-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
FFZUVM50/MXrZ6dAXXZaEEFA9bErZAEXqQ05JtxnwxYp2VEELe+HITiWgN2mLhOC
pqqo36BQBcXzzOmlshkr3A==
[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
ASSETS (in millions) |
September 30, 2007 |
December 31, 2006 |
||||||||
(Unaudited) | ||||||||||
CURRENT
ASSETS: |
||||||||||
Cash and cash
equivalents |
$ | 1,623 | $ | 2,034 | ||||||
Short-term
investments |
767 | 614 | ||||||||
Restricted
cash |
579 | 750 | ||||||||
Accounts
receivable, net of an allowance for uncollectible accounts of $23 at September 30, 2007 and $21 at December 31, 2006 |
1,213 | 915 | ||||||||
Expendable
parts and supplies inventories, net of an allowance for obsolescence of $7 at September 30, 2007 and $161 at December 31, 2006 |
257 | 181 | ||||||||
Deferred
income taxes, net |
807 | 402 | ||||||||
Prepaid
expenses and other |
399 | 489 | ||||||||
Total current
assets |
5,645 | 5,385 | ||||||||
PROPERTY
AND EQUIPMENT: |
||||||||||
Flight
equipment |
9,330 | 17,641 | ||||||||
Accumulated
depreciation |
(193 | ) | (6,800 | ) | ||||||
Flight
equipment, net |
9,137 | 10,841 | ||||||||
Ground
property and equipment |
1,815 | 4,575 | ||||||||
Accumulated
depreciation |
(158 | ) | (2,838 | ) | ||||||
Ground
property and equipment, net |
1,657 | 1,737 | ||||||||
Flight and
ground equipment under capital leases |
587 | 474 | ||||||||
Accumulated
amortization |
(38 | ) | (136 | ) | ||||||
Flight and
ground equipment under capital leases, net |
549 | 338 | ||||||||
Advance
payments for equipment |
215 | 57 | ||||||||
Total
property and equipment, net |
11,558 | 12,973 | ||||||||
OTHER
ASSETS: |
||||||||||
Goodwill
|
12,169 | 227 | ||||||||
Identifiable
intangibles, net of accumulated amortization of $92 at September 30, 2007 and $190 at December 31, 2006 |
2,861 | 89 | ||||||||
Other
noncurrent assets |
540 | 948 | ||||||||
Total other
assets |
15,570 | 1,264 | ||||||||
Total assets
|
$ | 32,773 | $ | 19,622 |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
LIABILITIES AND SHAREOWNERS EQUITY
(DEFICIT) (in millions, except share data) |
September 30, 2007 |
December 31, 2006 |
||||||||
(Unaudited) | ||||||||||
CURRENT
LIABILITIES: |
||||||||||
Current
maturities of long-term debt and capital leases |
$ | 904 | $ | 1,503 | ||||||
Air traffic
liability |
2,206 | 1,797 | ||||||||
Accounts
payable |
975 | 936 | ||||||||
Taxes payable
|
332 | 500 | ||||||||
Deferred
revenue |
1,117 | 363 | ||||||||
Accrued
salaries and related benefits |
744 | 405 | ||||||||
Note payable
|
297 | | ||||||||
Other accrued
liabilities |
129 | 265 | ||||||||
Total current
liabilities |
6,704 | 5,769 | ||||||||
NONCURRENT
LIABILITIES: |
||||||||||
Long-term
debt and capital leases |
7,430 | 6,509 | ||||||||
Pension and
related benefits |
3,214 | | ||||||||
Postretirement benefits |
1,038 | | ||||||||
Deferred
income taxes, net |
1,524 | 406 | ||||||||
Deferred
revenue |
2,566 | 346 | ||||||||
Other
|
549 | 368 | ||||||||
Total
noncurrent liabilities |
16,321 | 7,629 | ||||||||
LIABILITIES SUBJECT TO COMPROMISE |
| 19,817 | ||||||||
COMMITMENTS AND CONTINGENCIES |
||||||||||
SHAREOWNERS EQUITY (DEFICIT): |
||||||||||
Common
stock: |
||||||||||
Predecessor
common stock at $0.01 par value; 900,000,000 shares authorized, 202,081,648 shares issued at December 31, 2006 |
| 2 | ||||||||
Successor
common stock at $0.0001 par value; 1,500,000,000 shares authorized, 275,454,694 shares issued at September 30, 2007 |
| | ||||||||
Additional
paid-in capital |
9,479 | 1,561 | ||||||||
Retained
earnings (accumulated deficit) |
384 | (14,414 | ) | |||||||
Accumulated
other comprehensive income (loss) |
15 | (518 | ) | |||||||
Predecessor
stock held in treasury, at cost, 4,745,710 shares at December 31, 2006 |
| (224 | ) | |||||||
Successor
stock held in treasury, at cost, 6,339,220 shares at September 30, 2007 |
(130 | ) | | |||||||
Total
shareowners equity (deficit) |
9,748 | (13,593 | ) | |||||||
Total
liabilities and shareowners equity (deficit) |
$ | 32,773 | $ | 19,622 |
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended September 30, |
Five Months Ended September 30, |
Four Months Ended April 30, |
Nine Months Ended September 30, |
||||||||||||||||||||
(in millions, except per share data) | 2007 | 2006 | 2007 | 2007 | 2006 | ||||||||||||||||||
OPERATING
REVENUE: |
|||||||||||||||||||||||
Passenger: |
|||||||||||||||||||||||
Mainline
|
$ | 3,539 | $ | 3,207 | $ | 5,877 | $ | 3,829 | $ | 8,876 | |||||||||||||
Regional
affiliates |
1,099 | 1,016 | 1,859 | 1,296 | 2,909 | ||||||||||||||||||
Cargo
|
120 | 121 | 202 | 148 | 372 | ||||||||||||||||||
Other, net
|
469 | 407 | 737 | 523 | 1,129 | ||||||||||||||||||
Total
operating revenue |
5,227 | 4,751 | 8,675 | 5,796 | 13,286 | ||||||||||||||||||
OPERATING
EXPENSE: |
|||||||||||||||||||||||
Aircraft fuel
and related taxes |
1,270 | 1,276 | 2,060 | 1,270 | 3,377 | ||||||||||||||||||
Salaries and
related costs |
1,109 | 1,069 | 1,817 | 1,302 | 3,362 | ||||||||||||||||||
Contract
carrier arrangements |
815 | 724 | 1,345 | 956 | 1,993 | ||||||||||||||||||
Depreciation
and amortization |
297 | 293 | 490 | 386 | 912 | ||||||||||||||||||
Contracted
services |
264 | 230 | 424 | 326 | 670 | ||||||||||||||||||
Aircraft
maintenance materials and outside repairs |
253 | 230 | 418 | 320 | 689 | ||||||||||||||||||
Passenger
commissions and other selling expenses |
248 | 233 | 423 | 298 | 679 | ||||||||||||||||||
Landing fees
and other rents |
178 | 201 | 300 | 250 | 692 | ||||||||||||||||||
Passenger
service |
94 | 96 | 155 | 95 | 250 | ||||||||||||||||||
Aircraft rent
|
60 | 70 | 96 | 90 | 238 | ||||||||||||||||||
Profit
sharing |
79 | | 144 | 14 | | ||||||||||||||||||
Other
|
107 | 161 | 205 | 189 | 372 | ||||||||||||||||||
Total
operating expense |
4,774 | 4,583 | 7,877 | 5,496 | 13,234 | ||||||||||||||||||
OPERATING
INCOME |
453 | 168 | 798 | 300 | 52 | ||||||||||||||||||
OTHER
(EXPENSE) INCOME: |
|||||||||||||||||||||||
Interest
expense (contractual interest expense totaled $366 for the four months ended April 30, 2007, and $299 and $914 for the three and nine months ended
September 30, 2006, respectively) |
(132 | ) | (222 | ) | (252 | ) | (262 | ) | (663 | ) | |||||||||||||
Interest
income |
42 | 16 | 75 | 14 | 46 | ||||||||||||||||||
Miscellaneous, net |
| (31 | ) | 9 | 27 | (12 | ) | ||||||||||||||||
Total other
expense, net |
(90 | ) | (237 | ) | (168 | ) | (221 | ) | (629 | ) | |||||||||||||
INCOME
(LOSS) BEFORE REORGANIZATION ITEMS, NET |
363 | (69 | ) | 630 | 79 | (577 | ) | ||||||||||||||||
REORGANIZATION ITEMS, NET |
| 98 | | 1,215 | (3,685 | ) | |||||||||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES |
363 | 29 | 630 | 1,294 | (4,262 | ) | |||||||||||||||||
INCOME TAX
(PROVISION) BENEFT |
(143 | ) | 23 | (246 | ) | 4 | 40 | ||||||||||||||||
NET INCOME
(LOSS) |
220 | 52 | 384 | 1,298 | (4,222 | ) | |||||||||||||||||
PREFERRED
STOCK DIVIDENDS |
| | | | (2 | ) | |||||||||||||||||
NET INCOME
(LOSS) ATTRIBUTABLE TO COMMON SHAREOWNERS |
$ | 220 | $ | 52 | $ | 384 | $ | 1,298 | $ | (4,224 | ) | ||||||||||||
BASIC
INCOME (LOSS) PER SHARE |
$ | 0.56 | $ | 0.26 | $ | 0.98 | $ | 6.58 | $ | (21.53 | ) | ||||||||||||
DILUTED
INCOME (LOSS) PER SHARE |
$ | 0.56 | $ | 0.22 | $ | 0.97 | $ | 4.63 | $ | (21.53 | ) |
Successor | Predecessor | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
||||||||||||
Net cash
(used in) provided by operating activities |
$ | (198 | ) | $ | 1,025 | $ | 992 | ||||||||
Cash Flows
From Investing Activities: |
|||||||||||||||
Property and
equipment additions: |
|||||||||||||||
Flight
equipment, including advance payments |
(342 | ) | (167 | ) | (171 | ) | |||||||||
Ground
property and equipment, including technology |
(79 | ) | (41 | ) | (88 | ) | |||||||||
Proceeds from
sales of flight equipment |
24 | 21 | 34 | ||||||||||||
Proceeds from
sales of investments |
| 34 | | ||||||||||||
Purchase of
short-term investments |
(49 | ) | | | |||||||||||
Decrease
(increase) in restricted cash |
108 | 56 | (93 | ) | |||||||||||
Other,
net |
| | 4 | ||||||||||||
Net cash used
in investing activities |
(338 | ) | (97 | ) | (314 | ) | |||||||||
Cash Flows
From Financing Activities: |
|||||||||||||||
Payments on
long-term debt and capital lease obligations |
(327 | ) | (166 | ) | (398 | ) | |||||||||
Proceeds from
Exit Facilities |
| 1,500 | | ||||||||||||
Proceeds from
long-term obligations |
319 | | | ||||||||||||
Payments on
DIP Facility |
| (2,076 | ) | | |||||||||||
Other,
net |
(3 | ) | (50 | ) | (5 | ) | |||||||||
Net cash used
in financing activities |
(11 | ) | (792 | ) | (403 | ) | |||||||||
Net
(Decrease) Increase in Cash and Cash Equivalents |
(547 | ) | 136 | 275 | |||||||||||
Cash and cash
equivalents at beginning of period |
2,170 | 2,034 | 2,008 | ||||||||||||
Cash and cash
equivalents at end of period |
$ | 1,623 | $ | 2,170 | $ | 2,283 | |||||||||
Supplemental disclosure of cash paid (refunded) for: |
|||||||||||||||
Interest, net
of amounts capitalized |
$ | 231 | $ | 243 | $ | 548 | |||||||||
Interest
received from the preservation of cash due to Chapter 11 filing |
| (50 | ) | (79 | ) | ||||||||||
Professional
fee disbursements due to bankruptcy |
| | 73 | ||||||||||||
Cash received
from aircraft renegotiation |
| | (10 | ) | |||||||||||
Non-cash
transactions: |
|||||||||||||||
Flight
equipment |
$ | | $ | 135 | $ | | |||||||||
Flight
equipment under capital leases |
35 | 13 | 140 | ||||||||||||
Debt
extinguishment from aircraft renegotiation |
14 | | 171 |
(in millions, except share data) | Common Stock |
Additional Paid-In Capital |
Retained Earnings (Accumulated Deficit) |
Accumulated Other Comprehensive Income (Loss) |
Treasury Stock |
Total | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2007 (Predecessor) |
$ | 2 | $ | 1,561 | $ | (14,444 | ) | $ | (518 | ) | $ | (224 | ) | $ | (13,623 | ) | ||||||||||
Comprehensive income: |
||||||||||||||||||||||||||
Net income
from January 1 to April 30, 2007 |
| | 1,298 | | | 1,298 | ||||||||||||||||||||
Other
comprehensive income |
| | | 75 | | 75 | ||||||||||||||||||||
Total comprehensive income |
| | | | | 1,373 | ||||||||||||||||||||
Balance at April 30, 2007 (Predecessor) (Unaudited) |
2 | 1,561 | (13,146 | ) | (443 | ) | (224 | ) | (12,250 | ) | ||||||||||||||||
Fresh
start adjustments: |
||||||||||||||||||||||||||
Cancellation
of Predecessor common stock |
(2 | ) | (1,561 | ) | | | 224 | (1,339 | ) | |||||||||||||||||
Elimination
of Predecessor accumulated deficit and accumulated other comprehensive loss |
| | 13,146 | 443 | | 13,589 | ||||||||||||||||||||
Reorganization value ascribed to Successor |
| 9,400 | | | | 9,400 | ||||||||||||||||||||
Balance at May 1, 2007 (Successor) (Unaudited) |
| 9,400 | | | | 9,400 | ||||||||||||||||||||
Issuance of
275,454,694 shares of common stock ($0.0001 per share), including 6,339,220 shares held in Treasury ($20.52 per share)(1) |
| | | | (130 | ) | (130 | ) | ||||||||||||||||||
Comprehensive income: |
||||||||||||||||||||||||||
Net income
from May 1 to September 30, 2007 |
| | 384 | | | 384 | ||||||||||||||||||||
Other
comprehensive income |
| | | 15 | | 15 | ||||||||||||||||||||
Total
comprehensive income |
399 | |||||||||||||||||||||||||
Compensation expense associated with equity awards |
| 79 | | | | 79 | ||||||||||||||||||||
Balance at September 30, 2007 (Successor) (Unaudited) |
$ | | $ | 9,479 | $ | 384 | $ | 15 | $ | (130 | ) | $ | 9,748 |
(1) |
Weighted average price per share |
|
276 million shares of common stock to holders of allowed general, unsecured claims of $12.5 billion. We have reserved 110 million shares of common stock for future distributions to holders of allowed general, unsecured claims when disputed claims are resolved. |
|
Nearly all 14 million shares of common stock to eligible non-contract, non-management employees. We will distribute the remaining shares of common stock as eligible employees return to work during 2007. |
|
$66 million principal amount of senior unsecured notes in connection with our settlement agreement relating to the restructuring of certain of our lease and other obligations at the Cincinnati-Northern Kentucky International Airport (the Cincinnati Airport Settlement Agreement). For additional information on this subject, see Note 4; |
|
an aggregate of $102 million in cash to holders in satisfaction of their claims, including to holders of administrative claims, state and local priority tax claims, certain secured claims and de minimis allowed unsecured claims; |
|
$225 million in cash to the Pension Benefit Guaranty Corporation (the PBGC) in connection with the termination of our qualified defined benefit pension plan for pilots (the Pilot Plan); and |
|
$650 million in cash to fund an obligation (the Pilot Obligation) under our comprehensive agreement with the Air Line Pilots Association, International (ALPA), the collective bargaining representative of Deltas pilots, to reduce pilot labor costs. We paid $353 million and deposited the remaining $297 million in a grantor trust for the benefit of Delta pilots. The amount in the grantor trust is classified as restricted cash with a corresponding note payable on our Consolidated Balance Sheet until it is distributed in January 2008. |
(in millions) | Predecessor December 31, 2006 |
|||||
---|---|---|---|---|---|---|
Pension,
postretirement and other benefits |
$ | 10,329 | ||||
Debt and
accrued interest |
5,079 | |||||
Aircraft
lease related obligations |
3,115 | |||||
Accounts payable and other accrued liabilities |
1,294 | |||||
Total liabilities subject to compromise |
$ | 19,817 |
Predecessor | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | Four Months Ended April 30, 2007 |
Three Months Ended September 30, 2006 |
Nine Months Ended September 30, 2006 |
||||||||||||
Discharge of
claims and liabilities(1) |
$ | 4,424 | $ | | $ | | |||||||||
Revaluation
of frequent flyer obligation(2) |
(2,586 | ) | | | |||||||||||
Revaluation
of other assets and liabilities(3) |
238 | | | ||||||||||||
Aircraft
financing renegotiations and rejections(4) |
(440 | ) | 100 | (1,490 | ) | ||||||||||
Contract
carrier agreements(5) |
(163 | ) | | | |||||||||||
Emergence
compensation(6) |
(162 | ) | | | |||||||||||
Professional
fees |
(88 | ) | (34 | ) | (87 | ) | |||||||||
Pilot
collective bargaining agreement(7) |
(83 | ) | | (2,100 | ) | ||||||||||
Interest
income(8) |
50 | 32 | 79 | ||||||||||||
Facility
leases(9) |
43 | (1 | ) | (25 | ) | ||||||||||
Vendor waived
pre-petition debt |
29 | 15 | 20 | ||||||||||||
Retiree
healthcare claims(10) |
(26 | ) | | | |||||||||||
Debt issuance
costs |
| | (13 | ) | |||||||||||
Compensation
expense(11) |
| | (55 | ) | |||||||||||
Other |
(21 | ) | (14 | ) | (14 | ) | |||||||||
Total reorganization items, net |
$ | 1,215 | $ | 98 | $ | (3,685 | ) |
(1) |
The discharge of claims and liabilities primarily relates to allowed general, unsecured claims in our Chapter 11 proceedings, such as (a) ALPAs claim under our comprehensive agreement reducing pilot labor costs; (b) the PBGCs claim relating to the termination of the Pilot Plan; (c) claims relating to changes in postretirement healthcare benefits and the rejection of our non-qualified retirement plans; (d) claims associated with debt and certain municipal bond obligations based upon their rejection; (e) claims relating to the restructuring of financing arrangements or the rejection of leases for aircraft; and (f) other claims due to the rejection or modification of certain executory contracts, unexpired leases and contract carrier agreements. For additional information on these subjects, see Notes 1 and 10 of the Notes to the Consolidated Financial Statements in our Form 10-K. |
In accordance with the Plan, we discharged our obligations to holders of allowed general, unsecured claims in exchange for the distribution of 386 million newly issued shares of common stock and the issuance of certain debt securities and obligations. Accordingly, in discharging our liabilities subject to compromise, we recognized a reorganization gain of $4.4 billion as follows: |
(in millions) | ||||||
---|---|---|---|---|---|---|
Liabilities
subject to compromise |
$ | 19,345 | ||||
Reorganization value |
(9,400 | ) | ||||
Liabilities
reinstated |
(4,429 | ) | ||||
Issuance of
new debt securities and obligations, net of discounts of $22 |
(938 | ) | ||||
Other |
(154 | ) | ||||
Discharge of claims and liabilities |
$ | 4,424 |
(2) |
We revalued our SkyMiles frequent flyer obligation at fair value as a result of fresh start reporting, which resulted in a $2.6 billion reorganization charge. For information about a change in our accounting policy for the SkyMiles program, see Note 2. |
(3) |
We revalued our assets and liabilities at estimated fair value as a result of fresh start reporting. This resulted in a $238 million gain, primarily reflecting the fair value of newly recognized intangible assets, which was partially offset by reductions in the fair value of tangible property and equipment. |
(4) |
Estimated claims for the four months ended April 30, 2007 relate to the restructuring of the financing arrangements for 143 aircraft, the rejection of two aircraft leases and adjustments to prior claims estimates. The credit for the three months ended September 30, 2006 related to adjustments to claims estimates. Estimated claims for the nine months ended September 30, 2006 relate to the restructuring of the financing arrangements for 169 aircraft and the rejection of 16 aircraft leases. |
(5) |
In connection with amendments to our contract carrier agreements with Chautauqua Airlines, Inc. (Chautauqua) and Shuttle America Corporation (Shuttle America), both subsidiaries of Republic Airways Holdings, Inc. (Republic Holdings), which, among other things, reduced the rates we pay those carriers, we recorded (1) a $91 million allowed general, unsecured claim and (2) a $37 million net charge related to our surrender of warrants to purchase up to 3.5 million shares of Republic Holdings common stock. Additionally, in connection with an amendment to our contract carrier agreement with Freedom Airlines, Inc. (Freedom), a subsidiary of Mesa Air Group, Inc., which, among other things, reduced the rates we pay that carrier, we recorded a $35 million allowed general, unsecured claim. |
(6) |
In accordance with the Plan, we made $130 million in lump-sum cash payments to approximately 39,000 eligible non-contract, non-management employees. We also recorded an additional charge of $32 million related to our portion of payroll related taxes associated with the issuance, as contemplated by the Plan, of approximately 14 million shares of common stock to these employees. For additional information regarding the stock grants, see Note 10. |
(7) |
Allowed general, unsecured claims of $83 million for the four months ended April 30, 2007 and $2.1 billion for the nine months ended September 30, 2006 in connection with Comairs and Deltas respective comprehensive agreements with ALPA reducing pilot labor costs. |
(8) |
Reflects interest earned due to the preservation of cash during our Chapter 11 proceedings. |
(9) |
For the four months ended April 30, 2007, we recorded a net $43 million gain, primarily reflecting a $126 million net gain in connection with our settlement agreement with the Massachusetts Port Authority (Massport) which was partially offset by a net $80 million charge from an allowed general, unsecured claim under the Cincinnati Airport Settlement Agreement. For additional information regarding our settlement agreement with Massport and the Cincinnati Airport Settlement Agreement, see Note 4. |
(10) |
Allowed general, unsecured claims in connection with agreements reached with committees representing pilot and non-pilot retired employees reducing their postretirement healthcare benefits. |
(11) |
Reflects a charge for rejecting substantially all of our stock options in our Chapter 11 proceedings. For additional information regarding this matter, see Note 2 of the Notes to the Consolidated Financial Statements in our Form 10-K. |
(in millions) | Predecessor April 30, 2007 |
Debt Discharge, Reclassifications and Distribution to Creditors |
Repayment of DIP Facility and New Exit Financing |
Revaluation of Assets and Liabilities |
Successor Reorganized Balance Sheet May 1, 2007 |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
CURRENT
ASSETS |
||||||||||||||||||||||
Cash, cash
equivalents and short-term investments |
$ | 2,915 | $ | | $ | (557 | ) | $ | | $ | 2,358 | |||||||||||
Restricted
and designated cash |
1,069 | | | | 1,069 | |||||||||||||||||
Accounts
receivable, net |
1,086 | | | | 1,086 | |||||||||||||||||
Expendable
parts and supplies inventories, net |
183 | | | 58 | 241 | |||||||||||||||||
Deferred
income taxes, net |
441 | | | 302 | 743 | |||||||||||||||||
Prepaid
expenses and other |
437 | (19 | ) | | (75 | ) | 343 | |||||||||||||||
Total current
assets |
6,131 | (19 | ) | (557 | ) | 285 | 5,840 | |||||||||||||||
PROPERTY
AND EQUIPMENT |
||||||||||||||||||||||
Net flight
equipment and net flight equipment under capital lease |
11,087 | | | (1,254 | ) | 9,833 | ||||||||||||||||
Other
property and equipment, net |
1,498 | | | 215 | 1,713 | |||||||||||||||||
Total
property and equipment, net |
12,585 | | | (1,039 | ) | 11,546 | ||||||||||||||||
OTHER
ASSETS |
||||||||||||||||||||||
Goodwill |
227 | | | 12,199 | 12,426 | |||||||||||||||||
Intangibles,
net |
88 | | | 2,865 | 2,953 | |||||||||||||||||
Other
noncurrent assets |
740 | | 48 | 68 | 856 | |||||||||||||||||
Total other
assets |
1,055 | | 48 | 15,132 | 16,235 | |||||||||||||||||
Total
assets |
$ | 19,771 | $ | (19 | ) | $ | (509 | ) | $ | 14,378 | $ | 33,621 | ||||||||||
CURRENT
LIABILITIES |
||||||||||||||||||||||
Current
maturities of long-term debt and capital leases |
$ | 1,292 | $ | 5 | $ | | $ | 35 | $ | 1,332 | ||||||||||||
DIP
Facility |
1,959 | | (1,959 | ) | | | ||||||||||||||||
Accounts
payable, accrued salaries and related benefits |
1,396 | 561 | (50 | ) | 155 | 2,062 | ||||||||||||||||
SkyMiles
deferred revenue |
602 | | 620 | 1,222 | ||||||||||||||||||
Air traffic
liability |
2,567 | | | | 2,567 | |||||||||||||||||
Taxes
payable |
423 | | | (2 | ) | 421 | ||||||||||||||||
Total current
liabilities |
8,239 | 566 | (2,009 | ) | 808 | 7,604 | ||||||||||||||||
NONCURRENT
LIABILITIES |
||||||||||||||||||||||
Long-term
debt and capital leases |
5,132 | 37 | | 398 | 5,567 | |||||||||||||||||
Exit
Facilities |
| | 1,500 | | 1,500 | |||||||||||||||||
SkyMiles
deferred revenue |
294 | | | 1,958 | 2,252 | |||||||||||||||||
Other notes
payable |
| 697 | | | 697 | |||||||||||||||||
Pension,
postretirement and related benefits |
62 | 4,202 | | | 4,264 | |||||||||||||||||
Other |
1,026 | | | 1,311 | 2,337 | |||||||||||||||||
Total
noncurrent liabilities |
6,514 | 4,936 | 1,500 | 3,667 | 16,617 | |||||||||||||||||
Liabilities
subject to compromise |
19,345 | (19,345 | ) | | | | ||||||||||||||||
SHAREOWNERS (DEFICIT) EQUITY |
||||||||||||||||||||||
Debtors |
||||||||||||||||||||||
Common stock
and additional paid in capital Debtors |
1,563 | | | (1,563 | ) | | ||||||||||||||||
Retained
deficit and other Debtors |
(15,890 | ) | 4,424 | | 11,466 | | ||||||||||||||||
Reorganized Debtors |
||||||||||||||||||||||
Common stock
