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Exhibit 10.12(c)    
    


AMENDED AND RESTATED SEVERANCE AGREEMENT  


        THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (the "Agreement") was executed by the parties as of the date set
forth on the signature page (the "Signature Date") and was authorized and effective as of November 17, 2003 (the  "Effective Date"), by and between
FLYi, Inc., a Delaware corporation ("FLYi") and Independence
Air, Inc., a California corporation, and Richard J. Surratt ("Surratt"). 



        WITNESSETH THAT: 


        WHEREAS, Surratt is currently employed by the Company as Executive Vice President, Chief Financial Officer, Treasurer and Assistant
Secretary, and in connection with such employment entered into a Severance Agreement (last restated as of December 28, 2001) with the Company; and 


        WHEREAS, the Company wishes to assure itself of the continued services of Surratt; and 



        WHEREAS, on November 17, 2003, the Compensation Committee of the Board of Directors of FLYi determined that the best interests of
the Company would be served by amending and restating the terms and conditions of and benefits provided under the then-existing Amended and Restated Severance Agreement with Surratt; 


        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 Surratt and Surratt 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. For purposes of this Agreement, as used in the definition of Change in Control, "Company" shall mean FLYi, Inc., and as used elsewhere in this Agreement shall mean
FLYi, Inc. and its subsidiaries, and shall also mean any successor to FLYi, Inc., including without limitation any corporation or other entity into which it is merged or which acquires
all or substantially all of its outstanding common stock or assets. 



        2.    Duties    Surratt shall serve the Company in the capacities of
Executive Vice President, Chief Financial Officer, Treasurer and Assistant Secretary. Surratt shall generally be responsible for supervising and directing the financial affairs 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. Surratt shall otherwise be responsible for carrying out all such other
duties and services for the Company commensurate with Surratt's position, as may be designed from time to time by the Chief Executive Officer of the Company (the
"CEO"). 



        3.    Term of Employment    Surratt'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 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 Surratt's employment has previously been terminated or unless Surratt or the Company has provided notice of intention to terminate Surratt's employment pursuant
to the terms of Paragraph 10 below, in which case Surratt's term of employment under this Agreement will be extended to the pending Termination Date. 


        4.    Extent of Service    Surratt 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 Surratt, and Surratt agrees to accept from Company, in full payment for services rendered by Surratt and work to be performed by him under the terms of this Agreement, the following: 



        A.
Salary. An annual base salary as of the Effective Date of onehundred ninety-three thousand five hundred dollars ($193,500), which as of
April 1, 2004 was increased to an annual base salary of two hundred fifteen thousand dollars ($215,000). Commencing on October 1, 2005 and on each October 1
thereafter, the amount of Surratt's base salary shall be increased as determined by the Compensation Committee of the Board of Directors of the Company (the "Compensation Committee"). Surratt'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. Surratt shall participate in the Company's Management Incentive Program, or any successor bonus plan or
program for management employees. 


        C.
Executive Bonuses. Surratt 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, Surratt 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
prior to the commencement of each plan year. 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. 


        D.
Deferred Compensation.



        (i)
Surratt will be entitled to deferred compensation under an unfunded and non-tax qualified arrangement ("Deferred Compensation") as described in this
Paragraph 5.D., which shall supercede and control over all prior deferred compensation arrangements. The amounts credited as Deferred Compensation will be recorded as a bookkeeping entry
representing a general unsecured obligation of the Company and Surratt 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 Surratt equaled $429,900 and as of the Signature Date the balance in the Deferred Compensation
account recorded for Surratt equaled $591,150, which is the amount of the Company's Deferred Compensation "contributions" under the Severance Agreement between the Company and Surratt, as such was
amended from time to time, through such respective dates. After the Signature Date, the Company will credit Deferred Compensation at the rate of seventy-five percent (75%) of Surratt's
annual base salary. Deferred Compensation will be based on Surratt's annual base salary in effect on January 1 in each year, and will be credited as of January 1 in each year. The
Company may provide the Deferred Compensation through a benefit plan so long as (1) the amount credited by the Company on Surratt'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 Surratt as set forth herein. No interest or rate of return or other appreciation or
depreciation of value shall accrue or be payable on amounts credited to Surratt 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 Surratt to be credited with one Year of Service for completion of each twelve (12) consecutive
month period of employment with the Company beginning on the first day of Surratt's 




