EMPLOYMENT
AGREEMENT
between
ATA AIRLINES,
INC.,
ATA HOLDINGS
CORP.,
and
JOHN G.
DENISON
(Effective September 1,
2005)
EMPLOYMENT
AGREEMENT
between
ATA AIRLINES,
INC.,
ATA HOLDINGS
CORP.,
and
JOHN G.
DENISON
This Employment Agreement (“
Agreement ”) is made and entered into by and
between ATA Airlines, Inc. (“ ATA ”),
ATA Holdings Corp. (“ Holdings ”; ATA
and Holdings are referred to jointly and severally as the "
Companies "), and John G. Denison (“
Executive ”).
Recitals
A. On October 26, 2004, each of the Companies
filed with the United States Bankruptcy Court for the Southern
District of Indiana, Indianapolis Division (the "Bankruptcy
Court"), its respective voluntary petition for relief under
Chapter 11 of Title 11 of the United States Code,
11 U.S.C. §§ 101 et
seq . as amended (the "Bankruptcy Code"; the Chapter 11
cases initiated by these filings are collectively called the
"Chapter 11 Cases") The Companies each continue to operate their
businesses and manage their properties as debtors-in-possession
pursuant to the Bankruptcy Code.
B. ATA and Executive are parties to that certain
Employment Agreement dated effective as of February 21, 2005 (the
“Initial Employment Agreement”), pursuant to which
Executive serves as President and Chief Executive Officer of
ATA.
C. The Companies desire for Executive to continue
to be employed by ATA as its President and Chief Executive Officer
and also to serve as President and Chief Executive Officer of
Holdings, all in accordance with the terms of this
Agreement.
D. The Companies intend to seek confirmation of
plans of reorganization as soon as feasible, and if possible, by
December 31, 2005. Pursuant to the reorganization plan confirmed
for ATA, Holdings may continue as the sole shareholder of ATA or a
corporation other than Holdings may become the owner and holder of
all of the issued and outstanding capital stock of ATA. The term "
New ATA " as used in this
Agreement means the corporation which, after the confirmation of,
and pursuant to a plan of reorganization for ATA or Holdings in the
Chapter 11 Cases, owns and holds all of the issued and outstanding
capital stock of ATA and, by whatever means, is or has become the
employer of Executive as its Chief Executive Officer, or if there
is no such corporate owner and employer, then the term shall mean
ATA, as reorganized pursuant to such confirmed plan of
reorganization. As used in this Agreement: (a) the term "
Companies " shall mean, collectively, ATA and
Holdings, except that from and after the confirmation of a plan of
reorganization for ATA in ATA's Chapter 11 Case, the term shall
mean, collectively, ATA and New ATA; (b) the term "
Company " shall mean any one of the
Companies.
Agreement
NOW, THEREFORE, in consideration of the
foregoing recitals, the mutual promises set forth in this
Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Companies and
Executive agree as follows:
1.
Effective
Date. This Agreement
shall not become effective until it shall have been authorized by
the Bankruptcy Court in the Chapter 11 Cases. Subject to that
approval, this Agreement shall be effective for all purposes as of
September 1, 2005 (the “ Effective Date
”).
2.
Term of
Employment. The term
of this Agreement shall begin on the Effective Date and continue
through December 31, 2007, subject, however, to earlier termination
as provided in Section 8 of this Agreement (the “
Term ”).
3.
Position and
Responsibilities. During the Term, Executive will serve as
President and Chief Executive Officer of each of the Companies and
in such additional executive positions as each of the Companies may
designate from time to time during the Term. Executive agrees to
perform all of the duties and responsibilities associated with such
positions as well as other duties and responsibilities that may be
assigned to Executive from time to time by the Board of Directors
of each of the Companies. In addition, Executive's additional
duties shall include providing the Board of Directors of each of
the Companies periodic evaluations of the officers of the Companies
working under Executive’s supervision or review, with a
specific view of each individual’s qualifications and ability
as a potential successor President and Chief Executive Officer of
the Companies. Executive will report to the respective Boards of
Directors of the Companies. In recognition of Executive’s
role as President and Chief Executive Officer, it Executive shall
continue to serve as a member of the Boards of Directors of the
Companies during the Term.
4.
