Exhibit 10.5
SEVERANCE AND RETENTION
AGREEMENT
THIS SEVERANCE AND RETENTION
AGREEMENT (this “ Agreement ”) is made effective
as of August 15, 2008, by and between DPWN Holdings (USA),
Inc., an Ohio corporation (“ DPWN Holdings ”),
and ABX Air, Inc., a Delaware corporation (“ ABX Air
”).
RECITALS
A. DHL Network Operations (USA),
Inc., an Ohio corporation and the successor to Airborne, Inc.
(“ Network Operations ”), and ABX Air are
parties to that certain ACMI Service Agreement, dated as of
August 15, 2003, as amended and supplemented (the “
ACMI Agreement ”), pursuant to which ABX Air provides
certain air transportation services to Network Operations on an
“ACMI” basis ( i.e. , by providing aircraft,
crew, maintenance and insurance) to support Network
Operation’s operations in the U.S. and between the U.S. and
elsewhere in North America or internationally.
B. DHL Express (USA), Inc., an Ohio
corporation and the successor to Airborne, Inc. (“ DHL
Express ”), and ABX Air are parties to that certain Hub
and Line-Haul Services Agreement, dated as of August 15, 2003,
as amended and supplemented (the “ HLA Agreement
”), pursuant to which ABX Air provides DHL Express with
certain hub, line-haul and maintenance services at its sorting
facilities to support DHL Express’s operations in the
U.S.
C. DPWN Holdings is the parent of
Network Operations and DHL Express, which entities shall
hereinafter be collectively referred to as “ DHL
” from time to time.
D. On May 28, 2008, Deutsche
Post World Net announced a plan to restructure its DHL U.S.
business by greatly reducing costs. Among other measures, it is
pursuing a definitive agreement with United Parcel Service Inc.
(“ UPS ”) pursuant to which UPS will provide air
uplift and other services for DHL’s U.S. domestic and
international shipments within North America that is currently
provided by ABX Air, among other providers (such definitive
agreement, the “ UPS Contract ”).
E. Notwithstanding anything to the
contrary in the HLA Agreement and/or the ACMI Agreement,
respectively, each of which remains in full force and effect, the
parties agree to the following terms and conditions in order to
(i) provide for ABX Air’s employees in the event their
employment is terminated in connection with; and
(ii) encourage ABX Air’s employees to remain in the
employ of, and maintain their current level of performance for, ABX
Air as it endeavors to maintain service to DHL arising from;
DHL’s implementation of its US restructuring plan and/or the
UPS Contract.
F. The Parties signed a Term Sheet
on Friday, August 1, 2008, subject to final confirmation and
documentation, the substantive terms of which are intended to be
covered by this document as it relates to all employees of ABX Air
under the ACMI Agreement and HLA Agreement,
respectively.
1
NOW THEREFORE, in consideration of
the foregoing premises, mutual covenants, agreements, terms,
conditions, and consideration herein set forth, the receipt and
sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, hereby agree as follows:
1. DHL hereby agrees to reimburse or
pay to ABX Air the costs associated with the following severance,
retention and productivity bonus arrangements for ABX Air’s
employees performing services under the ACMI Agreement and HLA
Agreement:
(i) DHL hereby agrees to reimburse
the costs incurred by ABX Air for a severance plan effective as of
July 1, 2008, covering its employees (other than pilots, ABX
Air’s senior executive management at the Vice President level
or above, casuals, third party mechanics, temporary or contract
workers, employees at regional hub facilities, and day time sort
employees) that provide services under either the HLA Agreement or
the ACMI Agreement (such employees, the “ Covered
Employees ”). The severance plan shall provide for prompt
payment following the termination without cause (except as provided
for in section 1(vii)(D) below) of any Covered Employee’s
employment by ABX Air for the reasons specified in clauses
(A) through (C) below of a severance amount calculated
based on the following: (A) for Covered Employees terminated
as a result of DHL’s restructuring of its U.S. business, 2
weeks’ base salary for such Covered Employees for the first
full year worked by each such employee, and 1 week’s base
salary for each full year worked thereafter, in each case from his
or her date of hire, to be paid every two weeks until exhausted
(the number of weeks of base salary that a Covered Employee is
eligible for is hereinafter referred to as the “ Severance
Period ”); (B) for Covered Employees, contingent
upon the consummation of the UPS Contract, a retention bonus (the
“ Retention Bonus ”) of 2 weeks’ base
salary for such Covered Employee for every full calendar month
worked after July 1, 2008 and prior to the earlier of
(1) the effective date of any termination of a Covered
Employee arising as a result of the implementation of the UPS
Contract, and (2) the effective date of termination of the HLA
Agreement or the ACMI Agreement, as applicable, with a maximum
payment to each Covered Employee pursuant to this clause
(B) equal to 26 weeks’ base salary to be paid as a lump
sum; and (C) for Covered Employees terminated as a result of
DHL’s restructuring of its U.S. business or the consummation
of the UPS Contract, any and all accrued but unused vacation time
to be paid as a lump sum; provided , however , that
any carryover of vacation not to commence until the date on which
the UPS Contract is consummated (such severance and retention plan,
the “ Non-Pilot Employees Severance and Retention Plan
”). For purposes of calculating average hours worked by a
Covered Employee to determine their weekly pay for severance
purposes, an average of the hours per week worked during the period
of July 1, 2007 through July 1, 2008 is to be used. ABX
Air will provide 60-days advance notice to its employees stationed
in Wilmington, Ohio (ILN) prior to the effective date of severance
and no less than a two-week notice period or pay in lieu thereof
for those employees stationed at other locations.
