indemnification agreement between the Company and Executive, whichever affords
or afforded greater protection to Executive, and Executive shall be entitled to
the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers (and to the extent the
Company maintains such an insurance policy or policies, Executive shall be
covered by such policy or policies, in accordance with its or their terms, to
the maximum extent of the coverage available for any Company officer or
director), against all costs, charges and expenses whatsoever incurred or
sustained by Executive or Executive's legal representatives at the time such
costs, charges and expenses are incurred or sustained, in connection with any
action, suit or proceeding to which Executive (or Executive's legal
representatives or other successors) may be made a party by reason of
Executive's being or having been a director, officer or employee of the Company,
or any Subsidiary or Executive's serving or having served any other enterprise
as a director, officer, employee or fiduciary at the request of the Company.
ARTICLE 9
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below.
"Accounting Firm" has the meaning accorded such term in Section 6.02.
"Accrued Benefits" has the meaning accorded such term in Section
4.01(a).
"Actuarial Firm" has the meaning accorded such term in Section 5.04(c).
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"Affiliate" and "Associate" have the respective meanings accorded to
such terms in Rule 12b-2 under the Exchange Act as in effect on the Effective
Date.
"Agreement Term" has the meaning accorded such term in Section 1.01.
"Base Salary" means, at any time, the then-regular annual rate of pay
which Executive is receiving as annual salary.
"Beneficial Ownership." A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," securities pursuant to Rule 13d-3
under the Exchange Act as in effect on the Effective Date.
"Board" has the meaning accorded such term in the first "Whereas"
clause of this Agreement.
"Cause" means the occurrence of any one or more of the following:
(a) A demonstrably willful and deliberate act or failure to
act by Executive (other than as a result of incapacity due to physical
or mental illness) which is committed in bad faith, without reasonable
belief that such action or inaction is in the best interests of the
Company, and which act or inaction is not remedied within fifteen
business days of written notice from the Company; or
(b) Executive's conviction for committing an act of fraud,
embezzlement, theft, or any other act constituting a felony involving
moral turpitude.
Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
Executive a copy of a resolution duly adopted by the affirmative vote (which
cannot be delegated) of not less than three-quarters of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice to Executive and an opportunity for Executive, together with
Executive's counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, Executive is guilty of conduct set forth above in
clauses (a) or (b) of this definition and specifying the particulars thereof in
detail.
"Change in Control" means, and shall be deemed to have occurred upon,
the first to occur of any of the following events:
(a) Any Person (other than an Excluded Person) acquires,
together with all Affiliates and Associates of such Person, Beneficial
Ownership of
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securities representing 20% or more of the combined voting power of the
Voting Stock then outstanding, unless such Person acquires Beneficial
Ownership of 20% or more of the combined voting power of the Voting
Stock then outstanding solely as a result of an acquisition of Voting
Stock by the Company which, by reducing the Voting Stock outstanding,
increases the proportionate Voting Stock beneficially owned by such
Person (together with all Affiliates and Associates of such Person) to
20% or more of the combined voting power of the Voting Stock then
outstanding; provided, that if a Person shall become the Beneficial
Owner of 20% or more of the combined voting power of the Voting Stock
then outstanding by reason of such Voting Stock acquisition by the
Company and shall thereafter become the Beneficial Owner of any
additional Voting Stock which causes the proportionate voting power of
Voting Stock beneficially owned by such Person to increase to 20% or
more of the combined voting power of the Voting Stock then outstanding,
such Person shall, upon becoming the Beneficial Owner of such
additional Voting Stock, be deemed to have become the Beneficial Owner
of 20% or more of the combined voting power of the Voting Stock then
outstanding other than solely as a result of such Voting Stock
acquisition by the Company;
(b) During any period of two consecutive years (not including
any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board (and any new Director,
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for election
was so approved), cease for any reason to constitute a majority of
Directors then constituting the Board;
(c) A reorganization, merger or consolidation of the Company
is consummated, in each case, unless, immediately following such
reorganization, merger or consolidation, (i) more than 50% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners of the Voting Stock outstanding immediately prior to
such reorganization, merger or consolidation, (ii) no Person (but
excluding for this purpose any Excluded Person and any Person
beneficially owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, 20% or more of the voting
power of the outstanding Voting Stock) beneficially
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owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from
such reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation
were members of the Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation;
or
(d) The shareholders of the Company approve (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to any corporation with respect to which, immediately
following such sale or other disposition, (A) more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners of the Voting Stock outstanding
immediately prior to such sale or other disposition of assets, (B) no
Person (but excluding for this purpose any Excluded Person and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the voting power of
the outstanding Voting Stock) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares
of common stock of such corporation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of
the members of the board of directors of such corporation were members
of the Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition of
assets of the Company.
Notwithstanding the foregoing, in no event shall a "Change in Control"
be deemed to have occurred (i) as a result of the formation of a Holding Company
or (ii) with respect to Executive, if Executive is part of a "group," within the
meaning of Section 13(d)(3) of the Exchange Act as in effect on the Effective
Date, which consummates the Change in Control transaction. In addition, for
purposes of the definition of "Change in Control" a Person engaged in business
as an underwriter of securities shall not be deemed to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
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"Change Period" has the meaning accorded such term in Section 1.03.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning accorded such term in the introductory
paragraph of this Agreement.
"Compensation Committee" has the meaning accorded such term in
Section 3.01.
"Deferred Compensation Plan" means the Company's Executive Deferred
Compensation Plan (or any similar successor plan adopted by the Company), as in
effect immediately prior to a Change in Control.
"Current Residence" has the meaning accorded such term in Section
3.05(b).
"Deferred Compensation Trust" has the meaning accorded such term in
Section 5.01(a).
"Disability" means, except to the extent modified pursuant to Section
5.05, Executive's inability due to physical or mental incapacity for a period of
six consecutive months or for an aggregate of nine months in any 18 consecutive
month period substantially to perform his duties hereunder.
"Disability Plan" means the Delta Family-Care Disability and
Survivorship Plan (or any successor disability and/or survivorship plan adopted
by the Company), as in effect immediately prior to a Change in Control (subject
to changes in coverage levels applicable to all employees generally covered by
such Plan).
"Earliest Retirement Date" means the earliest date, after the date of
termination of Executive's employment, as of which Executive would be eligible
to commence receiving retirement benefits under the Qualified Pension Plan.