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employment
with the Company and ending on the Deferred Compensation Ending Date (as defined below). (That is, Surratt will continue to be credited with Years of Service during any applicable Severance
Period, as further provided in Paragraph 10.E.(iv) hereof.) Surratt will become vested in the Deferred Compensation based on the following schedule: 




	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.B.(ii) of this Agreement) of the Company, Surratt shall become immediately 100% vested in his Deferred
Compensation amount notwithstanding the above vesting schedule. 


        (iii)
The "Deferred Compensation Ending Date" shall mean the Termination Date (as defined below) if Surratt'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, or shall mean the last day of the Severance Period (as defined in Paragraph 10) if Surratt is entitled
to Severance Compensation. During a Severance Period, Deferred Compensation shall continue to accrue and vest pursuant to the terms of Paragraph 10.E.(iv) hereof. Upon the Deferred
Compensation Ending Date, the Company shall pay to Surratt 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 if Surratt's employment with the Company is terminated under circumstances in which he is entitled to Severance Compensation other than termination upon or
within twelve months following a Change in Control, the Company shall pay to Surratt as of the Split Dollar Release Date an interim payment of 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. and thereafter at the Deferred Compensation Ending Date shall pay to Surratt
whatever additional Deferred Compensation amounts that are or have been credited to and vested in his account. The Company shall make any payment required under this Paragraph 5.D. in cash
within thirty (30) days following the date such payment is due 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 Surratt to the Company. 




        E.
Split Dollar Life Insurance. The following provisions maintain and continue the split dollar life insurance funding commitments of the
Company as provided in Paragraph 5.D of Surratt's prior Severance Agreement entered into as of December 28, 2001. The Company shall advance amounts to fund payment of the premiums under
a split dollar life insurance arrangement covering Surratt as provided in this Paragraph 5.E. 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
Surratt in force on the date of this Agreement, but, subject to the foregoing, the Company may implement a substitute Split Dollar Agreement so long as the amount of premiums funded by the Company on
Surratt's behalf equals the amount set forth herein. 



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        (i)
Surratt 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)
The Company shall pay the annual premium due on the policy in an amount specified in this Agreement, as amended from time to time. From and after the Effective Date, the amount of
the annual premium the Company pays shall equal $146,250 (which is seventy-five percent (75%) of Surratt's annual base salary in effect on July 29, 2002) in each year the Company is
obligated to fund the premium as described herein. Provided that Surratt remains employed with the Company as of January 1 in a year, the Company shall, except as provided in
Paragraph 5.E.(iii) below, for such year 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
this Paragraph 5.E. During any Severance Period, the
Company's obligation to pay the annual premium due on the split dollar insurance policy shall end on the Termination Date unless Surratt's employment is terminated upon or within twelve months
following a Change in Control, in which case said payments will continue through the Severance Period. 


        (iii)
The "Split Dollar Release Date" shall mean (a) the Termination Date (as defined below, except that for purposes of this provision, if Surratt's employment with the Company
is terminated under the circumstances set forth in Paragraph 10(C)(i) hereof, then notwithstanding anything in that paragraph the Split Dollar Release Date shall be the thirtieth (30th)
day following the date of receipt of the notice provided for therein) except where Surratt's employment with the Company is terminated upon or within twelve months following a Change in Control, or
(b) the last day of the Severance Period (as defined in Paragraph 10), if Surratt's employment with the Company is terminated upon or within twelve months following a Change in Control.
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)
Surratt shall pay to the Company an amount equal to the total of all premiums paid by the Company on the split dollar policy(ies) acquired pursuant to his employment with the Company
to the date hereof or subsequently pursuant to this Paragraph 5.E., without interest thereon. The Company may, at its option, collect such amount from any amounts it or any of its affiliates
owes to Surratt and/or from any amounts it or any of its affiliates are obligated to pay Surratt in the future pursuant to this Agreement. Upon receipt of such payment the Company shall release its
interest in the policy, or a portion thereof, on Surratt'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 the released interest equals the total of all premiums paid by the Company on the split dollar policy(ies) acquired pursuant to this Paragraph 5.E. 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 Surratt 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 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 





