FORM OF CHANGE IN CONTROL AGREEMENT EXECUTED IN AUGUST 2003 WITH THE COMPANY’S CHIEF EXECUTIVE OFFICER AND THE NEXT FOUR MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS

 

 

[Date]                        

 

[Name]

c/o ABX Air, Inc.

145 Hunter Drive

Wilmington, Ohio 45177

 

Dear [Name]:

 

ABX Air, Inc., a Delaware corporation (the “Company”), and the Board of Directors of the Company (the “Board”) are not necessarily opposed to any merger proposal or acquisition attempt by third parties. We recognize, and insist that our executives recognize, that in such matters our responsibility is to serve the best interests of our shareholders in maximizing the worth and potential of their investment. However, the Company, as a publicly held corporation, must be aware that insofar as it may be the subject of acquisition attempts, such attempts do raise the possibility of a change in control of the Company. It further recognizes that such a possibility can breed uncertainties as to the continued tenure and fair treatment of key executives regardless of their value to the Company and their individual merit. The Company is concerned that the possibility of acquisition attempts and a change in control can have an adverse effect on its retention of key management personnel, and that such acquisition attempts can make it difficult for such personnel to function most effectively in the best interests of the Company and its shareholders. In light of these concerns, the Board has determined that it is appropriate to offer additional security to certain key management personnel to better enable them to function effectively without distraction in the event that uncertainties as to the future control of the Company should arise.

 

Therefore, to induce you to remain in the employ of the Company and to encourage a high level of effective management in the best interests of the Company and its shareholders, this letter agreement sets forth certain benefits which the Company agrees will be provided to you if your employment with the Company should be terminated other than for cause, or by death, disability or normal retirement, subsequent to a “change in control” of the Company as defined and set forth in this Agreement. As the purpose of this Agreement is to provide you with stability of job tenure without being discriminated against because of activities on behalf of the Company and its shareholders in the face of a possible “change in control” or in the alternative to provide you with certain defined severance benefits in the face of termination without cause or upon discriminatory treatment after a “change in control,” the provisions of this Agreement with regard to benefits shall not apply unless and until a “change in control” occurs. Further, the benefits set forth in Section 7 of this Agreement will not be provided if you cease to be in the Company’s employ, even after a “change in control” and during the term of this Agreement, because of death, normal retirement, disability, “for cause,” or because of voluntary termination by you without “good reason” as they are defined herein.

 

1. Term. This Agreement will at all times have a four-year term. At such time as either you or the Company give written notice to the other party that this Agreement is to be terminated (such notice on your part to have no force or effect unless given by you no later than four years after a “change in control”), then this Agreement will expire four years from receipt of the notice. In any event, this Agreement will terminate at your normal retirement date. For purposes of this Agreement, your normal retirement date shall be the first day of the month following the month in which you attain age 65.

 

2. Change in Control. For the purposes of invoking your benefits under this Agreement, a “change in control” shall mean the occurrence of any one of the following actions or events:

 

 

(a)

The acquisition by any person of the power, directly or indirectly, to exercise a controlling influence over the management or policies of the Company (either alone or pursuant to an arrangement or understanding with one or more other persons), whether through ownership of voting securities, through one or more intermediaries, by contract, by way of a reorganization, merger or consolidation, or otherwise; or

 

 

(b)

The acquisition by a person who is not a U.S. citizen (either alone or pursuant to an arrangement or understanding with one or more other persons) of the ownership of or power to vote 25% or more of the outstanding voting securities of the Company; or

 

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(c)

The acquisition by a person who is a U.S. citizen (either alone or pursuant to an arrangement or understanding with one or more other persons) of the ownership of or power to vote 35% or more of the outstanding voting securities of the Company, provided that no change in control shall be deemed to occur under this subsection (c) if less than 50% of the outstanding voting securities of the Company are acquired and such acquisition has been approved by the Board; or

 

 

(d)

If during a period of six years after the acquisition by any person, directly or indirectly, of the ownership of or power to vote 10% or more of the outstanding voting securities of the Company, the individuals who prior to such acquisition were Directors of the Company (“Prior Directors”) shall cease to constitute a majority of the Board, unless the nomination of each new Director was approved by a vote of a majority of the Prior Directors; or

 

 

(e)

The Company is liquidated; all or substantially all of the Company’s assets are sold in one or a series of related transactions; or

 

 

(f)

The Company is merged, consolidated, or reorganized with or involving any other corporation, other than a merger, consolidation, or reorganization (a “transaction”) that results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such transaction.

 

The term “person” for purposes of this paragraph shall include a natural person, corporation, partnership, association, joint-stock company, trust fund, or organized group of persons.

 

3. Death, Retirement and Disability. In the event of your death, normal retirement, disability or voluntary termination without good reason during the term hereof and following a “change in control,” the Company shall pay you your then current full base salary plus vacation and any other compensation actually accrued through the date of termination, and the Company shall have no further obligation to you except that you or your estate will be entitled to receive those applicable benefits under any plans, programs and policies in effect with regard to the executives or salaried employees of the Company. For purposes of this Agreement, normal retirement and disability are defined as follows:

 

 

(a)

Normal Retirement: For purposes of this Agreement, termination by the Company or you of your employment based on normal retirement shall mean termination at age 65 or such earlier or later age set in accordance with the retirement policy then generally in effect with regard to the Company’s salaried employees which is not discriminatory as to you. Normal retirement shall also include retirement in accordance with any early or deferred retirement age or date established with your consent.

