SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
March 15,2005
FLYi, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-21976 13-3621051
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
45200 Business Court, Dulles, VA 20166
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(703) 650-6000
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 1.01 Entry into a Material Definitive Agreement
On March 15, 2005, the Compensation Committee of the Board
of Directors authorized a number of actions to lower the
compensation of its three senior executives, Kerry Skeen,
its Chairman and Chief Executive Officer, Thomas Moore, its
President and Chief Operating Officer and Richard Surratt,
Executive Vice President, Treasurer and Chief Financial
Officer. The actions approved by the Compensation
Committee, which include amending the executives' employment
agreements, have been agreed to by the executives and are
designed to promote the Company's efforts to reduce its
costs, on both a cash and accounting basis.
First, the Compensation Committee approved reducing Mr.
Skeen's salary by 15% and reducing the salaries of Messrs.
Moore and Surratt by 10%. Messrs. Skeen, Moore and Surratt
have agreed to amendments to their employment agreements to
reflect the reduced salaries. As a result of these actions,
as of April 1, 2005, the executives' adjusted salaries will
be as follows:
Current Annual Adjusted Annual
Base Salary Base Salary
Kerry Skeen, $435,000 $369,750
Chairman and
CEO
Tom Moore, $275,000 $247,500
President and
COO
Richard $215,000 $193,500
Surratt, EVP
and CFO
These reduced salaries have the consequence of also reducing
the amount of other elements of compensation that are
calculated under the executives' employment agreements as a
percentage or multiple of current base pay. In connection
with the foregoing action, the Compensation Committee and
Mr. Skeen agreed to a one-year, automatic extension of
Mr. Skeen's employment under his agreement, thereby
deferring Mr. Skeen's right to retire and collect retirement
benefits under the agreement. Messrs. Skeen, Moore and
Surratt did not receive any bonuses under the Company's
bonus plans for 2004. Mr. Surratt was granted a cash bonus
of $50,000 in 2005 for his efforts in leading the Company's
financial restructuring that was announced on February 22,
2005.
Second, each of the executives agreed to waive and terminate
their rights to future deferred compensation under their
employment agreements. Prior to these amendments, Messrs.
Skeen and Moore are each entitled to deferred compensation
at the rate of 100% of their respective base salaries,
meaning that the elimination of this right is equivalent to
a 50% reduction in the amount of their fixed annual pay
(i.e., compensation other than bonuses, stock options and
perquisites). Mr. Surratt currently is entitled to deferred
compensation at the rate of 75% of his base salary. In
addition to reducing the Company's compensation expenses,
elimination of the deferred compensation contributions will
reduce the value of other benefits that are based on the
deferred compensation program. The deferred compensation
arrangements will be terminated as of May 1, 2005 in the
case of Mr. Skeen. In the case of Messrs. Moore and
Surratt, the deferred compensation arrangements will be
terminated when they are credited with nine years of service
under the arrangements (January 1, 2006 and January 1, 2008,
respectively). In connection with this, the Compensation
Committee authorized terminating the Company's obligation to
advance payment for premiums due under "split-dollar" life
insurance policies that the executives hold. Upon
termination of the deferred compensation arrangements, the
company will offset its obligation to pay the deferred
compensation amounts against the executives' obligation to
pay the Company an amount equal to the insurance policy
premiums.
Third, Messrs. Skeen and Moore agreed to release the Company
from its obligation to pay future premiums due under the
foregoing "split dollar" life insurance policies. As a
result, the Company will not be required to pay premiums in
the amount of $710,000 that otherwise would be due on
January 1, 2006.
Fourth, Mr. Skeen elected to defer until May 2006 the
Company's obligation to pay him approximately $1.4 million,
representing 50% of a tax reimbursement payment provided for
in his employment agreement. This amount, which otherwise
would have been payable to Mr. Skeen no later than the date
of the Company's 2005 annual meeting of stockholders,
represents a payment for amounts that will be taxable to Mr.
Skeen under benefits he has accrued over the past nine years
of service with the Company.
Finally, Messrs. Skeen, Moore and Surratt have agreed to the
cancellation of out-of-the-money options covering
approximately 2.3 million shares of the Company's common
stock. The Compensation Committee anticipates using these
shares for future equity compensation awards to key
employees at the Company.
The reductions in salary, elimination of deferred
compensation plan payments, and deferral of tax payments
agreed to by Messrs. Skeen, Moore and Surratt will save the
Company approximately $2.2 million in cash savings for the
Company during the period April 1, 2005 to March 31, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has caused this current report to be
signed on its behalf by the undersigned hereunto duly
authorized.
FLYi, Inc.
Date: March 18, 2005 By: /S/ Richard J. Surratt
Richard J. Surratt
Executive Vice President and
Chief Financial Officer