EXHIBIT 10.7
SEVERANCE AGREEMENT
Agreement dated as of April 8, 2002, between US Airways, Inc., a
Delaware corporation, having a place of business at Crystal Park Four, 0000
Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the "Company") and Xxxxxxxx X. Xxxxx,
residing at 0000 Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000 (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive has assumed duties of a responsible nature to
the benefit of the Company and to the satisfaction of its Board of Directors
(the "Board");
WHEREAS, the Board believes it to be in the best interests of the
Company to enter into this Agreement to assure Executive's continuing services
to the Company including, but not limited to, under circumstances in which there
is a possible, threatened or actual severance of employment or Change of Control
(as defined below) of the Company; and
WHEREAS, the Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened severance of employment or Change
of Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a severance of employment which ensure that the compensation
and benefits expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order to accomplish
all the above objectives, the Board has caused the Company to enter into this
Agreement.
WHEREAS, the Company and the Executive have entered into an Employment
Agreement dated as of October 31, 2001 (the "Prior Agreement"); and
WHEREAS, the Company and the Executive desire to supersede the Prior
Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the Company and the Executive hereby agree as follows:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall mean the date hereof.
(b) The "Change of Control Date" shall mean the first date during the
Employment Period (as defined in Section 1(d)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated or the Executive ceases to be an officer of the
Company prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment or
cessation of status as an officer (i) was at the request of a third party who
has taken steps reasonably calculated to effect the Change of Control or (ii)
otherwise arose in connection with or anticipation of the Change of Control,
then for all purposes of this Agreement the "Change of Control Date" shall mean
the date immediately prior to the date of such termination of employment or
cessation of status as an officer.
(c) The "Change of Control Period" shall mean the period commencing
on the Change of Control Date and ending on the earlier to occur of (a) the
third anniversary of such date, or (b) the Executive's Normal Retirement Date.
2
(d) The "Employment Period" shall mean the period commencing on the
Effective Date and ending on the earlier to occur of (i) the third anniversary
of such date or (ii) the first day of the month next following the Executive's
65th birthday ("Normal Retirement Date"); provided, however, that commencing on
the date one year after the Effective Date, and on each annual anniversary of
such date (such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"), the Employment Period shall be automatically
extended so as to terminate on the earlier of (x) three years from such Renewal
Date or (y) the Executive's Normal Retirement Date, unless at least 30 days
prior to the Renewal Date the Company shall give notice to the Executive that
the Employment Period shall not be so extended; and provided, further, that upon
the occurrence of a Change of Control Date, the Employment Period shall
automatically be extended so as to terminate on the earlier to occur of (1) the
third anniversary of such date or (2) the Executive's Normal Retirement Date.
(e) "Key Employee" shall mean a senior vice president level employee
of the Company.
2. CHANGE OF CONTROL.
For the purpose of this Agreement, a "Change of Control" or "Change in
Control" shall mean:
(a) The acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the
then outstanding shares of common stock of the Company's parent,
US Airways Group, Inc. ("Group") (the
3
"Outstanding Group Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of Group entitled to vote generally in the
election of directors (the "Outstanding Group Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (v) any acquisition directly from Group, (w) any acquisition by Group
or any of its subsidiaries, (x) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Group or any of its subsidiaries, (y)
any acquisition by any corporation with respect to which, following such
acquisition, more than 85% 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 beneficial
owners, respectively of the Outstanding Group Common Stock and Outstanding Group
Voting Securities in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Group Common Stock and
Outstanding Group Voting Securities, as the case may be or (z) any acquisition
by an individual, entity or group that, pursuant to Rule 13d-1 promulgated under
the Exchange Act, is permitted to, and actually does, report its beneficial
ownership of Outstanding Group Common Stock and Outstanding Group Voting
Securities on Schedule 13G (or any successor Schedule); provided further, that
if any such individual, entity or group subsequently becomes required to or does
report its ownership of Outstanding Group Common Stock and Outstanding Group
Voting Securities on Schedule 13D (or any successor Schedule) then, for purposes
of this Section 2(a), such individual, entity or group shall be deemed to have
first acquired, on the first date on which such individual, entity or
4
group becomes required to or does so file, beneficial ownership of all of the
Outstanding Group Common Stock and Outstanding Group Voting Securities
beneficially owned by it on such date; or
(b) Individuals who, as of the date hereof, constitute Group's Board
of Directors (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Group Board of Directors; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by Group's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or
(c) There is consummated a reorganization, merger or consolidation,
in each case, with respect to which all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the Outstanding
Group Common Stock and Outstanding Group Voting Securities immediately prior to
such reorganization, merger or consolidation, beneficially own, directly or
indirectly, less than 85% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger or
consolidation (or any parent thereof) in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger or
consolidation of the
5
Outstanding Group Common Stock and the Outstanding Group Voting Securities, as
the case may be; or
(d) Approval by the shareholders of Group of a complete liquidation
or dissolution of Group or the consummation of the sale or other disposition of
all or substantially all of the assets of Group, other than to a corporation
with respect to which, following such sale or other disposition, more than 85%
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, respectively, of the Outstanding Group Common Stock and Outstanding
Group Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Group Common Stock and Outstanding
Group Voting Securities, as the case may be.
