Exhibit 99(d)(1)(C)
LETTER OF AGREEMENT
BETWEEN
HAWAIIAN AIRLINES, INC.
AND
THE AIRLINE PILOTS
IN THE SERVICE OF
HAWAIIAN AIRLINES, INC.
AS REPRESENTED BY
THE AIR LINE PILOTS ASSOCIATION, INTERNATIONAL
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STOCK ALLOCATION AGREEMENT
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Hawaiian Airlines, Inc. (the "Company") and the Air Line Pilots in
the service of the Company, as represented by the Air Line Pilots Association,
International (the "Association"), and jointly referred to hereinafter as the
"Parties," enter into this LETTER OF AGREEMENT ("LOA") in accordance with the
provisions of Title II of the Railway Labor Act, as amended.
WITNESSETH:
WHEREAS, the Parties reached an agreement on or about December 20,
2000 (the "Agreement") regarding the general terms of a new collective
bargaining agreement between the Parties effective as of January 1, 2001;
WHEREAS, the Agreement requires the Company to provide 1,685,380
shares (the "Stock Pool") of the Company's common stock, par value $.01 per
share ("Company Common Stock"), for distribution to pilots in the service of the
Company pursuant to a method to be determined by the Hawaiian Airlines Pilots'
Master Executive Council (the "MEC");
WHEREAS, the MEC has, through balloting of the members of the
Association, determined a method for the contribution of the Stock Pool to the
Hawaiian Airlines, Inc. Pilots' 401(k) Plan (the "Plan") and the allocation
thereof;
NOW, THEREFORE, the Company and the Association hereby agree to
distribute the Stock Pool as follows:
1. ELIGIBILITY FOR ALLOCATION OF CONTRIBUTION. A pilot will be eligible for
an allocation from the Stock Pool as of an Allocation Date (as defined in
paragraph 3 below) if he or she has completed one year of employment with
the Company (a "Participating Pilot") prior to such Allocation Date.
2. CONTRIBUTION TO THE PLAN. Except as provided in paragraph 6.e below, the
Stock Pool will be contributed to the Plan and allocated to the individual
accounts ("Employer Contribution Accounts") of Participating Pilots to be
invested in the Plan's investment option (the "Plan Stock Fund") that
invests primarily in the Company's common stock in accordance with the
provisions of this LOA.
3. ALLOCATION DATES. The allocation dates for determining the portion of the
Stock Pool to be contributed to the Plan and allocated to Participating
Pilots will be March 31, 2001; June 30, 2001; September 30, 2001; December
31, 2001; March 31, 2002; June 30, 2002; September 30, 2002; and December
31, 2002 (each such date, an "Allocation Date").
4. QUARTERLY ALLOCATION CALCULATION.
a. Immediately following each Allocation Date, the Company will
calculate the number of shares of the Company Common Stock remaining
in the Stock Pool to be contributed to the Plan and allocated to
each Participating Pilot for the calendar quarter ending on such
Allocation Date (the "Allocation Period") in accordance with the
following four steps:
STEP 1: The Company will calculate the gross allocation dollars for
each Participating Pilot ("Gross Allocation Dollars") as the product
of (x) the pilot's Pay Hours and (y) the applicable Pay Gap,
where
"Pay Hours" are the pay and credit hours (including pilot bank
hours) accumulated by the pilot during the Allocation Period up to
maximum of the first 90 hours per month but excluding any non-flight
pay and credit hours (E.G., check airman premium pay, DIRTD pay,
meal and per diem pay), and
the pilot's "Pay Gap" for an Allocation Period, as determined by the
Association, is stated on Schedule A to this LOA by fleet, seat,
longevity year, and contract year.
STEP 2: The Company will calculate the net allocation dollars for
each Participating Pilot ("Net Allocation Dollars") as the excess of
(x) the pilot's Gross Allocation Dollars in that Allocation Period
over (y) the
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remaining balance in the pilot's Signing Bonus Account (but in no
event less than zero Net Allocation Dollars),
where
for any Allocation Period, the remaining balance in a pilot's
"Signing Bonus Account" will consist of (x) the gross W-2 dollar
amount of the signing bonus received by the pilot upon the
implementation of the Agreement less (y) the cumulative number of
signing bonus dollars netted against the pilot's Gross Allocation
Dollars in all previous Allocation Periods under this LOA.
STEP 3: The Company will calculate the number of shares of Company
Common Stock to be allocated to each Participating Pilot (the
"Allocation Shares") as (x) the pilot's Net Allocation Dollars
divided by (y) the numerical average of the final closing trading
price of such stock on each trading day during the relevant
Allocation Period (the "Average Stock Price").
STEP 4: The Company will round each Participating Pilot's Allocation
Shares up or down, as the case may be, to nearest whole number
(I.E., a fraction of .5 or greater will be rounded up to the nearest
whole number.)
b. The following examples will illustrate the allocation
calculation described in this paragraph 4:
EXAMPLE 1: a seventh year DC-10 captain earns a total of 270 pay
hours in the calendar quarter ending on March 31, 2001 and received
a $3,500 signing bonus; the average stock price for the calendar
quarter is $2.50. According to Schedule A, this pilot's Pay Gap for
the Allocation Period is $14.96. The pilot would receive Stock Fund
units equal to 216 shares for this Allocation Period (assuming he or
she has not exceeded the maximum benefit limitation of Section 415
of the Internal Revenue Code (the "Code")), calculated as follows:
270 Pay Hours x $14.96 Pay Gap = $4,039.20 Gross
Allocation Dollars
$4,039.20 - $3,500 Bonus Account = $539.20 Net
Allocation Dollars
$539.20 [DIVIDED BY] $2.50 Average Stock Price = 215.68 shares
215.68 shares rounded off = 216 shares
and the pilot's Signing Bonus Account would be reduced to $0.00 for
the next quarterly stock allocation.
EXAMPLE 2: an eighth year DC-9 first officer earns a total of 270
pay hours in the calendar quarter ending on March 31, 2001 and
received a
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$1.500 signing bonus; the average stock price for the calendar
quarter is $2.50. According to Schedule A, this pilot's Pay Gap for
the Allocation Period is $3.30. The pilot would receive no
allocation of Company Stock for this Allocation Period, calculated
as follows:
270 Pay Hours x $3.30 Pay Gap = $891.00 Gross Allocation Dollars
$891.00 - $1,500 Bonus Account = $0.00 Net Allocation Dollars
and the pilot's Signing Bonus Account would be reduced to $609.00
for the next quarterly stock allocation.
c. As described in paragraph 6 below, special allocation rules apply in
connection with the Final Allocation of Company Common Stock under
this LOA.
5. QUARTERLY ALLOCATION TO INDIVIDUAL PILOT ACCOUNTS.
a. As soon as practicable after each Allocation Date, but in no event
more than 90 days following the initial Allocation Date and 45 days
following each subsequent Allocation Date, the Company will
contribute to the Plan the portion of the Stock Pool required under
this LOA for such Allocation Period, and such contribution will be
allocated to the Employer Contribution Account of each Participating
Pilot in accordance with this LOA. The fair market value of the
shares of Company Common Stock on the date of actual contribution to
the Plan will determine the number of additional units of interest
in the Plan Stock Fund that the Plan's trustee will credit to each
Participating Pilot's' Employer Contribution Account. The Plan's
trustee will convert shares of Company Common Stock into Stock Fund
units in accordance with its normal procedures.
b. Notwithstanding the foregoing, no shares will be contributed to the
Plan or allocated to the Employer Contribution Account of a
Participating Pilot for an Allocation Date to the extent the
deduction limitations of Section 404 of the Code or the maximum
benefit limitations of Section 415 of the Code would be exceeded.
Any such shares (the "Excess Shares") will be deducted from the
Stock Pool and will be (i) contributed to the Plan and specially
allocated to such Participating Pilot as of the next Allocation Date
such contribution and allocation would not exceed the deduction
limitations of Section 404 of the Code or the maximum benefit
limitations of Section 415 of the Code or (ii) distributed directly
to a Participating Pilot as described in paragraph 6.e of this LOA.
6. DURATION OF ALLOCATION; FINAL ALLOCATION; TREATMENT OF EXCESS SHARES.
Except with respect to any Excess Shares, the quarterly stock allocations
described in this LOA will continue through and including the earlier of
(i) the Allocation Date on which the total number of quarterly Allocation
Shares equals or exceeds the total number of shares remaining in the Stock
Pool or (ii) December 31, 2002. The
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final quarterly stock allocation under this LOA (the "Final Allocation") will be
calculated as follows:
a. If the total number of Allocation Shares exceeds the total number of
shares remaining in the Stock Pool, each Participating Pilot will
receive a pro rata portion of the remaining shares in the Stock
Pool, calculated as the pilot's Allocation Shares multiplied by a
fraction, (x) the numerator of which is the total number of
remaining shares in the Stock Pool and (y) the denominator of which
is the total number of Allocation Shares for all Participating
Pilots.
b. If the total number of Allocation Shares equals the total number of
shares remaining in the Stock Pool, each Participating Pilot will
receive his/her Allocation Shares.
c. If the total number of shares remaining in the Stock Pool exceeds
the total number of Allocation Shares, (i) each Participating Pilot
will receive his/her Allocation Shares, and (ii) the shares
remaining in the Stock Pool following such allocation will be
divided equally (per capita) among all pilots who are Participating
Pilots for that calendar quarter.
d. The shares allocable to Participating Pilots in the
Final Allocation will be rounded down to the nearest
whole number. All fractional shares that result from
the Final Allocation will be aggregated into a
fractional share pool, and the Company will allocate one
share from the fractional share pool, in inverse
seniority order to each Participating Pilot until the
available number of whole shares in the fractional share
pool is exhausted.
e. In the event any Excess Shares have not been allocated
to the Employer Contribution Account of the
Participating Pilot as of the Final Allocation Date, the
Company will attempt to allocate such shares on each
subsequent Allocation Date, through and including
December 31, 2002, subject to the deduction limitations
of Section 404 of the Code or the maximum benefit
limitations of Section 415 of the Code. If any Excess
Shares have not been contributed to the Plan and
allocated to the Employer Contribution Account of the
Participating Pilot on or before December 31, 2002, (i)
such shares will be distributed directly to the
Participating Pilot as soon as practicable thereafter,
(ii) the Participating Pilot will be responsible for all
income taxes imposed on such distribution, (iii) such
distribution will be subject to any income or employment
tax withholding requirements, and (iv) the Company may
liquidate a portion of the Excess Shares otherwise
distributable to such pilot if necessary to satisfy
withholding requirements.
7. REPORTING, REVIEW AND DISPUTE RESOLUTION. As soon as practicable following
the conclusions of each quarterly stock allocation, (i) the Company will
create, and the Association will review and assist in explaining to
pilots, a summary of the
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allocation calculation for all Participating Pilots and (ii) the Company
will provide each Participating Pilot with a description of is/her
allocation calculation, including a statement of the pilot's Pay Hours,
the pilot's Pay Gap, and the applicable Average Stock Price during the
Allocation Period (an "Allocation Statement"). If a Participating Pilot
disputes (i) the number of Pay Hours or (ii) the applicable Pay Gap
contained on his/her Allocation Statement, the pilot must submit a written
issue statement to the Company, in a form to be determined by the Company,
by no later than 15 days following the distribution of the Allocation
Statements. All such issues will be conclusively determined by the Company
no later than 30 days following its receipt of such statement. The Company
will implement any corrections that result from this review process in the
next allocation following its decision or a special one-time allocation in
the event the correction concerns the Final Allocation. The parties will
develop a reasonable distribution mechanism (E.G., a brief deferral of the
Final Allocation or a holdback from the Final Allocation) to ensure that
the Company maintains sufficient shares in the Stock Pool to process any
such corrections with respect to the Final Allocation. In no event,
however, will the Company's obligation to contribute shares to the Plan
exceed 1,685,380.
