EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT (the 'Agreement') is made and entered into as of September 1, 1997 between United Air Lines, Inc. ('UA') and UAL Corporation ('UAL') (UA and UAL sometimes collectively referred to as 'United') and Joseph R. O'Gorman residing at P.O. Box 422, Barrington, Illinois 60011 (sometimes referred to as 'Executive'). WHEREAS, Executive has served and is presently serving as Executive Vice President-Fleet Operations and Administration and as a Director of UA and holds various other positions and directorships with subsidiaries and affiliates of UA or UAL (hereinafter collectively referred to as 'Executive Positions'); and WHEREAS, Executive is desirous of pursuing interests outside of United; and WHEREAS, United wishes to facilitate Executive's desires as stated above but also to retain Executive's services on the basis described herein; and WHEREAS, Executive has agreed in this Agreement to provide such services and to release United from any liability arising out of his hire and employment with United and his resignation from his Executive Position; NOW, THEREFORE, it is agreed by and between United and Executive as follows: 1. Resignation; Continued Employment: Executive --------------------------------- hereby resigns from his Executive Positions all effective as of September 1, 1997 (the 'Effective Date'). Thereafter, Executive will continue to be actively employed by United, but he will perform services for United by being 'on call', including testifying on behalf on United, and subject to such assignments consistent with Executive's experience as may be reasonably requested by United's President and reasonably acceptable to Executive. Executive and United hereby agree and affirm that circumstances constituting an event of 'Good Reason' or a termination of employment under the UAL Agreement (as hereinafter defined) have not arisen or are otherwise applicable and that this Agreement shall not constitute such circumstances. The 'UAL Agreement' shall mean, collectively, the 35 page agreement between Executive and UAL dated as of July 1, 1993, and any and all amendments or letters of agreement relating thereto. 2. Time Period of Employment: United agrees to ------------------------- employ Executive and Executive agrees to be employed by United on the basis stated in Paragraph 1 from September 1, 1997 through July 31, 1998, subject to sooner termination pursuant to Paragraph 4 (such period, as it may be shortened pursuant to Paragraph 4, being herein called the 'Term'). 3. Payments and Benefits: A.(i) During the Term, --------------------- United will pay Executive a salary of $28,333 per month. Such payments will be made on the same schedule as actively employed officers of United from time to time, currently the 15th and last day of each month. Any amounts will be prorated for any partial month. Executive will not be entitled to any increase nor subject to any decrease in such salary payments during the Term. (ii) In addition to the payments specified in Paragraph 3.A(i), on March 15, 1998, United will pay Executive a lump sum severance payment of $183,333. (iii) All payments under this Paragraph 3.A will be subject to withholding for taxes and other purposes as required by applicable law. B. Notwithstanding what may be provided to other active employees of United from time to time, the only benefits that Executive shall be entitled to during the Term are as follows, in each case subject to the rules and regulations of United as from time to time are in effect (except as otherwise stated below in this Paragraph 3.B): (i) Free and Reduced Rate Transportation: United shall provide to Executive and his eligibles free and reduced rate transportation of the type granted to actively employed officers in accordance with company regulations as revised from time to time. (ii) United Air Lines, Inc. Management and Salaried Employees' Retirement Plan: Executive shall continue to participate in (i) the Retirement Plan and (ii) The United Air Lines, Inc. Supplemental Retirement Plan in accordance with their terms (hereinafter collectively the 'Retirement Plans'). (iii) Management Medical/Dental: Executive and his eligible dependents shall continue to be covered by the Management Medical/Dental Plan in the same manner as other active employees. (iv) Group Life Insurance: Executive shall continue to be covered by Group Life Insurance including Contributory Life Insurance (if so covered), on the same basis as other active employees, provided the appropriate payroll deductions are authorized and in accordance with the terms of the policies. (v) Officer's Accidental Death and Dismemberment Insurance/Split Dollar Life Insurance: Executive's Officer's Accidental Death and Dismemberment coverage of $250,000 will continue until the termination of this Agreement as provided in Paragraph 4 herein. Executive will have the option of converting up to $100,000 of this coverage to a private policy within 31 days of termination, if Executive so chooses. Executive will continue to be covered by the Officer's Split Dollar Life Insurance until July 31, 2003. The terms of Executive's coverage and option for continuation of the Officer's Split Dollar Life Insurance thereafter will be explained in a separate letter by July 31, 2003. (vi) Disability Income Benefits: Executive, provided he is