Change in Control Benefits
Gerard Arpey's Change in Control Benefits are valued at $30,112,794.
Change In Control
As described above, if there is a change in control of the Company, the named executive officers are entitled to benefits under our long-term incentive plans, the Non-Qualified Plan and our executive termination benefit agreements.
Under these plans and agreements, a change in control of the Company is deemed to occur if: (a) over a 12-month period, a third party or group acquires beneficial ownership of 30% or more of our common stock, or the members of our Board of Directors (or their approved successors) no longer constitute a majority of the board; or (b) our stockholders approve a complete liquidation or dissolution of the Company. Also, a reorganization, merger or consolidation, or a sale or other disposition of all our assets, is considered a change in control unless (x) our stockholders prior to the transaction hold at least 50% of the voting securities of the successor company, (y) no one person owns more than 30% of the successor company, and (z) the members of the Board of Directors prior to the transaction constitute at least a majority of the board of the successor company. The event must also meet the change in control requirements of Section 409A of the Internal Revenue Code.
Under the terms of our long-term incentive plans and agreements, following a change in control all outstanding stock options and stock appreciation rights become immediately exercisable, all outstanding career equity and deferred shares vest, and all performance shares vest and will be paid at target levels (or 100%) of the original award. The career performance shares granted to Mr. Arpey will also vest and will be paid, subject to a determination by the Compensation Committee that we met the performance criteria in that agreement. Each named executive officer will also receive a payment under the Non-Qualified Plan equal to the present value of the accrued annual retirement benefit to be paid to him or her under that plan.
As described under "Compensation Discussion and Analysis - Post-Employment and Change in Control Benefits," our executive termination benefit agreements have a double trigger. Termination benefits under those agreements are therefore payable to a named executive officer in the event of a change of control only if: (a) within two years following a change in control, we (or a successor) terminate the named executive officer's employment for any reason (other than his or her death, disability, felony conviction or willful misconduct or dishonesty that materially harms our business or reputation); (b) within two years following a change in control, the named executive officer terminates his or her employment for good reason; (c) the named executive officer terminates his or her employment for any reason during the thirty days following the first anniversary of the change in control; or (d) the named executive officer's employment is terminated following the commencement of change in control discussions and the change of control occurs within 180 days after the termination. For Ms. Goren, since she was first elected a senior vice president after 2006, she is only entitled to the termination benefits described above if her employment is terminated under clause (a), (b) or (d). For purposes of these agreements, "good reason" includes any of the following after the change in control: (u) failure to maintain the executive in a substantially equivalent position; (v) a significant adverse change in the nature or scope of his or her position; (w) a reduction in his or her salary or incentive compensation target, or a reduction of his or her benefits; (x) a change in the executive's employment circumstances, such as a change in responsibilities that hinder the executive's ability to perform his or her duties; (y) the successor company breaches the agreement or does not assume our obligations under it; or (z) we relocate our headquarters or require the executive to relocate more than 50 miles from its current location.
Under the executive termination benefit agreements, if there is a change in control and termination of his or her employment in the situations described above, the named executive officer would be entitled to the following additional benefits:
- We would pay a cash payment of three times (or two times in the case of Ms. Goren and Mr. Horton) the sum of his or her annual base salary and the target annual award paid under our incentive compensation plan (or the largest incentive award paid under that plan during the prior three years, if greater)
- For three years following the termination of employment (or two years for Ms. Goren), we would provide all perquisites and benefits provided to him or her prior to the change in control, including health and welfare, insurance and other perquisites and benefits described above
- We would provide a one-time reimbursement for relocation expenses and outplacement services
- We would provide the named executive officer, his or her spouse or companion and any dependent children unlimited personal air travel on American Airlines or American Eagle Airlines in any available class of service until age 55. At age 55, we would provide the air travel perquisite we provided during their employment.
- Except for Ms. Goren, we would reimburse the named executive officer for any excise taxes payable under Sections 280G and 4999 of the Internal Revenue Code as a result and any federal income, employment or excise taxes payable on the excise tax reimbursement
- We would treat the named executive officer as fully vested in his or her currently accrued benefits under the Retirement Benefit Plan and the Non-Qualified Plan. We would calculate benefits under the plans as though his or her compensation rate equaled the sum of his or her base pay and incentive pay and credit the executive with three additional years of service
- We would pay the named executive officer's legal fees if there was a disagreement related to the agreement, and we would establish a trust to assure payment
The following table lists the estimated payments and values that would have been due to each named executive officer had a change in control occurred on December 31, 2010 and the named executive officer's employment was terminated on that date.
| Name | Cash Severance ($) |
Value of Stock Option/Stock Appreciation Rights Vesting ($) |
Value of Vesting of Non- Performance- Based Stock Awards ($) |
Value of Vesting of Performance- Based Stock Awards ($) |
Value of Additional Pension Benefits ($) |
Outplacement, Relocation and Continuing Perquisites and Benefits ($) |
Air Travel ($) |
Gross-up Payment for 280G Excise Taxes ($) |
Total Change in Control Benefits ($) |
| Arpey | 4,821,453 | 1,217,996 | 5,613,007 | 6,668,240 | 5,003,520 | 468,381 | 0 | 6,320,197 | 30,112,794 |
| Goren | 1,563,097 | 277,240 | 1,321,807 | 733,039 | 2,440,132 | 365,866 | 623 | 0 | 6,701,804 |
| Horton | 2,637,692 | 497,644 | 2,139,913 | 1,422,454 | 4,907,861 | 437,895 | 0 | 3,850,457 | 15,893,916 |
| Garton | 2,353,796 | 471,091 | 2,952,885 | 1,863,758 | 1,848,416 | 425,005 | 0 | 2,327,486 | 12,242,437 |
| Reding | 3,310,186 | 471,091 | 1,867,653 | 1,863,758 | 2,816,471 | 377,462 | 0 | 2,699,317 | 13,405,938 |
| Kennedy | 2,740,500 | 277,240 | 1,487,968 | 733,039 | 2,629,297 | 422,827 | 0 | 2,533,662 | 10,824,533 |
