SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or
Section 240.14a-12
ATLANTIC COAST AIRLINES HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and O-11.
1. Title of each class of securities to which transaction
applies:
______________________________________________________
2. Aggregate number of securities to which transaction
applies:
______________________________________________________
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (set forth
maximum amount on which filing fee is calculated and state
how it was determined):
_______________________________________________________
4. Proposed maximum aggregate value of transaction:
_______________________________________________________
5. Total fee paid:
_______________________________________________________
[ ] Fee previously paid by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
_______________________
2. Form/Schedule or Registration Statement No.:
_______________________
3. Filing Party:
_______________________
4. Date Filed:
_______________________
ATLANTIC COAST AIRLINES HOLDINGS, INC.
515-A Shaw Road
Dulles, Virginia 20166
April 14, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Atlantic Coast Airlines Holdings, Inc., to be
held on Wednesday, May 24, 2000, at 10:00 a.m. local time, at the
Hyatt Reston Town Center, 1800 Presidents Street, Reston,
Virginia.
This year we are asking you to elect nine directors of the
Company to serve until the 2001 Annual Meeting. We are pleased
that our nominees include Judy Shelton and Daniel L. McGinnis,
who were appointed to serve on the Board in January and March,
2000, respectively. We are also asking that you ratify the Board
of Directors' adoption of the Company's 2000 Stock Incentive Plan
and the Board of Directors' selection of independent auditors for
the year ending December 31, 2000. The Board of Directors
recommends that you vote FOR each of these proposals.
At the Annual Meeting, the Board of Directors will also
report on the Company's affairs and provide a discussion period
for questions and comments. The Board of Directors appreciates
and encourages stockholder attendance and participation.
Whether or not you plan to attend the Annual Meeting, it is
important that your shares be represented. Accordingly, we
request that you complete, sign, date and promptly return the
enclosed proxy card in the postage-paid envelope that is
provided.
Thank you for your cooperation.
Sincerely,
/S/
Kerry B. Skeen
Chairman of the Board of
Directors
ATLANTIC COAST AIRLINES HOLDINGS, INC.
515-A Shaw Road
Dulles, Virginia 20166
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2000
To the Stockholders of
ATLANTIC COAST AIRLINES HOLDINGS, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of
stockholders (the "Meeting") of Atlantic Coast Airlines Holdings,
Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 24, 2000, at 10:00 a.m., local time, at the Hyatt
Reston Town Center, 1800 Presidents Street, Reston, Virginia, for
the following purposes, as more fully described in the
accompanying Proxy Statement:
1) To elect nine directors to serve for the coming year and
until their successors are elected;
2) To ratify the Board of Directors' adoption of the Company's
2000 Stock Incentive Plan.
3) To ratify the Board of Directors' selection of the
Company's independent auditors for the fiscal year ending
December 31, 2000; and
4) To transact such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
Only holders of record of the Company's common stock,
par value $0.02 per share (the "Common Stock"), at the close of
business on April 7, 2000 are entitled to receive notice of and
to vote at the Meeting. A list of such holders will be open for
examination by any stockholder during regular business hours for
a period of ten days prior to the Meeting at the offices of the
Company, located at 515-A Shaw Road, Dulles, Virginia.
All stockholders are cordially invited to attend the
Meeting. In order to ensure that your Common Stock is represented
at the Meeting, regardless of whether you intend to attend in
person, please complete, date and sign the enclosed proxy and
return it promptly in the accompanying postage-paid envelope.
By order of the Board of
Directors
/S/
Richard J. Kennedy
Vice President, Secretary and
General Counsel
April 14, 2000
ATLANTIC COAST AIRLINES HOLDINGS, INC.
515-A Shaw Road
Dulles, Virginia 20166
_________________________
PROXY STATEMENT
_________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Atlantic
Coast Airlines Holdings, Inc. (the "Company") for use at the
Company's annual meeting of stockholders, to be held at 10:00
a.m., local time, on Wednesday, May 24, 2000, at the Hyatt
Reston Town Center, 1800 Presidents Street, Reston, Virginia, and
at any adjournment or postponement thereof (the "Meeting"). This
Proxy Statement and the accompanying proxy card (the "Proxy
Card"), together with a copy of the Company's 1999 Annual Report,
are first being mailed on or about April 14, 2000, to persons who
were holders of record of the Company's Common Stock, par value
$0.02 per share (the "Common Stock"), at the close of business on
April 7, 2000 (the "Record Date").
Agenda and Voting at the Meeting
At the Meeting, the holders of shares of Common Stock as of
the Record Date will be asked to elect nine members to the Board
of Directors for the coming year; to ratify the Board of
Directors' adoption of the Company's 2000 Stock Incentive Plan;
to ratify the Board of Directors' selection of KPMG LLP,
Certified Public Accountants, as the Company's independent
auditors for the fiscal year ending December 31, 2000; and to
transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed April 7, 2000 as the Record
Date, and only holders of record of the Common Stock at the close
of business on the Record Date are entitled to notice of, and to
vote at, the Meeting. On the Record Date, there were outstanding
and entitled to vote approximately 18,681,291 shares of the
Common Stock.
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of the Common Stock is
necessary to constitute a quorum at the Meeting. Nominees to the
Board of Directors will be elected by the affirmative vote of a
plurality of the shares of the Common Stock present and voting at
the Meeting. This means that the nine nominees who receive the
largest number of votes cast "FOR" will be elected as directors
at the Meeting. Holders of record of Common Stock on the Record
Date are entitled to vote for nine director nominees, but may not
cumulate their votes in favor of any one nominee. Approval of
the two proposals to be raised at the Meeting requires an
affirmative vote of at least a majority of the shares present and
entitled to be voted at the Meeting. On each of these matters,
holders of record of Common Stock on the Record Date are entitled
to one vote for each share of Common Stock held, except as
described below under "Foreign Ownership of Shares."
In accordance with Delaware law, abstentions are counted as
"shares present" for purposes of determining the presence of a
quorum and have the effect of a vote "against" any matter as to
which they are specified. Proxies submitted by brokers or other
nominees that do not indicate a vote for or against either or
both of the proposals ("broker non-votes") are not considered
"shares present" and will not affect the outcome of the vote on
those proposals.
2
Proxies
If the enclosed Proxy Card is properly executed and returned
in time for the Meeting, the shares of Common Stock represented
thereby will be voted in accordance with the instructions given
thereon. If no instructions are given, shares will be voted
"FOR" all of the Board's nominees for election to the Board of
Directors and "FOR" each of the other matters discussed in this
Proxy Statement. Proxies will extend to, and be voted at, any
adjournment or postponement of the Meeting.
The Board of Directors does not presently intend to
introduce any business at the Meeting other than as set forth in
this Proxy Statement, and has not been informed that any other
business is to be presented at the Meeting. Should any other
matter properly come before the Meeting, however, the persons
named as proxies in the accompanying Proxy Card or their duly
authorized and constituted substitutes intend to vote or act
thereon in accordance with their best judgment.
Any stockholder who has executed and returned a Proxy Card
and who for any reason wishes to revoke or change his or her
proxy may do so at any time before the proxy is exercised by (i)
giving written notice to the Secretary of the Company at the
above address, (ii) voting the shares represented by such proxy
in person at the Meeting, or (iii) delivering a later dated proxy
at any time before the Meeting. Attendance at the Meeting will
not, by itself, revoke a proxy. Any stockholder whose shares are
held through a bank, brokerage firm or other nominee and who
provides voting instructions on a form received from the nominee
may revoke or change his or her voting instructions only by
contacting the nominee who holds his or her shares.
Foreign Ownership of Shares
The Federal Aviation Act prohibits non-United States
citizens from owning more than 25 percent of the voting interest
of a company such as the Company, which owns a United States air
carrier. The Company's certificate of incorporation provides
that shares of the Company's capital stock may be voted by or at
the direction of persons who are not United States citizens
provided that such shares are registered on a separate stock
registry maintained by the Company for non-United States holders
(the "Foreign Stock Registry"). Any holder of Common Stock who
is not a United States citizen may request that its shares be
registered for purposes of voting at the Meeting by checking the
appropriate box on the proxy card. Any such holder may also
request that its shares be maintained on the Foreign Stock
Registry by providing separate written notice to the Secretary of
the Company. If shares representing more than 25% of outstanding
shares are registered for any meeting, precedence will be given
to foreign holders who demonstrate that their shares were
maintained on the Foreign Stock Registry prior to the meeting.
The Company does not anticipate that these provisions will
operate to limit voting rights at the Meeting. The enclosed
proxy card contains a statement that by signing the proxy card or
voting, the stockholder certifies that it is a United States
citizen as that term is defined in the Federal Aviation Act or
that the shares represented by the proxy card have been
registered on the Company's Foreign Stock Registry or are
requested to be registered for purposes of voting at the Meeting.
Under Section 40102(a)(15) of the Federal Aviation Act, the
term "citizen of the United States" is defined as: (i) an
individual who is a citizen of the United States, (ii) a
partnership each of whose partners is an individual who is a
citizen of the United States, and (iii) a corporation or
association organized under the laws of the United States or a
state, the District of Columbia or a territory or possession of
the United States of which the president and at least two-thirds
of the board of directors and other managing officers are
citizens of the United States, and in which at least 75 percent
of the voting interest is owned or controlled by persons that are
citizens of the United States.
3
PROPOSAL ONE: ELECTION OF DIRECTORS
The nine individuals set forth in the table below are the
Company's nominees for election to the Board of Directors at the
Meeting. Directors are elected for terms of one year and until
the next annual meeting of stockholders, and serve until
resignation or succession by election or appointment. Each of
the nominees has consented to being named as a nominee in this
Proxy Statement and has agreed to serve if elected. If any
nominee becomes unavailable for election at the time of the
Meeting or is not able to serve if elected, the persons voting
the proxies solicited hereby may in their discretion vote for a
substitute nominee or the Board of Directors may choose to reduce
the number of directors. The Board of Directors has no reason to
believe that any nominee will be unavailable or unable to serve.
Each of the nominees currently serves on the Company's Board of
Directors.
The following table sets forth each nominee's name, age as
of April 7, 2000 and position with the Company, and the year in
which each nominee first became a director:
Name Age Position Director
Since
Kerry B. Skeen 47 Chairman of the Board of 1991
Directors, Chief
Executive Officer and
Director
Thomas J. Moore 43 President, Chief 1997
Operating Officer and
Director
C. Edward Acker 71 Director 1991
Robert E. Buchanan 57 Director 1995
Susan MacGregor 54 Director 1997
Coughlin
Daniel L. McGinnis 61 Director 2000
James C. Miller III 57 Director 1995
Judy Shelton 45 Director 2000
John M. Sullivan 63 Director 1995
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED FOR EACH OF THE NOMINEES UNLESS
STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
Background of Nominees
The following is a brief account of the business experience
of each of the nominees for election to the Board of Directors.
There are no family relationships among the nominees or special
understandings pursuant to which the nominees have been nominated
as directors of the Company.
Kerry B. Skeen. Mr. Skeen is a co-founder of the Company
and has been Chairman of the Board of Directors since January
2000, a Director since October 1991, and Chief Executive Officer
since March 1995. He was President from October 1992 through
December 1999, Executive Vice President from October 1991 to
October 1992, and Chief Operating Officer from October 1992
through March 1995. Mr. Skeen was President of the Atlantic
Coast division of WestAir Commuter Airlines, Inc. ("WestAir")
from 1989 until it was acquired by the Company in 1991. From
1987 to 1989, Mr. Skeen was Vice President of Marketing and Sales
of WestAir and, in 1989, was named Senior Vice President of
WestAir. Mr. Skeen's affiliation with the regional airline
industry began in 1983 when he directed the development and
marketing activities of Delta Air Lines, Inc.'s regional airline
program, "The Delta Connection."
4
Thomas J. Moore. Mr. Moore became President of the Company
in January 2000 and has been a Director and Chief Operating
Officer since April 1997. He was Executive Vice President from
April 1997 through December 1999, and was Senior Vice President
of Maintenance and Operations from June 1994 until April 1997.
Prior to joining the Company, Mr. Moore spent nearly ten years
with Continental Airlines in Houston, Texas, where he served at
different times in the positions of staff vice president, senior
director of technical planning, director of financial planning
and division controller.
C. Edward Acker. Mr. Acker is a co-founder of the Company
and has been a Director since October 1991. He was Chairman of
the Board of Directors from April 1993 through December 1999,
Chief Executive Officer from October 1991 to March 1995, Vice
Chairman from October 1991 to April 1993, and President from
October 1991 to October 1992. Mr. Acker continues to serve in an
advisory capacity to the Chairman and is an employee of Atlantic
Coast Jet, Inc., a subsidiary of the Company. Mr. Acker served
as Chairman and Chief Executive Officer of Pan American World
Airways, Inc. from 1981 until 1988. Since 1988, Mr. Acker has
served as Chairman of The Acker Group, a private company which
acts as both principal and adviser in airline-related
transactions; and as a partner in Elsbury & Acker, an oil and
natural gas exploration company. From February 1995 until
February 1996, Mr. Acker served as Chairman and Chief Executive
Officer of BWIA International Airways, Ltd. From 1993 to the
present, he has served as Chairman of the Board and President of
Air Assets, Inc.
Robert E. Buchanan. Mr. Buchanan has been a Director since
March 1995. Mr. Buchanan is President of Buchanan Companies, LLC,
a metropolitan Washington, D.C. real estate firm specializing in
commercial and residential development, investments, construction
and property management in suburban Washington. Mr. Buchanan has
served on the Board of Directors of USLICO Corporation, and
currently serves on the Board of Directors of the Washington
Airports Task Force and the Economic Development Commission of
Loudoun County, Virginia (former Chairman), which is home to the
Company's corporate office and its hub at Washington-Dulles
International Airport.