"Effective Date" has the meaning accorded such term in the introductory
paragraph of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excess Benefit Agreement" has the meaning accorded such term in
Section 3.04.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excise Tax" has the meaning accorded such term in Section 6.01.
"Excluded Person" means (i) the Company; (ii) any of the Company's
Subsidiaries; (iii) any Holding Company; (iv) any employee benefit plan of the
Company, any of its Subsidiaries or a Holding Company; or (v) any Person
organized, appointed or established by the Company, any of its Subsidiaries or a
Holding Company for or pursuant to the terms of any plan described in clause
(iv).
"Executive" has the meaning accorded such term in the introductory
paragraph of this Agreement.
"Fiscal Year" means a fiscal year of the Company.
"Good Reason" means the occurrence of any one or more of the following,
unless (in the case of the events described in Paragraphs (a) through (e))
Executive has expressly consented in writing thereto:
(a) The assignment to Executive of duties inconsistent with
Executive's authorities, duties, titles, responsibilities and status as
an officer of the Company, or a reduction or alteration in the nature
or status of Executive's authorities, duties, titles or
responsibilities, from those in effect as of the Effective Date and
described in Section 2.01; other than an insubstantial and inadvertent
act that is remedied by the Company promptly after receipt of notice
thereof given by Executive;
(b) The Company's requiring Executive to be based at a
location in excess of 50 miles from Executive's principal job location
or office on the later of (i) the Effective Date or (ii) immediately
prior to the Reference Date; except for required travel on the
Company's business to an extent consistent with Executive's business
travel obligations on the later of (i) the Effective Date or (ii)
immediately prior to the Reference Date;
(c) A reduction by the Company of Executive's Base Salary as
in effect on the later of (i) the Effective Date or (ii) the Reference
Date (other than pursuant to a reduction by a uniform percentage of the
salary of all full-time domestic employees of the Company who are not
subject to a collective bargaining agreement); or a reduction in
Executive's short-term or long-term incentive compensation
opportunities under the executive incentive compensation plans of the
Company for which Executive is
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eligible as in effect on the later of (i) the Effective Date or (ii)
the Reference Date;
(d) The failure by the Company to keep in effect compensation,
retirement, health and welfare benefits, or perquisite programs under
which Executive receives benefits substantially similar, in the
aggregate, to the benefits under such programs as exist on the later of
(i) the Effective Date or (ii) immediately prior to the Reference Date
(other than pursuant to an equivalent reduction in such benefits of all
full-time domestic employees of the Company who are not subject to a
collective bargaining agreement); or the failure of the Company to meet
the funding requirements, if any, of any of such programs;
(e) Any material breach by the Company of its obligations
under this Agreement or any failure of a successor of the Company to
assume and agree to perform the Company's entire obligations under this
Agreement, as required by Article 7 herein, provided that such
successor has received at least ten days written notice from the
Company or Executive of the requirements of Article 7;
(f) The expiration of the Agreement Term; or
(g) The termination by Executive of his employment with the
Company during the sixty-day period commencing on the first anniversary
of a Change in Control.
"Gross-Up Payment" has the meaning accorded such term in Section 6.01.
"Holding Company" means an entity that becomes a holding company for
the Company or its businesses as a part of any reorganization, merger,
consolidation or other transaction, provided that the outstanding shares of
common stock of such entity and the combined voting power of the then
outstanding voting securities of such entity entitled to vote generally in the
election of directors is, immediately after such reorganization, merger,
consolidation or other transaction, beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Voting Stock outstanding immediately
prior to such reorganization, merger, consolidation or other transaction in
substantially the same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or other transaction, of such outstanding
Voting Stock.
"Later Payment" has the meaning accorded such term in Section 6.03.
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"Medical Plans" means the DeltaFlex and the Delta Family-Care Medical
Plans (or any successor medical plans adopted by the Company), as in effect
immediately prior to a Change in Control (subject to changes in coverage levels
applicable to all employees generally covered by such Plans).
"Person" means an individual, corporation, partnership, association,
trust or any other entity or organization.
"Qualified Pension Plan" means the Delta Family-Care Retirement Plan
(or any successor qualified defined benefit retirement plan adopted by the
Company).
"Reference Date" means the earlier to occur of (i) a Change in Control
and (ii) the date 90 days prior to the termination of Executive's employment.
"Reference Incentive Compensation Award" means:
(a) for purposes of Section 5.02 hereof, the greater of the
target annual incentive compensation award or bonus (A) for the
Company's most recently completed Fiscal Year prior to the Change in
Control and (B) for the Company's Fiscal Year that includes the Change
in Control.
(b) for all other purposes hereunder, the greater of (A) the
target annual incentive compensation award or bonus most recently
established prior to the termination of Executive's employment and (B)
the actual annual incentive compensation award or bonus for the
Company's most recently completed Fiscal Year prior to the termination
of employment.
For purposes of both parts (a) and (b) of this definition, the "target
annual incentive compensation award or bonus" with respect to any Fiscal Year
shall be determined by multiplying the target salary percentage applicable to
Executive for such year by the Reference Salary.
"Reference Long-Term Award" means, for each performance period that
includes the date of a Change in Control under a long-term incentive plan
maintained by the Company, the greater of (i) the actual award payable to
Executive for such performance period, calculated as if such performance period
had ended on the date of the Change in Control and (ii) the target award payable
to Executive for such performance period.
"Reference Salary" means Executive's annual rate of Base Salary as in
effect upon the date of termination of Executive's employment or, in the event
of
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such a termination during the Change Period, immediately prior to the Change in
Control, if higher.
"Severance Benefits" has the meaning accorded such term in
Section 4.01.
"Stock Incentive Plan" means the Company's 1989 Stock Incentive Plan.
"Subsidiary" of any Person means any other Person of which securities
or other ownership interests having voting power to elect a majority of the
board of directors or other Persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Supplemental Retirement Benefit" has the meaning accorded such term in
Section 3.04(a).
"Total Payments" has the meaning accorded such term in Section 6.01.
"Trust Instrument" has the meaning accorded such term in Section
5.01(c).
"Voting Stock" means securities of the Company entitled to vote
generally in the election of members of the Board.
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IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement, to be effective as of the day and year first written above.
