SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of Securities Exchange Act of 1934
For the quarter ended March 31, 1998
Commission File Number 0-15495
Mesa Air Group, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 85-0302351
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3753 Howard Hughes Parkway, Suite 200, Las Vegas 89109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 892-3773
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No
On May 4, 1998 the Registrant had outstanding 28,327,917 shares of Common Stock.
1
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PART I. FINANCIAL INFORMATION
Item 1.
MESA AIR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
----------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger $ 115,769 $ 123,037 $ 237,835 $ 241,912
Freight and other 3,864 2,373 6,357 4,909
----------------- ----------------- ---------------- -----------------
Total operating revenues 119,633 125,410 244,192 246,821
----------------- ----------------- ---------------- -----------------
Operating expenses:
Flight operations 47,765 45,705 95,729 87,683
Maintenance 23,604 21,482 46,531 42,775
Aircraft and traffic servicing 21,706 21,409 43,452 41,806
Promotion and sales 16,737 17,984 35,237 35,576
General and administrative 7,463 5,778 15,526 12,736
Depreciation and amortization 7,305 8,482 14,548 17,025
Other operating items 6,500 -- 40,443 --
----------------- ----------------- ---------------- -----------------
Total operating expenses 131,080 120,840 291,466 237,601
----------------- ----------------- ---------------- -----------------
Operating income (loss) (11,447) 4,570 (47,274) 9,220
----------------- ----------------- ---------------- -----------------
Non-operating income (expenses):
Interest expense (6,809) (6,897) (13,043) (13,593)
Interest income 268 503 863 1,045
Other 8,701 205 8,565 277
----------------- ----------------- ---------------- -----------------
Total non-operating income
(expense) 2,160 (6,189) (3,615) (12,271)
----------------- ----------------- ---------------- -----------------
Loss before income taxes (9,287) (1,619) (50,889) (3,051)
Income tax benefit -- (630) (2,511) (1,186)
----------------- ----------------- ---------------- -----------------
Net loss $ (9,287) $ (989) $ (48,378) $ (1,865)
================= ================= ================ =================
Average common and common equivalent
shares outstanding used in basic and
diluted computations 28,304 28,265 28,299 28,263
================= ================ ================= =================
Net loss per common and common equivalent
share, basic and diluted $ (0.33) $ (0.03) $ (1.71) $ (0.07)
================= ================= ================ =================
</TABLE>
2
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31 September 30
1998 1997
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,594 $ 57,232
Marketable securities -- 8,690
Receivables, principally traffic 47,268 53,852
Income tax refund receivable 7,349 6,999
Expendable parts and supplies, net 30,769 31,377
Prepaid expenses and other current assets 8,906 8,553
------------------ ------------------
Total current assets 134,886 166,703
Property and equipment, net 433,112 440,890
Lease and equipment deposits 11,671 10,354
Intangibles, net 21,350 22,071
Other assets 7,429 9,848
------------------- -----------------
Total assets $ 608,448 $ 649,866
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital leases $ 16,781 $ 31,786
Accounts payable 13,430 21,884
Air traffic liability 11,420 6,785
Accrued compensation 6,779 7,025
Other accrued expenses 37,528 30,662
------------------- ------------------
Total current liabilities 85,938 98,142
Long-term debt and capital leases, excluding current portion 329,809 338,199
Deferred credits and other liabilities 66,679 34,837
Deferred income taxes -- 1,600
Stockholder's equity:
Preferred stock of no par value, 2,000,000 shares
Authorized; no shares issued and outstanding -- --
Common stock of no par value, 75,000,000 shares authorized;
28,327,917 and 28,294,584 shares issued and outstanding 101,626 101,361
Retained earnings 24,396 72,686
Unrealized gain on marketable securities, net -- 3,041
-------------------- -----------------
Total stockholders' equity 126,022 177,088
-------------------- -----------------
Total liabilities and stockholders' equity $ 608,448 $ 649,866
==================== =================
</TABLE>
3
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended March 31
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (48,378) $ (1,865)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization 15,196 17,025
Provision for other operating items 40,443 --
Amortization of deferred credits (11,177) (846)
Stock bonus plan -- 348
Provision for doubtful accounts 1,012 --
Gain on sale of securities (4,544) --
Other 859 --
Changes in assets and liabilities:
Receivables 5,572 (9,187)
Expendable parts and supplies 608 (526)
Prepaid expenses and other current assets (353) (3,116)
Accounts payable (8,454) 4,403
Other accrued liabilities 10,036 (6,541)
------------------ ------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES: 820 (305)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,443) (4,198)
Proceeds from sale of property and equipment -- 1,803
Proceeds from sale of marketable securities 11,102 1,000
Other assets 2,419 5,027
Lease and equipment deposits (1,317) (900)
------------------ ------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES: 5,761 2,732
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and obligations
under capital leases (23,484) (8,826)
Proceeds from issuance of common stock 265 122
Proceeds from deferred credits -- 409
------------------ ------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES: (23,219) (8,295)
------------------ ------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS: (16,638) (5,868)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 57,232 54,720
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 40,594 $ 48,852
================== ==================
</TABLE>
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Month Period Ended March 31
Supplemental disclosures of cash flow information:
1998 1997
------------------- --------------------
Cash paid during the period for:
Interest $ 13,118 $ 13,593
ncome taxes -- 1,241
Mesa did not purchase any property or equipment upon which debt was assumed
during the six-month period ended March 31, 1998. Mesa purchased property and
equipment totaling approximately $37.0 million upon which debt of approximately
$36.4 million was assumed in the six-month period ended March 31, 1997.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended March
31, 1998 are not necessarily indicative of the results that may be
expected for the year ending September 30, 1998.
These condensed consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and
footnotes included in the annual report for the year ended September 30,
1997.
2. The condensed consolidated financial statements include the accounts of
Mesa Air Group, Inc. and its wholly owned subsidiaries Mesa Airlines,
Inc., WestAir Holding, Inc., Air Midwest, Inc., Mesa Leasing, Inc., MAGI
Insurance, Ltd., MPD, Inc., and FCA, Inc. All significant intercompany
balances and transactions have been eliminated in consolidation. See
discussion of WestAir Holding, Inc. in the "Liquidity and Capital
Resources" section of this report.
3. Income tax benefit in the six-month period ended March 31, 1998 has been
recognized only to the extent of previously recorded deferred tax
liability.
4. The Company recorded a provision of $4.0 million in the quarter ended
March 31, 1998 to recognize the discontinuation of service of its
independent jet operations in Ft. Worth, Texas.
5. On March 13, 1998, April 1, 1998, and April 13, 1998, the Company issued
options, subject to shareholder approval, to purchase approximately
1,630,000 shares of common stock to key employees, senior officers and
directors of the Company at fair market value on the date of the grant.
Generally accepted accounting principles provide that any increase in the
fair market value of the underlying common stock at the date of grant of
the stock option and the date of subsequent approval by the shareholders,
be recognized as compensation expense over the vesting period in the
Company's statement of operations.
6. Legal Proceedings:
See, "Part II., Item 1."
6
<PAGE>
Item 2.
MESA AIR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Mesa Air Group, Inc. and its subsidiaries (collectively referred to herein as
"Mesa" or the "Company") is a regional airline operating as America West
Express, Mesa Airlines, US Airways Express and, through May 31, 1998, United
Express (see, "Other Events--United Airlines") serving 127 cities in 29 states,
Canada and the District of Columbia. At March 31, 1998, Mesa had a fleet of 192
aircraft with approximately 1,500 daily departures. After cessation of United
Express service on May 31, 1998, the Company will be providing service to 110
cities in 28 states, Canada, and the District of Columbia with approximately
1,000 daily departures and will utilize approximately 114 aircraft.
Mesa's long-term strategy is to profitably service routes not directly served by
major air carriers and to supplement service of major carrier code partners on
certain routes. The Company evaluates market demand and utilizes its fleet of
aircraft to meet that demand. Code-sharing agreements with certain of the major
air carriers provide benefits from the name recognition, reservation systems,
marketing and promotional efforts of those carriers. Mesa operates a fleet of
new and efficient aircraft and performs much of its own maintenance and overhaul
work.
Historically, the Company has relied on generating most of its revenues by use
of a "through fare" arrangement with its major code-sharing partners. A "through
fare" is a combined fare offered to passengers who connect to Mesa from a major
code-sharing partner and vice versa. Mesa is paid a pro rata portion of the
"through fare." As an alternative to the "through fare" arrangements, the
Company, in certain markets, has utilized fee per departure arrangements. A fee
per departure arrangement allows the Company to obtain a fee based on a
proprietary formula for each flight operated. The Company seeks to obtain fee
per departure arrangements in those markets which it deems the arrangement more
favorable than a "through fare."