Susan MacGregor Coughlin. Mrs. Coughlin has been a Director
since October 1997. Mrs. Coughlin has been the Chief Operating
Officer and Director of the ATA Foundation since April 1998 and
previously was the President of Air Safety Management Associates,
an aviation consulting firm, since October 1997. From August
1995 to October 1997 she was President and Chief Operating
Officer of BDM Air Safety Management Corp., which designs and
develops air traffic control systems, and from April 1994 to
August 1995 was a Senior Vice President and General Manager of
BDM Federal, Inc. She served as a member of the National
Transportation Safety Board from 1990 to 1994, where she was
appointed to two consecutive terms as Vice Chairman in 1990 and
1992 and served as Acting Chairman in 1992. She held various
positions with the U.S. Department of Transportation from 1987 to
1990 and from 1981 to 1983, and with the Export-Import Bank of
the U.S. from 1983 to 1987.
Daniel L. McGinnis. Mr. McGinnis has been a Director since
March 2000. Since June 1999 he has been President, CEO and
Director of Sotas, Inc., a developer and manufacturer of
telecommunications equipment that is majority owned by Safeguard
Scientifics, Inc. From August 1998 until January 1999 he was
Senior Vice President of Tellabs Inc. and General Manager of the
N.E.T.S. Group of Tellabs. He was with Coherent Communications
from 1988 to 1998, joining as President and serving as Chief
Executive Officer beginning in 1994. Previously, he served as
division controller for Bausch & Lomb, and held senior
engineering and sales management positions at Air Products &
Chemicals, Clark, Ltd. (U.K.) and Hercules, Inc. He serves on
the boards of directors of Loudoun Healthcare, Inc. and COHPAC,
a distributor of Coherent products in Australia and New Zealand.
He also is a member of advisory boards for George Washington
University's Virginia campus and is an active member of the
Northern Virginia Roundtable, the Dulles Corridor Railway
Association, the Greater Washington Airports Advisory Group and
the Students in Free Enterprise (SIFE) Group.
5
James C. Miller III. Mr. Miller has been a Director since
March 1995. He has been associated with Citizens for a Sound
Economy since 1988, first as Chairman, and since 1993 as
Counselor. He is also Co-Chairman of the Tax Foundation and John
M. Olin Distinguished Fellow at George Mason University. He is a
Director of Washington Mutual Investors Fund. From 1985 to 1988,
he served as Director of the Office of Management and Budget of
the United States and as a member of President Reagan's cabinet.
From 1981 to 1985, he was Chairman of the Federal Trade
Commission. Mr. Miller wrote his Ph.D. dissertation on airline
scheduling and is the co-author of, among other works, a
Brookings Institution volume on airline regulation.
Judy Shelton. Dr. Shelton has been a Director since January
2000. Dr. Shelton is an economist who specializes in
international finance and monetary issues, and is the author of
books and opinion articles on global financial matters that have
been published worldwide. She has been Professor of
International Finance at DUXX Graduate School of Business
Leadership, Monterrey, Mexico, since 1996, and served as a staff
economist for the National Commission on Economic Growth and Tax
Reform from 1995 to 1996, and was Senior Research Fellow at the
Hoover Institution from 1991 to 1995. She is a director of
Hilton Hotels Corporation and of Empower America, and is on the
editorial board of the Cato Journal published by the Cato
Institute.
John M. Sullivan. Mr. Sullivan has been a Director since
January 1995. Mr. Sullivan joined the accounting firm of Arthur
Andersen & Co. in 1958, and was a Partner from 1970 until his
retirement from the firm in 1992. He served as International Tax
Director for General Motors Corporation from 1992 to 1994, and is
currently a financial and tax consultant. He is also a director
of Encompass Services Corporation.
Committees and Board Meetings
During 1999, there were four regular meetings of the Board
of Directors and one meeting by telephone conference. Each
nominee attended 75% or more of the aggregate of the meetings of
the Board and of the Board's committees on which he or she
served.
The Board has two standing committees -- an Audit Committee
and a Compensation Committee. Their functions are described
below.
Audit Committee. The role of the Audit Committee is governed
by a Charter of Responsibilities and Functions adopted by the
Board of Directors in January 2000. Pursuant to this Charter the
Audit Committee performs the following functions: recommends to
the Board of Directors, and evaluates, the firm of independent
certified public accountants to be appointed as auditors of the
Company; reviews any relationships between the auditor and the
Company; reviews and discusses with management and the
independent auditors the financial statements of the Company;
reviews the adequacy of the Company's internal controls; reviews
any significant changes in the accounting policies of the
Company; and, reviews any material contingent liabilities. The
Audit Committee held four meetings during 1999. The current
members of the Audit Committee are Mrs. Coughlin, Mr. McGinnis,
Dr. Shelton, Mr. Miller, who serves as Chairman, and Mr. James
Kerley, who is retiring from the Board and from the Committee
effective May 2000 and is not standing for re-election.
Compensation Committee. The role of the Compensation
Committee is governed by a Charter of Responsibilities and
Functions adopted by the Board of Directors. Pursuant to this
Charter, the Compensation Committee develops and administers a
comprehensive compensation policy for senior management; oversees
the establishment and administration of compensation programs for
the Company's employees generally; reviews annually the
performance of the executive officers of the Company; makes
grants under and otherwise administers the Company's equity-based
plans and bonus plans; reviews, establishes and approves salaries
and other employment and severance arrangements for senior
management; and, recommends, adopts and implements compensation
and other benefits for members of the Board of Directors.
Certain of these functions are subject to consultation with,
advice from or ratification by the Board of Directors as the
Committee determines appropriate. The Compensation Committee
held seven meetings during 1999. The current members of the
Compensation Committee are Messrs. Sullivan, Buchanan and Acker,
who serves as Chairman.
6
Directors' Compensation
Directors, with the exceptions noted below, received an
annual fee of $16,000 for serving as Directors, which fee has
been increased to $20,000 effective January 2000. Directors also
are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof.
Messrs. Skeen and Moore, as officers of the Company, and Mr.
Acker, as an employee of a subsidiary of the Company, do not
receive compensation for their service on the Board. Non-
employee directors are entitled to certain flight benefits made
available to employees of the Company.
Effective for the 1999 calendar year, outside directors also
receive as additional compensation options to purchase 4,000
shares per year of the Company's Common Stock, which options vest
if the individual continues to serve as a Director as of the end
of the year of the grant or if the Director retires by not
standing for re-election at the annual meeting of the
stockholders. Options were granted for 1999 on January 29, 1999,
and for 2000 effective as of January 1, 2000. Assuming that the
2000 Stock Incentive Plan is ratified by the stockholders, the
annual number of stock options granted to outside directors will
be increased to 6,000. The option exercise price for these
grants is equal to the closing price of the Company's Common
Stock reported for the date prior to the date of the grant.
PROPOSAL TWO: RATIFY ADOPTION OF
2000 STOCK INCENTIVE PLAN
At the Meeting, stockholders will be asked to approve the
Company's 2000 Stock Incentive Plan (the "2000 Plan"), which was
adopted by the Board of Directors in January 2000, subject to
approval by the Company's stockholders. The Company's Board of
Directors considers the 2000 Plan to be important to the
Company's ability to appropriately compensate its officers and
employees as the Company continues to grow. In this respect, the
2000 Plan will serve the objectives previously implemented under
the Company's 1995 Stock Incentive Plan, as amended (the "1995
Plan"). Substantially all of the shares authorized under the
1995 Plan have either been issued or are subject to currently
outstanding options or other awards under that plan.
Vote Required
Approval of the 2000 Plan requires the affirmative vote of a
majority of the shares of Common Stock present or represented by
proxy and entitled to vote at the Meeting.
Summary of the New Plan
The following summary of the main features of the 2000 Plan
is qualified in its entirety by reference to the complete text of
the 2000 Plan, which is set forth as Appendix A to this Proxy
Statement.
The 2000 Plan authorizes the grant and issuance of three
different types of Awards:
Stock Options, which can qualify as "incentive stock options"
under the Tax Code or as "non-qualified stock options;"
Incentive Stock, which is stock that is contingent on an
employee satisfying conditions based on continued employment,
passage of time or satisfaction of performance criteria; and
Incentive Bonuses, which are performance bonuses paid in
either cash or stock.
7
The 2000 Plan has a number of special terms and limitations,
including:
The exercise price for Stock Options granted under the plan
must equal the stock's fair market value at the time the Stock
Option is granted;
The 2000 Plan expressly states that Stock Options granted
under it can not be "repriced," as defined in the 2000 Plan;
2,000,000 shares are proposed to be available for issuance
under the 2000 Plan;
No more than 15% of the shares available under the 2000 Plan
may be issued under awards other than Stock Options;
Awards under the 2000 Plan typically are subject to either
three-year or one-year minimum vesting requirements, subject
to exceptions for death or disability of an employee or upon a
change of control;
Non-employee directors participate under the 2000 Plan only
through the receipt of an initial and annual Stock Option
grants which are subject to specified limits on the number of
shares covered by such options; and
Stockholder approval is required for certain types of
amendments to the 2000 Plan.
The 2000 Plan is designed to enable the Company to attract,
retain and motivate its directors, officers and other key
employees, and to further align their interests with those of the
stockholders of the Company, by providing for or increasing the
proprietary interest of such persons in the Company.
The 2000 Plan has various provisions so that Awards under it
may, but need not, qualify for an exemption from the "short swing
liability" provisions of Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 and/or qualify as "performance based
compensation" that is exempt from the $1 million limitation on
the deductibility of compensation under Section 162(m) of the Tax
Code. However, stockholder approval of the class of eligible
participants, the per person annual award limitations and the
"Qualifying Performance Criteria" which may be used under the
2000 Plan are required in order for awards under the 2000 Plan to
qualify as "performance based compensation" under Tax Code
Section 162(m).
Eligibility
Participants in the 2000 Plan can be any person who is an
employee (as that term is defined under SEC Form S-8, which is
used for registering compensatory stock arrangements under the
Securities Act) or prospective employee of the Company or any of
its affiliates is eligible to be selected as a recipient of an
Award under the 2000 Plan. The Compensation Committee of the
Board of Directors has not yet determined how many individuals
will ultimately participate in the 2000 Plan, but as of April 7,
2000 there were approximately 66 individuals holding awards
granted under previous stock option plans. While it is generally
expected that the same categories of executives and senior middle
managers who participate under the 1995 Plan will be eligible to
participate under the 2000 Plan, Awards may from time to time be
granted to employees who are not in these groups but who have
otherwise distinguished themselves for their contributions to the
Company or who are expected to make significant contributions to
the Company.
Non-employee directors are eligible to participate under the
2000 Plan solely for purposes of receiving initial and annual
Stock Option grants that are described below.
8
Administration
The 2000 Plan will be administered by the Compensation
Committee of the Board of Directors, although the Board of
Directors may exercise any authority of the Committee under the
2000 Plan in lieu of the Committee's exercise thereof. The
Committee may designate subcommittees and may delegate certain
administrative functions to others.
Subject to the express provisions of the 2000 Plan, the
Committee has broad authority to administer and interpret the
2000 Plan, including, without limitation, authority to determine
who is eligible to participate in the 2000 Plan and to which of
such persons, and when, Awards are granted under the 2000 Plan,
to determine the number of shares of Common Stock subject to
Awards and the exercise or purchase price of such shares under an
Award, to establish and verify the extent of satisfaction of any
performance goals applicable to Awards, to prescribe and amend
the terms of the agreements evidencing Awards made under the 2000
Plan, and to make all other determinations deemed necessary or
advisable for the administration of the 2000 Plan.
Stock Subject to the New Plan
The aggregate number of shares of the Company's Common Stock
that can be issued under the 2000 Plan may not exceed 2,000,000,
provided that no more than 15% of these shares may be issued
under Awards other than Stock Options. The number of shares
subject to the 2000 Plan and to outstanding Awards under the 2000
Plan may be appropriately adjusted by the Committee if the Common
Stock is affected through a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification,
dividend (other than quarterly cash dividends) or other
distribution, stock split, spin-off or sale of substantially all
of the Company's assets. For purposes of calculating the
aggregate number of shares issued under the 2000 Plan, only the
number of shares actually issued upon exercise or settlement of
an Award and not delivered to or retained by the Company upon
cancellation, expiration or forfeiture of an Award or in payment
or satisfaction of the purchase price, exercise price or tax
withholding obligation of an Award shall be counted. As of April
7, 2000, the closing price of the Common Stock on the Nasdaq
Stock Market was $26.25.
Awards
The 2000 Plan authorizes the grant and issuance of the
following types of Awards: Stock Options, Incentive Bonuses, and
Incentive Stock. In addition, special provisions apply to the
grant of Stock Options to non-employee directors.
