<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Mesa Air Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, no par value
(2) Aggregate number of securities to which transaction applies:
33,467,408
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
MESA AIR GROUP, INC.
2325 EAST 30TH STREET
FARMINGTON, NEW MEXICO 87401
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 15, 1996
To the Shareholders:
The Annual Meeting of Shareholders of Mesa Air Group, Inc. (the "Company")
will be held on Friday, March 15, 1996 at 10:00 a.m. Standard Time in Room 9010
of the Henderson Fine Arts Building, San Juan College, 4601 College Boulevard,
Farmington, New Mexico. The purpose of the Annual Meeting is to consider and
vote upon the following matters, as more fully described in the accompanying
Proxy Statement:
1. To elect seven directors of the Company to serve until the next
Annual Meeting of Shareholders.
2. To approve and adopt an Agreement and Plan of Merger providing for
the merger of the Company into a newly formed Nevada corporation for
purposes of changing the state of incorporation of the Company from New
Mexico to Nevada.
3. To approve the Company's new Compensation Plan and new Employee
Stock Option Plan (collectively the "Omnibus Plan").
4. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors for the Company during fiscal 1996.
5. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournments thereof.
The Board of Directors has fixed the close of business on January 25, 1996
as the record date for determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournments thereof.
EVEN IF YOU NOW EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND
MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IT IS IMPORTANT THAT THE PROXY BE RETURNED
REGARDLESS OF THE NUMBER OF SHARES OWNED. IF YOU DO ATTEND THE ANNUAL MEETING,
YOU MAY VOTE IN PERSON, IF YOU WISH, WHETHER OR NOT YOU HAVE ALREADY MAILED THE
ENCLOSED PROXY.
By Order of the Board of Directors
GARY E. RISLEY
Secretary
Farmington, New Mexico
January , 1996
<PAGE> 3
MESA AIR GROUP, INC.
2325 EAST 30TH STREET
FARMINGTON, NEW MEXICO 87401
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 15, 1996
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Mesa Air Group, Inc., a New
Mexico corporation (the "Company" or "Mesa"), for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held in Room 9010 of the Henderson
Fine Arts Building, San Juan College, 4601 College Boulevard, Farmington, New
Mexico, on Friday, March 15, 1996, at 10:00 a.m., Mountain Standard Time, or any
postponement or adjournment thereof. The Board has fixed the close of business
on January 25, 1996 as the record date for determining the shareholders entitled
to notice of, and to vote at, the Annual Meeting or any adjournments thereof. On
the record date, the Company had outstanding and entitled to vote
shares of Common Stock, no par value ("Common Stock"). Each share of Common
Stock is entitled to one vote per share. The Common Stock constitutes the only
class of capital stock of the Company issued and outstanding.
The Company's principal executive offices are located at 2325 East 30th
Street, Farmington, New Mexico 87401. The approximate date on which this Proxy
Statement and the accompanying proxy are first being sent to shareholders is
January , 1996.
QUORUM AND REQUIRED VOTE
Shares of Common Stock represented by properly executed proxies received by
the Company will be voted at the Annual Meeting in accordance with instructions
thereon. If there are no such instructions, the shares will be voted for (i) the
election of the nominees for director named in this Proxy Statement; (ii) the
approval and adoption of the Agreement and Plan of Merger providing for the
merger of the Company into a newly formed Nevada corporation for purposes of
changing the state of incorporation of the Company from New Mexico to Nevada
(the "Reincorporation Proposal"); (iii) the approval of the Company's new
Compensation Plan and Employee Stock Option Plan (collectively, the "Omnibus
Plan") and (iv) the ratification of the appointment of KPMG Peat Marwick LLP as
the Company's independent auditors for the fiscal year ending September 30, 1996
(collectively, the "Proposals").
Holders of shares of Common Stock entitled to a majority of the votes of
all shares entitled to vote, represented in person or by proxy, will constitute
a quorum at the Annual Meeting. The seven nominees receiving a plurality of
votes by shares represented and entitled to vote at the Annual Meeting, if a
quorum is present, will be elected as Directors of the Company. Cumulative
voting is not permitted by the Company's Restated Articles of Incorporation. An
affirmative vote of a majority of the shares present and voting at the Annual
Meeting is required for approval of all other Proposals being submitted to the
shareholders for their consideration. Abstentions cast by proxy will have the
same effect as negative votes. Broker non-votes are counted towards a quorum,
but are not counted for any purpose in determining whether a matter has been
approved.
REVOCABILITY OF PROXIES
Shareholders may revoke their proxy by a later proxy or by giving notice of
such revocation to the Company in writing or at the Annual Meeting before such
proxy is voted. Attendance at the Annual Meeting will not in and of itself
constitute the revocation of a proxy.
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SOLICITATION
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, officers, directors and regular employees of
the Company may solicit proxies by telephone, telefax or in person without
additional compensation. Brokerage houses, bank nominees, fiduciaries and other
custodians will be requested to forward soliciting material to the beneficial
owners of shares held of record by them and will be reimbursed for their
reasonable expenses. The Company may use the services of paid solicitors and
Georgeson & Co. has been retained at a base fee of $6,000.00 for that purpose.
Georgeson & Co. may receive additional fees based upon its customary rates if
unanticipated services are required.
ELECTION OF DIRECTORS
(PROPOSAL ONE)
The Company's Restated Articles of Incorporation provide that the number of
Directors shall be fixed from time to time by the Board of Directors. The number
of Directors is currently fixed at seven.
The seven nominees named herein have been recommended for election as
Directors for a term of one year or until their successors have been elected and
qualified. All nominees are currently members of the Board. It is intended that
proxies received in response to this solicitation will be voted for the election
of the seven persons so nominated, unless otherwise specified. If, for any
reason, any nominee shall become unavailable for election or shall decline to
serve, persons named in the Proxy may exercise discretionary authority to vote
for a substitute nominee proposed by the Board. No circumstances are presently
known which would render a nominee named herein unavailable.
The following Directors have been nominated for reelection:
LARRY L. RISLEY, age 51, is Chief Executive Officer and Chairman of the
Board of Directors of Mesa, positions he has held since Mesa was incorporated in
1983. He served as President of Mesa from 1983 through January 13, 1995. From
April 1979 until August 1982, Mr. Risley was President of Mesa Aviation
Services, Inc., the fixed base operator at Farmington, New Mexico.
E. JANIE RISLEY, age 49, has been a member of Mesa's Board of Directors
since 1983. From August, 1982 until June, 1990, Ms. Risley was Executive Vice
President and Vice President responsible for personnel management, reservations,
and station operations.
Larry L. Risley and Janie Risley are husband and wife.
JACK BRALY, age 54, has served as a director of Mesa since December, 1993.
Since June, 1994, Mr. Braly has been an officer of North American Aircraft
Modification of Rockwell Industries. He served as Vice President Aircraft
Manufacturing from June, 1994 to October, 1994, as Executive Vice President from
October, 1994 to October, 1995 and has been Vice President and General Manager
since October, 1995. Before joining Rockwell Industries, Mr. Braly served as a
consultant to various aircraft manufacturers and regional airlines from August,
1993 until June of 1994. Prior thereto, Mr. Braly was President of Beech
Aircraft Corporation from March, 1991 until July, 1993. Mr. Braly was employed
by Beech Aircraft Corporation in various manufacturing positions from 1978 until
he became President in March of 1991.
BLAINE M. JONES, age 41, has served as a director since January, 1986. Mr.
Jones served as President of Mountain West Airlines, a wholly owned division of
Mesa, from July, 1994 until March, 1995 and held the position of Chief Financial
Officer of the Company from April, 1985 through March, 1994 and Treasurer from
December, 1985 through March, 1994.
GEORGE W. PENNINGTON, age 67, has been a director of Mesa since January,
1986. Mr. Pennington is President of Farmer Family Center, Inc., a retail
supermarket; President of REDROX, Inc., a real estate development company; and
general partner of Pennington Partnerships, a real estate development company,
all located in Bloomsfield, New Mexico.
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RICHARD C. POE, age 61, has been a director of Mesa since January, 1986. He
has been President and Chief Executive Officer of Dick Poe Chrysler-Plymouth,
Inc. since 1962 and of Dick Poe Pontiac-Toyota, Inc. since 1980. He is also a
director of M Bank, El Paso, Texas.
J. CLARK STEVENS, age 45, has been a director of Mesa since May, 1995. Mr.
Stevens was named President of Mesa Air Group, Inc. in January, 1995 and
continues to serve in that capacity. From February, 1993 until January, 1995,
Mr. Stevens was President of the Company's FloridaGulf Airlines division and
from December, 1992 until February, 1993, Mr. Stevens served as Vice
President -- DFW Division with Simmons Airlines, dba American Eagle. From
September, 1990 to December, 1992, he served as Executive Vice-President
MetroFlight, Inc. dba American Eagle ("Metro"). In 1991, Metro filed for
bankruptcy under Chapter 11 of the United States Bankruptcy Code. Metro emerged
from bankruptcy during 1992. Prior to his service at Metro, from August, 1975 to
September, 1990, Mr. Stevens served as President of Chaparral Airlines, Inc.
The Board of Directors held five meetings during the fiscal year ended
September 30, 1995. Each of the directors attended at least 75 percent of the
meetings held during the year.
COMMITTEES
The Company has an Audit Committee which consisted of Jack Braly, Chairman,
George W. Pennington and Richard C. Poe until June of 1995, at which time Mr.
Pennington resigned from the Committee and was replaced by Blaine M. Jones. The
principal functions of the Audit Committee include the review of the annual
financial statements, reports and recommendations regarding the adequacy of
internal accounting controls made by the independent auditors and such other
matters with respect to the accounting, auditing and financial reporting
procedures as it may deem appropriate or as may be brought to its attention. The
Audit Committee had three meetings during fiscal 1995.
The Company has a Compensation Committee which, in fiscal 1995, consisted
of Jack Braly, Chairman, Richard C. Poe and George W. Pennington. The principal
functions of the Compensation Committee are to review and to make
recommendations to the Board of Directors as to the compensation of executive
officers and to administer compensation programs including the granting or
ratification of options to persons subject to Section 16 of the Securities
Exchange Act of 1934. The Compensation Committee had three meetings in fiscal
1995.
The Company does not have a formal nominating committee. The Board of
Directors performs the function of nominating persons for election to the Board.
COMMON STOCK OWNERSHIP AND COMPENSATION
For information concerning Common Stock ownership of the nominees for
director, see "COMMON STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS" herein. For information concerning the compensation of directors and
executive officers, see "COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION AS DIRECTORS EACH
OF THE NOMINEES NAMED IN THE PROXY STATEMENT.
REINCORPORATION PROPOSAL
(PROPOSAL TWO)
INTRODUCTION
For the reasons set forth herein, the Board of Directors believes that it
is in the best interests of the Company and its shareholders to change the state
of incorporation of the Company from New Mexico to Nevada (the "Reincorporation"
or the "Reincorporation Proposal"). As part of the Reincorporation Proposal, the
Company's Articles of Incorporation and Bylaws will be revised to conform to
Nevada law. The Board of Directors has unanimously approved the Reincorporation
Proposal. The primary purpose of the Reincorpora-
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tion is to enable the Company to realize savings in state taxes. The Company
will also benefit from certain corporate code provisions not available in the
state of New Mexico.
The discussion contained herein is qualified by reference to the Agreement
and Plan of Merger (the "Merger Agreement") by and between Mesa New Mexico and
Mesa Nevada and the Articles of Incorporation of Mesa Nevada and the Bylaws of
Mesa Nevada, copies of which are attached hereto as Appendices "A", "B" and "C",
respectively. The Articles of Incorporation have been or will be filed with the
Nevada Secretary of State. Shareholders are urged to read carefully the
following sections of this Proxy Statement, including the related appendices,
before voting on the Reincorporation Proposal. As used herein, the term "Mesa
New Mexico" refers to the existing New Mexico corporation and the term "Mesa
Nevada" refers to the new Nevada corporation which is the proposed successor to
the business of the Company.
REINCORPORATION OF THE COMPANY
The Reincorporation will be effectuated by merging (the "Merger") Mesa Air
Group, Inc. with and into Mesa Holdings, Inc., a Nevada corporation being formed
in preparation for the Reincorporation. Upon completion of the Merger, Mesa New
Mexico will cease to exist and Mesa Nevada will be the surviving corporation and
will continue to operate the business of the Company under the name "Mesa Air
Group, Inc."
If approved by the shareholders of Mesa New Mexico and if certain other
conditions set forth in the Merger Agreement are satisfied, the Reincorporation
will become effective upon the filing of the Merger Agreement and related
documentation with the Nevada Secretary of State (the "Effective Date").
Shareholders of Mesa New Mexico will automatically become shareholders of Mesa
Nevada and their rights will be governed by Nevada law and the Articles of
Incorporation and Bylaws of Mesa Nevada rather than by New Mexico law and the
existing Articles of Incorporation and Bylaws of Mesa New Mexico. The
Reincorporation is intended to be consummated as soon as practicable following
the Annual Meeting. However, pursuant to the Merger Agreement, at any time
before the Effective Date, the Merger Agreement may be terminated and the Merger
may be abandoned for any reason whatsoever by the Board of Directors of either
Mesa Nevada or Mesa New Mexico. In addition, the Merger Agreement, Mesa Nevada's
Articles of Incorporation and Mesa Nevada's Bylaws may be amended by the Boards
of Directors of Mesa New Mexico and Mesa Nevada at any time prior to the filing
of the Merger Agreement with the Nevada Secretary of State, provided that an
amendment made subsequent to the approval and adoption of the Merger Agreement
by the shareholders of either corporation does not: (1) alter or change the
amount or kind of shares, securities, cash, property or rights, or any
combination of the foregoing, to be received in exchange for or on conversion of
all or any of the shares of any class or series of either corporation, (2) alter
or change any term of the Articles of Incorporation of Mesa Nevada (except
revisions made to change the registered agent, registered office or incorporator
of Mesa Nevada, if approved by the Board of Directors), or (3) alter or change
any of the terms and conditions of the Merger Agreement if such alteration or
change would adversely affect the holders of any class or series thereof of
either corporation. However, the Boards of Directors of Mesa New Mexico and Mesa
Nevada may make any necessary amendments to the Merger Agreement, Mesa Nevada's
Articles of Incorporation or Mesa Nevada's Bylaws in response to the comments
received from either the New Mexico Secretary of State or the Nevada Secretary
of State. The name of Mesa Holdings, Inc. (referred to herein as Mesa Nevada)
will be changed to Mesa Air Group, Inc. upon the filing of the Merger Agreement
with the Nevada Secretary of State.
Pursuant to the Merger Agreement, on the Effective Date, the outstanding
shares and options to purchase shares of Common Stock, without par value ("Mesa
New Mexico Common Stock"), will automatically be converted into shares and
options to purchase shares of Common Stock of Mesa Nevada, without par value,
("Mesa Nevada Common Stock" or the "New Common Stock"), on the basis of one
share of Mesa New Mexico Common Stock for one share of Mesa Nevada Common Stock
and one option to purchase a certain number of shares of Mesa New Mexico Common
Stock for one option to purchase the same number of shares of Mesa Nevada Common
Stock. Each stock certificate representing issued and outstanding shares of Mesa
New Mexico Common Stock will continue to represent the same number and class of
shares of Mesa Nevada Common Stock. It will not be necessary for shareholders to
exchange their existing stock certificates for certificates of Mesa Nevada
Common Stock. However, shareholders may exchange their certificates if they so
choose. The Company expects that shares of Mesa Nevada Common Stock will be
traded in the over-
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the-counter market and reported on the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ/NMS").
Under New Mexico law, the affirmative vote of a majority of the outstanding
shares of Mesa New Mexico Common Stock is required to approve and adopt the
Merger Agreement and the other terms of the Reincorporation. The Reincorporation
has been approved by Mesa New Mexico's Board of Directors, which unanimously
recommends a vote "FOR" the Reincorporation Proposal.
Except as set forth herein, no federal or state regulatory requirements
must be complied with, nor must approvals be obtained, in connection with the
Reincorporation.
APPROVAL OF THE REINCORPORATION PROPOSAL BY SHAREHOLDERS WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, MESA NEVADA'S ARTICLES OF INCORPORATION AND
MESA NEVADA'S BYLAWS.