The following tables set forth year-to-year comparisons for the periods
indicated below:
OPERATING DATA
--------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Passengers 1,443,399 1,557,497 3,043,009 3,117,982
Available seat miles (000) 629,313 600,517 1,262,426 1,189,659
Revenue passenger miles (000) 326,653 328,201 681,126 655,689
Load factor 51.9% 54.7% 54.0% 55.1%
Yield per revenue passenger mile 35.4(cent) 37.5(cent) 34.9(cent) 36.9(cent)
Revenue per available seat mile 19.0(cent) 20.9(cent) 18.8(cent) 20.3(cent)
Operating cost per available seat mile 20.8(cent) 20.1(cent) 23.1(cent) 20.0(cent)
Average stage length (miles) 185 170 184 170
Number of aircraft in fleet 192 185 192 185
Gallons of fuel consumed (000) 18,966 18,155 37,596 36,657
Block hours flown 134,961 140,217 272,430 276,379
Departures 134,700 148,400 273,267 294,467
</TABLE>
7
<PAGE>
FINANCIAL DATA
--------------
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998 Versus Three Months Ended March 31, 1997
- --------------------------------------------------------------------------
Three Months Ended March 31
------------------------------------------------------------------------------
1998 1997
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Cost per Percent of total Cost per Percent of total
ASM operating revenues ASM operating revenues
--------------- --------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Flight operations 7.6(cent) 39.9% 7.5(cent) 36.5%
Maintenance 3.7(cent) 19.7% 3.6(cent) 17.1%
Aircraft and traffic servicing 3.4(cent) 18.2% 3.6(cent) 17.1%
Promotion and sales 2.7(cent) 14.0% 3.0(cent) 14.3%
General and administrative 1.2(cent) 6.3% 1.0(cent) 4.6%
Depreciation and amortization 1.2(cent) 6.1% 1.4(cent) 6.8%
Other operating items 1.0(cent) 5.4% -- --
--------------- --------------------- --------------- ---------------------
Total operating expenses 20.8(cent) 109.6% 20.1(cent) 96.4%
Interest expense 1.1(cent) 5.7% 1.1(cent) 5.5%
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended March 31, 1998 Versus Six Months Ended March 31, 1997
- ----------------------------------------------------------------------
Six Months Ended March 31
------------------------------------------------------------------------------
1998 1997
------------------------------------------------------------------------------
Cost per Percent of total Cost per Percent of total
ASM operating revenues ASM operating revenues
--------------- --------------------- --------------- ---------------------
<S> <C> <C> <C> <C>
Flight operations 7.6(cent) 39.2% 7.4(cent) 35.6%
Maintenance 3.7(cent) 19.1% 3.6(cent) 17.3%
Aircraft and traffic servicing 3.4(cent) 17.8% 3.5(cent) 16.9%
Promotion and sales 2.8(cent) 14.4% 3.0(cent) 14.4%
General and administrative 1.2(cent) 6.4% 1.1(cent) 5.2%
Depreciation and amortization 1.2(cent) 6.0% 1.4(cent) 6.9%
Other operating items 3.2(cent) 16.5% -- --
--------------- --------------------- --------------- ---------------------
Total operating expenses 23.1(cent) 119.4% 20.0(cent) 96.3%
Interest expense 1.0(cent) 5.3% 1.1(cent) 5.5%
</TABLE>
8
<PAGE>
OPERATIONS
Operating Revenues:
Operating revenues decreased by $5.8 million to $119.6 million in the quarter
ended March 31, 1998 from $125.4 million in the quarter ended March 31, 1997.
The revenue decrease was primarily due to a 7.3% decrease in passengers carried.
Although available seat miles ("ASMs") increased by 4.8%, the load factor
decreased from 54.7% during the March 31, 1997 quarter to 51.9% for the current
quarter. The primary reason for the decrease in load factor was low load factors
in the Company's independent jet operations in Ft. Worth, Texas. The independent
jet operation was discontinued in February 1998 (See, "Other Events--Independent
Jet Operation").
Operating revenues decreased by $2.6 million to $244.2 million for the six-month
period ended March 31, 1998 from $246.8 million for the six-month period ended
March 31, 1997. This decrease was primarily due to the decrease in the number of
passengers carried in this period as compared to the six months ended March 31,
1997, as explained above.
Operating Expenses:
Flight Operations:
- ------------------
Flight operations costs increased by $2.1 million to $47.8 million for the
quarter ended March 31, 1998 from the quarter ended March 31, 1997 and increased
by $8.0 million to $95.7 million for the six-month period ended March 31, 1998
from the six-month period ended March 31, 1997. The primary causes of the
increase over the quarter ended March 31, 1998 were a $2.3 million increase in
pilot training, costs mostly related to deployment of Canadair Regional Jet
("CRJ") aircraft into the Company's fleet, a $0.6 million increase in pilot
salaries, a $0.6 million increase in pilot travel and lodging expenses, a $0.2
million increase in dispatch costs, and a $0.3 million increase in flight
attendant costs. These increases were partially offset by a fuel cost decrease
of $2.3 million in the quarter ended March 31, 1998. Fuel costs in the quarter
ended March 31, 1998 were $14.9 million as compared to $17.2 million in the same
quarter of the previous year. For the six months ended March 31, 1998, the cost
increases over the six-month period ended March 31, 1997 were caused by a $3.4
million increase in pilot salaries, a $5.7 million increase in lease costs for
deployment of the CRJ aircraft into the Company's fleet, and a $2.9 million
increase in pilot training and lodging, all of which was partially offset by a
decrease in fuel costs of $2.8 million.
Maintenance Expense:
- --------------------
Maintenance expense increased by $2.1 million in the quarter ended March 31,
1998 to $23.6 million from $21.5 million in the same quarter of the previous
fiscal year and increased by $3.8 million in the six-month period ended March
31, 1998 from $42.8 million for the six-month period ended March 31, 1997. The
increase for the quarter ended March 31, 1998 was primarily due to the
maintenance of a greater number of CRJ aircraft for the period from the prior
year and higher costs of operating under increased regulatory oversight as a
Part 121 carrier. The increase for the six-month period ended March 31, 1998 was
primarily due to a provision of $1.1 million in uncollectible warranty and
insurance claims, a $0.5 million increase as a result of the higher cost of
operating under greater regulatory oversight, and maintenance of a greater
number of CRJ aircraft.
9
<PAGE>
Aircraft and Traffic Service Expense:
- -------------------------------------
Aircraft and traffic service expense increased by $0.3 million to $21.7 million
during the quarter ended March 31, 1998 from $21.4 million in the comparable
quarter of the previous fiscal year. Aircraft and traffic service expense
increased by $1.6 million to $43.5 million for the six-month period ended March
31, 1998 from $41.8 million for the six-month period ended March 31, 1997. The
increase for the quarter ended March 31, 1998 was primarily due to a $0.4
million increase in passenger reaccommodation expenses resulting from flight
cancellations caused by crew scheduling difficulties and training delays. The
increase for the six-month period ended March 31, 1998 was due to increased
charges for reaccommodation and lost baggage costs of $0.8 million, increased
de-icing charges of $0.4 million, and $0.1 million in station personnel wages as
a result of increased staffing levels to enhance customer service.
Promotion and Sales:
- --------------------
Promotion and sales expense decreased $1.2 million to $16.7 million for the
quarter ended March 31, 1998 and decreased by $0.3 million to $35.2 million for
the six-month period ended March 31, 1998 over the six-month and three-month
periods ended March 31, 1997. The primary reason for these decreases was a
significant decline in the number of passengers carried and a reduction in
commissions paid to travel agents, as a result of fewer passengers and a lower
commission rate.
General and Administrative Expense:
- -----------------------------------
General and administrative expense increased by $1.7 million for the three-month
period ended March 31, 1998 to $7.5 million as compared to the quarter ended
March 31, 1997 and increased by $2.8 million to $15.5 million for the six-month
period ended March 31, 1998 as compared to the six-month period ended March 31,
1997. The primary causes of the increase for the quarter ended March 31, 1998
were a $0.4 million increase in property taxes, $0.6 million increase in health
insurance claims, and $0.3 million increase in property and casualty insurance.
The primary causes of the increase for the six-month period ended March 31, 1998
was a $0.6 million increase in amounts paid to employees as part of the employee
performance bonus plan, a $0.9 million increase in the amount of health
insurance claims paid during the period, a $0.4 million increase in property
taxes, and a $0.3 million increase in property and casualty insurance.
Depreciation, Amortization and Interest Expense:
- ------------------------------------------------
Depreciation and amortization decreased by $1.2 million to $7.3 million for the
quarter ended March 31, 1998 as compared to the quarter ended March 31, 1997 and
by $2.5 million to $14.5 million for the six-month period ended March 31, 1998
from the comparable periods in the prior year. The primary reason for these
decreases in depreciation and amortization was the writedown of the Denver
system intangible asset as of September 30, 1997. Interest expense declined by
$0.1 million to $6.8 million during the quarter ended March 31, 1998 from $6.9
million during the similar period in the prior fiscal year and by $0.6 million
to $13.0 million for the six-month period ended March 31, 1998 from the
comparable period in the prior year. The decrease was primarily due to lower
outstanding principal loan balances.
Other Operating Items:
- ----------------------
During the quarter ended March 31, 1998, the Company recognized a $4.0 million
loss provision related to the discontinuation of its independent jet operations
in Ft. Worth, Texas. See, "Other Events--Independent Jet Operation." The Company
also recognized $2.5 million related to anticipated settlement costs of a
shareholder class action lawsuit. See, Part II, Item 1. "Legal Proceedings."
During the six-month period ended March 31, 1998, the Company also recognized a
$33.9 million loss provision related to the discontinuation of service under the
Mesa Airlines, Inc. ("MAI") code-sharing agreement with United Airlines, Inc.
("UAL"). See, "Other Events--United Airlines."
10
<PAGE>
Other Non-Operating Income:
- ---------------------------
In January 1998, Mesa sold its remaining investment in America West Airlines,
Inc. ("AWA") comprised of 100,000 Class A shares, 200,000 Class B shares and
warrants to purchase approximately 800,000 Class B shares. Mesa received cash of
approximately $11.1 million and recognized non-operating income of approximately
$8.1 million on the sale of these securities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance of $40.6 million at March 31, 1998 included $4.0
million of cash restricted for the issuance of letters of credit. The primary
reason for the decrease in the Company's cash balance from December 31, 1997 to
March 31, 1998 was the early retirement of approximately $15.5 million of long
term debt.
Mesa had receivables of $47.3 million at March 31, 1998 which consisted
primarily of amounts due from code-sharing partners UAL and US Airways, Inc.
("US Airways"). Under the terms of the UAL and US Airways code-sharing
agreements, Mesa receives a substantial portion of its revenues through the
Airline Clearing House. Historically, the Company has enjoyed cash flow
sufficient to meet its needs. However, UAL has terminated all of its
code-sharing agreements with the Company and the Company is in the process of
renegotiating its code-sharing contract with AWA. Such actions could have a
material negative impact on the financial position and cash flow of the Company,
particularly if the Company cannot successfully renegotiate its code-sharing
agreement with AWA, or cannot re-deploy its United Express aircraft on other
operating routes, or alternatively, sell the aircraft or return them to the
lessors. Management's belief that the Company will have adequate cash flow to
meet its operating needs is a forward-looking statement. The Company may have
less cash flow than anticipated in the event of the failure to reach a
satisfactory resolution in its renegotiation with AWA of a new code-sharing
agreement, a substantial decrease in the number of routes allocated to MAI under
its code-sharing agreements with US Airways, failure to sell, dispose of, or
redeploy its assets associated with United Express operations in a timely
manner, reduced levels of passenger revenue, additional taxes or costs of
compliance with governmental regulations, fuel cost increases, increase in
competition, increase in interest rates, general economic conditions and
unfavorable settlement of existing or potential litigation.
