Exhibit 10.12(b)

 

SECOND AMENDED AND RESTATED SEVERANCE AGREEMENT

 

THIS SECOND AMENDED AND RESTATED SEVERANCE AGREEMENT (the “Agreement”) is made
and entered into as of this 15th day of March, 2005 (the “Effective Date”), by
and between FLYi, INC., a Delaware corporation (“FLYi”) and INDEPENDENCE AIR, a
California corporation (“IA”) (FLYi and IA are herein collectively referred to
as the “Company”) and THOMAS J. MOORE (“Moore”).

 

Witnesseth That:

 

Whereas, Moore is currently employed by the Company as Chief Operating Officer
and President, and in connection with such employment entered into a Severance
Agreement dated as of December 28, 1999 (which was restated as of December 28,
2001) (the “Prior Severance Agreement”) with the Company; and

 

Whereas, the Company wishes to assure itself of the continued services of Moore;
and

 

Whereas, to promote the Company’s efforts to reduce its costs on both a cash and
accounting basis, the Company and Moore have agreed to certain modifications to
the Prior Severance Agreement to defer or reduce certain significant
compensation benefits provided for under the Prior Severance Agreement; 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 Moore;

 

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 Moore and Moore 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  Moore shall serve the Company in the capacities of Chief
Operating Officer and President.  Moore shall be responsible for supervising and
directing all operations of the Company and of any other entity(ies) to which
the Company’s obligations under this Agreement shall be assigned pursuant to
Paragraph 12.  Moore shall otherwise be responsible for carrying out all such
other duties and services for the Company commensurate with Moore’s position, as
may be designed from time to time by the Chief Executive Officer of the Company
(the “CEO”).

 

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3.             Term of Employment  Moore’s term of employment under this
Agreement shall commence on the Effective Date and shall terminate on the last
day of the calendar month which is twelve (12) 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 Moore’s employment has previously been terminated
or unless Moore or the Company has provided notice of intention to terminate
Moore’s employment pursuant to the terms of Paragraph 10 below, in which case
Moore’s term of employment under this Agreement will be extended to the pending
Termination Date.

 

4.             Extent of Service  Moore 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 under the direction of the CEO.

 

5.             Compensation  During the term of this Agreement, Company agrees
to pay to Moore, and Moore agrees to accept from Company, in full payment for
services rendered by Moore and work to be performed by him under the terms of
this Agreement, the following:

 

A.            Salary.  An annual base salary of Two Hundred Forty-Seven Thousand
Five Hundred Dollars ($247,500).  Commencing on October 1, 2005 and on each
October 1 thereafter, the amount of Moore’s base salary shall be increased as
determined by the Compensation Committee of the Board of Directors of the
Company (the “Compensation Committee”).  Moore’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.            Management Incentive  Plan.  Moore shall participate in the
Company’s Management Incentive Program, or any successor bonus plan or program
for management employees.

 

C.            Executive Bonuses.  Moore shall be eligible for an additional
annual bonus under an executive performance bonus plan currently known as Senior
Management Incentive Plan (“SMIP”) for so long as the Board of Directors
determines to maintain such plan.  Under such plan, each calendar year, Moore
shall be entitled to receive a bonus equal to a specified percentage of base
salary upon the attainment of certain pre-established goals.  Such goals and
percentage of salary shall be determined by the Compensation Committee.  The
bonus amount each year shall be paid in cash, stock, options or such other form
as the Compensation Committee provides, paid at the time period provided under
such plan, at the same time and in the same form as paid generally to other
eligible employees, except to the extent that this Agreement provides otherwise.

 

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D.            Deferred Compensation.

 

(i)                            Notwithstanding anything to the contrary in the
Prior Severance Agreement, Deferred Compensation (as defined below) shall be
provided as described in this Paragraph 5.D., which shall supercede and control
over all prior deferred compensation arrangements.  As of the Effective Date,
the Company has credited amounts of deferred compensation under an unfunded and
non-tax qualified arrangement (“Deferred Compensation”) pursuant to the Prior
Severance Agreement.  The amounts credited as Deferred Compensation are recorded
as a bookkeeping entry representing a general unsecured obligation of the
Company and Moore shall not have a claim to any specific assets of the Company
in satisfaction of the amounts, if any, payable as Deferred Compensation.  As of
the Effective Date, the balance in the Deferred Compensation account recorded
for Moore equals $1,747,250, which is the amount of the Company’s Deferred
Compensation “contributions” under the Prior Severance Agreement between the
Company and Moore, as such was amended from time to time, through the Effective
Date.  As of and after the Effective Date, (A) the Company’s obligation under
the prior Severance Agreement to credit Deferred Compensation for the benefit of
Moore at the rate of one hundred percent (100%) of Moore’s annual base salary
shall terminate and (B) the Company shall have no further obligation to accrue
any additional Deferred Compensation for the benefit of Moore, other than as a
result of additional vesting as provided for in Paragraph 5.D.(ii) below.  No
interest or rate of return or other appreciation or depreciation of value shall
accrue or be payable on amounts credited to Moore as Deferred Compensation
pursuant to this Paragraph 5.D. unless the Company elects otherwise.

