19
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or
Section 240.14a-12
ATLANTIC COAST AIRLINES, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box)
[ ] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and O-11.
1. Title of each class of securities to which transaction
applies:
______________________________________________________
2. Aggregate number of securities to which transaction
applies:
______________________________________________________
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (set forth
maximum amount on which filing fee is calculated and state
how it was determined):
_______________________________________________________
4. Proposed maximum aggregate value of transaction:
_______________________________________________________
5. Total fee paid:
_______________________________________________________
[ ] Fee previously paid by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
_______________________
2. Form/Schedule or Registration Statement No.:
_______________________
3. Filing Party:
_______________________
4. Date Filed:
_______________________
ATLANTIC COAST AIRLINES, INC.
515-A Shaw Road
Dulles, Virginia 20166
March 30, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Meeting") of Atlantic Coast Airlines, Inc. (the
"Company"), to be held on Tuesday, May 5, 1998, at 10:00 a.m. local
time, at the Washington Dulles Airport Hilton Hotel, 13869 Park
Center Road, Herndon, Virginia.
This year we are asking you to elect nine directors of the
Company to serve until the 1999 Annual Meeting. We are pleased that
our nominees include Susan MacGregor Coughlin, who was appointed to
serve on the Board in October 1997. We are also asking you to amend
the Company's Restated Certificate of Incorporation to change the
name of the Company to "ACA Holdings, Inc." and to increase the
number of shares of stock that the Company is authorized to issue to
76,000,000, to ratify the Board of Directors' adoption of an
amendment to the Company's Stock Incentive Plan and to ratify the
Board of Directors' selection of independent auditors for the year
ending December 31, 1998. The Board of Directors recommends that you
vote FOR each of these proposals.
At the Meeting, the Board of Directors will also report on the
Company's affairs and provide a discussion period for questions and
comments. The Board of Directors appreciates and encourages
stockholder attendance and participation.
Whether or not you plan to attend the Meeting, it is important
that your shares be represented. Accordingly, we request that you
complete, sign, date and promptly return the enclosed proxy card in
the enclosed postage-paid envelope.
Thank you for your cooperation.
Sincerely,
/S/ C. Edward Acker
C. Edward Acker
Chairman of the Board of
Directors
ATLANTIC COAST AIRLINES, INC.
515-A Shaw Road
Dulles, Virginia 20166
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 1998
To the Stockholders of
ATLANTIC COAST AIRLINES, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders
(the "Meeting") of Atlantic Coast Airlines, Inc., a Delaware
corporation (the "Company"), will be held on Tuesday, May 5, 1998, at
10:00 a.m., local time, at the Washington Dulles Airport Hilton
Hotel, 13869 Park Center Road, Herndon, Virginia, for the following
purposes, as more fully described in the accompanying Proxy
Statement:
1) To elect nine directors to serve for the coming year and
until their successors are elected;
2) To amend the Company's Restated Certificate of
Incorporation to change the Company's name to "ACA
Holdings, Inc.";
3) To amend the Company's Restated Certificate of
Incorporation to increase the total number of shares that
the Company is authorized to issue;
4) To ratify the Board of Directors' adoption of an amendment
to increase the number of shares available under the
Company's Stock Incentive Plan;
5) To ratify the Board of Directors' selection of the
Company's independent auditors for the fiscal year ending
December 31, 1998; and
6) To transact such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
Only holders of record of the Company's Common Stock, par value
$0.02 per share (the "Common Stock") at the close of business on
March 16, 1998 are entitled to receive notice of and to vote at the
Meeting. A list of such holders will be open for examination by any
stockholder during regular business hours for a period of ten days
prior to the Meeting at the offices of the Company, located at 515-A
Shaw Road, Dulles, Virginia.
All stockholders are cordially invited to attend the Meeting. In
order to ensure that your Common Stock is represented at the Meeting
if you are not personally present, please complete, date and sign the
enclosed proxy and return it promptly in the accompanying postage-
paid envelope.
By order of the Board of Directors
/S/ Richard J. Kennedy
Richard J. Kennedy
Vice President, Secretary and
General Counsel
March 30, 1998
ATLANTIC COAST AIRLINES, INC.
515A Shaw Road
Dulles, Virginia 20166
Phone: (703) 925-6000
_________________________
PROXY STATEMENT
_________________________
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Atlantic Coast
Airlines, Inc. (the "Company") for use at the Company's annual
meeting of stockholders, to be held at 10:00 a.m., local time, on
Tuesday, May 5, 1998, at the Washington Dulles Airport Hilton Hotel,
13869 Park Center Road, Herndon, Virginia, and at any adjournment or
postponement thereof (the "Meeting").
Written communications to the Company should be sent to the
Company's office, located at 515A Shaw Road, Dulles, Virginia 20166.
The Company can be reached by telephone at (703) 925-6000. This Proxy
Statement and the accompanying proxy card (the "Proxy Card"),
together with a copy of the Company's 1997 Annual Report, are first
being mailed on or about March 30, 1998, to persons who were holders
of record of the Company's Common Stock, par value $0.02 per share
(the "Common Stock"), at the close of business on March 16, 1998 (the
"Record Date").
Matters to be Considered at the Meeting
At the Meeting, the holders of shares of Common Stock as of the
Record Date will be asked to elect nine members to the Board of
Directors for the coming year; amend the Company's Restated
Certificate of Incorporation to change the Company's name to "ACA
Holdings, Inc."; amend the Company's Restated Certificate of
Incorporation to increase the total number of shares which the
Company has authority to issue to 76,000,000 shares; ratify the Board
of Directors' adoption of an amendment to increase the number of
shares available under the Company's Stock Incentive Plan; ratify the
Board of Directors' appointment of KPMG Peat Marwick LLP, Certified
Public Accountants, as the Company's independent auditors for the
fiscal year ending December 31, 1998; and transact such other
business as may properly come before the Meeting or any adjournment
or postponement thereof.
Voting at the Meeting
The Board of Directors has fixed March 16, 1998, as the Record
Date for the Meeting, and only holders of record of the Common Stock
at the close of business on the Record Date are entitled to notice
of, and to vote at, the Meeting. On the Record Date, there were
outstanding and entitled to vote approximately 7,640,286 shares of
the Common Stock.
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of the Common Stock is necessary
to constitute a quorum at the Meeting. Nominees to the Board of
Directors will be elected by the affirmative vote of a plurality of
the shares of the Common Stock present and voting at the Meeting.
This means that the nine nominees who receive the largest number of
votes cast "FOR" will be elected as directors at the Meeting.
Approval of the proposed amendments to the Company's Restated
Certificate of Incorporation requires an affirmative vote of at least
a majority of the shares outstanding as of the Record Date. Approval
of other matters to be raised at the Meeting requires an affirmative
vote of at least a majority of the shares voted and entitled to be
voted at the Meeting. On each of these matters, holders of record of
Common Stock on the Record Date will be entitled to one vote for each
share of Common Stock held.
In accordance with Delaware law, abstentions and shares held of
record by a broker or its nominee ("Broker Shares") that are voted on
any particular matter are included for purposes of determining the
number of votes present and entitled to vote on that matter. Broker
Shares that are not voted on any particular matter at the Meeting
will not be treated as entitled to vote for that matter.
Proxies
If the enclosed Proxy Card is properly executed and returned in
time for the Meeting, the shares of Common Stock represented thereby
will be voted in accordance with the instructions given thereon. If
no instructions are given, shares will be voted "FOR" all of the
Board's nominees for election to the Board of Directors and "FOR"
each of the other matters discussed in this Proxy Statement. Proxies
will extend to, and be voted at, any adjournment or postponement of
the Meeting.
The Board of Directors does not presently intend to introduce
any business at the Meeting other than as set forth in this Proxy
Statement, and has not been informed that any other business is to be
presented at the Meeting. Should any other matter properly come
before the Meeting, however, the persons named as proxies in the
accompanying Proxy Card or their duly authorized and constituted
substitutes intend to vote or act thereon in accordance with their
best judgment.
Any stockholder who has executed and returned a Proxy Card and
who for any reason wishes to revoke his or her proxy may do so at any
time before the proxy is exercised by (i) giving written notice to
the Secretary of the Company at the above address, (ii) voting the
shares represented by such proxy in person at the Meeting, or (iii)
giving a later dated proxy at any time before the Meeting.
Attendance at the Meeting will not, by itself, revoke a proxy.