Stock Options. Subject to the express provisions of the
2000 Plan and as discussed in this paragraph, the Committee has
discretion to determine the vesting schedule of Stock Options,
the events causing a Stock Option to expire, the number of shares
subject to any Stock Option, the restrictions on transferability
of a Stock Option, and such further terms and conditions, in each
case not inconsistent with the 2000 Plan, as may be determined
from time to time by the Committee, except that no Stock Option
granted to an employee may become exercisable within one (1) year
of the grant date other than upon a change of control or upon the
employee's death or disability. The 2000 Plan expressly provides
that the Company can not "reprice" Stock Options. The exercise
price for Stock Options may not be less than 100% of the fair
market value of the Common Stock (as determined pursuant to the
2000 Plan) at the time the Stock Option is granted. The exercise
price of an Stock Option may be paid through various means
specified by the Committee, including in cash or check, by
delivering to the Company shares of Common Stock, by a reduction
in the number of shares issuable pursuant to such option, or by a
promissory note or other commitment to pay (including such a
commitment by a stock broker to pay over proceeds from the sale
of shares issuable under a Stock Option). Stock Options granted
under the 2000 Plan may be either incentive stock options
("ISOs") qualifying under Section 422 of the Tax Code or non-
qualified stock options ("NQSOs"), which are not intended to
qualify as ISOs.
9
Incentive Bonuses. The 2000 Plan authorizes the grant of
Incentive Bonuses pursuant to which a participant may become
entitled to receive an amount based on satisfaction of such
performance criteria as are specified by the Committee.
Incentive Bonuses may be paid in either cash or in shares, and
payment in cash does not affect the number of shares available
under the 2000 Plan. Subject to the express provisions of the
2000 Plan and as discussed in this paragraph, the Committee has
discretion to determine the terms of any Incentive Bonus,
including the target and maximum amount payable to a participant
as an Incentive Bonus, the performance criteria (which may be
based on financial performance and/or personal performance
evaluations) and level of achievement versus these criteria that
determines the amount payable under an Incentive Bonus, the
fiscal year or other period (which may not be less than a year)
as to which performance will be measured for determining the
amount of any payment, the timing of any payment earned by virtue
of performance, restrictions on the alienation or transfer of an
Incentive Bonus prior to actual payment, forfeiture provisions,
and such further terms and conditions, in each case not
inconsistent with the 2000 Plan, as the Committee may determine
from time to time. All or any portion of an Incentive Bonus may
be designed to qualify as "performance based compensation" that
is exempt from the $1 million limit on deductible compensation
under Section 162(m) of the Code. The performance criteria for
any portion of an Incentive Bonus that is intended to satisfy the
requirements for "performance-based compensation" will be a
measure based on one or more Qualifying Performance Criteria (as
defined below). Notwithstanding satisfaction of any performance
goals, the amount paid under an Incentive Bonus may be reduced by
the Committee on the basis of such further considerations as the
Committee in its sole discretion shall determine.
Incentive Stock. Incentive Stock is an award or issuance of
shares the grant, issuance, retention, vesting and/or
transferability of which is subject during specified periods of
time to such conditions (including performance conditions) and
terms as the Committee deems appropriate. Subject to the
express provisions of the 2000 Plan and as discussed in this
paragraph, the Committee has discretion to determine the terms of
any Incentive Stock Award, including the number of shares subject
to an Incentive Stock Award or a formula for determining such,
the purchase price, if any, for the shares (which may be below
fair market value), the conditions that determine the number of
shares granted, issued, retainable and/or vested, forfeiture
provisions, the effect of termination of employment for various
reasons, and such further terms and conditions, in each case not
inconsistent with the 2000 Plan, as may be determined from time
to time by the Committee. Incentive Stock may be granted,
issued, retainable and/or vested based upon continued employment,
the passage of time or the satisfaction of performance criteria,
as specified by the Committee, except that any condition that is
based upon continued employment or the passage of time shall not
provide for full vesting of an Incentive Stock Award in less than
three (3) years from the date the award is made, other than upon
the death or disability of the employee or upon a change of
control. The performance criteria upon which Incentive Stock is
granted, issued, retained and/or vested may be based on financial
performance and/or personal performance evaluations, except that
for any Incentive Stock that is intended by the Committee to
satisfy the requirements for "performance-based compensation"
under Code Section 162(m) the performance criteria shall be a
measure based on one or more Qualifying Performance Criteria.
Notwithstanding satisfaction of any performance goals, the number
of shares granted, issued, retainable and/or vested under an
Incentive Stock Award may be reduced by the Committee on the
basis of such further considerations as the Committee in its sole
discretion shall determine.
Non-Employee Director Stock Options. Non-employee directors
participate under the 2000 Plan only through the receipt of
initial and annual Stock Option grants. The 2000 Plan provides
that each year non-employee directors may receive an annual Stock
Option grant for up to 6,000 shares, except that in the first
year a non-employee director joins the Board he or she may
instead receive a Stock Option for up to 10,000 shares. The 2000
Plan expressly provides that the Company can not "reprice" Stock
Options. The exercise price for Stock Options may not be less
than 100% of the fair market value of the Common Stock at the
time the Stock Option is granted. Subject to the foregoing, the
Committee determines the date of grant of Non-Employee Director
Stock Options, the vesting and/or exercisability provisions of
such options and the exact number of shares subject to such
options.
10
Qualifying Performance Criteria and Section 162(m) Limits
Subject to stockholder approval of the 2000 Plan, the
performance criteria for any Incentive Bonus or any Incentive
Stock that is intended to satisfy the requirements for
"performance based compensation" under Code Section 162(m) shall
be any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any
combination, and measured either annually or cumulatively over a
period of years, on an absolute basis or relative to a pre-
established target, to previous years' results or to a designated
comparison group, in each case as specified by the Committee in
the Award: (a) cash flow, (b) earnings per share, (c) earnings
before interest, taxes and amortization, (d) return on equity,
(e) total stockholder return, (f) share price performance, (g)
return on capital, (h) return on assets or net assets, (i)
revenue, (j) income or net income, (k) operating income or net
operating income, (l) operating profit or net operating profit,
(m) operating margin or profit margin, (n) return on operating
revenue, (o) market share, (p) overhead or other expense
reduction, (q) departure or on-time arrival performance, and (r)
baggage handling. The Committee shall appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria
to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation or
claim judgments or settlements, (iii) the effect of changes in
tax law, accounting principles or other such laws or provisions
affecting reported results, (iv) accruals for reorganization and
restructuring programs, and (v) any extraordinary non-recurring
items as described in Accounting Principles Board Opinion No. 30
and/or in management's discussion and analysis of financial
condition and results of operations appearing in the Company's
annual report to stockholders for the applicable year.
The aggregate number of shares subject to Stock Options
granted under the 2000 Plan during any calendar year to any one
participant may not exceed 500,000, unless such limitation is not
required under Section 162(m) of the Code. The aggregate number
of shares issued or issuable under all Awards other than Stock
Options granted under the 2000 Plan during any calendar year to
any one participant may not exceed 100,000. The maximum amount
payable pursuant to that portion of an Incentive Bonus Award
granted for any fiscal year to any person that is intended to
satisfy the requirements for "performance based compensation"
under Code Section 162(m) may not exceed $1,000,000.
Change of Control
The Committee may provide that in connection with a change
of control (as defined in the 2000 Plan), Awards will become
exercisable, payable, vested, paid, or canceled, and may provide
for an absolute or conditional exercise, payment or lapse of
conditions or restrictions on an Award that would be effective
only if, upon the announcement of a transaction intended or
reasonably expected to result in a change of control, no
provision is made under the terms of such transaction for the
holder of an Award to realize the full benefit of the Award. A
change of control is defined to include (i) any merger or
consolidation in which the Company is not the surviving entity
(or survives only as a subsidiary of another entity whose
stockholders did not own all or substantially all of the
Company's Common Stock immediately prior to such transaction),
(ii) the sale of all or substantially all of the Company's assets
to any other person or entity (other than a wholly-owned
subsidiary), (iii) the acquisition of beneficial ownership or
control of more than 50% of the outstanding shares of Common
Stock by any person or entity, including a group of persons who
agree to act together, (iv) the dissolution or liquidation of the
Company, (v) a contested election of directors, as a result of
which or in connection with which the persons who were directors
of the Company before such election or their nominees cease to
constitute a majority of the Board, or (vi) any other event
specified by the Committee.
Transferability of Awards and Other Provisions Applicable to
Awards
Generally, Awards granted under the 2000 Plan may not be
sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner prior to the vesting or lapse
of any and all restrictions applicable thereto, other than by
will or the laws of descent and distribution, except that the
Committee may permit an Award to be transferable to a member or
members of the participant's family or to entities owned or
established for the benefit of a participant's family.
11
The 2000 Plan has provisions designed so that it qualifies
as an "eligible plan" under the margin provisions of Regulation
U, by expressly providing that the Committee may, but is not
required to, loan the amount necessary to purchase shares and/or
pay taxes under any award. The 2000 Plan also provides that the
Committee may, but need not, provide that the holder of an Award
has a right under an Award to receive a number of shares or cash,
or a combination thereof, the amount of which is determined by
reference to the value of the Award. Finally, the 2000 Plan does
not limit the Company's right to make other arrangements to
provide stock options and other forms of compensation
arrangements as it determines appropriate.
Amendments and Termination
The Board of Directors may amend, alter or discontinue the
2000 Plan or any agreement evidencing an Award made under the
2000 Plan, but no such amendment shall, without the approval of
the stockholders of the Company: (a) materially increase the
maximum number of shares of Common Stock for which Awards may be
granted under the 2000 Plan; (b) reduce the price at which Stock
Options may be granted; (c) reduce the exercise price of
outstanding Stock Options; (d) extend the term of the 2000 Plan;
(e) change the class of persons eligible to participate under the
2000 Plan; (f) increase the number of shares subject to Non-
Employee Director Stock Options granted to a Non-Employee
Director under the 2000 Plan; (g) increase the number of shares
that are eligible for issuance under Incentive Bonuses and
Incentive Stock Awards; or (h) after any change of control,
impair the rights of any Award holder without such holder's
consent. No Award granted under the 2000 Plan shall be granted
pursuant to the 2000 Plan more than 10 years after the date of
the Board's adoption of the 2000 Plan.
Federal Income Tax Consequences
The following discussion of the federal income tax
consequences of the 2000 Plan is intended to be a summary of
applicable federal law as currently in effect. State and local
tax consequences may differ, and tax laws may be amended or
interpreted differently during the term of the 2000 Plan or of
Awards thereunder. Because the federal income tax rules
governing Awards and related payments are complex and subject to
frequent change, and they depend on the participant's individual
circumstances, participants are advised to consult their tax
advisors prior to exercise of options or other Awards or
dispositions of stock acquired pursuant to Awards.
ISOs and NQSOs are treated differently for federal income
tax purposes. ISOs are intended to satisfy the requirements of
Section 422 of the Code. NQSOs need not satisfy such
requirements.
An optionee is not taxed on the grant or, except as
described below, exercise of an ISO. The difference between the
exercise price and the fair market value of the shares on the
exercise date, however, will be a preference item for purposes of
the alternative minimum tax, and thus an optionee could be
subject to the alternative minimum tax as a result of the
exercise of an ISO. If an optionee holds the shares acquired upon
exercise of an ISO for at least two years following the option
grant date and at least one year following exercise, the
optionee's gain, if any, upon a subsequent disposition of such
shares is long-term capital gain. The measure of the gain is
the difference between the proceeds received on disposition and
the optionee's basis in the shares (which generally equals the
exercise price). If an optionee disposes of shares acquired
pursuant to exercise of an ISO before satisfying the one and two-
year holding periods described above, the optionee may recognize
both ordinary income and capital gain in the year of disposition.
The amount of the ordinary income will be the lesser of (i) the
amount realized on disposition less the optionee's adjusted basis
in the shares (usually the exercise price) or (ii) the difference
between the fair market value of the shares on the exercise date
and the exercise price. The balance of the consideration
received on such a disposition will be long-term capital gain if
the stock had been held for at least one year following exercise
of the ISO. The Company is not entitled to an income tax
deduction on the grant or exercise of an ISO or on the optionee's
disposition of the shares after satisfying the holding period
requirements described above. If the holding periods are not
satisfied, the Company will be entitled to a deduction in the
year the optionee disposes of the shares in an amount equal to
the ordinary income recognized by the optionee.
12
An optionee is not taxed on the grant of an NQSO. On
exercise, however, the optionee recognizes ordinary income equal
to the difference between the option price and the fair market
value of the shares acquired on the date of exercise. The
Company is entitled to an income tax deduction in the year of
exercise in the amount recognized by the optionee as ordinary
income. Any gain on subsequent disposition of the shares is long
term capital gain if the shares are held for at least one year
following exercise. The Company does not receive a deduction for
this gain.
Participants generally are required to recognize ordinary
income with respect to Incentive Stock equal to the fair market
value of the shares (less any amount paid to acquire the shares)
when the shares are both received and no longer subject to
vesting restrictions, except that a participant who receives
Incentive Stock that is subject to vesting restrictions and who
properly makes an election under Section 83(b) of the Code (an
"83(b) election") within 30 days of receipt will recognize
ordinary income based on the value of the underlying shares
(determined without regard to the vesting restrictions) on the
date of initial receipt (as opposed to the date of vesting) and
may treat appreciation subsequent to the date of receipt as
capital gain (depending on the holding period for the shares).
Participants receiving Incentive Stock should consult their tax
advisors regarding the ability and advisability of making the
83(b) election, including the limitations on claiming a loss if
the shares decline in value or are forfeited after receipt. The
Company generally receives a deduction equal to the ordinary
income recognized by the recipient of Incentive Stock.
Special rules will apply in cases where a recipient of an
Award pays the exercise or purchase price of the Award or
applicable withholding tax obligations under the 2000 Plan by
delivering previously owned shares or by reducing the number of
shares otherwise issuable pursuant to the Award. The surrender
or withholding of such shares will in certain circumstances
result in the recognition of income with respect to such shares
or a carryover basis in the shares acquired, and may constitute a
disposition for purposes of applying the ISO holding periods
discussed above. The Company generally will be entitled to
withhold any required taxes in connection with the exercise or
payment of an Award, and may require the participant to pay such
taxes as a condition to exercise of an Award.
