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:
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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 HOLDINGS, INC.
45200 BUSINESS COURT
DULLES, VIRGINIA 20166
April 29, 2002
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 29, 2002,
at 10:00 a.m. local time, at the Atlantic Coast Airlines Employee Center
Auditorium, 515 Shaw Road, Dulles, Virginia.
This year we are asking you to elect eight directors of the Company to serve
until the 2003 Annual Meeting. We are also asking that you ratify the Board of
Directors' selection of independent auditors for the year ending December 31,
2002. 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
Kerry B. Skeen
Chairman of the Board of Directors
ATLANTIC COAST AIRLINES HOLDINGS, INC.
45200 BUSINESS COURT
DULLES, VIRGINIA 20166
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 29, 2002
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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 29, 2002, at 10:00 a.m., local
time, at the Atlantic Coast Airlines Employee Center Auditorium, 515 Shaw Road,
Dulles, Virginia, for the following purposes, as more fully described in the
accompanying Proxy Statement:
1) To elect eight directors to serve for the coming year and until their
successors are elected;
2) To ratify the Board of Directors' selection of the Company's independent
auditors for the fiscal year ending December 31, 2002; and
3) 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 5, 2002 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 45200 Business Court, 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
Richard J. Kennedy
Vice President, Secretary and General Counsel
April 29, 2002
ATLANTIC COAST AIRLINES HOLDINGS, INC.
45200 BUSINESS COURT
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 29, 2002, at the Atlantic
Coast Airlines Employee Center Auditorium, 515 Shaw Road, Dulles, 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 2001 Annual Report, are first being mailed on or about April 29, 2002,
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 5, 2002
(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 eight members to the Board of Directors for the
coming year; 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, 2002; 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 5, 2002 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 45,037,948 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 eight 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
eight director nominees, but may not cumulate their votes in favor of any one
nominee. Approval of the proposal to ratify the Board of Directors' selection of
KPMG LLP, Certified Public Accountants, as the Company's independent auditors 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. Shares
held by brokers who have not received voting instructions from their customers
and who do not have discretionary authority to vote on a particular proposal
("broker non-votes") are not considered "shares present" and therefore will not
affect the outcome of the vote on the two proposals.
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 on each matter introduced for a
vote at the Meeting. 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 at any time before the Meeting, (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.
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PROPOSAL ONE: ELECTION OF DIRECTORS
The Nominating Committee of the Board has proposed and the Board has
recommended that the eight 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 12,
2002 and position with the Company, and the year in which each nominee first
became a director:
Director
Name Age Position Since
---- --- -------- -----
Kerry B. Skeen...................... 49 Chairman of the Board of Directors, Chief 1991
Executive Officer and Director
Thomas J. Moore..................... 45 President, Chief Operating Officer and 1997
Director
C. Edward Acker..................... 73 Director 1991
Robert E. Buchanan.................. 59 Director 1995
Susan MacGregor Coughlin............ 56 Director 1997
Daniel L. McGinnis.................. 63 Director 2000
James C. Miller III................. 59 Director 1995
John M. Sullivan.................... 66 Director 1995
VOTE NECESSARY TO ELECT DIRECTORS
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 eight 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 eight director nominees, but
may not cumulate their votes in favor of any one nominee.
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. Dr. Judy Shelton
determined to step down from the Board of Directors in March 2002. We thank her
for her service to the Company.
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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."
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. 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 Principal of Buchanan Partners, LLC, a metropolitan Washington,
D.C. real estate firm specializing in commercial and residential development,
construction and property management in suburban Washington. Mr. Buchanan
presently 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. He is also a member of the advisory
board for George Washington University's Virginia campus and a Trustee for the
Greater Washington Initiative.
Susan MacGregor Coughlin. Mrs. Coughlin has been a Director since
October 1997. Mrs. Coughlin will become President and Chief Executive Officer of
the Aviation Safety Alliance in June 2002. Presently she is President and Chief
Operating Officer of the American Transportation Research Institute, a position
she has held since November 2000. Previously she was the Director and Chief
Operating Officer of the ATA Foundation from April 1998 to November 2000. She
also has been 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
was confirmed by the United States Senate in 1990 as a member of the National
Transportation Safety Board and served until mid-1994. She served as Board Vice
Chairman for two consecutive terms 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
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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. Other memberships include the
advisory board for George Washington University's Virginia campus, the advisory
board for an investment fund of the Robert W. Baird Company, the Northern
Virginia Roundtable and the Washington Airports Task Force.