and additional paid in capital Reorganized Debtors |
| 9,400 | | | 9,400 | |||||||||||||||||
Total
liabilities and shareowners (deficit) equity |
$ | 19,771 | $ | (19 | ) | $ | (509 | ) | $ | 14,378 | $ | 33,621 |
|
Debt Discharge, Reclassifications and Distribution to Creditors. Adjustments reflect the elimination of liabilities subject to compromise totaling $19.3 billion on our Consolidated Balance Sheet immediately prior to the Effective Date. Excluding certain liabilities assumed by the Successor, liabilities subject to compromise of $13.8 billion were discharged in the Chapter 11 cases. Adjustments include: |
(a) |
The recognition or reinstatement of $561 million to accounts payable, accrued salaries and related benefits comprised of (1) a $225 million obligation to the PBGC relating to the termination of the Pilot Plan (which is reflected on the Consolidated Balance Sheet net of a $3 million discount) and (2) $339 million to reinstate or accrue certain liabilities related to the current portion of our pension and postretirement benefit plans and for certain administrative claims and cure costs. |
(b) |
The recognition of $697 million in other notes payable comprised of (1) the $650 million Pilot Obligation relating to our comprehensive agreement with ALPA reducing pilot labor costs (which is reflected on the Consolidated Balance Sheet net of a $19 million discount) and (2) $66 million principal amount of senior unsecured notes (following the reduction of the $85 million face value of the notes for the application of certain payments made by us in 2006 and 2007) under the Cincinnati Airport Settlement Agreement. For additional information on the Cincinnati Airport Settlement Agreement, see Note 4. |
(c) |
The reinstatement of $4.2 billion to pension, postretirement and related benefits comprised of (1) $3.2 billion associated with our non-pilot defined benefit pension plan (the Non-pilot Plan) and other long-term accrued benefits and (2) $1.0 billion associated with postretirement benefits. |
|
Repayment of DIP Facility and New Exit Financing. Adjustments reflect the repayment of the DIP Facility and borrowing under the Exit Facilities. Financing fees related to (1) the DIP Facility were written off at the Effective Date and (2) fees related to the Exit Facilities were capitalized and will be amortized over the term of the facility. For additional information regarding the Exit Facilities, see Note 4. |
|
Revaluation of Assets and Liabilities. Significant adjustments reflected in the Fresh Start Consolidated Balance Sheet based on the revaluation of assets and liabilities are summarized as follows: |
(a) |
Property and equipment, net. A net adjustment of $1.0 billion to reduce the net book value of fixed assets to their estimated fair value. |
(b) |
Goodwill. An adjustment of $12.2 billion to reflect reorganization value of the Successor in excess of the fair value of tangible and identified intangible assets. During the September 2007 quarter, goodwill decreased by $50 million as a result of net adjustments in the fair value of certain assets and liabilities. These adjustments were recorded on the Successors opening balance sheet at May 1, 2007. |
(c) |
Intangibles. An adjustment of $2.9 billion to recognize identifiable intangible assets. These intangible assets reflect the estimated fair value of our trade name, takeoff and arrival slots, SkyTeam alliance agreements, marketing agreements, customer relationships and certain contracts. Certain of these assets will be subject to an annual impairment review. For additional information on intangible assets, see Note 2. |
(d) |
Long-term debt and capital leases. An adjustment of $398 million primarily to reflect a $223 million net premium associated with long-term debt and a $138 million net premium associated with capital lease obligations to be amortized to interest expense over the life of such debt and capital lease obligations. |
(e) |
SkyMiles deferred revenue. An adjustment to revalue our obligation under the SkyMiles frequent flyer program to reflect the estimated fair value of miles to be redeemed in the future. Adjustments of $2.0 billion and $620 million were reflected for the fair value of these miles in long-term and current classifications, respectively. Effective with our emergence from bankruptcy, we changed our accounting policy from an incremental cost basis to a deferred revenue model for miles earned |
through travel. For additional information on the accounting policy for our SkyMiles frequent flyer program, see Note 2. |
(f) |
Noncurrent liabilities other. An adjustment of $1.3 billion primarily related to the tax effect of fresh start valuation adjustments. |
(g) |
Total shareowners deficit. The adoption of fresh start reporting resulted in a new reporting entity with no beginning retained earnings or accumulated deficit. All common stock of the Predecessor was eliminated and replaced by the new equity structure of the Successor based on the Plan. The Fresh Start Consolidated Balance Sheet reflects initial shareowners equity value of $9.4 billion, representing the low end in the range of $9.4 billion to $12.0 billion estimated in our financial projections developed in connection with the Plan. The low end of the range is estimated to reflect market conditions as of the Effective Date and therefore was used to establish initial shareowners equity value. |
|
In-sourcing revenue. We reclassified $79 million and $215 million, respectively, associated with revenue for our maintenance in-sourcing business to other, net revenue, and reclassified the related costs to (1) salaries and related costs, (2) aircraft maintenance materials and outside repairs and (3) other operating expense. Previously, these revenues and expenses were reflected on a net basis in other operating expense. |
|
Delta Global Services, LLC (DGS). We reclassified $45 million and $127 million, respectively, associated with salaries for employees at our wholly owned subsidiary, DGS, to salaries and related costs. DGS provides staffing services to both internal and external customers. Previously, these costs were recorded in contracted services. |
|
Fuel taxes. We reclassified $34 million and $95 million, respectively, to aircraft fuel expense. Previously, fuel taxes were recorded in other operating expense. |
|
Crown Room Club. We reclassified $13 million and $38 million, respectively, associated with the expense of our Crown Room Club operations to several operating expense line items, primarily salaries and related costs and contracted services. Our Crown Room Club provides amenities to members when traveling. Previously, these expenses were recorded net in other, net revenue. |
|
Arrangements with Other Airlines. We reclassified to passenger revenue $20 million and $116 million, respectively, of revenue associated with (1) SkyMiles earned or redeemed on other airlines and (2) frequent flyer miles of other airlines earned or redeemed on Delta. Previously, these amounts were reflected in other, net revenue. |
Estimated Useful Life | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Asset Classification | Successor | Predecessor | |||||||||
Flight
equipment |
2530
years |
25
years |
|||||||||
Capitalized
software |
57
years |
57
years |
|||||||||
Ground property
and equipment |
340
years |
340
years |
|||||||||
Leasehold
improvements |
Shorter of
lease term or estimated useful life |
Shorter of
lease term or estimated useful life |
|||||||||
Flight equipment under capital lease |
Shorter of lease term or estimated useful life |
Shorter of lease term or estimated useful life |
Successor | Predecessor | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2007 |
December 31, 2006 |
||||||||||
(in millions) | Gross Carrying Amount |
Gross Carrying Amount |
|||||||||
Goodwill |
$ | 12,169 | $ 227 |
||||||||
Trade
name |
880 | 1 |
|||||||||
Takeoff and
arrival slots |
635 | 71 |
|||||||||
SkyTeam
alliance |
480 | |
|||||||||
Other |
2 | |
|||||||||
Total |
$ | 14,166 | $ 299 |
Successor | Predecessor | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2007 | December 31, 2006 | ||||||||||||||||||||||||||
(in millions) | Esitmated Life in Year(s) |
Gross Carrying Amount |
Accumulated Amortization |
Estimated Life in Years |
Gross Carrying Amount |
Accumulated Amortization |
|||||||||||||||||||||
Marketing
agreements |
4 | $ | 710 | $ | (81 | ) | $ | | $ | | |||||||||||||||||
Contracts
|
17 to
34 |
205 | (7 | ) | | | |||||||||||||||||||||
Customer
relationships |
4 | 40 | (4 | ) | | | |||||||||||||||||||||
Operating
rights |
| | 9 to
19 |
121 | (104 | ) | |||||||||||||||||||||
Other |
1 | 1 | | 3 to 5 |
3 | (3 | ) | ||||||||||||||||||||
Total |
$ | 956 | $ | (92 | ) | $ | 124 | $ | (107 | ) |
(in millions) | ||||||
---|---|---|---|---|---|---|
Three months
ending December 31, 2007 |
$ | 55 | ||||
2008
|
217 | |||||
2009
|
217 | |||||
2010
|
217 | |||||
2011
|
18 | |||||
After 2011 |
140 | |||||
Total |
$ | 864 |
Aircraft Fuel and Related Taxes | Other Income (Expense) | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||
(in millions) | Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
|||||||||||||||
Open fuel
hedge contracts |
$ | | $ | | $ | (3 | ) | $ | (11 | ) | |||||||||
Settled fuel hedge contracts |
17 | (26 | ) | 4 | (20 | ) | |||||||||||||
Total |
$ | 17 | $ | (26 | ) | $ | 1 | $ | (31 | ) |
Aircraft Fuel and Related Taxes | Other Income (Expense) | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||||||
(in millions) | Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
|||||||||||||||||||||
Open fuel
hedge contracts |
$ | | $ | | $ | | $ | (1 | ) | $ | 15 | $ | (3 | ) | |||||||||||||
Settled fuel hedge contracts |
21 | (8 | ) | (22 | ) | 5 | (1 | ) | (20 | ) | |||||||||||||||||
Total |
$ | 21 | $ | (8 | ) | $ | (22 | ) | $ | 4 | $ | 14 | $ | (23 | ) |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in millions) | September 30, 2007 |
December 31, 2006 |
||||||||
Senior
Secured(1) |
||||||||||
Senior
Secured Exit Financing Facility(2) |
||||||||||
7.36%
First-Lien Synthetic Revolving Facility due April 30, 2012 |
$ | 567 | $ | | ||||||
8.61% Second-Lien Term Loan due April 30, 2014 |
900 | | ||||||||
1,467 | | |||||||||
Secured
Super-Priority Debtor-in-Possession Credit Agreement(2) |
||||||||||
8.12% GE DIP
Credit Facility Term Loan A due March 16, 2008 |
| 600 | ||||||||
10.12% GE DIP
Credit Facility Term Loan B due March 16, 2008 |
| 700 | ||||||||
12.87% GE DIP Credit Facility Term Loan C due March 16, 2008 |
| 600 | ||||||||
| 1,900 | |||||||||
Other
senior secured debt(2) |
||||||||||
14.11% Amex Facility Note due in installments during 2007 |
| 176 | ||||||||
| 176 | |||||||||
Secured(1) |
||||||||||
Series
2000-1 Enhanced Equipment Trust Certificates (EETC) |
||||||||||
7.38% Class
A-1 due in installments from 2007 to May 18, 2010 |
120 | 136 | ||||||||
7.57% Class
A-2 due November 18, 2010 |
738 | 738 | ||||||||
7.92% Class B due November 18, 2010 |
182 | 182 | ||||||||
1,040 | 1,056 | |||||||||
Series
2001-1 EETC |
||||||||||
6.62% Class
A-1 due in installments from 2007 to March 18, 2011 |
127 | 130 | ||||||||
7.11% Class
A-2 due September 18, 2011 |
571 | 571 | ||||||||
7.71% Class B due September 18, 2011 |
207 | 207 | ||||||||
905 | 908 | |||||||||
Series
2001-2 EETC(2)(3) |
||||||||||
7.35% Class A
due in installments from 2007 to December 18, 2011 |
291 | 313 | ||||||||
8.55% Class B
due in installments from 2007 to December 18, 2011 |
124 | 145 | ||||||||
9.90% Class C due in installments from 2007 to December 18, 2011 |
55 | 64 | ||||||||
470 | 522 |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in millions) | September 30, 2007 |
December 31, 2006 | ||||||||
Series 2002-1 EETC |
||||||||||
6.72% Class
G-1 due in installments from 2007 to January 2, 2023 |
421 | 454 | ||||||||
6.42% Class
G-2 due July 2, 2012 |
370 | 370 | ||||||||
7.78% Class C due in installments from 2007 to January 2, 2012 |
95 | 111 | ||||||||
886 | 935 | |||||||||
Series
2003-1 EETC(2) |
||||||||||
6.11% Class G
due in installments from 2007 to January 25, 2008 |
272 | 291 | ||||||||
9.11% Class C due in installments from 2007 to January 25, 2008 |
135 | 135 | ||||||||
407 | 426 | |||||||||
General
Electric Capital Corporation(GECC)(2)(4)(5) |
||||||||||
9.86% Notes
due in installments from 2007 to July 7, 2011 |
145 | 168 | ||||||||
9.86% Notes
due in installments from 2007 to July 7, 2011(3) |
103 | 119 | ||||||||
7.33% Notes due in installments from 2007 to September 27, 2014(6) |
415 | 271 | ||||||||
663 | 558 | |||||||||
Other
secured debt(2) |
||||||||||
8.70% Senior
Secured Notes due in installments from 2007 to September 29, 2012 |
169 | 189 | ||||||||
4.95% to 7.56% Other secured financings due in installments from 2007 to September 28, 2022(7)(8) |
1,001 | 1,354 | ||||||||
Total senior secured and secured debt |
$ | 7,008 | $ | 8,024 | ||||||
Unsecured(8) |
||||||||||
Massachusetts Port Authority Special Facilities Revenue Bonds |
||||||||||
5.05.5%
Series 2001A due in installments from 2012 to January 1, 2027 |
$ | | $ | 338 | ||||||
4.25% Series
2001B due in installments from 2027 to January 1, 2031(2) |
| 80 | ||||||||
4.3% Series
2001C due in installments from 2027 to January 1, 2031(2) |
| 80 | ||||||||
8.75% Boston
Terminal A due in installments from 2007 to June 30, 2016 |
209 | | ||||||||
Development Authority of Clayton County, loan agreement(2)(3) |
||||||||||
3.92% Series
2000A due June 1, 2029 |
65 | 65 | ||||||||
4.00% Series
2000B due May 1, 2035 |
110 | 110 | ||||||||
4.00% Series
2000C due May 1, 2035 |
120 | 120 | ||||||||
Other
unsecured debt |
||||||||||
7.7% Notes
due December 15, 2005 |
| 122 | ||||||||
7.9% Notes
due December 15, 2009 |
| 499 | ||||||||
9.75%
Debentures due May 15, 2021 |
| 106 | ||||||||
8.3% Notes
due December 15, 2029 |
| 925 | ||||||||
8.125% Notes
due July 1, 2039 |
| 538 | ||||||||
10.0% Senior
Notes due August 15, 2008 |
| 248 | ||||||||
8.0%
Convertible Senior Notes due June 3, 2023 |
| 350 | ||||||||
2 7/8%
Convertible Senior Notes due February 18, 2024 |
| 325 | ||||||||
3.01% to 8.00% Other unsecured debt due in installments from 2007 to December 1, 2030 |
71 | 703 | ||||||||
Total unsecured debt |
575 | 4,609 | ||||||||
Total secured and unsecured debt, including liabilities subject to compromise |
7,583 | 12,633 | ||||||||
Plus: unamortized premiums, net |
185 | | ||||||||
Total secured and unsecured debt, including liabilities subject to compromise |
7,768 | 12,633 | ||||||||
Less: pre-petition debt classified as liabilities subject to compromise(7)(8) |
| (4,945 | ) | |||||||
Total debt |
7,768 | 7,688 | ||||||||
Less: current maturities |
(819 | ) | (1,466 | ) | ||||||
Total long-term debt |
$ | 6,949 | $ | 6,222 |
(1) |
Our senior secured debt and secured debt is collateralized by first liens, and in many cases second and junior liens, on substantially all of our assets, including but not limited to accounts receivable, owned aircraft, certain spare engines, certain spare parts, certain flight simulators, ground equipment, landing slots, international routes, equity interests in certain of our domestic subsidiaries, intellectual property and real property. For more information on the Senior Secured Exit Financing Facility, see Exit Financing in this Note. |
(2) |
Our variable interest rate long-term debt is shown using interest rates which represent LIBOR or Commercial Paper plus a specified margin, as provided for in the related agreements. The rates shown were in effect at September 30, 2007, if applicable. For our long-term debt discharged as part of our emergence from bankruptcy, the rates shown were in effect at December 31, 2006. |
(3) |
In October 2007, we completed the issuance and sale of $1.4 billion of Pass Through Certificates, Series 2007-1 (the Certificates). The proceeds from this offering are primarily being used to prepay certain existing aircraft-secured financings. For additional information regarding the Certificates, see 2007-1 EETC below. |
(4) |
For information about the letters of credit issued by, and our related reimbursement obligation to, GECC, see Letter of Credit Enhanced Special Facility Bonds and Reimbursement Agreement and Other GECC Agreements in Note 6 of the Notes to the Consolidated Financial Statements in our Form 10-K. |
(5) |
For additional information about this debt, as amended, see Reimbursement Agreement and Other GECC Agreements in Note 6 of the Notes to the Consolidated Financial Statements in our Form 10-K. |
(6) |
On September 27, 2007, we and GECC amended this credit facility, among other things, to increase to $415 million the outstanding principal amount of borrowings under this facility and to reduce the interest rate we pay on these borrowings. |
(7) |
In accordance with SOP 90-7, substantially all of our unsecured debt had been classified as liabilities subject to compromise at December 31, 2006. Additionally, certain of our undersecured debt had been classified as liabilities subject to compromise at December 31, 2006. For more information on liabilities subject to compromise, see Note 1. |
(8) |
Certain of our secured and undersecured debt, which was classified as liabilities subject to compromise at December 31, 2006, has been reclassified from liabilities subject to compromise to long-term debt or converted to operating leases as of emergence in connection with restructuring initiatives during our Chapter 11 reorganization. |
Years Ending December 31, (in millions) |
Principal Amount |
|||||
---|---|---|---|---|---|---|
Three months
ending December 31, 2007 |
$ | 95 | ||||
2008
|
803 | |||||
2009
|
477 | |||||
2010
|
1,379 | |||||
2011
|
1,204 | |||||
After 2011 |
3,810 | |||||
Total |
$ | 7,768 |
|
maintain a minimum fixed charge coverage ratio (defined as the ratio of (1) earnings before interest, taxes, depreciation, amortization and aircraft rent, and subject to other adjustments to net income (EBITDAR) to (2) the sum of gross cash interest expense, cash aircraft rent expense and the interest portion of our capitalized lease obligations, for successive trailing 12-month periods ending at each quarter-end date through the maturity date of the respective Exit Facilities), which minimum ratio will range from 1.00:1 to 1.20:1 in the case of the First-Lien Facilities and from 0.85:1 to 1.02:1 in the case of the Second-Lien Facility; |
|
maintain unrestricted cash, cash equivalents and short-term investments of not less than $750 million in the case of the First-Lien Facilities and $650 million in the case of the Second-Lien Facility, in each case at all times following the 30th day after the Closing Date; |
|
maintain a minimum total collateral coverage ratio (defined as the ratio of (1) certain of our Collateral that meets specified eligibility standards (Eligible Collateral) to (2) the sum of the aggregate outstanding exposure under the First-Lien Facilities and the Second-Lien Facility and the aggregate termination value of certain hedging agreements) of 125% at all times; and |
|
in the case of the First-Lien Facilities, also maintain a minimum first-lien collateral coverage ratio (together with the total collateral coverage ratio described above, the collateral coverage ratios) (defined as the ratio of (1) Eligible Collateral to (2) the sum of the aggregate outstanding exposure under the First Lien Facilities and the aggregate termination value of certain hedging agreements) of 175% at all times. |
|
provides for agreements under which we will continue to use certain facilities at the Cincinnati Airport at substantially reduced costs; |
|
settles all disputes among us, the KCAB, the Bond Trustee and the former, present and future holders of the 1992 Bonds (the 1992 Bondholders); |
|
gives the Bond Trustee, on behalf of the 1992 Bondholders, a $260 million allowed general, unsecured pre-petition claim in our bankruptcy proceedings; and |
|
provides for our issuance of $66 million principal amount of senior unsecured notes to the Bond Trustee on behalf of the 1992 Bondholders. |
Year Ending December 31, (in millions) |
Amount | |||||
---|---|---|---|---|---|---|
Three months
ending December 31, 2007 |
$ | 315 | ||||
2008
|
1,273 | |||||
2009
|
1,225 | |||||
2010 |
712 | |||||
Total |
$ | 3,525 |
Carrier | Aircraft in Operation as of September 30, 2007 |
Number of Aircraft Scheduled to be in Operation as of December 31, 2007 |
Number of Aircraft Scheduled to be in Operation Immediately Prior to the Expiration Date of the Agreement |
Expiration Date of Agreement |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Atlantic
Southeast Airlines, Inc. (ASA) |
153 | 153 | 149 | 2020 | ||||||||||||||
SkyWest
Airlines, Inc. (SkyWest) |
82 | 82 | 82 | 2020 | ||||||||||||||
SkyWest/ASA(1) |
10 | 12 | 12 | 2012 | ||||||||||||||
Chautauqua
|
39 | 39 | 24 | 2016 | ||||||||||||||
Freedom
(ERJ-145 aircraft)(2) |
36 | 36 | 22 | 2017 | ||||||||||||||
Freedom
(CRJ-900 aircraft)(2) |
| 2 | 14 | 2017 | ||||||||||||||
Shuttle
America |
16 | 16 | 16 | 2019 | ||||||||||||||
ExpressJet
Airlines, Inc. (ExpressJet) |
10 | 10 | 10 | 2009 | ||||||||||||||
Pinnacle Airlines, Inc. |
| 1 | 16 | 2019 |
The table above was not subject to the review procedures of our Independent Registered Public Accounting Firm. |
(1) |
We have an agreement with SkyWest, ASA and Sky West, Inc., the parent company of SkyWest and ASA, under which the parties collectively determine whether the aircraft are operated by SkyWest or ASA. |
(2) |
We have separate agreements with Freedom that involve different aircraft types, expiration dates and terms. These agreements are shown separately to illustrate the variance in the number of aircraft that will be operated during the term of each agreement. |
|
ASA, SkyWest, Chautauqua, Freedom and Shuttle America for all periods presented; and |
|
ExpressJet from February 27, 2007 to September 30, 2007. |
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | 2007 | 2006 | 2007 | 2006 | |||||||||||||||
ASMs
|
4,691 | 4,033 | 13,373 | 11,310 | |||||||||||||||
RPMs
|
3,771 | 3,107 | 10,551 | 8,820 | |||||||||||||||
Number of aircraft operated, end of period |
346 | 324 | 346 | 324 |
The table above was not subject to the review procedures of our Independent Registered Public Accounting Firm. |
Employee Group | Approximate Number of Employees Represented |
Union | Date on which Collective Bargaining Agreement Becomes Amendable |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Delta Pilots
|
6,200 | ALPA |
December 31,
2009 |
|||||||||||
Delta Flight
Superintendents |
180 | PAFCA(1) |
January 1,
2010 |
|||||||||||
Comair Pilots
|
1,520 | ALPA |
March 2,
2011 |
|||||||||||
Comair
Maintenance Employees |
530 | IAM(2) |
December 31,
2010 |
|||||||||||
Comair Flight Attendants |
920 | IBT(3) |
December 31, 2010 |
The table above was not subject to the review procedures of our Independent Registered Public Accounting Firm. |
(1) |
PAFCA Professional Airline Flight Controllers Association |
(2) |
IAM International Association of Machinists and Aerospace Workers |
(3) |
IBT International Brotherhood of Teamsters |
Current Fleet | ||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aircraft Type | Owned | Capital Lease |
Operating Lease |
Total | Average Age |