Expenses of Solicitation
The costs of the solicitation of proxies will be borne by the
Company. Such costs include preparation, printing and mailing of the
Notice of Annual Meeting of Stockholders, this Proxy Statement, the
enclosed Proxy Card and the Company's 1997 Annual Report, and the
reimbursement of brokerage firms and others for reasonable expenses
incurred by them in connection with the forwarding of proxy
solicitation materials to beneficial owners. The solicitation of
proxies will be conducted primarily by mail, but may also include
telephone, facsimile or oral communications by directors, officers or
regular employees of the Company acting without special compensation.
PROPOSAL ONE
ELECTION OF DIRECTORS
Introduction
The nine individuals set forth in the table below are the
Company's nominees for election to the Board of Directors at the
Meeting. Directors are elected for terms of one year and until the
next annual meeting of stockholders, and serve until resignation or
succession by election or appointment. Each of the nominees has
consented to being named as a nominee in this Proxy Statement and has
agreed to serve if elected. If any nominee becomes unavailable for
election at the time of the Meeting or is not able to serve if
elected, the persons voting the proxies solicited hereby may in their
discretion vote for a substitute nominee or the Board of Directors
may choose to reduce the number of directors. The Board of Directors
has no reason to believe that any nominee will be unavailable. Each
of the nominees currently serves on the Company's Board of Directors.
The following table sets forth each nominee's name, age as of
March 30, 1998 and position with the Company, and the year in which
each nominee first became a director:
Name Age Position Director
Since
C. Edward Acker 69 Chairman of the Board of 1991
Directors
Kerry B. Skeen 45 President, Chief 1991
Executive Officer and
Director
Thomas J. Moore 41 Executive Vice 1997
President, Chief
Operating Officer and
Director
Robert E. Buchanan 55 Director 1995
Susan MacGregor 52 Director 1997
Coughlin
Joseph W. Elsbury 68 Director 1991
James J. Kerley 75 Director 1991
James C. Miller 55 Director 1995
John M. Sullivan 61 Director 1995
Recommendation of the Board
The Board of Directors recommends a vote "FOR" each of the nominees.
Unless a contrary choice is specified, proxies solicited by the Board
of Directors will be voted FOR election of each of the nominees.
Background of Nominees
The following is a brief account of the business experience of
each of the nominees for election to the Board of Directors. There
are no family relationships among the nominees or special
understandings pursuant to which the nominees have been nominated as
directors of the Company.
C. Edward Acker. Mr. Acker is a co-founder of the Company and
was its Chief Executive Officer from its formation in October 1991
until March 1995. He became Chairman of the Board of Directors in
April 1993, prior to which he had been Vice Chairman of the Board of
Directors. He has been a Director since October 1991 and served as
President of the Company from October 1991 until October 1992. Mr.
Acker served as Chairman and Chief Executive Officer of Pan American
World Airways, Inc. ("Pan Am") from 1981 until 1988. Since 1988, Mr.
Acker has served as Chairman of The Acker Group, a private company
which acts as both principal and adviser in airline-related
transactions; and as a partner in Elsbury & Acker, an oil and natural
gas exploration company. From February 1995 until February 1996, Mr.
Acker served as Chairman and Chief Executive Officer of BWIA
International Airways, Ltd. From 1993 to the present, he has served
as Chairman of the Board and President of Air Assets, Inc.
Kerry B. Skeen. Mr. Skeen is a co-founder of the Company and
has been its President since October 1992 and Chief Executive Officer
since March 1995. From October 1991 until October 1992, Mr. Skeen
was Executive Vice President of the Company. He has been a Director
of the Company since October 1991 and was its Chief Operating Officer
from October 1991 to April 1997. Mr. Skeen was President of the
Atlantic Coast division of WestAir Commuter Airlines, Inc.
("WestAir") from 1989 until it was acquired by the Company in 1991.
From 1987 to 1989, Mr. Skeen was Vice President of Marketing and
Sales of WestAir and, in 1989, was named Senior Vice President of
WestAir. Mr. Skeen's affiliation with the regional airline industry
began in 1983 when he directed the development and marketing
activities of Delta Air Lines, Inc.'s regional airline program, "The
Delta Connection."
Thomas J. Moore. Mr. Moore has been Executive Vice President
and Chief Operating Officer since April 1997, and was Senior Vice
President of Maintenance and Operations from June 1994 until then.
Prior to joining the Company, Mr. Moore spent nearly ten years with
Continental Airlines in Houston, Texas, where he served at different
times in the positions of staff vice president, senior director of
technical planning, director of financial planning and division
controller.
Robert E. Buchanan. Mr. Buchanan has been a Director since
March 1995. Mr. Buchanan is President of Buchanan Companies, LLC, a
metropolitan Washington, D.C., real estate firm specializing in
commercial and residential development, investments, construction and
property management in suburban Washington. Mr. Buchanan has served
on the Board of Directors of USLICO Corporation, and currently serves
on the Board of Directors of the Washington Airports Task Force and
the Economic Development Commission of Loudoun County, Virginia
(former Chairman), which is home to the Company's corporate office
and of its hub at Washington-Dulles International Airport.
Susan MacGregor Coughlin. Mrs. Coughlin has been a Director
since October 1997. Mrs. Coughlin has been president of Air Safety
Management Associates, an aviation consulting firm, since October
1997. From August 1995 to October 1997 she was President and Chief
Operating Officer of BDM Air Safety Management Corp., which designs
and develops air traffic control systems, and from April 1994 to
August 1995 was Senior Vice President and General Manager of BDM
Federal, Inc. She served as a member of the National Transportation
Safety Board from 1990 to 1994, where she was appointed to two
consecutive terms as Vice Chairman in 1990 and 1992 and served as
Acting Chairman in 1992. She held various positions with the U.S.
Department of Transportation from 1987 to 1990 and from 1981 to 1983,
and with the Export-Import Bank of the U.S. from 1983 to 1987.
Joseph W. Elsbury. Mr. Elsbury has been a Director of the
Company since its formation in October 1991. Mr. Elsbury has been a
partner in Elsbury & Acker, an oil and natural gas exploration
company, since 1987.
James J. Kerley. Mr. Kerley has been a Director of the Company
since its formation in October 1991 and an independent financial
consultant since 1986. Between 1993 and 1994, Mr. Kerley served as
the non-executive Chairman of the Board of Rohr, Inc. From 1981
through 1985 he was Vice Chairman of the Board of Directors and Chief
Financial Officer of Emerson Electric Co., and for eleven years prior
to that was Chief Financial Officer of Monsanto Company. From 1962 to
1968, he served as Vice President-Finance and Chief Financial Officer
of Trans World Airlines, Inc. Mr. Kerley is a director of Borg-
Warner Automotive, Inc., DT Industries, Inc. and Goss Graphics
Systems, Inc. During the past five years, Mr. Kerley has been, but
is no longer, a member of the Boards of various other corporations,
including Rohr Industries, Inc., Kellwood Company, Cyprus Amax
Minerals, ESCO Electronics Corporation and Sterling Chemicals, Inc.
He has also served as a director of Trans World Airlines, Inc., World
Airways and Frontier Airlines.
James C. Miller III. Mr. Miller has been a Director since March
1995. He has been associated with Citizens for a Sound Economy since
1988, first as Chairman, and since 1993 as Counselor. He is also co-
chairman of the Tax Foundation and John M. Olin Distinguished Fellow
at George Mason University. He is a director of Washington Mutual
Investors Fund. From 1985 to 1988, he served as Director of the
Office of Management and Budget of the United States and as a member
of President Reagan's cabinet. From 1981 to 1985, he was Chairman of
the Federal Trade Commission. Mr. Miller wrote his Ph.D.
dissertation on airline scheduling and is the co-author of, among
other works, a Brookings Institution volume on airline regulation.
John M. Sullivan. Mr. Sullivan has been a Director since
January 1995. Mr. Sullivan joined the accounting firm of Arthur
Andersen & Co. in 1958, and was a Partner from 1970 until his
retirement from the firm in 1992. He served as International Tax
Director for General Motors Corporation from 1992 to 1994, and is
currently a financial and tax consultant. He is also a director of
Group Maintenance America Corp.
Committees and Board Meetings
During 1997, there were four regular meetings of the Board of
Directors and four meetings by telephone conference. Each nominee
attended 75% or more of the aggregate of the meetings of the Board
and of the Board's committees on which he or she served except for
Mr. Kerley, who attended 67% of these meetings.
The Board has two standing committees -- an Audit Committee and
a Compensation Committee. Their functions are described below.
Audit Committee. The Audit Committee meets with management and
the Company's independent accountants to consider the adequacy of the
Company's internal controls and financial reporting. The Audit
Committee recommends to the Board the Company's independent
accountants; discusses with the independent accountants their audit
procedures, including the proposed scope and timing of the audit, the
audit results and accompanying management letters; reviews the
auditor's fees and services; and in general endeavors to ensure the
independence of the auditors and accountants. The Audit Committee
held two meetings during 1997. The current members of the Audit
Committee are Messrs. Elsbury, Kerley and Miller, who serves as
chairman.