(ii) DHL hereby agrees to the
adoption of a productivity bonus plan for Covered Employees
(including, for purposes of this Section 1(ii), day time sort
employees) that provides, beginning with the first full calendar
month after July 1, 2008, for a monthly payment, promptly
following the end of each calendar month, of $150 (less any
applicable withholding taxes) for each
2
Covered Employee that has a perfect
work attendance record (excluding any approved vacation time)
during the applicable calendar month (such productivity bonus plan,
the “ Non-Pilot Employees Productivity Bonus Plan
” and, together with the Non-Pilot Employees Severance and
Retention Plan, the “ Non-Pilot Plans ”). If DHL
does not enter into the UPS Contract, the Non-Pilot Employees
Productivity Bonus Plan may be cancelled at the conclusion of the
month that DHL formally notifies ABX Air that the discussions with
UPS have been terminated without the execution of a
contract.
(iii) DHL hereby agrees to reimburse
ABX Air for the same portion of any health insurance COBRA premiums
(the “ HIP Reimbursement Obligation ”) that ABX
Air pays for employed Covered Employees for each Covered Employee
whose employment is terminated as a result of DHL’s
restructuring of its U.S. business or consummation of the UPS
Contract, up to a maximum number of weeks equal to the length of
the applicable Covered Employee’s Severance Period calculated
pursuant to Section (1)(i)(A) above; provided that ABX
Air will not increase, from its practice as of the date hereof, the
portion of any health insurance COBRA premiums, other than normal
annual rate increases, that ABX Air pays for employed Covered
Employees without the prior written agreement of DHL (such
agreement not to be unreasonably withheld or delayed).
(iv) The Parties hereby agree that
any increase in compensation costs directly attributable to the
adoption of the Non-Pilot Plans, the Pilots Plan (as defined in
Section 2 below) or the HIP Reimbursement Obligation shall not
be subject to mark-up nor included in calculating labor cost
increase limitations under the ACMI Agreement or HLA Agreement.
(v) DHL shall reimburse ABX Air, promptly upon receipt of a
separate invoice with respect thereto, for the costs incurred by
ABX Air under the Non-Pilot Plans or in connection with the HIP
Reimbursement Obligation; provided , however , except
as may be otherwise provided herein, DHL’s obligation to
reimburse ABX Air for costs associated with the Retention Bonus are
contingent upon DHL entering into a contract with UPS.
(vi) For certain employees,
identified in Exhibit 1 of this Agreement, the parties agree to pay
the Retention Bonus on a monthly basis rather than the lump sum set
forth in paragraph 1(i)(B) above. DHL shall reimburse ABX Air,
promptly upon receipt of a separate invoice for those costs. These
payments are being made in lieu of the lump sum Retention Bonus and
are not contingent upon the consummation of the UPS Contract. At
the conclusion of the month that DHL formally notifies ABX in
writing that discussions with UPS have been terminated without the
execution of a contract, these payments shall stop.
(vii) For the avoidance of doubt:
(A) the term “Covered Employees” does not include:
any employee of ABX Air who is terminated for reasons other than
those arising from DHL’s restructuring of its U.S. business
and consummation of the UPS Contract, members of ABX Air’s
senior ex