 

 

(b)

Disability: Disability as grounds for termination shall mean physical or mental illness resulting in your absence from your duties with the Company on a full time basis for 365 consecutive days following the exhaustion of all current and accrued sick leave and vacation (as provided by Company policy to all salaried employees on a nondiscriminatory basis). If within thirty (30) days after written notice of proposed termination for disability is given by the Company, you have not returned to the full time performance of your duties, the Company may terminate your employment by giving written Notice of Termination for “Disability.”

 

4. Other Termination Following a Change in Control. If a “change in control” occurs and you are subsequently terminated as an employee by the Company during the term of this Agreement (except for normal retirement, disability or for cause as hereinafter defined) or if you terminate your employment for good reason, as hereinafter defined, you will be entitled to receive the benefits set forth in Section 7 hereof. In addition, and notwithstanding any other provision of this Agreement to the contrary, the benefits set forth in Section 7 shall be payable to you if a “change in control” occurs and you were terminated as an employee by the Company prior to the date on which a change in control occurs, and it is reasonably demonstrated by you that such termination of employment (i) was at the request of a third party who was taking steps reasonably calculated to effect the change in control or (ii) otherwise arose in connection with, or in anticipation of, the change in control, provided that no benefits under Section 4 or 7 are payable if termination is for normal retirement, disability or for cause, as hereinafter defined, or if you voluntarily terminate.

 

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5. Cause. After a “change in control,” the Company may terminate your employment for “cause” without liability under the benefit provisions hereof only upon:

 

 

(a)

The willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or

 

 

(b)

The willful engaging by you in gross misconduct demonstrably injurious to the Company.

 

For the purpose of this Section 5, no act, or failure to act, on your part shall be considered “willful” if done, or omitted to be done, by you in good faith and in the reasonable belief that your act or omission was in the best interests of the Company. You shall not be deemed to have been terminated for cause unless and until you receive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth in clauses (a) or (b) of the first sentence of this Section 5 and specifying the particulars thereof.

 

If your employment is terminated for cause, the Company shall pay you your then current full base salary plus vacation and any other compensation actually accrued through the date of termination, and the Company shall have no further obligation to you except that you or your estate will be entitled to receive applicable benefits under any plans, programs or policies in effect with regard to executive or salaried employees of the Company.

 

6. Good Reason. You may regard your employment as constructively terminated by the Company, and yourself terminate your employment for “good reason” following a “change in control” and during the term hereof, receiving the benefits set forth in Section 7, upon the happening of one or more of the following events which will constitute good reason for your own termination of your employment:

 

 

(a)

Without your express written consent, the assignment to you of any duties not customarily performed by senior executives of the Company or inconsistent with your position as senior executive prior to a “change in control,” or the failure of the Company to maintain you in senior executive position; or to provide you with the normal perquisites of a senior executive of the Company, including but not limited to an office and appropriate support services or any other action by the Company which results in a diminution in your position, authority, duties or responsibilities as they existed immediately prior to the “change in control,” excluding, however, an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by you.

 

 

(b)

A reduction by the Company in your base salary as in effect prior to a “change in control” unless such reduction is applied to all officers of the Company (including any parent or successor of the Company) and does not exceed the average percentage reduction in base salary for all officers of the Company, with a maximum permissible reduction of 25%, or the failure by the Company to increase such base salary each year following a “change in control” by an amount which equals at least one-half ( 1/2), on a percentage basis, the average percentage increase in base salary for all officers of the Company or any parent or successor of the Company during the prior two full calendar years;

 

 

(c)

A failure by the Company to maintain any of the employee benefits to which you are entitled prior to a “change in control” at a level equal to or greater than that in effect prior to a “change in control,” through the continuation of the same or substantially similar plans, programs and policies, or the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any such plans, programs or policies or deprive you of any fringe benefits enjoyed by you prior to a “change in control,” unless such a reduction in benefits is nondiscriminatory as to you and is applied generally.

 

 

(d)

The failure by the Company to provide you with the number of paid vacation days to which you would be entitled as a salaried employee of the Company, its subsidiaries or affiliates, or any parent or successor of the Company on a nondiscriminatory basis.

 

 

(e)

The Company’s requiring you to be based anywhere other than your current location (or within 25 miles thereof) except for required travel on the Company’s business to an extent substantially consistent with your present business travel obligations; or the relocation of your offices outside of their current location (or within 25 miles thereof) without your consent.

 

 

(f)

Any purported termination of your employment by the Company which is not effected pursuant to the notice of termination and procedures required by the specific provision relied upon (i.e., Disability, or Cause), or normal retirement as defined in Section 3 hereof, or any purported termination for which the grounds relied upon are not valid.

 

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Upon the happening of one or more of these events, should you choose to regard your employment as constructively terminated, delivery of a written notice of termination setting forth the “good reason” therefor will entitle you to the benefits as set forth in Section 7 hereof.

 

7. Compensation Upon Termination Without Cause or Termination for Good Reason. If (1) after a “change in control” and during the term hereof or prior to a “change in control” if the conditions set forth in the last sentence of Section 4 are met, you are terminated by the Company other than by reason of normal retirement, disability or for cause under the definitions and procedures as set forth herein, or (2) after a “change in control” and during the term hereof, you choose to terminate your employment for “good reason” as set forth herein, then the Company shall pay to you the following amounts:

 

 

(a)

Your full base salary through the date of any Notice of Termination plus payment for all accrued vacation, and any incentive and deferred compensation to which you are entitled for the year most recently ended and the pro rata share of any such compensation which would be due in the year of termination, up to the date of termination, to the extent not already paid; plus

 

 

(b)

An amount equal to:

 

(i) The sum of A and B, multiplied by the number set forth in paragraph (b)(ii) below, where

 

A is the highest of the following: (1) your annual base salary at the rate in effect as of your termination, (2) your annual base salary at the highest rate in effect during the two-year period prior to the date of termination, and (3) [current base salary], and