Orders | Options | Rolling Options |
||||||||||||||||||||||||||
B-737-700
|
| | | | | 10 | | | ||||||||||||||||||||||||||
B-737-800
|
71 | | | 71 | 6.9 | 43 | (1) | 60 | 120 | |||||||||||||||||||||||||
B-757-200
|
68 | 34 | 18 | 120 | 16.0 | | | | ||||||||||||||||||||||||||
B-757-200ER
|
| 2 | 4 | 6 | 10.7 | | | | ||||||||||||||||||||||||||
B-767-300
|
4 | | 20 | 24 | 17.2 | | | | ||||||||||||||||||||||||||
B-767-300ER
|
50 | | 9 | 59 | 11.6 | | 10 | (3) | | |||||||||||||||||||||||||
B-767-400ER
|
21 | | | 21 | 6.6 | | 16 | | ||||||||||||||||||||||||||
B-777-200ER
|
8 | | | 8 | 7.7 | | | | ||||||||||||||||||||||||||
B-777-200LR
|
| | | | | 8 | 11 | 12 | ||||||||||||||||||||||||||
MD-88
|
63 | 33 | 23 | 119 | 17.3 | | | | ||||||||||||||||||||||||||
MD-90
|
16 | | | 16 | 11.8 | | | | ||||||||||||||||||||||||||
CRJ-100
|
35 | 13 | 49 | 97 | 10.1 | | | | ||||||||||||||||||||||||||
CRJ-200
|
5 | | 12 | 17 | 5.2 | | 20 | | ||||||||||||||||||||||||||
CRJ-700
|
17 | | | 17 | 3.9 | | 25 | | ||||||||||||||||||||||||||
CRJ-900 |
3 | | | 3 | 0.1 | 24 | (2) | 30 | | |||||||||||||||||||||||||
Total |
361 | 82 | 135 | 578 | 12.4 | 85 | 172 | 132 |
The table above was not subject to the review procedures of our Independent Registered Public Accounting Firm. |
(1) |
Includes 41 aircraft which we have entered into definitive agreements to sell to third parties immediately following delivery of these aircraft to us by the manufacturer. |
(2) |
Excludes 16 aircraft orders we assigned to a regional air carrier in April 2007. See Aircraft Order Commitments in Note 5 for additional information regarding this matter. |
(3) |
At our discretion, these options may be exercised for either B-767-300 or B-767-300ER aircraft. |
Pension Benefits | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||
(in millions) | Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
||||||||||||||||||
Service cost
|
$ | | $ | | $ | | $ | | $ | 35 | |||||||||||||
Interest cost
|
110 | 178 | 184 | 145 | 534 | ||||||||||||||||||
Expected
return on plan assets |
(105 | ) | (130 | ) | (175 | ) | (129 | ) | (390 | ) | |||||||||||||
Amortization
of prior service cost |
| | | | 1 | ||||||||||||||||||
Recognized
net actuarial loss |
| 57 | | 19 | 171 | ||||||||||||||||||
Settlement
gain on termination |
| | | (30 | ) | | |||||||||||||||||
Revaluation of liability |
| | | (143 | ) | | |||||||||||||||||
Net periodic (benefit) cost |
$ | 5 | $ | 105 | $ | 9 | $ | (138 | ) | $ | 351 |
Other Postretirement Benefits | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||
(in millions) | Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
||||||||||||||||||
Service cost
|
$ | 3 | $ | 4 | $ | 5 | $ | 4 | $ | 14 | |||||||||||||
Interest cost
|
16 | 24 | 26 | 21 | 73 | ||||||||||||||||||
Amortization
of prior service benefit |
| (11 | ) | | (31 | ) | (32 | ) | |||||||||||||||
Recognized
net actuarial loss |
| 2 | | 8 | 6 | ||||||||||||||||||
Revaluation of liability |
| | | 49 | | ||||||||||||||||||
Net periodic cost |
$ | 19 | $ | 19 | $ | 31 | $ | 51 | $ | 61 |
Other Postemployment Benefits | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||
(in millions) | Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
||||||||||||||||||
Service cost
|
$ | 8 | $ | 11 | $ | 13 | $ | 8 | $ | 37 | |||||||||||||
Interest cost
|
31 | 31 | 52 | 41 | 93 | ||||||||||||||||||
Expected
return on plan assets |
(39 | ) | (41 | ) | (65 | ) | (51 | ) | (122 | ) | |||||||||||||
Amortization
of prior service benefit |
| | | (2 | ) | | |||||||||||||||||
Recognized
net actuarial loss |
| 2 | | 5 | 8 | ||||||||||||||||||
Revaluation of liability |
| | | (273 | ) | | |||||||||||||||||
Net periodic (benefit) cost |
$ | | $ | 3 | $ | | $ | (272 | ) | $ | 16 |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in millions) | September 30, 2007 |
December 31, 2006 |
||||||||
Deferred
tax assets: |
||||||||||
Net operating
loss carryforwards |
$ | 2,834 | $ | 2,921 | ||||||
Additional
minimum pension liability |
| 615 | ||||||||
AMT credit
carryforward |
346 | 346 | ||||||||
Employee
benefits |
1,741 | 2,898 | ||||||||
Deferred
revenue |
1,300 | 311 | ||||||||
Other
temporary differences (primarily reorganization charges) |
2,408 | 2,183 | ||||||||
Valuation allowance |
(4,614 | ) | (5,169 | ) | ||||||
Total deferred tax assets |
$ | 4,015 | $ | 4,105 |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in millions) | September 30, 2007 |
December 31, 2006 | ||||||||
Deferred tax liabilities: |
||||||||||
Depreciation
|
$ | 3,425 | $ | 3,870 | ||||||
Intangibles
|
1,062 | (20 | ) | |||||||
Other |
245 | 259 | ||||||||
Total deferred tax liabilities |
$ | 4,732 | $ | 4,109 |
Successor | Predecessor | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in millions) | September 30, 2007 |
December 31, 2006 |
||||||||
Current
deferred tax assets, net |
$ | 807 | $ | 402 | ||||||
Noncurrent deferred tax liabilities, net |
(1,524 | ) | (406 | ) | ||||||
Net deferred tax liabilities |
$ | (717 | ) | $ | (4 | ) |
(in millions) | Unrecognized Pension Liability |
Fuel Derivative Instruments |
Marketable Equity Securities |
Valuation Allowance |
Total | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at January 1, 2007 (Predecessor) |
$ | (727 | ) | $ | (23 | ) | $ | 2 | $ | 230 | $ | (518 | ) | |||||||||
SFAS 158
|
6 | | | | 6 | |||||||||||||||||
Unrealized
gain |
| 70 | | | 70 | |||||||||||||||||
Realized gain |
| (1 | ) | | | (1 | ) | |||||||||||||||
Balance at April 30, 2007 (Predecessor) |
(721 | ) | 46 | 2 | 230 | (443 | ) | |||||||||||||||
Elimination
of Predecessor other comprehensive loss |
721 | (46 | ) | (2 | ) | (230 | ) | 443 | ||||||||||||||
Unrealized
gain |
| 5 | | | 5 | |||||||||||||||||
Realized gain
|
| 3 | | | 3 | |||||||||||||||||
Tax effect
|
| (3 | ) | | 3 | | ||||||||||||||||
Net of tax |
| 5 | | 3 | 8 | |||||||||||||||||
Balance at June 30, 2007 (Successor) |
$ | | $ | 5 | $ | | $ | 3 | $ | 8 | ||||||||||||
Unrealized
gain |
| 24 | | | 24 | |||||||||||||||||
Realized gain
|
| (17 | ) | | | (17 | ) | |||||||||||||||
Tax effect
|
| (3 | ) | | 3 | | ||||||||||||||||
Net of tax |
| 4 | | 3 | 7 | |||||||||||||||||
Balance at September 30, 2007 (Successor) |
$ | | $ | 9 | $ | | $ | 6 | $ | 15 |
Predecessor | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | Additional Minimum Pension Liability |
Fuel Derivative Instruments |
Marketable Equity Securities |
Valuation Allowance |
Total | ||||||||||||||||||
Balance at January 1, 2006 |
$ | (2,553 | ) | $ | | $ | 1 | $ | (170 | ) | $ | (2,722 | ) | ||||||||||
Unrealized
gain |
| 4 | | | 4 | ||||||||||||||||||
Realized gain |
| (2 | ) | | | (2 | ) | ||||||||||||||||
Balance at June 30, 2006 |
$ | (2,553 | ) | $ | 2 | $ | 1 | $ | (170 | ) | $ | (2,720 | ) | ||||||||||
Unrealized
(loss) gain |
| (57 | ) | 1 | | (56 | ) | ||||||||||||||||
Realized gain |
| (1 | ) | | | (1 | ) | ||||||||||||||||
Balance at September 30, 2006 |
$ | (2,553 | ) | $ | (56 | ) | $ | 2 | $ | (170 | ) | $ | (2,777 | ) |
Shares (000) |
||||||
---|---|---|---|---|---|---|
Authorized
under the 2007 Plan |
30,000 | |||||
Awarded(1) |
(26,443 | ) | ||||
Forfeited
|
54 | |||||
Returned to Treasury |
5,322 | |||||
Available for Future Grants |
8,933 |
(1) |
Awards include unrestricted common stock grants, restricted stock, stock options and performance shares. |
Shares (000) |
Weighted Average Grant-Date Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Granted
|
7,455 | $ | 20.23 | |||||||
Vested
|
(187 | ) | 20.45 | |||||||
Forfeited |
(47 | ) | 20.45 | |||||||
Non-vested at September 30, 2007 |
7,221 | $ | 20.22 |
Assumption | ||||||
---|---|---|---|---|---|---|
Risk-free
interest rate |
4.8 | % | ||||
Average
expected life of stock options (in years) |
6.0 | |||||
Expected
volatility of common stock |
55.0 | % | ||||
Weighted average fair value of a stock option granted |
$ | 10.70 |
Shares (000) |
Weighted Average Exercise Price |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Outstanding
at the beginning of the period |
| $ | | |||||||
Granted
|
3,348 | 18.65 | ||||||||
Exercised
|
| | ||||||||
Forfeited |
(9 | ) | 18.84 | |||||||
Outstanding at the end of the period |
3,339 | $ | 18.65 | |||||||
Exercisable at the end of the period |
143 | $ | 18.84 |
Successor | Predecessor | Successor | Predecessor | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions, except per share data) |
Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Five Months Ended September 30, 2007 |
Four Months Ended April 30, 2007 |
Nine Months Ended September 30, 2006 |
||||||||||||||||||
Basic: |
|||||||||||||||||||||||
Net income
(loss) |
$ | 220 | $ | 52 | $ | 384 | $ | 1,298 | $ | (4,222 | ) | ||||||||||||
Dividends on allocated Series B ESOP Convertible Preferred Stock |
| | | | (2 | ) | |||||||||||||||||
Net income
(loss) attributable to common shareowners |
$ | 220 | $ | 52 | $ | 384 | $ | 1,298 | $ | (4,224 | ) | ||||||||||||
Basic weighted average shares outstanding |
393.5 | 197.3 | 393.5 | 197.3 | 196.2 | ||||||||||||||||||
Basic earnings (loss) per share |
$ | 0.56 | $ | 0.26 | $ | 0.98 | $ | 6.58 | $ | (21.53 | ) | ||||||||||||
Diluted: |
|||||||||||||||||||||||
Net income
(loss) attributable to common shareowners |
$ | 220 | $ | 52 | $ | 384 | $ | 1,298 | $ | (4,224 | ) | ||||||||||||
Gain recognized on the forgiveness of convertible debt |
| | | (216 | ) | | |||||||||||||||||
Net income (loss) attibutable to common shareowners assuming conversion |
$ | 220 | $ | 52 | $ | 384 | $ | 1,082 | $ | (4,224 | ) | ||||||||||||
Basic
weighted average shares outstanding |
393.5 | 197.3 | 393.5 | 197.3 | 196.2 | ||||||||||||||||||
Additional
shares assuming: |
|||||||||||||||||||||||
Restricted
shares |
1.6 | | 0.6 | | | ||||||||||||||||||
Conversion of
8.0% Convertible Senior Notes |
| 12.5 | | 12.5 | | ||||||||||||||||||
Conversion of 2 7/8% Convertible Senior Notes |
| 23.9 | | 23.9 | | ||||||||||||||||||
Weighted average shares outstanding, as adjusted |
395.1 | 233.7 | 394.1 | 233.7 | 196.2 | ||||||||||||||||||
Dilutive earnings (loss) per share |
$ | 0.56 | $ | 0.22 | $ | 0.97 | $ | 4.63 | $ | (21.53 | ) |
(a) |
Market approach. Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities |
(b) |
Cost approach. Amount that would be required to replace the service capacity of an asset (replacement cost) |
(c) |
Income approach. Techniques to convert future amounts to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models). |
(in millions) |
Successor September 30, 2007 |
|
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant other observable inputs (Level 2) |
Valuation Technique |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Short term
investments |
$ | 767 | $ | 767 | $ | | (a) |
|||||||||||||||
Fuel hedging derivatives |
17 | | 17 | (a) |
(in millions) |
Successor May 1, 2007 |
|
Significant Other Observable Inputs (Level 2) |
Significant(1) Unobservable Inputs (Level 3) |
Valuation Technique |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Expendable
parts and supplies inventories |
$ | 241 |
$ | 241 | $ | |
(a)
(b) |
||||||||||||||||
Prepaid
expense and other |
343 |
343 | |
(a) (b)
(c) |
|||||||||||||||||||
Net flight
equipment and net flight equipment under capital lease |
9,833 |
9,833 | |
(a)
(b) |
|||||||||||||||||||
Other
property and equipment |
1,713 |
1,713 | |
(a)
(b) |
|||||||||||||||||||
Indefinite-lived intangible assets(2) |
1,997 |
| 1,997 |
(a)
(c) |
|||||||||||||||||||
Definite-lived intangible assets(2) |
956 |
| 956 |
(c) |
|||||||||||||||||||
Other
noncurrent assets |
856 |
856 | |
(a) (b)
(c) |
|||||||||||||||||||
Debt and
obligations under capital lease |
6,899 |
6,899 | |
(a)
(c) |
|||||||||||||||||||
SkyMiles
deferred revenue(3) |
3,474 |
| 3,474 |
(a) |
|||||||||||||||||||
Accounts payable and other noncurrent liabilities |
405 |
405 | |
(a) (c) |
(1) |
These valuations were based on the present value of future cash flows for specific assets derived from our projections of future revenue, expense and airline market conditions. These cash flows were then discounted to their present value using a rate of return that considers the relative risk of not realizing the estimated annual cash flows and time value of money. |
(2) |
Intangible assets are identified by asset type in Note 2. |
(3) |
The fair value of our SkyMiles frequent flyer award liability was determined based on the estimated price we would pay a third party to assume the obligation for miles expected to be redeemed under our SkyMiles program. These miles were valued based upon the weighted average of the equivalent ticket value of similar fares on Delta and the amounts paid to other SkyTeam alliance partners. See Note 2 for the accounting policy related to our SkyMiles frequent flyer program. |
|
A $112 million charge in landing fees and other rents. This adjustment is associated primarily with our airport facility leases at JFK. It resulted from historical differences associated with recording escalating rent expense based on actual rent payments instead of on a straight-line basis over the lease term as required by SFAS No. 13, Accounting for Leases. |
|
A $108 million net charge related to the sale of mileage credits under our SkyMiles frequent flyer program. This includes an $83 million decrease in passenger revenues, a $106 million decrease in other, net operating revenues, and an $81 million decrease in other operating expenses. This net charge primarily resulted from the reconsideration of our position with respect to the timing of recognizing revenue associated with the sale of mileage credits that we expect will never be redeemed for travel. |
|
A $90 million charge in salaries and related costs to adjust our accrual for postemployment healthcare benefits. This adjustment is due to healthcare payments applied to this accrual over several years, which should have been expensed as incurred. |
Successor | Predecessor | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) |
Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Increase (Decrease) |
% Increase (Decrease) |
||||||||||||||
Operating
Revenue: |
||||||||||||||||||
Passenger:
|
||||||||||||||||||
Mainline |
$ | 3,539 | $ | 3,207 | $ | 332 | 10 | % | ||||||||||
Regional affiliates |
1,099 | 1,016 | 83 | 8 | % | |||||||||||||
Total
passenger revenue |
4,638 | 4,223 | 415 | 10 | % | |||||||||||||
Cargo |
120 | 121 | (1 | ) | (1 | )% | ||||||||||||
Other, net |
469 | 407 | 62 | 15 | % | |||||||||||||
Total operating revenue |
$ | 5,227 | $ | 4,751 | $ | 476 | 10 | % |
Successor | Increase (Decrease) Three Months Ended September 30, 2007 vs. 2006 |
||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) |
Three Months Ended September 30, 2007 |
Passenger Revenue |
RPMs | ASMs | Passenger Mile Yield |
PRASM | Load Factor |
||||||||||||||||||||||||
Passenger
Revenue: |
|||||||||||||||||||||||||||||||
North
America |
$ | 3,175 | 4 | % | 3 | % | (2 | )% | 1 | % | 6 | % | 4.0 pts |
||||||||||||||||||
International |
1,429 | 24 | % | 15 | % | 14 | % | 8 | % | 9 | % | 1.1 pts |
|||||||||||||||||||
Charter |
34 | 22 | % | 70 | % | 42 | % | NM | NM | NM |
|||||||||||||||||||||
Total passenger revenue |
$ | 4,638 | 10 | % | 7 | % | 3 | % | 3 | % | 6 | % | 2.9 pts |
Successor | Predecessor | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) | Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Increase (Decrease) |
% Increase (Decrease) |
||||||||||||||
Operating
Expense: |
||||||||||||||||||
Aircraft fuel
and related taxes |
$ | 1,270 | $ | 1,276 | $ | (6 | ) | | % | |||||||||
Salaries and
related costs |
1,109 | 1,069 | 40 | 4 | % | |||||||||||||
Contract
carrier arrangements |
815 | 724 | 91 | 13 | % | |||||||||||||
Depreciation
and amortization |
297 | 293 | 4 | 1 | % | |||||||||||||
Contracted
services |
264 | 230 | 34 | 15 | % | |||||||||||||
Aircraft
maintenance materials and outside repairs |
253 | 230 | 23 | 10 | % | |||||||||||||
Passenger
commissions and other selling expenses |
248 | 233 | 15 | 6 | % | |||||||||||||
Landing fees
and other rents |
178 | 201 | (23 | ) | (11 | )% | ||||||||||||
Passenger
service |
94 | 96 | (2 | ) | (2 | )% | ||||||||||||
Aircraft
rent |
60 | 70 | (10 | ) | (14 | )% | ||||||||||||
Profit
sharing |
79 | | 79 | NM | ||||||||||||||
Other |
107 | 161 | (54 | ) | (34 | )% | ||||||||||||
Total operating expense |
$ | 4,774 | $ | 4,583 | $ | 191 | 4 | % |
Combined | Predecessor | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) |
Nine Months Ended September 30, 2007 |
Nine Months Ended September 30, 2006 |
Increase (Decrease) |
% Increase (Decrease) |
||||||||||||||
Operating
Revenue: |
||||||||||||||||||
Passenger: |
||||||||||||||||||
Mainline |
$ | 9,706 | $ | 8,876 | $ | 830 | 9 | % | ||||||||||
Regional liates |
3,155 | 2,909 | 246 | 8 | % | |||||||||||||
Total
passenger revenue |
12,861 | 11,785 | 1,076 | 9 | % | |||||||||||||
Cargo
|
350 | 372 | (22 | ) | (6 | )% | ||||||||||||
Other, net |
1,260 | 1,129 | 131 | 12 | % | |||||||||||||
Total operating revenue |
$ | 14,471 | $ | 13,286 | $ | 1,185 | 9 | % |
Combined | Increase (Decrease) Nine Months Ended September 30, 2007 vs. 2006 |
||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) |
Nine Months Ended September 30, 2007 |
Passenger Revenue |
RPMs | ASMs | Passenger Mile Yield |
PRASM | Load Factor |
||||||||||||||||||||||||
Passenger
Revenue: |
|||||||||||||||||||||||||||||||
North
American |
$ | 9,171 | 3 | % | | % | (4 | )% | 3 | % | 7 | % | 3.3 pts |
||||||||||||||||||
International |
3,605 | 29 | % | 18 | % | 17 | % | 9 | % | 10 | % | 0.5 pts |
|||||||||||||||||||
Charter |
85 | (1 | )% | 17 | % | 10 | % | NM | NM | NM |
|||||||||||||||||||||
Total passenger revenue |
$ | 12,861 | 9 | % | 5 | % | 2 | % | 4 | % | 7 | % | 2.4 pts |
Combined | Predecessor | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in millions) |
Nine Months Ended September 30, 2007 |
Nine Months Ended September 30, 2006 |
Increase (Decrease) |
% Increase (Decrease) |
||||||||||||||
Operating
Expense: |
||||||||||||||||||
Aircraft fuel
and related taxes |
$ | 3,330 | $ | 3,377 | $ | (47 | ) | (1 | )% | |||||||||
Salaries and
related costs |
3,119 | 3,362 | (243 | ) | (7 | )% | ||||||||||||
Contract
carrier arrangements |
2,301 | 1,993 | 308 | 15 | % | |||||||||||||
Depreciation
and amortization |
876 | 912 | (36 | ) | (4 | )% | ||||||||||||
Contracted
services |
750 | 670 | 80 | 12 | % | |||||||||||||
Aircraft
maintenance materials and outside repairs |
738 | 689 | 49 | 7 | % | |||||||||||||
Passenger
commissions and other selling expenses |
721 | 679 | 42 | 6 | % | |||||||||||||
Landing fees
and other rents |
550 | 692 | (142 | ) | (21 | )% | ||||||||||||
Passenger
service |
250 | 250 | | | % | |||||||||||||
Aircraft
rent |
186 | 238 | (52 | ) | (22 | )% | ||||||||||||
Profit
sharing |
158 | | 158 | NM | ||||||||||||||
Other |
394 | 372 | 22 | 6 | % | |||||||||||||
Total operating expense |
$ | 13,373 | $ | 13,234 | $ | 139 | 1 | % |
|
Emergence gain. A net $2.1 billion gain due to our emergence from bankruptcy, comprised of (1) a $4.4 billion gain related to the discharge of liabilities subject to compromise in connection with the settlement of claims, (2) a $2.6 billion charge associated with the revaluation of our SkyMiles frequent flyer obligation and (3) a $238 million gain from the revaluation of our remaining assets and liabilities to fair value. For additional information regarding this emergence gain, see Note 1 of the Notes to the Condensed Consolidated Financial Statements. |
|
Aircraft financing renegotiations and rejections. $440 million of estimated claims primarily associated with the restructuring of the financing arrangements for 143 aircraft and adjustments to prior claims estimates. |
|
Contract carrier agreements. A net charge of $163 million in connection with amendments to certain contract carrier agreements. For additional information regarding this charge and our contract carrier agreements, see Notes 1 and 5, respectively, of the Notes to the Condensed Consolidated Financial Statements. |
|
Emergence compensation. In accordance with the Plan, we made $130 million in lump-sum cash payments to approximately 39,000 eligible non-contract, non-management employees. We also recorded an additional charge of $32 million related to our portion of payroll related taxes associated with the issuance, as contemplated by the Plan, of approximately 14 million shares of common stock to those employees. For additional information regarding the common stock issuance, see Note 10 of the Notes to the Condensed Consolidated Financial Statements. |
|
Pilot collective bargaining agreement. An $83 million allowed general, unsecured claim in connection with Comairs agreement with ALPA to reduce Comairs pilot labor costs. |
|
Facility leases. A net $43 million gain, which primarily reflects (1) a $126 million net gain related to our settlement agreement with the Massachusetts Port Authority offset by (2) a net $80 million charge from an allowed general, unsecured claim in connection with the settlement relating to the restructuring of certain of our lease and other obligations at the Cincinnati Airport. For additional information regarding these matters, see Notes 1 and 4 of the Notes to the Condensed Consolidated Financial Statements. |
Successor | Predecessor | Combined | Predecessor | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended September 30, 2007 |
Three Months Ended September 30, 2006 |
Nine Months Ended September 30, 2007 |
Nine Months Ended September 30, 2006 |
|||||||||||||||
Consolidated: |
||||||||||||||||||
Revenue
Passenger Miles (millions)(1) |
34,036 | 31,784 | 92,827 | 88,220 | ||||||||||||||
Available Seat
Miles (millions)(1) |
40,943 | 39,643 | 114,350 | 111,963 | ||||||||||||||
Passenger Mile
Yield(1) |
13.63 | ¢ | 13.29 | ¢ | 13.85 | ¢ | 13.36 | ¢ | ||||||||||
Passenger
Revenue Per Available Seat Mile(1) |
11.33 | ¢ | 10.65 | ¢ | 11.25 | ¢ | 10.53 | ¢ | ||||||||||
Operating Cost
Per Available Seat Mile(1) |
11.66 | ¢ | 11.56 | ¢ | 11.69 | ¢ | 11.82 | ¢ | ||||||||||
Passenger Load
Factor(1) |
83.1 | % | 80.2 | % | 81.2 | % | 78.8 | % | ||||||||||
Breakeven
Passenger Load Factor(1) |
75.0 | % | 77.0 | % | 74.2 | % | 78.4 | % | ||||||||||
Fuel Gallons
Consumed (millions) |
575 | 566 | 1,597 | 1,600 | ||||||||||||||
Average Price
Per Fuel Gallon, Net of Hedging activity |
$ | 2.21 | $ | 2.25 | $ | 2.09 | $ | 2.11 | ||||||||||
Number of
Aircraft in Fleet, End of Period |
578 | 607 | 578 | 607 | ||||||||||||||
Full-Time
Equivalent Employees, End of Period |
55,022 | 51,059 | 55,022 | 51,059 | ||||||||||||||
Mainline: |
||||||||||||||||||
Revenue
Passenger Miles (millions) |
29,048 | 27,220 | 78,818 | 75,359 | ||||||||||||||
Available Seat
Miles (millions) |
34,707 | 33,679 | 96,391 | 95,208 | ||||||||||||||
Operating Cost
Per Available Seat Mile |
10.49 | ¢ | 10.42 | ¢ | 10.52 | ¢ | 10.74 | ¢ | ||||||||||
Number of Aircraft in Fleet, End of Period |
444 | 440 | 444 | 440 |
(1) Includes the operations under contract carrier agreements with
unaffiliated regional air carriers:
ASA, Chautauqua Airlines, Inc., Freedom Airlines, Inc., Shuttle
America Corporation and SkyWest Airlines, Inc. for all periods presented and
ExpressJet Airlines, Inc. from February 27, 2007 to September
30, 2007.
