Exhibit 10.12(a)
SECOND AMENDED AND RESTATED SEVERANCE AGREEMENT
THIS SECOND AMENDED AND RESTATED SEVERANCE AGREEMENT (the
"Agreement") is made and entered into as of this 25th day of
July, 2001 (the "Effective Date"), by and between ATLANTIC COAST
AIRLINES HOLDINGS, INC., a Delaware corporation ("ACAH") and
ATLANTIC COAST AIRLINES, a California corporation ("ACA") (ACAH
and ACA are herein collectively referred to as the "Company") and
▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇").
WITNESSETH THAT:
WHEREAS, ▇▇▇▇▇ is currently employed by the Company as Chief
Executive Officer and Chairman of the Board of Directors, and in
connection with such employment entered into a Severance
Agreement (last restated as of December 28, 1999) with the
Company; and
WHEREAS, the Company has restructured its agreement with
United Airlines, as a result of which the nature and scope of
▇▇▇▇▇'▇ duties and responsibilities have changed; and
WHEREAS, the Company wishes to assure itself of the
continued services of ▇▇▇▇▇; and
WHEREAS, the Board of Directors of the Company has
determined that the best interests of the Company would be served
by entering into this amended and restated Agreement with ▇▇▇▇▇;
and
NOW, THEREFORE, the parties, for and in consideration of the
mutual and reciprocal covenants and agreements hereinafter
contained, and intending to be legally bound hereby, do contract
and agree as follows:
1. Employment: Company hereby employs ▇▇▇▇▇ and ▇▇▇▇▇ hereby
accepts employment by Company and agrees to perform his duties
and responsibilities hereunder upon all of the terms and
conditions as are hereinafter set forth.
2. Duties: ▇▇▇▇▇ shall serve in the capacities of Chief
Executive Officer and Chairman of the Board of the Company and of
any other entity(ies) to which the Company's obligations under
this Agreement shall be assigned pursuant to Paragraph 14. ▇▇▇▇▇
shall be responsible for supervising and directing all operations
of the Company for which the Company is responsible, pursuant to
its agreements with United Airlines, Delta Airlines or otherwise.
All other officers of the Company shall report to ▇▇▇▇▇. ▇▇▇▇▇
shall otherwise be responsible for carrying out all duties
assigned to the Chairman by the Company's Board of Directors and
under ACAH's and ACA's Bylaws. The Company shall use its good
faith efforts to ensure that ▇▇▇▇▇ continues to serve as a member
of the Company's Board of Directors.
3. Terms of Employment: ▇▇▇▇▇'▇ term of employment under this
Agreement shall commence on the Effective Date and shall
terminate on May 31, 2005, unless further extended as hereinafter
set forth. Commencing on May 31, 2002, and each successive
anniversary of that date, the Agreement shall automatically be
extended for an additional twelve (12) months without further
action by either party unless (i) ▇▇▇▇▇ elects to retire from his
positions with the Company pursuant to Paragraph 11, or (ii)
either party provides the other sixty (60) days' written notice
that such party does not wish to extend the term of this
Agreement.
4. Extent of Service: ▇▇▇▇▇ shall devote such time and
attention as is required to perform his obligations under this
Agreement and will at all times faithfully and industriously,
consistent with his ability, experience and talent, perform his
duties hereunder.
5. Compensation: During the term of this Agreement, Company
agrees to pay to ▇▇▇▇▇, and ▇▇▇▇▇ agrees to accept from Company,
in full payment for services rendered by ▇▇▇▇▇ and work to be
performed by him under the terms of this Agreement, the
following:
A. SALARY. An annual base salary of Four-Hundred Thirty
Five Thousand Dollars ($435,000) shall be paid to ▇▇▇▇▇.
Commencing October 1, 2001 and each October 1 thereafter, the
amount of ▇▇▇▇▇'▇ base salary shall be increased as determined by
the Compensation Committee of the Board of Directors of the
Company; provided, however, that in no event shall ▇▇▇▇▇'▇ annual
base salary be less than the previous year's annual base salary.
▇▇▇▇▇'▇ base salary for each year shall be payable to him in
accordance with the reasonable payroll practices of the Company
as from time to time in effect for executive employees (but in no
event less often than monthly).
B. MANAGEMENT INCENTIVE PLAN. ▇▇▇▇▇ shall participate in
the Company's Management Incentive Program, or any successor
bonus plan or program for management employees. In addition, if
the Company maintains an additional executive/management bonus
plan, then ▇▇▇▇▇'▇ bonus arrangement shall be at least consistent
with the provisions of such bonus plan.
C. EXECUTIVE BONUSES. ▇▇▇▇▇ shall be eligible for an
additional annual bonus under an executive performance bonus plan
currently known as Senior Management Incentive Plan ("SMIP") for
so long as the Board of Directors determines to maintain such
plan. Under such plan, each calendar year, ▇▇▇▇▇ shall be
entitled to receive a bonus equal to specified percentage of base
salary upon the attainment of certain pre-established goals.
The maximum bonus under this plan assuming all goals are met will
not be less than 100% of base salary. Such goals and percentage
of salary shall be determined by the Compensation Committee of
the Board of Directors of the Company prior to the commencement
of each plan year. The bonus amount each year shall be paid in
cash, stock, options or such other form as the Compensation
Committee provides, paid at the time period provided under such
plan, at the same time and in the same form as paid generally to
other eligible employees, except to the extent that this
Agreement provides otherwise.
D. DEFERRED COMPENSATION.
(i) ▇▇▇▇▇ will be entitled to deferred compensation
under an unfunded and non-tax qualified arrangement ("Deferred
Compensation") as described in this Paragraph 5.D., which shall
supercede and control over all prior deferred compensation
arrangements. The amounts credited as Deferred Compensation
will be recorded as a bookkeeping entry representing a general
unsecured obligation of the Company and ▇▇▇▇▇ shall not have a
claim to any specific assets of the Company in satisfaction of
the amounts, if any, payable as Deferred Compensation. As of the
Effective Date, the balance in the Deferred Compensation account
recorded for ▇▇▇▇▇ shall equal $1,660,672, which is the amount of
the Company's Deferred Compensation "contributions" under the
Severance Agreement between the Company and ▇▇▇▇▇, as such was
amended from time to time, through the Effective Date. After the
Effective Date, the Company will credit Deferred Compensation at
the rate of one hundred percent (100%) of ▇▇▇▇▇'▇ annual base
salary. Deferred Compensation will be based on ▇▇▇▇▇'▇ annual
base salary in effect on January 1 in each year, and will be
credited as of January 1 in each year. The Company may provide
the Deferred Compensation through a benefit plan so long as (1)
the amount credited by the Company on ▇▇▇▇▇'▇ behalf equals the
amount set forth herein, and (2) the vesting schedule, credit for
Years of Service, and terms of distribution are all at least as
favorable to ▇▇▇▇▇ as set forth herein. No interest or rate of
return or other appreciation or depreciation of value shall
accrue or be payable on amounts credited to ▇▇▇▇▇ as Deferred
Compensation pursuant to this Section 5.D. unless the Company
elects otherwise.
(ii) Vesting of Deferred Compensation will be based
upon "Years of Service," with ▇▇▇▇▇ to be credited with one Year
of Service for completion of each twelve (12) consecutive month
period of employment with the Company beginning January 1, 1996
and ending on the Deferred Compensation Ending Date (as defined
below). (That is, ▇▇▇▇▇ will be credited with Years of Service
for any applicable Severance Period, as further provided in
Paragraph 10.E.(iv) hereof.) ▇▇▇▇▇ will become vested in the
Deferred Compensation based on the following schedule:
PERCENTAGE
YEARS OF SERVICE VESTED
LESS THAN 4 0%
AT LEAST 4 BUT LESS THAN 5 25%
AT LEAST 5 BUT LESS THAN 6 35%
AT LEAST 6 BUT LESS THAN 7 50%
AT LEAST 7 BUT LESS THAN 8 65%
AT LEAST 8 BUT LESS THAN 9 80%
AT LEAST 9 100%
In the event of a Change in Control (as defined and determined
under Paragraph 13.A. of this Agreement) of the Company, ▇▇▇▇▇
shall become immediately 100% vested in his Deferred Compensation
amount notwithstanding the above vesting schedule.
(iii) The "Deferred Compensation Ending Date" shall
mean the date of Termination Date (as defined below) if ▇▇▇▇▇'▇
employment with the Company is terminated at any time under
circumstances that do not entitle him to Severance Compensation
pursuant to Paragraph 10 of this Agreement, or shall mean the
last day of the Severance Period (as defined in Paragraph 10) if
▇▇▇▇▇ is entitled to Severance Compensation. During a Severance
Period, Deferred Compensation shall continue to accrue and vest
pursuant to the terms of 10.E.(iv) hereof. Upon the Deferred
Compensation Ending Date, the Company shall pay to ▇▇▇▇▇ whatever
"Deferred Compensation" amount is equal to the applicable vested
percentage of the total amount then credited to his account
pursuant to this Paragraph 5.D. The Company shall make this
payment in cash within thirty (30) days following the Deferred
Compensation Ending Date, provided that the Company shall have a
right of set-off against, and may reduce the amount payable as
Deferred Compensation by, any amount owed or payable by ▇▇▇▇▇ to
the Company.
