EX-10.17.1 34 c37970ex10_17-1.txt EXHIBIT 10.17.1 EMPLOYMENT AGREEMENT This Employment Agreement (hereinafter referred to as the "Agreement") is made and entered into as of the 1st day of February, 2003, by and between Wakelee Smith (hereinafter referred to as "Employee") and Atlas Air Worldwide Holdings, Inc., a Delaware corporation (hereinafter referred to as "Atlas" or the "Company"). WHEREAS, Atlas believes that it is in the best interests of Atlas to retain the services of the Employee and the Employee desires an affiliation with Atlas, on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, Employee warrants that Employee is entering voluntarily into this Agreement, and that no promises or inducements for this Agreement have been made outside of the terms and conditions referred to herein, and Employee enters into this Agreement without reliance upon any statement or representation by Atlas or any other person, concerning any fact material hereto. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, covenant and agree as follows: 1. DEFINITIONS 1.1 For purposes of this Agreement, "CAUSE" as used herein means (i) any act or acts of material dishonesty taken by the Employee, (ii) the failure of the Employee to comply with any of the Employee's obligations within ten (10) days of written notice from Atlas, (iii) any violation by Employee of Atlas corporate policies as set forth in the Employee Compliance Manual, Employee Handbook or related corporate policies of which Employee has received written notice; provided that, if such violation is subject to cure, Employee shall have ten (10) days within which to cure such violation after receipt of written notice thereof, or (iv) the conviction of or "no contest" plea by the Employee to any misdemeanor of moral turpitude or any felony. 1.2 "EMPLOYMENT PERIOD" shall be defined as the period commencing on the date hereof and extending until January 31, 2008, subject to earlier termination as set forth in Section 4 below and extension as provided in the next succeeding sentence. On February 1, 2008 and on each anniversary thereafter, the Employment Period shall be automatically extended for an additional one year unless Atlas gives notice in writing to the Employee or the Employee gives notice in writing to Atlas at least three months prior to February 1, 2008 or such anniversary, as the case may be, that the Employment Period is not to be so extended. 1.3 "PERMANENT DISABILITY" as used herein shall be deemed to have been sustained by Employee if Employee shall have been continuously disabled from performing the duties assigned to Employee during the Employment Period for a period of six (6) consecutive calendar months, and such Permanent Disability shall be deemed to have commenced on the day following the end of such six (6) consecutive calendar months. 1.4 "CONFIDENTIAL OR PROPRIETARY" as used herein shall refer to all information relative to the plans, structure and practices, including information relating to its customers, contracts and aircraft of Holdings (as defined below) or any affiliate or subsidiary thereof, except: - 2 - (a) information that is or becomes a matter of public knowledge through no fault of the Employee; or (b) information rightfully received by the Employee from a third party without a duty of confidentiality; or (c) information disclosed to Employee with Atlas' prior approval for public dissemination. 1.5 "GOOD REASON" as used herein means (i) a reduction during the term of this Agreement in either the Employee's Base Annual Salary or eligibility to participate in bonus pro-grams or other benefits universally offered to similarly situated executives, (ii) a substantial and material reduction in the Employee's title or job responsibilities from the Employee's then current title or job responsibilities, and (iii) any reduction, within twelve (12) months following a Change of Control, in the Employee's title or job responsibilities from the Employee's title or job responsibilities. For purposes of this Section 1.5, "Change of Control" shall mean the acquisition by any person, entity or "group" within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this purpose, (x) the Estate of Michael Chowdry, Chowdry Limited Partnership, Chowdry, Inc., the Chowdry Foundation and Linda H. Chowdry and her family members and (y) any employee benefit plan of Atlas, Holdings or its affiliates) of beneficial owner-ship, within the meaning of Rule 13(d) (c) promulgated under the Exchange Act, of greater than fifty percent (50%) of the combined voting power of the outstanding voting securities of Holdings entitled to vote generally in the election of directors. - 3 - 2. EMPLOYMENT AND OBLIGATIONS OF EMPLOYEE Atlas and Employee agree to the following rights, obligations and duties with respect to employment: 2.1 EMPLOYMENT. During the Employment Period, Atlas agrees to employ the Employee as Vice President, Corporate Planning. The scope of Employee's responsibilities shall be as determined by the Board of Directors and/or appropriate officers of Atlas. If the Board of Directors of Atlas requests Employee to serve in any capacity for Atlas or any of its respective subsidiaries or affiliates, Employee agrees that Employee shall serve in such capacity, without any additional compensation. 