Compensation Committee. The Compensation Committee reviews and
approves the direct and indirect compensation and employee benefits
of the executive officers of the Company, particularly the Chief
Executive Officer; administers the Company's stock option and
incentive compensation plans; and reviews in general the Company's
policies relating to the compensation of senior management and other
employees. The Compensation Committee held four meetings during
1997. The current members of the Compensation Committee are Messrs.
Sullivan, Buchanan and Acker, who serves as chairman.
Directors' Compensation
Directors, with the exceptions noted below, receive an annual
fee of $16,000 for serving as Directors, and are reimbursed for out-
of-pocket expenses incurred in attending meetings of the Board of
Directors or committees thereof. Messrs. Acker, Skeen, and Moore, as
officers of the Company, do not receive compensation for their
service on the Board. Mr. Sullivan waived his annual fees through
December 31, 1997, but began receiving his fee effective January 1,
1998. Non-employee directors are entitled to certain flight benefits
made available to employees of the Company.
Effective for the 1998 calendar year, outside directors also
receive as additional compensation options to purchase 2,000 shares
per year of the Company's common stock, which options vest if the
individual continues to serve as a Director as of the end of the year
of the grant. The option exercise price for 1998 grants was the last
traded price of the Company's common stock at the time of the grant.
PROPOSAL TWO
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE THE NAME OF THE COMPANY TO
"ACA HOLDINGS, INC."
On January 29, 1998, the Board of Directors adopted resolutions
(i) proposing to amend the Company's Restated Certificate of
Incorporation to change the Company's name to "ACA Holdings, Inc.,"
subject to stockholder approval (the "Name Amendment"); (ii)
declaring the Name Amendment to be advisable and in the best
interests of the Company and its stockholders; and (iii) calling for
submission of the Name Amendment for approval by the Company's
stockholders at the Meeting.
Proposed Amendment to Restated Certificate of Incorporation
The following is the text of Article I of the Company's Restated
Certificate of Incorporation, as proposed to be amended by the Name
Amendment:
1. The name of the corporation (the
"Corporation") is ACA Holdings, Inc.
* * *
Purpose and Effect of the Name Amendment
The Board of Directors believes that it is in the Company's best
interest to change the Company's name because the Company, Atlantic
Coast Airlines, Inc., a Delaware corporation (referred to in this
paragraph only as the "Parent"), is a holding company that owns 100%
of the stock of Atlantic Coast Airlines, a California corporation
(the "Subsidiary"). The Subsidiary engages in the business of
operating an airline. Following stockholder approval of the Name
Amendment, and conditioned on its obtaining certain required
approvals, the Subsidiary intends to reincorporate as a Delaware
corporation under the name "Atlantic Coast Airlines, Inc." If
approved, the Name Amendment will make the name "Atlantic Coast
Airlines, Inc." available for the Subsidiary in Delaware, make the
Parent's name more clearly distinguishable from the Subsidiary's name
and reflect the Parent's status as a holding company.
Vote Necessary to Approve the Amendment
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is necessary to approve the Name
Amendment.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the proposal to amend
the Company's Restated Certificate of Incorporation to change the
Company's name to "ACA Holdings, Inc." Unless a contrary choice is
specified, proxies solicited by the Board of Directors will be voted
FOR approval of the Name Amendment.
PROPOSAL THREE
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES
On January 29, 1998, the Board of Directors adopted resolutions
(i) proposing that the Company's Restated Certificate of
Incorporation be amended to increase the number of shares of Common
Stock that the Company is authorized to issue, subject to stockholder
approval of the amendment (the "Stock Amendment"), (ii) declaring the
Stock Amendment to be advisable and in the best interests of the
Company and its stockholders; and (iii) calling for submission of the
Stock Amendment for approval by the Company's stockholders at the
Meeting.
Introduction
The Company's Restated Certificate of Incorporation currently
authorizes the issuance of (i) 15,000,000 shares of Common Stock,
with a par value of two cents ($.02) per share ("Common Stock");
(ii) 6,000,000 shares of Class A-Non-Voting Common Stock, with a par
value of two cents ($.02) per share ("Class A Non-Voting Common");
and (iii) 5,000,000 shares of Preferred Stock, with a par value of
two cents ($.02) per share ("Preferred Stock").
Current Use of Shares. As of March 2, 1998, the Company had
approximately 11.5 million shares of Common Stock issued or committed
and approximately 3.5 million shares remaining available for other
purposes. The issued or committed shares included approximately
7.6 million shares outstanding, 2.9 million shares reserved for
future issuance to holders of its 7% Convertible Subordinated Notes
due 2004 (the "Notes," which are convertible into shares of Common
Stock); and 1.0 million shares reserved for future issuance under the
Company's various benefit plans, all of which are currently reserved
for outstanding options.
Stock Split. As part of the same resolution in which the Board
of Directors proposed the Stock Amendment, the Board considered
whether to effect a stock split. The Board determined that under
certain conditions it may be appropriate to declare a stock split
(the "Stock Split"), which would be effected as a dividend.
Accordingly, the Board approved the Stock Split, and delegated to the
Company's Chief Executive Officer the decision whether to effect the
Stock Split subject to satisfaction of certain conditions. The
Board's authorization to declare the Stock Split expires on April 22,
1998. If the Chief Executive Officer determines to declare the Stock
Split, it will be conditioned on stockholder approval of the Stock
Amendment. Stockholders are not being asked to vote on the Stock
Split, but the Stock Split, if declared, will not take place unless
the Stock Amendment is approved. Without this increase in authorized
shares, the Company would not have enough authorized but unissued
shares of Common Stock to effect the Stock Split.
Proposed Amendment to Restated Certificate of Incorporation
The Board of Directors has adopted resolutions setting forth
(i) the proposed amendment to Paragraph 1 of Article IV of the
Company's Restated Certificate of Incorporation; (ii) the
advisability of the Stock Amendment; and (iii) a call for submission
of the Stock Amendment for approval by the Company's stockholders at
the Meeting.
The following is the text of Paragraph 1 of article IV of the
Restated Certificate of Incorporation of the Company, as proposed to
be amended:
1. The total number of shares which the
Corporation shall have the authority to issue is
76,000,000 shares, which shall consist of (i)
65,000,000 shares of Common Stock ("Common"), par
value $.02 per share; (ii) 6,000,000 shares of
Class A Non-Voting Common Stock, par value $.02
per share ("Class A Non-Voting Common" and,
together with the Common, the "Common Stock");
and (iii) 5,000,000 shares of preferred stock,
par value $.02 per share ("Preferred Stock").
* * *
Purpose and Effect of the Stock Amendment
The Board of Directors believes that it is in the Company's best
interests to increase the number of shares of Common Stock that the
Company is authorized to issue in order to give the Company
additional flexibility to maintain a reasonable stock price through
stock splits and stock dividends and to issue Common Stock for other
proper corporate purposes that may be identified in the future,
including without limitation to raise equity capital, to adopt
additional employee benefit plans or reserve additional shares for
issuance under such plans, and to make acquisitions through the use
of Common Stock. As noted above, the Board of Directors has approved
the Stock Split, subject to the Chief Executive Officer's final
determination and to the satisfaction of certain conditions,
including stockholder approval of the Stock Amendment.
Other than with respect to the Stock Split and as permitted or
required under the Company's employee benefit plans, outstanding
options and the Notes, (which are convertible into shares of Common
Stock), the Board of Directors has no immediate plans,
understandings, agreements or commitments to issue additional Common
Stock for any purposes. However, no additional action or
authorization by the Company's stockholders would be necessary prior
to the issuance of additional shares unless required by applicable
law or the rules of any stock exchange or national securities
association trading system on which the Common Stock is then listed
or quoted.
Under the Company's Restated Certificate of Incorporation, the
Company's stockholders do not have preemptive rights with respect to
Common Stock. Thus, should the Board of Directors elect to issue
additional shares of Common Stock, existing stockholders would not
have any preferential rights to purchase the newly issued shares. In
addition, if the Board of Directors elects to issue additional shares
of Common Stock, such issuance could have a dilutive effect on the
earnings per share, voting power and shareholdings of current
stockholders.