 

B is the amount of any additional compensation, including any sums awarded under any incentive compensation plan or plans, awarded you for the year most recently ended, whether or not fully paid, or, if higher, such additional compensation for the year in which your termination occurred, determined in accordance with the following principles: the additional compensation under any incentive compensation plans for the year in which your termination occurred shall be (1) for the period up until the end of the most recent quarter-end prior to termination, a pro rata amount of the annual award that would have been made assuming (i) to the extent such award is based on an objective performance measure, the actual performance for that period, expressed as a percentage of target for that measure during the period, continued the entire year, and (ii) to the extent the award is based on other factors or if the target performance was not established prior to the applicable quarter-end, the award shall be made by assuming performance for the year equaled the weighted average of percentages of target performance achieved for the objective measures for such period, and (2) for the remaining period, a pro rata amount of the annual award that would have been made assuming performance for each measure for the year equaled the target. 1 The additional compensation for such year under any replacement or successor to such plans shall be based on comparable principles. Notwithstanding the foregoing, in no event shall B be less than [bonus amount received under Management Incentive Compensation Program for Calendar Year 2002, if applicable].

 

(ii) The number [“3” if President and Chief Executive Officer; “2” if Senior Vice President or Vice President]. If your normal retirement date is less than three (3) years from your termination date, then the multiplier shall be that fraction remaining until your normal retirement date rounded to the nearest tenth (i.e., 18 months equals 1.5, 8 months equals .7).

 

(iii) With regard to the Company’s Profit Sharing Plan and Retirement Income Plan, the Company shall pay a lump sum equal to the amount forfeited by you, if any, under such plan which would have vested if your employment had continued for the remaining term of this Agreement.


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By way of example, assume a change in control and termination in the middle of the third quarter. Assume also that for the first two quarters, the Company made 104% of the profit target (with a 60% weight) and 96% of the revenue target (with a 20% weight); there is also a 20% weighted non-objective factor. The award for the year would be the sum of (1) 50% of the annual award that would be made if the Company made 104% of profit target for the year, 96% of the revenue target and 102% of target for the other factor (102% equals the weighted average of the 104% and 96% performances) plus (2) 50% of the annual award that would be made if all measures were at 100% of target for the year.

 

2

DHL’s approval rights include approval over the dollar amounts to be included in Section 3 of this Agreement. DHL is currently reviewing data provided by ABX.

 

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(iv) For the remaining term of this Agreement prior to your normal retirement date, the Company shall pay your health insurance premiums, provided you have elected COBRA continuation coverage, and at the end of such continuation coverage period it shall at its option either arrange for you to receive health benefits substantially similar to those which you were receiving immediately prior to termination of the coverage period, or pay to you an amount equal to the premiums the Company would pay on your behalf for participation in such health plan or plans for the remaining term of this Agreement prior to your normal retirement date.

 

(v) The Company shall maintain in full force and effect at its expense, for the remaining term of this Agreement prior to your normal retirement date, all other employee benefit plans, programs and policies (including any life or health insurance plans) in which you were entitled to participate immediately prior to your termination, provided that your continued participation is possible under the general terms and provisions of such plans, programs and policies. In the event that your participation in any such plan, program or policy is not possible under its terms and conditions, the Company shall arrange to provide you with benefits substantially similar to those which you would have been entitled to receive under each plan, program or policy. At the end of the period of coverage, you will have the option to have assigned to you at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating to you and to take advantage of any conversion privileges pertinent to the benefits available under Company policies.

 

(vi) In addition to the payment of any benefits to which you are entitled under the Supplemental Executive Retirement Plan (“SERP”) and qualified retirement plans maintained by the Company in which you are a participant on the date of your termination, the Company shall pay you in cash at the time specified in Section 8, an amount equal to the sum of the following: (a) the difference between the actuarial equivalent of the amount which you are entitled to receive, if any, under the SERP and the amount which you would have received from the SERP if you had continued in the employ of the Company for an additional three years. If your normal retirement date would occur during that three-year period, then the amount of such additional compensation shall be calculated on the basis that your employment continued to that date. For the purposes of the calculation of benefits under the SERP, the “actuarial equivalent” shall be determined by using the interest rate specified in such plan for lump sum calculations and assuming your survival to age 80, and (b) the difference between the actuarial equivalent of the amount which you are entitled to receive, if any, under the Retirement Income Plan and the amount which you would have received from such plan if you had continued in the employ of the Company for an additional three years (each amount to be determined as if paid at the end of such three year period). If your normal retirement date would occur during that three-year period, then the amount of such additional compensation shall be calculated on the basis that your employment continued to that date. For the purposes of the calculation of benefits under the Retirement Income Plan, the “actuarial equivalent” shall be determined by using the interest rate specified in such plan for lump sum calculations and assuming your survival to age 80. For purposes of this paragraph, the benefit you would have received from the SERP and Retirement Income Plan if you continued to be employed for three years shall be made based on the terms of such plan at the time of the change in control, unless the plan has been amended to provide (or replaced with a new plan that provides) a larger benefit, in which case the new terms shall apply.

 

(vii) Notwithstanding any other provisions of this Agreement, if any severance benefits under Section 7 of this Agreement, together with any other Parachute Payments (as defined under Internal Revenue Code Section 280(G)(b)(2)) made by the Company to you, if any, are characterized as Excess Parachute Payments (as defined in Internal Revenue Code, Section 280(G)(b)(1)), then the Company shall pay to you, in addition to the payments to be received under this Agreement, an amount such that, after payment by you of all taxes, including federal and state income taxes and additional excise taxes imposed by Section 4999 of the Code on this additional payment, you retain an amount equal to the excise taxes imposed by Section 4999 of the Code on your Excess Parachute Payments.

