Page 5
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission file number 0-21976
ATLANTIC COAST AIRLINES HOLDINGS, INC.
Formerly known as Atlantic Coast Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3621051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515-A Shaw Road, Dulles, Virginia 20166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 925-6000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
As of July 31, 1998, there were 19,199,197 shares of common stock, par
value $.02 per share, outstanding.
Part I. Financial Information
Item 1. Financial Statements
Atlantic Coast Airlines Holdings, Inc.
and Subsidiary
Condensed Consolidated Balance Sheets
<TABLE>
<S> <C> <C>
December 31, June 30, 1998
(In thousands except for share data and par 1997 (Unaudited)
values)
Assets
Current:
Cash and cash equivalents $ 39,167 $ 58,857
Short term investments 10,737 930
Accounts receivable, net 21,621 28,475
Expendable parts and fuel inventory, 2,477 2,824
net
Prepaid expenses and other current 2,855 6,524
assets
Total current assets 76,857 97,610
Property and equipment at cost, net of
accumulated depreciation and 40,638 46,195
amortization
Preoperating costs, net of accumulated
amortization 2,004 1,736
Intangible assets, net of accumulated 2,613 3,179
amortization
Deferred tax asset 688 688
Debt issuance costs, net of accumulated 3,051 2,368
amortization
Aircraft deposits 19,040 19,420
Other assets 4,101 4,794
Total assets $ 148,992 $ 175,990
Liabilities and Stockholders' Equity
Current:
Accounts payable $ 4,768 $ 9,088
Current portion of long-term debt 1,851 2,143
Current portion of capital lease 1,730 1,447
obligations
Accrued liabilities 23,331 32,054
Total current liabilities 31,680 44,732
Long-term debt, less current portion 73,855 36,741
Capital lease obligations, less current 2,290 2,007
portion
Deferred credits 6,362 6,188
Total liabilities 114,187 89,668
Stockholders' equity:
Preferred Stock, $.02 par value per share;
shares authorized 5,000,000; no shares - -
issued or outstanding
Common stock: $.02 par value per share;
shares authorized 65,000,000; shares issued
16,006,514 and 20,663,263 respectively;
shares outstanding 14,534,014 and 320 413
19,190,763 respectively
Class A common stock: nonvoting; par value;
$.02 stated value per share; shares
authorized 6,000,000; no shares issued or - -
outstanding
Additional paid-in capital 40,151 79,501
Less: Common stock in treasury, at cost, (17,069) (17,069)
1,472,500 shares
Retained earnings 11,403 23,477
Total stockholders' equity 34,805 86,322
Total liabilities and stockholders' $ 148,992 $ 175,990
equity
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
Atlantic Coast Airlines Holdings, Inc.
and Subsidiary
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
Three months ended June 30,
<S> <C> <C>
(In thousands, except for per share 1997 1998
data)
Operating revenues:
Passenger $ 52,549 $ 74,815
Other 671 944
Total operating revenues 53,220 75,759
Operating expenses:
Salaries and related costs 12,137 16,507
Aircraft fuel 4,203 5,738
Aircraft maintenance and materials 3,263 5,928
Aircraft rentals 7,808 8,951
Traffic commissions and related fees 8,690 11,395
Depreciation and amortization 767 1,461
Other 6,384 8,421
Total operating expenses 43,252 58,401
Operating income 9,968 17,358
Other income (expense):
Interest expense (460) (946)
Interest income 148 1,497
Debt conversion expense - (1,410)
Other, net (9) 32
Total other income (expense) (321) (827)
Income before income tax provision 9,647 16,531
Income tax provision 3,762 7,439
Net income $ 5,885 $ 9,092
Income per share:
-basic $0.35 $0.48
-diluted $0.33 $0.42
Weighted average shares used in
computation:
-basic 17,021 18,805
-diluted 17,675 22,246
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
Atlantic Coast Airlines Holdings, Inc.
and Subsidiary
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
Six months ended June 30,
<S> <C> <C>
(In thousands, except for per share 1997 1998
data)
Operating revenues:
Passenger $ 93,049 $ 131,508
Other 1,285 2,306
Total operating reves 94,334 133,814
Operating expenses:
Salaries and related costs 23,732 31,177
Aircraft fuel 8,527 10,803
Aircraft maintenance and mls 7,008 11,597
Aircraft rentals 15,110 17,218
Traffic commissions and related fees 15,038 20,513
Depreciation and amortization 1,487 2,848
Other 12,427 16,425
Total operating expenses 83,329 110,581
Operating income 11,005 23,233
Other income (expense):
Interest expense (650) (2,148)
Interest income 293 1,937
Debt conversion expense - (1,410)
Other, net (13) 61
Total other income (expense) (370) (1,560)
Income before income tax provision 10,635 21,673
Income tax provision 4,048 9,599
Net income $ 6,587 $ 12,074
Income per share:
-basic $0.39 $0.71
-diluted $0.37 $0.58
Weighted average shares used in
computation:
-basic 17,012 16,994
-diluted 17,663 22,115
</TABLE>
See accompanying notes to the condensed consolidated financial
statements.
Atlantic Coast Airlines Holdings, Inc.
and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<S> <C> <C>
Six months ended June 30,
(In thousands) 1997 1998
Cash flows from operating activities:
Net income $ 6,587 $
12,074
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation 1,280 2,497
Amortization of intangibles and preoperating costs 207 350
Provision for uncollectible accounts and inventory 45 70
obsolescence
Amortization of deferred credits (49) (224)
Loss on disposal of fixed assets 348 199
Amortization of debt discount and finance costs 27 233
Debt conversion expense - 1,410
Interest on debt conversion - 200
Interest on credit due from manufacturer - (362)
Capitalized interest - (731)
Changes in operating assets and liabilities:
Accounts receivable (4,218) (6,861)
Expendable parts and fuel inventory (587) (382)
Prepaid expenses and other current assets (574) (4,748)
Preoperating costs (258) (5)
Accounts payable (1,137) 4,320
Accrued liabilities 4,745 8,703
Net cash provided by operating activities 6,416 16,743
Cash flows from investing activities:
Purchases of property and equipment (1,946) (6,032)
Proceeds from sale-leaseback - 1,318
Maturities of short term investments - 9,808
Refund of aircraft and other deposits 250 120
Payments for aircraft and other deposits (4,000) (500)
Net cash (used in) provided by investing activities (5,696) 4,714
Cash flows from financing activities:
Payments of long-term debt (645) (503)
Payments of capital lease obligations (770) (1,981)
Net increase in line of credit 7 -
Deferred financing costs (225) (870)
Proceeds from receipt of deferred credits 686 -
Proceeds from exercise of stock options 131 1,587
Net cash used in financing activities (816) (1,767)
Net (decrease) increase in cash and cash equivalents (96) 19,690
Cash and cash equivalents, beginning of period 21,470 39,167
Cash and cash equivalents, end of period $ 21,374 $
58,857
</TABLE> [C] [C]
See accompanying notes to the condensed consolidated financial
statements.
ATLANTIC COAST AIRLINES HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared
by Atlantic Coast Airlines Holdings, Inc. ("ACAI") and its subsidiary,
Atlantic Coast Airlines ("ACA"), (ACAI and ACA, together, the "Company"),
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. The information furnished in the consolidated
financial statements includes normal recurring adjustments and reflects
all adjustments which are, in the opinion of management, necessary for a
fair presentation of such consolidated financial statements. Results of
operations for the three and six month periods presented are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998. Certain amounts as previously reported have been
reclassified to conform to the current year presentation. Certain
information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements, and the
notes thereto, included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
2. OTHER - COMMITMENTS
During the fourth quarter of 1997, the Company entered into an agreement
with Aero International (Regional) for the purchase of one additional new
Jetstream 41 ("J-41") aircraft for $5.3 million, and also took delivery
of the aircraft under an interim manufacturer financing arrangement. The
Company is obligated to arrange third party financing of this aircraft,
or to purchase it outright, upon completion of certain technical
modifications relating to the aircraft, and expects to complete this
financing no later than August 31, 1998.
The Company completed third party financings for three additional50 seat
Canadair Regional Jets ("CRJ's) during the first half of 1998. These
were delivered in March, April and May, respectively. The Company entered
into leveraged operating lease transactions for terms of 16.5 years at
the time of delivery of each aircraft, for aggregate monthly lease costs
of approximately $314,000.
As of June 30, 1998, the Company was operating nine CRJ aircraft, had
firm orders for an additional 14, and options for a further 25. Of the
14 firm CRJ orders, one was delivered on July 22, 1998, an additional
four will be delivered during the remainder of 1998, and nine will be
delivered in 1999. The capital cost to the Company for the remaining four
1998 and the 1999 deliveries is approximately $74.0 million and $166.5
million respectively.
In the second quarter of 1998, the Company announced that, the
Metropolitan Washington Airport Authority ("MWAA") in coordination with
the Company, will build an approximately 70,000 square foot regional
passenger concourse at Washington Dulles International Airport. The
facility is scheduled to open in Summer 1999. The new facility will
offer improved passenger amenities and operational enhancements, and will
provide additional space to support the Company's expanded operations
resulting from the introduction of CRJs. The facility will be designed,
financed, constructed, operated and maintained by MWAA, and will be
leased to the Company. The lease rate will be determined based upon
final selection of funding methods and rates, and on the final scope of
the project. MWAA has agreed to fund the construction through the
proceeds of bonds and, subject to approval by the FAA, passenger facility
charges ("PFC"). Until MWAA obtains bond funding or funding through
PFCs, the Company has committed to obtain its own interim financing from
a third party lender to fund a portion of the total program cost of the
regional concourse not to exceed $13 million. MWAA has agreed to replace
the Company's interim financing with the proceeds of bonds or, if
obtained, PFC funds, no later than one year following the substantial
completion date of the project.
In July 1997, the Company entered into a series of interest rate swap
contracts in the amount of $39.8 million. The swaps were executed by
purchasing six contracts maturing between March and September 1998 with a
third party as the counterparty. The interest rate hedge was designed to
limit approximately 40% of the Company's exposure to interest rate
changes until permanent financing for the six CRJ aircraft, scheduled for
delivery between March and September 1998, was secured. During the first
half of 1998, the Company settled three of these six contracts, paying
the counterparty approximately $827,000 and is amortizing this cost over
the life of the related aircraft leases. At June 30, 1998, had the
remaining three contracts settled on that date, the Company would have
been obligated to pay the counterparty approximately $1 million.
3. INCOME TAXES
The Company's combined effective tax rate for state and federal taxes
during the second quarter of 1998 was 45%, as compared to combined
effective rates of 39% during the second quarter of 1997 and 42% during
the first quarter of 1998, and a combined statutory tax rate for state
and federal taxes of approximately 41%. The increased effective rate in
the second quarter of 1998 is primarily due to the effect of a one-time
non-cash, non-operating charge of approximately $1.4 million related to
the reduced conversion price offered to noteholders as discussed in Note
6.
4. STOCK DIVIDEND
On April 14, 1998, the Company declared a 2-for-1 stock split payable as
a stock dividend on May 15, 1998. The stock dividend was contingent on
shareholder approval to increase the number of authorized Common Shares
from 15,000,000 to 65,000,000 shares. Shareholder approval was obtained
on May 5, 1998. The effect of this stock split is reflected in the
calculation of income per share and shareholders' equity as presented
herein for the three and six month periods ended June 30, 1997 and 1998,
respectively.
5. INCOME PER SHARE
The computation of basic income per share is computed by dividing net
income by the weighted average number of common shares outstanding.
Diluted income per share is computed by dividing net income by the
weighted average number of common shares outstanding and common stock
equivalents, which consist of shares subject to stock options computed
using the treasury stock method. In addition, under the if-converted
method, dilutive convertible securities are included in the denominator
while interest expense, net of tax, for convertible debt is added to the
numerator.
5. INCOME PER SHARE (Continued)
A reconciliation of the numerator and denominator used in computing basic
and diluted income per share is as follows:
<TABLE>
Three Six Months
Months Ended Ended June 30,
June 30,
<S> <C> <C> <C> <C>
(in thousands) 1997 1998 1997 1998
Net income (basic) 5,885 9,092 6,587 12,07
4
Interest expense on 7% Convertible Notes net
of tax effect - 326 - 805
Net income (diluted) 5,885 9,418 6,587 12,87
9
Weighted average shares outstanding (basic) 17,021 18,805 17,012 16,99
4
Incremental shares related to stock 654 951 651 943
options
Incremental shares related to 7%
Convertible Notes - 2,490 - 4,178
Weighted average shares outstanding 17,675 22,246 17,663 22,11
(diluted) 5
</TABLE>
6. DEBT CONVERSION
The Company temporarily reduced the conversion price of its 7%
Convertible Subordinated Notes ("Notes") during the period March 25 -
April 8, 1998. During this period, holders of $31.7 million of the Notes
submitted their Notes for conversion to common stock. These Notes were
converted into 1.8 million (pre stock dividend) shares of common stock,
which includes an additional 28,087 pre stock dividend shares issued as
the result of the reduced conversion price. The Company recorded a one-
time non-cash, non-operating charge of approximately $1.4 million as the
fair market value of these additional shares.
7. SUBSEQUENT EVENTS
In July 1998, the Company entered into six additional interest rate swap
contracts having an aggregate notional amount of $51.8 million. The
swaps were executed by purchasing six contracts maturing between October
1998 and April 1999. The interest rate hedge is designed to limit
approximately 50% of the Company's exposure to interest rate changes
until permanent financing for six additional CRJ aircraft, which are
scheduled for delivery between October 1998 and April 1999, is secured.
Gains or losses resulting from the interest rate swap contracts will be
deferred until the contracts are settled and then amortized over the
aircraft lease term or capitalized as part of acquisition cost, if
purchased, and depreciated over the life of the aircraft.
8. RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income",
which requires, effective January 1, 1998, that comprehensive income and
the associated income tax expense or benefit be reported in financial
statements with the same prominence as other financial statements with an
aggregate amount of comprehensive income reported in that statement. For
the periods presented in this Form 10Q, the Company did not have any
separately reported components of comprehensive income and therefore, no
separate Statement of Comprehensive Income is presented.
The American Institute of Certified Public Accountants has issued
Statement of Position 98-5 on accounting for start-up costs, including
preoperating costs related to the introduction of new fleet types by
airlines. The new accounting guidelines will take effect for fiscal
years beginning after December 15, 1998. The Company has deferred
certain start-up costs related to the introduction of the CRJs and is
amortizing such costs to expense ratably over four years. The Company
will be required to expense any remaining unamortized amounts as of
January 1, 1999 as a cumulative effect of a change in accounting
principle. The Company estimates the remaining unamortized balance for
deferred start-up costs will be approximately $1.4 million on January 1,
1999.
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement
establishes accounting and reporting standards for derivative instruments
and all hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities at their fair values.
Accounting for changes in the fair value of a derivative depends on its
designation and effectiveness. For derivatives that qualify as effective
hedges, the change in fair value will have no impact on earnings until
the hedged item affects earnings. For derivatives that are not designated
as hedging instruments, or for the ineffective portion of a hedging
instrument, the change in fair value will affect current period earnings.
The Company will adopt Statement No. 133 during its first quarter of
fiscal 2000 and is currently assessing the impact this statement will
have on interest rate swaps and any future hedging contracts that may be
entered into by the Company.
9. YEAR 2000 COMPLIANCE
The Company has completed its assessment phase for year 2000 compliance
and remediation is in process. The Company believes that the cost to
modify any of its non-compliant systems or applications will not have a
material effect on its financial position or the results of its
operations. However, the Company cannot give any assurances that the
systems of other parties upon which the Company must rely, will be year
2000 compliant on a timely basis. Examples of systems operated by others
that the Company may use and or rely upon are: FAA Air Traffic Control,
Computer Reservation Systems for travel agent sales and United Airlines'
reservation, passenger check in and ticketing systems. The Company's
business, financial condition and or results of operations could be
materially adversely affected by the failure of its systems and
applications or those operated by others.
10. STOCKHOLDERS' EQUITY
The Company's shareholders amended the 1995 stock option plan which
provides for the issuance of options to purchase Common Stock of the
Company to certain employees and directors of the Company. After
reflecting the change for the stock dividend, the amendment increased the
aggregate number of shares of Common Stock that can be issued under the
1995 plan from 1,500,000 to 2,500,000. As of June 30, 1998, 635,182
shares are available for grant.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Second Quarter Operating Statistics
<TABLE>
<S> <C> <C> <C>
Increase
(Decrease
)
Three months ended June 30, 1997 1998 % Change
Revenue passengers carried 424,74 646,21 52.1%
0 7
Revenue passenger miles ("RPMs") 105,37 203,31 93.0%
(000's) 2 9
Available seat miles ("ASMs") (000's) 208,66 334,58 60.3%
3 8
Passenger load factor 50.5% 60.8% 10.3 pts
Break-even passenger load factor 1 40.9% 46.7% 5.8 pts
Revenue per ASM (cents) 25.2 22.4
(11.1%)
Yield (cents) 49.9 36.8 (26.2%)
Cost per ASM (cents) 20.7 17.5 (15.5%)
Average passenger fare $123.7 $115.7 (6.4%)
2 7
Average passenger segment (miles) 248 315 27.0%
Revenue departures 36,051 40,814 13.2%
Revenue block hours 44,963 55,420 23.3%
Aircraft utilization (block hours) 8.3 8.9 7.2%
Average cost per gallon of fuel (cents) 77.3 67.8 (12.3%)
Aircraft in service (end of period) 60 69 15.0%
</TABLE>
Comparison of three months ended June 30, 1997, to three months ended
June 30, 1998.
Results of Operations
The following Management's Discussion and Analysis contains
forward-looking statements and information that are based on management's
current expectations as of the date of this document. When used herein,
the words "anticipate", "believe", "estimate" and "expect" and similar
expressions, as they relate to the Company's management, are intended to
identify such forward-looking statements. Such forward-looking statements
are subject to risks, uncertainties, assumptions and other factors that
may cause the actual results of the Company to be materially different
from those reflected in such forward-looking statements. Such factors
include, among others, the costs of implementing regional jet service,
the response of the Company's competitors to the Company's business
strategy, the ability of the Company to obtain favorable financing terms
for its aircraft, market acceptance of the new regional jet service,
routes and schedules offered by the Company, the cost of fuel, the
weather, general economic conditions, changes in and satisfaction of
regulatory requirements, and the factors discussed below and in the
Company's Annual Report on Form 10-K for the year ended December 31,
1997. The Company does not intend to update these forward-looking
statements prior to its next required filing with the Securities and
Exchange Commission.
General
In the second quarter of 1998 the Company posted net income of
$9.1 million compared to net income of $5.9 million for the second
quarter of 1997. In the three months ended June 30, 1998, the Company
earned pretax income of $16.5 million compared to $9.6 million in the
three months ended June 30, 1997.
Operating Revenues
The Company's operating revenues increased 42.4% to $75.8
million in the second quarter of 1998 compared to $53.2 million in the
second quarter of 1997. The increase resulted from a 60.3% increase in
ASMs and an increase in load factor of 10.3 percentage points, partially
offset by a 26.2% decrease in yield.
The increase in ASM's is largely the result of service
expansion of the 50 seat Canadair Regional Jet ("CRJ"), first introduced
into service during the fourth quarter of 1997, and the addition of four
British Aerospace Jetstream - 41 ("J-41") aircraft, three of which were
placed in service during the second quarter of 1997. The Company operated
nine CRJ's as of June 30, 1998. In addition, the average aircraft stage
length for the second quarter 1998 increased 14.5% over the second
quarter 1997 to 269 miles.