3. EMPLOYMENT PERIOD.
The Company hereby agrees to continue the Executive in its employ, and
the Executive hereby agrees to remain in the employ of the Company, during the
Employment Period under the terms and conditions provided herein.
4. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period and prior to a Change of
Control Date, (A) if the Board determines that the Executive has been
performing his duties in accordance with Section 4(a)(iii) hereof, it shall
re-elect
6
the Executive to the position of Senior Vice President with substantially
similar duties to the position held by the Executive on the Effective Date,
and (B) the Executive's services shall be performed at the Executive's
location on the Effective Date, the Company's headquarters, or a location
where a substantial activity for which the Executive has responsibility is
located.
(ii) During the Employment Period and on and following a Change
of Control Date, (A) the Executive's position (including status, offices,
titles and reporting relationships), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
90-day period immediately preceding the Change of Control Date and (B) the
Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Change of Control Date or any office
or location where a substantial activity for which the Executive has
responsibility is located.
(iii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is also expressly understood and agreed that to the extent
that such activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Change of Control Period, the Company
shall pay the Executive a base salary (x) for the first 12 months of such period
at a rate not less than his base salary in effect on the Change of Control Date
and (y) during each succeeding 12 months at a rate not less than his base salary
in effect on the last day of the preceding 12-month period. During the Change of
Control Period, base salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially consistent
with increases in base salary awarded in the ordinary course of business to
other Key Employees of the Company and its subsidiaries. Any increase in base
salary shall
7
not serve to limit or reduce any other obligation to the Executive under this
Agreement. Base salary shall not be reduced after any such increase. Base salary
under Section 4(b)(i) shall hereinafter be referred to as the "Base Salary".
(ii) Annual Bonus. In addition to Base Salary, the Executive shall be
awarded, for each fiscal year during the Change of Control Period, an annual
bonus as shall be determined by the Board or its Human Resources Committee in
accordance with the Incentive Compensation Plan as approved by the Group Board
of Directors or other annual bonus plan hereafter approved by the Board
("Incentive Plan"). The annual bonus under Section 4(b)(ii) shall hereinafter be
referred to as the "Annual Bonus".
(iii) Incentive, Savings and Retirement Plans. In addition to Base
Salary and Annual Bonus payable as hereinabove provided, the Executive shall be
entitled to participate during the Change of Control Period in all incentive
(including but not limited to the Long Term Incentive Plan and all stock
incentive plans), savings and retirement plans, practices, policies and programs
applicable to other Key Employees, in each case providing benefits which are at
least as favorable as the most favorable of such plans, practices, policies and
programs in effect at any time during the 90-day period immediately preceding
the Change of Control Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with respect to other
Key Employees.
(iv) Welfare Benefit Plans. During the Change of Control Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs applicable to other Key Employees (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs), in each case providing benefits which are at
least as favorable as the most favorable of such plans, practices, policies and
programs in effect at any time during the 90-day period immediately preceding
the Change of Control Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with respect to other
Key Employees.