 

8. Payments and Disputes. For purposes of this Agreement, your date of termination will be the date written notice of termination is given by the Company to you. If termination is under circumstances invoking the benefits of Section 7, then the sums specified therein will be paid no more than ten (10) working days after the date of termination (if the last sentence of Section 4 applies, 10 working days after the “change in control”). However, the portion of the payment based upon the amounts payable under any incentive compensation plans, Profit Sharing Plan, Retirement Income Plan and the SERP shall be paid no later than the later of the date set forth in the preceding sentence or ten (10) working days after the amount payable under such particular plan has been determined following availability of results necessary for computation of such amount.

 

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In the event that the Company wishes to contest or dispute a termination for “good reason” by you, it must give written notice of such dispute within the five day period after the date of termination. If you wish to contest or dispute a termination by the Company, or any failure to make payments claimed to be due hereunder, you must give written notice of such dispute within thirty days of receiving a notice of termination (if the last sentence of Section 4 applies, within thirty days after the “change in control”). In the event of a dispute, the Company shall continue to pay your full base salary and continue all your employee benefits in force until final resolution of any such dispute by mutual agreement or the final judgment, decree or order of a court of competent jurisdiction (including any appeals, if such are perfected). You may, at your or the Company’s option, be suspended from all duties during the pendency of such a contest or dispute. If you prevail in any such contest or dispute, the Company shall thereupon be liable for the full amounts due under Section 7 as of the date of termination after adjustments for amounts already paid.

 

The Company will pay all fees and expenses, including full attorneys’ fees, incurred by you in good faith in contesting or disputing any termination after a “change in control” or in seeking to obtain or enforce any right or benefit provided by this Agreement.

 

In the event that any payments due hereunder shall be delayed for any reason beyond the date set forth in the first paragraph of this Section 8, the amounts due shall bear simple interest at the rate of eighteen percent (18%) per annum until paid.

 

Notwithstanding the provisions as to time of payment as above set forth, you may at your sole option elect to have some or all of such amounts due you deferred to a date or dates of your choosing over a period not to exceed three years, in which event the unpaid balances shall not bear interest during the deferred period elected by you.

 

9. Mitigation. You shall not be required to mitigate the amount of any payment due under Section 7 by seeking other employment. If you should accept a position with another employer after your date of termination and during the period of provision of benefits under Section 7, then the Company shall have no further liability for the provision of benefits or further payments under Section 7(b)(iv) and (v).

 

10. Covenant for Confidentiality and Not to Compete.

 

You agree that as an executive of the Company, with important responsibilities for and knowledge of its operations, your services are a valuable asset to the Company and that you have access to business information of material importance to the Company. Therefore, to protect the Company’s interest in you and in the integrity and success of its operations, you agree that during the term of this Agreement while employed by the Company you will keep all Company information (excluding publicly available information) confidential and will not enter into the employment of, or invest in or contribute to, participate in the activities of, or act as consultant to or advise any enterprise in whatever form organized and carried on which is directly competitive with any business activity then conducted or planned by the Company, provided, however, that you may make investments in publicly traded securities of any issuer if the securities owned represent less than 1% of the class of such securities of such issuer then issued and outstanding. You further agree that for a period of one year following the termination of your employment with the Company you will continue to keep all Company information (excluding publicly available information) confidential and that, unless you are entitled to, or received, the benefits set forth in Section 7, you will not enter into the employment in an executive or consultant capacity or serve on the Board of Directors of any enterprise in whatever form organized and carried on which is directly competitive with any business activity then conducted by the Company within the continental United States.

 

11. Successors; Binding Agreement.

 

 

(a)

This Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. As used herein, “Company” shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid.

 

 

(b)

This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amounts are still payable to you hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be not such designee, to your estate.

 

12. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chief Executive Officer of the Company or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

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13. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and the Chief Executive Officer of the Company or such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach of, or lack of compliance with, any conditions or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

 

No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

 

This Agreement supercedes any prior agreement between the Company and you with respect to the matters set forth herein.

 

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Ohio.

 

14. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

15. Counterparts. This Agreement is to be executed in counterparts, each of which shall be deemed to be an original.

 

If this letter correctly sets forth our agreements, sign and return to the Company the enclosed copy of this letter, retaining your copy for your files.

 

ABX AIR, INC.

 

 

By

 

 


Its

 

 


 


Employee

 

 

 

FORM OF RETENTION BONUS AGREEMENT EXECUTED IN AUGUST 2003 WITH THE COMPANY’S CHIEF EXECUTIVE OFFICER AND THE NEXT FOUR MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS

 

 

ABX AIR, INC

 

RETENTION BONUS AGREEMENT

 

This Retention Bonus Agreement (“Agreement”) is entered into as of August     , 2003 by and between ABX Air, Inc., a Delaware corporation, (the “Company”) and              (“Executive”).

