THIS FORM OF AWARD AGREEMENT IS PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AIR TRANSPORT SERVICES GROUP, INC. AMENDED AND RESTATED PERFORMANCE-BASED STOCK UNITS GRANTED TO [NAME] ON [DATE]
Exhibit 10.5
THIS FORM OF AWARD AGREEMENT IS PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933
AIR TRANSPORT SERVICES GROUP, INC.
AMENDED AND RESTATED
2005 LONG-TERM INCENTIVE PLAN
PERFORMANCE-BASED STOCK UNITS
GRANTED TO [NAME] ON [DATE]
Air Transport Services Group, Inc. (“Company”) and its shareholders believe that their business interests are best served by extending to you an opportunity to earn additional compensation based on the growth of the Company’s business. To this end, the Company and its shareholders adopted the Air Transport Services Group, Inc. 2005 Long-Term Incentive Plan (“Plan”) as a means through which you may share in the Company’s success. This is done by granting Awards to key employees like you. If you satisfy the conditions described in this Agreement (and the Plan), your Award will mature into common shares of the Company.
This Award Agreement describes many features of your Award and the conditions you must meet before you may receive the value associated with your Award. To ensure you fully understand these terms and conditions, you should:
| • | Read the Plan and the Plan’s Prospectus carefully to ensure you understand how the Plan works; |
| • | Read this Award Agreement carefully to ensure you understand the nature of your Award and what must happen if you are to earn it; and |
| • | Contact W. Xxxxxx Xxxxx at (937) 382-5591 ext. 62686 if you have any questions about your Award. |
Also, no later than [Date], you must return a signed copy of the Award Agreement to:
W. Xxxxxx Xxxxx
Air Transport Services Group, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
If you do not do this, your Award will be revoked automatically as of the date it was granted and you will not be entitled to receive anything on account of the retroactively revoked Award.
Section 409A of the Internal Revenue Code (“Section 409A”) imposes substantial penalties on persons who receive some forms of deferred compensation (see the Plan’s Prospectus for more information about these penalties). Your Award has been designed to avoid these penalties. As a condition of accepting this Award, you must agree to accept any revisions that the Company subsequently determines to be necessary in order for you to avoid these penalties, without any further consideration, even if those revisions change the terms of your Award and reduce its value or potential value.
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1. Nature of Your Award
You have been granted an Award consisting of stock units, which will be converted to common shares of the Company if the conditions described in this Award Agreement are met. Federal income tax rules apply to the payment of your Award. These and other conditions affecting your Award are described in this Award Agreement, the Plan and the Plan’s Prospectus, all of which you should read carefully.
No later than [Date], you must return a signed copy of this Award Agreement to:
W. Xxxxxx Xxxxx
Air Transport Services Group, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
If you do not do this, your Award will be revoked automatically as of the Grant Date and you will not be entitled to receive anything on account of the retroactively revoked Award.
| x. | Xxxxx Date: Your Performance Units were issued on [Date]. |
This is the date you begin to earn your Award.
| b. | Amount of Award: The amount of your Award and the conditions that must be met before it will be earned are discussed below in the section below titled “When Your Award Will Be Settled.” |
| c. | Performance Period: The period that begins on January 1, 2010, and ends on December 31, 2012. |
This is the period over which the Plan committee will determine if you have met the conditions imposed on your Award.