(v) Expenses. During the Change of Control Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its subsidiaries applicable at any
time on or after the Effective Date to other Key Employees of the Company and
its subsidiaries.
(vi) Fringe Benefits. During the Change of Control Period, the
Executive shall be entitled to fringe benefits, including but not limited to
space positive and space available travel privileges in all classes of service
and cabins on
8
all air carriers owned by the Company and any of its affiliates (including all
carriers owned by any individual, entity or group that has entered into an
agreement the consummation of which constitutes a Change of Control, or which
otherwise caused a Change of Control) ("Travel Privileges"), in each case
providing benefits which are at least as favorable as the most favorable of such
plans, practices, policies and programs in effect at any time during the 90-day
period immediately preceding the Change of Control Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any time thereafter
with respect to other Key Employees.
(vii) Vacation. During the Change of Control Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its subsidiaries as in
effect at any time during the 90-day period immediately preceding the Change of
Control Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter with respect to other Key Employees.
5. TERMINATION.
(a) Mutual Agreement. During the Employment Period, the Executive's
employment hereunder may be terminated at any time by mutual agreement on terms
to be negotiated at the time of such termination.
(b) Death or Disability. This Agreement shall terminate automatically upon
the Executive's death. If the Company determines in good faith that the
Disability of the Executive has occurred (pursuant to the definition of
"Disability" set forth below), it may give to the Executive written notice of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 90th
day after receipt by the Executive of such notice given at any time after a
period of six consecutive months of Disability and while such Disability is
continuing (the "Disability Effective Date"), provided that, within the 90 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" means disability which, at least six
9
months after its commencement, is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably). During such six month period and
until the Disability Effective Date, Executive shall be entitled to all
compensation provided for under Section 4 hereof, to the extent applicable.
(c) Cause. During the Employment Period, the Company may terminate the
Executive's employment for "Cause." For purposes of this Agreement, "Cause"
means (1) a reasonable good faith determination by the Company that the
Executive engaged in an act or acts of personal dishonesty intended to result in
substantial personal enrichment of the Executive at the expense of the Company,
(2) repeated violations by the Executive of the Executive's obligations under
Section 4(a) of this Agreement which are demonstrably willful and deliberate on
the Executive's part and which are not remedied in a reasonable period of time
after receipt of written notice from the Company or (3) the conviction of the
Executive of a felony.
(d) Good Reason. During the Employment Period, the Executive's employment
hereunder may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means:
(i) with respect to the termination of the Executive's employment
other than during the Change of Control Period:
(1) any reduction by the Company of the Executive's rate of
base salary, as in effect on the Effective Date or as the
same may be increased from time to time;
(2) any material and substantial diminution in the Executive's
position, authority, duties or responsibilities as
contemplated by Section 4(a)(i) of this Agreement, or any
other action by
10
the Company which results in a material and substantial
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(3) any demotion of the Executive to a position lower than
Senior Vice President; or
(4) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement, and
(ii) with respect to the termination of the Executive's employment
during the Change of Control Period:
(1) the assignment to the Executive of any duties inconsistent
in any respect with Executive's position (including
status, offices, titles and reporting relationships),
authority, duties or responsibilities as contemplated by
Section 4(a)(ii) or (iii) of this Agreement, or any other
action by the Company which results in a diminution in
such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(2) (x) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than
an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by
the Executive or (y) any failure of the Company to pay
Base Salary or Annual Bonus in accordance with Sections
4(b)(i) and (ii), respectively, and any failure by the
Company to maintain or provide the plans, programs,
policies and practices, and benefits described in Sections
4(b)(iii) - (vii) on the most favorable basis such plans,
programs, policies and practices were maintained and
benefits provided during the 90-day period immediately
preceding the Change of Control Date, or if more favorable
to the Executive and/or the Executive's family, as in
effect at any time thereafter with respect to other Key
Employees;
11
(3) the Company's requiring the Executive to be based at any
office or location other than that described in Section
4(a)(ii)(B) hereof, except for travel reasonably required
in the performance of the Executive's responsibilities;
(4) any purported termination by the Company of the
Executive's employment otherwise than as expressly
permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(d)(ii), any good faith determination of "Good
Reason" made by the Executive on or after the Change of Control Date shall be
conclusive.