The terms of the agreements or other documents pursuant to
which specific Awards are made under the 2000 Plan may provide
for accelerated vesting or payment of an Award in connection with
a change in ownership or control of the Company. In that event
and depending upon the individual circumstances of the
participant, certain amounts with respect to such Awards may
constitute "excess parachute payments" under the "golden
parachute" provisions of the Code. Pursuant to these provisions,
a participant will be subject to a 20% excise tax on any "excess
parachute payments" and the Company will be denied any deduction
with respect to such payments. The Company may agree to
reimburse participants for these taxes and for taxes on the
amount of such reimbursements. Participants should consult their
tax advisors as to whether accelerated vesting of an Award in
connection with a change of ownership or control of the Company
would give rise to an excess parachute payment.
As described above, Awards under the 2000 Plan may qualify
as "performance-based compensation" under Section 162(m) of the
Code in order to preserve federal income tax deductions by the
Company with respect to any compensation required to be taken
into account under Section 162 of the Code that is in excess of
$1,000,000 and paid to a Covered Employee (as defined in Section
162). Compensation for any year that is attributable to an Award
granted to a Covered Employee and that does not so qualify may
not be deductible by the Company to the extent such compensation,
when combined with other compensation paid to such employee for
the year, exceeds $1,000,000.
13
Initial Grants
The Committee has full discretion to determine the timing
and recipients of any Stock Option grants under the 2000 Plan and
the number of shares subject to any such options that may be
granted under the 2000 Plan, subject to an annual limitation on
the total number of Stock Options that may be granted to any
participant and the plan-specified limits on Non-Employee
Director Stock Options. Therefore, the benefits and amounts that
will be received by each of the Named Executive Officers, the
executive officers as a group, the non-employee directors and all
other key employees under the 2000 Plan are not presently
determinable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN
FAVOR OF THE NEW PLAN. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE VOTED FOR THIS PROPOSAL UNLESS STOCKHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES.
PROPOSAL THREE: RATIFICATION OF INDEPENDENT AUDITORS
The Board has selected KPMG LLP, Certified Public
Accountants, as the Company's independent auditors for the fiscal
year ending December 31, 2000 and as a matter of corporate
governance is requesting stockholders to ratify that selection.
In the event that the Board's selection of auditors is not
ratified by a majority of the shares of Common Stock voting
thereon, the Board will review its future selection of auditors.
A representative of KPMG LLP is expected to attend the
Meeting and will have the opportunity to make a statement and/or
respond to appropriate questions from stockholders present at the
Meeting.
Vote Necessary to Approve Ratification
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present and entitled to vote
at the Meeting is necessary to ratify the Board's selection of
KPMG LLP as the Company's independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN
FAVOR OF THE RATIFICATION OF THE SELECTION OF KPMG LLP AS
AUDITORS. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED FOR THIS PROPOSAL UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN
THEIR PROXIES.
14
EXECUTIVE OFFICERS
The following table sets forth the name, age as of April 7,
2000 and position of each executive officer of the Company:
Officer
Name Age Position Since
Kerry B. Skeen 47 Chairman of the Board 1991
of Directors and Chief
Executive Officer
Thomas J. Moore 43 President, Chief 1994
Operating Officer and
Director
Richard J. Surratt 39 Senior Vice President, 1999
Chief Financial
Officer, Treasurer and
Assistant Secretary
Michael S. Davis 35 Senior Vice President - 1995
Customer Service
Richard J. Kennedy 45 Vice President, General 1996
Counsel and Secretary
David W. Asai 44 Vice President - 1998
Financial Planning,
Controller and
Assistant Secretary
Background of Executive Officers
The following is a brief account of the business experience
of each of the executive officers of the Company other than
Messrs. Skeen and Moore, each of whose background is described
above. There are no family relationships or special
understandings pursuant to which such persons have been appointed
as executive officers of the Company.
Richard J. Surratt. Mr. Surratt has served as Senior Vice
President, Chief Financial Officer, Treasurer and Assistant
Secretary since December 1999. From 1990 until joining the
Company Mr. Surratt was with Mobil Corporation. During that time
he held a number of executive management positions in corporate
finance, accounting and new business development. Most recently
he was Director in the Mergers and Acquisitions Group,
functioning as the lead finance member for that team. Prior to
that position he served as Treasurer of Latin America for the
company. In addition to his experience at Mobil, he also spent
six years in various management and engineering positions with
Advanced Marine Enterprises. Mr. Surratt passed the Certified
Public Accountant exam in 1999.
Michael S. Davis. Mr. Davis has served as Senior Vice
President - Customer Service since May 1995. From 1993 until
that time, he served as Vice President, Customer Service, for
Business Express Airlines, Inc. Previously, from 1986 to 1993,
he served in a variety of positions with USAir, Inc., including
Station Manager in Boston, Passenger Service Manager in
Philadelphia, Ramp Operations Manager in Dayton and various
positions in Pittsburgh.
Richard J. Kennedy. Mr. Kennedy has served as General
Counsel and Secretary since May 1996 and was named Vice President
in November 1997. From 1991 until joining the Company he was
with British Aerospace Holdings, Inc., where he served in various
capacities including contract negotiation, aircraft finance, and
financial restructuring. Previously he was a private attorney in
Washington, D.C. for over ten years.
15
David W. Asai. Mr. Asai has served as Vice President -
Financial Planning, Controller and Assistant Secretary since
January 1998. From December 1994 until that time, he served as
Vice President, Controller and Chief Accounting Officer at Reno
Air, Inc. From July 1992 to November 1994, Mr. Asai was Vice
President - Finance and Chief Financial Officer of Spirit
Airlines, Inc. From 1981 to June 1992, Mr. Asai was employed by
Midway Airlines, Inc. in various capacities, including Director
of Financial Planning and Analysis. Mr. Asai is a Certified
Public Accountant.
EXECUTIVE COMPENSATION
The following table sets forth information regarding the
compensation of the individual who served as the Company's Chief
Executive Officer during 1999, the Company's four other most
highly compensated executive officers serving as executive
officers at December 31, 1999, and an additional individual who
served as an executive officer during the fiscal year. Bonus
amounts reflect amounts earned for the specified year regardless
of when paid.
Summary Compensation Table
Annual Compensation Long Term
Compensation Awards
Re All
Name and Other stricted Securities Other
Current Year Salary Bonus Annual Stock Underly Compen
Position Compensation Awards ing sation
(1) (2) (3) Options (4)
(3)
C. Edward 1999 $180,000 35,577 $23,062 - - $6,930
Acker 1998 180,000 26,541 27,255 - - 6,930
Chairman of 1997 180,000 52,406 3,758 20,000 6,930
the Board
Through Dec.
31, 1999
Kerry B. 1999 316,539 224,966 40,564 - 300,000 395,000
Skeen
Chief 1998 295,000 356,360 29,206 $653,854 173,000 147,500
Executive
Officer and 1997 275,577 363,474 11,055 - 220,000 148,680
President
Thomas J. 1999 200,000 117,800 10,493 - 170,000 150,000
Moore
Executive 1998 184,942 180,307 12,674 326,927 73,000 60,000
Vice
President and 1997 147,843 157,578 12,159 - 50,000 31,000
Chief
Operating
Officer
Paul H. Tate 1999 150,000 86,187 10,861 - 60,000 33,000
(5)
Senior Vice 1998 148,212 142,359 19,725 326,927 60,900 27,000
President
Chief 1997 119,423 131,478 23,414 - 100,000 -
Financial
Officer
Michael S. 1999 140,846 83,328 6,497 - 65,000 81,000
Davis
Senior Vice 1998 136,654 131,610 6,706 196,146 40,100 28,000
President
Customer 1997 126,000 133,966 9,289 - 10,000 27,646
Service
Richard J. 1999 107,423 23,094 - 20,000 -
Kennedy
Vice 1998 107,000 22,256 - - 4,000 -
President,
Secretary
and General 1997 98,283 31,361 - - 36,000 -
Counsel
______________
(1) Includes income from certain medical expense and tax
reimbursement payments. Automobile compensation in 1999 for Mr.
Acker of $10,750 and Mr. Skeen $15,250 are also included.
(2) Shares of restricted stock were granted in exchange for
cancellation of previously granted options. Value reported based
on a grant date closing stock price of $17.00 per share.
(3) Number of options reported in table for 1998 includes
options that were cancelled in 1998 upon the grant of restricted
stock described in note 2, above, as follows: Mr. Skeen, options
for 100,000 shares were cancelled; Mr. Moore, options for 50,000
shares were cancelled; Mr. Tate, options for 50,000 shares were
cancelled; and Mr. Davis, options for 30,000 shares were
cancelled. The May 15, 1998 two for one stock dividend has been
reflected in this table.
(4) Represents term life insurance premiums in the amount of
$6,930 for Mr. Acker, and the total amount of premiums paid by
the Company in 1999 for split dollar life insurance under the
Company's deferred compensation agreements in the amount of
$395,000 for Mr. Skeen, $150,000 for Mr. Moore, $33,000 for Mr.
Tate, and $81,000 for Mr. Davis.
(5) Mr. Tate ceased to serve as an executive officer effective
December 14, 1999 and ceased to be an employee effective January
24, 2000.
16
The following table sets forth information regarding grants of
stock options by the Company during the fiscal year ended
December 31, 1999, to the individuals named in the Summary
Compensation Table above.
Option Grants in Last Fiscal Year
Number % of
of Total
Securities Options Potential
Granted Exerc Realizable Value
Name Underlying to ise Expiration at Assumed Annual
Employee Price Date Rates of Stock
Options in (2) Price
Granted Fiscal Appreciation (3)
Year
5% 10%
C. Edward - -
Acker
Kerry B. 100,000(1) 13.61% $25.00 Jan 1,2009 $1,572,237 $3,984,356
Skeen
100,000(1) 13.61% 24.25 Mar 23,2009 1,525,069 3,864,825
100,000(1) 13.61% 20.00 July 21,2009 1,257,789 3,187,485
Thomas J. 70,000(1) 9.52% 24.25 Mar 23,2009 1,067,549 2,705,378
Moore 100,000(1) 13.61% 20.00 July 21,2009 1,257,789 3,187,485
Paul H. 60,000(4) 8.16% 24.25 Mar 23,2009 915,042 2,318,895
Tate
Michael S. 45,000(1) 6.12% 24.25 Mar 23,2009 686,281 1,739,171
Davis 20,000(1) 2.72% 20.63 Dec 3,2009 259,419 657,419
Richard 10,000(1) 1.36% 24.25 Mar 23,2009 152,507 386,483
J.Kennedy 10,000(1) 1.36% 20.63 Dec 3,2009 129,709 328,709
(1) Options vest in equal portions over a four year period and
become fully exercisable upon a change in control.
(2) Exercise Price equals market price of the Company's Common
Stock on the date of grant.
(3) Assumed value at the end of ten year period pursuant to SEC-
mandated calculations, although these percentages do not
necessarily reflect expected appreciation or actual period of
holding by executive.
(4) Options terminated as a result of termination of Mr. Tate's
employment.
17
The following table provides information regarding the
exercise of options during the year ended December 31, 1999, and
the number and value of unexercised options held at December 31,
1999, by the individuals named in the Summary Compensation Table
above.
Aggregate Option Exercises in 1999 and Option Values at December
31, 1999
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options
Options at FY-End at FY-
Shares
Acquired
on Value
Name Exercise Realized Exerci Unexer Exerci Unexer
(1) sable cisable sable cisable
C. Edward 30,000 $609,581 443,333 6,667 $9,929,463 $82,087
Acker
Kerry B. 111,011 2,436,698 155,982 413,334 2,135,172 1,407,093
Skeen
Thomas J. - - 139,473 194,668 2,421,543 641,061
Moore
Paul H. 29,000 405,643 18,068 23,333 205,238 389,369
Tate
Michael S.12,510 341,671 120,256 68,334 2,067,762 103,550
Davis
Richard J. 6,667 155,441 20,605 32,001 279,867 211,306
Kennedy
(1) Based on difference between option exercise price and
market price of Common Stock on date of exercise.
(2) Based upon a market value of the Common Stock of $23.75
per share as of December 31, 1999.
Employment Agreements
Under an agreement between the Company and Kerry B. Skeen,
which was amended and restated as of December 28, 1999 (the
"Skeen Agreement"), the Company has agreed to employ Mr. Skeen as
Chief Executive Officer for a three year term that is
automatically extended unless terminated. The Skeen Agreement
provides for a minimum annual base salary of $395,000, which
amount may be increased from time to time by the Board's
Compensation Committee. The Skeen Agreement further provides
deferred compensation at a rate of 100% of the annual base salary
subject to ten year graduated vesting, and provides that
Mr. Skeen shall participate in any bonus plan provided to
executive officers generally and in employee benefit and medical
plans and other arrangements as the Compensation Committee shall
determine. In addition, the Skeen Agreement provides that Mr.
Skeen shall be granted options covering a minimum of 100,000
shares per year.
Under the Skeen Agreement, if Mr. Skeen's employment is
terminated by the Company without cause, or if he terminates his
own employment with good reason (including any termination by the
Company or by Mr. Skeen within twelve months after a change in
control), or upon Mr. Skeen's death or disability, then: (1) all
of Mr. Skeen's options become immediately exercisable; (2) he is
paid his year-to-date bonus plus three times his annual bonus;
(3) he is paid his full base salary, deferred compensation, and
insurance benefits for 36 months; and (4) he will become fully
vested in any deferred compensation. Upon a change in control of
the Company, as defined in the Skeen Agreement, Mr. Skeen would
receive the amounts and benefits of his severance compensation
whether or not his employment is terminated, and certain
insurance and other benefits would be extended. The Skeen
Agreement also provides for additional benefits during the term
of the Skeen Agreement and following any change in control.