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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 Surratt. 





        F.  Discretionary Compensation. The Company may pay Surratt 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 Surratt's employment has terminated, Surratt 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 Surratt's annual base salary in effect at the time of the Change in Control. 


        (ii)
Bonus. For all bonus plans in which Surratt is participating as of a Change in Control, the Company shall pay to Surratt 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 Surratt'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 Surratt'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 Surratt 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 Surratt 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 Surratt for years (or any other applicable bonus period) completed prior to the date on 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 Surratt's reaching age 65, the premiums due on any disability
insurance policy as was provided to Surratt 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. Surratt shall receive all of the other benefits separately provided herein or in other
agreements as occurring upon a Change in Control. These include, without limitation, vesting of unvested stock options and restricted stock. In the event a Change in Control occurs, Surratt 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 Surratt's employment, even if Surratt'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 




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the
benefit of Surratt under any other agreement in connection with a Change in Control, any state, local or federal taxing authority imposes any taxes on Surratt 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 Surratt 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 Surratt (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 Surratt 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 Surratt as a result of the Parachute Tax Reimbursement
being paid or payable to Surratt and/or as a result of the additional amounts paid or payable to Surratt pursuant to this sentence, such that after payment of such additional taxes Surratt 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 Surratt. 




        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 Surratt's employment shall continue on the terms set forth in this Agreement and Surratt 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 Surratt's employment is terminated upon or within one year following the Change in Control, such that
Surratt 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 Surratt be required to repay the amounts paid to Surratt
under Paragraph 5.G(i) and 5.G.(ii)), but Surratt will be entitled to all other Severance Compensation as provided in Paragraph 10.E. herein. In the event that Surratt's
employment is terminated more than one year following the Change in Control, Surratt 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 Surratt 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 Surratt's dependents). 



        B.
The Company agrees to promptly reimburse Surratt 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 Surratt and other key executive employees. If such payments are taxable to Surratt, the Company shall pay Surratt 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.
Surratt 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 



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employees
of Company. Surratt shall also be eligible to participate in any stock option, restricted stock, stock appreciation rights or stock purchase plans or programs or nonqualified deferred
compensation arrangements of Company, which participation shall be at levels as may be determined appropriate by the Compensation Committee. 


        D.
The Company agrees to reimburse Surratt for the cost of investment and tax planning services up to $5,000 incurred during each calendar year. If such payments are taxable to Surratt,
the Company shall pay Surratt 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 Surratt, 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 Surratt in performing his duties pursuant to this Agreement. 



        8.    Stock Options    The Company may from time to time grant to
Surratt options under FLYi's stock option plan to purchase shares of the common stock of FLYi at the price per share at the closing of the trading market on the last business date prior to such grant.
Any such grant will be pursuant to the terms of the Stock Option Agreement being utilized at the time of the grant for stock options granted to Executive Vice Presidents of the FLYi, except that
options granted to Surratt shall contain terms relating to the consequences of a Change in Control that are no less favorable to Surratt than the terms contained in the form of Stock Option Agreement
granted to Surratt on June 26, 2000. The Compensation Committee retains full discretion of whether to grant any stock options. 