On March 1, 1998, the Company's $20 million secured line of credit expired under
its terms and the bank declined to renew it. Upon expiration, the Company had
approximately $4.0 million of letters of credit ("LOCs") issued under the line
and elected to restrict approximately $4.0 million of cash to secure them. The
Company has subsequently arranged for the issuance of bonds to replace the
outstanding LOCs and expects to have retired all of the LOCs and obtain the
release of its restricted cash prior to June 30, 1998. In addition, the Company
is presently in discussion with other financial institutions to provide a
secured $20 million line of credit and expects to have such a facility prior to
June 30, 1998. The Company's expectation that restricted cash will be released
and that it will have a $20 million secured credit facility prior to June 30,
1998 are forward-looking statements. The Company may or may not accomplish its
objectives to release its restricted cash or arrange a $20 million line of
credit depending upon the decisions of credit committees of financial
institutions and authorities responsible for releasing outstanding LOCs.
11
<PAGE>
As of March 31, 1998, Mesa was not in compliance with some of the secured debt
covenants required by a bank credit agreement; however, the bank has waived
compliance with such covenants. The Company believes it will either maintain
compliance or obtain waivers of compliance with its present debt covenants
through September 30, 1998. Management's belief that it will maintain compliance
with its present debt covenants is a forward-looking statement. Compliance may
be adversely impacted in the event of the termination or renegotiation of one or
more code-sharing agreements, a substantial decrease in the number of routes
allocated to MAI under its code-sharing agreements with US Airways, unfavorable
renegotiation of the Company's AWA code-sharing agreement, failure to dispose of
or redeploy assets associated with its United Express operations, reduced levels
of passenger revenue, additional taxes or costs of compliance with governmental
regulations, fuel cost increases, increase in competition, increase in interest
rates, general economic conditions and settlement of existing or potential
litigation.
As of March 31, 1998, the Company had aggregate indebtedness of approximately
$346.6 million payable to various parties under promissory notes issued in
connection with the purchase of aircraft. The notes have interest rates ranging
from 6.66% to 7.87% with maturities through December 2011. In addition, the
Company has significant lease obligations on existing aircraft operated by the
Company. These leases are classified as operating leases and therefore are not
reflected as liabilities in the accompanying balance sheet. At March 31, 1998,
82 aircraft were leased by the Company with terms extending through June 2016.
Total lease expense for the six-month period ended March 31, 1998 amounted to
$22.5 million.
Mesa has ordered 32 CRJ aircraft for use in its AmericaWest Express operation in
Phoenix, Arizona, as USAirways Express on the East Coast and in other markets
that management believes have the potential for profitable operations. As of
March 31, 1998, the Company had received fourteen of the 32 CRJ aircraft on
order and expects to take delivery of the remaining 18 aircraft by the end of
1999. The Company has options for an additional 16 CRJ aircraft with a delivery
schedule of one per month beginning June 2000. The value of these 32 CRJ
aircraft is approximately $640 million. The expected delivery schedule of
aircraft is a forward-looking statement which could significantly differ based
on manufacturer's delivery delays, among other factors.
The Company has recognized a loss provision of approximately $4.0 million during
the quarter ending March 31, 1998 to provide for the expense of closing the
facilities associated with the independent jet operation and relocating the jet
aircraft described in the "Other Events" section of this report.
The Company's wholly owned subsidiary, WestAir Holding, Inc. ("WHI"), owns
WestAir Commuter Airlines, Inc. ("WestAir"), a certificated air carrier and
Regional Aircraft Services, Inc. ("RAS"), an aircraft equipment repair service
company. WestAir presently operates 21 Jetstream 31 and 19 Embraer Brasilia
aircraft in California as United Express. In addition to the 40 aircraft
operated by WestAir, there are an additional 11 Embraer Brasilia aircraft leased
by WestAir which are currently parked and not being utilized in WestAir's
operations. WestAir intends to make lease payments for all 51 aircraft only
through May 31, 1998, the expiration date of WestAir's code-sharing agreement
with UAL. Failure to make lease payments will constitute a default under the
lease agreements with various aircraft lessors. The aircraft lessors shall have
the right to exercise liens each lessor has on particular aircraft.
If the aircraft provide insufficient collateral for the remaining lease
payments, it is the belief of management that while the various lessors may seek
recovery of any deficiency from WestAir (or WHI, as the various lease contracts
permit) that they will have no right to seek any recovery of deficiencies from
Mesa Air Group, Inc. Management's belief that the various aircraft lessors will
have no right of recovery against Mesa Air Group, Inc. itself is a
forward-looking statement which could materially differ based on the
interpretation of lease agreements and other documents entered into between
WestAir and/or WHI and the lessors by a court or an arbitrator, as the case may
be.
12
<PAGE>
Although the WestAir operation is currently being marketed for sale, the
operation will most likely be liquidated upon expiration of the UAL code-sharing
agreement. The assets and liabilities of WHI and its subsidiaries are included
in the consolidated financial statements of Mesa Air Group, Inc. as of March 31,
1998. If the operation is liquidated it is unlikely that any assets of WestAir
will remain for distribution to WHI and, ultimately, Mesa Air Group, Inc. At
March 31, 1998 the consolidated assets, liabilities and shareholder's deficiency
of WHI included in the Mesa Air Group, Inc. consolidated financial statements
were approximately as follows:
March 31, 1998
($000s)
----------------
Cash $ 7,350
Current assets $ 25,129
Total assets $ 26,926
================
Current liabilities 23,200
Total liabilities 38,741
Shareholders' deficiency $ (11,815)
Total liabilities and equity $ 26,926
================
Management of the Company recognizes the need to ensure its operations will not
be adversely impacted by Year 2000 software failure and that the Company's
computer systems and applications must function properly beyond 1999. The
Company is conducting analysis necessary to determine the potential Year 2000
risk and until completion of its analysis will not know the cost to the Company
of potential Year 2000 software failure. Although the Company cannot presently
estimate the costs associated with Year 2000 software failure, such costs will
be expensed as incurred.
The Company recognizes that its business is reliant upon the systems and
applications of third parties and will conduct an assessment of the potential
risks. However, there can be no assurance that the systems and applications of
other parties upon which the Company's business relies will be converted on a
timely basis. The Company's business, financial condition, or results of
operations could be materially adversely affected by the failure of its systems
and applications or the failure of those systems operated by other parties to
properly operate or manage dates beyond 1999.
OTHER EVENTS
Election of New Officers; Employment Agreements
On February 3, 1998, Mr. Larry L. Risley, the Company's Chief Executive Officer
("CEO") and Chairman of the Board of Directors, retired as Chairman and
effective May 1, 1998, Mr. Risley retired as CEO. On February 16, 1998, the
Company entered into an employment agreement (the "Agreement") with Larry L.
Risley as Manager of Special Projects effective as of May 1, 1998. As Manager of
Special Projects, Mr. Risley will be retained by the Board from time to time to
advise and assist in the strategic acquisition of assets, businesses and mergers
and acquisitions of other airline companies. The Agreement is for a period of
five years and will pay Mr. Risley an annual salary of $275,000. Under the
Agreement, Mr. Risley is not eligible for vacation pay or other fringe benefits,
except for health insurance for himself and his wife.
13
<PAGE>
The Agreement further provides that Mr. Risley shall continue to hold the
position of Chairman Emeritus while serving on the Board. The Board is required
to vote to nominate Mr. Risley and to use its best efforts to cause his election
as a member of the Board through the fiscal year ending September 30, 2003.
In exchange for entering into a covenant not to compete and a covenant of
confidentiality, the Agreement provides that Mr. Risley's employment will be
non-terminable through the fifth anniversary of his retirement as CEO. The
Agreement also provides that the Board will offer to sell FCA, Inc. dba Four
Corners Aviation to Mr. Risley at a price determined by an independent appraisal
firm. If such sale is not consummated, the Agreement provides that Mr. Risley
will receive an annual office expense allowance of $9,000 during the term of the
Agreement.
On February 3, 1998, Paul R. Madden was elected Chairman of the Board of
Directors.
On March 13, 1998, the Board of Directors appointed Jonathan G. Ornstein as the
new CEO effective May 1, 1998. Mr. Ornstein is a member of the Board of
Directors of the Company and was most recently President and CEO of Virgin
Express, a low-cost European carrier based in Brussels, Belgium. He is a former
Mesa Executive Vice-President, as well as having served as President and Chief
Executive Officer of Continental Express. Upon his appointment as Chief
Executive Officer of the Company as of May 1, 1998, Jonathan G. Ornstein and the
Company entered into an employment agreement (the "Agreement").
The Agreement is for a term of three years ending March 13, 2001 and is subject
to automatic renewal unless either party gives written notice of its intent to
terminate. Under the Agreement, Mr. Ornstein will be compensated by a
combination of a minimum base salary of $200,000 per year plus a bonus based on
positive growth in earnings per share. Mr. Ornstein will receive a "Minimum
Bonus" of $52,500 if the Company achieves any positive growth in earnings per
share, a "Threshold Bonus" of $105,000 for growth between 7 percent and 12.9
percent, a "Target Bonus" of $210,000 for growth between 13 percent and 17.9
percent and a "Maximum Bonus" of $420,000 for growth of 18 percent or better.
In addition to salary and bonus, Mr. Ornstein's employment agreement gives him
the right to receive an initial grant of 1,000,000 stock options vesting in
one-third increments on the date of grant and the remainder over a two-year
period and additional annual option grants of 150,000 shares throughout the term
of the Agreement, subject to shareholder approval. If the shareholders do not
approve such grants, Mr. Ornstein's employment agreement requires the Company to
issue stock appreciation rights in an amount necessary to provide the same level
of compensation as would have been provided by the grant of stock options.
The Agreement provides that upon permanent disability, as defined in the
Agreement, Mr. Ornstein will receive his base salary plus an amount equal to the
Minimum Bonus plus any monthly payments under any policy of disability income
insurance paid for by the Company. The Company will pay such permanent
disability payments for the remaining term of the Agreement, but in no case will
the period exceed 24 months.
14
<PAGE>
Mr. Ornstein may terminate the Agreement at any time, upon written notice,
within one year following the occurrence of an event constituting "Good Reason,"
as defined below. Upon the termination by the Company without Cause or
termination by Mr. Ornstein for Good Reason, Mr. Ornstein will be entitled to a
lump-sum severance payment equal to the sum of (1) the number of years (or
fractions thereof) remaining in the then-unexpired term or two, whichever is
greater, multiplied by (a) base salary times the number of years, plus (b) the
amount of cash equal to the Target Bonus or the minimum amount of any similar
bonus then in effect, plus (c) any other cash or other bonus earned prior to the
date of termination; and (2) any additional payments necessary to discharge
certain tax liabilities as defined in the Agreement. Upon Mr. Ornstein's
termination Without Good Cause or upon Good Reason, any and all vesting or
performance requirements affecting outstanding stock and other compensation
under the Employee Stock Option Plan will be deemed fully satisfied and any risk
of forfeiture with respect thereto will be deemed to have lapsed.