NO CHANGE IN BUSINESS, MANAGEMENT, ASSETS, LIABILITIES OR NET WORTH
The Reincorporation will effect a change in the legal domicile of Mesa New
Mexico from New Mexico to Nevada and will produce those changes resulting from
the difference between New Mexico and Nevada law and between Mesa New Mexico's
Articles of Incorporation and Bylaws and Mesa Nevada's Articles of Incorporation
and Bylaws and other changes of a legal nature, certain of which are described
in this Proxy Statement. The proposed reorganization will not result in any
change in the business, management, location of the principal facilities, fiscal
year, assets, liabilities or net worth of the Company and will have no material
accounting implications. However, it is the intent of management of Mesa Nevada
to operate Mesa Nevada as a holding company. Immediately prior to the
Reincorporation, Mesa New Mexico will transfer all of the assets and liabilities
associated with the operations of Mountain West Airlines, FloridaGulf Airlines,
and Liberty Express, wholly owned divisions of Mesa New Mexico, into a new
corporation called "Mountain West Airlines, Inc." Mesa New Mexico will retain
stock in all of its subsidiaries, maintain certain investments, trademarks,
tradenames, and airplane leases. Mesa New Mexico will be reincorporated in
Nevada and will retain no assets in, conduct activities in, or have employees in
the state of New Mexico.
Under the terms of the Merger Agreement, upon the effective date of the
Merger the name of Mesa Nevada will be changed to Mesa Air Group, Inc. and all
of the previous outstanding shares of Common Stock of Mesa New Mexico will be
automatically converted into the same number and class of shares of Common Stock
of Mesa Nevada. All stock options issued pursuant to stock option plans will
automatically be converted into options to purchase the same number of shares of
Mesa Nevada Common Stock upon the same terms and subject to the same conditions
as set forth in such plans. The Company's benefit arrangements will be continued
by Mesa Nevada upon the terms and subject to the conditions then currently in
effect. It will not be necessary for shareholders to exchange their Mesa New
Mexico stock certificates for Mesa Nevada stock certificates. The only
significant changes that will result from the reincorporation of the Company in
Nevada will be: (a) an annual savings in state taxes and (b) the Company will be
subject to Nevada law.
If the Reincorporation Proposal is approved by the shareholders, it is
anticipated that the Reincorporation will be completed by March 31, 1996. The
Company will publicly announce the consummation of the Merger promptly upon its
completion. The Merger may, however, be abandoned either before or after
shareholder approval if circumstances arise which, in the opinion of the Board
of Directors, make it inadvisable to proceed.
PRINCIPAL REASONS FOR THE REINCORPORATION
The Board of Directors and management believe that it is in the best
interests of the Company and its shareholders to change the state of
incorporation of the Company from New Mexico to Nevada. The Reincorporation
coupled with the reorganization of the assets, activities and operations of the
Company will result in savings to the Company in the amount of various states'
income taxes that it is required to pay annually. Such savings are expected to
arise as a result of moving certain assets and activities to Nevada, and because
of the different methods by which various states compute and levy income taxes
on the income generated by the Company and its subsidiaries. See "No Change in
Business, Management, Assets/Liabilities
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or Net Worth" and "Certain Differences Between the Corporation Statutes of New
Mexico and Nevada -- Tax Provisions". Absent the various state tax burdens upon
the Company, management and the Board of Directors would not be recommending the
change of the state of incorporation at this time.
Also, Nevada has followed a policy of encouraging incorporation in that
state and, in furtherance of that policy, has adopted comprehensive, modern,
flexible corporate statutes (very similar to those in effect in Delaware) which
are periodically updated and reviewed to meet changing business needs.
Reincorporation in Nevada will (i) limit the liability of both officers and
directors which may ultimately lower the Company's insurance premiums for
director and officer insurance; (ii) restrict the exercise of appraisal rights
in the event of a merger or stock exchange; (iii) allow the Company to take
advantage of business combination and control share statutes not available in
New Mexico should the Company face a hostile takeover attempt.
POSSIBLE ADVERSE EFFECTS ON SHAREHOLDERS
Notwithstanding the belief of the Board of Directors and management as to
the benefits to shareholders of the Merger, shareholders should realize that, as
is the case in New Mexico, there are certain possible adverse effects of the
Merger. The Reincorporation will (i) make incumbent directors more difficult for
shareholders to remove, particularly if the Board increases its size and
approves a classified, staggered structure, whereby only one-third of the total
members of the Board would be subject to reelection each year; (ii) prohibit any
shareholder who desires to acquire more than ten percent of the Company from
controlling the Company through appointment of new directors until three years
after acquisition of a ten percent interest and then only in certain
circumstances; (iii) not allow shareholders to inspect the books or records of
the Company or obtain appraisal rights for their shares. For a detailed summary
of significant differences between New Mexico and Nevada corporate law, see
"Certain Differences Between the Corporation Statutes of New Mexico and Nevada".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The reorganization provided for in the Merger Agreement is intended to be
tax-free under the Internal Revenue Code of 1986, as amended. Accordingly, it is
expected that under present federal income tax laws, no gain or loss will be
recognized by Mesa New Mexico, Mesa Nevada or the holders of Common Stock of the
Company as a result of the consummation of the Merger. The effect of state tax
laws upon shareholders may vary from state to state. Each former holder of Mesa
New Mexico shares will have the same basis in the Mesa Nevada shares received by
him pursuant to the reorganization as he has in the Mesa New Mexico shares held
by him at the time of consummation of the Reincorporation, and his holding
period with respect to such Mesa Nevada shares will include the period during
which he held the corresponding Mesa New Mexico shares, provided the latter were
held by him as capital assets at the time of consummation of the reorganization.
The foregoing is only a summary of the federal income tax consequences and is
not tax advice. The Company has not secured, nor does it intend to secure, any
ruling from the Internal Revenue Service on the nontaxable nature of the
transaction.
A successful challenge by the Internal Revenue Service to the tax-free
status of the Reincorporation would result in a shareholder recognizing gain or
loss with respect to each share of Company Common Stock converted in the
Reincorporation equal to the difference between that shareholder's basis in such
shares and the fair market value, as of the time of the Reincorporation, of the
Mesa Nevada Common Stock converted in the Reincorporation. In such event, a
shareholder's aggregate basis in the shares of Mesa Nevada Common Stock acquired
in the Reincorporation would equal the fair market value of all such shares, and
such shareholder's holding period for such shares would not include the period
during which such shareholder held Mesa New Mexico Common Stock.
State, local or foreign income tax consequences to shareholders may vary
from the federal tax consequences described generally above. Shareholders should
consult their own tax advisors as to the effect of the Reincorporation under
applicable federal, state, local or foreign income tax laws.
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For financial accounting purposes, the Reincorporation will be accounted
for as a reincorporation. Accordingly, there will be no impact on the carrying
amount of assets or liabilities of the Company as currently reported.
EACH SHAREHOLDER IS URGED TO CONSULT WITH HIS OWN TAX ADVISOR WITH RESPECT
TO THE TAX CONSEQUENCE, IF ANY, TO HIM IF THE REINCORPORATION PROPOSAL IS
APPROVED AND THE REINCORPORATION IS EFFECTED.
SECURITIES ACT CONSEQUENCES
The shares of Mesa Nevada to be issued in exchange for shares of Mesa New
Mexico are not being registered under the Securities Act of 1933, as amended
(the "Securities Act"). In that respect, Mesa Nevada is relying on Rule
145(a)(2) of the Commission under the Securities Act, which provides that a
merger which has as its sole purpose a change in the domicile of the corporation
does not involve the sale of securities for purposes of the Securities Act.
After the Merger, Mesa Nevada will be a publicly held company, its Common Stock
is expected to be reported on NASDAQ/NMS and it will file with the Commission
and provide to its shareholders the same type of information that Mesa New
Mexico has previously filed and provided. Shareholders whose stock in Mesa New
Mexico is fully tradable before the Merger will receive freely tradable shares
of Mesa Nevada. Shareholders holding restricted securities of Mesa New Mexico
will receive stock certificates of Mesa Nevada bearing the same restrictive
legend as appears on their present stock certificates, and their shares of stock
in Mesa Nevada will be subject to the same restrictions on transfer as those
which their present shares of stock in Mesa New Mexico are subject. For purposes
of computing compliance with the holding period of Rule 144, shareholders will
be deemed to have acquired their shares of Mesa Nevada Common Stock on the date
they acquired their shares of Mesa New Mexico Common Stock. In summary, Mesa
Nevada and its shareholders will be in the same respective position under the
federal securities laws after the Merger as were Mesa New Mexico and its
shareholders prior to the Merger.
CERTAIN DIFFERENCES BETWEEN THE CORPORATION STATUTES OF NEW MEXICO AND NEVADA
Mesa New Mexico is incorporated in the State of New Mexico and Mesa Nevada
is incorporated in the State of Nevada. Shareholders' rights are currently
governed by the New Mexico Business Corporation Act and the Mesa New Mexico
Articles and Bylaws, but will, upon consummation of the Merger, be governed by
the Nevada Revised Statutes and the Articles and Bylaws of Mesa Nevada.
There are certain significant differences between the corporate codes of
the States of Nevada and New Mexico and therefore the rights of the shareholders
will change upon consummation of the Merger. This summary is not intended to be
relied upon as an exhaustive list or a detailed description of the provisions
discussed and is qualified in its entirety by the respective corporate codes of
the states of New Mexico and Nevada to which shareholders are referred.
Tax Provisions
The primary reason for the Merger is the annual state tax savings which
management believes will accrue upon reincorporation in Nevada. Nevada provides
more favorable tax treatment for corporations than New Mexico because it does
not charge a corporate income tax. Coupled with the reorganization of the
Company into a holding company, the Reincorporation should result in potential
savings to the Company in the amount of state income taxes that it is required
to pay annually. Tax savings are expected to arise as a result of moving certain
assets and activities to Nevada because of a more favorable allocation of income
from operations in states with a state income tax to the State of Nevada.
Affidavit of Consent
Under New Mexico law, a signed affidavit of consent must be submitted on
behalf of each director to the corporation on whose board he intends to serve
stating that he is willing to serve on that corporation's board of directors.
Under Nevada law, a director may serve on the board of directors of a
corporation without submitting any such written consent.
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<PAGE> 10
Removal of Directors; Classified Board
Under New Mexico law, a director of a corporation that does not have a
classified board of directors or cumulative voting may be removed with or
without cause by a majority of the outstanding shares entitled to vote. In the
case of a corporation having cumulative voting, if less than the entire board is
to be removed, a director may not be removed unless the shares voted against
such removal would be insufficient to elect the director under cumulative voting
at an election of the entire board of directors, or, if there are classes of
directors, at an election of the class of directors of which he is a part. Under
New Mexico law, cumulative voting is allowed only if permitted by the articles
of incorporation. The Mesa New Mexico Articles do not permit cumulative voting.
Under Nevada law, any director of a corporation that does not have a
classified board of directors or cumulative voting may be removed upon the
approval of not less than two-thirds of the outstanding shares entitled to vote;
however, (i) in the case of corporations which have provided in their articles
of incorporation for the election of directors by cumulative voting, no director
may be removed from office except upon the vote of shareholders owning
sufficient shares to have prevented the election of the director in the first
instance; and (ii) the articles of incorporation may require the concurrence of
a larger percentage of the stock entitled to voting power to remove a director.
Under Nevada law, cumulative voting is allowed only if permitted by the articles
of incorporation. The Mesa Nevada Articles do not permit cumulative voting.
New Mexico law permits any corporation to provide for a classified board
pursuant to which the directors can be divided into two or three classes with
staggered terms of office with only one class of directors coming up for
election each year. Nevada law permits any corporation to provide for the
classification of directors as to the duration of their respective terms of
office or as to their election by one or more authorized classes or series of
shares, but at least one-fourth in number of the directors of every corporation
must be elected annually.
Under both New Mexico and Nevada law, a classified board of directors is
allowed only if permitted by the articles of incorporation. The Mesa New Mexico
Articles do not provide for a classified board. The Mesa Nevada Articles provide
for a classified Board of Directors if nine or more directors are elected to
office. Presently, there are only seven directors and the directors have no
intention of nominating any additional members to the Board prior to the date
set for the 1996 Annual Meeting. However, the Board may in the future expand the
number of directors to nine or more members and stagger the directors' terms.
Should nine or more directors be elected in the future, only one-third (or a
fraction close to one-third in case more than nine directors are elected) of the
members of the Board would be subject to reelection each year and each director
would serve a three-year term.
Regardless of whether Mesa Nevada ultimately appoints nine or more members
to its Board of Directors, it is more difficult to remove directors in the state
of Nevada than to remove them in the state of New Mexico because Nevada requires
two-thirds of the outstanding shares to vote for removal while New Mexico only
requires a majority of the outstanding shares to vote for removal.
Indemnification
In New Mexico and Nevada, directors, officers, employees, and agents may be
indemnified.
New Mexico law provides that the indemnification of directors will not be
valid (i) unless consistent with the indemnification statute or (ii) to the
extent that indemnification is limited by the articles of incorporation. Nevada
law provides that the rights pursuant to the Nevada indemnification statutes are
not exclusive of any other rights to which directors, officers, employees or
agents are entitled by bylaw, agreement, vote of shareholders, disinterested
directors, or otherwise.
Unlike Nevada, New Mexico law distinguishes the conduct of a person acting
in his "official capacity" on behalf of a corporation from the conduct of a
person not acting in his "official capacity." A person seeking to qualify for
indemnification who acted in his "official capacity" on behalf of the
corporation must show, among other factors, that he reasonably believed that his
actions were in the corporation's best interests. A person not acting in the
"official capacity" on behalf of the corporation must show, among other factors,
that he reasonably believed that his conduct was at least not opposed to the
corporation's best interests. New Mexico
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<PAGE> 11
law defines "official capacity" to mean, when used with respect to a director,
the office of director in the corporation and, when used with respect to a
person who is not only a director but acts also in another capacity, the
elective or appointive office in the corporation held by the officer or the
employment or agency relationship undertaken by the employee or agent on behalf
of the corporation.
The Nevada indemnification statutes distinguish between derivative and
third-party actions. Nevada law generally provides that a corporation shall have
the power to indemnify any person who was or is a party or a threat to be made a
party to any threatened, pending or completed action against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit. Indemnification for derivative
suits is limited to expenses, specifically including attorneys' fees, actually
and reasonably incurred in the defense or settlement of a suit if the statutory
standards are met.
Both New Mexico and Nevada law prohibit indemnification in respect of any
claim, issue or matter as to which the person shall have been adjudged to be
liable to the corporation in performance of that person's duty to the
corporation and its shareholders, unless and only to the extent that the court
in which the proceeding is or was pending determines that the person is fairly
and reasonably entitled to indemnity for expenses and then only to the extent
that the court shall determine. The New Mexico statute also prohibits
indemnification with respect to derivative suits if a director has been found
liable for negligence or misconduct in the performance of a duty owed the
corporation.
New Mexico law allows indemnification of reasonable expenses to a director,
officer, agent or employee who, in the board of directors' opinion, has been
wholly successful on the merits or otherwise in the defense of any action
against him; or the court, upon petition of the director, will award
indemnification of reasonable expenses based on the successful outcome of the
proceedings. Nevada law requires indemnification of expenses including
reasonable attorney fees to the extent that an agent of the corporation has been
successful on the merits in defense of any proceeding without regard to the
opinion of the board of directors of the corporation or petition to a court.
New Mexico and Nevada law predicate indemnification on (i) acting in good
faith; (ii) in a manner he or she reasonably believes to be in or not opposed to
the best interests of the corporation; and (iii) with respect to criminal
proceedings, such person must not have had reasonable cause to believe that his
or her conduct was unlawful. The termination of any action adverse to such
person, whether by settlement, judgment, conviction, or plea of nolo contendere
does not in and of itself create a presumption that the statutory standards of
conduct have not been met.
Under both the laws of New Mexico and Nevada, other than when a person has
been successful on the merits in defending an action, a corporation may
indemnify such person only if a determination is made that such person met the
statutory standard of conduct. In New Mexico, if a quorum consisting of
directors not at the time parties to a proceeding cannot be obtained,
indemnification may be awarded by (i) a majority vote of a committee of the
board of directors duly designated to act in the matter by a majority vote of
the full board, in which designated directors who are parties may participate,
but consisting solely of two or more directors not at the time parties to the
proceeding, (ii) by special legal counsel or (iii) by shareholders not parties
to the proceedings. In Nevada, the determination may be made by (i) majority
vote of a quorum of directors who are not parties to the proceeding, (ii) by the
shareholders, or by (iii) independent legal counsel in a written opinion if
either a quorum of disinterested directors cannot be obtained or if so directed
by such quorum.
If a written undertaking is provided to the corporation by the indemnitee
stating that the amount advanced will be repaid if indemnification is not
proper, both New Mexico law and Nevada law will allow advancement of certain
expenses incurred by the indemnitee prior to final disposition of a proceeding
against the indemnitee. However, in addition to the written undertaking, New
Mexico law requires a written affirmation by the director of the director's good
faith belief that the director has met the standard of conduct necessary for
indemnification by the corporation and a determination must be made that the
facts then known to those making the determination would not preclude
indemnification under this section.
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<PAGE> 12
New Mexico law requires the reporting in writing to the shareholders with
or before the notice of the next shareholders meeting of either indemnification
or advancement of expenses. Nevada law has no similar requirement.
