EMPLOYMENT AGREEMENT between ATA AIRLINES, INC., ATA HOLDINGS CORP., and JOHN G. DENISON (Effective September 1, 2005)
between
ATA
AIRLINES, INC.,
and
▇▇▇▇
▇. ▇▇▇▇▇▇▇
(Effective
September 1, 2005)
between
ATA
AIRLINES, INC.,
and
▇▇▇▇
▇. ▇▇▇▇▇▇▇
This
Employment Agreement (“Agreement”)
is
made and entered into by and between ATA Airlines, Inc. (“ATA”),
ATA
Holdings Corp. (“Holdings”;
ATA
and Holdings are referred to jointly and severally as the "Companies"),
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (“Executive”).
Recitals
A. On
October 26, 2004, each of the Companies filed with the United States
Bankruptcy Court for the Southern District of Indiana, Indianapolis Division
(the "Bankruptcy Court"), its respective voluntary petition for relief under
Chapter 11 of Title 11 of the United States Code,
11 U.S.C. §§ 101 et seq.
as
amended (the "Bankruptcy Code"; the Chapter 11 cases initiated by these filings
are collectively called the "Chapter 11 Cases") The Companies each continue
to
operate their businesses and manage their properties as debtors-in-possession
pursuant to the Bankruptcy Code.
B. ATA
and
Executive are parties to that certain Employment Agreement dated effective
as of
February 21, 2005 (the “Initial Employment Agreement”), pursuant to which
Executive serves as President and Chief Executive Officer of ATA.
C.
The
Companies desire for Executive to continue to be employed by ATA as its
President and Chief Executive Officer and also to serve as President and Chief
Executive Officer of Holdings, all in accordance with the terms of this
Agreement.
D. The
Companies intend to seek confirmation of plans of reorganization as soon as
feasible, and if possible, by December 31, 2005. Pursuant to the reorganization
plan confirmed for ATA, Holdings may continue as the sole shareholder of ATA
or
a corporation other than Holdings may become the owner and holder of all of
the
issued and outstanding capital stock of ATA. The term "New ATA"
as used
in this Agreement means the corporation which, after the confirmation of, and
pursuant to a plan of reorganization for ATA or Holdings in the Chapter 11
Cases, owns and holds all of the issued and outstanding capital stock of ATA
and, by whatever means, is or has become the employer of Executive as its Chief
Executive Officer, or if there is no such corporate owner and employer, then
the
term shall mean ATA, as reorganized pursuant to such confirmed plan of
reorganization. As used in this Agreement: (a) the term "Companies"
shall
mean, collectively, ATA and Holdings, except that from and after the
confirmation of a plan of reorganization for ATA in ATA's Chapter 11 Case,
the
term shall mean, collectively, ATA and New ATA; (b) the term "Company"
shall
mean any one of the Companies.
Agreement
NOW,
THEREFORE, in consideration of the foregoing recitals, the mutual promises
set
forth in this Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Companies and Executive
agree as follows:
1. Effective
Date. This
Agreement shall not become effective until it shall have been authorized by
the
Bankruptcy Court in the Chapter 11 Cases. Subject to that approval,
this
Agreement shall be effective for all purposes as of September 1, 2005
(the
“Effective
Date”).
2. Term
of Employment. The
term
of this Agreement shall begin on the Effective Date and continue through
December 31, 2007, subject, however, to earlier termination as provided in
Section 8 of this Agreement (the “Term”).
3. Position
and Responsibilities. During
the Term, Executive will serve as President and Chief Executive Officer of
each
of the Companies and in such additional executive positions as each of the
Companies may designate from time to time during the Term. Executive agrees
to
perform all of the duties and responsibilities associated with such positions
as
well as other duties and responsibilities that may be assigned to Executive
from
time to time by the Board of Directors of each of the Companies. In addition,
Executive's additional duties shall include providing the Board of Directors
of
each of the Companies periodic evaluations of the officers of the Companies
working under Executive’s supervision or review, with a specific view of each
individual’s qualifications and ability as a potential successor President and
Chief Executive Officer of the Companies. Executive will report to the
respective Boards of Directors of the Companies. In recognition of Executive’s
role as President and Chief Executive Officer, it Executive shall continue
to
serve as a member of the Boards of Directors of the Companies during the Term.
4. Location
and Travel.
Executive’s employment positions will be based at ATA’s corporate headquarters
in Indianapolis, Indiana, and Executive will be expected to spend the vast
majority of his employment time at such headquarters. The Companies understand
that Executive’s permanent residence is in Dallas, Texas, and the Companies
acknowledge that Executive may continue to commute weekly or bi-weekly to such
permanent residence consistent with Executive’s commuting practices during his
employment under the Initial Employment Agreement, as long as such commuting
does not interfere unreasonably with the execution of Executive’s duties for the
Companies. Given Executive’s positions for the Companies and the nature of the
Companies’ business, the performance of Executive’s duties will entail
significant travel around North America and occasionally abroad. ATA will
reimburse Executive for all reasonable and actual travel expenses, subject
to
Executive’s compliance with applicable employee travel policies and guidelines
of the Companies, as in effect from time to time.
5. Standard
of Care. During
the Term, Executive (a) will devote his full working time, attention, energies
and skills exclusively to the business and affairs of the Companies; (b) will
exercise the highest degree of loyalty and the highest standards of conduct
in
the performance of his duties; (c) will not, except as noted herein, engage
in
any other business activity, whether or not such business activity is pursued
for gain, profit or other pecuniary advantage, without the express written
consent of the Companies; and (d) will not take any action that deprives the
Companies of any business opportunities or otherwise act in a manner that
conflicts with the best interests of the Companies or that is detrimental to
the
business of the Companies; provided, however, this Section 5 shall not be
construed as preventing Executive (x) from investing his personal assets in
such
form or manner as will not require his services in any capacity in the
operations and affairs of the businesses in which such investments are made,
or
(y) from participating in charitable or other not-for-profit activities as
long
as such activities do not interfere with Executive’s work for the Companies.