"Good Reason" is defined to mean the occurrence of the following circumstances
without Mr. Ornstein's consent: (i) assignment to any duties substantially
inconsistent with the duties or a reduction in the duties contemplated by the
Agreement; (ii) removal of any titles bestowed under the Agreement; (iii) the
Company's failure to include Mr. Ornstein as a nominee for the Board in its
proxy or his failure to be reelected to the Board; (iv) any breach or failure of
the Company to carry out the provisions of the Agreement after notice and an
opportunity to cure; (v) a Change in Control (as defined below); or (vi)
relocation of Mr. Ornstein, his office, facilities or personnel except if such
relocation is to any future location of the Company's headquarters and such new
location is in a metropolitan area with a population of over 1,000,000 people.
A Change in Control is defined to include (i) a change in control reportable on
Form 8-K or Schedule 14A of the Securities Exchange Act of 1934; (ii) the
acquisition, other than by an employee benefit plan, of twenty-five percent
(25%) or more of the combined voting power of the Company's outstanding
securities; (iii) failure of the Incumbent Directors (as defined in the
employment agreements) to constitute at least a majority of all directors of the
Company; (iv) the closing of a sale of all or substantially all the assets of
the Company; (v) the Company's adoption of a plan of dissolution or liquidation;
or (vi) the closing of a merger or consolidation in which the Company is not the
surviving corporation or at least seventy-five percent (75%) of the surviving
corporation's stock is not held by persons who were stockholders of Company
immediately prior to such merger or consolidation.
If under the Agreement, Mr. Ornstein is to receive any payment for termination
for Good Reason, death or permanent disability payment, payment for termination
Without Good Cause or any payment as a result of a Change of Control of the
Company Mr. Ornstein shall be entitled to receive the amounts sufficient to
cover the excise tax, if any, imposed on such payments.
On April 9, 1998, the Company announced the appointment of Blaine M. Jones as
Chief Financial Officer. Mr. Jones will rejoin the Company after a three-year
sabbatical. Mr. Jones was previously employed by the Company from 1985 to 1995
as Chief Financial Officer and later as President for the Mesa Airlines
division. Mr. Jones will enter into an employment agreement substantially
similar to Mr. Ornstein's contract effective April 13, 1998.
Independent Jet Operation
On February 20, 1998, the Company terminated the jet operations conducted under
its MAI subsidiary between Fort Worth, Texas and Houston, San Antonio, and
Austin, Texas; San Antonio and Colorado Springs, Colorado; and Colorado Springs
and Nashville, Tennessee. The Company provided for a $4.0 million provision in
the quarter ended March 31, 1998 to recognize the expense of discontinuation of
the independent jet operation. Management has announced the redeployment of the
five jets previously operated by its independent jet operation into its
USAirways Express system in the eastern United States. Three of the aircraft
began service in the USAirways system on May 1, 1998 and the remaining two
aircraft will be placed in service with USAirways Express on June 15, 1998.
Management anticipates cash expenditures of approximately $1.5 million related
to the shutdown of the independent jet operation in the 12-month period
subsequent to March 31, 1998.
15
<PAGE>
United Airlines, Inc.
As a result of termination by UAL of the West Air and MAI Code-Sharing
Agreements on April 22 and May 31, 1998 respectively, the Company incurred a
loss provision totaling $106 million to provide for costs to dispose of certain
aircraft, equipment, and other costs to shut down the entire United Express
system. Should the Company fail to locate purchasers for its excess Beechcraft
1900D aircraft or redeploy its Dash 8-200 aircraft utilized in the MAI United
Express system in a timely manner, the $106 million loss provision may be
inadequate and subject to a material increase. Management of the Company
believes that it will incur approximately $15 to $20 million of net cash
expenditures during the 12-month period subsequent to May 31, 1998 as a result
of the termination of its MAI and WestAir code-sharing agreements. The estimated
net cash expenditure is a forward-looking statement which could materially
change as a result of UAL's failure to compensate or adequately compensate the
Company for its flights through the scheduled termination date of May 31, 1998,
the ultimate cost to park the WestAir fleet, or the failure to sell or dispose
of excess aircraft in a timely manner.
US Airways, Inc.
Mesa has entered into a marketing agreement with US Airways in which it will
initially operate 12 CRJ aircraft in its USAirways Express operation. The
Company began USAirways Express CRJ service on January 19, 1998, with flights
between Philadelphia, Pennsylvania and Birmingham, Alabama; St. Louis, Missouri;
Cincinnati, Ohio; and Newburgh, New York. Other cities to be served include
Charlotte, North Carolina; Washington, D.C.; Toronto, Canada; Little Rock,
Arkansas; Charleston, West Virginia; Raleigh Durham, North Carolina; Boston,
Massachusetts; Milwaukee, Wisconsin; White Plains, New York; and Tallahassee,
Florida. All of this service is to be provided pursuant to a fee per departure
arrangement. All 12 CRJ aircraft are expected to be operating in the US Airways
Express system by June 15, 1998.
The Company had experienced a shortage of flight crews resulting in the
temporary removal of ten Beechcraft 1900D aircraft from service in the US
Airways system. The Company's temporary flight crew shortage in the US Airways,
Inc. system was alleviated by the end of February, 1998. Although the timing of
the return of all of the grounded aircraft to service is uncertain, the Company
has already returned five of the ten previously grounded Beechcraft 1900D
aircraft to service.
America West Airlines, Inc.
The terms of the Company's code-sharing agreement with AWA provide for a minimum
controllable flight completion factor for any consecutive two-month period.
Primarily as a result of flight crew shortages in December 1997 and January
1998, MAI's controllable flight completion factor fell below the minimum and AWA
issued the Company a notice of termination. In early February 1998, MAI resolved
its crew shortages with AWA and its controllable completion factor exceeded the
minimum requirement in February 1998 through April 1998. Subsequent to the
termination by AWA of the code-sharing agreement, AWA and Mesa entered into an
interim agreement to continue Mesa operations as America West Express through
June 30, 1998. The interim agreement provides that both AWA and Mesa will
proceed in good faith to negotiate and execute a new long-term code-sharing
agreement. Under the interim agreement, Mesa has agreed to performance
16
<PAGE>
guarantees which include penalties for failure to meet those standards.
Passenger fees and facility charges have also been increased from the prior
code-sharing agreement. Management of AWA and the Company have entered into
discussions to negotiate a long-term code-sharing agreement and AWA management
has expressed an interest in continuing its relationship with the Company. Both
parties are actively negotiating a conversion of essentially all of the AWA
operations to a fee per departure basis. Management of the Company believes that
a new and materially satisfactory code-sharing agreement will be negotiated
prior to June 30, 1998. Management's belief that a mutually satisfactory
code-sharing agreement will be negotiated is a forward-looking statement subject
to the parties' expectations and the willingness to compromise on an acceptable
fee and flight frequency structure.
The following table lists the aircraft owned and leased by Mesa for scheduled
operations as of March 31, 1998:
NUMBER OF AIRCRAFT
-------------------------------------------- Passenger
Type of Aircraft Owned Leased Total Capacity
-------------------------------------------------------------------------------
Beechcraft 1900 108 10 118 19
Embraer Brasilia 2 25 27 30
BAe Jetstream 31 -- 21 21 19
Dash 8-200 -- 12 12 37
CRJ -- 14 14 50
------------------------------------------
Total 110 82 192
------------------------------------------
OF THESE AIRCRAFT, 78 WERE BEING UTILIZED IN THE UNITED EXPRESS SYSTEM ON MARCH
31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During 1994, seven shareholder class action complaints were filed
in the United States District Court for the District of New Mexico
against Mesa, certain of its present and former corporate officers
and directors, its independent auditor, and certain underwriters
who participated in Mesa's June 1993 public offering of Common
Stock. During October 1995, the court certified a class consisting
of persons who purchased Mesa stock between January 28, 1993 and
August 5, 1994. These complaints were consolidated by court order,
and, after the court granted in part a motion to dismiss in May
1996, a third amended consolidated complaint was filed alleging
that during the class period the defendants caused or permitted
Mesa to issue publicly misleading financial statements and other
misleading statements in the registration statement for the June
1993 public offering, annual and quarterly reports to
shareholders, press releases and interviews with securities
analysts.
17
<PAGE>
In May 1998, the Company entered into a memorandum of
understanding with the plaintiffs to settle the litigation.
While the Company and its corporate officers and directors believe
they have substantial and meritorious defenses against the
plaintiff's allegations and have defended their position
vigorously, they have agreed to a settlement to avoid ongoing
litigation. The memorandum of understanding provides for a total
of $8 million to be paid to the class plaintiffs on behalf of the
defendants. The Company will pay a substantial portion of this
settlement. The settlement still must be approved by the Court
following notification of the Class. The Company intends to
utilize funds reserved for the defense of the case as its
contribution towards the settlement.
In June 1997, UAL filed a complaint in the United States District
Court for the Northern District of Illinois against two
subsidiaries of the Company, Mesa Airlines, Inc. ("MAI") and
WestAir Commuter Airlines, Inc. ("WestAir"), seeking a judicial
declaration of the parties' rights and obligations under two
separate written agreements, pursuant to which MAI and WestAir
allegedly agreed to provide certain airline transportation
services to UAL including the provision of scheduled air
transportation services in certain areas of the United States
under the service mark "United Express." UAL contends that, under
these agreements, UAL has the right to "increase, decrease, or in
any other way adjust the flight frequencies, or markets, or both"
in certain airports currently serviced by WestAir and/or MAI. In
January 1998, UAL amended its complaint to include damages related
to MAI's purported breach of contract to provide specified levels
of service in certain cities. MAI and WestAir have filed motions
to have the case transferred to California. Those motions have not
yet been considered. MAI and WestAir dispute the principal
contentions in UAL's complaint, and unless a satisfactory
negotiated resolution is achieved, intend to defend their position
vigorously. Furthermore, MAI and WestAir believe that UAL has
breached its code-sharing agreements with the respective entities
and have filed a counterclaim seeking to recover the substantial
damages to the business of MAI and WestAir which have been
incurred.
