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, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box)
[ ] 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:
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2. Aggregate number of securities to which transaction applies:
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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):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] 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, INC.
515-A Shaw Road
Dulles, Virginia 20166
March 31, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Meeting") of Atlantic Coast Airlines, Inc. (the "Company"), to be held on
Tuesday, May 5, 1998, at 10:00 a.m. local time, at the Washington Dulles Airport
Hilton Hotel, 13869 Park Center Road, Herndon, Virginia.
This year we are asking you to elect nine directors of the Company to serve
until the 1999 Annual Meeting. We are pleased that our nominees include Susan
MacGregor Coughlin, who was appointed to serve on the Board in October 1997. We
are also asking you to amend the Company's Restated Certificate of Incorporation
to change the name of the Company to "ACA Holdings, Inc." and to increase the
number of shares of stock that the Company is authorized to issue to 76,000,000,
to ratify the Board of Directors' adoption of an amendment to the Company's
Stock Incentive Plan and to ratify the Board of Directors' selection of
independent auditors for the year ending December 31, 1998. The Board of
Directors recommends that you vote FOR each of these proposals.
At the 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 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 enclosed postage-paid envelope.
Thank you for your cooperation.
Sincerely,
/S/
C. Edward Acker
Chairman of the Board of Directors
ATLANTIC COAST AIRLINES, INC.
515-A Shaw Road
Dulles, Virginia 20166
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1998
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To the Stockholders of ATLANTIC COAST AIRLINES, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Meeting") of Atlantic Coast Airlines, Inc., a Delaware corporation (the
"Company"), will be held on Tuesday, May 5, 1998, at 10:00 a.m., local time, at
the Washington Dulles Airport Hilton Hotel, 13869 Park Center Road, Herndon,
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 amend the Company's Restated Certificate of Incorporation to change the
Company's name to "ACA Holdings, Inc.";
3) To amend the Company's Restated Certificate of Incorporation to increase the
total number of shares that the Company is authorized to issue;
4) To ratify the Board of Directors' adoption of an amendment to increase the
number of shares available under the Company's Stock Incentive Plan;
5) To ratify the Board of Directors' selection of the Company's independent
auditors for the fiscal year ending December 31, 1998; and
6) 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 March 16, 1998 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 if you are not
personally present, 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
March 31, 1998
ATLANTIC COAST AIRLINES, INC.
515A Shaw Road
Dulles, Virginia 20166
Phone: (703) 925-6000
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PROXY STATEMENT
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Atlantic Coast Airlines, Inc. (the
"Company") for use at the Company's annual meeting of stockholders, to be held
at 10:00 a.m., local time, on Tuesday, May 5, 1998, at the Washington Dulles
Airport Hilton Hotel, 13869 Park Center Road, Herndon, Virginia, and at any
adjournment or postponement thereof (the "Meeting").
Written communications to the Company should be sent to the Company's
office, located at 515A Shaw Road, Dulles, Virginia 20166. The Company can be
reached by telephone at (703) 925-6000. This Proxy Statement and the
accompanying proxy card (the "Proxy Card"), together with a copy of the
Company's 1997 Annual Report, are first being mailed on or about March 30, 1998,
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 March 16, 1998
(the "Record Date").
Matters to be Considered 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; amend the Company's Restated Certificate of Incorporation to change
the Company's name to "ACA Holdings, Inc."; amend the Company's Restated
Certificate of Incorporation to increase the total number of shares which the
Company has authority to issue to 76,000,000 shares; ratify the Board of
Directors' adoption of an amendment to increase the number of shares available
under the Company's Stock Incentive Plan; ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP, Certified Public Accountants, as the
Company's independent auditors for the fiscal year ending December 31, 1998; and
transact such other business as may properly come before the Meeting or any
adjournment or postponement thereof.
Voting at the Meeting
The Board of Directors has fixed March 16, 1998, as the Record Date for
the Meeting, 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 7,640,286 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. Approval
of the proposed amendments to the Company's Restated Certificate of
Incorporation requires an affirmative vote of at least a majority of the shares
outstanding as of the Record Date. Approval of other matters to be raised at the
Meeting requires an affirmative vote of at least a majority of the shares voted
and entitled to be voted at the Meeting. On each of these matters, holders of
record of Common Stock on the Record Date will be entitled to one vote for each
share of Common Stock held.
In accordance with Delaware law, abstentions and shares held of record
by a broker or its nominee ("Broker Shares") that are voted on any particular
matter are included for purposes of determining the number of votes present and
entitled to vote on that matter. Broker Shares that are not voted on any
particular matter at the Meeting will not be treated as entitled to vote for
that matter.
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 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) giving a later dated proxy at any time before the
Meeting. Attendance at the Meeting will not, by itself, revoke a proxy.
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 1997 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.
PROPOSAL ONE
ELECTION OF DIRECTORS
Introduction
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. 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 March 30,
1998 and position with the Company, and the year in which each nominee first
became a director:
Name Age Position Director
Since
C. Edward Acker..................... 69 Chairman of the Board of Directors 1991
Kerry B. Skeen...................... 45 President, Chief Executive Officer and 1991
Director
Thomas J. Moore..................... 41 Executive Vice President, Chief Operating 1997
Officer and Director
Robert E. Buchanan.................. 55 Director 1995
Susan MacGregor Coughlin............ 52 Director 1997
Joseph W. Elsbury................... 68 Director 1991
James J. Kerley..................... 75 Director 1991
James C. Miller..................... 55 Director 1995
John M. Sullivan.................... 61 Director 1995
Recommendation of the Board
.........The Board of Directors recommends a vote "FOR" each of the nominees.
Unless a contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR election of each of the nominees.
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.
.........C. Edward Acker. Mr. Acker is a co-founder of the Company and was its
Chief Executive Officer from its formation in October 1991 until March 1995. He
became Chairman of the Board of Directors in April 1993, prior to which he had
been Vice Chairman of the Board of Directors. He has been a Director since
October 1991 and served as President of the Company from October 1991 until
October 1992. Mr. Acker served as Chairman and Chief Executive Officer of Pan
American World Airways, Inc. ("Pan Am") 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.
.........Kerry B. Skeen. Mr. Skeen is a co-founder of the Company and has been
its President since October 1992 and Chief Executive Officer since March 1995.
From October 1991 until October 1992, Mr. Skeen was Executive Vice President of
the Company. He has been a Director of the Company since October 1991 and was
its Chief Operating Officer from October 1991 to April 1997. 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."
.........Thomas J. Moore. Mr. Moore has been Executive Vice President and Chief
Operating Officer since April 1997, and was Senior Vice President of Maintenance
and Operations from June 1994 until then. 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.