 

(ii)           Vesting of Deferred Compensation will be based upon “Years of
Service,” with Moore 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, 1997 and ending on the Deferred Compensation Ending Date
(as defined below).  (That is, Moore will continue to be credited with Years of
Service during any applicable Severance Period, as further provided in Paragraph
10.E.(iv) hereof.)  Moore will become vested in the Deferred Compensation based
on the following schedule, with the effect that no later than January 1, 2006,
Moore shall be 100% vested:

 

YEARS OF SERVICE

 

PERCENTAGE
VESTED

 

Less than 4

 

0

%

At least 4 but less than 5

 

25

%

At least 5 but less than 6

 

35

%

At least 6 but less than 7

 

50

%

At least 7 but less than 8

 

65

%

At least 8 but less than 9

 

80

%

At least 9

 

100

%

 

In the event of a Change in Control (as defined and determined under Paragraph
8.C.(ii) of this Agreement) of the Company, Moore shall become immediately 100%
vested in his Deferred Compensation amount notwithstanding the above vesting
schedule.

 

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(iii)          The “Deferred Compensation Ending Date” shall mean the earliest
of (a) January 1, 2006, (b) the Termination Date (as defined below) if Moore’s
employment with the Company is terminated at any time under circumstances that
do not entitle him to Severance Compensation pursuant to Paragraph 10 of this
Agreement, and (c) the last day of the Severance Period (as defined in Paragraph
10) if Moore is entitled to Severance Compensation.  If Moore is entitled to
Severance Compensation, he shall vest in the Deferred Compensation to the extent
provided pursuant to the terms of Paragraph 10.E.(iv) hereof.  Upon the Deferred
Compensation Ending Date, the Company shall pay to Moore in cash whatever
Deferred Compensation amount is equal to the applicable vested percentage of the
total amount then credited to his account pursuant to this Paragraph 5.D.,
provided that the Company shall have a right of set-off against, and may reduce
the amount payable as Deferred Compensation by, any amount owed or payable by
Moore to the Company, including as provided in Paragraph 5.E.

 

E.             Split Dollar Life Insurance.  Notwithstanding anything to the
contrary in the Prior Severance Agreement, the Company shall maintain a split
dollar life insurance arrangement covering Moore as described in this Paragraph
5.E, which shall supercede and control over all prior deferred compensation
arrangements.  As of the Effective Date, the Company has paid $1,747,250 to fund
payment of the premiums under a split dollar life insurance arrangement covering
Moore as provided in Paragraph 5.E. of the Prior Severance Agreement As of the
date hereof, the split dollar life insurance arrangement is provided under a
policy or policies with Phoenix Home Life Mutual (such policies and agreements
related thereto, the “Split Dollar Agreement”).  The Company shall continue to
abide by the terms of the Split Dollar Agreement with Moore in force on the date
of this Agreement.

 

(i)            Moore shall be the owner of the policy under the Split Dollar
Agreement and will have the right to designate his beneficiary with respect to
proceeds of the policy payable upon his death; provided, however, that
notwithstanding the foregoing, the Company shall have a collateral assignment of
the policy as security for the repayment of the amounts paid by the Company
toward the premiums for the policy.

 

(ii)           As of and after the Effective Date, (A) the Company’s obligation
under the Prior Severance Agreement to pay the annual premium due on the policy
in an amount equal to one hundred percent (100%) of Moore’s annual base salary
shall terminate and (B) the Company shall have no further obligation to fund any
premium payments in excess of the amount funded as of the Effective Date, which
amount is set forth in the first paragraph of this Section 5.E.

 

(iii)          The “Split Dollar Release Date” shall mean the Deferred
Compensation Ending Date.  The Company shall fund payment of the premiums as
provided in the Paragraph 5.E. in each year until the Split Dollar Release
Date.  Upon the Split Dollar Release Date, the following shall occur:

 

(a)           If the Company elects pursuant to Paragraph 5.D.(iii) to offset
its obligation to pay the Deferred Compensation against Moore’s obligation to
pay the total of all premiums paid by the Company on the split dollar
policy(ies) acquired pursuant to Moore’s employment with the Company then, in
complete satisfaction of the Company’s obligation to pay

 

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the Deferred Compensation to Moore, the Company shall release its entire
interest in the policy on Moore’s life acquired pursuant to the terms of the
Split Dollar Agreement.  Moore hereby agrees that such action shall satisfy the
Company’s obligation with respect to the Deferred Compensation.  The Company
agrees that the amount of any such release of interest by the Company shall
satisfy in full the amount of “Liabilities” (as such term is defined in the
Agreement of Assignment of Life Insurance Death Benefit As Collateral entered
into between Moore 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
as of such date to release in full its interest as acquired by collateral
assignment of the policy pursuant to the Split Dollar Agreement and related
Collateral Assignment Agreement.

 

(b)           The Split Dollar Agreement shall continue in full force and effect
and survive separate and apart from this Agreement; provided, however, that the
Company shall have no further obligation to pay any premium on the policy under
the Split Dollar Agreement which has a due date after the Split Dollar Release
Date and such obligation shall be transferred to Moore.