Under an agreement between the Company and Thomas J. Moore,
which was amended and restated as of December 28, 1999 (the
"Moore Agreement"), the Company has agreed to employ Mr. Moore as
President and Chief Operating Officer for a one year term that is
continuously extended unless terminated. The Moore Agreement is
substantially similar to the Skeen Agreement except that: the
minimum annual base salary is $250,000; the deferred compensation
rate is a lesser percentage of base salary; the minimum annual
stock option grant is 50,000 shares; the severance compensation
is two years of base pay and bonus (or three years upon a change
in control); unexercisable options do not become exercisable
except in the event of a change in control; and, the disability
period prior to termination is six months.
18
Under separate agreements between the Company and Mr. Davis
and Mr. Surratt (both of which were restated effective December
28, 1999 (collectively, the "Officer Agreements"), the Company
agreed to employ Mr. Davis as Senior Vice President - Customer
Service and Mr. Surratt as Senior Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary, each for a one year
term. The Officer Agreements provide for automatic twelve month
extensions unless earlier terminated, and for annual base
salaries, which may be and, for officers subject to Officer
Agreements in the past, have been increased from time to time by
the Compensation Committee to amounts above that specified in the
original agreements. The Officer Agreements provide that Messrs.
Davis and Surratt shall participate in any bonus plan provided to
executive officers generally, in the Company's deferred
compensation program, and in employee benefit and medical plans
and other arrangements as the Compensation Committee shall
determine. In the event of termination by the Company "without
cause", the terminated officer shall receive his full base salary
and major medical insurance coverage for a period of twelve
months, and a portion of any annual bonus shall be prorated to
the date of termination. Change in control provisions are
similar to the Moore Agreement except that compensation would be
at a rate of two years of base pay and bonus. The Company
previously had entered into an agreement with Mr. Tate providing
substantially similar benefits, pursuant to which he was provided
severance benefits as described above.
Deferred compensation for all of the executive officers
under the foregoing agreements is presently funded in the form of
life insurance. By separate agreement, upon termination of
employment the Company will release to the officer its interest
in the life insurance policy, including earnings from invested
funds in an amount equal to the specified vested percentage
(which shall be 100% upon a change in control) of the premiums
paid by the Company.
For all executive officers and other vice presidents, in the
event that any payments made in connection with a change in
control would be subjected to the excise tax imposed on excess
parachute payments by the Internal Revenue Code, the Corporation
will "gross-up" the employee's compensation for all such excise
taxes and any federal, state and local income tax applicable to
such excise tax, penalties and interest thereon. In the event of
a change in control, all vice presidents would receive
compensation in the form of one years' salary, bonus, and
insurance, and all options held by them would become fully
exercisable.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation for Messrs. Skeen, Moore, Davis and Surratt
(the "Senior Executive Officers") consists primarily of base
salary, bonus, stock-based awards and participation in a deferred
compensation program. Consistent with previous years'
compensation practices, in 1999 the Compensation Committee
maintained a policy of using primarily operational and financial
performance criteria, along with other discretionary factors, as
a basis for setting the compensation of its executive officers.
The Committee reviewed and considered performance measures for
year-to-date improvements by the Company's executive officers and
also used industry performance averages as a comparison factor.
Agreements between the Company and each of the Senior
Executive Officers establish minimum base salaries and other
compensation and benefits. The Compensation Committee made a
determination to amend the agreements with the executive officers
during 1999 to reflect promotions and the expansion of each
individual's responsibilities by virtue of the pending expansion
of the Company's business, and to conform the language and terms
of older agreements to those of the agreements prepared more
recently. The Committee made a qualitative evaluation of a
variety of factors, including level of responsibility within the
organization, time in position, prior experience, individual
performance, and a comparison to compensation provided for
comparable positions by similarly situated corporations. The
Committee also decided to increase the use of deferred
compensation, which vests over ten years, as a means to retain
executives. A minimum annual stock option award was established
for Mr. Moore, and actual stock option grants were made based on
a subjective evaluation of each participant's contribution and
potential. Following the takeover during 1999 of two other
regional air carriers, the Committee met on two occasions to
review change in control provisions for all executive officers
and vice presidents, and determined to provide one-time
compensation in the event of a change in control based on a
sliding scale proportionate to rank, to continue certain benefits
for a specified period, and to provide protection against
potential excise taxes.
19
Senior Executive Officers participate in the Senior
Management Incentive Plan ("SMIP"), under which they may receive
a percentage of their salary as bonus. SMIP payments are based
on percentage improvements in the Company's earnings per share
over the prior year and on price performance of the Company's
stock relative to its peer group members, each in comparison to
targets established by the Committee. Maximum payouts range from
100% for the Chief Executive Officer to lesser percentages for
other participants. For 1999, participants in the SMIP received
50% of the maximum bonus allowed under the program. Senior
Executive Officers also participate with all other management
employees in the Company's Management Incentive Plan ("MIP"),
which provides for additional bonus compensation based on the
attainment of specified levels of profit margin and operating
performance. The 1999 MIP bonus was in the upper one-third of
the maximum payout and represented a composite rate made up of
actual performance in each of the goal categories.
The primary factors considered in evaluation Mr. Skeen's
promotion to Chairman, and in determining adjustments to his
compensation, were his performance with respect to the
achievement of key strategic, financial, and leadership
development objectives. These included his role in the
development of the strategy to initiate a significant expansion
of the Company's business. Mr. Skeen's compensation for 1999
consisted primarily of the base salary, deferred compensation, an
annual bonus under the SMIP and the MIP, and option grants
totaling 300,000 shares. His base salary was increased to
$395,000 effective October 1, 1999. Stock options granted to him
included contractual options pursuant to his employment
agreement, additional options in exchange for his agreement to
delay the effective date of the next contractual option grant to
October 2000, and further options granted at the discretion of
the Committee. Certain benefits were also increased to reflect
Mr. Skeen's performance and to conform to industry standards. In
May 1999 the Committee also approved a loan to Mr. Skeen in the
amount of $2 million, bearing interest at prime, and repayable
within one year. This loan was repaid during the first quarter
of 2000.
Section 162(m) of the Internal Revenue Code, disallows
corporate tax deductions for compensation in excess of $1 million
paid to each of the five highest paid officers of the Company
unless such compensation is deemed performance related within the
meaning of Section 162(m). The Company's Stock Incentive Plans
are designed so that compensation under the plans can qualify as
"performance based compensation" which is not subject to Section
162(m). Assuming its approval by stockholders, the Company's
proposed 2000 Stock Incentive Plan also will allow the Company to
grant stock options and to grant other stock and cash awards that
can qualify as "performance based compensation" which is not
subject to Section 162(m).
Compensation
Committee
C. Edward Acker,
Chairman
Robert E. Buchanan
John M. Sullivan
The above report of the Compensation Committee shall not be
deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or under the Securities Exchange
Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation
During 1999 Mr. Acker served as Chairman of the Board of the
Company, and together with Messrs. Buchanan and Sullivan, served
on the Compensation Committee.
Company Stock Performance Graph
The graph below compares the cumulative total return on
Atlantic Coast Airlines Holdings, Inc. ("ACAI") Common Stock for
the last five fiscal years with the cumulative total return on
the Nasdaq Market Index and the peer group index selected by the
Company. The comparison assumes an investment of $100 each in
the Company's Common Stock, the Nasdaq Market Index and the peer
group on December 31, 1994, with dividends reinvested when they
are paid. The companies included in the peer group are Comair
Holdings, Inc., Mesa Air Group, Inc., Mesaba Holdings, Inc.,
Midway Airlines Corporation, and SkyWest Airlines, Inc. The peer
group does not include ASA Holdings, Inc., which was included in
the peer group in prior years but was acquired during 1999. In
the calculation of the annual cumulative stockholder return of
the peer group index, the stockholder returns of the companies
included in the peer group are weighted according to their stock
market capitalization.
Cumulative Total
Return
12/94 12/95 12/96 12/97 12/98 12/99
ATLANTIC COAST AIRLINES 100.00 546.67 653.33 1693.33 2666.67 2533.33
HOLDINGS, INC.
PEER GROUP 100.00 102.87 102.72 152.69 235.30 169.11
NASDAQ STOCK MARKET (U.S.) 100.00 141.34 173.90 213.07 300.43 555.99
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of
December 31, 1999 (except as noted otherwise), concerning
beneficial ownership of the Common Stock by each person known by
the Company, based upon Schedule 13D/G filings with the SEC, to
own beneficially more than five percent of the outstanding shares
of the Common Stock. Except as noted otherwise all amounts
reflected in the table represent shares in which the beneficial
owners have sole voting and investment power.
Number of Shares
Beneficially Owned
Name Shares Percent
Gordon A. Cain 2,110,400 11.3%
Eight Greenway Plaza
Suite 702
Houston, TX 77046
FMR Corp. and Fidelity 1,768,370 (1) 9.5%
International Limited
82 Devonshire St.
Boston, MA 02109
Pembroke Hall, 42 Crowlane
Hamilton, Bermuda
Franklin Resources, Inc. 1,641,700 (2) 8.9%
777 Mariners Island Boulevard
San Mateo, CA 94404
PRIMECAP Management Company 1,565,000 (3) 8.4%
225 South Lake Avenue #400
Pasadena, CA 91101
Capital Research and Management 1,268,000 (4) 6.8%
Company
333 South Hope Street
Los Angeles, CA 90071
Vanguard Horizon Funds - Vanguard 1,100,000 (5) 5.9%
Capital Opportunity Fund
P.O. Box 2600
Valley Forge, PA 19482
(1) Based solely upon Amendment No. 2 to FMR Corp. and Fidelity
International Limited Schedules 13G, which they filed on February
14, 2000.
(2) Based solely upon Amendment No. 3 to Franklin Resources,
Inc.'s Schedule 13G, which they filed on January 13, 2000.
(3) Based solely upon Amendment No. 1 to PRIMECAP Management
Company's Schedule 13G, which they filed on January 31, 2000.
(4) Based solely upon Capital Research and Management Company's
Schedule 13G, which they filed on February 10, 2000.
(5) Based solely upon Vanguard Horizon Funds - Vanguard Capital
Opportunity Fund's Schedule 13G, which they filed on February 8,
2000.
22
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of
March 1, 2000, concerning beneficial ownership of the Company's
Common Stock by (i) each director of the Company, (ii) each
executive officer of the Company named in the Summary
Compensation Table, and (iii) all directors and executive
officers of the Company as a group. Except for the effect of
community property laws and as noted otherwise all amounts
reflected in the table represent shares in which the beneficial
owners have sole voting and investment power.
Number of Shares
Beneficially Owned (1)
Name Shares Percent
Kerry B. Skeen 363,874 1.9%
Thomas J. Moore 191,035 *
C. Edward Acker 843,533 4.4%
Robert E. Buchanan 29,600 *
Susan MacGregor Coughlin 8,830 *
James J. Kerley 10,000 *
Daniel L. McGinnis 0 *
James C. Miller III 22,000 *
Judy Shelton 0 *
John M. Sullivan 10,000 *
Michael S. Davis 134,347 1.0%
Richard J. Kennedy 43,995 *
Paul H. Tate 10,000 *
All directors and executive
officers 1,688,439 8.6%
as a group (15 persons)
* Less than one percent.
(1) Includes options that are exercisable on or within 60 days
after March 1, 2000, as follows: Mr. Skeen, 200,982 shares; Mr.
Moore, 131,307 shares; Mr., Acker, 433,333 shares; Mr. Buchanan,
8,000 shares; Mrs. Coughlin, 8,000 shares; Mr. Kerley, 8,000
shares; Mr. Miller, 8,000 shares; Mr. Sullivan, 8,000 shares; Mr.
Davis, 121,506 shares, and Mr. Kennedy, 29,772 shares.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, executive officers and persons
who own more than ten percent of the Common Stock to file with
the Securities Exchange Commission, the Nasdaq Stock Market and
the Company reports on Forms 4 and Forms 5 reflecting
transactions affecting beneficial ownership. Based solely upon
its review of the copies of such forms received by it, the
Company believes that, during fiscal year 1999, all persons
complied with such filing requirements except that Mr. Skeen did
not timely file a Form 4 and a Form 5 to report an option
exercise and sale of the underlying securities, Mr. Kennedy did
not timely file a Form 4 to report an option exercise, and
Messrs. Moore and Tate each did not timely file a Form 4 to
report a sale of shares.
23
EXPENSES OF SOLICITATION
The costs of the solicitation of proxies will be borne by
the Company. Such costs include preparation, printing and
mailing of the Notice of Annual Meeting of Stockholders, this
Proxy Statement, the enclosed Proxy Card and the Company's 1999
Annual Report, and the reimbursement of brokerage firms and
others for reasonable expenses incurred by them in connection
with the forwarding of proxy solicitation materials to beneficial
owners. The solicitation of proxies will be conducted primarily
by mail, but may also include telephone, facsimile or oral
communications by directors, officers or regular employees of the
Company acting without special compensation. In addition, the
Company has retained Georgeson Shareholder Communications Inc. to
assist in the solicitation of proxies, for which the Company will
pay a fee and reimburse expenses in an amount estimated not to
exceed $6,000 in the aggregate.
