Exhibit 10.42
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AGREEMENT
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THIS AGREEMENT (the "Agreement") is made and entered into as
of March 1, 1997 (the "Effective Date") between United Air Lines,
Inc. ("United") and Xxxxxxx X. Xxxxxxx ("Employee") and is
intended to set forth the parties' understanding regarding
certain compensation opportunities if and only if Employee is
employed by United on March 1, 2000.
1. Elections. Not later than each of February 1, 2000,
2001 and 2002 (each such date, an "Election Date"), Employee
shall elect either the following Option 1 or Option 2 for the
calendar year in which the Election Date occurs (a "Calculation
Year") by written notice to United:
(a) Option 1: Employee may elect to forego any
Supplemental Payment (as defined below), in which case he
shall be entitled (subject to subsequent elections made
under this Agreement) to retain his vested options granted
on or after the Effective Date under the 1981 Incentive
Stock Plan (the "1981 Plan") of UAL Corporation ("UAL"), and
exercise them in accordance with their terms.
(b) Option 2: (i) Employee may elect to receive a payment
("Supplemental Payment"), if any, from United for such
Calculation Year which when added to the "aggregate value of
Employee's options" (as defined below) on the Valuation Date
(as defined in the table below) for the Calculation Year
will equal the Target Amount (as defined below) for such
Calculation Year. If Employee makes this election in any
Calendar Year he must exercise all options that vest on or
prior to the applicable Valuation Date ("Vested Options")
not later than the fifth business day following such
Valuation Date. In no event will the Supplemental Payment
in any Calculation Year exceed the Target Amount for such
year, and no Supplemental Payment shall be owed if the
calculation in the first sentence yields a result of $0 or
less.
Calendar Year Election Date Valuation Date Target Amount
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2000 February 1, 2000 March 1, 2000 $333,333
2001 February 1, 2001 March 1, 2001 $666,667 *
2002 February 1, 2002 March 1, 2002 $1,000,000 *
* To determine the Target Amount for the second and third
Calculation Year, subtract from the amount in the Table, the
Target Amount for each preceding Calculation Year, if any,
in which (x) Option 2 was elected and (y) a Supplemental
Payment was actually owed.
(ii) The "aggregate value of Employee's options" for each
Calculation Year shall mean the sum of (A) (x) the market
value of UAL common stock on the Valuation Date multiplied
by the total number of Vested Options, whether or not
exercised, less (y) the aggregate exercise prices paid or
payable upon exercise of all Vested Options plus (B) for any
Vested Option that was exercised on or prior to the
Valuation Date, the incremental gross proceeds, if any,
realized by Employee upon the exercise of such option in
excess of the amount determined pursuant to the preceding
clause (A) with respect to such Vested Options.
Notwithstanding the foregoing, if Employee elects Option 2
in the first or second Calculation Year and a Supplemental
Payment is actually owed, then for purposes of the preceding
equation in any subsequent Calculation Year, the aggregate
value of Employee's options shall not include the value of
Vested Options included in the calculation that resulted in
the Supplemental Payment being owed.
Supplemental Payments shall not be counted as Earnings for
any retirement program sponsored by United or UAL. Any
Supplemental Payment award shall be paid by United to Employee
promptly after the exercise of any remaining Vested Options as
required by subparagraph (i) above.
The right of Employee to elect Option 2 in any Calculation
Year shall terminate if Employee becomes employed by an airline
competitor, as determined by United or UAL, or if Employee's
employment with United is terminated for cause after the first
Election Date and on or before the last Election Date. If no
election is made on or before the Election Date in any
Calculation Year, Employee shall be deemed to have elected Option
1 for such Calculation Year.
2. Consideration. Employee acknowledges that his
employment on March 1, 1997, constitutes consideration for this
agreement.
3. Non-Assignability; Assignment in the Event of
Acquisition or Merger. This Agreement and the benefits hereunder
may not be assigned or transferred, by operation of law or
otherwise, except that the rights and obligations of United under
this Agreement shall automatically be deemed to be assigned by
United to any corporation or entity into which United may be
merged or consolidated or to any other successor corporation of
United.
4. Severability. If any provision of this Agreement or the
application thereof is held invalid, the invalidity shall not
affect other provisions or applications of this Agreement which
can be given effect without the invalid provisions or application
in accordance with the essential intent of this Agreement, and to
this end the provisions of this Agreement are declared to be
severable.
5. Superseded Prior Agreement(s). This Agreement
supersedes and voids any prior oral or written agreement relating
in any way to the subject matter hereof which may have been
entered into between the parties hereto, but excluding stock
option agreements entered into between Employee and UAL under the
1981 Plan. Any change to this Agreement after the Effective Date
shall be in writing and shall be executed by Employee and United.
6. Retirement; Expiration of this Agreement. For purposes
of the definition of "Retirement" in Section 5 of any and all
options granted to Employee under the 1981 Plan, Employee shall
be deemed to have retired if cessation of employment occurs on or
after the first Election Date, regardless of whether Employee was
eligible for early or normal retirement under United's retirement
plan.
This Agreement shall expire on the earliest to occur of (i)
Employee's cessation of employment from United for any reason, if
such cessation occurs prior to the first Election Date,
(ii) Employee's death, and (iii) satisfaction of United's payment
obligations pursuant to Section 1 hereof.
7. Applicable Law; Arbitration. This Agreement shall be
construed in accordance with the laws of the State of Illinois
and the rights and obligations of the parties hereunder shall be
construed and enforced in accordance with, and governed by the
laws of the State of Illinois, without regard to the principles
of conflicts of laws. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Chicago, Illinois in accordance with the rules
of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction. The prevailing party in such arbitration shall be
awarded reasonable legal fees and costs as determined by the
arbitrator.
United and Employee, having read and understood this
Agreement and, having consulted with others as appropriate,
hereby agree to be bound by its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of March 1, 1997 at the World Headquarters of United Air
Lines, Inc., 0000 Xxxx Xxxxxxxxx Xxxx, Xxx Xxxxx Xxxxxxxx,
Xxxxxxxx 00000.
UNITED AIR LINES, INC.
By: /s/ Xxxxxx Xxxxxxxxx /s/ Xxxxxxx X. Xxxxxxx
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Its: Chairman and Chief Xxxxxxx X. Xxxxxxx
Executive Officer