EXECUTIVE Delta Air Lines, Inc.
/s/ Leo F. Mullin By: /s/ Gerald Grinstein
- -------------------------- -------------------------
Leo F. Mullin Name: Gerald Grinstein
Title: Chairman of the Board
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EXHIBIT A
SENIOR OFFICER EXCESS BENEFIT AGREEMENT
THIS EXCESS BENEFIT AGREEMENT ("Agreement") is made and entered into as of
the 14th day of August, 1997, by and between DELTA AIR LINES, INC. (hereinafter
the "Company") and Leo F. Mullin (hereinafter "Key Employee"):
WITNESSETH:
WHEREAS, the Company has implemented the 1991 Delta Excess Benefit Plan,
and the Delta Supplemental Excess Benefit Plan, both as amended (collectively
referred to as the "Plans"), and has entered into an Employment Agreement with
Key Employee (the "Employment Agreement"); and
WHEREAS, the Company believes it is in the best interest of the Company in
seeking to assure itself of Key Employee's best efforts in the future to provide
for the payment of full retirement and other benefits to the Key Employee; and
WHEREAS, the Company has agreed in the Employment Agreement to provide Key
Employee with specified retirement benefits, as described herein; and
WHEREAS, various sections of the Internal Revenue Code of 1986 (the
"Code"), including, but not limited to, Sections 79, 401(a)(4), 401(a)(17), 415,
and 505(b) restrict either: (i) compensation that may be taken into account in
determining benefits under a qualified pension plan; (ii) benefits that can be
paid from qualified pension plans; (iii) compensation that may be taken into
account in determining benefits for participants in a Voluntary Employee
Beneficiary Association ("VEBA") described in-Section 501(c)(9) of the Code; or
(iv) restrict benefits that can be paid from a VEBA (such limitations
collectively or individually hereinafter referred to as the "Restrictions"); and
WHEREAS, the Company wishes to make up under this Agreement any reduction
in Key Employee's disability or survivor benefits under the Delta Family-Care
Disability and Survivorship Plan (the "Disability and Survivorship Plan") which
results from the Restrictions, or any other applicable laws, statutes, or
regulations which restrict in any way the benefits that can be paid from a VEBA;
and
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WHEREAS, the Board of Directors of the Company has authorized
post-retirement life insurance benefits for senior officers in excess of the
coverage provided to other employees of the Company through the Basic Lump Sum
Death Benefit under the Disability and Survivorship Plan; and
WHEREAS, certain restrictions imposed by the Tax Equity and Fiscal
Responsibility Act of 1982 ("TEFRA") prohibit the Company from providing
post-retirement life insurance benefits to officers in excess of that provided
to other employees of the Company; and
WHEREAS, the Company wishes to make up any such loss of group life
insurance coverage for Key Employee which cannot be provided because of the
TEFRA restrictions;
NOW, THEREFORE, the parties hereby agree as follows:
1. Certain Requirements Not Applicable. The parties specifically
acknowledge that this Agreement is exempt from certain provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") including, but not
limited to, parts 2, 3 and 4 of Subtitle B of Title 1 of ERISA and is also
subject to limited reporting and disclosure requirements of part 1 of Subtitle B
of Title 1 of ERISA.
2. Incorporation of the Retirement Plan and the Disability and
Survivorship Plan. The terms of the Delta Family-Care Retirement Plan (the
"Retirement Plan") and the Disability and Survivorship Plan are hereby
incorporated into this Agreement by reference, except that changes in those
plans which reduce benefits (except such changes as may be required by law)
shall be incorporated as to Key Employee only if advance notice of such proposed
reduction is given to the Key Employee and the Key Employee agrees to an
amendment of this Agreement to incorporate the benefit reduction. The
incorporation of the Retirement Plan and the Disability and Survivorship Plan is
not intended to modify any provision of this Agreement, and the benefits
provided hereunder shall be governed only by the provisions hereof. Unless
indicated otherwise, capitalized terms used in this Agreement shall have the
meaning given those terms in the Retirement Plan and Disability and Survivorship
Plan.
3. Supplemental Retirement Income.
(a) Upon termination of his employment with the Company, in addition
to retirement income which Key Employee might be eligible to receive
through his participation in the Plans, and subject to the vesting
provision in Section 3(c) below, Key Employee will be entitled to receive
from the Company supplemental retirement income ("Supplemental Retirement
Income") which will provide Key Employee
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31
with an aggregate retirement benefit (taking into account the amounts offset as
described in Section 3(b) below) in an annual amount (in the form of an
unreduced joint and 50% survivor annuity) equal to the aggregate retirement
benefits that would have accrued to the benefit of Key Employee under the
Retirement Plan and the Plans (which shall provide benefits substantially
equivalent to those described in the excerpt from the Company's 1996 Proxy
Statement attached as Exhibit 1 hereto (disregarding references to plans
maintained primarily for pilots), without regard to any changes after the date
of such Proxy Statement), calculated crediting Key Employee with 22 years of
service credit plus the number of years of service credit attributable to Key
Employee's service with the Company after the date hereof, and calculated
without regard to any waiting period which might otherwise apply with respect to
the accrual of benefits under the Retirement Plan and the Plans.
(b) The amount of the Supplemental Retirement Income will be offset
by (i) the benefits provided Key Employee under any qualified defined
benefit retirement plans of the Company, including but not limited to the
Retirement Plan; (ii) benefits provided Key Employee under any nonqualified
defined benefit retirement plans of the Company, including but not limited
to the Plans; and (iii) Social Security benefits and other amounts for
which and to the extent offset is provided for under the Retirement Plan.
In the event Key Employee commences receiving the Supplemental Retirement
Income on or after his attainment of age 60, the Supplemental Retirement
Income (prior to actuarial conversion to the form of benefit elected by Key
Employee) will be paid without reduction for early commencement. In the
event Key Employee commences receiving the Supplemental Retirement Income
prior to his attainment of age 60, the Supplemental Retirement Income
(prior to actuarial conversion to the form of benefit elected by Key
Employee) will be subject to a reduction of 0.25% for each whole or partial
month by which 60 years exceeds Key Employee's age as of such commencement
of benefits.