 

F.             Discretionary Compensation.  The Company may pay Moore
discretionary compensation, bonuses and benefits in addition to those provided
for herein in such amounts and at such times as the Compensation Committee shall
determine.

 

G.            Compensation Upon a Change in Control.  Upon a Change in Control,
whether or not Moore’s employment has terminated, Moore shall receive all of the
following compensation, paid at the time of the Change in Control:

 

(i)            Salary. A payment in the amount of 300% of Moore’s annual base
salary in effect at the time of the Change in Control.

 

(ii)           Bonus.  For all bonus plans in which Moore is participating as of
a Change in Control, the Company shall pay to Moore a lump sum bonus payout.
This payout shall consist of a payment in the amount calculated by the formula
[(x + y) * z] where (x) is Moore’s base salary earned in the year from January 1
to the date of the Change in Control, (y) is the amount which is three times
Moore’s annual base salary in effect at the time of the Change in Control, and
(z) is the percentage which under each plan is the maximum percentage of base
salary that Moore was eligible to earn during the year in which the Change in
Control occurred assuming all targets were met in full, whether or not said
targets actually were met.  The payments provided for under this Paragraph
5.G.(ii) will be paid within thirty days following the Change in Control in cash
or in such other form as bonus amounts generally are paid to eligible employees,
or in a combination thereof, as determined by the Compensation Committee, whose
determination and valuation of any non-cash compensation shall be final and
binding, and shall be considered to be full compensation for all amounts due to
Moore for bonus plans in which he was participating as of the Change in Control,
and he shall not be entitled to any further payments under any of said plans
during the year of participation, other than pursuant to any arrangements as
provided in Paragraph 5.G.(iv) below.  Notwithstanding the above, any bonus due
to Moore for years (or any other applicable bonus period) completed prior to the
date on

 

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which the Change of Control occurs but not yet paid shall be paid in addition to
the bonus described herein.

 

(iii)          Disability Insurance.  The Company will prepay, to the time of
Moore’s reaching age 65, the premiums due on any disability insurance policy as
was provided to Moore as of the time of Change in Control.  In the event that
the Company discontinued or reduced the amount of coverage of any disability
insurance within one year preceding a Change in Control, the Company shall at
the time of the Change in Control re-establish disability insurance to the
amount previously provided and with equivalent coverage, and shall prepay future
premiums as provided herein.

 

(iv)          Other Benefits Upon a Change in Control.  Moore shall receive all
of the other benefits separately provided herein or in other agreements as
occurring upon a Change in Control.  These include vesting of unvested stock
options and restricted stock.  In the event a Change in Control occurs, Moore
shall be entitled to the insurance benefits provided upon Change in Control per
Paragraph 10.E.(v) and the travel benefits, per Paragraph 10.E.(viii), as
provided upon a Change in Control.  These benefits will apply at the time of
termination of Moore’s employment, even if Moore’s employment is subsequently
terminated in a fashion that does not give rise to Severance Compensation.

 

(v)           Certain Adjustments.  If, as a result of payments provided for
under or pursuant to this Agreement together with all other payments in the
nature of compensation provided to or for the benefit of Moore under any other
agreement in connection with a Change in Control, any state, local or federal
taxing authority imposes any taxes on Moore that would not be imposed on such
payments but for the occurrence of a Change in Control, including any excise tax
under Section 4999 of the Internal Revenue Code and any successor or comparable
provision, then, in addition to any other benefits provided under or pursuant to
this Agreement or otherwise, the Company (including any successor to the
Company) shall pay to Moore at the time any such payments are made under or
pursuant to this or the other agreements, an amount equal to the amount of any
such taxes imposed or to be imposed on Moore  (the amount of any such payment,
the “Parachute Tax Reimbursement”).  In addition, the Company (including any
successor to the Company) shall “gross up” such Parachute Tax Reimbursement by
paying to Moore at the same time an additional amount equal to the aggregate
amount of any additional taxes (whether income taxes, excise taxes, special
taxes, employment taxes or otherwise) that are or will be payable by Moore as a
result of the Parachute Tax Reimbursement being paid or payable to Moore and/or
as a result of the additional amounts paid or payable to Moore pursuant to this
sentence, such that after payment of such additional taxes Moore shall have been
paid on a net after-tax basis an amount equal to the Parachute Tax
Reimbursement.  The amount of any Parachute Tax Reimbursement and of any such
gross-up amounts shall be determined by the Company’s independent auditing firm,
whose determination, absent manifest error, shall be treated as conclusive and
binding absent a binding determination by a governmental taxing authority that a
greater amount of taxes are payable by Moore.