Location and
Travel. Executive’s employment positions will be
based at ATA’s corporate headquarters in Indianapolis,
Indiana, and Executive will be expected to spend the vast majority
of his employment time at such headquarters. The Companies
understand that Executive’s permanent residence is in Dallas,
Texas, and the Companies acknowledge that Executive may continue to
commute weekly or bi-weekly to such permanent residence consistent
with Executive’s commuting practices during his employment
under the Initial Employment Agreement, as long as such commuting
does not interfere unreasonably with the execution of
Executive’s duties for the Companies. Given Executive’s
positions for the Companies and the nature of the Companies’
business, the performance of Executive’s duties will entail
significant travel around North America and occasionally abroad.
ATA will reimburse Executive for all reasonable and actual travel
expenses, subject to Executive’s compliance with applicable
employee travel policies and guidelines of the Companies, as in
effect from time to time.
5.
Standard of
Care. During the
Term, Executive (a) will devote his full working time, attention,
energies and skills exclusively to the business and affairs of the
Companies; (b) will exercise the highest degree of loyalty and the
highest standards of conduct in the performance of his duties; (c)
will not, except as noted herein, engage in any other business
activity, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage, without the express
written consent of the Companies; and (d) will not take any action
that deprives the Companies of any business opportunities or
otherwise act in a manner that conflicts with the best interests of
the Companies or that is detrimental to the business of the
Companies; provided, however, this Section 5 shall not be construed
as preventing Executive (x) from investing his personal assets in
such form or manner as will not require his services in any
capacity in the operations and affairs of the businesses in which
such investments are made, or (y) from participating in charitable
or other not-for-profit activities as long as such activities do
not interfere with Executive’s work for the
Companies.
6.
Compensation and
Benefits. As
remuneration for all services to be rendered by Executive during
the Term pursuant to this Agreement, and as consideration for
complying with the covenants herein, the Companies shall pay and
provide to Executive the following:
6.1.
Annual Base
Salary .
Executive’s base salary shall be the nominal amount of Three
Hundred Fifty Thousand Dollars ($350,000) on an annualized basis;
provided, however, consistent with salary reductions taken by other
executives of the Companies, the Companies shall pay Executive a
reduced base salary of Two Hundred Eighty Thousand Dollars
($280,000) on an annualized basis (the “ Base
Salary ”) unless and until Executive and the
Companies agree to a different amount. The Companies will review
the Base Salary on an annual basis to determine any appropriate
annual increase in Base Salary, based on considerations such as
Executive's performance, market compensation conditions, the
financial performance of the Companies and inflation. The Base
Salary shall be paid to Executive consistent with the Companies
customary payroll practices.
6.2.
Incentive
Bonus. Executive
will be eligible to earn annual incentive bonus compensation from
the Companies. The amount of the incentive bonus compensation, if
any, shall be determined at the discretion of the Board of
Directors of New ATA, with Executive not participating in the
determination. Such annual incentive compensation will target 50%
to 125% of Executive’s Base Salary and will be based on a
combination of the achievement by the Companies on a consolidated
basis of performance goals established by the Board of Directors of
New ATA prior to the start of the calendar year for which the bonus
is being determined, as well as such Board’s assessment of
Executive’s performance as President and Chief Executive
Officer of the Companies. The first annual incentive bonus
compensation will be considered in January, 2007, relating to
performance during calendar year 2006. New ATA also will consider
in January, 2008, an incentive bonus for Executive relating to
performance during calendar year 2007, notwithstanding that the
term of Executive’s employment is to end at December 31,
2007.
6.3.