(e) Notice of Termination. Any termination during the Change of
Control Period by the Company for Cause or by the Executive for Good Reason
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than fifteen (15) days after the giving of such notice). The
failure by the Executive to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from asserting such
fact or circumstance in enforcing his rights hereunder. Any termination other
than during the Change of Control Period by the Company for Cause or by the
Executive for Good Reason shall be communicated by
12
written notice (which written notice shall not constitute a Notice of
Termination hereunder) to the other party hereto given in accordance with
Section 12(b) of this Agreement.
(f) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be; provided, however, that (i) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (ii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
(g) Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 5(g)), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Change of Control Period ends or
(ii) the date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of an
arbitrator or a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence; and provided further, this Section 5(g) shall be
applicable only for terminations of employment occurring during the Change of
Control Period.
13
(h) Compensation During Dispute. If a purported termination occurs
during the Change of Control Period and the Date of Termination is extended in
accordance with Section 5(g) hereof, the Company shall continue to pay the
Executive the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with
Section 5(g) hereof. Amounts paid under this Section 5(h) are in addition to all
other amounts due under this Agreement and shall not be offset against or reduce
any other amounts due under this Agreement.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death.
(i) If the Executive's employment is terminated during the
Change of Control Period by reason of the Executive's
death, this Agreement shall terminate without further
obligations to the Executive's legal representatives under
this Agreement, other than those obligations accrued or
earned and vested (if applicable) by the Executive as of
the Date of Termination, including, for this purpose (1)
the Executive's full Base Salary through the Date of
Termination at the rate in effect on the Date of
Termination, disregarding any reduction in Base Salary in
violation of this Agreement (the "Highest Base Salary"),
(2) the product of the Annual Bonus paid to the Executive
for the last full fiscal year and a fraction, the
numerator of which is
14
the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the
Executive (together with any accrued interest thereon) and
not yet paid by the Company and any accrued vacation pay
not yet paid by the Company (such amounts specified in
clauses (1) through (3)) are hereinafter referred to as
"Accrued Obligations" and such amounts specified in
clauses (1) and (3) are hereinafter referred to as
"Termination Obligations"). Anything in this Agreement to
the contrary notwithstanding, the Executive's family shall
be entitled to receive benefits in accordance with the
most favorable plans, programs, practices and policies of
the Company and its subsidiaries in effect during the
90-day period immediately preceding the Change of Control
Date, or if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter
with respect to other Key Employees.
(ii) If the Executive's employment is terminated by reason of
the Executive's death other than during the Change of
Control Period, this Agreement shall terminate without
further obligations to the Executive's legal
representatives under this Agreement other than the
Termination Obligations.
(iii) All such Accrued Obligations and Termination Obligations
shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump
15
sum in cash within 30 days of the Date of Termination or
the date of termination (as applicable).
(b) Disability.
(i) If the Executive's employment is terminated during the
Change of Control Period by reason of the Executive's
Disability, this Agreement shall terminate without further
obligations to the Executive, other than those obligations
accrued or earned and vested (if applicable) by the
Executive as of the Date of Termination, including for
this purpose, all Accrued Obligations. Anything in this
Agreement to the contrary notwithstanding, the Executive
shall be entitled after the Disability Effective Date to
receive disability and other benefits in accordance with
the most favorable plans, programs, practices and policies
of the Company and its subsidiaries in effect during the
90-day period immediately preceding the Change of Control
Date, or if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter
with respect to other Key Employees.
(ii) If the Executive's employment is terminated by reason of
the Executive's Disability other than during the Change of
Control Period, this Agreement shall terminate without
further obligations to the Executive under this Agreement
other than the Termination Obligations.
16
(iii) All such Accrued Obligations and Termination Obligations
shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination or the date of
termination (as applicable).
(c) Cause; Other than for Good Reason. If during the
Employment Period the Executive's employment is terminated for Cause or the
Executive terminates his employment other than for Good Reason, this Agreement
shall terminate without further obligations to the Executive under this
Agreement other than those obligations accrued or earned and vested (if
applicable) by the Executive through the Date of Termination or the date of
termination (as applicable), including for this purpose, the Termination
Obligations. All such Termination Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
(d) Good Reason; Other Than for Cause or Disability.