 

WHEREAS, Executive is currently a valued key executive of the Company;

 

WHEREAS, the Company’s parent corporation, Airborne, Inc., a Delaware corporation (“Airborne”) and DHL Worldwide Express, B.V., a company organized and existing under the laws of the Netherlands (“DHL”) have entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which a subsidiary of DHL will merge with and into Airborne (the “Merger”), provided that certain conditions precedent to the Merger set forth in the Merger Agreement are satisfied;

 

WHEREAS, in connection with the Merger Agreement, the Company, Airborne and Wilmington Air Park LLC, a Delaware limited liability company, wholly-owned by the Company, have entered into a Master Separation Agreement (the “Separation Agreement”), pursuant to which, among other things, Airborne will distribute the shares of the Company to its shareholders (the “Spin-Off”), as a result of which the Company will become a separate public company;

 

WHEREAS, in connection with the Merger and the Spin-Off, the Company and Airborne have entered into an Employee Matters Agreement (the “Employee Matters Agreement”);

 

WHEREAS, Executive, the Company and Airborne previously entered into a letter agreement dated              (the “Prior Letter Agreement”) that provides for certain payments and other benefits in the event of certain terminations of Executive’s employment with Airborne and its subsidiaries and affiliates in connection with or following a change in control of Airborne and if other conditions described in the Prior Letter Agreement are met;

 

WHEREAS, pursuant to the Employee Matters Agreement, the Company and Airborne agreed to ask Executive to accept a retention bonus arrangement as a substitute for any and all payments and other benefits under the Prior Letter Agreement and to release the Company, Airborne and their respective subsidiaries and affiliates of any and all liabilities and obligations under the Prior Letter Agreement, subject to DHL’s advance review and approval of the terms of such substitute arrangement;

 

WHEREAS, [DHL has reviewed and approved the terms of the substitute retention bonus arrangement as set forth in this Agreement]; and2

 

WHEREAS, Executive has agreed to accept the substitute retention bonus arrangement as set forth herein in lieu of the payment of any amounts and other benefits under the Prior Letter Agreement.

 

NOW, THEREFORE, in consideration of Executive’s continued employment with the Company, in consideration of the covenants and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. Definitions. The following terms when used in this Agreement with the first letter capitalized, shall have the meanings set forth below.

 

(a) “Beneficiary” shall mean the person or entity designated or deemed designated by Executive pursuant to Section 15 of this Agreement.

 

(b) “Board” shall mean the Board of Directors of the Company.

 

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(c) “Cause” shall mean, after the Spin Off:

 

(i) Executive’s continued failure to substantially perform Executive’s duties to the Company (other than any such failure resulting from total or partial incapacity due to Executive’s physical or mental illness) unless Executive corrects such failure within 10 calendar days following written notice by the Company to Executive specifically identifying the manner in which the Company believes Executive has failed to substantially perform;

 

(ii) dishonesty in the performance of Executive’s duties to the Company;

 

(iii) Executive’s willful malfeasance or willful misconduct in connection with Executive’s duties to the Company or any act or omission which is injurious to the financial condition or business reputation of the Company; or

 

(iv) Executive’s conviction of, or plea of nolo contendere to, a crime constituting (A) a felony under the laws of the United States or any state thereof, or (B) a misdemeanor involving moral turpitude.

 

For purposes of this Section 1(c), no act, or failure to act, shall be considered “willful” if the Board concludes that it was done, or omitted to be done, by Executive in good faith and in the reasonable belief that Executive’s act or omission was in the best interests of the Company.

 

(d) “Disability” shall mean physical or mental illness that renders Executive incapable of discharging his/her normal duties and is reasonably expected to continue for at least 365 consecutive calendar days. Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement, and shall apply in lieu of the dispute resolution procedures set forth in Section 10.

 

(e) Good Reason” shall mean, after the Spin Off, without Executive’s express written consent:

 

(i) the failure of the Company to pay or cause to be paid Executive’s base salary when due;

 

(ii) a reduction by the Company in Executive’s annual base salary, unless such reduction is nondiscriminatory as to Executive and is applied generally to other officers of the Company, with a maximum permissible reduction of 25% over any period of 3 consecutive years commencing after the Spin Off;

 

(iii) a substantial and sustained diminution in Executive’s authority or responsibilities; or

 

(iv) the relocation by the Company of Executive’s primary place of employment by more than 50 miles from the [SPECIFY CURRENT LOCATION], unless the Company makes available to Executive a reasonable relocation package to facilitate such relocation; provided that in no event shall the relocation by the Company of Executive’s primary place of employment to Cincinnati, Ohio constitute Good Reason hereunder;

 

provided that any of the events described in Clauses (i) through (iv) shall constitute Good Reason only if the Company fails to cure such event within 30 calendar days after receipt from Executive of written notice of the event which constitutes Good Reason; provided, further, that “Good Reason” shall cease to exist for an event on the 60th calendar day following the later of its occurrence or Executive’s knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.

 

(f) “Payment Dates” shall mean the first, second and third anniversaries of the Spin Off.

 

(g) “Retirement” shall mean termination of employment at or after reaching age 65.

 

2. Waivers of Rights under Prior Letter Agreement. Executive hereby waives and relinquishes any and all rights and benefits he/she may have, now or in the future, for payments of amounts and benefits under the Prior Letter Agreement against each and all parties to the Prior Letter Agreement and their respective affiliates and subsidiaries, and agrees not to make any claim, now or in the future, for any amounts or benefits under the Prior Letter Agreement.

 

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3. Bonus Payments. In consideration for Executive’s continued employment with the Company, in consideration for the waiver and release of Executive’s rights to any and all payments and benefits under the Prior Letter Agreement, and subject to Section 7 of this Agreement and Executive’s execution and non-revocation of a release in substantially the form attached hereto as Exhibit A, the Company hereby agrees to pay Executive a bonus payment in an amount equal to $         on each of the three (3) Payment Dates; provided that, except as provided in Section 4 of this Agreement, each such bonus payment shall be contingent on Executive’s continued employment by the Company on such Payment Date. Following the Company’s payment of such bonuses, except as is expressly set forth in Section 5, the Company shall have no further obligations under this Agreement, and Executive shall have no further rights to any other payments under this Agreement.

 

4. Effect of Termination of Employment.

 

(a) By the Company without Cause; By Executive with Good Reason; Due to Executive’s Death or Disability.

