Document:

EXHIBIT
10.35

 

EMPLOYMENT
AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”), effective as of December 23, 2002 (the “Effective Date”) is entered by and between MARK B. DUNKERLEY (“Employee”) and each of Hawaiian Holdings,
Inc. and its wholly owned subsidiary Hawaiian Airlines, Inc. (collectively
herein referred to as the “Company”).

 

The Company desires to establish its right to the
continued services of the Employee, in the capacity described below, on the
terms and conditions and subject to the rights of termination hereinafter set
forth, and the Employee is willing to accept such employment on such terms and
conditions,

 

In consideration of the mutual agreements hereinafter
set forth, the Employee and the Company have agreed and do hereby agree as
follows:

 

1.                                      EMPLOYMENT AS PRESIDENT and CHIEF OPERATING OFFICER.  The Company
does hereby employ, engage, and hire the Employee as President and Chief
Operating Officer and the Employee does hereby accept and agree to such hiring,
engagement, and employment.  The
Employee’s duties during the Employment Period (defined below) shall be the
executive, managerial and reporting duties as required by a chief operating
officer of a corporation and such other duties as the Chairman/Chief Executive
Officer and the Board of Directors of the Company shall from time to time
prescribe and as provided in the Bylaws of the Company, including but not
limited to direct responsibility for and supervision of the departments
responsible for operations, marketing (including sales, scheduling and
technical innovation planning) and people services.  The Employee shall report directly to the Chairman/Chief
Executive Officer for the Employment Period. 
The Employee shall devote his full time, energy, and skill to the
performance of his duties for the Company and for the benefit of the Company,
reasonable vacations authorized by the Chairman/Chief Executive Officer and
reasonable absences because of illness excepted, it being understood that Employee shall be eligible for up to
four (4) weeks of vacation annually, subject to requirements of operations and
as duties may permit provided that unused vacation shall not be accrued and the
Company shall not make payment to Employee for unutilized vacation.  Furthermore,
the Employee shall exercise due diligence and care in the performance of his
duties to the Company under this Agreement.

 

2.                                      TERM
OF AGREEMENT.  The term of this
Agreement (“Term”) shall commence on the Effective Date and shall continue for
a period of eighteen (18) months; provided, however, that on the first day of
each calendar month commencing one month following the Effective Date, the Term
shall be extended one additional month unless either party shall have given
written notice to the other that it does not wish to extend the Term.  On the date one (1) year after the Effective
Date (the “First Anniversary”), if Employee remains employed hereunder, the
Term shall be revised so that it will expire twenty-four (24) months after the
First Anniversary.  Thereafter, the Term
shall continue to be extended one additional month on the first day of each
successive calendar month unless either party shall have given written notice
to the other that it does not wish to extend the Term.  On the date two (2) years after the
Effective Date (the “Second Anniversary”), if Employee remains employed
hereunder, the Term shall be revised so that it will expire thirty-six (36)
months after the Second Anniversary. 
Thereafter, the Term shall continue to be extended one additional month
on the first day of each successive calendar month unless either party shall
have given written notice to the other that it does not wish to extend the
Term.  The period of time commencing on
the Effective Date and ending on the expiration date of the Term, or, if
earlier, the date of termination of the Employee’s employment (“Termination
Date”) under this or any successor agreement shall be referred to as the
“Employment Period.”

 

 

President and Chief Operating Officer

Employment Agreement

 

3.                                      COMPENSATION.

 

a)                                      BASE
SALARY.  The Company shall pay the
Employee, and the Employee agrees to accept from the Company in full payment
for his services to the Company, a base salary at the rate of Four Hundred
Fifteen Thousand Dollars ($415,000.00) per year (“Base Salary”), payable in
equal semi-monthly installments or at such other time or times as the Employee
and the Company shall agree.  Employee’s
Base Salary shall be reviewed on a calendar year basis, at least annually, by
the Company and may be increased as determined by the Company’s Board of
Directors in its sole and absolute discretion.

 

b)                                     PERFORMANCE/INCENTIVE
BONUS.  Employee will be eligible to
receive an annual performance/incentive bonus of up to fifty percent (50%) of
his annual salary based upon achievement of goals established with the
Chairman/Chief Executive Officer and as approved by the Board of Directors in
its sole and absolute discretion, such discretion to include a review of the
Company’s actual performance and comparison to the Company’s business plan(s).

 

c)                                      1996
STOCK INCENTIVE PLAN.  Subject to
approval by the Compensation Committee of the Board of Directors, on the
Effective Date Employee shall receive a grant of options to purchase 200,000
shares of the Company’s stock pursuant to the Company’s 1996 Incentive Stock
Plan, as Amended.  The vesting period
and other terms will be determined by the Compensation Committee and the
exercise price shall be equal to the fair market value of the stock on the
grant date.

 

4.                                      FRINGE
BENEFITS.  Employee shall be entitled
to participate, at the Company’s expense, in any benefit programs adopted from
time to time by the Company for the benefit of its executive employees and
Employee shall be entitled to receive such other fringe benefits as may be
granted to him from time to time by the Company’s Board of Directors.

 

a)                                      BENEFIT
PLANS.  Employee shall be entitled
to participate in any benefit plans relating to stock options, stock purchases,
pension, thrift, profit sharing, life and disability insurance, medical
coverage, executive medical coverage, education, or other retirement or
employee benefits available to other executive employees of the Company,
subject to any restrictions (including waiting periods) specified in such
plans.

 

b)                                     AUTOMOBILE.  The Company shall provide Employee with an
automobile allowance of $1000.00 per month.

 

c)                                      HOUSING
ALLOWANCE.  The Company shall
provide Employee a monthly Housing Allowance of $3000.00.