In addition, Mesa and WestAir have filed suit against UAL and
SkyWest Airlines. SkyWest was contracted to be Mesa's successor on
the West Coast. The complaint alleges that SkyWest unlawfully
interfered with Mesa's and WestAir's contracts with UAL. It
further alleges improper conduct on the part of UAL and SkyWest in
terminating markets under the Mesa agreement and in leading to the
non-renewal of the WestAir agreement. The Company is seeking
substantial damages against each defendant.
Mesa is also a party to legal proceedings and claims which arise
during the ordinary course of business.
In the belief of management, based upon information at this time,
the ultimate outcome of all the proceedings and claims pending
against Mesa other than that with UAL referred to above is not
expected to have a material adverse effect on Mesa's consolidated
financial position. It is too early to determine the impact on
Mesa's financial position of the litigation with UAL.
The belief that UAL has breached its code-sharing agreements with
MAI and WestAir and the belief that the ultimate outcome of
certain of the proceedings and claims pending against Mesa will
favorably be resolved are forward-looking statements which could
materially differ as a result of the determination of a judge or
jury.
Item 2. Change in Securities
None
18
<PAGE>
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(A) Documents filed as part of this report:
1. Reference is made to consolidated financial statement schedules in
item 8 hereof.
2. Reports on Form 8-K
None
3. Exhibits
The following exhibits are either filed as part of this report or
are incorporated herein by reference from documents previously
filed with the Securities and Exchange Commission:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
<S> <C> <C>
2.1 Plan and Agreement of Merger of Mesa Air Filed as Exhibit 2.1 to Registrant's Form 10-K
Group, Inc. into Mesa Holding, Inc. dated for the fiscal year ended September 30, 1996,
September 16, 1996 incorporated herein by reference
3.1 Articles of Incorporation of Mesa Air Filed as Exhibit 3.1 to Registrant's Form 10-K
Holdings, Inc. dated May 28, 1996 for the fiscal year ended September 30, 1996,
incorporated herein by reference
3.2 Bylaws of Mesa Air Group, Inc., as amended Filed as Exhibit 3.2 to Registrant's Form 10-K
for the fiscal year ended September 30, 1996,
incorporated herein by reference
4.1 Form of Common Stock certificate Filed as Exhibit 4.5 to Amendment No. 1 to
Registrant's Form S-18, Registration No.
33-11765 filed March 6, 1987, incorporated
herein by reference
4.2 Form of Common Stock certificate (issued Filed as Exhibit 4.8 to Form S-1, Registration
after November 12, 1990) No. 33-35556 effective December 6, 1990,
incorporated herein by reference
4.8 Form of Employee Non-Incentive Stock Option Filed as Exhibit 4.12 to Registrant's Form 10-K
Plan, dated as of June 2, 1992 for the fiscal year ended September 30, 1992,
Commission File No. 33-15495, incorporated
herein by reference
4.9 Form of Non-Incentive Stock Option issued Filed as Exhibit 4.13 to Registrant's Form 10-K
under Mesa Airlines, Inc. Employee for the fiscal year ended September 30, 1992,
Non-Incentive Stock Option Plan, dated as of Commission File No. 33-15495, incorporated herein by reference
June 2, 1992
19
<PAGE>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
4.10 Form of Mesa Airlines, Inc. Outside Filed as Exhibits 4.1, 4.2 and 4.3 to
Directors Stock Option Plan, dated as of Registration No. 33-09395 effective August 1,
March 9, 1993 1996
4.11 Form of Stock Option issued under Mesa Filed as Exhibit 4.4 to Registration No.
Airlines, Inc. Outside Director's Stock 33-09395 effective August 1, 1996
Option Plan, dated as of March 9, 1993
4.12 Form of Mesa Airlines, Inc. Additional Filed as Exhibit 4.5 to Registration No.
Outside Directors Stock Option Plan dated as 33-09395 effective August 1, 1996
of December 9, 1994
4.13 Form of Non-Qualified Stock Option Issued Filed as Exhibit 4.6 to Registration No.
Under Mesa Airlines, Inc. Additional Outside 33-09395 effective August 1, 1996
Directors' Stock Option Plan
4.14 Form of Mesa Air Group, Inc. Restated and Filed as Exhibit 4.1 to Registration No.
Amended Employee Stock Option Plan dated 33-02791 effective April 24, 1996
April 23, 1996
4.15 Form of Non-Qualified Stock Option issued Filed as Exhibit 4.2 to Registration No.
under Mesa Air Group, Inc. Restated and 33-02791 effective April 24, 1996
Amended Employee Stock Option Plan dated
April 23, 1996
4.16 Form of Qualified Stock Option issued under Filed as Exhibit 4.3 to Registration No.
Mesa Air Group, Inc. Restated and Amended 33-02791 effective April 24, 1996
Employee Stock Option Plan dated April 23,
1996
10.17 Agreement between Beech Aircraft Corporation Filed as Exhibit 10.30 to Form S-1,
and Mesa Airlines, Inc., dated April 30, 1990 Registration No. 33-35556 effective December 6,
1990, incorporated herein by reference
10.18 Sublease Agreement between Air Midwest, Inc. Filed as Exhibit 10.32.1 to Form S-1,
and Mesa Airlines, Inc., dated April 27, Registration No. 33-35556 effective December 6,
1990 for Embraer Brasilia aircraft 120.180 1990, incorporated herein by reference
10.20 Agreement between Air Midwest, Inc. and Mesa Filed as Exhibit 10.32.3 to Form S-1,
Airlines, Inc., dated February 27, 1990, for Registration No. 33-35556 effective December 6,
purchase of four Embraer Brasilia aircraft 1990, incorporated herein by reference
10.21 Letter Agreement between McDonnell Douglas Filed as Exhibit 10.32.4 to Form S-1,
Finance Corporation, Air Midwest, Inc. and Registration No. 33-35556 effective December 6,
Mesa Airlines, Inc., dated March 19, 1990, 1990, incorporated herein by reference
as amended, regarding lease and sublease of
four Embraer Brasilia aircraft
10.22 Sublease Agreement between Air Midwest Inc. Filed as Exhibit 10.32.5 to Form S-1,
and Mesa Airlines, Inc., dated July 26, Registration No. 33-35556 effective December 6,
1990, for Embraer Brasilia aircraft 120.193 1990, incorporated herein by reference
10.23 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.6 to Form S-1,
Finance Corporation and Mesa Airlines, Inc., Registration No. 33-35556 effective December 6,
dated July 26, 1990, for Embraer Brasilia 1990, incorporated herein by reference
aircraft 120.193
20
<PAGE>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
10.24 Sublease Agreement between Air Midwest Inc. Filed as Exhibit 10.32.7 to Form S-1,
and Mesa Airlines, Inc., dated September 26, Registration No. 33-35556 effective December 6,
1990, for Embraer Brasilia aircraft 120.203 1990, incorporated herein by reference
10.25 Lease Agreement between McDonnell Douglas Filed as Exhibit 10.32.8 to Form S-1,
Finance Corporation and Mesa Airlines, Inc., Registration No. 33-35556 effective December 6,
dated September 26, 1990, for Embraer 1990, incorporated herein by reference
Brasilia aircraft 120.203
10.27 Expanded Partner Agreement between United Filed as Exhibit 19.3 to Registrant's Form 10-Q
Air Lines, Inc., and Mesa Airlines, Inc., for the quarterly period ended June 30, 1990,
dated February 15, 1990 Commission File No. 0-15495, incorporated
herein by reference
10.29 Form of Directors' and Officers' Filed as Exhibit 10.41 to Form S-1,
Indemnification Agreement Registration No. 33-35556 effective December 6,
1990, incorporated herein by reference
10.31 Agreement Relating to the Settlement of Filed as Exhibit 10.45 to Form S-1,
Interline Accounts through Airlines Clearing Registration No. 33-35556 effective December 6,
House, Inc., between Airlines Clearing 1990, incorporated herein by reference
House, Inc. and Mesa Airlines, Inc., dated
September 2, 1981
10.32 Agreement between Beech Aircraft Corporation Filed as Exhibit 10.42 to Form 10-K for fiscal
and Mesa Airlines, Inc., dated September 18, year ended September 30, 1991, Commission File
1991 No. 0-15495, incorporated herein by reference
10.33 Agreement between US Airways, Inc. and Air Filed as Exhibit 10.43 to Form 10-K for fiscal
Midwest, Inc. year ended September 30, 1991, Commission File
No. 0-15495, incorporated herein by reference
10.34 Agreement between US Airways, Inc. and Filed as Exhibit 10.44 to Form 10-K for fiscal
FloridaGulf Airlines, Inc. year ended September 30, 1991, Commission File
No. 0-15495, incorporated herein by reference
10.35 Sublease agreement between Trans States Filed as Exhibit 10.45 to Form 10-K for fiscal
Airlines, Inc. and Air Midwest, Inc. year ended September 30, 1992, Commission File
No. 0-15495, incorporated herein by reference
10.37 Agreement between Beech Aircraft Filed as Exhibit 10.47 to Form 10-K for fiscal
Corporation, Beech Acceptance Corporation, year ended September 30, 1992, Commission File
Inc. and Mesa Airlines, Inc., dated August No. 0-15495, incorporated herein by reference
21, 1992
10.38 Agreement between America West Airlines, Filed as Exhibit 10.48 to Form 10-K for fiscal
Inc. and Mesa Airlines, Inc. year ended September 30, 1992, Commission File
No. 0-15495, incorporated herein by reference
10.39 Agreement between United Air Lines, Inc. and Filed as Exhibit 10.49 to Form 10-K for fiscal
WestAir Commuter Airlines, Inc. (WestAir) year ended September 30, 1992, Commission File