2.2 OBLIGATIONS OF EMPLOYEE. During the Employment Period, the Employee agrees, except when prevented by illness or Permanent Disability or during a period of vacation, to devote substantially all of Employee's business time and attention to the good faith performance of the duties contemplated. 3. COMPENSATION During the Employment Period, Atlas will pay Employee as follows: 3.1 BASE ANNUAL SALARY. Atlas will pay Employee a base annual salary (the "Base Annual Salary") of Two Hundred Twenty Thousand (USD $ 220,000.00) Dollars per annum, payable in semimonthly installments. The Company shall review Base Salary not less frequently than annually for increases, including among other considerations, EMPLOYEE's performance, it being understood that any increases shall be at the discretion of the Company. 3.2 INCENTIVE BONUS PAYMENTS. Employee will be eligible to receive an annual incentive bonus under the annual executive incentive program at a target of 501 of Base Salary - 4 - (or such percentage offered to similarly situated executives of the Company) based on performance, including financial and individual performance for each calendar year (prorated accordingly for 2003) during the Employment Period upon approval of the Compensation Committee of the Board of Directors of Atlas (the "Compensation Committee"). Employee will also be able, subject to eligibility requirements as set forth in each respective program, to participate in the Company's, Deferred Compensation Plan, Annual Stock Option Plan, Employee Stock Purchase Plan, Profit Sharing and 401(k) Plan, or other plans offered to similarly situated executives, the details of which have already been provided to Employee. Employee shall also be entitled to a sign on bonus of Twenty Thousand ($USD 20,000.00) Dollars payable within thirty (30) days of the date of this Agreement. 3.3 BENEFITS. Employee and Employee's dependents shall be entitled to participate in the Atlas health insurance plan, and Atlas will contribute to Employee's monthly premium as provided by such plan. Atlas reserves the right to discontinue participation in any health insurance plan at any time with the understanding that Atlas will comply in full measure with all state and federal laws regarding the changes of insurance coverage by private employers and notification under the Consolidated Omnibus Budget Reconciliation Act. Employee also shall be entitled, to the same extent and at a level commensurate with the corporate officers of Atlas, to participate in any other benefit plans or arrangements of Atlas. 3.4 FRINGE BENEFITS. Employee also will be entitled to professional and personal use of a company vehicle initially blue-book valued at up to, or actual purchase price not to exceed, $40,000. Atlas will be responsible for all expenses related to the vehicle, except for the costs of fuel. In the event Employee's employment terminates, with or without Cause, - 5 - Employee shall, within thirty (30) days of the date of termination, return the company vehicle to Atlas together with all keys, owners manual(s) and maintenance records. 3.5 STOCK OPTIONS. Employee shall be entitled to an initial stock option grant of 11,250 shares of Common Stock of Holdings. These options shall vest ratably (i.e. 25% per year) at the end of each of the first four years of employment, subject to certain vesting rules established by the Board of Directors or provided in the applicable Stock Option Agreement that will be provided to Employee. The option exercise price shall be the stock price of Holdings as of the close of trading on the last business day immediately prior to the date of this Agreement. All other terms of this grant are contained in the Stock Option Agreement. Employee shall also be eligible to participate in the Atlas Annual Incentive Compensation Plan, that is targeted to deliver additional 11,250 options annually in accordance with the Plan. 4. TERMINATION OF EMPLOYMENT PERIOD The Employment Period shall terminate under the following terms and conditions: 4.1 AT WILL ARRANGEMENT. Atlas may terminate the Employment Period upon written notice to the Employee at any time and for any reason. Atlas and Employee expressly understand and agree that the employment relationship is at-will. Atlas is entitled to sever the employment relationship for any reason. Employee hereby agrees to give Atlas at least three months prior written notice of Employee's voluntary termination of employment for other than Good Reason. 