(1) If, during the Employment Period and prior to a Change
of Control, the Company shall terminate the Executive's employment
other than for Cause, Disability or death or if the Executive shall
terminate his employment for Good Reason, the Executive shall be
entitled to:
A. to the extent not theretofore paid, the Executive's
annual rate of base salary as in effect immediately
prior to the date of termination; and
B. a lump sum in cash within 30 days after the date of
termination equal to the product of two (2) times the
sum of (x) the Executive's annual rate of base salary
as in effect immediately prior to the date of
termination, and (y) the Executive's "target bonus"
under the Incentive Plan for the year in which the
date of termination occurs; and
C. in the case of compensation previously deferred by
the Executive, all amounts previously deferred
(together with
17
any accrued interest thereon) and not yet paid by the
Company, and any accrued vacation pay not yet paid by
the Company; and
D. if such termination should occur prior to October
31, 2003, continuation of health insurance on the same
basis such benefits were provided to the Executive on
the Effective Date, or, if more favorable to the
Executive and/or the Executive's family, as in effect
at any time thereafter with respect to the Executive,
with such benefits to continue for the life of the
Executive; provided, however, that if the Executive
becomes eligible for health insurance through a
subsequent employer, the Company's provision of such
benefits shall be secondary to the benefit coverage of
the subsequent employer.
(2) If, during the Employment Period and on and after a
Change of Control Date, the Company shall terminate the Executive's
employment other than for Cause, Disability, or death or if the
Executive shall terminate his employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum
in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
A. to the extent not theretofore paid, the Executive's
Highest Base Salary through the Date of Termination;
and
B. the product of (x) the Annual Bonus paid to the
Executive for the last full fiscal year ending during
the Change of Control Period or, if higher, the Annual
Bonus paid to the Executive during the last full
fiscal year ending during the Change of Control Period
or, if higher, a constructive annual bonus calculated
at the "target bonus" level under the Incentive Plan
in effect immediately preceding the Change of Control
Date (the highest Annual Bonus determined under this
clause (x) shall hereinafter be referred to as the
"Recent Bonus") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year
through the Date of Termination and the denominator of
which is 365: and
18
C. the product of (x) three and (y) the sum of (i) the
Highest Base Salary and (ii) the Recent Bonus; and
D. in the case of compensation previously deferred by
the Executive, all amounts previously deferred
(together with any accrued interest thereon) and not
yet paid by the Company, and any accrued vacation pay
not yet paid by the Company; and
(ii) The Company shall:
A. for a period of three years following the Date of
Termination or such longer period as any plan,
program, practice or policy may provide, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would
have been provided to them in accordance with the
plans, programs, practices and policies described in
Sections 4(b)(iii)(with respect to any retirement
plans), (iv) and (vi) of this Agreement as if the
Executive's employment had not been terminated and as
if the Change of Control Period expired on the 3rd
anniversary of the Date of Termination, and for
purposes of eligibility for retiree benefits pursuant
to such plans, practices, programs and policies, the
Executive shall be considered to have remained
employed until the 3rd anniversary of the Date of
Termination; and
B. the Company shall provide continuation of Travel
Privileges for the life of the Executive which are at
least as favorable as the benefits provided pursuant
to the most favorable of such plans, practices,
policies and programs in effect at any time during the
90-day period immediately preceding the Change of
Control Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any
time thereafter with respect to other Key Employees.
(e) Notwithstanding any other provisions of this Agreement to the
contrary, (1) upon termination of the Executive's employment for any reason
following the 5th anniversary of the Executive's date of employment, the
Executive shall be entitled to the Travel Privileges described in 6(d)(2)(ii)(B)
above; and (2) upon termination of the
19
Executive's employment for any reason after October 31, 2003, the Executive
shall be entitled to continuation of health insurance on the same basis such
benefits were provided to the Executive on the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter with respect to the Executive, with such benefits to continue
for the life of the Executive; provided, however, that if the Executive becomes
eligible for health insurance through a subsequent employer, the Company's
provision of such benefits shall be secondary to the benefit coverage of the
subsequent employer.