2
6. Compensation
and Benefits. As
remuneration for all services to be rendered by Executive during the Term
pursuant to this Agreement, and as consideration for complying with the
covenants herein, the Companies shall pay and provide to Executive the
following:
6.1. Annual
Base Salary.
Executive’s base salary shall be the nominal amount of Three Hundred Fifty
Thousand Dollars ($350,000) on an annualized basis; provided, however,
consistent with salary reductions taken by other executives of the Companies,
the Companies shall pay Executive a reduced base salary of Two Hundred Eighty
Thousand Dollars ($280,000) on an annualized basis (the “Base
Salary”)
unless
and until Executive and the Companies agree to a different amount. The Companies
will review the Base Salary on an annual basis to determine any appropriate
annual increase in Base Salary, based on considerations such as Executive's
performance, market compensation conditions, the financial performance of the
Companies and inflation. The Base Salary shall be paid to Executive consistent
with the Companies customary payroll practices.
6.2. Incentive
Bonus. Executive
will be eligible to earn annual incentive bonus compensation from the Companies.
The amount of the incentive bonus compensation, if any, shall be determined
at
the discretion of the Board of Directors of New ATA, with Executive not
participating in the determination. Such annual incentive compensation will
target 50% to 125% of Executive’s Base Salary and will be based on a combination
of the achievement by the Companies on a consolidated basis of performance
goals
established by the Board of Directors of New ATA prior to the start of the
calendar year for which the bonus is being determined, as well as such Board’s
assessment of Executive’s performance as President and Chief Executive Officer
of the Companies. The first annual incentive bonus compensation will be
considered in January, 2007, relating to performance during calendar year 2006.
New ATA also will consider in January, 2008, an incentive bonus for Executive
relating to performance during calendar year 2007, notwithstanding that the
term
of Executive’s employment is to end at December 31, 2007.
3
6.3. Equity
Participation.
An
important part of Executive’s compensation as President and Chief Executive
Officer of the Companies is to be in the form of equity participation,
particularly given that Executive has agreed to a below-market annual Base
Salary under this Agreement. The parties further acknowledge that it is not
possible at the Effective Date of this Agreement for the parties to specify
with
precision the form of such equity participation because, among other reasons,
the ultimate capital structure and valuation of New ATA upon emergence from
bankruptcy are not yet known. Accordingly, Executive’s equity participation will
be determined by mutual agreement at a future time closer to the actual date
of
the confirmation of a plan of reorganization and the emergence of ATA from
bankruptcy, when the issues of capital structure and valuation of New ATA have
been resolved, provided such equity participation is guided by the following
principles: (a) the structure and form of Executive’s equity participation will
align Executive’s long term interests with those of New ATA and its shareholders
pursuant to which Executive will gain from the increase in shareholder equity
that is created; (b) Executive’s equity participation will vest ratably over the
remaining scheduled term of his employment and will vest immediately if New
ATA
or ATA terminates Executive’s employment without Cause or if Executive
terminates his employment because of a Change in Control occurring after ATA’s
exit from bankruptcy (and not in connection with that exit); (c) the life of
the
equity vehicle will be set in a manner to allow Executive to benefit from the
potential long-term appreciation in New ATA equity. For example, if stock
options are deployed, such options will have a minimum life of seven (7) years
and a maximum life of ten (10) years, and Executive will be able to hold all
vested options for their full term even after Executive is no longer employed
by
any of the Companies; (d) the value of the equity participation, over the full
life of the equity vehicle deployed and as determined by the Black-Scholes
method, should be set at a level consistent with comparable CEO-level
appointments (post-bankruptcy and normal course of business) at mid-size
carriers in the airline industry subject to reasonableness standards; (e) the
value of the equity participation will also reflect Executive’s assistance to
ATA in connection with its cost control and reduction efforts by Executive’s
election to forego the bankruptcy exit bonus that would have been due Executive
under the Initial Employment Agreement; (f) the strike price for any equity
vehicle will be equal to the lower of (i) the valuation set forth in the final
Disclosure Statement issued in connection with the confirmed reorganization
plan
for the Companies or (ii) the average closing price of the capital stock of
New
ATA over the first thirty (30) days after (A) exit from bankruptcy protection,
and (B) at least twenty-five percent (25%) of New ATA’s capital stock having
been distributed, so as to place Executive on the same basis as the shareholders
of New ATA; and (g) the specific vehicle(s) selected for equity participation
will reflect the parties’ objective of aligning Executive’s equity participation
interest with the creation of long-term value for New ATA shareholders while
serving Executive and New ATA in a tax efficient manner; the parties currently
believe that the most advantageous vehicle would be stock options. At the
appropriate juncture during the Term but in no event later than seventy-five
(75) days after the effective date of a confirmed plan of reorganization of
ATA
and/or Holdings (the "Effective Reorganization Date"), the parties agree to
negotiate and implement an equity participation benefits and awards for
Executive consistent with the foregoing general principles.
6.4. Employee
Benefits. The
Companies shall provide to Executive and his eligible dependents employee fringe
benefits to which other employees of the Companies and their eligible dependents
are generally entitled, subject to the eligibility requirements and other terms
and conditions of such plans. Nothing contained in this Section shall obligate
the Companies to institute, maintain or refrain from changing, amending or
discontinuing any employee fringe benefit plan, so long as such changes are
similarly applicable to other employees generally.
4
6.5. Vacation.
Executive shall be entitled to twenty (20) vacation days per year.
6.6. Relocation
Benefits.
If
Executive relocates his permanent residence to the Indianapolis, Indiana area
before December 31, 2006, Executive will be entitled to relocation benefits
in
accordance with the executive relocation package policy of the Companies, or
if
there is more than one, the policy of Holdings.