4.2 RIGHTS FOLLOWING TERMINATION. (a) If the Employment Period is terminated by Atlas for reasons other than Cause (including the giving of notice by Atlas pursuant to Section 1.2 hereof of Atlas' election - 6 - not to extend the Employment Period) or if the Employment Period is terminated by the Employee for Good Reason, and subject to Employee's execution of a release upon terms and conditions acceptable to Atlas, the Employee shall be entitled to: (i) receive 18 months severance based on Employee's monthly salary; and (ii) continued coverage and rights and benefits available under the employee benefit programs of Atlas as provided in Section 3.3 above for a period of 12 months from the date of termination subject to the Employee paying the same portion for the premiums for such coverage as he paid during his employment with the Company; PROVIDED, HOWEVER, that any such continued coverage shall cease in the event Employee obtains comparable coverage in connection with subsequent employment, and to the extent Atlas is unable to continue such coverage, Atlas shall provide the Employee with economically equivalent benefits determined on an after-tax basis. (b) Upon the death or Permanent Disability of the Employee, the Employment Period shall terminate and the Employee's Base Annual Salary which is accrued for the current pay period but unpaid as of the date of such death or Permanent Disability shall be paid to the Employee or Employee's personal representative. In addition, upon the death or Permanent Disability of the Employee, Employee or Employee's personal representative shall be entitled to the compensation and benefits as set forth in Section 4.2 (a) (i) and (ii) above. (c) If the Employment Period is terminated by Atlas for Cause or by the Employee for other than Good Reason (including the giving of notice by Employee pursuant to Section 1.2 hereof of Employee's election not to extend the Employment Period), the Employee shall be entitled to receive Employee's Base Annual Salary which is accrued for the current pay period but unpaid as of the date of termination. - 7 - 4.3 NON-COMPETITION PROVISION. (a) Employee covenants and agrees that Employee will not, at any time, reveal, divulge or make known to any third party any confidential or proprietary records, data, trade secrets, pricing policies, strategy, rate structure, personnel policy, management methods, financial reports, methods or practice of obtaining or doing business, or any other confidential or proprietary information of Atlas, or any of its subsidiaries or affiliates (collectively the "Atlas Companies" and each, an "Atlas Company") which is not in the public domain. (b) In addition, Employee covenants and agrees that, at no time before eighteen (18) months after Employee's termination of employment with Atlas, will Employee engage in any of the following activities directly or indirectly, for any reason, whether for Employee's own account or for the account of any other person, firm, corporation or other organization: (i) solicit, employ or otherwise interfere with any of the Atlas Companies' contracts or relation- ships with any client, employee, officer, director or any independent contractor whether the person is employed by or associated with an Atlas Company on the date of this Agreement or at any time thereafter; or (ii) solicit, accept or otherwise interfere with any of the Atlas Companies' contracts or relationships with any independent contractor, customer, client or supplier, or any person who is a bona fide prospective independent contractor, customer, client or supplier of an Atlas Company. (c) In addition, Employee covenants and agrees that, at no time before eighteen (18) months after Employee's termination of employment with Atlas, will Employee directly or indirectly, for any reason, whether for Employee's own account or for the account of any other person, firm, corporation or other organization, accept employment with, or give advice to, (i) any air cargo carrier, (ii) any air cargo division or cargo-affiliate of any other airline - 8 - or (iii) any company that leases cargo aircraft as a significant part of its business on an ACMI, wet lease, charter or dry lease basis. The parties agree d intend that breach of this non-competition clause shall a subject Employee to the full measure of contract and equitable damages. 5. DISPUTE RESOLUTION AND CHOICE OF LAW 5.1 NEGOTIATION. If a dispute between the Parties arises under this Agreement, the Parties shall negotiate in good faith in an attempt to resolve their differences. The obligation of the Parties to negotiate in good faith shall commence immediately, and shall continue for a period of at least thirty (30) days ("Negotiation") If Negotiation fails to resolve a dispute between the Parties within the first thirty (30) days, either Party may proceed to demand mediation ("Mediation"). Upon agreement of both Parties, arbitration may be initiated immediately, in lieu a of Mediation. 5.2 MEDIATION. If a dispute between the Parties arises under this Agreement and has not been resolved under the Negotiation procedures described herein, either Party may require, by written notice to the other Party, that Negotiation be facilitated by a single mediator, to be selected by the Parties (the "Mediator"). The Parties shall select the Mediator within ten (10) days after receipt of notice. If the Parties are unable to agree on the Mediator, the Mediator shall be selected by Atlas, but the selected Mediator shall be independent of Atlas and its affiliates. The fees of the Mediator shall be divided equally between the Parties. With the assistance of the Mediator, the Parties shall continue Negotiation in good faith for a period not to exceed thirty (30) days. If the Parties are unable to reach agreement - 9 - during this period, the Mediator shall be discharged and the Parties' obligations under this Mediation section shall be deemed satisfied. 5.3 ARBITRATION. Subject to the duty to negotiate and mediate set forth above, all disputes, claims, or causes of action arising out of or relating to this Agreement or the validity, interpretation, breach, violation, or termination thereof not resolved by Mediation, shall be finally and solely determined and settled by arbitration, to be conducted in the State of New York, USA, in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect at the date of arbitration ("Arbitration"). This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. Any Arbitration commenced pursuant to this Agreement shall be conducted by a single neutral arbitrator, who shall have a minimum of three (3) years of commercial experience (the "Arbitrator"). The Parties shall meet within ten (10) days of failure to resolve by Mediation to attempt to agree on an Arbitrator. Absent agreement at this meeting, the Arbitrator shall be selected by AAA. Such Arbitrator shall be free of any conflicts with Atlas and shall hold a hearing within thirty (30) days of the notice to Employee. If the terms and conditions of this Agreement are inconsistent with the Commercial Arbitration Rules of the AAA, the terms and conditions of this Agreement shall control. The Parties hereby consent to any process, notice, or other application to said courts and any document in connection with Arbitration may be served by (i) certified mail, return receipt requested; (ii) by personal service; or (iii) in such other manner as may be permissible under the rules of the applicable court or Arbitration tribunal; PROVIDED, HOWEVER, a - 10 - treasonable time for appearance is allowed. The Parties further agree that Arbitration proceedings must be instituted within one (1) year after the occurrence of any dispute, and failure to institute Arbitration proceedings within such time period shall constitute an absolute bar to the institution of any proceedings and a waiver of all claims. The Parties shall equally divide all costs and expenses incurred in such proceeding and related legal proceedings unless determined otherwise by the arbitrator. The Judgment of the Arbitrator shall be final and either Party may submit such decision to courts for enforcement thereof. 6. SEVERABILITY AND ENFORCEABILITY It is expressly acknowledged and agreed that the covenants and provisions hereof are separable; that the enforceability of one covenant or provision shall in no event affect the full enforceability of any other covenant or provision herein. Further, it is agreed that, in the event any covenant or provision of this Agreement is found by any court of competent jurisdiction or Arbitrator to be unenforceable, illegal or invalid, such invalidity, illegality or unenforceability shall not affect the validity or enforceability of any other covenant or provision of this Agreement. In the event a court of competent jurisdiction or an Arbitrator would otherwise hold any part hereof unenforceable by reason of its geographic or business scope or duration, said part shall be construed as if its geographic or business scope or duration had been more narrowly drafted so as not to be invalid or unenforceable. 7. MISCELLANEOUS 7.1 NO MITIGATION. The amounts to be paid to Employee are net to Employee, without any reduction or duty to mitigate, except for taxes, other governmental charges or - 11 - amounts owed to Atlas by Employee, and all payments to be made hereunder shall be net of all applicable income and employment taxes required to be withheld therefrom. 7.2 PRO-RATION. In the event the Employment Period is terminated in the middle of any calendar month, the amount due for such month shall be pro-rated on a daily basis. 7.3 NO WAIVER EXCEPT IN WRITING. No waiver or modification of a this Agreement or any of the terms and conditions set forth herein shall be effective unless submitted to a writing duly executed by the parties. 7.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding on Atlas and any successor thereto, whether by reason of merger, consolidation or otherwise. The duties and obligations of Employee may not be assigned by Employee. 7.5 CONFIDENTIALITY OF TERMS. Atlas and Employee agree that the terms and conditions of this Agreement are confidential and that they will not disclose the terms of this Agreement to any third parties, other than the Employee's spouse, their attorneys, auditors, accountants or as required by law or as may be necessary to enforce this Agreement. 7.6 FULL UNDERSTANDING. Employee declares and represents that Employee has carefully read and fully understands the terms of this Agreement, has had the opportunity to obtain advice and assistance of counsel with respect thereto, and knowingly and of Employee's own free will, without any duress, being fully informed and after due deliberation, voluntarily accepts the terms of this Agreement and represents that the execution, delivery and performance of this Agreement does not violate any agreement to which Employee is subject. 7.7 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes all - 12 - prior agreements, arrangements, and understandings between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have executed this agreement on the date and year first above written. WAKELEE SMITH ATLAS AIR WORLDWIDE HOLDINGS, INC. ------------------------------- ---------------------------------- - 13 - AMENDMENT TO EMPLOYMENT AGREEMENT OF WAKELEE SMITH WHEREAS, by this Amendment dated as of January 29, 2004 (the "Amendment") ATLAS AIR WORLDWIDE HOLDINGS, INC. ("ATLAS") and Wakelee Smith ("Employee") wish to update, amend and modify provisions of the Employment Agreement between them dated February 1, 2003, (hereafter referred to as the "AGREEMENT") as set forth herein. Now, therefore, for good and valuable consideration, the receipt of which is hereby acknowledged, the terms and conditions of the above-referenced AGREEMENT are updated, amended and modified as follows: 1.0 Effective February 1, 2004, Employee's job title as set forth in Article 2.1 of the Agreement shall be changed to Senior Vice President, Corporate Planning and Development 2.0 Section 3 of the Agreement is amended by striking "ATLAS" in line 1 and replacing it with "Atlas Air, Inc., a wholly-owned subsidiary of ATLAS". 3.0 Section 3.1 is amended by striking "ATLAS" in line 1 and replacing it with "Atlas Air, Inc., a wholly-owned subsidiary of ATLAS". In addition, effective February 1, 2004, Employee's Base Annual Salary shall be increased to $260,000 per annum. Effective June 30, 2004, Employee's Base Annual Salary shall be increased to $280,000.00 per annum, it being understood that the second installment of Key Employee Retention Program which is payable on or about July 1, 2004, shall be paid Employee based on a $280,000 Base Annual Salary. - 14 - With the exception of the amendments and modifications reflected in Paragraphs 1.0 through 3.0 of this AMENDMENT, the AGREEMENT otherwise remains in full force and effect. AGREED TO AND ACCEPTED BY: EMPLOYEE ---------------------------------- --------------------- WAKELEE SMITH Date ATLAS AIR WORLDWIDE HOLDINGS, INC. By: ---------------------------------- --------------------- Name: Date - 15 - AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT OF WAKELEE SMITH WHEREAS, by this Amendment No. 2 dated as of June 15, 2004 (the "Amendment No. 2") ATLAS AIR WORLDWIDE HOLDINGS, INC. ("ATLAS") and Wakelee Smith ("Employee") wish to update, amend and modify provisions of the Employment Agreement between them dated February 1, 2003, (hereafter referred to as the "AGREEMENT") as set forth herein. Now, therefore, for good and valuable consideration, the receipt of which is hereby acknowledged, the terms and conditions of the above-referenced AGREEMENT are updated, amended and modified as follows: 1.0 Effective June 16, 2004, Employee's job title as set forth in Article 2.1 of the Agreement shall be changed to Senior Vice President & Chief Operating Officer. 2.0 Effective June 16, 2004, Employee's Base Annual Salary shall be increased to $300,000 per annum, it being understood that the second installment of Key Employee Retention Program which is payable on or about August 29, 2004, shall be paid Employee based on Employee's $300,000 Base Annual Salary. 3.0 The Agreement is amended to add Article 4.1.1 as follows: "4.1.1 Notwithstanding Article 1.5(i) and (ii), 4.2(a), or any other provision to the contrary, if the Company relocates its corporate headquarters from Purchase, New York, and Employee elects not to relocate his principal residence to the new location, the - 16 - Company may (i) restore Employee to his previous title or other Senior Vice President position in the Company's discretion, and Employee's compensation package (including Base Annual Salary, bonus and benefits) shall be set at the level as of June 16, 2004, it being understood that (A) Employee shall be required to spend a reasonable amount of office time at the Company's new location as requested by the CEO, and (B) any such change in title or compensation shall not be deemed to constitute Good Reason, or (ii) terminate Employee's employment and the Employment Agreement without further payment or recourse, and, subject to Employee executing a release satisfactory to the Company, the Company will pay Employee nine (9) months salary as severance. With the exception of the amendments and modifications reflected in Paragraphs 1.0 through 3.0 of this AMENDMENT, the AGREEMENT otherwise remains in full force and effect. AGREED TO AND ACCEPTED BY: EMPLOYEE /s/ Wakelee Smith 6/21/04 ---------------------------------- --------------------- WAKELEE SMITH Date ATLAS AIR WORLDWIDE HOLDINGS, INC. By: /s/ John Dietrich 6/21/04 ---------------------------------- --------------------- Name: John Dietrich Date SVP - 17 -