2. When Your Award Will Be Settled
| a. | In General: At the end of the Performance Period, your stock units will be converted to an equal number of common shares of the Company or forfeited depending on: |
| • | The extent to which the appreciation of the Company stock during the Performance Period equals or exceeds the Total Shareholder Return (“TSR”) performance of the NASDAQ Transportation Index during the same period (these stock units are referred to as “Stock Performance Units”); and |
| • | How the Company’s Average Return on Invested Capital for the Performance Period compares to the levels specified in the table below (these stock units are referred to as “ROIC Units”). |
The tables below demonstrate how these criteria will affect your Award. However, before analyzing those tables, it is important that you understand that:
| • | Separate criteria are applied to each of the parts of your Award. This means that you might earn Stock Performance Units at the threshold level but earn your ROIC Units at the maximum level. |
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| • | The NASDAQ Transportation Index is a group comprised of transportation corporations whose stock is traded on the NASDAQ. |
| • | “Average ROIC” is equal to the sum of the Company’s ROIC for each fiscal year that began during the Performance Period and ending on December 31, 2012, divided by three. |
| • | The Company shall determine its “ROIC” for each fiscal year beginning January 1 and ending each December 31 during the Performance Period, by dividing the NOPAT for such period by Invested Capital for such period, as such terms are defined below. |
| • | The Company’s “NOPAT” for any fiscal year will be equal to the Company’s net operating profit after taxes based on the Company’s financial statements for such year. The Company’s Board of Directors may exclude any extraordinary, non-recurring items from the determination of NOPAT for any period, in its discretion. |
| • | The Company’s “Invested Capital” for any fiscal year is the result obtained by adding the Company’s operating assets and net fixed assets and subtracting its operating current liabilities, all determined as of December 31 of such year. |
| b. | Your Stock Performance Units: You will earn or forfeit all or part of your Stock Performance Units depending on the extent to which the criteria described in the following table are met. |
| If, on December 31, 2007, the Company’s stock performance is |
You will receive the following number of shares of Company stock | |
| Below the 40th percentile of the NASDAQ Transportation Index | 0 | |
| At the 40th percentile of the NASDAQ Transportation Index (“threshold Stock Performance Unit level”) | [Number]* | |
| At the 50th percentile of the NASDAQ Transportation Index (“target Stock Performance Unit level”) | [Number]* | |
| At the 75th or higher percentile of the NASDAQ Transportation Index (“maximum Stock Performance Unit Level”) | [Number]* |
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| * | Note: For performance outcomes between the 40th percentile and the 75th percentile levels, actual awards will be interpolated. |
| c. | Your ROIC Units: You will earn or forfeit all or part of your ROIC Units depending on the extent to which the criteria described in the following table are met. |
| If, over the Performance Period, the Company’s Average Return on Invested Capital is |
You will receive the following number of shares of Company stock | |
| Less than 8% | 0 | |
| 8% (“threshold ROIC Unit level”) | [Number]* | |
| 10% (“target ROIC Unit level”) | [Number]* | |
| 12% or higher (“maximum ROIC Unit level”) | [Number]* |
| * | Note: For performance outcomes between the 8% ROIC and 12% ROIC levels, actual awards will be interpolated. |
As noted above, between the threshold and maximum performance levels, actual awards will be calculated by interpolating between the ranges shown in the preceding tables. This interpolation will be done only in whole increments (full percentiles for the Stock Performance Units and percentages to the nearest 10th for the ROIC Units) and will not be applied below the threshold level or above the maximum level.
Example 1: Assume that the Company’s Average Return on Invested Capital for the Performance Period is 11 percent (one full percentage point above the lowest range of the “target ROIC Unit level”). In this case, you will receive [Number] shares of Company stock (because whole percentages between the threshold and maximum levels are interpolated).
Example 2: Assume that the Company’s Average Return on Invested Capital for the Performance Period is 13 percent (one full percentage point above the “maximum ROIC Unit level”). In this case, you still will receive [Number] shares of Company stock (because no interpolation is applied above the maximum level).
Example 3: Assume that the Company’s Average Return on Invested Capital for the Performance Period is 7 percent (one full percentage point below the lowest range of the “threshold ROIC Unit level”). In this case, all of the ROIC Units will be forfeited (because no interpolation is applied below the threshold level).
Example 4: Assume that the Company’s Average Return on Invested Capital for the Performance Period is 8.7 percent (seven-tenths of a percentage point above the lowest range of the “target ROIC Unit level”). In this case, you still will receive [Number] shares of Company stock (based on interpolation between the threshold and target level).