        9.    Deductions    Deductions shall be made from any component of
Surratt'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    Surratt's employment with the Company shall be
terminated only in accordance with the following provisions: 



        A.
Disability. 



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




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        (iii)
For purposes of this Agreement, Surratt 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 Surratt 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 Surratt's employment with the Company), Surratt 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 Surratt is subject to any disability, the issue shall be submitted to a Board of Arbiters (whose decision shall be binding on the Company and
Surratt) 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 Surratt 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 Surratt is not subject to any disability for purposes of this Agreement, Surratt shall return to work under the provisions hereof. Such Specialists may
physically examine Surratt, 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 Surratt can return to work hereunder on a part-time basis, the parties agree to use good faith efforts to negotiate the terms of Surratt's
return to work. 


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


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


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



        (i)
Other than Following a Change in Control. Surratt 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, Surratt (i) shall
continue to render his services up to the Termination 




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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. Surratt 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 Surratt'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 Surratt 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.B. of this Agreement, Company shall be obligated to provide Surratt 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 Surratt's employment under this Agreement at any time by giving Surratt 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
Surratt's employment with Company is terminated without cause, Company shall be obligated to provide Surratt with Severance Compensation as provided in Paragraph 10.E. herein. At the option of
Company, Surratt's employment shall be immediately terminated upon the Company giving such notice, in which case Surratt 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 Surratt'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.B. 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. 




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        (ii)
For Cause. Company may terminate Surratt's employment under this Agreement immediately for
"cause". In such event, the Company shall not be liable to Surratt 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 material performance of Surratt's duties hereunder, (ii) commission of an act of theft, fraud,
dishonesty or personal misconduct by Surratt, which act is harmful to Company, (iii) breach of any provision of this Agreement if such breach has not been cured by Surratt (or if Surratt 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 Surratt
written notice of such breach. Any termination under this Paragraph 10.D.(ii) shall take effect immediately upon the Company giving Surratt 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 Surratt upon the occurrence of any of the events described elsewhere in this Agreement as providing for Surratt'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 Surratt'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 Surratt's spouse shall refer to Surratt's spouse as of the date such benefits are extended or, after Surratt's death, to Surratt'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, Surratt 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. For all bonus plans in which Surratt is participating as of the Termination Date, the Company shall pay to Surratt 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 Surratt's base salary earned
in the year from January 1 to the Termination Date, (y) is the amount which is two times Surratt'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 Surratt 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 Surratt 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 Surratt 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 Surratt 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 




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the
stock has not yet been distributed, Surratt 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 Surratt 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), the terms of exercise,
payment and expiration shall be as provided in each option agreement. 


        (iv)
Deferred Compensation. The Deferred Compensation program will continue throughout the Severance Period, including Surratt's
accumulation of Years of Service for vesting purposes, and including the Company's continuation of contributions. Alternatively, the Company may elect to pay such amounts to Surratt 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. At the end of the
Severance Period, the Company shall pay Surratt an amount equal to his vested interest under the Deferred Compensation as provided in Paragraph 5.D.(iii), reduced for any interim payments made
pursuant to such Paragraph. Notwithstanding the foregoing, 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 Surratt to the Company. 


        (v)
Insurance Programs. In the event Surratt's employment with the Company is terminated upon or within twelve months following a Change
in Control, 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 this Agreement for the Severance Period. On the Termination Date (except that for purposes of this provision,
if Surratt's employment is terminated under the circumstances set forth in Paragraph 10(C)(i) hereof, then notwithstanding anything in that provision, the Termination Date for purposes
of this Paragraph shall be the thirtieth (30th) day following the date of receipt of the notice provided for therein), or, if Surratt's employment with the Company is terminated upon or within twelve
months following a Change in Control, at the end of the Severance Period, Surratt shall pay to the Company an amount equal to the total of all premiums paid by the Company on the split dollar
policy(ies) acquired pursuant to Paragraph 5.E., without interest thereon, and upon receipt of such payment the Company shall release its interest in the policy, or a portion thereof, on
Surratt'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 total of all premiums paid by the Company on the split dollar policy(ies) acquired pursuant to Paragraph 5.E. Alternatively, if the Company elects to pay the Deferred Compensation to
Surratt within fifteen (15) days after the Termination Date pursuant to Paragraph 10.E.(iv) above, the Company at the time of such payment may demand payment from Surratt of an
amount equal to the total of all premiums paid by the Company on the split dollar policy(ies) acquired pursuant to Paragraph 5.E., without interest thereon, and upon receipt of such payment
release its interest in the policy, or portion thereof, acquired pursuant to the terms of the Split Dollar Agreement, and any or all of the paid up additions standing to the credit of such policy, if
any, and thereafter the Company shall be under no obligation to pay any further premiums under the Split Dollar Agreement. 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 