(iv) TAX LIABILITY ON DEFERRED COMPENSATION. The
Company shall pay to ▇▇▇▇▇ the Deferred Compensation Tax Payment
on the earliest of (x) the date of ACAH's 2005 annual meeting of
stockholders (or special meeting in lieu thereof), provided ▇▇▇▇▇
remains at that time actively employed by the Company pursuant to
the terms hereof (other than as a consultant), (y) the date of a
Change in Control (as defined and determined under Paragraph
13.A), provided ▇▇▇▇▇ remains at that time actively employed by
the Company pursuant to the terms hereof, or, (z) if ▇▇▇▇▇'▇
employment with the Company is terminated at any time under
circumstances that entitle him to Severance Compensation, the
last day of the Severance Period (as defined in Paragraph 10.E.).
For purposes of this Agreement, the Deferred Compensation Tax
Payment shall be a payment in cash equal to the amount of any
state, local and federal taxes that would be imposed on ▇▇▇▇▇ on
the amount of the Company's cumulative Deferred Compensation
contributions through and including such date, if he were taxed
on such amounts as of such date. In addition, at the time, if
any, that ▇▇▇▇▇ becomes entitled to payment of the Deferred
Compensation Tax Payment, the Company shall pay ▇▇▇▇▇ a "▇▇▇▇▇
up" payment on the Deferred Compensation Tax Payment, equal to
the aggregate amount of any additional taxes (whether income
taxes, excise taxes, special taxes, employment taxes or
otherwise) that are or will be payable by ▇▇▇▇▇ as a result of
the Deferred Compensation Tax Payment being paid or payable to
▇▇▇▇▇ and/or as a result of the additional amounts paid or
payable to ▇▇▇▇▇ pursuant to this sentence, such that after
payment of such additional taxes ▇▇▇▇▇ shall have been paid on a
net after-tax basis an amount equal to the Deferred Compensation
Tax Payment. The payments provided for under this Paragraph
5.D.(iv) shall be made whether or not any taxes are due by ▇▇▇▇▇
on the Deferred Compensation contributions at that time and
whether or not such Deferred Compensation is to be paid at that
time, based on rates then in effect for state, local and federal
income taxes then applicable to ▇▇▇▇▇, and for FICA (if due) and
Medicare taxes, estimated at the highest marginal rates in effect
at that time. The amount of the Deferred Compensation Tax
Payment and of any gross-up amounts payable under this Paragraph
5.D.(iv) shall be determined by the Company's independent
auditing firm, whose determination, absent manifest error, shall
be treated as conclusive and binding absent a binding
determination by a governmental taxing authority that a greater
amount of taxes is payable by ▇▇▇▇▇.
E. SPLIT DOLLAR LIFE INSURANCE. The Company shall advance
amounts to fund payment of the premiums under a split dollar life
insurance arrangement covering ▇▇▇▇▇ as provided in this
Paragraph 5.E. As of the date hereof, the split dollar life
insurance arrangement is provided under a policy or policies with
Phoenix Home Life Mutual - (such policies and agreements related
thereto, the "Split Dollar Agreement"). The Company shall
continue to abide by the terms of the Split Dollar Agreement with
▇▇▇▇▇ in force on the date of this Agreement, but, subject to the
foregoing, the Company may implement a substitute Split Dollar
Agreement so long as the amount of premiums funded by the Company
on ▇▇▇▇▇'▇ behalf equals the amount set forth herein.
(i) ▇▇▇▇▇ shall be the owner of the policy under the
Split Dollar Agreement and will have the right to designate his
beneficiary with respect to proceeds of the policy payable upon
his death; provided, however, that notwithstanding the foregoing,
the Company shall have a collateral assignment of the policy as
security for the repayment of the amounts paid by the Company
toward the premiums for the policy.
(ii) The Company shall pay the annual premium due on
the policy in an amount equal to one hundred percent (100%) of
▇▇▇▇▇'▇ annual base salary in effect on January 1 in each year
the Company is obligated to fund the premium as described herein.
The Company shall, except as provided in Paragraph 5.E.(iii)
below, each year pay, on or before the due date(s) under the
terms of the policy, the entire amount of the annual premium due
on the policy acquired pursuant to this Paragraph 5.E. During
any Severance Period, the Company's obligation to pay the annual
premium due on the split dollar insurance policy shall continue
pursuant to the terms of 10.E.(v) hereof.
(iii) The "Split Dollar Release Date" shall mean
(a) the Termination Date (as defined below), if ▇▇▇▇▇'▇
employment with the Company is terminated at any time under
circumstances that do not entitle him to Severance Compensation
pursuant to Paragraph 10 of this Agreement, or (b) the last day
of the Severance Period (as defined in Paragraph 10), if ▇▇▇▇▇ is
entitled to Severance Compensation. The Company shall fund
payment of the premiums as provided in the Paragraph 5.E. in each
year until the "Split Dollar Release Date." Upon the Split
Dollar Release Date, the following shall occur:
(a) ▇▇▇▇▇ shall pay to the Company an amount
equal to the total of all premiums paid by the Company on the
split dollar policy(ies) acquired pursuant to his employment with
the Company to the date hereof or subsequently pursuant to this
Paragraph 5.E., without interest thereon. The Company may, at
its option, collect such amount from any amounts it or any of its
affiliates owes to ▇▇▇▇▇. Upon receipt of such payment the
Company shall release its interest in the policy, or a portion
thereof, on ▇▇▇▇▇'▇ life acquired pursuant to the terms of the
Split Dollar Agreement, or any or all of the paid up additions
standing to the credit of such policy, if any, such that the
released interest equals the total of all premiums paid by the
Company on the split dollar policy(ies) acquired pursuant to this
Paragraph 5.E. The Company agrees that the amount of any such
release of interest by the Company shall reduce the amount of
"Liabilities" (as such term is defined in the Agreement of
Assignment of Life Insurance Death Benefit As Collateral entered
into between ▇▇▇▇▇ and the Company in connection with the Split
Dollar Agreement) owed to the Company in connection with the
Split Dollar Agreement and related Collateral Assignment
Agreement. Accordingly, the Company also agrees to reduce to
such extent its interest as acquired by collateral assignment of
the policy pursuant to the Split Dollar Agreement and related
Collateral Assignment Agreement.
(b) The Split Dollar Agreement shall continue in
full force and effect and survive separate and apart from this
Agreement; provided, however, that the Company shall have no
further obligation to pay any premium on the policy under the
Split Dollar Agreement which has a due date after the Split
Dollar Release Date and such obligation shall be transferred to
▇▇▇▇▇.
F. DISCRETIONARY COMPENSATION. The Company may pay ▇▇▇▇▇
discretionary compensation, bonuses and benefits in addition to
those provided for herein in such amounts and at such times as
the Compensation Committee of the Board of Directors of the
Company shall determine.
6. Benefits:
A. The Company shall pay for or provide ▇▇▇▇▇ such
vacation time and benefits, including but not limited to,
coverage under Company's major medical, accident, health, dental,
disability and life insurance plans, as are made available to
other executive employees of Company generally (and, to the
extent provided by such policies, to ▇▇▇▇▇'▇ dependents).
B. The Company agrees to promptly reimburse ▇▇▇▇▇ for any
otherwise unreimbursed health or medical insurance premiums
and/or uncovered medical expenses up to $25,000 per calendar year
under a written medical reimbursement plan maintained for ▇▇▇▇▇
and other key executive employees. If such payments are taxable
to ▇▇▇▇▇, the Company shall pay ▇▇▇▇▇ a gross-up equal to the
estimated income, FICA and Medicare taxes due with respect to
such reimbursement, with federal and state income taxes being
estimated at the highest marginal rates.
▇. ▇▇▇▇▇ shall be eligible to participate in any profit
sharing plan, employee stock ownership plan or other qualified
retirement plan adopted by Company to the same extent as other
executive employees of Company. ▇▇▇▇▇ shall also be eligible to
participate in any stock option, restricted stock, stock
appreciation rights or stock purchase plans or programs or
nonqualified deferred compensation arrangements of Company, which
participation shall be at levels at least equal in value to such
benefits provided by Company to other key executive employees of
Company.
D. The Company agrees to reimburse ▇▇▇▇▇ for the cost of
investment and tax planning services up to $15,000 incurred
during each calendar year. If such payments are taxable to
▇▇▇▇▇, the Company shall pay ▇▇▇▇▇ a ▇▇▇▇▇-up equal to the
estimated income, FICA and Medicare taxes due with respect to
such reimbursement, with federal and state income taxes being
estimated at the highest marginal rates.
▇. ▇▇▇▇▇ shall be permitted to use the Company's aircraft
(or aircraft operated by any successor in interest to the
Company) from time to time for business entertainment purposes or
personal use, with personal use to be subject to the following
limitations: (i) ▇▇▇▇▇'▇ request on timing and type of aircraft
should be reasonable as to not impact the operation of the
airline; (ii) no more than 20 segments (i.e., 10 round trips) per
calendar year, excluding ferry flights; (iii) trip length not to
exceed 1,000 nautical miles.