The quarter over quarter percentage reduction in yield is
significantly related to the 27% increase in the average passenger trip
length and the use of introductory fares in new CRJ markets. Total
passengers increased 52.1% in the second quarter of 1998 compared to the
second quarter of 1997.
Operating Expenses
The Company's operating expenses increased 35% in the second
quarter of 1998 compared to the second quarter of 1997 due primarily to a
60.3% increase in ASMs and a 52.1% increase in passengers carried. The
increase in ASMs reflects the net addition of nine CRJ's and four J-41
aircraft, three of which were placed in service during the second quarter
of 1997.
A summary of operating expenses as a percentage of operating
revenues and cost per ASM for the three months ended June 30, 1997, and
1998 is as follows:
<TABLE>
1997 1998
<S> <C> <C> <C> <C>
Percent Cost Percent Cost
of of
Operati Per ASM Operatin Per ASM
ng g
Revenue (cents) Revenue (cents)
s s
Salaries and related costs 22.8% 5.8 21.8% 4.9
Aircraft fuel 7.9% 2.0 7.6% 1.7
Aircraft maintenance and 6.1% 1.6 7.8% 1.8
materials
Aircraft rentals 14.7% 3.7 11.8% 2.7
Traffic commissions and related 16.3% 4.2 15.0% 3.4
fees
Depreciation and amortization 1.4% 0.4 1.9% 0.4
Other 12.1% 3.0 11.2% 2.6
Total 81.3% 20.7 77.1% 17.5
Re
</TABLE>
Cost per ASM decreased 15.5% to 17.5 cents during the second
quarter of 1998 compared to 20.7 cents during the second quarter of 1997
primarily due to the introduction of a more unit cost-efficient aircraft,
the CRJ, with its longer aircraft stage length in addition to the
refinancing of 19 J-41 aircraft in the second half of 1997. The increase
in ASMs resulted from the net addition of nine CRJ's and four J-41
aircraft.
Salaries and related costs per ASM decreased 15.5% to 4.9 cents
in the second quarter of 1998 compared to the second quarter of 1997. In
absolute dollars, salaries and related costs increased 36% from $12.1
million in the second quarter of 1997 to $16.5 million in the second
quarter of 1998. The increase resulted primarily from additional flight
crews, customer service personnel and maintenance personnel to support
the nine regional jets and four additional J-41 aircraft.
The cost per ASM of aircraft fuel decreased to 1.7 cents in the
second quarter of 1998 compared to 2.0 cents in the second quarter of
1997. In absolute dollars, aircraft fuel expense increased 36.5% from
$4.2 million in the second quarter of 1997 to $5.7 million in the second
quarter of 1998. The increased fuel cost resulted from the 23.3% increase
in block hours, partially offset by a 12.3% decrease in the average cost
per gallon of fuel from 77.3 cents to 67.8 cents including applicable
taxes and into-plane fees. Aircraft fuel prices fluctuate with a variety
of factors, including the price of crude oil, and future increases or
decreases cannot be predicted with a high degree of certainty. There is
no assurance that future increases will not adversely affect the
Company's operating expenses. In January and March 1998, the Company
entered into contracts to purchase fuel at fixed prices from United
Aviation Fuels Corporation, a wholly owned subsidiary of United Airlines
for the period February through December 1998. The Company is committed
to purchase 33,000 barrels per month which represents approximately 50%
of the Company's monthly consumption, at a delivered price excluding
taxes and into-plane fees of 52.2 cents per gallon from February through
September 1998, and 50.35 cents per gallon from October through December
1998.
The cost per ASM of aircraft maintenance and materials
increased 12.5% to 1.8 cents in the second quarter of 1998 compared to
the second quarter of 1997. In absolute dollars, aircraft maintenance and
materials expense increased 81.7% from $3.3 million in the second quarter
of 1997 to $5.9 million in the second quarter of 1998. The increased
expense resulted from the increase in the size of the fleet by 14
aircraft and an increase in the average age of the turbo prop fleet. This
increase is partially offset by credits received from vendors for
aircraft maintenance performance guarantees in the second quarter of
1998.
The cost per ASM of aircraft rentals decreased to 2.7 cents for
the second quarter of 1998 compared to 3.7 cents for the second quarter
of 1997. During the third and fourth quarters of 1997, the Company
refinanced 19 of its J-41 aircraft at significantly reduced rental rates.
In absolute dollars, aircraft rentals increased 14.6% from $7.8 million
in the second quarter of 1997 to $9.0 million in the second quarter of
1998 reflecting the addition of nine CRJ aircraft.
The cost per ASM of traffic commissions and related fees
decreased to 3.4 cents in the second quarter of 1998 compared to 4.2
cents in the second quarter of 1997. In absolute dollars, traffic
commissions and related fees increased 31.1% from $8.7 million in the
second quarter of 1997 to $11.4 million in the second quarter of 1998.
The increase in costs resulted from a 42.4% increase in passenger
revenues, a 52.1% increase in passengers, and contractual rate increases
in fees paid to United Airlines, Inc. ("United") and Computer Reservation
System vendors. These increases were partially offset by the reduction
in the travel agency commission rate from 10% to 8% enacted in late 1997.
The cost per ASM of depreciation and amortization remained
unchanged at 0.4 cents. In absolute dollars, depreciation and
amortization increased 90.5% from $0.8 million in the second quarter of
1997 to $1.5 million in the second quarter of 1998 primarily as a result
of additional rotable spare parts associated with the CRJs and the
purchase of four previously leased J-41 aircraft in the third quarter of
1997.
The cost per ASM of other operating expenses decreased to 2.6
cents in the second quarter of 1998 from 3.0 cents in the second quarter
of 1997. In absolute dollars, other operating expenses increased 31.9%
from $6.4 million in the second quarter of 1997 to $8.4 million in the
second quarter of 1998. The increased costs result primarily from the
13.2% increase in the number of departures and the 52.1% increase in
passengers.
As a result of the foregoing changes in operating expenses, and
a 60.3% increase in ASMs, total cost per ASM decreased to 17.5 cents in
the second quarter of 1998 compared to 20.7 cents in the second quarter
of 1997. In absolute dollars, total operating expenses increased 35% from
$43.3 million in the second quarter of 1997 to $58.4 million in the
second quarter of 1998.
The Company's combined effective tax rate for state and federal
taxes during the second quarter of 1998 was approximately 45% as compared
to 39% for the second quarter 1997. This increase is primarily due to the
effect of a one time non-cash, non-operating charge of approximately $1.4
million related to the reduced conversion price accepted by certain
holders of the Company's 7% Notes. The Company estimates that the
effective tax rate will be approximately 41.5% during the third and
fourth quarters of 1998.
Six Months Operating Statistics
<TABLE>
<S> <C> <C> <C>
Increase
(Decrease
)
Six months ended June 30, 1997 1998 % Change
Revenue passengers carried 723,75 1,111,21 53.5%
9 0
Revenue passenger miles ("RPMs") 178,61 342,915 92.0%
(000's) 3
Available seat miles ("ASMs") (000's) 395,55 619,569 56.6%
6
Passenger load factor 45.2% 55.3% 10.1 pts
Break-even passenger load factor 2 39.8% 45.6% 5.8 pts
Revenue per ASM (cents) 23.5 21.2 (9.8%)
Yield (cents) 52.1 38.4 (26.3%)
Cost per ASM (cents) 21.1 17.8 (15.6%)
Average passenger fare $128.5 $118.35 (7.9%)
6
Average passenger segment (miles) 247 309 25.1%
Revenue departures 69,187 79,800 15.3%
Revenue block hours 86,514 106,657 23.3%
Aircraft utilization (block hours) 7.9 8.7 10.1%
Average cost per gallon of fuel (cents) 81.0 68.4 (15.5%)
Aircraft in service (end of period) 60 69 15.0%
</TABLE>
Comparison of six months ended June 30, 1997, to six months ended June
30, 1998.
Results of Operations
General
In the first half of 1998, the Company posted net income of
$12.1 million compared to net income of $6.6 million for the first half
of 1997. In the six months ended June 30, 1998, the Company earned
pretax income of $21.7 million compared to $10.6 million in the six
months ended June 30, 1997.
Operating Revenues
The Company's operating revenues increased 41.9% to $133.8
million in the first half of 1998 compared to $94.3 million in the first
half of 1997. The increase resulted from a 56.6% increase in ASMs and an
increase in load factor of 10.1 percentage points, partially offset by a
26.3% decrease in yield.
The increase in ASM's is largely the result of service
expansion of the 50 seat CRJ, first introduced into service during the
fourth quarter of 1997, and the addition of four British Aerospace
Jetstream - 41 ("J-41") aircraft, three of which were placed in service
during the second quarter of 1997. The Company operated nine CRJ's as of
June 30, 1998. In addition, the average aircraft stage length for the
first half of 1998 increased 12.8% over the first half of 1997 to 264
miles.
The year over year percentage reduction in yield is related in
part to the temporary expiration of the ticket tax from January 1, 1997
to March 6, 1997 and to the 25.1% increase in the average passenger trip
length. Total passengers increased 53.5% in the first half of 1998
compared to the first half of 1997.
Operating Expenses
The Company's operating expenses increased 32.7% in the first
half of 1998 compared to the first half of 1997 due primarily to a 56.6%
increase in ASMs and a 53.5% increase in passengers carried. The increase
in ASMs reflects the net addition of nine CRJ's and four J-41 aircraft,
three of which were placed in service during the first half of 1997.
A summary of operating expenses as a percentage of operating
revenues and cost per ASM for the six months ended June 30, 1997, and
1998 is as follows:
<TABLE>
1997 1998
<S> <C> <C> <C> <C>
Percent Cost Percent Cost
of of
Operati Per ASM Operatin per ASM
ng g
Revenue (cents) Revenue (cents)
s s
Salaries and related costs 25.2% 6.0 23.3% 5.0
Aircraft fuel 9.0% 2.2 8.1% 1.7
Aircraft maintenance and 7.4% 1.8 8.6% 1.9
materials
Aircraft rentals 16.0% 3.8 12.9% 2.8
Traffic commissions and related 15.9% 3.8 15.3% 3.3
fees
Depreciation and amortization 1.6% 0.4 2.1% 0.5
Other 13.2% 3.1 12.3% 2.6
Total 88.3% 21.1 82.6% 17.8
Re
</TABLE>
Cost per ASM decreased 15.6% to 17.8 cents during the first
half of 1998 compared to 21.1 cents during the first half of 1997
primarily due to the introduction of a more unit cost-efficient aircraft,
the CRJ, with its longer aircraft stage length, in addition to the
refinancing of 19 J-41 aircraft in the second half of 1997. The increase
in ASMs resulted from the net addition of nine CRJ's and four J-41
aircraft.
Salaries and related costs per ASM decreased 16.7% to 5.0 cents
in the first half of 1998 compared to the first half of 1997. In absolute
dollars, salaries and related costs increased 31.4% from $23.7 million in
the first half of 1997 to $31.2 million in the first half of 1998. The
increase resulted primarily from additional flight crews, customer
service personnel and maintenance personnel to support the nine regional
jets and four additional J-41 aircraft.
The cost per ASM of aircraft fuel decreased to 1.7 cents in the
first half of 1998 compared to 2.2 cents in the first half of 1997. In
absolute dollars, aircraft fuel expense increased 26.7% from $8.5 million
in the first half of 1997 to $10.8 million in the first half of 1998. The
increased fuel cost resulted from the 23.3% increase in block hours,
partially offset by a 15.5% decrease in the average cost per gallon of
fuel from 81.0 cents to 68.4 cents including taxes and into-plane fees.
Aircraft fuel prices fluctuate with a variety of factors, including the
price of crude oil, and future increases or decreases cannot be predicted
with a high degree of certainty. There is no assurance that future
increases will not adversely affect the Company's operating expenses.
The cost per ASM of aircraft maintenance and materials
increased 5.6% to 1.9 cents in the first half of 1998 compared to the
first half of 1997. In absolute dollars, aircraft maintenance and
materials expense increased 65.5% from $7.0 million in the first half of
1997 to $11.6 million in the first half of 1998. The increased expense
resulted from the increase in the size of the fleet by 14 aircraft and an
increase in the average age of the turbo prop fleet.
The cost per ASM of aircraft rentals decreased to 2.8 cents for
the first half of 1998 compared to 3.8 cents for the first half of 1997.
During the third and fourth quarters of 1997, the Company refinanced 19
of its J-41 aircraft at significantly reduced rental costs. In absolute
dollars, aircraft rentals increased 14.0% from $15.1 million in the first
half of 1997 to $17.2 million in the first half of 1998 reflecting the
addition of nine CRJ aircraft, offset by savings resulting from the
refinancing of 18 J-41 leases after the first quarter of 1997.
The cost per ASM of traffic commissions and related fees
decreased to 3.3 cents in the first half of 1998 compared to 3.8 cents in
the first half of 1997. In absolute dollars, traffic commissions and
related fees increased 36.4% from $15.0 million in the first half of 1997
to $20.5 million in the first half of 1998. The increase in costs
resulted from a 41.3% increase in passenger revenues, a 53.5% increase in
passengers, and contractual rate increases in fees paid to United
Airlines, Inc. ("United") and Computer Reservation System vendors. These
increases were partially offset by the reduction in the travel agency
commission rate from 10% to 8% enacted in late 1997. Since substantially
all passenger revenues are derived from interline sales, the Company did
not begin realizing the savings from this reduction until February 1998.
The cost per ASM of depreciation and amortization increased to
0.5 cents in the first half of 1998 compared to 0.4 cents for the first
half of 1997. In absolute dollars, depreciation and amortization
increased 91.5% from $1.5 million in the first half of 1997 to $2.8
million in the first half of 1998 primarily as a result of additional
rotable spare parts associated with the CRJs and the purchase of four
previously leased J-41 aircraft in the third quarter of 1997.
The cost per ASM of other operating expenses decreased to 2.6
cents in the first six months of 1998 from 3.1 cents in the first half of
1997. In absolute dollars, other operating expenses increased 32.2% from
$12.4 million in the first half of 1997 to $16.4 million in the first
half of 1998. The increased costs result primarily from the 15.3%
increase in the number of departures and the 53.5% increase in
passengers.
As a result of the foregoing changes in operating expenses, and
a 56.6% increase in ASMs, total cost per ASM decreased to 17.8 cents in
the first half of 1998 compared to 21.1 cents in the first half of 1997.
In absolute dollars, total operating expenses increased 32.7% from $83.3
million in the first half of 1997 to $110.6 million in the first half of
1998.
The Company's combined effective tax rate for state and federal
taxes during the first half of 1998 was approximately 44% as compared to
38% for the first half of 1997. This increase is primarily due to the
effect of a one time non-cash, non-operating charge of approximately $1.4
million related to the reduced conversion price accepted by certain
holders of the Company's 7% Notes. The Company estimates that the
effective tax rate will be approximately 41.5% during the third and
fourth quarters of 1998.
Outlook
This outlook section contains forward-looking statements which are
subject to the risks and uncertainties set forth above on pages 12 and
13.
At July 15, 1998, the Company was operating 28 J32's, 32 J41's, and
nine CRJ's. The Company has firm orders to acquire an additional 14
CRJ's and options to acquire another 25 CRJ's. The delivery schedule for
the 14 firm orders is as follows; one was delivered on July 22, 1998,
four are expected to be delivered during the balance of 1998, and nine
will be delivered in 1999. The introduction of these CRJ aircraft will
expand the Company's business into new markets and increase capacity in
existing markets. In general, service to new markets and increased
capacity to existing markets may result in increased operating expense
that may not be immediately offset by increases in operating revenues.
On August 3, 1998, the Company inaugurated non-stop service from
Chicago's O'Hare International Airport to Charleston, W. VA using the
limited use slots previously awarded the Company. Non-stop service from
Chicago to Springfield/Branson, MO and Wilkes-Barre/Scranton, PA will
commence as additional CRJ aircraft are delivered. These flights,
operated as United Express, connect to United's vast Chicago Hub complex
of over 540 daily departures to 137 destinations worldwide.
In June 1998, the Company received notification that its mechanics,
represented by the Aircraft Mechanics Fraternal Association ("AMFA"), had
ratified the Company's contract proposal. This initial, four year
agreement completes negotiations that began in March 1994. The Company
does not anticipate the terms of the new contract to have a material
effect on its future results of operations or financial condition.
The Company's contract with the Association of Flight Attendants
("AFA") became amendable on April 30, 1997. In March 1998, a tentative
agreement between the Company and AFA was rejected by a vote of the
members. In July 1998 the Company and AFA commenced mediation under the
guidance of the National Mediation Board (the "NMB"). Additional
sessions are scheduled for September 1998. Pending completion of these
negotiations, the Company is operating under the terms of the existing
agreement. The Company cannot predict the outcome of the negotiations
and whether they will have a material effect on the future results of
operations or financial condition. If at some point the NMB should
decide that the parties are deadlocked, the NMB could declare an impass
along with a thirty day cooling off period. At the conclusion of that
period if an agreement has not been reached, AFA would have the authority
to use self help, up to and including the right to strike.
Liquidity and Capital Resources
As of June 30, 1998, the Company had cash, cash equivalents and
short-term investments of $59.8 million and working capital of $52.9
million compared to $21.4 million and $56.5 million respectively as of
June 30, 1997. During the first six months of 1998, cash and cash
equivalents increased by $19.7 million, reflecting net cash provided by
operating activities of $16.7 million, net cash provided by investing
activities of $4.7 million and net cash used in financing activities of
$1.8 million. The net cash provided by operating activities is primarily
the result of net income for the period of $12.1 million, non cash
depreciation and amortization expenses of $2.8 million, and the non cash
debt inducement expense of $1.4 million. The net cash provided by
investing activities consisted primarily of the sale of $9.8 million in
short term investments partially offset by capital expenditures of $6
million. The net cash used in financing activities consisted primarily
of the payments of long-term debt and capital lease obligations, offset
by proceeds received from the exercise of stock options.
Other Financing
The Company has an asset-based lending agreement with a financial
institution that provides the Company with a line of credit of up to
$20.0 million, depending on the amount of assigned ticket receivables.
Borrowings under the line of credit can provide the Company a source of
working capital until proceeds from ticket coupons are received. The line
is collateralized by all of the Company's receivables. There were no
borrowings under the line during the first six months of 1998. The
Company has pledged $5.5 million of this line of credit as collateral to
secure letters of credit issued on behalf of the Company by a financial
institution. At June 30,1998, the available amount of credit was $12.5
million.
In July 1997, the Company issued $57.5 million aggregate principal
amount of 7% Convertible Subordinated Notes due July 1, 2004 ("the
Notes"). The Notes are convertible into shares of Common Stock, unless
previously redeemed or repurchased, at a conversion price of $9 per
share, (after giving effect to the stock split on May 15, 1998) subject
to certain adjustments. Interest on the Notes is payable on April 1 and
October 1 of each year. The Notes are not redeemable by the Company
until July 1, 2000.
In January 1998, approximately $5.9 million of the Notes were
converted, at the option of the holders, into 330,413 shares (pre stock
dividend) of Common Stock. From March 20, 1998 to April 8, 1998, the
Company temporarily reduced the conversion price from $18 to $17.72 for
holders of the Notes. During this period, $31.7 million of the Notes
converted into approximately 1.8 million shares (pre stock dividend) of
Common Stock. As a result of this temporary price reduction, the Company
recorded a one-time, non-cash, non-operating charge to earnings during
the second quarter of 1998 of $1.4 million representing the fair value of
the additional shares distributed upon conversion.