8. DIVIDENDS, RECLASSIFICATION, SALE OR EXCHANGE. As a general matter, the
Company will take all commercially reasonable steps necessary to ensure
that the unallocated shares in the Stock Pool receive all of the rights
and benefits enjoyed by the Company's issued and outstanding common stock
in connection with any dividend, reclassification, sale, or exchange of
Company Common Stock. In particular:
a. If the Company declares a cash dividend, stock dividend, or any
other distribution to shareholders before the Final Allocation, then
(to the extent legally permissible) such cash dividend, stock
dividend, or other distribution will accrue with respect to all
unallocated shares remaining in the Stock Pool and will be
contributed or distributed as the unallocated shares to which it
relates are contributed to the Plan or distributed to a
Participating Pilot in accordance with this LOA.
b. If Company Common Stock is split, converted, reclassified, changed
into, or exchanged for a different number or kind of securities of
the Company before the Final Allocation, then (i) all unallocated
shares remaining in the Stock Pool will (to the extent legally
permissible) be subject to the same split, conversion,
reclassification, or exchange and (ii) the calculation of Allocation
Shares under paragraph 4 above will be comparably adjusted if
necessary to give effect to the stock allocation described in this
LOA.
c. If shares of Company Common Stock are changed into or exchanged for
cash, securities or other property pursuant to an acquisition,
recapitalization, stock repurchase, merger, consolidation,
combination, or similar transaction (a "Transaction") before the
Final Allocation, then
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i. The Company will provide the Association with
written notice of such Transaction no later than
it provides notice to its shareholders of such
Transaction; and
ii. at the written request of the Association
delivered as soon as practicable after its receipt
such notice (but prior to the date of closing of
such Transaction), the Company will divide all
remaining shares in the Stock Pool equally among
all pilots actively employed by the Company for at
least one year as of the date of the Association's
request, and contribute to the Plan or distribute
to pilots all such shares in accordance with
paragraph 5 above.
This LOA will become effective upon execution by all signatories
thereof and shall remain in full force and effect until the distribution of all
shares in the Stock Pool is completed in accordance with the provisions of this
LOA.
IN WITNESS WHEREOF, the Parties have signed this LOA this ___ day of
May, 2001.
FOR HAWAIIAN AIRLINES, INC.
/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx
Its President & Chief Operating
Officer
/s/ Xxxxxxxxx X. Xxxxxxx
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Xxxxxxxxx X. Xxxxxxx
Its Executive Vice President,
Chief Financial Officer & Treasurer
WITNESS:
FOR THE AIR LINE PILOTS
ASSOCIATION, INTERNATIONAL
--------------------------------
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President
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/s/ X. Xxxxxxx
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-------------------------------- X. Xxxxxxx, Chairman
Hawaiian Master Executive Council
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SCHEDULE A
HOURLY PILOT PAY GAP
(ALL NUMBERS IN DOLLARS PER HOUR)
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12
----- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ------
DC9/B-717
CAPTAIN
2001 4.78 4.80 4.82 4.83 4.85 4.87 4.89
2002 3.51 3.52 3.54 3.55 3.56 3.57 3.59
FIRST OFFICER
2001 0.00 2.21 2.62 2.78 2.94 3.09 3.25 3.30 3.35 3.37 3.39 3.41
2002 0.00 1.62 1.92 2.04 2.15 2.27 2.39 2.42 2.46 2.47 2.49 2.50
DC10/B-767
CAPTAIN
2001 15.08 15.09 15.06 14.99 14.99 14.97 14.96
2002 13.66 13.66 13.61 13.53 13.52 13.49 13.46
FIRST OFFICER
2001 0.00 6.96 8.19 8.60 9.07 9.35 9.96 10.09 10.24 10.30 10.38 10.44
2002 0.00 6.11 7.40 7.77 8.18 8.41 8.97 9.09 9.22 9.28 9.34 9.40
SECOND OFFICER
2001 0.00 5.96 6.12 6.25 6.42 6.57 6.73 6.88 7.03 7.18 7.33 7.48
2002 0.00 5.46 5.58 5.68 5.82 5.94 6.06 6.19 6.33 6.46 6.60 6.73
* The hourly pay gap for probationary pilots is $0.00.