The Mesa Nevada Articles and Bylaws provide that indemnification is to be
provided to the fullest extent permitted by Nevada law. Each of the directors
and officers of Mesa New Mexico are parties to an indemnification agreement
which shall be fully assumed by Mesa Nevada.
Limitation of Liability
New Mexico law permits the articles of incorporation to provide that a
director shall not be personally liable to the corporation or its shareholders
for breach of fiduciary duty, except for claims involving breaches or failures
to perform (i) that constitute negligence, willful misconduct, or recklessness
for a director with an ownership interest in the corporation or who receives in
his capacity as a director or as an employee of the company compensation of more
than $2,000 in any calendar year or (ii) that constitute willful misconduct or
recklessness in all other cases. The limitation applies only to actions taken by
a director at meetings of the board of directors, a committee of the board of
directors, or by virtue of action of directors without a meeting.
Nevada law allows a corporation to limit or eliminate the personal
liability of a director or officer to the corporation or its stockholders for
damages for breach of fiduciary duty as a director or officer, but such a
provision must not eliminate or limit the liability of a director or officer
for: (i) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or (ii) the payment of distributions in violation of
the Nevada Statutes.
Unlike New Mexico, the limitation of liability also applies to officers and
is not restricted in its application solely to directors acting at board of
directors meetings or through committees of the board of directors.
The Mesa Nevada Articles limit the liability of officers and directors to
the fullest extent permitted by law.
Inspection of Shareholders' List
New Mexico law provides that any person who has been a holder of record of
shares or voting trust certificates at least six months immediately preceding
his demand to inspect a shareholders' list or who shall be the holder of record
of, or the holder of record of voting trust certificates for, at least five
percent of all the outstanding shares of the corporation, upon written demand
setting the purpose thereof, may examine, in person, or by agent or attorney, at
any reasonable time or times, for any proper purpose, the record of shareholders
and make extracts therefrom. Any officer or agent who, or corporation which,
refuses to allow such an inspection shall be liable to the shareholders in the
penalty of ten percent of the value of the shares owned by the shareholder in
addition to any other damages or remedies afforded him by law. It is a complete
defense to any penalties assessed against an officer, agent or corporation who
refuses to allow an inspection if the person suing therefor has within the past
two years used a shareholder list, or the information obtained therein, aided
another in using a shareholder list, or not acted in good faith in making his
demand to inspect the shareholder list. Regardless of the percentage of
ownership of a shareholder, the stock of a corporation or the amount of time a
shareholder has held such stock, a court may compel the production of a
shareholder list for examination by such shareholder.
Nevada does not provide any shareholder with the right to inspect the
shareholder's list, financial statements or any other records of the corporation
as long as the corporation is listed on any recognized stock exchange or
furnishes to its shareholders a detailed, annual financial statement. Upon
completion of the Merger, shareholders will no longer have any inspection
rights.
Dividends and Repurchase of Shares
A New Mexico corporation may pay dividends to its shareholders and
repurchase stock unless the corporation would then be unable to pay its debts as
they become due in the usual course of business or the
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<PAGE> 13
corporation's total assets will be less than the sum of its total liabilities.
The Nevada statute which restricts payment of dividends is almost identical to
the New Mexico provision, however, Nevada requires that the corporation's total
assets not be less than the sum of its total liabilities plus the amount needed,
assuming dissolution of the corporation, to satisfy preferential rights upon
dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.
Dissenters' Rights
The limitations on the availability of dissenters' rights under Nevada law
are different from those under New Mexico law. Under New Mexico law, a
dissenting shareholder of a corporation participating in certain major corporate
transactions may, under varying circumstances, be entitled to dissenters' rights
pursuant to which such shareholder may receive cash in the amount of the fair
market value of the shares held by such shareholder (as determined by a court or
by agreement of the corporation and the shareholder) in lieu of the
consideration such shareholder would otherwise receive in the transaction.
However, New Mexico law does not provide shareholders of a corporation with
dissenters' rights when the corporation acquires another business through the
issuance of its stock (i) in exchange for the outstanding stock of the
corporation to be acquired, or (ii) in a merger of the corporation to be
acquired with a subsidiary of the acquiring corporation.
Shareholders of a Nevada corporation whose shares are listed on a national
securities exchange, designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held by at least 2,000 shareholders of record generally do not have
dissenters' rights. New Mexico law does not contain any similar limitations on
dissenters' rights, but allows any shareholder who perfects dissenters' rights
to receive fair value for his shares.
Upon completion of the Merger shareholders will no longer have dissenters'
rights except in very limited circumstances.
Shareholder Derivative Actions
Under both New Mexico and Nevada law, any shareholder may bring a
derivative action against a corporation if the shareholder owns stock at the
time of the transaction of which he complains or has stock thereafter devolved
upon him by operation of law. New Mexico and Nevada law both require that the
complaint be verified and that the plaintiff allege with particularity the
efforts, if any, made by the plaintiff to obtain the action he desires from the
directors and the reasons for his failure to obtain the action or for not making
the effort.
Business Combination; Control Share Acquisitions
New Mexico has not adopted any statutes which limit business combinations
or restrict or limit the acquisition of a controlling interest in a company.
Nevada has adopted business combination statutes and control share acquisition
statutes.
Under the Nevada business combination statute, except under certain
circumstances, business combinations with interested shareholders are not
permitted for a period of three years following the date such shareholder became
an interested shareholder. The Nevada statute defines an interested shareholder,
generally, as a person who owns ten percent or more of the outstanding shares of
the corporation's voting stock.
Corporations with 200 or more shareholders which have a class of shares
registered under Section 12 of the Exchange Act are subject to the business
combination provisions. The "business combinations" with an "interested
stockholder" which are regulated include: a merger with the interested
shareholder or affiliate thereof; a sale, lease, exchange, mortgage pledge,
transfer or other disposition equal to or more than five percent of the
corporation's assets or equal to five percent or more of the aggregate values of
all outstanding shares of the corporation or equal to or more than 10% of its
earning power or net income; a transfer or issuance of stock having a market
value of more than five percent of the market value of the corporation's shares;
a dissolution of the corporation proposed by the interested shareholder; a
reclassification, recapitaliza-
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<PAGE> 14
tion or other transaction with the interested shareholder that has the effect of
increasing the interested shareholder's proportionate share in any class of
voting shares; or a loan from the corporation to the interested shareholder.
Business combinations with the interested shareholder are prohibited except
those which are approved by the Board of Directors before the interested
shareholder first obtained a ten percent (10%) ownership interest in the
corporation's stock. After three years have lapsed from the date of acquiring
shares, a business combination with an "interested shareholder" may take place
so long as a majority of the non-interested shareholders approve it or if the
common stock holders receive the highest share price the "interested
shareholder" paid for the corporation's stock in the previous three years plus
interest. The provisions, in effect, require either board approval of the
"business combination" or approval of the non-interested shareholders unless the
interested shareholder offers the other shareholders the highest price paid for
his shares within that three year period. A corporation can opt out of the
business combination provisions by so providing in its articles of
incorporation. The Articles of Incorporation of Mesa Nevada do not contain any
provision opting out of the business combination statutes therefore Mesa Nevada
will be governed by such statutes.
Nevada also has statutes which limit acquisition of a "controlling
interest" in a corporation. Control share statutes prohibit an acquirer, under
certain circumstances, from voting shares of a target corporation's stock after
crossing certain threshold ownership percentages unless the acquirer obtains the
approval of the target corporation's shareholders. This statute is designed to
prevent any party from obtaining control of the voting rights of a corporation
without approval of the shareholders of the corporation.
The Nevada statute applies solely to domestic corporations with 200 or more
shareholders when at least 100 shareholders are residents of Nevada. The
corporations must do business in Nevada directly or through an affiliated
corporation. Upon completion of the Merger, Mesa Nevada may become subject to
the "controlling interest" statutes in Nevada in the future upon meeting the
aforementioned criteria.
Under the Nevada statute, any person ("Acquiring Person") who acquires
shares of any public corporation in excess of 20% will not be permitted to vote
those shares or any other shares acquired within 90 days or acquired pursuant to
a plan to make a control share acquisition unless the remaining shareholders
vote to enfranchise the control shares. The Acquiring Person, officers, and
employee-directors of the corporation may not vote on the matter. The issue of
voting rights for the Acquiring Person's control shares must be submitted to a
shareholder vote, if requested by the Acquiring Person, at a special meeting to
be held within 50 days of the request, provided the Acquiring Person delivers a
statement with prescribed disclosures at the time of the request and undertakes
to pay the cost of the special meeting. If the measure is approved, all
shareholders are entitled to dissenters' rights based on the highest price paid
for the control shares by the Acquiring Person unless otherwise provided in the
corporation's articles of incorporation or bylaws. If the measure is not
approved, or if the Acquiring Person elects not to deliver a disclosure
statement to the issuing public corporation within 60 days after the last
acquisition of control shares by the Acquiring Person, the corporation has the
right to acquire the control shares for "fair value" if its articles of
incorporation provided for such a buy-back prior to the control share
acquisition. If a corporation does not desire to be bound by the Nevada
"controlling interest" statutes, it may opt out of them if its articles of
incorporation or by-laws in effect on the tenth day following the acquisition of
a controlling interest state that the sections do not apply. Mesa Nevada will be
subject to the "controlling interest" statutes because it has no provisions in
its Articles of Incorporation or Bylaws limiting such statutes.
VOTE REQUIRED FOR APPROVAL
The Reincorporation will require the affirmative vote of the holders of at
least a majority of the Company's outstanding Common Stock represented in person
or by proxy at the Annual Meeting. All of the directors and executive officers
of the Company have advised the Company that they will vote their shares of
Company Common Stock "FOR" the Reincorporation Proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE
REINCORPORATION PROPOSAL.
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OMNIBUS PLAN
(PROPOSAL THREE)
RATIFICATION OF MESA AIR GROUP, INC. OMNIBUS PLAN
On December 1, 1995, at the recommendation of the Compensation Committee,
the Board of Directors adopted, subject to shareholder approval, new salary
levels, and a related structured bonus plan (the "Compensation Plan") and the
Mesa Air Group, Inc. Employee Stock Option Plan (the "Stock Option Plan"). The
Stock Option Plan is attached hereto as Appendix "D". The Compensation Plan and
Stock Option Plan are collectively referred to as the "Omnibus Plan." A brief
summary of the Omnibus Plan is set forth below. Although adopted by the Board of
Directors on December 1, 1995, the Omnibus Plan was made effective as of October
1, 1994. Approximately 35 officers and key employees selected by the
Compensation Committee participate in the Omnibus Plan.
General
The goals of the Omnibus Plan are to more closely align the interests of
key employees with those of the shareholders, reward key employees when
specified goals are met, and enable the Company to recruit and keep quality
people on its management team. The Compensation Plan portion of the Omnibus Plan
provides for a significant increase in the base salary of most of the officers
and key employees paid pursuant to the plan (collectively, "Key Employees") as
compared to the nominal base salaries previously in effect while significantly
reducing the potential bonuses to be paid as compared to the MIP. The
Compensation Plan also provides for bonuses based on the growth of the Company's
earnings per share, or increases in rates of return in lieu of the distribution
of ten percent of the Company pre-tax earnings provided for under the Management
Incentive Program ("MIP"). Under the Compensation Plan, salaries for Key
Employees have been capped and bonuses are limited to prescribed percentages of
base salary. Bonuses under MIP were uncapped. Bonuses paid to Key Employees,
except Key Employees of divisions or subsidiaries, are based upon the annual
percentage growth in earnings per share. Growth in earnings per share ("EPS")
has been categorized at four levels: Minimum -- any growth in EPS during the
prior fiscal year; Threshold -- 7.0% to 12.9% growth in EPS; Target 13.0% to
17.9% growth in EPS and Maximum -- 18.0% or greater growth in EPS. Division and
subsidiary Key Employee bonuses are based on earnings before taxes and interest
divided by total revenues of the division or subsidiary (the "Rate of Return").
The Rate of Return has been categorized at four levels: Minimum -- a Rate of
Return from five to nine and nine-tenths percent; Threshold -- a Rate of Return
of 10 to 12.9%; Target -- a Rate of Return of 13 to 17.9% and Maximum -- a Rate
of Return of 18% or more. See "COMPENSATION OF EXECUTIVE OFFICES AND
DIRECTORS -- COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION."
The Compensation Committee estimates that the Omnibus Plan will reduce the
Company's overall compensation cost by over $1,000,000 per year. Larry L.
Risley, Chairman of the Board and Chief Executive Officer, will experience the
greatest reduction in aggregate salary and bonus under the Omnibus Plan. During
fiscal 1995, Mr. Risley's total salary and cash bonus could not exceed $770,000
per annum, excluding the value assigned to stock options. For fiscal 1995, Mr.
Risley's total cash compensation was $350,000. In contrast, Mr. Risley's cash
compensation under MIP, excluding the value assigned to stock options, in prior
years was $2,753,438 in 1994 and $934,028 in 1993. Bonuses payable under the MIP
totaling $909,545 or 10% of the pre-tax net income of the Company for fiscal
1995 have been set aside and will be paid to members of senior management should
the Omnibus Plan not be approved by the shareholders. Should shareholders not
approve the Omnibus Plan, Larry L. Risley will be paid total cash compensation
of approximately $607,772 or an additional $257,772 upon allocation of a bonus
under the MIP. He would also relinquish Options with a value of approximately
$506,250 at September 30, 1995. See "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS -- Salaries and Management Incentive Program for Senior Management"
for a further discussion of the Omnibus Plan.
Since salary and bonuses are capped under the Compensation Plan, an
integral part of the Omnibus Plan is the issuance of stock options on an
annualized basis to Key Employees under the Stock Option Plan. The Board of
Directors also believes that stock options more closely align the interests of a
company's management
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<PAGE> 16
with those of its shareholders. The Stock Option Plan provides for the grant of
both incentive and non-statutory stock options (the "Options") to Key Employees
. Options granted under the Omnibus Plan may or may not be intended to qualify
as incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), at the discretion of the Compensation Committee.
Because incentive stock options provide more favorable tax treatment to
employees than non-statutory stock options, the Compensation Committee will seek
to grant incentive stock options to Key Employees whenever possible. Because it
had been over one year since any options had been granted to officers and key
employees under existing plans, the Committee recommended and the Board
approved, subject to shareholder approval of the Omnibus Plan, the granting of
twice the amount of Options in 1995 as allocated for 1996. Under the Stock
Option Plan, other than Options granted as of June 28, 1995, Options will be
issued at the low selling price of the Company's Common Stock on April 1 of each
year. Options granted on June 28, 1995, were granted at a price of $8.50, the
low selling price on June 28, 1995.
The following table sets forth the benefits or amounts received by each of
the following under the Omnibus Plan during the Company's fiscal year ended
September 30, 1995 and recommended allocations of Options for fiscal 1996
through the termination of the Stock Option Plan:
OMNIBUS PLAN
<TABLE>
<CAPTION>
1995 FUTURE ANNUAL
OPTIONS OPTIONS TO
NAME AND POSITION SALARY BONUS(1) GRANTED BE GRANTED
- ------------------------------------------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C>
Larry L. Risley............................ $ 350,000 -- 300,000 150,000
Chairman of the Board and Chief Executive
Officer
J. Clark Stevens........................... $ 198,000(2) -- 160,000 80,000
President and Chief Operating Officer
Gary L. Risley............................. $ 150,000 -- 100,000 50,000
Vice President of Legal Affairs and
Secretary
W. Stephen Jackson......................... $ 150,000 -- 100,000 50,000
Chief Financial Officer, Vice President
Finance and Treasurer
Executive Group............................ $ 848,000 -- 850,000 425,000
Non-Executive Officer Employee Group(3).... $2,504,000 $161,537 475,000 275,000
</TABLE>
- ---------------
(1) Bonuses payable to the Chairman and Chief Executive Officer will vary from a
minimum of 15% to a maximum of 120% of salary and for the other officers
listed above, from a minimum of 12.5% to 100%. Because there was no growth
in EPS, no bonuses were paid in fiscal 1995.
(2) Mr. Stevens did not begin employment as President and Chief Operating
Officer until January, 1995 and his compensation was prorated accordingly.
For fiscal 1996, Mr. Stevens will receive a salary of $235,000.
(3) The base salary of other Key Employees range from $41,000 to $85,000 per
annum with bonuses ranging from 3.75% to 100%. Options granted to other Key
Employees range from 2,500 to 40,000 options. Such amounts are maximum
amounts and may be adjusted downward by the Compensation Committee.
The total number of options granted under the Stock Option Plan in 1995 was
1,325,000 options. The total number of options to be granted under the Stock
Option Plan each year (other than for fiscal 1995), assuming all key positions
are filled by persons eligible to receive options, will not be greater than
700,000 options. At the present time, all positions determined to be key
positions have not been filled and it is estimated that all the Options
allocated will not be issued each year because of vacancies and terminations.