.........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 of its hub at
Washington-Dulles International Airport.
.........Susan MacGregor Coughlin. Mrs. Coughlin has been a Director since
October 1997. Mrs. Coughlin has been 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.
.........Joseph W. Elsbury. Mr. Elsbury has been a Director of the Company since
its formation in October 1991. Mr. Elsbury has been a partner in Elsbury &
Acker, an oil and natural gas exploration company, since 1987.
.........James J. Kerley. Mr. Kerley has been a Director of the Company since
its formation in October 1991 and an independent financial consultant since
1986. Between 1993 and 1994, Mr. Kerley served as the non-executive Chairman of
the Board of Rohr, Inc. From 1981 through 1985 he was Vice Chairman of the Board
of Directors and Chief Financial Officer of Emerson Electric Co., and for eleven
years prior to that was Chief Financial Officer of Monsanto Company. From 1962
to 1968, he served as Vice President-Finance and Chief Financial Officer of
Trans World Airlines, Inc. Mr. Kerley is a director of Borg-Warner Automotive,
Inc., DT Industries, Inc. and Goss Graphics Systems, Inc. During the past five
years, Mr. Kerley has been, but is no longer, a member of the Boards of various
other corporations, including Rohr Industries, Inc., Kellwood Company, Cyprus
Amax Minerals, ESCO Electronics Corporation and Sterling Chemicals, Inc. He has
also served as a director of Trans World Airlines, Inc., World Airways and
Frontier Airlines.
.........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.
.........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 Group
Maintenance America Corp.
Committees and Board Meetings
.........During 1997, there were four regular meetings of the Board of Directors
and four meetings 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 except for Mr. Kerley, who attended 67% of these
meetings.
.........The Board has two standing committees -- an Audit Committee and a
Compensation Committee. Their functions are described below.
.........Audit Committee. The Audit Committee meets with management and the
Company's independent accountants to consider the adequacy of the Company's
internal controls and financial reporting. The Audit Committee recommends to the
Board the Company's independent accountants; discusses with the independent
accountants their audit procedures, including the proposed scope and timing of
the audit, the audit results and accompanying management letters; reviews the
auditor's fees and services; and in general endeavors to ensure the independence
of the auditors and accountants. The Audit Committee held two meetings during
1997. The current members of the Audit Committee are Messrs. Elsbury, Kerley and
Miller, who serves as chairman.
.........Compensation Committee. The Compensation Committee reviews and approves
the direct and indirect compensation and employee benefits of the executive
officers of the Company, particularly the Chief Executive Officer; administers
the Company's stock option and incentive compensation plans; and reviews in
general the Company's policies relating to the compensation of senior management
and other employees. The Compensation Committee held four meetings during 1997.
The current members of the Compensation Committee are Messrs. Sullivan, Buchanan
and Acker, who serves as chairman.
Directors' Compensation
.........Directors, with the exceptions noted below, receive an annual fee of
$16,000 for serving as Directors, and are reimbursed for out-of-pocket expenses
incurred in attending meetings of the Board of Directors or committees thereof.
Messrs. Acker, Skeen, and Moore, as officers of the Company, do not receive
compensation for their service on the Board. Mr. Sullivan waived his annual fees
through December 31, 1997, but began receiving his fee effective January 1,
1998. Non-employee directors are entitled to certain flight benefits made
available to employees of the Company.
.........Effective for the 1998 calendar year, outside directors also receive as
additional compensation options to purchase 2,000 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. The option exercise price
for 1998 grants was the last traded price of the Company's common stock at the
time of the grant.
PROPOSAL TWO
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY TO
"ACA HOLDINGS, INC."
On January 29, 1998, the Board of Directors adopted resolutions (i)
proposing to amend the Company's Restated Certificate of Incorporation to change
the Company's name to "ACA Holdings, Inc.," subject to stockholder approval (the
"Name Amendment"); (ii) declaring the Name Amendment to be advisable and in the
best interests of the Company and its stockholders; and (iii) calling for
submission of the Name Amendment for approval by the Company's stockholders at
the Meeting.
Proposed Amendment to Restated Certificate of Incorporation
The following is the text of Article I of the Company's Restated
Certificate of Incorporation, as proposed to be amended by the Name Amendment:
1. The name of the corporation (the "Corporation") is ACA Holdings,
Inc.
* * *
Purpose and Effect of the Name Amendment
The Board of Directors believes that it is in the Company's best
interest to change the Company's name because the Company, Atlantic Coast
Airlines, Inc., a Delaware corporation (referred to in this paragraph only as
the "Parent"), is a holding company that owns 100% of the stock of Atlantic
Coast Airlines, a California corporation (the "Subsidiary"). The Subsidiary
engages in the business of operating an airline. Following stockholder approval
of the Name Amendment, and conditioned on its obtaining certain required
approvals, the Subsidiary intends to reincorporate as a Delaware corporation
under the name "Atlantic Coast Airlines, Inc." If approved, the Name Amendment
will make the name "Atlantic Coast Airlines, Inc." available for the Subsidiary
in Delaware, make the Parent's name more clearly distinguishable from the
Subsidiary's name and reflect the Parent's status as a holding company.
Vote Necessary to Approve the Amendment
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is necessary to approve the Name Amendment.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the proposal to amend
the Company's Restated Certificate of Incorporation to change the Company's name
to "ACA Holdings, Inc." Unless a contrary choice is specified, proxies solicited
by the Board of Directors will be voted FOR approval of the Name Amendment.
PROPOSAL THREE
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
On January 29, 1998, the Board of Directors adopted resolutions (i)
proposing that the Company's Restated Certificate of Incorporation be amended to
increase the number of shares of Common Stock that the Company is authorized to
issue, subject to stockholder approval of the amendment (the "Stock Amendment"),
(ii) declaring the Stock Amendment to be advisable and in the best interests of
the Company and its stockholders; and (iii) calling for submission of the Stock
Amendment for approval by the Company's stockholders at the Meeting.
Introduction
The Company's Restated Certificate of Incorporation currently
authorizes the issuance of (i) 15,000,000 shares of Common Stock, with a par
value of two cents ($.02) per share ("Common Stock"); (ii) 6,000,000 shares of
Class A-Non-Voting Common Stock, with a par value of two cents ($.02) per share
("Class A Non-Voting Common"); and (iii) 5,000,000 shares of Preferred Stock,
with a par value of two cents ($.02) per share ("Preferred Stock").