qualified under the terms of the Plan, and provided he makes such payments as may be required by the Plan Administrator, will be eligible for any disability income benefits from company disability insurance plans. (vii) Stock: Executive shall continue to participate in the UAL, Inc. 1981 Incentive Stock Program (the 'Program') and the 1988 Restricted Stock Plan ('1988 Plan'). Termination of employment pursuant to Paragraph 4 of the Agreement will be a cessation of employment within the meaning of the Program and the 1988 Plan. Nothing in this Agreement will increase or diminish the right of Executive to exercise any stock option that becomes exercisable according to the terms of the Program and the relevant option. Notwithstanding the foregoing, the parties hereby agree that the Non-Qualified Stock Option Agreements with Executive dated as of April 26, 1996 (the 'April 1996 Agreement') and May 20, 1997 (the 'May 1997 Agreement') and the Restricted Stock Agreement with Executive dated May 17, 1995 (the 'May 1995 Agreement') are hereby amended as follows: (a) The unvested options to purchase up to 20,000 shares of UAL common stock that Executive has remaining under the April 1996 Agreement that are scheduled to vest after July 31, 1998 will be forfeited on the Effective Date. (b) The unvested options to purchase up to 11,775 shares of UAL common stock that Executive has remaining under the May 1997 Agreement that are scheduled to vest after July 31, 1998 will be forfeited on the Effective Date. (c) The 12,000 restricted shares of UAL common stock that Executive has under the May 1995 Agreement that are not scheduled to be released from restrictions until after July 31, 1998 will be forfeited on the Effective Date. Executive will not be eligible for any grants made under the Program or the 1988 Plan after the Effective Date. (viii) Other Benefits: Executive will continue to be eligible to participate in the stock purchase plan, 401(k) plan, Flexible Spending Account, and be eligible for payroll savings bonds on the same basis as other active employees. Executive will also be eligible to utilize the Credit Union subject to its rules. (ix) Vacation and Holidays: Executive agrees to forego any unused vacation time existing as of September 1, 1997 and no paid vacation or holiday time will be accrued or taken after September 1, 1997. (x) UAL Stock Ownership Plan: Because, among other matters, Executive is receiving compensation pursuant to this Agreement at a rate greater than that which he had received after the commencement of the UAL Stock Ownership Plan ('ESOP'), all parties acknowledge and agree that Executive will no longer be eligible to participate in the ESOP after August 31, 1997, and as of September 1, 1997 his participation with respect to future accruals of UAL stock shall cease, but he will retain whatever stock or other benefits rights he may have accrued prior to that date, all in accordance with the ESOP's terms and conditions. (xi) Company Owned Car: Executive will be entitled to retain the company owned car provided to him by United. In addition, no later than 31 days following the Effective Date, United will pay off all amounts due under the lease pertaining to the vehicle, and United will cause title in the vehicle to be conveyed to Executive. To the extent there is any imputed income as a result of the conveyance of title or the liquidation of the lease or both, Executive will be deemed to have received such imputed income and United may make withholdings for income taxes and other purposes as required by applicable law. C. Each of the benefits enumerated in Paragraph 3.B. is subject to the practices, rules, and regulations of United, as in effect from time to time. D. For purposes of clarity, if an Incentive Compensation Plan (ICP) award is granted for 1997 performance or thereafter, Executive will not be eligible under the ICP for any award. 4. Termination of Employment Under Agreement: ----------------------------------------- A. Non-Election of Executive: Executive's employment ------------------------- under this Agreement shall terminate and Executive will no longer have the status of an active employee of United and will no longer be entitled to any of the benefits of this Agreement (including the entitlement to the payment and benefits described in Paragraph 3 (other than those required by law and otherwise vested)), on the happening of the earliest of the following events: (i) Executive's death. (ii) Executive's discharge for cause. (iii) Any action or communication by Executive that adversely reflects upon United or the service it provides or any action or communication that causes, induces, or facilitates others to act adversely to United. (iv) 11:59 p.m. on July 31, 1998, at which time he will be deemed to have elected to retire. Notwithstanding such termination, Executive shall continue to be bound by the provisions of Paragraphs 6 through 12 of this Agreement. Discharge for 'cause' shall mean termination upon (a) willful and continued failure by Executive to substantially perform the duties set forth in Paragraph 1 of this Agreement (other than any such failure resulting from Executive's incapacity due to physical or mental illness) after written demand for substantial performance is delivered to Executive by the Board of Directors of UAL Corporation, which demand specifically