7. NON-EXCLUSIVITY OF RIGHTS.
Nothing in this Agreement shall prevent or limit the Executive's continuing
or future participation in any benefit, bonus, incentive or other plans,
programs, policies or practices, provided by Group, the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any stock
option, restricted stock or other agreements with Group, the Company or any of
its subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any Plan, policy, practice or program of
Group, the Company or any of its subsidiaries at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program.
8. FULL SETTLEMENT.
The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be
20
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement. The Company agrees to pay, to the full extent permitted by law (a)
all legal fees and expenses, as incurred by the Company, the Executive and
others, which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement (other
than Section 6(d)(1) and 6(e)) or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant of Section 9 of this Agreement) and (b) all legal fees and
expenses, as incurred by the Company, the Executive and others, which the
Executive may reasonably incur as a result of any contest by the Company or
others of the validity or enforceability of, or liability under, Section 6(d)(1)
and 6(e) of this Agreement or any guarantee of performance thereof but only, in
the case of this clause (b), if the Executive prevails on at least one material
issue in such contest plus, in the case of clauses (a) and (b), interest at the
applicable Federal rate provided for in Section 7872(f)(2) (or any successor
provision thereto) of the Internal Revenue Code of 1986, as amended (the
"Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9, including, but not limited to, any amounts in respect of (i) options to
acquire shares of Group common stock, and (ii) restricted shares of
21
Group common stock (a "Payment"), would be subject to the excise tax imposed by
Section 4999 (or any successor provision thereto) 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 the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income and employment taxes
(and any interest and penalties imposed with respect thereto) and Excise Tax,
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by a firm of
independent public accountants selected by Group prior to the Change of Control
(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen (15) business days of the
receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company or the Executive. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the 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. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid
22
to the Executive within five (5) days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or other penalty.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code (or any successor provision thereto) at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
(together with interest and penalties incurred by the Executive in connection
therewith) that has occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive knows
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty-day period following the date
on which he gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect
23
to such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim,
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis, for
any Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on
an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax,
including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be
payable hereunder; whereas the Executive shall be entitled to settle
or contest, as the case may be, any
24
other issued raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section
9(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of
thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
10. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of
the Company all confidential and proprietary information, relating to Group, the
Company or any of their subsidiaries, and their respective businesses, which
shall have been obtained by the Executive's employment by the Company or any of
its subsidiaries and which shall not be or become public knowledge (other than
by acts by Executive or his representatives in violation of this Agreement).
After termination of the Executive's employment with the Company, the Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information to anyone other than the Company and those
25
designated by it. Notwithstanding the foregoing, the Executive or his
representatives may disclose any such information if such information is
compelled by legal process, provided that if Executive is so compelled, he shall
provide the Company with prompt notice so that it may seek a protective order or
other remedy. In any event, Executive shall furnish only that portion of the
confidential information that is legally required to be disclosed. In the event
the Executive breaches any provision of this Section 10, any payments or other
benefits promised under this Agreement shall be forfeited. Such a forfeiture
shall not limit the Company from seeking any other contractual or equitable
remedies available to it which are appropriate under the circumstances. The
Executive expressly consents to the award of injunctive relief in the event a
violation of this Section 10 is alleged by the Company.
11. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean
26
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive If to the Company:
------------------- -----------------
Xxxxxxxx X. Xxxxx US Airways, Inc.
0000 Xxxxxxxxx Xxxx 0000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
27
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision hereof.
(f) Words or terms used in this Agreement which connote the masculine
gender are deemed to apply equally to female executives.
(g) This Agreement supersedes any prior employment agreement between the
Company and the Executive, including but not limited to the Prior Agreement, and
contains the entire understanding of the Company and the Executive with respect
to the subject matter hereof.
28
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
-------------------------------------
Xxxxxxxx X. Xxxxx
US AIRWAYS, INC.
-------------------------------------
Xxxxxxxx X. XxXxxxx
Vice President, Deputy General Counsel
and Secretary
29