Current Use of Shares. As of March 2, 1998, the Company had
approximately 11.5 million shares of Common Stock issued or committed and
approximately 3.5 million shares remaining available for other purposes. The
issued or committed shares included approximately 7.6 million shares
outstanding, 2.9 million shares reserved for future issuance to holders of its
7% Convertible Subordinated Notes due 2004 (the "Notes," which are convertible
into shares of Common Stock); and 1.0 million shares reserved for future
issuance under the Company's various benefit plans, all of which are currently
reserved for outstanding options.
Stock Split. As part of the same resolution in which the Board of
Directors proposed the Stock Amendment, the Board considered whether to effect a
stock split. The Board determined that under certain conditions it may be
appropriate to declare a stock split (the "Stock Split"), which would be
effected as a dividend. Accordingly, the Board approved the Stock Split, and
delegated to the Company's Chief Executive Officer the decision whether to
effect the Stock Split subject to satisfaction of certain conditions. The
Board's authorization to declare the Stock Split expires on April 22, 1998. If
the Chief Executive Officer determines to declare the Stock Split, it will be
conditioned on stockholder approval of the Stock Amendment. Stockholders are not
being asked to vote on the Stock Split, but the Stock Split, if declared, will
not take place unless the Stock Amendment is approved. Without this increase in
authorized shares, the Company would not have enough authorized but unissued
shares of Common Stock to effect the Stock Split.
Proposed Amendment to Restated Certificate of Incorporation
The Board of Directors has adopted resolutions setting forth (i) the
proposed amendment to Paragraph 1 of Article IV of the Company's Restated
Certificate of Incorporation; (ii) the advisability of the Stock Amendment; and
(iii) a call for submission of the Stock Amendment for approval by the Company's
stockholders at the Meeting.
The following is the text of Paragraph 1 of article IV of the Restated
Certificate of Incorporation of the Company, as proposed to be amended:
1. The total number of shares which the Corporation shall have the
authority to issue is 76,000,000 shares, which shall consist of
(i) 65,000,000 shares of Common Stock ("Common"), par value $.02
per share; (ii) 6,000,000 shares of Class A Non-Voting Common
Stock, par value $.02 per share ("Class A Non-Voting Common" and,
together with the Common, the "Common Stock"); and (iii)
5,000,000 shares of preferred stock, par value $.02 per share
("Preferred Stock").
* * *
Purpose and Effect of the Stock Amendment
The Board of Directors believes that it is in the Company's best
interests to increase the number of shares of Common Stock that the Company is
authorized to issue in order to give the Company additional flexibility to
maintain a reasonable stock price through stock splits and stock dividends and
to issue Common Stock for other proper corporate purposes that may be identified
in the future, including without limitation to raise equity capital, to adopt
additional employee benefit plans or reserve additional shares for issuance
under such plans, and to make acquisitions through the use of Common Stock. As
noted above, the Board of Directors has approved the Stock Split, subject to the
Chief Executive Officer's final determination and to the satisfaction of certain
conditions, including stockholder approval of the Stock Amendment.
Other than with respect to the Stock Split and as permitted or required
under the Company's employee benefit plans, outstanding options and the Notes,
(which are convertible into shares of Common Stock), the Board of Directors has
no immediate plans, understandings, agreements or commitments to issue
additional Common Stock for any purposes. However, no additional action or
authorization by the Company's stockholders would be necessary prior to the
issuance of additional shares unless required by applicable law or the rules of
any stock exchange or national securities association trading system on which
the Common Stock is then listed or quoted.
Under the Company's Restated Certificate of Incorporation, the
Company's stockholders do not have preemptive rights with respect to Common
Stock. Thus, should the Board of Directors elect to issue additional shares of
Common Stock, existing stockholders would not have any preferential rights to
purchase the newly issued shares. In addition, if the Board of Directors elects
to issue additional shares of Common Stock, such issuance could have a dilutive
effect on the earnings per share, voting power and shareholdings of current
stockholders.
The Stock Amendment could, under certain circumstances, have an
anti-takeover effect, although this is not its intention. For example, in the
event of a hostile attempt to take control of the Company, it may be possible
for the Company to endeavor to impede the attempt by issuing shares of the
Common Stock, thereby diluting the voting power of the other outstanding shares
and increasing the potential cost to acquire control of the Company. The Stock
Amendment therefore may have the effect of discouraging unsolicited takeover
attempts. However, the Board of Directors is not aware of any attempt or
proposal to take control of the Company.
Effect of the Potential Stock Split
If declared, the Stock Split will be effected as a special distribution
to holders of outstanding Common Stock. If the Company's Chief Executive Officer
determines to declare the Stock Split, the Stock Split will not change the
Company's total stockholders' equity. The aggregate amount of capital
represented by the outstanding shares of Common Stock will be increased by $.02
for each share issued to effect the Stock Split and the Company's Additional
paid-in capital account will be reduced by the same amount. The Company has been
advised that, based on current tax law, the Stock Split should not result in any
gain or loss for Federal income tax purpose. As noted above, the Stock Split is
contingent, among other events, on stockholder approval of the Stock Amendment,
but stockholders are not being asked to vote on the Stock Split.
Vote Necessary to Approve the Amendment
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is necessary to approve the Stock Amendment.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the proposal to amend
the Company's Restated Certificate of Incorporation to increase the number of
shares of Common Stock that the Company is authorized to issue to 76,000,000.
Unless a contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR approval of the Stock Amendment.
PROPOSAL FOUR
ADOPTION OF AN AMENDMENT TO THE ATLANTIC COAST AIRLINES, INC.
1995 STOCK INCENTIVE PLAN
The 1995 Stock Incentive Plan (the "1995 Plan) was adopted by the Board
of Directors and approved by the shareholders in 1996. As approved at that time,
the aggregate number of shares of the Company's common stock $0.02 par value
(the "Common Stock") that can be issued under the 1995 Plan may not exceed
750,000. As of March 16, 1998, 91 shares remained available for future Awards
(as defined below) under the 1995 Plan and under the Company's 1992 Stock
Incentive Plan. On January 29, 1998, the Board of Directors approved, subject to
stockholder ratification, an amendment to the 1995 Stock Incentive Plan to
increase the aggregate number of shares of Common Stock that can be issued under
the 1995 Plan to 1,250,000. On that same date, the Compensation Committee also
approved awards of options to purchase an additional 150,000 shares subject to
the approval by the shareholders of the proposed amendment. Other than with
respect to the number of shares available under the 1995 Plan, the Board has not
amended the other terms of the 1995 Plan. The following summary of the main
features of the 1995 Plan is qualified in its entirety by the complete text of
the 1995 Plan, which is set out as Exhibit A to this Proxy Statement.