James C. Miller III. Dr. Miller has been a Director since March 1995.
Although he has been associated with Citizens for a Sound Economy for over a
decade, he recently joined the law firm of Howrey Simon Arnold & White as
Chairman of its Capital Group. He also serves as Co-Chairman of the Tax
Foundation, a member of the Board of the Progress & Freedom Foundation, and a
Member of the Board of Visitors of George Mason University. He is a Director of
Washington Mutual Investors Fund, the Tax Exempt Fund of Maryland, the Tax
Exempt Fund of Virginia, and the J.P. Morgan Value Opportunities Fund. From 1985
to 1988, he served as Director of the Office of Management and Budget and as a
member of President Reagan's cabinet. From 1981 to 1985, he was Chairman of the
Federal Trade Commission. Dr. 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.
He joined Beta Consulting, Inc., a financial management firm, in 1994 and
currently serves as its President. Previously, he served as International Tax
Director for General Motors Corporation from 1992 to 1994. He joined the
accounting firm of Arthur Andersen & Co. in 1958, and was a Partner from 1970
until his retirement from the firm in 1992. Mr. Sullivan is also a director of
Encompass Services Corporation.
COMMITTEES AND BOARD MEETINGS
During 2002, there were four regular meetings of the Board of Directors
and three 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.
The Board has three standing committees -- an Audit Committee, a
Compensation Committee, and a Nominating 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 and amended in January 2002, a copy of which is attached as
Appendix A to this Proxy Statement. Each of the members of the Audit Committee
is "independent" as defined in Rule 4200(a)(14) of the National Association of
Securities Dealers' listing standards. Pursuant to its Charter, the Audit
Committee's functions include the following: recommending to the Board of
Directors and evaluating the firm of independent certified public accountants to
be appointed as auditors of the Company; reviewing any relationships between the
independent auditor and the Company; reviewing and discussing with management
and the independent auditors the financial statements of the Company; reviewing
the adequacy of the Company's internal controls; reviewing any significant
changes in the accounting policies of the Company; and, reviewing any material
contingent liabilities. In its review of audit-related and non-audit service
fees paid to the Company's independent auditors, the Committee considered
whether the provision of such services is compatible with maintaining the
auditors' independence. The Audit Committee held five meetings during 2001. The
current members of the Audit Committee are Ms. Coughlin, Mr. McGinnis, and Mr.
Miller, who serves as Chairman.
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.
5
The Compensation Committee held six meetings during 2001. The current members of
the Compensation Committee are Mr. Sullivan, Mr. Buchanan and Mr. Acker, who
serves as Chairman.
Nominating Committee. The Nominating Committee reviews and assesses the
composition of the Board, assists in considering potential new candidates for
director, including nominees suggested by stockholders, and recommends to the
Board candidates for election as directors. Stockholders may suggest nominees by
mailing the candidate's name and qualifications to the Company, addressed to the
attention of the corporate secretary. The Nominating Committee was formed in
2001, held one meeting during 2001, and consists of only non-employee directors.
Its members are Mr. Buchanan, Ms. Coughlin, and Mr. Sullivan, who serves as
Chairman.
DIRECTORS' COMPENSATION
Directors, with the exceptions noted below, received an annual fee of
$20,000 for serving as Directors. 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, do
not receive compensation for their service on the Board and Mr. Acker, as an
employee of the Company in his advisory role, does not receive cash compensation
but does receive stock options as described below. Non-employee directors are
entitled to certain flight benefits made available to employees of the Company.
All outside Directors and, commencing in 2001, Mr. Acker, also receive
as additional compensation options to purchase shares of the Company's Common
Stock, which options vest at the end of the year 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. For each of 2001 and 2002, these directors were granted options
for 12,000 shares. 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: RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
At the Audit Committee's recommendation, the Board has selected KPMG
LLP, Certified Public Accountants, as the Company's independent auditors for the
fiscal year ending December 31, 2002 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 Audit Committee and the Board will review its future
selection of auditors. The Audit Committee is responsible for evaluating and
recommending to the Board the firm to be selected as auditors of the Company and
may recommend a change in the firm selected to be auditors at such time and
based on such factors as it determines to be appropriate.
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.
DISCLOSURE OF AUDITOR FEES
The following is a description of the fees billed to the Company by KPMG
during the year ended December 31, 2001:
Audit Fees: Audit fees paid by the company to KPMG in connection with KPMG's
audit of the company's annual financial statements for the year ended December
31, 2001 and KPMG's review of the company's interim financial statements
included in its quarterly reports on Forms 10-Q during that year totaled
approximately $153,500.