identifies the manner in which that Board believes Executive has not substantially performed such duties, and reasonable opportunity of Executive to perform, or (b) the willful engaging by Executive in conduct which is demonstrably and materially injurious to United or its subsidiaries or affiliates monetarily or otherwise, or (c) any willful breach by Executive of this Agreement. For purposes of this definition, no act, or failure to act, on Executive's part shall be deemed 'willful' unless done, or omitted to be done, by Executive not in good faith and without the reasonable belief that such action or omission was in the best interest of United or its subsidiaries or affiliate. B. Upon Retirement: If this Agreement and --------------- Executive's employment under it have not otherwise terminated pursuant to Paragraph 4 as of 11:59 p.m. of July 31, 1998, then effective as of that time and day Executive hereby retires from United and Executive will be entitled to the benefits of a retired United officer, as such may be revised from time to time. In addition, United will pay Executive a supplemental retirement benefit computed and paid in accordance with the Retirement Plans ( as defined in Paragraph 3.B.(ii)) but calculating Executive's accrued benefit (the 'Additional Years of Service Credit') as if Executive had been continuously employed by United from June 27, 1966 to the date of Executive's retirement from United. The amount of this supplemental retirement benefit shall be determined without decrement based on age at the time of retirement, so that such benefit will be determined as if Executive actually retired at age 65, regardless of the actual age at which Executive retires. This supplemental retirement benefit shall be offset by the accrued benefit payable to Executive under the Retirement Plans, and shall be paid out of United's general funds pursuant to United's contractual obligation hereunder, but no funds shall be placed in trust or otherwise set aside by United to provide for payments hereunder. Such supplemental retirement benefit shall be payable at the same time and in the same manner as Executive elects to receive his benefits under the Retirement Plans. The Additional Years of Service Credit shall also apply in determining Executive's eligibility for, and the amount of, Executive's other retiree benefits. C. Election of Executive: If, prior to 11:59 p.m. on --------------------- July 31, 1998, Executive elects to terminate his employment for any reason, Executive will receive a one time lump sum payment (subject to withholding for taxes and other purposes as required by applicable laws) in an amount equal to the sum of the remaining monthly salary payments payable under this Agreement between the effective date of Executive's election to terminate his employment under this Agreement and July 31, 1998 plus, if it has not otherwise been paid, the lump sum severance payment specified in paragraph 3. Before Executive's election to terminate under this paragraph can become effective, Executive must have provided United seven (7) days' written notice of his election by registered mail addressed to the President of United at its principal World Headquarters offices. Executive's termination of employment will be as of the seventh (7th) day after receipt by United of such notice, at which time he will no longer have the status of an active employee of United (including the entitlement to benefits described in Paragraph 3). 5. Regulations: During his employment, Executive ----------- will be governed by applicable United regulations, as in effect from time to time. 6. Confidentiality: --------------- A. Executive agrees to keep any proprietary or confidential information concerning United which he has gained through his employment confidential. Executive agrees that money damages could not adequately compensate United in case of a breach or threatened breach of this promise of confidentiality and that, therefore, United would be entitled to injunctive relief upon such breach. Executive understands that it is United's intent to have this promise of confidentiality enforced to its fullest extent. Accordingly, Executive and United agree that, if any portion of this promise of confidentiality is unenforceable, the court should still construe and enforce this promise of confidentiality to the fullest extent permitted by law. B. Executive and United agree to keep the terms of this Agreement, and of his working arrangement, as defined herein, confidential except that the source and amount of his income may be revealed as necessary for implementation and fulfillment of this Agreement, tax, loan purposes and the like and for disclosure to legal counsel to carry out the review of this Agreement in accordance with Paragraph 7. C. During the term of this Agreement, United will not take any action or make any communication that adversely reflects upon Executive or that causes, induces, or facilitates others to act adversely to Executive. 