No. 0-15495, incorporated herein by reference
10.40 Plan and Agreement to Merge between Mesa Filed as Exhibit A to Form S-4 Registration No.
Airlines, Inc., Mesa Acquisition Corporation 33-45638, effective April 17, 1992,
and WestAir Holding, Inc., dated February 7, incorporated herein by reference
1992
10.41 Certificate of Public Convenience and Filed as Exhibit 10.1(a) to WestAir Holding,
Necessity for WestAir Commuter Airlines, Inc. Inc.'s Registration Statement on Form S-1,
Commission File No. 33-24316, incorporated
herein by reference
21
<PAGE>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
10.42 Air Carrier Operating Certificate for WestAir Filed as Exhibit 10. to WestAir Holding, Inc.'s
Registration Statement on Form S-1, Commission
File No. 33-24316, incorporated herein by
reference
10.46 Original Agreement to Lease dated as of Filed as Exhibit 10.44 to WestAir Holding,
April 27, 1987 between NPA, Inc. ("NPA") and Inc.'s Registration Statement on Form S-1,
British Aerospace, Inc. ("BAe") with a Commission File No. 33-24316, incorporated
Letter to FG Holdings, Inc. ("FGH") dated herein by reference
March 11, 1988 and Amendment No. 1 to
Agreement to Lease dated as of March 3, 1988
between BAe and FGH
10.47 Side Letter Agreement to NPA from JACO dated Filed as Exhibit 10.48 to WestAir Holding,
June 4, 1987 Inc.'s Registration Statement on Form S-1,
Commission File No. 33-24316, incorporated
herein by reference
10.49 Employment Agreement dated as of September Filed as Exhibit 10.51(b) to WestAir Holding,
1, 1988 between WestAir and Maurice J. Inc.'s Registration Statement on Form S-1,
Gallagher Jr. Commission File No. 33-24316, incorporated
herein by reference
10.50 Aviation Land and Building Lease and Filed as Exhibit 10.164 to the Pre-effective
Agreement between City of Fresno, California Amendment No. 1, filed October 19, 1988, to
and WestAir dated January 7, 1986 WestAir Holding, Inc.'s Registration Statement
on Form S-1, Commission File No. 33-24316,
incorporated herein by reference
10.51 Airport Operating Permit between Airport Filed as Exhibit 10.67 to WestAir Holding,
Commission of City and County of San Inc.'s Registration Statement on Form S-1,
Francisco and WestAir Commission File No. 33-24316, incorporated
herein by reference
10.58 Promissory Note to Textron for spare parts Filed as Exhibit 10.80 to WestAir Holding,
as executed by WestAir, dated December 30, Inc.'s Form 10-K dated December 31, 1988,
1988 Commission File No. 33-24316, incorporated
herein by reference
10.59 Agreement to lease Jetstream model 3101 Filed as Exhibit 2.1 to WestAir Holding, Inc.'s
aircraft and Jetstream model 3201 aircraft Form 8-K filed June 8, 1989, Commission File
between BAe and WestAir, dated May 11, 1989 No. 33-24316, incorporated herein by reference
10.60 Amendment to Agreement to Lease dated May Filed as Exhibit 10.38 to WestAir Holding,
11, 1989 between WestAir and BAe, dated Inc.'s Form 10-K for the year ended December
February 15, 1990 31, 1989, Commission File No. 33-24316,
incorporated herein by reference
10.61 Amended and Restated Stock Purchase Filed as Exhibit 10.42(a) to WestAir Holding,
Agreement, dated September 30, 1991 among Inc.'s Form 10-K for the year ended December
WestAir Holding, Inc., WestAir Commuter 31, 1991, Commission File No. 33-24316,
Airlines, Inc. and Atlantic Coast Airlines, incorporated herein by reference
Inc., relating to the sale of the Atlantic
Coast division of WestAir Commuter Airlines,
Inc.
10.65 Agreement of Purchase and Sales of Assets by Filed as Exhibit 10.90 to Mesa Airlines, Inc.
and among Crown Airways, Inc., Phillip R. Form 10-K for the year ended September 30,
Burnaman, A. J. Beiga and Mesa Airlines, 1994, Commission File No. 0-15495
Inc., dated as of December 16, 1993
22
<PAGE>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
10.66 Supplemental Agreement No. 9/03/94 Filed as Exhibit 10.66 to Mesa Airlines, Inc.
Beechcraft 1900 D Airliner Acquisition Form 10-K for the year ended September 30,
Master Agreement between Mesa Airlines, 1994, Commission File No. 0-15495
Inc., Beech Aircraft Corporation and Beech
Acceptance Corporation, Inc., dated as of
September 23, 1994
10.67 Form of Lease Agreement between Beech Filed as Exhibit 10.67 to Mesa Airlines, Inc.
Acceptance Corporation, Inc. and Mesa Form 10-K for the year ended September 30,
Airlines, Inc., negotiated September 30, 1994, Commission File No. 0-15495
1994 for all prospective 1900 D Airliner
leases.
10.68 Asset Purchase Agreement dated July 29, 1994 Filed as Exhibit 10.68 to Mesa Airlines, Inc.
among Pennsylvania Commuter Airlines, Inc., Form 10-K for the year ended September 30,
dba Allegheny Commuter Airlines, US Airways 1994, Commission File No. 0-15495
Leasing and Services, Inc., and Mesa
Airlines, Inc.
10.69 Letter Agreement in Principle dated as of Filed as Exhibit 10.69 to Mesa Airlines, Inc.
October 16, 1994 among Air Wisconsin, Inc., Form 10-K for the year ended September 30,
United Air Lines Inc. and Mesa Airlines, 1994, Commission File No. 0-15495
Inc. (Certain portions deleted pursuant to
request for confidential treatment)
(Referred to erroneously as Exhibit 10.94 in
letter asking for confidential treatment to
Securities and Exchange Commission dated
12-23-94 from Chapman & Cutler)
10.70 Subscription Agreement between AmWest Filed as Exhibit 10.70 to Mesa Airlines, Inc.
Partners, L.P. and Mesa Airlines, Inc. dated Form 10-K for the year ended September 30,
as of June 28, 1994 1994, Commission File No. 0-15495
10.71 Omnibus Agreement Filed as Exhibit 10.71 to Mesa Air Group, Inc.
Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.72 Aircraft Purchase and Sale Agreement Filed as Exhibit 10.72 to Mesa Air Group, Inc.
Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.73 Expendable and Rotable Spare Parts and Sale Filed as Exhibit 10.73 to Mesa Air Group, Inc.
Agreement Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.74 United Express Agreement Amendment Filed as Exhibit 10.74 to Mesa Air Group, Inc.
Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.75 Side Letter Agreement Filed as Exhibit 10.75 to Mesa Air Group, Inc.
Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.76 First Amendment to Omnibus Agreement Filed as Exhibit 10.76 to Mesa Air Group, Inc.
Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.77 Operating Lease Agreement Filed as Exhibit 10.77 to Mesa Air Group, Inc.
Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
23
<PAGE>
EXHIBIT
NUMBER DESCRIPTION REFERENCE
------- ----------- ---------
10.78 Item 3. Legal Proceedings - Form 10-K dated Filed as Exhibit 10.78 to Mesa Air Group, Inc.
September 30, 1994 Form 10-Q for the quarter ended December 31,
1994, Commission File No. 0-15495
10.79 Purchase Agreement B95-7701-PA-200 between Filed as Exhibit 10.79 to Mesa Air Group, Inc.
Bombardier Inc. and Mesa Airlines, Inc. Form 10-Q for the quarter ended March 31, 1995,
Commission File No. 0-15495
10.81 Letter of Understanding between Mesa Air Filed as Exhibit 10.81 to Mesa Air Group, Inc.
Group, Inc. and Raytheon Aircraft Company Form 10-Q for the quarter ended March 31, 1996,
(RAC) dated April 12, 1996. Commission File No. 0-15495
10.82 Supplemental Agreement No. 05/22/96, Filed as Exhibit 10.82 to Mesa Air Group, Inc.
Beechcraft 1900D Airliner Acquisition Master Form 10-Q for the quarter ended March 31, 1997,
Agreement between Mesa Air Group, Inc., Commission File No. 0-15495
Raytheon Aircraft Company and Raytheon
Aircraft Credit Corporation
10.83 Bombardier Regional Aircraft Division Filed as Exhibit 10.83 to Mesa Air Group, Inc.
Purchase Agreement CRJ-0351 between Form 10-Q for the quarter ended December 31,
Bombardier Inc. and Mesa Air Group, Inc. 1996, Commission File No. 0-15495
10.84 Aircraft Option Exercise B97-7701-RJTL-3492L Filed as Exhibit 10.84 to Mesa Air Group, Inc.
dated as of August 15, 1997 between Mesa Air Form 10-K for the fiscal year ended September
Group, Inc. and Bombardier Inc. (Request 30, 1997, Commission File No. 0-15495.
for confidential treatment submitted to SEC.)
10.85 Bombardier Regional Aircraft Division Filed as Exhibit 10.85 to Mesa Air Group, Inc.
Settlement Agreement B97-7701-RJTL-3493L Form 10-K for the fiscal year ended September
dated as of August 15, 1997 between Mesa Air 30, 1997, Commission File No. 0-15495.
Group, Inc. and Bombardier Inc. (Request
for confidential treatment submitted to SEC.)
10.86 Service Agreement dated as of November 11, Filed as Exhibit 10.86 to Mesa Air Group, Inc.
1997 between Mesa Airlines, Inc. and US Form 10-K for the fiscal year ended September
Airways, Inc. (Request for confidential 30, 1997, Commission File No. 0-15495.
treatment submitted to SEC.)
10.87 Letter Agreement dated as of March 26, 1998 Filed herewith
between Mesa Airlines, Inc. and America West
Airlines, Inc. (Request for confidential
treatment submitted to SEC.)
10.88 Employment Agreement dated as of March 13, Filed herewith
1998, between Mesa Air Group, Inc. and
Jonathan G. Ornstein
10.89 Form of Employment Agreement dated as of Filed herewith
January 5, 1998 entered into by and between
Mesa Air Group, Inc. and Gary E. Risley,
W. Stephen Jackson, J. Clark Stevens and
various other officers of the Company and
its subsidiaries
10.90 Letter Agreement dated as of February 4, Filed herewith
1998 between Mesa Air Group, Inc. and Larry
L. Risley
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the duly
authorized undersigned.
MESA AIR GROUP, INC.
Registrant
Date: May 15, 1998 /s/ Blaine M. Jones
------------------------------
Blaine M. Jones
Chief Financial Officer
(Principal Accounting Officer)
25
<PAGE>
EXHIBIT 10.87
AMERICA WEST AIRLINES, INC.
4000 East Sky Harbor Boulevard
Phoenix, Arizona 85034
March 26, 1998
Mesa Airlines, Inc.