|
Long-term debt, not including liabilities subject to compromise. During the nine months ended September 30, 2007, we (1) entered into the Exit Facilities to borrow up to $2.5 billion, (2) repaid the $2.1 billion DIP Facility, (3) issued $66 million principal amount of senior unsecured notes in connection with a settlement agreement relating to the restructuring of certain lease and other obligations at the Cincinnati Airport and (4) amended our Spare Parts Loan to borrow an additional $181 million. In October 2007, we completed the issuance and sale of $1.4 billion principal amount of Certificates. |
|
Long-term debt classified as liabilities subject to compromise. In connection with our emergence from Chapter 11, we discharged $3.8 billion of the $4.9 billion of long-term debt classified as liabilities subject to compromise at December 31, 2006. |
|
Aircraft order commitments. Our aircraft order commitments are estimated to be $3.5 billion at September 30, 2007, compared to $3.0 billion at December 31, 2006. For additional information regarding these commitments, see Note 5 of the Notes to the Condensed Consolidated Financial Statements. |
|
provides for agreements under which we will continue to use certain facilities at the Cincinnati Airport at substantially reduced costs; |
|
settles all disputes among us, the KCAB, the Bond Trustee and the former, present and future holders of the 1992 Bonds (the 1992 Bondholders); |
|
gives the Bond Trustee, on behalf of the 1992 Bondholders, a $260 million allowed general, unsecured pre-petition claim in our bankruptcy proceedings; and |
|
provides for our issuance of $66 million principal amount of senior unsecured notes to the Bond Trustee on behalf of the 1992 Bondholders. |
(a) |
Exhibits |
10.1 |
Delta Air Lines, Inc. 2007 Officer and Director Severance Plan, as amended October 14, 2007 |
|||||
10.2 |
Offer of Employment dated August 28, 2007 between Delta Air Lines, Inc. and Richard H. Anderson |
|||||
10.3 |
Delta 2007 Performance Compensation Plan Award Agreement between Delta Air Lines, Inc. and Edward H. Bastian dated August 28,
2007 |
|||||
10.4 |
Separation Agreement and General Release between Delta Air Lines, Inc. and James M. Whitehurst dated August 27, 2007 |
|||||
10.5 |
Description of Certain Benefits of Members of the Board of Directors and Executive Officers |
|||||
15 |
Letter from Ernst & Young LLP regarding unaudited interim financial information |
|||||
31.1 |
Certification by Deltas Chief Executive Officer with respect to Deltas Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2007 |
|||||
31.2 |
Certification by Deltas President and Chief Financial Officer with respect to Deltas Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2007 |
|||||
32 |
Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code by Deltas Chief Executive Officer and
President and Chief Financial Officer with respect to Deltas Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2007 |
Exhibit 10.1
DELTA AIR LINES, INC.
2007 OFFICER AND DIRECTOR SEVERANCE PLAN
As amended October 14, 2007
INTRODUCTION
Delta Air Lines, Inc. (the Company or together with its Affiliates, Delta) has adopted this Officer and Director Severance Plan (the Plan) to provide benefits to certain eligible U.S.-payroll regular full-time Officer and Corporate Director level employees of the Company. Capitalized terms that are not otherwise defined within the text of this Plan are defined in Appendix A. As of the Effective Date, this Plan shall supersede the Companys prior Director and Officer Severance Plan (the Prior Plan) in its entirety and, as of that date, the Prior Plan shall be void and of no further force or effect. Notwithstanding anything herein to the contrary, a Participant (as defined below) shall not be entitled to receive benefits under the Plan if the Participant has entered into an employment or other agreement with the Company or any Affiliate that provides benefits similar to the type of benefits provided by this Plan, which benefits have not been waived by the Participant or terminated by the Company.
ELIGIBILITY CRITERIA
|
Separation from Delta |
Any employee who is classified as (i) a Corporate Director (a Director) or Officer (an Officer) of the Company according to the Companys Human Resources records, is eligible for benefits under this Plan (a Participant) in accordance with the terms described below. In addition, with respect to any Affiliate that does not offer a severance plan or program to its executive employees, any officer or director of such Affiliate may be designated by the Plan Administrator as a Participant in the Plan and any reference herein to a director or officer of the Company shall be deemed to also be a reference to a director or officer of equivalent level of such Affiliate who has been so designated. Notwithstanding anything in this Plan to the contrary, at his request, Gerald Grinstein, the Companys current Chief Executive Officer, is not eligible to be a Participant in this Plan.
Subject to the terms of the Plan, a Participant shall receive the benefits described in Attachment B hereto if: (1) the Participants employment is terminated by Delta other than for Cause; or (2) the Participant (a) resigns from employment with Delta for Good Reason during the period beginning on a Change in Control Date and ending on the second anniversary thereof and (b) was employed by Delta as of the Change in Control Date.
|
Full Execution of Separation Agreement and General Release |
In order to receive the benefits of this Plan, eligible Participants must first sign a Separation Agreement and General Release prepared by Delta (the Agreement) within 45 days of the date that the Agreement is presented to the Participant. Participants who fail to sign the Agreement within 45 days or who rescind the Agreement within the applicable Revocation Period are not eligible to receive the benefits of this Plan. The Agreement is designed to ensure that both Delta and the Participant have their rights and obligations established with certainty and finality. Delta is offering benefits under this Plan in exchange for the execution of the Agreement. The Agreement shall be in a form provided by and satisfactory to Delta
1
and shall include, without limitation, a release in favor of Delta and its employees, directors and Affiliates and certain non-competition, non-solicitation and non-recruitment agreements for the benefit of Delta; provided, however, that for the two year period following a Change in Control Date, the Agreement shall be in substantially the same form as the form of Agreement used prior to the Change in Control Date.
PLAN ADMINISTRATION AND INTERPRETATION
The Plan Administrator is the Executive Vice President Human Resources and Labor Relations of the Company (or any other Officer of the Company designated by the Personnel & Compensation Committee of the Board). The Plan Year is January 1 to December 31. Benefits from this Plan are paid from the general assets of Delta.
The Plan Administrator, or his delegate, has the full power and authority, in his sole discretion to construe, interpret and administer this Plan and his decisions shall be final and binding. The Plan Administrator shall have the broadest discretionary authority permitted under law in the exercise of all its functions including, but not limited to, deciding questions of eligibility, interpretation and the right to benefits hereunder.
PLAN CLAIMS AND APPEALS
The terms applicable to claims and appeals are set forth at Appendix C.
AMENDMENT
Except as expressly set forth herein, the Company may amend or terminate this Plan at any time; provided, however, that as of a Change in Control Date, no amendment to or termination of this Plan that is adverse to any person who is an employee of Delta on the Change in Control Date shall be effective until after the second anniversary of the Change in Control Date.
SUCCESSORS AND ASSIGNS
This Plan shall be binding upon Deltas successors and assigns.
GOVERNING LAW
This Plan is governed by the Employee Retirement Income Security Act of 1974, as amended (ERISA), but it is intended to qualify as a plan maintained for the purpose of providing benefits to a select group of management or highly compensated employees. As such, it is exempt from certain provisions of ERISA pursuant to ERISA Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b) and applicable regulations (including Department of Labor Regulation 2520.104-23). However, some of the underlying benefits provided for under the terms of this Plan, such as travel privileges, financial planning and career transition services are not governed by ERISA, and their inclusion in this Plan does not deem them subject to ERISA. To the extent not superseded by ERISA, the Plan and all determinations made and actions taken thereunder shall be governed by the internal substantive laws of the State of Delaware and construed accordingly.
2
SECTION 409A OF THE INTERNAL REVENUE CODE
To the extent required to be in compliance with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (together, Section 409A), notwithstanding any other provision of this Plan, any payment or benefit to which a Participant is eligible under this Plan, including a Participant who is a specified employee as defined in Section 409A, shall be adjusted or delayed in such manner as to comply with Section 409A and maintain the intent of this Plan to the maximum extent possible. For example, compliance with Section 409A could require a significant delay of payment or commencement of benefits beyond separation in certain circumstances. Notwithstanding the foregoing, Delta shall not have any liability to any Participant or any other person if any payment or benefit is determined to constitute nonqualified deferred compensation within the meaning of Section 409A and does not satisfy the additional conditions applicable to nonqualified deferred compensation under Section 409A.
3
APPENDIX A
DEFINITIONS
The following definitions shall apply for purposes of the Plan:
Affiliate means any entity that directly or indirectly controls or is controlled by or under common control with the Company.
Base Salary means the Participants monthly base salary at the time of separation, excluding expense reimbursements and supplemental salary payments, and any items not considered by the Plan Administrator to be a component of regular monthly base earnings; provided, however, that, as of a Change in Control Date, in the event of a termination of employment by the Participant because of a reduction in the Participants pay, Base Salary means the Participants monthly base salary prior to the reduction in pay which gave rise to the Participants termination of employment.
Board means the Board of Directors of the Company.
Cause means the Participants
(i) continued, substantial failure to perform his duties with Delta (other than any such failure resulting from incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant which identifies the manner in which Delta believes that the Participant has not performed his duties, or
(ii) misconduct which is economically injurious to Delta, or
(iii) conviction of, or plea of guilty or no contest to, a felony or any other crime involving moral turpitude, fraud, theft, embezzlement or dishonesty, or
(iv) material violation of any material Delta policy or rule regarding conduct, which policy or rule has been communicated in writing to the Participant.
A Participant shall have at least ten (10) business days to cure, if curable, any of the events (other than clause (iii)) which could lead to his termination of Cause. For any Participant who is an Executive Vice President or more senior executive of the Company, a termination for Cause must be approved by a 2/3 vote of the entire Board.
Change in Control means the occurrence after the Effective Date of any of the following:
(i) any person (as defined in Section 13(d) of the Securities Exchange Act of 1934 (Act)) other than the Company, its Affiliates or an employee benefit plan or trust maintained by the Company or its Affiliates, becoming the beneficial owner (as defined in Rule 13d-3 under the Act), directly or indirectly, of more than 35% of the combined voting power of the Companys then outstanding Voting Stock (excluding any person who becomes such a beneficial owner in connection with a transaction described in clause (A) of paragraph (iii) below), unless such person acquires beneficial ownership of more than 35% of the combined
A-1
voting power of the Companys Voting Stock then outstanding solely as a result of an acquisition of Company Voting Stock by the Company which, by reducing the Company Voting Stock outstanding, increases the proportionate Company Voting Stock beneficially owned by such person to more than 35% of the combined voting power of the Companys Voting Stock then outstanding; provided, that if a person shall become the beneficial owner of more than 35% of the combined voting power of the Companys Voting Stock then outstanding by reason of such Voting Stock acquisition by the Company and shall thereafter become the beneficial owner of any additional Company Voting Stock which causes the proportionate voting power of such Company Voting Stock beneficially owned by such person to increase to more than 35% of the combined voting power of such Voting Stock then outstanding, such person shall, upon becoming the beneficial owner of such additional Company Voting Stock, be deemed to have become the beneficial owner of more than 35% of the combined voting power of the Companys Voting Stock then outstanding other than solely as a result of such Voting Stock acquisition by the Company;
(ii) at any time during a period of twelve consecutive months (but not including any period before the Effective Date) individuals who at the beginning of such period constituted the Board (and any new member of the Board, whose election by the Board or nomination for election by the Companys shareowners was approved by a vote of at least two-thirds of the members of the Board then still in office who either were member of the Board 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 members then constituting the Board; or
(iii) the consummation of (A) a reorganization, merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a reorganization, merger or consolidation which results in the Companys Voting Stock outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or being converted into Voting Stock of the surviving entity or any parent thereof) more than 65% of the voting power of the Voting Stock or the total fair market value of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of assets of the Company having a total gross fair market value equal to more than 40% of the total gross fair market value of all assets of the Company immediately prior to such transaction or transactions other than any such sale to an Affiliate.
Notwithstanding the foregoing, in no event shall a Change in Control be deemed to have occurred with respect to a Participant if the Participant is part of a group, within the meaning of Section 13(d)(3) of the Act, 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 persons participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition.
Change in Control Date means the date on which a Change in Control occurs.
Change in Control Event has the meaning set forth under the definition of Severance Pay below.
A-2
Disability means long-term or permanent disability as determined under the disability plan of the Company or Affiliate applicable to the Participant.
Effective Date means the effective date of the Debtors Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code--Case No. 05-17923(ASH).
Good Reason means with respect to any Participant who is employed by Delta on a Change in Control Date, any of the following that occurs without a Participants express written consent during the period beginning on the Change in Control Date and ending on the second anniversary thereof:
(i) in the case of any Participant, a diminution or other reduction of such Participants authorities, duties or responsibilities, other than an insubstantial and inadvertent act that is promptly remedied by Delta after written notice by such Participant to the Chief Executive Officer of the Company;
(ii) the Participants office is relocated by more than 50 miles;
(iii) a reduction of Participants Base Salary or incentive compensation opportunities, in either case other than pursuant to a uniform percentage salary reduction for all full-time domestic employees not subject to a collective bargaining agreement;
(iv) the Company does not keep in effect compensation, retirement, health and welfare benefits, or perquisite programs under which the Participant receives benefits substantially similar, in the aggregate, to those in effect prior to a reduction (other than a reduction pursuant to an equivalent reduction in such benefits for all full-time domestic employees who are not subject to a collective bargaining agreement); or
(v) a material breach by Delta of any binding obligation to the Participant relating to a material term of the Participants employment, including, but not limited to, indemnification or the terms of an award under the Delta Air Lines, Inc. 2007 Performance Compensation Plan, or any failure of a successor to the Company to assume and agree to perform such obligation.
Notwithstanding the foregoing: (x) any grant of a long-term incentive award on or about the Effective Date under the Delta Air Lines, Inc. 2007 Performance Compensation Plan will be ignored for purposes of determining whether a Participant has suffered a reduction that constitutes Good Reason under subsection (iii) and (iv) above; (y) as to any Participant, an event described in subsections (i) through (v) above shall constitute Good Reason only if such Participant gives the Company written notice of intent to resign and the reasons therefore within ninety (90) days of the occurrence of such event, unless the Plan Administrator agrees otherwise; and (z) no event described in subsections (i) through (v) which is curable shall constitute Good Reason if such event is cured by Delta within ten (10) days of the Participants notice, given in accordance with (y) above.
MIP Target Amount means as to any Participant, such Participants target award amount under the Companys Management Incentive Plan (or any similar plan) in effect at the time such Participant has a termination of employment that entitles the Participant to benefits hereunder.
Protected Period means the six month period immediately prior to a Change in Control Date. No period may be identified as a Protected Period until a Change in Control Date has occurred.
A-3
Revocation Period means, as applicable, the seven (7) or twenty-one (21) calendar days immediately following the date a Participant signs an Agreement.
Severance Event has the meaning set forth under the definition of Severance Pay below.
Severance Pay means:
(1) with respect to any termination of employment: (a) by Delta without Cause either: (i) prior to a Change in Control (other than with respect to terminations of employment during the Protected Period); (ii) after a Change in Control with respect to any Participant who was not employed by Delta as of the Change in Control Date; or (iii) after the second anniversary of a Change in Control Date or (b) as a consequence of the Participants Disability (individually and collectively, a Severance Event), an amount equal to:
(a) 6 months Base Salary for Directors, plus 50% of any applicable MIP Target Amount;
(b) 9 months Base Salary for Vice Presidents and Senior Vice Presidents, plus 75% of any applicable MIP Target Amount; or
(c) 12 months Base Salary for Executive Vice Presidents and higher ranking Officers, plus 100% of any applicable MIP Target Amount; and
(2) with respect to any termination of employment: (a) by Delta without Cause either (i) during the Protected Period or (ii) during the period between the Change in Control Date and the second anniversary thereof but only with respect to any Participant employed by Delta as of the Change in Control Date; or (b) due to any Participants resignation from employment for Good Reason between the Change in Control Date and the second anniversary thereof but only with respect to by a Participant employed by Delta as of the Change in Control Date (individually and collectively, a Change in Control Event), an amount equal to:
(a) 6 months Base Salary for Directors, plus 50% of any applicable MIP Target Amount;
(b) 12 months Base Salary for Vice Presidents and Senior Vice Presidents, plus 100% of any applicable MIP Target Amount; or
(c) 24 months Base Salary for Executive Vice Presidents and higher ranking Officers, plus 200% of any applicable MIP Target Amount.
A-4
Severance Period means:
(1) with respect to any Severance Event, the period beginning on the Participants employment termination date from Delta and ending:
|
(a) |
6 months after the termination date for Directors; |
|
(b) |
9 months after the termination date for Vice Presidents and Senior Vice Presidents; or |
|
(c) |
12 months after the termination date for Executive Vice Presidents and higher ranking Officers; and |
(2) with respect to any Change in Control Event, the period beginning on the Participants employment termination date from Delta and ending:
|
(a) |
6 months after the termination date for Directors; |
|
(b) |
12 months after the termination date for Vice Presidents or Senior Vice Presidents of the Company; or |
|
(c) |
24 months after the termination date for Executive Vice Presidents and higher ranking Officers. |
Voting Stock means securities entitled to vote generally on the election of members of the board of directors.
A-5
APPENDIX B
DESCRIPTION OF SPECIFIC BENEFITS1
SEVERANCE PAY
|
This Plan provides for the payment of Severance Pay based on job level at the time of termination of employment; provided, however, that following a Change in Control, in the event of a Participants resignation for Good Reason because of a significant diminution of the Participants position, responsibilities or duties, Severance Pay shall be based on the Participants job level prior to the diminution which gave rise to the Participants resignation. |
|
Severance Pay is paid as a one-time lump-sum payment promptly following the Participants separation from employment and fulfillment of the other eligibility criteria. For purposes of any termination by Delta without Cause during the Protected Period, the Participants termination will change from a Severance Event to a Change in Control Event as of the Change in Control Date and such Participants Severance Pay and Severance Period will be adjusted accordingly as soon as practicable after the Change in Control Date. |
|
All applicable federal, state, and local taxes will be withheld from all Severance Payments that are made. Federal tax will be withheld at a rate consistent with applicable law. |
|
Severance Pay will not be considered as earnings under the Delta Retirement Plan, the Delta Family-Care Savings Plan, the Delta Family-Care Disability and Survivorship Plan, or any other qualified or non-qualified plans. |
|
Severance Pay will be provided by check and cannot be direct deposited to any financial institution. |
MEDICAL/DENTAL AND LIFE INSURANCE BENEFITS
Payment of COBRA Premiums
|
Employees who have a separation from employment are offered the right to continue applicable medical, dental, vision and Health Flexible Spending Account coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Under this Plan, Delta will pay the premiums for medical, dental and/or vision COBRA coverage elected by a Participant or his eligible dependents for a period not to exceed the Severance Period, as further described below in this section. |
|
Delta will not pay any portion of the COBRA premium required for the Healthcare Flexible Spending Account COBRA coverage that is elected by a Participant or his or her eligible dependents. The COBRA statute, COBRA regulations and COBRA provisions of the Delta Family-Care Medical Plan (or corresponding pilot or Affiliate plan, if applicable) will, in all cases, govern whether a Participant or his dependents are eligible for COBRA coverage and accordingly whether such Participant or dependent will receive any payment of COBRA premiums by Delta in accordance with this Plan. |
|
If the Participant and/or dependent fail to meet these requirements, such Participant and/or dependent will not be eligible for COBRA continuation coverage at either Deltas expense or |
_________________________
1 It is intended that the benefits under this Plan be appropriately integrated with severance provided for under other arrangements, if any, covering the Participant to avoid duplication of severance pay.
B-1
their own. Deltas payment of the COBRA premiums under this Plan will expire on the earlier of: (i) the end of the Severance Period; or (ii) the date the Participants or the Participants dependents eligibility for COBRA coverage ceases as provided under COBRA and the terms of the Delta Family-Care Medical Plan (or corresponding pilot or Affiliate plan, applicable).