7. Assent and Release: In consideration for the ------------------ payments and benefits provided in this Agreement, Executive hereby voluntarily, knowingly, willingly, irrevocably, and unconditionally releases UA and UAL together with their respective parents, subsidiaries and affiliates, and each of their respective officers, directors, employees, representatives, attorneys and agents, and each of their respective predecessors, successors and assigns (collectively, the 'Releasees') from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, causes of action, rights, costs, losses, debts, and expenses of any nature whatsoever, known or unknown, which against them Executive or his successors or assigns ever had, now have or hereafter can, shall or may have (either directly, indirectly, derivatively or in any other representative capacity) by reason of any matter, fact or cause whatsoever arising from the beginning of time to the date of this Agreement, including without limitation all claims arising under the UAL Agreement, Title VII of the Civil Rights Act of 1964, the federal Age Discrimination in Employment Act of 1967, as amended, and all other federal, state or local laws, rules, regulations, judicial decisions or public policies now or hereafter recognized. This release by Executive of the Releasees also includes, without limitation, all claims arising under each employee pension, employee welfare, and executive compensation plan of United now in effect or hereafter adopted, except for any benefits to be provided to Executive under this Agreement or in the normal course of Executive's employment through the Effective Date. It is agreed that this paragraph shall survive termination of the Agreement. Executive expressly acknowledges and agrees that, by entering into this Agreement, Executive is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended, which have arisen on or before the date of execution of this Agreement. Executive further expressly acknowledges and agrees that: (i) In return for this Agreement, Executive will receive compensation beyond that which he was already entitled to receive before entering into this Agreement; (ii) Executive has been advised by United to consult with an attorney before signing this Agreement; (iii) Executive was given a copy of this Agreement on August 5, 1997, and informed that Executive had twenty-one (21) days within which to consider the Agreement and, if Executive considers this Agreement for fewer than 21 days, then Executive agrees that he has had a reasonable period of time to consider the Agreement; and (iv) Executive was informed that Executive had seven (7) days following the date of execution of the Agreement in which to revoke the Agreement. After seven (7) days this Agreement will become effective, enforceable and irrevocable unless written revocation is received by the undersigned from Executive on or before the close of business on the seventh (7th) day after Executive executed this Agreement. If Executive revokes this Agreement it shall not be effective or enforceable and Executive will not receive the compensation or benefits described in this Agreement. 8. Non-Assignability; Assignment in the Event of --------------------------------------------- Acquisition or Merger: This Agreement and the benefits --------------------- hereunder are not assignable or transferable by Executive; the rights and obligations of United under this Agreement will automatically be deemed to by assigned by United to any corporation or entity into which United may be merged or consolidate. 9. Applicable Law: This Agreement shall be -------------- construed in accordance with the laws of the State of Illinois, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by the laws of the State of Illinois, without regard to principles of conflict of laws. Except for an action seeking injunctive relief under Paragraph 6, any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Each party shall be responsible for its own attorneys fees, costs, and expenses in connection with the arbitration. 10. Paragraph Reference: Any reference to paragraphs ------------------- or subparagraphs shall be references to paragraphs or subparagraphs of this Agreement unless expressly stated otherwise. 11. Severability: If any provision of this Agreement ------------ or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or application in accordance with the essential intent and purpose of this Agreement, and to this end the provisions of this Agreement are declared to be severable. 12. Supersedes Prior Agreement(s): This Agreement ----------------------------- supersedes and voids any prior oral or written agreement relating in any way to Executive's employment with UA or UAL which may have been entered into between the parties hereto including, without limitation the UAL Agreement. Any change to this Agreement after its Effective Date must be in writing and must be executed by UA, UAL, and Executive. Executive hereby expressly waives any and all rights to which he may be entitled under the UAL Agreement. United and Executive, having read and understood this Agreement and, having consulted with others as appropriate, hereby agree to be bound by its terms. IN WITNESS WHEREOF, the parties have executed this Agreement effective as of August 8, 1997 at the World Headquarters of United Air Lines, Inc., 1200 East Algonquin Road, Elk Grove Twp., Illinois 60007. UAL Corporation and United Air Lines, Inc. By: /s/ G. Greenwald /s/ J.R. O'Gorman ---------------- ----------------- Gerald Greenwald Joseph R. O'Gorman Chairman & Chief Executive Officer
Employment Agreement - United Air Lines Inc. and Joseph R. O'Gorman
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