The Stock Amendment could, under certain circumstances, have an
anti-takeover effect, although this is not its intention. For
example, in the event of a hostile attempt to take control of the
Company, it may be possible for the Company to endeavor to impede the
attempt by issuing shares of the Common Stock, thereby diluting the
voting power of the other outstanding shares and increasing the
potential cost to acquire control of the Company. The Stock
Amendment therefore may have the effect of discouraging unsolicited
takeover attempts. However, the Board of Directors is not aware of
any attempt or proposal to take control of the Company.
Effect of the Potential Stock Split
If declared, the Stock Split will be effected as a special
distribution to holders of outstanding Common Stock. If the
Company's Chief Executive Officer determines to declare the Stock
Split, the Stock Split will not change the Company's total
stockholders' equity. The aggregate amount of capital represented by
the outstanding shares of Common Stock will be increased by $.02 for
each share issued to effect the Stock Split and the Company's
Additional paid-in capital account will be reduced by the same
amount. The Company has been advised that, based on current tax law,
the Stock Split should not result in any gain or loss for Federal
income tax purpose. As noted above, the Stock Split is contingent,
among other events, on stockholder approval of the Stock Amendment,
but stockholders are not being asked to vote on the Stock Split.
Vote Necessary to Approve the Amendment
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is necessary to approve the Stock
Amendment.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the proposal to
amend the Company's Restated Certificate of Incorporation to increase
the number of shares of Common Stock that the Company is authorized
to issue to 76,000,000. Unless a contrary choice is specified,
proxies solicited by the Board of Directors will be voted FOR
approval of the Stock Amendment.
PROPOSAL FOUR
ADOPTION OF AN AMENDMENT TO THE ATLANTIC COAST AIRLINES, INC. 1995
STOCK INCENTIVE PLAN
The 1995 Stock Incentive Plan (the "1995 Plan) was adopted by
the Board of Directors and approved by the shareholders in 1996. As
approved at that time, the aggregate number of shares of the
Company's common stock $0.02 par value (the "Common Stock") that can
be issued under the 1995 Plan may not exceed 750,000. As of March
16, 1998, 91 shares remained available for future Awards (as defined
below) under the 1995 Plan and under the Company's 1992 Stock
Incentive Plan. On January 29, 1998, the Board of Directors
approved, subject to stockholder ratification, an amendment to the
1995 Stock Incentive Plan to increase the aggregate number of shares
of Common Stock that can be issued under the 1995 Plan to 1,250,000.
On that same date, the Compensation Committee also approved awards of
options to purchase an additional 150,000 shares subject to the
approval by the shareholders of the proposed amendment. Other than
with respect to the number of shares available under the 1995 Plan,
the Board has not amended the other terms of the 1995 Plan. The
following summary of the main features of the 1995 Plan is qualified
in its entirety by the complete text of the 1995 Plan, which is set
out as Exhibit A to this Proxy Statement.
PURPOSE. The 1995 Plan is designed to encourage ownership of
the Common Stock by eligible key employees and directors of the
Company and to provide increased incentive for such employees and
directors to render services and to exert maximum effort for the
business success of the Company through grants of options and other
stock-based awards (any such option or award, an "Award"). In
addition, the Plan is designed to further strengthen the
identification of employees and corporate directors with the
stockholders by providing for various incentive arrangements that
involve or are based on the value of the Common Stock.
The 1995 Plan has various provisions so that Awards under it
may, but need not, qualify for an exemption from the "short swing
liability" provisions of Section 16(b) of the Securities Exchange Act
of 1934 pursuant to Rule 16b-3 and/or qualify as "performance based
compensation" that is exempt from the $1 million limitation on the
deductibility of compensation under Section 162(m) of the Internal
Revenue Code (the "Code").
ELIGIBILITY. The persons eligible to participate in the Plan as
recipients of Awards ("Participant") shall include only key employees
and directors of the Company or its affiliates at the time the Award
is granted. The Company estimates that approximately 100 employees
and directors may potentially be eligible for awards under the 1995
Plan.
ADMINISTRATION. The 1995 Plan is administered by a committee
(any such committee, a "Committee") of the Board of Directors of the
Company (the "Board"). With respect to Awards granted to the
Company's executive officers, the Committee may consist of two or
more directors meeting the requirements necessary for Awards to be
exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3
and/or for Awards to qualify as "performance based compensation"
under Section 162(m) of the Code, to the extent that the Company
determines to satisfy such requirements. With respect to any Award
that is not intended to satisfy the conditions of Exchange Act Rule
16b-3 or Code Section 162(m)(4)(c), the Committee may delegate all or
any of its responsibilities to one or more directors of the Company,
including individuals who participate in the 1995 Plan.
Subject to the express provisions of the 1995 Plan, the
Committee has broad authority to administer and interpret the 1995
Plan, including, without limitation, authority to determine who is
eligible to participate in the 1995 Plan and to which of such
persons, and when, Awards are granted under the 1995 Plan; to
determine the number of shares of Common Stock subject to Awards and
the exercise or purchase price of such shares under an Award; to
establish and verify the extent of satisfaction of any performance
goals applicable to Awards, to prescribe and amend the terms of the
agreement evidencing Awards made under the 1995 Plan; and to make all
other determinations deemed necessary or advisable for the
administration of the 1995 Plan.
STOCK SUBJECT TO THE 1995 PLAN. The aggregate number of shares
of the Common Stock that can be issued under the 1995 Plan may not
exceed 1,250,000. The aggregate number of shares subject to Awards
granted under the 1995 Plan during any calendar year to any one
Participant may not exceed 500,000. The number of shares subject to
the 1995 Plan and to outstanding Awards under the 1995 Plan will be
appropriately adjusted by the Board of Directors if the Company's
Common Stock is affected through a reorganization, merger, stock
split, spin-off, or similar transaction. For purposes of calculating
the aggregate number of shares issued under the 1995 Plan, only the
number of shares actually issued upon exercise or settlement of an
Award and not returned to the Company upon cancellation, expiration
or forfeiture of an Award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an
Award shall be counted. On March 16, 1998, the Company's closing
stock price was $49.375.
AWARDS. Awards that are granted under the 1995 Plan are not
restricted to any specified form or structure. Instead, the 1995
Plan authorizes the grant, issuance, sale or bonus grant of stock
options, restricted stock, reload options, stock appreciation rights,
limited stock appreciation rights, or performance shares, or any
other arrangement that involves or might involve the issuance of
Common Stock or a right or interest with a value based on the value
of the Common Stock, and an Award may consist of one such security or
benefit, or consist of or be amended to include two or more of them
in tandem or in the alternative. The Committee may permit the taxes
required to be withheld by the Company or paid by the Participant in
connection with the exercise of an option or the exercise, vesting or
settlement of any other Award to be satisfied by having the Company
withhold shares of Common Stock issuable under such option or Award,
or by surrendering to the Company previously owned shares.
STOCK OPTIONS. Subject to the express provisions of the 1995
Plan and as discussed in this paragraph, the Committee has discretion
to determine the vesting schedule of options, the events causing an
option to expire, the number of shares subject to any option, and
such further terms and conditions, in each case not inconsistent with
the 1995 Plan, as may be determined from time to time by the
Committee. Options granted under the 1995 Plan may be either
Incentive Stock Options qualifying under Code Section 422 or options
which are not intended to qualify as Incentive Stock Options
("nonqualified options"). The exercise price for options is
determined by the Committee, but in the case of options intended to
qualify as Incentive Stock Options or as performance based
compensation under Code Section 162(m) may not be less than 100% of
the fair market value of the Company's Stock on the date the option
is granted. The exercise price of an option may be paid through
various means specified by the Committee, including in cash or by
check, by delivering to the Company shares of the Company's stock, by
a reduction in the number of shares issuable pursuant to such option,
or by a promissory note or other commitment to pay (including such a
commitment by a stock broker). Options may have a term of up to ten
years, and options with a less than ten year term may be amended to
increase the term thereof to up to ten years. The Committee from
time to time may permit a Participant to surrender for cancellation
any unexercised outstanding option and receive from the Company in
exchange an option for such number of shares of Common Stock as may
be designated by the Committee. The Committee may, with the consent
of the person entitled to exercise any outstanding option, amend such
option, including reducing the exercise price of any option to not
less than the fair market value of the Common Stock at the time of
the amendment and extending the term thereof.
CHANGE OF CONTROL. The Committee may provide that a Corporate
Change (as defined below) has such effect (if any) as the Committee
specifies, which may include that options become fully exercisable,
either for their full term or for a limited time, or that options are
surrendered to the Company for substitution with options issued by
the other company involved in the Corporate Change or for
cancellation and payment of the difference between the aggregate fair
market value of the shares underlying the option and the aggregate
exercise price of the option. "Corporate Change" is defined in the
1995 Plan to include to include certain transactions that would
result in over 50% of the Company's outstanding shares being held by
certain persons or groups, certain substantial changes in the Board
of Directors, the approval of certain fundamental changes to the
Company's structure, such as merger, consolidation, reorganization,
liquidation or dissolution and other events specified by the
Committee.