Payment of Retiree Medical Premiums
|
To the extent applicable, for those Participants who take special early, early or normal retirement at the time of their separation, and elect COBRA coverage, instead of retiree medical and/or dental coverage, the above section entitled Payment of COBRA Premiums will apply with respect to any Delta-paid COBRA premium. If the Participant instead elects retiree medical and/or dental coverage, Delta will, as an alternative to paying COBRA premiums as described above, pay the retiree medical and/or dental premium for the Participant and their eligible, properly enrolled dependents during the Severance Period. |
|
In order to be eligible, the Participant must timely complete and return the separate retiree medical election form that is provided to employees at retirement. Failure to meet this requirement will result in no retiree medical coverage and therefore no payment of the retiree medical premium by Delta. |
|
If a Participant or his dependents become ineligible for Delta retiree coverage for any reason or opt out of such coverage, all coverage will cease and Delta will have no responsibility to pay any further retiree medical and/or dental premiums under this Plan. |
BASIC LIFE INSURANCE
|
To the extent applicable, Participants will also have their basic life insurance coverage under the Delta Family-Care Disability and Survivorship Plan (or corresponding pilot or Affiliate plan, if applicable) continued for the Severance Period at Deltas expense. The amount of coverage continued will be equal to the amount of basic life insurance coverage in effect immediately prior to separation up to a maximum of $50,000. |
|
If a Participant instead shall have reached early retirement age at the time of his or her separation, he or she will not be eligible for this continuation of basic life coverage but instead will receive the standard retiree basic life coverage (currently $10,000 at the Company). |
TRAVEL PRIVILEGES
|
During the Severance Period, a Participant will be eligible for continued travel privileges comparable to Deltas travel policy as in effect for similarly situated active employees during such period. |
|
Family status changes (marriage, divorce, adoption or birth of child) that occur during the Severance Period must be reported to the Employee Service Center (or corresponding Affiliate administrator) within 30 days of the status change. Failure to do so will result in the ineligibility of the new family member for travel privileges described under this Plan. |
|
All travel privileges shall be governed by all applicable rules and procedures which are generally applicable at the time the travel privileges are used, except as expressly modified in this Plan. Travel privileges may be used for pleasure, vacation, or personal emergency, but may not be used for any type of business or professional activity. Any violation of the rules |
B-2
governing non-revenue and reduced rate travel may result in the suspension or termination of all travel privileges.
|
With respect to any Participant who (i) incurs a termination that constitutes a Change in Control Event and (ii) is a Vice President of the Company or more senior Officer at the time of the Change in Control Event, such Participant will be treated as a retiree for purposes of the Companys travel policy regardless of the Participants actual age or years of service and the Participants travel benefits will be based on the Company travel policy in effect immediately prior to the Change in Control Event that was applicable to the Participant. |
CAREER TRANSITION SERVICES
|
Participants are eligible to receive career transition services valued at up to $5,000 at a career transition services firm chosen by Delta. |
|
These career transition services may include seminars, job search work teams, productivity clinic, resumé preparation, assessments, resource library, on-line database, job lead development, individual counseling, administrative support, computer lab, and workspace phone/fax. |
|
The eligibility to receive these services will expire upon the employee becoming employed or the expiration of the Severance Period, whichever occurs first. |
FINANCIAL PLANNING SERVICES
|
Participants are eligible for continuation of the financial planning services for which they are eligible at the time of their separation from Delta. |
|
The eligibility to receive these services will expire at the conclusion of the calendar year in which the Participant separates from Delta, even if that occurs during the Severance Period. |
GROSS-UP PAYMENT
|
(a) Gross-Up Payments. In the event that a Participant becomes entitled to benefits under this Appendix B, Delta shall pay to such Participant an additional lump sum payment (the Gross-Up Payment), in cash, equal to the amounts, if any, described in sub-paragraph (x), subject to sub-paragraph (y), below: |
(x) Subject to sub-paragraph (y) below, if any portion of any payment under this Appendix B, when taken together with any payment under any other agreement with or plan of Delta (in the aggregate Total Payments) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (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 Participant shall be entitled under this paragraph to an additional amount such that after payment by the Participant of all such Participants applicable federal, state and local taxes, including any Excise Tax, imposed upon such additional amount, the Participant will retain an amount sufficient to pay the Excise Tax imposed on the Total Payments.
(y) Notwithstanding the provisions of sub-paragraph (x) above, if it shall be determined that the Participant would be entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were
B-3
reduced by an amount that is less than 10% of the portion of the Total Payments that would be treated as parachute payments under Section 280G of the Code, then the amounts payable to the Participant shall be reduced (but not below zero) to the maximum amount that could be paid to Participant without giving rise to the Excise Tax (the Safe Harbor Cap), and no Gross-Up Payment shall be made to the Participant. Such reduction of the amounts payable to the Safe Harbor Cap, if applicable, shall be made by reducing payments comprising the Total Payments in such order as elected by the Participant.
|
The amounts payable under this paragraph (a) shall be paid by Delta as soon as practicable (but in no event more than 30 days) after the occurrence of the events giving rise to the Participants right to benefits under Appendix B. |
|
(b) Determinations. In the event of a Change in Control, all determinations required to be made under paragraph (a) above, including the amount of the Gross-Up Payment, whether a payment is required under paragraph (a) above, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the nationally recognized accounting firm generally used by the Company as its financial auditor (the Accounting Firm) which shall provide detailed supporting calculations both to Delta and the Participant within twenty business days of the receipt of notice from the Participant that there has been an event giving rise to the right to benefits under paragraph (a) above, or such earlier time as is requested by Delta. 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, the Participant 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 Delta. |
|
(c) Subsequent Redeterminations. Unless requested otherwise by the Company, each Participant must use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that such Participant owes an amount of Excise Tax greater than the amount previously determined under paragraph (a); provided, however, that Participants shall be entitled to reimbursement by Delta of all fees and expenses reasonably incurred by the Participant in contesting such determination. In the event the Internal Revenue Service or any court of competent jurisdiction determines that the Participant owes an amount of Excise Tax that is either greater or less than the amount previously taken into account and paid under paragraph (a), Delta shall promptly pay to such Participant, or the Participant shall promptly repay to Delta, as the case may be, the amount of such excess or shortfall. In the case of any payment that Delta is required to make to the Participant pursuant to the preceding sentence (a Later Payment), Delta shall also pay to the Participant an additional amount such that after payment by the Participant of all such Participants applicable federal, state and local taxes on such additional amount, the Participant will retain an amount sufficient to pay the total of such Participants applicable federal, state and local taxes arising due to the Later Payment. In the case of any repayment of Excise Tax that a Participant is required to make to Delta pursuant to the second sentence of this paragraph (c), the Participant shall also repay to Delta the amount of any additional payment received by such Participant from Delta in respect of applicable federal, state and local taxes on such repaid Excise Tax, to the extent the Participant is entitled to a refund of (or has not yet paid) such federal, state or local taxes. |
B-4
APPENDIX C
PLAN CLAIMS AND APPEALS
FILING A CLAIM
All claims for benefits under this Plan must be submitted in writing to the Vice President Compensation and Benefits of the Company (or such other officer as may be designated by the Company). If a claim is denied, the claimant will receive written notification of the denial within 90 days after the claim is properly and completely filed. Special circumstances may require an additional period of no more than 90 days. In that event, the claimant will receive a written notice of the special circumstances requiring the extension and the date when the claimant may expect a decision on the claim. If the claimant is not furnished with written notification of the decision on the claim within 90 days (or within 180 days if an extension is necessary) after the claim is properly and completely filed, the claimant or his/her authorized representative may request a review of the claim under the appeal procedures described below.
APPEAL PROCEDURES FOR DENIED CLAIMS
If a claimant is dissatisfied with a denial of a claim under the Plan, the claimant has the right to appeal the denial. All appeals must be addressed to the proper party in a timely manner. All appeal time deadlines will be strictly enforced.
If a claimant desires a review of a denial, he/she or his/her representative designated in writing must submit a written request that is received by the Plan Administrator within 90 days of the date of this Plans letter denying benefits. The date of the denial indicated on the denial letter counts as day one in determining this 90-day period and the Plan Administrator expressly reserves the right to refuse to consider tardy appeals.
The claimant will be notified in writing of the decision on review within 60 days after the Plan Administrator receives the review request. If the claim denial is upheld, the claimant will be so advised and informed of the reason, the provisions of the Plan document upon which the denial was based, and, if applicable, an explanation of other relevant material or information necessary to perfect the claim. The Plan Administrator may take an additional 60 days to inform a claimant of a decision if special circumstances require an extension of processing time and the Plan Administrator has notified the claimant in writing that there will be a delay, the reasons for needing more time, and the date by which the final decision will be made.
Review by the Plan Administrator is made only upon the written record. The claimant or a representative designated by the claimant in writing may review pertinent documents relating to the denial and may submit comments, a statement of issues, and/or additional documentary evidence if desired. Personal appearances are not permitted.
A claimant must timely exhaust the administrative remedies allowed under this Plan as described above before filing any legal action on a claim. The previously described procedure is the exclusive administrative claims procedure provided under this Plan.
C-1
August 28, 2007
Mr. Richard H. Anderson
Dear Richard:
I am pleased to confirm our offer of employment for the position of Chief Executive Officer of Delta Air Lines, Inc. (Delta or Company). As per our discussions, your active employment in this position will begin on September 1, 2007 (Starting Date). The following information generally summarizes the terms of our agreement.
Your starting annual base salary will be at the rate of $600,000 per annum, payable in accordance with the usual pay practices of the Company, and will be subject to annual review by the Board of Directors.
To align your variable compensation opportunities with the creation of shareholder value and the variable compensation opportunities provided to all Delta people, you will participate in certain annual and long-term incentive plans as outlined below.
|
1. |
You will participate in our annual cash incentive plan, the Delta Management Incentive Plan (MIP), according to the terms of the MIP as in effect from time to time. The 2007 MIP links pay and performance by providing approximately 1,200 management employees with a compensation opportunity based on Deltas achieving key business plan goals in this year. It also aligns the interests of Deltas management and other employees because these goals are the same ones that drive payouts under the broad-based employee profit sharing plan and shared rewards program. For 2007, your Target MIP Award (as defined in the MIP) will be 150% of the annual base salary prorated for actual service in 2007. For 2008, your Target MIP Award will be at least 150% of your starting annual base salary. |
|
2. |
You will participate in Deltas long-term incentive program on the same basis as the Companys other Executive Officers. In 2008, you will receive a long-term incentive award with a targeted value of $4,000,000. This award will generally vest over a three-year period and is subject to the performance goals and other terms and conditions as may be established by the Personnel & Compensation Committee of Deltas Board of Directors. |
|
3. |
In recognition of the substantial compensation awards that we understand you will forfeit by leaving your current employer, upon the Starting Date, you will receive certain equity awards under Deltas 2007 Performance Compensation Plan (the 2007 Plan). The terms of these awards, which are attached hereto as Exhibit A, are similar to the equity awards granted to Delta officers in connection with the Companys emergence from bankruptcy on April 30, 2007. The value of these awards is tied to and contingent on Deltas future performance. |
Mr. Richard H. Anderson
August 28, 2007
Page 2
Except as otherwise provided in this letter agreement, your employment with Delta will be subject to Deltas standard policies applicable to all employees and will be governed by the terms and conditions of the Human Resources Practices Manual, as may be amended from time to time hereafter. You will also be entitled to such other benefits as are provided to the Companys Executive Officers.
During your employment with Delta, you may continue to serve as a member of the board of directors for Cargill, Incorporated and Medtronic, Inc. In addition, subject to approval by the Delta Board of Directors, you will be allowed other outside activities such as corporate, trade, and charitable board memberships.
You will also be subject to non-competition, non-solicitation, and confidentiality covenants, as provided in Exhibit A.
You will be eligible to participate in Deltas standard benefit programs applicable to all employees, as amended from time to time, including healthcare, disability, and defined contribution retirement plans.
In addition, you will participate in the Delta Air Lines, Inc. Officer and Director Severance Plan (O&D Plan) in accordance with the terms of the O&D Plan, subject to the understanding that (a) Severance Pay shall mean 24 months Base Salary, plus 200% of any applicable MIP Target Amount (as such terms are defined in the O&D Plan), (b) Severance Period shall mean 24 months after the date of your termination of employment and (c) the definition of Severance Event (as defined in the O&D Plan) shall include your resignation for Good Reason (as such term is defined in the 2007 Plan).
You will be eligible for a relocation benefit as provided under the terms of the Delta Air Lines Officer Relocation Program (Relocation Policy), except that the provisions of this policy will apply for 18 months. In addition, should you sell your Minnesota residence within 18 months of the Effective Date and the net sales price, as defined in the Relocation Policy, is less than $2,100,000 (your cost of acquiring that residence), Delta will reimburse you for the difference. If you are due the difference between the sales price and your cost of acquiring that residence, such payment will be grossed-up to cover taxes due on this payment.
All consideration provided by Delta shall be provided subject to withholding and other federal, state and local taxes and deductions as provided by law.
This letter agreement supersedes all prior discussions and documentation concerning your compensation arrangements with the Company.
If the terms provided herein reflect your understanding of our agreement and you accept employment based on these terms, please indicate your acceptance by signing the two original letters provided. Please keep one letter for your records and return the other to me.
Mr. Richard H. Anderson
August 28, 2007
Page 3
Richard, we are extremely pleased to have you join the Delta team, and we look forward with great pleasure to our association with you in this important role at Delta.
Sincerely,
/s/ David R. Goode
David R. Goode
Chair, Personnel & Compensation Committee
Board of Directors of Delta Air Lines, Inc.
/s/ Richard H. Anderson |
Richard H. Anderson
29 August 2007 |
Date
Enclosure
|
Exhibit A |
DELTA 2007 PERFORMANCE COMPENSATION PLAN
AWARD AGREEMENT
August 28, 2007
Richard H. Anderson
This Award Agreement, including Appendix A hereto (the Agreement), describes some of the terms of your award (the Award) under the Delta 2007 Performance Compensation Plan (the Plan). Your Award is subject to the terms of the Plan and this Agreement. Words beginning with a capital letter which are used but not otherwise defined in this Agreement have the meaning set forth in the Plan. In order for this Award to become effective, you must accept the Award in accordance with the terms of Section 9 below. This Agreement is contingent on your commencement of employment as the Chief Executive Officer of Delta Air Lines, Inc. as of September 1, 2007. If, for any reason, your employment does not commence on that date, this Agreement shall be null and void as of that date.
1. Summary of Award. Subject to your acceptance, your Award will include a Nonqualified Stock Option, Restricted Stock and a Performance Award as described below. Terms applicable to your Award, including vesting and forfeitability, are included at Appendix A to this Agreement.
(a) Nonqualified Stock Options. Effective as of Saturday, September 1, 2007, (the Grant Date), you are hereby awarded a Nonqualified Stock Option (the Stock Option), exercisable for 264,300 shares of Delta Common Stock, par value $0.0001 per share (Common Stock). The exercise price of the shares subject to the Stock Option will be the closing price of a share of Common Stock on the New York Stock Exchange on Friday, August 31, 2007.
(b) Restricted Stock. As of the Grant Date, you are hereby awarded 341,900 shares of Restricted Stock.
(c) Performance Award. As of the Grant Date, you are hereby awarded a Performance Award for 124,300 shares of Common Stock at the target level.
2. Restrictive Covenants. In exchange for the Award, you hereby agree as follows:
(a) Trade Secrets. You hereby acknowledge that during the term of your employment with Delta Air Lines, Inc., its subsidiaries and affiliates (Delta), you will acquire knowledge of secret, confidential and proprietary information regarding Delta and its business that fits within the definition of trade secrets under the law of the State of Georgia, including, without limitation, information regarding Deltas present and future operations, its financial operations, marketing plans and strategies, alliance agreements and relationships, its compensation and incentive programs for employees, and the business methods used by Delta and its employees, and other information which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (each, a Trade Secret). You hereby agree that for so long as such information remains a Trade Secret as defined by Georgia law, you will hold in a fiduciary
capacity for the benefit of Delta and shall not directly or indirectly make use of, on your own behalf or on behalf of others, any Trade Secret, or transmit, reveal or disclose any Trade Secret to any person, concern or entity. Nothing in this Agreement is intended, or shall be construed, to limit the protections of any applicable law protecting trade secrets.
(b) Confidential or Proprietary Information. You further agree that you will hold in a fiduciary capacity for the benefit of Delta, and, during the term of your employment with Delta and for the two year period after such employment terminates, shall not directly or indirectly use or disclose, any Confidential or Proprietary Information, as defined hereinafter, that you acquire (whether or not developed or compiled by you and whether or not you were authorized to have access to such Confidential or Proprietary Information) during the term of, in the course of, or as a result of your employment by Delta. Subject to the provisions set forth below, the term Confidential or Proprietary Information as used in this Agreement means the following secret, confidential and proprietary information of Delta not otherwise included in the definition of Trade Secret: all marketing, alliance, advertising and sales plans and strategies; all pricing information; all financial, advertising and product development plans and strategies; all compensation and incentive programs for employees; all alliance agreements, plans and processes; all plans, strategies, and agreements related to the sale of assets; all third party provider agreements, relationships, and strategies; all business methods and processes used by Delta and its employees; all personally identifiable information regarding Delta employees, contractors, and applicants; and all lists of actual or potential customers or suppliers maintained by Delta. The term Confidential and Proprietary Information does not include information that has become generally available to the public by the act of one who has the right to disclose such information. Nothing in this Agreement is intended, or shall be construed, to limit the protections of any applicable law protecting confidential or proprietary information.
(c) Employee Non-Solicitation Agreement. During the term of your employment with Delta and during the one-year period following the termination of such employment, you will not directly or indirectly (on your own behalf or on behalf of any other person, company, partnership, corporation or other entity), employ or solicit for employment any individual who is a management or professional employee of Delta for employment with any entity or person other than Delta or solicit, encourage or induce any such person to terminate their employment with Delta. The restrictions set forth in this Section shall be limited to those Delta management or professional employees who: (i) were employed by Delta during your employment in a supervisory or administrative job; and (ii) with whom you had material professional contact during your employment with Delta.
(d) Non-Competition Agreement. During the term of your employment with Delta and for the one-year period following the termination of such employment, you will not on your own behalf or on behalf of any person, firm, partnership, association, corporation or business organization, entity or enterprise, provide the same or substantially similar services, as an employee, consultant, partner, or in any other capacity, to any of the following entities, which you hereby acknowledge are all competitors of Delta: AMR Corporation, American Airlines, Inc., Continental Airlines, Inc., Southwest Airlines Co., UAL Corporation, United Air Lines, Inc., US Airways, Inc., Jet Blue Airways, Inc., AirTran Airways, Inc., or Northwest Airlines, Inc. (individually and collectively, the Competitor). This restriction shall only apply to the extent that you may not provide services to the Competitor: (a) while working within a fifty (50)
2
mile radius of the city limits of Atlanta, Georgia; or (b) while working out of or within a fifty (50) mile radius of the corporate headquarters of the Competitor.
(e) Return of Property. You hereby agree that all property belonging to Delta, including records, files, memoranda, reports, personnel information (including benefit files, training records, customer lists, operating procedure manuals, safety manuals, financial statements, price lists and the like), relating to the business of Delta, with which you come in contact in the course of your employment (hereinafter Deltas Materials) shall, as between the parties hereto, remain the sole property of Delta. You hereby warrant that you shall promptly return all originals and copies of Deltas Materials to Delta at the time your employment terminates.
(f) Cooperation. You hereby agree that you shall, both during and after your employment with Delta, to the extent requested in writing and reasonable under the circumstances, cooperate with and serve in any capacity requested by Delta in any pending or future litigation in which Delta has an interest, and regarding which you, by virtue of your employment with Delta, have knowledge or information relevant to the litigation.
3. Dispute Resolution. (a) Arbitration. You hereby agree that except as expressly set forth below, all disputes and any claims arising out of or under or relating to the Award or this Agreement, including without limitation any dispute or controversy as to the validity, interpretation, construction, application, performance, breach or enforcement of this Agreement, shall be submitted for, and settled by, mandatory, final and binding arbitration in accordance with the Commercial Arbitration Rules then prevailing of the American Arbitration Association. Unless an alternative locale is otherwise agreed in writing by the parties to this Agreement, the arbitration shall be conducted in the City of Wilmington, Delaware. The arbitrator will apply Delaware law to the merits of any dispute or claim without reference to rules of conflicts of law. Any award rendered by the arbitrator shall provide the full remedies available to the parties under the applicable law and shall be final and binding on each of the parties hereto and their heirs, executors, administrators, successors and assigns and judgment may be entered thereon in any court having jurisdiction. You hereby consent to the personal jurisdiction of the state and federal courts in the State of Delaware for any action or proceeding arising from or relating to any arbitration under this Agreement. The prevailing party in any such arbitration shall be entitled to an award by the arbitrator of all reasonable attorneys fees and expenses incurred in connection with the arbitration. However, Delta will pay all fees associated with the American Arbitration Association and the arbitrator. All parties must initial here for this Section 3 to be effective:
/s/ RHA Richard H. Anderson
/s/ DRG Delta Air Lines, Inc.David Goode, Chairman of the Personnel & Compensation Committee of the Board
(b) Injunctive Relief in Aid of Arbitration; Forum Selection. You hereby acknowledge and agree that the provisions contained in Section 2 of this Agreement are reasonably necessary to protect the legitimate business interests of Delta, and that any breach of any of these provisions will result in immediate and irreparable injury to Delta for which monetary damages will not be an adequate remedy. You further acknowledge that if any such provision is breached or threatened to be breached, Delta will be entitled to seek a temporary restraining order, preliminary injunction or other equitable relief in aid of arbitration in any court of competent jurisdiction without the necessity of posting a bond, restraining you from continuing to commit any violation of the covenants, and you
3
hereby irrevocably consent to the jurisdiction of the state and federal courts of the State of Delaware, with venue in Wilmington, which shall have jurisdiction to hear and determine any claim for a temporary restraining order, preliminary injunction or other equitable relief brought against you by Delta in aid of arbitration.
(c) Consequences of Breach. Furthermore, you acknowledge that, in partial consideration for the awards described in the Plan and this Agreement, Delta is requiring that you agree to and comply with the terms of Section 2 and you hereby agree that without limiting any of the foregoing, should you violate any of the covenants included in Section 2 above, you will not be entitled to and shall not receive any Awards under the Plan and this Agreement and any outstanding Awards will be forfeited.
(d) Tolling. You further agree that in the event the enforceability of any of the restrictions as set forth in Section 2 of this Agreement are challenged and you are not preliminarily or otherwise enjoined from breaching such restriction(s) pending a final determination of the issues, then, if an arbitrator finds that the challenged restriction(s) is enforceable, the time period set forth in such Section shall be deemed tolled upon the filing of the arbitration or action seeking injunctive or other equitable relief in aid of arbitration, whichever is first in time, until the dispute is finally resolved and all periods of appeal have expired.
(e) Governing Law. Unless governed by federal law, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws of that State.
(f) Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, YOU HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER ARISING OUT OF, UNDER, IN CONNECTION WITH, OR IN ANY WAY RELATED TO THIS AGREEMENT. THIS INCLUDES, WITHOUT LIMITATION, ANY DISPUTE CONCERNING ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN), OR ACTION OF DELTA OR YOU, OR ANY EXERCISE BY DELTA OR YOU OF OUR RESPECTIVE RIGHTS UNDER THIS AGREEMENT OR IN ANY WAY RELATING TO THIS AGREEMENT. YOU FURTHER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR DELTA TO ISSUE AND ACCEPT THIS AGREEMENT.
4. Validity; Severability. In the event that one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal, or unenforceable in any respect, such holding shall not affect any other provisions in this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein. The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.
5. Authority of the Committee. You acknowledge and agree that the Committee has the sole and complete authority and discretion to construe and interpret the terms of the Plan and this Agreement. All determinations of the Committee shall be final and binding for all purposes and upon all persons, including, without limitation, you and the Company, and your heirs and successors. The Committee shall be under no obligation to construe this Agreement or
4
treat the Award in a manner consistent with the treatment provided with respect to other Awards or Participants.