7. Reimbursement of Expenses: The Company agrees to promptly
reimburse ▇▇▇▇▇, within fifteen (15) days after presentation of
receipts and other appropriate documentation, for all reasonable,
ordinary and necessary travel costs and other necessary expenses
incurred by ▇▇▇▇▇ in performing his duties pursuant to this
Agreement.
8. Stock Options:
A. Company agrees to continue in force a stock option plan
or one which is substantially similar to the existing plan
("Stock Option Plan"), which has been approved by the
shareholders of the Company and, on the first business day in
each October commencing in October, 2001, and (subject to the
provisions of Paragraph 10.A.(vii)) continuing so long as ▇▇▇▇▇
is employed by the Company to ▇▇▇▇▇ ▇▇▇▇▇ options under the Stock
Option Plan to purchase not less than 200,000 shares of the
common stock of ACAH (such number to be adjusted to reflect any
stock splits after the Effective Date) at the price per share at
the closing of the trading market on the last business date prior
to such grant. The Company also agrees to approve the issuance
of such additional shares as are necessary to enable ▇▇▇▇▇ to
exercise such options. The Company will not be required to
reserve shares from existing plans to cover future obligations
under this paragraph, but will use reasonable efforts to obtain
shareholder approval as necessary from time to time to make a
sufficient number of additional shares available on a timely
basis, and will provide ▇▇▇▇▇ with equivalent alternative
compensation should approval not be obtained. The terms of the
grant of such options granted after January 1, 2000 shall provide
that (a) ▇▇▇▇▇'▇ right to exercise such options shall vest and
become exercisable over the four-year period beginning on the
date of each grant at the rate of one-fourth per year (i.e., one-
fourth shall vest and become exercisable on the first anniversary
of the grant) so long as ▇▇▇▇▇ is employed by the Company or
consulting with the Company pursuant to the terms of Paragraph
12, (b) ▇▇▇▇▇'▇ right to exercise such options to purchase the
entire number of shares covered thereby, shall become immediately
100% vested in the event there is a Change in Control (as defined
and determined under Paragraph 13.A.) or in the event Company
shall otherwise become obligated to provide ▇▇▇▇▇ with ▇▇▇▇▇▇▇▇▇
Compensation as provided in Paragraph 10.E. herein, (c) such
options shall be exercisable for ten (10) years after the date of
the grant so long as ▇▇▇▇▇ is employed by the Company and (d)
▇▇▇▇▇ shall have the right to exercise such vested options within
ninety (90) days following any termination of ▇▇▇▇▇'▇ employment
except that in the case of termination of employment for which
▇▇▇▇▇ is entitled to "Severance Compensation" as provided herein,
in which case the terms of Paragraph 10.E.(iii) shall apply.
Notwithstanding the above, the terms of the grant of such options
shall be no less favorable to ▇▇▇▇▇ than the terms of options
granted as of the time of the grant to other senior executive
officers.
B. In addition to the foregoing, if the Company in the
exercise of its discretion, shall ▇▇▇▇▇ ▇▇▇▇▇ any additional
stock options, such options shall contain terms and conditions
which are at least as favorable to ▇▇▇▇▇ as those set forth in
this Paragraph 8. All outstanding options previously issued to
▇▇▇▇▇ prior to the Effective Date of this Amended and Restated
Severance Agreement shall also be subject to the foregoing terms,
except that vesting periods shall be as stated in the existing
option agreements, and except that no such terms shall be
applicable to options intended to qualify as Incentive Stock
Options if and to the extent such terms would be deemed to result
in a "material modification" of such options (for example, ▇▇▇▇▇
will not be entitled to more than 90 days to exercise such
options following any termination of employment other than on
account of death or disability, in which case he will be entitled
to one year to exercise such options).
C. The Company has granted to ▇▇▇▇▇ options, under the
Stock Option Plan and pursuant to a Company Stock Option
Agreement, to purchase 100,000 shares (prior to adjustment for
subsequent stock splits) of the common stock of ACAH, effective
as of July 21, 1999 at the price per share at the closing of the
trading market on July 20, 1999. ▇▇▇▇▇ acknowledges that said
grant is in lieu of grants that were to be made to him effective
January 1, 2000 pursuant to the terms of this Agreement as
existed prior to the execution of Amendment Number One.
9. Deductions: Deductions shall be made from any component of
▇▇▇▇▇'▇ compensation provided pursuant to this Agreement or
otherwise for social security, Medicare, federal, state and local
withholding taxes, and any other such taxes as may from time to
time be required by any governmental authority.
10. Termination: ▇▇▇▇▇'▇ employment with the Company shall be
terminated only in accordance with the following provisions:
A. DISABILITY.
(i) In the event ▇▇▇▇▇ shall become mentally or
physically disabled so as to have been unable to perform his
duties hereunder for twelve (12) consecutive months, subject to
▇▇▇▇▇'▇ right to return to work as provided below, Company shall
have the right to terminate ▇▇▇▇▇'▇ employment with Company upon
the expiration of such twelve (12) month period; provided,
however, that upon any such termination Company shall be
obligated to provide ▇▇▇▇▇ with Severance Compensation as
provided in Paragraph 10.E. herein. Such twelve-month period
shall be deemed to have commenced on the date when ▇▇▇▇▇ is first
unable to perform his duties on a substantially full-time basis
because of mental or physical disability and shall end on the
date on which ▇▇▇▇▇ shall return to the substantial full-time
performance of his duties. If at the expiration of such twelve
(12) month period, the Company shall desire to terminate ▇▇▇▇▇
on the basis of disability, it shall give written notice to him.
▇▇▇▇▇'▇ employment shall thereafter be terminated if he does not
return to substantial full-time performance of his duties within
ten (10) calendar days after such notice is given.
(ii) Nothing contained herein shall be construed to
affect ▇▇▇▇▇'▇ rights under any disability insurance or similar
policy, whether maintained by the Company, ▇▇▇▇▇ or another
party. The Company may utilize a disability policy to fund, in
whole or in part, the compensation that would be due to ▇▇▇▇▇
during the term of or in the event of a disability, in which case
the proceeds of the policy would not be in addition to any
compensation otherwise payable to ▇▇▇▇▇.
(iii) For purposes of this Agreement, ▇▇▇▇▇ shall
be deemed to be disabled when he shall have been absent from his
duties because of sickness, illness, injury or other physical or
mental infirmity on a substantially full-time basis. In the
event of a dispute as to whether ▇▇▇▇▇ is disabled, the issue of
the determination of disability shall be submitted to a Board of
Arbiters for a binding decision under the procedures set forth in
Paragraph 10.A.(v) below.
(iv) At the end of any disability (other than a
disability that results in the termination of ▇▇▇▇▇'▇ employment
with the Company), ▇▇▇▇▇ shall return to work and this Agreement
shall continue as though such disability had not occurred.
(v) If there is a dispute as to whether ▇▇▇▇▇ is
subject to any disability, the issue shall be submitted to a
Board of Arbiters (whose decision shall be binding on the Company
and ▇▇▇▇▇) consisting of three persons: one physician who
specializes in the physical or mental disability in dispute
(hereinafter referred to as a "Specialist") shall be appointed on
behalf of Company by the Board of Directors of Company (with
▇▇▇▇▇ having no vote on this question); a second Specialist shall
be appointed by ▇▇▇▇▇ and a third Specialist shall be appointed
by the two Specialists so appointed. The decision of a majority
of such Specialists shall be binding upon the parties hereto. If
a majority of the Specialists determines that ▇▇▇▇▇ is not
subject to any disability for purposes of this Agreement, ▇▇▇▇▇
shall return to work under the provisions hereof. Such
Specialists may physically examine ▇▇▇▇▇, who hereby consents to
such examination and to make available any pertinent medical
records. The cost of such Specialists shall be paid by Company.
(vi) If it is determined that ▇▇▇▇▇ can return to work
hereunder on a part-time basis, the parties agree to use good
faith efforts to negotiate the terms of ▇▇▇▇▇'▇ return to work.
(vii) During any period in which ▇▇▇▇▇ is disabled
but his employment shall not have been terminated, ▇▇▇▇▇ shall
continue to receive his base salary and any applicable bonus, and
shall continue to receive all benefits as an employee and as
provided herein generally. Any options previously granted shall
continue to vest, but no new options shall be issued to ▇▇▇▇▇.
(viii) During any period in which ▇▇▇▇▇ is disabled
but his employment shall not have been terminated, ▇▇▇▇▇ shall
continue to be credited with Years of Service for purposes of
vesting of Deferred Compensation as set forth in Paragraph 5.D.
B. DEATH.
(i) ▇▇▇▇▇'▇ employment with Company shall terminate
immediately upon ▇▇▇▇▇'▇ death; provided, however, that Company
shall be obligated to provide the Severance Compensation as
specified in Paragraph 10.E. herein to ▇▇▇▇▇'▇ estate, heirs or
beneficiaries.
(ii) Nothing contained herein shall be construed to
affect ▇▇▇▇▇'▇ rights under any life insurance or similar policy,
whether maintained by Company, ▇▇▇▇▇ or another party. The
Company may utilize a life insurance policy to fund, in whole or
in part, the Severance Compensation that would be payable in the
event of ▇▇▇▇▇'▇ death, in which case the proceeds of any such
policy other than the Split Dollar Agreement would not be in
addition to any Severance Compensation otherwise payable under
this Paragraph 10.B.