Equity
Participation. An
important part of Executive’s compensation as President and
Chief Executive Officer of the Companies is to be in the form of
equity participation, particularly given that Executive has agreed
to a below-market annual Base Salary under this Agreement. The
parties further acknowledge that it is not possible at the
Effective Date of this Agreement for the parties to specify with
precision the form of such equity participation because, among
other reasons, the ultimate capital structure and valuation of New
ATA upon emergence from bankruptcy are not yet known. Accordingly,
Executive’s equity participation will be determined by mutual
agreement at a future time closer to the actual date of the
confirmation of a plan of reorganization and the emergence of ATA
from bankruptcy, when the issues of capital structure and valuation
of New ATA have been resolved, provided such equity participation
is guided by the following principles: (a) the structure and form
of Executive’s equity participation will align
Executive’s long term interests with those of New ATA and its
shareholders pursuant to which Executive will gain from the
increase in shareholder equity that is created; (b)
Executive’s equity participation will vest ratably over the
remaining scheduled term of his employment and will vest
immediately if New ATA or ATA terminates Executive’s
employment without Cause or if Executive terminates his employment
because of a Change in Control occurring after ATA’s exit
from bankruptcy (and not in connection with that exit); (c) the
life of the equity vehicle will be set in a manner to allow
Executive to benefit from the potential long-term appreciation in
New ATA equity. For example, if stock options are deployed, such
options will have a minimum life of seven (7) years and a maximum
life of ten (10) years, and Executive will be able to hold all
vested options for their full term even after Executive is no
longer employed by any of the Companies; (d) the value of the
equity participation, over the full life of the equity vehicle
deployed and as determined by the Black-Scholes method, should be
set at a level consistent with comparable CEO-level appointments
(post-bankruptcy and normal course of business) at mid-size
carriers in the airline industry subject to reasonableness
standards; (e) the value of the equity participation will also
reflect Executive’s assistance to ATA in connection with its
cost control and reduction efforts by Executive’s election to
forego the bankruptcy exit bonus that would have been due Executive
under the Initial Employment Agreement; (f) the strike price for
any equity vehicle will be equal to the lower of (i) the valuation
set forth in the final Disclosure Statement issued in connection
with the confirmed reorganization plan for the Companies or (ii)
the average closing price of the capital stock of New ATA over the
first thirty (30) days after (A) exit from bankruptcy protection,
and (B) at least twenty-five percent (25%) of New ATA’s
capital stock having been distributed, so as to place Executive on
the same basis as the shareholders of New ATA; and (g) the specific
vehicle(s) selected for equity participation will reflect the
parties’ objective of aligning Executive’s equity
participation interest with the creation of long-term value for New
ATA shareholders while serving Executive and New ATA in a tax
efficient manner; the parties currently believe that the most
advantageous vehicle would be stock options. At the appropriate
juncture during the Term but in no event later than seventy-five
(75) days after the effective date of a confirmed plan of
reorganization of ATA and/or Holdings (the "Effective
Reorganization Date"), the parties agree to negotiate and implement
an equity participation benefits and awards for Executive
consistent with the foregoing general principles.
6.4.
Employee
Benefits. The
Companies shall provide to Executive and his eligible dependents
employee fringe benefits to which other employees of the Companies
and their eligible dependents are generally entitled, subject to
the eligibility requirements and other terms and conditions of such
plans. Nothing contained in this Section shall obligate the
Companies to institute, maintain or refrain from changing, amending
or discontinuing any employee fringe benefit plan, so long as such
changes are similarly applicable to other employees
generally.
6.5.
Vacation.
Executive shall be entitled to
twenty (20) vacation days per year.
6.6.
Relocation
Benefits. If
Executive relocates his permanent residence to the Indianapolis,
Indiana area before December 31, 2006, Executive will be entitled
to relocation benefits in accordance with the executive relocation
package policy of the Companies, or if there is more than one, the
policy of Holdings.
6.7.
Travel
Benefits. Executive
shall be entitled to participate in ATA’s travel benefits
program subject to the terms and conditions of such program, which
program may be amended from time to time.
6.8.
Joint and Several
Obligations . All
compensation, benefit and other commitments, liabilities and
obligations of the Companies to Executive arising under, pursuant
to, by virtue of or in connection with this Agreement while
Executive serves as Chief Executive Officer of the Companies shall
be the joint and several obligations and liabilities of the
Companies. If for any reason Executive shall cease to be employed
as Chief Executive Officer of one of the Companies but continues to
be employed as the Chief Executive Officer of the other Companies,
then the compensation, benefits and other commitments, liabilities,
and obligations to Executive arising under, pursuant to, by virtue
of or in connection with this Agreement from and after termination
of Executive's employment with that one Company shall be joint and
several among such of the Companies as then continue to employ
Executive. The Companies may elect to allocate among themselves the
costs of the employment of Executive under and pursuant to this
Agreement, with the allocation being based on whatever factors the
Companies mutually determine are appropriate, but in the absence of
such an allocation agreement, all costs of the employment of
Executive shall be allocated to ATA. As a matter of convenience to
the Companies, one of the Companies may pay compensation and
benefits to Executive on behalf of the Companies.
7.
Reimbursement of Business
Expenses. The
Companies shall pay or reimburse Executive for all ordinary and
necessary expenses, in a reasonable amount, which Executive incurs
in performing his duties under this Agreement. Such expenses shall
be paid or reimbursed to Executive consistent with the expense
reimbursement policies of the Companies in effect from time to time
and Executive agrees to abide by any such expense reimbursement
policies.
8.
Termination of
Employment.
8.1.