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| d. | How Your Performance Units Might Be Settled Before the End of the Performance Period: If there is a Business Combination (as defined in the Plan) while you are employed, all performance criteria will be deemed to have been met at the threshold level or at any higher level actually achieved as of the date of the Business Combination (“Accelerated Units”) and you will receive cash or stock (depending on the nature of the Business Combination) as if the Performance Period ended on the date of the Business Combination. The amount you will receive will be determined under the following formula: |
Your Accelerated Units multiplied by the number of whole months between the beginning of the Performance Period and the date of the Business Combination
Divided by the number of whole months in the Performance Period
| e. | How Your Performance Units Are Settled if You Die, Retire or Become Disabled Before the End of the Performance Period: If your employment terminates before the end of the Performance Period (and before a Business Combination) because of death, disability (as defined in the Plan) or after qualifying for retirement under the company retirement plan to which you are subject, you may receive a portion of your Award. The amount (if any) you will receive will depend on whether (and the extent to which) the performance criteria are met at the end of the Performance Period, not when you terminate employment. If the performance criteria are met at the end of the Performance Period during which you terminate because of death, disability or retirement, you (or your beneficiary) will receive the number of shares you would have received if you had remained actively employed until the end of that Performance Period multiplied by the number of whole years (i.e., elapsed 12-consecutive-month periods) between the first day of the Performance Period and the date you terminate employment because of death, retirement or disability and divided by the number of whole years (i.e., elapsed 12-consecutive-month periods included in the Performance Period). |
| f. | How Your Performance Units May Be Forfeited: You will forfeit your Performance Units if, before your Performance Units are settled: |
| • | You terminate employment voluntarily (and before you are eligible for retirement) or if you are involuntarily terminated by the Company for any reason (or for no reason) before the Normal Settlement Date (and you are not then eligible for retirement); |
| • | You commit any act of fraud, intentional misrepresentation, embezzlement, misappropriation or conversion of any of the Company’s or any Subsidiary’s (as defined in the Plan) assets or business opportunities; |
| • | You are convicted of, or enter into a plea of nolo contendere to, a felony; |
| • | You intentionally, repeatedly or continually violate any of the Company’s policies or procedures after notice that you have violated a Company policy or procedure; |
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| • | You breach any written covenant or agreement with the Company or any Subsidiary, including the terms of the Plan; |
| • | Without the Company’s advance written consent, you agree to or actually serve in any capacity for a business or entity that competes with any portion of the Company’s or any Subsidiary’s (as defined in the Plan) business or provide services (including business consulting) to an entity that competes with any portion of the Company’s or any Subsidiary’s business; |
| • | You refuse or fail to consult with, supply information to or otherwise cooperate with the Company after having been requested to do so; or |
| • | You deliberately engage in any action that the Company decides xxxxx the Company or any Subsidiary. |
3. Settling Your Award
If all applicable conditions have been met, your Performance Units will be settled within 60 days following the end of the Performance Period.
4. Other Rules Affecting Your Award
| a. | Rights During the Performance Period: During the Performance Period, you will not actually own the shares that you might receive at the end of the Performance Period. This means that you may not exercise any voting rights or receive any dividends associated with those shares until your Award is settled. |
| b. | Beneficiary Designation: You may name a Beneficiary or Beneficiaries to receive any shares associated with your Performance Units that are settled after you die. This may be done only on the attached Beneficiary Designation Form and by following the rules described in that form and in the Plan. If you have not made an effective Beneficiary designation, your Beneficiary will be your surviving spouse or, if you do not have a surviving spouse, your estate. |
| c. | Tax Withholding: Income taxes must be withheld when your Award is settled (see the Plan’s Prospectus for a discussion of the tax treatment of your Award). These taxes may be paid in one of several ways. They are: |
| • | The Company may withhold this amount from other amounts owed to you (e.g., from your salary). |
| • | You may pay these taxes by giving the Company a check (payable to “Air Transport Services Group, Inc.”) in an amount equal to the taxes that must be withheld. |
| • | By having the Company withhold a portion of the shares that otherwise would be distributed. The number of shares withheld will have a fair market value equal to the taxes that must be withheld. |
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| • | You may give the Company other shares of Company stock (that you have owned for at least six months) with a value equal to the taxes that must be withheld. |
You may choose the approach you prefer, although the Company may reject your preferred method for any reason (or for no reason). If this happens, the Company will specify (from among the alternatives just listed) how these taxes are to be paid.
If you do not choose a method within 30 days of the Settlement Date, the Company will withhold a portion of the shares that otherwise would be distributed. The number of shares withheld will have a fair market value equal to the taxes that must be withheld and the balance of the shares will be distributed to you.
| d. | Transferring Your Performance Units: Normally your Performance Units may not be transferred to another person. However, you may complete a Beneficiary Designation Form to name the person to receive any stock that is distributed after you die. Also, the Committee may allow you to place your Performance Units into a trust established for your benefit or the benefit of your family. Contact W. Xxxxxx Xxxxx at (937) 382-5591 ext. 62686 or at the address given below if you are interested in doing this. |
| e. | Governing Law: This Award Agreement will be construed in accordance with and governed by the laws (other than laws governing conflicts of laws) of the United States and of the State of Ohio, except to the extent that the Delaware General Corporation Law is mandatorily applicable. |
| f. | Other Agreements: Also, your Performance Units will be subject to the terms of any other written agreements between you and the Company. |
| g. | Adjustments to Your Performance Units: Your Award will be adjusted, if appropriate, to reflect any change to the Company’s capital structure (e.g., the number of your Performance Units will be adjusted to reflect a stock split). |
| h. | Other Rules: Your Stock Performance Units are also subject to more rules described in the Plan and in the Plan’s Prospectus. You should read both these documents carefully to ensure you fully understand all the conditions of this Award. |
5. Tax Treatment of Your Award
The federal income tax treatment of your Performance Units is discussed in the Plan’s Prospectus.
