Exhibit 10.17
FORM OF SENIOR OFFICER EXCESS BENEFIT AGREEMENT
THIS EXCESS BENEFIT AGREEMENT ("Agreement") is made and entered into as
of the ___ day of ___, 19__, by and between DELTA AIR LINES, INC. (hereinafter
the "Company") and_________, (hereinafter "Key Employee"):
W I T N E S S E T H :
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 Executive
Retention Protection Agreement with Key Employee; and
WHEREAS, Key Employee has been deemed to be a participant in the Plans
in accordance with their terms; and
WHEREAS, Key Employee has rendered valuable service to the Company in
various executive capacities and the Company believes it is in the best interest
of the Company in seeking to assure itself of Key Employee's continued best
efforts in the future to provide for the payment of full retirement and other
benefits to the Key Employee; 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 nonqualified excess
benefit plans and/or this Agreement any reduction in Key Employee's monthly
retirement income benefit, disability or survivor benefits under either the
Delta Family-Care Retirement Plan (the "Retirement Plan") or 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 or qualified pension plan; and
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 and Key Employee's participation in the Delta
Supplemental Excess Benefit Plan 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. The parties further acknowledge that the 1991 Delta Excess
Benefit Plan is an "excess benefit plan" as defined in section 3(36) of ERISA
and is unfunded and not subject to any provision of ERISA.
2. Incorporation of the Retirement Plan and the Disability and
Survivorship Plan. The terms of 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
and the Plans. 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. Subject to Sections 8 and 18, the
Company agrees to pay Key Employee, or, in the event of Key Employee's death,
Key Employee's Spouse, at the time and in the manner set forth below,
supplemental retirement income ("Supplemental Retirement Income") equal to (a)
minus (b) where
(a) equals the Early, Normal or Deferred Retirement
income benefit or deferred vested pension benefit
(whichever is appropriate) which Key Employee would
receive or survivor benefit to which his spouse would
receive under the Retirement Plan beginning on the
Benefit Commencement Date (as defined below) if the
Restrictions as reflected in the Retirement Plan and
the Code were not in effect;
2
(b) equals the Early, Normal or Deferred Retirement
benefit, or deferred vested pension benefit
(whichever is appropriate) which Key Employee
actually receives or survivor benefit which his
Spouse actually receives under the Retirement Plan
beginning on the Benefit Commencement Date;
(c) For purposes of determining benefits under (a) and
(b) above, any Qualified Domestic Relations Order
(QDRO) will be taken into account, such that the
benefits payable hereunder will not exceed those
which would be payable absent the QDRO.
Except as provided in the next sentence, for purposes of calculating the
Supplemental Retirement Income, Key Employee shall be credited with an
additional 11 years of service for vesting and benefit accrual purposes under
the Retirement Plan (the "Additional Service Credit"). The Additional Service
Credit shall not apply if prior to March 23, 2001 either (i) Key Employee's
employment with the Company is terminated for Cause; or (ii) Key Employee
terminates employment with the Company without Good Reason. For purposes of this
paragraph, "Cause" and "Good Reason" shall have the same meaning as ascribed to
those terms in Exhibit C attached to the March 23, 1998 letter to Key Employee
from Leo Mullin.
The amount of Supplemental Retirement Income paid under this Agreement will be
adjusted when and if the amount in (b) above increases or decreases as a result
of a change in the Restrictions, including cost of living adjustments to such
Restrictions.
4. Supplemental Disability Income. Subject to Sections 8 and 18, 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 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 Plan, and if the amount in (b) above increases
or decreases as a result of a change in the Restrictions.
3
5. Supplemental Monthly Survivor Income. Subject to Sections 8 and 18,
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
(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 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 the Retirement Plan 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
payable hereunder may cease pursuant to Section 8 at any time.
7. Supplemental Lump Sum Death Benefit. Subject to Sections 8 and 18,
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
4
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.
8. Certain Restrictions. Subject to Section 18, or unless waived by the
Committee under circumstances the Committee deems appropriate, if a 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 benefits under this Agreement shall have
not yet commenced, no benefits shall be paid under this Agreement to such Key
Employee, his Spouse, Eligible Family Member or beneficiary; and (b) if benefits
under this Agreement have commenced, no further 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. This section shall be deemed waived, but only with
respect to the Supplemental Retirement Income, if at any time subsequent to
March 23, 2001 either (i) Key Employee's employment with the Company is
terminated for cause; or (ii) Key Employee terminates his employment with the
Company without Good Reason; provided "Cause" and "Good Reason" shall have
the same meaning as ascribed to those terms in Exhibit C attached to the
letter dated ____________, 19__ to Key Employee from [the CEO].
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
5
to the Company's obligation to provide benefits and amounts as may be required
hereunder.
12. Arbitration. The parties acknowledge that any claims or controversy
arising out of this Agreement is subject to arbitration in accordance with the
Plans.
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, including any terms or documents
incorporated herein by reference, supersedes 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; No Elections. Subject to Section 18 (Change In
Control), Key Employee shall not be permitted to exercise any election under the
Plans which affects the date of commencement, manner or form in which Key
Employee's Supplemental Retirement Income is paid. In addition, no election
under the Retirement Plan shall affect the manner or form in which Supplemental
Retirement Income is paid under the Plans. If Key Employee becomes entitled to
Supplemental Retirement Income under this Excess Benefit Agreement, such benefit
shall automatically be paid commencing with the date payments under the
Retirement Plan begin as follows:
(a) In every case in which the form of benefit payable
under the Retirement Plan is automatic and does not
depend on the election
6
of the Participant thereunder, Supplemental
Retirement Income under this Excess Benefit Agreement
shall automatically be paid in the identical form
that it is payable under the Retirement Plan.
(b) In the case of any Key Employee who becomes eligible
for Early Retirement under the Retirement Plan and is
eligible to elect the level income option thereof,
such Key Employee's Supplemental Retirement income
under this Agreement, if any, shall be automatically
payable in the form that would have been payable
disregarding any election by such Key Employee of the
level income option.
18. Change In Control. Notwithstanding anything in this Agreement to
the contrary, in the event Key Employee has rights under an Executive Retention
Protection Agreement with the Company at the time 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 and the Plans. 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 the Plans and 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 the
Plans and Agreement, regardless of whether such benefit is vested.
The instrument governing the Trust shall, to the extent reasonably
necessary to assure that the Plans and 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 as a result
of a Qualifying Event (as defined in any Executive Retention Protection
Agreement between Key Employee and the Company), Section 8 of this Agreement
shall be deemed waived and Section 6 of the 1991 Delta Excess Benefit Plan and
Section 6 of the Delta Supplemental Excess Benefit Plan shall not be applicable
to Key Employee. Further, the timing and payments of any retirement benefits to
be provided hereunder shall be governed by, and subject to, the terms of said
Executive Retention Protection 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:
7
(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
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
8
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 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.
9
As used in the above definition, the terms "Person", "Excluded
Person", "Affiliate", "Associate", "Beneficial Ownership", "Voting
Stock", "Board", "Exchange Act", "Holding Company", and "Effective
Date" shall have the same meaning as ascribed to those terms in the
then current Executive Retention Protection Agreement between
the Company and Key Employee.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
on the date(s) shown below.
DELTA AIR LINES, INC.
By:
------------------------------
President and Chief Executive Officer
Date:
----------------------------
----------------------------------
Date:
----------------------------
10