Purpose
Early in 1995, at the direction of the Board, the Compensation Committee
undertook a review of the Company's salary and benefit program, the associated
MIP, and a study of the executive compensation policies of other regional air
carriers. The Committee engaged an independent compensation consultant to assist
it in these undertakings. Based upon its study and review and the
recommendations of the compensation consultant, the Committee concluded and
recommended to the Board of Directors the Omnibus Plan. Like
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<PAGE> 17
the MIP, the purpose of the Omnibus Plan is to attract and retain Key Employees
who are and will be responsible for the growth and the success of the Company by
providing an incentive-based form of compensation. However, the Board of
Directors believes that because compensation paid pursuant to the Omnibus Plan
is primarily related to an increase in earnings per share and appreciation of
the Common Stock of the Company that it will provide a more equitable
alternative to cash bonuses based on pre-tax profitability paid under the MIP.
The Company's two employee stock option plans, which were adopted
previously by the Company, have either expired or fail to have any significant
remaining options available for grant. Furthermore, options allocated under
those plans were primarily granted to the upper management of the parent
company, Mesa Air Group, Inc. Beginning in early 1994, the Company hired many
new middle managerial employees and added to its upper management to handle the
increasing responsibilities brought about by acquisitions and expansions made in
1992 and 1993. The Company believes that it is in the best interests of its
shareholders to reward the performance of all of its Key Employees with a
broad-based grant of stock options.
Terms of Stock Option Plan
Administration. Because allocations made pursuant to the Stock Option Plan
are based on a formula, it may be administered by the Board of Directors of the
Company or by any person or persons chosen by a majority of the Board. Certain
material amendments may not be made to the Stock Option Plan without shareholder
approval.
Grant of Options. Under the Stock Option Plan, employees were granted
Options on June 28, 1995 and will be granted additional Options on April 1 of
each year (the "Grant Date") according to the amounts set forth on a schedule
(the "Schedule") developed by the Compensation Committee. (For a copy of the
Schedule, please refer to Schedule "B" attached to Appendix "D"). If a Key
Employee is employed by the Company after June 28, 1995, the Key Employee is,
upon the first day of employment, granted a pro rata portion of the Options set
forth on the Schedule ("Pro Rata Options"). The Compensation Committee has full
and complete discretion to decrease the amount of Options allocated to Key
Employees other than those employees subject to Section 16 of the Securities
Exchange Act of 1934, as amended, from the amounts set forth in the Schedule and
such amounts are set forth only as maximum allocations permitted by the Stock
Option Plan.
Vesting of Options and Pro Rata Options. One-third of the total Options
granted on a Grant Date vest on the first anniversary date after the Grant Date;
one-third of the total Options granted on a Grant Date vest on the second
anniversary date after the Grant Date; and the remaining one-third of the total
Options granted on a Grant Date vest on the third anniversary date after the
Grant Date. One-third of the total Pro Rata Options vest on the first April 1
after their Grant Date (the "Initial Vesting Date"); one-third of the total Pro
Rata Options vest on the first anniversary date after the Initial Vesting Date;
and the remaining one-third of the total Pro Rata Options vest on the second
anniversary date after the Initial Vesting Date. However, Pro Rata Options
granted to Insiders on or after October 1 and prior to April 1 in any year do
not vest until the second April 1 following the Grant Date at which time
two-thirds of the total Pro Rata Options vest and the remaining one-third of the
total Pro Rata Options vest on the first anniversary date thereafter.
Exercise Price. The exercise price of the Options may not be less than the
fair market value (as defined by the Stock Option Plan) of the Common Stock on
the date of the grant.
Additional Restrictions. The aggregate fair market value, determined as of
the time an incentive stock option is granted, of the Common Stock with respect
to which such Options are exercisable by an employee for the first time during
any calendar year shall not exceed $100,000. There is no such limit for
non-statutory Options. Options may be exercised only during the period beginning
on the third business day following the release for publication of quarterly or
annual summary statements of sales and earnings and ending two weeks prior to
the end of the then current-fiscal quarter of the Company.
Certain Termination of Options. Although the maximum term of the options
under the Stock Option Plan is 10 years, in certain circumstances the maximum
term may be less. If any option holder ceases to be an employee of the Company,
other than for death, disability, retirement or discharge for cause, such holder
may, within three months after the date of termination but in no event after the
stated expiration date, purchase
15
<PAGE> 18
some or all of the shares with respect to which such option holder was entitled
to exercise such option on the date such employment terminated; provided that
(1) if the option holder's employment is terminated for dishonesty or other acts
detrimental to the Company's interest or for the holder's breach of any
employment, confidentiality or other contract or agreement, or (2) if after the
employment is terminated, the holder commits acts detrimental to the Company's
interest, then the Option shall thereafter be void for all purposes. If the
option holder is removed as an employee due to disability, the option holder may
exercise the Options in whole or in part to the extent they are exercisable on
the date when the option holder's employment terminated, at any time prior to
the expiration date of the Options or within one year of the date of removal,
whichever is earlier. If an option holder is removed as an employee of the
Company for cause, the Option shall terminate upon receipt by the option holder
of notice of such removal or on the effective date of the removal, whichever is
earlier. If any option holder (i) ceases to be an employee of the Company other
than for death, disability or discharge for cause; and (ii) has been
continuously employed by the Company for five or more years; and is (iii) over
59 1/2 years of age (collectively referred to as "Retirement"), all of the
Options which have been granted to such option holder prior to Retirement vest
30 days after Retirement (the "Vested Options"). Such holder (or his successors
in the case of the holder's death after Retirement) may, within three months
after the date of Retirement or prior to the stated expiration date, whichever
first occurs, purchase some or all of the Shares which such option holder was
entitled to exercise; provided, that (i) if the holder's employment is
terminated for dishonesty or other acts detrimental to the Company's interests
or for the holder's breach of any employment, confidentiality or other contract
or agreement with the Company, or (ii) if after employment is terminated, the
holder commits acts detrimental to the Company's interests, then the Option is
void for all purposes. If the option holder dies while employed by the Company,
an option shall be exercisable until the stated expiration date thereof by the
person or persons to whom the holder's rights pass under will or by laws of
descent and distributed to the extent that the holder was entitled to exercise
the Option at the date of death.
Adjustment Provisions. The aggregate number of shares subject to the Stock
Option Plan, the number of shares covered by outstanding Options, and the price
per share stated in such Options must be proportionately adjusted for an
increase or decrease in the number of outstanding shares of Common Stock of the
Company resulting from a subdivision or consolidation of shares or any other
capital adjustment or a stock dividend or any other increase or decrease in the
number of such shares effected without receipt by the Company of consideration
therefore in money, services or property. Also, if the Company is the surviving
corporation in any merger or consolidation, any Options granted under the Stock
Option Plan shall pertain to and apply to the securities to which a holder of
the number of shares subject to the Option would have been entitled. A
dissolution or liquidation of the Company shall cause every Option outstanding
hereunder to terminate, unless specifically provided otherwise by the Board. A
merger or consolidation in which the Company is not the surviving corporation
shall also cause every Option outstanding hereunder to terminate, unless
specifically provided otherwise by the Board, but each holder shall have the
right immediately prior to a merger or consolidation in which the Company is not
the surviving corporation to exercise such Option in whole or in part without
regard to any installment provisions contained in the Option Agreement.
Maximum Shares Allocated. The aggregate number of shares of Common Stock
covered by the Stock Option Plan issuable upon exercise of all Options is
10,000,000 shares, and such shares have been reserved for issuance by the
Company upon the exercise of the Options.
Tax Consequences
Non-Statutory Options. There are no tax consequences to the option holder
or to the Company upon the grant of a non-statutory stock option. Upon exercise
of a non-statutory stock option, the option holder normally will recognize
taxable ordinary income equal to the excess of the stock's fair market value on
the date of exercise over the option exercise price. The Company will be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the option holder. Upon disposition of the stock, the option holder
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
shall be long- or short-term depending on whether the stock was held for more
than one year.
16
<PAGE> 19
Incentive Options. No taxable income will be recognized by an option
holder upon receipt of an incentive stock option, and the Company will not be
entitled to a tax deduction in respect of such grant.
In general, no taxable income for Federal income tax purposes will be
recognized by an option holder upon exercise of an incentive stock option and
the Company will not then be entitled to any tax deduction. Assuming that the
option holder does not dispose of the option shares before the expiration of the
longer of (i) two years after the date of grant, or (ii) one year after the
transfer of the option shares, upon disposition, the option holder will
recognize capital gain equal to the difference between the sale price on
disposition and the exercise price.
If, however, the option holder disposes of his option shares prior to the
expiration of the required holding period, he will recognize ordinary income for
Federal income tax purposes in the year of disposition equal to the lesser of
(i) the difference between the fair market value of the shares at date of
exercise and the exercise price, or (ii) the difference between the sale price
upon disposition and the exercise price. Any additional again on such
disqualifying disposition will be treated as capital gain. In addition, if such
a disqualifying disposition is made by the option holder, the Company will be
entitled to a deduction equal to the amount of ordinary income recognized by the
option holder provided such amount constitutes an ordinary and reasonable
expense of the Company.
The amount of which the fair market value of the shares at the time of
exercise exceeds the exercise price of an incentive stock option will be a tax
preference item for purposes of the alternative maximum tax, which, in general,
imposes a 24% tax rate upon the excess of (i) an individual's adjusted gross
income plus certain tax preference items over (ii) $30,000 ($40,000 for joint
returns) reduced by $.25 for each $1.00 by which the alternative minimum taxable
income exceeds $112,500 ($150,000 for joint returns). An individual will be
liable for the alternative minimum tax only to the extent that the amount of
such tax exceeds the liability for regular Federal income tax.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE OMNIBUS
PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL FOUR)
KPMG Peat Marwick LLP has been selected by the Board of Directors as the
Company's independent auditors for fiscal year 1996. KPMG Peat Marwick LLP has
served as the independent auditors of the Company from 1985 through fiscal year
1995.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE RATIFYING THE APPOINTMENT OF KPMG
PEAT MARWICK AS THE COMPANY'S INDEPENDENT AUDITORS FOR FISCAL YEAR 1996.
17
<PAGE> 20
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
THE REPORT OF THE COMPENSATION COMMITTEE AND THE FIVE-YEAR SHAREHOLDER
RETURN COMPARISON AND PERFORMANCE GRAPH AND RELATED EXPLANATION AND FOOTNOTES
SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY FILINGS UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (THE "EXCHANGE ACT"), NOTWITHSTANDING STATEMENTS MADE WITHIN THE
COMPANY'S PREVIOUS FILINGS THAT ALL SUBSEQUENT FILINGS, IN WHOLE OR IN PART,
INCLUDE, WITHOUT LIMITATION, THIS PROXY STATEMENT.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee consists of three non-employee directors of the
Company and has responsibility for allocation of cash compensation and options
to senior executive officers of the Company. The Compensation Committee
primarily administers the Company's Management Incentive Program, Omnibus Plan,
employee stock option plans, and employee stock purchase plans. In those
instances in which Rule 16b-3 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires grants or awards of stock options to be made by a
"disinterested" committee, the Compensation Committee is solely responsible for
the administration of such plans. The full Board of Directors regularly reviews
the Compensation Committee decisions relating to executive compensation. Also,
the Compensation Committee has allocated certain compensation decisions to the
Chairman of the Board of the Company and the presidents of the various divisions
and subsidiaries of the Company.
The Company's executive compensation policies are designed to maximize the
profitability of the Company through individual executives' efforts to contain
costs, manage resources, and enhance revenues; and links an executive's personal
interest in improving shareholder return by rewarding executive officers with a
cash bonus and with the Company's capital stock, thereby aligning executives'
interests with the interests of the Company's shareholders. Bonus allocations
and stock option grants (whether directly made by the Compensation Committee or
allocated by the Chairman of the Board subject to review by the Compensation
Committee) are based on the level of policy making and operational
responsibility of the individual executive; direct contributions to cost control
that are achieved through limitations in overhead or through pricing concessions
obtained by the senior executive officer in negotiating the purchase of assets
or the acquisition of other companies; the compensation offered by competitors
for similar positions and job responsibilities; and the risk inherent in
receiving a substantial portion of compensation based on net profit or increases
in earnings per share instead of fixed annual compensation which is paid
regardless of net profit.
Commencing in January, 1988, the Company provided compensation to its
executive officers and key employees under the Company's Management Incentive
Program ("MIP"). The MIP provides for the distribution annually of up to 10% of
the Company's net income before taxes to management employees who have been
employed at least nine months with the Company. The MIP is based on the theory
that a base salary with annual pay increases does not provide the incentive
necessary to keep talented executive officers nor to reward executive officers
sufficiently for their individual performance. Under the MIP, senior officers
were paid nominal salaries, as compared to comparable officers in the regional
airline industry, and bonuses based upon the Company's net profit before tax.
Bonuses under MIP, if allocated for 1995, will be allocated up to five percent
of the net profit before tax to the Chairman of the Board and Chief Executive
Officer ("Chairman") with the balance to be allocated by the Chairman to the
other officers, including the President. Payment of bonuses under MIP is based
strictly on pre-tax net profitability of the Company. If in a given fiscal year
the Company has a negative pre-tax profit, no bonuses would be paid.
Early in 1995, at the direction of the Board, the Compensation Committee
undertook a review of the Company's salary and benefit program, the associated
MIP, and a study of the executive compensation policies of other regional air
carriers. The Committee engaged an independent compensation consultant to assist
it in these undertakings. Based upon its study and review and the
recommendations of the compensation consultant, the Committee concluded and
recommended to the Board of Directors new levels of base compensation and
related structured bonus plan (the "Compensation Plan") and an Employee Stock
Option Plan (the "Stock Option Plan"), collectively the "Omnibus Plan", as a
replacement for existing salaries and
18
<PAGE> 21
the MIP. The Omnibus Plan, as proposed, was adopted by the Board of Directors on
December 1, 1995 and was made effective October 1, 1994, subject to approval of
the Omnibus Plan by the shareholders of the Company.
The Compensation Plan portion of the Omnibus Plan provides for increases in
the base salary of most of the officers and key employees. The Compensation Plan
also provides for bonuses based on the growth of the Company's earning per share
or increases in rates of return, in lieu of the distribution of ten percent of
the Company pre-tax earnings provided for under the existing MIP. Under the
Compensation Plan, salaries for all executive officers and key employees have
been capped. Bonuses for executive officers and key employees, other than
division or subsidiary key employees, are limited to prescribed percentages of
base salary, based upon the percentage growth in earnings per share. Growth in
earning per share ("EPS") is categorized at four levels: Minimum -- any growth
in EPS during the prior fiscal year; Threshold -- 7.0% to 12.9% growth in EPS;
Target 13.0% to 17.9% growth in EPS and Maximum -- 18.0% or greater growth in
EPS. The Compensation Plan provides that the Chairman of the Board is entitled
to receive a cash bonus of 15%, 30%, 60% and 120% if the Minimum, Threshold,
Target and Maximum, respectively, levels of EPS are reached. Other executive
officers and key employees, other than key employees of a division or
subsidiary, receive cash bonuses of from 3.75% to 100%, graded as to each
position at the four levels of EPS. Division and subsidiary employee bonuses are
based on increases in earnings before taxes and interest divided by total
revenues of the division or subsidiary (the "Rate of Return"). The Rate of
Return has been categorized at four levels: Minimum -- a Rate of Return from
five to nine and nine-tenths percent; Threshold -- a Rate of Return of 10 to
12.9%; Target -- a Rate of Return of 13 to 17.9% and Maximum -- a Rate of Return
of 18% or more. Under the Compensation Plan, division and subsidiary key
employees are entitled to cash bonuses of five percent, 10%, 13% and 18% of the
Rate of Return, depending upon the level of the Rate of Return.
The Committee estimates that the Omnibus Plan will reduce the Company's
overall compensation cost by over $1,000,000 per year. Larry L. Risley, Chairman
of the Board and Chief Executive Officer, will experience the greatest reduction
in aggregate salary and bonus under the Omnibus Plan. Mr. Risley's total salary
and cash bonus could not exceed $770,000 per annum, excluding the value assigned
to stock options. In contrast, Mr. Risley's cash compensation under MIP,
excluding the value assigned to stock options, in prior years was $2,753,438 in
1994 and $930,028 in 1993. Because the Company had no EPS for fiscal 1995,
neither the Chief Executive Officer nor any other executive officer received a
bonus. Although the Chief Executive Officer received an increase in his annual
salary, because bonuses are more difficult to earn under the Omnibus Plan than
under the MIP, the Chief Executive Officer's total cash compensation for fiscal
1995 was approximately $2,403,438 below that earned in fiscal 1994. In addition
to the bonus component of the Plan, the approximate 300,000 options granted to
Mr. Risley pursuant to the Stock Option Plan provide incentive to Mr. Risley to
increase shareholder return. While Mr. Risley's bonus is now capped at a maximum
of 120% of salary, he can participate in a return on the appreciation of the
Common Stock of the Company through exercise of his options.