(c) Except as otherwise expressly provided in the Employment
Agreement, Key Employee's right to Supplemental Retirement Income will be
wholly unvested until August 14, 2000, on which date, provided Key Employee
remains employed by the Company until such date, such Income will become
fully vested. Unless Key Employee's right to Supplemental Retirement Income
shall have previously or thereupon become vested, Key Employee's rights
thereto will be forfeited upon termination of his employment with the
Company prior to August 14, 2000.
(d) If Key Employee dies after the date hereof but before
Supplemental Retirement Income becomes payable, his spouse will receive a
survivor annuity for her life equal to 50% of the aggregate annual benefit
amount which would have been payable to Key Employee under this Section 3
if he had
3
32
terminated his employment for Good Reason (as defined in the Employment
Agreement) on the date immediately before his death (without regard to the
additional two or three years of credited service described in Sections 4.01(f)
and 5.04(b) of the Employment Agreement), but such survivor annuity will be
reduced by the amount of (i) any pre-retirement survivor benefit payable under
the Company's qualified and nonqualified defined benefit retirement plans
(including but not limited to the Retirement Plan and the Plans) and (ii)
survivor benefits under the Company's Disability and Survivorship Plan.
4. Supplemental Disability Income. Subject to Section 8, the Company
agrees to pay Key Employee at the time set forth below a supplemental monthly
disability income ("Supplemental Disability Income") equal to (a) minus (b),
where
(a) equals the monthly disability benefit which the Key Employee
would receive under the Disability and Survivorship Plan
beginning on the Benefit Commencement Date (as defined below) if
the Restrictions were not in effect and taking into account his
or her elections under the Delta Air Lines, Inc. DELTAFLEX Plan;
and
(b) equals the monthly disability benefit to which the Key Employee
actually receives from the Disability and Survivorship Plan
beginning on the Benefit Commencement Date, taking into account
his or her elections under the Delta Air Lines, Inc.
DELTAFLEX Plan.
The amount of Supplemental Disability Income paid under this Agreement will be
adjusted as permitted under the Delta Air Lines, Inc. DELTAFLEX Plan, and if
the amount in (b) above increases or decreases as a result of a change in the
Restrictions.
5. Supplemental Monthly Survivor Income. Subject to Section 8, the
Company agrees to pay to Eligible Family Member(s) (as defined in the Disability
and Survivorship Plan) of Key Employee at Key Employee's death a supplemental
monthly survivor income ("Supplemental Survivor Income") equal to (a) minus (b),
where
(a) equals the monthly survivor benefit which the Eligible Family
Member(s) of Key Employee would receive under the Disability and
Survivorship Plan beginning on the Benefit Commencement Date (as
defined below) without considering any Restrictions on any
benefit plan; and
4
33
(b) equals the monthly survivor benefit which the Eligible Family
Member(s) of Key Employee actually receives under the terms of
the Disability and Survivorship Plan.
The amount of Supplemental Survivor Income paid under this Agreement will be
adjusted as permitted under the Disability and Survivorship Plan and the Code
to account for, inter alia, changes in the number of Eligible Family Members.
6. Benefit Commencement Date; Cessation of Benefits. Subject to Section 18
(Change in Control), the Company shall commence payment of the Supplemental
Retirement Income as of the Benefit Commencement Date under the Retirement Plan
and the Supplemental Disability or Survivor Income as of the Benefit
Commencement Date under the Disability and Survivorship Plan. Subject to Section
18, Benefit Commencement Date under this Agreement shall mean the day that the
retirement income benefit, disability benefit or survivor benefit, as the case
may be, commences under the Retirement Plan or Disability and Survivorship Plan
with respect to Key Employee or his Spouse, or Eligible Family Member(s);
Supplemental Retirement Income will cease upon the death of the last to die of
Key Employee or, if applicable, his Spouse, or if changes in the Restrictions
permit the full benefit due under Section 3 hereof to be paid from the
Retirement Plan and the Retirement Plan assumes such full payment, or if full
payment of retirement benefits due hereunder have already been made.
Supplemental Disability Income will cease if the full benefit due under the
Disability and Survivorship Plan may be paid from that Plan and the Disability
and Survivorship Plan assumes such full payment or when the Key Employee is no
longer eligible for disability benefits under that Plan. Supplemental Survivor
Income will cease if the full benefit due under the Disability and Survivorship
Plan may be paid from that Plan, and the Disability and Survivorship Plan
assumes full payment of the benefit amount or when there are no remaining
Eligible Family Member(s) under that Plan. Subject to Section 18, all benefits
(other than Supplemental Retirement Income benefits) payable hereunder may cease
pursuant to Section 8 at any time.
7. Supplemental Lump Sum Death Benefit. Subject to Section 8, the Company
agrees to pay to the named beneficiary (as designated by Key Employee for the
Basic Life Benefit under the Disability and Survivorship Plan) of Key Employee
at Key Employee's death, a supplemental lump sum death benefit in the amount
necessary to provide a total lump sum death benefit of $50,000 when combined
with the Basic Life Benefit actually provided by the Disability and Survivorship
Plan. Such benefit shall be taken into account in determining the Company's
compliance with any provision of the Employment Agreement providing for the
payment of life insurance benefits, and the Company's obligations under this
Section 7 shall be treated as discharged upon the purchase by the Company of a
fully paid-up term life insurance policy on Key Employee's life pursuant to
Section 5.04 (d)(ii) of the Employment Agreement.
5
34
8. Certain Restrictions. Subject to Section 18, or unless waived by the
Committee under circumstances the Committee deems appropriate, if Key Employee
terminates active employment with the Company prior to his Normal Retirement
Date and within two years of such termination directly or indirectly
provides management or executive services (whether as a consultant, advisor,
officer or director) to any Person (as defined in Section 18) who is in direct
and substantial competition with the air transportation business of the Company
or any of its subsidiaries, then (a) if Supplemental Monthly Survivor Income or
Supplemental Lump Sum Death benefits under this Agreement shall have not yet
commenced, no such benefits shall be paid under this Agreement to Key Employee,
his Spouse, Eligible Family Member or beneficiary; and (b) if Supplemental
Monthly Survivor Income or Supplemental Lump Sum Death benefits under this
Agreement have commenced, no further such benefits shall be paid. Because of
the broad and extensive scope of the Company's air transportation business, the
restrictions contained in this provision are intended to extend to management
or executive services which are directly related to the provision of air
transportation services into, within or from the United States, as no smaller
geographical restriction will adequately protect the legitimate business
interest of the Company.
9. Funding of Benefit. Subject to Section 18 (Change in Control) the
benefits provided by this Agreement shall be paid, as they become due, from the
Company's general assets or by such other means as the Company deems advisable,
including a trust or trusts established by the Company, provided however, if
such trusts are established, benefits shall be payable from such trusts only as
and to the extent provided therein. To the extent Key Employee acquires the
right to receive payments from the Company under this Agreement, such right
shall be no greater than that of a general creditor of the Company. The Company
shall have complete discretion under this Agreement to account for and report,
or to refrain from accounting for or reporting, its liabilities under this
Agreement. In the event that the Company in its sole discretion establishes a
reserve or bookkeeping account for the benefits payable under this Agreement,
the Key Employee shall have no proprietary or security interest in any such
reserve or account.
10. Nonassignability of Benefits. No benefit payable under this Agreement
may be assigned, transferred, encumbered or subjected to legal process for the
payment of any claim against Key Employee, his Spouse, Eligible Family Member,
or beneficiary.
11. No Right to Continued Employment. Nothing in this Agreement shall be
deemed to give Key Employee the right to be retained in the service of the
Company or to deny the Company any right it may have to discharge Key Employee
at any time, subject to the Company's obligation to provide benefits and amounts
as may be required hereunder.
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35
12. Arbitration. The parties acknowledge that any claim or controversy
arising out of this Agreement is subject to arbitration in accordance with the
Employment Agreement.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without regard to its conflict
of laws rules.
14. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the parties hereto.
15. Amendment. This writing and the Employment Agreement, including any
terms or documents incorporated herein by reference, supersede any previous
excess benefit agreement between Key Employee and the Company. This Agreement
may not be modified orally, but only by writing signed by the parties hereto.
16. Notice. All notices, requests, demands and other communications under
this Agreement, shall be in writing and shall be delivered personally (including
by courier) or mailed by certified mail, return receipt requested. Refusal to
acknowledge receipt of such notice shall constitute receipt of such notice upon
the date it is returned to the sender. Any notice under this Agreement shall be
sent to Key Employee, Spouse, his Eligible Family Member or beneficiary at the
last known address of such person as reflected in the Company's records. Notice
to the Company or the Committee shall be sent to:
Delta Air Lines, Inc.
Law Department
1030 Delta Boulevard
Atlanta, Georgia 30320
Attention: Robert S. Harkey,
Senior Vice President - General Counsel
17. Form of Payment. If Key Employee becomes entitled to Supplemental
Retirement Income under this Excess Benefit Agreement, such benefit shall
automatically be paid in the identical form that benefits are payable under the
Retirement Plan, subject to actuarial adjustment in accordance with the
Retirement Plan, commencing with the date payments under the Retirement Plan
begin.
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36
18. Change in Control. Notwithstanding anything in this Agreement to the
contrary, in the event a Change in Control (as defined below) occurs, the
Company shall, if not previously established, establish a grantor trust (the
"Trust") to provide benefits payable under this Agreement. Subject to the
following paragraph, the Company shall promptly cause to be irrevocably
deposited in such Trust for the benefit of Key Employee and his or her
beneficiaries, on the terms set forth below, an amount equal to the balance as
of the date of such deposit of Key Employee's accrued benefit under this
Agreement, regardless of whether such benefit is vested. From and after the date
of such Change in Control, the Company shall cause to be irrevocably deposited
in the Trust any additional accruals under this Agreement, regardless of whether
such benefit is vested.
The instrument governing the Trust shall, to the extent reasonably
necessary to assure that this Agreement will continue to be treated as
"unfunded" for purposes of ERISA and the Code, provide that upon insolvency of
the Company, the assets of the trust will be subject to the claims of the
Company's general creditors. The Trust instrument shall provide that in all
other respects the assets of the Trust will be maintained for the exclusive
benefit of Key Employee and his or her beneficiaries, and will otherwise be
subject to all fiduciary and other requirements of applicable state trust law.
In addition, in the event Employee's employment terminates under
circumstances in which Section 5.04 of the Employment Agreement applies,
Section 8 of this Agreement shall be deemed waived. Further, the timing and
payments of any retirement benefits to be provided hereunder shall be governed
by, and subject to, the terms of the Employment Agreement to the extent such
Agreement provides for accelerated payments of retirement benefits otherwise
payable under this Agreement.
For purposes of this Agreement, "Change in Control" means, and shall be
deemed to have occurred upon, the first to occur of any of the following events:
(a) Any Person (other than an Excluded Person) acquires, together
with all Affiliates and Associates of such Person, Beneficial Ownership of
securities representing 20% or more of the combined voting power of the
Voting Stock then outstanding, unless such Person acquires Beneficial
Ownership of 20% or more of the combined voting power of the Voting Stock
then outstanding solely as a result of an acquisition of Voting Stock by
the Company which, by reducing the Voting Stock outstanding, increases the
proportionate Voting Stock beneficially owned by such Person (together with
all Affiliates and Associates of such Person) to 20% or more of the
combined voting power of the Voting Stock then
8
37
outstanding; provided, that if a Person shall become the Beneficial Owner of 20%
or more of the combined voting power of the Voting Stock then outstanding by
reason of such Voting Stock acquisition by the Company and shall thereafter
become the Beneficial Owner of any additional Voting Stock which causes the
proportionate voting power of Voting Stock beneficially owned by such Person to
increase to 20% or more of the combined voting power of the Voting Stock then
outstanding, such Person shall, upon becoming the Beneficial Owner of such
additional Voting Stock, be deemed to have become the Beneficial Owner of 20% or
more of the combined voting power of the Voting Stock then outstanding other
than solely as a result of such Voting Stock acquisition by the Company;
(b) During any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of
such period constitute the Board (and any new Director, whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the Directors then still in
office who either were Directors at the beginning of the period or whose
election or nomination for election was so approved), cease for any reason
to constitute a majority of Directors then constituting the Board;
(c) A reorganization, merger or consolidation of the Company is
consummated, in each case, unless, immediately following such
reorganization, merger or consolidation, (i) more than 50% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all OF
the individuals and entities who were the beneficial owners of the Voting
Stock outstanding immediately prior to such reorganization, merger or
consolidation, (ii) no Person (but excluding for this purpose any Excluded
Person and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or
more of the voting power of the outstanding Voting Stock) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members
9
38
of the Board at the time of the execution of the initial agreement
providing for such reorganization, merger or consolidation; or
(d) The shareholders of the Company approve (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
other than to any corporation with respect to which, immediately
following such sale or other disposition, (A) more than 50% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners of the Voting Stock
outstanding immediately prior to such sale or other disposition of
assets, (B) no Person (but excluding for this purpose any Excluded
Person and any Person beneficially owning, immediately prior to such
sale or other disposition, directly or indirectly, 20% or more of the
voting power of the outstanding Voting Stock) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of such corporation or the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors
and (C) at least a majority of the members of the board of directors
of such corporation were members of the Board at the time of the
execution of the initial agreement or action of the Board providing
for such sale or other disposition of assets of the Company.
Notwithstanding the foregoing, in no event shall a "Change in Control" be deemed
to have occurred (i) as a result of the formation of a Holding Company, or (ii)
with respect to Key Employee, if Key Employee is part of a "group," within the
meaning of Section 13(d)(3) of the Exchange Act as in effect on the Effective
Date, which consummates the Change in Control transaction. In addition, for
purposes of the definition of "Change in Control" a Person engaged in business
as an underwriter of securities shall not be deemed to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
As used in the above definition, "Person" shall mean an individual,
corporation, partnership, association, trust or any other entity or
organization. "Excluded Person" means (i) the Company; (ii) any of the Company's
Subsidiaries; (iii) any Holding Company; (iv) any employee benefit plan of the
Company, any of its Subsidiaries or a Holding Company; or (v) any Person
organized, appointed or established by the Company, any of its Subsidiaries or a
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39
Holding Company for or pursuant to the terms of any plan described in clause
(iv). "Affiliate" and "Associate" have the respective meanings accorded to such
terms in Rule 12b-2 under the Exchange Act as in effect on the Effective Date. A
Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own," securities pursuant to Rule 13d-3 under the Exchange Act as
in effect on the Effective Date. "Voting Stock" means securities of the Company
entitled to vote generally in the election of members of the Board. "Board"
means the Board of Directors of the Company. "Exchange Act" means the Securities
Exchange Act of 1934. "Holding Company" means an entity that becomes a holding
company for the Company or its businesses as a part of any reorganization,
merger, consolidation or other transaction, provided that the outstanding shares
of common stock of such entity and the combined voting power of the then
outstanding voting securities of such entity entitled to vote generally in the
election of directors is, immediately after such reorganization, merger,
consolidation or other transaction, beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Voting Stock outstanding immediately
prior to such reorganization, merger, consolidation or other transaction in
substantially the same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or other transaction, of such outstanding
Voting Stock.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on
the date first set forth above.
DELTA AIR LINES, INC.
By:
---------------------------------
Gerald Grinstein
Chairman of the Board
KEY EMPLOYEE
------------------------------------
Leo F. Mullin
11
40
EXHIBIT B
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
UNDER THE 1989 STOCK INCENTIVE PLAN
August 14, 1997
Leo F. Mullin
President & Chief Executive Officer
The 1989 Stock Incentive Plan of Delta Air Lines, Inc., as amended
("Plan"), is intended as an inducement for officers, executives and key
employees of Delta Air Lines, Inc. (the "Company") to continue in the employment
of the Company, and to provide a greater incentive to such employees to make
material contributions to the Company's success by increasing their proprietary
interest in the Company through increased direct stock ownership. The Plan,
which provides for certain awards to eligible employees, is administered by the
Personnel & Compensation Committee of the Board of Directors (the "Committee").
Pursuant to the Plan, the Committee selected you to receive an award of a
Nonqualified Stock Option under the Plan, effective as of the close of business
on August 14, 1997, and has instructed me, on behalf of the Company, to provide
this Agreement to you.
In consideration of the mutual covenants herein contained and for other
good and valuable consideration, the Company and you as an employee of the
Company (hereinafter called "Employee"), do hereby agree as follows:
1. The Company hereby grants to Employee a Nonqualified Stock Option
("Stock Option") covering 500,000 shares of Stock, as defined in the Plan, a
copy of which has been furnished to Employee. This award is in all respects made
subject to the terms and conditions of the Plan and, by signing and returning a
copy of this Agreement to the Secretary of the Company, Employee acknowledges
that he has read this Agreement and the Plan and agrees to all of the terms and
conditions thereof for himself, any designated beneficiary and his heirs,
executors, administrators or personal representative. Terms used in this
Agreement which are defined in the Plan shall have the meanings set forth in the
Plan. In the event of any conflict between the Plan and this Agreement, the Plan
shall control. Employee also acknowledges receipt of the Prospectus dated
January 26, 1995, relating to the Plan.
2. The Option Price of the Stock Option covered by this award shall be
$88.3125 per share, which price was the opening price of the Stock on the New
York Stock Exchange (the "NYSE") on the date of this award.
41
3. Subject to the terms and conditions of the Plan and the other
provisions of this Agreement, the Stock Option shall become exercisable in
installments as follows, provided Employee continues to be employed by the
Company on the dates indicated:
Number of Shares with
Respect to which Option
First Becomes Exercisable Date
------------------------- ----
200,000 August 14, 1998
100,000 August 14, 1999
100,000 August 14, 2000
100,000 August 14, 2001
In the event of the occurrence prior to August 14, 2001 of (i) a Change in
Control or (ii) the termination of Employee's employment (A) by the Company
without Cause, or (B) by Employee with Good Reason, the Stock Option shall
immediately become fully exercisable. In the event of the termination of
Employee's employment for any other reason prior to August 14, 2001, Employee
shall forfeit that portion of the Stock Option attributable to Shares with
respect to which the Stock Option has not previously become exercisable pursuant
to this Paragraph 3. For purposes of this Agreement, the terms "Change in
Control," "Cause" and "Good Reason" shall have the respective meanings assigned
such terms for purposes of the Employment Agreement between Employee and the
Company dated as of August 14, 1997.