2325 East 30th Street
Farmington, New Mexico 87401
Re: Letter Agreement concerning America West Express Service Agreement,
dated September 4, 1992, between America West Airlines, Inc. ("AWA"),
and Mesa Airlines, Inc. ("Mesa"), as amended by the following: Letter
Agreement, dated September 3, 1993, re: America West Express Service
Agreement; Amendment to Agreement between AWA and Mesa, dated March
31, 1993; Second Amendment to the Agreement between AWA and Mesa,
dated July 31, 1993; Letter Agreement, dated October 5, 1993, re:
America West Express Service Agreement; Third Amendment to Agreement
between AWA and Mesa, dated October 7, 1993; Third Amendment to
Agreement between AWA and Mesa, dated August, 1994; Letter Agreement,
dated March 31, 1994, re: America West Express Code-Share Agreement
Addendum; Letter Agreement, dated August 16, 1994, re: America West
Express Code-Share Agreement Addendum; and Fourth Amendment, dated
October, 1994, to the Agreement between AWA and Mesa (collectively,
the "AWA/Mesa Code Agreement")
Ladies and Gentlemen:
The purpose of this letter is to establish the terms and
conditions pursuant to which America West Airlines, Inc. ("AWA") is willing to
continue the code-share relationship with Mesa Airlines, Inc. ("Mesa") pursuant
to the AWA/Mesa Code Agreement as amended, revised and superseded by this letter
(the "Revised AWA/Mesa Code Agreement"). If Mesa executes and delivers this
letter agreement by 5:00 p.m., Phoenix time, on March 26, 1998, AWA's default
notice contained in AWA's letter, dated March 2, 1998, to Mesa (the "Default
Notice") will hereby be rescinded.
After execution and delivery of this letter agreement, AWA and
Mesa shall proceed diligently and in good faith to negotiate and execute a new
code-share agreement to replace and supersede the Revised AWA/Mesa Code
Agreement, in a form and substance acceptable to AWA and Mesa (the "New
Agreement"). AWA will exclusively negotiate with Mesa to reach the New Agreement
through April 30, 1998. If the New Agreement is not executed by April 30, 1998,
then AWA may proceed to negotiate with other carriers to provide America West
<PAGE>
March 26, 1998
Page 2
Express ("AWE") code share service. Commencing with the delivery of this letter,
the AWA/Mesa Code Agreement is amended, revised and superseded as follows:
1. Sections 2.01(a) and (b) of the AWA/Mesa Code Agreement are
revised in their entirety to provide that during the term of the Revised
AWA/Mesa Code Agreement, Mesa shall schedule and operate AWE service in the
markets and, at a minimum, with the frequencies listed on Schedule 1 attached
hereto. If AWA establishes its own America West Airlines services to a market
listed on Schedule 1 and/or Mesa's performance standards for a market fall below
the minimum levels specified in paragraph 11 of this letter for [ * ] (i.e.
[ * ] completion factor), then AWA, by [ * ] days' prior written notice to Mesa,
may revise Schedule 1 by removing that market or markets or reducing the
frequency of AWE service to that market and if the frequency of AWE services is
reduced, AWA may specify which AWE flight is to be removed as AWE service.
2. Section 2.01(d) of the AWA/Mesa Code Agreement is deleted.
3. Section 2.02(a) of the AWA/Mesa Code Agreement is revised
in its entirety to require that the scheduled air service required in Sections
2.01(a) and (b) shall be performed by Mesa using Beech 1900, Dash 8, CRJ or
other aircraft approved by AWA.
4. Section 3.05(c)(2) of the AWA/Mesa Code Agreement is
revised by permitting AWA to [ * ] by AWA to Mesa the performance penalties
established herein.
5. Section 3.07 of the AWA/Mesa Code Agreement is deleted.
6. Section 8.02(a) of the AWA/Mesa Code Agreement is revised
to provide that Mesa shall provide to AWA on the 15th day and last day of each
calendar month status reports (on a form to be provided by AWA), with all
necessary details and backup, on AWE's ontime performance and completion factor,
on a market-by-market basis during the prior 30 days.
7. A new Section 8.01(d) is added to the AWA/Mesa Code
Agreement to provide that AWA shall have the right, during normal business hours
after reasonable prior written notice to Mesa, to make any examination or audit
of Mesa's books and records related to AWE passengers and performance maintained
in connection with the AWA/Mesa relationship created by the Revised AWA/Mesa
Code Agreement. If such examination or audit shall disclose that Mesa has
underpaid any sum due by Mesa to AWA, Mesa shall pay such sum to AWA within
[ * ] after receipt of written demand from AWA. If such examination or audit
shall disclose that Mesa has overpaid any sum due by Mesa to AWA, AWA shall
pay any overpayment to Mesa within [ * ] after receipt of written demand from
Mesa.
" [CONFIDENTIAL PORTION DELETED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION] "
<PAGE>
March 26, 1998
Page 3
8. Section 9.01(_) of the AWA/Mesa Code Agreement is amended
in its entirety to provide that in addition to the remedies provided in Section
9.01, if during any [ * ] the [ * ] (excluding [ * ]) of published scheduled
flights for the [ * ] falls below [ * ], Mesa shall pay to AWA the sum of [ * ]
for [ * ] the [ * ] is [ * ]. The performance penalty shall be paid to AWA by
Mesa within [ * ] days after the expiration of each [ * ]. AWA shall be entitled
to offset any performance penalties not paid timely against sums otherwise
payable to Mesa pursuant to Section 3.05(c)(2).
9. Section 9.01 is revised by deleting subsection (b) and
revising subsection (a) in its entirety to provide that the AWA/Mesa Code
Agreement became effective on October 1, 1992 and shall expire on June 30, 1998,
unless this Agreement is terminated at an earlier date as permitted by the other
sections of the Revised AWA/Mesa Code Agreement. If the Revised AWA/Mesa Code
Agreement is terminated, then AWA and Mesa shall continue to perform the duties
and obligations in the manner prescribed by the Revised AWA/Mesa Code Agreement
to and including the effective date of the termination.
Commencing on May 1, 1998, in addition to the revisions
provided in Paragraphs 1-9, above, the AWA/Mesa Code Share Agreement shall
further be amended, revised and superseded as follows:
The first sentence of Section 8.01 of the AWA/Mesa Code
Agreement is revised in its entirety to provide that Mesa shall pay to AWA: (i)
in consideration of the [ * ] provided to Mesa, the [ * ], [ * ] and other
considerations provided by AWA to Mesa, Mesa shall pay to AWA the [ * ] to be
provided by AWA, which for 1998 shall be the [ * ] on all AWE's flights operated
by Mesa; (ii) a [ * ]; (iii) an [ * ] for [ * ] in [ * ]; and (iv) a [ * ] for
[ * ] equal to [ * ] of [ * ] given to AWE passengers who are denied boarding
by Mesa on AWE flights (collectively, the "Service Charges"). After receipt
of written request, AWA shall provide Mesa with backup information supporting
the [ * ] of the [ * ] for above.
" [CONFIDENTIAL PORTION DELETED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION] "
<PAGE>
March 26, 1998
Page 4
Please acknowledge your agreement to the terms of this letter
and the amendment, modification and revisions of the AWA/Mesa Code Agreement as
provided herein. By your execution of this letter you represent and warrant that
you have the authority and power to bind Mesa to the terms of this letter.
Sincerely,
AMERICA WEST AIRLINES, INC.
By /s/ Stephen L. Johnston
------------------------
Stephen L. Johnston
Senior Vice President - Corporate
Affairs
Acknowledged, accepted and agreed to this 26 day of March, 1998.
----
MESA AIRLINES, INC.
By /s/ Robert C. Dynan
--------------------
Its President
---------------
<PAGE>
SCHEDULE ONE
Minimum Frequency
Frequencies
Market Weekdays Weekends EQP
- ------ -------- -------- ---
Aspen, CO (ASE) [ * ] [ * ] DH8
Bullhead City, AZ (IFP) [ * ] [ * ] BE1
Des Moines, IA (DSM) [ * ] [ * ] CRJ
Durango, CO (DRO) [ * ] [ * ] BE1
Farmington, NM (FMN) [ * ] [ * ] BE1
Flagstaff, AZ (FLG) [ * ] [ * ] BE1
Fort Huachuca, AZ (FHU) [ * ] [ * ] BE1
Fresno, CA (FAT) [ * ] [ * ] CRJ
Gallup, NM (GUP) [ * ] [ * ] BE1
Grand Junction, CO (GJT) [ * ] [ * ] BE1
Kingman, AZ (IGM) [ * ] [ * ] BE1
Lake Havasu, AZ (HII) [ * ] [ * ] BE1
Montrose, CO (MTJ) [ * ] [ * ] BE1
Palm Springs, CA (PSP) [ * ] [ * ] CRJ
Prescott, AZ (PRC) [ * ] [ * ] BE1
Santa Barbara, CA (SBA) [ * ] [ * ] CRJ
Telluride, CO (TEX) [ * ] [ * ] BE1
Yuma, AZ (YUM) [ * ] [ * ] BE1
- --------------------------- ----------------- --------------- ----------------
TOTAL [ * ] [ * ]
" [CONFIDENTIAL PORTION DELETED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION] "
EXHIBIT 10.88
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of the 13th day of March, 1998 by and between MESA AIR GROUP,
INC., a Nevada corporation (the "Company"), and JONATHAN G. ORNSTEIN, residing
at Building 116, Melsbroek Airport, 1820 Melsbroek, Belgium (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive
hereby accepts such employment, upon the terms and subject to the conditions set
forth in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter
provided, the term of employment under this Agreement shall begin on the date
hereof and shall continue through the 13th day of March, 2001, provided,
however, that if the Company fails to give one hundred eighty days written
notice prior to the date of termination, the term of this Agreement shall
automatically be extended for an additional one hundred eighty day period.
3. COMPENSATION
3.1 Base Salary. The Company shall pay to the Executive as
basic compensation for all services rendered by the Executive during the term of
this Agreement a basic annualized salary of $200,000 per year, or such other sum
in excess of that amount as the parties may agree on from time to time or as
provided in the last sentence of this Section 3.1 (as in effect from time to
time, the "Base Salary"), payable bi-weekly or in other more frequent
installments, as determined by the Company. The Board of Directors shall have no
authority to reduce the Executive's Base Salary in effect from time to time. In
addition, the Board of Directors, in its discretion, may award a bonus or
bonuses to the Executive in addition to the bonuses provided for in Section 3.2,
provided, however, such discretionary bonus shall not be included in the
definition of "Base Salary." Annually, the Board of Directors shall review the
Base Salary and increase it as it deems appropriate.