6. Amendment. This Agreement may not be amended or modified except by written agreement signed by you and Delta.
7. Acknowledgement. By signing this Agreement: (a) you acknowledge that you have had a full and adequate opportunity to read this Agreement and you agree with every term and provision herein, including without limitation, the terms of Sections 2, 3, 4, and 5; (b) you acknowledge that you have received and had a full and adequate opportunity to read the Plan; (c) you agree, on behalf of yourself and on behalf of any designated beneficiary and your heirs, executors, administrators and personal representatives, to all of the terms and conditions contained in this Agreement and the Plan; and (d) you consent to receive all material regarding any awards under the Plan, including any prospectuses, electronically with an e-mail notification to your work e-mail address.
8. Entire Agreement. This Agreement, together with the Plan (the terms of which are made a part of this Agreement and are incorporated into this Agreement by reference), constitutes the entire agreement between you and Delta with respect to the Award.
9. Acceptance of this Award. If you agree to all of the terms of this Agreement and would like to accept this Award, you must sign and date the Agreement where indicated below and return an original signed version of this Agreement to Mary Steele, either by hand or by mail to Department 936, P.O Box 20706, Atlanta, Georgia 30320. If you have any questions regarding how to accept your Award, please contact Ms. Steele at (404) 715-6333. Delta hereby acknowledges and agrees that its legal obligation to make the Award to you shall become effective when you sign this Agreement.
You and Delta, each intending to be bound legally, agree to the matters set forth above by signing this Agreement, all as of the date set forth below.
DELTA AIR LINES, INC. | |
| |
By: |
/s/ David R. Goode |
|
Name: David Goode Personnel & Compensation Committee of the Board of Directors |
PARTICIPANT |
/s/ Richard H. Anderson |
Richard H. Anderson
|
Date: 29 August 2007 |
5
APPENDIX A
The terms of this Appendix A shall apply to the Award set forth in the Delta 2007 Performance Compensation Plan Award Agreement to which this Appendix is attached. Words beginning with a capital letter which are used but not otherwise defined in this Appendix have the meaning set forth in the Agreement or the Plan. For purposes of Appendix A, Richard H. Anderson is referred to as Participant. This Award will be ignored for purposes of determining whether Participant has suffered a reduction that constitutes Good Reason under subsection 2(p)(v) or 2(p)(vi) of the Plan.
|
A. |
STOCK OPTION. |
1. Exercise Period. Subject to the terms of the Plan, including Section A of this Appendix A, the Stock Option (a) shall become exercisable with respect to one-third of the Shares on each of the first, second and third anniversaries of the Grant Date1; and (b) shall be exercisable through and including the day immediately preceding the tenth anniversary of the Grant Date (Expiration Date).
2. Change in Exercisability and Exercise Period upon Termination of Employment. The exercisability of the Option and the exercise period set forth in Section A.1 of this Appendix A is subject to the following terms and conditions:
(a) Without Cause or For Good Reason. Upon Participants Termination of Employment by the Company without Cause or by Participant for Good Reason (including the Termination of Employment of any Participant employed by an Affiliate at the time the Company sells or otherwise divests itself of such Affiliate), the Option shall become fully and immediately exercisable and shall remain exercisable, in whole or in part, during the period: (i) beginning on the date of such termination; and (ii) ending on the earlier of (A) the second anniversary of such termination or (B) the Expiration Date.
(b) Voluntary Resignation. Upon Participants Termination of Employment by reason of a voluntary resignation (other than for Good Reason): (i) any portion of the Option that is not exercisable at the time of such termination shall be forfeited; and (ii) any portion of the Option that is exercisable at the time of such termination shall remain exercisable until the earlier of (A) 90 days after such termination or (B) the Expiration Date.
(c) Death or Disability. Upon Participants Termination of Employment due to death or Disability, the Option shall become fully and immediately exercisable and shall remain exercisable, in whole or in part, during the period: (i) beginning on the date
_________________________
1 The number of Shares subject to each installment will be equal to the total number of Shares subject to the Option divided by three; provided, that if this formula results in any fractional Share allocation to any Option Installment, the number of Shares in the first installment will be increased so that only full shares are covered by each installment.
of such termination; and (ii) ending on the earlier of (A) the third anniversary of such termination or (B) the Expiration Date.
(d) For Cause. Upon Participants Termination of Employment by the Company for Cause, the Option shall be immediately forfeited.
3. Change in Control. Subject to Section D of this Appendix A, upon a Change in Control which occurs prior to Participants Termination of Employment, the Option shall become fully and immediately exercisable and shall remain exercisable, in whole or in part, during the period (i) beginning on the date of such Change in Control; and (ii) ending on the Expiration Date; provided, however, that the unexercised portion of the Option shall be immediately forfeited upon Participants Termination of Employment by the Company for Cause; provided, further, that upon Participants Termination of Employment for any reason other than by the Company for Cause, the period to exercise the Option will end on the earlier of (i) the third anniversary of such termination or (ii) the Expiration Date.
|
B. |
RESTRICTED STOCK |
1. Restrictions. Until the restrictions imposed by this Section B.1 (the Restrictions) have lapsed pursuant to Section 2, 3, 4, or 5 below, Participant will not be permitted to sell, exchange, assign, transfer, pledge or otherwise dispose of the Restricted Stock and the Restricted Stock will be subject to forfeiture as set forth below.
2. Lapse of Restrictions--Passage of Time. Subject to the terms of the Plan and the Agreement, including Section B of this Appendix A, the Restrictions shall lapse and be of no further force or effect with respect to one-third of the Shares of Restricted Stock six (6) months after the Grant Date, with respect to one-third of the Shares of Restricted Stock eighteen (18) months after the Grant Date and with respect to one-third of the Shares of Restricted Stock thirty (30) months after the Grant Date.2
3. Accelerated Lapse of Restrictions. If, at any time during the twelve (12) month period commencing on October 30, 2007, the aggregate market value of all outstanding Shares is at least $14,000,000,000 for ten (10) consecutive trading days, as determined by the closing price of the Shares on the New York Stock Exchange, the Restrictions shall lapse and be of no further force or effect on the last day of such twelve (12) month period, provided that Participant has not had a Termination of Employment prior to such day.
4. Lapse of Restrictions/Forfeiture upon Termination of Employment. In addition to the other provisions of the Plan and this Agreement, the Restricted Stock and the Restrictions set forth in Section B of this Appendix A are subject to the following terms and conditions:
_________________________
2 The number of Shares subject to each installment will be equal to the total number of Shares subject to the Restricted Stock Award divided by three; provided, that if this formula results in any fractional Share allocation to any installment, the number of Shares will be adjusted in the same manner as described in footnote 1 above.
ii
(a) Without Cause or For Good Reason. Upon Participants Termination of Employment by the Company without Cause or by Participant for Good Reason, the Restrictions shall immediately lapse and be of no further force or effect as of the date of such termination.
(b) Voluntary Resignation. Upon Participants Termination of Employment by reason of a voluntary resignation (other than for Good Reason), any portion of the Restricted Stock subject to the Restrictions shall be forfeited as of the date of such termination.
(c) Death or Disability. Upon Participants Termination of Employment due to death or Disability, the Restrictions shall immediately lapse and be of no further force or effect as of the date of such termination.
(d) For Cause. Upon Participants Termination of Employment by the Company for Cause, any portion of the Restricted Stock subject to the Restrictions shall be forfeited as of the date of such termination.
5. Change in Control. Subject to Section D of this Appendix A, upon a Change in Control which occurs prior to Participants Termination of Employment, the Restrictions shall immediately lapse on the date of such Change in Control and be of no further force or effect as of such date.
6. Dividends. In the event a cash dividend shall be paid in respect of Shares at a time the Restrictions on the Restricted Stock have not lapsed, Participant shall receive the dividend.
|
C. |
LONG-TERM PERFORMANCE AWARDS. |
1. Payout Criteria. Except as otherwise expressly set forth in this Appendix A, the actual number of Shares paid, if any, to Participant under the Performance Award will be based on (a) the Companys EBITDAR performance and (b) the occurrence of a contemporaneous annual payout under the Companys broad-based employee Profit Sharing Program (a Profit Sharing Payout), as described below.
2. Annual Vesting Opportunities for 2007 and 2008. Subject to the terms of the Plan and the Agreement, including Section C of this Appendix A, Performance Awards will be subject to the following vesting opportunities in 2007 and 2008.
(a) Calendar Year 2007. If the Company (i) has achieved EBITDAR of at least $2,838,000,000 for the year ending December 31, 2007 and (ii) made a Profit Sharing Payout for 2007, a number of Shares equal to 15% of the Performance Award (rounded up to the nearest whole share) shall vest and be paid.
(b) Calendar Year 2008. If the Company (i) has achieved cumulative EBITDAR of at least $6,295,000,000 for the two year period ending December 31, 2008 and (ii) made a Profit Sharing Payout for 2008, a number of Shares equal to 15% of the Performance Award (rounded up to the nearest whole share) shall vest and be paid.
(c) Condition Precedent. No Performance Awards will vest or be paid under this Section C.2 with respect to any year for which there is no Profit Sharing Payout.
iii
(d) Timing of Payment. The Company will pay Performance Awards that vest under this Section C.2 as soon as practicable after the determination that the payment criteria described in this Section have been met.
3. Vesting Opportunity for 2009; Payment of Vested Shares. Subject to the terms of the Plan and the Agreement, including Section C of this Appendix A, the Performance Award shall vest, as described in this Section 3, as of December 31, 2009, to the extent the Company meets or exceeds the EBITDAR goals described below. If the Company does not meet the Threshold Level, as defined below, any unpaid portion of the Performance Award will lapse and become void as of December 31, 2009.
(a) Threshold Vesting. If the Company has achieved cumulative EBITDAR of $7,433,000,000 (Threshold Level) for the three year period ending December 31, 2009, the Performance Award will vest with respect to a number of Shares equal to (i) 50% of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above. The remaining unvested portion of the Performance Award will lapse and become void.
(b) Target Vesting. If the Company has achieved cumulative EBITDAR of $9,911,000,000 (Target Level) for the three year period ending December 31, 2009, the Performance Award will vest with respect to a number of Shares equal to (ii) 100% of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above.
(c) Maximum Vesting. If the Company has achieved cumulative EBITDAR of at least $11,849,000,000 (Maximum Level) for the three year period ending December 31, 2009, the Performance Award will vest with respect to a number of Shares equal to (i) 150% of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above.
(d) Vesting by Interpolation. If the Company has achieved cumulative EBITDAR for the three year period ending December 31, 2009 which is above the Threshold Level but below the Target Level, or above the Target Level but below the Maximum Level, the Performance Award will vest with respect to a number of Shares equal to (i) the Specified Percentage of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above. For purposes of this Section 3(d), the Specified Percentage will be determined by interpolating on a straight line basis as follows: (i) between Threshold Level (at which 50% of the Performance Award vests) and Target Level (at which 100% of the Performance Award vests) if the Companys cumulative EBITDAR for the three year period ending December 31, 2009 is above the Threshold Level and below the Target Level; and (ii) between Target Level (at which 100% of the Performance Award vests) and Maximum Level (at which 150% of the Performance Award vests) if the Companys cumulative EBITDAR for the three year period ending December 31, 2009 is above the Target Level and below the Maximum Level.3
_________________________
3 The interpolation calculation is a four step process. The following is the calculation for a cumulative EBITDAR that is between Threshold Level and Target Level:
Step 1: Subtract the cumulative EBITDAR achieved from $9,911,000,000 (Target Level).
Step 2: Divide the total in Step 1 by $2,478,000,000 (the difference between Target Level and Threshold Level).
Step 3: Multiply the result of Step 2 by 50% or 0.50 (the difference between 100% target vesting and 50% threshold vesting). Round up to the nearest thousandth; in other words, 0.456908 would be rounded up to 0.457
Step 4: The fraction resulting from Step 3 is the percentage subtracted from the 100% target vesting level to determine the actual percentage of the Participants Performance Award that will vest.
iv
(e) Definition of EBITDAR. EBITDAR means, with respect to any fiscal period of the Company, an amount equal to the consolidated operating income of the Company and its subsidiaries during such fiscal period, determined prior to the charges, costs, and expenses associated with depreciation, amortization, and aircraft rent, based on regularly prepared and publicly available statements of operations of the Company, prepared in accordance with generally accepted accounting principals (GAAP); provided, however, that EBITDAR shall be adjusted to exclude the following items, in each case as determined by the Committee, where applicable, in accordance with GAAP and only to the extent to which these items impact the Companys consolidated operating income: (i) all asset write downs related to long term assets; (ii) gains or losses with respect to employee equity securities; (iii) gains or losses incurred as a consequence of fresh start accounting; and (iv) gains or losses with respect to extraordinary, one-time or non-recurring events.
(f) Condition Precedent. No Shares that vested under this Section C.3 will be paid to Participant until there is a Profit Sharing Payout for 2009 or a subsequent year.
(g) Timing of Payment. The Company will pay Participant any Shares that vest under this Section C.3 as soon as practicable after the determination that the payment criteria described in this Section have been met.
4. Accelerated Vesting/Forfeiture upon Termination of Employment. In addition to the other provisions of the Plan and this Agreement, the Performance Award is subject to the following terms and conditions:
(a) Without Cause or For Good Reason. Upon Participants Termination of Employment by the Company without Cause or by Participant for Good Reason (including the Termination of Employment of Participant is employed by an Affiliate at the time the Company sells or otherwise divests itself of such Affiliate), Participant will be entitled to any Shares that become payable under Section C.2 and/or Section C.3 in the same manner and to the same extent as if Participants employment had continued.
(b) Voluntary Resignation. Upon Participants Termination of Employment by reason of a voluntary resignation (other than for Good Reason), Participant will immediately forfeit any unpaid portion of the Performance Award as of the date of such termination.
(c) Death or Disability. Upon Participants Termination of Employment by reason of death or Disability, the number of Shares subject to the target Performance
v
Award as of the date of such termination will be recalculated and will be the result of the following formula (the Adjusted Performance Award): S × (T ÷ E) where,
S = the total number of Shares subject to Participants Performance Award as of the Grant Date;
T = the number of calendar months from the Grant Date to the date of such Termination of Employment (rounded up for any partial month); and
E = the number of calendar months from the Grant Date to December 31, 2009 (rounded up for any partial month).
The Shares subject to the Adjusted Performance Award will become immediately vested and will be paid as soon as practicable thereafter to Participant or Participants estate, as applicable.
(d) For Cause. Upon Participants Termination of Employment by the Company for Cause, Participant will immediately forfeit any unpaid portion of the Performance Award as of the date of such termination.
5. Change in Control. Subject to Section D of this Appendix A, upon a Change in Control, any Performance Award not previously forfeited under Section 4(b) or Section 4(d), or settled under Section 4(c), shall immediately vest and be paid to Participant as soon as practicable without regard to whether a Profit Sharing Payout has been made. The number of Shares to be paid to Participant in respect of the Performance Award shall be equal to 100% of the number of Shares subject to the Performance Award minus the number of Shares paid, if any, under Section C.2 above to Participant.
|
D. |
Gross-Up for Certain Taxes. |
1. Gross-Up Payments. In the event that Participant becomes entitled to benefits under the Plan, the Company shall pay to Participant an additional lump sum payment (the Gross-Up Payment), in cash, equal to the amounts, if any, described in sub-section (a), subject to sub-section (b), below:
(a) Subject to sub-section (b) below, if any portion of any payment under the Plan, when taken together with any payment under any other agreement with or plan of the Company (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 Participant shall be entitled under this paragraph to an additional amount such that after payment by Participant of all Participants applicable federal, state and local taxes, including any Excise Tax, imposed upon such additional amount, Participant will retain an amount sufficient to pay the Excise Tax imposed on the Total Payments.
(b) Notwithstanding the provisions of sub-section (a) above, if it shall be determined that Participant would be entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the portion of the Total Payments that
vi
would be treated as parachute payments under Section 280G of the Code, then the amounts payable to Participant shall be reduced (but not below zero) to the maximum amount that could be paid to Participant without giving rise to the Excise Tax (the Safe Harbor Cap), and no Gross-Up Payment shall be made to Participant. Such reduction of the amounts payable to the Safe Harbor Cap, if applicable, shall be made by reducing payments comprising the Total Payments in such order as elected by Participant.
The amounts payable under this Section D.1 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 Participants right to benefits under the Plan.
2. Determinations. In the event of a Change in Control, all determinations required to be made under Section D.1 above, including the amount of the Gross-Up Payment, whether a payment is required under Section D.1 above, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the nationally recognized accounting firm generally used by the Company as its financial auditor (the Accounting Firm) which shall provide detailed supporting calculations both to the Company and Participant within twenty business days of the receipt of notice from Participant that there has been an event giving rise to the right to benefits under Section D.1 above, or such earlier 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, Participant 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.
3. Subsequent Redeterminations. Unless requested otherwise by the Company, Participant must use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Participant owes an amount of Excise Tax greater than the amount previously determined under paragraph (a); provided, however, that Participant shall be entitled to reimbursement by the Company of all fees and expenses reasonably incurred by Participant in contesting such determination. In the event the Internal Revenue Service or any court of competent jurisdiction determines that Participant owes an amount of Excise Tax that is either greater or less than the amount previously taken into account and paid under Section D.1, the Company shall promptly pay to Participant, or Participant 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 Participant pursuant to the preceding sentence (a Later Payment), the Company shall also pay to Participant an additional amount such that after payment by Participant of all Participants applicable federal, state and local taxes on such additional amount, Participant will retain an amount sufficient to pay the total of Participants applicable federal, state and local taxes arising due to the Later Payment. In the case of any repayment of Excise Tax that Participant is required to make to the Company pursuant to the second sentence of this Section D.3, Participant shall also repay to the Company the amount of any additional payment received by Participant from the Company in respect of applicable federal, state and local taxes on such repaid Excise Tax, to the extent Participant is entitled to a refund of (or has not yet paid) such federal, state or local taxes.
vii
EXHIBIT 10.3
DELTA 2007 PERFORMANCE COMPENSATION PLAN
AWARD AGREEMENT
August 28, 2007
Ed Bastian
This Award Agreement, including Appendix A hereto (the Agreement), describes some of the terms of your award (the Award) under the Delta 2007 Performance Compensation Plan (the Plan). Your Award is subject to the terms of the Plan and this Agreement. Words beginning with a capital letter which are used but not otherwise defined in this Agreement have the meaning set forth in the Plan. In order for this Award to become effective, you must accept the Award in accordance with the terms of Section 9 below.
1. Summary of Award. Subject to your acceptance, your Award will include a Nonqualified Stock Option, Restricted Stock and a Performance Award as described below. Terms applicable to your Award, including vesting and forfeitability, are included at Appendix A to this Agreement. In addition, you will participate in the annual incentive bonus component of the Plan (the MIP), according to the terms set forth below.
(a) Nonqualified Stock Options. Effective as of Saturday, September 1, 2007, (the Grant Date), you are hereby awarded a Nonqualified Stock Option (the Stock Option), exercisable for 60,100 shares of Delta Common Stock, par value $0.0001 per share (Common Stock). The exercise price of the shares subject to the Stock Option will be the closing price of a share of Common Stock on the New York Stock Exchange on Friday, August 31, 2007.
(b) Restricted Stock. As of the Grant Date, you are hereby awarded 77,700 shares of Restricted Stock.
(c) Performance Award. As of the Grant Date, you are hereby awarded a Performance Award for 28,300 shares of Common Stock at the target level.
2. Restrictive Covenants. In exchange for the Award, you hereby agree as follows:
(a) Trade Secrets. You hereby acknowledge that during the term of your employment with Delta Air Lines, Inc., its subsidiaries and affiliates (Delta), you have acquired and will continue to acquire knowledge of secret, confidential and proprietary information regarding Delta and its business that fits within the definition of trade secrets under the law of the State of Georgia, including, without limitation, information regarding Deltas present and future operations, its financial operations, marketing plans and strategies, alliance agreements and relationships, its compensation and incentive programs for employees, and the business methods used by Delta and its employees, and other information which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (each, a Trade Secret). You hereby agree that for so long as such information remains a Trade Secret as defined by Georgia law, you will hold in a fiduciary capacity for the benefit of Delta and shall not directly or indirectly make use of, on your own behalf or on behalf of others, any Trade
Secret, or transmit, reveal or disclose any Trade Secret to any person, concern or entity. Nothing in this Agreement is intended, or shall be construed, to limit the protections of any applicable law protecting trade secrets.
(b) Confidential or Proprietary Information. You further agree that you will hold in a fiduciary capacity for the benefit of Delta, and, during the term of your employment with Delta and for the two year period after such employment terminates, shall not directly or indirectly use or disclose, any Confidential or Proprietary Information, as defined hereinafter, that you acquire (whether or not developed or compiled by you and whether or not you were authorized to have access to such Confidential or Proprietary Information) during the term of, in the course of, or as a result of your employment by Delta. Subject to the provisions set forth below, the term Confidential or Proprietary Information as used in this Agreement means the following secret, confidential and proprietary information of Delta not otherwise included in the definition of Trade Secret: all marketing, alliance, advertising and sales plans and strategies; all pricing information; all financial, advertising and product development plans and strategies; all compensation and incentive programs for employees; all alliance agreements, plans and processes; all plans, strategies, and agreements related to the sale of assets; all third party provider agreements, relationships, and strategies; all business methods and processes used by Delta and its employees; all personally identifiable information regarding Delta employees, contractors, and applicants; and all lists of actual or potential customers or suppliers maintained by Delta. The term Confidential and Proprietary Information does not include information that has become generally available to the public by the act of one who has the right to disclose such information. Nothing in this Agreement is intended, or shall be construed, to limit the protections of any applicable law protecting confidential or proprietary information.
(c) Employee Non-Solicitation Agreement. During the term of your employment with Delta and during the one-year period following the termination of such employment, you will not directly or indirectly (on your own behalf or on behalf of any other person, company, partnership, corporation or other entity), employ or solicit for employment any individual who is a management or professional employee of Delta for employment with any entity or person other than Delta or solicit, encourage or induce any such person to terminate their employment with Delta. The restrictions set forth in this Section shall be limited to those Delta management or professional employees who: (i) were employed by Delta during your employment in a supervisory or administrative job; and (ii) with whom you had material professional contact during your employment with Delta.
(d) Non-Competition Agreement. During the term of your employment with Delta and for the one-year period following the termination of such employment, you will not on your own behalf or on behalf of any person, firm, partnership, association, corporation or business organization, entity or enterprise, provide the same or substantially similar services, as an employee, consultant, partner, or in any other capacity, to any of the following entities, which you hereby acknowledge are all competitors of Delta: AMR Corporation, American Airlines, Inc., Continental Airlines, Inc., Southwest Airlines Co., UAL Corporation, United Air Lines, Inc., US Airways, Inc., Jet Blue Airways, Inc., AirTran Airways, Inc., or Northwest Airlines, Inc. (individually and collectively, the Competitor). This restriction shall only apply to the extent that you may not provide services to the Competitor: (a) while working within a fifty (50) mile radius of the city limits of Atlanta, Georgia; or (b) while working out of or within a fifty (50) mile radius of the corporate headquarters of the Competitor.
2
(e) Return of Property. You hereby agree that all property belonging to Delta, including records, files, memoranda, reports, personnel information (including benefit files, training records, customer lists, operating procedure manuals, safety manuals, financial statements, price lists and the like), relating to the business of Delta, with which you come in contact in the course of your employment (hereinafter "Delta's Materials") shall, as between the parties hereto, remain the sole property of Delta. You hereby warrant that you shall promptly return all originals and copies of Delta's Materials to Delta at the time your employment terminates.
(f) Cooperation. You hereby agree that you shall, both during and after your employment with Delta, to the extent requested in writing and reasonable under the circumstances, cooperate with and serve in any capacity requested by Delta in any pending or future litigation in which Delta has an interest, and regarding which you, by virtue of your employment with Delta, have knowledge or information relevant to the litigation.