Since salary and bonuses are capped under the Compensation Plan, an
integral part of the Omnibus Plan is the issuance of stock options on an
annualized basis to key employees under the Stock Option Plan.
The Stock Option Plan provides for options to be issued to officers and key
employees on an annualized basis and to vest at the rate of approximately
one-third per year. The Committee recommended and the Board approved, subject to
shareholder approval of the Omnibus Plan, the granting of twice the number of
options in 1995, since it has been over one year since any options have been
granted to officers and key employees under existing plans. The options have a
ten-year term and are subject to standard option provisions such as are included
in existing Company plans and exclude the requirement of continued employment
and provisions to deal with termination of employment due to retirement, death
or disability. Under the plan, options will be issued at the low selling price
of the Company's Common Stock on the date of grant.
The total number of options granted under the Stock Option Plan in 1995 was
1,325,000 options. Beginning in fiscal 1996, the total number of options to be
granted under the Stock Option Plan, assuming all key positions are filled by
persons eligible to receive options, will be 700,000 options per year. At the
present time, all positions determined to be key positions are not filled.
19
<PAGE> 22
The Compensation Committee believes that the Omnibus Plan, which provides
for established salary levels, a limit on cash bonuses and provides for the
issuance of stock options to officers and key employees related to the
appreciation of the Company's Common Stock, will provide a more equitable
alternative to cash bonuses paid under the existing MIP which is based on the
Company's pre-tax profitability. In the event the Omnibus Plan is not approved
by the shareholders at the Annual Meeting, $909,545, which has been accrued but
not paid under the MIP at September 30, 1995, will be distributed to key
employees and previous salary levels will be adjusted accordingly. If the
Omnibus Plan is approved by the shareholders, the MIP will be abandoned and
officers and key employees will receive the options granted under the Omnibus
Plan on June 28, 1995.
Compensation Committee
Jack Braly, Chairman
George W. Pennington
Richard C. Poe
COMPENSATION SUMMARY OF EXECUTIVE OFFICERS
The following table sets forth certain compensation paid or accrued by the
Company during the fiscal year ended September 30, 1995 to the Chief Executive
Officer and the three most highly compensated executive officers of the Company
whose total annual salary and bonuses exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ---------------------- PAYOUT
OTHER RESTRICTED ----------------------
ANNUAL STOCK LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION(1) AWARD(S)(2) OPTIONS PAYOUT COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------ ---- ------- --------- --------------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry L. Risley......... 1995 350,000 --(3) 4,620 -- 650,000(4) -- --
Chairman of the Board, 1994 153,000 2,595,313 5,125 -- 350,000 -- --
Chief Executive
Officer 1993 153,000 776,614 4,414 -- -- -- --
J. Clark Stevens........ 1995 198,000 --(3) 4,846 -- 80,000(4) -- --
Chief Operating
Officer 1994 50,962 117,414 1,583 -- 60,000 -- --
and President 1993 32,083 59,706 -- -- 40,000 -- --
Gary E. Risley.......... 1995 150,000 --(3) 5,151 -- 175,000(4) -- --
Vice President of 1994 46,000 391,018 2,212 -- 75,000 -- --
Legal Affairs and 1993 46,000 155,322 1,150 -- -- -- --
Corporate Secretary
W. Stephen Jackson...... 1995 150,000 --(3) 3,080 -- 50,000(4) -- --
Chief Financial
Officer, 1994 27,885 125,000 -- -- -- -- --
Vice President of 1993 -- -- -- -- -- -- --
Finance and Treasurer
</TABLE>
- ---------------
(1) These amounts represent both vested and non-vested Registrant contributions
to the individual named executive officer's 401(k) plan. Under the Company's
401(k) plan, employees may contribute up to 15% of their annual
compensation, as defined. The Company currently makes matching contributions
of 50% of employees' contribution (including officers) with a cap of 10% of
the employees' annual compensation. Contributions by the Company to its
401(k) plans for the year ended September 30, 1995 was $1,097,023.
(2) As of December 1, 1995, Larry L. Risley owned 503,966 shares of Mesa Common
Stock and Gary E. Risley owned 15,300 shares of Mesa Common Stock.
(3) Bonuses of approximately $909,545 have been set aside for payment under the
MIP should the Omnibus Plan not be approved by shareholders. Of the $909,545
available for allocation, approximately $455,000 would be paid to Larry L.
Risley (or an additional $257,772 after offset from the higher base salary
already received) and the balance would be allocated to the executive
officers set forth above and other officers of the Company as determined by
the Compensation Committee.
(4) Includes 300,000 options granted to Larry L. Risley, 160,000 options granted
to J. Clark Stevens, 100,000 options granted to Gary E. Risley, and 100,000
options granted to W. Stephen Jackson pursuant to the Omnibus Plan which is
subject to the approval of the shareholders of the Company at the 1996
Annual Meeting.
20
<PAGE> 23
OPTIONS
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED
UNDERLYING SARS ANNUAL RATES OF STOCK
OPTIONS/ GRANTED TO PRICE APPRECIATION
SARS EMPLOYEES EXERCISE OF FOR OPTION TERM
GRANTED IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME (#) YEAR ($/SH) DATE 5% (S) 10% (S)
(A) (B) (C) (D) (E) (F) (G)
- ------------------------- ---------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Larry L. Risley.......... 300,000 19% 8.50 6/28/05 637,500 1,275,000
J. Clark Stevens......... 180,000 11% 8.42 (2) 378,750 757,500
Gary Risley.............. 110,000 7% 8.43 (2) 231,875 463,750
W. Stephen Jackson....... 150,000 10% 8.25 (2) 309,375 618,750
</TABLE>
- ---------------
(1) Includes options granted pursuant to the Omnibus Plan subject to approval by
the Shareholders at the 1996 Annual Meeting as follows: Larry Risley,
300,000; J. Clark Stevens, 160,000; Gary Risley, 100,000, W. Stephen
Jackson, 100,000.
(2) Options expire as follows: J. Clark Stevens -- 160,000 -- 6/28/05;
20,000 -- 11/21/99
Gary Risley -- 100,000 -- 6/28/05;
10,000 -- 11/21/99
W. Stephen Jackson -- 100,000 -- 6/28/05;
50,000 -- 11/21/99
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT SEPTEMBER 30, THE-MONEY OPTIONS AT
1995 SEPTEMBER 30, 1995
------------------------ ------------------------
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE(1) UNEXERCISABLE(1),(2)
- ------------------- ------------------ ----------------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Larry L. Risley.... 450,000 4,108,500 416,666/533,334 854,250/506,250
J. Clark Stevens... -- -- 33,332/206.668 --/318,750
Gary E. Risley..... 16,500 149,078 115,000/160,000 256,275/193,125
W. Stephen
Jackson.......... -- -- --/150,000 --/290,625
</TABLE>
- ---------------
(1) Includes options granted pursuant to the Omnibus Plan subject to approval by
the Shareholders at the 1996 Annual Meeting.
(2) Based on the closing price of the Common Stock on September 30, 1995 at
$10.1875.
COMPENSATION OF DIRECTORS
Each outside director receives a retainer of $10,000 per year, along with
the payment of $1,000 per meeting attended in person; $500 for each committee
meeting attended in person; $500 for each telephone Board meeting attended and
reimbursement of all expenses associated with attending committee or Board of
Directors meetings. In addition, each outside director was granted 3,000 options
in fiscal 1995 pursuant to a stock option plan which automatically grants 3,000
options to each outside director on an annual basis.
Each outside director also participates in the Company's Outside Directors
Stock Option Plan (the "Formula Plan"). Other than initial grants made under
this plan, grants pursuant to the Formula Plan are contingent on improved
returns for the shareholders. Pursuant to the Formula Plan, Blaine Jones
received an
21
<PAGE> 24
initial grant of 10,000 options during fiscal 1995 upon becoming a
non-management director. All other non-management directors received no options
under this plan during fiscal 1995.
Each director who is not an employee of the Company also receives free
travel on Mesa for himself and certain family members and through arrangements
with certain major air carriers receives free or reduced-fare travel on those at
no cost to the Company. Directors hold office until the next annual meeting of
shareholders or until their successors are elected and qualified.
COMPENSATION COMMITTEE INTERLOCKS
Richard C. Poe, Jack Braly and George W. Pennington all served as members
of the Compensation Committee during the fiscal year ended September 30, 1995.
None of these directors held any executive officer position or other employment
with the Company prior to or during such service nor did any executive officer
serve on any other company's compensation committee.
RELATED PARTY TRANSACTIONS POLICY
The Company's Restated Articles of Incorporation provide that the Company
may enter into business arrangements with directors or other related parties.
The Board of Directors has adopted a policy of doing so only where such
arrangements are approved by a majority of disinterested directors and are on
terms at least as favorable as available from unaffiliated third parties.
Presently, the Company is not a party to any related party contracts or
arrangements.
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
Set forth below is a graph comparing the five-year cumulative shareholder
return on the Common Stock of Mesa Air Group, Inc. against the five-year
cumulative total return on the CRSP Index for NASDAQ Stock Market (US Companies)
and the CRSP Index for NASDAQ Stocks (SIC 4510-4519) (an index composed of
NASDAQ companies engaged in air transportation, and includes regional Airlines
whose stocks trade on NASDAQ) for the periods indicated. The graph assumes an
initial investment of $100.00 and reinvestment of dividends, if any.
22
<PAGE> 25
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
MESA AIR GROUP, INC.
<TABLE>
<CAPTION>
NASDAQ STOCK NASDAQ STOCKS
MEASUREMENT PERIOD MESA AIR MARKET (US (SIC 4510-4519
(FISCAL YEAR COVERED) GROUP, INC. COMPANIES) US COMPANIES)
<S> <C> <C> <C>
09/28/90 100.0 100.0 100.0
09/30/91 262.0 157.3 138.7
09/30/92 823.5 176.3 176.3
09/30/93 1395.0 231.0 300.1
09/30/94 477.0 232.9 254.0
09/29/95 733.5 321.4 464.0
</TABLE>
LEGEND
<TABLE>
<CAPTION>
CRSP TOTAL RETURNS INDEX FOR: 09/28/90 09/30/91 09/30/92 09/30/93 09/30/94 09/29/95
- -------------------------------------------------------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Mesa Air Group, Inc. 100.0 262.0 823.5 1395.0 477.0 733.5
Nasdaq Stock Market (US Companies) 100.0 157.3 176.3 231.0 232.9 321.4
NASDAQ Stocks (SIC 4510-4519 US Companies) 100.0 138.7 176.3 300.1 254.0 464.0
Air Transportation, Scheduled, and Air Courier Services
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 09/28/90.
23
<PAGE> 26
COMMON STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 1, 1995 by all directors,
by each person who is known by the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock, by each executive officer
named in the Summary Compensation Table and by all directors and executive
officers as a group.
The number of shares beneficially owned by each director or executive
officer is determined under rules of the Securities and Exchange Commission (the
"Commission"), and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes
any shares as to which the individual has the sole or shared voting power or
investment power and also any shares which the individual has the right to
acquire within 60 days of December 1, 1995 through the exercise of any stock
option or other right. Unless otherwise indicated, each person has sole
investment and voting power (or shares such powers with his or her spouse) with
respect to the shares set forth in the following table. In certain instances,
the number of shares listed includes, in addition to shares owned directly,
shares held by the spouse or children of the person, or by a trust or estate of
which the person is a trustee or an executor or in which the person may have a
beneficial interest.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK BENEFICIALLY OWNED
--------------------------------------------------
VESTED
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OPTIONS(1) TOTAL(1) PERCENT
- ----------------------------------------------- --------- ---------- --------- -------
<S> <C> <C> <C> <C>
Larry L. Risley(2)............................. 503,966 533,333 1,037,299 3.1%
2325 East 30th Street
Farmington, New Mexico 87401
E. Janie Risley(2)............................. -- -- -- --
2325 East 30th Street
Farmington, New Mexico 87401
Blaine M. Jones................................ 16,464 -- 16,464 0.05%
3405 Northridge Court
Farmington, New Mexico 87401
George W. Pennington........................... 66,124 43,000 109,124 0.3%
401 West Broadway
Bloomfield, New Mexico 84712
Richard C. Poe................................. 238,496 43,000 281,496 0.8%
6501 Montana
El Paso, Texas 79925
Jack Braly..................................... -- 13,000 13,000 0.03%
78805 Pina Street
LaQuinta, California 92253
J. Clark Stevens............................... -- 46,665 46,665 0.1%
2325 East 30th Street
Farmington, New Mexico 87401
Gary E. Risley................................. 15,300 140,000 155,300 0.5%
2325 East 30th Street
Farmington, New Mexico 87401
W. Stephen Jackson............................. -- 16,667 16,667 0.05%
2325 East 30th Street
Farmington, New Mexico 87401
JP Morgan & Co. Inc............................ 2,990,000 -- 2,990,000 8.9%
1251 Avenue of Americas
New York, NY 10020
All directors and officers as a group (9 840,350 835,665 1,676,015 5.0%
persons).....................................
</TABLE>
- ---------------
(1) Includes options vested on December 1, 1995 and options which will become
vested on or before February 1, 1996.
(2) Larry L. Risley and E. Janie Risley are husband and wife and Ms. Risley has
a beneficial interest in Mr. Risley's shares.
24
<PAGE> 27
OTHER BUSINESS
So far as is presently known, there is no business to be transacted at the
Annual Meeting other than that referred to in the Notice of Annual Meeting of
Shareholders and it is not anticipated that other matters will be brought before
the Annual Meeting. If, however, other matters should properly be brought before
the Annual Meeting, it is intended that the proxy holders may vote or act in
accordance with the Company's Board of Directors' recommendation on such
matters.
ADDITIONAL INFORMATION
LATE FILING DURING FISCAL YEAR 1995
To the knowledge of the Company, all individuals filed reports with the
U.S. Securities and Exchange Commission in a timely manner during fiscal year
1995.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholder proposals for consideration at the next Annual Meeting, which
the Company expects to hold in March, 1997, must be received by the Company no
later than September 30, 1996 in order for them to be included in the Company's
proxy materials and form of proxy for the 1997 Annual Meeting. In order to be
included, proposals must be proper under law and must comply with the rules and
regulations of the U.S. Securities and Exchange Commission.
MISCELLANEOUS
Representatives of KPMG Peat Marwick LLP, Mesa's independent auditors, will
be present at the Annual Meeting with the opportunity to make a statement if
they desire to do so and will be available to respond to appropriate questions.
The financial statements for the Company for fiscal year 1995 are contained
in the Company's Annual Report on Form 10-K.
By Order of the Board of Directors
GARY E. RISLEY
Secretary
Farmington, New Mexico
January , 1996
25
<PAGE> 28
APPENDIX "A"
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered into as
of January , 1996 by and between MESA AIR GROUP, INC., a New Mexico
corporation (hereinafter referred to as "Mesa NM"), and MESA HOLDINGS, INC., a
Nevada corporation (hereinafter referred to as "Mesa NV").
RECITAL:
WHEREAS, Mesa NM desires to merge into Mesa NV and thereby transfer to Mesa
NV all rights and property owned by it, such merger (the "Merger") is provided
for in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Mesa NM and Mesa NV hereby agree as follows:
AGREEMENT:
SECTION 1. Merger and the Surviving Corporation. (a) Subject to the terms
and conditions of this Agreement, Mesa NM shall be merged into Mesa NV (which
shall be the surviving corporation in the Merger) in accordance with the New
Mexico Business Corporation Act and the Nevada Revised Statutes. The Merger
shall become effective upon the filing with the Secretary of State of the State
of Nevada of the Articles of Merger with respect thereto. For purposes hereof,
the term "Effective Time" shall mean the time when such Articles of Merger are
filed with the Nevada Secretary of State, and the term "Surviving Corporation"
shall mean Mesa NV as the corporation surviving in the Merger which will be
governed by the laws of the State of Nevada.
(b) At the Effective Time, by virtue of the Merger, all the rights,
privileges, immunities and franchises, of a public as well as of a private
nature, of each of Mesa NM and Mesa NV and all property, real, personal and
mixed, and all debts due on whatever account, including choses in action, and
all and every other interest of or belonging to or due to each of Mesa NM and
Mesa NV shall be taken and deemed to be transferred to and vested in the
Surviving Corporation without further act or deed, and the Surviving Corporation
shall be responsible and liable for all of the liabilities and obligations of
each of Mesa NM and Mesa NV, all with the full effect provided for in the New
Mexico Business Corporation Act and the Nevada Revised Statutes.
(c) The Articles of Incorporation of Mesa NV in effect immediately prior to
the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation, until amended in accordance with the provisions thereof and the
Nevada Revised Statutes, except that the name of Mesa NV, the Surviving
Corporation, shall be changed to Mesa Air Group, Inc.