AMENDMENTS AND TERMINATION. The Board may amend, alter or
discontinue the Plan, but no amendment or alteration shall be made
which would impair the rights of any Award holder, without his
consent, under any Award theretofore granted. Notwithstanding the
foregoing, if an amendment to the 1995 Plan would affect the ability
of Awards granted under the 1995 Plan to comply with Rule 16b-3 under
the Exchange Act or Section 422 or 162(m) or other applicable
provisions of the Code, the amendment shall be approved by the
Company's stockholders to the extent required to comply with Rule 16b-
3 under the Exchange Act, Section 422 or Section 162(m) of the Code,
or other applicable provisions of or rules under the Code.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS. The following is a
brief summary of the principal United States Federal income tax
consequences under current Federal income tax laws related to
incentive Awards under the 1995 Plan. This summary is not intended
to be exhaustive and, among other things, does not describe state or
local tax consequences.
Section 162(m): As described above, options granted under
the 1995 Plan may qualify as `performance-based compensation'
under Section 162 of the Code in order to preserve Federal
income tax deductions by the Company with respect to any
compensation required to be taken into account under Section 162
of the Code that is in excess of $1,000,000 and paid to a
`Covered Employee' (as defined in Section 162). To so qualify,
options must have an exercise price at least equal to the fair
market value of the underlying shares on the date of grant, be
awarded by a Committee consisting of two or more `outside
directors' (as defined in Section 162), and satisfy the 500,000
share limit on the total number of shares subject to options
that may be awarded to any one Participant during any calendar
year.
Nonqualified Options: The recipient of a nonqualified
option does not recognize income at the time the option is
granted. When the nonqualified option is exercised, the grantee
recognizes ordinary income equal to the difference between the
fair market value on the exercise date of the number of shares
issued and their exercise price. The Company receives a
deduction equal to the amount of ordinary income recognized by
the Participant. The Participant's basis in the shares acquired
upon exercise of an option is equal to their exercise price
plus the ordinary income recognized upon exercise. Upon
subsequent disposition of the shares, the Participant will
recognize capital gain or loss, which will be short-term or long
term, depending upon the length of time the shares were held
since the date the nonqualified option was exercised.
Incentive Stock Options: In general, the recipient of an
Incentive Stock Option will not be subject to tax at the time
the Incentive Stock Option is granted or exercised. However,
the excess of the fair market value of the shares received upon
exercise of the Incentive Stock Option over their exercise price
is potentially subject to the alternative minimum tax. Upon
disposition of the shares acquired upon exercise of an Incentive
Stock Option, long-term capital gain or loss will be recognized
in an amount equal to the difference between the sales price and
the aggregate exercise price for those shares provided that the
Participant has not disposed of the shares within one year from
the date the Incentive Stock Option was exercised and two years
from the date the Incentive Stock Option was granted. If the
participant disposes of the shares without satisfying both
holding period requirements (a `Disqualifying Disposition'), the
participant will recognize ordinary income at the time of such
Disqualifying Disposition to the extent of the difference
between the option exercise price and the lesser of the fair
market value of the shares on the date the Incentive Stock
Option is exercised or the amount realized on such Disqualifying
Disposition. Any remaining gain or loss is treated as a short-
term or long-term capital gain or loss, depending upon how long
the shares have been held. The Company is not entitled to a tax
deduction upon either the exercise of an Incentive Stock Option
or upon disposition of the shares acquired pursuant to such
exercise, except to the extent that the Participant recognizes
ordinary income in a Disqualifying Disposition.
Special Rules. To the extent a Participant pays all or part
of the option exercise price of a nonqualified stock option by
tendering shares already owned by the Participant, the tax
consequences described above apply except that the number of
shares received upon such exercise shall have the same basis and
tax holding period as the shares surrendered. If the shares
surrendered had previously been acquired upon the exercise of an
Incentive Stock Option, the surrender of such shares may be a
Disqualifying Disposition if the holding period requirements
described above have not been satisfied with respect to such
shares at the time of such exercise. The additional shares of
the Company Common Stock received upon such exercise have a tax
basis equal to the amount of ordinary income recognized on such
exercise and a holding period which commences on the date of
exercise. Under proposed Treasury regulations, if any
Participant exercises an Incentive Stock Option by tendering
shares previously acquired on the exercise of an Incentive Stock
Option, a Disqualifying Disposition may occur if the holding
period requirements described above have not been satisfied with
respect to such shares at the time of such exercise, and the
Participant may recognize income and be subject to other basis
allocation and holding period requirements.
NEW PLAN BENEFITS. On January 29, 1997, the Compensation
Committee approved the grant of certain stock options to employees
under the 1995 Plan subject to shareholder approval of this Proposal
Four. The following table sets forth the number of shares underlying
these options.
Name and Position Number of Shares
Underlying Option
Kerry B. Skeen, President & CEO 50,000
C. Edward Acker, Chairman --
Thomas J. Moore, Executive Vice 25,000
President
Michael S. Davis, Senior Vice 15,000
President
Paul H. Tate, Senior Vice 25,000
President & CFO
Executive Officers, as a Group 130,000
Non-Executive Directors, as a --
Group
Non-Executive Officer Employees, 20,000
as a Group
VOTE NECESSARY TO RATIFY AMENDMENT. The affirmative vote of the
holders of a majority of the outstanding shares of Common Stock
present and entitled to vote at the Meeting is necessary to ratify
the Board's amendment to the 1995 Plan.
RECOMMENDATION OF THE BOARD. The Board of Directors recommends
a vote "FOR" ratification of the amendment to increase the number of
shares of Common Stock available under the 1995 Plan. Unless a
contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR ratification of the amendment.
PROPOSAL FIVE
RATIFICATION OF INDEPENDENT AUDITORS
The Board has selected KPMG Peat Marwick LLP, Certified Public
Accountants, as the Company's independent auditors for the fiscal
year ending December 31, 1998. In the event that the Board's
selection of auditors is not ratified by a majority of the shares of
Common Stock voting thereon, the Board will review its future
selection of auditors.
Effective October 24, 1997, the Company dismissed BDO Seidman
LLP as its certifying accountant. BDO Seidman's reports on the
Company's financial statements for the fiscal years ending December
31 1995 and 1996 did not contain any adverse opinion or a disclaimer
of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's past two
fiscal years, there were not any disagreements with BDO Seidman on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure that, if not resolved to
BDO Seidman's satisfaction, would have caused it to make reference to
the subject matter of the disagreements in connection with its
reports. The Board of Directors' Audit Committee recommended, and
the Board of Directors approved, the decision to change accountants.
KPMG Peat Marwick LLP conducted the Company's audit for fiscal 1997.
A representative of KPMG Peat Marwick LLP is expected to attend
the Meeting and will have the opportunity to make a statement and/or
respond to appropriate questions from stockholders present at the
Meeting.
Vote Necessary to Approve Ratification
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock present and entitled to vote at
the Meeting is necessary to ratify the Board's selection of KPMG Peat
Marwick LLP as the Company's independent auditors.
Recommendation of the Board
The Board of Directors recommends a vote "FOR" the ratification
of the selection of KPMG Peat Marwick LLP as the Company's
independent auditors for the year ending December 31, 1998. Unless a
contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR ratification of the selection of KPMG
Peat Marwick LLP.
EXECUTIVE OFFICERS
The following table sets forth the name, age as of March 30,
1998, and position of each executive officer of the Company:
Officer
Name Age Position Since
C. Edward Acker 69 Chairman of the Board 1991
of Directors
Kerry B. Skeen 45 Chief Executive 1991
Officer, President, and
Director
Thomas J. Moore 41 Executive Vice 1994
President and Chief
Operating Officer
Paul H. Tate 46 Senior Vice President, 1997
Chief Financial
Officer, Treasurer, and
Assistant Secretary
Michael S. Davis 33 Senior Vice President - 1995
Customer Service
Richard J. Kennedy 43 Vice President, General 1996
Counsel and Secretary
David W. Asai 42 Vice President 1998
Financial Planning,
Controller and
Assistant Secretary
Background of Executive Officers
The following is a brief account of the business experience of
each of the executive officers of the Company other than Messrs.
Acker, Skeen, and Moore, each of whose background is described above.
There are no family relationships or special understandings pursuant
to which such persons have been elected as executive officers of the
Company.