C. TERMINATION BY ▇▇▇▇▇.
(i) WITHOUT GOOD REASON. ▇▇▇▇▇ may, without "Good
Reason" (as hereinafter defined), terminate his employment by
giving to Company sixty (60) days' written notice by Certified
Mail, Return Receipt Requested, at the office of Company, and
such termination shall be effective on the sixtieth (60th) day
following the date of such notice (the "Termination Date"). In
such event, ▇▇▇▇▇ (i) shall continue to render his services up to
the Termination Date if so requested by Company and (ii) shall be
paid his regular base salary and shall receive all benefits up to
the Termination Date. ▇▇▇▇▇ will be entitled to payment of any
bonus due but not yet paid for prior bonus periods, and for a pro-
rata bonus amount for the bonus period in which the termination
occurs pursuant to this Paragraph 10.C.(i) but will not be
entitled to Severance Compensation or to any other compensation,
bonus or fringe benefits accrued after the Termination Date. The
bonus payable to ▇▇▇▇▇ will be paid at the same time it would
have been paid had ▇▇▇▇▇'▇ employment not been terminated, will
be based on the achievement of targets for the entire bonus
period without regard to interim results as of the termination
date, and will be paid pro-rata based on the number of full
months ▇▇▇▇▇ was employed within the bonus period divided by the
total number of months in the bonus period.
(ii) WITH GOOD REASON. ▇▇▇▇▇ may terminate his
employment with Company immediately for Good Reason. In the
event ▇▇▇▇▇'▇ employment with Company is terminated by ▇▇▇▇▇ for
Good Reason, Company shall be obligated to provide ▇▇▇▇▇ with
▇▇▇▇▇▇▇▇▇ Compensation as provided in Paragraph 10.E. herein.
"Good Reason" shall mean any of the following (without ▇▇▇▇▇'▇
express prior written consent):
(a) The assignment to ▇▇▇▇▇ by Company of duties
inconsistent with ▇▇▇▇▇'▇ positions, duties, responsibility and
status with Company, or any removal of ▇▇▇▇▇ from or any failure
to re-elect ▇▇▇▇▇ to his positions, including his position as a
member of the Company's Board of Directors (except in connection
with the termination of his employment for disability, death or
for cause as provided herein), unless cured within fifteen (15)
days of ▇▇▇▇▇ giving written notice thereof to the Company.
(b) Any material adverse change in any benefit
plan or arrangement in which ▇▇▇▇▇ is participating and which is
not applicable generally to other key executive employees of
Company who participate in such plan or arrangement), unless
cured within fifteen (15) days of ▇▇▇▇▇ giving written notice
thereof to the Company.
(c) ▇▇▇▇▇'▇ relocation outside of the Washington
D.C./ Northern Virginia region without his consent, except for
required travel by ▇▇▇▇▇ on Company business; provided, however,
that if the Board of Directors of Company determines to relocate
Company's principal executive offices, Company shall pay all of
▇▇▇▇▇'▇ reasonable moving and other relocation expenses, the
Board of Directors shall make such adjustments in ▇▇▇▇▇'▇ salary
as it reasonably deem necessary to reflect the increased costs of
living in the new location, and ▇▇▇▇▇ shall be obligated to
perform his services generally at such new location and such
relocation shall not constitute "Good Reason" hereunder.
(d) Any material breach by Company of any
provisions of this Agreement which is not cured by Company within
fifteen (15) days of ▇▇▇▇▇ giving written notice thereof to the
Company.
(e) Except in the case of disability or death,
any purported termination of ▇▇▇▇▇'▇ employment by the Company
which is not effected pursuant to sixty (60) days' prior written
notice of termination.
(f) Any termination by ▇▇▇▇▇ of his employment
with the Company which is effected as a result of, in connection
with or within two years following a "Change in Control" as
defined and determined under Paragraph 13.A. of this Agreement;
provided that any amounts due as Severance Compensation shall be
reduced as provided in Paragraph 13.D. The two year period will
be deemed to mean any notice given within two years following a
Change in Control where an actual termination occurs within sixty
days following said notice.
D. TERMINATION BY COMPANY.
(i) WITHOUT CAUSE. Company may, without cause,
terminate ▇▇▇▇▇'▇ employment under this Agreement at any time by
giving ▇▇▇▇▇ sixty (60) days' written notice thereof, and such
termination shall be effective on the sixtieth (60th) day
following the date such notice is given (said 60th day, the
"Termination Date"). In the event ▇▇▇▇▇'▇ employment with
Company is terminated without cause, Company shall be obligated
to provide ▇▇▇▇▇ with Severance Compensation as provided in
Paragraph 10.E. herein. At the option of Company, ▇▇▇▇▇'▇
employment shall be immediately terminated upon the Company
giving such notice, in which case ▇▇▇▇▇ shall continue to receive
his full base salary and related fringe benefits through the
Termination Date. Notwithstanding any provision of this
Agreement to the contrary, any termination of ▇▇▇▇▇'▇ employment
by the Company, for any reason or no reason, within two years
following a "Change in Control," as defined and determined under
Paragraph 13.A. of this Agreement, shall automatically be deemed
to be a termination without cause; provided that any amounts due
as Severance Compensation shall be reduced as provided in
Paragraph 13.D.
(ii) FOR CAUSE. Company may terminate ▇▇▇▇▇'▇
employment under this Agreement immediately for "cause." In such
event, ▇▇▇▇▇ will be entitled to payment of a pro-rata bonus
amount to the date of termination of employment, but will not be
entitled to Severance Compensation or to any other compensation,
bonus or fringe benefits accrued after the date of termination of
employment. The bonus amount payable to ▇▇▇▇▇ will be calculated
in the same fashion as in the case of termination by ▇▇▇▇▇
without good reason, as set forth in Paragraph 10.C.(i) above.
Cause shall be defined as any of the following: (i) willful
unauthorized misconduct in the material performance of ▇▇▇▇▇'▇
duties hereunder, (ii) commission of an act of theft, fraud or
dishonesty by ▇▇▇▇▇, which act is materially harmful to Company,
(iii) material breach of any provision of this Agreement if such
breach has not been cured by ▇▇▇▇▇ (or if ▇▇▇▇▇ has not
compensated the Company for such breach by payment of an amount
deemed reasonable by the Company if the breach cannot be cured)
within fifteen (15) days after the Company gives ▇▇▇▇▇ written
notice of such breach. Any termination under this Paragraph
10.D.(ii) shall take effect immediately upon the Company giving
▇▇▇▇▇ written notice thereof.
▇. ▇▇▇▇▇▇▇▇▇ COMPENSATION. "Severance Compensation" is
defined as all of the compensation and benefits described in this
Paragraph 10.E. It will be provided to ▇▇▇▇▇ upon the occurrence
of any of the events described elsewhere in this Agreement as
providing for ▇▇▇▇▇'▇ receipt of Severance Compensation, but not
in any other circumstances except to the extent that individual
components of Severance Compensation may be separately provided
pursuant to the terms of this Agreement. "Termination Date" is
defined as the last day of ▇▇▇▇▇'▇ employment with the Company.
"Severance Period" is defined as the period beginning on the day
following the Termination Date and ending on the day which is
three years following the Termination Date. Benefits extending
to ▇▇▇▇▇'▇ spouse shall refer to ▇▇▇▇▇'▇ spouse as of the date
such benefits are extended or, after ▇▇▇▇▇'▇ death, to ▇▇▇▇▇'▇
spouse as of the date of his death. The compensation and
benefits to be provided as Severance Compensation are as follows:
(i) SEVERANCE PAY. Throughout the Severance Period,
▇▇▇▇▇ will receive severance pay at the rate of 100% of his
annual base salary in effect at the time of his termination, to
be paid on the Company's regular payroll payment dates at the
same time and in the same fashion as the Company's regular
payroll payments.
(ii) BONUS. For all bonus plans in which ▇▇▇▇▇ is
participating as of the Termination Date, the Company shall pay
to ▇▇▇▇▇ a lump sum bonus payout. This payout shall consist of a
payment in the amount calculated by the formula [(x + y) * z]
where (x) is ▇▇▇▇▇'▇ base pay earned in the year from January 1
to the Termination Date, (y) is the amount which is three times
▇▇▇▇▇'▇ annual base salary in effect at the time of Termination,
and (z) is the percentage which under each plan is the maximum
percentage of base pay that ▇▇▇▇▇ was eligible to earn during the
year in which the Termination Date occurred assuming all targets
were met in full, whether or not said targets actually were met.
The payments provided for under this Paragraph 10.E.(ii) will be
paid in cash or in such other form as bonus amounts generally are
paid to eligible employees, or in a combination thereof, as
determined by the Committee, within thirty days following the
Termination Date and shall be considered to be full compensation
for all amounts due to ▇▇▇▇▇ for bonus plans in which he was
participating as of the Termination Date, and he shall not be
entitled to any further payments under any of said plans during
the Severance Period or thereafter. Notwithstanding the above,
any bonus due to ▇▇▇▇▇ for years (or other applicable bonus
period) completed prior to the Termination Date but not yet paid
shall be paid in addition to the bonus described herein.
(iii) STOCK OPTIONS. All options to purchase
shares of ACAH stock that have been granted to ▇▇▇▇▇ shall become
100% vested as of the Termination Date. All options that would
have been granted to ▇▇▇▇▇ in the future pursuant to Paragraph
8.A. hereof shall not be granted if the date on which they would
have been granted occurs after the Termination Date, even though
said date may occur during the Severance Period. ▇▇▇▇▇ (or, in
the case of death, his estate or his beneficiaries) shall have
the right to exercise such vested options until the earlier of
the original expiration date of said option, or a date determined
as follows: (a) for options not intended to qualify as Incentive
Stock Options, ▇▇▇▇▇ shall have the right to exercise vested
options any time prior to the end of the Severance Period;
(b) for options granted after the date of this Agreement that are
intended to qualify as Incentive Stock Options, ▇▇▇▇▇ shall have
the right to exercise vested options any time prior to the end of
the Severance Period, provided that ▇▇▇▇▇ shall not be entitled
to Incentive Stock Option treatment with respect to such options
unless ▇▇▇▇▇ exercises them within three months following
termination of his employment on account of reasons other than
his death or disability or unless ▇▇▇▇▇ (or his estate or his
beneficiaries) exercises them within one year following any
termination on account of death or disability; (c) for options
intended to qualify as Incentive Stock Options where termination
is caused by his death or disability, ▇▇▇▇▇ (or his estate or his
beneficiaries) shall have the right to exercise within one year
following termination of his employment.
(iv) DEFERRED COMPENSATION. The Deferred Compensation
program will continue throughout the Severance Period, including
▇▇▇▇▇'▇ accumulation of Years of Service for vesting purposes,
and (subject to Paragraph 13.B.(iv) and 13.D.) including the
Company's continuation of contributions. At the end of the
Severance Period, the Company shall pay ▇▇▇▇▇ an amount equal to
his vested interest under the Deferred Compensation as provided
in Section 5.D(iii). Alternatively, the Company may elect to pay
such amounts to ▇▇▇▇▇ as would be payable during the Severance
Period by the Company under the Deferred Compensation program in
a single lump sum payment within fifteen (15) days after the
Termination Date. Notwithstanding the foregoing, the Company
shall have a right of set-off against, and may reduce the amount
payable as Deferred Compensation by, any amount owed or payable
by ▇▇▇▇▇ to the Company.
(v) INSURANCE PROGRAMS. The Split Dollar Agreement
shall continue in full force and effect through the Severance
Period and shall survive separate and apart from this Agreement,
and the Company's obligation to pay all premiums pursuant to this
Agreement shall continue in accordance with the terms of this
Agreement for the Severance Period (subject to Paragraph 13.B.(v)
and 13.D.). At the end of the Severance Period, ▇▇▇▇▇ shall pay
to the Company an amount equal to the total of all premiums paid
by the Company on the split dollar policy(ies) acquired pursuant
to Paragraph 5.E., without interest thereon, and upon receipt of
such payment the Company shall release its interest in the
policy, or a portion thereof, on ▇▇▇▇▇'▇ life acquired pursuant
to the terms of the Split Dollar Agreement, or any or all of the
paid up additions standing to the credit of such policy, if any,
such that such released interest equals the total of all premiums
paid by the Company on the split dollar policy(ies) acquired
pursuant to Paragraph 5.E. Alternatively, if the Company elects
to pay the Deferred Compensation to ▇▇▇▇▇ within fifteen (15)
days after the Termination Date pursuant to Paragraph 10.E.(iv)
above, the Company at the time of such payment may demand payment
from ▇▇▇▇▇ of an amount equal to the total of all premiums paid
by the Company on the split dollar policy(ies) acquired pursuant
to Paragraph 5.E., without interest thereon, and upon receipt of
such payment release its interest in the policy, or portion
thereof, acquired pursuant to the terms of the Split Dollar
Agreement, and any or all of the paid up additions standing to
the credit of such policy, if any, and thereafter the Company
shall be under no obligation to pay any further premiums under
the Split Dollar Agreement. Coverage under the Company's major
medical, accident, health, dental, and life insurance plans as
from time to time provided to other executive employees of the
Company (and, to the extent provided by such policies, to ▇▇▇▇▇'▇
dependents) shall continue to be paid for by the Company for the
remainder of ▇▇▇▇▇'▇ and his spouse's life. Provided, however,
if such coverage cannot be continued during the foregoing time
period under the terms of such policies or plans, the Company
shall reimburse ▇▇▇▇▇ for the cost of comparable coverage under
individually obtained policies or for COBRA coverage, or shall
make other arrangements to assure that ▇▇▇▇▇ has comparable
coverage.
(vi) DISABILITY INSURANCE. The Company will prepay, to
the time of ▇▇▇▇▇'▇ reaching age 65, the premiums due on any
disability insurance policy as was provided to ▇▇▇▇▇ as of the
time of Termination. In the event that the Company discontinued
or reduced the amount of coverage of any disability insurance
within one year preceding the Termination, the Company shall at
the time of the Termination re-establish disability insurance to
the amount previously provided and with equivalent coverage, and
shall prepay future premiums as provided herein.
(vii) VACATION. Vacation shall not continue to
accrue after the Termination Date under any circumstances.
(viii) EXECUTIVE MEDICAL REIMBURSEMENT PLAN AND
INVESTMENT AND TAX PLANNING. Throughout the Severance Period,
the Company will continue to promptly reimburse ▇▇▇▇▇ for any
otherwise unreimbursed health and medical insurance premiums
and/or uncovered medical expenses up to $25,000 per calendar year
under a written medical reimbursement plan maintained for the
Company's key executive employees, and for the $15,000 per year
investment and tax planning service expenses, incurred during
each calendar year, including the tax gross-up, if applicable.
(ix) TRAVEL BENEFITS. ▇▇▇▇▇ and his wife shall be
provided with free travel on the Company's aircraft or on the
aircraft of any successor in interest to the Company on a
positive space basis. The above travel will be first class on
aircraft offering more than one class of service. These travel
benefits will be provided for the longer of the Severance Period
or the remainder of ▇▇▇▇▇'▇ life. ▇▇▇▇▇ shall not be entitled to
travel benefits on any other airline.
(x) DEDUCTIONS FOR TAXES. Subject to Paragraph 13.C.,
any compensation due to ▇▇▇▇▇ hereunder will be subject to
deductions for social security, federal and state withholding
taxes, and any other such taxes as may from time to time be
required by governmental authority.
(xi) COMPANY AIRCRAFT. The limited use of Company
aircraft (or aircraft operated by any successor in interest to
the Company) as provided herein shall continue throughout the
Severance Period and shall continue thereafter until such time as
▇▇▇▇▇ has reached age 75. ▇▇▇▇▇ may elect to receive a lump sum
cash payment equal to the present value of said benefit.
(xii) TAX LIABILITY ON DEFERRED COMPENSATION. The
Company shall pay to ▇▇▇▇▇ the amounts provided for under
Paragraph 5.D.(iv).
11. Retirement: If ▇▇▇▇▇ remains actively employed by the
Company pursuant to the terms hereof (other than as a consultant)
on the Retirement Eligibility Date, then ▇▇▇▇▇ may terminate his
employment other than pursuant to Paragraph 10 hereof by electing
to retire from his positions with the Company, in which case he
shall receive certain benefits from the Company and may remain
with the Company in certain capacities, as provided in this
Paragraph 11. If ▇▇▇▇▇ remains actively employed by the Company
pursuant to the terms hereof (other than as a consultant) on the
Retirement Eligibility Date, and if ▇▇▇▇▇'▇ employment terminates
on or after the Retirement Eligibility Date due to death or
disability, or if after that date the Company terminates ▇▇▇▇▇'▇
employment for any reason other than for "cause" (as defined in
Paragraph 10.D.(ii)), then in addition to any Severance
Compensation to which he may be entitled, he shall thereafter
receive certain benefits from the Company as provided in this
Paragraph 11.C and 12.G. For purposes of this Paragraph 11, the
"Retirement Eligibility Date" shall mean the earlier of the date
of ACAH's 2005 annual meeting of stockholders (or special meeting
in lieu thereof) or June 1, 2005.
▇. ▇▇▇▇▇ shall provide the Board of Directors with written
notice to the Company of his intention to retire pursuant to the
terms hereof. Said notice shall be provided at least three
months prior to the intended date of retirement unless otherwise
agreed. The retirement date ("Retirement Date") will be a date
selected by ▇▇▇▇▇, but may be no earlier than the Retirement
Eligibility Date. If ▇▇▇▇▇ has not previously retired, his
Retirement Date will be the earlier of June 1 or the date of the
annual meeting of stockholders (or special meeting in lieu
thereof) first occurring after ▇▇▇▇▇ reaches age 70.
B. On the Retirement Date, ▇▇▇▇▇ shall resign from all of
his positions as an officer and an employee of the ACAH and from
each of its subsidiaries, and from any other position he holds at
the request of, or in connection with, his employment with the
Company. ▇▇▇▇▇ shall tender his resignation from the Board of
Directors of ACAH and of each of its subsidiaries, unless
requested otherwise by the Board of Directors. From and after
the Retirement Date, ▇▇▇▇▇ may serve as a Consultant as provided
in Paragraph 12 and in such other capacities as agreed from time
to time.
C. Following retirement from the Company as provided in
this Paragraph 11, ▇▇▇▇▇ shall receive the benefits set forth in
this Subparagraph C in lieu of any commitments, salary, severance
payments or other benefits provided for in Paragraphs 1 through 8
of this Agreement. These benefits shall commence as of the
Retirement Date (except for retirement pay which commences after
the Retirement Date as provided below) and shall continue until
the earlier of the date of ▇▇▇▇▇'▇ death or the date indicated
below, except that benefits expressly identified as extending to
▇▇▇▇▇'▇ spouse's life shall end on her death. Benefits extending
to ▇▇▇▇▇'▇ spouse shall refer to ▇▇▇▇▇'▇ spouse as of the date
such benefits are extended or, after ▇▇▇▇▇'▇ death, to ▇▇▇▇▇'▇
spouse as of the date of his death. Benefits to be provided
pursuant to this Subparagraph C are as follows:
(i) Following the Retirement Date, ▇▇▇▇▇ shall be paid
retirement pay as provided in this Paragraph 11.C.(1).
Retirement pay will be paid on the Company's regular payroll
payment dates at the same time and in the same fashion as the
Company's regular payroll payments until the date indicated
below. Upon ▇▇▇▇▇'▇ death, retirement pay will be paid to
▇▇▇▇▇'▇ estate or as ▇▇▇▇▇ may otherwise designate in a written
beneficiary designation furnished to the Company prior to his
death. Retirement pay will be in an amount, based on a
percentage of ▇▇▇▇▇'▇ annual base salary at the highest rate in
effect during the 12 months preceding the Retirement Date and for
the periods, as indicated below:
Percentage
of annual
Period base salary
Beginning on the Retirement 0%
Date through the date which is
the fifth anniversary of the
Retirement Date
Beginning one day after the 75%
fifth anniversary of the
Retirement Date and ending on
the date which is the tenth
anniversary of the Retirement
Date
Beginning one day after the 50%
tenth anniversary of the
Retirement Date through the
later of (a) the date which is
the fifteenth (15th)
anniversary of the Retirement
Date, and (b) the date of
▇▇▇▇▇'▇ 76th birthday
Beginning on the date which is 0%
the later of 15 years following
the Retirement Date or the date
of ▇▇▇▇▇'▇ 76th birthday
(ii) ▇▇▇▇▇ shall be provided with coverage under the
Company's major medical, accident, health, dental, disability and
life insurance plans as from time to time provided to other
executive employees of the Company generally (and, to the extent
provided by such policies, to ▇▇▇▇▇'▇ dependents), which coverage
shall continue to be paid for by the Company for the remainder of
▇▇▇▇▇'▇ and his spouse's life. Provided, however, if such
coverage cannot be continued until ▇▇▇▇▇'▇ and his spouse's
death, as the case may be, under the terms of such policies or
plans, the Company shall reimburse ▇▇▇▇▇ for the cost of
comparable coverage under individually obtained policies or for
COBRA coverage, or shall make other arrangements to assure that
▇▇▇▇▇ has comparable coverage.
(iii) ▇▇▇▇▇ shall be provided with reimbursement
for unreimbursed medical costs, as provided in Paragraph 6.B
hereof, for the period ending on the later of the date which is
15 years following the Retirement Date, or the date of ▇▇▇▇▇'▇
76th birthday.
(iv) ▇▇▇▇▇ and his wife shall be provided with travel
benefits, as provided in Paragraph 10.E.(ix) hereof, for the
remainder of ▇▇▇▇▇'▇ life and his spouse's life.
(v) ▇▇▇▇▇ shall be permitted to use the Company's
aircraft (or aircraft operated by any successor in interest to
the Company) from time to time, as provided in Paragraph 6.E.
hereof, for the period ending on the later of the date which is
15 years following the Retirement Date, or the date of ▇▇▇▇▇'▇
76th birthday.
(vi) The Company will provide an automobile for ▇▇▇▇▇'▇
use for the period ending on the later of the date which is 15
years following the Retirement Date, or the date of ▇▇▇▇▇'▇ 76th
birthday. The type of vehicle, and the frequency of replacement,
will be as per the last vehicle provided to ▇▇▇▇▇ prior to the
Retirement Date.
(vii) The Company will provide ▇▇▇▇▇ with an office
and secretary at a location convenient to his primary residence.
Costs shall be estimated in advance on an annual basis, and shall
be reasonable.
12. Consulting: If ▇▇▇▇▇ retires from the Company pursuant to
Paragraph 11 above, ▇▇▇▇▇ may elect to continue to serve the
Company as a consultant for up to five years following the
Retirement Date, on the terms and conditions set forth in this
Paragraph 12. The consulting arrangements provided under this
Paragraph 12 shall not be available following termination of
▇▇▇▇▇'▇ employment under any circumstances other than retirement
pursuant to Paragraph 11.
▇. ▇▇▇▇▇ may serve as a consultant under this Paragraph
for a term (the "Consulting Term") beginning on the Retirement
Date and ending on the date which is the fifth anniversary of the
Retirement Date, but ending in any case not later than the date
that ▇▇▇▇▇ reaches age 75. If ▇▇▇▇▇ for any reason does not
serve as a consultant during any portion of the Consulting Term,
the expiration of the Consulting Term will not be extended.
▇. ▇▇▇▇▇ will serve as an advisor to the executive
officers of the Company under the direction and supervision of
the Chief Executive Officer, and as such will provide expertise
and guidance regarding issues under consideration by the Chief
Executive Officer. ▇▇▇▇▇ may work on special projects and other
matters of a strategic nature as designated by that individual
and agreed by ▇▇▇▇▇, consistent with his expertise and with his
prior role as Chief Executive Officer. If requested by the
Company, during the Consulting Term ▇▇▇▇▇ will also serve as a
director of ACAH or any of the Company's subsidiaries (without
compensation other than as provided herein) and/or, subject to
the foregoing restriction on ▇▇▇▇▇'▇ duties and responsibilities,
as a part-time employee of ACAH or any of its subsidiaries.
▇▇▇▇▇ will tender his resignation from any such positions at the
end of the Consulting Term and at any time during the Consulting
Term that he elects not to serve as a consultant to the Company.
▇. ▇▇▇▇▇ shall hold himself available to perform
consulting services for up to twenty hours during any calendar
month, which service shall be scheduled at mutually convenient
times. If consented to by the Company, ▇▇▇▇▇ may provide more
than twenty hours of consulting services during any one month, in
which case he shall not be required to provide such services in a
subsequent month without being deemed to have ceased providing
consulting services.
▇. ▇▇▇▇▇ may elect to cease serving as a consultant at any
time. Should ▇▇▇▇▇ elect not to serve as a consultant at any
time during the Consulting Term, he may later, but within the
Consulting Term, notify the Company of his availability to
provide consulting services hereunder for the remainder of the
five year period. In such case, ▇▇▇▇▇'▇ service as a consultant
under this Paragraph 12 shall recommence thirty days following
the date of the Company's receipt of such notice, unless
otherwise agreed, and shall continue through the remainder of the
Consulting Term.
▇. ▇▇▇▇▇ will be free to pursue any other business
interests during the Consulting Term. However, ▇▇▇▇▇ shall not
at any time while providing consulting services during the
Consulting Term, without prior notice to and consent of the
Company, directly or indirectly, as a sole proprietor, member of
a partnership, stockholder or investor, officer or director of a
corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business
organization or entity other than the Company: (i) solicit or
endeavor to entice away from the Company or any of its
subsidiaries any person or entity who is, or, during the then
most recent 12 month period, was employed by, or had served as an
agent of, the Company or any of its subsidiaries; or (ii) engage
in or contract with others to engage in any business, enterprise,
line of work, consulting contract, joint venture or other
arrangement which conducts a business or businesses substantially
similar to or in competition with the business conducted by
Company in any area in which Company or any of its affiliates or
subsidiaries provides or plans to provide air transportation to
the public; (iii) solicit business from the Company or any
airline with which the Company has a code share or similar
agreement or arrangement.
F. During such time during the Consulting Term as ▇▇▇▇▇
serves as a consultant to the Company pursuant to the terms of
this Paragraph 12, ▇▇▇▇▇ shall receive (in addition to any
retirement benefits provided to ▇▇▇▇▇ during such time pursuant
to Paragraph 11 of this Agreement) the following compensation and
other benefits:
(i) Consulting fees at the rate of 90% of ▇▇▇▇▇'▇
annual base salary at the highest rate in effect during the 12
months preceding the Retirement Date, to be paid on the Company's
regular payroll payment dates at the same time and in the same
fashion as the Company's regular payroll payments.
(ii) Continuation of reimbursement for investment
and tax planning services, including tax gross-up, as provided in
Paragraph 6.D. hereof.
(iii) In the event that stock options and/or
restricted stock granted to ▇▇▇▇▇ prior to the Retirement Date do
not otherwise continue to vest and remain exercisable pursuant to
their original terms on account of ▇▇▇▇▇'▇ service as an employee
and/or director of ACAH or one of its subsidiaries during the
Consulting Term, then the Company shall take appropriate steps so
that for so long as ▇▇▇▇▇ is providing or holding himself
available to provide consulting services during the Consulting
Term, all such options and all shares of restricted stock shall
continue to remain outstanding (but not beyond their original
maximum term) and shall continue to vest according to the
schedule set forth under their terms as in effect immediately
prior to the Retirement Date, as if ▇▇▇▇▇ continued to remain an
employee and/or director of ACAH and its subsidiaries, except
that any such options that qualify for treatment as Incentive
Stock Options shall cease to so qualify to the extent provided
under the Code (but shall not otherwise be affected). In the
event that ▇▇▇▇▇ shall cease to provide consulting services
during the Consulting Term (including on or following a Change in
Control) and the Company shall not otherwise elect to permit
▇▇▇▇▇ to continue to serve as an employee and/or director, then
such event shall be treated as a termination without good reason
for purposes of vesting and expiration of any options and vesting
of shares of restricted stock then held by ▇▇▇▇▇, notwithstanding
any subsequent election by ▇▇▇▇▇ to provide consulting services
during the Consulting Term. In the event of ▇▇▇▇▇'▇ death while
serving as a consultant hereunder, all options and grants of
restricted stock shall become 100% vested as of the date of
▇▇▇▇▇'▇ death.
G. In the event that ▇▇▇▇▇ becomes disabled while serving
as a consultant during the Consulting Term, then during the
period of disability (but not after the expiration of the
Consulting Term) he shall be relieved of his obligation to
perform consulting services but shall continue to receive all
compensation and benefits provided in consideration of consulting
services under this Paragraph 12. Disability shall be determined
as provided in Paragraph 10.A. In the event that ▇▇▇▇▇ dies
while serving as a consultant during the Consulting Term, or dies
prior to the termination of his employment but after the
Retirement Eligibility Date, he will be entitled to payment of
the consulting fees provided in Paragraph 12.F.(i) for the
balance of the Consulting Term, and all unvested stock options
and restricted stock held by him shall become 1005 vested in the
same fashion as provided herein in the case of death during the
term of his employment prior to retirement.
13. Effect of a Change in Control:
A. DEFINITION OF "CHANGE IN CONTROL." For purposes of
this Agreement, a "Change in Control" shall be deemed to occur on
the earliest of (a) an acquisition (other than directly from
Company) of any securities of Company entitled to vote for the
election of Directors (the "Voting Securities") by any "person or
group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) other than an employee benefit
plan of Company, immediately after which such person has
"Beneficial Ownership" (within the meaning of Rule 13d-3 under
the Exchange Act) of more than thirty percent (30%) of the
combined voting power of Company's then outstanding Voting
Securities; (b) announcement by any "person or group" (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934) of its acceptance for payment of securities
tendered pursuant to a tender offer or exchange offer initiated
by such person owning or representing securities constituting
more than twenty percent (20%) of the combined voting power of
Company's then outstanding Voting Securities; (c) the
satisfaction or waiver of all conditions (including without
limitation any required approval by the Company's stockholders
and any required regulatory approvals) to (1) a merger,
consolidation or reorganization involving Company or a transfer
of substantially all of the assets of Company (other than to an
entity or entities owned by Company), unless the company
resulting from such merger, consolidation or reorganization or
the company to which such assets are transferred (the "Surviving
Corporation") shall adopt or assume this Agreement and the
stockholders of Company immediately before such merger,
consolidation or reorganization own, directly or indirectly
immediately following such merger, consolidation or
reorganization, at least eighty percent (80%) of the combined
voting power of the Surviving Corporation in substantially the
same proportion as their ownership immediately before such
merger, consolidation or reorganization, or (2) a complete
liquidation or dissolution of Company; or (d) persons who on the
date of this Agreement are directors of Company, together with
people nominated by a majority of them or by persons who were
nominated by them, cease for any reason to constitute a majority
of Company's Board of Directors.
B. COMPENSATION UPON A CHANGE IN CONTROL. Upon a Change
in Control, whether or not ▇▇▇▇▇'▇ employment has terminated as a
result of or in connection with the Change in Control, ▇▇▇▇▇
shall receive all of the following compensation, paid at the time
of the Change in Control:
(i) SALARY. A payment in the amount of 300% of ▇▇▇▇▇'▇
annual base salary in effect at the time of the Change in
Control.
(ii) BONUS. For all bonus plans in which ▇▇▇▇▇ is
participating as of a Change in Control, the Company shall pay to
▇▇▇▇▇ a lump sum bonus payout. This payout shall consist of a
payment in the amount calculated by the formula [(x + y) * z]
where (x) is ▇▇▇▇▇'▇ base pay earned in the year from January 1
to the date of the Change in Control, (y) is the amount which is
three times ▇▇▇▇▇'▇ annual base salary in effect at the time of
the Change in Control, and (z) is the percentage which under each
plan is the maximum percentage of base pay that ▇▇▇▇▇ was
eligible to earn during the year in which the Change in Control
occurred assuming all targets were met in full, whether or not
said targets actually were met. The payments provided for under
this Paragraph 13.B.(ii) will be paid in cash or in such other
form as bonus amounts generally are paid to eligible employees,
or in a combination thereof, as determined by the Committee,
within thirty days following the Termination Date and shall be
considered to be full compensation for all amounts due to ▇▇▇▇▇
for bonus plans in which he was participating as of the Change in
Control, and he shall not be entitled to any further payments
under any of said plans during the year of participation.
Notwithstanding the above, any bonus due to ▇▇▇▇▇ for years (or
other applicable bonus period) completed prior to the Date in
which the Change of Control occurs but not yet paid shall be paid
in addition to the bonus described herein.
(iii) DISABILITY INSURANCE. The Company will
prepay, to the time of ▇▇▇▇▇'▇ reaching age 65, the premiums due
on any disability insurance policy as was provided to ▇▇▇▇▇ as of
the time of Change in Control. In the event that the Company
discontinued or reduced the amount of coverage of any disability
insurance within one year preceding a Change in Control, the
Company shall at the time of the Change in Control re-establish
disability insurance to the amount previously provided and with
equivalent coverage, and shall prepay future premiums as provided
herein.
(iv) DEFERRED COMPENSATION. The Company will credit
three years of Deferred Compensation, without interest, by
crediting an amount equal to 300% of ▇▇▇▇▇'▇ annual base salary
in effect as of the date of the Change in Control.
(v) SPLIT DOLLAR INSURANCE. The Company will prepay
three years' premium on the split dollar insurance provided under
Paragraph 5.E. by paying over to the insurance company which is
the carrier under the Split Dollar Agreement premiums in an
amount equal to 300% of ▇▇▇▇▇'▇ annual base salary in effect as
of the date of the Change in Control.
(vi) OTHER BENEFITS UPON A CHANGE IN CONTROL. ▇▇▇▇▇
shall receive all of the other benefits separately provided
herein or in other agreements as occurring upon a Change in
Control. These include vesting of unvested stock options,
vesting of Deferred Compensation, and the Deferred Compensation
Tax Payment. In the event a Change in Control occurs, ▇▇▇▇▇
shall be entitled to the insurance benefits provided upon Change
in Control per Paragraph 10.E.(v) and (vi), the travel benefits
provided upon Change in Control per Paragraph 10.E.(ix), and the
use of Company aircraft provided upon termination of employment
per Paragraph 10.E(xi). These benefits will apply at the time of
termination of ▇▇▇▇▇'▇ employment, even if ▇▇▇▇▇'▇ employment is
subsequently terminated in a fashion that does not give rise to
Severance Compensation.
C. TAX GROSS-UP. If, as a result of payments provided for
under or pursuant to this Agreement together with all other
payments in the nature of compensation provided to or for the
benefit of ▇▇▇▇▇ under any other agreement in connection with a
Change in Control, any state, local or federal taxing authority
imposes any taxes on ▇▇▇▇▇ that would not be imposed on such
payments but for the occurrence of a Change in Control, including
any excise tax under Section 4999 of the Internal Revenue Code of
1986 (the "Code") and any successor or comparable provision,
then, in addition to any other benefits provided under or
pursuant to this Agreement or otherwise, the Company (including
any successor to the Company) shall pay to ▇▇▇▇▇ at the time any
such payments are made under or pursuant to this or the other
agreements, an amount equal to the amount of any such taxes
imposed or to be imposed on ▇▇▇▇▇ (the amount of any such
payment, the "Parachute Tax Reimbursement"). In addition, the
Company (including any successor to the Company) shall "gross up"
such Parachute Tax Reimbursement by paying to ▇▇▇▇▇ at the same
time an additional amount equal to the aggregate amount of any
additional taxes (whether income taxes, excise taxes, special
taxes, employment taxes or otherwise) that are or will be payable
by ▇▇▇▇▇ as a result of the Parachute Tax Reimbursement being
paid or payable to ▇▇▇▇▇ and/or as a result of the additional
amounts paid or payable to ▇▇▇▇▇ pursuant to this sentence, such
that after payment of such additional taxes ▇▇▇▇▇ shall have been
paid on a net after-tax basis an amount equal to the Parachute
Tax Reimbursement. The amount of any Parachute Tax Reimbursement
and of any such gross-up amounts shall be determined by the
Company's independent auditing firm, whose determination, absent
manifest error, shall be treated as conclusive and binding absent
a binding determination by a governmental taxing authority that a
greater amount of taxes is payable by ▇▇▇▇▇.