STOCKHOLDER PROPOSALS
Securities and Exchange Commission regulations permit
stockholders to submit certain types of proposals for inclusion
in the Company's proxy statement. Any such proposals for the
Company's Annual Meeting of Stockholders to be held in 2001 must
be submitted to the Company on or before December 15, 2000, and
must comply with the requirements of Securities and Exchange
Commission Rule 14a-8 in order to be eligible for inclusion in
proxy materials relating to that meeting. Such proposals should
be sent to: Atlantic Coast Airlines Holdings, Inc., Attn:
Secretary, 515-A Shaw Road, Dulles, Virginia 20166. The
submission of a stockholder proposal does not guarantee that it
will be included in the Company's proxy statement.
Alternatively, stockholders of record may introduce certain
types of proposals that they believe should be voted upon at the
Annual Meeting or nominate persons for election to the Board of
Directors. Under the Company's Bylaws, unless the date of the
2001 Annual Meeting of Stockholders is advanced by more than 30
days or delayed (other than as a result of adjournment) by more
than 30 days from the anniversary of the 2000 Annual Meeting,
notice of any such proposal or nomination must be provided in
writing to the Secretary of the Company no later than February
23, 2001 and not before January 24, 2001. Stockholders wishing
to make such proposals or nominations must in addition satisfy
other requirements under the Company's Bylaws. If the
stockholder does not also comply with the requirements of Rule
14a-4 under the Securities Exchange Act of 1934, the Company may
exercise discretionary voting authority under proxies it solicits
to vote in accordance with its best judgment on any such proposal
submitted by a stockholder.
___________________________
Please complete, date, sign and return promptly the
accompanying Proxy Card in the postage-paid envelope enclosed for
your convenience. Signing and returning the Proxy Card will not
prevent record holders or beneficial holders who obtain a valid
proxy from voting in person at the Meeting.
April 14, 2000
Dulles, Virginia
24
2000 STOCK INCENTIVE PLAN
OF
ATLANTIC COAST AIRLINES HOLDINGS, INC.
SECTION 1. PURPOSE OF PLAN
The purpose of this 2000 Stock Incentive Plan (this "Plan")
of Atlantic Coast Airlines Holdings, Inc., a Delaware corporation
(the "Company"), is to enable the Company to attract, retain and
motivate its directors, officers and other key employees, and to
further align the interests of such persons with those of the
stockholders of the Company by providing for or increasing the
proprietary interest of such persons in the Company.
SECTION 2. ADMINISTRATION OF PLAN
2.1 Composition of Committee. Subject to the provisions
for directors pursuant to Section 6.8, this Plan shall be
administered by the Compensation Committee of the Board of
Directors (the "Committee"), as appointed from time to time by
the Board of Directors. The Board of Directors shall fill
vacancies on, and from time to time may remove or add members to,
the Committee. The Committee shall act pursuant to a majority
vote or unanimous written consent. The Board of Directors, in
its sole discretion, may exercise any authority of the Committee
under this Plan in lieu of the Committee's exercise thereof.
Notwithstanding the foregoing, with respect to any Award that is
not intended to satisfy the conditions of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
or Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Committee may appoint one or more
separate committees (any such committee, a "Subcommittee")
composed of one or more directors of the Company (who may but
need not be members of the Committee) and may delegate to any
such Subcommittee(s) the authority to grant Awards, as defined in
Section 5.1 hereof, under the Plan to Eligible Persons, to
determine all terms of such Awards, and/or to administer the Plan
or any aspect of it. Any action by any such Subcommittee within
the scope of such delegation shall be deemed for all purposes to
have been taken by the Committee. The Committee may designate the
Secretary of the Company or other Company employees to assist the
Committee in the administration of the Plan, and may grant
authority to such persons to execute agreements or other
documents evidencing Awards made under this Plan or other
documents entered into under this Plan on behalf of the Committee
or the Company.
2.2 Powers of the Committee. Subject to the express
provisions of this Plan, the Committee shall be authorized and
empowered to do all things necessary or desirable, in its sole
discretion, in connection with the administration of this Plan,
including, without limitation, the following:
(a) to prescribe, amend and rescind rules and
regulations relating to this Plan and to define terms not
otherwise defined herein; provided that, unless the
Committee shall specify otherwise, for purposes of this Plan
(i) the term "fair market value" shall mean, as of any date,
the closing price for a Share (as defined in Section 3.1)
reported for the last trading day prior to such date by the
Nasdaq Stock Market (or such other stock exchange or
quotation system on which Shares are then listed or quoted)
or, if no Shares are traded on the Nasdaq Stock Market (or
such other stock exchange or quotation system) on the date
in question, then for the next preceding date for which
Shares traded on the Nasdaq Stock Market (or such other
stock exchange or quotation system); and (ii) the term
"Company" shall mean the Company and its subsidiaries and
affiliates, unless the context otherwise requires;
(b) to determine which persons are Eligible Persons
(as defined in Section 4), to which of such Eligible
Persons, if any, Awards shall be granted hereunder and the
timing of any such Awards, and to grant Awards;
25
(c) to grant Awards to Eligible Persons and determine
the terms and conditions thereof, including the number of
Shares subject to Awards and the exercise or purchase price
of such Shares and the circumstances under which Awards
become exercisable or vested or are forfeited or expire,
which terms may but need not be conditioned upon the passage
of time, continued employment, the satisfaction of
performance criteria, the occurrence of certain events
(including events which the Board or the Committee determine
constitute a change of control), or other factors;
(d) to establish, verify the extent of satisfaction
of, adjust, reduce or waive any performance goals or other
conditions applicable to the grant, issuance,
exercisability, vesting and/or ability to retain any Award;
(e) to prescribe and amend the terms of the agreements
or other documents evidencing Awards made under this Plan
(which need not be identical);
(f) to determine whether, and the extent to which,
adjustments are required pursuant to Section 10;
(g) to interpret and construe this Plan, any rules and
regulations under this Plan and the terms and conditions of
any Award granted hereunder, and to make exceptions to any
such provisions in good faith and for the benefit of the
Company; and
(h) to make all other determinations deemed necessary
or advisable for the administration of this Plan.
2.3 Determinations of the Committee. All decisions,
determinations and interpretations by the Committee regarding
this Plan shall be final and binding on all Eligible Persons and
Participants. The Committee shall consider such factors as it
deems relevant to making such decisions, determinations and
interpretations including, without limitation, the
recommendations or advice of any director, officer or employee of
the Company and such attorneys, consultants and accountants as it
may select.
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Aggregate Limits. The aggregate number of shares of
the Company's Common Stock, $.01 par value ("Shares"), issued
pursuant to all Awards granted under this Plan shall not exceed
2,000,000 plus the number of shares subject to awards granted
under the Company's 1992 Stock Option Plan or the Company's 1995
Stock Incentive Plan but which are not issued under such plans as
a result of the cancellation, expiration or forfeiture of such
awards; provided that no more than 15% of such Shares may be
issued pursuant to all Incentive Bonuses and Incentive Stock
Awards granted under this Plan. The aggregate number of Shares
available for issuance under this Plan and the number of Shares
subject to outstanding Options or other Awards shall be subject
to adjustment as provided in Section 10. The Shares issued
pursuant to this Plan may be Shares that either were reacquired
by the Company, including Shares purchased in the open market, or
authorized but unissued Shares.
3.2 Tax Code Limits. The aggregate number of Shares
subject to Options granted under this Plan during any calendar
year to any one Eligible Person shall not exceed 500,000. The
aggregate number of Shares issued or issuable under all Awards
granted under this Plan, other than Options, during any calendar
year to any one Eligible Person shall not exceed 100,000.
Notwithstanding anything to the contrary in this Plan, the
foregoing limitations shall be subject to adjustment under
Section 10 only to the extent that such adjustment will not
affect the status of any Award intended to qualify as
"performance based compensation" under Code Section 162(m). The
foregoing limitations shall not apply to the extent that they are
no longer required in order for compensation in connection with
grants under this Plan to be treated as "performance-based
compensation" under Code Section 162(m). The aggregate number of
Shares that may be issued pursuant to the exercise of ISOs
granted under this Plan shall not exceed 2,000,000, which number
shall be calculated and adjusted pursuant to Section 3.3 and
Section 10 only to the extent that such calculation or adjustment
will not affect the status of any Option intended to qualify as
an ISO under Code Section 422.
26
3.3 Issuance of Shares. For purposes of Section 3.1, the
aggregate number of Shares issued under this Plan at any time
shall equal only the number of Shares actually issued upon
exercise or settlement of an Award and shall not include Shares
subject to Awards that have been canceled, expired or forfeited
or Shares subject to Awards that have been delivered (either
actually or constructively by attestation) to or retained by the
Company in payment or satisfaction of the purchase price,
exercise price or tax withholding obligation of an Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an
employee or prospective employee of the Company or any of its
affiliates shall be eligible to be considered for the grant of
Awards hereunder (an "Eligible Person"). For purposes of the
grant provisions under Section 6.8, an "Eligible Person" shall
also include a director of the Company who is not also a salaried
employee (a "Nonemployee Director"). Unless provided otherwise
by the Committee, the term "employee" shall mean an "employee,"
as such term is defined in General Instruction A to Form S-8
under the Securities Act of 1933, as amended, and a "Participant"
is any current or former Eligible Person to whom an Award has
been made and any person (including any estate) to whom an Award
has been assigned or transferred pursuant to Section 9.1. The
status of the chairman of the Board of Directors as an "employee"
shall be determined by the Committee.
SECTION 5. PLAN AWARDS
5.1 Award Types. The Committee, on behalf of the Company,
is authorized under this Plan to enter into certain types of
arrangements with Eligible Persons and to confer certain benefits
on them. The following arrangements or benefits are authorized
under this Plan if their terms and conditions are not
inconsistent with the provisions of this Plan: Options, Incentive
Bonuses and Incentive Stock. Such arrangements and benefits are
sometimes referred to herein as "Awards." The authorized types
of arrangements and benefits for which Awards may be granted are
defined as follows:
(a) Options: An Option is a right granted under
Section 6 to purchase a number of Shares at such exercise
price, at such times, and on such other terms and conditions
as are specified in the agreement or terms and conditions or
other document evidencing the Award (the "Option Document
"). Options intended to qualify as Incentive Stock Options
("ISOs") pursuant to Code Section 422 and Options not
intended to qualify as ISOs ("Nonqualified Options") may be
granted under Section 6. Options may be granted to
Nonemployee Directors only pursuant to Section 6.8.
(b) Incentive Stock: Incentive Stock is an award or
issuance of Shares made under Section 8, the grant,
issuance, retention, vesting and/or transferability of which
is subject during specified periods of time to such
conditions (including continued employment or performance
conditions) and terms as are expressed in the agreement or
other document evidencing the Award (the "Incentive Stock
Document").
(c) Incentive Bonus: An Incentive Bonus is a bonus
opportunity awarded under Section 7 pursuant to which a
Participant may become entitled to receive an amount based
on satisfaction of such performance criteria as are
specified in the agreement or other document evidencing the
Award (the "Incentive Bonus Document").
5.2 Grants of Awards. An Award may consist of one such
arrangement or benefit or two or more of them in tandem or in the
alternative.
SECTION 6. OPTIONS
The Committee may grant an Option or provide for the grant
of an Option, either from time to time in the discretion of the
Committee or automatically upon the occurrence of specified
events, including, without limitation, the achievement of
performance goals, the satisfaction of an event or condition
within the control of the recipient of the Award or within the
control of others.
27
6.1 Option Document. Each Option Document shall contain
provisions regarding (a) the number of Shares that may be issued
upon exercise of the Option, (b) the purchase price of the Shares
and the means of payment for the Shares, (c) the term of the
Option, (d) such terms and conditions on the vesting and/or
exercisability of an Option as may be determined from time to
time by the Committee, (e) restrictions on the transfer of the
Option and forfeiture provisions and (f) such further terms and
conditions, in each case not inconsistent with this Plan as may
be determined from time to time by the Committee. Option
Documents evidencing ISOs shall contain such terms and conditions
as may be necessary to qualify, to the extent determined
desirable by the Committee, with the applicable provisions of
Section 422 of the Code.
6.2 Option Price. The purchase price per share of the
Shares subject to each Option granted under this Plan shall equal
or exceed 100% of the fair market value of a Share on the date
the Option is granted.
6.3 Option Term. The "Term" of each Option granted under
this Plan, including any ISOs, shall be 10 years from the date of
its grant, unless the Committee provides for a lesser term.
6.4 Option Vesting. Options granted under this Plan shall
be exercisable at such time and in such installments during the
period prior to the expiration of the Option's Term as determined
by the Committee. The Committee shall have the right to make the
timing of the ability to exercise any Option granted under this
Plan subject to continued employment, the passage of time and/or
such performance requirements as deemed appropriate by the
Committee. At any time after the grant of an Option the
Committee may reduce or eliminate any restrictions surrounding
any Participant's right to exercise all or part of the Option,
except that no Option other than Nonemployee Director Options
shall first become exercisable within one (1) year from its date
of grant, other than upon death or disability of the Eligible
Person or upon a Corporate Change (as defined in Section 11.1
hereof).
6.5 Termination of Employment or Service. Subject to
Section 11, upon a termination of employment by an Eligible
Person prior to the full exercise of an Option, the unexercised
portion of the Option shall be subject to such procedures as the
Committee may establish.