6.7. Travel
Benefits.
Executive shall be entitled to participate in ATA’s travel benefits program
subject to the terms and conditions of such program, which program may be
amended from time to time.
6.8. Joint
and Several Obligations.
All
compensation, benefit and other commitments, liabilities and obligations of
the
Companies to Executive arising under, pursuant to, by virtue of or in connection
with this Agreement while Executive serves as Chief Executive Officer of the
Companies shall be the joint and several obligations and liabilities of the
Companies. If for any reason Executive shall cease to be employed as Chief
Executive Officer of one of the Companies but continues to be employed as the
Chief Executive Officer of the other Companies, then the compensation, benefits
and other commitments, liabilities, and obligations to Executive arising under,
pursuant to, by virtue of or in connection with this Agreement from and after
termination of Executive's employment with that one Company shall be joint
and
several among such of the Companies as then continue to employ Executive. The
Companies may elect to allocate among themselves the costs of the employment
of
Executive under and pursuant to this Agreement, with the allocation being based
on whatever factors the Companies mutually determine are appropriate, but in
the
absence of such an allocation agreement, all costs of the employment of
Executive shall be allocated to ATA. As a matter of convenience to the
Companies, one of the Companies may pay compensation and benefits to Executive
on behalf of the Companies.
7. Reimbursement
of Business Expenses. The
Companies shall pay or reimburse Executive for all ordinary and necessary
expenses, in a reasonable amount, which Executive incurs in performing his
duties under this Agreement. Such expenses shall be paid or reimbursed to
Executive consistent with the expense reimbursement policies of the Companies
in
effect from time to time and Executive agrees to abide by any such expense
reimbursement policies.
8. Termination
of Employment.
5
8.1. Termination
Due to Death.
If
Executive dies during the Term, this Agreement shall terminate on the date
of
Executive’s death. Upon the death of Executive, the obligation to pay and
provide to Executive compensation and benefits under this Agreement shall
immediately terminate, except: (a) Executive shall be paid by the Companies
that portion of his Base Salary, at the rate then in effect, which shall have
been earned through the termination date; and (b) Executive shall be
paid
or provided by the Companies such other payments and benefits, if any, which
had
accrued hereunder before Executive’s death. Other than the foregoing, the
Companies shall have no further obligations to Executive (or Executive’s estate,
heirs, executors, administrators and personal representatives) under this
Agreement.
8.2. Termination
Due to Disability. If
Executive suffers a Disability, the Companies shall have the right to terminate
this Agreement and Executive’s employment with the Companies. The Companies
shall deliver written notice to Executive of the Companies’ termination because
of Disability, pursuant to this Section 8.2, specifying in such notice
a
termination date, and this Agreement and Executive’s employment by the Companies
shall terminate at the close business on the specified termination date.
Upon
the
termination of this Agreement because of Disability, the obligation to pay
and
provide to Executive compensation and benefits under this Agreement shall
immediately terminate, except: (a) Executive shall be paid by the
Companies that portion of his Base Salary, at the rate then in effect, which
shall have been earned through the termination date; and (b) Executive
shall be paid or provided by the Companies such other payments and benefits,
if
any, which had accrued hereunder before the termination for Disability.
The
term
“Disability”
shall
mean either (i) when Executive is deemed disabled in accordance with
the
long-term disability insurance policy or plan, if any, of the Companies in
effect at the time of the illness or injury causing the disability and under
which Executive is insured, or if no such policy or plan is in effect,
(ii) the inability of Executive, because of injury, illness, disease
or
bodily or mental infirmity as determined by a physician reasonably acceptable
to
the Companies, to perform the essential functions of his job (with or without
reasonable accommodation) for more than one hundred twenty (120) days during
any
period of twelve (12) consecutive months.
8.3. Termination
Without Cause.
At any
time during the Term, the Companies may terminate this Agreement and Executive’s
employment with the Companies without cause for any reason or no reason by
notifying Executive in writing of the Companies’ intent to terminate, specifying
in such notice the effective termination date, and this Agreement and
Executive’s employment with the Companies shall terminate at the close of
business on the termination date specified in the Companies’ notice. Upon
termination of Executive’s employment by the Companies without cause, the
obligation to pay and provide Executive compensation and benefits under this
Agreement shall immediately terminate, except: (a) Executive shall
be paid
that portion of his Base Salary, at the rate then in effect, which shall have
been earned through the termination date; (b) Executive shall be paid
or
provided such other payments and benefits, if any, which had accrued hereunder
before the termination date; (c) the Companies shall pay Executive
severance compensation in the form of salary continuation at Executive’s Base
Salary rate, as then in effect, for a period of twelve (12) months following
the
termination date; and (d) the Companies shall pay Executive supplemental
severance compensation consisting of twelve (12) monthly payments each equal
to
the sum of (i) an amount equal to the monthly COBRA premium Executive would
pay
if he elected to exercise his COBRA rights to continue group health and dental
insurance coverage for himself and any eligible dependents, and (ii) an amount
equal to the estimated federal and state tax liability that Executive will
incur
as a result of his receipt of the amounts set forth in this subpart (d) so
that
such supplemental payments are fully grossed-up (the payments set forth in
this
subpart (d) shall hereinafter be referred to as the “Supplemental
Severance Payments”).
To
the extent that the salary continuation payments or the Supplemental Severance
Payments constitute payments of "deferred compensation" to a "specified
employee" within the meaning of Internal Revenue Code section 409A(a)(2)(B)(i),
any such payments due during the first six months following Executive's
termination date will be delayed and will be paid to Executive on the first
day
of the seventh month following his termination date. Other than the foregoing,
the Companies shall have no further obligations to Executive under this
Agreement.
6
8.4. Termination
For Cause. At
any
time during the Term, the Companies may terminate this Agreement and Executive’s
employment with the Companies for “Cause” as provided in this Section 8.4.
The term “Cause”
shall
mean the occurrence of one or more of the following events: (a) Executive’s
gross or habitual neglect of his employment duties and responsibilities;
(b) Executive’s conviction of, pleading guilty to, or pleading nolo
contendere
or its
equivalent to, a felony or any crime involving moral turpitude; (c) Executive’s
engaging in any illegal conduct or willful misconduct in the performance of
his
employment duties for any of the Companies (or their affiliates); (d)
Executive’s engaging in any fraudulent or dishonest conduct in his dealings
with, or on behalf of, any of the Companies (or their affiliates);
(e) Executive’s failure or refusal to follow the lawful instructions of the
Board of Directors of any of the Companies, if such failure or refusal continues
for a period of five (5) calendar days after the Board of Directors of any
of
the Companies delivers to Executive a written notice stating the instructions
which Executive has failed or refused to follow; (f) Executive’s breach of his
obligations under this Agreement; (g) Executive’s gross negligence in the
performance of his employment duties under this Agreement; or (h) Executive’s
misuse of alcohol or drugs which interferes materially with the performance
of
Executive’s employment duties for any of the Companies.
Upon
the
occurrence of any of the events specified above, the Companies may terminate
Executive’s employment for Cause by notifying Executive in writing of its
decision to terminate his employment for Cause, and Executive’s employment and
this Agreement shall terminate at the close of business on the date on which
the
Companies give such notice.
Upon
termination of Executive’s employment by the Companies for Cause, the obligation
to pay or provide Executive compensation and benefits under this Agreement
shall
terminate, except: (a) Executive shall be paid that portion of his
Base
Salary, at the rate then in effect, which shall have been earned through the
termination date; and (b) Executive shall be paid or provided such
other
payments or benefits, if any, which had accrued hereunder before the termination
date.
7
8.5. Termination
by Executive Without Good Reason. At
any
time during the Term, Executive may terminate his employment without Good Reason
by giving the Companies at least ninety (90) calendar days written notice of
termination without Good Reason. Upon termination of Executive’s employment by
Executive without Good Reason, the obligation to pay or provide Executive
compensation and benefits under this Agreement shall terminate, except: (a)
Executive shall be paid that portion of his Base Salary, at the rate then in
effect, which shall have been earned through the termination date; and (b)
Executive shall be paid or provided such other payments or benefits, if any,
which had accrued hereunder before the termination date.
8.6. Termination
by Executive for Good Reason.
At any
time during the Term, Executive may terminate his employment with the Companies
for Good Reason by giving the Companies written notice of termination for Good
Reason. For purposes of this Agreement, the term “Good
Reason”
shall
mean any of the following:
(a) any
material breach by any of the Companies of any provision of this Agreement
which
is not cured by the breaching Company within ten (10) business days of receipt
by that Company of written notice from Executive specifying with particularity
the existence and nature of the breach; or
(b) Executive’s
termination of his employment for any reason within three (3) months immediately
following a Change in Control.
If
this
Agreement and Executive’s employment are terminated by Executive for Good Reason
pursuant to this Section 8.6, the obligation to pay or provide Executive
compensation and benefits under this Agreement shall terminate,
except: (a) Executive shall be paid that portion of
his Base
Salary, at the rate then in effect, which shall have been earned through the
termination date; (b) Executive shall be paid or provided such other
payments or benefits, if any, which had accrued hereunder before the termination
date; (c) the Companies shall pay Executive severance compensation in
the
form of salary continuation payments at Executive’s Base Salary rate, at the
rate then in effect, for a period of twelve (12) months following the
termination date; and (d) the Companies shall pay Executive the Supplemental
Severance Payments. To the extent that the salary continuation payments or
the
Supplemental Severance Payments constitute payments of "deferred compensation"
to a "specified employee" within the meaning of Internal Revenue Code section
409A(a)(2)(B)(i), any such payments due during the first six months following
Executive's termination date will be delayed and will be paid to Executive
on
the first day of the seventh month following his termination date.
8.7. Definition
of Change in Control.
For
purposes of this Agreement, the term “Change in Control” means and shall be
deemed to have occurred upon the occurrence of any one or more of the
following:
8
(a) entry
by
the Court in the Bankruptcy Proceeding of a final, non-appealable order
confirming a plan of reorganization of both or either of the
Companies;
(b) consummation
of a sale or other disposition of all or substantially all of the assets of
ATA,
or of all of the issued and outstanding capital stock of ATA which is now owned
by Holdings, other than to New ATA;
(c) following
the confirmation of a plan of reorganization for ATA, and not pursuant to such
plan, the acquisition by any individual, entity, or group of beneficial
ownership of more than percent (50%) of the outstanding equity interests of
ATA
or New ATA;
(d) a
majority of the members of the Board of Directors of New ATA or ATA are not
Continuing Directors; or
(e) following
the confirmation of a plan of reorganization for ATA, and not pursuant to such
plan, there shall occur a consummation of a plan of merger or consolidation
involving ATA or New ATA pursuant to which after the merger or consolidation
more than fifty percent (50%) of the equity interests of the surviving entity
is
owned or controlled by a person or entity other than New ATA.
As
used
above, the term "Continuing Directors"
means,
as of any date of determination, any member of the board of directors of ATA
or
New ATA who (i) was a member of such board of directors thirty (30) days
following the date on which a confirmed plan of reorganization for ATA, as
confirmed in the Chapter 11 case, becomes effective, or (ii) was nominated
for
election or elected to such board of directors by a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
8.8. Severance
Release.
Executive acknowledges and agrees that as a condition to receiving any of the
severance compensation (including the Supplemental Severance Payments) pursuant
to Section 8.3 or 8.6 of this Agreement (such severance compensation
being
collectively referred to as the "Severance
Compensation"),
Executive shall execute and deliver to the Companies a Release Agreement in
form
and substance reasonably satisfactory to the Companies pursuant to which
Executive releases and waives any and all claims against the Companies and
their
affiliates arising out of this Agreement, Executive’s employment with the
Companies, Executive’s work for the Companies or their affiliates and/or the
termination of Executive’s employment with the Companies; provided, however,
that such Release Agreement shall not affect or relinquish (a) any vested
rights Executive may have under any insurance or other employee benefit plans
sponsored by any of the Companies, (b) any claims for salary or other
compensation earned by Executive prior to the employment termination date;
(c) any claims for reimbursement of business expenses incurred prior
to the
employment termination date, (d) any rights to Severance Compensation;
or
(e) Executive's rights to indemnification pursuant to Section 12 of this
Agreement or by law. In the event Executive dies during the period he is
receiving any Severance Compensation, the Companies' obligation to pay such
Severance Compensation shall not terminate, and the unpaid portion of such
Severance Compensation shall be paid in a lump sum to Executive's estate as
soon
as administratively feasible.
9
8.9. Resignation
as Officer and/or Director Upon Employment Termination.
In the
event Executive’s employment with the Companies terminates for any reason
(including, without limitation, pursuant to Sections 8.1 - 8.6 herein),
Executive agrees and covenants that he will immediately resign any and all
positions, including, without limitation, as an officer and/or member of the
Board of Directors or any other governing boards, he may hold with the Companies
or any of their affiliates.
8.10. No
Duplication.
Executive acknowledges that, unless otherwise provided for in any policy or
plan
governing severance benefits for employees of either of the Companies, including
Executive, Executive shall be entitled only to the Severance Compensation as
a
severance benefit related to his employment under this Agreement.
9. Non-Disclosure.
Executive
acknowledges that during the course of Executive’s employment with the Companies
Executive will be creating, making use of, acquiring, and/or adding to
confidential information relating to the business and affairs of the Companies
(and their affiliates), which information will include, without limitation,
procedures, methods, manuals, lists of customers, suppliers and other contacts,
sales and other reports, marketing plans, business plans, financial data, and
personnel information. Executive covenants and agrees that Executive shall
not,
at any time during Executive’s employment with the Companies or thereafter at
any time, directly or indirectly, use, divulge or disclose for any purpose
whatsoever any of the Companies’ (or their affiliates’) confidential information
or trade secrets, except in the course of Executive’s work for and on behalf of
the Companies (or their affiliates). During Executive’s employment by the
Companies, any inventions, new devices or procedures, as well as any patent,
copyright or trademark applications filed, or patents, copyrights or trademarks
obtained, as a result of Executive’s efforts on behalf of the Companies (or any
of their affiliates) shall belong and inure to the exclusive benefit of the
Companies. Upon the termination of Executive’s employment with the Companies, or
at any of the Companies’ request, Executive shall immediately deliver to the
Companies any and all records, documents, or electronic data (in whatever form
or media), and all copies thereof, in Executive’s possession or under
Executive’s control, whether prepared by Executive or others, containing
confidential information or trade secrets relating to the Companies (or their
affiliates). Executive acknowledges and agrees that his obligations under this
Section shall survive the expiration or termination of this Agreement and the
cessation of his employment with the Companies for whatever reason.
10. Restrictive
Covenants. Executive
acknowledges that in connection with his employment with the Companies, he
will
provide executive-level services that are of a unique and special value and
that
he will be entrusted with confidential and proprietary information concerning
the Companies and their affiliates. Executive further acknowledges that the
Companies and their affiliates are engaged in highly competitive businesses
and
that the Companies and their affiliates expend substantial amounts of time,
money and effort to develop trade secrets, business strategies, customer
relationships, employee relationships and goodwill. Therefore, as an essential
part of this Agreement, Executive agrees and covenants to comply with the
following restrictive covenants.
10
10.1. Non-Competition.
Executive agrees to comply with the non-competition covenants set forth in
this
Section 10.1. Executive may at any time waive his right to receive Severance
Compensation (including during the period that he is receiving Severance
Compensation) by notifying ATA in writing of such waiver, at which point
Executive will no longer be entitled to receive any further Severance
Compensation and Executive will no longer be bound by the non-competition
covenants set forth in Section 10.1 of this Agreement. If Executive violates
any
of the non-competition covenants set forth in Section 10.1 of this Agreement,
Executive will not be entitled to payment of any further Severance Compensation.
(a) During
the term of Executive’s employment with the Companies under this Agreement and
thereafter during the period that Executive is actually receiving Severance
Compensation after the termination of such employment (the "Post-Termination
Period"),
Executive will not own, manage, operate, control, invest in, lend to, acquire
an
interest in, or otherwise engage or participate in (whether as an employee,
independent contractor, consultant, partner, shareholder, joint venturer,
investor or any other type of participant), or use or permit Executive’s name to
be used in, any business which competes with any Business (as defined below).
For purposes of clarity, if this Agreement terminates and Executive is not
to
receive Severance Compensation following such termination, the non-competition
covenants in this Section 10.1 shall no longer be in effect. Further, if
following a termination of this Agreement Executive is to be receiving Severance
Compensation but the Companies default in its payment following ten (10) days'
written notice to the Companies from Executive, the non-competition covenants
in
this Section 10.1 shall expire and shall no longer be in effect.
(b) During
Executive’s employment under this Agreement and thereafter during the
Post-Termination Period, Executive will not within the Restricted Geographic
Territory own, manage, operate, control, invest in, lend to, acquire an interest
in, or otherwise engage or participate in (whether as an employee, independent
contractor, consultant, partner, shareholder, joint venturer, investor or any
other type of participant), or use or permit Executive’s name to be used in, any
business which competes with any Business. The parties acknowledge and agree
that the Business is generally located at least within the Restricted Geographic
Territory, extends throughout the Restricted Geographic Territory and is not
limited to any particular region of the Restricted Geographic Territory.
11
(c) During
Executive’s employment under this Agreement and thereafter during the
Post-Termination Period, Executive will not within the Restricted Geographic
Territory own, manage, operate, control, invest in, lend to, acquire an interest
in, or otherwise engage or participate in (whether as an employee, independent
contractor, consultant, partner, shareholder, joint venturer, investor or any
other type of participant), or use or permit Executive’s name to be used in, any
business which competes with any Business, as such Business existed during
Executive’s employment with ATA and as of the termination of Executive’s
employment with ATA.
(d) During
Executive’s employment under this Agreement and thereafter during the
Post-Termination Period, Executive will not within the Restricted Geographic
Territory own, manage, operate, control, invest in, lend to, acquire an interest
in, or otherwise engage or participate in (whether as an employee, independent
contractor, consultant, partner, shareholder, joint venturer, investor or any
other type of participant) or use or permit Executive’s name to be used in, any
business which competes with any charter or scheduled service commercial air
carrier routes flown by ATA as such existed during Executive’s employment with
ATA and as of the termination of Executive’s employment with ATA.
(e) Notwithstanding
the provisions of Sections 10.1(a), 10.1(b), 10.1(c), and 10.1(d) hereof, the
parties agree that Executive is not prohibited from owning for investment
purposes securities of any public company provided such ownership does not
exceed five percent (5%) of any class of securities of such public
company.
(f) Notwithstanding
the provisions of Sections 10.1(a), 10.1(b), 10.1(c), and 10.1(d) hereof, the
parties agree that during the Post-Termination Period, Executive may be employed
by or render services to Southwest Airlines Co. or any of its subsidiaries,
without limitation, and also to any entity that owns at least ten percent (10%)
of one of the Companies, if Executive’s principal function for such entity is to
assist in monitoring, and counseling such entity with respect to, its investment
in both or either of the Companies.
(g) For
purposes of this Agreement, the term “Business”
means,
collectively, the sale or provision of air carrier services certified by the
Federal Aviation Association (“FAA”)
or
United States Department of Transportation (“DOT”),
non-military charter and air taxi services, military charter services to the
United States’ military, cargo services, wet leasing or any other business
conducted by either of the Companies as such business existed at any time during
Executive’s employment with either of the Companies and as of the termination of
such employment. For purposes of this Agreement, the term “Restricted
Geographic Territory”
means
(i) the geographic area of the continental United States plus the State
of
Hawaii plus any geographic area within a 100-mile radius of any destination
in
the world to which ATA has flown commercial airline passengers at any time
during Executive’s employment with either of the Companies; (ii) the
geographic area of the continental United States, plus the State of Hawaii,
plus
any geographic area within a 50-mile radius of any destination in the world
to
which ATA has flown United States’ military charters at any time during the
Executive’s employment with either of the Companies; and (iii) any
additional geographic areas in which either of the Companies sold or solicited
or marketed the sale of any aspect of its Business at any time during
Executive’s employment with either of the Companies.
12
10.2. Non-Solicitation
of Employees.
During
the term of Executive’s employment under this Agreement and for a period of one
(1) year immediately after the termination of such employment, Executive will
not solicit, recruit, hire, employ or attempt to hire or employ any person
who
is then an employee of any of the Companies, or was employed by either of the
Companies within the one (1) year period immediately prior to termination
of Executive's employment under this Agreement, or urge, influence, induce
or
seek to induce any employee of any of the Companies to terminate such employee's
relationship with either of the Companies.
10.3. Non-Interference
With Contractors and Vendors.
During
the term of Executive’s employment under this Agreement and for a period of one
(1) year immediately after the termination of such employment, Executive will
not urge, induce or seek to induce any of the Companies’ independent
contractors, subcontractors, consultants, vendors, suppliers or lessors to
terminate their relationship with, or representation of, any of the Companies
or
to cancel, withdraw, reduce, limit, or in any manner modify any of such person’s
or entity’s business with, or representation of, any of the Companies.
10.4. Direct
or Indirect Activities. Executive
acknowledges and agrees that the covenants contained in Sections 9 and 10
prohibit Executive from engaging in certain activities directly or indirectly,
whether on Executive’s own behalf or on behalf of any other person or entity,
and regardless of the capacity in which Executive is acting, including without
limitation as an employee, independent contractor, owner, partner, officer,
agent, consultant, or advisor.
10.5. Survival
of Restrictive Covenants. Executive
acknowledges and agrees that his obligations under Sections 9 and 10 of this
Agreement shall survive the expiration or termination of this Agreement and
the
cessation of his employment with the Companies for whatever reason.
10.6. Severability;
Modification of Restrictions.
The
covenants and restrictions in Sections 9 and 10 of this Agreement are separate
and divisible, and to the extent any covenant, provision or portion of Sections
9 and 10 of this Agreement is determined to be unenforceable or invalid for
any
reason, such unenforceability or invalidity shall not affect the enforceability
or validity of the remainder of Sections 9 and 10 of this Agreement. If any
particular covenant, provision or portion of Sections 9 and 10 is determined
to
be unreasonable for unenforceable for any reason, such covenant, provision
or
portion thereof shall automatically be deemed reformed such that the contested
covenant, provision or portion will have the closest effect permitted by
applicable law to the original form and shall be given effect and enforced
as so
reformed to whatever extent would be reasonable and enforceable under applicable
law. The parties agree that any court interpreting any of the restrictions
and
covenants contained in Sections 9 and 10 of this Agreement shall, if necessary,
reform any such covenant to make it enforceable under applicable
law.
13
11. Remedies.
Executive recognizes that a breach or threatened breach by Executive of Sections
9 or 10 of this Agreement will give rise to irreparable injury to the Companies
and that money damages will not be adequate relief for such injury and,
accordingly, Executive agrees that the Companies shall be entitled to obtain
injunctive relief, including, but not limited to, temporary restraining orders,
preliminary injunctions and/or permanent injunctions, without having to post
any
bond or other security, to restrain or prohibit such breach or threatened
breach, in addition to any other legal remedies which may be available,
including without limitations, the cessation of payments and benefits under
this
Agreement and recovery of money damages.
12. Indemnification.
(a) The
Companies shall indemnify Executive against all Liability and Expense that
may
be incurred by him in connection with or resulting from any Claim to the fullest
extent authorized or permitted by law, as the same exists or may hereafter
be
amended (but in the case of any such amendment, only to the extent that such
amendment permits the Companies to provide broader indemnification rights than
such law permitted the Companies to provide prior to such amendment), or
otherwise consistent with the public policy of the State of Indiana. In
furtherance of the foregoing, and not by way of limitation, Executive shall
be
indemnified by the Companies against all Liability and reasonable Expense that
may be incurred by him in connection with or resulting from any Claim,
(1) if Executive is Wholly Successful with respect to the Claim, or
(2) if not Wholly Successful, then if Executive is determined, as provided
in either subsection (e) or (f) below, to have acted in good faith, in what
he
reasonably believed to be the best interests of the Companies or at least not
opposed to its best interests and, in addition, with respect to any criminal
claim is determined to have had reasonable cause to believe that his conduct
was
lawful or had no reasonable cause to believe that his conduct was unlawful.
The
termination of any Claim, by judgment, order, settlement (whether with or
without court approval), or conviction or upon a plea of guilty or of nolo
contendere, or its equivalent, shall not create a presumption that Executive
did
not meet the standards of conduct set forth in clause (2) of this
subsection (a).
(b) The
term
“Claim”
as used
in this Section shall include every pending, threatened, or completed claim,
action, suit, or proceeding and all appeals thereof (whether brought by or
in
the right of any of the Companies or otherwise), civil, criminal,
administrative, or investigative, formal or informal, in which Executive may
become involved, as a party or otherwise:
14
| (1) |
by
reason of his or her being or having been an officer or employee
of any of
the Companies, or
|
| (2) |
by
reason of any action taken or not taken by him in his capacity as
an
officer or employee of any of the Companies, whether or not he continued
in such capacity at the time such Liability or Expense shall have
been
incurred.
|
(c) The
terms
“Liability”
and
“Expense”
as used
in this Section shall include, but shall not be limited to, counsel
fees
and disbursements and amounts of judgments, fines, or penalties against
(including excise taxes assessed with respect to an employee benefit plan),
and
amounts paid in settlement by or on behalf of Executive.
(d) The
term
“Wholly Successful”
as used
in this Section shall mean (1) termination of any Claim, whether on
the
merits or otherwise, against Executive in question without any finding of
liability or guilt against him, (2) approval by a court, with knowledge
of
the indemnity herein provided, of a settlement of any Claim, or (3) the
expiration of a reasonable period of time after the making or threatened making
of any Claim without the institution of the same, without any payment or promise
made to induce a settlement.
(e) If
Executive is claiming indemnification hereunder (other than if Executive has
been Wholly Successful with respect to any Claim), Executive shall be entitled
to indemnification (1) if special independent legal counsel, which may
be
regular counsel of the Companies, or other disinterested person or persons,
in
either case selected by the Board of Directors of the Companies (such counsel
or
person or persons being hereinafter called the “Referee”),
shall
deliver to the Companies a written finding that Executive has met the standards
of conduct set forth in subsection (a)(2) above, and (2) if the Board
of
Directors of any of the Companies, acting upon such written finding, so
determines. Such Board of Directors shall, if Executive is found to be entitled
to indemnification pursuant to the preceding sentence, also determine the
reasonableness of Executive’s Expenses. Executive shall, if requested, appear
before the Referee, answer questions that the Referee deems relevant and shall
be given ample opportunity to present to the Referee evidence upon which
Executive relies for indemnification. The Companies shall, at the request of
the
Referee, make available facts, opinions, or other evidence in any way relevant
to the Referee’s findings that are within the possession or control of the
Companies.
(f) If
Executive is claiming indemnification pursuant to subsection (e) above and
if
the Board of Directors fails to select a Referee within a reasonable amount
of
time following a written request of Executive for the selection of a Referee,
or
if the Referee or the Board of Directors fails to make a determination under
subsection (e) above within a reasonable amount of time following the selection
of a Referee, Executive may apply for indemnification with respect to a Claim
to
a court of competent jurisdiction, including a court in which the Claim is
pending against Executive. On receipt of an application, the court, after giving
notice to the Companies and giving the Companies opportunity to present to
the
court any information or evidence relating to the claim for indemnification
that
the Companies deems appropriate, may order indemnification if it determines
that
Executive is entitled to indemnification with respect to the Claim because
Executive met the standards of conduct set forth in subsection (a)(2) above.
If
the court determines that Executive is entitled to indemnification, the court
shall also determine the reasonableness of Executive’s Expenses.
15
(g) Expenses
incurred by Executive in defending any Claim shall be paid by the Companies
in
advance of the final disposition of such Claim promptly as they are incurred
upon receipt of an undertaking by or on behalf of Executive to repay such amount
if he is determined not to be entitled to indemnification.
(h) The
rights of indemnification and advancement of Expenses provided in this Section
shall be in addition to any rights to which Executive may otherwise be entitled,
provided that the Companies shall not be obligated to make any payment in
connection with a Claim to the extent Executive has received payment of such
amount from another source, including without limitation any insurer.
(i) The
provisions of this Section shall be applicable to Claims made or commenced
after
the date of this Agreement, whether arising from acts or omissions to act
occurring before or after the date of this Agreement.