 

d)                                     TRAVEL
BENEFITS.  Employee and Employee’s
spouse or domestic partner shall be entitled to travel benefits on Company
flights (but not charter flights) at the PS2F/PS2Y category. Employee’s
eligible dependents, if any, shall be entitled to travel benefits on Company
flights (but not charter flights) at the PS2F/PS2Y category when traveling with
Employee and/or Employee’s spouse or domestic partner; when not traveling with
Employee and/or Employee’s spouse or domestic partner, eligible dependents
shall be entitled to travel benefits on Company transpacific flights (but not
charter flights) at the PS8Y/SA1F category and interisland flights at the
SA0Y/SA1F category.  Employee and
Employee’s spouse or domestic partner and eligible dependents shall be entitled
to travel benefits on other airlines at the sole discretion of such airlines,
at a comparable level to that provided to other Company executive officers.

 

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e)                                      EXECUTIVE
LONG-TERM DISABILITY INSURANCE PLAN. 
Subject to the applicable waiting periods, Employee will be included in
the Company’s Executive Long-Term Disability Insurance Plan, as it may be
modified from time to time, at the Company’s expense.

 

f)                                        BUSINESS
EXPENSES.  The Company shall
reimburse the Employee for any and all necessary, customary, and usual
expenses, properly receipted in accordance with Company policies, incurred by
Employee on behalf of the Company.

 

5.                                      RELOCATION.

 

a)                                      The
Company will reimburse the Employee for eligible costs related with relocation
to Hawaii, which will include but not be limited to the following items:  i) the reasonable out-of-pocket costs of
moving his household goods and belongings from his present home to Hawaii,
including packing, unpacking, shipping and insurance; ii) the shipment of one
automobile; iii) closing costs at actual and reasonable amounts for the sale of
Employee’s current home, and/or the purchase of a home in Honolulu, Hawaii, and
(iv) travel costs for Employee and his domestic partner directly related to
Employee’s relocation to Hawaii (collectively referred to as the “Relocation
Expenses”).  The Relocation Expenses
will be reimbursed up to a maximum of $50,000.00, inclusive of tax.

 

b)                                     If,
during the first three (3) years following the Effective Date, the Company
terminates the Employee’s employment without cause, or if Employee terminates
his employment pursuant to Section 7(e) hereunder, then the Company will
reimburse the Employee for eligible costs related with relocation from Hawaii,
which will include but not be limited to the following items:  i) the reasonable out-of-pocket costs of
moving his household goods and belongings from Hawaii, including packing,
unpacking, shipping and insurance, (ii) the shipment of one automobile, and
(iii) travel costs for Employee and his domestic partner directly related to
Employee’s relocation from Hawaii (collectively referred to as the “Termination
Expenses”).  The Termination Expenses
will be reimbursed up to a maximum of $50,000.00, inclusive of tax

 

c)                                      If
Employee purchases a residence in Honolulu and within one year of the Effective
Date is terminated by the Company without cause, or if Employee terminates
employment hereunder within said first year of employment pursuant to Section
7(e) of this Agreement, Employee shall have the option, exercisable on written
notice to the Company delivered within ninety (90) days of said termination, to
sell said purchased residence to the Company at the original purchase
price.  The closing of the sale of the
Employee’s residence to the Company pursuant to this provision shall take place
no later than ninety (90) days after the receipt by the Company of the written
notice of the exercise by the Employee of the option set forth herein.

 

6.                                      CONFIDENTIAL
INFORMATION.  Employee
recognizes that by reason of his employment by and service to the Company he will
occupy a position of trust with respect to business and technical information
of a secret or confidential nature which is the property of the Company which
will be imparted to him from time to time in the course of the performance of
his duties hereunder.  Employee
acknowledges that such information is a valuable and unique asset of the
Company and agrees that he shall not, during or after the Term of this
Agreement, use or disclose directly or indirectly any confidential information
of the Company to any person, except that Employee may use and disclose to
authorized personnel of the Company such confidential information as is
reasonably appropriate in the course of the performance of his duties
hereunder.  Confidential information of
the Company shall include all information and knowledge of any nature and in
any form relating to the Company including but not limited to, business plans;
development projects; computer software and related documentation and
materials; designs, practices, processes, methods, know-how and other facts
relating to the business of the Company; advertising, promotions, financial
matters,

 

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sales and profit figures, customers or customer lists.  Confidential information shall not include
any information that is or shall become publicly known through no fault of the
Employee and any information received in good faith from a third party who has
the right to disclose such information and who has not received such
information, either directly or indirectly, from the Company.

 

7.                                      TERMINATION
OF EMPLOYEE’S EMPLOYMENT.

 

a)                                      DEATH.  If the Employee dies while employed by the
Company, his employment shall immediately terminate.  The Company’s obligation to pay the Employee’s Base Salary shall
cease as of the date of Employee’s death. 
Thereafter, Employee’s beneficiaries or his estate shall receive
benefits in accordance with the Company’s retirement, insurance, and other
applicable programs and plans then in effect.

 

b)                                     DISABILITY.  If, as a result of Employee’s mental or
physical incapacity, Employee shall be unable to perform the services for the
Company contemplated by this Agreement in the manner in which he previously
performed them during an aggregate of one hundred twenty (120) business days in
any consecutive seven (7) month period (“Disability”), Employee’s employment
may be terminated by the Company for Disability.  During any period prior to such termination during which Employee
is absent from the full-time performance of his duties with the Company due to
Disability, the Company shall continue to pay Employee his Base Salary at the
rate in effect at the commencement of such period of Disability.  Any such payments made to the Employee shall
be reduced by amounts received from disability insurance obtained or provided
by the Company, and by the amounts of any benefits payable to Employee, with
respect to such period, under the Company’s Executive Long-Term Disability
Plan.  Subsequent to the termination
provided for in this Section 7(b), Employee’s benefits shall be determined
under the Company’s retirement, insurance, and other compensation programs then
in effect in accordance with the terms of such programs.