4. Subject to the terms and conditions of the Plan and Paragraph 8
below, the Stock Option granted to Employee herein may be exercised during the
period beginning as set forth in Paragraph 3 above and ending August 13, 2007,
except as provided in Sections 5 and 10 of the Plan. In the event of termination
of Employee's employment with the Company (i) by the Company without Cause, (ii)
by Employee with Good Reason or (iii) on or after August 14, 2000 for any reason
other than death or Disability (to the extent the Stock Option is otherwise
exercisable pursuant to Paragraph 3 above), the termination of Employee's
employment will be treated, for purposes of determining the terms of exercise of
the Stock Option under Section 10(b) of the Plan, as having occurred because of
Employee's Retirement. Subject to the terms and conditions of the Plan, Employee
(or, if Employee is deceased, a party acting on his behalf pursuant to Section
10 of the Plan) may exercise the Stock Option granted herein in whole or, from
time to time, in part by way of a written notice delivered to the Secretary of
the Company which includes the following: (i) name, mailing address and social
security number of Employee and the date, which shall be the actual date of the
notice; (ii) the number of shares of Stock with respect to which the Stock
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42
Option is being exercised; (iii) the date of grant and the Option Price with
respect to the Stock Option being exercised; and (iv) the signature of Employee
or a party acting on behalf of a deceased employee. Payment of the full purchase
price of the shares of Stock covered by the exercise shall be made in the manner
prescribed by the Committee from time to time. If the Committee, in its sole
discretion, shall determine that it is appropriate to do so, such payment may be
made in whole or in part by tender of shares of unrestricted Stock, as set forth
in Section 5 of the Plan, subject to such requirements or procedures as the
Committee may specify.
5. When the Stock Option is exercised, the Company shall make the
appropriate calculations under the Plan and deliver to Employee, as soon as
practicable, a certificate or certificates representing the net number of shares
of Stock due to Employee pursuant to such exercise, calculated in accordance
with this paragraph. Unless other tax withholding arrangements are made by
Employee and the Company, the Company shall withhold from the shares of Stock
issued to Employee a sufficient number of shares of Stock based on its fair
market value on the date of exercise to cover any amounts which the Company is
required to withhold to comply with withholding requirements of federal, state
or local tax laws, rules or regulations. The fair market value for purposes of
the second sentence of this paragraph shall be as reasonably determined by the
Committee.
6. The Stock Option granted herein is not transferable otherwise than
by will, by the laws of descent and distribution, or by a written designation
referred to in Section 10(c) of the Plan, and is exercisable during Employee's
lifetime only by Employee. In the event that the Stock Option is exercised
pursuant to Section 10 of the Plan by any person other than Employee, such
notice shall be accompanied by appropriate proof of the right of such person to
exercise the Stock Option.
7. The Stock Option granted herein is subject to all terms of the Plan,
including but not limited to Section 10(b), which provides for the forfeiture
and repayment of certain benefits in certain circumstances in the event of
Employee's Retirement prior to his normal retirement date.
8. Employee acknowledges that the federal securities laws and/or the
Company's policies regarding trading in its securities may limit or restrict
Employee's right to buy or sell shares of Stock, including, without limitation,
sales of Stock to exercise the Stock Option or sales of Stock acquired pursuant
to the exercise of the Stock Option. Employee agrees to comply with such federal
securities law requirements and Company policies, as such laws and policies are
amended from time to time.
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This Agreement has been prepared in duplicate. Please note your
acceptance in the space provided therefor and return the original for the
Company's records.
IN WITNESS WHEREOF, the Company, acting through the Committee, has
caused this Agreement to be duly executed, and Employee has hereunto set his
hand, all as of the day and year first written above.
DELTA AIR LINES, INC.
By
--------------------------------
Gerald Grinstein, Chairman
Personnel & Compensation Committee
EMPLOYEE
----------------------------
Leo F. Mullin
4
44
Exhibit C
RESTRICTED STOCK AWARD AGREEMENT
UNDER THE 1989 STOCK INCENTIVE PLAN
August 14, 1997
Leo F. Mullin
President & Chief Executive Officer
The 1989 Stock Incentive Plan of Delta Air Lines, Inc., as amended
("Plan"), is intended as an inducement for officers, executives and key
employees of Delta Air Lines, Inc. (the "Company") to continue in the employment
of the Company, and to provide a greater incentive to such employees to make
material contributions to the Company's success by increasing their proprietary
interest in the Company through increased direct common stock ownership. The
Plan, which provides for certain awards to eligible employees, is administered
by the Personnel & Compensation Committee of the Board of Directors (the
"Committee"). Pursuant to the Plan, the Committee has selected you to receive an
award of Restricted Stock (as defined in the Plan) effective as of the close of
business on August 14, 1997, and has instructed me to direct this letter to you.
In consideration of the mutual covenants herein contained and for other
good and valuable consideration, the Company and you as an employee of the
Company (hereinafter called "Employee"), do hereby agree as follows:
1. Grant of Shares. Pursuant to action of the Committee, the Company
has granted to Employee 6,000 shares of Restricted Stock (the "Shares"). This
award is in all respects made subject to the terms and conditions of the Plan, a
copy of which has been provided to Employee, and by signing and returning a copy
of this Agreement to the Secretary of the Company, Employee acknowledges that he
has read the Plan and agrees to all of the terms and conditions thereof for
himself, any designated beneficiary and his heirs, executors, administrators or
personal representative. Terms used in this Agreement which are defined in the
Plan shall have the meanings set forth in the Plan. In the event of any conflict
between the Plan and this Agreement, the Plan shall control. Employee also
acknowledges receipt of the Prospectus dated January 26, 1995, relating to the
Plan.
As soon as practicable following Employee's execution of this Agreement
and the stock power described below in Section 6, a certificate or certificates
representing the Shares and bearing the legend described below in Section 6
shall be issued to Employee. Upon issuance of the certificates representing the
Shares,
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Employee shall have all rights of a stockholder with respect to the Shares,
including the right to vote and, subject to Section 10 of this Agreement, to
receive all dividends or other distributions paid or made with respect to the
Shares; provided, however, that the Shares (and any securities of the Company
which may be issued with respect to the Shares by virtue of any dividend
reinvestment, stock split, combination, stock dividend or recapitalization,
which securities shall be deemed to the "Shares" hereunder) shall be subject to
the terms and all of the restrictions set forth in this Agreement.