Financial Information Systems Design and Implementation Fees: The Company
did not engage KPMG to provide advice regarding financial information systems
design and implementation during the year ended December 31, 2001.
6
All Other Fees: Fees billed to the Company by KPMG during the year ended
December 31, 2001 for audit-related and non-audit services other than those
described above totaled approximately $320,000. Other fees consisted primarily
of tax consulting services, tax compliance services, merger and acquisition
consulting fees, and employee benefit plan auditing.
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.
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EXECUTIVE OFFICERS
The following table sets forth the name, age as of April 12, 2002 and
position of each executive officer of the Company:
Officer
Name Age Position Since
---- --- -------- -----
Kerry B. Skeen....................... 49 Chairman of the Board of Directors and 1991
Chief Executive Officer
Thomas J. Moore...................... 45 President, Chief Operating Officer and 1994
Director
Richard J. Surratt................... 41 Executive Vice President, Chief Financial 1999
Officer, Treasurer and Assistant Secretary
Michael S. Davis..................... 37 Senior Vice President - Operations 1995
William R. Lange..................... 57 Senior Vice President - Operations 2000
Resources & Safety
Richard J. Kennedy................... 47 Vice President, General Counsel and 1996
Secretary
David W. Asai........................ 46 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. 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.
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Richard J. Surratt. Mr. Surratt has served as Executive Vice President,
Chief Financial Officer, Treasurer and Assistant Secretary since December 2001
and 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 is a
Certified Public Accountant.
Michael S. Davis. Mr. Davis became Senior Vice President, Operations in
July 2001. He was Senior Vice President and Chief Operating Officer of ACJet
from July 2000 to July 2001 and was Senior Vice President - Customer Service for
ACA from May 1995 to July 2000. 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.
William R. Lange. Mr. Lange has served as Senior Vice President -
Operations Resources & Safety since July 2001. He was Senior Vice President -
Operations from October 2000 to July 2001, having joined ACA in February 2000 as
Senior Vice President - Technical Operations for ACA, and been appointed a
Senior Vice President of the Company in July 2000. From 1997 until December
1999, he served as Executive Vice President for World Airways, Inc., prior to
which he served for four years as Executive Vice President and COO for Jetstream
Aircraft, Inc. From 1973 through 1992, Mr. Lange held a variety of positions
with Pan American World Airways, Inc. including System Director Scheduling,
General Manager System Control, Vice President Planning, and President and COO
of Pan Am Express, Inc.
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, including Director of Financial Planning and Analysis. Mr.
Asai is a Certified Public Accountant.
8
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
of the individual who served as the Company's Chief Executive Officer during
2001, and the Company's four other most highly compensated executive officers
serving as executive officers at December 31, 2001. Bonus amounts reflect
amounts earned for the specified year regardless of when paid. All share and
share-related amounts have been adjusted to reflect the Company's February 23,
2001 two-for-one stock split.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
SECURITIES ALL
OTHER ANNUAL RESTRICTED UNDERLYING OTHER
NAME AND CURRENT POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS COMPENSATION
------------------------- ---- ------ ----- ------------ ------------ ------- ------------
(1) (2) (3)
Kerry B. Skeen 2001 $425,798 $46,811 $44,048 $437,580 329,866 $435,000
Chairman of the Board 2000 403,462 59,949 28,456 439,063 200,000 395,000
and Chief Executive 1999 316,539 224,966 22,086 -- 600,000 395,000
Officer
Thomas J. Moore 2001 269,183 29,593 20,395 208,260 171,837 206,250
President and Chief 2000 253,402 37,930 13,134 210,750 100,000 187,500
Operating Officer 1999 200,000 117,800 5,509 -- 340,000 150,000
Richard J. Surratt (4) 2001 176,192 19,370 10,942 135,720 122,021 90,000
Executive Vice President, 2000 164,283 24,644 8,705 158,063 80,000 32,400
Treasurer and Chief 1999 8,723 -- -- -- 70,000 --
Financial Officer
Michael S. Davis 2001 185,981 20,446 12,439 142,740 124,633 95,000
Senior Vice President 2000 171,577 25,717 5,974 158,063 50,000 81,000
Operations 1999 140,846 83,328 3,396 -- 130,000 81,000
William B. Lange (5) 2001 164,475 18,168 11,104 121,680 114,669 32,400
Senior Vice President 2000 133,825 22,529 4,322 105,375 50,000 --
Operations Resources 1999 -- -- -- -- -- --
and Safety
- --------------
(1) Represents amounts reimbursed during each year for the payment of taxes in
order to make the named executive officers whole. Does not reflect
perquisites since the dollar value of these personal benefits in each
reported year did not exceed the lesser of $50,000 or ten percent of each
executive officer's salary and bonus amounts.
(2) In 2000, shares of restricted stock were granted to certain executive
officers. Shares granted in 2000 vest over three years based on continued
employment, subject to acceleration if the Company's stock price increases
by at least 25% from the date of grant. Based on the Company's stock price
performance, all of these shares vested in April 2001. In 2001, shares of
restricted stock were granted to the executive officers. Shares granted in
2001 vest over four years based on continued employment, subject to
acceleration if the Company achieves a 25% growth in quarterly operating
earnings on a year over year comparison. Based on the Company's operating
earnings performance for the first quarter of 2002, all of these shares
will vest in April 2002. Although the Company has not traditionally paid
cash dividends, shares of restricted stock would be entitled to participate
if dividends were declared. Year-end value of restricted stock, including
unvested shares from a 1998 grant, held by Messrs. Skeen, Moore, Surratt,
Davis, and Lange was $1,152,156, $565,621, $135,082, $357,082 and $121,108,
respectively, based on a year-end stock price of $23.29 per share.
9
(3) The amounts reported for 2001 represent accruals by the Company to deferred
compensation accounts for each of the named executive officers. Deferred
compensation benefits are applied to indirectly finance an insurance policy
for each executive's benefit.
(4) Mr. Surratt joined the Company as Senior Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary in December 1999 and was
promoted to Executive Vice President in December 2001.
(5) Mr. Lange joined the Company as Senior Vice President - Technical
Operations for ACA in February 2000 and became a Senior Vice President of
the Company in July 2000, Senior Vice President - Operations in October
2000 and Senior Vice President Operations Resources and Safety in July
2001.
The following table sets forth information regarding grants of stock options by
the Company to the individuals named in the Summary Compensation Table above
during the fiscal year ended December 31, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
Number of % of Total
Securities Options
Underlying Granted to Potential Realizable Value at
Options Employee in Exercise Assumed Annual Rates of Stock
Name Granted (1) Fiscal Year Price (2) Expiration Date Price Appreciation (3)
---- ----------- ----------- --------- --------------- ----------------------
5% 10%
-- ---
Kerry B. Skeen 329,866 14.97% $13.95 Sept. 18, 2011 $2,893,941 $7,333,814
Thomas J. Moore 171,837 7.80% 13.95 Sept. 18, 2011 1,507,540 3,820,402
Richard J. Surratt 122,021 5.54% 13.95 Sept. 18, 2011 1,070,500 2,712,857
Michael S. Davis 124,633 5.66% 13.95 Sept. 18, 2011 1,093,415 2,770,929
William B. Lange 114,669 5.21% 13.95 Sept. 18, 2011 1,006,000 2,549,402
- --------------------
(1) Options vest in equal portions over a four year period and become fully
exercisable upon a change in control. The number of shares covered by
option grants and the exercise price have been adjusted for the February
23, 2001 two-for-one stock split.
(2) Exercise Price equals the closing market price per share 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.
10
The following table provides information regarding the exercise of
options during the year ended December 31, 2001, and the number and value of
unexercised options held at December 31, 2001, by the individuals named in the
Summary Compensation Table above.
AGGREGATE OPTION EXERCISES IN 2001 AND OPTION VALUES AT DECEMBER 31, 2001
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired on Value Options at FY-End at FY-End (2)
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- --------- ------------ ----------- ------------- ----------- -------------
Kerry B. Skeen 294,348 $4,346,871 168,320 839,866 $1,743,795 $8,701,012
Thomas J. Moore 240,954 4,109,258 156,328 424,837 1,777,449 4,830,397
Richard J. Surratt 25,000 445,937 30,000 217,021 292,200 2,113,785
Michael S. Davis 121,396 2,092,923 113,284 227,133 1,306,165 2,618,843
William B. Lange 6,000 110,046 10,000 144,669 89,900 1,300,574
- ------------------
(1) Based on difference between the option exercise price and the closing
market price of the Company's Common Stock on the date of exercise.