Paul H. Tate. Mr. Tate has served as Senior Vice President and
Chief Financial Officer since February 1997. From 1993 until that
time, he served in various officer capacities at Reno Air, Inc.,
based in Reno, Nevada, most recently as Chief Financial Officer.
Prior to that Mr. Tate served as Vice President - Controller and Vice
President of Information Systems with Midway Airlines for over eleven
years. Mr. Tate is a Certified Public Accountant.
Michael S. Davis. Mr. Davis has served as Senior Vice President
- - Customer Service since May 1995. From 1993 until that time, he
served as Vice President, Customer Service, for Business Express
Airlines, Inc. Previously, from 1986, he served in a variety of
positions with USAir, Inc., including Station Manager in Boston,
Passenger Service Manager in Philadelphia, Ramp Operations Manager in
Dayton, and various positions in Pittsburgh.
Richard J. Kennedy. Mr. Kennedy has served as General Counsel
and Secretary since May 1996 and was named Vice President in November
1997. From 1991 until joining the Company he was with British
Aerospace Holdings, Inc., where he served in various capacities
including contract negotiation, aircraft finance, and financial
restructuring. Previously he was a private attorney in Washington,
D.C. for over ten years.
David W. Asai. Mr. Asai has served as Vice President Financial
Planning, Controller and Assistant Secretary since January 1998.
From December 1994 until that time, he served as Vice President,
Controller and Chief Accounting Officer at Reno Air, Inc. From July
1992 to November 1994, Mr. Asai was Vice President - Finance and
Chief Financial Officer of Spirit Airlines, Inc. From 1981 to June
1992, Mr. Asai was employed by Midway Airlines, Inc. in various
capacities, most recently as Director of Financial Planning and
Analysis. Mr. Asai is a Certified Public Accountant.
Executive Compensation
The following table sets forth information regarding the
compensation of the individual who served as the Company's Chief
Executive Officer during 1997 and the Company's four other most
highly compensated executive officers serving as executive officers
at December 31, 1997. Bonus amounts reflect amounts earned for the
specified year regardless of when paid. Amounts reported as earned
in 1995 have been restated from the April 10, 1996 Proxy Statement to
conform to this method of reporting.
Summary Compensation Table
Long Term
Compensat
Annual Other ion All
Awards
Compensat Annual Securitie Other
ion s
Name and Current Year Salary Bonus Compensati Underlyin Compensat
Position on g Options ion
C. Edward Acker 1997 $180,000 $52,40 $8,380 (1) 10,000 $3,491
6 (2)
Chairman and 1996 180,000 45,838 275 (1) 0 14,188
former
Chief Executive 1995 180,000 44,097 3,768 (1) 0 13,588
Officer
Kerry B. Skeen 1997 275,577 363,47 25,650 (1) 110,00 61,193
4 0 (2)
Chief Executive 1996 255,000 327,82 4,699 (1) 100,00 61,464
3 0
Officer and 1995 199,933 299,58 2,015 (1) 100,00 7,697
President 1 0
Thomas J. Moore 1997 147,843 157,57 22,444 (1) 25,000 24,249
8 (2)
Executive Vice 1996 128,281 127,96 15,147 (1) 50,000 19,982
3
President and 1995 112,170 77,011 1,881 (1) 5,000 7,404
Chief
Operating
Officer
Paul H. Tate 1997 119,423 131,47 58,484 (1) 50,000 --
8
Senior Vice 1996 (3) (3) (3) (3)
President (3)
Chief Financial 1995 (3) (3) (3) (3)
(3)
Officer,
Treasurer,
and Asst.
Secretary
Michael S. Davis 1997 126,000 133,96 18,081 (1) 5,000 21,288
6 (2)
Senior Vice 1996 117,298 116,62 4,007 (1) 55,000 22,425
President 7
Customer Service 1995 (3) (3) (3) (3)
(3)
______________
(1) Includes income from certain tax reimbursement payments.
For Mr. Tate, also includes $29,904 in reimbursement of relocation
costs.
(2) Represents term life insurance premiums in the amount of
$3,491 for Mr. Acker, $11,842 for Mr. Skeen, $4,257 for Mr. Moore
and $4,666 for Mr. Davis, and the actuarial valuation, determined
under Securities and Exchange Commission ("SEC") rules, for the
"whole life" component of coverage paid by the Company for split-
dollar life insurance under the Company's deferred compensation
program, in the amount of $49,351 for Mr. Skeen, $19,992 for Mr.
Moore, and $16,622 for Mr. Davis. If all assumptions as to life
expectancy, length of service and other factors occur in
accordance with projections, the Company expects to recover the
premiums it pays with respect to the whole life component of the
coverage.
(3) Not previously reportable.
The following table sets forth information regarding grants of
stock options by the Company during the fiscal year ended December
31, 1997, to the executive officers named in the Summary
Compensation Table above.
Option Grants in Last Fiscal Year
Individ
ual
Grants
% of
Total
Options
Granted Marke Potential
Number to t Realized
of Employe Price Value at
Securiti e in on Assumed Annual
es Fiscal Exercis Date Expirati Rates of Stock
Name Underlyi Year e Price of on Price
ng Grant Date Appreciation
Options (2)
Granted
5% 10%
C. Edward 10,000( 3% $22.87 $22.87 October $138,76 $356,46
Acker 1) 5 5 22, 2007 9 3
Kerry B. 50,000( 33% 16.500 16.500 July 16, 498,477 1,282,4
Skeen 1) 2007 16
21.500 21.500 October 798,229
50,000( 1, 2007 1,907,8
1) 22.875 22.875 October 138,769 04
22, 2007
10,000( 356,463
1)
Thomas J. 20,000( 7.5% 13.750 13.750 April 185,163 457,732
Moore 1) 16, 2007
22.875 22.875 October 69,385 178,232
5,000(1 22, 2007
)
Paul H. 35,000( 14% 14.125 14.125 January 339,415 833,297
Tate 1) 23, 2007
16.500 16.500 July 16, 99,695 256,483
10,000( 2007
1) 22.875 22.875 October 69,385 178,232
22, 1998
5,000(1
)
Michael 5,000(1 1.5% 22.875 22.875 October 69,385 178,232
S. Davis ) 22, 2007
(1) Options vest in equal portions over a three year period and
become fully exerciseable upon a change in control subject in
certain cases to the discretion of the Compensation Committee or
the Board of Directors.
(2) Assumed value at the end of ten year period pursuant to SEC
mandated calculations, although these percentages do not
necessarily reflect expected appreciation or actual period of
holding by executive.
The following table provides information regarding the exercise of
options during the year ended December 31, 1997, and the number and
value of unexercised options held at December 31, 1997, by the
executive officers named above.
Aggregate Option Exercises in 1997 and Option Values at December 31,
1997
Number of Value of
Securities Unexercised
Shares Underlying In-the-Money
Acquir Value Unexercised Options
Name ed Realized( Options at FY-End at FY-End(1)
on 2)
Exerci
se
Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
C. Edward 72,500 $1,286,44 275,000 10,000 $8,159,2 $88,750
Acker 6 50
Kerry B. 47,917 576,481 85,416 210,000 2,017,44 3,563,73
Skeen 3 6
Thomas J. 15,500 333,000 29,498 60,002 682,832 1,115,97
Moore 8
Paul H. Tate -- -- -- 50,000 -- 813,750
Michael S. 7,500 112,875 27,498 50,002 574,855 939,832
Davis
(1) Based upon a market value of the Common Stock of $31.75 per
share as of December 31, 1997.
(2) Based on difference between option exercise price and
market price of Common Stock on date of exercise.
Employment Agreements
Under an agreement between the Company and Kerry B. Skeen, as
amended on October 16, 1996 (the "Skeen Agreement"), the Company has
agreed to employ Mr. Skeen as Chief Executive Officer through October
2000. The Skeen Agreement provides for automatic twelve month
extensions unless earlier terminated and for an annual base salary of
$295,000 effective October, 1997, which amount may be increased from
time to time by the Board's Compensation Committee. The Skeen
Agreement further provides that Mr. Skeen shall participate in any
bonus plan provided to executive officers generally, in the Company's
deferred compensation program, and in employee benefit and medical
plans and other arrangements as the Compensation Committee shall
determine. In addition, the Skeen Agreement provides that Mr. Skeen
shall be granted options covering 50,000 shares on October 1, 1997
and 1998.
Under the Skeen Agreement, if Mr. Skeen's employment is
terminated by the Company "without cause", or if he terminates his
own employment "with good reason" (including any termination by the
Company within twelve months, or by Mr. Skeen within six months,
after a "Change in Control"), then: (1) all of Mr. Skeen's options
become immediately exercisable; (2) he is paid the maximum bonus
amounts under all bonus programs in which he is participating; and
(3) he is paid his full base salary for the longer of 24 months or
through October 19, 1999. In addition, all of Mr. Skeen's options
become immediately exercisable upon any Change in Control. If Mr.