D. EMPLOYMENT OR TERMINATION FOLLOWING A CHANGE IN
CONTROL. Provided that he remains employed and the parties have
not otherwise agreed to amend this Agreement, following a Change
in Control ▇▇▇▇▇'▇ employment shall continue on the terms set
forth in this Agreement and ▇▇▇▇▇ shall remain subject to this
Agreement, and be entitled to receive the compensation, payments
and benefits provided for in this Agreement. In the event that
▇▇▇▇▇'▇ employment terminates upon or within two years following
the Change in Control, such that ▇▇▇▇▇ would be entitled to
Severance Compensation, then (i) any amounts due as Severance
Compensation under 10.E.(i) and 10.E.(ii) herein shall be reduced
by any amounts paid under Paragraph 13.B.(i) and 13.B.(ii) at the
time of Change in Control, and any amounts due as Severance
Compensation under Paragraph 10.E.(iv) and 10.E.(v) shall be
reduced by any amounts paid under Paragraph 13.B.(iv) and
13.B.(v) (but in no event shall ▇▇▇▇▇ or the Deferred
Compensation arrangement be required to refund, repay or forego
the benefit of amounts paid, contributed, allocated or accrued
pursuant to Paragraph 13.B.(i), 13.B.(ii), 13.B.(iv) or
13.B.(v)), and (ii) ▇▇▇▇▇ will be entitled to all other payments
and benefits provided for herein with respect to such termination
of employment. In the event that ▇▇▇▇▇'▇ employment terminates
more than two years following the Change in Control, ▇▇▇▇▇ will
be entitled to all payments and benefits provided for herein with
respect to such termination of employment
E. CHANGE IN CONTROL DURING RETIREMENT. In the event of a
Change in Control after the Retirement Date, then (i) ▇▇▇▇▇ shall
continue to be entitled to all retirement payments and benefits
provided for under Paragraph 11, (ii) all stock options then held
by ▇▇▇▇▇ which have not previously expired or been exercised
shall become immediately 100% vested and exercisable as of the
date of the Change in Control, (iii) ▇▇▇▇▇ shall be released from
his obligation to provide consulting services under Paragraph
12.C. and on the date of the Change in Control the Company shall
pay ▇▇▇▇▇ a lump sum payment equal to 90% of ▇▇▇▇▇'▇ monthly base
salary at the highest rate in effect during the 12 months
preceding the Retirement Date, multiplied by a number determined
by subtracting from 60 the number of full months between the
Retirement Date and the date of the Change in Control, and (iv)
the Company (including any successor) shall continue to reimburse
▇▇▇▇▇ for investment and tax planning services, including tax
gross-up, as provided in Paragraph 6.D. hereof, until the fifth
anniversary of the Retirement Date.
14. Assignment: This Agreement, as it relates to the employment
of ▇▇▇▇▇, is a personal contract and the rights and interests of
▇▇▇▇▇ hereunder may not be sold, transferred, assigned, pledged
or hypothecated. However, this Agreement shall inure to the
benefit of and be binding upon Company and its successors and
assigns including, without limitation, any corporation or other
entity into which Company is merged or which acquires all or
substantially all of the outstanding common stock or assets of
Company. At any time prior to a Change in Control, Company may
provide, without the prior written consent of ▇▇▇▇▇, that ▇▇▇▇▇
shall be employed pursuant to this Agreement by any of its
affiliates instead of or in addition to Company, and in such case
all references herein to the "Company" shall be deemed to include
any such entity, provided that (i) such action shall not relieve
Company of its obligation to make or cause an affiliate to make
or provide for any payment to or on behalf of ▇▇▇▇▇ pursuant to
this Agreement, and (ii) ▇▇▇▇▇'▇ duties and responsibilities
shall not be significantly diminished as a result thereof. The
Board of Directors may assign any or all of its responsibilities
hereunder to any committee of the Board, in which case references
to the Board of Directors shall be deemed to refer to such
committee.
15. Invalid Provisions: The invalidity of any one or more of
the paragraphs or provisions of this Agreement shall not affect
the reasonable enforceability of the remaining paragraphs or
provisions of this Agreement, all of which are inserted herein
conditionally upon being valid in law; and in the event one or
more of the paragraphs or provisions contained herein shall be
invalid, this instrument shall be construed as if such invalid
paragraphs or provisions had not been inserted or, alternatively,
said paragraphs or provisions shall be reasonably limited to the
extent that the applicable court interpreting the provisions of
this Agreement considered to be reasonable.
16. Specific Performance: The parties hereby agree that any
violation by ▇▇▇▇▇ of the covenants and agreements contained
herein shall cause irreparable damage to Company, and Company
may, as a matter of course, enjoin and restrain said violation by
▇▇▇▇▇ by process issued out of a court of competent jurisdiction,
in addition to any other remedies that said court may see fit to
award.
17. Binding Effect: All the terms of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, successors and assigns.
18. Attorneys' Fees: Company shall pay all legal fees incurred
by ▇▇▇▇▇ in connection with the preparation of this Agreement
promptly after submission of a ▇▇▇▇ therefor. In the event an
action is taken by either party to enforce this Agreement or
resolve a dispute in connection herewith, the prevailing party
shall be entitled to recover the costs incurred with the
prosecution and defense of such action, including reasonable
attorney's fees.
19. Waiver of Breach or Violation Not Deemed Continuing: The
waiver by either party of any provision of this Agreement shall
not operate as, or be construed to be, a waiver of any subsequent
breach hereof.
20. Entire Agreement; Law Governing: This Agreement, together
with the letter of even date herewith regarding the change in
▇▇▇▇▇'▇ duties resulting from revision to the United Express
Agreement, supersede in their entirety any and all other
agreements (specifically including any earlier versions of this
Severance Agreement), either oral or in writing, between the
parties hereto with respect to the subject matter hereof, by and
between Company and ▇▇▇▇▇, and contains all the covenants and
agreements among the parties with respect to such subject matter.
Notwithstanding the foregoing, to the extent that the Company's
Deferred Compensation contributions or any other compensation or
benefit provided for hereunder was paid, granted, credited or
funded under and pursuant to an earlier version of this Agreement
with respect to service prior to the Effective Date, then such
compensation or benefit need not be again paid, granted or
funded, respectively, pursuant to this Agreement. This Agreement
shall be construed in accordance with the laws of the
Commonwealth of Virginia. ▇▇▇▇▇ hereby acknowledges that he was
represented by counsel of his choosing in the drafting and
negotiation of this Agreement and that he reviewed this Agreement
with and was advised as to each of the terms thereof by such
counsel. In interpreting this Agreement, a court shall not treat
either party as the draftsman of the Agreement.
21. Paragraph Headings: The Paragraph headings contained in
this Agreement are for convenience only and shall in no manner be
construed as a part of this Agreement.
22. Release by ▇▇▇▇▇. In the event of a termination of
employment by ▇▇▇▇▇ that results in the payment of Severance
Compensation to him pursuant to the terms of this Agreement, in
consideration for such Severance Compensation, ▇▇▇▇▇ hereby
agrees to execute a full and complete release to the Company
releasing any and all claims that he may have against the Company
including any claims relating to his termination of employment.
23. Notices. All notices permitted or required to be given
pursuant to this Agreement shall be in writing and shall be
deemed to have been sufficiently given, subject to the further
provisions of this Paragraph 23, for all purposes when presented
personally to such party (which in the case of notice to the
Company, shall be presented to the person holding the office or
offices identified below) or sent by facsimile transmission, any
national overnight delivery service, or certified or registered
mail, to such party at its address set forth below:
If to ▇▇▇▇▇, to the most recent address indicated for
▇▇▇▇▇'▇ residence in the personnel records of Company, unless
▇▇▇▇▇ gives written notice that such notices are to be delivered
to another address.
If to ACA or the Company:
Atlantic Coast Airlines Holdings, Inc.
Atlantic Coast Airlines
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel or Corporate Secretary
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Such notice shall be deemed to be given and received when
delivered if delivered personally, upon electronic or other
confirmation of receipt if delivered by facsimile transmission,
the next business day after the date sent if sent by a national
overnight delivery service, or five (5) business days after the
date mailed if mailed in the continental United States by
certified or registered mail. Any notice of any change in such
address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such
notice may be waived in writing by the party entitled to receive
such notice.
A copy of any notice given to ▇▇▇▇▇ shall be sent to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Powell, Goldstein, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇., ▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
IN WITNESS WHEREOF, the Company has hereunto caused this
Agreement to be executed by a duly authorized officer and ▇▇▇▇▇
has hereunto set his hand as of the day and year first above
written.
WITNESS:
_____________________________ /S/▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
COMPANY:
ATTEST: ATLANTIC COAST AIRLINES
HOLDINGS, INC.
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ BY:/S/ C. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, C. ▇▇▇▇▇▇ ▇▇▇▇▇,
Secretary Chairman of the
Compensation Committee of
the Board of Directors
ATTEST: ATLANTIC COAST AIRLINES
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ BY:/S/ C. ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, C. ▇▇▇▇▇▇ ▇▇▇▇▇,
Secretary Chairman of the
Compensation Committee of
the Board of Directors