 

H.            Employment or Termination Following a Change in Control. Provided
that he remains employed and the parties have not otherwise agreed to amend this
Agreement, following a Change in Control Moore’s employment shall continue on
the terms set

 

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forth in this Agreement and Moore shall remain subject to this Agreement, and be
entitled to receive the compensation, payments and benefits provided for in this
Agreement.  In the event that Moore’s employment is terminated upon or within
one year following the Change in Control, such that Moore would be entitled to
Severance Compensation, any amounts due at the time of termination as Severance
Compensation under Paragraphs 10.E.(i) and 10.E.(ii) herein shall be reduced by
any amounts paid under Paragraph 5.G.(i) and 5.G.(ii) at the time of Change in
Control  (under no circumstances would Moore be required to repay the amounts
paid to Moore under Paragraph 5.G(i) and 5.G.(ii)), but Moore will be entitled
to all other Severance Compensation as provided in Paragraph 10.E. herein. In
the event that Moore’s employment is terminated more than one year following the
Change in Control, Moore will be entitled to all payments and benefits provided
for herein with respect to such termination of employment.

 

6.             Benefits

 

A.            The Company shall pay for or provide Moore 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 Moore’s dependents).

 

B.            The Company agrees to promptly reimburse Moore for any otherwise
unreimbursed health or medical insurance premiums and/or uncovered medical
expenses up to $10,000 per calendar year under a written medical reimbursement
plan maintained for Moore and other key executive employees.  If such payments
are taxable to Moore, the Company shall pay Moore 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.            Moore 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.  Moore shall
also be eligible to participate in any stock option, restricted stock, stock
appreciation rights or stock purchase plans or programs of Company, which
participation shall be at levels as may be determined appropriate by the
Compensation Committee.

 

D.            The Company agrees to reimburse Moore for the cost of investment
and tax planning services up to $5,000 incurred during each calendar year.  If
such payments are taxable to Moore, the Company shall pay Moore 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.

 

7.             Reimbursement of Expenses  The Company agrees to promptly
reimburse Moore, 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 Moore in performing his
duties pursuant to this Agreement.

 

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8.             Stock Options

 

A.            Mandatory Stock Options.  Company agrees to continue in force a
stock option plan or one which is substantially similar to the existing plan
(“Stock Option Plan”), which has been approved by the shareholders of the
Company, and, on the first business day in each October commencing in October
2002 and (subject to the provisions of Paragraph 10.E.(iii)) continuing so long
as Moore is employed by the Company to grant Moore options under the Stock
Option Plan to purchase not less than 100,000 shares of the common stock of FLYi
(such number to be adjusted to reflect any stock splits or other adjustments
after the Effective Date) at the price per share at the opening of the trading
market on the date of such grant.  The Company also agrees to approve the
issuance of such additional shares as are necessary to enable Moore 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 Moore with equivalent alternative compensation should approval not be
obtained.  The terms of the grant of such options shall be consistent with the
terms of the Stock Option Agreement being utilized at the time of the grant for
stock options granted to other senior executive officers at or below Moore’s
position with the Company. The Compensation Committee retains full discretion of
whether to grant any additional stock options other than those required as
provided above, and to change the terms of the Stock Option Agreement for any
such additional stock options.

 

B.            Acceleration of Stock Options upon a Change in Control.  If the
Company experiences a Corporate Change, the exercisability and vesting of all
Stock Options held by Moore as of the date of the Corporate Change shall
accelerate as of the date of such Corporate Change.  The Compensation Committee
of the Company’s Board of Directors shall provide that if a Corporate Change
occurs, then effective as of a date selected by the Compensation Committee, the
Compensation Committee (which for purposes of the Corporate Changes described in
clauses (iii) and (v) of the definition of Corporate Change below shall be the
Compensation Committee as constituted prior to the occurrence of such Corporate
Change) acting in its sole discretion without the consent or approval of Moore,
will effect one or more of the following alternatives or combination of
alternatives with respect to all outstanding Stock Options (which alternatives
may be conditional on the occurrence of such of the Corporate Change specified
in clause (i) through (v) of the definition of Corporate Change below which
gives rise to the Corporate Change):  (1) in the case of a Corporate Change
specified in clauses (i), (ii) or (iv) of the definition thereof, provide that
exercisable options (including any options exercisable pursuant to the first
sentence of this Paragraph 8.B.) then outstanding may be exercised in full for a
limited period of time on or before a specified date (which will permit Moore 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) of the
definition of Corporate Change below, as the case may be) fixed by the
Compensation Committee, after which specified date all unexercised options and
all rights of Moore thereunder shall terminate, (2) provide that exercisable
options (including any options exercisable pursuant to the first sentence of
this Paragraph 8.B.) 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 Moore (including any
options exercisable pursuant to the first

 

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sentence of this Paragraph 8.B.) as of a date, before or not later than sixty
days after such Corporate Change, specified by the Compensation Committee, and
in such event the Compensation Committee shall thereupon cancel such options and
the Company shall pay to Moore 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 Compensation Committee shall
not select an alternative (unless consented to by Moore) that, if Moore
exercised his accelerated options pursuant to alternative 1 or 2 and
participated in the transaction specified in clause (i), (ii) or (iv)  of the
definition of Corporate Change below or received cash pursuant to alternative 3,
would result in Moore’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
Compensation Committee shall take such action, which is hereby authorized, to
put Moore in as close to the same position as Moore would have been in had
alternative 1, 2 or 3 been selected but without resulting in any payment by
Moore pursuant to Section 16(b) of the Exchange Act.  Notwithstanding the
foregoing, with the consent of Moore, the Compensation Committee may in lieu of
the foregoing make such provision with respect of any Corporate Change as it
deems appropriate.

 

C.            Definitions.  For purposes of this Agreement:

 

(i)            “Stock Options” shall mean any grant to Moore by the Company,
pursuant to a Stock Option Plan, of the right and option to purchase from the
Company a specified number of shares of Atlantic Coast Airlines Holdings, Inc.
common stock under certain terms and conditions.

 

(ii)           “Change in Control” and “Corporate Change” shall each 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), unless the
stockholders of Company immediately before such merger or consolidation own,
directly or indirectly immediately following such merger or consolidation,
substantially all of the combined voting power of the surviving entity in
substantially the same proportion as their ownership immediately before such
merger or consolidation, (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 Compensation Committee.

 

D.            Amendment to Existing Option Agreements.  The provisions of
Paragraph 8.B. and 8.C herein shall apply to all Stock Options or restricted
stock previously granted to Moore, and this Agreement shall be deemed to be a
restatement of the previous amendment to all Stock Option or Restricted Stock
Agreements presently in existence between the Company and Moore, and will
supercede any language to the contrary contained in said agreements.  These
terms will also apply to mandatory Stock Options granted as provided in
subparagraph A above.  The Compensation Committee retains full discretion of
whether to grant

 

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any additional Stock Options in the future, and if so whether the terms provided
herein will apply to said Stock Options.

 

E.             Moore and the Company agree that, effective as of March 15, 2005,
the stock options set forth on Attachment A to this Agreement, which were
previously granted by FLYi to Moore, shall be cancelled and of no further effect
and Moore shall have no further rights or claims with respect thereto.

 

9.             Deductions  Deductions shall be made from any component of
Moore’s compensation provided pursuant to this Agreement or otherwise for social
security, Medicare, federal, state and local withholding taxes, and any other
such taxes as may from time to time be required by any governmental authority.

 

10.          Termination  Moore’s employment with the Company shall be
terminated only in accordance with the following provisions:

 

A.            Disability.

 

(i)            In the event Moore shall become mentally or physically disabled
so as to have been unable to perform his duties hereunder for six (6)
consecutive months, subject to Moore’s right to return to work as provided
below, Company shall have the right to terminate Moore’s employment with Company
upon the expiration of such six month period; provided, however, that upon any
such termination Company shall be obligated to provide Moore with Severance
Compensation as provided in Paragraph 10.E. herein.  Such six-month period shall
be deemed to have commenced on the date when Moore 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 Moore shall return to the
substantial full-time performance of his duties.  If at the expiration of such
six month period, the Company shall desire to terminate Moore on the basis of
disability, it shall give written notice to him.  Moore’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 Moore’s
rights under any disability insurance or similar policy, whether maintained by
the Company, Moore or another party.  The Company may utilize a disability
policy to fund, in whole or in part, the compensation that would be due to Moore
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
Moore.

 

(iii)          For purposes of this Agreement, Moore 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 Moore 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.

 

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(iv)          At the end of any disability (other than a disability that results
in the termination of Moore’s employment with the Company), Moore 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 Moore is subject to any
disability, the issue shall be submitted to a Board of Arbiters (whose decision
shall be binding on the Company and Moore) 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 Chairman of the Board, or by the Compensation Committee; a second
Specialist shall be appointed by Moore 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 Moore is not subject to any disability for purposes
of this Agreement, Moore shall return to work under the provisions hereof.  Such
Specialists may physically examine Moore, 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 Moore can return to work hereunder on a
part-time basis, the parties agree to use good faith efforts to negotiate the
terms of Moore’s return to work.

 

(vii)         During any period in which Moore is disabled but his employment
shall not have been terminated, Moore 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 Moore.  Any mandatory
option grants as provided herein shall be deferred until such time as the
disability period ends.

 

(viii)        During any period in which Moore is disabled but his employment
shall not have been terminated, Moore 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)            Moore’s employment with Company shall terminate immediately upon
Moore’s death; provided, however, that Company shall be obligated to provide the
Severance Compensation as specified in Paragraph 10.E. herein to Moore’s estate,
heirs or beneficiaries.

 

(ii)           Nothing contained herein shall be construed to affect Moore’s
rights under any life insurance or similar policy, whether maintained by
Company, Moore 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 Moore’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.

 

11

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C.            Termination by Moore.

 

(i)            Other than Following a Change in Control.  Moore may terminate
his employment by delivering to Company sixty (60) days’ written notice, and
such termination shall be effective on the sixtieth (60th) day following the
date of receipt of such notice (the “Termination Date”).  In such event, Moore
(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.  Moore will be entitled to
payment of any bonus due but not yet paid for prior bonus periods (paid at the
same time it would have been paid had Moore’s employment not been terminated),
but will not be entitled to Severance Compensation, to any bonus for the current
bonus period, or to any other compensation, bonus or fringe benefits accrued
after the Termination Date.

 

(ii)           Following a Change in Control.  Notwithstanding the above, in the
event of any termination by Moore of his employment with the Company which is
effected within twelve (12) months following a Change in Control as defined and
determined under Paragraph 8.C. of this Agreement, Company shall be obligated to
provide Moore with Severance Compensation as provided in Paragraph 10.E. herein;
provided that payments made as separately provided in Paragraph 5.H. of this
Agreement shall be deducted from Severance Compensation due in this event.  The
twelve month period will be deemed to mean any notice given within twelve months
following a Change in Control where an actual termination occurs within sixty
days following said notice.

 

D.            Termination by Company.

 

(i)            Without Cause.  Company may, without cause, terminate Moore’s
employment under this Agreement at any time by giving Moore fifteen (15) days’
written notice thereof, and such termination shall be effective on the fifteenth
day following the date such notice is given (said 15th day, the “Termination
Date”).  In the event Moore’s employment with Company is terminated without
cause, Company shall be obligated to provide Moore with Severance Compensation
as provided in Paragraph 10.E. herein.  At the option of Company, Moore’s
employment shall be immediately terminated upon the Company giving such notice,
in which case Moore 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 Moore’s employment by the
Company, for any reason or no reason, 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, shall automatically be deemed
to be a termination without cause provided that any amounts due as Severance
Compensation shall be reduced as provided in Paragraph 5.H.  The twelve month
period will be deemed to mean any notice given within twelve months following a
Change in Control regardless of when actual termination occurs following said
notice.

 

(ii)           For Cause. Company may terminate Moore’s employment under this
Agreement immediately for “cause”.  In such event, the Company shall not be
liable to Moore for any compensation, bonus or benefits after the date of
termination of employment. Cause shall be defined as any of the following: (i)
willful unauthorized misconduct in the

 

12

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material performance of Moore’s duties hereunder, (ii) commission of an act of
theft, fraud, dishonesty or personal misconduct by Moore, which act is harmful
to Company, (iii) breach of any provision of this Agreement if such breach has
not been cured by Moore (or if Moore 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 Moore written
notice of such breach.  Any termination under this Paragraph 10.D.(ii) shall
take effect immediately upon the Company giving Moore 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 Moore upon the occurrence of any of the events described
elsewhere in this Agreement as providing for Moore’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 Moore’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 two years following the Termination Date. Benefits extending to
Moore’s spouse shall refer to Moore’s spouse as of the date such benefits are
extended or, after Moore’s death, to Moore’s spouse as of the date of his
death.  The compensation and benefits to be provided as Severance Compensation
are as follows:

 

(i)            Severance Pay.  Throughout the Severance Period, Moore 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.  In the event that a Termination Date occurs on or before December 31,
1999 such that Moore is entitled to Severance Compensation as provided herein,
severance pay will be at the rate of 100% of his annual base salary that would
have been in effect beginning January 1, 2000 as provided herein.

 

(ii)           Bonus. For all bonus plans in which Moore is participating as of
the Termination Date, the Company shall pay to Moore a lump sum bonus payout. 
This payout shall consist of a payment in the amount calculated by the formula
[(x + y) * z] where (x) is Moore’s base salary earned in the year from January 1
to the Termination Date, (y) is the amount which is two times Moore’s annual
base salary in effect at the time of Termination, and (z) is the percentage
which under each plan is the highest percentage of base salary that Moore was
paid during any one of the five years immediately preceding the year in which
the Termination Date occurred, but which shall not be greater than the maximum
percentage of base salary that Moore was eligible to earn during the year in
which the Termination Date occurred assuming all targets were met in full,
whether or not said targets actually were met.  The payments provided for under
this Paragraph 10.E.(ii) will be paid within thirty days following the
Termination Date in cash or in such other form as bonus amounts generally are
paid to eligible employees, or in a combination thereof, as determined by the
Compensation Committee, whose determination and valuation of any non-cash
compensation shall be final and binding, and shall be considered to be full
compensation for all amounts due to Moore 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,

 

13

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any bonus due to Moore for years (or any other applicable bonus period)
completed prior to the Termination Date but not yet paid shall be paid in
addition to the bonus described herein. If such bonus for prior years is in the
form of restricted stock, such bonus will be considered earned to the extent
that applicable vesting targets have been met as of the Termination Date,
whether the confirmation that the targets have been met occurs before or after
the Termination Date.  If such targets have been met but the stock has not yet
been distributed, Moore will be entitled to receive the stock, or, at the option
of the Company, the cash equivalent thereof, no later than the date the stock
was due to be distributed had the termination not occurred.  Any such stock for
which targets have not been met will be forfeited.

 

(iii)          Stock Options.  All options to purchase shares of FLYi stock that
have been granted to Moore and that are not exercisable as of the Termination
Date shall terminate as of said date.  For all options that are exercisable as
of said date (including options that are accelerated following a Change in
Control pursuant to Paragraph 8 above), the terms of exercise, payment, and
expiration, shall be as provided in each option agreement.  All options that
would have been granted to Moore 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.

 

(iv)          Deferred Compensation.  The Deferred Compensation will fully vest
upon a termination of employment that entitles Moore to severance benefits
pursuant to this Paragraph 10.E. or, if later, on January 1, 2006.

 

(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 Moore’s dependents) shall continue to be paid for
by the Company during the Severance Period or, in the event of Moore’s
termination upon or 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
Moore’s and his spouse’s life, and including children to age 21 as per coverage
provided prior to the Change in Control.  Provided, however, if such coverage
cannot be continued during the Severance Period or until Moore’s and his
spouse’s death, as the case may be, under the terms of such policies or plans,
the Company shall reimburse Moore for the cost of comparable coverage under
individually obtained policies or for COBRA coverage, or shall make other
arrangements to assure that Moore has comparable coverage.

 

(vi)          Vacation.  Vacation shall not continue to accrue after the
Termination Date under any circumstances.

 

(vii)         Executive Medical Reimbursement Plan and Investment and Tax
Planning.  Throughout the Severance Period, the Company will continue to
promptly reimburse Moore for any otherwise unreimbursed health and medical
insurance 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, and for the $5,000 per year investment and tax planning
service expenses, incurred during each calendar year, including the tax
gross-up, if applicable.

 

14

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(viii)        Travel Benefits. The Atlantic Coast Airlines Holdings, Inc. and
its subsidiaries flight pass privileges currently granted to Moore will continue
for the Severance Period.  Moore 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, and his children shall be provided free
travel on a space available basis.  Moore shall not be entitled to travel
benefits on any other airline.

 

(ix)           Deductions for Taxes. Subject to Paragraph 5.G.(v), any
compensation due to Moore 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.

 

F.             Deferral of Payments.  Notwithstanding any other provision of
this Agreement to the contrary, all payments pursuant to this Section 10 shall
be deferred until six months after Moore’s termination of employment to the
extent necessary to avoid the application of the excise tax under Section 409A
of the Code.

 

11.          Nonsolicitation, Non-Competition, and Confidentiality

 

A.            Nonsolicitation and Non-Competition.  For so long as Moore is an
employee of the Company, and continuing thereafter for twelve months following
any termination of Moore’s employment, or with respect to the provisions of (i),
below, for the longer of such twelve month period or for such period as Moore is
receiving Severance Compensation, Moore shall not, without the prior written
consent of the Company, directly or indirectly, as a sole proprietor, member of
a partnership, stockholder or investor, officer or director of a corporation, or
as an employee, associate, consultant or agent of any person, partnership,
corporation or other business organization or entity other than the Company: 
(i) solicit or endeavor to entice away from the Company or any of its
subsidiaries any person or entity who is, or, during the then most recent 12
month period, was employed by, or had served as an agent of, the Company or any
of its subsidiaries; or (ii) engage in or contract with others to engage in any
business enterprise, line of work consulting contract, joint venture or other
arrangement which conducts a business or businesses substantially similar to the
business conducted by Company in any area in which Company or any of its
affiliates or subsidiaries provides or plans to provide air transportation to
the public.  Moore acknowledges that the geographic area covered hereby, and the
period and nature of the agreed restrictions are reasonable and necessary for
the protection of the business of the Company.  All provisions of this Paragraph
concerning non-competition are severable; and while it is the intention of the
parties that all of said provisions shall be enforceable, if any one of the same
shall be held to be unenforceable in whole or in part, the remainder shall
continue to be in full force and effect.  The terms of this Paragraph 11.A will
not apply following any termination of Moore’s employment that was effected as a
result of, in connection with or within twelve (12) months following a Change in
Control.  The provisions of clause (ii) above of this Paragraph 11.A will not
apply following any termination of Moore’s employment by the Company other than
for cause.  The twelve month period will be deemed to mean any notice given
within twelve months following a Change in Control regardless of when actual
termination occurs following said notice.

 

15

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B.            Confidentiality.  Moore covenants and agrees with the Company that
he will not at any time, except in performance of his obligations to the Company
hereunder or with the prior written consent of the Company, directly or
indirectly, disclose any secret or confidential information that he may learn or
has learned by reason of his association with the Company or any of its
subsidiaries and affiliates.  The term “confidential information” includes
information not previously disclosed to the public or to the trade by the
Company’s management, or otherwise in the public domain, with respect to the
Company’s or any of its affiliates’ or subsidiaries’, products, facilities,
applications and methods, trade secrets and other intellectual property,
systems, procedures, manuals, confidential reports, price lists, customer lists,
technical information, financial information (including the revenues, costs or
profits associated with the Company), business plans, prospects or
opportunities, but shall exclude any information which (i) is or becomes
available to the public or is generally known in the industry or industries in
which the Company operates other than as a result of disclosure by Moore in
violation of his agreements under this Paragraph 11.B or (ii) Moore is required
to disclose under any applicable laws, regulations or directives of any
government agency, tribunal or authority having jurisdiction in the matter or
under subpoena or other process of law.

 

C.            Exclusive Property.  Moore confirms that all confidential
information is and shall remain the exclusive property of the Company.  All
business records, papers and documents kept or made by Moore relating to the
business of the Company shall be and remain the property of the Company, except
for such papers customarily deemed to be the personal copies of Moore.

 

D.            Injunctive Relief.  Without intending to limit the remedies
available to the Company, Moore acknowledges that a breach of any of the
covenants contained in this Paragraph 11 may result in material and irreparable
injury to the Company or its affiliates or subsidiaries for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries precisely and that, in the event of such a breach or threat thereof,
the Company shall be entitled to seek a temporary restraining order and/or a
preliminary or permanent injunction restraining Moore from engaging in
activities prohibited by this Paragraph 11 or such other relief as may be
required specifically to enforce any of the covenants in this Paragraph 11.  If
for any reason, it is held that the restrictions under this Paragraph 11 are not
reasonable or that consideration therefor is inadequate, such restrictions shall
be interpreted or modified to include as much of the duration and scope
identified in this Paragraph 11 as will render such restrictions valid and
enforceable.

 

12.          Assignment  This Agreement, as it relates to the employment of
Moore, is a personal contract and the rights and interests of Moore 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
Moore, that Moore 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

 

16

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any such entity, provided that 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 Moore pursuant to this Agreement.

 

13.          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 considers to be reasonable.

 

14.          Specific Performance  The parties hereby agree that any violation
by Moore of the covenants and agreements contained herein shall cause
irreparable damage to the Company, and the Company may, as a matter of course,
enjoin and restrain said violation by Moore by process issued out of a court of
competent jurisdiction, in addition to any other remedies that said court may
see fit to award.

 

15.          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.

 

16.          Waiver of Breach or Violation Not Deemed Continuing  The waiver by
the Company of any provision of this Agreement may be effected only by a written
waiver duly executed on behalf of the Company and except to the extent
specifically provided in such waiver shall not operate as, or be construed to
be, a waiver of any subsequent breach hereof.

 

17.          Entire Agreement; Law Governing  This Agreement supercedes in its
entirety the terms of the Severance Agreement between the parties dated as of
December 28, 1999 and any and all other agreements, either oral or in writing,
between the parties hereto with respect to the subject matter hereof, by and
between the Company and Moore, and contains all the covenants and agreements
among the parties with respect to such subject matter. Notwithstanding the
foregoing, to the extent that the Company’s Deferred Compensation contributions
or any other compensation or benefit provided for hereunder was paid, granted,
credited or funded under and pursuant to an earlier version of this Agreement
with respect to service prior to the Effective Date and at rates provided for
under such earlier version, then such compensation or benefit need not be again
paid, granted or funded, respectively, pursuant to this Agreement.  This
Agreement shall be construed in accordance with the laws of the Commonwealth of
Virginia, without regard to principles of conflicts of law.  Moore hereby
acknowledges that he was given the opportunity to be represented by counsel of
his choosing in the drafting and negotiation of this Agreement and that he
reviewed this Agreement. 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.

 

17

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19.          Release by Moore  In the event of a termination of employment by
Moore that results in the payment of Severance Compensation to him pursuant to
the terms of this Agreement, in consideration for such Severance Compensation
and as a condition precedent to the payment thereof, Moore 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 Paragraph 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 Moore, to the most recent address indicated for Moore’s residence in the
personnel records of Company, unless Moore gives written notice that such
notices are to be delivered to another address.

 

If to IA or FLYi:

 

FLYi, Inc.

Independence Air

45200 Business Court

Dulles, VA  20166

Attention:  General Counsel or Corporate Secretary

Fax No. (703) 650-6294

 

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.

 

18

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In Witness Whereof, the Company has hereunto caused this Agreement to be
executed by a duly authorized officer and Moore has hereunto set his hand as of
the day and year first above written.

 

 

WITNESS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thomas Moore

 

 

 

 

 

 

 

COMPANY:

 

 

 

 

 

ATTEST:

 

FLYi, INC.

 

 

 

 

 

 

 

 

 

 

BY:

 

 

 

Richard J. Kennedy,

 

Caroline M. Devine,

 

Secretary

 

 

Chairman of the Compensation

 

 

 

Committee of the Board of Directors

 

 

 

 

 

ATTEST:

 

INDEPENDENCE AIR

 

 

 

 

 

 

 

 

 

 

 

BY:

 

 

 

Richard J. Kennedy,

 

Caroline M. Devine,

 

Secretary

 

 

Chairman of the Compensation

 

 

 

Committee of the Board of Directors

 

 

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Attachment A
Stock Options Surrendered and Cancelled on March 15, 2005

 

Date of
Grant

 

Number
of
Shares

 

Strike
Price

 

5/5/1998

 

20,000

 

14.96

 

9/18/2001

 

171,837

 

13.95

 

6/26/2000

 

75,000

 

13.75

 

3/23/1999

 

73,308

 

12.12

 

7/21/1999

 

100,000

 

10.00

 

6/2/2003

 

137,000

 

9.47

 

10/1/2002

 

100,000

 

9.25

 

 

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