3. Dispute Resolution. (a) Arbitration. You hereby agree that except as expressly set forth below, all disputes and any claims arising out of or under or relating to the Award or this Agreement, including without limitation any dispute or controversy as to the validity, interpretation, construction, application, performance, breach or enforcement of this Agreement, shall be submitted for, and settled by, mandatory, final and binding arbitration in accordance with the Commercial Arbitration Rules then prevailing of the American Arbitration Association. Unless an alternative locale is otherwise agreed in writing by the parties to this Agreement, the arbitration shall be conducted in the City of Wilmington, Delaware. The arbitrator will apply Delaware law to the merits of any dispute or claim without reference to rules of conflicts of law. Any award rendered by the arbitrator shall provide the full remedies available to the parties under the applicable law and shall be final and binding on each of the parties hereto and their heirs, executors, administrators, successors and assigns and judgment may be entered thereon in any court having jurisdiction. You hereby consent to the personal jurisdiction of the state and federal courts in the State of Delaware for any action or proceeding arising from or relating to any arbitration under this Agreement. The prevailing party in any such arbitration shall be entitled to an award by the arbitrator of all reasonable attorneys fees and expenses incurred in connection with the arbitration. However, Delta will pay all fees associated with the American Arbitration Association and the arbitrator. All parties must initial here for this Section 3 to be effective:
|
/s/ |
EHB |
Ed Bastian |
|
/s/ |
DRG |
Delta Air Lines, Inc.David Goode, Chairman of the Personnel & Compensation Committee of the Board |
(b) Injunctive Relief in Aid of Arbitration; Forum Selection. You hereby acknowledge and agree that the provisions contained in Section 2 of this Agreement are reasonably necessary to protect the legitimate business interests of Delta, and that any breach of any of these provisions will result in immediate and irreparable injury to Delta for which monetary damages will not be an adequate remedy. You further acknowledge that if any such provision is breached or threatened to be breached, Delta will be entitled to seek a temporary restraining order, preliminary injunction or other equitable relief in aid of arbitration in any court of competent jurisdiction without the necessity of posting a bond, restraining you from continuing to commit any violation of the covenants, and you hereby irrevocably consent to the jurisdiction of the state and federal courts of the State of Delaware, with venue in Wilmington, which shall have jurisdiction to hear and
3
determine any claim for a temporary restraining order, preliminary injunction or other equitable relief brought against you by Delta in aid of arbitration.
(c) Consequences of Breach. Furthermore, you acknowledge that, in partial consideration for the awards described in the Plan and this Agreement, Delta is requiring that you agree to and comply with the terms of Section 2 and you hereby agree that without limiting any of the foregoing, should you violate any of the covenants included in Section 2 above, you will not be entitled to and shall not receive any Awards under the Plan and this Agreement and any outstanding Awards will be forfeited.
(d) Tolling. You further agree that in the event the enforceability of any of the restrictions as set forth in Section 2 of this Agreement are challenged and you are not preliminarily or otherwise enjoined from breaching such restriction(s) pending a final determination of the issues, then, if an arbitrator finds that the challenged restriction(s) is enforceable, the time period set forth in such Section shall be deemed tolled upon the filing of the arbitration or action seeking injunctive or other equitable relief in aid of arbitration, whichever is first in time, until the dispute is finally resolved and all periods of appeal have expired.
(e) Governing Law. Unless governed by federal law, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws of that State.
(f) Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, YOU HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER ARISING OUT OF, UNDER, IN CONNECTION WITH, OR IN ANY WAY RELATED TO THIS AGREEMENT. THIS INCLUDES, WITHOUT LIMITATION, ANY DISPUTE CONCERNING ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN), OR ACTION OF DELTA OR YOU, OR ANY EXERCISE BY DELTA OR YOU OF OUR RESPECTIVE RIGHTS UNDER THIS AGREEMENT OR IN ANY WAY RELATING TO THIS AGREEMENT. YOU FURTHER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR DELTA TO ISSUE AND ACCEPT THIS AGREEMENT.
4. Validity; Severability. In the event that one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal, or unenforceable in any respect, such holding shall not affect any other provisions in this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein. The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.
5. Authority of the Committee. You acknowledge and agree that the Committee has the sole and complete authority and discretion to construe and interpret the terms of the Plan and this Agreement. All determinations of the Committee shall be final and binding for all purposes and upon all persons, including, without limitation, you and the Company, and your heirs and successors. The Committee shall be under no obligation to construe this Agreement or treat the Award in a manner consistent with the treatment provided with respect to other Awards or Participants.
4
6. Amendment. This Agreement may not be amended or modified except by written agreement signed by you and Delta.
7. Acknowledgement. By signing this Agreement: (a) you acknowledge that you have had a full and adequate opportunity to read this Agreement and you agree with every term and provision herein, including without limitation, the terms of Sections 2, 3, 4, and 5; (b) you acknowledge that you have received and had a full and adequate opportunity to read the Plan; (c) you agree, on behalf of yourself and on behalf of any designated beneficiary and your heirs, executors, administrators and personal representatives, to all of the terms and conditions contained in this Agreement and the Plan; and (d) you consent to receive all material regarding any awards under the Plan, including any prospectuses, electronically with an e-mail notification to your work e-mail address.
8. Entire Agreement. This Agreement, together with the Plan (the terms of which are made a part of this Agreement and are incorporated into this Agreement by reference), constitutes the entire agreement between you and Delta with respect to the Award.
9. Acceptance of this Award. If you agree to all of the terms of this Agreement and would like to accept this Award, you must sign and date the Agreement where indicated below and return an original signed version of this Agreement to Mary Steele, either by hand or by mail to Department 936, P.O Box 20706, Atlanta, Georgia 30320. If you have any questions regarding how to accept your Award, please contact Ms. Steele at (404) 715-6333. Delta hereby acknowledges and agrees that its legal obligation to make the Award to you shall become effective when you sign this Agreement.
You and Delta, each intending to be bound legally, agree to the matters set forth above by signing this Agreement, all as of the date set forth below.
DELTA AIR LINES, INC. | |
| |
By: |
/s/ David R. Goode |
|
Name: David Goode Personnel & Compensation Committee of |
|
|
PARTICIPANT |
/s/ Edward H. Bastian |
Ed Bastian
8-29-07 |
Date: |
5
APPENDIX A
The terms of this Appendix A shall apply to the Award set forth in the Delta 2007 Performance Compensation Plan Award Agreement to which this Appendix is attached. Words beginning with a capital letter which are used but not otherwise defined in this Appendix have the meaning set forth in the Agreement or the Plan. For purposes of Appendix A, Ed Bastian is referred to as Participant. This Award will be ignored for purposes of determining whether Participant has suffered a reduction that constitutes Good Reason under subsection 2(p)(v) or 2(p)(vi) of the Plan.
A. |
STOCK OPTION. |
1. Exercise Period. Subject to the terms of the Plan, including Section A of this Appendix A, the Stock Option (a) shall become exercisable with respect to one-third of the Shares on each of the first (the First Option Installment), second (the Second Option Installment) and third (the Third Option Installment) anniversaries of the Grant Date1; and (b) shall be exercisable through and including the day immediately preceding the tenth anniversary of the Grant Date (Expiration Date).
2. Change in Exercisability and Exercise Period upon Termination of Employment. The exercisability of the Option and the exercise period set forth in Section A.1 of this Appendix A is subject to the following terms and conditions:
(a) Without Cause or For Good Reason. Upon Participants Termination of Employment by the Company without Cause or by Participant for Good Reason (including the Termination of Employment of any Participant employed by an Affiliate at the time the Company sells or otherwise divests itself of such Affiliate), the Option shall become fully and immediately exercisable and shall remain exercisable, in whole or in part, during the period: (i) beginning on the date of such termination; and (ii) ending on the earlier of (A) the second anniversary of such termination or (B) the Expiration Date.
(b) Voluntary Resignation. Upon Participants Termination of Employment by reason of a voluntary resignation (other than for Good Reason or Retirement): (i) any portion of the Option that is not exercisable at the time of such termination shall be forfeited; and (ii) any portion of the Option that is exercisable at the time of such termination shall remain exercisable until the earlier of (A) 90 days after such termination or (B) the Expiration Date.
(c) Retirement. Upon Participants Termination of Employment by reason of Retirement, any portion of the Stock Option that is not exercisable at the time of such
_________________________
1 The number of Shares subject to each Option Installment will be equal to the total number of Shares subject to the Option divided by three; provided, that if this formula results in any fractional Share allocation to any Option Installment, the number of Shares in the First Option Installment will be increased so that only full shares are covered by each Installment.
termination shall be exercisable on a pro rata basis (Pro Rata Option Portion), and any portion of the Stock Option that is exercisable at the time of such termination shall be exercisable, during the period: (i) beginning on the date of such termination; and (ii) ending on the earlier of (A) the third anniversary of such termination or (B) the Expiration Date. Upon Participants Termination of Employment by reason of Retirement, any portion of the Stock Option that is not exercisable at the time of such termination, other than the Pro Rata Option Portion, shall be immediately forfeited.
Pro Rata Option Portion means, with respect to any Option Installment that is not exercisable at the time of Participants Termination of Employment by reason of Retirement, the number of Shares covered by such Option Installment multiplied by a fraction (i) the numerator of which is the number of calendar months from the Grant Date to the date of such termination, rounded up for any partial months and (ii) the denominator of which is twelve (12) for the First Option Installment, twentyfour (24) for the Second Option Installment and thirty-six (36) for the Third Option Installment.
(d) Death or Disability. Upon Participants Termination of Employment due to death or Disability, the Option shall become fully and immediately exercisable and shall remain exercisable, in whole or in part, during the period: (i) beginning on the date of such termination; and (ii) ending on the earlier of (A) the third anniversary of such termination or (B) the Expiration Date.
(e) For Cause. Upon Participants Termination of Employment by the Company for Cause, the Option shall be immediately forfeited.
3. Change in Control. Subject to Section D of this Appendix A, upon a Change in Control which occurs prior to Participants Termination of Employment, the Option shall become fully and immediately exercisable and shall remain exercisable, in whole or in part, during the period (i) beginning on the date of such Change in Control; and (ii) ending on the Expiration Date; provided, however, that the unexercised portion of the Option shall be immediately forfeited upon Participants Termination of Employment by the Company for Cause; provided, further, that upon Participants Termination of Employment for any reason other than by the Company for Cause, the period to exercise the Option will end on the earlier of (i) the third anniversary of such termination or (ii) the Expiration Date.
B. |
RESTRICTED STOCK |
1. Restrictions. Until the restrictions imposed by this Section B.1 (the Restrictions) have lapsed pursuant to Section 2, 3, 4, or 5 below, Participant will not be permitted to sell, exchange, assign, transfer, pledge or otherwise dispose of the Restricted Stock and the Restricted Stock will be subject to forfeiture as set forth below.
2. Lapse of Restrictions--Passage of Time. Subject to the terms of the Plan and the Agreement, including Section B of this Appendix A, the Restrictions shall lapse and be of no further force or effect with respect to one-third of the Shares of Restricted Stock six (6) months after the Grant Date (the First RS Installment), with respect to one-third of the Shares of Restricted Stock eighteen (18) months after the Grant Date (the Second RS Installment)and with respect to one-third of the Shares of Restricted Stock thirty (30)
ii
months after the Grant Date(the Third RS Installment).2
3. Accelerated Lapse of Restrictions. If, at any time during the twelve (12) month period commencing on October 30, 2007, the aggregate market value of all outstanding Shares is at least $14,000,000,000 for ten (10) consecutive trading days, as determined by the closing price of the Shares on the New York Stock Exchange, the Restrictions shall lapse and be of no further force or effect on the last day of such twelve (12) month period, provided that Participant has not had a Termination of Employment prior to such day.
4. Lapse of Restrictions/Forfeiture upon Termination of Employment. In addition to the other provisions of the Plan and this Agreement, the Restricted Stock and the Restrictions set forth in Section B of this Appendix A are subject to the following terms and conditions:
(a) Without Cause or For Good Reason. Upon Participants Termination of Employment by the Company without Cause or by Participant for Good Reason, the Restrictions shall immediately lapse and be of no further force or effect as of the date of such termination.
(b) Voluntary Resignation. Upon Participants Termination of Employment by reason of a voluntary resignation (other than for Good Reason or Retirement), any portion of the Restricted Stock subject to the Restrictions shall be forfeited as of the date of such termination.
(c) Retirement. Upon Participants Termination of Employment by reason of Retirement, with respect to any portion of the Restricted Stock subject to the Restrictions, the Restrictions shall immediately lapse on a pro rata basis (Pro Rata RS Portion) as of the date of such termination. Upon Participants Termination of Employment by reason of Retirement, any Restricted Stock that remains subject to the Restrictions, other than the Pro Rata RS Portion, shall be immediately forfeited.
Pro Rata RS Portion means, with respect to any RS Installment that is subject to the Restrictions at the time of Participants Termination of Employment by reason of Retirement, the number of Shares covered by such RS Installment multiplied by a fraction (i) the numerator of which is the number of calendar months from the Emergence Date to the date of such termination, rounded up for any partial months and (ii) the denominator of which is six (6) for the First RS Installment, eighteen (18) for the Second RS Installment and thirty (30) for the Third RS Installment.
(d) Death or Disability. Upon Participants Termination of Employment due to death or Disability, the Restrictions shall immediately lapse and be of no further force or effect as of the date of such termination.
_________________________
2 The number of Shares subject to each RS Installment will be equal to the total number of Shares subject to the Restricted Stock Award divided by three; provided, that if this formula results in any fractional Share allocation to any RS Installment, the number of Shares will be adjusted in the same manner as described in footnote 1 above.
iii
(e) For Cause. Upon Participants Termination of Employment by the Company for Cause, any portion of the Restricted Stock subject to the Restrictions shall be forfeited as of the date of such termination.
5. Change in Control. Subject to Section D of this Appendix A, upon a Change in Control which occurs prior to Participants Termination of Employment, the Restrictions shall immediately lapse on the date of such Change in Control and be of no further force or effect as of such date.
6. Dividends. In the event a cash dividend shall be paid in respect of Shares at a time the Restrictions on the Restricted Stock have not lapsed, Participant shall receive the dividend.
C. |
LONG-TERM PERFORMANCE AWARDS. |
1. Payout Criteria. Except as otherwise expressly set forth in this Appendix A, the actual number of Shares paid, if any, to Participant under the Performance Award will be based on (a) the Companys EBITDAR performance and (b) the occurrence of a contemporaneous annual payout under the Companys broad-based employee Profit Sharing Program (a Profit Sharing Payout), as described below.
2. Annual Vesting Opportunities for 2007 and 2008. Subject to the terms of the Plan and the Agreement, including Section C of this Appendix A, Performance Awards will be subject to the following vesting opportunities in 2007 and 2008.
(a) Calendar Year 2007. If the Company (i) has achieved EBITDAR of at least $2,838,000,000 for the year ending December 31, 2007 and (ii) made a Profit Sharing Payout for 2007, a number of Shares equal to 15% of the Performance Award (rounded up to the nearest whole share) shall vest and be paid.
(b) Calendar Year 2008. If the Company (i) has achieved cumulative EBITDAR of at least $6,295,000,000 for the two year period ending December 31, 2008 and (ii) made a Profit Sharing Payout for 2008, a number of Shares equal to 15% of the Performance Award (rounded up to the nearest whole share) shall vest and be paid.
(c) Condition Precedent. No Performance Awards will vest or be paid under this Section C.2 with respect to any year for which there is no Profit Sharing Payout.
(d) Timing of Payment. The Company will pay Performance Awards that vest under this Section C.2 as soon as practicable after the determination that the payment criteria described in this Section have been met.
3. Vesting Opportunity for 2009; Payment of Vested Shares. Subject to the terms of the Plan and the Agreement, including Section C of this Appendix A, the Performance Award shall vest, as described in this Section 3, as of December 31, 2009, to the extent the Company meets or exceeds the EBITDAR goals described below. If the Company does not meet the Threshold Level, as defined below, any unpaid portion of the Performance Award will lapse and become void as of December 31, 2009.
(a) Threshold Vesting. If the Company has achieved cumulative EBITDAR of $7,433,000,000 (Threshold Level) for the three year period ending December 31,
iv
2009, the Performance Award will vest with respect to a number of Shares equal to (i) 50% of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above. The remaining unvested portion of the Performance Award will lapse and become void.
(b) Target Vesting. If the Company has achieved cumulative EBITDAR of $9,911,000,000 (Target Level) for the three year period ending December 31, 2009, the Performance Award will vest with respect to a number of Shares equal to (ii) 100% of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above.
(c) Maximum Vesting. If the Company has achieved cumulative EBITDAR of at least $11,849,000,000 (Maximum Level) for the three year period ending December 31, 2009, the Performance Award will vest with respect to a number of Shares equal to (i) 150% of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above.
(d) Vesting by Interpolation. If the Company has achieved cumulative EBITDAR for the three year period ending December 31, 2009 which is above the Threshold Level but below the Target Level, or above the Target Level but below the Maximum Level, the Performance Award will vest with respect to a number of Shares equal to (i) the Specified Percentage of the Performance Award, (ii) minus the number of Shares, if any, paid to Participant under Section C.2 above. For purposes of this Section 3(d), the Specified Percentage will be determined by interpolating on a straight line basis as follows: (i) between Threshold Level (at which 50% of the Performance Award vests) and Target Level (at which 100% of the Performance Award vests) if the Companys cumulative EBITDAR for the three year period ending December 31, 2009 is above the Threshold Level and below the Target Level; and (ii) between Target Level (at which 100% of the Performance Award vests) and Maximum Level (at which 150% of the Performance Award vests) if the Companys cumulative EBITDAR for the three year period ending December 31, 2009 is above the Target Level and below the Maximum Level.3
(e) Definition of EBITDAR. EBITDAR means, with respect to any fiscal period of the Company, an amount equal to the consolidated operating income of the Company and its subsidiaries during such fiscal period, determined prior to the charges, costs, and expenses associated with depreciation, amortization, and aircraft rent, based on
_________________________
3 The interpolation calculation is a four step process. The following is the calculation for a cumulative EBITDAR that is between Threshold Level and Target Level:
Step 1: Subtract the cumulative EBITDAR achieved from $9,911,000,000 (Target Level).
Step 2: Divide the total in Step 1 by $2,478,000,000 (the difference between Target Level and Threshold Level).
Step 3: Multiply the result of Step 2 by 50% or 0.50 (the difference between 100% target vesting and 50% threshold vesting). Round up to the nearest thousandth; in other words, 0.456908 would be rounded up to 0.457
Step 4: The fraction resulting from Step 3 is the percentage subtracted from the 100% target vesting level to determine the actual percentage of the Participants Performance Award that will vest.
v
regularly prepared and publicly available statements of operations of the Company, prepared in accordance with generally accepted accounting principals (GAAP); provided, however, that EBITDAR shall be adjusted to exclude the following items, in each case as determined by the Committee, where applicable, in accordance with GAAP and only to the extent to which these items impact the Companys consolidated operating income: (i) all asset write downs related to long term assets; (ii) gains or losses with respect to employee equity securities; (iii) gains or losses incurred as a consequence of fresh start accounting; and (iv) gains or losses with respect to extraordinary, one-time or non-recurring events.
(f) Condition Precedent. No Shares that vested under this Section C.3 will be paid to Participant until there is a Profit Sharing Payout for 2009 or a subsequent year.
(g) Timing of Payment. The Company will pay Participant any Shares that vest under this Section C.3 as soon as practicable after the determination that the payment criteria described in this Section have been met.
4. Accelerated Vesting/Forfeiture upon Termination of Employment. In addition to the other provisions of the Plan and this Agreement, the Performance Award is subject to the following terms and conditions:
(a) Without Cause or For Good Reason. Upon Participants Termination of Employment by the Company without Cause or by Participant for Good Reason (including the Termination of Employment of Participant is employed by an Affiliate at the time the Company sells or otherwise divests itself of such Affiliate), Participant will be entitled to any Shares that become payable under Section C.2 and/or Section C.3 in the same manner and to the same extent as if Participants employment had continued.
(b) Voluntary Resignation. Upon Participants Termination of Employment by reason of a voluntary resignation (other than for Good Reason or Retirement), Participant will immediately forfeit any unpaid portion of the Performance Award as of the date of such termination.
(c) Retirement, Death or Disability. Upon Participants Termination of Employment by reason of Retirement, death or Disability, the number of Shares subject to the target Performance Award as of the date of such termination will be recalculated and will be the result of the following formula (the Adjusted Performance Award): S × (T ÷ E) where,
S = the total number of Shares subject to Participants Performance Award as of the Grant Date;
T = the number of calendar months from the Grant Date to the date of such Termination of Employment (rounded up for any partial month); and
E = the number of calendar months from the Grant Date to December 31, 2009 (rounded up for any partial month).
The Shares subject to the Adjusted Performance Award will become immediately vested
vi
and will be paid as soon as practicable thereafter to Participant or Participants estate, as applicable.
(d) For Cause. Upon Participants Termination of Employment by the Company for Cause, Participant will immediately forfeit any unpaid portion of the Performance Award as of the date of such termination.
5. Change in Control. Subject to Section D of this Appendix A, upon a Change in Control, any Performance Award not previously forfeited under Section 4(b) or Section 4(d), or settled under Section 4(c), shall immediately vest and be paid to Participant as soon as practicable without regard to whether a Profit Sharing Payout has been made. The number of Shares to be paid to Participant in respect of the Performance Award shall be equal to 100% of the number of Shares subject to the Performance Award minus the number of Shares paid, if any, under Section C.2 above to Participant.
D. |
Gross-Up for Certain Taxes. |
1. Gross-Up Payments. In the event that Participant becomes entitled to benefits under the Plan, the Company shall pay to Participant an additional lump sum payment (the Gross-Up Payment), in cash, equal to the amounts, if any, described in sub-section (a), subject to sub-section (b), below:
(a) Subject to sub-section (b) below, if any portion of any payment under the Plan, when taken together with any payment under any other agreement with or plan of the Company (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 Participant shall be entitled under this paragraph to an additional amount such that after payment by Participant of all Participants applicable federal, state and local taxes, including any Excise Tax, imposed upon such additional amount, Participant will retain an amount sufficient to pay the Excise Tax imposed on the Total Payments.
(b) Notwithstanding the provisions of sub-section (a) above, if it shall be determined that Participant would be entitled to a Gross-Up Payment, but that the Total Payments would not be subject to the Excise Tax if the Total Payments were reduced by an amount that is less than 10% of the portion of the Total Payments that would be treated as parachute payments under Section 280G of the Code, then the amounts payable to Participant shall be reduced (but not below zero) to the maximum amount that could be paid to Participant without giving rise to the Excise Tax (the Safe Harbor Cap), and no Gross-Up Payment shall be made to Participant. Such reduction of the amounts payable to the Safe Harbor Cap, if applicable, shall be made by reducing payments comprising the Total Payments in such order as elected by Participant.
The amounts payable under this Section D.1 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 Participants right to benefits under the Plan.
vii
2. Determinations. In the event of a Change in Control, all determinations required to be made under Section D.1 above, including the amount of the Gross-Up Payment, whether a payment is required under Section D.1 above, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the nationally recognized accounting firm generally used by the Company as its financial auditor (the Accounting Firm) which shall provide detailed supporting calculations both to the Company and Participant within twenty business days of the receipt of notice from Participant that there has been an event giving rise to the right to benefits under Section D.1 above, or such earlier 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, Participant 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.