6.6 Payment of Exercise Price. The exercise price of an
Option shall be paid in the form of one of more of the following,
as the Committee shall specify, either through the terms of the
Option Document or at the time of exercise of an Option: (a) cash
or certified or cashiers' check, (b) shares of capital stock of
the Company that have been held by the Participant for such
period of time as the Committee may specify, (c) other property
deemed acceptable by the Committee, (d) a reduction in the number
of Shares or other property otherwise issuable pursuant to such
Option, (e) payment under an arrangement with a broker selected
or approved by the Company where payment is made pursuant to an
irrevocable commitment by the broker to deliver to the Company
proceeds from the sale of the Shares issuable upon exercise of
the Option, or (f) any combination of (a) through (d).
6.7 No Option Repricing. Without the approval of
stockholders, the Company shall not reprice any Options. For
purposes of this Plan, the term "reprice" shall mean lowering the
exercise price of previously awarded Options within the meaning
of Item 402(i) under Securities and Exchange Commission
Regulation S-K (including canceling previously awarded Options
and regranting them with a lower exercise price).
6.8 Non-Employee Director Options. Each fiscal year, each
Nonemployee Director shall automatically be granted a
Nonqualified Option (a "Nonemployee Director Option") not more
than 6,000 Shares, provided that for the year in which a
Nonemployee Director first joins the Board, in lieu of the
foregoing, he or she shall automatically be granted a Nonemployee
Director Option to purchase not more than 10,000 Shares. If, on
any date upon which Nonemployee Director Options are to be
granted pursuant to this Section 6.8, the number of Shares
remaining available for options under this Plan is insufficient
for the grant to each Nonemployee Director of a Nonemployee
Director Option to purchase the entire number of Shares specified
in this Section 6.8, then a Nonemployee Director Option to
purchase a proportionate amount of such available number of
Shares (rounded to the nearest whole share) shall be granted to
each Nonemployee Director on such date.
28
SECTION 7. INCENTIVE BONUSES
Each Incentive Bonus Award will confer upon the Employee the
opportunity to earn a future payment tied to the level of
achievement with respect to one or more performance criteria
established for a performance period of not less than one year.
7.1 Incentive Bonus Document. Each Incentive Bonus Document
shall contain provisions regarding (a) the target and maximum
amount payable to the Participant as an Incentive Bonus, (b) the
performance criteria and level of achievement versus these
criteria that shall determine the amount of such payment, (c) the
term of the performance period as to which performance shall be
measured for determining the amount of any payment, which term
shall not be less than one year, (d) the timing of any payment
earned by virtue of performance, (e) restrictions on the
alienation or transfer of the Incentive Bonus prior to actual
payment, (f) forfeiture provisions and (g) such further terms and
conditions, in each case not inconsistent with this Plan as may
be determined from time to time by the Committee. The maximum
amount payable as an Incentive Bonus may be a multiple of the
target amount payable, but the maximum amount payable pursuant to
that portion of an Incentive Bonus Award granted under this Plan
for any fiscal year to any Eligible Person that is intended to
satisfy the requirements for "performance based compensation"
under Code Section 162(m) shall not exceed $3,000,000.
7.2 Performance Criteria. The Committee shall establish
the performance criteria and level of achievement versus these
criteria that shall determine the target and maximum amount
payable under an Incentive Bonus Award, which criteria may be
based on financial performance and/or personal performance
evaluations. The Committee may specify the percentage of the
target Incentive Bonus that is intended to satisfy the
requirements for "performance-based compensation" under Code
Section 162(m). Notwithstanding anything to the contrary herein,
the performance criteria for any portion of an Incentive Bonus
that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall
be a measure based on one or more Qualifying Performance Criteria
(as defined in Section 9.2) selected by the Committee and
specified at the time the Incentive Bonus Award is granted. The
Committee shall certify the extent to which any Qualifying
Performance Criteria has been satisfied, and the amount payable
as a result thereof, prior to payment of any Incentive Bonus that
is intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m).
7.3 Timing and Form of Payment. The Committee shall
determine the timing of payment of any Incentive Bonus. The
Committee may provide for or, subject to such terms and
conditions as the Committee may specify, may permit a Participant
to elect for the payment of any Incentive Bonus to be deferred to
a specified date or event. An Incentive Bonus may be payable in
Shares or in cash or other property. Any Incentive Bonus that is
paid in cash or other property shall not affect the number of
Shares otherwise available for issuance under this Plan.
7.4 Discretionary Adjustments. Notwithstanding
satisfaction of any performance goals, the amount paid under an
Incentive Bonus Award on account of either financial performance
or personal performance evaluations may be reduced by the
Committee on the basis of such further considerations as the
Committee shall determine.
SECTION 8. INCENTIVE STOCK
Incentive Stock is an award or issuance of Shares the grant,
issuance, retention, vesting and/or transferability of which is
subject during specified periods of time to such conditions
(including continued employment or performance conditions) and
terms as the Committee deems appropriate.
29
8.1 Incentive Stock Document. Each Incentive Stock
Document shall contain provisions regarding (a) the number of
Shares subject to such Award or a formula for determining such,
(b) the purchase price of the Shares, if any, and the means of
payment for the Shares, (c) the performance criteria, if any, and
level of achievement versus these criteria that shall determine
the number of Shares granted, issued, retainable and/or vested,
(d) such terms and conditions on the grant, issuance, vesting
and/or forfeiture of the Shares as may be determined from time to
time by the Committee, (e) restrictions on the transferability of
the Shares and (f) such further terms and conditions in each case
not inconsistent with this Plan as may be determined from time to
time by the Committee.
8.2 Sale Price. Subject to the requirements of applicable
law, the Committee shall determine the price, if any, at which
Shares of Incentive Stock shall be sold or awarded to an Eligible
Person, which may vary from time to time and among Eligible
Persons and which may be below the fair market value of such
Shares at the date of grant or issuance.
8.3 Share Vesting. The grant, issuance, retention and/or
vesting of Shares of Incentive Stock shall be at such time and in
such installments as determined by the Committee or under
criteria established by the Committee. The Committee shall have
the right to make the timing of the grant and/or the issuance,
ability to retain and/or vesting of Shares of Incentive Stock
subject to continued employment, passage of time and/or such
performance criteria and level of achievement versus these
criteria as deemed appropriate by the Committee, which criteria
may be based on financial performance and/or personal performance
evaluations, except that no such condition that is based upon
continued employment or the passage of time shall provide for
full vesting of an Award in less than three (3) years from the
date the Award is made, other than upon the death or disability
of the Eligible Person or upon a Corporate Change (as defined in
Section 11.1 hereof). Notwithstanding anything to the contrary
herein, the performance criteria for any Incentive Stock that is
intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m) shall be a measure based
on one or more Qualifying Performance Criteria selected by the
Committee and specified at the time the Incentive Stock Award is
granted.
8.4 Discretionary Adjustments. Notwithstanding
satisfaction of any performance goals, the number of Shares
granted, issued, retainable and/or vested under an Incentive
Stock Award on account of either financial performance or
personal performance evaluations may be reduced by the Committee
on the basis of such further considerations as the Committee
shall determine.
8.5 Termination of Employment. Subject to Section 11, upon
a termination of employment by an Eligible Person prior to the
vesting of or the lapsing of restrictions on Incentive Stock, the
Incentive Stock Awards granted to such Eligible Person shall be
subject to such procedures as determined by the Committee.
SECTION 9. OTHER PROVISIONS APPLICABLE TO AWARDS
9.1 Transferability. Unless the agreement or other
document evidencing an Award (or an amendment thereto authorized
by the Committee) expressly states that the Award is transferable
as provided hereunder, no Award granted under this Plan, nor any
interest in such Award, may be sold, assigned, conveyed, gifted,
pledged, hypothecated or otherwise transferred in any manner
prior to the vesting or lapse of any and all restrictions
applicable thereto, other than by will or the laws of descent and
distribution. The Committee may grant an Award or amend an
outstanding Award to provide that the Award is transferable or
assignable (a) in the case of a transfer without the payment of
any consideration, to any "family member" as such term is defined
in Section 1(a)(5) of the General Instructions to Form S-8 under
the 1933 Act, as such may be amended from time to time, and (b)
in any transfer described in clause (ii) of Section 1(a)(5) of
the General Instructions to Form S-8 under the 1933 Act as
amended from time to time, provided that following any such
transfer or assignment the Award will remain subject to
substantially the same terms applicable to the Award while held
by the Participant, as modified as the Committee shall determine
appropriate, and as a condition to such transfer the transferee
shall execute an agreement agreeing to be bound by such terms.
30
9.2 Qualifying Performance Criteria. For purposes of this
Plan, the term "Qualifying Performance Criteria" shall mean any
one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any
combination, and measured either annually or cumulatively over a
period of years, on an absolute basis or relative to a pre-
established target, to previous years' results or to a designated
comparison group, in each case as specified by the Committee in
the Award: (a) cash flow, (b) earnings per share, (c) earnings
before interest, taxes and amortization, (d) return on equity,
(e) total stockholder return, (f) share price performance, (g)
return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or
net operating income, (l) operating profit or net operating
profit, (m) operating margin or profit margin, (n) return on
operating revenue, (o) market share, (p) overhead or other
expense reduction, (q) departure or on-time arrival performance,
and (r) baggage handling. The Committee shall appropriately
adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that
occurs during a performance period: (i) asset write-downs,
(ii) litigation or claim judgments or settlements, (iii) the
effect of changes in tax law, accounting principles or other such
laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any
extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management's discussion
and analysis of financial condition and results of operations
appearing in the Company's annual report to stockholders for the
applicable year.
9.3 Dividends. Unless otherwise provided by the Committee,
no adjustment shall be made in Shares issuable under Awards on
account of cash dividends that may be paid or other rights that
may be issued to the holders of Shares prior to their issuance
under any Award. The Committee shall specify whether dividends
or dividend equivalent amounts shall be paid to any Participant
with respect to the Shares subject to any Award that have not
vested or been issued or that are subject to any restrictions or
conditions on the record date for dividends.
9.4 Documents Evidencing Awards. The Committee shall,
subject to applicable law, determine the date an Award is deemed
to be granted, which for purposes of this Plan shall not be
affected by the fact that an Award is contingent on subsequent
stockholder approval of this Plan. The Committee or, except to
the extent prohibited under applicable law, its delegate(s) may
establish the terms of agreements or other documents evidencing
Awards under this Plan and may, but need not, require as a
condition to any such agreement's or document's effectiveness
that such agreement or document be executed by the Participant
and that such Participant agree to such further terms and
conditions as specified in such agreement or document. The grant
of an Award under this Plan shall not confer any rights upon the
Participant holding such Award other than such terms, and subject
to such conditions, as are specified in this Plan as being
applicable to such type of Award (or to all Awards) or as are
expressly set forth in the agreement or other document evidencing
such Award.
9.5 Tandem Stock or Cash Rights. Either at the time an
Award is granted or by subsequent action, the Committee may, but
need not, provide that an Award shall contain as a term thereof,
a right, either in tandem with the other rights under the Award
or as an alternative thereto, of the Participant to receive,
without payment to the Company, a number of Shares, cash or a
combination thereof, the amount of which is determined by
reference to the value of the Award.
9.6 Financing. The Committee may in its discretion provide
financing to a Participant in a principal amount sufficient to
pay the purchase price of any Award and/or to pay the amount of
taxes required by law to be withheld with respect to any Award.
Any such loan shall be subject to all applicable legal
requirements and restrictions pertinent thereto, including
Regulation U promulgated by the Federal Reserve Board. The grant
of an Award shall in no way obligate the Company or the Committee
to provide any financing whatsoever in connection therewith.
9.7 Additional Restrictions on Awards. Either at the time
an Award is granted or by subsequent action, the Committee may,
but need not, impose such restrictions, conditions or limitations
as it determines appropriate as to the timing and manner of any
resales by a Participant or other subsequent transfers by a
Participant of any Shares issued under an Award, including
without limitation (a) restrictions under an insider trading
policy, (b) restrictions designed to delay and/or coordinate the
timing and manner of sales by Participants, and (c) restrictions
as to the use of a specified brokerage firm for such resales or
other transfers.
31
SECTION 10. CHANGES IN CAPITAL STRUCTURE
10.1 Corporate Actions Unimpaired. The existence of
outstanding Awards (including any Options) shall not affect in
any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations,
reorganizations, exchanges, or other changes in the Company's
capital structure or its business, or any merger or consolidation
of the Company, or any issuance of Shares or other securities or
subscription rights thereto, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or
affecting the Shares or other securities of the Company or the
rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a
similar character or otherwise. Further, except as expressly
provided herein or by the Committee, (a) the issuance by the
Company of shares of stock of any class of securities convertible
into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, (b) the payment of a dividend in property other than
Shares, or (c) the occurrence of any similar transaction, and in
any case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the
number of Shares subject to Options or other Awards theretofore
granted or the purchase price per Share, unless the Committee
shall determine in its sole discretion that an adjustment is
necessary to provide equitable treatment to a Participant.
10.2 Adjustments Upon Certain Events. If the outstanding
Shares or other securities of the Company, or both, for which the
Award is then exercisable or as to which the Award is to be
settled shall at any time be changed or exchanged by declaration
of a stock dividend, stock split, combination of shares,
recapitalization, or reorganization, the Committee may, and if
such event occurs after a Corporate Change the Committee shall,
appropriately and equitably adjust the number and kind of Shares
or other securities which are subject to the Plan or subject to
any Awards theretofore granted, and the exercise or settlement
prices of such Awards, so as to maintain the proportionate number
of Shares or other securities without changing the aggregate
exercise or settlement price, provided, however, that such
adjustment shall be made so as to not affect the status of any
Award intended to qualify as an ISO or as "performance based
compensation" under Section 162(m) of the Code. If the Company
recapitalizes or otherwise changes its capital structure, or
merges, consolidates, sells all of its assets or dissolves (each
of the foregoing a "Fundamental Change"), then thereafter upon
any exercise of an Option or settlement of an Award theretofore
granted, the Participant shall be entitled to purchase under such
Option or receive under such Award, in lieu of the number of
Shares as to which such Option shall then be exercisable or such
Award shall then be subject, the number and class of shares of
stock and securities to which the Participant would have been
entitled pursuant to the terms of the Fundamental Change if,
immediately prior to such Fundamental Change, the Participant had
been the holder of record of the number of Shares as to which
such Option or Award is then subject.