(2) Based upon a market value of the Common Stock of $23.29 per share as of
December 31, 2001.
EMPLOYMENT AGREEMENTS
Agreements between the Company and each of its senior executive
officers establish minimum base salaries and other compensation and benefits,
including benefits in the event of a change in control. Following the September
11 terrorist attacks, these senior executive officers agreed to a 10% cut in
base pay for an indefinite period of time, effective October 1, 2001. The
executives further agreed that the reduced base salary levels would apply for
bonus calculations that are determined as a percentage of pay, that deferred
compensation benefits would be adjusted to generally maintain benefit levels and
that for purposes of calculating certain other benefits the salary reductions
would not be taken into account, including in the event that any severance or
change in control benefits become payable. The employment agreements described
below reflect salary at the contractually agreed rates, prior to the effect of
the foregoing 10% reduction.
Under an agreement between the Company and Kerry B. Skeen, which was
entered into as of July 25, 2001 to reflect amendments approved by the
Compensation Committee in 2000 (the "Skeen Agreement"), the Company has agreed
to employ Mr. Skeen as Chief Executive Officer through May 31, 2005, subject to
automatic extensions unless terminated. The Skeen Agreement provides for a
minimum annual base salary of $435,000, which amount may be increased from time
to time by the Board's Compensation Committee. The Skeen Agreement further
provides for a deferred compensation accrual at a rate of 100% of the annual
base salary subject to ten year graduated vesting, with benefits under the
deferred compensation arrangement being applied to indirectly finance an
insurance policy for Mr. Skeen's benefit, 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 200,000 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
twenty-four 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.
11
The Skeen Agreement also provides that Mr. Skeen will be eligible to retire at
any time after the annual shareholders meeting to be held in 2005 and to receive
benefits through age 75 or for 15 years, whichever is greater. Benefits will
include retirement payments at 75% of Mr. Skeen's last base salary for 10 years,
and at 50% thereafter, as well as continuation of certain other benefits
provided in the Skeen Agreement. In addition, Mr. Skeen will be paid an annual
consulting fee of 15% of his last base salary for up to five years following his
retirement to the extent he provides consulting services during that period, and
his previously granted options will continue to vest and remain exercisable.
Under an agreement between the Company and Thomas J. Moore, which was
amended and restated as of December 28, 2001 (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 $275,000; the deferred compensation rate is a
lesser percentage of base salary; the minimum annual stock option grant is
100,000 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; there is no retirement
or post-employment consulting provision; and, the disability period prior to
termination is six months.
Under separate agreements between the Company and Mr. Surratt, Mr.
Davis and Mr. Lange (all of which were restated, or in the case of Mr. Lange,
executed, effective December 28, 2001, (collectively, the "Officer
Agreements")), the Company agreed to employ Mr. Surratt as Executive Vice
President, Chief Financial Officer, Treasurer and Assistant Secretary, Mr. Davis
as Senior Vice President - Operations, and Mr. Lange as Senior Vice President -
Operations Resources and Safety, 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, Surratt and Lange
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 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.
Under the deferred compensation program for all of the senior executive
officers, the executive will receive upon termination of employment an amount
equal to the specified vested percentage (which shall be 100% upon a change in
control) of the executive officer's annual accruals as provided under his
employment agreement. These amounts are applied to indirectly finance an
equivalent amount of Company paid life insurance premiums under a policy
maintained for the executive officer.
The Company provides certain benefits for each of its executive
officers and other vice presidents in the event of a change in control,
including one-time compensation based on a sliding scale proportionate to rank,
the continuation of certain benefits for a specified period, acceleration of
option grants and protection against potential excise taxes. 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.
12
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation for Messrs. Skeen, Moore, Surratt, Davis, and Lange (the
"Senior Executive Officers") consists primarily of base salary, bonus,
stock-based awards and participation in a deferred compensation program. The
Compensation Committee has historically 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.
While the Compensation Committee continues to employ this policy, industry
issues following the September 11, 2001 terrorist attacks were the overriding
factor in its year-end decisions for 2001 executive compensation.
Within a week following the terrorist attacks, the Senior Executive
Officers offered to accept a 10% reduction in base pay for an indefinite period
and to suspend payments under cash bonus plans effective beginning September 1,
2001 in light of the circumstances indicating that cash preservation and cost
cutting would be critical, and that additional hardships may be necessary. The
Compensation Committee determined to accept this proposal, recognizing
management's leadership in this action as an important signal to the Company's
employees and partners of the Company's resolve. In approving the base pay
reductions, the Compensation Committee also recognized that Mr. Skeen and Mr.
Moore were due for salary reviews as of October 1, 2001 and that, absent the
terrorist events, they would have been due pay increases based on the criteria
traditionally used by the Company. The Compensation Committee also approved
adjustments in other compensation and benefits to reflect the salary reductions,
as detailed above in this proxy statement's discussion of employment agreements.
Senior Executive Officers participate in the Senior Management
Incentive Plan ("SMIP"), under which they may receive a percentage of their
salary as bonus. Maximum payouts for 2001 ranged from 100% for the Chief
Executive Officer to lesser percentages for other participants. In April 2001,
the Compensation Committee replaced SMIP targets and cash payout arrangements
with grants of restricted stock having a total value on the date of grant equal
to the maximum SMIP award otherwise payable for each Senior Executive Officer.
The Compensation Committee provided that the restricted stock would vest ratably
over four years, subject to accelerated vesting in 2002 if operating profit for
any 2002 quarter exceeded the comparable 2001 quarter by 25% or more. These
targets were met during the first quarter of 2002 and all of this restricted
stock will vest on April 30, 2002. 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.
Payout under MIP included 50% participation paid on a quarterly basis based on
operational targets, with 50% paid following the year-end based on financial
targets. The annual portion was not paid during 2001 due to the suspension of
cash bonus payments following the terrorist attacks. Certain quarterly payments
that were earned were paid, with the result that overall MIP bonus payments for
the year were in the bottom quartile of the maximum payout and were based
strictly on operational performance goals. In September 2001 the Compensation
Committee awarded special option grants to the executive officers and others,
based upon performance prior to and in light of the events of September 11, and
the salary and cash bonus reductions. These option grants were made in lieu of
contractual and discretionary option grants typically awarded in October of each
year.
In December 2001 the Compensation Committee established new MIP goals
for 2002 based strictly on operational performance. The overall maximum benefits
for the senior level of participation was reduced by 50%. While other employees
received a pay adjustment to compensate for this change, the Senior Executive
Officers received a 15% increase in the potential maximum amount of bonus they
could receive under SMIP. This was designed to keep the Senior Executive
Officers at risk for this compensation based on the Company's achieving desired
targets. In January 2002 the Company established new SMIP goals for 2002, with
targets weighted equally between operating performance and earnings per share
growth.
Mr. Skeen's employment agreement (the "Skeen Agreement") was amended as
of July 25, 2001 to provide for certain consulting and retirement arrangements,
to clarify the operation of various provisions and to clarify the effect under
the Skeen Agreement of ACA's restructuring of its agreement with United
Airlines, all as approved by the Compensation Committee during 2000 and
described in last year's Compensation Committee Report. The
13
Company began to accrue for Mr. Skeen's retirement benefits during 2001. The
agreements with Mr. Moore and the other Senior Executive Officers also were
amended to clarify the operation of various provisions, to establish certain
provisions addressing the possibility that bonus programs may be made in the
form of stock-based compensation and to address other compensation developments
that had taken place since they were last drafted.
Mr. Skeen's compensation was eligible for review effective October 1,
2001, but the Compensation Committee did not change his compensation at that
time. This decision was based on industry factors and was made despite Mr.
Skeen's performance with respect to the achievement of key strategic, financial,
and leadership development objectives. Mr. Skeen's compensation for 2001
consisted primarily of the base salary, deferred compensation, the reduced
annual bonus under MIP described above, option grants totaling 329,866 shares,
the grant of 18,700 shares of restricted stock under the SMIP program, and
accrual for retirement benefits. His base salary was last increased to $435,000
effective October 1, 2000, and was reduced to $391,500 effective October 1,
2001. The stock options granted to him included 200,000 in contractual options
pursuant to his employment agreement, with the balance granted for performance
reasons.
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). SMIP and MIP bonuses
and stock options granted to executive officers under the Company's plans are
designed so that compensation realized by the executives can qualify as
"performance based compensation" which is not subject to Section 162(m).
However, in order to maintain flexibility in motivating and compensating Company
executives, the Compensation Committee has not adopted a policy that all
compensation will qualify as "performance based compensation."
COMPENSATION COMMITTEE
C. Edward Acker, Chairman
Robert E. Buchanan
John M. Sullivan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During a portion of 2001 Mr. Acker served as an officer of one of the
Company's subsidiaries, and together with Dr. Shelton and with Messrs. Buchanan
and Sullivan, served on the Compensation Committee.
14
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company's financial reporting process
on behalf of the Board. Management has the primary responsibility for the
financial statements and the reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of the
Company's audited consolidated financial statements to accounting principles
generally accepted in the United States of America.
The Audit Committee members do not serve as professional accountants or
auditors and their functions are not intended to duplicate or to certify the
activities of management and the independent auditors. The Audit Committee
serves a board-level oversight role where it receives information from, consults
with and provides its views and directions to management and the independent
auditors on the basis of the information it receives and the experience of its
members in business, financial and accounting matters.
In this context, the Audit Committee reviewed and discussed with
management and the independent auditors the audited financial statements for the
year ended December 31, 2001 (the "Audited Financial Statements"). The Audit
Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). In addition, the Audit Committee has received from the independent
auditors the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees) and discussed
with them their independence.
Following the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the Audited Financial Statements be
included in the Company's Annual Report on SEC Form 10-K for the year ended
December 31, 2001, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
James C. Miller III, Chairman
Susan MacGregor Coughlin
Daniel L. McGinnis
15
COMPANY STOCK PERFORMANCE GRAPH
The table and graph below compare 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, 1996, with dividends reinvested when they are paid. The
companies included in the peer group are Mesa Air Group, Inc., Mesaba Holdings,
Inc., and SkyWest Airlines, Inc. The peer group does not include Midway Airlines
Corporation, which was included in the peer group in prior years but filed for
bankruptcy in 2001. 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.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ATLANTIC COAST AIRLINES HOLDINGS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
[GRAPHIC]
* $100 INVESTED ON 12/31/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEARS ENDING DECEMBER 31.
----------------------------------------------------------------------
Cumulative Total Return
----------------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
ATLANTIC COAST AIRLINES HOLDINGS, INC. 100.00 259.18 408.16 387.76 667.35 760.49
NASDAQ STOCK MARKET (U.S.) 100.00 122.48 172.68 320.89 193.01 153.15
PEER GROUP 100.00 148.65 246.86 181.15 320.17 278.31
16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of December 31,
2001 (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.
Amount and Nature of
--------------------
Name Beneficial Ownership Percent of Class
- ---- -------------------- ----------------
Gordon A. Cain 3,622,600 8.2%
Eight Greenway Plaza
Suite 702
Houston, TX 77046
Franklin Resources, Inc. 4,395,700 (1) 10.0%
777 Mariners Island Boulevard
San Mateo, CA 94404
Vanguard Horizon Funds - Vanguard 3,200,000 (2) 7.29%
Capital Opportunity Fund
P.O. Box 2600
Valley Forge, PA 19482
FMR Corp. 2,834,420 (3) 6.455%
82 Devonshire Street
Boston, MA 02109
- ------------------------
(1) Based solely upon Amendment No. 6 to Franklin Resources, Inc.'s Schedule
13G, which they filed on March 8, 2002.
(2) Based solely upon Amendment No. 2 to Vanguard Horizon Funds - Vanguard
Capital Opportunity Fund's Schedule 13G, which they filed on February 11,
2002.
(3) Based solely upon Schedule 13G filed by FMR Corp. on February 14, 2002.
17
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of April 1,
2002, 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.
Amount and Nature of
--------------------
Beneficial Ownership (1) Percent of Class
------------------------ ----------------
Name Shares Percent
- ---- ------ -------
Kerry B. Skeen 135,287 *
Thomas J. Moore 209,478 *
C. Edward Acker 652,400 1.5%
Robert E. Buchanan 63,800 *
Susan MacGregor Coughlin 41,660 *
Daniel L. McGinnis 12,000 *
James C. Miller III 68,000 *
John M. Sullivan 26,000 *
Richard J. Surratt 41,400 *
Michael S. Davis 135,816 *
William B. Lange 7,700 *
All directors and executive officers
as a group (13 persons) 1,479,495 3.3%
* Less than one percent.
- ------------------
(1) Includes options and restricted stock that are exercisable on or within
60 days after April 1, 2002, as follows: Mr. Skeen, 70,000 shares; Mr. Moore,
103,636 shares; Mr. Acker, 52,000 shares; Mr. Buchanan, 40,000 shares; Mrs.
Coughlin, 40,000 shares; Mr. McGinnis, 12,000 shares; Mr. Miller, 40,000 shares;
Mr. Sullivan, 24,000 shares; Mr. Surratt, 30,000 shares; Mr. Davis, 81,632
shares; Mr. Lange, 2,500 shares; and All directors and executive officers as a
group, 566,202 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 2001, all persons complied with such filing requirements except that Mr.
Davis did not timely file a report regarding an exercise of an option to
purchase certain shares and a report regarding a sale of certain shares, and Mr.
Sullivan did not timely file a report regarding an open-market purchase of
certain shares.
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 2001 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.
18
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 2003 must be submitted to the Company on or before December 30,
2002, 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, 45200 Business Court, 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 2003 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 2002 Annual Meeting, notice of any such
proposal or nomination must be provided in writing to the Secretary of the
Company no later than March 1, 2003 and not before January 30, 2003.
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 29, 2002
Dulles, Virginia
19
APPENDIX A
ATLANTIC COAST AIRLINES HOLDINGS, INC.
AUDIT COMMITTEE CHARTER
1. Members. The Board of Directors shall appoint an Audit
Committee of at least three members, consisting entirely of "independent"
directors of the Board, and shall designate one member as chairperson. For
purposes hereof, "independent" shall mean a director who meets the National
Association of Securities Dealers, Inc. ("NASD") definition of "independence."
Each member of the Company's audit committee must be
financially literate and one member of the audit committee shall have accounting
or related financial management expertise, both as provided in the NASD rules.
2. Purposes, Duties, and Responsibilities. The Audit Committee
shall represent the Board of Directors in discharging its responsibility
relating to the accounting, reporting, and financial practices of the Company
and its subsidiaries, and shall have general responsibility for surveillance of
internal controls and accounting and audit activities of the Company and its
subsidiaries. Specifically, the Audit Committee shall:
(i) Recommend to the Board of Directors, and evaluate, the
firm of independent certified public accountants to be
appointed as auditors of the Company, which firm shall be
ultimately accountable to the Board of Directors through the
Audit Committee.
(ii) Review with the independent auditors their audit
procedures, including the scope, fees and timing of the audit,
and the results of the annual audit examination and any
accompanying management letters, and any reports of the
independent auditors with respect to interim periods.
(iii) Review the written statement from the outside auditor
of the Company concerning any relationships between the
auditor and the Company or any other relationships that may
adversely affect the independence of the auditor, establish
such standards and procedures it considers appropriate, if
any, for the engagement of the outside auditor to provide
non-audit services and assess the independence of the outside
auditor as required under Independent Standard Boards Standard
No. 1.
(iv) Review and discuss with management and the independent
auditors the financial statements of the Company, including an
analysis of the auditors' judgment as to the quality of the
Company's accounting principles, and any material financial or
non-financial arrangements of the Company which do not appear
on the financial statements of the Company but which are
relevant to an understanding of the Company's financial
statements and financial condition.
(v) Review the adequacy of the Company's internal controls.
(vi) Review with management and the outside auditors the
accounting policies which may be viewed as critical, and
review any significant changes in the accounting policies of
the Company and accounting and financial reporting proposals
that may have a significant impact on the Company's financial
reports.
(viii) Review material pending legal proceedings involving the
Company and other contingent liabilities.
(ix) Review the adequacy of the Audit Committee Charter on
an annual basis.
A-1
3. Meetings. The Audit Committee shall meet as often as may be deemed
necessary or appropriate in its judgment, generally four times each year, either
in person or telephonically. The Audit Committee shall meet in executive session
with the independent auditors at least annually. The Audit Committee may create
subcommittees who shall report to the Audit Committee. The Audit Committee shall
report to the full Board of Directors with respect to its meetings. The majority
of the members of the Audit Committee shall constitute a quorum.
4. Outside Advisors. The Audit Committee shall have the authority to
retain, at the expense of the Company but without further approval or
authorization of the Company, such outside counsel, experts and other advisors
as it determines appropriate to assist in the full performance of its functions.
A-2
PROXY
ATLANTIC COAST AIRLINES HOLDINGS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING -- MAY 29, 2002.
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 PROPOSALS ONE AND TWO 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, and John M. Sullivan.
FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES [ ]
[ ] For all except: ______________________________.
2. To ratify selection of KPMG LLP as the Company's independent auditors for
the current year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
(Continued and to be signed and dated on the reverse side)
(Continued from other 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 PROPOSAL ONE (ELECTION OF DIRECTORS) AND FOR
PROPOSAL TWO (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 __________________________, 2002.
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.