 

If, prior to any Payment Date, Executive’s employment is terminated by the Company without Cause or due to Disability, Executive terminates employment with the Company with Good Reason, or Executive’s employment terminates due to Executive’s death, then the Company shall pay to Executive (or Executive’s Beneficiary in the event of death) a lump sum payment in an amount equal to the sum of the amount of all then-unpaid bonus payments that otherwise would have become payable to Executive under this Agreement if his/her employment had continued through the last Payment Date. Such payment shall be made within ten (10) business days following Executive’s termination of employment and shall not be reduced on account of the acceleration of the timing of the payment. Following the Company’s payment of such bonuses, except as is expressly set forth in Section 5, the Company shall have no further obligations under this Agreement, and Executive shall have no further rights to any other payments under this Agreement.

 

(b) Termination For Any Other Reason.

 

If, prior to any Payment Date, Executive’s employment with the Company terminates or is termination for any reason other than a reason set forth in Section 4(a) above (including without limitation, termination by the Company for Cause, or termination by Executive due to Retirement or without Good Reason), the Company shall have no obligation to make any further bonus payments, and Executive shall forfeit all then unpaid bonus payments under this Agreement for all Payment Dates occurring after Executive’s termination of employment with the Company, although any obligation arising under Section 5 with respect to payments made before Executive’s termination of employment will not be affected. Following such termination of employment, except as is expressly set forth in Section 5, the Company shall have no further obligations under this Agreement, and Executive shall have no further rights to any other payments under this Agreement.

 

5. Gross Up Payments. Notwithstanding any other provisions of this Agreement, if any bonus payments under this Agreement, together with any other Parachute Payments as defined under Internal Revenue Code Section 280(G)(b)(2) made by Airborne or the Company in connection with the Spin-Off or Merger, if any, are characterized as Excess Parachute Payments as defined in Internal Revenue Code Section 280(G)(b)(1), then the Company shall pay to Executive, in addition to the bonus payments to be received under this Agreement, an amount such that, after payment by Executive of all taxes, including federal and state income taxes and additional excise taxes imposed by Section 4999 of the Code on this additional payment, Executive retains an amount equal to the excise taxes imposed by Section 4999 of the Code on Executive’s Excess Parachute Payments. Amounts provided for under this Section 5 shall not duplicate, with respect to any particular payment, any similar gross-up amounts provided for under any other change in control, parachute, employment or severance agreement to which Executive is a party. This obligation will not be extinguished on the last Payment Date.

 

6. Effect of Subsequent Tax Claim. Executive must notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority relating to any golden parachute excise taxes alleged to be due with respect to payments under Section 5 (“Tax Claim”). Executive also must give this notification in writing as soon as practicable but no later than 10 business days after the date Executive has actual knowledge of any Tax Claim. Simultaneously, Executive must apprise the Company of the nature of the Tax Claim. Executive also agrees not to pay any Tax Claim before the expiration of the 90-day period following the date on which Executive gives this notice to the Company (or any shorter period ending on the date that any payment of taxes with respect to the Tax Claim is due).

 

If, before the expiration of the period described in the last sentence of the preceding paragraph, the Company notifies Executive in writing that it intends to contest the Tax Claim, Executive must:

 

(a) Give the Company any information it reasonably requests in writing that is related to the Tax Claim;

 

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(b) Take any action in connection with contesting the Tax Claim that the Company reasonably requests in writing, including accepting legal representation with respect to the Tax Claim by an attorney selected by the Company;

 

(c) Cooperate with the Company in good faith to contest the Tax Claim effectively; and

 

(d) Permit the Company to participate in and to control any proceedings relating to any Tax Claim.

 

If Executive does not comply in every respect with the procedures described in this Section 6, the Company will be discharged from all obligations described in Section 5.

 

Subject to Executive’s compliance with the rules stated above, following receipt of the notice related to the Tax Claim, the Company will notify Executive that it will either accede to or contest the Tax Claim. If this notice is not given by the Company within 90 calendar days following receipt of the notice from Executive of the Tax Claim, the Company will be deemed to have acceded to the Tax Claim and will apply Section 5 to reimburse Executive for the effect of the additional amounts due.

 

If the Company decides to contest the Tax Claim, the Company will:

 

(a) Assume control of all proceedings taken in connection with any contest relating to the Tax Claim and, at the Company’s sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of any Tax Claim; and

 

(b) Directly bear and pay all costs and expenses (including additional interest and penalties) incurred in connection with any contest relating to a Tax Claim and will indemnify and hold Executive harmless, on an after-tax basis, for any additional interest and penalties imposed as a result of the Company’s payment of the costs of resisting any Tax Claim.

 

If, after the receipt by Executive of an amount under Section 5, Executive becomes entitled to receive any tax refund relating to any overpayment of any excise tax or other tax (including interest and penalties) related to payments under Section 4 or 5 of this Agreement, Executive will promptly pay to the Company the amount of any refund (together with any interest received with respect to that refund).

 

Executive also agrees to promptly notify the Company if and when Executive consents to the extension of the statute of limitations for any year for which a payment is made under Section 4 or 5.

 

7. Set-Off. Anything to the contrary contained herein notwithstanding, in the event that any amounts become payable to Executive by the Company or any of its subsidiaries or affiliates pursuant to the terms of any change in control, parachute or severance arrangement, or pursuant to the terms of any employment agreement as a result of Executive’s termination of employment, then any amounts paid or payable under this Agreement shall reduce and off-set any amounts otherwise payable to Executive under that change in control, parachute, severance or employment agreement or arrangement. To the extent that amounts are actually paid under such other agreement contrary to the provisions of this Section 7, amounts paid or payable under this Agreement shall be subject to reduction, set-off, counter-claim or recoupment by the Company. The provisions of this Section 7 shall survive the Executive’s termination of employment, and any termination of the Company’s obligation to make payments hereunder.