3. Subsequent Redeterminations. Unless requested otherwise by the Company, Participant must use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Participant owes an amount of Excise Tax greater than the amount previously determined under paragraph (a); provided, however, that Participant shall be entitled to reimbursement by the Company of all fees and expenses reasonably incurred by Participant in contesting such determination. In the event the Internal Revenue Service or any court of competent jurisdiction determines that Participant owes an amount of Excise Tax that is either greater or less than the amount previously taken into account and paid under Section D.1, the Company shall promptly pay to Participant, or Participant 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 Participant pursuant to the preceding sentence (a Later Payment), the Company shall also pay to Participant an additional amount such that after payment by Participant of all Participants applicable federal, state and local taxes on such additional amount, Participant will retain an amount sufficient to pay the total of Participants applicable federal, state and local taxes arising due to the Later Payment. In the case of any repayment of Excise Tax that Participant is required to make to the Company pursuant to the second sentence of this Section D.3, Participant shall also repay to the Company the amount of any additional payment received by Participant from the Company in respect of applicable federal, state and local taxes on such repaid Excise Tax, to the extent Participant is entitled to a refund of (or has not yet paid) such federal, state or local taxes.
viii
EXHIBIT 10.4
SEPARATION AGREEMENT AND GENERAL RELEASE
1. Agreement. Delta Air Lines, Inc. (Delta), and James Whitehurst, (I, or me) the undersigned and individual named on the signature page hereto, wish to enter into this Separation Agreement and General Release (Agreement) in order to resolve all outstanding issues and matters of every type between them. I wish to accept the benefits and bear the obligations provided pursuant to this Agreement which partially consist of the benefits that would be provided to me and the obligations that would be born by me as if my separation was a termination by Delta without cause under the Delta Air Lines, Inc. 2007 Officer and Director Severance Plan, (the "Plan"). I acknowledge I have carefully reviewed the provisions of the Plan, as well as the provisions of this Agreement. I believe both the Agreement and the provisions of the Plan are in my best interest and I acknowledge entering into this Agreement voluntarily and without coercion. I further acknowledge and agree that my employment termination date with Delta shall be August 31, 2007, and I shall provide any transition services requested by Delta until such date. I shall also resign from all other positions with Delta subsidiaries and affiliates as of such date.
2. Severance Benefits. In exchange for voluntarily executing and returning this Agreement to Delta, and satisfying all obligations set forth herein and in the Plan, Delta will provide me with the level of benefits provided in the Plan as if my separation was a termination by Delta other than for Cause (as defined in the Plan), (a) subject to the required withholding and payment of all applicable federal, state and local taxes and (b) except as specifically provided in Section 4, with no tax reimbursement by Delta related to any travel privileges or any other benefits provided under the Plan. In addition, Delta will provide me with a payment equal to Five Hundred Ten Thousand Twenty Five Dollars ($510,025) which represents a pro rata share of my MIP award for 2007. In exchange for such benefits, I agree to be bound by the terms and obligations of the Plan as if my separation was a termination by Delta other than for Cause. I acknowledge and agree that Delta will have no obligation to provide me with any benefits in connection with my employment relationship with Delta, or the termination of that relationship, except as described in the Plan or described in this Agreement (other than retirement and equity-based benefits in accordance with the respective terms of any retirement and equity-based plan in which I participated during my employment with Delta as provided in Section 3 below). I specifically acknowledge that as provided in the Plan, payment of certain of my Severance Benefits may be subject to delayed payment pursuant to Section 409A of the Internal Revenue Code of 1986, as determined by Delta.
3. Treatment of Emergence Awards. In addition to the Severance Benefits to be provided pursuant to Section 2 above, Delta and I agree that my rights and obligations with respect to the Emergence Awards granted to me under the Delta Air Lines, Inc. 2007 Performance Compensation Plan, (including Appendix A thereto) (the 2007 Performance Plan), a copy of which is attached hereto as Exhibit 1, and as further described in the Delta 2007 Performance Compensation Plan Award Agreement to me dated April 30, 2007, (the Emergence Award Agreement), a copy of which is attached hereto as Exhibit 2 shall be determined as if my separation was a termination by Delta other than for Cause, (as defined in the 2007 Performance Plan). I agree to be bound by all provisions of the Emergence Award Agreement and the 2007 Performance Plan, except as such provisions may be specifically superseded by this Agreement.
4. Flight Benefits. For a period of fourteen years following my separation date, and subject to all applicable rules and restrictions, Delta will allow me, my spouse and dependent children and other PPR members to be eligible for the same non revenue travel benefits as those provided to active executive officers (and their spouse and dependent children and other PPR members) as modified from time to time, except that: a) any so called gross up allowance will not exceed the amount provided under the program as of my separation date and there shall be no carryover from year to year of the gross up allowance, or no year to year carryover of any other allowance type benefit which may be implemented during such 14 year period; b) such travel must be on the Delta system, and shall not include reciprocal benefits that may be provided on other airlines (except for certain Delta Connection flights); c) Delta may implement any additional change specifically to my benefits even if such change is not applied to other participants in the travel program if Delta determines such changes are required by law or regulation, including Section 409A of the Internal Revenue Code. All bookings for anyone other than my PPR members must occur by my separation date. In addition, I acknowledge and agree that I may not exchange the Flight Benefits for any other benefit or for a payment in cash or kind and that Delta may immediately suspend or terminate the Flight Benefits under this Section 4 if it determines in its reasonable discretion that I have violated any of my obligations under this Agreement or any travel policy. I agree that I have advised Delta that should I receive flight benefits from another source on a comparable or more favorable basis, I will no longer wish to participate in Deltas travel program while receiving such other flight benefits.
5. General Waiver and Release. In exchange for the benefits which Delta is providing under this Agreement and the Plan, I hereby agree as follows:
a. Except for the rights and obligations provided by or arising under this Agreement, the Plan, the Delta Retirement Plan, the Delta Family-Care Savings Plan, the 2007 Performance Plan, any bankruptcy claim I may have as the result of my participation in any Delta sponsored non qualified pension plan or any right I may have to indemnification by Delta, I hereby release, acquit, withdraw, retract and forever discharge any and all claims, or causes of action which I now have or may have hereafter, directly or indirectly, personally or in a representative capacity, against Delta, including its predecessors and successors, and its subsidiaries and affiliates and all of each entitys respective administrators, fiduciaries, parents, subsidiaries, plans, affiliates, officers, directors, shareholders, representatives, agents, employees, and all persons acting through or in connection with Delta (each a "Released Party") by reason of any matter, conduct, claim, event, act, omission, cause or thing whatsoever, from the beginning of time to, and including, the date of execution of this Agreement. This general release includes, but is not limited to, all claims, manner of actions, and causes of action which arise under Title VII of the Civil Rights Act of 1964, as amended; The Age Discrimination in Employment Act of 1967, as amended; The Americans with Disabilities Act; The Rehabilitation Act of 1973, as amended; The Family & Medical Leave Act; The Worker Adjustment and Retraining Notification Act; 42 U.S.C. §§ 1981 through 1988; the Employee Retirement Income Security Act of 1974, as amended, any other federal, state or local statute or ordinance respecting discriminatory hiring or employment practices or civil rights laws based on protected class status; common law claims of intentional or negligent infliction of emotional distress, defamation, negligent hiring, breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel, negligence, or wrongful termination of employment; and all other claims of any type or nature, including any claim in contract or tort, and including any claim for attorneys' fees. I understand and intend that this General Release shall discharge all claims against the Released Parties to the extent permitted by law, but shall not discharge claims arising out of any events which may occur after the date of execution of this Agreement.
2
b. Except as necessary to enforce the terms of this Agreement, I agree that neither I, nor anyone acting on my behalf, will sue any Released Party based on any claim released under this Agreement. In the event that I sue, or anyone acting on my behalf sues, any Released Party based on any claim released under this Agreement, I will hold each Released Party harmless from any claim asserted in such lawsuit and will accept no payment or other benefit as a result of such lawsuit or any settlement thereof.
6. No Admissions. This Agreement is not to be construed in any way as an admission by any of the Released Parties that they have violated any federal, state, or local law, ordinance, regulation, or policy.
7. Acknowledgements. I understand that there may be numerous, valuable rights under federal and state law which I am waiving by executing this Agreement. In connection with this, I hereby acknowledge that:
a. This Agreement and the Plan are written in a manner that is understandable to me, and there shall be no Revocation Period as defined in the Plan;
b. I am receiving valuable consideration under this Agreement to which I would not otherwise be entitled;
c. I have been advised in writing to consult with an attorney prior to executing this Agreement;
d. I understand that this Agreement is a general release of Delta and the other Released Parties from any past or existing claim or potential claim including any claim or potential claim relating to my employment relationship with Delta, and termination of that relationship;
e. I have been given a period of five (5) days in which to consider whether to sign this Agreement and to consult with an attorney, accountant, tax advisor, spouse, or any other person. I have either used this full five (5) day period to consider this Agreement, or have voluntarily chosen to execute this Agreement before the end of that period.
8. Return of Property. I agree that all property belonging to Delta, including records, files, memoranda, reports, personnel information (including benefit files, training records, customer lists, operating procedure manuals, safety manuals, financial statements, price lists and the like), relating to the business of Delta, which I have come in contact with in the course of my employment (hereinafter "Delta's Materials") shall, as between the parties hereto, remain the sole property of Delta. I hereby warrant that I have returned all originals and copies of Delta's Materials to Delta.
9. Cooperation. I agree that I shall, to the extent requested in writing and reasonable under the circumstances, cooperate with and serve in any capacity requested by Delta in any pending or future litigation in which Delta has an interest, and regarding which I, by virtue of my employment with Delta, have knowledge or information relevant to the litigation. I also agree to cooperate with Delta regarding matters and communications concerning my employment and separation. Delta shall reimburse me for reasonable and necessary out-of-pocket expenses that I incur in connection with such cooperation.
3
10. Trade Secrets. I hereby acknowledge that during the term of my employment with Delta, I had access to and acquired knowledge of secret, confidential and proprietary information regarding, Delta and its business that fits within the definition of trade secrets under the law of the State of Georgia, including, without limitation, information regarding Deltas present and future operations, its financial operations, marketing plans and strategies, alliance agreements and relationships, its compensation and incentive programs for employees, and the business methods used by Delta and its employees, and other information which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (each, a Trade Secret). I hereby agree that, for so long as such information remains a Trade Secret as defined by Georgia law, I will hold in a fiduciary capacity for the benefit of Delta and shall not directly or indirectly make use of, on my own behalf or on behalf of others, any Trade Secret, or transmit, reveal or disclose any Trade Secret to any person, concern or entity. Nothing in this Agreement is intended, or shall be construed, to limit the protections of any applicable law protecting trade secrets.
11. Confidential or Proprietary Information. I further agree that I will hold in a fiduciary capacity for the benefit of Delta, and, during the two year period beginning on the date I sign this Agreement (the Effective Date), shall not directly or indirectly use or disclose, any Confidential or Proprietary Information, as defined hereinafter, that I may have acquired (whether or not developed or compiled by me and whether or not I was authorized to have access to such Confidential or Proprietary Information) during the term of, in the course of, or as a result of my employment by Delta. Subject to the provisions set forth below, the term Confidential or Proprietary Information as used in this Agreement means the following secret, confidential and proprietary information of Delta not otherwise included in the definition of Trade Secret: all marketing, alliance, advertising and sales plans and strategies; all pricing information; all financial, advertising and product development plans and strategies; all compensation and incentive programs for employees; all alliance agreements, plans and processes; all plans, strategies, and agreements related to the sale of assets; all third party provider agreements, relationships, and strategies; all business methods and processes used by Delta and its employees; all personally identifiable information regarding Delta employees, contractors and applicants; and all lists of actual or potential customers or suppliers maintained by Delta. The term Confidential and Proprietary Information does not include information that has become generally available to the public by the act of one who has the right to disclose such information. Nothing in this Agreement is intended, or shall be construed, to limit the protections of any applicable law protecting confidential or proprietary information.
12. Employee Non-Solicitation Agreement. During the one-year period following the Effective Date, I will not directly or indirectly (on my own behalf or on behalf of any other person, company, partnership, corporation or other entity), employ or solicit for employment any individual who is a management or professional employee of Delta for employment with any entity or person other than Delta or its subsidiaries or solicit, encourage or induce any such person to terminate their employment with Delta and its subsidiaries. The restrictions set forth in this Section shall be limited to those Company management or professional employees who:
4
(i) were employed by Delta during my employment in a supervisory or administrative job; and (ii) with whom I had material professional contact during my employment with Delta.
13. Non-Competition Agreement. I acknowledge that Delta competes in a worldwide passenger air travel market, and Deltas business plan is increasingly international in scope. Such business plan continues to focus on international air travel as a critical component, but will also continue to provide primarily domestic air travel service. I acknowledge that the airlines listed below are particular competitors to Delta in the domestic or international market, and employment with any of the listed carriers would create more harm to Delta relative to my possible employment or consulting with other air passenger carriers or air cargo carriers. I agree that the restrictions placed on me under this paragraph will not prevent from earning a livelihood, given the large number of worldwide and domestic air carriers not included in the list below. During the one-year period following the Effective Date, I will not on my own behalf or on behalf of any person, firm, partnership, association, corporation or business organization, entity or enterprise, provide the same or substantially similar services as I performed at Delta, as an employee, consultant, partner, or in any other capacity, to any of the following entities, which I hereby acknowledge are all competitors of Delta: AMR Corporation, American Airlines, Inc., Continental Airlines, Inc., Southwest Airlines Co., UAL Corporation, United Air Lines, Inc., US Airways, Inc., Jet Blue Airways, Inc., AirTran Airways, Inc., Virgin America, or Northwest Airlines, Inc. (individually and collectively, the Competitor).
14. Arbitration. I hereby agree that any dispute with respect to the Emergence Awrds shall be submitted for, and settled by, mandatory, final and binding arbitration in accordance with the Commercial Arbitration Rules then prevailing of the American Arbitration Association. Unless an alternative locale is otherwise agreed to in writing by the parties to this Agreement, the arbitration shall be conducted in the City of Wilmington, Delaware. The arbitrator will apply Delaware law to the merits of any dispute or claim, without reference to rules of conflict of law. Any award rendered by the arbitrator shall provide the full remedies available to the parties under the applicable law and shall be final and binding on each of the parties hereto and their heirs, executors, administrators, successors and assigns and judgment may be entered thereon in any court having jurisdiction. I hereby consent to the personal jurisdiction of the state and federal courts located in the State of Delaware for any action or proceeding arising from or relating to any arbitration under this Agreement. The prevailing party in any such arbitration shall be entitled to an award by the arbitrator of all reasonable attorneys fees and expenses incurred in connection with the arbitration. However, Delta will pay all fees associated with the American Arbitration Association and the arbitrator. All parties must initial here for this Section 14 to be effective:
|
JMW |
James Whitehurst |
|
RLK |
Robert Kight, Vice President, Compensation and Benefits Delta Air Lines, Inc. |
No other disputes under this Agreement shall be subject to arbitration.
15. Forum Selection. I hereby acknowledge and agree that the provisions contained in Sections 10, 11, 12, and 13 of this Agreement are reasonably necessary to protect the legitimate business interests of Delta, and that any breach of any of these provisions will result in immediate and irreparable injury to Delta for which monetary damages will not be an adequate remedy. I further acknowledge that if any such provision is breached or threatened to be
5
breached, Delta will be entitled to seek a temporary restraining order, preliminary injunction or other equitable relief in any court of competent jurisdiction without the necessity of posting a bond, restraining me from continuing to commit any violation of the covenants, and I hereby irrevocably consent to the jurisdiction of the state and federal courts of the State of Delaware, with venue in Wilmington, which shall have jurisdiction to hear and determine any claim for a temporary restraining order, preliminary injunction or other equitable relief brought against me by Delta.
16. Consequences of Breach. Furthermore, I acknowledge that, in partial consideration for the payments and benefits described in the Plan and this Agreement, Delta is requiring that I agree to and comply with the terms of Sections 10 through 13 and I hereby agree that without limiting any of the foregoing, should I violate any of the terms of Sections 10 through 13 hereof , after the date of such violation, I: (a) will not be entitled to and shall not receive any benefits or payments under the Plan and this Agreement, and no such payments or benefits scheduled to be provided after such violation shall be provided; and (b) shall repay to Delta all cash compensation I have received under this Agreement.
17. Tolling. I further agree that in the event the enforceability of any of the restrictions as set forth in Sections 11, 12, or 13 of this Agreement are challenged and I am not preliminarily or otherwise enjoined from breaching such restriction(s) pending a final determination of the issues, then, if a court determines that the challenged restriction(s) is enforceable, the time period set forth in such Section(s) shall be deemed tolled upon the filing of the action seeking injunctive or other equitable relief, whichever is first in time, until the dispute is finally resolved and all periods of appeal have expired.
18. Governing Law. Unless governed by federal law, this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws of that State.
19. Waiver of Jury Trial. TO THE MAXIMUM EXTENT PERMITTED BY LAW, I HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER ARISING OUT OF, UNDER, IN CONNECTION WITH, OR IN ANY WAY RELATED TO THIS AGREEMENT. THIS INCLUDES, WITHOUT LIMITATION, ANY DISPUTE CONCERNING ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN), OR ACTION OF DELTA OR ME, OR ANY EXERCISE BY DELTA OR ME OF OUR RESPECTIVE RIGHTS UNDER THIS AGREEMENT OR IN ANY WAY RELATING TO THIS AGREEMENT. I FURTHER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR DELTA TO ISSUE AND ACCEPT THIS AGREEMENT.
20. No Statements. I agree that I will not make any oral or written statement to the news media, in any public forum, or to any business competitive with Delta, concerning any actions or inactions by Delta, or any of its present or former subsidiaries or affiliates or any of its present or former officers, directors or employees, relative to Deltas compliance with any state, federal or local law or rule. I further agree that except as I reasonably deem necessary to enforce this Agreement, I will not make any oral or written statement or take any other action which disparages or criticizes Delta, or any of its present or former subsidiaries or affiliates or any of its present or former officers, directors or employees, including, but not limited to any
6
such statement which damages Deltas good reputation or impairs its normal operations. I further agree that I will not initiate or solicit claims against Delta, or otherwise directly or indirectly encourage or support any claim that has been or in the future is asserted by a third party against Delta. Similarly, except as it reasonably deems necessary to enforce this Agreement, Delta agrees to not make any oral or written statement or take any other action which disparages or criticizes me.
21. Validity; Severability. In the event that one or more of the provisions contained in this Agreement shall for any reason be held invalid, illegal, or unenforceable in any respect, such holding shall not affect any other provisions in this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had never been contained herein. The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect.
22. Entire Agreement. This Agreement sets forth the entire Agreement between me and Delta and supersedes any other written or oral agreement. No representations, statements, or inducements have been made to me concerning this Agreement other than the representations and statements contained and memorialized in this Agreement. I agree that the nature, terms, conditions, and substance of this Agreement are strictly confidential and shall be kept confidential by me and my agents and, except as may be required by law, shall not be disclosed at any time to any other person without the prior written consent of Delta, except as such information becomes public through no act of me.
23. Professional Fees. Delta agrees to pay the actual reasonable attorney fees I incur to negotiate and prepare this Agreement, (including reimbursement for any taxes I may incur as the result of such payment on my behalf), but which payment and reimbursement shall not exceed $10,000 in total.
24. Indemnification. Delta will continue to indemnify me, and cover me under any contract of directors and officers liability insurance, for all acts and omissions occurring through August 31, 2007 to the same extent as I would have been so indemnified had my employment continued.
IN WITNESS WHEREOF, Delta has executed this Agreement on the 27th day of August , 2007, and James Whitehurst has executed this Agreement on the date indicated below.
/s/ James M. Whitehurst
|
(James Whitehurst) |
Date:
/s/ Robert L. Kight
|
Robert L. Kight |
Vice President Compensation and Benefits
|
Delta Air Lines, Inc. |
7
EXHIBIT 10.5
Description of Certain Benefits of Members of the Board of Directors and Executive Officers
Delta provides certain flight benefits to members of its Board of Directors and provides certain benefits to its executive officers. Delta reserves the right to change, amend or terminate these programs, consistent with their terms, at any time for any reason for both active and retired directors and employees.
Flight Benefits: As is common in the airline industry, Delta provides complimentary travel and certain Delta Crown Room privileges for members of the Board of Directors; executive officers; the directors or officers spouse, domestic partner or designated companion; the directors or officer's children and parents; and, to a limited extent, other persons designated by the director or officer. Complimentary travel for such other persons is limited to an aggregate imputed value of $20,000 per year for Deltas directors, Chief Executive Officer and President, and $15,000 per year for Deltas executive vice presidents. Delta reimburses the associated taxes on complimentary travel with an imputed value of up to (1) $25,000 per year for directors, the Chief Executive Officer and the President and (2) $20,000 per year for executive vice presidents. Unused portions of the annual allowances described in the previous two sentences accumulate and may be carried into succeeding years. A director who retires from the Board at or after age 52 with at least 10 years of service as a director, at or after age 68 with at least five years of service as a director, or at his or her mandatory retirement date continues to receive these travel benefits during his or her life, except the director does not receive any additional annual allowances following retirement. An executive officer who retires at or after age 52 with at least 10 years of service, or at or after age 62 with five years of service, continues to receive these travel benefits during his or her life, except the officer does not receive any additional annual allowances following retirement.
Executive Life Insurance: Delta provides life insurance coverage of two times base salary to executive officers through an endorsement split dollar program under which Delta owns the policy. Delta reimburses active participants for taxes associated with the program while the endorsement is in effect. After retirement, death benefit coverage continues for an executive officer who retires at or after age 62 with at least ten years of service. If an executive officer retires prior to age 62 or with less than ten years of service, the participants death benefit is reduced by 3% for each year of age less than 62 and by 10% for each year of service less than ten years. Insurance coverage ceases for executive officers who terminate employment other than as a result of retirement, approved long-term disability or death.
Executive Physicals: Delta requires executive officers to obtain a comprehensive annual physical examination. Delta pays the cost of this required examination and reimburses active participants for associated taxes, if any.
Financial Planning Services: Executive officers are eligible for reimbursement of up to $15,000 per year for tax preparation, legal and financial planning services under Delta's Financial Planning Program if they so choose.
Home Security Services: Delta reimburses executive officers for installation and monthly monitoring of home security systems if they so choose.
Vacation: Deltas standard policy regarding personal time off and paid holidays applies to Deltas executive officers except that they will begin to accrue vacation at the service level currently corresponding to four weeks of vacation.
EXHIBIT 15
October 30, 2007
To the Board of Directors and Shareowners of
Delta Air Lines, Inc.
We are aware of the incorporation by reference in the Registration Statement (Form S-8 No. 333-142424) of Delta Air Lines, Inc. for the registration of shares of its common stock of our reports dated April 26, 2007, August 2, 2007 and October 31, 2007 relating to the unaudited condensed consolidated interim financial statements of Delta Air Lines, Inc. that are included in its Form 10-Q for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007.
/s/ Ernst & Young LLP
EXHIBIT 31.1
I, Richard Anderson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Delta Air Lines, Inc. (Delta) for the quarterly period ended September 30, 2007;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Delta as of, and for, the periods presented in this report;
4. Deltas other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Delta and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Delta, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of Deltas disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in Deltas internal control over financial reporting that occurred during Deltas most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Deltas internal control over financial reporting; and
5. Deltas other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Deltas auditors and the Audit Committee of Deltas Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Deltas ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in Deltas internal control over financial reporting.
Date: October 31, 2007 |
/s/ Richard Anderson |
|
Richard Anderson |
|
Chief Executive Officer |
EXHIBIT 31.2
I, Edward H. Bastian, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Delta Air Lines, Inc. (Delta) for the quarterly period ended September 30, 2007;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Delta as of, and for, the periods presented in this report;
4. Deltas other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Delta and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Delta, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of Deltas disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in Deltas internal control over financial reporting that occurred during Deltas most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Deltas internal control over financial reporting; and
5. Deltas other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Deltas auditors and the Audit Committee of Deltas Board of Directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Deltas ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in Deltas internal control over financial reporting.
Date: October 31, 2007 |
/s/ Edward H. Bastian |
|
Edward H. Bastian |
|
President and Chief Financial Officer |
EXHIBIT 32
October 31, 2007
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
The certifications set forth below are hereby submitted to the Securities and Exchange Commission pursuant to, and solely for the purpose of complying with, Section 1350 of Chapter 63 of Title 18 of the United States Code in connection with the filing on the date hereof with the Securities and Exchange Commission of the Quarterly Report on Form 10-Q of Delta Air Lines, Inc. (Delta) for the quarterly period ended September 30, 2007 (the Report).
Each of the undersigned, the Chief Executive Officer and the President and Chief Financial Officer, respectively, of Delta, hereby certifies that, as of the end of the period covered by the Report:
|
1. |
such Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
|
2. |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta. |
/s/ Richard Anderson |
|
Name: Richard Anderson |
|
Chief Executive Officer |
|
|
|
/s/ Edward H. Bastian |
|
Name: Edward H. Bastian |
|
President and Chief Financial Officer |
|