The Company's effective income tax rate for the first half of 1998
is slightly higher due to the non-deductibility, for income tax purposes,
of the conversion price reduction. This increase is primarily due to the
effect of a one time non-cash, non-operating charge of approximately $1.4
million related to the reduced conversion price accepted by certain
holders of the Company's 7% Notes. The Company estimates that the
effective tax rate will be approximately 41.5% during the third and
fourth quarters of 1998.
Other Commitments
In July 1997, the Company entered into a series of interest rate
swap contracts having an aggregate notional amount of $39.8 million. The
swaps were executed by purchasing six contracts maturing between March
and September 1998 with a third party as the counterparty. The interest
rate hedge was designed to limit approximately 40% of the Company's
exposure to interest rate changes until permanent financing for the six
CRJ aircraft scheduled for delivery between March and September 1998 was
secured. During the first half of 1998, the Company settled three of
these six contracts, paying the counterparty approximately $827,000 and
is amortizing this cost over the life of the related aircraft leases. At
June 30, 1998, had the remaining three contracts settled on that date,
the Company would have been obligated to pay the counterparty
approximately $1 million.
On July 2, 1998, the Company entered into additional interest rate
swap contracts having an aggregate notional amount of $51.7 million to
hedge its exposure, by approximately 50%, to interest rate changes until
permanent financing for six CRJ aircraft scheduled for delivery between
October 1998 and April 1999, is secured.
During the first half of 1998, the Company entered into a contract
to purchase aircraft fuel at a fixed price from United Aviation Fuels
Corporation, a wholly owned subsidiary of United Airlines. The Company
is committed to purchase 33,000 barrels of fuel per month, which
represents 50% of the Company's monthly consumption for the remainder of
1998. The delivered price per gallon excluding taxes and into-plane fees
is 52.2 cents through September 1998, reducing to 50.35 cents per gallon
in October through December 1998.
In the second quarter of 1998, the Company announced that, the
Metropolitan Washington Airport Authority ("MWAA"), in coordination with
the Company, will build an approximately 70,000 square foot regional
passenger concourse at Washington Dulles International Airport. The
facility is scheduled to open in Summer 1999. The new facility will
offer improved passenger amenities and operational enhancements, and will
provide additional space to support the Company's expanded operations
resulting from the introduction of CRJs. The facility will be designed,
financed, constructed, operated and maintained by MWAA, and will be
leased to the Company. The lease rate will be determined based upon final
selection of funding methods and rates, and on the final scope of the
project. MWAA has agreed to fund the construction through the proceeds of
bonds and, subject to approval by the FAA, passenger facility charges
("PFC"). Until MWAA obtains bond funding or funding through PFCs, the
Company has committed to obtain its own interim financing from a third
party lender to fund a portion of the total program cost of the regional
concourse for approximately $15 million. MWAA has agreed to replace the
Company's interim financing with the proceeds of bonds or, if obtained,
PFC funds, no later than one year following the substantial completion
date of the project.
Aircraft
The Company has firm commitments to acquire 14 additional CRJ's from
Bombardier, Inc. In addition, the Company has options to acquire an
additional 25 CRJ's. Of the 14 firm CRJ orders, one was delivered on
July 22, an additional four will be delivered during the remainder of
1998, and nine will be delivered in 1999. The capital cost to the Company
for the remaining four 1998 and the 1999 deliveries is approximately $74
million and $166.5 million respectively. The Company intends to use debt
financing to purchase two of the 13 remaining firm ordered CRJ's and to
find lease financing to acquire the balance.
During the fourth quarter of 1997, the Company entered into an
agreement with Aero International (Regional) for the purchase of one
additional new Jetstream 41 aircraft for $5.3 million, and took delivery
of the aircraft under an interim financing agreement. The Company has
arranged permanent financing for the purchase, and currently anticipates
closing the acquisition in the third quarter of 1998.
Capital Equipment and Debt Service
Capital expenditures for the first half of 1998 were $6 million
compared to $1.9 million for the same period in 1997. Capital
expenditures for 1998 consisted primarily of the purchase of rotable
spare parts for the CRJ and J-41 aircraft, facility leasehold
improvements, ground equipment, and computer and office equipment. For
the remainder of 1998, the Company anticipates spending approximately $9
million for rotable spare parts related to the CRJ and J-41 aircraft,
ground service equipment, facilities, computers, and software, and $39
million for the acquisition of two regional jets and one J-41 aircraft.
The aircraft acquisitions are expected to be financed under anticipated
commercially acceptable terms.
Debt service including capital leases for the six months ended June
30, 1998 was $2.5 million compared to $1.4 million in the same period of
1997. The increase is primarily the result of payments made for the
early retirement of aircraft-related debts.
The Company believes that, in the absence of unusual circumstances,
its cash flow from operations, the accounts receivable credit facility,
and other available equipment financing, will be sufficient to meet its
working capital needs, capital expenditures, and debt service
requirements for the next twelve months.
Recent Accounting Pronoucements
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income",
which requires, effective January 1, 1998, that comprehensive income and
the associated income tax expense or benefit be reported in financial
statements with the same prominence as other financial statements with an
aggregate amount of comprehensive income reported in that statement. For
the periods presented in this Form 10Q, the Company did not have any
separately reported components of comprehensive income and therefore, no
separate Statement of Comprehensive Income is presented.
The American Institute of Certified Public Accountants has issued a
statement of position on accounting for start-up costs, including
preoperating costs related to the introduction of new fleet types by
airlines. The new accounting guidelines will take effect for fiscal
years beginning after December 15, 1998. The Company has deferred
certain start-up costs related to the introduction of the CRJs and is
amortizing such costs to expense ratably over four years. The Company
will be required to expense any unamortized amounts remaining as of
January 1, 1999. The Company estimates the remaining unamortized balance
for deferred start-up costs will be approximately $1.4 million on January
1, 1999.
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement
establishes accounting and reporting standards for derivative instruments
and all hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities at their fair values.
Accounting for changes in the fair value of a derivative depends on its
designation and effectiveness. For derivatives that qualify as effective
hedges, the change in fair value will have no impact on earnings until
the hedged item affects earnings. For derivatives that are not designated
as hedging instruments, or for the ineffective portion of a hedging
instrument, the change in fair value will affect current period earnings.
The Company will adopt Statement No. 133 during its first quarter of
fiscal 2000 and is currently assessing the impact this statement will
have on interest rate swaps and any future hedging contracts that may be
entered into by the Company.
ATLANTIC COAST AIRLINES, INC.
FISCAL QUARTER ENDED June 30, 1998
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is a party to routine litigation incidental to its
business, none of which is likely to have a material effect on the
Company's financial position.
The Company is a party to an action pending in the United
States District Court for the Southern District of Ohio, Peter J.
Ryerson, administrator of the estate of David Ryerson, v. Atlantic Coast
Airlines, Case No. C2-95-611. This action is more fully described in the
Company's Annual Report on Form 10K for the fiscal year ended December
31, 1997. On March 10, 1997, the Court granted Plaintiff's motion to the
effect that liability would not be limited to those damages available
under the Warsaw Convention. The Company is currently unable to estimate
the monetary award, if any, resulting from this litigation, but believes
it remains fully covered under the Company's insurance policy.
The Company is also a party to an action pending in the United
States Court of Appeals for the Fourth Circuit known as Afzal v. Atlantic
Coast Airlines, Inc. (No. 98-1011). This action is an appeal of the
December 1997 decision granted in favor of the Company in a case claiming
wrongful termination of employment brought in the United States District
Court for the Eastern District of Virginia known as Afzal v. Atlantic
Coast Airlines, Inc. (Civil Action No. 96-1537-A). The Company does not
expect the outcome of this case to have any material adverse effect on
its financial condition or results of its operations.
ITEM 2. Changes in Securities.
In April 1998, $31.7 million of Notes were converted into
1,788,391 (pre stock dividend) shares of common stock. The Notes were
originally issued under Rule 144A of the Securities Act of 1933.
On April 14, 1998, the Company declared a 2-for-1 stock split
payable as a stock dividend on May 15, 1998. The stock dividend was
contingent on shareholder approval to increase the number of authorized
common shares from 15,000,000 to 65,000,000 shares. Shareholder approval
was obtained on May 5, 1998.
ITEM 3. Defaults Upon Senior Securities.
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None to report.
ITEM 5. Other Information.
Under the Company's Amended and Restated Bylaws, a stockholder
who wishes to propose business for consideration at the Annual Meeting or
to nominate persons for election to the Board of Directors, must deliver
to the Company between January 5, 1999 and February 4, 1999 the
information specified in the Company's Bylaws regarding such proposal or
nomination. Under the SEC's Rule 14a-4, as recently amended, the Company
may exercise discretionary voting authority under proxies it solicits to
vote on a proposal made by a stockholder that is not included in the
Company's proxy statement, unless the Company is notified about the
proposal between January 5, 1999 and February 4, 1999 and the stockholder
satisfies the other requirements of Rule 14a-4(c). Separately, under
SEC Rule 14a-8, a stockholder wishing to submit a proposal that qualifies
for inclusion in the Company's proxy statement must submit his or her
proposal to the Company before December 1, 1998 and must satisfy the
other requirements of SEC Rule 14a-8. Copies of the Company's Bylaws and
of SEC Rules 14a-4 and 14a-8 may be obtained by contacting the Company's
Corporate Secretary at 515-A Shaw Road, Dulles, Virginia 20166.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Restated Certificate of Incorporation of the Company.
3.2 Restated By-laws of the Company.
10.12(i) Amendment and Restated Severance Agreement, dated as of
July 22, 1998 between the Company and Kerry B. Skeen.
10.24 Stock Incentive Plan of 1995 as amended.
11.1 Computation of Per Share Income
27.1 Financial Date Schedule
(b) Reports on Form 8-K
None to report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ATLANTIC COAST AIRLINES HOLDINGS, INC.
August 14, 1998 By: /S/ Paul H. Tate
Paul H. Tate
Senior Vice President and Chief
Financial Officer
August 14, 1998 By: /S/ Kerry B. Skeen
Kerry B. Skeen
President and Chief Executive
Officer
_______________________________
1 "Break-even passenger load factor" represents the percentage of ASMs
which must be flown by revenue passengers for the airline to break-even
at the operating income level.
"Break-even passenger load factor" represents the percentage of ASMs
which must be flown by revenue passengers for the airline to break-even
at the operating income level.
10
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ATLANTIC COAST AIRLINES, INC.
The undersigned, for the purpose of amending and
restating the Certificate of Incorporation of Atlantic Coast
Airlines, Inc., a Delaware corporation (the "Corporation"), does
hereby certify that:
1. The date of filing of the Corporation's original Certificate
of Incorporation with the Secretary of State of the State of
Delaware was June 14, 1991.
2. This Amended and Restated Certificate of Incorporation has
been duly adopted pursuant to Sections 242 and 245 of the
Delaware General Corporation Law.
3. The Certificate of Incorporation of the Corporation is
hereby amended and restated in its entirety as follows:
ARTICLE I
The name of the Corporation (the "Corporation") is
Atlantic Coast Airlines Holdings, Inc.
ARTICLE II
The address of the registered office of the Corporation
in the State of Delaware is Corporation Trust Center, 1209 Orange
Street in the City of Wilmington, County of New Castle, Delaware
19801. The name of the registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted
or promoted by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
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").
2. Except as otherwise provided in this Article IV or
as otherwise required by applicable law, all shares of Common and
Class A Non-Voting Common shall be identical in all respects and
shall entitle the holders thereof to the same rights and
privileges, subject to the same qualifications, limitations and
restrictions.
A. Voting Rights: Except as otherwise provided
in this Article IV or as otherwise required by applicable law,
holders of Common shall be entitled to one vote per share on all
matters to be voted on by the stockholders of the Corporation,
and the holders of Class A Non-Voting Common shall have no right
to vote on any matters to be voted on by the stockholders of the
Corporation; provided, however, that the approval of the holders
of a majority of the outstanding Class A Non-Voting Common,
voting as a separate class, shall be required for any merger or
consolidation of the Corporation with or into another entity or
entities, any sale of all or substantially all the Corporation's
assets, or any recapitalization or reorganization, if, as a
result of any of the foregoing, the shares of Class A Non-Voting
Common would receive or be exchanged for consideration different
on a per share basis than the consideration received with respect
to or in exchange for the shares of Common or would otherwise be
treated differently from shares of Common in connection with such
transaction, except that shares of Class A Non-Voting Common may,
without such a separate class vote, receive or be exchanged for
non-voting securities which are otherwise identical on a per
share basis in amount and form to the voting securities received
with respect to or exchanged for the Common so long as (i) such
non-voting securities are convertible into such voting securities
on the same terms as the Class A Non-Voting Common is convertible
into Common and (ii) all other consideration is equal on a per
share basis.
B. Dividends: As and when dividends are
declared or paid thereon, whether in cash, property or securities
of the Corporation, the holders of Common and the holders of
Class A Non-Voting Common shall be entitled to participate in
such dividends ratably on a per share basis; provided that (i) if
dividends are declared which are payable in shares of Common or
Class A Non-Voting Common, dividends shall be declared which are
payable at the same rate on both classes of stock and the
dividends payable in shares of Common shall be payable to holders
of that class of stock and the dividends payable in shares of
Class A Non-Voting Common shall be payable to holders of that
class of stock and (ii) if the dividends consist of other voting
securities of the Corporation, the Corporation shall make
available to each holder of Class A Non-Voting Common, at such
holder's request, dividends consisting of non-voting securities
of the Corporation which are otherwise identical to the voting
securities and which are convertible into or exchangeable for
such voting securities on the same terms as the Class A Non-
Voting Common is convertible into the Common.
C. Liquidation: The holders of the Common and the
Class A Non-Voting Common shall be entitled to participate
ratably on a per share basis in all distributions to the holders
of Common Stock in any liquidation, dissolution or winding up of
the Corporation.
D. Conversion: (i) Subject to and upon compliance
with the provisions herein, at the option of the holder, shares
of Class A Non-Voting Common may, at any time and from to time,
be converted into fully paid and nonassessable shares of Common
at the rate of one share of Common for each share of Class A Non-
Voting Common.
(ii) Each conversion of shares of Class A Non-
Voting Common into shares of Common will be
effected by the surrender of the certificate or
certificates representing the shares to be
converted to the Corporation at the principal
office of the Corporation at any time during
normal business hours, together with a written
notice by the holder of such shares of Class A Non-
Voting Common stating that such holder desires to
convert the shares, or a stated number of the
shares, of such Class A Non-Voting Common
represented by such certificate or certificates
into shares of Common. Such conversion will be
deemed to have been effected immediately prior to
the close of business on the date of surrender of
certificates for conversion in accordance with the
foregoing provisions, and at such time the rights
of the holder of the converted Class A Non-Voting
Common as such holder shall cease and the person
or persons in whose name or names the certificate
or certificates for shares of Common are to be
issued upon such conversion shall be deemed to
have become the holder or holders of record of the
shares of Common represented thereby from and
after such time.
(iii)Promptly after the surrender of
certificates and the receipt of written notice,
the Corporation shall issue and deliver in
accordance with the surrendering holder's
instructions (i) the certificate or certificates
for the Common issuable upon such conversion and
(ii) a certificate representing any Class A Non-
Voting Common which was represented by the
certificate or certificates delivered to the
Corporation in connection with such conversion but
which was not converted.
(iv) The issuance of certificates for Common
upon conversion of Class A Non-Voting Common will
be made without charge to the holders of such
shares for any issuance tax in respect thereof or
other cost incurred by the Corporation in
connection with such conversion and the related
issuance of Common.
(v) The Corporation shall at all times
reserve and keep available, out of its authorized
and unissued shares of Common solely for the
purpose of issuance upon the conversion of shares
of the Class A Non-Voting Common as herein
provided, free from preemptive and other
subscription rights, such number of shares of
Common as shall then be issuable upon the
conversion of all outstanding Class A Non-Voting
Common. The Corporation shall ensure that all
shares of Common which shall be so issuable shall,
upon issue, be duly and validly issued and fully
paid and nonassessable, and free from all taxes,
liens and charges.
(vi) The Corporation shall take all such
actions as may be necessary to assure that all
shares of Common Stock may be issued without
violation of any applicable law or governmental
regulation or any requirements of any domestic
securities exchange upon which shares of Common
Stock may be listed (except for official notice of
issuance which will be immediately transmitted by
the Corporation upon issuance). If any shares of
Common required to be reserved for the purposes of
conversion of shares of Class A Non-Voting Common
hereunder require registration with or approval of
any governmental authority under any federal or
state law or regulation, or listing upon any
national securities exchange, before such shares
may be issued upon conversion, the Corporation
will, in good faith and as expeditiously as
possible, endeavor to cause such shares to be duly
registered, approved or listed, as the case may
be. The Corporation shall provide upon request to
any holder who proposes to convert shares of Class
A Non-Voting Common for shares of Common with any
information that may be required concerning the
Corporation in any filing or application to be
made by such holder to any governmental authority
or agency prior to, in connection with, or as a
result of such conversion.
(vii)If the Corporation in any manner
subdivides or combines the outstanding shares of
one class of Common Stock, the outstanding shares
of the other class of Common Stock will be
proportionately subdivided or combined.
(viii) The Corporation will not close its
books against the transfer of Class A Non-Voting
Common or of Common issued or issuable upon
conversion of Class A Non-Voting Common in any
manner which would interfere with the timely
conversion of any shares of Class A Non-Voting
Common.
E. Registration of Transfer. The Corporation
shall keep at its principal office (or such other place as the
Corporation reasonably designates) a register for the
registration of shares of Common Stock. Upon the surrender of
any certificate representing shares of any class of Common Stock
at such place, the Corporation shall, at the request of the
registered holder of such certificate, execute and deliver a new
certificate or certificates in exchange therefor representing in
the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall
cancel such surrendered certificate. Each such new certificate
will be registered in such name and, in the case of Class A Non-
Voting Common, will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and
will be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made
without charge to the holders of the surrendered certificates for
any issuance tax in respect thereof, or other cost incurred by
the Corporation in connection with such issuance.
F. Replacement. Upon receipt of evidence
reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Common Stock, and
in the case of any such loss, theft or destruction, upon receipt
of indemnity reasonably satisfactory to the Corporation (provided
that, if the holder is a financial institution or other
institutional investor, its own agreement will be satisfactory),
or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like
kind representing the number of shares of such class represented
by such lost, stolen, destroyed or mutilated certificate and
dated the date of such lost, stolen, destroyed or mutilated
certificate.
G. Notices. All notices referred to herein
shall be in writing, shall be delivered personally or by first
class mail, postage prepaid, and shall be deemed to have been
given when so delivered or mailed to the Corporation at its
principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the
Corporation (unless otherwise specified in a written notice to
the Corporation by such holder).
H. Amendment and Waiver. No amendment or waiver
of any provision of this Article IV shall be effective without
the prior approval of the holders of a majority of the then
outstanding Class A Non-Voting Common voting as a separate class.
3. The Preferred Stock may be issued from time to
time as herein provided in one or more series. The designations,
relative rights, preferences and limitations of the Preferred
Stock, and particularly of the shares of each series thereof,
may, to the extent permitted by law, be similar to or differ from
those of any other series. The Board of Directors of the
Corporation is hereby expressly granted authority, subject to the
provisions of this Article IV, to fix, from time to time before
issuance thereof, the number of shares in each series and all
designations, relative rights, preferences and limitations of the
shares in each such series, including, but without limiting the
generality of the foregoing, the following:
(a) the designation of the series and the number
of shares to constitute each series;
(b) the dividend rate on the shares of each
series, any conditions on which and times at which dividends are
payable, whether dividends shall be cumulative, and the
preference or relation (if any) with respect to such dividends
(including possible preferences over dividends on the Common and
the Class A Non-Voting Common or any other class or classes);
(c) whether the series will be redeemable (at the
option of the Corporation or the holders of such shares or both,
or upon the happening of a specified event) and, if so, the
redemption prices and the conditions and times upon which
redemption may take place and whether for cash, property or
rights, including securities of the Corporation or another
Corporation;
(d) the terms and amount of any sinking,
retirement or purchase fund;
(e) the conversion or exchange rights (at the
option of the Corporation or the holders of such shares or both,
or upon the happening of a specified event), if any, including
the conversion or exchange price and other terms of conversion or
exchange;
(f) the voting rights, if any (other than any
voting rights that the Preferred Stock may have as a matter of
law);
(g) any restrictions on the issue or reissue or
sale of additional Preferred Stock;
(h) the rights of the holders upon voluntary or
involuntary liquidation, dissolution or winding up of the affairs
of the Corporation (including preferences over the Common and the
Class A Non-Voting Common or other class or classes or series of
stock);
(i) the preemptive rights, if any, to subscribe
to additional issues of stock or securities of the Corporation;
and
(j) such other special rights and privileges, if
any, for the benefit of the holders of the Preferred Stock, as
shall not be inconsistent with provisions of this Restated
Certificate of Incorporation.
All shares of Preferred Stock of the same series shall
be identical in all respects, except that shares of any one
series issued at different times may differ as to dates, if any,
from which dividends thereon may accumulate. All shares of
Preferred Stock of all series shall be of equal rank and shall be
identical in all respects except that any series may differ from
any other series with respect to any one or more of the
designations, relative rights, preferences and limitations
described or referred to in subparagraphs 2(a) to 2(j) inclusive
above.
ARTICLE V
1. Notwithstanding anything to the contrary contained
in this Restated Certificate of Incorporation, at no time shall
shares of capital stock of the Corporation be voted by, or at the
direction of, Persons ("Aliens") who are not "Citizens of the
United States" as defined in 49 U.S.C. 40102(a)(15), as now in
effect or as it may hereafter from time to time be amended ("U.S.
Citizens"), unless such shares are registered on the separate
stock record maintained by the Corporation for the registration
of ownership of Voting Stock, as defined in the Bylaws, by
Aliens. The Bylaws may contain provisions to implement this
provision.
2. (a) The Bylaws of the Corporation may make
appropriate provisions to effect the requirement of this Article
V.
(b) All certificates representing Common Stock or
any other voting stock of the Corporation are subject to the
restrictions set forth in this Article V.
(c) A majority of the directors of the
Corporation shall have the exclusive power to determine all
matters necessary to determine compliance with this Article V;
and the good faith determination of a majority of the directors
on such matters shall be conclusive and binding for all the
purposes of this Article V.
3. (a) The Corporation may by notice in writing
(which may be included in the form of proxy or ballot distributed
to stockholders of the Corporation in connection with the annual
meeting or any special meeting of the Stockholders of the
Corporation, or otherwise) require a Person that is a holder of
record of equity securities of the Corporation or that the
Corporation knows to have, or has reasonable cause to believe
has, beneficial ownership of equity securities of the
Corporation, to certify in such manner the Corporation shall deem
appropriate (including by way of execution of any form of proxy
or ballot by such Person) that, to the knowledge of such Person:
(i) all equity securities of the Corporation
as to which such Person has record ownership or
beneficial ownership are owned and controlled only
by U.S. Citizens; or
(ii) the number and class or series of equity
securities of the Corporation owned of record or
beneficially owned by such person that are owned
or controlled by Aliens are as set forth in such
certificate.
As used herein, "beneficial ownership" and "beneficially owned"
refer to beneficial ownership as defined in Rule 13d-3 (without
regard to the 60-day provision in paragraph (d)(1)(i) thereof)
under the Securities Exchange Act of 1934.
(b) With respect to any equity securities
identified by such Person in response to Section 3(a)(ii) of this
Article V, the Corporation may require such Person to provide
such further information as the Corporation may reasonably
require in order to implement the provisions of this Article V.
(c) For the purpose of applying the provisions of
this Article V with respect to any equity securities of the
Corporation, in the event of the failure of any Person to provide
the certificate or other information to which the Corporation is
entitled pursuant to this Section 3, the Corporation shall
presume that the equity securities in question are owned or
controlled by Aliens.
ARTICLE VI
The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors
consisting of such number of directors as is determined from time
to time by resolution adopted by the Board of Directors.
ARTICLE VII
In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly
authorized to make, alter or repeal the by-laws of the
Corporation.
ARTICLE VIII
1. Elections of directors need not be written ballot
unless the by-laws of the Corporation shall so provide.
2. Meetings of stockholders may be held at such place
either within or without the State of Delaware, as may be
designated by or in the manner provided by the by-laws. The
books of the Corporation may be kept (subject to any provision
contained in the statutes of the State of Delaware) outside the
State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the by-laws of
the Corporation.
ARTICLE IX
1. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article VIII to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
2. (a) Each person who was or is made a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding")
(including an action by or in the right of the Corporation), by
reason of the fact that he is or was serving as a director or
officer of the Corporation (or is or was serving at the request
of the Corporation in a similar capacity with another entity,
including employee benefit plans), shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by
the Delaware General Corporation Law. This indemnification will
cover all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and settlement
amounts) reasonably incurred by the director in connection with a
proceeding. All such indemnification shall continue as to a
director or officer who has ceased to be a director or officer
and shall continue to the benefit of such director's or officer's
heirs, executors and administrators. Except as provided in
paragraph (b) hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any
such director or officer who initiates a proceeding only if such
proceeding was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred by this
Section shall be a contract right and shall include the right to
be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"). If the Delaware General
Corporation Law requires, an advancement of expenses incurred by
a director or officer in his capacity as a director or officer
shall be made only upon delivery to the Corporation of an
undertaking by such director or officer to repay all amounts so
advanced if it is ultimately determined by final judicial
decision that such director or officer is not entitled to be
indemnified for such expenses under this Section or otherwise
(hereinafter an "undertaking").
(b) If a claim under paragraph (a) of this
Section is not paid in full by the Corporation within ninety days
after receipt of a written claim, the director or officer may
bring suit against the Corporation to recover the unpaid amount.
(In the case of a claim for advancement of expenses, the
applicable period will be twenty days.) If successful in any
such suit, the director or officer will also be entitled to be
paid the expense of prosecuting such suit. In any suit brought
by the director or officer to enforce a right to indemnification
hereunder (but not in a suit brought by the director or officer
to enforce a right to an advancement of expenses), it shall be a
defense that the director or officer has not met the applicable
standard of conduct under the Delaware General Corporation Law.
In any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, it shall be
entitled to recover such expenses upon a final adjudication that
the director or officer has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law.
Neither the failure of the Board of Directors of the Corporation
to determine prior to the commencement of such suit that the
director or officer has met the applicable standard of conduct
for indemnification set forth in the Delaware General Corporation
Law, nor an actual determination by the Board of Directors of the
Corporation that the director or officer has not met such
applicable standard of conduct, shall create a presumption that
the director or officer has not met the applicable standard of
conduct or, in the case of such a suit brought by the director or
officer to enforce a right hereunder, or by the Corporation to
recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the director or officer
is not entitled to be indemnified or to such advancement of
expenses under this Section or otherwise shall be on the
Corporation.
(c) The rights to indemnification and to the
advancement of expenses conferred in this Section will not be
exclusive of any other right which any person may have or
hereafter acquire under any statute, this Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Corporation or other entity against any
expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person under the Delaware
General Corporation Law.
(e) The Corporation may, if authorized by the
Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the
Corporation to the same extent as for directors of the
Corporation.
ARTICLE X
The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by the Laws of the State of Delaware and may add
additional provisions authorized by such laws as are then in
force. All rights conferred upon the directors or stockholders
of the Corporation herein or in any amendment hereof are granted
subject to this reservation.
IN WITNESS WHEREOF, the undersigned has executed this
Amended and Restated Certificate of Incorporation on behalf of
the Corporation and does hereby verify and affirm, under penalty
of perjury, that this Amended and Restated Certificate of
Incorporation is the act and deed of the Corporation and that the
facts stated herein are true as of May 5, 1998.
________________________________
Richard J. Kennedy
Vice President, General Counsel and
Secretary
WA980210.153/7+
13
ATLANTIC COAST AIRLINES HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
AMENDED AND RESTATED BY-LAWS
ARTICLE I
OFFICES
The registered office of Atlantic Coast Airlines Holdings,
Inc. (the "Corporation") in Delaware shall be at 1209 Orange
Street in the City of Wilmington, County of New Castle, in the
State of Delaware, and The Corporation Trust Company shall be the
resident agent of this Corporation in charge thereof. The
Corporation may also have such other offices at such other
places, within or without the State of Delaware, as the Board of
Directors may from time to time designate or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such
date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the Board of
Directors from time to time. At the annual meeting, any business
may be transacted and any corporate action may be taken whether
stated in the notice of meeting or not, except as otherwise
expressly provided by statute or the Restated Certificate of
Incorporation of the Corporation (the "Restated Certificate").
Section 2.2. Special Meetings. Special meetings of
stockholders for any purpose or purposes may be called at any
time by the Chairman of the Board of Directors, by a majority of
the full Board of Directors, or by a committee of the Board of
Directors which has been duly designated by a majority of the
full Board of Directors and whose powers and authority, as
expressly provided in a resolution by a majority of the full
Board of Directors, include the power to call such meetings, but
such special meetings may not be called by any other person or
persons. Special meetings shall be held at such place or places
within or without the State of Delaware as shall from time to
time be designated by the Board of Directors and stated in the
notice of such meeting. At a special meeting, no business shall
be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting.
Section 2.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place,
date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the Amended and Restated
Certificate of Incorporation of the Corporation or these by-laws,
the written notice of any meeting shall be given not less than
ten nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
Section 2.4. Adjournments. Any meeting of stockholders,
annual or special, may adjourn from time to time to reconvene at
the same or some other place, and notice need not be given of any
such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting. If the
adjournment is for more than 30 days or, if after the
adjournment, a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.5. Quorum. Except as otherwise provided by law,
the Amended and Restated Certificate of Incorporation or these by-
laws, at each meeting of stockholders, the presence in person or
by proxy of the holders of shares of stock having a majority of
the votes which could be cast by the holders of all outstanding
shares of stock entitled to vote at the meeting shall be
necessary and sufficient to constitute a quorum. In the absence
of a quorum, the stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided in
Section 2.4 of these by-laws until a quorum shall attend. Shares
of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to
vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to
vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 2.6. Organization. Meetings of stockholders shall
be presided over by the Chairman of the Board, if any, or in his
absence, by the Vice Chairman of the Board, if any, or in his
absence, by the President, or in his absence, by a Vice
President, or in the absence of the foregoing persons, by a
chairman designated by the Board of Directors, or in the absence
of such designation, by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to act
as secretary of the meeting. To the maximum extent permitted by
law, such presiding person shall have the power to set procedural
rules governing all aspects of the conduct of such meetings,
including but not limited to, rules respecting the time allotted
to stockholders to speak, determinations of whether business has
been properly brought before the meeting and the power to adjourn
the meeting governing all aspects of the conduct of such
meetings.
Section 2.7. Voting; Proxies. Except as otherwise provided
by the Amended and Restated Certificate of Incorporation, each
stockholder entitled to vote at any meeting of stockholders shall
be limited to one vote for each share of stock held by him which
has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize
another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by
attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation.
Voting at meetings of stockholders need not be by written ballot
and need not be conducted by inspectors of election unless so
determined by the Chairman of the meetingholders of shares of
stock having a majority of the votes which could be cast by the
holders of all outstanding shares of stock entitled to vote
thereon which are present in person or by proxy at such meeting.
At all meetings of stockholders for the election of directors, a
plurality of the votes cast shall be sufficient to elect. All
other elections and questions shall, unless otherwise provided by
law, the Amended and Restated Certificate of Incorporation or
these by-laws, be decided by the vote of the holders of shares of
stock having a majority of the vote which could be cast by the
holders of all shares of stock entitled to vote thereon which are
present in person or represented by proxy at the meeting.
Section 2.8. Fixing Date for Determination of Stockholders
of Record. In order that the Corporation may determine the
stockholders entitled to notice of, or to vote at, any meeting of
stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of
stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than 60 nor less than ten days
before the date of such meeting; (2) in the case of determination
of stockholders entitled to express consent to corporate action
in writing without a meeting, shall not be more than ten days
from the date upon which the resolution fixing the record date is
adopted by the Board of Directors; and (3) in the case of any
other action, shall not be more than 60 days prior to such other
action. If no record date is fixed: (1) the record date for
determining stockholders entitled to notice of, or to vote at, a
meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (2) the
record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting when no
prior action of the Board of Directors is required by law, shall
be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the
Corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at
the close of business on the day on which the Board of Directors
adopts the resolution taking such prior action; and (3) subject
to the following sentence in this Section 2.8, the record date
for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. Any stockholder of
record seeking to have the stockholders authorize or take
corporate action by written consent shall deliver to the
Secretary of the Corporation a notice setting forth the
information required under Section 2.11(b) of these By-Laws
respecting such proposed corporate action and requesting the
Board of Directors to fix a record date for purposes of
determining stockholders entitled to express consent to corporate
action in writing, and the Board of Directors shall promptly, but
in all events within 10 days after the date on which such a
request is received, adopt a resolution fixing the record date;
provided that if no record date is set by the Board within 10
days of the date on which a notice and request meeting the
requirements of this Section 2.8 is received, the record date for
determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action of the
Board of Directors is required by law, shall be the first date on
which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation in
accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action. A determination of
stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Chairman of the meeting or
the majority of the full Board of Directors may fix a new record
date for the adjourned meeting.
Section 2.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the directors to
produce such a list at any meeting for the election of directors,
they shall be ineligible for election to any office at such
meeting. The stock ledger shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the
list of stockholders or the books of the Corporation, or to vote
in person or by proxy at any meeting of stockholders.
Section 2.10. Action By Consent of Stockholders. Unless
otherwise restricted by the Restated Certificate of
Incorporation, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not
consented in writing.
Section 2.11. Nominations and Stockholder Business.
(a) To be properly brought before an annual meeting of
stockholders, nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be
considered by the stockholders at an annual meeting of
stockholders must be either (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction
of the Board of Directors (or any duly authorized committee
thereof), (ii) otherwise properly brought before the annual
meeting by or at the direction of the President, the Chairman of
the Board of Directors or by vote of a majority of the full Board
of Directors, or (iii) otherwise brought before the annual
meeting by any stockholder of the Corporation who is a
stockholder of record on the date of the giving of the notice
provided for in Section 2.3, who is entitled to vote at the
meeting and who complied with the notice procedures set forth in
this Section 2.11.
(b) For nominations or other business to be properly
brought before an annual meeting by a stockholder under this
Section 2.11, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such
business must be a proper subject for stockholder action under
the Delaware General Corporation Law ("DGCL"). To be timely, a
stockholder's notice must be delivered to the Secretary at the
principal executive offices of the Corporation not less than 90
days nor more than 120 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that if the
date of the annual meeting is advanced by more than 30 days or
delayed by more than 30 days from such anniversary date, then
notice by the stockholder to be timely must be delivered not
later than the close of business on the later of the 90th day
prior to the annual meeting or the 10th day following the day on
which the date of the meeting is publicly announced. Such
stockholder's notice must set forth (i) as to each person whom
the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) as to any other business
that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (iii) as to the stockholder giving the
notice and the beneficial owners, if any, on whose behalf the
nomination or proposal is made (A) the name and address of such
stockholder, as they appear on the Corporation's books, and of
such beneficial owner, (B) the number of shares of the
Corporation which are owned (beneficially or of record) by such
stockholder and such beneficial owner, (C) a description of all
arrangements or understandings between such stockholder and such
beneficial owner and any other person or persons (including their
names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder and of
such beneficial owner in such business, and (D) a representation
that such stockholder or its agent or designee intends to appear
in person or by proxy at the annual meeting to bring such
business before the meeting.
(c) Notwithstanding anything in this Section 2.11 to the
contrary, if the number of directors to be elected to the Board
of Directors of the Corporation is increased and there is no
public announcement specifying the size of the increased Board of
Directors made by the Corporation at least 90 days prior to the
first anniversary of the preceding year's annual meeting, then a
stockholder's notice required by this Section 2.11 will also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it is delivered to the
Secretary at the principal executive offices of the Corporation
not later than the close of business on the 10th day following
the day on which such public announcement is first made by the
Corporation.
(d) Only such business may be conducted at a special
meeting of stockholders as has been brought before the meeting
pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be
elected pursuant to the Corporation's notice of meeting (i) by or
at the direction of the Board of Directors or (ii) by any
stockholder of the Corporation who is a stockholder of record at
the time of giving the notice required by this Section 2.11, who
is entitled to vote at the meeting and who complies with the
notice procedures set forth in this Section 2.11. Nominations by
stockholders of persons for election to the Board of Directors
may be made at such a special meeting of Stockholders if the
stockholder's notice required by this Section 2.11 is delivered
to the Secretary at the principal executive offices of the
Corporation not earlier than the 120th day prior to such special
meeting and not later than the close of business on the later of
the 90th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
(e) Only those persons who are nominated in accordance with
the procedures set forth in this Section 2.11 will be eligible
for election as directors at any meeting of stockholders. Only
business brought before the meeting in accordance with the
procedures set forth in this Section 2.11 may be conducted at a
meeting of stockholders. The chairman of the meeting has the
power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Section 2.11 and, if any
proposed nomination or business is not in compliance with this
Section 2.11, to declare that such defective proposal shall be
disregarded.
(f) For purposes of this Section 2.11, "public
announcement" shall include disclosure in a press release
reported by the Dow Jones News Service, Associated Press,
Business Wire, PR Newswire or comparable national news service or
in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to the Exchange Act.
(g) Notwithstanding the foregoing provisions of this
Section 2.11, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section
2.11. Nothing in this Section 2.11 shall be deemed to remove any
obligation of stockholders to comply with the requirements of
Rule 14a-8 under the Exchange Act with respect to proposals
requested to be included in the Corporation's proxy statement
pursuant to said Rule 14a-8.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Number; Qualifications. The Board of
Directors of the Corporation shall consist of three or more
members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors need not be
stockholders.
Section 3.2. Election; Resignation; Vacancies. The Board
of Directors shall initially consist of the persons named as
directors in the certificate of incorporation, and each director
so elected shall hold office until the first annual meeting of
stockholders or until his successor is elected and qualified. At
the first annual meeting of stockholders and at each annual
meeting thereafter, the stockholders shall elect directors each
of whom shall hold office for a term of one year or until his
successor is elected and qualified. Any director may resign at
any time upon written notice to the Corporation. Such
resignation shall take effect at the time specified therein, and
if no time be specified, at the time of its receipt by the
President. The acceptance of a resignation shall not be
necessary to make it effective, unless so specified therein.
Any newly created directorship or any vacancy occurring in
the Board of Directors for any cause may be filled by a majority
of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes
cast at a meeting of stockholders, and each director so elected
shall hold office until the expiration of the term of office of
the director whom he has replaced or until his successor is duly
elected and qualified.
Section 3.3. Regular Meetings. Regular meetings of the
Board of Directors may be held at such places within or without
the State of Delaware and at such times as the Board of Directors
may from time to time determine and, if so determined, notices
thereof need not be given.
Section 3.4. Special Meetings. Special meetings of the
Board of Directors may be held at any time or place within or
without the State of Delaware whenever called by the Chairman of
the Board of Directors, the President, any Executive or Senior
Vice President, the Secretary, or [by forty percent (40%) of the
full] [any member of the] Board of Directors. Notice of a
special meeting of the Board of Directors shall be given by the
person or persons calling the meeting at least twenty-four hours
before the special meeting.
Section 3.5. Notice and Place of Meetings. Meetings of the
Board of Directors may be held at the principal office of the
Corporation, or at such other place as shall be stated in the
notice of such meeting. Notice of any special meeting, and,
except as the Board of Directors may otherwise determine by
resolution, notice of any regular meeting also, shall be mailed
to each director addressed to him at his residence or usual place
of business at least two days before the day on which the meeting
is to be held, or if sent to him, at such place by telegraph or
cable, or delivered personally or by telephone, not later than
the day before the day on which the meeting is to be held. No
notice of the annual meeting of the Board of Directors shall be
required if it is held immediately after the annual meeting of
the stockholders and if a quorum is present.
Section 3.6. Business Transacted at Meetings, etc. Any
business may be transacted and any corporate action may be taken
at any regular or special meeting of the Board of Directors at
which a quorum shall be present, whether such business or
proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall
be required by statute.
Section 3.7. Meetings Through Use of Communications
Equipment. Members of the Board of Directors, or any committee
designated by the Board of Directors, shall, except as otherwise
provided by law, the Amended and Restated Certificate of
Incorporation or these by-laws, have the power to participate in
a meeting of the Board of Directors, or any committee, by means
of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in
person at the meeting.
Section 3.7. Telephonic Meetings Permitted. Members of the
Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting thereof by means of which
all persons participating in the meeting can hear each other, and
participation in a meeting in accordance with this Section 3.7
shall constitute presence in person at such meeting.
Section 3.8. Quorum; Vote Required for Action. At all
meetings of the Board of Directors a majority of the whole Board
of Directors shall constitute a quorum for the transaction of
business. Except in cases in which the Amended and Restated
Certificate of Incorporation or these by-laws otherwise provide,
the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of
Directors. The members of the Board of Directors shall act only
as the Board of Directors and the individual members thereof
shall not have any powers as such.
Section 3.9. Organization. Meetings of the Board of
Directors shall be presided over by the Chairman of the Board, if
any, or in his absence by the Vice Chairman of the Board, if any,
or in his absence by the President, or in their absence, by a
chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the
meeting.
Section 3.10. Action by Consent of the Board of
DirectorsInformal Action by Directors. Unless otherwise
restricted by the Amended and Restated Certificate of
Incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be,
consent thereto in writing and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or such
committee.
Section 3.11. Removal. Any director may be removed, only
for cause by the holders of a majority of shares entitled to vote
at any special meeting of stockholders of the Corporation called
for that purpose.
Section 3.12. Compensation. Directors shall be entitled to
such compensation for their services as may be approved by
resolution of the Board of Directors, including, if so approved
by resolution of the Board of Directors, a fixed sum and expenses
for attendance at each regular or special meeting of the Board of
Directors or any committee thereof. No such payment shall
preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 3.13. Action by Consent of the Board of Directors.
Any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as
the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the
Board or committee.
Section 3.14. Meetings Through Use of Communications
Equipment. Members of the Board of Directors, or any committee
designated by the Board of Directors, shall, except as otherwise
provided by law, the Restated Certificate of Incorporation or
these by-laws, have the power to participate in a meeting of the
Board of Directors, or any committee, by means of a conference
telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
such participation shall constitute presence in person at the
meeting.
ARTICLE IV
COMMITTEES
Section 4.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors,
designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the
absence or disqualification of a member of the committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent permitted
by law and to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have such power or
authority in reference to amending the Amended and Restated
Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution,
or amending the by-laws of the Corporation; and, unless the
resolution or the Amended and Restated Certificate of
Incorporation expressly so provide, no committee shall have the
power or authority to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and
merger as provided by law. Such committee or committees shall
have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to
the Board of Directors when required. Members of special or
standing committees shall be entitled to receive such
compensation for serving on such committees as the Board of
Directors shall determine.
Section 4.2. Committee Rules. Unless the Board of
Directors otherwise provides, each committee designated by the
Board of Directors may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article IV
of these by-laws.
ARTICLE V
OFFICERS
Section 5.1. Executive Officers; Election; Qualifications;
Term of Office; Resignation; Removal; Vacancies. The officers of
the Corporation shall be elected or appointed by the Board of
Directors and may include, at the discretion of the Board, a
President, a Secretary, a Chairman of the Board, one or more Vice
Presidents, one or more Assistant Secretaries, a Treasurer and
one or more Assistant Treasurers and any other officers as may be
elected or appointed from time to time by the Board. Each such
officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next
succeeding his election, and until his successor is elected and
qualified or until his earlier resignation or removal. Any
officer may resign at any time upon written notice to the
Corporation. The Board of Directors may remove any officer with
or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with
the Corporation. Except as otherwise provided by law, any number
of offices may be held by the same person. Any vacancy occurring
in any office of the Corporation by death, resignation, removal
or otherwise may be filled for the unexpired portion of the term
by the Board of Directors at any regular or special meeting.
Section 5.2. Chairman of the Board. The Chairman of the
Board, if any, shall be a director subject to election elected as
provided in Section 3.2 of these by-laws, shall preside at all
meetings of the Board of Directors and shall have such other
powers and duties as may from time to time be prescribed by the
Board of Directors, upon directions given to them pursuant to
resolutions duly adopted by the Board of Directors.
Section 5.3. President. The President shall be the chief
executive officer of the Corporation, shall have general and
active management of the business of the corporation and shall
see that all orders and resolutions of the Board of Directors are
carried into effect. The President shall preside at all meetings
of the stockholders. The President shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of
the corporation, except (i) where required or permitted by law to
be otherwise signed and executed or (ii) delegated by the Board
of Directors to some other officer or agent of the Corporation.
Section 5.4. Vice President. In the absence of the
President or in the event of his inability or refusal to act, the
Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the
directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the
President, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 5.5. Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of
the Corporation and of the Board of Directors in a book to be
kept for that purpose. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings
of the Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors or the President,
under whose supervision he shall be. He shall have custody of
the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such Assistant Secretary.
The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 5.6. Assistant Secretary. The Assistant Secretary,
or if there by more than one, the Assistant Secretaries in the
order determined by the Board of Directors (or, if there be no
such determination, then in the order of their election) shall,
in the absence of the Secretary, or in the event of his inability
or refusal to act, perform the duties and exercise the powers of
the Secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time
prescribe.
Section 5.7. Treasurer. The Treasurer shall have the
custody of the corporate funds and securities and shall keep full
and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the
Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of
Directors, at its regular meetings, or when the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in
such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration
to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the Corporation.
Section 5.8. Assistant Treasurer. The Assistant Treasurer,
or if there shall be more than one, the Assistant Treasurers in
the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election) shall in
the absence of the Treasurer, or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 5.9. Other Officers. Other officers, including one
or more additional vice-presidents, assistant secretaries or
assistant treasurers, may from time to time be appointed by the
Board of Directors, which other officers shall have such powers
and perform such duties as may be assigned to them by the Board
of Directors or the officer or committee appointing them.
Section 5.10. Resignation. Any officer of the Corporation
may resign at any time. Such resignation shall be in writing and
shall take effect at the time specified therein, and if no time
be specified, at the time of its receipt by the President or the
Secretary. The acceptance of a resignation shall not be
necessary in order to make it effective, unless so specified
therein.
Section 5.11. Filing of Vacancies. A vacancy in any office
shall be filled by the Board of Directors or by the authority
appointing the predecessor in such office.
Section 5.12. Compensation. The compensation of the
officers shall be fixed by the Board of Directors, or by any
committee upon whom power in that regard may be conferred by the
Board of Directors.
ARTICLE VI
CAPITAL STOCK
Section 6.1. Certificates. Certificates of capital stock
shall be in such form as shall be approved by the Board of
Directors. They shall be numbered in the order of their issue
and shall be signed by the President and the Secretary and the
seal of the Corporation or a facsimile thereof shall be impressed
or affixed or reproduced thereon, provided, however, that where
such certificates are signed by a transfer agent or an assistant
transfer agent or by a transfer clerk acting on behalf of the
Corporation and a registrar, the signatures of the President and
the Secretary may be a facsimile thereof. In case any officer,
transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to
be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Section 6.2. Registration and Transfer of Shares. The name
of each person owning a share of the capital stock of the
Corporation shall be entered on the books of the Corporation
together with the number of shares held by him, the numbers of
the certificates covering such shares and the dates of issue of
such certificates. The shares of stock of the Corporation shall
be transferable on the books of the Corporation by the holders
thereof in person, or by their duly authorized attorneys or legal
representatives, on surrender and cancellation of certificates
for a like number of shares, accompanied by an assignment or
power of transfer endorsed thereon or attached thereto, duly
executed, and with such proof of the authenticity of the
signature as the Corporation or its agents may reasonably
require. A record shall be made of each transfer.
The Board of Directors may make other and further rules and
regulations concerning the transfer and registration of
certificates for stock and may appoint a transfer agent or
registrar or both and may require all certificates of stock to
bear the signature of either or both.
Section 6.3. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The holder of any stock of the
Corporation shall immediately notify the Corporation of any loss,
theft, destruction or mutilation of the certificate therefor.
The Corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the Corporation may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to
indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate, or may remit
such owner to such remedy or remedies as he may have under the
laws of the State of Delaware.
Section 6.4. Certificates Issued for Partly Paid Shares.
Certificates may be issued for partly paid shares and in such
case upon the face and back of the certificates issued to
represent any such partly paid shares the total amount of
consideration to be paid therefor, and the amount paid thereon
shall be specified.
Section 6.5. Facsimile Signatures. Any of or all the
signatures on the certificates may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
ARTICLE VII
INDEMNIFICATION
Section 7.1. The Corporation shall be authorized to
indemnify any person entitled to indemnity under the General
Corporation Law of the State of Delaware as the same exists or
may hereafter be amended ("DGCL") to the fullest extent permitted
by the DGCL; provided, however, that the Corporation shall not be
permitted to indemnify any person in connection with any
proceeding initiated by such person, unless such proceeding is
authorized by a majority of the directors of the Corporation.
Section 7.2. Alternative Sources of Funding. The
Corporation may create a trust fund, purchase a letter of credit
or obtain other sources of funding, which the Board of Directors
determines to be in the best interest of the Corporation, to
secure payment or proper advances and indemnification under this
Article VII or under Article VIII of the Amended and Restated
Articles of Incorporation.
ARTICLE VIII
DIVIDENDS, SURPLUS, ETC.
Section 8.1. General Discretion of Directors. The Board of
Directors shall have power to fix and vary the amount to be set
aside or reserved as working capital of the Corporation, and,
subject to the requirements of the Amended and Restated
Certificate of Incorporation, to determine whether any, if any,
part of the surplus or net profits of the Corporation shall be
declared as dividends and paid to the stockholders, and to fix
the date or dates for the payment of dividends.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fiscal year. The fiscal year of the
Corporation shall be determined by resolution of the Board of
Directors.
Section 9.2. Corporate Seal. The corporate seal shall have
the name of the Corporation inscribed thereon and shall be in
such form as may be approved from time to time by the Board of
Directors. The corporate seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced
otherwise.
Section 9.3. Notices. Except as otherwise expressly
provided, any notice required by these By-laws to be given shall
be sufficient if given by depositing the same in a post office or
letter box in a sealed postpaid wrapper addressed to the person
entitled thereto at his address, as the same appears upon the
books of the Corporation, or by faxing, telegraphing or cabling
the same to such person at such addresses; and such notice shall
be deemed to be given at the time it is mailed, faxed,
telegraphed or cabled.
Section 9.4. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Any written waiver of notice, signed
by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of any regular or special meeting
of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice.
Section 9.5. Deposits. All funds of the Corporation shall
be deposited from time to time to the credit of the Corporation
in such bank or banks, trust companies or other depositories as
the Board of Directors may select, and, for the purpose of such
deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the
Corporation, may be endorsed for deposit, assigned and delivered
by any officer of the Corporation, or by such agents of the
Corporation as the Board of Directors, the President or the
Secretary may authorize for that purpose.
Section 9.8. Voting Stock of Other Corporations. Except as
otherwise ordered by the Board of Directors, the President or the
Secretary shall have full power and authority on behalf of the
Corporation to attend and to act and to vote at any meeting of
the stockholders of any corporation of which the Corporation is a
stockholder and to execute a proxy to any other person to
represent the Corporation at any such meeting., tThe President
or the Secretary or the holder of any such proxy, as the case may
be, shall possess and may exercise any and all rights and powers
incident to ownership of such stock and which, as owner thereof
the Corporation might have possessed and exercised if present.
The Board of Directors may from time to time confer like powers
upon any other person or persons.
Section 9.9. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in
which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for
such purpose, if (1) the material facts as to his relationship of
interest and as to the contract or transaction are disclosed or
are known to the Board of Directors orf the committee, and the
Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of
the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to
his relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by the vote of the
stockholders; or (3) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof, or the
stockholder. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or
transaction.
Section 9.10. Form of Records. Any records maintained by
the Corporation in the regular course of its business, including
its stock ledger, books of account, and minute books, may be kept
on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into
clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any
person entitled to inspect the same in accordance with the DGCL.
Section 9.11. Amendment of By-Laws. These by-laws may be
altered or repealed, and new by-laws made, by the Board of
Directors, but the stockholders may make additional by-laws and
may alter and repeal any by-laws whether adopted by them or
otherwise.
SECRETARY'S CERTIFICATE
I, Richard J. KennedyEdward J. Wegel, Secretary of Atlantic
Coast Airlines Holdings, Inc., hereby certify that the attached
is a true, correct and complete copy of the By-Laws of Atlantic
Coast Airlines Holdings, Inc., as amended, if applicable as in
effect on the date hereof.
Date: July 22__, 1998June 15, 1993
______________//s//______
_____
Richard J.
KennedyEdward J.
Wegel
Vice President
WA981880.002DOCUMENT.01/3+0+
5
SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (the
"Agreement") is made and entered into as of this 22nd day of
July, 1998 (the "Effective Date"), by and between ATLANTIC COAST
AIRLINES HOLDINGS, INC., a Delaware corporation ("ACAH"),
ATLANTIC COAST AIRLINES, a California corporation ("ACA") (ACAH
and ACA are herein collectively referred to as the "Company") and
KERRY B. SKEEN ("Skeen").
WITNESSETH THAT:
WHEREAS, Skeen is currently employed by the Company as Chief
Executive Officer and President, and in connection with such
employment entered into a Severance Agreement (dated October 16,
1991), as amended (April 28, 1994, April 27, 1995 and October 16,
1996), with the Company; and
WHEREAS, the Company wishes to assure itself of the
continued services of Skeen; and
WHEREAS, the Board of Directors of the Company has
determined that the best interests of the Company would be served
by entering into this amended and restated Agreement with Skeen;
NOW, THEREFORE, the parties, for and in consideration of the
mutual and reciprocal covenants and agreements hereinafter
contained, and intending to be legally bound hereby, do contract
and agree as follows:
1. Employment: Company hereby employs Skeen and Skeen
hereby accepts employment by Company and agrees to perform his
duties and responsibilities hereunder upon all of the terms and
conditions as are hereinafter set forth.
2. Duties: Skeen shall serve the Company in the
capacities of Chief Executive Officer and President. Skeen shall
be responsible for supervising and directing all operations of
the Company. All other officers of the Company shall report to
Skeen except the Chairman of the Board of Directors (to the
extent such person is deemed to be an officer).. Skeen shall
otherwise be responsible for carrying out all duties assigned to
the President by the Company's Board of Directors and under
ACAH's and ACA's Bylaws. The Company shall use its good faith
efforts to ensure that Skeen continues to serve as a member of
the Company's Board of Directors.
3. Terms of Employment: Skeen's term of employment under
this Restated Agreement shall commence on the Effective Date and
shall terminate on the last day of the calendar month which is
thirty-six (36) calendar months after the Effective Date, unless
further extended as hereinafter set forth. Commencing on each
successive anniversary of the Effective Date, the Agreement shall
automatically be extended for an additional twelve (12) months
without further action by either party unless one party provides
the other sixty (60) days' written notice that such party does
not wish to extend the term of this Agreement.
4. Extent of Service: Skeen shall devote such time and
attention as is required to perform his obligations under this
Agreement and will at all times faithfully and industriously,
consistent with his ability, experience and talent, perform his
duties hereunder.
5. Compensation: During the term of this Agreement,
Company agrees to pay to Skeen, and Skeen agrees to accept from
Company, in full payment for services rendered by Skeen and work
to be performed by him under the terms of this Agreement, the
following:
A. An annual base salary of Two-Hundred Ninety Five
Thousand Dollars ($295,000) shall be paid to Skeen. Commencing
October 1, 1998 and each October 1 thereafter, the amount of
Skeen's base salary shall be increased as determined by the
Compensation Committee of the Board of Directors of the Company;
provided, however, that in no event shall Skeen's annual base
salary be less than the previous year's annual base salary.
Skeen's base salary for each year shall be payable to him in
accordance with the reasonable payroll practices of the Company
as from time to time in effect for executive employees (but in no
event less often than monthly).
B. Skeen shall participate in the Company's
Management Incentive Program, or any successor bonus plan or
program for management employees. In addition, if the Company
maintains an additional executive/management bonus plan, then
Skeen's bonus arrangement shall be at least consistent with the
provisions of such bonus plan.
C. Skeen shall be eligible for an additional annual
bonus under an executive performance bonus plan currently known
as Senior Management Incentive Plan for so long as the Board of
Directors determines to maintain such plan. Under such plan,
each calendar year, Skeen shall be entitled to receive a bonus
equal to specified percentage of base salary upon the attainment
of certain pre-established goals. The maximum bonus under this
plan assuming all goals are met will not be less than 100% of
base salary. Such goals and percentage of salary shall be
determined by the Compensation Committee of the Board of
Directors of the Company prior to the commencement of each plan
year. The bonus amount each year shall be paid in a single cash
lump sum paid at the time period provided under such plan, at the
same time as paid to other eligible employees, and generally no
later than 90 days after the end of the plan period.
D. Skeen will be entitled to deferred compensation
("Deferred Compensation") as described in this section. The
Company will make Deferred Compensation contributions at the rate
of fifty percent (50%) of Skeen's annual base salary beginning
with the annual lump sum contribution made as of June 30, 1998.
Such contributions will be applied toward funding such deferred
compensation program as the Company and Skeen may agree to from
time to time, consistent with the funding and vesting provisions
of this Agreement.
The method of funding of Deferred Compensation, and the timing of
contributions, shall be agreed between the Company and Skeen from
time to time. As of the date hereof, the Deferred Compensation
program is provided under a split dollar life insurance
arrangement with Minnesota Mutual Life Insurance Company (which
may be changed to an arrangement with Phoenix Home Life Mutual -
(the "Split Dollar Agreement"). The Company may implement a
substitute Deferred Compensation plan not tied to a Split Dollar
Agreement so long as (1) the amount contributed by the Company on
Skeen's behalf equals the amount set forth herein, and (2) the
vesting schedule, credit for Years of Service, and terms of
distribution are all at least as favorable to Skeen as set forth
herein. The Company shall continue to abide by the terms of the
Split Dollar Agreement with Skeen previously executed the 29th
day of December, 1995, which shall provide for a split dollar
plan for a policy of insurance upon the life of Skeen in a face
amount to be mutually agreed upon between Skeen and the Company.
For so long as the Split Dollar Agreement shall serve as the
deferred compensation program under this Agreement, the following
terms shall apply:
(i) Skeen shall be the owner of the policy under the
Split Dollar Agreement and will have the right to designate his
beneficiary with respect to proceeds of the policy payable upon
his death; provided, however, that notwithstanding the
foregoing, the Company shall have a collateral assignment of the
policy as security for the repayment of the amounts contributed
by the Company toward the payment of premiums for the policy.
(ii) The Company shall, except as provided in paragraph
5D(iii) below, each year as required under the Split Dollar
Agreement and the related policy, pay, on or before the due
date(s) under the terms of the policy, the entire amount of the
annual premium due on the policy acquired pursuant to the terms
of the Split Dollar Agreement. The annual premium due on the
policy will be the amount of the Company's contribution to
deferred compensation calculated as described above.
(iii) The "Deferred Compensation Ending Date" shall
mean the date of termination of Skeen's employment if Skeen's
employment with the Company is terminated at any time under
circumstances that do not entitle him to Severance Compensation
pursuant to Section 10 of this Agreement, or shall mean the last
day of the Severance Period (as defined in Section 10) if Skeen
is entitled to Severance Compensation. During a Severance
Period, Deferred Compensation shall continue pursuant to the
terms of 10.E.(iii) hereof. Upon the Deferred Compensation Ending
Date, the following shall occur:
(a) The applicable vested percentage of Skeen's
interest in Deferred Compensation shall be calculated
as provided herein. Skeen will be entitled to receive
the deferred compensation benefit provided under such
deferred compensation program only to the extent he is
vested in the Company's contributions. Vesting will be
based upon "Years of Service", with Skeen to be
credited with one Year of Service for completion of
each twelve (12) consecutive month period of employment
with the Company beginning January 1, 1996 and ending
on the Deferred Compensation Ending Date. (That is,
Skeen will be credited with Years of Service for any
applicable Severance Period, as further provided in
Section 10.E.(iv) hereof.) Skeen will become vested in
the deferred compensation based on the following
schedule:
Years of ServicePercentage Vested
1-4 0%
5 25%
6 35%
7 50%
8 65%
9 80%
10 100%
In the event of a Change in Control (as defined in
Paragraph 8.C. of this Agreement) of the Company, Skeen
shall become immediately 100% vested in his Deferred
Compensation amount notwithstanding the above vesting
schedule.
(b) The Split Dollar Agreement shall continue in
full force and effect and survive separate and apart
from this Agreement; provided, however, that the
Company shall, at its election, have no further
obligation to pay any premium on the policy under the
Split Dollar Agreement which has a due date after the
Deferred Compensation Ending Date and such obligation
shall be transferred to Skeen.
(c) The Company shall pay to Skeen whatever
"Deferred Compensation" amount is equal to the
applicable vested percentage of the total policy
premiums paid by the Company pursuant to the Split
Dollar Agreement. The Company shall make this payment
within thirty (30) days following the Deferred
Compensation Ending Date by releasing its interest in
the policy, or a portion thereof, on Skeen's life
acquired pursuant to the terms of the Split Dollar
Agreement, or any or all of the paid up additions
standing to the credit of such policy, if any, such
that such released interest equals the Deferred
Compensation amount paid to Skeen pursuant to this
Paragraph 5D. The Company agrees that the amount of
any such release of interest by the Company shall
reduce the amount of "Liabilities" (as such term is
defined in the Agreement of Assignment of Life
Insurance Death Benefit As Collateral entered into
between Skeen and the Company in connection with the
Split Dollar Agreement) owed to the Company in
connection with the Split Dollar Agreement and related
Collateral Assignment Agreement. Accordingly, the
Company also agrees to reduce to such extent its
collateral assignment of the policy pursuant to the
Split Dollar Agreement and related Collateral
Assignment Agreement.
E. The Company may pay Skeen discretionary compensation,
bonuses and benefits in addition to those provided for herein in
such amounts and at such times as the Compensation Committee of
the Board of Directors of the Company shall determine.
6. Benefits:
A. The Company shall pay for or provide Skeen such
vacation time and benefits, including but not limited to,
coverage under Company's major medical, accident, health, dental,
disability and life insurance plans, as are made available to
other executive employees of Company generally (and, to the
extent provided by such policies, to Skeen's dependents).
B. The Company agrees to promptly reimburse Skeen
for any otherwise unreimbursed premiums and/or uncovered medical
expenses up to $10,000 per calendar year under a written medical
reimbursement plan maintained for Skeen and other key executive
employees. If such payments are taxable to Skeen, the Company
shall pay Skeen a gross-up equal to the estimated income, FICA
and Medicare taxes due with respect to such reimbursement, with
federal and state income taxes being estimated at the highest
marginal rates.
C. Skeen shall be eligible to participate in any
profit sharing plan, employee stock ownership plan or other
qualified retirement plan adopted by Company to the same extent
as other executive employees of Company. Skeen shall also be
eligible to participate in any stock option, stock appreciation
rights or stock purchase plans or programs or nonqualified
deferred compensation arrangements of Company, which
participation shall be at levels at least equal in value to such
benefits provided by Company to other key executive employees of
Company.
7. Reimbursement of Expenses: The Company agrees to
promptly reimburse Skeen, within fifteen (15) days after
presentation of receipts and other appropriate documentation, for
all reasonable, ordinary and necessary travel costs and other
necessary expenses incurred by Skeen in performing his duties
pursuant to this Agreement.
8. Stock Options:
A. Company agrees to continue in force a stock option
plan or one which is substantially similar to the existing plan
("Stock Option Plan"), which has been approved by the
shareholders of the Company and, on the first business day in
each January commencing in January, 1999, and (subject to the
provisions of Paragraph 10.A.(vii)) continuing so long as Skeen
is employed by the Company to grant Skeen options under the Stock
Option Plan to purchase not less than 100,000 shares of the
common stock of ACAH at the price per share at the closing of the
trading market on the last business date prior to such grant.
The Company also agrees to approve the issuance of such
additional shares as are necessary to enable Skeen to exercise
such options. The Company will not be required to reserve shares
from existing plans to cover future obligations under this
paragraph, but will use reasonable efforts to obtain shareholder
approval as necessary from time to time to make a sufficient
number of additional shares available on a timely basis, and will
provide Skeen with equivalent alternative compensation should
approval not be obtained. The terms of the grant of such options
granted after January 1, 1998 shall provide that (a) Skeen's
right to exercise such options shall vest and become exercisable
over the five-year period beginning on the date of each grant at
the rate of one-fifth per year (i.e., one-fifth shall vest and
become exercisable on the first anniversary of the grant) so long
as Skeen is employed by the Company, (b) such options shall be
exercisable for ten (10) years after the date of the grant so
long as Skeen is employed by the Company and (c) Skeen shall have
the right to exercise such vested options within ninety (90) days
following any termination of Skeen's employment except that in
the case of termination of employment for which Skeen is entitled
to "Severance Compensation" as provided herein, in which case the
terms of Paragraph 10.E.(iii) shall apply.
B. In addition to the foregoing, if the Company in
the exercise of its discretion, shall grant Skeen any additional
stock options, such options shall contain terms and conditions
which are at least as favorable to Skeen as those set forth in
this Paragraph 8. All outstanding options previously issued to
Skeen prior to the Effective Date of this Amended and Restated
Severance Agreement shall also be subject to the foregoing terms,
except that options granted on or before December 31, 1997 shall
vest over three years at the rate of one-third per year and
except that no such terms shall be applicable to options intended
to qualify as Incentive Stock Options if and to the extent such
terms would be deemed to result in a "material modification" of
such options (for example, Skeen will not be entitled to more
than 90 days to exercise such options following any termination
of employment other than on account of death or disability, in
which case he will be entitled to one year to exercise such
options).
C. For purposes of this Agreement, a "Change in Control"
shall be deemed to occur on the earliest of (a) an acquisition
(other than directly from Company) of any securities of Company
entitled to vote for the election of Directors (the "Voting
Securities") by any "person or group" (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) other than an employee benefit plan of Company, immediately
after which such person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 under the Exchange Act) of more than thirty
percent (30%) of the combined voting power of Company's then
outstanding Voting Securities; (b) announcement by any "person
or group" (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934) of its acceptance for
payment of securities tendered pursuant to a tender offer or
exchange offer initiated by such person owning or representing
securities constituting more than twenty percent (20%) of the
combined voting power of Company's then outstanding Voting
Securities; (c) the approval by the Company's stockholders of
(1) a merger, consolidation or reorganization involving Company
or a transfer of substantially all of the assets of Company
(other than to an entity or entities owned by Company), unless
the company resulting from such merger, consolidation or
reorganization or the company to which such assets are
transferred (the "Surviving Corporation") shall adopt or assume
this Agreement and the stockholders of Company immediately before
such merger, consolidation or reorganization own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least eighty percent (80%) of the combined
voting power of the Surviving Corporation in substantially the
same proportion as their ownership immediately before such
merger, consolidation or reorganization, or (2) a complete
liquidation or dissolution of Company; or (d) persons who on the
date of this Agreement are directors of Company, together with
people nominated by a majority of them or by persons who were
nominated by them, cease for any reason to constitute a majority
of Company's Board of Directors.
9. Deductions: Deductions shall be made from Skeen's
compensation for social security, Medicare, federal, state and
local withholding taxes, and any other such taxes as may from
time to time be required by any governmental authority.
10. Termination: Skeen's employment with the Company shall
be terminated only in accordance with the following provisions:
A. Disability.
(i) In the event Skeen shall become mentally or
physically disabled so as to have been unable to perform his
duties hereunder for twelve (12) consecutive months, subject to
Skeen's right to return to work as provided below, Company shall
have the right to terminate Skeen's employment with Company upon
the expiration of such twelve (12) month period; provided,
however, that upon any such termination Company shall be
obligated to provide Skeen with Severance Compensation as
provided in Paragraph 10.E. herein. Such twelve-month period
shall be deemed to have commenced on the date when Skeen is first
unable to perform his duties on a substantially full-time basis
because of mental or physical disability and shall end on the
date on which Skeen shall return to the substantial full-time
performance of his duties. If at the expiration of such twelve
(12) month period, the Company shall desire to terminate Skeen
on the basis of disability, it shall give written notice to him.
Skeen's employment shall thereafter be terminated if he does not
return to substantial full-time performance of his duties within
ten (10) calendar days after such notice is given.
(ii) Nothing contained herein shall be construed
to affect Skeen's rights under any disability insurance or
similar policy, whether maintained by the Company, Skeen or
another party. The Company may utilize a disability policy to
fund, in whole or in part, the compensation that would be due to
Skeen during the term of or in the event of a disability, in
which case the proceeds of the policy would not be in addition to
any compensation otherwise payable to Skeen.
(iii) For purposes of this Agreement, Skeen
shall be deemed to be disabled when he shall have been absent
from his duties because of sickness, illness, injury or other
physical or mental infirmity on a substantially full-time basis.
In the event of a dispute as to whether Skeen is disabled, the
issue of the determination of disability shall be submitted to a
Board of Arbiters for a binding decision under the procedures set
forth in Paragraph 10.A.(v) below.
(iv)At the end of any disability (other than a
disability that results in the termination of Skeen's employment
with the Company), Skeen shall return to work and this Agreement
shall continue as though such disability had not occurred.
(v) If there is a dispute as to whether Skeen is
subject to any disability, the issue shall be submitted to a
Board of Arbiters (whose decision shall be binding on the Company
and Skeen) consisting of three persons: one physician who
specializes in the physical or mental disability in dispute
(hereinafter referred to as a "Specialist") shall be appointed on
behalf of Company by the Board of Directors of Company (with
Skeen having no vote on this question); a second Specialist shall
be appointed by Skeen and a third Specialist shall be appointed
by the two Specialists so appointed. The decision of a majority
of such Specialists shall be binding upon the parties hereto. If
a majority of the Specialists determines that Skeen is not
subject to any disability for purposes of this Agreement, shall
return to work under the provisions hereof. Such Specialists may
physically examine Skeen, who hereby consents to such examination
and to make available any pertinent medical records. The cost of
such Specialists shall be paid by Company.
(vi) If it is determined that Skeen can return to
work hereunder on a part-time basis, the parties agree to use
good faith efforts to negotiate the terms of Skeen's return to
work.
(vii) During any period in which Skeen is
disabled but his employment shall not have been terminated, Skeen
shall continue to receive his base salary and any applicable
bonus, and shall continue to receive all benefits as an employee
and as provided herein generally. Any options previously granted
shall continue to vest, but no new options shall be issued to
Skeen.
(viii) During any period in which Skeen is
disabled but his employment shall not have been terminated, Skeen
shall continue to be credited with Years of Service for purposes
of vesting of Deferred Compensation as set forth in Paragraph
5.D.
B. Death.
(i) Skeen's employment with Company shall
terminate immediately upon Skeen's death; provided, however, that
Company shall be obligated to provide the Severance Compensation
as specified in Paragraph 10.E. herein to Skeen's estate, heirs
or beneficiaries.
(ii) Nothing contained herein shall be construed
to affect Skeen's rights under any life insurance or similar
policy, whether maintained by Company, Skeen or another party.
The Company may utilize a life insurance policy to fund, in whole
or in part, the Severance Compensation that would be payable in
the event of Skeen's death, in which case the proceeds of any
such policy other than the Split Dollar Agreement would not be in
addition to any Severance Compensation otherwise payable under
this Paragraph 10.B.
C. Termination by Skeen.
(i) Without Good Reason. Skeen may, without
"Good Reason" (as hereinafter defined), terminate his employment
by giving to Company sixty (60) days' written notice by Certified
Mail, Return Receipt Requested, at the office of Company, and
such termination shall be effective on the sixtieth (60th) day
following the date of such notice (the "Termination Date"). In
such event, Skeen (i) shall continue to render his services up to
the Termination Date if so requested by Company and (ii) shall be
paid his regular base salary and shall receive all benefits up to
the Termination Date. Skeen will be entitled to payment of any
bonus due but not yet paid for prior bonus periods, and for a pro-
rata bonus amount for the bonus period in which the termination
occurs pursuant to this Paragraph 10.C.(i) but will not be
entitled to Severance Compensation or to any other compensation,
bonus or fringe benefits accrued after the Termination Date. The
bonus payable to Skeen will be paid at the same time it would
have been paid had Skeen's employment not been terminated, will
be based on the achievement of targets for the entire bonus
period without regard to interim results as of the termination
date, and will be paid pro-rata based on the number of full
months Skeen was employed within the bonus period divided by the
total number of months in the bonus period.
(ii) With Good Reason. Skeen may terminate his
employment with Company immediately for Good Reason. In the
event Skeen's employment with Company is terminated by Skeen for
Good Reason, Company shall be obligated to provide Skeen with
Severance Compensation as provided in Paragraph 10.E. herein".
Good Reason" shall mean any of the following (without Skeen's
express prior written consent):
(a) The assignment to Skeen by Company of
duties inconsistent with Skeen's positions, duties,
responsibility and status with Company, or any removal of Skeen
from or any failure to re-elect Skeen to his positions, including
his position as a member of the Company's Board of Directors
(except in connection with the termination of his employment for
disability, death or for cause as provided herein), unless cured
within fifteen (15) days of Skeen giving written notice thereof
to the Company.
(b) Any material adverse change in any
benefit plan or arrangement in which Skeen is participating and
which is not applicable generally to other key executive
employees of Company who participate in such plan or
arrangement), unless cured within fifteen (15) days of Skeen
giving written notice thereof to the Company.
(c) Skeen's relocation outside of the
Washington D.C./ Northern Virginia region without his consent,
except for required travel by Skeen on Company business;
provided, however, that if the Board of Directors of Company
determines to relocate Company's principal executive offices,
Company shall pay all of Skeen's reasonable moving and other
relocation expenses, the Board of Directors shall make such
adjustments in Skeen's salary as it reasonably deem necessary to
reflect the increased costs of living in the new location, and
Skeen shall be obligated to perform his services generally at
such new location and such relocation shall not constitute "Good
Reason" hereunder.
(d) Any material breach by Company of any
provisions of this Agreement which is not cured by Company within
fifteen (15) days of Skeen giving written notice thereof to the
Company.
(e) Except in the case of disability or
death, any purported termination of Skeen's employment by the
Company which is not effected pursuant to sixty (60) days' prior
written notice of termination.
(f) Any termination by Skeen of his
employment with the Company which is effected as a result of, in
connection with or within twelve (12) months following a "Change
in Control" as defined and determined under Paragraph 8.C. of
this Agreement.
D. Termination by Company.
(i) Without Cause. Company may, without cause,
terminate Skeen's employment under this Agreement at any time by
giving Skeen sixty (60) days' written notice thereof, and such
termination shall be effective on the sixtieth (60th) day
following the date such notice is given (said 60th day, the
"Termination Date"). Company shall be obligated to provide Skeen
with Severance Compensation as provided in Paragraph 10.E.
herein. At the option of Company, Skeen's employment shall be
immediately terminated upon the Company giving such notice, in
which case Skeen shall continue to receive his full base salary
and related fringe benefits through the Termination Date.
Notwithstanding any provision of this Agreement to the contrary,
any termination of Skeen's employment by the Company, for any
reason or no reason, within one year following a "Change in
Control", as defined and determined under Paragraph 8.C. of this
Agreement, shall automatically be deemed to be a termination
without cause.
(ii) For Cause. Company may terminate Skeen's
employment under this Agreement immediately for "cause." In such
event, Skeen will be entitled to payment of a pro-rata bonus
amount to the date of termination of employment, but will not be
entitled to Severance Compensation or to any other compensation,
bonus or fringe benefits accrued after the date of termination of
employment. The bonus amount payable to Skeen will be calculated
in the same fashion as in the case of termination by Skeen
without good reason, as set forth in paragraph 10.C.(i) above.
Cause shall be defined as any of the following: (i) willful
unauthorized misconduct in the material performance of Skeen's
duties hereunder, (ii) commission of an act of theft, fraud or
dishonesty by Skeen, which act is materially harmful to Company,
(iii) material breach of any provision of this Agreement if such
breach has not been cured by Skeen (or if Skeen has not
compensated the Company for such breach by payment of an amount
deemed reasonable by the Company if the breach cannot be cured)
within fifteen (15) days after the Company gives Skeen written
notice of such breach. Any termination under this Paragraph
10.D.(ii) shall take effect immediately upon the Company giving
Skeen written notice thereof.
E. Severance Compensation. "Severance Compensation"
is defined as all of the compensation and benefits described in
this Paragraph 10.E. It will be provided to Skeen upon the
occurrence of any of the events described elsewhere in this
Agreement as providing for Skeen's receipt of Severance
Compensation, but not in any other circumstances except to the
extent that individual components of Severance Compensation may
be separately provided pursuant to the terms of this Agreement.
"Termination Date" is defined as the last day of Skeen's
employment with the Company. "Severance Period" is defined as
the period beginning on the day following the Termination Date
and ending on the day which is three years following the
Termination Date. The compensation and benefits to be provided
as Severance Compensation are as follows:
(i) Severance Pay. Throughout the Severance
Period, Skeen will receive severance pay at the rate of 100% of
his annual base salary in effect at the time of his termination,
to be paid on the Company's regular payroll payment dates at the
same time and in the same fashion as the Company's regular
payroll payments.
(ii) Bonus. The Company shall pay to Skeen a one-
time bonus equal to three times the highest annual bonus received
by Skeen during any one of the five years immediately preceding
the year in which the Termination Date occurs. This bonus will
be paid within thirty days following the Termination Date. It
shall be considered to be full compensation for all amounts due
to Skeen for bonus plans in which he was participating as of the
Termination Date, and he shall not be entitled to any further
payments under any of said plans during the Severance Period or
thereafter. Notwithstanding the above, any bonus due to Skeen
for years (or other applicable bonus period) completed prior to
the Termination Date but not yet paid shall be paid in addition
to the bonus described herein.
(iii) Stock Options. All options to purchase
shares of ACAH stock that have been granted to Skeen shall become
100% vested as of the Termination Date. All options that would
have been granted to Skeen in the future pursuant to paragraph
8.A. hereof shall not be granted if the date on which they would
have been granted occurs after the Termination Date, even though
said date may occur during the Severance Period. Skeen (or, in
the case of death, his estate or his beneficiaries) shall have
the right to exercise such vested options until the earlier of
the original expiration date of said option, or a date determined
as follows: (a) for options not intended to qualify as Incentive
Stock Options, Skeen shall have the right to exercise vested
options any time prior to the end of the Severance Period;
(b) for options intended to qualify as Incentive Stock Options
where termination is caused by reasons other than his death or
disability, Skeen shall have the right to exercise within 90 days
following termination of his employment; (c) for options intended
to qualify as Incentive Stock Options where termination is caused
by his death or disability, Skeen (or his estate or his
beneficiaries) shall have the right to exercise within one year
following termination of his employment.
(iv) Deferred Compensation. The Deferred
Compensation program will continue throughout the Severance
Period, including Skeen's accumulation of Years of Service for
vesting purposes, and including the Company's continuation of
contributions. The Split Dollar Agreement shall continue in full
force and effect through the Severance Period and shall survive
separate and apart from this Agreement, and the Company's
obligation to pay all premiums pursuant to this Agreement shall
continue in accordance with the terms of the Split Dollar
Agreement for the Severance Period. At the end of the Severance
Period, Skeen shall receive his vested interest and any
obligation to pay premiums shall be transferred to Skeen.
Alternatively, the Company may elect to pay such amounts to Skeen
as would be payable during the Severance Period by the Company
under the Deferred Compensation program in a single lump sum
payment within fifteen (15) days after the Termination Date.
(v) Insurance Programs. Coverage under the
Company's major medical, accident, health, dental, disability and
life insurance plans as from time to time provided to other
executive employees of the Company (and, to the extent provided
by such policies, to Skeen's dependents) shall continue to be
paid for by the Company during the Severance Period, or, in the
event of Skeen's termination following a Change of Control of the
Company as defined in paragraph 8.C., for the longer of the
Severance Period or the remainder of Skeen's life. Provided,
however, if such coverage cannot be continued during the
Severance Period or until Skeen's death, as the case may be,
under the terms of such policies or plans, the Company shall
reimburse Skeen for the cost of comparable coverage under
individually obtained policies or for COBRA coverage, or shall
make other arrangements to assure that Skeen has comparable
coverage.
(vi) Vacation. Vacation shall not continue to
accrue after the Termination Date under any circumstances.
(vii) Executive Medical Reimbursement Plan.
Throughout the Severance Period, the Company will continue to
promptly reimburse Skeen for any otherwise unreimbursed premiums
and/or uncovered medical expenses up to $10,000 per calendar year
under a written medical reimbursement plan maintained for the
Company's key executive employees, including the tax gross-up, if
applicable.
(viii) Travel Benefits. Skeen and his wife
shall be provided with free travel on the Company's planes or on
the planes of any successor in interest to the Company on a
positive space basis. These travel benefits will be provided
throughout the Severance Period, or, in the event of a Change of
Control of the Company as defined in paragraph 8.C., for the
longer of the Severance Period or the remainder of Skeen's life.
Skeen shall not be entitled to travel benefits on any other
airline.
(ix) Deductions for Taxes. Any compensation due
to Skeen hereunder will be subject to deductions for social
security, federal and state withholding taxes, and any other such
taxes as may from time to time be required by governmental
authority.
(x) Notwithstanding any provision to the contrary
in this Agreement, if any part of the payments provided for under
or pursuant to this Agreement (the "Agreement Payments"),
together with all payments in the nature of compensation to or
for the benefit of Skeen under any other arrangement, would if
paid constitute a "parachute payment" under Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), then the
amount payable to Skeen under or pursuant to this Agreement in
such circumstances shall be subject to the following sentence of
this Paragraph 10.E(x). If (i) the value of the Agreement
Payments plus the value of all other payments to or for the
benefit of Skeen that constitute "parachute payments," minus the
amount of any excise taxes payable under Code Section 4999 with
respect to such payments and the amount of any similar or
comparable taxes payable only in connection with a change in
control, is greater than (ii) the greatest value of payments in
the nature of compensation contingent upon a change in control
that could be paid at such time to or for the benefit of Skeen
and not constitute a "parachute payment" (the "Alternative
Payment"), then the Agreement Payments shall be payable to Skeen;
otherwise, only the Alternative Payment shall be payable to
Skeen.
11. Assignment: This Agreement, as it relates to the
employment of Skeen, is a personal contract and the rights and
interests of Skeen hereunder may not be sold, transferred,
assigned, pledged or hypothecated. However, this Agreement shall
inure to the benefit of and be binding upon Company and its
successors and assigns including, without limitation, any
corporation or other entity into which Company is merged or which
acquires all or substantially all of the outstanding common stock
or assets of Company. At any time prior to a Change in Control,
Company may provide, without the prior written consent of Skeen,
that Skeen shall be employed pursuant to this Agreement by any of
its affiliates instead of or in addition to Company, and in such
case all references herein to the "Company" shall be deemed to
include any such entity, provided that (i) such action shall not
relieve Company of its obligation to make or cause an affiliate
to make or provide for any payment to or on behalf of Skeen
pursuant to this Agreement, and (ii) Skeen's duties and
responsibilities shall not be significantly diminished as a
result thereof. The Board of Directors may assign any or all of
its responsibilities hereunder to any committee of the Board, in
which case references to the Board of Directors shall be deemed
to refer to such committee.
12. Invalid Provisions: The invalidity of any one or more
of the paragraphs or provisions of this Agreement shall not
affect the reasonable enforceability of the remaining paragraphs
or provisions of this Agreement, all of which are inserted herein
conditionally upon being valid in law; and in the event one or
more of the paragraphs or provisions contained herein shall be
invalid, this instrument shall be construed as if such invalid
paragraphs or provisions had not been inserted or, alternatively,
said paragraphs or provisions shall be reasonably limited to the
extent that the applicable court interpreting the provisions of
this Agreement considered to be reasonable.
13. Specific Performance: The parties hereby agree that
any violation by Skeen of the covenants and agreements contained
herein shall cause irreparable damage to Company, and Company
may, as a matter of course, enjoin and restrain said violation by
Skeen by process issued out of a court of competent jurisdiction,
in addition to any other remedies that said court may see fit to
award.
14. Binding Effect: All the terms of this Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, successors and
assigns.
15. Attorneys' Fees: Company shall pay all legal fees
incurred by Skeen in connection with the preparation of this
Agreement promptly after submission of a bill therefor. In the
event an action is taken by either party to enforce this
Agreement or resolve a dispute in connection herewith, the
prevailing party shall be entitled to recover the costs incurred
with the prosecution and defense of such action, including
reasonable attorney's fees.
16. Waiver of Breach or Violation Not Deemed Continuing:
The waiver by either party of any provision of this Agreement
shall not operate as, or be construed to be, a waiver of any
subsequent breach hereof.
17. Entire Agreement; Law Governing: This Agreement
supersedes in its entirety any and all other agreements
(specifically including any earlier versions of this Severance
Agreement), either oral or in writing, between the parties hereto
with respect to the subject matter hereof, by and between Company
and Skeen, and contains all the covenants and agreements among
the parties with respect to such subject matter. This Agreement
shall be construed in accordance with the laws of the
Commonwealth of Virginia. Skeen hereby acknowledges that he was
represented by counsel of his choosing in the drafting and
negotiation of this Agreement and that he reviewed this Agreement
with and was advised as to each of the terms thereof by such
counsel. In interpreting this Agreement, a court shall not treat
either party as the draftsman of the Agreement.
18. Paragraph Headings: The Paragraph headings contained
in this Agreement are for convenience only and shall in no manner
be construed as a part of this Agreement.
19. Release by Skeen. In the event of a termination of
employment by Skeen that results in the payment of Severance
Compensation to him pursuant to the terms of this Agreement, in
consideration for such Severance Compensation, Skeen hereby
agrees to execute a full and complete release to the Company
releasing any and all claims that he may have against the Company
including any claims relating to his termination of employment.
20. Notices. All notices permitted or required to be given
pursuant to this Agreement shall be in writing and shall be
deemed to have been sufficiently given, subject to the further
provisions of this Section 20, for all purposes when presented
personally to such party (which in the case of notice to the
Company, shall be presented to the person holding the office or
offices identified below) or sent by facsimile transmission, any
national overnight delivery service, or certified or registered
mail, to such party at its address set forth below:
If to Skeen, to the most recent address indicated for
Skeen's residence in the personnel records of Company, unless
Skeen gives written notice that such notices are to be delivered
to another address.
If to ACA or the Company:
Atlantic Coast Airlines Holdings, Inc.
Atlantic Coast Airlines
515A Shaw Road
Dulles, VA 20166
Attention: General Counsel or Corporate Secretary
Fax No. (703) 925-6294
Such notice shall be deemed to be given and received when
delivered if delivered personally, upon electronic or other
confirmation of receipt if delivered by facsimile transmission,
the next business day after the date sent if sent by a national
overnight delivery service, or five (5) business days after the
date mailed if mailed in the continental United States by
certified or registered mail. Any notice of any change in such
address shall also be given in the manner set forth above.
Whenever the giving of notice is required, the giving of such
notice may be waived in writing by the party entitled to receive
such notice.
A copy of any notice given to Skeen shall be sent to:
Robert E. Madden
Carr Goodson Lee & Warner
1301 K Street, NW
Suite 400, East Tower
Washington, DC 20005-3300
Fax No. (202) 310-5555
IN WITNESS WHEREOF, the Company has hereunto caused this
Agreement to be executed by a duly authorized officer and Skeen
has hereunto set his hand as of the day and year first above
written.
WITNESS:
________________________________
_____________________________
Kerry B. Skeen
COMPANY:
ATTEST: ATLANTIC COAST AIRLINES
_______________________________ BY:
____________________________
Richard J. Kennedy, C. Edward Acker,
Secretary Chairman of the Board
ATTEST: ATLANTIC COAST
AIRLINES HOLDINGS, INC.
_______________________________ BY:
____________________________
Richard J. Kennedy, C. Edward
Acker,
Secretary Chairman of the Board
15
ATLANTIC COAST AIRLINES HOLDINGS, INC.
1995 STOCK INCENTIVE PLAN
(as amended as of May 5, 1998, and adjusted to
reflect May 15, 1998 stock split)
SECTION 1. Purpose of the Plan. The purpose of this
1995 Stock Incentive Plan effective October 18, 1995 ("Plan")
is to encourage ownership of common stock, $.01 par value
("Common Stock"), of Atlantic Coast Airlines Holdings, Inc., a
Delaware corporation (the "Company"), by eligible key
employees and directors of the Company and its Affiliates (as
defined below) 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. In addition,
the Company expects that the Plan will further strengthen the
identification of employees and directors with the
stockholders. Options granted under this Plan may be intended
to qualify as Incentive Stock Options ("ISOs") pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), or may be options which are not intended to qualify
as ISOs ("Nonqualified Options"), either or both as provided
in the agreements evidencing the options as provided in
Section 6 hereof. As used in this Plan, the term "Affiliates"
means any "parent corporation" of the Company and any
"subsidiary corporation" of the Company within the meaning of
Code Sections 424(e) and (f), respectively.
SECTION 2. Administration of the Plan.
(a) Composition of Committee. The Plan shall be
administered by one or more committees of the Board (any
such committee, the "Committee"). If no persons are
designated by the Board to serve on the Committee, the
Plan shall be administered by the Board and all
references herein to the Committee shall refer to the
Board. The Board shall have the discretion to appoint,
add, remove or replace members of the Committee, and
shall have the sole authority to fill vacancies on the
Committee. Unless otherwise provided by the Board:
(i) with respect to any Award (as defined in Section 7)
for which such is necessary and desired for such Award to
be exempted by Rule 16b-3 of the Exchange Act, the
Committee shall consist of two or more directors, each of
whom is a "disinterested person" (as such term is defined
in Rule 16b-3 promulgated under the Exchange Act, as such
Rule may be amended from time to time), (ii) with respect
to any Award that is intended to qualify as "performance
based compensation" under Section 162(m) of the Code, the
Committee shall consist of two or more directors, each of
whom is an "outside director" (as such term is defined
under Section 162(m) of the Code), and (iii) with respect
to any other Award, the Committee shall consist of one or
more directors (any of whom also may be a Participant (as
defined in Section 4) who has been granted or is eligible
to be granted Awards under the Plan).
(b) Committee Action. The Committee shall hold its
meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum, and
all determinations of the Committee shall be made by not
less than a majority of its members. Any decision or
determination reduced to writing and signed by a majority
of the members shall be fully as effective as if it had
been made by a majority vote of its members at a meeting
duly called and held. The Committee may designate the
Secretary of the Company or other Company employees to
assist the Committee in the administration of the Plan,
and may grant authority to such persons to execute Award
agreements or other documents on behalf of the Committee
and the Company.
(c) Committee Expenses. All expenses and
liabilities incurred by the Committee in the
administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants,
accountants or other persons.
(d) Powers of the Committee. Subject to the
express provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or
desirable in connection with the administration of this
Plan with respect to the Awards over which such Committee
has authority, including, without limitation, the
following:
(i) prescribe, amend and rescind rules and
regulations relating to this Plan;
(ii) determine which persons are
Participants and to which of such Participants,
if any, and when options and/or other Awards
shall be granted hereunder;
(iii) to prescribe and amend the terms of
the Award agreements (which need not be
identical);
(iv) to make all other determinations deemed
necessary or advisable for the administration of
the Plan;
(v) determine whether, and the extent to
which adjustments are required pursuant to
Section 7(e) hereof; and
(vi) interpret and construe this Plan, any
rules and regulations under the Plan and the
terms and conditions of any Award granted
hereunder.
SECTION 3. Stock Reserved for the Plan. Subject to
adjustment as provided in Section 7(e) hereof, the aggregate
number of shares of Common Stock that may be issued and
issuable pursuant to all Awards (including Incentive Stock
Options) granted under the Plan is 2,500,000 and such number
of shares shall be and is hereby reserved for sale for such
purpose. The aggregate number of Shares subject to Awards
granted during any calendar year to any one Participant
(including the number of shares involved in Awards having a
value derived from the value of Shares) shall not exceed
750,000. The shares subject to the Plan shall consist of
authorized but unissued shares of Common Stock or previously
issued and reacquired shares of Common Stock. Any of such
shares which may remain unsold and which are not subject to
outstanding options at the termination of the Plan shall cease
to be reserved for the purpose of the Plan, but until
termination of the Plan or the termination of the last of the
options granted under the Plan, whichever last occurs, the
Company shall at all times reserve a sufficient number of
shares to meet the requirements of the Plan. The aggregate
number of Shares issued under this Plan at any time shall
equal only the number of shares actually issued upon exercise
or settlement of an Award and not returned to the Company upon
forfeiture of an Award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation
of an Award.
SECTION 4. Eligibility. The persons eligible to
participate in the Plan as a recipient of Awards
("Participant") shall include only key employees and directors
of the Company or its Affiliates at the time the Award is
granted; provided, however, the members of the Committee shall
not be eligible to be granted Awards if the Company is
governed by Rule 16b-3 as in effect on April 31, 1994. An
employee who has been granted an option hereunder may be
granted an additional option or options, if the Committee
shall so determine.
SECTION 5. Grant of Options.
(a) Committee Discretion. The Committee shall have
sole and absolute discretionary authority (i) to
determine, authorize, and designate those key employees
and directors of the Company or its Affiliates who are to
receive options under the Plan (each, an "Optionee"),
(ii) to determine the number of shares of Common Stock to
be covered by such options and the terms thereof, and
(iii) to determine the type of option granted: ISO,
Nonqualified Option or a combination of ISO and
Nonqualified Options; provided that a non-employee
director may not receive any ISOs. The Committee shall
thereupon grant options in accordance with such
determinations as evidenced by a written option
agreement.
(b) Limitation on Incentive Stock Options. Except
as described in Section 6(i), the aggregate fair market
value (determined in accordance with Section 6(b) of this
Plan at the time the option is granted) of the Common
Stock with respect to which options intended to qualify
as ISOs may be exercisable for the first time by any
Optionee during any calendar year under all such plans of
the Company and its Affiliates shall not exceed $100,000.
SECTION 6. Terms and Conditions. Each option granted
under the Plan shall be evidenced by an agreement, in a form
approved by the Committee, which shall be subject to the
following express terms and conditions and to such other terms
and conditions as the Committee may deem appropriate.
(a) Option Period. The Committee shall promptly
notify the Optionee of the option grant and a written
agreement shall promptly be executed and delivered by and
on behalf of the Company and the Optionee, provided that
the option grant shall expire if a written agreement is
not signed by said Optionee (or his agent or attorney)
and returned to the Company within 60 days from date of
receipt by the Optionee of such agreement. Each option
agreement shall specify the period for which the option
thereunder is granted (which in no event shall exceed ten
years from the date of grant) and shall provide that the
option shall expire at the end of such period. If the
original term of an option is less than ten years from
the date of grant, the option may be amended prior to its
expiration, with the approval of the Committee and the
Optionee, to extend the term so that the term as amended
is not more than ten years from the date of grant.
However, in the case of an ISO granted to an individual
who, at the time of grant, owns stock possessing more
than 10 percent of the total combined voting power of all
classes of stock of the Company or its Affiliate ("Ten
Percent Stockholder"), such period shall not exceed five
years from the date of grant.
(b) Option Price. The purchase price of each share
of Common stock subject to each option granted pursuant
to the Plan shall be determined by the Committee at the
time the option is granted and, in the case of options
intended to qualify as ISOs or as "performance based
compensation" for purposes of Section 162(m) of the Code,
shall not be less than 100% of the fair market value of a
share of Common Stock on the date the option is granted,
as determined by the Committee. In the case of an ISO
granted to a Ten Percent Stockholder, the option price
shall not be less than 110% of the fair market value of a
share of Common Stock on the date the option is granted.
The purchase price of each share of Common Stock subject
to a Nonqualified Option under this Plan shall be
determined by the Committee prior to granting the option.
The Committee shall set the purchase price for each share
subject to a Nonqualified Option at either the fair
market value of each share on the date the option is
granted, or at such other price as the Committee in its
sole discretion shall determine.
For all purposes under the Plan, the fair market
value of a share of Common Stock on a particular date
shall be determined by such manner as shall be approved
by the Committee. In the event the Common Stock is not
publicly traded at the time a determination of its value
is required to be made hereunder, the determination of
its fair market value shall be made by the Committee in
such manner as it deems appropriate.
(c) Exercise Period. The Committee may provide in
the option agreement that an option may be exercised in
whole, immediately, or is to be exercisable in
increments. However, no portion of any option may be
exercisable by an Optionee prior to the approval of the
Plan by the stockholders of the Company.
(d) Procedure for Exercise. Options shall be
exercised by the delivery of written notice to the
Secretary of the Company setting forth the number of
shares with respect to which the option is being
exercised. Such notice shall be accompanied by payment
of the exercise price for such number of shares, which
may be paid in the form of cash, previously owned shares
of capital stock of the Company, other property deemed
acceptable by the Committee, a reduction in the amount of
Common Stock or other property otherwise issuable
pursuant to such option, or a promissory note of the
Optionee or of a third party, the terms and conditions of
which shall be determined by the Committee. The notice
shall specify the address to which the certificates for
such shares are to be sent. Subject to satisfaction of
any tax obligations pursuant to Section 11, an Optionee
shall be deemed to be a stockholder with respect to
shares covered by an option on the date the Company
receives such written notice and such option payment.
As promptly as practicable after receipt of such written
notification and payment, the Company shall deliver to
the Optionee certificates for the number of shares with
respect to which such option has been so exercised;
provided, however, that such delivery shall be deemed
effected for all purposes when a stock transfer agent of
the Company shall have deposited such certificates in the
United States mail, addressed to the Optionee at the
address specified pursuant to this Section 6(d).
(e) Termination of Employment. In the event an
employee to whom an option is granted ceases to be
employed by the Company for any reason other than death
or disability or if a director to whom an option is
granted ceases to serve on the Board for any reason other
than death or disability, any option previously granted
to him may be exercised (to the extent he would have been
entitled to do so at the date the employee ceases to be
employed by the Company or a director ceases to serve on
the Board) at any time and from time to time, within a
thirty (30) day period after such date the employee
ceases employment with the Company or the director ceases
to serve on the Board; provided, however, the Committee,
in its sole discretion, may (i) allow a longer period for
exercise than thirty (30) days as stated in this
paragraph or (ii) allow for the exercise of all or a part
of those options not exercisable by the employee on
account of his termination of employment or by the
director on account of his cessation from service on the
Board.
(f) Disability or Death of Optionee. In the event
of the determination of disability or the death of an
Optionee under the Plan while he is employed by the
Company or while he serves on the Board, the options
previously granted to him may be exercised (to the extent
he would have been entitled to do so at the date of the
determination of disability or of death) at any time and
from time to time, within a one year period after such
determination of disability or death, by the former
employee or director, the guardian of his estate, the
executor or administrator of his estate or by the person
or persons to whom his rights under the option shall pass
by will or the laws of descent and distribution, but in
no event may the option be exercised after its expiration
under the terms of the option agreement. An Optionee
shall be deemed to be disabled if, in the opinion of a
physician selected by the Committee, he is incapable of
performing services for the Company of the kind he was
performing at the time the disability occurred by reason
of any medically determinable physical or mental
impairment which can be expected to result in death or to
be of long, continued and indefinite duration. The date
of determination of disability for purposes hereof shall
be the date of such determination by such physician. The
Committee, in its sole discretion, may (i) allow a longer
period for exercise than the one year period as stated in
this paragraph or (ii) allow for the exercise of all or a
part of those options not exercisable by the employee on
account of his death or disability.
(g) Incentive Stock Options. Each option agreement
may contain such terms and provisions as the Committee
may determine to be necessary or desirable in order to
qualify an option designated as an ISO.
(h) No Rights as Stockholder. No Optionee shall
have any rights as a stockholder with respect to shares
covered by an option until the option is exercised by the
written notice, accompanied by payment as provided in
clause (d) above, and any tax obligations are satisfied
pursuant to Section 11.
(i) Extraordinary Corporate Transactions. If the
Company recapitalizes or otherwise changes its capital
structure, or merges, consolidates, sells all of its
assets or dissolves (each of the foregoing a "Fundamental
Change"), then thereafter upon any exercise of an option
theretofore granted, the Optionee shall be entitled to
purchase under such option, in lieu of the number of
shares of Common Stock as to which such option shall then
be exercisable, the number and class of shares of stock
and securities to which the Optionee would have been
entitled pursuant to the terms of the Fundamental Change
if, immediately prior to such Fundamental Change, the
Optionee had been the holder of record of the number of
shares of Common Stock as to which such option is then
exercisable. For purposes of the Plan and Options
granted under the Plan, the term "Corporate Change" shall
mean (i) any merger or consolidation in which the Company
shall not be the surviving entity (or survives only as a
subsidiary of another entity whose shareholders did not
own all or substantially all of the Company's Common
Stock immediately prior to such transaction), (ii) the
sale of all or substantially all of the Company's assets
to any other person or entity (other than a wholly-owned
subsidiary), (iii) the acquisition of beneficial
ownership or control of (including, without limitation,
power to vote) more than 50% of the outstanding shares of
Common Stock by any person or entity (including a "group"
as defined by or under Section 13(d)(3) of the Exchange
Act), (iv) the dissolution or liquidation of the Company,
(v) a contested election of directors, as a result of
which or in connection with which the persons who were
directors of the Company before such election or their
nominees cease to constitute a majority of the Board, or
(vi) any other event specified by the Committee,
regardless of whether at the time an Option is granted or
thereafter. The Committee may provide, either at the
time an Option is granted or thereafter, that a Corporate
Change shall have such effect as specified by the
Committee, or no effect, as the Committee in its sole
discretion may provide. Without limiting the foregoing,
the Committee may but need not provide, either at the
time an Option is granted or thereafter, that if a
Corporate Change occurs, then effective as of a date
selected by the Committee, the Committee (which for
purposes of the Corporate Changes described in (iii) and
(v) above shall be the Committee as constituted prior to
the occurrence of such Corporate Change) acting in its
sole discretion without the consent or approval of any
Optionee, will effect one or more of the following
alternatives or combination of alternatives with respect
to all outstanding options (which alternatives may be
conditional on the occurrence of such of the Corporate
Change specified in clause (i) through (v) above which
gives rise to the Corporate Change and which may vary
among individual Optionees): (1) in the case of a
Corporate Change specified in clauses (i), (ii) or (iv),
accelerate the time at which options then outstanding may
be exercised in full for a limited period of time on or
before a specified date (which will permit the Optionee
to participate with the Common Stock received upon
exercise of such option in the event of a Corporate
Change specified in clauses (i), (ii) or (iv), as the
case may be) fixed by the Committee, after which
specified date all unexercised options and all rights of
Optionees thereunder shall terminate, (2) accelerate the
time at which options then outstanding may be exercised
so that such options may be exercised in full for their
then remaining term, or (3) require the mandatory
surrender to the Company of outstanding options held by
such Optionee (irrespective of whether such options are
then exercisable under the provisions of the Plan) as of
a date, before or not later than sixty days after such
Corporate Change, specified by the Committee, and in such
event the Committee shall thereupon cancel such options
and the Company shall pay to each Optionee an amount of
cash equal to the excess of the fair market value of the
aggregate shares subject to such option over the
aggregate option price of such shares; provided, however,
the Committee shall not select an alternative (unless
consented to by the Optionee) that, if the Optionee
exercised his accelerated options pursuant to
alternative 1 or 2 and participated in the transaction
specified in clause (i), (ii) or (iv) or received cash
pursuant to alternative 3, would result in the Optionee's
owing any money by virtue of operation of Section 16(b)
of the Exchange Act. If all such alternatives have such
a result, the Committee shall take such action, which is
hereby authorized, to put such Optionee in as close to
the same position as such Optionee would have been in had
alternative 1, 2 or 3 been selected but without resulting
in any payment by such Optionee pursuant to Section 16(b)
of the Exchange Act. Notwithstanding the foregoing, with
the consent of the Optionee, the Committee may in lieu of
the foregoing make such provision with respect of any
Corporate Change as it deems appropriate.
(j) Acceleration of Options. Except as herein
expressly provided, (i) the issuance by the Company of
shares of stock of any class of securities convertible
into shares of stock of any class, for cash, property,
labor or services, upon direct sale, upon the exercise of
rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company
convertible into such shares or other securities,
(ii) the payment of a dividend in property other than
Common Stock, or (iii) the occurrence of any similar
transaction, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of
shares of Common Stock subject to options theretofore
granted or the purchase price per share, unless the
Committee shall determine in its sole discretion that an
adjustment is necessary to provide equitable treatment to
Optionee. Notwithstanding anything to the contrary
contained in this Plan, the Committee may in its sole
discretion accelerate the time at which any option may be
exercised, including, but not limited to, upon the
occurrence of the events specified in this Section 6, and
is authorized at any time (with the consent of the
Optionee) to purchase options from an Optionee.
(k) Stockholders Agreement. The Committee shall
provide in the option agreement that prior to receiving
any shares of Common Stock or other securities on the
exercise of the option, the Optionee (or the Optionee's
representative upon the Optionee's death) shall be
required to execute the Company's Stockholders Agreement.
SECTION 7. Other Provisions of Options and Other Awards.
(a) Awards. The terms upon which an award under
this Plan (an "Award") is granted shall be evidenced by a
written agreement executed by the Company and the
Participant to whom such Award is granted. Awards that
are granted under this Plan are not restricted to any
specified form or structure and may include, without
limitation, stock options as provided in Sections 5 and
6, sales or bonuses of stock, restricted stock, reload
stock options, stock purchase warrants, other rights to
acquire stock, securities convertible into or redeemable
for stock, stock appreciation rights, limited stock
appreciation rights, phantom stock, dividend equivalents,
performance units 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.
(b) Powers of the Committee. Subject to the
provisions of this Plan, the Committee shall have sole
and absolute discretionary authority (i) to determine,
authorize and designate those Participants who are to
receive Awards under the Plan, (ii) to determine the
number of shares of Common Stock subject to any such
Award, and (iii) at any time to cancel an Award with the
consent of the holder and grant a new Award to such
holder in lieu thereof, which new Award may be for a
greater or lesser number of Shares and may have a higher
or lower exercise or settlement price.
(c) Terms of Awards. Subject to the provisions of
this Plan, the Committee, in its sole and absolute
discretion, shall determine all of the terms and
conditions of each Award granted under this Plan, which
terms and conditions may include, among other things:
(i) provisions permitting the Committee to
allow or require the recipient of such Award, or
permitting any such recipient the right, to pay
the purchase price of the shares or other
property issuable pursuant to such Award, in
whole or in part, by any one or more of the means
permitted for the payment of the exercise price
of options under Section 6(d);
(ii) provisions specifying the purchase,
exercise or settlement price for any Award, or
specifying the method by which such price is
determined, provided that the exercise or
settlement price of any stock appreciation right
or similar Award that is intended to qualify as
"performance based compensation" for purposes of
Section 162(m) of the Code shall be not less than
the fair market value of a share of Common Stock
on the date such Award is granted;
(iii) provisions relating to the
exercisability and/or vesting of Awards, lapse
and non-lapse restrictions upon the shares
obtained or obtainable under Awards or under the
Plan and the termination, expiration and/or
forfeiture of Awards, which provisions may but
need not be conditioned upon the passage of time,
continued employment or service on the Board, the
satisfaction of performance criteria, the
occurrence of certain events (including events
which the Board or the Committee determine
constitute a change of control), or other
factors; and/or
(iv) provisions conditioning or accelerating
the grant of an Award or the receipt of benefits
pursuant to such Award, either automatically or
in the discretion of the Committee, upon the
occurrence of specified events, including,
without limitation, the achievement of
performance goals, the exercise or settlement of
a previous Award, the satisfaction of an event or
condition within the control of the recipient of
the Award or within the control of others, a
change of control of the Company, an acquisition
of a specified percentage of the voting power of
the Company, the dissolution or liquidation of
the Company, a sale of substantially all of the
property and assets of the Company or an event of
the type described in Section 6(i) hereof.
(d) Assignability. Unless otherwise provided by
the Committee, (i) an Award (including an option) shall
not be assignable or otherwise transferable except by
will or by the laws of descent and distribution or
pursuant to a domestic relations order, and (ii) during
the lifetime of a Participant, an Award (including an
option) shall be exercisable only by him.
(e) Changes in Company's Capital Structure. The
existence of outstanding Awards (including any options)
shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations,
exchanges, or other changes in the Company's capital
structure or its business, or any merger or consolidation
of the Company, or any issuance of Common Stock or other
securities or subscription rights thereto, or any
issuance of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock
or the rights thereof, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or
otherwise. However, if the outstanding shares of Common
Stock or other securities of the Company, or both, for
which the Award is then exercisable or as to which the
Award is to be settled shall at any time be changed or
exchanged by declaration of a stock dividend, stock
split, combination of shares, recapitalization, or
reorganization, the number and kind of shares of Common
Stock or other securities which are subject to the Plan
or subject to any Awards theretofore granted, and the
exercise or settlement prices, shall be appropriately and
equitably adjusted so as to maintain the proportionate
number of shares or other securities without changing the
aggregate exercise or settlement price, provided,
however, that such adjustment shall be made only to the
extent that such will not affect the status of any Award
intended to qualify as an ISO or as "performance based
compensation" under Section 162(m) of the Code.
SECTION 8. Amendments or 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 Plan would affect the ability of Awards granted under the
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.
SECTION 9. Compliance With Other Laws and Regulations.
The Plan, the grant and exercise of Awards thereunder, and the
obligation of the Company to sell, issue or deliver shares
under such Awards, shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by
any governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the
completion of any registration or qualification of such shares
under any federal or state law or issuance of any ruling or
regulation of any government body which the Company shall, in
its sole discretion, determine to be necessary or advisable.
Any adjustments provided for in Section 6(i), Section (6)(j)
and Section 7(e) shall be subject to any shareholder action
required by Delaware corporate law. This Plan is intended to
constitute an unfunded arrangement for a select group of
management or other key employees.
SECTION 10. Purchase for Investment. Unless the Awards
and shares of Common Stock covered by this Plan have been
registered under the Securities Act of 1933, as amended, or
the Company has determined that such registration is
unnecessary, each person exercising an option or other Award
or receiving Common Stock pursuant to any Award under this
Plan may be required by the Company to give a representation
in writing that he is acquiring such shares for his own
account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
SECTION 11. Taxes.
(a) The Company may make such provisions or impose
such conditions as it may deem appropriate for the
withholding or payment by the Participant of any taxes
which it determines are required in connection with any
Awards granted under this Plan.
(b) Notwithstanding the terms of Paragraph 11(a),
any Optionee or other Participant may pay all or any
portion of the taxes required to be withheld by the
Company or paid by him in connection with the exercise of
a Nonqualified Option or the exercise, vesting or
settlement of any other Award by electing to have the
Company withhold shares of Common Stock, or by delivering
previously owned shares of Common Stock, having a fair
market value, determined in accordance with Paragraph
6(b), equal to the amount required to be withheld or
paid. Any such elections are subject to such conditions
or procedures as may be established by the Committee and
may be subject to disapproval by the Committee.
SECTION 12. Replacement of Options. The Committee from
time to time may permit an Optionee under the Plan 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.
SECTION 13. No Right to Company Employment. Nothing in
this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in
the employ of the Company or interfere in any way with the
right of the Company to terminate an individual's employment
at any time. The Award agreements may contain such provisions
as the Committee may approve with reference to the effect of
approved leaves of absence.
SECTION 14. Liability of Company. The Company and any
Affiliate which is in existence or hereafter comes into
existence shall not be liable to a Participant, an Optionee or
other persons as to:
(a) The Non-Issuance of Shares. The non-issuance
or sale of shares as to which the Company has been unable
to obtain from any regulatory body having jurisdiction
the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares
hereunder; and
(b) Tax Consequences. Any tax consequence
expected, but not realized, by any Participant, Optionee
or other person due to the receipt, exercise or
settlement of any option or other Award granted
hereunder.
SECTION 15. Effectiveness and Expiration of Plan. The
Plan shall be effective on the date the Board adopts the Plan.
All Awards, including any options, granted under this Plan are
subject to, and may not be exercised before, the approval of
this Plan by the stockholders prior to the first anniversary
date of the effective date of the Plan, by the affirmative
vote of the holders of a majority of the outstanding shares of
the Company present, or represented by proxy, and entitled to
vote thereat or by written consent in accordance with the laws
of the State of Delaware; provided that if such approval by
the stockholders of the Company is not forthcoming, all
options or other Awards previously granted under this Plan
shall be void. If the stockholders of the Company fail to
approve the Plan within twelve months of the date the Board
approved the Plan, the Plan shall terminate and all options
and other Awards previously granted under the Plan shall
become void and of no effect. No option or other Award
granted under this Plan shall have a term of more than ten
years from the date it is granted. The Plan shall expire ten
years after the effective date of the Plan and thereafter no
Awards shall be granted pursuant to the Plan.
SECTION 16. Non-Exclusivity of the Plan. Neither the
adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may
deem desirable, including without limitation, the granting of
restricted stock or stock options otherwise than under the
Plan, and such arrangements may be either generally applicable
or applicable only in specific cases.
SECTION l7. Governing Law. This Plan and any agreements
hereunder shall be interpreted and construed in accordance
with the laws of the State of Delaware and applicable federal
law.
WA952790.046/15+
EXHIBIT 11.1 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Six Months
Months Ended Ended June 30,
June 30,
(in thousands) 1997 1998 1997 1998
Net income (basic) 5,885 9,092 6,587 12,07
4
Interest expense on 7% Convertible Notes net
of tax effect - 326 - 805
Net income (diluted) 5,885 9,418 6,587 12,87
9
Weighted average shares outstanding (basic) 17,021 18,805 17,012 16,99
4
Incremental shares related to stock 654 951 651 943
options
Incremental shares related to 7%
Convertible Notes - 2,490 - 4,178
Weighted average shares outstanding 17,675 22,246 17,663 22,11
(diluted) 5
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<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1998 MAR-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 58,857 41,802 39,167 21,470
<SECURITIES> 930 930 10,737 0
<RECEIVABLES> 28,475 26,466 21,621 15,961
<ALLOWANCES> 0 0 0 0
<INVENTORY> 2,824 2,738 2,477 1,759
<CURRENT-ASSETS> 97,610 79,822 76,857 41,744
<PP&E> 46,195 44,374 40,638 16,157
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> 175,990 155,898 148,992 64,758
<CURRENT-LIABILITIES> 44,732 35,627 31,680 23,962
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0 0 0 0
0 0 0 0
<COMMON> 413 309 320 339
<OTHER-SE> 85,909 43,797 34,485 37,395
<TOTAL-LIABILITY-AND-EQUITY> 175,990 155,898 148,992 64,758
<SALES> 131,508 56,693 202,540 179,370
<TOTAL-REVENUES> 133,814 58,055 205,444 182,484
<CGS> 0 0 0 0
<TOTAL-COSTS> 110,581 52,180 176,501 162,221
<OTHER-EXPENSES> 1,560 732 2,104 655
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 2,148 1,201 3,450 1,013
<INCOME-PRETAX> 21,673 5,143 26,839 19,608
<INCOME-TAX> 9,599 2,160 12,339 450
<INCOME-CONTINUING> 12,074 2,983 14,500 19,158
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<NET-INCOME> 12,074 2,983 14,500 19,158
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