(j) If
this
Section or any portion hereof shall be invalidated on any ground by any court
of
competent jurisdiction, then the Companies shall nevertheless indemnify
Executive as to costs, charges and expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit
or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Companies, to the fullest extent
permitted by any applicable portion of this Section that shall not have been
invalidated and to the fullest extent permitted by applicable law.
13. Assignment.
13.1. Assignment
by the Companies.
The
Companies shall have the right to assign this Agreement, and this Agreement
shall inure to the benefit of, and may be enforced by, any and all successors
and assigns of the Companies, including without limitation by asset assignment,
stock sale, merger, consolidation or other corporate reorganization.
13.2. Non-Assignment
by Executive. The
services to be provided by Executive to the Companies hereunder are personal
to
Executive, and Executive’s duties may not be assigned by Executive.
16
14. Notice.
Any
notice required or permitted under this Agreement shall be in writing and either
delivered personally or sent by nationally recognized overnight courier, express
mail, or certified or registered mail, postage prepaid, return receipt
requested, at the following respective address unless the party notifies the
other party in writing of a change of address:
If
to any
of the Companies:
ATA
Airlines, Inc.
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇, Senior Vice President and General Counsel
If
to
Executive:
▇▇▇▇
▇.
▇▇▇▇▇▇▇
_____________________________________
_____________________________________
A
notice
delivered personally shall be deemed delivered and effective as of the date
of
delivery. A notice sent by overnight courier or express mail shall be deemed
delivered and effective one (1) day after it is deposited with the postal
authority or commercial carrier. A notice sent by certified or registered mail
shall be deemed delivered and effective two (2) days after it is deposited
with
the postal authority.
15. Miscellaneous.
15.1. Entire
Agreement and Cancellation of Initial Employment Agreement.
This
Agreement supersedes any prior agreements or understandings, oral or written,
between the parties hereto, with respect to the subject matter hereof, and
constitutes the entire agreement of the parties with respect thereto. ATA and
Executive acknowledge and agree that this Agreement supersedes and cancels
the
Initial Employment Agreement for all purposes. In addition, an earlier version
of this Agreement bearing the same date is rescinded and cancelled, the same
as
if it had not been executed.
15.2. Modification.
This
Agreement shall not be varied, altered, modified, canceled, changed, or in
any
way amended except by mutual agreement of the parties in a written instrument
executed by Executive and the Boards of Directors of ATA and Holdings.
15.3. Counterparts.
This
Agreement may be executed in one (1) or more counterparts, each of which shall
be deemed to be an original, but all of which together will constitute one
and
the same Agreement.
17
15.4. Tax
Withholding. The
Companies may withhold from any compensation or benefits payable under this
Agreement all federal, state, city, or other taxes as may be required pursuant
to any law or governmental regulation or ruling.
15.5. Contractual
Rights to Benefits.
Nothing
herein contained shall require or be deemed to require, or prohibit or be deemed
to prohibit, the Companies to segregate, earmark or otherwise set aside any
funds or other assets, in trust or otherwise, to provide for any payments to
be
made or required hereunder.
15.6. Employment
Policies.
Executive agrees to abide by any employment rules or policies applicable to
ATA’s employees generally that ATA currently has or may adopt, amend or
implement from time to time during Executive’s employment under this Agreement.
15.7. No
Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants or conditions
of this Agreement shall not be deemed a waiver of such term, covenant or
condition, nor shall any waiver or relinquishment of any right or power
hereunder at any one or more times be deemed a waiver or relinquishment of
such
right or power at any other time or times.
15.8. Code
Section 409A Standards.
The
Agreement and all forms of compensation and benefits to be provided under the
Agreement Plan shall be interpreted, applied, and effected in a manner
consistent with the standards for nonqualified deferred compensation plans
established by Internal Revenue Code Section 409A and its interpretive
regulations (the "Section 409A Standards"). To the extent that any terms of
the
Agreement provide for payments that would subject Executive to gross income
inclusion, interest, or additional tax pursuant to Internal Revenue Code Section
409A, those terms are to that extent superseded by the applicable Section 409A
Standards.
15.9. Governing
Law; Choice of Forum.
To the
extent not preempted by federal law, the provisions of this Agreement shall
be
construed and enforced in accordance with the laws of the State of Indiana,
notwithstanding any state’s choice-of-law or conflicts-of-law rules to the
contrary. This Agreement is intended, among other things, to supplement the
provisions of the Uniform Trade Secrets Act, as amended from time to time,
and
the duties Executive owes to the Companies under the common law, including,
but
not limited to, the duty of loyalty. The parties agree that any legal action
relating to this Agreement shall be commenced and maintained exclusively before
any appropriate state court of record in ▇▇▇▇▇▇ County, Indiana, or in the
United States District Court for the Southern District of Indiana, Indianapolis
Division, and the parties hereby irrevocably consent and submit to the
jurisdiction and venue of such courts and waive any right to challenge or
otherwise object to personal jurisdiction or venue in any action commenced
or
maintained in such courts.
[SIGNATURES
ON FOLLOWING PAGE; REMAINDER OF PAGE
INTENTIONALLY
LEFT BLANK]
18
IN
WITNESS WHEREOF, ATA, Holdings, and Executive have executed this Agreement,
intending it to be effective as provided in Section 1 of this
Agreement.
ATA
AIRLINES, INC.
By:
_______/s/ ▇▇▇▇▇ ▇. Hunt______________________
Name:
______Brian T. Hunt_______________________
Title:
____Vice President and General Counsel__________
By:_______/s/
▇▇▇▇▇ ▇. Hunt______________________
Name:
______Brian T. Hunt_______________________
Title:
____Vice President and General Counsel__________
EXECUTIVE
/s/
▇▇▇▇ ▇.
▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
19