Document:

a50093457ex101.htm

Exhibit 10.1

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

AMENDED AND RESTATED

MARKETING AND SERVICING AGREEMENT

This AMENDED AND RESTATED MARKETING AND SERVICING AGREEMENT is effective the 29th day of November, 2011, and is between JTH Tax, Inc. d/b/a Liberty Tax Service, a Delaware corporation, with a principal place of business at 1716 Corporate Landing Parkway, Virginia Beach, VA 23454 ("Liberty") and REPUBLIC BANK & TRUST COMPANY, with a principal place of business at 601 West Market Street, Louisville, KY 40202 ("Republic").

RECITALS

A. Liberty is a tax preparation franchisor and an operator of company-owned tax preparation offices. Liberty provides software and systems to its franchisees and company-owned stores (together, "EROs") in connection with the business of providing tax preparation, with electronic filing and related services.

B. Republic is engaged in, among other things, the underwriting, approval and funding of Refund Anticipation Loans (“RALs”), to Customers (as defined herein) whose federal and/or state income tax returns are filed electronically.  RALs are generally repaid when the Customer’s tax refund is electronically delivered to Republic.  The Customer’s refund amount is then debited for fees due Republic and others and for repayment of the RAL.  Republic is also in the business of receiving tax refunds electronically and issuing an Electronic Refund Check (“ERC”) or Electronic Refund Deposit (“ERD”) for the amount of the refund, minus fees due Republic and others, to the Customer (RALs, ERCs and ERDs collectively referred to as “Financial Products”)..

C. Republic licenses EROs to offer its Financial Products in connection with the provision of the Financial Product Program (as defined herein).

D. Republic desires, and Liberty agrees to provide, its marketing and training services and personnel in connection with, and to devote support and additional resources in support of, the Financial Product Program.

E. Republic and Liberty entered into the Marketing and Servicing Agreement effective November 30, 2009, as amended on December 27, 2009 (as amended, the "Original Agreement").

F. Republic and Liberty wish to amend and restate the Original Agreement as set forth herein.

 

  

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In consideration of the mutual promises set forth herein, the parties intending to be legally bound, agree as indicated above and as follows:

1.           Definitions

(a)           "Applicable Law" shall mean all laws, rules, regulations and published regulatory guidance that are applicable to the provision of Financial Products, privacy of consumer information and tax preparation.

(b)           "Application" shall mean the Bank Product Application and Agreement in a form developed by Republic and reviewed by Liberty prior to each Tax Season.

(c)           “Business Day” shall mean any day that is not a Saturday, Sunday, legal holiday or any day recognized by the Federal Reserve Bank as a legal holiday.

(d)           “Customer” shall mean a customer of an ERO that applies for a Financial Product.  For purposes of this definition, joint borrowers or joint recipients of a Financial Product shall constitute one “Customer.”

(e)           "Disclosure Documents" shall mean a Republic-required disclosure document(s) or form(s) meeting the requirements of applicable federal laws and regulations as determined by Republic.

(f)           “Electronic Refund Check” or “ERC” shall mean a non-loan financial product through which a Customer’s federal and/or state income tax refund (as identified in IRS Form 8879 and any applicable state tax form, respectively) is deposited into an account established by Republic and disbursed, net of authorized fees and charges, to the Customer by ERC check.

(g)           “Electronic Refund Deposit” or “ERD” shall mean a non-loan financial product through which a Customer’s federal and/or state income tax refund (as identified in IRS Form 8879 and any applicable state tax form, respectively) is deposited into an account established by Republic and disbursed, net of authorized fees and charges, to the Customer (i) by debit card or (ii) via an automated clearing house credit (“ACH“) deposit to the Customer’s designated bank account.

(h)           “Financial Product(s)” shall mean the products offered by Republic under the Financial Product Program, specifically, a RAL, federal and state ERC and federal and state ERD (each as defined herein).

(i)           "Financial Product Program" shall mean the process described in this Agreement pursuant to which Republic will utilize Liberty's software to enable EROs to provide Financial Products to Customers.

 

  

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(k)           “Refund Anticipation Loan” or “RAL” shall mean a loan to a customer secured by the customer’s anticipated federal income tax return refund (as identified in IRS Form 8879 or similar form).

(l)           "State Disclosure Documents" shall mean disclosures required to be provided to a Customer pursuant to applicable State or local law in connection with an Application.

(m)           “Tax Season” shall mean the period beginning on January 2 of a calendar year and ending on the last day an individual is permitted to file a federal income tax return with the Internal Revenue Service (“IRS”), typically on or about October 15th of such calendar year.

2.           License/Marks. Republic hereby grants Liberty a non-exclusive, non-transferable, non-assignable license to grant a non-exclusive, non-transferable, non-assignable sublicense to any of Liberty's EROs to use the Financial Product Program and offer the Financial Products. Liberty agrees that the Financial Product Program is the sole property of Republic and that it may not be duplicated or used for any purpose whatsoever without the express written consent of Republic. Republic hereby grants Liberty a nonexclusive and nontransferable license, during the term of this Agreement, to use Republic's name, trade names, trademarks, service marks, and logos (whether or not registered or protected or protectable) to market Financial Products to EROs. All uses of the Republic marks must be approved in advance in writing by Republic, such approval not to be unreasonably withheld or delayed. Republic does not grant to Liberty any ownership in its marks. Liberty shall discontinue, and shall require its EROs to discontinue, all use of the Republic marks upon the expiration or termination of this Agreement and, upon request by Republic, will return all materials provided by Republic.

3.           Duties of Liberty.

a. Liberty will promote and market the Financial Products and Financial Product Program in promotional materials provided to Customers by Liberty and on Liberty's website and other marketing, sales and promotional materials, comparisons, etc., said promotion to be no less equal than that of any other financial products or financial product providers(s) so promoted by Liberty. Liberty agrees to submit any and all Financial Product Program advertising/marketing material including, but not limited to, point-of-sale materials, direct mail pieces, newsletters, radio/television scripts/video, newspaper/magazine advertisements, internet website advertisements or links, training materials and/or announcements to Republic for prior written approval.

b. Liberty will incorporate the Financial Product Program into Liberty's tax preparation software in accordance with Republic's Record Layouts and Processing Specifications, incorporated herein by reference, which will be provided to Liberty, unless Republic releases Liberty from offering a specific requirement in writing.

 

  

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c. Liberty agrees that the incorporation of the Financial Product Program into Liberty's tax preparation software, including any check writing software, must be tested and approved in writing by Republic, before being made available to EROs. The testing shall include, but is not limited to, communications, electronic record formats, Truth-in-Lending disclosure calculations and the printing of consumer disclosures such as the Application, Disclosure Documents, State Disclosure Documents, checks and any other documentation that is contained in Republic's Record Layouts and Processing Specifications.

d. Liberty agrees that Designated ERO Locations (as defined in Section 3.j. below) accepted to participate in the Financial Product Program will not be permitted to submit to any financial product provider other than Republic, through Liberty or otherwise, an Application for Customers to whom Republic makes available that Financial Product or substantially similar Financial Products, without prior written approval from Republic. EROs found to be participating in both the Financial Product Program and other bank programs, in violation of this Section 3.d., will be terminated from the Financial Product Program. Republic may accept or reject Designated ERO Locations based on criteria developed by Republic, which will be consistent with the criteria used by Republic in accepting or rejecting other tax preparers for similar Financial Product Programs.  If Republic rejects one or more EROs, Liberty will provide additional ERO locations in order to maintain the anticipated number of Applications pursuant to Section 3.j. below. EROs that are not accepted by Republic may offer Financial Products or similar financial products from other providers without any restriction imposed by this Agreement.

e. Liberty agrees to ensure that EROs affiliated with Liberty that select Republic as their Financial Products provider accept and/or agree to the Republic Bank Tax Refund Solutions ERO Agreement. Liberty agrees to require all of the owners of Designated ERO Locations to comply with the ERO Agreement.

f. Liberty shall offer to EROs training regarding Financial Products, and shall further require EROs to satisfactorily complete such training. In connection therewith, Liberty agrees to (i) submit the training to Republic for prior review and approval and, (ii) incorporate Republic's ERO compliance and operational training into such training program. Liberty understands and agrees that Republic may offer and/or require EROs to receive additional training with respect to Financial Products.

g. Should Liberty choose to charge a transmitter fee, or any other similar fee (for transmission of necessary Financial Product information to Republic), Liberty shall require each participating ERO to charge the same amount for ERCs, ERDs and RALs. Liberty and Republic shall agree in advance to the amount of any transmitter or similar fee, and will not withhold their agreement to such fee that is consistent with industry standards.

h. Liberty agrees to procure and maintain Commercial General Liability insurance of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate.