Skeen's employment is terminated by the Company other than for Cause,
or by Mr. Skeen, then the Company will release to Mr. Skeen its
interest in his life insurance policy, including earnings from
invested funds in an amount equal to a specified percentage (which
shall be 100% upon a Change in Control) of the premiums paid by the
Company.
Under separate agreements between the Company and Messrs. Moore
and Davis (each of which was effective January 1, 1997 and extended
effective January 1, 1998) and Mr. Tate (which was effective February
1, 1998) (collectively, the "Officer Agreements"), the Company agreed
to employ Mr. Moore as Senior Vice President of Maintenance &
Operations through December 31, 1998, Mr. Davis as Senior Vice
President of Customer Sales and Services through December 31, 1998
and Mr. Tate as Senior Vice President and Chief Financial Officer
through January 31, 1999. The Officer Agreements provide for
automatic twelve month extensions unless earlier terminated, and for
annual base salaries, all of which may be and have been increased
from time to time by the Compensation Committee to amounts above that
specified in the original agreements. The Officer Agreements provide
that Messrs. Moore, Davis and Tate shall participate in any bonus
plan provided to executive officers generally, in the Company's
deferred compensation program, and in employee benefit and medical
plans and other arrangements as the Compensation Committee shall
determine.
Under the Officer Agreements, if Mr. Moore, Mr. Davis or Mr.
Tate is terminated by the Company "without cause", then the
terminated officer shall receive his full base salary and major
medical insurance coverage for a period of twelve months, a portion
of any annual bonus prorated to the date of termination and, in some
instances, immediate vesting of certain stock options. If employment
is terminated by the Company "without cause", or by the applicable
officer, then the Company will release to the terminated officer its
interest in the officer's life insurance policy including earnings
from invested funds in an amount equal to a specified percentage
(which shall be 100% upon a Change in Control) of the premiums paid
by the Company.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation for Messrs. Skeen, Moore, Tate, and Davis (the
"Senior Executive Officers"), consists primarily of base salary,
bonus, stock option grants and participation in a deferred
compensation program. In 1997 the Compensation Committee, consistent
with previous years' compensation practices, maintained a policy of
using primarily operational and financial performance criteria, along
with other discretionary factors, to adjust the compensation of its
executive officers. The Committee reviewed and considered
performance measures for year-to-date improvements by the Company's
executive officers and also used industry performance averages as a
comparison factor.
Agreements between the Company and each of the Senior Executive
Officers establish minimum base salaries. The Compensation Committee
increased base salaries for these individuals in 1997 (and for Mr.
Tate in January 1998) in recognition of the current and long-term
level of the Company's performance and each individual's contribution
to that performance since the last review.
Senior Executive Officers participate in the Senior Management
Incentive Plan ("SMIP"), under which they may receive a percentage of
their salary as bonus. SMIP payments are based on percentage
improvements in the Company's earnings per share over the prior year
and on price performance of the Company's stock relative to its peer
group members, each in comparison to targets established early in the
year. Maximum payouts range from 100% for the Chief Executive
Officer to lesser percentages for other participants. For 1997,
participants in the SMIP received the maximum bonus allowed under the
program. Senior Executive Officers also participate with all other
management employees in the Management Incentive Plan ("MIP"), which
provides for additional bonus compensation based on the attainment of
specified levels of profit margin, costs and operating performance.
The 1997 MIP bonus was in the upper one-third of the maximum payout
and represented a composite rate made up of actual performance in
each of the goal categories. In October 1997 the Compensation
Committee elected to reduce cash bonuses for senior level MIP
participants in favor of longer-term incentive compensation by
reducing the maximum awards under MIP beginning in 1998 and granting
these individuals stock options in lieu thereof. Finally, the
Committee granted options at various times in 1997 in recognition of
individual contributions to favorable mid-year results and
operational successes.
In October 1997 the Compensation Committee adjusted incentive
compensation to provide that awards are earned over a longer term.
Maximum cash bonuses payable to senior level MIP participants were
reduced effective 1998, and affected individuals, including all
Senior Executive Officers, were awarded stock options in lieu
thereof. Further, the vesting period for employee stock options was
increased from three years to five years for options granted
effective January 1, 1998.
The Committee reviewed Mr. Skeen's compensation as President and
Chief Executive Officer at its October 22, 1997 meeting. The Skeen
Agreement was amended at that time to provide for a base pay and
deferred compensation adjustment of 9%. The Committee also made a
discretionary award of stock options to Mr. Skeen for 50,000 shares
in July 1996. The pay adjustment and the stock award were given in
recognition of Mr. Skeen's leadership in developing and implementing
the Company's regional jet strategy and for successfully handling
negotiations related thereto. Finally, Mr. Skeen was awarded stock
options for 10,000 shares in October 1997 in conjunction with a
reduction in the maximum cash payout to him under MIP beginning in
1998.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
disallows corporate tax deductions for compensation in excess of $1
million paid to each of the five highest paid officers of the Company
unless such compensation is deemed performance related within the
meaning of Section 162(m). The 1995 Stock Incentive Plan is designed
so that compensation under the Plan can qualify as "performance based
compensation" which is not subject to 162(m). The Company does not
believe that, apart from stock options, its arrangements will result
in excess of $1 million being paid to any of its executive officers,
but is continuing to study how to respond to the possible effects of
162(m).
Compensation
Committee
C. Edward Acker,
Chairman
Robert E. Buchanan
John M. Sullivan
The above report of the Compensation Committee shall not be
deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed
filed under such Acts.
Compensation Committee Interlocks and Insider Participation
During 1997 Mr. Acker served as Chairman of the Board of the
Company, and together with Messrs. Buchanan and Sullivan (beginning
in July 1997), and with Mr. Gordon Cain (prior to July 1997), served
on the Compensation Committee.
Company Stock Performance Graph
The graph below compares the cumulative total return on Atlantic
Coast Airlines, Inc. ("ACAI") Common Stock since July 21, 1993, when
the Company became publicly traded, with the cumulative total return
on the Nasdaq Market Index and the peer group index selected by the
Company. The comparison assumes an investment of $100 each in the
Company's Common Stock, the Nasdaq Market Index and the peer group on
July 21, 1993, with dividends reinvested when they are paid. The
companies included in the peer group are ASA Holdings, Inc. (formerly
Atlantic Southeast Airlines, Inc.), CCAIR, Inc., Comair Holdings,
Inc., Mesa Air Group, Inc., and SkyWest, Inc. The Company is not
included in the peer group. In the calculation of the annual
cumulative stockholder return of the peer group index, the
stockholder returns of the companies included in the peer group are
weighted according to their stock market capitalization.
<TABLE>
<S> <C <C <C <C <C <C <C <C <C <C <C <C <C <C <C <C <C <C <C> <C>
> > > > > > > > > > > > > > > > > >
7/ 9/ 12 3/ 6/ 9/ 12 3/ 6/ 9/ 12 3/ 6/ 9/ 12 3/ 6/ 9/ 12/ 2/9
93 93 /9 94 94 94 /9 95 95 95 /9 96 96 96 /9 97 97 97 97 8
3 4 5 6
ACAI 10 13 81 56 40 26 19 26 88 78 10 15 13 11 12 13 15 21 318 434
0 6 3 5 1 8 3 5 8 5
PEER 10 10 10 10 75 70 54 55 96 89 82 10 11 95 93 86 11 11 133 160
GROUP 0 1 6 5 1 6 0 1
NASDAQ 10 10 11 10 10 11 10 11 13 15 15 16 17 18 18 17 21 24 232 240
0 9 1 7 2 0 9 8 6 2 4 1 4 0 9 9 2 7
</TALE>
Prior to July 21, 1993, there was no active market for the
Company's Common Stock Therefore, the prices of the Company's Common
Stock as set forth in the Performance Graph are for a period from
July 21, 1993 until February 28, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information, as of March
11, 1998 (except as noted otherwise), concerning beneficial ownership
of the Company's Common Stock by (i) each person known by the Company
based on Schedule 13D/G filings with the SEC to own beneficially more
than five percent of the outstanding shares of the Common Stock, (ii)
each director of the Company, (iii) each executive officer of the
Company named in the Summary Compensation Table, and (iv) all
directors and executive officers of the Company as a group. Except
as noted otherwise all amounts reflected in the table represent
shares in which the beneficial owners have sole voting and investment
power.
Name Number of Shares
Beneficially Owned
Shares Percent
Gordon A. Cain 1,520,500 19.9%
Eight Greenway Plaza
Suite 702
Houston, TX 77046
Franklin Resources, Inc. 822,675(1) 10.7%
777 Mariners Island Blvd.
6th Floor
San Mateo, CA 94404
AXA Assurances I.A.R.D. Mutuelle 776,400(2) 10.2%
The Equitable Companies, Incorporated
787 Seventh Avenue
New York, NY 10019
Atlantic Coast Airlines, Inc. 555,377(3) 7.3%
Employee Stock Ownership
Trust, Bank One, Texas, N.A.,
as Trustee
910 Travis Street
Houston, TX 77002
Bankers Trust New York Corporation 549,624(4) 7.2%
130 Liberty Street
New York, NY 10006
C. Edward Acker 498,864(5) 6.5%
HBK Investments, L.P. 458,543(6) 5.7%
777 Main Street, Suite 2750
Fort Worth, TX 76102
Kerry B. Skeen 141,742(7) 1.9%
Joseph W. Elsbury 44,000 *
Robert E. Buchanan 6,500 *
James J. Kerley 1,000 *
James C. Miller 7,000 *
John M. Sullivan 1,000 *
Thomas J. Moore 50,076(8) *
Paul H. Tate 6,666(9) *
Michael S. Davis *
27,965(10)
All directors and executive
Officers as a group (13 persons) 791,478 10.4%
* Less than one percent.
(1) As of December 31, 1997, based solely upon Franklin Resources,
Inc.'s Schedule 13G filed with the SEC. All shares are beneficially
owned by subsidiaries of Franklin Resources, Inc. Includes 27,775
shares obtainable upon conversion of the Company's 7% Convertible
Subordinated Notes due 2004.
(2) As of January 31, 1998, based solely upon AXA Assurances
I.A.R.D. Mutuelle's Schedule 13G/A filed with the SEC. All shares are
beneficially owned by Alliance Capital Management L.P. ("Alliance"),
a subsidiary of The Equitable Companies Incorporated. Alliance has
sole power to vote or to direct the vote of 689,900 of these shares
and shared power to vote or to direct the vote of 81,800 of these
shares.
(3) Pursuant to the ESOP, voting of shares allocated to
participants' accounts is passed through to such participants.
(4) As of December 31, 1997, based solely upon Bankers Trust New
York Corporation's Schedule 13G filed with the SEC. All shares are
beneficially owned by subsidiaries of Bankers Trust New York
Corporation.
(5) Includes options to purchase 240,000 shares with an exercise
price of $2.08 a share.
(6) As of December 15, 1997, based solely upon HBK Investments
L.P.'s Schedule 13D filed with the SEC. HBK Investments L.P. has
sole voting power over 24,886 of these shares and shared voting power
over 17,032 of these shares. The remaining 416,625 shares reported
are shares obtainable upon conversion of the Company's 7% Convertible
Subordinated Notes due 2004. Upon conversion, HBK Investments L.P.
will have sole voting power over these shares.
(7) Includes options to purchase 25,000 shares with an exercise
price of $2.50 per share; options to purchase 27,083 shares with an
exercise price of $8.875 per share; and options to purchase 33,332
shares with an exercise price of $11.75 per share.
(8) Includes options to purchase 9,500 shares with an exercise price
of $3.75
per share; options to purchase 3,333 shares with an exercise
price of $7.313 per share; options to purchase 13,333 shares
with an exercise price of $9.25 per share; options to purchase
6,666 shares with an exercise price of $11.75 per share; and
options to purchase 3,333 shares with an exercise price of
$16.125 per share.
(9) Includes options to purchase 6,666 shares with an exercise price
of $14.13.
(10) Includes options to purchase 5,833 shares with an exercise price
of $4.625 per share; options to purchase 3,333 shares with an
exercise price of $8.000 per share; options to purchase 11,666 shares
with an exercise price of $11.75 per share; and options to purchase
6,666 shares with an exercise price of $16.125.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1997, the Company repurchased 1.46 million shares of
Common Stock from British Aerospace for approximately $16.9 million.
The price paid by the Company, which represented a 22.5% discount
from the average of the closing bid prices during the period June 24
through June 30, 1997, was agreed to through negotiations between the
Company and British Aerospace.
The Company loaned Paul Tate $75,000 pursuant to a promissory
note dated February 19, 1997 bearing interest at 5.75%. This loan
was made as part of a relocation package provided to Mr. Tate in
connection with his joining the Company. The loan was repaid in full
on July 18, 1997.
REPORTS OF BENEFICIAL OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, executive officers and persons who
own more than ten percent of the Common Stock to file reports of
beneficial ownership with the Securities Exchange Commission, the
Nasdaq National Market and the Company. Based solely upon its review
of the copies of such forms received by it, the Company believes
that, during fiscal year 1997, these persons complied with all such
filing requirements.
STOCKHOLDER PROPOSALS
Securities and Exchange Commission regulations permit
stockholders to submit proposals for consideration at annual meetings
of stockholders. Any such proposals for the Company's Annual Meeting
of Stockholders to be held in 1999 must be submitted to the Company
on or before December 1, 1998, and must comply with applicable
regulations of the Securities and Exchange Commission in order to be
included in proxy materials relating to that meeting. Proposals
should be sent to: Atlantic Coast Airlines, Inc., Attn: Secretary,
515A Shaw Road, Dulles, Virginia 20166.
___________________________
Please complete, date, sign and return promptly the
accompanying Proxy Card in the postage-paid envelope enclosed for
your convenience. The signing of the Proxy Card will not prevent
your attending the Meeting and voting in person.
March 30, 1998
Dulles, Virginia
ATLANTIC COAST AIRLINES, INC.
Proxy solicited by the Board of Directors for Annual Meeting --
May 5, 1998.
Each of the undersigned, revoking all other proxies heretofore given,
hereby constitutes and appoints Paul H. Tate and Richard J. Kennedy,
and each of them, with full power of substitution, as proxy or
proxies to represent and vote all shares of Common Stock, par value
$.02 per share (the "Common Stock"), of ATLANTIC COAST AIRLINES, INC.
(the "Company") owned by the undersigned at the Annual Meeting and
any adjournments or postponements thereof.
The shares represented hereby will be voted in accordance with the
directions given in this proxy. If not otherwise directed herein,
shares represented by this proxy will be voted FOR Item 1 (Election
of Directors), FOR Item 2 (Amendment of the Company's Certificate of
Incorporation to change the Company's name to "ACA Holdings, Inc."),
FOR Item 3 (Amendment of the Company's Certificate of Incorporation
to increase the Company's total authorized shares to 76,000,000), FOR
Item 4 (Ratification of amendment of the Company's Stock Incentive
Plan) and FOR Item 5 (Ratification of the appointment of Independent
Auditors). If any other matters are properly brought before the
Annual Meeting, proxies will be voted on such matters as the proxies
named herein, in their sole discretion, may determine.
Please Mark, Sign, Date and Mail Promptly in the Enclosed Envelope.
The Board of Directors recommends a vote FOR Items 1, 2, 3, 4 and 5
to be voted upon at the Annual Meeting:
1. Election of all nominees listed to the Board of Directors, except
as noted (write the names of the nominees, if any, for whom you
withhold authority to vote). Nominees: C. Edward Acker, Kerry B.
Skeen, Thomas J. Moore, Robert E. Buchanan, Susan MacGregor Coughlin,
Joseph W. Elsbury, James J. Kerley, James C. Miller and John M.
Sullivan.
For all except: ____________________________________.
FOR all nominees WITHHOLD AUTHORITY to vote for all
nominees
2. To approve amendment to the Company's Certificate of
Incorporation to change the Company's name to "ACA Holdings, Inc."
FOR AGAINST ABSTAIN
3. To approve amendment to the Company's Certificate of
Incorporation to increase the Company's authorized shares to
76,000,000.
FOR AGAINST ABSTAIN
4. To ratify amendment to the Company's 1995 Stock Incentive Plan to
increase the shares available under the Plan to 1,250,000.
FOR AGAINST ABSTAIN
5. To ratify appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the current year.
FOR AGAINST ABSTAIN
Date
________________________
_________, 1998.
Signature
________________________
__________
Title
________________________
______________
________________________
___________________
(Signature, if Held
Jointly)
Please sign exactly as
name appears hereon.
Please manually date
this card. When signing
as an attorney,
executor, administrator,
trustee or guardian,
give full title as such.
If a corporation, sign
in full corporate name
by President or other
authorized officer. If
a partnership, sign in
partnership name by
authorized person.
</TABLE>