Termination Due to
Death. If Executive
dies during the Term, this Agreement shall terminate on the date of
Executive’s death. Upon the death of Executive, the
obligation to pay and provide to Executive compensation and
benefits under this Agreement shall immediately terminate, except:
(a) Executive shall be paid by the Companies that portion of
his Base Salary, at the rate then in effect, which shall have been
earned through the termination date; and (b) Executive shall
be paid or provided by the Companies such other payments and
benefits, if any, which had accrued hereunder before
Executive’s death. Other than the foregoing, the Companies
shall have no further obligations to Executive (or
Executive’s estate, heirs, executors, administrators and
personal representatives) under this Agreement.
8.2.
Termination Due to
Disability. If
Executive suffers a Disability, the Companies shall have the right
to terminate this Agreement and Executive’s employment with
the Companies. The Companies shall deliver written notice to
Executive of the Companies’ termination because of
Disability, pursuant to this Section 8.2, specifying in such
notice a termination date, and this Agreement and Executive’s
employment by the Companies shall terminate at the close business
on the specified termination date.
Upon the termination of this Agreement because
of Disability, the obligation to pay and provide to Executive
compensation and benefits under this Agreement shall immediately
terminate, except: (a) Executive shall be paid by the
Companies that portion of his Base Salary, at the rate then in
effect, which shall have been earned through the termination date;
and (b) Executive shall be paid or provided by the Companies
such other payments and benefits, if any, which had accrued
hereunder before the termination for Disability.
The term “ Disability
” shall mean either (i) when Executive is deemed
disabled in accordance with the long-term disability insurance
policy or plan, if any, of the Companies in effect at the time of
the illness or injury causing the disability and under which
Executive is insured, or if no such policy or plan is in effect,
(ii) the inability of Executive, because of injury, illness,
disease or bodily or mental infirmity as determined by a physician
reasonably acceptable to the Companies, to perform the essential
functions of his job (with or without reasonable accommodation) for
more than one hundred twenty (120) days during any period of twelve
(12) consecutive months.
8.3.
Termination Without
Cause. At any time
during the Term, the Companies may terminate this Agreement and
Executive’s employment with the Companies without cause for
any reason or no reason by notifying Executive in writing of the
Companies’ intent to terminate, specifying in such notice the
effective termination date, and this Agreement and
Executive’s employment with the Companies shall terminate at
the close of business on the termination date specified in the
Companies’ notice. Upon termination of Executive’s
employment by the Companies without cause, the obligation to pay
and provide Executive compensation and benefits under this
Agreement shall immediately terminate, except: (a) Executive
shall be paid that portion of his Base Salary, at the rate then in
effect, which shall have been earned through the termination date;
(b) Executive shall be paid or provided such other payments
and benefits, if any, which had accrued hereunder before the
termination date; (c) the Companies shall pay Executive
severance compensation in the form of salary continuation at
Executive’s Base Salary rate, as then in effect, for a period
of twelve (12) months following the termination date; and (d) the
Companies shall pay Executive supplemental severance compensation
consisting of twelve (12) monthly payments each equal to the sum of
(i) an amount equal to the monthly COBRA premium Executive would
pay if he elected to exercise his COBRA rights to continue group
health and dental insurance coverage for himself and any eligible
dependents, and (ii) an amount equal to the estimated federal and
state tax liability that Executive will incur as a result of his
receipt of the amounts set forth in this subpart (d) so that such
supplemental payments are fully grossed-up (the payments set forth
in this subpart (d) shall hereinafter be referred to as the “
Supplemental Severance Payments ”). Other
than the foregoing, the Companies shall have no further obligations
to Executive under this Agreement.
8.4.
Termination For
Cause. At any time
during the Term, the Companies may terminate this Agreement and
Executive’s employment with the Companies for
“Cause” as provided in this Section 8.4. The term
“ Cause ” shall mean the occurrence of
one or more of the following events: (a) Executive’s
gross or habitual neglect of his employment duties and
responsibilities; (b) Executive’s conviction of,
pleading guilty to, or pleading nolo contendere or its
equivalent to, a felony or any crime involving moral turpitude; (c)
Executive’s engaging in any illegal conduct or willful
misconduct in the performance of his employment duties for any of
the Companies (or their affiliates); (d) Executive’s engaging
in any fraudulent or dishonest conduct in his dealings with, or on
behalf of, any of the Companies (or their affiliates);
(e) Executive’s failure or refusal to follow the lawful
instructions of the Board of Directors of any of the Companies, if
such failure or refusal continues for a period of five (5) calendar
days after the Board of Directors of any of the Companies delivers
to Executive a written notice stating the instructions which
Executive has failed or refused to follow; (f) Executive’s
breach of his obligations under this Agreement;
(g) Executive’s gross negligence in the performance of
his employment duties under this Agreement; or (h)
Executi
|