SECTION 11. CHANGE OF CONTROL
11.1 Definitions. Unless the Committee provides otherwise,
For purposes of the Plan and Awards granted under the Plan,
the term "Corporate Change" shall mean:
(i) any merger or consolidation in which the Company
shall not be the surviving entity (or survives only as a
subsidiary of another entity whose shareholders did not own
all or substantially all of the Company's Common Stock
immediately prior to such transaction),
(ii) the sale of all or substantially all of the
Company's assets to any other person or entity (other than a
wholly-owned subsidiary),
(iii) the acquisition of beneficial ownership or
control of (including, without limitation, power to vote)
more than 50% of the outstanding shares of Common Stock by
any person or entity (including a "group" as defined by or
under Section 13(d)(3) of the Exchange Act),
32
(iv) the dissolution or liquidation of the Company,
(v) a contested election of directors, as a result of
which or in connection with which the persons who were
directors of the Company before such election or their
nominees cease to constitute a majority of the Board, or
(vi) any other event specified by the Committee,
regardless of whether at the time an Option is granted or
thereafter.
11.2 Effect of Change of Control. The Committee may
provide, either at the time an Option is granted or thereafter,
that a Corporate Change shall have such effect as specified by
the Committee, or no effect, as the Committee in its sole
discretion may provide. Without limiting the foregoing, the
Committee may but need not provide, either at the time an Option
is granted or thereafter, that if a Corporate Change occurs, then
effective as of a date selected by the Committee, the Committee
(which for purposes of the Corporate Changes described in (iii)
and (v) above shall be the Committee as constituted prior to the
occurrence of such Corporate Change) acting in its sole
discretion without the consent or approval of any Participant,
will effect one or more of the following alternatives or
combination of alternatives with respect to all outstanding
Options (which alternatives may be conditional on the occurrence
of such of the Corporate Change specified in clause (i) through
(v) above which gives rise to the Corporate Change and which may
vary among individual Participants): (1) in the case of a
Corporate Change specified in clauses (i), (ii) or (iv),
accelerate the time at which Options then outstanding may be
exercised in full for a limited period of time on or before a
specified date (which will permit the Participant to participate
with the Common Stock received upon exercise of such Option in
the event of a Corporate Change specified in clauses (i), (ii) or
(iv), as the case may be) fixed by the Committee, after which
specified date all unexercised Options and all rights of
Participants thereunder shall terminate, (2) accelerate the time
at which Options then outstanding may be exercised so that such
Options may be exercised in full for their then remaining term,
or (3) require the mandatory surrender to the Company of
outstanding Options held by such Participant (irrespective of
whether such Options are then exercisable under the provisions of
the Plan) as of a date, before or not later than sixty days after
such Corporate Change, specified by the Committee, and in such
event the Committee shall thereupon cancel such Options and the
Company shall pay to each Participant an amount of cash equal to
the excess of the fair market value of the aggregate shares
subject to such Option over the aggregate Option price of such
shares; provided, however, the Committee shall not select an
alternative (unless consented to by the Participant) that, if the
Participant exercised his accelerated Options pursuant to
alternative 1 or 2 and participated in the transaction specified
in clause (i), (ii) or (iv) or received cash pursuant to
alternative 3, would result in the Participant's owing any money
by virtue of operation of Section 16(b) of the Exchange Act. If
all such alternatives have such a result, the Committee shall
take such action, which is hereby authorized, to put such
Participant in as close to the same position as such Participant
would have been in had alternative 1, 2 or 3 been selected but
without resulting in any payment by such Participant pursuant to
Section 16(b) of the Exchange Act. Notwithstanding the
foregoing, with the consent of the Participant, the Committee may
in lieu of the foregoing make such provision with respect of any
Corporate Change as it deems appropriate.
SECTION 12. TAXES
12.1 Withholding Requirements. The Committee may make such
provisions or impose such conditions as it may deem appropriate
for the withholding or payment by a Participant of any taxes that
the Committee determines are required in connection with any
Award granted under this Plan, and a Participant's rights in any
Award are subject to satisfaction of such conditions.
33
12.2 Payment of Withholding Taxes. Notwithstanding the
terms of Section 12.1, the Committee may provide in the agreement
or other document evidencing an Award or otherwise that all or
any portion of the taxes required to be withheld by the Company
or, if permitted by the Committee, desired to be paid by the
Participant, in connection with the exercise, vesting, settlement
or transfer of any other Award shall be paid or, at the election
of the Participant, may be paid by the Company by withholding
shares of the Company's capital stock otherwise issuable or
subject to such Award, or by the Participant delivering
previously owned shares of the Company's capital stock, in each
case having a fair market value equal to the amount required or
elected to be withheld or paid, or by a broker selected or
approved by the Company paying such amount pursuant to an
irrevocable commitment by the broker to deliver to the Company
proceeds from the sale of the Shares issuable under the Award.
Any such election is subject to such conditions or procedures as
may be established by the Committee and may be subject to
approval by the Committee.
SECTION 13. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue this Plan or any
agreement or other document evidencing an Award made under this
Plan but, except as provided pursuant to the anti-dilution
adjustment provisions of Section 10.2, no such amendment shall,
without the approval of the stockholders of the Company:
(a) materially increase the maximum number of shares
of Common Stock for which Awards may be granted under this Plan;
(b) reduce the price at which Options may be granted
below the price provided for in Section 6.2;
(c) reduce the exercise price of outstanding Options;
(d) extend the term of this Plan;
(e) change the class of persons eligible to be
Eligible Persons or Participants;
(f) increase the number of shares subject to
Nonemployee Director Options granted to a Nonemployee
Director above the number approved by stockholders as set
forth in Section 6.8;
(g) increase the number of shares that are eligible
for non-Option Awards; or
(h) after any Corporate Change, impair the rights of
any Award holder without such holder's consent.
The Board may amend, alter or discontinue the Plan or any
agreement evidencing an Award made under the Plan, but no
amendment or alteration shall be made which would impair the
rights of any Award holder, without such holder's consent, under
any Award theretofore granted, provided that no such consent
shall be required if the Committee determines in its sole
discretion and prior to the date of any Corporate Change or
change of control (as defined, if applicable, in the agreement
evidencing such Award) that such amendment or alteration either
is required or advisable in order for the Company, the Plan or
the Award to satisfy any law or regulation or to meet the
requirements of any accounting standard.
34
SECTION 14. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
This Plan, the grant and exercise of Awards thereunder, and
the obligation of the Company to sell, issue or deliver Shares
under such Awards, shall be subject to all applicable federal,
state and foreign laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be
required. The Company shall not be required to register in a
Participant's name or deliver any Shares prior to the completion
of any registration or qualification of such Shares under any
federal, state or foreign law or any ruling or regulation of any
government body which the Committee shall determine to be
necessary or advisable. This Plan is intended to constitute an
unfunded arrangement for a select group of management or other
key employees, directors and consultants.
No Option shall be exercisable unless a registration
statement with respect to the Option is effective or the Company
has determined that such registration is unnecessary. Unless the
Awards and Shares covered by this Plan have been registered under
the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person
receiving an Award and/or Shares pursuant to any Award may be
required by the Company to give a representation in writing that
such person is acquiring such Shares for his or her own account
for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.
SECTION 15. OPTION GRANTS BY SUBSIDIARIES
In the case of a grant of an Option to any eligible Employee
employed by a Subsidiary, such grant may, if the Committee so
directs, be implemented by the Company issuing any subject shares
to the Subsidiary, for such lawful consideration as the Committee
may determine, upon the condition or understanding that the
Subsidiary will transfer the shares to the optionholder in
accordance with the terms of the Option specified by the
Committee pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Option may be
issued by and in the name of the Subsidiary and shall be deemed
granted on such date as the Committee shall determine.
SECTION 16. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted
pursuant to this Plan shall confer on any individual any right to
continue in the employ of the Company or interfere in any way
with the right of the Company to terminate an individual's
employment at any time. The agreements or other documents
evidencing Awards may contain such provisions as the Committee
may approve with reference to the effect of approved leaves of
absence.
SECTION 17. LIABILITY OF COMPANY
The Company and any Affiliate which is in existence or
hereafter comes into existence shall not be liable to a
Participant, an Eligible Person or other persons as to:
(a) The Non-Issuance of Shares. The non-issuance or
sale of shares as to which the Company has been unable to
obtain from any regulatory body having jurisdiction the
authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and
(b) Tax Consequences. Any tax consequence expected,
but not realized, by any Participant, Eligible Person or
other person due to the receipt, exercise or settlement of
any Option or other Award granted hereunder.
35
SECTION 18. EFFECTIVENESS AND EXPIRATION OF PLAN
This Plan shall be effective on the date the Company's
stockholders adopt this Plan. All Awards granted under this Plan
are subject to, and may not be exercised before, the approval of
this Plan by the stockholders prior to the first anniversary date
of the effective date of this Plan, by the affirmative vote of
the holders of a majority of the outstanding shares of the
Company present, or represented by proxy, and entitled to vote,
at a meeting of the Company's stockholders or by written consent
in accordance with the laws of the State of Delaware; provided
that if such approval by the stockholders of the Company is not
forthcoming, all Awards previously granted under this Plan shall
be void. No Awards shall be granted pursuant to this Plan more
than 10 years after the effective date of this Plan.
SECTION 19. NON-EXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board nor the
submission of this Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the
power of the Board or the Committee to adopt such other incentive
arrangements as either may deem desirable, including without
limitation, the granting of restricted stock or stock options
otherwise than under this Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
SECTION 20. GOVERNING LAW
This Plan and any agreements or other documents hereunder
shall be interpreted and construed in accordance with the laws of
the State of Delaware and applicable federal law. The Committee
may provide that any dispute as to any Award shall be presented
and determined in such forum as the Committee may specify,
including through binding arbitration. Any reference in this
Plan or in the agreement or other document evidencing any Award
to a provision of law or to a rule or regulation shall be deemed
to include any successor law, rule or regulation of similar
effect or applicability.
36
ATLANTIC COAST AIRLINES HOLDINGS, INC.
Proxy solicited by the Board of Directors for Annual Meeting --
May 24, 2000.
Each of the undersigned, revoking all other proxies heretofore
given, hereby constitutes and appoints Richard J. Surratt and
Richard J. Kennedy, and each of them, with full power of
substitution, as proxy or proxies to represent and vote all
shares of Common Stock, par value $.02 per share (the "Common
Stock"), of ATLANTIC COAST AIRLINES HOLDINGS, INC. (the
"Company") owned by the undersigned at the Annual Meeting and any
adjournments or postponements thereof. The Company's stock may
be voted by or at the direction of non-U.S. citizens provided
that shares they own have been registered in the Company's
Foreign Stock Registry or are registered for voting at the Annual
Meeting. See reverse side to request that shares be so
registered. By signing below, the undersigned represents that it
is a U.S. citizen (as defined in the Proxy Statement) or that the
shares represented by this Proxy have been registered in the
Company's Foreign Stock Registry or are requested to be
registered for this Annual Meeting.
The Board of Directors recommends a vote FOR Items 1, 2 and 3 to
be voted upon at the Annual Meeting:
1. Election of all nominees listed to the Board of Directors,
except as noted (write the names of the nominees, if any, for
whom you withhold authority to vote). Nominees: Kerry B.
Skeen, Thomas J. Moore, C. Edward Acker, Robert E. Buchanan,
Susan MacGregor Coughlin, Daniel L. McGinnis, James C. Miller
III, Judy Shelton and John M. Sullivan.
FOR all WITHHOLD AUTHORITY to vote for all nominees
nominees
For all except: ______________________________.
2. To ratify adoption of the 3. To ratify selection of
Company's 2000 Stock Incentive KPMG LLP as the Company's
Plan. independent auditors for the
current year.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
PLEASE MARK VOTES AS IN THIS EXAMPLE (Continued and to be
signed and dated on the reverse side)
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH
THE DIRECTIONS GIVEN IN THIS PROXY. IF NOT OTHERWISE DIRECTED
HEREIN, SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ITEM 1
(ELECTION OF DIRECTORS), FOR ITEM 2 (RATIFICATION OF THE ADOPTION
OF THE COMPANY'S 2000 STOCK INCENTIVE PLAN) AND FOR ITEM 3
(RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS). IF ANY
OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING,
PROXIES WILL BE VOTED ON SUCH MATTERS AS THE PROXIES NAMED
HEREIN, IN THEIR SOLE DISCRETION, MAY DETERMINE.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY IN THE ENCLOSED
ENVELOPE.
Date
_________________________
, 2000.
Signature
_________________________
__
Title
_________________________
______
_________________________
__________
(Signature, if Held
Jointly)
Please sign exactly as
name appears hereon.
Please manually date this
card. When signing as an
attorney, executor,
administrator, trustee or
guardian, give full title
as such. If a
corporation, sign in full
corporate name by
President or other
authorized officer. If a
partnership, sign in
partnership name by
authorized person.
? Check box to request
that shares be
registered for voting by
a non-U.S. citizen at
the Annual Meeting.