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Surratt's
dependents) shall continue to be paid for by the Company during the Severance Period or, in the event of Surratt's termination upon or following a Change of Control of the Company as defined
in Paragraph 8.B., for the longer of the Severance Period or the remainder of Surratt'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 Surratt's and his spouse's death, as the case may be, under the terms of such policies or plans,
the Company shall reimburse Surratt for the cost of comparable coverage under individually obtained policies or for COBRA coverage, or shall make other arrangements to assure that Surratt 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 Surratt 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. 


        (viii)  Travel Benefits. The FLYi, Inc. and its subsidiaries flight pass privileges currently granted to Surratt will continue for
the Severance Period. Surratt 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. Surratt 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 Surratt 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. 





        11.    Nonsolicitation, Non-Competition, and Confidentiality    



        A.
Nonsolicitation and Non-Competition. For so long as Surratt is an employee of the Company, and continuing thereafter for
twelve months following any termination of Surratt's employment, or with respect to the provisions of (i), below, for the longer of such twelve month period or for such period as Surratt is receiving
Severance Compensation, Surratt 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. Surratt 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 



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of
Surratt'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 Surratt'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. 



        B.  Confidentiality. Surratt 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 Surratt in violation of his agreements under this Paragraph 11.B or (ii) Surratt 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. Surratt 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 Surratt 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 Surratt. 


        D.
Injunctive Relief. Without intending to limit the remedies available to the Company, Surratt 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 Surratt 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 Surratt, is a personal contract and the rights and interests of Surratt 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 Surratt, that Surratt 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 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 Surratt pursuant
to this Agreement. 


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        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 Surratt 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
Surratt 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 supersedes in
its entirety the terms of the Severance Agreement between the parties dated as of December 28, 2001 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 Surratt, 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. Surratt 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. 


        19.    Release by Surratt    In the event of a termination of
employment by Surratt 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, Surratt 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 


14







 



facsimile
transmission, any national overnight delivery service, or certified or registered mail, to such party at its address set forth below: 



        If
to Surratt, to the most recent address indicated for Surratt's residence in the personnel records of Company, unless Surratt gives written notice that such notices are to be delivered
to another address. 






If
to Independence Air or the Company: 


FLYi, Inc.

Independence Air, Inc.

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. 


15







 

        IN WITNESS WHEREOF, the Company has hereunto caused this Agreement to be executed by a duly authorized officer and Surratt has hereunto
set his hand as of the day and year written below, with such Agreement to be effective as of the Effective Date set forth herein. 



	WITNESS:	 	 	 
	

	
 	

 Richard J. Surratt

Dated: December    , 2004
	

 	
 	

COMPANY:
	

ATTEST:	
 	

FLYI, INC.
	

 Richard J. Kennedy,

Secretary	
 	

BY:	

 Kerry B. Skeen,

Chairman & Chief Executive Officer
	 	 	Dated: December    , 2004
	

ATTEST:	
 	

INDEPENDENCE AIR, INC.
	

 Richard J. Kennedy,

Secretary	
 	

BY:	

 Kerry B. Skeen,

Chairman & Chief Executive Officer
	 	 	Dated: December    , 2004




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Exhibit 10.12(c)