 

c)                                      TERMINATION
BY THE COMPANY FOR CAUSE.  The
Company may terminate Employee’s employment under this Agreement for “Cause” at
any time prior to expiration of the Term, only upon the occurrence of any one
or more of the following events:

 

(i)                                     The
material breach by Employee of his obligations hereunder, after Employee has
been given written notice specifying the breach and has been provided a thirty
day opportunity to cure.  This includes,
without limitation, willful neglect of Employee’s duties or Employee’s willful
failure (other than any such failure resulting from the termination of the
Employee’s employment for death, disability, retirement or good reason, as
provided elsewhere in this Agreement) to implement or adhere to policies
established by, or directives of, the Company’s Board of Directors.

 

(ii)                                  Employee
is convicted of, or pleads guilty or no contest to a felony, or written
evidence is presented to the Board that Employee engaged a crime that may have
an adverse impact on the Company’s reputation and standing in the community.

 

(iii)                               Committed fraud in
connection with the business affairs of the Company, regardless of whether said
conduct is designed to defraud the Company or others.

 

In the event of termination for cause or resignation
by the Employee without good reason, the Company’s obligation to pay Employee’s
Base Salary for any periods after the Termination Date shall cease as of the
Termination Date.  If Employee’s
employment is terminated for cause, Employee’s employment may be terminated on
written notice, effective immediately, unless otherwise expressly provided for
in this Agreement.

 

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d)                                     TERMINATION
BY THE COMPANY WITHOUT CAUSE.  The
Company shall have the right to terminate this Agreement prior to the
expiration of the Term, at any time, without cause.  In the event the Company shall so elect to terminate this
Agreement, the Employee shall receive compensation pursuant to the provisions
of Section 8 hereof.

 

e)                                      TERMINATION
BY THE EMPLOYEE FOR GOOD REASON. 
The Employee shall have the right to terminate this Agreement for good
reason.  For purposes of this Agreement,
“good reason” shall mean the occurrence, without the Employee’s prior written
consent, of any one or more of the following events:

 

(i)                                     The
assignment to the Employee of any duties that are materially inconsistent with,
or reflect a material reduction of the powers and responsibilities, or a change
of the Employee’s reporting responsibilities, or a negative change of
Employee’s title and responsibilities;

 

(ii)                                  The
Company’s material breach of any of the provisions of this Agreement, or a
material change in the conditions of Employee’s employment (e.g.
including, without limitation, a failure by the Company to provide the Employee
with incentive compensation and benefit plans that provide comparable benefits
and amounts as such type of programs in effect as of the Effective Date or as
provided to other Company executive officers, etc); and

 

(iii)                               The relocation of the
Company’s principal executive offices to a location outside of the Honolulu
area or the Company’s requiring the Employee to be based anywhere other than
the Company’s principal executive offices, except for travel on Company
business to an extent substantially consistent with the Employee’s position and
responsibilities.

 

(iv)                              A
change in control of the Company as provided for in Section 10 hereof.

 

(v)                                 A
failure by the Company to maintain Directors’ and Officers’ insurance as set
forth in Paragraph 19 hereof.

 

The Employee agrees to provide the Company thirty (30)
days’ prior written notice of any termination for good reason (except in the
case of a termination pursuant to subparagraph (iv) hereof), during which
30-day period the Company shall have the right to cure the circumstances giving
rise to the good reason stated in such notice. 
In the event of termination for good reason, the Employee shall receive
compensation pursuant to the provisions of Section 8 hereof.

 

8.                                      COMPENSATION
UPON TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE OR BY THE EMPLOYEE FOR
GOOD REASON.  If the Employee’s
employment shall be terminated (i) by act of the Company other than for cause,
or (ii) by the Employee for good reason, the Employee shall be entitled to the
following benefits:

 

a)                                      PAYMENT
OF UNPAID BASE SALARY.  The Company
shall immediately pay the Employee any portion of the Employee’s Base salary
accrued, but not paid, prior to the Termination Date.

 

b)                                     CONTINUED
PAYMENT OF BASE SALARY.  The
Employee shall continue to be paid the Base Salary that would have been payable
to the Employee pursuant to this Agreement had the Employee continued to be
employed for the Term of this Agreement on the Termination Date (such Base
Salary for such period being equal to the Employee’s Base Salary in effect as
of the Termination Date); and (ii) an

 

5

 

amount equal to the greater of (A) the total of any performance bonus
or bonuses paid to the Employee pursuant to Section 3(b) in the fiscal year of
the Company ended immediately prior to the fiscal year in which the Termination
Date occurs, and (B) the average of the annual performance bonuses (excluding
the signing bonus and any special bonus not based on performance) paid to him
by the Company with respect to the two (or, if less, the number of years the
Employee has been employed with the Company) fiscal years ended immediately
prior to the fiscal year in which the Termination Date occurs.

 

c)                                      CONTINUATION
OF FRINGE BENEFITS.  Throughout the
Term of this Agreement from and after the date of Termination, the Company shall
continue to provide the Employee with the following fringe benefits as if the
Employee’s employment under the Agreement had not been terminated:  (i) Benefit Plans set forth in Section 4(a)
provided that [1] such plans shall be those plans then in effect by the
Employer (or, if they are not, then benefits not less favorable to the Employee
than those in effect immediately prior to his termination), [2] that in lieu of
medical plan benefits, Employee will be provided with a cash lump sum payment
equivalent to the value of such benefits for the Term grossed up for taxes, and [3] that coverage (as distinct
from benefits due to disability) under the Company’s long term disability
insurance will not be included as part of benefits provided after termination
of employment because the carrier limits provision of such to employees and
(ii) Travel Benefits set forth in Section 4(d).  If required by law or otherwise allowed by the relevant carrier,
Employee will be afforded the opportunity to continue such benefits at
Employee’s own cost after the Term.

 

d)                                     STOCK
OPTIONS.  Notwithstanding any
provision in any applicable Company benefit plans or agreements (including, but
not limited to, those relating to stock options, stock appreciation rights,
restricted stock awards, stock purchases, pensions, thrift, profit sharing, or
other retirement or employee benefits) to the contrary, all rights to such
benefits previously granted to Employee shall become immediately fully vested
and exercisable as of the Termination Date and shall remain exercisable for a
period thereafter of one (1) year.  The
provisions of this Section 8(d) shall supersede, insofar as concerns Employee,
any such plans or agreements of the Company referred to above as of the
Effective Date.