 

  

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i. Liberty agrees to provide a Business Continuity/Disaster Recovery Plan, with respect to the Financial Product Program, and the results of any recent Business Continuity/Disaster Recovery testing, upon Republic's request.

j. On or prior to [*] of each year of this Agreement, Liberty shall designate Republic as the sole and exclusive provider of Financial Products under the Financial Product Program for ERO locations that will generate [*] Applications (the “Designated ERO Locations”); provided, however, that (i) on or prior to [*] of each year of this Agreement, Liberty may designate Republic as the sole and exclusive Financial Product provider under the Financial Product Program for additional ERO locations to the extent Liberty believes necessary to meet the [*] Applications requirement, and (ii) Liberty may, only with Republic’s mutual understanding and prior written agreement, also designate Republic as the sole and exclusive Financial Product provider under the Financial Product Program for additional ERO locations. The Customers of the Designated ERO Locations shall not in the aggregate have a RAL delinquency in excess of [*] based upon Republic's loan history as measured on August 31 of each year of this Agreement.

k. To the extent that Customers request disbursement of the proceeds of any ERD on a debit or similar prepaid card, Republic shall cause such disbursement to be made on the prepaid cards made available to Customers by Liberty and its EROs.

l. Liberty shall pay to Republic an amount equal to the actual RAL delinquency in excess of [*] in the aggregate, for Customers during the tax season ending during such year who have obtained RALs from Republic pursuant to this Agreement based upon Republic’s RAL history as measured on [*] (after taking into account all October fundings by the IRS).  No later than [*] of each year, Republic shall deliver to Liberty the detail of the calculation of such amount.  Republic will provide Liberty with additional detailed information reasonably requested by Liberty to validate such calculation.  Liberty will make the payment to Republic no later than [*] of each year.  If Liberty disputes Republic’s calculation, such disagreement shall be resolved pursuant to the dispute resolution procedures set forth in this Agreement and Liberty shall not be obligated to make any payment until such dispute is resolved. Liberty and Republic agree that the amount payable pursuant to this section 3.l. will be equitably adjusted by them each year if necessary to reflect any material changes in the fee structure associated with RALs in the Financial Product Program.  In addition, to the extent Republic later recovers from a Customer an amount of a delinquent RAL that has been included in a calculation pursuant to this section 3.l that resulted in a payment by Liberty to Republic, (including a collection by Republic pursuant to section 6.d.(ii)(4)), Republic shall use its best efforts to equitably adjust Liberty’s prior or subsequent payments to Republic to account for such recovery for any recovery made by Republic on or prior [*] in the calendar year that is two calendar years after the calendar year in which this Agreement expires or is terminated.

 

  

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4.           Duties of Republic.

a. Republic shall develop reasonable program guidelines for the offering, marketing, receipt and processing of Applications, the making of RALs and the delivery of Financial

Product proceeds (“Program Guidelines”) and shall create and distribute to Liberty for its prior review forms to be used by Designated ERO Locations of each of the following: the Application, Disclosure Document(s), State Disclosure Documents, and disbursement checks.  For the avoidance of doubt, the term "Program Guidelines" shall not include guidelines or other materials that are developed by Liberty, including, without limitation, materials that are developed by Liberty and reviewed by Republic pursuant to Section 3.a. hereof or otherwise.  Republic may create solicitation, marketing and promotional materials relating to the Financial Products Program, each of which shall be subject to Liberty’s prior review.  Republic shall provide such assistance as Liberty reasonably may request in connection with the preparation and dissemination to customers of State Disclosure Documents.  Republic covenants and agrees that the Program Guidelines and all documents and materials provided by it hereunder (including, without limitation, the Application, Disclosure Document(s), State Disclosure Documents, disbursement checks, solicitation materials and marketing and promotional materials) shall comply with Applicable Law.

b. Republic shall provide Record Layouts and Processing Specifications to Liberty that shall contain the procedures and requirements for Liberty to offer the Financial Product Program.

c. Republic shall provide and distribute to each Designated ERO Location an adequate supply of checks upon which they may affix a facsimile signature of an authorized Republic signatory as provided by Republic, and shall promptly replenish such stock upon the ERO’s request at no charge, unless the ERO requests overnight delivery (in which case the ERO shall pay for such delivery).

d. The pricing, fees, and terms for the Financial Product Program shall be developed for each Tax Season by Republic in consultation with Liberty, provided, however, that if Republic and Liberty cannot agree on the pricing and fees for the Financial Products, Republic’s decision will control, subject to the parameters set forth in this Section 4.d.. The underwriting criteria for the Financial Products will be developed by Republic and may be modified from time to time at Republic’s sole discretion.  The pricing, fees, terms and underwriting criteria must be commercially reasonable, substantially similar to the pricing, fees and terms of financial product programs offered in other Liberty offices through other providers that are not corporate affiliates of Liberty, be established on a basis no less favorable than made available by Republic to any party other than Liberty, and within published regulatory guidelines, based on the best information available that tax season, including IRS prior-year funding trends, competitive product offerings and customer and ERO behavior.  The Financial Product Program pricing, fees and terms shall be set forth in writing by Republic no later than October 1 preceding each Tax Season.

 

  

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e. Republic shall provide ERC and ERD services to all Customers requesting the same, if approved, with respect to all states whose taxing authority accepts state income tax returns electronically and disburses refund amounts via direct deposit.

f. Republic shall utilize substantially the same care, criteria, diligence and procedures in accepting or rejecting RAL Applications from, and in collecting RALs made to, Customers of Liberty and its EROs as it utilizes in accepting, rejecting and collecting similar Applications and obligations from customers of other tax preparers to which it makes available similar Financial Product programs.

g. [*] Regardless, Liberty must ensure access to signed copies of such documents in accordance with Section 11 below.

5.           Liberty Procedures.

a. Liberty will provide ERO enrollment information to Republic in the form of applications and agreements provided by Republic (or approved substitute application), site listings and electronic site set-up records in accordance with Republic's standard procedures established prior to each Tax Season.

b. Liberty shall require participating EROs to require that each Customer applying for a Financial Product (i) complete and sign the Application and applicable Disclosure Document(s), and (ii) is given a copy of any and all applicable State Disclosure Documents.  The Application shall include, among other things, a request for certain information and certifications, as well as an authorization, signed by the customer, to (A) disclose the tax return information for the application process in accordance with Section 301.7216 of the U.S. Treasury Department regulations (“Section 7216”) and (B) allow Republic to repay any delinquent RAL originated by Republic with the proceeds of the Financial Product obtained pursuant to the Application. Participating EROs shall be responsible, pursuant to the terms of the ERO Agreement, for ensuring that the Application is complete and accurately reflects all material information received from the customer; provided, however, if the ERO uses commercially reasonable due diligence and fraud prevention measures in accordance with the Program Guidelines, neither Liberty nor the ERO shall be held responsible for false or inaccurate information provided by Customers.

c. In connection with each Application, Liberty shall require each participating ERO to complete IRS Form 8879 and the direct deposit designation in the electronic portion of the applicant’s federal (and state, if applicable) income tax return which shall include information provided by Republic (such as the applicable Republic check routing number and customer account number) and shall name Republic as the financial institution.  The forms shall be signed by an employee of the ERO and by the Customer, and shall also indicate that the account is a checking account and that the source is “other”.  Liberty shall cause the same information to be contained in the appropriate data field as part of the income tax return electronically filed by the ERO.

 

  

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d. Liberty shall require each participating ERO to timely provide to each applicant a signed copy of the Application, applicable Disclosure Document(s), and applicable State Disclosure Documents (which may be combined into one or more forms), signed IRS Form 8453

or similar form, together with any other agreements or documents that Republic reasonably may require; provided that Republic shall be solely responsible for the form and content of the Application, Disclosure Document(s), and State Disclosure Documents , subject to Liberty review prior to each Tax Season, and their compliance with Applicable Law.

e. Retention and Handling of Documents.

                      (i)           Liberty shall require each participating ERO to retain, a copy, electronic or otherwise, of the signed Application and signed Disclosure Document(s) in the Customer’s file, maintained by them for a period of three (3) years following the preparation and execution thereof, after which time such documents shall be properly destroyed by commercially reasonable methods in accordance with the Program Guidelines.  At the reasonable request of Republic, Liberty shall cause EROs to deliver to Republic a copy of any Application or other documentation within three (3) Business Days.

                      (ii)           For fraud detection, underwriting and collection purposes, subject to Liberty’s receipt of the Customer’s consent as provided in Section 7216, Liberty shall provide to Republic electronic copies of each such Customer’s electronically filed federal income tax return, in the format prescribed by the IRS, simultaneously with or promptly after the Application information is transmitted to Republic.

f. After Liberty has transmitted the Customer's income tax return to the IRS, Liberty shall electronically transmit to Republic all information with respect to issuance of a Financial Product necessary to implement the Financial Product Program in accordance with Republic's current year Record Layouts and Processing Specifications provided to Liberty.

g. The IRS has agreed to advise Liberty, as to each Customer, whether such Customer's tax return has been accepted for Electronic Filing (the "IRS Acknowledgment"). When Liberty receives an IRS Acknowledgment, Liberty shall transmit the IRS Acknowledgment to Republic.

h. Upon receiving notice from Republic that a Customer's Application has been approved, Liberty will transmit information to ERO enabling ERO to prepare a disbursement check by completing a blank check form supplied directly by Republic. Such check shall be for the amount of the RAL or ERC less all applicable fees and finance charges authorized by the Customer.

i. Liberty shall distribute to each participating ERO its tax preparation and electronic filing software, which will enable the ERO to file returns electronically through Liberty to the IRS, print the Application, Disclosure Documents, State Disclosure Documents as well as any and all other documents contained in the Record Layouts and Processing Specifications, and will

 

  

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also permit the ERO to send to Republic, via Liberty, the required information to process the Financial Product. Liberty will provide a check writing program to each ERO that will be printing Financial Product checks on site. This check writing program will be designed to permit checks to be written only in the name of the proper Customer provided by Republic and only in the amount approved by Republic as well as to control the preparation of information on the perforated stub of the check form. It will, in addition, have the capability of printing additional checks when additional funds are received causing an additional amount due the Customer.

j. After Liberty has sent an ERO a record approved by Republic authorizing the printing of the disbursement check for the Financial Product, Liberty shall timely transmit to Republic a check reconciliation file as described in Republic's Record Layouts and Processing Specifications.

k. At the reasonable request of Republic, Liberty shall provide reasonable assistance to Republic, recognizing contractual and confidentiality limitations, which may aid Republic in the collection of past due RALs. This assistance may include, but not be limited to, providing updated addresses and phone numbers for EROs, Customers and taxpayers to the extent such information is in the possession of Liberty.

6.           Republic Procedures.

a. Republic shall, on each day during the Term (as defined in section 9.a.), including Saturdays, Sundays and holidays, process Applications and provide Financial Products with respect thereto for all Applications received electronically in accordance with Republic’s underwriting criteria in effect at that time (as the same may be amended from time to time by the mutual consent of the parties) and in accordance with industry standards; provided that Republic shall use commercially reasonable efforts to process RAL Applications within [*] (if a credit bureau is employed to evaluate the creditworthiness of a RAL applicant, then within [*]; if there is a positive match to the Office of Foreign Assets Control List, then within [*]) after having received from Liberty an acknowledgment of the due filing of the related tax return, together with any corresponding debt indicator (if applicable), as received from the IRS.  The foregoing process times shall, in each case, be met [*] of the time (i.e., a [*] service level).  Notwithstanding the foregoing, Republic shall not accept any Applications at any time if Republic (i) receives notification from the IRS that an ERO is under investigation, (ii) reasonably suspects fraudulent activity originating through an ERO, or (iii) considers loan delinquencies on RALs originating through an ERO to be unacceptable, in its reasonable discretion. Republic shall be responsible for decisions made by it to approve or deny RAL Applications, including, without limitation, the provision to applicants of adverse action notices or other notices required by Applicable Law.

b. Republic shall promptly communicate disbursement authorizations to Liberty (i) immediately upon approval of a RAL solely for loan proceeds and (ii) for all other disbursements upon receipt of and after processing IRS or state refund pre-note files to the extent such practice does not violate any applicable bank regulations, provided that federal and state funding shall be

 

  

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released by Republic no later than the effective date designated by the IRS or applicable state taxing authority, respectively.  Republic shall be responsible for all disbursement/check authorizations issued by it, including losses incurred as a result of its issuance of duplicate or multiple check print authorizations or checks issued by Republic in error or with information inconsistent with the information in the disbursement request received from Liberty.  Liberty agrees to cooperate with Republic in the recovery of all duplicate checks.  Additionally, the ERO shall be responsible for and indemnify Republic for any losses incurred as a result of printing duplicate checks from a single check print authorization; provided, however, that such ERO shall have no indemnity obligations if the ERO complies with the requirements set forth in the Program Guidelines regarding check print authorizations and duplicate checks.

c. Establishment of Accounts; Availability of Funds.

(i)           Republic shall establish and maintain at Republic a segregated account for the benefit of Customers (each, a “Deposit Account”), which account shall conform to the requirements of 12 C.F.R. 330.5 so as to afford such customers FDIC insurance with respect to such Deposit Accounts. Upon notification to Liberty that a RAL has been approved or that an ERC or ERD has been funded, Republic shall transfer the amount of the net loan proceeds or net refund, respectively, to the Deposit Account.  All disbursements to Customers shall be drawn on the Deposit Account and shall be paid promptly upon presentment.  Republic shall make all disbursements in the manner elected by the Customer, as set forth in the Application. Republic shall have the right to offset against the Deposit Account all fees and charges authorized by the Customer to be paid to Republic, the ERO or otherwise pursuant to such Customer’s Application for a Financial Product in an amount up to the amount of the Financial Product.

(ii)           Upon notification to Liberty that an ERC or ERD has been funded, Republic shall transfer funds via ACH from the Deposit Account into the account designated for receipt thereof by the Customer.  If the ACH transfer is not successful, then Republic shall disburse the refund via a check drawn on the Deposit Account and printed by the Customer’s ERO or mailed directly by Republic.

(iii)           Republic shall have sufficient funds available at all times to pay all disbursements authorized by Republic under the Program. All checks shall, unless subject to potential defenses by Republic, be paid promptly upon presentment.

d. Deduction of Additional Charges; Timing and Order of Disbursements.

(i)           Republic shall remit payment to the appropriate ERO of all fees and charges authorized by Customers to be paid to such ERO (e.g., tax preparation and other fees) upon funding of the Customer’s tax refund.  The foregoing shall be set forth in greater detail in the applicable ERO Agreement between such ERO and Republic and in the Program Guidelines.

(ii)           All Financial Product disbursements shall be made to the customer net of all authorized fees, deductions or charges.  From the Customer’s refund, and after the RAL payoff (if applicable), disbursements will be made in the following order:  (1) Republic, for Tax

 

  

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Refund Administration Fee; (2) ERO, for tax preparation fees; (3) Liberty, for fees charged by Liberty as provided in section 3.g.; (4) Republic, for prior year RAL obligation(s) to Republic; and, (5) Customer, for all remaining funds.  However, in the event that following the RAL payoff

Republic does not receive funds in excess of its Tax Refund Administration Fee, all funds received will be disbursed to the Customer.

(iii)           If the Customer’s refund is less than the amount of the outstanding RAL, then Republic shall notify the ERO and the Customer of such shortfall, and demand prompt payment to Republic of the outstanding amount.

e. Upon the receipt of any IRS or state payments, Republic shall make available to Liberty a file that shall include a list of ACH transmissions from the IRS or state and a list of all paid items. At Liberty’s request, Republic shall provide weekly reports to Liberty describing all ACH transmissions from the IRS to Republic and all paid items, and covering such other matters and in such form as Liberty reasonably may request.  Republic covenants and agrees that each such report will be true, correct and complete in all respects and all such reports shall be available to Liberty on a secure website on a real-time basis.

f. Republic shall send a proper adverse action notice under the Equal Credit Opportunity Act, Regulation B and other Applicable Laws to each applicant whose RAL request was declined by Republic.

g. Republic shall cooperate with Liberty in developing and implementing procedures to detect fraudulent activity in the Financial Product Program.  Republic shall immediately inform Liberty when it suspects fraudulent activity originating through an ERO and Liberty shall inform Republic of the actions it takes in response to such notification.  Furthermore, Liberty agrees to take additional action as requested by Republic in reference to any participating ERO’s fraudulent activity, to the extent commercially reasonable.

h. Republic will provide Liberty with an ERO Agreement in advance of the applicable filing season to be provided to potential EROs.

8.           Representations and Warranties.

 

a. Republic and Liberty each represent and warrant to the other as follows: (i) it is duly organized and validly existing in good standing under the laws of the jurisdiction in which it is organized and has the full corporate power to own its property and to carry on its business as now being conducted; (ii) the execution and delivery of this Agreement does not conflict with or result in a breach of the terms, conditions or provisions of, give rise to a right of termination under, constitute a default under, or result in any violation of, the organizational documents of it or any mortgage, agreement, contract, order, judgment, decree, statute, law, rule or regulation to which it or any of its respective properties is subject; (iii) no authorizations or other consents, approvals or notices of or to any person or entity are required in connection with (a) the performance by it of its obligations under this Agreement, (b) the validity and enforceability of

 

  

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this Agreement; or (c) the execution, delivery and performance by it of this Agreement; and (iv) it owns, or has the right to use under valid and enforceable agreements, all intellectual property rights reasonably necessary for and related to its performance of, and obligations under, this Agreement and the Financial Product Program.

b. Liberty represents and warrants to Republic that it is in compliance with all Applicable Laws, and shall be responsible for its compliance with all Applicable Laws, the Financial Product Program, the Record Layouts and Processing Specifications, and the terms and conditions of this Agreement.

c. Republic represents and warrants to Liberty that it is in compliance with all Applicable Laws, and shall be responsible for its compliance with all Applicable Laws and the Financial Product Program, as implemented pursuant to the Program Guidelines, and this Agreement.

9.           Term of Agreement.

a. The term of this Agreement (the "Term") shall begin on the effective date, as stated above, and terminate on October 16, 2014. This Agreement shall only be renewable by mutual written consent of both parties.

b. Either party may at its option terminate this Agreement upon twenty (20) days’ prior written notice if (i) the other party has materially breached any of the terms hereof and has failed to cure such breach within such twenty day time period or (ii) the continued operation of the Financial Product Program or the electronic filing program is no longer commercially feasible or practical, or no longer provides the same opportunity, to the terminating party due to legal, legislative or regulatory determinations, enactments or interpretations or significant external events or occurrences beyond the control of the terminating party; provided, however, that in the case of clause (ii), the parties shall first mutually endeavor in good faith to modify the Financial Product Program in a manner resolving the problems caused by legal, legislative or regulatory or external events or occurrences. In addition, either party may terminate this Agreement immediately upon notice to the other party, upon (x) the filing by or against the other party of any petition in bankruptcy or for reorganization or debt consolidation under the federal bankruptcy laws or under comparable law, if such petition is not dismissed within ninety (90) days; (y) the other party’s making of an assignment of all or substantially all of its assets for the benefit of creditors; or (z) application of the other party for the appointment of a receiver or trustee of its assets.  In addition, Republic may terminate this Agreement upon notice to Liberty at the latest date allowable by Republic’s regulator in the event that Republic is directed by one of its regulators to cease offering all of the Financial Products or to cease the Financial Product Program with Liberty.

 

  

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10.           Confidentiality.

The parties acknowledge that as a result of the matters provided for in this Agreement, trade secrets and information of a proprietary or confidential nature relating to the business of the parties and their affiliates may be disclosed to and/or developed by the parties including, without limitation, information about trade secrets, agreements, products, services, licenses, costs, sales and pricing information, and any other information that may not be known generally or publicly

(collectively "Confidential Information"). The parties acknowledge that such Confidential Information is generally not known in the trade and is of considerable importance to the parties and their affiliates and agree that this relationship to each other with respect to such information shall be fiduciary in nature. Each party expressly agrees that during the term of this Agreement and thereafter it will hold in confidence and not disclose and not make use of any such Confidential Information, except (i) as required pursuant to this Agreement;  (ii) for disclosure to its directors, officers, employees, attorneys, advisors or agents who need to review the Confidential Information in connection with the conduct of its business (it being understood that such directors, officers, employees, advisors and agents will be informed of the confidential nature of such information); (iii) in the course of any litigation or court proceeding involving Republic and Liberty concerning this Agreement; (iv) as required by legal process or operation of applicable law, provided, however, that unless prohibited prompt notice of such requirement shall be provided to the party which owns the Confidential Information to allow such party a reasonable amount of time to seek a protective or similar order prior to any such disclosure; and (v) for disclosure of information that (a) was or becomes generally available to the public other than as a result of a disclosure by its directors, officers, employees, advisors or agents in breach of this provision, (b) was available to it on a non­-confidential basis prior to disclosure to it pursuant to this Agreement or prior to any similar agreement between Republic and Liberty, (c) is obtained by it on a non-confidential basis from a source other than such persons or their agents, which source is not prohibited from transmitting the information by a confidentiality agreement or other legal or fiduciary obligation, or (d) has been authorized by the other party to be disseminated to persons on a non-­confidential basis.

b. Section 501(b)(3) of the Gramm-Leach-Bliley Act states that information security standards must include various safeguards to protect against not only "unauthorized access to" but also the "use of" Confidential Information relating to taxpayers that could result in "substantial harm or inconvenience to any customer." In addition to the definition of Confidential Information above, Confidential Information includes, but is not limited to, taxpayers' names, social security numbers, dates of birth, addresses, number of months at address, phone numbers, financial information as to loans with Republic or other loans or accounts, bankruptcy, employer names and phone numbers. Liberty will utilize its best efforts to protect all Confidential Information and to that extent utilize appropriate means including, but not limited to, firewalls, intrusion protections systems, encrypted data transfer, and software security controls to protect all Confidential Information. Both parties shall warrant that such reasonable and appropriate safeguards are and will remain in place. Both parties will immediately provide notice of any breach resulting in unauthorized intrusion(s) of the Confidential Information and shall specify

 

  

16

  

 

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

 

the corrective action taken by the breached party. The breached party shall assess the nature and scope of any incident and specifically identify the Confidential Information that has or may have been improperly accessed or misused. The breached party shall take appropriate steps to contain and control any incident of breach of security relating to the Confidential Information, assist the other party with all reasonably requested steps needed to notify customers of any such breach and prevent harm or inconvenience from such breach and agrees upon request to indemnify the injured party for any loss or costs associated with any breach of security or unauthorized disclosure.

11.           Audit. Liberty agrees to provide to the internal and external auditors and personnel of Republic, and any examiners or agents from any regulatory body asserting jurisdiction over the business of Republic, all third party audit and examination reports prepared by regulatory examiners, subject to the prior approval of such examiners, or independent public accountants of Liberty, and shall grant such auditors, personnel, examiners and agents reasonable access to Liberty (including, without limitation, to its records). It shall fully cooperate and provide to such auditors, personnel, examiners and agents, in a timely manner, all such assistance as they may reasonably require in monitoring and/or verifying compliance with Applicable Law and this Agreement, including providing information concerning EROs or Customers and will assist Republic in obtaining any such information from EROs. Specifically, Liberty shall, and shall require an ERO to, provide to Republic upon its written request within three (3) days of such request Financial Product documentation and information about a Customer or Customers or one or more EROs. Additionally, Liberty agrees to implement additional criteria related to the Financial Product Program that will be mutually agreed to by Liberty and Republic, into Liberty's onsite evaluations of EROs and provide all results of said onsite evaluations to Republic upon request.

12.           Indemnification. Liberty shall indemnify, hold harmless and reimburse Republic and its officers, directors, employees and agents, for all expenses and costs including, but not limited to, reasonable attorneys' fees, judgments, penalties, payments of other direct expenses and payments and settlement or other disposition of, or in connection with, any claims, disputes, controversies or litigation with respect to anything wrongfully done or not done by Liberty or for the violation of any laws, rules or regulations applicable to Liberty in connection with the Financial Product Program.

13.           Severability. If any provision of this agreement shall for any reason be held invalid, illegal, or unenforceable, same shall not affect the validity of this Agreement or any other provision hereof and this Agreement shall be interpreted and construed as if such provision to the extent invalid, had not been contained herein.

14.           Survival. Sections 1, 2 (the last sentence only), 3.l., 4.g, 5.e., 9.b., and 10 - 24 shall survive the termination or expiration of this Agreement.

 

  

17

  

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

15.           Entire Agreement. The Agreement, as amended, constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, including any obligations owed under all prior agreements (including the Original Agreement) and/or understandings, whether written or oral, relating to the subject matter of this Agreement. Upon the execution and delivery of this Agreement by both parties, the Original Agreement shall be deemed to have been terminated and superseded by this Agreement.

16.           Amendment. This Agreement may be amended or modified only by a written instrument executed by all the parties hereto.

17.           Relationship of the Parties. This Agreement is not intended to create, and shall not create a partnership relationship or joint venture between Republic and Liberty, each party being an independent contractor.

18.           Successors and Assigns. Neither party may assign this Agreement without the prior written approval from the other party.

19.           Agreement Not Exclusive. This Agreement shall not be exclusive with respect to either Republic or Liberty.

20.           Notice. All notices, consents, waivers or other communications, including any errors and omissions inquiries, required or permitted under this agreement shall be in writing and shall be deemed effective upon personal delivery or when sent by registered or certified mail or overnight courier which provides a receipt upon delivery, postage prepaid, addressed to the following business addresses or at such other address or addresses as either party may designate to the other in writing hereinafter:

 

	If to Liberty:	 	JTH Tax, Inc.
	 	 	Attn: Mr. Mark F. Baumgartner, CFO
	 	 	1716 Corporate Landing Parkway
	 	 	Virginia Beach, Virginia 23454
	 	 	 
	If to Republic:	 	Republic Bank & Trust Company
	 	 	Tax Refund Solutions
	 	 	Attn: William R Nelson
	 	 	200 South 7th Street
	 	 	Louisville, Kentucky 40202

 

21.           Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same Agreement. This Agreement is not binding until executed by both parties.

 

  

18

  

 

[*] designates portions of this document that have been omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission.

22.           Waiver of Jury Trial. Both parties to this Agreement hereby knowingly, voluntarily, and intentionally waive any right to a trial by jury in any action, suit, proceeding, or counterclaim concerning any rights under this agreement, any related document or under any other document or agreement delivered in connection herewith or therewith, or arising from any relationship existing in connection with this agreement, and agree that any such action, suit, proceeding or counterclaim shall be tried before a court and not before a jury. This provision is a material inducement for the parties entering into this Agreement.

23.           Applicable Law - Arbitration. Any dispute arising out of or relating to this Agreement, or the relationship or dealings between the practice hereto, shall be settled by mediation, or, if the parties cannot agree on an acceptable mediator or fail to reach a solution through the mediation process, then by binding arbitration, conducted on a confidential basis, under the then current Commercial Arbitration Rules of the American Arbitration Association (including the Optional Rules for Emergency Relief) strictly in accordance with the terms of this Agreement and the substantive law of the State of Kentucky. The arbitration shall be held at a mutually agreeable location in Jefferson County, Kentucky and conducted by one (1) arbitrator chosen from a list of attorneys or judges. If the parties cannot within thirty (30) days agree on the selection of the arbitrator, the arbitrator will be appointed by the Circuit Court of Jefferson County, Kentucky in an action commenced to enforce this Section. The costs of the arbitration, including the fees to be paid to the arbitrator, shall be shared equally by the parties. Judgment upon the award rendered by the arbitrator may be entered and enforced in any court of competent jurisdiction. The arbitrator shall not award any consequential, incidental punitive or exemplary damages. The parties acknowledge that they have voluntarily agreed to arbitrate their disputes in accordance with the foregoing and each party hereby irrevocably waives any damages in excess of compensatory damages.

24.           Governing Law. The Agreement shall be constructed in accordance with the laws of the Commonwealth of Kentucky and any action commenced hereunder to construe or enforce this Agreement shall be commenced in a court of competent jurisdiction located in the Commonwealth of Kentucky.

IN WITNESS WHEREOF, Liberty and Republic have executed this Agreement on the date indicated below.

                                                                                   

	Republic Bank & Trust Company	 	JTH Tax, Inc.	 
	 	 	 	 	 	 
	By:	/s/ William R. Nelson	 	By:	/s/ James J. Wheaton	 
	Name:	William R. Nelson	 	Name:	James J. Wheaton	 
	Title:	President – TRS	 	Title:	Vice President	 
	Date:	November 29, 2011	 	Date:	November 29, 2011	 

 

19exhibit10-96.htm

Exhibit 10.96

MANAGEMENT COMPENSATION AGREEMENT

 

(Vice President and Chief Operating Officer)

 

between

 

PINNACLE AIRLINES CORP.

 

and

 

JOHN SPANJERS

 

dated as of

 

October 1, 2011

 

  

 

  

Management Compensation Agreement

 

for the Vice President and Chief Operating Officer

 

of

 

Pinnacle Airlines Corp.

 

This Management Compensation Agreement (the "Agreement") is made, entered into, and effective as of October 1, 2011, by and between Pinnacle Airlines Corp., a Delaware corporation ("Company"). and John Spanjers ("Executive").

 

RECITALS

 

Executive is currently employed by Company at will; and

 

Company and Executive wish to continue that employment relationship and to state the terms and conditions of such employment and compensation.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein, Company and Executive, intending to be legally bound, hereby agree as follows.

 

1.           Terms of Employment.

 

1.1           Employment.  Company agrees to continue to employ Executive, and Executive agrees to continue to serve Company, on the terms and conditions set forth herein.

 

1.2           Position and Duties.  During the term of Executive's employment hereunder, Executive shall serve as Vice President and Chief Operating Officer of Company and shall have such powers and duties consistent with such position in a company the nature and size of Company and as may from time to time be prescribed by the Chief Executive Officer or the Board of Directors consistent herewith.  Executive shall devote substantially all his working time and effort to the business and affairs of Company and its Affiliates.  Executive shall obtain approval prior to accepting any duties or responsibilities related to businesses other than Company and its Affiliates or charitable/community organizations (from the Chairman of the Board, or from the Board of Directors if Executive's time commitment may become significant, in the discretion of the Chairman).

 

2.           Compensation.

 

2.1           Annual.  Executive's Base Salary in effect on the Effective Date shall be as set forth on Attachment "A" hereto, as modified thereafter by the Board.  Executive's Base Salary shall be payable in accordance with Company's payroll policies.

 

2.2.           Incentive Compensation Programs.  In addition to Base Salary, Executive shall continue while employed hereunder to participate in Company's incentive compensation programs (including any annual bonus program, any long-term incentive program, and any successor programs) as set forth on Attachment "A" hereto (including any future amendments) (the "Incentive Compensation Programs").

 

2.3           Expenses.  During the term of Executive's employment hereunder, Executive shall be entitled to receive prompt reimbursements for all reasonable expenses incurred in performing services hereunder, provided that Executive properly accounts therefor in accordance with Company policy.

 

2.4           Benefit Programs; Attachment "A".  During the term of his employment, Company shall provide Executive with the same benefits that it provides generally to its other employees or specifically to its executive employees, including but not limited to life, medical, and dental insurance, pension, vacation, bonus, profit-sharing and savings plans and similar benefits, as such plans and benefits may be adopted, modified or eliminated by Company from time to time.  Executive shall also be entitled to the awards, payments and entitlements set forth on Attachment "A" hereto.

 

2.5           Indemnification and Insurance.  Company shall indemnify Executive with respect to matters relating to Executive's services as an officer and/or director of Company or any of its Affiliates to the extent set forth in Company's Certificate of Incorporation (limited by Delaware law, as reflected in Company's form of Indemnity Agreement being executed by Executive and Company contemporaneously herewith) as in effect on the date hereof as amended from time to time and in accordance with the terms of any other indemnification which is generally applicable to executive officers of Company or of its Affiliates that may be provided by Company or any such Affiliate from time to time.  The foregoing indemnity is contractual and will survive any adverse amendment to or repeal of the Certificate of Incorporation.  Company shall also cover Executive under any policy of officers' and (if Executive is a director at the relevant time) directors' liability insurance provided that such coverage is comparable to that provided currently or hereafter to any other executive officer or (if Executive is a director at the relevant time) director of Company.  The provisions of this Paragraph 2.5 shall survive termination of Executive's employment, unless the termination is by Company for Cause.

 

3.           Termination of Employment.

 

3.1           Upon Death.  Executive's employment hereunder shall terminate upon his death.

 

3.2           By Company.  Company may terminate Executive's employment hereunder at any time with or without Cause.

 

3.3           By Executive.  Executive may terminate his employment hereunder at any time for any reason.

 

3.4           Notice of Termination.  Any termination of Executive's employment hereunder (other than by death) shall be communicated by thirty (30) days' advance written Notice of Termination by the terminating party to the other party to this Agreement; provided that no Notice of Termination is required in advance if the  Executive is terminated by Company for Cause.

 

4.           Payments in the Event of Termination of Employment.

 

4.1           Payments in the Event of Termination by Company for Cause or Voluntary Termination by Executive.  If Executive's employment hereunder is terminated by Company for Cause or by Executive other than for Good Reason or other than as set forth in Sections 4.3(b) or 4.5 of this Agreement, Company shall pay Executive (a) his accrued and unpaid Base Salary through the Date of Termination and (b) any vested or accrued and unpaid payments, rights or benefits Executive may be otherwise entitled to receive pursuant to the terms of Attachment "A" (including, without limitation, any unpaid relocation benefits) or any retirement, pension or other employee benefit or compensation plan (but not any Incentive Compensation Program) maintained by Company at the time or times provided therein.

 

4.2           Payments in the Event of Termination  by Company other than for Cause or by Executive for Good Reason.  If Executive's employment hereunder is terminated by Company other than for Cause, or by Executive for Good Reason, and Executive experiences a Separation From Service:

 

(a)           Company shall pay Executive:

 

(i) any accrued and unpaid Base Salary through the Date of Termination;

 

(ii) any accrued and unpaid bonus or additional compensation under any annual bonus plan (the "Incentive Bonus") for any calendar year ended before the Date of Termination;

 

(iii) a pro rata share (based on days employed during the applicable year) of any unpaid Incentive Bonus Executive would otherwise have received with respect to the year in which the Date of Termination occurs, payable at the time the Incentive Bonus would otherwise be payable to Executive; provided, however, that 100% of the Incentive Bonus shall be determined solely with reference to the actual financial performance of Company for the full year (based on the goals previously established with respect thereto) (rather than a portion of the Incentive Bonus determined on the basis of individual performance), if there are such financial goals previously established; provided, further, in the event that no Company financial performance goals have been established for such year, then that portion of the Incentive Bonus that would have (but for this Section 4.2(a)) related to the achievement of the individual performance target shall be deemed to have been fully achieved and shall determine 100% of the Incentive Bonus potential; and

 

(iv) any vested or accrued and unpaid payments, rights or benefits Executive may be otherwise entitled to receive pursuant to the terms of Attachment "A" (including, without limitation, any unpaid relocation benefits) or any written retirement, pension or other employee benefit or compensation plan maintained by Company at the time or times provided therein.

 

(b)           In addition to the compensation and benefits described in Section 4.2(a):

 

(i)          If Executive's employment hereunder is terminated by Company other than for Cause or if Executive terminates his employment for Good Reason, and in either event Executive experiences a Separation From Service, then subject to the conditions stated below Company shall pay Executive, in substantially equal installments at Executive's regular pay intervals in effect prior to such Separation From Service, over a period of eighteen (18) months, an aggregate amount equal to one-and-one-half (1.5) (the "Multiple") times the sum of

 

(aa)          Executive's annual Base Salary, and

 

(bb)          the target Incentive Bonus for Executive with respect to the year in which the Separation From Service occurs (or if no target has been set for that year, the target Incentive Bonus for the most recent year in which a target Incentive Bonus was in effect).

 

The initial installment shall be paid to Executive on the first regular pay date which would have been in effect for Executive but for the Separation From Service and which occurs on or first following the date (the "First Severance Payment Date") which is thirty (30) days after the date of Executive’s Separation From Service (the "Separation Date").

 

(ii)          On the Separation Date, Executive's rights under any compensation or benefits programs shall become vested and any restrictions on restricted stock, stock options or contractual rights granted to Executive shall be removed, except as provided in Section 4.7 below.

 

(iii)          In addition, Company shall compensate Executive for transition expenses in the amount of $45,000 payable on the First Severance Payment Date.

 

(c)           Executive shall not be required to mitigate the amount of any payment provided for in this Section 4.2 by seeking other employment or otherwise, and no such payment shall be offset or reduced as a result of Executive obtaining new employment.

 

(d)           Notwithstanding anything else to the contrary in this Agreement, Company's obligation regarding the payments and acceleration provided for in Section 4.2(b)(i) and (ii) is expressly contingent upon Executive both (i) executing a general release in the form attached hereto as Attachment "B" (the "General Release") within twenty one (21) days after the Separation Date, and (ii) the time for revocation of the General Release having lapsed (as determined by counsel to Company) prior to the date which is thirty (30) days after the Separation Date.

 

4.3           Payment in the Event of Termination Upon Change in Control of Company.

 

(a)  In the event a Change in Control occurs after the date of this Agreement, the Multiple shall be two (2.0) instead of one-and-one-half (1.5) for purposes of determining the amount payable to Executive under Section 4.2(b)(i) upon any termination of employment described therein, or described in Section 4.3(b), if either occurs on or after the date of such Change of Control.

 

(b)  Notwithstanding anything else to the contrary in this Agreement, Executive shall be entitled to terminate his employment as a Separation From Service without Good Reason at any time during the 30-day period immediately following the expiration of the six months from the date of the Change in Control.  Upon any such Separation From Service, Section 4.1 shall not apply and Company instead shall be obligated to make the payments and provide the benefits to Executive as set forth in Section 4.2 and 4.3(a).

 

(c)  Notwithstanding anything in Section 4.2(b)(i) to the contrary, the aggregate amount payable to Executive thereunder upon any termination of employment described therein, or upon any termination of employment described in Section 4.3(b), that occurs at any time during the 30-day period immediately following the expiration of six months from the date of a Change in Control shall be paid in a lump sum on the First Severance Date if the Change in Control qualifies as a "change in control event" within the meaning of the regulations issued under Section 409A of the Internal Revenue Code of 1986, as amended (such section and its implementing regulations, "Code Section 409A").

 

(d)  Nothing set forth in this Section 4.3 is intended or shall be construed to limit Executive's right to terminate his employment for Good Reason during the aforementioned six month period, or any other time, or to limit Company's obligation to make the payments or provide the benefits set forth in Section 4.2 upon events described in Section 4.2.

 

(e)  Executive shall not be required to mitigate the amount of any payment provided for in this Section 4.3 by seeking other employment or otherwise, and no such payment shall be offset or reduced as a result of Executive obtaining new employment.

 

(f)  If any payment, benefit or entitlement to be made or provided to or for the benefit of Executive under this Agreement or otherwise is at any time determined to be subject to excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended, and its implementing regulations, such payment, benefit or entitlement shall be subject to the provisions set forth in Attachment "C" hereto.

 

4.4           Payments in the Event of Termination upon Death or Termination by Company upon Disability.  If Executive's employment hereunder is terminated as a result of death or by Company as a result of Executive’s Disability:

 

(a)           Company shall pay Executive (i) his accrued and unpaid Base Salary through the Date of Termination and (ii) any vested or accrued and unpaid payments, rights or benefits Executive may be otherwise entitled to receive pursuant to Attachment "A" (including, without limitation, any unpaid relocation benefits) or the terms of any retirement, pension or other employee benefit or compensation plan maintained by Company at the time or times provided therein; and

 

(b)           Executive's rights under any compensation or benefits programs shall become vested and any restrictions on restricted stock, stock options or contractual rights granted to Executive shall be removed, except as provided in Section 4.7.

 

4.5           Payment in Event of Executive’s Voluntary Termination effective December 31, 2012.  Notwithstanding anything else to the contrary in this Agreement, Executive shall be entitled to terminate his employment as a Separation From Service without Good Reason effective on December 31, 2012, and, in such event, the Company shall be obligated to pay Employee the amounts set forth in Section 4.1 and the Stay Bonus and Severance pay that he would have received had he resigned from Mesaba on September 30, 2011.  On or before October 1, 2012, Executive shall advise the Company’s CEO whether he plans to remain employed with the Company beyond December 31, 2012.

 

4.6           Transfer of Insurance Policies upon Termination.  Upon termination of Executive's employment by Company or by Executive, then within seventy five (75) days after the termination of employment Company shall transfer to Executive the transferable ownership of any Company owned insurance policy or policies on the life of Executive.  Executive shall be solely responsible for the payment of any premiums due after the Date of Termination.

 

4.7           Cash Awards under Long-Term Incentive Plan (“LTIP”).  As set forth in Sections 4.2(b)(ii) and 4.4(b), accelerated vesting of Executive’s rights under compensation and benefit programs occurs under the circumstances described in those sections.  For purposes of cash awards under Company’s LTIP as described in Attachment "A" (which for the avoidance of doubt shall not include the Cash Award in Lieu of 2011 LTIP Cash Award), such acceleration means that (a) if the annual performance objective applicable to an award is achieved in a subject year that ended before the Separation Date and the payment date, then Company will pay Executive on the payment date the full amount of the award, and (b) if the annual performance objective applicable to an award is achieved in a subject year that ended after the Separation Date and prior to the payment date, then Company will pay Executive on the payment date an amount equal to such full amount multiplied by a fraction equal to the portion of the subject year which expired on the Separation Date.

 

4.8           Section 409A Applicability Notwithstanding any other provision of this Agreement to the contrary, in the case of compensation or benefits provided under Sections 4.2(b)(i) or similar compensation or benefits provided under Section 4.3, if Executive is determined to be a Specified Employee at the time of a Separation From Service and the payment or provision of such compensation is made as a result of the Separation From Service and is properly treated as a deferral of compensation subject to Code Section 409A after taking into account all exclusions applicable to such payment under Section 409A, then no portion of such benefits or other such compensation shall be made before the date that is six (6) months after the Separation Date or, if earlier, the date of death of the Specified Employee.  Any compensation which would otherwise be paid within such six (6) month period after the Separation Date shall be paid on the date which is six (6) months and one day after the Separation Date, or the first business day thereafter.  Each payment under this Agreement, including each installment of severance under Section 4.2(b)(i), and each payment to be made to Executive under any nonqualified deferred compensation plan (within the meaning of Code Section 409A) maintained by Company in which Executive participates, shall be deemed to be a separate payment for purposes of Code Section 409A.  To the extent any reimbursement, payment or indemnification of any expenses  or the provision of any in-kind benefits under this Agreement, including Attachment "A", or otherwise is subject to Code Section 409A (after taking into account all exclusions applicable to such reimbursements or payments under Code Section 409A), (i) the amount of such expenses eligible for reimbursement or indemnification or in-kind benefits to be provided during any calendar year shall not affect the amount of such expenses eligible for reimbursement or indemnification or in-kind benefits to be provided in any other calendar year, (ii) reimbursement or indemnification of any such expense shall be made by no later than December 31 of the year next following the calendar year in which such expense is incurred, and (iii) Executive’s right to receive such reimbursements or indemnification or in-kind benefits shall not be subject to liquidation or exchange for another benefit.  The provisions and application of this paragraph will be construed and applied in a manner consistent with Code Section 409A and Treasury Regulations or other guidance issued thereunder.

 

5.           Board/Committee Resignation.

 

Executive's termination of employment or Separation From Service, for any reason, shall constitute, as of the date of such termination and to the extent applicable, a resignation as an officer of Company and a resignation from the Board (and any committees thereof) and the Board of Directors (and any committees thereof) of any of Company's Affiliates and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any Affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as Company's or such Affiliate's designee or other representative.

 

6.           Confidentiality, Non-Competition, Non-Solicitation, Non-Disparagement.

 

(a)  Confidentiality.  While employed by Company and thereafter, Executive shall not disclose any Confidential Information either directly or indirectly, to anyone (other than appropriate Company employees and advisors), or use such information for his own account, or for the account of any other person or entity, without the prior written consent of Company or except as required by law. This confidentiality covenant has no temporal or geographical restriction. For purposes of this Agreement, "Confidential Information" shall mean all non-public information respecting Company's business, including, but not limited to, its services, pricing, scheduling, products, research and development, processes, customer lists, marketing plans and strategies, and  financing plans, but excluding information that is, or becomes, available to the public (unless such availability occurs through an unauthorized act on the part of Executive). Upon termination of this Agreement, Executive shall promptly supply to Company all property and any other tangible product or document that has been produced by, received by or otherwise submitted to Executive during or prior to his term of employment, and shall not retain any copies thereof.

 

(b)  Non-Competition.  Executive acknowledges that his services are of special, unique and extraordinary value to Company. Accordingly, if Company is paying or has paid the Executive an amount determined by the Multiple in Section 4.2(b)(i) or 4.3(a), then the  Executive shall not at any time prior to the first anniversary of the Date of Termination become an employee, consultant, officer, partner or director of any air carrier which competes with Company (or any of its affiliates).

 

(c)  Non-solicitation.  Executive shall not, at any time prior to the first anniversary of the Date of Termination, whether on Executive's own behalf or on behalf of or in conjunction with any person, company, business entity or other organization whatsoever, directly or indirectly, (x) solicit or encourage any employee of Company or its Affiliates to leave the employment of Company or its Affiliates or (y), without permission of Company, knowingly hire a former employee of Company or its Affiliates.

 

(d)  Non-disparagement.  While employed by Company and at any time prior to the later of the first anniversary of the Date of Termination or the cessation of any payments due Executive under Section 4.2 or 4.3, Executive agrees not to make any untruthful or disparaging statements, written or oral, about Company, its Affiliates, their predecessors or successors or any of their past and present officers, directors, stockholders, partners, members, agents and employees or Company's business practices, operations or personnel policies and practices to any of Company's customers, clients, competitors, suppliers, investors, directors, consultants, employees, former employees, or the press or other media in any country.

 

(e)  Condition and Remedies.  Notwithstanding the foregoing, if Executive is entitled to any payments under Sections 4.2 or 4.3 hereof, then Executive's obligations pursuant to this Section 6 are specifically conditioned on Company paying (whether in installments or as a lump sum, as required herein) any amounts to which Executive may be entitled thereunder in the manner required. Executive agrees that any breach of the terms of this Section 6 would result in irreparable injury and damage for which there would be no adequate remedy at law, and that, in the event of said breach or any threat of breach, Company shall be entitled to (i) an immediate injunction and restraining order to prevent such breach or threatened breach, without having to prove damages and (ii) any other remedies to which Company may be entitled at law or in equity. Executive further agrees that the provisions of the covenant not to compete are reasonable. Should a court determine, however, that any provision of the covenant not to compete is unreasonable, either in period of time, geographical area, or otherwise, the parties hereto agree that the covenant should be interpreted and enforced to the maximum extent which such court deems reasonable. The provisions of this Section 6 shall survive any termination of this Agreement and Executive's term of employment.  The existence of any claim or cause of action or otherwise, shall not constitute a defense to the enforcement of the covenants and agreements of this Section 6.

 

7.           Successors and Assigns.

 

(a)  This Agreement shall bind any successor to Company, whether by purchase, merger, consolidation or otherwise, in the same manner and to the same extent that Company would be obligated under this Agreement if no such succession had taken place.

 

(b)  This Agreement shall not be assignable by Executive.  This Agreement and all rights of Executive hereunder shall inure to the benefit of and be enforceable by, Executive's personal or legal representatives, executors, administrators, successors, heirs, distributes, devises and legatees.

 

8.           Term.  The term of this Agreement shall commence on the Effective Date and end upon Executive's termination of employment.  The rights and obligations of Company and Executive shall survive the termination of this Agreement to the fullest extent necessary to give effect to the terms hereof.

 

9.           Notices.  Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or e-mail, the day after delivery to Federal Express for overnight delivery, two days after delivery to the United States Postal Service for mailing, addressed:

 

(a) if to Executive, to the address set forth on the signature page hereto, and

 

(b) if to Company, c/o Pinnacle Airlines Corp., One Commerce Square, Memphis, TN 38103  Attention: Chairman of the Board of Directors, or, in each case, to such other address as may have been furnished in writing.

 

10.           Withholding.

 

All payments required to be made by Company hereunder shall be subject to the withholding and/or deduction of such amounts as are required to be withheld or deducted pursuant to any applicable law or regulation.  Company shall have the right and is hereby authorized to withhold or deduct from any compensation or other amount owing to Executive, applicable withholding taxes and deductions and to take such action as may be necessary in the opinion of Company to satisfy all obligations for the payment of such taxes or deductions.

 

11.           Certain Defined Terms.  As used herein, the following terms have the following meanings:

 

"Agreement" shall mean this Management Compensation Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance herewith.

 

"Affiliate" shall mean any corporation, trust, partnership, limited liability company or other organization which controls, is controlled by, or is under common control with Company.

 

"Base Salary" shall mean the salary of Executive in effect from time to time under Section 2.1.

 

"Board" shall mean the Board of Directors of Company.

 

"Cause" shall mean with respect to termination by Company of Executive's employment hereunder (i) an act or acts of dishonesty by Executive resulting in, or intended to result in, directly or indirectly, any personal enrichment of Executive, (ii) an act or acts of dishonesty by Executive intended to cause substantial injury to Company, (iii) material breach (other than as a result of a Disability) by Executive of Executive's obligations under this Agreement which action was (a) undertaken without a reasonable belief that the action was in the best interests of Company and (b) not remedied within a reasonable period of time after receipt of written notice from Company specifying the alleged breach, (iv) Executive's conviction of, or plea of nolo contendere to, (a) a crime constituting  a felony under the laws of any country, the United States or any state thereof or (b) a misdemeanor involving moral turpitude, (v) a material breach of (a) Company's policies and procedures in effect from time to time or (b) the provisions of this Agreement; provided, however, that such breach shall constitute "Cause" only if Company gives Executive notice pursuant to Section 9 hereof, which shall include a detailed and specific description of the alleged material breach or breaches.

 

"Change in Control" shall have the meaning given such term in the Stock Incentive Plan in effect on the effective date of this Agreement.

 

"Company" shall mean Pinnacle Airlines Corp., a Delaware corporation, and any successor thereto.

 

"Date of Termination" shall mean, with respect to Executive, the date of termination of Executive's employment hereunder after the notice period provided by Section 3.4.

 

"Disability" shall mean Executive's physical or mental condition which prevents continued performance of his duties hereunder, if Executive establishes by medical evidence that such condition will be permanent and continuous during the remainder of Executive's life or is likely to be of at least three (3) years duration.

 

"Effective Date" shall mean October 1, 2011.

 

"Good Reason" shall mean with respect to an Executive, any one or more of the following:

(a)           a material reduction in Executive's Base Salary or level of target bonus under the Bonus Plan or any successor bonus plan without Executive's consent;

 

(b)           any substantial and sustained diminution in Executive's title, position, authority, or responsibilities hereunder (unless due to Executive's Disability); or

 

(c)           a failure by Company to comply with any provision of this Agreement; provided, however, that the foregoing events shall constitute Good Reason only if Company fails to cure such event within thirty (30) days after receipt from Executive of written notice of the event which constitutes Good Reason; provided, further, that "Good Reason" shall cease to exist for an event on the 90th day following the later of its occurrence or Executive's knowledge thereof, unless Executive has given Company written notice thereof prior to such date.

 

In order for Executive's termination of his employment to be considered for Good Reason, such termination must occur within one (1) year after the event giving rise to such Good Reason. Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder.

 

"Incentive Compensation Programs" shall have the meaning set forth in Section 2.2, and shall include the Annual Bonus and the Long-Term Incentive programs referenced in Attachment "A".

 

"Notice of Termination"  shall mean a notice specifying the Date of Termination.

 

"Separation Date" shall mean the date of Executive's Separation From Service.

 

"Separation From Service" shall mean the date from and after which the parties reasonably anticipate that no further services will be performed by Executive, or (if Executive is anticipated to continue providing services to Company in any capacity) that the level of bona fide services Executive would perform for Company from and after such date (whether rendered as an employee or as an independent contractor) would permanently not exceed twenty (20) percent of the average level of bona fide services performed (whether rendered as an employee or as an independent contractor) by the individual during the immediately preceding 36-month period.  (Thus, Executive would not be entitled to the benefit of Sections 4.2 and 4.3 unless and until he has experienced a Separation From Service, as defined in the preceding sentence.

 

"Specified Employee" means a service provider who, as of the date of the service provider’s Separation from Service, is a key employee of a service recipient any stock of which is publicly traded on an established securities market or otherwise. A key employee is any individual who is described in Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the Regulations thereunder and disregarding section 416(i)(5)) at any time during the 12-month period ending on a Specified Employee identification date. The provisions and application of this paragraph will be construed and applied in a manner consistent with Code Section 409A and Treasury Regulations of other guidance issued thereunder.

 

12.           Executive Representation.  Executive hereby represents to Company that the execution and delivery of this Agreement by Executive and Company and the performance by Executive of Executive's duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Executive is a party or otherwise bound.

 

13.           Amendment.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by Executive and an officer of Company authorized by the Board to do so.  No waiver of any provision of this Agreement shall be deemed a continuing waiver or a waiver of any other provision, whether or not similar.

 

14.           Governing Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee, without regard to principles of conflicts of laws. The provisions of this Agreement are intended to be construed and applied in a manner consistent with compliance with Code Section 409A, where applicable.  Accordingly, the provisions hereof shall be construed and applied consistent with such intent, to the extent applicable.

 

15.           Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement which shall remain in full force and effect.

 

16.           Arbitration.  Except as otherwise provided in Paragraph 17 of this Agreement, all disputes and controversies arising from or in conjunction with Executive's employment with, or any termination from, Company and all disputes and controversies arising under or in connection with this Agreement (except claims for vested benefits brought under ERISA) shall be settled by mandatory arbitration conducted before one arbitrator having knowledge of employment law in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The arbitration shall be held in the Memphis, Tennessee metropolitan area at a location selected by Company. The determination of the arbitrator shall be made within thirty (30) days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. The parties hereby waive their right to a trial of any and all claims arising out of this Agreement or breach of this Agreement.  Each party agrees to pay his or its own costs and expenses incurred in connection with any arbitration including, without limitation, attorney's fees and one-half of the arbitrator's fees, unless the arbitrator determines that such expenses must be otherwise allocated under applicable law to maintain the validity of this Section 16.

 

17.           Specific Performance.  Notwithstanding Section 16 of this Agreement, if Executive breaches or threatens to commit a breach of Section 6 of this Agreement, Company shall have the right to specific performance (i.e., the right and remedy to have the terms and conditions of Section 6 specifically enforced by a court of competent jurisdiction), it being agreed that any breach or threatened breach of Section 6 would cause irreparable injury and that money damages may not provide an adequate remedy.  If Company exercises its right to seek specific performance in a court of competent jurisdiction, Executive may assert any claims he may have against Company or its Affiliates in such action, and nothing set forth in Paragraph 16 of this Agreement is intended or shall be construed to limit Executive's right to assert such claims.

 

18.           Cooperation.  Executive shall provide his reasonable cooperation in connection with any investigation, action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Executive's employment hereunder. This provision shall survive any termination of this Agreement.

 

19.           Compensation Limitation.  Notwithstanding the foregoing, Executive and Company agree that (i) to the extent permitted by any Federal statute (the "Act") that limits compensation of Executive hereunder, any payments or benefits payable to Executive under this Agreement (including, without limitation, payments under Sections 2 and 4 hereof) or pursuant to any other compensation or benefit plan of Company or other arrangement between Company and Executive that do not comply with the Act shall be deferred until such payments or benefits may be paid under the Act, and (ii) to the extent the Act does not permit the deferral of any such payments or benefits, the maximum compensation and/or severance Executive may receive from Company under this Agreement or any other compensation or benefit plan of Company or other arrangement between Company and Executive will not exceed the amount allowed under the Act.

 

20.           Entire Agreement.

 

This Agreement, any award agreement between Company and Executive entered into pursuant to Company's stock Incentive Compensation Programs, and Company's employee benefit plans in which Executive will continue to participate as provided in this Agreement, contain the entire understanding between Company and Executive with respect to Executive's employment with Company and supersede in all respects any prior or other agreement or understanding between Company or any Affiliate of Company and Executive with respect to Executive's employment.

 

IN WITNESS WHEREOF, Company and Executive have executed this Agreement as of the day and year first above written.

 

 

[This space purposely left blank.  Next page is the signature page.]

 

  

 

  

IN WITNESS WHEREOF, Company and Executive have executed this Agreement as of the day and year first above written.

 

PINNACLE AIRLINES CORP.

 

By:     /s/ Sean E. Menke                                                                                                    

Sean E. Menke, Chief Executive Officer

 

EXECUTIVE:

  /s/ John Spanjers                                    

JOHN SPANJERS

 

 

  

 

  

Attachment "A"

 

Position:                                               Vice President and Chief Operating Officer

Reporting to:                                        President and Chief Executive Officer

	
Location:

	
Executive will be expected to perform his duties from the Company’s office in Memphis, Tennessee

	
Base Salary:

	
$275,000, subject to review on an annual basis

	
Annual Bonus:

	
For calendar year 2011, Executive shall participate in the Mesaba Annual Incentive Plan pursuant to which Executive shall be eligible to receive an annual cash bonus based on the achievement of performance metrics as approved by the Board of Directors.  Beginning on January 1, 2012, Executive will be eligible to participate in Company’s Annual Bonus Program, with an annual target of 50% of Base Salary and a maximum of 100% of Base Salary, with the actual amount determined by the Board of Directors based on Executive's performance relative to pre-established corporate and individual objectives.  Payment will be no later than April 30 of each year.  If Executive remains employed through December 31, 2012, he shall be eligible for a payment under the Annual Bonus Program to the extent that the Board of Directors approves a payout for senior officers of the Company in the first quarter of 2013.

	
Long-Term Incentive:

	
Executive will continue to participate in Company’s Long-Term Incentive Program under which Executive will receive a restricted stock award and a cash award.

	
  

	
Restricted Stock Award.  Each year Executive will receive under the LTIP a restricted stock award under Company’s 2003 Stock Incentive Plan, as amended May 15, 2008 (or any successor plan), of shares valued at no less than 75% of Base Salary and the shares will vest ratably over three years without regard to performance of Company; provided, however, that the Board of Directors may cause the LTIP to be amended to permit awards of equity to Executive based upon performance, so long as LTIP equity awards to all executive officers of Company are also subject to performance objectives. The issuance and resale of shares under such plan are registered with the Securities and Exchange Commission pursuant to a Registration Statement on form S-8.

	
  

	
Cash Award.  The cash award will be at a targeted amount of 75% of Base Salary (“Target”) and a maximum of 112.5% of Base Salary, with the actual amount determined by the Board of Directors based on corporate performance relative to pre-established annual objectives.  The objectives for Executive will be the same as for other program participants.  The cash portion will be payable within 10 business days after the third anniversary of the award date.

	
  

	
 

	
Cash Award in Lieu of 

2011 LTIP Cash Award

	
To avoid a three-year delay in realizing the value from the cash component of the first LTIP Cash Award, the Company established several transition periods for evaluating performance.  The period from July 1, 2011 to December 31, 2011 will be treated as six-month performance measuring period using one-third of the applicable percentage as the payout basis.  2012 will be treated as a one-year performance measuring period using two-thirds of the applicable percentage as the payout basis.  The period from 2012 to 2013 will be treated as a two-year performance measuring period using the full applicable percentage as the payout basis.  The period from 2012 to 2014 would be the first full three-year performance measuring period under the Cash LTIP.  The 2011 performance objectives shall be as determined by the Company’s Board of Directors.

 

 

	
401(k):

	
You will be eligible to participate in the Pinnacle Corp 401(k) Plan to the same extent as other Company executives.

	
Employment Benefits:

	
Executive will be eligible to participate in Company’s health benefit plans on the same basis made available to other executives of Company.

	
Executive Physical:

	
Annual visit to the Mayo Clinic for a medical checkup.

	
Vacation:

	
3 weeks per year.

	
Travel Benefits:

	
Positive space, first class (where available) travel benefits for Executive, Executive's spouse, and Executive's eligible children on all Pinnacle Airlines and Delta Air Lines (mainline and Delta Connection) flights (if permited by any non-Pinnacle flag airline involved).

	
Other Benefits:

	
Annual Delta SkyClub membership.  Complimentary parking at Memphis airport.

	
Incoming Relocation:

	
The Company will reimburse Executive for receipted living expenses in Memphis, Tennessee through December 31, 2012 not to exceed $2,000 per month.  After December 31, 2012, Executive shall be reimbursed for customary and reasonable relocation expenses associated with moving his residence from the Minneapolis area to Memphis as per the terms of the Company’s standard relocation policy.

	
Start Date:

	
October 1, 2011

	
Conditions:

	
Acceptance of offer no later than noon, Central Time, September 30, 2011

 

 

 

  

 

  

 

Attachment "B"

 

 

GENERAL RELEASE

 

This Release is made and entered into by John Spanjers (the "Executive") and Pinnacle Airlines Corp. (the "Company").

 

In consideration of the payments, benefit continuation and acceleration provided for in Section 4.2(b)(i) and (ii) of this Management Compensation Agreement, Executive, on behalf of himself and for any person or entity who may claim by or through him, irrevocably and unconditionally releases, waives, and forever discharges Company, its past, present, and future subsidiaries, divisions, Affiliates, successors, and their respective officers, directors, attorneys, agents, and present and past employees from any and all claims or causes of action that Executive had, has, or may have relating to Executive's employment with Company and/or termination therefrom up to and including the date of this Agreement, including but not limited to any claims under Title VII of the Civil Rights Act of 1964, as amended, the Tennessee Human Rights Act, the Age Discrimination in Employment Act ("ADEA"), and claims under any other federal, state, or local statute, regulation, or ordinance, including wrongful or retaliatory discharge.

 

This Release shall not be construed as an admission by Company of any liability, wrongdoing, or violation of any law, statute, regulation, agreement or policy, and Company denies any such liability or wrongdoing.

 

Executive acknowledges and agrees that this Release includes a release and waiver as to claims under the ADEA.  Executive is hereby advised to consult with an attorney prior to executing the Management Compensation Agreement and this Release.  Executive acknowledges and confirms that he understands and agrees to the terms and conditions of this Release; that these terms are written in layperson terms, and that he has been fully advised of his rights to seek the advice and assistance of consultants, including an attorney, to review this Release.  Executive further acknowledges that he does not waive any rights or claims under the ADEA that arise after the date this Release is signed by him, and specifically, Executive understands that he is receiving money and benefits beyond anything of value to which he is already entitled from Company.  Executive acknowledges that he has had up to 21 days to consider whether to accept and sign this Release, and has had adequate time and opportunity to review the Release and consult with any legal counsel or other advisors of his choosing.  Executive understands that if he signs this Release before the expiration of the 21-day period, his signature will evidence his voluntary election to forego waiting the full 21 days to sign this Release.  If Executive chooses not to accept, or the 21-day period expires without his acceptance, then the offer in this Release is null and void.  Executive further acknowledges that in compliance with the Older Workers' Benefit Protection Act of 1990, he has been fully advised by Company of his right to revoke and nullify this Release, and that this revocation must be exercised, if at all, within seven days of the date he signs this Release.  Executive may revoke his acceptance at any time within the seven days following his signing of this Release by notifying Company of his decision to revoke the acceptance by writing directed and delivered to Pinnacle Airlines Corp., One Commerce Square, Memphis, TN 38103, Attention:  Chairman of the Board.

 

Acceptance of this offer is strictly voluntary.  This Release shall become effective and enforceable only after the seven-day revocation period has expired.  Should Executive decline to accept the benefits of this Release, or if is revoked by him, Executive will not receive the proposed additional compensation and benefits.

 

By his signature below, Executive accepts the terms of this Release.

 

 

	
PINNACLE AIRLINES, INC.

	
EXECUTIVE

	
By: ____________________________                                                               

	 ___________________________
	
Name:                                                                

	
Name:  John Spanjers

	
Title:                                                                

	
                                                            

	
 

 

Date:                                                                

	
                                                

Date:                                                                

 

  

 

  

Attachment "C"

Modified 280G Cutback

(A)           Notwithstanding any other provisions of the employment agreement or otherwise, in the event that any payment, entitlement or benefit paid or payable to, or for the benefit of, Executive (including any payment, entitlement or benefit paid or payable in connection with a Change in Control or the termination of Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments, entitlements and benefits being hereinafter referred to as the “Total Payments”) would be subject (in whole or part), to the excise tax imposed under Code Section 4999 (the “Excise Tax”), then the Total Payments which constitute “parachute payments” within the meaning of Code Section 280G and its regulations shall be reduced (but not below zero) as set forth herein, to the smallest extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).  The Total Payments which constitute “parachute payments” within the meaning of Code Section 280G and its regulations shall be reduced in the following order: (A) reduction by cancellation of the acceleration of their dates of payment, in inverse order of their originally scheduled payment dates, for any payments that became fully vested prior to the change in control and that pursuant to paragraph (b) of Treas. Reg.  1.280G-1, Q/A 24 are treated as payment solely by reason of the acceleration of their originally scheduled dates of payment, (B) reduction of any cash severance payments otherwise payable to Executive, including without limitation, the pro-rata bonus (but with respect to the pro-rata bonus only that portion of the full amount which is treated as contingent on the Code Section 280G change in control pursuant to paragraph (a) of Treas. Reg. §1.280G-1, Q/A 24), in the inverse order of their originally scheduled payment dates, (C) reduction of any other cash payments or benefits otherwise payable to Executive, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity or long-term incentive award, in the inverse order of their originally scheduled payment dates, (D) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Code Section 409A, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity or long-term incentive award,  (E) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity or long-term incentive award other than any stock option or stock appreciation award, in the inverse order of their originally scheduled payment dates, and (F) reduction of any payments attributable to the acceleration of vesting or payment with respect to any stock option or stock appreciation right.

(B)           A determination as to whether any Excise Tax is payable with respect to the Total Payments and if so, as to the amount thereof, and a determination as to whether any reduction in the Total Payments is required pursuant to the provisions of paragraph (A) above, and if so, as to the amount of the reduction so required, shall be made by an independent auditor of nationally recognized standing selected by Company (other than the accounting firm that is regularly engaged by Company or any party that is effecting the change in control) (“Independent Advisor”), all of whose fees and expenses shall be borne and directly paid solely by Company.  The parties hereto shall cooperate to cause the Independent Advisor to timely provide a written report of its determinations, including detailed supporting calculations, both to Executive and to Company.

(C)           For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Code Section 280G(b) shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of the Independent Advisor, does not constitute a “parachute payment” within the meaning of Code Section 280G(b)(2) (including by reason of Code Section 280G(b)(4)(A)) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the Independent Advisor, constitutes reasonable compensation for services actually rendered, within the meaning of Code Section 280G(b)(4)(B), in excess of the Base Amount (as defined in Code Section 280G(b)(3)) allocable to such reasonable compensation, and (iii) the value of any non cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisor in accordance with the principles of Code Sections 280G(d)(3) and (4).

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