 

8. Date of Termination of Employment. For purposes of this Agreement, Executive’s date of termination of employment will be the earliest of (a) the date written notice of termination is given by the Company to Executive, (b) the date written notice of termination is given by Executive to the Company, or (c) the date Executive ceases to perform services for the Company (other than due to Disability, but including due to death or Retirement).

 

9. Other Benefit Plans and Compensation Arrangements. The payments hereunder shall not be taken into account in computing Executive’s salary or compensation for the purposes of determining any benefits, payments or compensation under any employee benefit, incentive or compensation arrangement (including any pension, retirement, severance, bonus, or life insurance arrangement) of the Company or any of its subsidiaries or affiliates, or for purposes of any agreement (including any change in control, parachute, employment or severance agreement) between Executive and the Company or its past or current subsidiaries or affiliates.

 

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10. Disputes. In the event that the Company wishes to contest or dispute a termination for Good Reason by Executive, it must give written notice of such dispute within 20 calendar days following the date of termination. If Executive wishes to contest or dispute a termination by the Company for Cause, or, subject to Section 1(d), any failure of the Company to make payments claimed to be due hereunder, Executive must give written notice of such dispute within 20 calendar days following the date or termination or the alleged payment date, as applicable. If Executive prevails in any such contest or dispute, as determined by the Board (or its delegate), the amounts then due shall be paid as soon as administratively practicable, together with simple interest calculated with reference to the mid-term applicable federal rate as defined pursuant to Internal Revenue Code Section 1274(d) for January 1 of each calendar year, compounded annually until paid.

 

11. Mitigation. Executive shall not be required to mitigate the amount of any payment due under this Agreement by seeking other employment.

 

12. Successors; Binding Agreement.

 

(a) This Agreement shall not be assignable by Executive. This Agreement shall be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company. As used herein, “Company” shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid.

 

(b) This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

13. Notices. Any notice or other communication provided for in this Agreement shall be in writing and sent if to the Company to its principal office at:

 

145 Hunter Drive

Wilmington, Ohio 45177

Attention: Vice President of Human Resources

 

or at such other address as the Company may from time to time in writing designate, and if to Executive, at:

 

______________________

______________________

 

or such address as Executive may from time to time in writing designate (or Executive’s residential address of record in the absence of such designation),

 

or, if to a Beneficiary, at the address given in the latest beneficiary designation form or such other address that the Beneficiary may from time to time in writing designate.

 

Each such notice or other communication shall be effective (a) if given by telecommunication, when transmitted to the applicable number so specified pursuant to this Section 13 and an appropriate answer back is received, (b) if given by mail, three business days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (c) if given by any other means, when actually delivered at such address.

 

14. No Right to Employment. Nothing contained in this Agreement shall (a) confer on Executive any right to continue in the employ of the Company or a subsidiary or affiliate, (b) constitute any contract or agreement of employment, or (c) interfere in any way with the right of the Company to terminate Executive’s employment at any time and for any reason, with or without Cause.

 

15. Beneficiaries. Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any payments that become due to Executive under this Agreement. Executive may make or change the designation at any time, provided that any designation or change thereto must be in the form of a signed writing acceptable to and received by the Company’s Corporate Director of Human Resources or any successor.

 

16. Entire Agreement / Amendments. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof, and expressly supercedes the Prior Letter Agreement. There are no restrictions,

 

5


agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein. No amendment or modification of the terms of this Agreement shall be valid unless made by written agreement executed by the parties hereto or their respective successors and legal representative.

 

17. Waiver. No failure on the part of any party to exercise or delay in exercising any right hereunder, shall be deemed a waiver thereof or of any other right, nor shall any single or partial exercise preclude any further or other exercise of such right or any other right.

 

18. Choice of Law. This Agreement, the legal relations between the parties and any action, whether contractual or non-contractual, instituted by any party with respect to matters arising under or growing out of or in connection with or in respect of this Agreement, the relationship of the parties or the subject matter hereof shall be governed by and construed in accordance with the laws of the State of Ohio applicable to contracts made and performed in such State and without regard to conflicts of law doctrines.

 

19. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

20. Withholding; Deductions. The Company will withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld under applicable law.

 

21. Section Headings. Section and other headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

 

22. Counterparts. This Agreement and any amendment hereto may be executed in one or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

ABX AIR, INC.

 

 

By

 

 


Its

 

 


 

By signing this Agreement, Executive acknowledges that he/she (a) has read and fully understands the terms of this Agreement and their effect, (b) is surrendering any and all rights under the Prior Letter Agreement against each and all parties to the Prior Letter Agreement and their respective affiliates and subsidiaries in exchange for the payments and other consideration described in this Agreement, (c) fully understands that the payments and other consideration described in this Agreement are adequate consideration for surrendering rights under the Prior Letter Agreement, and (d) shall have no claim to any consideration, payments, benefits or other rights under the Prior Letter Agreement.

 


Executive

 

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Exhibit A

 

RELEASE

 

(                        )

 

THIS RELEASE (“Release”) is made by              (“you”) in favor of Airborne, Inc. (“Airborne”) and ABX Air, Inc. (the “Company”), as of the date set forth below.