 

e)                                      NO
MlTIGATION REQUIRED; NO OTHER ENTITLEMENT TO BENEFITS UNDER AGREEMENT.  The Employee shall not be required in any
way to mitigate the amount of any payment provided for in this Section 8,
including, but not limited to, by seeking other employment, nor shall the amount
of any payment provided for in this Section 8 be reduced by any compensation
earned by the Employee as the result of employment with another employer after
the Termination Date, or otherwise. 
Except as set forth in this Section 8, following a termination governed
by this Section 8, the Employee shall not be entitled to any other compensation
or benefits set forth in this Agreement, except as may be separately negotiated
by the parties and approved by the Board of Directors of the Company in writing
in conjunction with the termination of Employee’s employment under this Section
8.

 

6

 

9.                                      NONCOMPETITION
PROVISIONS.

 

a)                                      NONCOMPETITION.   During the Term of this Agreement and for a
period of twenty-four (24) months commencing on the Termination Date, Employee
agrees and covenants that Employee shall not, directly or indirectly, undertake
to become an employee, officer, partner, consultant or otherwise be connected
with any entity for which, at such time, (i) in excess of 5% of its business
is, or (ii) in which Employee’s specific duties and responsibilities are, in
direct competition with the Company either within Hawaii or on routes to and
from Hawaii serviced by the Company.  
Employee acknowledges and agrees that any breach of this non-competition
provision shall entitle Employer to immediately terminate payments pursuant to
Section 8 of this Agreement.  If the
Company ceases operations on a permanent basis or if the Company ceases to make
payments to Employee pursuant to Section 8 hereof, the restrictions of this
section shall immediately terminate.

 

b)                                     NONDISPARAGEMENT.        During the Term of this
Agreement and for a period of twenty-four (24) months commencing on the
Termination Date, each party agrees that it/he shall not make any statements
that disparage or tend to disparage the other party, including, in the case of
the Company, its products, services, officers, employees, advisers or other
business contacts.   Employee
acknowledges and agrees that any breach of this nondisparagement provision
shall entitle Employer to immediately terminate payments pursuant to Section 8
of this Agreement.   Employer
acknowledges that any breach of this nondisparagement provision shall
accelerate all payments due Employee under Paragraph 8 hereof, which shall
become immediately payable in full.

 

c)                                      RIGHT
TO COMPANY MATERIALS.  Employee
agrees that all styles, designs, lists, materials, books, files, reports,
correspondence, records, and other documents (“Company Materials”) used,
prepared, or made available to Employee, shall be and shall remain the property
of the Company.  Upon the termination of
employment or the expiration of this Agreement, all Company Materials shall be
returned immediately to the Company, and Employee shall not make or retain any
copies thereof.

 

d)                                     ANTISOLICITATION.  Employee promises and agrees that during the
Term of this Agreement and for the twenty-four (24) month period commencing on
the Termination Date, he will not influence or attempt to influence customers
or suppliers of the Company or any of its present or future subsidiaries or
affiliates, either directly or indirectly, to divert their business to any
individual, partnership, firm, corporation or other entity then in competition
with the Company, or any subsidiary or affiliate of the Company.

 

e)                                      SOLICITING
EMPLOYEES.  During the Term of this
Agreement and for the twenty-four (24) month period commencing on the
Termination Date, Employee promises and agrees that he will not directly or
indirectly solicit any of the Company’s employees to work for any business,
individual, partnership, firm, corporation, or other entity then in competition
in Hawaii with the business of the Company or any subsidiary or affiliate of
the Company.

 

10.                               MERGER
OR OTHER CHANGE IN CONTROL.  In the event of a “change in control”
(defined below) of the Company, the Employee shall have the right, on written
notice to the Company given at any time within sixty (60) days after such
change in control occurs, to elect to 
terminate his employment with the Company, which termination will be
deemed a termination by the Employee for good cause as set forth in Section
7(e), in accordance with which the Employee shall receive compensation pursuant
to the provisions of Section 8 hereof. 
A “change in control” shall occur if (i) AIP, LLC, currently the
majority shareholder of Hawaiian Holdings, Inc., sells, transfers or assigns,
in one transaction or in a series of related transactions, all or substantially
all of its shares in the Company, or otherwise no longer controls the
management of the Company or (ii) John W. Adams no longer controls, either
directly or indirectly, a majority

 

7

 

of the stock and/or the management of AIP,LLC; or (iii) at any time
after the First Anniversary, any person other than John W. Adams holds the
position of chief executive officer of the Company, provided that if Employee
terminates this Agreement pursuant to this Section 10(iii), then (A) Employee
will give notice of termination within 60 days after the later to occur of (x)
the first anniversary of the effective date of this Agreement and (y) the date
on which the Company announces the appointment of said chief executive officer;  and (B) Employee shall receive benefits and
payments pursuant to Section 8 hereof for a period of one (1) year.

 

11.                               NOTICES.  All notices and other communications under
this Agreement shall be in writing and shall be given by facsimile (with
confirmation of transmission), first class mail, certified or registered with
return receipt requested, or national, reputable overnight courier and shall be
deemed to have been duly given three (3) days after mailing or on the next
business day following delivery by overnight courier or transmission of a
facsimile to the respective persons named below:

 

	
  If to Company:

  	
   

  	
  Hawaiian Airlines, Inc.

  Attn:  Chief Executive Officer

  3375 Koapaka Street, Suite G-350

  Honolulu, Hawaii  96819

  with a copy to General Counsel

  
	
   

  	
   

  	
   

  
	
  If to Employee:

  	
   

  	
  Mark B. Dunkerley

  Menaker & Herrmann LLP

  Att:  Richard G. Menaker, Esq.

  10 East 40th Street, 43rd Floor

  New York, New York  10016

  Tel:  (212) 545-1900

  Fax:     (212) 545-1656

  

 

Either party may change such party’s address for
notices by written notice duly given pursuant hereto.