(d) The Bylaws of Mesa NV in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation, until altered, amended or
repealed.
(e) The directors of Mesa NV in office immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, until their successors
are elected in accordance with the Bylaws of the Surviving Corporation and shall
have been duly qualified.
(f) The officers of Mesa NV in office immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, holding the offices in
the Surviving Corporation which they then hold in Mesa NV, until their
successors are elected or appointed in accordance with the Bylaws of the
Surviving Corporation and shall have been duly qualified.
SECTION 2. Conversion of Stock. At the Effective Time:
SECTION 2.1. Mesa NV. (a) Each share of the Common Stock, without
par value, of Mesa NV which is issued immediately prior to the Effective
Time (whether then outstanding or held in the
A-1
<PAGE> 29
treasury of Mesa NV) shall be canceled and returned to the status of
authorized but unissued shares, without the payment of any consideration
therefor; and
(b) Each share of the Preferred Stock, without par value, of Mesa NV
which is issued immediately prior to the Effective Time (whether then
outstanding or held in the treasury of Mesa NV) shall be canceled and
returned to the status of authorized but unissued shares without the
payment of any consideration therefor.
SECTION 2.2. Mesa NM. (a) Each share of the Common Stock, without
par value, of Mesa NM which is issued immediately prior to the Effective
Time (whether then outstanding or held in the treasury of Mesa MN) shall be
changed and converted into one fully paid and non-assessable share of Mesa
NV Common Stock;
(b) Each share of the Preferred Stock, without par value, of Mesa NM
which is issued immediately prior to the Effective Time (whether then
outstanding or held in the treasury of Mesa NM) shall be changed and
converted into one fully paid and nonassessable share of Mesa NV Preferred
Stock; and
(c) Each of the outstanding stock options granted by Mesa NM which is
outstanding immediately prior to the Effective Time shall be changed and
converted into a stock option of Mesa NV.
SECTION 2.3. Stock Certificates. Each outstanding certificate that
prior to the Effective Time represented one share of either Common Stock or
Preferred Stock of Mesa NM shall be deemed for all purposes to evidence
ownership of and to represent one share of Common Stock or Preferred Stock
of Mesa NV, respectively, into which the share of Mesa NM represented by
such certificate has been converted as provided herein and shall be so
registered on the books and records of Mesa NV or its transfer agents. The
registered owner of any such outstanding stock certificate shall, until
such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to Mesa NV or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to and to
receive any dividend and other distributions upon the share of Mesa NV
evidenced by such outstanding certificate as provided above.
SECTION 3. Conditions Precedent. The obligations of the parties to effect
the Merger shall be subject to (a) the approval of this Agreement by the Board
of Directors of each of the constituent corporations and (b) the approval of
this Agreement by the affirmative vote of the holders of at least a majority of
the outstanding shares of Common Stock of each of the constituent corporations
at meetings of the stockholders duly called and held. Thereupon, Articles of
Merger shall be duly filed and recorded in both Nevada and in New Mexico.
SECTION 4. Amendment and Termination. (a) This Agreement may be amended
by the parties hereto, with the approval of their respective Boards of
Directors, at any time prior to the Effective Time, whether before or after
approval of this Agreement by the stockholders of the constituent corporations,
but, after such approval by the stockholders, no amendment shall be made which
materially adversely affects the rights of the stockholders of the constituent
corporations without further approval of such stockholders. This Agreement may
not be amended, except by an instrument in writing signed on behalf of each of
the parties hereto.
(b) This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval hereof by the stockholders of the
constituent corporations or by the Board of Directors of either Mesa NV or Mesa
NM.
(c) If this Agreement is terminated for any reason, no party hereto shall
have any liability hereunder for any nature whatsoever to the others.
SECTION 5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
SECTION 6. Further Assurances. From time to time after the Effective Time
as and when requested by the Surviving Corporation and to the extent permitted
by law, the officers and directors of each of
A-2
<PAGE> 30
Mesa NV and Mesa NM last in office shall execute and deliver such assignments,
deeds and other instruments and shall take or cause to be taken such further or
other actions as shall be necessary in order to vest or perfect in or to confirm
of record or otherwise to the Surviving Corporation title to, and possession of,
all of the assets, rights, franchises and interests of each of Mesa NV and Mesa
NM in and to every type of property (real, personal and mixed) and choses in
action, and otherwise to carry out the purposes of this Agreement, and the
proper officers and directors of the Surviving Corporation are fully authorized
to take any and all such actions in the name of Mesa NV or Mesa NM or otherwise.
SECTION 7. Execution in Counterparts. This Agreement may be executed in
two or more counterparts, which together shall constitute a single agreement.
IN WITNESS WHEREOF, Mesa NV and Mesa NM have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
MESA HOLDINGS, INC., a Nevada
corporation
By:
--------------------------------------
Larry L. Risley, Chairman of the
Board
and Chief Executive Officer
ATTEST:
- --------------------------------------
Gary E. Risley, Secretary
MESA AIR GROUP, INC., a New Mexico
corporation
By:
--------------------------------------
Larry L. Risley, Chairman of the
Board
and Chief Executive Officer
ATTEST:
- --------------------------------------
Gary E. Risley, Secretary
A-3
<PAGE> 31
APPENDIX "B"
ARTICLES OF INCORPORATION
OF
MESA HOLDINGS, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Nevada (particularly Chapter 78 of the Nevada Corporation Code and the
acts amendatory thereof and supplemental thereto) hereby certifies that:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is:
MESA HOLDINGS, INC.
SECOND: The name and street address of the registered agent of the
Corporation in the State of Nevada is Beckley, Singleton, Jemison & List,
Chartered, 530 Las Vegas Boulevard South, Las Vegas, Nevada 89101.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the laws of the State of
Nevada.
FOURTH: The Corporation is authorized to issue two classes of shares of
capital stock designated as "Common Stock" and "Preferred Stock". The total
number of shares of voting Common Stock which the Corporation shall have
authority to issue is Seventy-Five Million (75,000,000) shares, with no par
value. Each share of Common Stock issued and outstanding shall be entitled to
one vote. The total number of shares of Preferred Stock which the Corporation
shall have authority to issue is Two Million (2,000,000) shares, with no par
value. The Board of Directors may divide the shares of Preferred Stock into
classes or series and shall, by resolution, fix and determine the voting powers,
designations, preferences, limitations, restrictions, relative rights and
distinguishing designation of each class or series.
The Board of Directors shall have the right to create and issue, whether or
not in connection with the issuance and sale of any of its shares or other
securities, rights or options entitling the holders thereof to purchase from the
Corporation shares of its Common or Preferred Stock upon such terms, at such
times and at such prices as the Board of Directors may determine. Such options
or rights may be granted to officers, directors or employees of the Corporation
without requirement that the issuance thereof be approved or ratified by or in
accordance with a plan approved or ratified by the shareholders.
FIFTH: The name and the mailing address of the incorporator is as follows:
Paul R. Madden
Chapman and Cutler
Two North Central Avenue
Suite 1100
Phoenix, Arizona 85004
SIXTH: The members of the governing board shall be styled "directors." The
first Board of Directors shall consist of seven directors. The name and address
of the members of the first Board of Directors who shall serve until the first
annual meeting of Shareholders are:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- --------------------- -----------------------------
<S> <C>
Larry L. Risley 2325 E. 30th Street
Farmington, New Mexico 87401
E. Janie Risley 2325 E. 30th Street
Farmington, New Mexico 87401
Jack Braly 78805 Pina Street
LaQuinta, California 92253
</TABLE>
B-1
<PAGE> 32
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- --------------------- -----------------------------
<S> <C>
Blaine M. Jones 3405 N. Ridge Court
Farmington, New Mexico 87401
George W. Pennington 401 W. Broadway
Bloomfield, New Mexico 87413
Richard C. Poe 6501 Montana Avenue
El Paso, Texas 79925
J. Clark Stevens 2325 E. 30th Street
Farmington, New Mexico 87401
</TABLE>
Thereafter, the number of persons to serve on the Board of Directors, their
terms of office and the manner of their election shall be fixed in the manner
provided in the Bylaws.
SEVENTH: To the fullest extent allowable under the Nevada Revised Statutes,
no director or officer shall have personal liability to the Corporation or its
shareholders, or to any other person or entity, for monetary damages for breach
of his fiduciary duty as a director, except where there has been:
(a) acts or omissions which involve intentional misconduct, fraud or
knowing violation of law; or
(b) authorization of the unlawful payment of a dividend or other
distribution on the Corporation's capital stock, or the unlawful purchase
of its capital stock.
EIGHTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 78.751 of the Corporation Code of the Nevada Revised
Statutes as the same may be amended and supplemented, indemnify all persons whom
it shall have power to indemnify under such section from and against any and all
of the expenses, liabilities or other matters referred to in or covered by such
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation shall pay or otherwise advance all expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
as such expenses are incurred and in advance of the final disposition of the
action, suit or proceeding, provided that the indemnified officer or director
undertakes to repay the amounts so advanced if a court of competent jurisdiction
ultimately determines that such officer or director is not entitled to be
indemnified by the Corporation. Nothing herein shall be construed to affect any
rights to advancement of expenses to which personnel other than officers or
directors of the Corporation may be entitled under any contract or otherwise by
law.
Dated this day of March, 1996.
By
Its Incorporator
- ---------------------------------------------------------
STATE OF ARIZONA
County of Maricopa
The foregoing instrument was acknowledged before me this day of March,
1996, by Paul R. Madden.
--------------------------------------
Notary Public
My Commission Expires:
- ------------------------------------
ss.
<PAGE> 33
APPENDIX "C"
BYLAWS
OF
MESA HOLDINGS, INC.
ARTICLE I
OFFICES AND CORPORATE SEAL
1.1 Offices. The registered office of the corporation in the State of
Nevada shall be located at 530 Las Vegas Boulevard South, Las Vegas, Nevada
89101. The corporation may conduct business and may have such other offices,
either within or without the state of incorporation, as the Board of Directors
may designate or as the business of the corporation may from time to time
require.
1.2 Corporate Seal. A corporate seal is not required on any instrument
executed for the corporation. If a corporate seal is used, it shall be either a
circle having on its circumference "Mesa Holding, Inc.," and in the center
"Incorporated 1996 Nevada," or a circle having on its circumference the words
"Corporate Seal."
ARTICLE II
SHAREHOLDERS
2.1 Annual Meeting. The annual meeting of the shareholders shall be held
on March 15 of each year, beginning with the year 1996, at 10:00 o'clock a.m.,
or at such other time or on such other day as shall be fixed by the Board of
Directors, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2.2 Special Meetings. The Chairman of the Board may and the Chairman of
the Board or the Secretary shall, on written request of two members of the Board
of Directors or of shareholders owning not less than 50 percent of the
outstanding voting shares of the corporation, call special meetings of the
shareholders, for any purpose or purposes unless otherwise prescribed by
statute. The written request and the notice of the special meeting shall state
the purposes of the meeting and the business transacted at the meeting shall be
limited to the purposes stated in the notice.
2.3 Place of Meeting. The Board of Directors and the Chairman of the Board
or the Secretary shall fix the time and place of all meetings of shareholders.
2.4 Notice of Meeting. Written notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than 10 nor more than 60 days
before the date of the meeting either personally or by mail to each shareholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the shareholder at this address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
2.5 Fixing Date for Determination of Shareholders of Record. To determine
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or entitled to express written consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of shares
or for the purpose of any other lawful action, the Board of Directors of the
corporation may fix, in advance, a record date which shall not be more than 60
days nor less than 10 days before the date of such meeting, nor more than 60
days nor less than 10 days prior to any other action.
2.6 Shareholder List. The officer or agent having charge of the stock
transfer books shall prepare, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
C-1
<PAGE> 34
meeting, or any adjournment thereof, arranged in alphabetical order with the
address of and the number of shares held by each shareholder of record.
2.7 Quorum. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. All shares represented and entitled to vote on any
single subject matter which may be brought before the meeting shall be counted
for the purposes of a quorum. Only those shares entitled to vote on a particular
subject matter shall be counted for the purposes of voting on that subject
matter. Business may be conducted once a quorum is present and may continue
until adjournment of the meeting notwithstanding the withdrawal or temporary
absence of sufficient shares to reduce the number present to less than a quorum.
Unless otherwise required by law, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on a subject matter shall
constitute the act of the shareholders; provided, however, that if the shares
then represented are less than required to constitute a quorum, the affirmative
vote must be such as would constitute a majority if a quorum were present and,
provided further, that the affirmative vote of the majority of the shares then
present is sufficient in all cases to adjourn the meeting.
2.8 Proxies. At all meetings of shareholders, a shareholder may vote in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. No proxy shall be valid after six months from the
date of its execution, unless otherwise provided in the proxy, but in no event
shall the proxy be valid for greater than seven years. Subject to these
restrictions, any proxy properly created is not revoked and continues in full
force and effect until another instrument or transmission revoking it or a
properly created proxy bearing a later date is filed with or transmitted to the
Secretary.
2.9 Voting Rights. Unless otherwise provided in the Articles of
Incorporation or by the Nevada Revised Statutes, each outstanding share of
capital stock shall be entitled to one vote on each matter submitted to a vote
at a meeting of shareholders. At each election for directors every shareholder
entitled to vote at such election shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there are
directors to be elected for whose election he has a right to vote. Cumulative
voting shall not be permitted. The candidates receiving the highest number of
votes up to the number of directors to be elected are elected.
ARTICLE III
BOARD OF DIRECTORS
3.1 General Powers. The business and affairs of the corporation shall be
managed by its Board of Directors. The directors shall in all cases act as a
Board, and they may adopt such rules and regulations for the conduct of their
meetings and the management of the corporation, as they may deem proper, not
inconsistent with these Bylaws and the laws of Nevada.
3.2 Number, Tenure and Qualifications. The Board of Directors shall
consist of seven directors. Each director shall hold office until the next
annual meeting of shareholders and until his successor shall have been elected
and qualified, or until his earlier resignation or removal. Should the number of
directors be fixed at nine or more, the Board may, by resolution, classify the
Board into three classes of directors. Each class of directors shall be elected
for staggered terms so that approximately one-third of the total number of
directors shall be elected at each annual meeting. Directors need not be
residents of the State of Nevada or shareholders of the corporation.
3.3 Annual Meetings. The Board of Directors shall hold its annual meeting
immediately following the annual meeting of shareholders at the place announced
at the annual meeting of shareholders. No notice is necessary to hold the annual
meeting, provided a quorum is present. If a quorum is not present, the annual
meeting shall be held at the next regular meeting or as a special meeting.
3.4 Regular Meetings. The Board of Directors may hold regular meetings
without notice at the times and places determined by the Board of Directors.
C-2
<PAGE> 35
3.5 Special Meetings. The Chairman of the Board or Secretary may, and on
written request of two directors shall, call special meetings of the Board of
directors on not less than two days' notice to each director personally or by
telegram or telephone, or on not less than five days' notice to each director by
mail.
3.6 Telephonic Meetings. Regular or special meetings of the Board of
Directors may be held at any place within or without State of Nevada and may be
held by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other,
their participation in such a meeting to constitute presence in person.
3.7 Waiver of Notice. Attendance of a director at a meeting shall
constitute waiver of notice unless the director objects at the commencement of
the meeting that the meeting is not lawfully called or convened. Any director
may waive notice of any meeting by executing a written waiver of notice.
3.8 Quorum. A majority of the directors then serving shall constitute a
quorum for the transaction of business, but if less than said number is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice. The act of a majority of the directors
present at a meeting at which a quorum is present, unless otherwise provided by
the Nevada Revised Statutes, these Bylaws or the Articles of Incorporation,
shall be the act of the Board of Directors.
3.9 Newly Created Directorships. The Board of Directors may increase the
number of directors by a majority vote. Newly created directorships resulting
from an increase in the number of directors may be filled by a majority vote of
the directors then in office. The term of any newly created directorship shall
be determined by the Board of Directors.
3.10 Removal of Directors. At a meeting of shareholders called expressly
for that purpose and by a vote of the holders of not less than two-thirds of the
shares then entitled to vote at an election of the directors, any director or
the entire Board of Directors may be removed, with or without cause.
3.11 Vacancies. Directors shall be elected to fill any vacancy by a
majority vote of the remaining directors, though not less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his or her successor.
3.12 Committees of the Board. The Board of Directors, by resolution
adopted by a majority of the Board of Directors, may designate from among its
members an executive committee and one or more other committees each of which,
to the extent provided in such resolution and permitted by the Nevada Revised
Statutes, shall have and may exercise all the authority of the Board. The Board,
with or without cause, may dissolve any such committee or remove any member
thereof at any time. The designation of any such committee and the delegation
thereto of authority shall not operate to relieve the Board, or any member
thereof, of any responsibility imposed by law. No committee shall have the power
or authority to amend the Articles of Incorporation or Bylaws; adopt a plan of
merger or consolidation, recommend to the shareholders the sale, lease, or other
disposition of all or substantially all the property and assets of its business,
or recommend to the shareholders a voluntary dissolution of the corporation.