PURPOSE. The 1995 Plan is designed to encourage ownership of the Common
Stock by eligible key employees and directors of the Company and to provide
increased incentive for such employees and directors to render services and to
exert maximum effort for the business success of the Company through grants of
options and other stock-based awards (any such option or award, an "Award"). In
addition, the Plan is designed to further strengthen the identification of
employees and corporate directors with the stockholders by providing for various
incentive arrangements that involve or are based on the value of the Common
Stock.
The 1995 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 Securities Exchange Act of 1934 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 Internal Revenue Code (the "Code").
ELIGIBILITY. The persons eligible to participate in the Plan as
recipients of Awards ("Participant") shall include only key employees and
directors of the Company or its affiliates at the time the Award is granted. The
Company estimates that approximately 100 employees and directors may potentially
be eligible for awards under the 1995 Plan.
ADMINISTRATION. The 1995 Plan is administered by a committee (any such
committee, a "Committee") of the Board of Directors of the Company (the
"Board"). With respect to Awards granted to the Company's executive officers,
the Committee may consist of two or more directors meeting the requirements
necessary for Awards to be exempt from Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 and/or for Awards to qualify as "performance based
compensation" under Section 162(m) of the Code, to the extent that the Company
determines to satisfy such requirements. With respect to any Award that is not
intended to satisfy the conditions of Exchange Act Rule 16b-3 or Code Section
162(m)(4)(c), the Committee may delegate all or any of its responsibilities to
one or more directors of the Company, including individuals who participate in
the 1995 Plan.
Subject to the express provisions of the 1995 Plan, the Committee has
broad authority to administer and interpret the 1995 Plan, including, without
limitation, authority to determine who is eligible to participate in the 1995
Plan and to which of such persons, and when, Awards are granted under the 1995
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 agreement evidencing Awards made under
the 1995 Plan; and to make all other determinations deemed necessary or
advisable for the administration of the 1995 Plan.
STOCK SUBJECT TO THE 1995 PLAN. The aggregate number of shares of the
Common Stock that can be issued under the 1995 Plan may not exceed 1,250,000.
The aggregate number of shares subject to Awards granted under the 1995 Plan
during any calendar year to any one Participant may not exceed 500,000. The
number of shares subject to the 1995 Plan and to outstanding Awards under the
1995 Plan will be appropriately adjusted by the Board of Directors if the
Company's Common Stock is affected through a reorganization, merger, stock
split, spin-off, or similar transaction. For purposes of calculating the
aggregate number of shares issued under the 1995 Plan, only the number of shares
actually issued upon exercise or settlement of an Award and not returned to 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. On March 16, 1998, the Company's closing stock
price was $49.375.
AWARDS. Awards that are granted under the 1995 Plan are not restricted
to any specified form or structure. Instead, the 1995 Plan authorizes the grant,
issuance, sale or bonus grant of stock options, restricted stock, reload
options, stock appreciation rights, limited stock appreciation rights, or
performance shares, or any other arrangement that involves or might involve the
issuance of Common Stock or a right or interest with a value based on the value
of the Common Stock, and an Award may consist of one such security or benefit,
or consist of or be amended to include two or more of them in tandem or in the
alternative. The Committee may permit the taxes required to be withheld by the
Company or paid by the Participant in connection with the exercise of an option
or the exercise, vesting or settlement of any other Award to be satisfied by
having the Company withhold shares of Common Stock issuable under such option or
Award, or by surrendering to the Company previously owned shares.
STOCK OPTIONS. Subject to the express provisions of the 1995 Plan and
as discussed in this paragraph, the Committee has discretion to determine the
vesting schedule of options, the events causing an option to expire, the number
of shares subject to any option, and such further terms and conditions, in each
case not inconsistent with the 1995 Plan, as may be determined from time to time
by the Committee. Options granted under the 1995 Plan may be either Incentive
Stock Options qualifying under Code Section 422 or options which are not
intended to qualify as Incentive Stock Options ("nonqualified options"). The
exercise price for options is determined by the Committee, but in the case of
options intended to qualify as Incentive Stock Options or as performance based
compensation under Code Section 162(m) may not be less than 100% of the fair
market value of the Company's Stock on the date the option is granted. The
exercise price of an option may be paid through various means specified by the
Committee, including in cash or by check, by delivering to the Company shares of
the Company's 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). Options may have a term of up to ten years, and
options with a less than ten year term may be amended to increase the term
thereof to up to ten years. The Committee from time to time may permit a
Participant to surrender for cancellation any unexercised outstanding option and
receive from the Company in exchange an option for such number of shares of
Common Stock as may be designated by the Committee. The Committee may, with the
consent of the person entitled to exercise any outstanding option, amend such
option, including reducing the exercise price of any option to not less than the
fair market value of the Common Stock at the time of the amendment and extending
the term thereof.
CHANGE OF CONTROL. The Committee may provide that a Corporate Change
(as defined below) has such effect (if any) as the Committee specifies, which
may include that options become fully exercisable, either for their full term or
for a limited time, or that options are surrendered to the Company for
substitution with options issued by the other company involved in the Corporate
Change or for cancellation and payment of the difference between the aggregate
fair market value of the shares underlying the option and the aggregate exercise
price of the option. "Corporate Change" is defined in the 1995 Plan to include
certain transactions that would result in over 50% of the Company's outstanding
shares being held by certain persons or groups, certain substantial changes in
the Board of Directors, the approval of certain fundamental changes to the
Company's structure, such as merger, consolidation, reorganization, liquidation
or dissolution and other events specified by the Committee.
AMENDMENTS AND TERMINATION. The Board may amend, alter or discontinue
the Plan, but no amendment or alteration shall be made which would impair the
rights of any Award holder, without his consent, under any Award theretofore
granted. Notwithstanding the foregoing, if an amendment to the 1995 Plan would
affect the ability of Awards granted under the 1995 Plan to comply with Rule
16b-3 under the Exchange Act or Section 422 or 162(m) or other applicable
provisions of the Code, the amendment shall be approved by the Company's
stockholders to the extent required to comply with Rule 16b-3 under the Exchange
Act, Section 422 or Section 162(m) of the Code, or other applicable provisions
of or rules under the Code.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. The following is a brief
summary of the principal United States Federal income tax consequences under
current Federal income tax laws related to incentive Awards under the 1995 Plan.
This summary is not intended to be exhaustive and, among other things, does not
describe state or local tax consequences.
Section 162(m): As described above, options granted under the
1995 Plan may qualify as `performance-based compensation' under Section
162 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). To so
qualify, options must have an exercise price at least equal to the fair
market value of the underlying shares on the date of grant, be awarded
by a Committee consisting of two or more `outside directors' (as
defined in Section 162), and satisfy the 500,000 share limit on the
total number of shares subject to options that may be awarded to any
one Participant during any calendar year.
Nonqualified Options: The recipient of a nonqualified option
does not recognize income at the time the option is granted. When the
nonqualified option is exercised, the grantee recognizes ordinary
income equal to the difference between the fair market value on the
exercise date of the number of shares issued and their exercise price.
The Company receives a deduction equal to the amount of ordinary income
recognized by the Participant. The Participant's basis in the shares
acquired upon exercise of an option is equal to their exercise price
plus the ordinary income recognized upon exercise. Upon subsequent
disposition of the shares, the Participant will recognize capital gain
or loss, which will be short-term or long term, depending upon the
length of time the shares were held since the date the nonqualified
option was exercised.
Incentive Stock Options: In general, the recipient of an
Incentive Stock Option will not be subject to tax at the time the
Incentive Stock Option is granted or exercised. However, the excess of
the fair market value of the shares received upon exercise of the
Incentive Stock Option over their exercise price is potentially subject
to the alternative minimum tax. Upon disposition of the shares acquired
upon exercise of an Incentive Stock Option, long-term capital gain or
loss will be recognized in an amount equal to the difference between
the sales price and the aggregate exercise price for those shares
provided that the Participant has not disposed of the shares within one
year from the date the Incentive Stock Option was exercised and two
years from the date the Incentive Stock Option was granted. If the
participant disposes of the shares without satisfying both holding
period requirements (a `Disqualifying Disposition'), the participant
will recognize ordinary income at the time of such Disqualifying
Disposition to the extent of the difference between the option exercise
price and the lesser of the fair market value of the shares on the date
the Incentive Stock Option is exercised or the amount realized on such
Disqualifying Disposition. Any remaining gain or loss is treated as a
short-term or long-term capital gain or loss, depending upon how long
the shares have been held. The Company is not entitled to a tax
deduction upon either the exercise of an Incentive Stock Option or upon
disposition of the shares acquired pursuant to such exercise, except to
the extent that the Participant recognizes ordinary income in a
Disqualifying Disposition.
Special Rules. To the extent a Participant pays all or part of
the option exercise price of a nonqualified stock option by tendering
shares already owned by the Participant, the tax consequences described
above apply except that the number of shares received upon such
exercise shall have the same basis and tax holding period as the shares
surrendered. If the shares surrendered had previously been acquired
upon the exercise of an Incentive Stock Option, the surrender of such
shares may be a Disqualifying Disposition if the holding period
requirements described above have not been satisfied with respect to
such shares at the time of such exercise. The additional shares of the
Company Common Stock received upon such exercise have a tax basis equal
to the amount of ordinary income recognized on such exercise and a
holding period which commences on the date of exercise. Under proposed
Treasury regulations, if any Participant exercises an Incentive Stock
Option by tendering shares previously acquired on the exercise of an
Incentive Stock Option, a Disqualifying Disposition may occur if the
holding period requirements described above have not been satisfied
with respect to such shares at the time of such exercise, and the
Participant may recognize income and be subject to other basis
allocation and holding period requirements.
NEW PLAN BENEFITS. On January 29, 1998, the Compensation Committee approved the
grant of certain stock options to employees under the 1995 Plan subject to
shareholder approval of this Proposal Four. The following table sets forth the
number of shares underlying these options.
Number of Shares Underlying
Name and Position Option
Kerry B. Skeen, President & CEO 50,000
C. Edward Acker, Chairman --
Thomas J. Moore, Executive Vice President 25,000
Michael S. Davis, Senior Vice President 15,000
Paul H. Tate, Senior Vice President & CFO 25,000
Executive Officers, as a Group 130,000
Non-Executive Directors, as a Group --
Non-Executive Officer Employees, as a Group 20,000
VOTE NECESSARY TO RATIFY AMENDMENT. 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 amendment to the 1995
Plan.
RECOMMENDATION OF THE BOARD. The Board of Directors recommends a vote
"FOR" ratification of the amendment to increase the number of shares of Common
Stock available under the 1995 Plan. Unless a contrary choice is specified,
proxies solicited by the Board of Directors will be voted FOR ratification of
the amendment.
PROPOSAL FIVE
RATIFICATION OF INDEPENDENT AUDITORS
The Board has selected KPMG Peat Marwick LLP, Certified Public
Accountants, as the Company's independent auditors for the fiscal year ending
December 31, 1998. 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.
Effective October 24, 1997, the Company dismissed BDO Seidman LLP as
its certifying accountant. BDO Seidman's reports on the Company's financial
statements for the fiscal years ending December 31 1995 and 1996 did not contain
any adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Company's past two fiscal years, there were not any disagreements with BDO
Seidman on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure that, if not resolved to BDO Seidman's
satisfaction, would have caused it to make reference to the subject matter of
the disagreements in connection with its reports. The Board of Directors' Audit
Committee recommended, and the Board of Directors approved, the decision to
change accountants. KPMG Peat Marwick LLP conducted the Company's audit for
fiscal 1997.
A representative of KPMG Peat Marwick 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 Peat Marwick LLP as the Company's
independent auditors.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the ratification of the
selection of KPMG Peat Marwick LLP as the Company's independent auditors for the
year ending December 31, 1998. Unless a contrary choice is specified, proxies
solicited by the Board of Directors will be voted FOR ratification of the
selection of KPMG Peat Marwick LLP.
EXECUTIVE OFFICERS
The following table sets forth the name, age as of March 30, 1998, and
position of each executive officer of the Company:
Officer
Name Age Position Since
---- --- -------- -----
C. Edward Acker...................... 69 Chairman of the Board of Directors 1991
Kerry B. Skeen....................... 45 Chief Executive Officer, President, and 1991
Director
Thomas J. Moore...................... 41 Executive Vice President and Chief 1994
Operating Officer
Paul H. Tate......................... 46 Senior Vice President, Chief Financial 1997
Officer, Treasurer, and Assistant
Secretary
Michael S. Davis..................... 33 Senior Vice President - Customer Service 1995
Richard J. Kennedy................... 43 Vice President, General Counsel and 1996
Secretary
David W. Asai........................ 42 Vice President Financial Planning, 1998
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. Acker, 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
elected as executive officers of the Company.
.........Paul H. Tate. Mr. Tate has served as Senior Vice President and Chief
Financial Officer since February 1997. From 1993 until that time, he served in
various officer capacities at Reno Air, Inc., based in Reno, Nevada, most
recently as Chief Financial Officer. Prior to that Mr. Tate served as Vice
President - Controller and Vice President of Information Systems with Midway
Airlines for over eleven years. Mr. Tate is a Certified Public Accountant.
.........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, 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.
.........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, most recently as 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
1997 and the Company's four other most highly compensated executive officers
serving as executive officers at December 31, 1997. Bonus amounts reflect
amounts earned for the specified year regardless of when paid. Amounts reported
as earned in 1995 have been restated from the April 10, 1996 Proxy Statement to
conform to this method of reporting.
Summary Compensation Table
Long Term
Compensation
Annual Other Awards All
Compensation Annual Securities Other
Name and Current Position Year Salary Bonus Compensation Underlying Compensation
------------------------- ---- ------ ----- ------------ Options ------------
C. Edward Acker 1997 $180,000 $52,406 $8,380 (1) 10,000 $3,491 (2)
Chairman and former 1996 180,000 45,838 275 (1) 0 14,188
Chief Executive 1995 180,000 44,097 3,768 (1) 0 13,588
Officer
Kerry B. Skeen 1997 275,577 363,474 25,650 (1) 110,000 61,193 (2)
Chief Executive 1996 255,000 327,823 4,699 (1) 100,000 61,464
Officer and President 1995 199,933 299,581 2,015 (1) 100,000 7,697
Thomas J. Moore 1997 147,843 157,578 22,444 (1) 25,000 24,249 (2)
Executive Vice 1996 128,281 127,963 15,147 (1) 50,000 19,982
President and Chief 1995 112,170 77,011 1,881 (1) 5,000 7,404
Operating Officer
Paul H. Tate 1997 119,423 131,478 58,484 (1) 50,000 --
Senior Vice President 1996 (3) (3) (3) (3) (3)
Chief Financial 1995 (3) (3) (3) (3) (3)
Officer, Treasurer,
and Asst. Secretary
Michael S. Davis 1997 126,000 133,966 18,081 (1) 5,000 21,288 (2)
Senior Vice President 1996 117,298 116,627 4,007 (1) 55,000 22,425
Customer Service 1995 (3) (3) (3) (3) (3)
- --------------
(1) Includes income from certain tax reimbursement payments. For Mr. Tate, also
includes $29,904 in reimbursement of relocation costs.
(2) Represents term life insurance premiums in the amount of $3,491 for Mr.
Acker, $11,842 for Mr. Skeen, $4,257 for Mr. Moore and $4,666 for Mr. Davis, and
the actuarial valuation, determined under Securities and Exchange Commission
("SEC") rules, for the "whole life" component of coverage paid by the Company
for split-dollar life insurance under the Company's deferred compensation
program, in the amount of $49,351 for Mr. Skeen, $19,992 for Mr. Moore, and
$16,622 for Mr. Davis. If all assumptions as to life expectancy, length of
service and other factors occur in accordance with projections, the Company
expects to recover the premiums it pays with respect to the whole life component
of the coverage.
(3) Not previously reportable.
The following table sets forth information regarding grants of stock
options by the Company during the fiscal year ended December 31, 1997, to
the executive officers named in the Summary Compensation Table above.
Option Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options Granted Market Price
Underlying to Employee in on Date of Potential Realized Value at
Options Granted Fiscal Year Exercise Grant Assumed Annual Rates of Stock
Name Price Expiration Date Price Appreciation (2)
5% 10%
C. Edward Acker 10,000(1) 3% $22.875 $22.875 October 22, 2007 $138,769 $356,463
Kerry B. Skeen 50,000(1) 33% 16.500 16.500 July 16, 2007 498,477 1,282,416
50,000(1) 21.500 21.500 October 1, 2007 798,229 1,907,804
10,000(1) 22.875 22.875 October 22, 2007 138,769 356,463
Thomas J. Moore 20,000(1) 7.5% 13.750 13.750 April 16, 2007 185,163 457,732
5,000(1) 22.875 22.875 October 22, 2007 69,385 178,232
Paul H. Tate 35,000(1) 14% 14.125 14.125 January 23, 2007 339,415 833,297
10,000(1) 16.500 16.500 July 16, 2007 99,695 256,483
5,000(1) 22.875 22.875 October 22, 1998 69,385 178,232
Michael S. Davis 5,000(1) 1.5% 22.875 22.875 October 22, 2007 69,385 178,232
(1) Options vest in equal portions over a three year period and become fully
exerciseable upon a change in control subject in certain cases to the
discretion of the Compensation Committee or the Board of Directors.
(2) 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.
The following table provides information regarding the exercise of options
during the year ended December 31, 1997, and the number and value of unexercised
options held at December 31, 1997, by the executive officers named above.
Aggregate Option Exercises in 1997 and Option Values at December 31, 1997
Shares Number of Securities Underlying Value of Unexercised
Acquired Unexercised In-the-Money Options
on Value Options at FY-End at FY-End(1)
Name Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
C. Edward Acker 72,500 $1,286,446 275,000 10,000 $8,159,250 $88,750
Kerry B. Skeen 47,917 576,481 85,416 210,000 2,017,443 3,563,736
Thomas J. Moore 15,500 333,000 29,498 60,002 682,832 1,115,978
Paul H. Tate -- -- -- 50,000 -- 813,750
Michael S. Davis 7,500 112,875 27,498 50,002 574,855 939,832
(1) Based upon a market value of the Common Stock of $31.75 per share as of
December 31, 1997. (2) Based on difference between option exercise price and
market price of Common Stock on date of exercise.
Employment Agreements
Under an agreement between the Company and Kerry B. Skeen, as amended
on October 16, 1996 (the "Skeen Agreement"), the Company has agreed to employ
Mr. Skeen as Chief Executive Officer through October 2000. The Skeen Agreement
provides for automatic twelve month extensions unless earlier terminated and for
an annual base salary of $295,000 effective October, 1997, which amount may be
increased from time to time by the Board's Compensation Committee. The Skeen
Agreement further provides that Mr. Skeen 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 addition, the Skeen Agreement
provides that Mr. Skeen shall be granted options covering 50,000 shares on
October 1, 1997 and 1998.
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 within twelve months, or by
Mr. Skeen within six months, after a "Change in Control"), then: (1) all of Mr.
Skeen's options become immediately exercisable; (2) he is paid the maximum bonus
amounts under all bonus programs in which he is participating; and (3) he is
paid his full base salary for the longer of 24 months or through October 19,
1999. In addition, all of Mr. Skeen's options become immediately exercisable
upon any Change in Control. If Mr. Skeen's employment is terminated by the
Company other than for Cause, or by Mr. Skeen, then the Company will release to
Mr. Skeen its interest in his life insurance policy, including earnings from
invested funds in an amount equal to a specified percentage (which shall be 100%
upon a Change in Control) of the premiums paid by the Company.
Under separate agreements between the Company and Messrs. Moore and
Davis (each of which was effective January 1, 1997 and extended effective
January 1, 1998) and Mr. Tate (which was effective February 1, 1998)
(collectively, the "Officer Agreements"), the Company agreed to employ Mr. Moore
as Senior Vice President of Maintenance & Operations through December 31, 1998,
Mr. Davis as Senior Vice President of Customer Sales and Services through
December 31, 1998 and Mr. Tate as Senior Vice President and Chief Financial
Officer through January 31, 1999. The Officer Agreements provide for automatic
twelve month extensions unless earlier terminated, and for annual base salaries,
all of which may be and 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. Moore, Davis and Tate
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.
Under the Officer Agreements, if Mr. Moore, Mr. Davis or Mr. Tate is
terminated by the Company "without cause", then the terminated officer shall
receive his full base salary and major medical insurance coverage for a period
of twelve months, a portion of any annual bonus prorated to the date of
termination and, in some instances, immediate vesting of certain stock options.
If employment is terminated by the Company "without cause", or by the applicable
officer, then the Company will release to the terminated officer its interest in
the officer's life insurance policy including earnings from invested funds in an
amount equal to a specified percentage (which shall be 100% upon a Change in
Control) of the premiums paid by the Company.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation for Messrs. Skeen, Moore, Tate, and Davis (the "Senior
Executive Officers"), consists primarily of base salary, bonus, stock option
grants and participation in a deferred compensation program. In 1997 the
Compensation Committee, consistent with previous years' compensation practices,
maintained a policy of using primarily operational and financial performance
criteria, along with other discretionary factors, to adjust 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. The Compensation Committee increased
base salaries for these individuals in 1997 (and for Mr. Tate in January 1998)
in recognition of the current and long-term level of the Company's performance
and each individual's contribution to that performance since the last review.
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 early in the year. Maximum payouts range from 100% for the
Chief Executive Officer to lesser percentages for other participants. For 1997,
participants in the SMIP received the maximum bonus allowed under the program.
Senior Executive Officers also participate with all other management employees
in the Management Incentive Plan ("MIP"), which provides for additional bonus
compensation based on the attainment of specified levels of profit margin, costs
and operating performance. The 1997 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. In October 1997 the Compensation Committee elected
to reduce cash bonuses for senior level MIP participants in favor of longer-term
incentive compensation by reducing the maximum awards under MIP beginning in
1998 and granting these individuals stock options in lieu thereof. Finally, the
Committee granted options at various times in 1997 in recognition of individual
contributions to favorable mid-year results and operational successes.
In October 1997 the Compensation Committee adjusted incentive
compensation to provide that awards are earned over a longer term. Maximum cash
bonuses payable to senior level MIP participants were reduced effective 1998,
and affected individuals, including all Senior Executive Officers, were awarded
stock options in lieu thereof. Further, the vesting period for employee stock
options was increased from three years to five years for options granted
effective January 1, 1998.
The Committee reviewed Mr. Skeen's compensation as President and Chief
Executive Officer at its October 22, 1997 meeting. The Skeen Agreement was
amended at that time to provide for a base pay and deferred compensation
adjustment of 9%. The Committee also made a discretionary award of stock options
to Mr. Skeen for 50,000 shares in July 1997. The pay adjustment and the stock
award were given in recognition of Mr. Skeen's leadership in developing and
implementing the Company's regional jet strategy and for successfully handling
negotiations related thereto. Finally, Mr. Skeen was awarded stock options for
10,000 shares in October 1997 in conjunction with a reduction in the maximum
cash payout to him under MIP beginning in 1998.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
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 1995 Stock Incentive Plan is designed so that compensation under the Plan
can qualify as "performance based compensation" which is not subject to
ss.162(m). The Company does not believe that, apart from stock options, its
arrangements will result in excess of $1 million being paid to any of its
executive officers, but is continuing to study how to respond to the possible
effects of ss.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 1997 Mr. Acker served as Chairman of the Board of the Company,
and together with Messrs. Buchanan and Sullivan (beginning in July 1997), and
with Mr. Gordon Cain (prior to July 1997), served on the Compensation Committee.
Company Stock Performance Graph
The graph below compares the cumulative total return on Atlantic Coast
Airlines, Inc. ("ACAI") Common Stock since July 21, 1993, when the Company
became publicly traded, 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 July 21, 1993, with dividends reinvested when they
are paid. The companies included in the peer group are ASA Holdings, Inc.
(formerly Atlantic Southeast Airlines, Inc.), CCAIR, Inc., Comair Holdings,
Inc., Mesa Air Group, Inc., and SkyWest, Inc. The Company is not included in the
peer group. 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.
[GRAPHIC OMITTED]
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7/93 9/93 12/933/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96
9/96 12/96 3/97 6/97 9/97 12/97 2/98
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACAI 100 136 81 56 40 26 19 26 88 78 103 155 131 118 123 135 158 215 318 434
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PEER GROUP 100 101 106 105 75 70 54 55 96 89 82 101 116 95 93 86 110 111 133 160
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NASDAQ 100 109 111 107 102 110 109 118 136 152 154 161 174 180 189 179 212 247
232 240
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Prior to July 21, 1993, there was no active market for the Company's
Common Stock Therefore, the prices of the Company's Common Stock as set forth in
the Performance Graph are for a period from July 21, 1993 until February 28,
1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information, as of March 11,
1998 (except as noted otherwise), concerning beneficial ownership of the
Company's Common Stock by (i) each person known by the Company based on Schedule
13D/G filings with the SEC to own beneficially more than five percent of the
outstanding shares of the Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company named in the Summary Compensation Table,
and (iv) all directors and executive officers of the Company as a group. 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 1,520,500 19.9%
Eight Greenway Plaza
Suite 702
Houston, TX 77046
Franklin Resources, Inc. 822,675(1) 10.7%
777 Mariners Island Boulevard
6th Floor
San Mateo, CA 94404
AXA Assurances I.A.R.D. Mutuelle 776,400(2) 10.2%
The Equitable Companies, Incorporated
787 Seventh Avenue
New York, NY 10019
Atlantic Coast Airlines 555,377(3) 7.3%
Employee Stock Ownership
Trust, Bank One, Texas, N.A. ,
as Trustee
910 Travis Street
Houston, TX 77002
Bankers Trust New York Corporation 549,624(4) 7.2%
130 Liberty Street
New York, NY 10006
C. Edward Acker 508,864(5) 6.5%
HBK Investments, L.P. 443,554(6) 5.5%
777 Main Street
Suite 2750
Fort Worth, TX 76102
Kerry B. Skeen 141,743(7) 1.8%
Joseph W. Elsbury 44,000 *
Robert E. Buchanan 8,800 *
James J. Kerley 1,000 *
James C. Miller 7,000 *
John M. Sullivan 1,000 *
Thomas J. Moore 50,076(8) *
Paul H. Tate 6,666(9) *
Michael S. Davis 27,965(10) *
All directors and executive officers
as a group (13 persons) 803,780 10.0%
* Less than one percent.
(1) As of December 31, 1997, based solely upon Franklin Resources, Inc.'s
Schedule 13G filed with the SEC. All shares are beneficially owned by
subsidiaries of Franklin Resources, Inc. Includes 27,775 shares obtainable upon
conversion of the Company's 7% Convertible Subordinated Notes due 2004.
(2) As of January 31, 1998, based solely upon AXA Assurances I.A.R.D. Mutuelle's
Schedule 13G/A filed with the SEC. All shares are beneficially owned by Alliance
Capital Management L.P. ("Alliance"), a subsidiary of The Equitable Companies
Incorporated. Alliance has sole power to vote or to direct the vote of 689,900
of these shares and shared power to vote or to direct the vote of 81,800 of
these shares.
(3) Pursuant to the ESOP, voting of shares allocated to participants' accounts
is passed through to such participants.
(4) As of December 31, 1997, based solely upon Bankers Trust New York
Corporation's Schedule 13G filed with the SEC. All shares are beneficially owned
by subsidiaries of Bankers Trust New York Corporation.
(5) Includes options to purchase 250,000 shares with an exercise price of $2.08
a share.
(6) As of March 19, 1998, based solely upon HBK Investments L.P.'s Schedule 13D
filed with the SEC. HBK Investments L.P. has sole voting power over 6,973 of
these shares and shared voting power over 11,625 of these shares. The remaining
424,956 shares reported are shares obtainable upon conversion of the Company's
7% Convertible Subordinated Notes due 2004. Upon conversion, HBK Investments
L.P. will have sole voting power over these shares.
(7) Includes options to purchase 25,000 shares with an exercise price of $2.50
per share; options to purchase 16,666 shares with an exercise price of $2.625
per share; options to purchase 27,083 shares with an exercise price of $8.875
per share; and options to purchase 33,332 shares with an exercise price of
$11.75 per share.
(8) Includes options to purchase 9,500 shares with an exercise price of $3.75
per share; options to purchase 3,333 shares with an exercise price of $7.313 per
share; options to purchase 13,333 shares with an exercise price of $9.25 per
share; options to purchase 6,666 shares with an exercise price of $11.75 per
share; and options to purchase 3,333 shares with an exercise price of $16.125
per share.
(9) Includes options to purchase 6,666 shares with an exercise price of $14.13.
(10) Includes options to purchase 5,833 shares with an exercise price of $4.625
per share; options to purchase 3,333 shares with an exercise price of $8.000 per
share; options to purchase 11,666 shares with an exercise price of $11.75 per
share; and options to purchase 6,666 shares with an exercise price of $16.125.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1997, the Company repurchased 1.46 million shares of Common
Stock from British Aerospace for approximately $16.9 million. The price paid by
the Company, which represented a 22.5% discount from the average of the closing
bid prices during the period June 24 through June 30, 1997, was agreed to
through negotiations between the Company and British Aerospace.
The Company loaned Paul Tate $75,000 pursuant to a promissory note
dated February 19, 1997 bearing interest at 5.75%. This loan was made as part of
a relocation package provided to Mr. Tate in connection with his joining the
Company. The loan was repaid in full on July 18, 1997.
REPORTS OF BENEFICIAL OWNERSHIP
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 reports of beneficial ownership with the
Securities Exchange Commission, the Nasdaq National Market and the Company.
Based solely upon its review of the copies of such forms received by it, the
Company believes that, during fiscal year 1997, these persons complied with all
such filing requirements.
STOCKHOLDER PROPOSALS
Securities and Exchange Commission regulations permit stockholders to
submit proposals for consideration at annual meetings of stockholders. Any such
proposals for the Company's Annual Meeting of Stockholders to be held in 1999
must be submitted to the Company on or before December 1, 1998, and must comply
with applicable regulations of the Securities and Exchange Commission in order
to be included in proxy materials relating to that meeting. Proposals should be
sent to: Atlantic Coast Airlines, Inc., Attn: Secretary, 515A Shaw Road, Dulles,
Virginia 20166.
---------------------------
Please complete, date, sign and return promptly the accompanying Proxy
Card in the postage-paid envelope enclosed for your convenience. The signing of
the Proxy Card will not prevent your attending the Meeting and voting in person.
March 31, 1998
Dulles, Virginia
ATLANTIC COAST AIRLINES, INC.
Proxy solicited by the Board of Directors for Annual
Meeting -- May 5, 1998.
Each of the undersigned, revoking all other proxies heretofore given, hereby
constitutes and appoints Paul H. Tate 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, INC. (the "Company") owned by the undersigned at the
Annual Meeting and any adjournments or postponements thereof.
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
(Amendment of the Company's Certificate of Incorporation to change the Company's
name to "ACA Holdings, Inc."), FOR Item 3 (Amendment of the Company's
Certificate of Incorporation to increase the Company's total authorized shares
to 76,000,000), FOR Item 4 (Ratification of amendment of the Company's Stock
Incentive Plan) and FOR Item 5 (Ratification of the appointment 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.
The Board of Directors recommends a vote FOR Items 1, 2, 3, 4 and 5 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: C. Edward Acker, Kerry B. Skeen, Thomas J. Moore, Robert E.
Buchanan, Susan MacGregor Coughlin, Joseph W. Elsbury, James J. Kerley, James C.
Miller and John M. Sullivan.
For all except: ____________________________________.
FOR all nominees ____ WITHHOLD AUTHORITY to vote for all nominees ____
2 To approve amendment to the Company's Certificate of Incorporation to change
the Company's name to "ACA Holdings, Inc."
FOR AGAINST ABSTAIN
3. To approve amendment to the Company's Certificate of Incorporation to
increase the Company's authorized shares to 76,000,000.
FOR AGAINST ABSTAIN
4. To ratify amendment to the Company's 1995 Stock Incentive Plan to increase
the shares available under the Plan to 1,250,000.
FOR AGAINST ABSTAIN
5. To ratify appointment of KPMG Peat Marwick LLP as the Company's independent
auditors for the current year.
FOR AGAINST ABSTAIN
Date _________________________________ 1998.
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
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Please Mark, Sign, Date and Mail Promptly in the Enclosed Envelope.