 

12.                               ARBITRATION
CLAUSE/ATTORNEYS FEES.  Any
controversy or claim arising out of or relating to this Agreement shall be
settled by expedited arbitration administered by the DRS, Inc. in Honolulu,
Hawaii, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.  In the event judicial or quasi-judicial determination is
necessary of any dispute arising as to the parties’ rights and obligations
hereunder, the Company and Employee shall each bear its/his respective
attorneys’ fees and costs associated with such dispute.

 

13.                               TERMINATION
OF PRIOR AGREEMENTS.  This
Agreement terminates and supersedes any and all prior agreements and
understandings between the parties with respect to employment or with respect
to the compensation of the Employee by the Company from and after the Effective
Date.

 

14.                               ASSIGNMENT;
SUCCESSORS.  This Agreement is
personal in its nature and neither of the parties hereto shall, without the
consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder; provided that, in the event of the merger,
consolidation, transfer or sale of all or substantially all of the assets of
the Company with or to any other individual or entity, this Agreement shall,
subject to the express provisions hereof, be binding upon and inure to the
benefit of such successor and such successor shall discharge and perform all
the promises, covenants, duties, and obligations of the Company hereunder

 

8

 

15.                               GOVERNING
LAW.  This Agreement and the
legal relations thus created between the parties hereto shall be governed by
and construed under and in accordance with the laws of the State of Hawaii.

 

16.                               ENTIRE
AGREEMENT; HEADINGS.  This
Agreement embodies the entire agreement of the parties respecting the matters
within its scope and may be modified only in writing.  Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

 

17.                               WAIVER;
MODIFICATION.  Failure to insist
upon strict compliance with any of the terms, covenants, or conditions hereof
shall not be deemed a waiver of such term, covenant, or condition, nor shall
any waiver or relinquishment of, or failure to insist upon strict compliance
with, any right or power hereunder at any one or more times be deemed a waiver
or relinquishment of such right or power at any other time or times.  This Agreement shall not be modified in any
respect except by a writing executed by each party hereto.

 

18.                               SEVERABILITY.  In the event that a court of competent
jurisdiction determines that any portion of this Agreement is in violation of
any statute or public policy, only the portions of this Agreement that violate
such statute or public policy shall be stricken.  All portions of this Agreement that do not violate any statute or
public policy shall continue in full force and effect.  Further, any court order striking any
portion of is Agreement shall modify the stricken terms as narrowly as possible
to give as much effect as possible to the intentions of the parties under this
Agreement.

 

19.                               INDEMNIFICATION.  The Company shall indemnify and hold
Employee harmless to the maximum extent permitted by Section 415-5 of the
Hawaii Business Corporation Act, Section 145 of the Delaware General
Corporation Law and the Restated Articles of Incorporation and Amended Bylaws
of Hawaiian Airlines, Inc. and of Hawaiian Holdings, Inc. respectively.   The Company will maintain an Errors and
Omissions insurance policy during the term of this Agreement, which policy
shall name the Employee as an insured.

 

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20.                               COUNTERPARTS.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

 

IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its duly authorized officers, and the Employee has
hereunto signed this Agreement, as of the date first above written.

 

 

	
  EMPLOYEE

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/  Mark B.
  Dunkerley

  	
   

  	
  By:

  	
  /s/  John W.
  Adams

  	
   

  
	
  Mark B. Dunkerley

  	
  John W. Adams

  
	
   

  	
  Chairman, Chief
  Executive Officer,

  
	
   

  	
  and President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Ruthann
  S. Yamanaka

  	
   

  
	
   

  	
  Ruthann S.
  Yamanaka

  
	
   

  	
  Senior Vice
  President-People Services

  
	
   

  	
  and Corporate
  Secretary

  
					

 

10EXHIBIT
10.39

 

SEVERANCE,
GENERAL RELEASE, AND INDEMNITY AGREEMENT

 

This Severance, General Release, and Indemnity
Agreement (“Agreement”) is made and entered into by and between Steven E.
Markhoff (“Employee”) and Hawaiian Airlines, Inc. (“Employer”) and its
successors.

 

RECITALS

 

Whereas, Employee was employed by Employer from
November 15, 1999 as an at-will employee; and

 

Whereas, Employee will be separated from employment
with Employer on March 15, 2002; and

 

Whereas, Employee and Employer wish to settle and
compromise any and all claims Employee had, has, or may hereafter claim to have
had relating to Employee’s employment or termination from employment with
Employer, as well as any and all claims Employee had, has, or may hereafter
claim to have against Employer predating this Agreement;

 

Now, therefore, in accordance with the preceding
recitals and in consideration of the covenants, agreements, and representations
set forth in this Agreement, Employee and Employer agree as follows.

 

1.                                       Last
Date of Employment.  Employee’s last
day of work shall be March 15, 2002. 
Employee shall not be required to perform any services for the Company
after that date.

 

2.                                       Continuation
of Base Salary.  Employer shall pay
Employee an amount equal to 12 months of Employee’s base annual salary (the
“Consideration Amount”).  Employee and
Employer agree that the Consideration Amount shall be One Hundred Fifty
Thousand U.S. Dollars ($150,000.00), less all employment taxes and other deductions
required to be withheld by Employer.  It
is expressly understood by and between the parties that payment of the
Consideration Amount, whether by Employer or by a third party, shall inure to
the benefit of Employer.  The
Consideration Amount shall be paid by check in equal semi-monthly installments
on the standard pay dates of the Employer, beginning on April 5, 2002 and
ending on March 20, 2003.  The checks
will be mailed to an address provided by the Employee to the Employer.  The Employee is responsible for informing
the Employer of any changes in address affecting this Agreement.  Direct deposit is not an available
option.  Payments under this section (as
well as other payments to Employee under this Agreement) are contingent on
Employee’s continued compliance with all provisions of this Agreement.

 

3.                                       Continuation
of Benefits.  As further
consideration for this Agreement, Employer shall provide Employee with the
following:

 

a)                                      Benefit
plans:  Employer shall provide
Employee, Employee’s spouse and eligible dependents with group life insurance,
medical

 

 

Mr. Steven E. Markhoff

March 15, 2002

 

and dental coverage through March 31, 2003,
through the Employer’s benefit plans. 
Thereafter, Employee may elect to continue medical and/or dental
coverage under the Employer’s medical and dental plans, at Employee’s own
expense, in accordance with the Consolidated Omnibus Budget Reconciliation Act
of 1985.  In addition, if permitted by
the insurance company issuing the policy, Employee may continue the above referenced
life insurance policy in accordance with the terms set by the insurance
company.  These benefits will cease when
Employee becomes eligible for said benefits from a new employer; Employee will
notify Employer promptly upon effectiveness of said eligibility.

 

b)                                     Travel
benefits:  Employee, Employee’s
spouse and eligible dependents shall be entitled to travel benefits on
Employer’s flights (but not charter flights) at the PS2F/PS2Y
category.  These benefits continue
through March 15, 2003.

 

c)                                      Compensation
for fringe benefits made unavailable by reason of employment separation:  In recognition of the fact that Employee
will no longer be eligible to participate in certain employee benefits,
including the Employer’s 401(k) plan, the Employer shall pay Employee the sum
of Fifty-three Thousand Eight Hundred U.S. Dollars ($53,800.00), less all
employment taxes and other deductions required to be withheld by Employer, on
or before seven (7) days after execution of this Agreement in full satisfaction
of the Employer’s obligations for these benefits.  A check for this amount will be mailed to the Employee within
seven (7) days of execution of this Agreement. 
In the event Employee has not repaid Employer for outstanding amounts
due, the amount paid to the Employee under this paragraph will be reduced by
the amounts owed to the Employer and an accounting of such amounts will be
provided to Employee.

 

d)                                     Reimbursement
of Relocation Expense:  Employee
will receive reimbursement, with receipts, of up to Fifty Thousand U.S. Dollars
($50,000.00) to cover allowable expenses if he relocates outside of the State
of Hawaii on or before March 15, 2003. 
Allowable expenses include movement of household effects of Employee’s
residence including packing, unpacking, shipping and insurance, and shipment of
one automobile.  Expenses not eligible
for reimbursement include but are not limited to expenses related to the sale,
rental, cleaning or improvement of personal property, residence and/or housing
in the State of Hawaii, registrations required in the new domicile (e.g., car),
expenses related to the purchase, rental, cleaning, set-up or improvement of
housing in the

 

2

 

new domicile, expenses related to the purchase or
rental of equipment, electronics, hardware, software or other related property,
materials and merchandise.  Up to
Fifteen Thousand U.S, Dollars ($15,000.00) of this amount may be used for
relocation and employment-seeking related travel (airfare, hotels and rental car).  Reimbursement payments for eligible
relocation expenses will be made within thirty (30) days of receipt by Employer
of expense receipts.

 

e)                                      Other
Payments:  The Employer will pay
Employee a one-time lump sum of Fifty-three Thousand Four Hundred U.S. Dollars
($53,400.00), less all employment taxes and other deductions required to be
withheld by Employer.  Payment will be
mailed on or before seven (7) days after execution of this Agreement as is
reasonably practicable to the address provided by the Employee to the Employer.

 

4.                                       Stock
Options.  On July 10, 2001,
Employee was granted options for the purchase of 50,000 shares of Employer’s
common stock pursuant to Employer’s 1996 Stock Incentive Plan, As Amended.  None of these options are vested and all of
these options will expire upon termination of employment.  In lieu of these options, Employee will be
paid Thirty-Seven Thousand Five Hundred U.S. Dollars ($37,500.00), less all
employment taxes and other deductions required to be withheld by Employer.  This amount is calculated as $4.00 per option
minus the exercise price of $3.25 per option for each option.  Payment will be made on or before seven (7)
days after execution of this Agreement.

 

5.                                       Release
of Claims.  In consideration of the
benefits and payments to Employee under this Agreement, Employee hereby
releases the Company and its successors, and their directors, officers,
employees, and agents from any and all claims (including, but not limited to,
claims for personal injury, tort, pension and/or retirement benefits,
inflection of emotional distress, breach of contract or for any statutory or
regulatory violations, including but not limited to violation of Title VII of
the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the
Hawaii Civil Rights Act, and the Hawaii Employment Practices Law, H.R.S.
Chapter 378) Employee now has, known or unknown, arising out of your employment
with or separation from employment with the Company.  Employee also waives any claim for attorneys’ fees related to the
foregoing released claims, except for claims related to the enforcement of this
Agreement.

 

6.                                       Return
of Property.  Employee warrants that
he has returned all property of Employer in Employee’s possession, custody, or
control, including, but not limited to, computer equipment, computer hardware,
computer software, fax machine(s), pager(s), company credit card(s), company
telephone card(s), Travel Authority Cards from other airlines, identification
card(s), access card(s), AOA Badge(s), Friendship

 

3

 

Travel Passes (FTPs), access code(s), key(s), company files, work
product, manuals, customer lists, company documents, financial information,
operational information, blueprints, plans, memoranda, notes, and
correspondence.  Employee will be
allowed to retain his cellular phone and number, but all service costs will be
assumed by Employee as of March 16, 2002.

 

7.                                       Confidentiality
of Proprietary Information.

 

a.                                       Employee
acknowledges that he has had an obligation under the Code of Business Ethics and Conduct Policy and House Rules to protect and preserve the
confidentiality of information relating to Employer throughout his employment
with Employer.  Employee warrants and
affirms that he has not disclosed any information protected by the Code of Business Ethics and Conduct Policy
and House Rules.

 

b.                                      As
used in this Agreement, the term “Proprietary Information” means (i) any
information of a confidential nature relating to the suppliers, potential
suppliers, customers, and/or potential customers of Employer, (ii) any
information of a confidential nature relating to the trade secrets,
manufacturing processes, product details, specific product applications,
computer software and design techniques, concepts, inventions, practices,
processes, and/or finances of Employer, (iii) any information of a
confidential nature relating to any business, financial, and/or other
arrangements transacted between Employer and any other person, firm, company,
or other entity, and (iv) any information of a confidential nature that
Employee learned or created during his employment with Employer.

 

c.                                       Employee
acknowledges that he has been privy to Proprietary Information during his
employment with Employer.  Employee
agrees that he shall maintain the confidentiality of the Proprietary
Information and shall take all steps necessary to protect the Proprietary
Information and prevent any portion of the Proprietary Information from
entering the public domain or falling into the hands of others not obligated to
maintain the secrecy of the Proprietary Information.  Employee further agrees that he shall not directly or indirectly
use and/or disclose the Proprietary Information or any portion of the Proprietary
Information following his termination from employment with Employer.

 

d.                                      Employee
acknowledges that any and all documents or materials containing any Proprietary
Information, as well as any and all notes and extracts related thereto are the
exclusive property of Employer. 
Employee warrants and affirms that any and all such documents,
materials, notes, and extracts have not been removed or duplicated by Employee,
and that any and all drafts, originals, and copies of such documents,
materials, notes, and extracts have been returned to Employer.

 

e.                                       Employee
further acknowledges that any and all documents, papers, drawings, magnetic or
other media, tangible property, correspondence, memoranda, voice-mail, and/or
electronic mail made, compiled,

 

4

 

received by, or made available to Employee during his employment with
Employer are the exclusive property of Employer, whether or not any such
materials contain any Proprietary Information. Employee warrants and affirms
that any and all such materials have not been removed or duplicated by
Employee, and that any and all drafts, originals, and copies of such materials
have been returned to Employer.

 

8.                                       Intellectual
Property Rights.

 

a.                                       Employee
acknowledges that from time to time during his employment with Employer he may
have been involved (whether during or outside normal business hours) in the
concept, research, design or development of new ideas, products, processes or
practices.  As used in this Agreement,
any ideas, concepts, inventions, designs, products, software, documents or
other works of authorship (in any medium), improvements, modifications,
processes or practices conceived, created or developed in whole or in part by
Employee during the period of his employment with Employer are referred to as
an “Invention” or as “Inventions”. 
However, as used in this Agreement, the terms “Invention” and/or
“Inventions” do not apply to any invention which was developed entirely on
Employee’s own time without using any equipment, supplies, facilities, or trade
secret information of Employer, except for inventions that either:  (1) relate at the time of conception or
reduction to practice of the invention to the business, actual research or
development, and/or anticipated research or development of Employer, or
(2) result from any work performed by Employee for Employer.

 

b.                                      Employee
acknowledges, represents, and agrees that all Inventions are the sole property
of Employer, and that all tangible expressions of the Inventions, including,
without limitation, all documents, instruments, sketches, drawings, notes,
records, plans, specifications, manuals and tapes, and all reproductions,
copies or facsimiles thereof, have been developed, made or invented exclusively
for the benefit of and are the sole and exclusive property of Employer and
constitute work made for hire under Section 201 of Title 17 of the United
States Code (17 U.S.C. Section 201).

 

c.                                       Employee
acknowledges, represents, and agrees that upon the request of and at the
expense of Employer, Employee shall execute any and all documents (including,
but not limited to, patent applications and assignments) and render any
assistance (including, but not limited to, assistance in arbitration,
mediation, and/or litigation), that Employer reasonably determines to be
necessary or appropriate to perfect, enjoy and defend the rights of Employer in
any Invention.

 

d.                                      Employee
acknowledges, represents, and agrees that he shall not register or seek to
register with any governmental or other entity anywhere in the world any rights
in any Invention and shall not challenge Employer’s rights in any Invention.

 

5

 

9.                                       Covenant
Not to Compete.

 

a.                                       Employee
acknowledges that he has had an obligation under the Code of Business Ethics and Conduct Policy to refrain from
competing with Employer throughout his employment with Employer.  Employee warrants and affirms that he has
not knowingly or intentionally engaged in any such competitive activity.

 

b.                                      As
of the date of this Agreement and continuing until the first anniversary of the
date the Employee’s employment terminates, the Employee shall not, directly or
indirectly, own an interest in, manage, operate, join, control, lend money or
render financial or other assistance to or participate in or be connected with,
as an officer, employee, partner, stockholder, creditor, investor, consultant
or otherwise, any individual partnership, firm, corporation or other business
organization or entity (collectively, an “Entity”) that, at such time:  (a) is headquartered in Hawaii and is
primarily engaged in the business of passenger or freight airlines services or
aircraft ground maintenance operations; (b) is an airline that has Hawaii
inter-island passenger or freight services that constitute a material share of
its overall airlines business measured by passenger revenue miles or freight
pound miles; or (c) has 5% or more of the Hawaii inter-island passenger or
freight air services measured by passenger revenue miles or freight pound miles
and the Employee or his affiliates are serving directly as an officer,
employee, partner or consultant of, or otherwise has significant duties or
responsibilities involving, such Entity’s Hawaii operations.

 

10.                                 Non-Solicitation.

 

a.                                       Employee
agrees that for a period of twelve (12) months following the termination of his
employment with Employer, he shall not directly or indirectly represent any
corporation or entity in any business transaction with the Employer, unless
waived by Employer in writing by an authorized officer of Employer.

 

b.                                      Employee
agrees that for a period of twelve months following the termination of his
employment with Employer, he shall not directly or indirectly employ, engage,
attempt to employ or engage, negotiate, arrange for the employment or
engagement, solicit, or otherwise endeavor to entice away any individual who
was employed by Employer as a director, officer, manager, sales representative,
or technician, or research and development position at the time of Employee’s
termination from employment with Employer.

 

11.                                 Confidentiality
of Agreement.  Employer has an
interest in avoiding public disclosure and commentary concerning the terms and
conditions of this Agreement. 
Therefore, Employee agrees to keep the terms and conditions of this
Agreement strictly confidential, except as required by law.  However, Employee may disclose the terms and
conditions of this Agreement to a spouse, legal counsel and tax preparer(s),
provided that Employee’s spouse, legal counsel and tax preparer(s) agree not to
further disclose the terms and conditions of this Agreement, except as required
by law.

 

6

 

12.                                 Non-Disparagement.  (a)  Employer has an interest in
preserving its reputation in the community. 
Employee agrees not to make any statements that disparage or tend to
disparage the Employer or its products, services, officers, employees, advisers
or other business contacts.  Employee
shall not represent, suggest, or hold himself out as being currently associated
or affiliated with Employer in any way. 
Employee shall not make contact with or engage in communications about
the Employer or its operations with the media, current or former employees of
Employer, or current or former customers of Employer, provided, however, that
if Employee is contacted by the media, current or former employees of Employer,
current or former customers of Employer, the general public, or any other
individual or entity, Employee shall not suggest or imply that he is privy to
current information about Employer, and shall not comment about the current or
prospective operation of Employer. 
Employee acknowledges and agrees that any breach of this non-disparagement
provision shall entitle Employer to immediately terminate payment of the
Consideration Amount set forth in paragraph 2 of this Agreement and to sue
Employee for breach of this Agreement for the immediate recovery of any damages
caused by such breach and to prevent Employee from making further statements
that disparage or tend to disparage the Employer or any of its products,
services, officers, employees, advisors or other business contacts.

 

(b)                                 Employer
recognizes Employee’s interest in preserving his reputation in the community
and the airline industry.  Employer
agrees not to make any unsubstantiated statements that disparage or tend to
disparage the Employee.  Employer shall
not make contact with or engage in communications about the Employee with
(i) the media, current or former employees of Employer, or
(ii) current or former business contacts of Employer.  Employer acknowledges and agrees that any
breach of this non-disparagement provision shall entitle Employee to sue
Employer for breach of this Agreement and seek immediate recovery of any
damages caused by such breach and to prevent Employer from further statements
that disparage or tend to disparage the Employee or any of his products or
services.

 

13.                                 Right
to Seek Injunctive Relief.  Employee
agrees that in addition and without prejudice to Employer’s right to seek
legal, equitable, and/or any other form of relief, a breach of any of the
provisions set forth in paragraph 7 (Confidentiality of Proprietary
Information), paragraph 8 (Intellectual Property Rights), paragraph 9
(Covenant Not to Compete), paragraph 10 (Non-Solicitation),
paragraph 11 (Confidentiality of Agreement), and/or paragraph 12
(Non-Disparagement) of this Agreement shall be temporarily, preliminarily,
and/or permanently enjoined by any court of competent jurisdiction upon motion
by Employer upon notice to Employee without a need to show irreparable
injury.  If the period of time or the
geographic scope identified in paragraphs 9 or 10 of this Agreement should
be adjudged unreasonable in any proceeding to enforce this Agreement, then the
period of time shall be reduced by such number of months or the geographical
scope shall be reduced by the elimination of such portion thereof, or both, so
that such restrictions may be enforced for such time and in such geographical area
as is adjudged to be reasonable.

 

7

 

14.                                 No
Admission of Liability.  This
Agreement represents a compromise and settlement between the parties hereto,
and nothing contained herein shall be construed as an admission of liability by
or on behalf of either party, by whom liability is expressly denied.

 

15.                                 Complete
Agreement.  This Agreement contains
the entire understanding and agreement between Employee and Employer and fully
supersedes any and all prior understandings and agreements pertaining to the
subject matter of this Agreement.

 

16.                                 Voluntary
Agreement.  Employee agrees and
acknowledges that he is executing this Agreement voluntarily and not in
response to any coercion by anyone, and that he is not under any form of duress
to agree to the terms of this Agreement.

 

17.                                 Amendment
and Modification in Writing.  This
Agreement may not be amended or modified except by an agreement in writing,
duly signed by the party or parties against whom the enforcement of any
modification or amendment is sought.

 

18.                                 Severability.  If any provision of this Agreement shall be
or become legally void or unenforceable for any reason whatsoever, such
invalidity and unenforceability shall not impair the validity or enforceability
of the other provisions of this Agreement. 
In such an event and to this extent only, the provisions of this
Agreement are deemed to be severable.

 

19.                                 No
Waiver of Rights.  A failure or
refusal by any party to this Agreement either to insist upon the strict
performance of any provision of this Agreement or to exercise any right in any
one or more instances or circumstances shall not be construed as a waiver or
relinquishment of such provision or right, nor shall such failure or refusal be
deemed a custom or practice contrary to such provision or right.  No waiver of any type shall be binding
unless evidenced by a writing signed by the party making the waiver.  A waiver of any breach of this Agreement
shall not be deemed a waiver of any other breach of this Agreement.

 

20.                                 Counterparts
and Facsimile.  This Agreement may
be executed on documents transmitted by facsimile and/or in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

 

8

 

21.                                 Successors
and Assigns.  All rights under this
Agreement shall inure to the benefit of Hawaiian Airlines, Inc., its successors
and assigns.

 

IN WITNESS WHEREOF, the
parties have duly executed this Agreement.

 

SO AGREED:

 

 

	
  /s/  Steven E. Markhoff

  	
   

  	
  4/1/02

  	
   

  
	
  STEVEN E. MARKHOFF

  	
  Date

  
	
   

  	
   

  
	
   

  	
   

  
	
  HAWAIIAN AIRLINES, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/  John Adams

  	
   

  	
   

  
	
  By:

  	
  John Adams

  	
   

  
	
  Its:

  	
  Chairman of the Board

  	
   

  	
  Date:  April 1, 2002

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/  Lyn F. Anzai

  	
   

  	
   

  
	
  By:

  	
  Lyn F. Anzai

  	
   

  
	
  Its:

  	
  Vice
  President, General Counsel

  And Corporate Secretary

  	
   

  	
  Date:  April 1, 2002

  
						

 

9

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