Each committee shall keep regular minutes of its meetings.
3.13 Action without a Meeting. Any action required or permitted to be
taken by the Board of Directors at a meeting may be taken without a meeting if
all directors consent thereto in writing. Such consent shall have the same
effect as a unanimous vote. The writing or writings shall be filed with the
minutes of the Board of Directors.
3.14 Compensation. The corporation may pay, or reimburse the directors
for, the expenses of attendance at each meeting of the Board of Directors. The
corporation may pay the directors a fixed sum for attendance at each meeting of
the Board of Directors and a stated salary as director or directors may be
granted stock options or a combination thereof. The Board of Directors shall
establish and set forth in its minutes the amount or rate of compensation of
directors.
3.15 Presumption of Assent. A director of the corporation who is present
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action
C-3
<PAGE> 36
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file a written dissent to such action with the Secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered or
certified mail to the Secretary of the Corporation within three business days
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
ARTICLE IV
OFFICERS
4.1 Number. The officers of the corporation shall be a Chairman of the
Board, a President, a Secretary, a Chief Financial Officer, and a Treasurer,
each of whom shall be appointed by the Board of Directors. Such other officers,
assistant officers and agents as deemed necessary may be elected or appointed by
the Board of Directors. Any two or more offices may be held by the same person,
except the offices of President and Secretary.
4.2 Tenure and Duties of Officers. The officers of the corporation to be
appointed by the Board of Directors at the annual meeting of the Board of
Directors. Officers shall hold office at the pleasure of the Board and shall
exercise the power and perform the duties determined from time to time by the
Board of Directors until his successor shall have been duly elected and shall
have qualified or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided.
4.3 Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed by the affirmative vote of a majority of the directors,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
4.4 Chairman of the Board. The Chairman of the Board shall be the chief
executive officer of the corporation and, subject to the control of the
directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders and of the directors and in general shall perform all duties
incident to the office of Chairman of the Board and such other duties as may be
prescribed by the directors from time to time. Unless otherwise ordered by the
Board of Directors, the Chairman of the Board shall have full power and
authority on behalf of the corporation to attend and to act and to vote at any
meeting of security holders of other corporations in which the corporation may
hold securities. At such meeting, the Chairman of the Board shall possess and
may exercise any and all rights and powers incident to the ownership of such
securities which the corporation might have possessed and exercised if it had
been present. The Board of Directors from time to time may confer similar powers
upon any other person or persons.
4.5 President. In the absence of the Chairman of the Board or in the event
of his inability or refusal to act, the President shall perform the duties of
the Chairman of the Board, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the Chairman of the Board.
4.6 Vice Presidents. There shall be as many vice presidents as the Board
of Directors chooses to appoint. Vice Presidents shall perform the duties
assigned to them by the Board of Directors of the Chairman of the Board or the
President. Any one of the vice Presidents, as authorized by the Board of
Directors, shall have all the powers and perform all the duties of President if
the President is temporarily absent or unable to act.
4.7 Secretary. The Secretary shall attend all meetings of the Board of
Directors and the shareholders and shall keep the minutes of the shareholders'
and of the directors' meetings in one or more books provided for that purpose,
see that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law, have charge of the corporate records, books, and
accounts, and keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder, have general
charge of the stock transfer books of the corporation, sign with the Chairman of
the Board certificates for shares of the corporation, and in general perform all
duties incident to the office of Secretary, and perform
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such other duties as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board.
4.8 Chief Financial Officer/Treasurer. The Chief Financial
Officer/Treasurer shall be the chief financial officer of the Corporation. If
required by the Board of Directors, the Chief Financial Officer/Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety as the directors shall determine. He shall have charge and custody of and
be responsible for all funds and securities of the corporation; receive and give
receipts for monies due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected by the Board
of Directors and in general perform all of the duties incident to the office of
Chief Financial Officer/Treasurer and such other duties as from time to time may
be assigned to him by the Chairman of the Board or by the directors.
ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
5.1 Certificates for Shares.
5.1.1 Certificates representing the shares of the corporation shall be
in such form as shall be determined by the Board of Directors. Such
certificates shall be signed by the Chairman of the Board or President and
by the Secretary or an Assistant Secretary of the corporation. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a
registrar, other than the corporation itself or an employee of the
corporation. No certificate shall be issued for any share until such share
is fully paid.
5.1.2 If the corporation is authorized to issue shares of more than
one class, every certificate representing shares issued by the corporation
shall set forth or summarize upon the face or back of the certificate, or
shall state that the corporation will furnish to any shareholder upon
request and without charge, a full statement of the designations,
preferences, limitations and relative rights of the shares of each class
authorized to be issued, together with the variations in the relative
rights and preferences between the various shares.
5.1.3 Each certificate representing shares shall state upon the face
thereof (i) that the corporation is organized under the laws of the State
of Nevada, (ii) the name of the person to whom issued, (iii) the number,
class and designation of the series, if any, which the certificate
represents, and (iv) the par value of each share represented by the
certificate or a statement that the shares are without par value; and the
(v) date of issue.
5.1.4 Any restriction on the right to transfer shares and any
reservation of lien on the shares shall be noted on the face or the back of
the certificate by providing (i) a statement of the terms of such
restriction or reservation, (ii) a summary of the terms of such restriction
or reservation and a statement that the corporation will mail to the
shareholder a copy of such restrictions or reservations without charge
within five (5) days after receipt of written notice therefor, (iii) if the
restriction or reservation is contained in the Articles of Incorporation or
Bylaws of the corporation, or in an instrument in writing to which the
corporation is a party, a statement of that effect and a statement that the
corporation will mail to the shareholder a copy of such restriction or
reservation without charge within five days after receipt of written
request therefor, or (iv) if each such restriction or reservation is
contained in an instrument in writing to which the corporation is not a
party, a statement to that effect.
5.1.5 Each certificate for shares shall be consecutively numbered or
otherwise identified.
5.2 Transfers of Shares.
5.2.1 Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to
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transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, and cancel the old certificate;
every such transfer shall be entered on the transfer book of the
corporation.
5.2.2 The corporation shall be entitled to treat the holder of record
of any shares as the holder in fact thereof, and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such
share on the part of any other person whether or not it shall have express
or other notice thereof, except as expressly provided by the laws of
Nevada.
5.3 Lost, Destroyed, Mutilated, or Stolen Certificates. The holder of any
shares of the corporation shall immediately notify the corporation of any loss,
destruction, mutilation, or theft of the certificate therefor, and the Board of
Directors, may, in its discretion, cause a new certificate or certificates to be
issued to him, in case of mutilation of the certificate, upon the surrender of
the mutilated certificate, or, in case of loss, destruction, or theft of the
certificate, upon a satisfactory proof of such loss, destruction, or theft, and,
if the Board of Directors shall so determine, the submission of a properly
executed lost security affidavit and indemnity agreement, or the deposit of a
bond in such form and in such sum, and with such surety or sureties, as the
Board may direct.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification. Every person who was or is a party or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or a person of whom he is the legal representative is or was a director or
officer of the corporation or is or was serving at the request of the
corporation or for its benefit as a director or officer of another corporation,
or as its representative in a partnership, joint venture, trust or other
enterprise, shall be indemnified and held harmless to the fullest extent legally
permissible under the general corporation law of the State of Nevada from time
to time against all expenses, liability and loss (including attorneys' fees,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The Board of Directors may
in its discretion cause the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding to be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. No such person shall be indemnified against, or be reimbursed for,
any expense or payments incurred in connection with any claim or liability
established to have arisen out of his own willful misconduct or gross
negligence. Any right of indemnification shall not be exclusive of any other
right which such directors, officers or representatives may have or hereafter
acquire and, without limiting the generality of such statement, they shall be
entitled to their respective rights of indemnification under any Bylaws,
agreement, vote of stockholders, provision of law or otherwise, as well as their
rights under this Article.
6.2 Insurance. The Board of Directors may cause the corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
6.3 Right to Amend Indemnification Provisions. The Board of Directors may
from time to time adopt further Bylaws with respect to indemnification and may
amend these and such Bylaws to the full extent permitted by the General
Corporation Law of the State of Nevada.
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ARTICLE VII
REPEAL, ALTERATION OR AMENDMENT
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted by a vote of the majority of the Board of Directors.
CERTIFICATE
I, Gary E. Risley, the duly elected, qualified and acting Secretary of Mesa
Holdings, Inc., a Nevada corporation, do hereby certify that the above and
foregoing are the Bylaws of this corporation duly and regularly adopted by the
Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand this day of March,
1996.
--------------------------------------
Secretary
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APPENDIX "D"
MESA AIR GROUP, INC.
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE OF THE PLAN; TYPE OF PLAN
(a) Attract and Retain Key Employees. The purpose of the Mesa Air Group,
Inc. Employee Stock Option Plan (the "Plan") is to attract and retain key
employees who are and will be responsible for the growth and success of Mesa Air
Group, Inc., a New Mexico corporation (the "Company"), and its subsidiaries. The
term "subsidiary" means any corporation other than the Company in an unbroken
chain of corporations beginning with the Company if, at the time of the granting
of the Option, as defined below, each of the corporations other than the last
corporation in the unbroken chain owns shares possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. The term "Employee" includes individuals employed by
the Company or any of its subsidiaries.
(b) Incentive Stock Options. Some one or more of the options granted under
the Plan may be intended to qualify as an "incentive stock option" as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
any grant of such an option shall clearly specify that such option is intended
to so qualify. If no such specification is made, an option granted hereunder
shall be intended to not qualify as an "incentive stock option."
(c) Exemption from Short-Swing Liability. Options granted to Officers or
Directors of the Company ("Insiders") pursuant to this Plan shall be exempt from
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), pursuant to Regulation sec.240.16(b)-3 adopted under the Exchange Act
which was enacted on May 1, 1991.
(d) Formula Plan. This Plan may be administered by the Board of Directors
of the Company (the "Board") or by any person or persons chosen by a majority of
the Board. Grants or awards made pursuant to this Plan are to be made pursuant
to the formula set forth in Section 3 (the "Formula") which may be adjusted for
non-Insiders at the sole discretion of the Compensation Committee. The Formula
is intended to qualify under Regulation 240.16b-3(c)(2)(ii) of the Exchange Act,
thereby alleviating the necessity for disinterested administration of the Plan
required by Regulation 240.16b-3(c)(2)(i).
2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN
(a) Description of Stock and Maximum Shares Allocated. The stock subject
to the provisions of this Plan and issuable upon exercise of the Options are
shares of the Company's Common Stock, no par value, which may be either unissued
or treasury shares, as the Board may from time to time determine. Subject to
adjustment as provided in Section 6, the aggregate number of shares of Common
Stock covered by the Plan issuable upon exercise of all Options shall be
10,000,000 shares, which shares shall be reserved for use upon the exercise of
the Options. The shares available for Options and all other shares of Common
Stock of the Company shall be referred to as the "Shares".
(b) Restoration of Unpurchased Shares. If an Option expires or terminates
for any reason prior to the exercise in full before the term of the Plan
expires, the Shares subject to, but not issued under, such Option shall again be
available for other Options hereafter granted.
3. FORMULA AND OPERATION OF THE PLAN
(a) Eligible Persons. Unless otherwise directed by the Compensation
Committee, Options shall be granted to the persons who fill each of the
positions listed on Schedule "A" attached hereto (all parties listed on Schedule
"A" shall be referred to herein as "Key Employees"). However, Options shall
automatically be granted to the Insiders listed on Schedule "A".
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(b) Date of Grants; Allotment. Adjustment.
(1) Options shall be granted to each Key Employee of the Company on
June 28, 1995 and on April 1 of each year thereafter according to the
amounts set forth on Schedule "B" attached hereto. If a Key Employee is
employed by the Company after June 28, 1995, Key Employee shall, upon the
first day of employment, be granted a pro rata portion of the Options as
set forth in the column labeled "April 1, 1996 and Following Years" shown
on Schedule "B" (collectively, the "Pro Rata Options") and Options shall be
granted to such Key Employee on each succeeding April 1 in the amounts set
forth in Schedule "B." The amount of Pro Rata Options to be granted to each
Key Employee shall be calculated by dividing the number of days prior to
April 1 by the number of days in the calendar year and multiplying the
quotient by the number of Options listed in Schedule "B" to be allotted to
that Key Employee.
(2) Notwithstanding any language to the contrary contained herein,
other than Options granted to Insiders pursuant to Section 3(b)(1) above,
the Compensation Committee shall have full and complete discretion to
decrease the amount of Options allocated to Key Employees from the amount
set forth in Schedule "B" and such amounts are set forth only as maximum
allocations permitted by the Plan.
(c) Price. The Option price per share shall not be less than the fair
market value of the Shares, as defined below, on the Grant Date.
(d) Fair Market Value. The fair market value of a Share on any particular
day shall be determined as follows:
(1) If the Shares are listed or admitted to trading on any securities
exchange, the fair market value shall be the average sales price on such
day on the New York Stock Exchange, or if the Shares have not been listed
or admitted to trading on the New York Stock Exchange, on such other
securities exchange on which such stock is then listed or admitted to
trading, or if no sale takes place on such day on any such exchange, the
average of the closing bid and asked price on such day as officially quoted
on any such exchange;
(2) If the Shares are not then listed or admitted to trading on any
securities exchange, the fair market value shall be the average sales price
on such day or, if no sale takes place on such day, the average of the
reported closing bid and asked price on such date, in the over-the-counter
market as furnished by the National Association of Securities Dealers
Automated Quotation ("NASDAQ"), or if NASDAQ at the time is not engaged in
the business of reporting such prices, as furnished by any similar firm
then engaged in such business and selected by the Board; or
(3) If the Shares are not then listed or admitted to trading in the
over-the-counter market, the fair market value shall be the amount
determined by the Board in a manner consistent with Treasury Regulation
Section 20-2031-2 promulgated under the Code or in such other manner
prescribed by the Secretary of the Treasury or the Internal Revenue
Service.
(e) Duration of Plan. The term of the Plan, unless previously terminated
by the Board, is ten years or August 1, 2005. No Option shall be granted under
the Plan unless granted within ten years after the adoption of the Plan by the
Board, but Options outstanding on that date shall not be terminated or otherwise
affected by virtue of the Plan's expiration.
(f) Vesting of the Options and Pro Rata Options. One-third of the total
Options granted on a Grant Date shall vest on the first anniversary date after
the Grant Date; one-third of the total Options granted on a Grant Date shall
vest on the second anniversary date after the Grant Date; and the remaining
one-third of the total Options granted on a Grant Date shall vest on the third
anniversary date after the Grant Date. One-third of the total Pro Rata Options
shall vest on the first April 1 after their Grant Date (the "Initial Vesting
Date"); one-third of the total Pro Rata Options shall vest on the first
anniversary date after the Initial Vesting Date; and the remaining one-third of
the total Pro Rata Options shall vest on the second anniversary date after the
Initial Vesting Date. However, Pro Rata Options granted to Insiders on or after
October 1 and prior to April 1 in any year shall not vest until the second April
1 following the Grant Date at which time two-thirds of the total Pro Rata
Options shall vest and the remaining one-third of the total Pro Rata Options
shall vest on the first anniversary date thereafter.
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NOTWITHSTANDING ANY LANGUAGE TO THE CONTRARY, OPTIONS GRANTED TO THE KEY
EMPLOYEES SHALL NOT BECOME EXERCISABLE UNTIL SHAREHOLDER APPROVAL AS REQUIRED BY
SECTION 4(A) OF THE PLAN HAS BEEN OBTAINED; AND OPTIONS GRANTED TO INSIDERS
SHALL NOT BECOME EXERCISABLE UNTIL (I) A MINIMUM OF SIX (6) MONTHS HAS PASSED
FROM THE DATE OF SHAREHOLDER APPROVAL, OR (II) A MINIMUM OF ONE (1) YEAR HAS
PASSED FROM THE GRANT DATE, WHICHEVER OCCURS LATER.
(g) Additional Restrictions on Option Exercise. A Key Employee may only
exercise Options during the period commencing three days following the release
for publication of quarterly or annual financial information regarding the
Company and ending two weeks prior to the end of the then current fiscal quarter
of the Company.
This condition shall be deemed to be satisfied if the specified financial
data appears:
(1) On a wire service;
(2) A financial news service;
(3) In a newspaper of general circulation; and
(4) Is otherwise made publicly available, and shall remain in effect
so long as it does not violate the law or any rule or regulation
adopted by the appropriate governmental authority.
4. TERMS AND CONDITIONS OF OPTIONS
(a) Approval by Shareholders. The Plan shall be submitted to the
shareholders of the Company for their approval at their regular meeting to be
held within twelve (12) months after the adoption of the Plan by the Board.