 

WHEREAS, Airborne, the Company and you previously entered into a letter agreement dated              (the “Letter Agreement”) that provides for certain payments and other benefits in the event of certain terminations of your employment in connection with or following a change in control of Airborne and if other conditions described in the Letter Agreement are met; and

 

WHEREAS, you have agreed to enter into a retention bonus arrangement (the “Retention Agreement”) as a substitute for and in lieu of any and all payments and other benefits under the Letter Agreement and to release Airborne, the Company and their respective subsidiaries and affiliates of any and all liabilities and obligations under the Letter Agreement; and

 

IN CONSIDERATION OF your continued employment with the Company, in consideration of the benefits provided under the Retention Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, you hereby agree as follows:

 

a.  You hereby agree on behalf of yourself, your agents, assignees, attorneys, successors, assigns, heirs and executors, to, and you do hereby, fully and completely forever release Airborne, the Company and their respective subsidiaries, affiliates, predecessors and successors and all of their respective past and/or present officers, directors, partners, members, managing members, managers, employees, agents, representatives, administrators, attorneys, insurers and fiduciaries in their individual and/or representative capacities (hereinafter collectively referred to as the “Releasees”), from any and all causes of action, suits, agreements, promises, damages, disputes, controversies, contentions, differences, judgments, claims, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialities, covenants, contracts, variances, trespasses, extents, executions and demands of any kind whatsoever, which you or your heirs, executors, administrators, successors and assigns ever had, now have or may have against the Releasees or any of them, in law, admiralty or equity, whether known or unknown to you, for, upon, or by reason of, any matter, action, omission, course or thing, including without limitation in connection with, under, derivative of, or in relationship to the Letter Agreement or your employment or other service relationship with Airborne, the Company or any of their respective subsidiaries or affiliates, separation from or termination of any such employment or service relationship, and any applicable employment, compensatory, benefit or equity arrangement with Airborne, the Company or any of their respective subsidiaries or affiliates occurring up to the date this Release is signed by you; provided that such released claims shall not include any claims to enforce your rights under, or with respect to, the Retention Agreement pursuant to its terms (such released claims are collectively referred to herein as the “Released Claims”).

 

b.  Notwithstanding the generality of clause (a) above, the Released Claims include, without limitation, (i) any and all claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1971, the Civil Rights Act of 1991, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, the Family and Medical Leave Act of 1993, and any and all other federal, state or local laws, statutes, rules and regulations, whether pertaining to employment or otherwise, and (ii) any claims for wrongful discharge, breach of contract, fraud, misrepresentation or any claims relating to compensation, or any other claims under any statute, rule or regulation or under the common law, including compensatory damages, punitive damages, attorney’s fees, costs, expenses and all claims for any other type of damage or relief.

 

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c.  You expressly understand and agree that the obligations of the Company as set forth in the Retention Agreement are in lieu of any and all other amounts which you might be, are now, or may become entitled to receive from Airborne, the Company or any of their respective subsidiaries or affiliates under the Letter Agreement or upon any claim released herein and, without limiting the generality of the foregoing, you expressly waive any right or claim that you may have or assert with respect to the Letter Agreement and any employment, compensation, benefit or equity arrangement with Airborne, the Company or any of their respective subsidiaries or affiliates, and any damages and/or attorney’s fees and costs.

 

d.  To ensure that the foregoing release is fully enforceable in accordance with its terms, you agree to waive any and all rights of Section 1542 of the California Civil Code (to the extent applicable) as it exists from time to time or a successor provision thereto, which provides:

 

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

 

In addition, to ensure that the foregoing release is fully enforceable in accordance with its terms, you agree to waive any protection that may exist under any comparable or similar statute and under any principle of common law of the United States or any and all States.

 

e.  You understand and agree that you must continue to keep confidential all proprietary or confidential information (excluding publicly available information unless made public by you) of Airborne, the Company and their respective subsidiaries and affiliates that you learned while employed by or providing services to any of them, and you shall not make use of any such proprietary or confidential information on your own behalf or on behalf of any other person or entity.

 

f.  You represent that you have read carefully and fully understand the terms of this Release, and that you have been advised to consult with an attorney and have had the opportunity to consult with an attorney prior to signing this Release. You acknowledge that you are executing this Release voluntarily and knowingly and that you have not relied on any representations, promises or agreements of any kind made to you in connection with your decision to accept the terms of this Release, other than those set forth in this Release. You acknowledge that you have been given at least twenty-one (21) days to consider whether you want to sign this Release and that the Age Discrimination in Employment Act gives you the right to revoke this Release within seven (7) days after it is signed, and you understand that you will not receive any payments due you under the Agreement before such seven (7) day revocation period (the “Revocation Period”) has passed and then, only if you have not revoked this Release. To the extent you have executed this Release within less than twenty-one (21) days after its delivery to you, you hereby acknowledge that your decision to execute this Release prior to the expiration of such twenty-one (21) day period was entirely voluntary.

 

In the event that any one or more of the provisions of this Release shall be or become invalid, illegal or unenforceable in any respect or to any degree, the validity, legality and enforceability of the remaining provisions of this Release shall not be affected thereby. You, Airborne and the Company intend to give the terms of this Release the fullest force and effect so that if any provision shall be found to be invalid or unenforceable, the court reaching such conclusion may modify or interpret such provision in a manner that shall carry out the parties’ intent and shall be valid and enforceable.

 

This Release shall be governed by and construed, interpreted, applied and enforced in accordance with the laws of the State of Ohio, without regard to principles of conflicts of law thereunder.

 

 

This the              day of August, 2003

 

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[NAME OF EXECUTIVE]

 

 

 

 


 

 

ACCEPTED AND AGREED:

 

 

AIRBORNE, INC.

 

By:

 

 

 

 


Name:

 

 

 

 


Title:

 

 

 

 


 

ABX AIR, INC.

 

 

By:

 

 

 

 


Name:

 

 

 

 


Title:

 

 

 

 


 

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