2. Restriction. Until the restriction imposed by this Section 2 (the
"Restriction") has lapsed pursuant to Section 3 or 4 below, Employee shall not
be permitted to sell, exchange, assign, transfer, pledge or otherwise dispose of
the Shares and the Shares shall be subject to forfeiture as set forth in Section
5 below.
3. Lapse of Restriction by Passage of Time. The Restriction shall lapse
and have no further force or effect with respect to 33-1/3% of the Shares
(including 33-1/3% of any additional Shares which at the time have been
purchased with dividends on the Shares) awarded hereunder on July 1 of each of
1998, 1999 and 2000, provided Employee remains employed by the Company on such
dates. If Employee's employment is terminated because of Retirement prior to his
Normal Retirement Date as determined under the qualified retirement or pension
plan of the Company applicable to Employee, and within two years after any such
early Retirement and without the Committee's approval Employee directly or
indirectly provides management or executive services (whether as a consultant,
advisor, officer or director) to any Person who is in direct and substantial
competition with the air transportation business of the Company or its
Subsidiaries, Employee shall be required to repay to the Company the cash value
of any Shares and any cash which were vested at such early Retirement. The
amount of such repayment shall be the closing price of the Company's common
stock ("Common Stock") on the New York Stock Exchange ("NYSE") on the day that
the Restriction on such Shares lapsed (or, in the event that no sale of the
Common Stock takes place on the NYSE on such date, the closing price of the
Common Stock on the NYSE on the immediately preceding date on which such a sale
occurred) multiplied by the number of such Shares. Because of the broad and
extensive scope of the Company's air transportation business, the restrictions
contained in this provision are intended to extend to management or executive
services which are directly related to the provision of air transportation
services into, within, or from the United States, as no smaller geographical
restriction will adequately protect the legitimate business interests of the
Company.
4. Lapse of Restriction in Certain Cases. The Restriction shall lapse
and have no further force or effect with respect to all Shares hereunder upon
(a) the occurrence of a Change in Control or (b) termination of Employee's
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employment (i) by the Company without Cause, (ii) by Employee with Good Reason
or (iii) by reason of Employee's death or Disability (as defined in the Plan).
For this purpose, the terms "Change in Control," "Cause" and "Good Reason" shall
have the respective meanings assigned such terms for purposes of the Employment
Agreement between Employee and the Company dated as of August 14, 1997. Employee
may provide to the Company written designation naming a person or persons who
shall receive the Shares in the event of Employee's death, and such designation
must be in a form approved by counsel for the Company. If there is no such
approved designation, Shares shall be distributed upon Employee's death pursuant
to Employee's last will and testament or as provided by law.
5. Forfeiture of Shares. In the event of termination of Employee's
employment with the Company other than in the circumstances described in clauses
(i), (ii) or (iii) of Section 4(b) and prior to lapse of the Restriction under
Section 3, Employee shall immediately forfeit all right, title, and interest to
the Shares which are still subject to the Restriction, and such Shares shall be
canceled or transferred to the Company by Employee, without consideration to
Employee or his heirs, executors, administrators or personal representative.
6. Endorsement and Retention of Certificates. All certificates
representing the Shares shall be endorsed on the face thereof with the following
legend:
"The shares of stock represented by this certificate and the sale,
transfer or other disposition of such shares are restricted by and
subject to a Restricted Stock Award Agreement dated August 14, 1997
between Leo F. Mullin and the Company, a copy of which is on file
with the Secretary of the Company."
All certificates for Shares shall be held by the Company until the restrictions
thereon shall have lapsed, and as a condition to this award, Employee shall
execute and deliver to the Company a stock power, endorsed in blank and approved
by counsel for the Company, relating to the Shares, as set forth in the Plan.
Upon lapse of the Restriction pursuant to Section 3 or 4 of this
Agreement without a prior forfeiture of the Shares, a certificate or
certificates for an appropriate number of unrestricted Shares shall be delivered
to Employee and the certificate with the legend indicated above shall be
canceled.
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7. Withholding Taxes. Upon lapse of the Restriction on the Shares
pursuant to Section 3 or 4 above, unless other tax withholding arrangements are
made by Employee and the Company, sufficient Shares shall be transferred to the
Company to provide for the payment of any taxes required to be withheld by
federal, state, or local law with respect to income resulting from such lapse.
The value of the Shares so transferred shall be the closing price of the Common
Stock on the NYSE on the date the Restriction lapses (or, in the event that no
sale of the Common Stock takes place on the NYSE on such date, the closing price
of the Common Stock on the NYSE on the immediately preceding date on which such
a sale occurred).
8. Rights Not Enlarged. Nothing herein confers on Employee any right
to continue in the employ of the Company or any of its subsidiaries.
9. Succession. This Agreement shall be binding upon and operate for
the benefit of the Company and its successors and assigns, and Employee and his
heirs, executors, administrators or personal representative.
10. Dividends. Any cash dividends which may become payable on the
Shares shall be reinvested by the Company in shares of Common Stock, to the
extent Shares are available under the Plan. If Shares are not so available,
dividends shall be paid in cash and held by the Company for the account of
Employee until the Restriction lapses. In such event the Company shall pay
interest on the amount so held as determined by the Committee, and the
accumulated amount of such dividends and interest shall be payable to Employee
upon the lapse of the Restriction. Those Shares and any cash held for the
account of the Employer shall be governed by the Restriction set forth in the
Agreement; the Restriction with respect to such Shares and such cash shall lapse
as provided in Sections 3 and 4 of this Agreement; and such Shares and such cash
shall be forfeited pursuant to Section 5 to the extent that the Shares on which
such dividends were paid shall be so forfeited.
11. Fractional Shares. Upon lapse of the Restriction, certificates for
fractional Shares shall not be delivered to Employee, and the value of any
fractional Shares which may result from the application of Section 3 or 4 of
this Agreement shall be paid in cash to Employee, as determined in the last
sentence of Section 7 above.
This Agreement has been prepared in duplicate. Please note your
acceptance in the space provided below, and return the original for the
Company's records.
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IN WITNESS WHEREOF, the Company, acting through the Committee, has
caused this Agreement to be duly executed and Employee has hereunto set his or
her hand, all as of the day and year first written above.
DELTA AIR LINES, INC.
By:
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Gerald Grinstein, Chairman
Personnel & Compensation Committee
EMPLOYEE
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Leo F. Mullin
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