Shareholder approval shall be evidenced by the affirmative vote of the holders
of a majority of the Shares of Common Stock present in person or by proxy and
voting at the meeting. If the shareholders decline to approve the Plan at such
meeting or if the Plan is not approved by the shareholders within twelve (12)
months after its adoption by the Board, the Plan and all Options and rights
granted hereunder shall automatically terminate to the same extent and with the
same effect as though the Plan had never been adopted.
(b) Amendments to Plan. The approval of the shareholders of the Company
shall be required to (i) increase the aggregate number of shares of Common Stock
subject to the Plan; (ii) change the class of persons eligible to receive
Options; (iii) modify the period within which Options may be granted, the
exercise price or the terms upon which Options may be exercised, or (iv)
increase the material benefits accruing to participants under the Plan.
(Collectively, each of these changes in the Plan are referred to herein as
"Material Amendments.") Notwithstanding any other terms contained herein to the
contrary, no Material Amendments shall be made to the Plan more than one time in
any given one year period. The Board, however, may suspend or terminate the Plan
at any time.
(c) Individual Agreements. Options granted under the Plan shall be
evidenced by agreements in such form as the Board from time to time approves,
which agreements shall substantially comply with and be subject to the terms of
the Plan.
(d) Required Provisions. Each agreement shall state (i) the total number
of shares to which it pertains, (ii) the exercise price for the shares covered
by the option, (iii) the time at which the option becomes exercisable, (iv) the
scheduled expiration date of the option, (v) the vesting period(s) for such
options, and (vi) the timing and conditions of issuance of any stock option
exercise.
(e) No Fractional Shares. Options shall be granted and exercisable only
for whole shares; no fractional shares will be issuable upon exercise of any
Option granted under the Plan. Fractional Options shall be rounded down to the
nearest whole share number.
(f) Method of Exercising Options. Options shall be exercised by written
notice to the Company, addressed to the Company at its principal place of
business. Such notice shall state the election to exercise the
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option and the number of shares with respect to which it is being exercised, and
shall be signed by the person exercising the option. Such notice shall be
accompanied by payment in full of the exercise price for the number of Shares
being purchased. Payment may be made in cash or by bank cashier's check or by
tendering duly endorsed certificates for shares of the Company's Common Stock
then owned by the optionholder. The Company shall deliver a certificate or
certificates representing the Option Shares to the purchaser as soon as
practicable after payment for those Shares has been received. If an Option is
exercised by any person other than the optionholder, such notice shall be
accompanied by appropriate proof of the right of such person to exercise the
Option. All Shares that are purchased and paid for in full upon the exercise of
an Option shall be fully paid and non-assessable. The Board may determine that
payment upon the exercise of an Option may be made with Shares owned by the Key
Employee having a fair market value on the exercise date equivalent to the
amount of payment, or any combination of cash and such Shares equal to such
amount.
(g) No Rights of a Shareholder. An optionholder shall have no rights as a
shareholder with respect to shares covered by an Option. No adjustment will be
made for cash dividends for which the record date is prior to the date a stock
certificate is issued upon exercise of an Option. Upon such exercise of an
Option, the holder of the Shares of Common Stock so received shall have all the
rights of a shareholder of the Company as of the date of issuance.
(h) Compliance with Law. No Shares shall be issued or transferred upon the
exercise of any Option unless and until the following occurs:
(1) All legal requirements applicable to the issuance or transfer of
Shares have been complied with; and
(2) All requirements of any national securities exchange or
association upon which the Shares are listed, traded or quoted have been
met, in each case to the satisfaction of the Board. The Board shall have
the right to condition the issuance of any Shares made to any person
hereunder on such person's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such Shares as the
Board shall deem necessary or advisable as a result of any applicable law,
regulation or official interpretation thereof, and certificates
representing such shares may be legend to reflect any such restriction.
5. TERMINATION OF EMPLOYMENT; ASSIGNABILITY; DEATH
(a) Termination of Employment. If any optionholder ceases to be an
employee of the Company other than for Retirement (as such is defined in Section
5(b)), death, disability or discharge for cause, such holder (or his successors
in the case of the holder's death after the termination of employment) may,
within three months after the date of termination, but in no event after the
stated expiration date, purchase some or all of the Shares with respect to which
such optionholder was entitled to exercise such Option on the date employment
terminated; provided, that (i) if the holder's employment is terminated for
dishonesty or other acts detrimental to the Company's interests or for the
holder's breach of any employment, confidentiality or other contract or
agreement with the Company, or (ii) if after employment is terminated, the
holder commits acts detrimental to the Company's interests, then the Option
shall thereafter be void for all purposes.
(b) Retirement. If any optionholder (i) ceases to be an employee of the
Company other than for death, disability or discharge for cause; and (ii) has
been continuously employed by the Company for five or more years; and is (iii)
over fifty-nine and one-half (59 1/2) years of age (collectively referred to as
"Retirement"), all of the options which have been granted to such optionholder
prior to Retirement shall vest thirty (30) days after Retirement (the "Vested
Options"). Such holder (or his successors in the case of the holder's death
after Retirement) may, within three months after the date of Retirement or prior
to the stated expiration date, whichever first occurs, purchase some or all of
the Shares which such optionholder was entitled to exercise; provided, that (i)
if the holder's employment is terminated for dishonesty or other acts
detrimental to the Company's interests or for the holder's breach of any
employment, confidentiality or other contract or agreement with the Company, or
(ii) if after employment is terminated, the holder commits acts detrimental to
the Company's interests, then the Option shall thereafter be void for all
purposes.
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(c) Assignability. No Option or the privileges conferred thereby shall be
assignable or transferable by a holder other than by will or the laws of descent
and distribution.
(d) Disability. If the optionholder is removed as an employee due to
disability, the optionholder may exercise the Options, in whole or in part, to
the extent they were exercisable on the date when the optionholder's employment
terminated, at any time prior to the expiration date of the Options or within
one year of the date of removal, whichever is earlier.
(e) Discharge for Cause. If an optionholder is removed as an employee of
the Company for cause, the Options shall terminate upon receipt by the
optionholder of a notice of such removal or on the effective date of the
removal, whichever is earlier. The Board shall have the right to determine
whether the optionholder has been discharged for cause for purposes of the Plan
and the date of such discharge.
(f) Death of Holder. If optionholder dies while serving as an employee, an
Option shall be exercisable until the stated expiration date thereof by the
person or persons ("successors") to whom the holder's rights pass under will or
by the laws of descent and distribution, but only to the extent that the holder
was entitled to exercise the Option at the date of death. An Option may be
exercised (and payment of the option price made in full) by the successors only
after written notice to the Company, specifying the number of shares to be
purchased. Such notice shall comply with the provisions of Section 4(e).
6. CERTAIN ADJUSTMENTS
(a) Capital Adjustments. Except as limited by Section 422 of the Code, the
aggregate number of Shares subject to the Plan, the number of Shares covered by
outstanding Options, and the price per share stated in such Options shall be
proportionately adjusted for any increase or decrease in the number of
outstanding Shares of Common Stock of the Company resulting from a subdivision
or consolidation of shares or any other capital adjustment or the payment of a
stock dividend or any other increase or decrease in the number of such shares
effected without receipt by the Company of consideration therefor in money,
services or property.
(b) Mergers, Etc. Except as limited by the provisions of Section 422 of
the Code, if the Company is the surviving corporation in any merger or
consolidation, any Option granted under the Plan shall pertain to and apply to
the securities to which a holder of the number of Shares subject to the Option
would have been entitled. A dissolution or liquidation of the Company shall
cause every Option outstanding hereunder to terminate, unless specifically
provided otherwise by the Board. A merger or consolidation in which the Company
is not the surviving corporation shall also cause every Option outstanding
hereunder to terminate, unless specifically provided otherwise by the Board, but
each holder shall have the right immediately prior to a merger or consolidation
in which the Company is not the surviving corporation, to exercise such Option
in whole or in part without regard to whether such Options have vested.
7. COMPLIANCE WITH LEGAL REQUIREMENTS
If, at the time of exercise of this option, there is not in effect as to
the Option Shares being purchased a registration statement under the Securities
Act of 1933, as amended (or any successor statute) (collectively the "1933
Act"), then the exercise of this option shall be effective only upon receipt by
the Company from the Grantee (or his legal representatives or heirs) of a
written representation that the Option Shares are being purchased for investment
and not for distribution.
The Grantee hereby agrees to supply the Company with such information and
to cooperate with the Company, as the Company may reasonably request, in
connection with the preparation and filing of the registration statements and
amendments thereto under the 1933 Act and applicable state statutes and
regulations applicable to the Option Shares. The Company shall not be liable for
failure to issue any such Option Shares where such opinion of counsel cannot be
obtained within the period specified for the exercise of the option, or where
such registration is required in the opinion of counsel. If shares of common
stock of the Company are, at the time of the exercise of this option, listed
upon a securities exchange, the exercise of this
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option shall be contingent upon completion of the necessary steps to list the
Option Shares being purchased upon such securities exchange.
8. MISCELLANEOUS
(a) No Funding. This Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure any payment under the Plan.
(b) New Mexico Law. The Plan and the Options shall be governed by the laws
of the State of New Mexico.
(c) Modification of Grant, Vesting Date. Should April 1 in any given year
fall on a day on which trading in the Shares is closed, the action which would
have taken place on April 1 shall be delayed until the first day after April 1
that trading in the Shares commences.
DATED as of the 25th day of August, 1995 and effective as of June 28, 1995.
MESA AIR GROUP, INC.
By:
--------------------------------------
ATTESTED BY:
By:
- ----------------------------------------------------
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<PAGE> 46
SCHEDULE "A"
KEY EMPLOYEE POSITIONS
MESA AIR GROUP, INC.:
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Chief Legal Officer
Vice President Airline Operations
Vice President Safety
Vice President Maintenance
Vice President Planning/Pricing
Vice President Corporate Communications
Corporate Controller
Director, Information Systems
Tax Manager
Director, Corporate Accounting
Director, Revenue Accounting (Vacant)
Corporate Accountant
Special Projects Manager
Manager, Planning/Pricing
>$150 MILLION DIVISION/SUBSIDIARY:
President
Vice President
Controller
$100 MILLION DIVISION/SUBSIDIARY:
President
Vice President
Controller
<$100 MILLION DIVISION/SUBSIDIARY:
President
Vice President
Controller
D-7
<PAGE> 47
SCHEDULE "B"
<TABLE>
<CAPTION>
APRIL 1, 1996
AND
JUNE 28, 1995 FOLLOWING YEARS
POSITION OPTION AMOUNTS OPTION AMOUNTS
------------------------------------------------------ -------------- ----------------
<S> <C> <C>
MESA AIR GROUP, INC.:
Chief Executive Officer............................... 300,000 150,000
Chief Operating Officer............................... 160,000 80,000
Chief Financial Officer............................... 100,000 50,000
Chief Legal Officer................................... 100,000 50,000
Vice President Operations............................. 50,000 25,000
Vice President Safety................................. 50,000 25,000
Vice President Maintenance............................ 50,000 25,000
Vice President Planning/Pricing....................... 20,000 10,000
Vice President Corporate Communications............... 20,000 10,000
Corporate Controller.................................. 10,000 5,000
Director, Information Systems......................... 10,000 5,000
Tax Manager........................................... 5,000 2,500
Director, Corporate Accounting........................ 5,000 2,500
Director, Revenue Accounting.......................... 5,000 2,500
Corporate Accountant.................................. 5,000 2,500
Special Projects Manager.............................. 5,000 2,500
Manager, Planning/Pricing............................. 5,000 2,500
>$150 MILLION DIVISION/SUBSIDIARY:
President............................................. 40,000
Vice President........................................ 10,000
Controller............................................ 2,500
$100 MILLION DIVISION/SUBSIDIARY:
President............................................. 25,000
Vice President........................................ 7,500
Controller............................................ 2,500
<$100 MILLION DIVISION/SUBSIDIARY:
President............................................. 20,000
Vice President........................................ 5,000
Controller............................................ 2,500
</TABLE>
D-8
<PAGE> 48
PROXY
MESA AIR GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, MARCH 15, 1996
The undersigned hereby appoints Larry L. Risley and Gary E. Risley as
proxies with full power of substitution to represent the undersigned and to vote
all shares of Common Stock of Mesa Air Group, Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
on March 15, 1996 or any adjournments thereof.
1. Election of seven Directors to serve until the next annual Meeting of
Shareholders and until their successors are elected and shall duly qualify:
<TABLE>
<CAPTION>
WITHHOLD
FOR AGAINST AUTHORITY
---------- ---------- ----------
<S> <C> <C> <C>
Larry L. Risley
-------- -------- --------
E. Janie Risley
-------- -------- --------
Blaine M. Jones
-------- -------- --------
George W. Pennington
<CAPTION>
WITHHOLD
FOR AGAINST AUTHORITY
---------- ---------- ----------
<S> <C> <C> <C>
-------- -------- --------
Richard C. Poe
-------- -------- --------
Jack Braly
-------- -------- --------
J. Clark Stevens
-------- -------- --------
</TABLE>
2. PROPOSAL to approve and adopt the Agreement and Plan of Merger between the
Company and Mesa Holdings, Inc.
FOR AGAINST ABSTAIN
3. PROPOSAL to approve the Company's Omnibus Plan.
FOR AGAINST ABSTAIN
4. PROPOSAL to ratify the selection of KPMG Peat Marwick LLP as independent
auditors for fiscal 1996.
FOR AGAINST ABSTAIN
<PAGE> 49
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournments
thereof.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES TO THE BOARD OF DIRECTORS AND FOR THE ADOPTION OF
PROPOSALS 2, 3 AND 4.
MESA'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES TO THE BOARD OF DIRECTORS, "FOR" PROPOSAL 2 TO MERGE THE COMPANY
WITH MESA HOLDINGS, INC., "FOR" PROPOSAL 3 TO APPROVE THE COMPANY'S OMNIBUS
PLAN AND "FOR" PROPOSAL 4 TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS FOR FISCAL 1996.
Please sign exactly as name appears on the mailing label. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
Dated:
-----------------------------------
-----------------------------------
Signature
-----------------------------------
Signature, if held jointly
(If a corporation, please sign in
full corporate name by President or
other authorized officer. If a
partnership, please sign in the
partnership name by an authorized
person.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY BY USING THE ENCLOSED
ENVELOPE.
<PAGE> 50
[STATIONERY OF THE CHAIRMAN OF THE BOARD]
MESA AIR GROUP, INC.
2325 EAST 30TH STREET
FARMINGTON, NEW MEXICO 87401
January , 1996
Dear Shareholder:
Enclosed you will find the notice of the Annual Meeting of Shareholders of
Mesa Air Group, Inc. (the "Company") to be held on Friday, March 15, 1996 at
10:00 a.m. at 4601 College Boulevard, Room 9010 of the Henderson Fine Arts
Building, San Juan College in Farmington, New Mexico. At the Annual Meeting you
will be asked:
1. To elect seven directors of the Company to serve until the next
Annual Meeting of Shareholders.
2. To approve and adopt an Agreement and Plan of Merger providing for
the merger of the Company into a newly formed Nevada corporation for
purposes of changing the state of incorporation of the Company from New
Mexico to Nevada.
3. To approve the Company's new Compensation Plan and new Employee
Stock Option Plan (collectively the "Omnibus Plan").
4. To ratify the selection of KPMG Peat Marwick LLP as independent
auditors for the Company during fiscal 1996.
5. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
Each of the proposals is more fully described in the accompanying Proxy
Statement which I urge you to read carefully. The Board of Directors has
unanimously approved and recommends a vote "FOR" each of the proposals.
One of the proposals you are being asked to approve is the proposal to
change the state of incorporation of the Company from New Mexico to Nevada. The
primary purpose of this reincorporation is to enable the Company to realize
savings in state taxes. You are also being asked to approve the Omnibus Plan, a
salary-based plan which includes a new Employee Stock Option Plan and a
Compensation Plan. The Omnibus Plan, upon approval by the shareholders, will
replace the Company's existing compensation plans including the Management
Incentive Plan which has, since 1988, provided cash bonuses to key employees
based on pre-tax profitability of the Company as a whole. The Board of Directors
believes that because compensation awarded pursuant to the Omnibus Plan is
directly related to the growth in earnings per share and to the appreciation of
the Common Stock of the Company that it will provide a more equitable
alternative to the cash bonuses based on pre-tax profitability heretofore paid
under the Management Incentive Plan.
Our agenda for the Annual Meeting will also include presentations on the
past accomplishments and future objectives of the Company.
<PAGE> 51
It is important that your shares be represented at the Annual Meeting.
Whether or not you attend personally, I urge you to sign, date and return the
enclosed Proxy at your earliest convenience.
Kindest regards,
By
------------------------------------
Larry L. Risley, Chairman of the
Board
and Chief Executive Officer
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY