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You may contact W. Xxxxxx Xxxxx at (937) 382-5591 ext. 62686 or at the address given below if you have any questions about your Award or this Award Agreement.
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6. Your Acknowledgment of Award Conditions
Note: You must sign and return a copy of this Award Agreement to W. Xxxxxx Xxxxx at the address given below no later than [Date].
By signing below, I acknowledge and agree that:
• A copy of the Plan has been made available to me;
| • | I have received a copy of the Plan’s Prospectus; |
| • | I understand and accept the conditions placed on my Award and understand what I must do to earn my Award; |
| • | I will consent (on my own behalf and on behalf of my beneficiaries and without any further consideration) to any change to my Award or this Award Agreement to avoid paying penalties under Section 409A of the Internal Revenue Code, even if those changes affect the terms of my Award and reduce its value or potential value; and |
| • | If I do not return a signed copy of this Award Agreement to the address shown below not later than [Date], my Award will be revoked automatically as of the date it was granted and I will not be entitled to receive anything on account of the retroactively revoked Award. |
| [Name] | ||
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| ||
| (signature) | ||
| Date signed: |
| |
A signed copy of this form must be sent to the following address no later than [Date]:
W. Xxxxxx Xxxxx
Air Transport Services Group, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
After it is received, the Air Transport Services Group, Inc. 2005 Long-Term Incentive Plan Committee will acknowledge receipt of your signed agreement.
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Committee’s Acknowledgment of Receipt
A signed copy of this Award Agreement was received on .
| By: |
| |
| [Name]: |
Has complied with the conditions imposed on the grant and the Award and the Award Agreement remains in effect; or
Has not complied with the conditions imposed on the grant and the Award and the Award Agreement are revoked as of the Grant Date because
|
|
| describe deficiency |
Air Transport Services Group, Inc. 2005 Long-Term Incentive Plan Committee
| By: |
| |
| Date: |
| |
Note: Send a copy of this completed form to W. Xxxxxx Xxxxx and keep a copy as part of the Plan’s permanent records.
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AIR TRANSPORT SERVICES GROUP, INC.
AMENDED AND RESTATED
2005 LONG-TERM INCENTIVE PLAN
BENEFICIARY DESIGNATION FORM
RELATING TO PERFORMANCE STOCK UNITS ISSUED TO [NAME] ON [DATE]
Instructions for Completing This Form
You may use this form to [1] name the person you want to receive any amount due under the Air Transport Services Group, Inc. 2005 Long-Term Incentive Plan after your death or [2] change the person who will receive these benefits.
There are several things you should know before you complete this form.
First, if you do not elect another Beneficiary, any amount due to you under the Plan when you die will be paid to your surviving spouse or, if you have no surviving spouse, to your estate.
Second, your election will not be effective (and will not be implemented) unless you complete all applicable portions of this form.
Third, your election will be effective only if this form is completed properly and returned to W. Xxxxxx Xxxxx at the address given below.
Fourth, all elections will remain in effect until they are changed (or until all death benefits are paid).
Fifth, if you designate your spouse as your Beneficiary but are subsequently divorced from that person (or your marriage is annulled), your Beneficiary designation will be revoked automatically.
Sixth, if you have any questions about this form or if you need additional copies of this form, please contact W. Xxxxxx Xxxxx at (937) 382-5591 ext. 62686 or at the address given below.
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Designation of Beneficiary
1.01 Primary Beneficiary:
I designate the following persons as my Primary Beneficiary or Beneficiaries to receive any amount due under the Award Agreement described at the top of this form after my death. This benefit will be paid, in the proportion specified, to:
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1.02 Contingent Beneficiary
If one or more of my Primary Beneficiaries dies before I die, I direct that any amount due under the Award Agreement described at the top of this form after my death:
Be paid to my other named Primary Beneficiaries in proportion to the allocation given above (ignoring the interest allocated to the deceased Primary Beneficiary); or
Be distributed among the following Contingent Beneficiaries.
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Elections made on this form will be effective only after this form is received by W. Xxxxxx Xxxxx and only if it is fully and properly completed and signed.
Name: [Name]
| Soc. Sec. No.: |
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| Date of Birth: |
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| Address: |
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Sign and return this form to W. Xxxxxx Xxxxx at the address given below
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| Date | Signature |
Return this signed form to W. Xxxxxx Xxxxx at the following address:
W. Xxxxxx Xxxxx
Air Transport Services Group, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
| Received on: |
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| By: |
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