3.2 Bonuses. In addition to the Base Salary to be paid
pursuant to Section 3.1, the Company shall pay the Executive as incentive
compensation the annual bonus, to the extent earned, as specified in this
Section 3.2. A "Minimum Bonus" will be paid to the Executive if Company achieves
any positive growth in the Company's earnings per share. A "Threshold Bonus"
will be paid to the Executive if the Company achieves earnings per share growth
of at least 7% but less than 13%. A "Target Bonus" will be paid to the Executive
if the Company achieves earnings per share growth of at least 13% but less than
18%. A "Maximum Bonus" will be paid to the Executive if the Company achieves
<PAGE>
earnings per share growth of at least 18%. The Minimum Bonus will be $52,500,
the Threshold bonus will be $105,000, the Target Bonus will be $210,000 and the
Maximum Bonus will be $420,000. Earnings per share growth will be based on the
earnings per share for the year in which the bonus is deemed to be earned and
compared against the earning per share for the prior year as each are stated in
the Company's then latest applicable audited financial statements. In the event
the Base Salary is increased, the Minimum Bonus, Threshold Bonus, Target Bonus
and Maximum Bonus will be increased by the same percentage as the increase in
the Base Salary. The annual bonus shall be deemed to have been earned as of the
last day of the Company's fiscal year to which the bonus relates. Except as
otherwise provided herein, such annual bonus shall be paid no later than 90 days
after the close of such fiscal year.
3.3 Stock Option Award. Upon the execution of this Agreement,
the Company shall grant the Executive an option (the "Initial Option") under a
plan, the underlying shares of Common Stock of which will be registered on Form
S-8 or any successor form, to purchase 1,000,000 shares of the Company's common
stock (the "Common Stock") at an exercise price of Closing Price on March 13,
1998. On April 1 of each year (beginning April 1, 1999) during the initial term
of this Agreement, the Company will grant the Executive an option (each an
"Annual Option," collectively the "Annual Options" and together with the Initial
Option, the "Executive's Options") to purchase 150,000 shares of Common Stock at
the average sales price per share of Common Stock on the stock exchange or stock
market on which shares of Common Stock are then listed or admitted for trading
on the applicable April 1st. The Initial Option will be for a term of ten years
from the date of grant and, except as otherwise provided (but in no event shall
the vesting schedule be more restrictive than as set forth in this Agreement),
shall vest one-third on April 1st of the year of the grant, one-third on the
first anniversary of the date of the initial vesting and one-third on the second
anniversary of the initial vesting. The Initial Option, to the extent it is
vested, shall be exercisable until the time stated in the agreement granting the
Initial Option but in no event shall it terminate earlier than the earlier of
(i) ten years from the date of grant or (ii) the ninety days after the date the
Executive is no longer employed with the Company or is no longer a director of
the Company, whichever is later. The Annual Options will be for a term of ten
years from the date of grant and, except as otherwise provided (but in no event
shall the vesting schedule be more restrictive than as set forth in this
Agreement), shall vest one-third on the first anniversary of the date of the
grant, and one-third on the second anniversary of the grant, and one-third on
the third anniversary of the grant. The granting of the Executive's Options will
be made subject to Stockholder approval. The Company shall submit the granting
of the Executive's Options to the stockholders of the Company no later than June
30, 1998 and shall solicit proxies in favor of the granting of the Executive's
Options. In the event Stockholder approval is not received by July 31, 1998 or
all options to be granted pursuant to this Section 3.3 are not approved by the
stockholders, the Company will issue stock appreciation rights in an amount
necessary to provide the same level of compensation as would have been provided
by the Executive's Options.
3.4 Other Benefits. The Executive shall be entitled to such
fringe benefits including, but not limited to, medical and other insurance
benefits (for the Executive and his family), airline travel benefits on the
2
<PAGE>
Company's airlines, as may be provided from time to time by the Company to other
senior officers the Company. The Company will use its commercially reasonable
efforts to obtain from other airlines the same benefits for the Executive as the
Company provides to chief executive officers of other airlines.
3.5 Moving and Living Expenses. The Company will pay for all
reasonable and customary expenses in accordance with Company policy incurred by
the Executive in relocating and moving to Farmington, New Mexico and a temporary
leasing allowance of $1,500 per month for a six month period. If at any time a
permanent location is established for the Executive's office outside of
Farmington, New Mexico, the Company will pay reasonable and customary expenses
in accordance with Company policy incurred in relocating to such new location.
3.6 Reimbursement. The Company shall reimburse the Executive,
in accordance with the Company's policies and practices for senior management,
for all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement.
3.7 Other Incentive and Benefit Plans. The Executive shall be
eligible to participate, in accordance with the terms of such plans as they may
be adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company from
time to time.
3.8 Life and Disability Insurance. The Company shall
immediately purchase and maintain during the term of this Agreement or any
renewal or extension thereof a term life insurance policy on the Executive's
life in the face amount of $750,000. The life insurance policy shall be payable
to a beneficiary designated by the Executive from time to time. The Company
shall also immediately purchase and maintain during the term of this Agreement,
a disability insurance policy in the face amount of at least $410,000. The face
amount of such policies will be increased proportionally with any increase in
the Base Salary. The Company shall maintain the policies in full face value and
effect without decrease in the benefit and pay the premiums during the terms of
this Agreement and any renewals or extensions hereof. The Executive shall have
the right of ownership of said policy and to continue to maintain said insurance
and be responsible for the satisfaction of premiums after the termination of
this Agreement.
4. DUTIES
The Executive is engaged as the Chief Executive Officer of the
Company and initially shall be elected as a director of the Company. During the
term of this Agreement, the Company shall use its good-faith efforts to cause
the Board of Directors of the Company to include the Executive as a nominee and
cause his election to the Board of Directors of the Company. The Executive shall
report directly to the Board of Directors, and all other officers and employees
of the Company shall report either directly or indirectly to the Executive and
no such other officer or employee shall report directly to the Board of
Directors. The Executive's duties and responsibilities shall be commensurate
3
<PAGE>
with those customarily associated with the chief executive of a corporation
comparable to the Company, including, without limitation, (a) general executive
responsibility for the Company's over-all operations; (b) the development and
implementation of the long-term objectives and a long-term strategic plan of the
Company; and (c) together with the assistance of appropriate financial staff and
operating management, the preparation and implementation of the Company's annual
operating budget.
5. VACATIONS AND DAYS OFF
The Executive shall be entitled to vacations with pay and to
such personal and sick leave with pay in accordance with the policy of the
Company as may be established from time to time by the Company and applied to
other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may be
carried over from one year to the next for a period of up to one year. Any
vacation days which remain unused on the first anniversary of the end of the
fiscal year to which they originally related shall expire and shall thereafter
no longer be useable by the Executive.
6. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
6.1 Death. If the Executive dies during the term of the
Executive's employment, the Company shall pay to the estate of the Executive
within 30 days after the date of death such Base Salary and any cash bonus
compensation earned pursuant to the provisions of this Agreement or any
incentive compensation plan then in effect but not yet paid, as would otherwise
have been payable to the Executive up to the end of the month in which the
Executive's death occurs. After receiving the payments provided in this Section
6.1, the Executive and the Executive's estate shall have no further rights under
this Agreement (other than those rights already accrued).
6.2 Disability. (i) During any period of disability, illness
or incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3.1 of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
this Agreement or any incentive compensation plan then in effect but not yet
paid, less any cash benefits received by him under any disability insurance
carried by or provided by the Company. Upon the Executive's "Permanent
Disability" (as defined below), which Permanent Disability continues during the
payment periods specified herein, the Company shall pay to the Executive for the
period of time specified below an amount (the "Disability Payment") equal to the
(i) sum of (A) the Base Salary paid in the same bi-weekly or other period
installments as in effect at the time of the Executive's Permanent Disability
plus (B) an amount equal to the Minimum Bonus payable to the Executive under
Section 3.2 of this Agreement or the minimum amount of any similar bonus or
incentive plans or programs then in effect if greater than the Minimum Bonus in
respect of the fiscal year during which the Executive's Permanent Disability
occurred, which amount, in any event, shall be paid in pro rata equal bi-weekly
installments over the period of time specified below (ii) reduced by the amount
of any monthly payments under any policy of disability income insurance paid for
4
<PAGE>
by the Company which payments are received during the time when any Disability
Payment is being made to the Executive following the Executive's Permanent
Disability. For so long as the Executive's Permanent Disability continues, the
Disability Payment shall be paid by the Company to the Executive in equivalent
installments at the same time or times as would have been the case for payment
of Base Salary over the unexpired term of this Agreement if the Executive had
not become permanently disabled and had remained employed by the Company
hereunder, but in no case shall such period exceed 24 months. The Executive may
be entitled to receive payments under any disability income insurance which may
be carried by or provided by the Company from time to time. Upon "Permanent
Disability' (as that term is defined in Section 6.2(ii) below) of the Executive,
except as provided in this Section 6.2 all rights of the Executive under this
Agreement (other than rights already accrued or the Executive's rights under
Section 3.8 shall terminate).
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, the inability of the Executive, as determined by the Board of
Directors of the Company, by reason of physical or mental disability to perform
the duties required of him under this Agreement for a period of one hundred and
eighty (180) days in any 210-day period. Successive periods of disability,
illness or incapacity will be considered separate periods unless the later
period of disability, illness or in capacity is due to the same or related cause
and commences less than three months from the ending of the previous period of
disability. Upon such determination, the Board of Directors may terminate the
Executive's employment under this Agreement upon ten (10) days' prior written
notice. If any determination of the Board of Directors with respect to permanent
disability is disputed by the Executive, the parties hereto agree to abide by
the decision of a panel of three physicians. The Executive and Company shall
each appoint one member, and the third member of the panel shall be appointed by
the other two members. The Executive agrees to make himself available for and
submit to examinations by such physicians as may be directed by the Company.
Failure to submit to any such examination shall constitute a breach of a
material part of this Agreement.
7. OTHER TERMINATIONS
7.1 By the Executive. (i) The Executive may terminate the
Executive's employment hereunder upon giving at least ninety (90) days' prior
written notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 7.4 of this Agreement.
(ii) If the Executive gives notice pursuant to the first
sentence of Section 7.1(i) above, the Company shall have the right (but not the
obligation) to relieve the Executive, in whole or in part, of the Executive's
duties under this Agreement, or direct the Executive to no longer perform such
duties, or direct that the Executive should no longer report to work, or any
combination of the foregoing. In any such event, the Executive shall be entitled
to receive only the Base Salary not yet paid, as would otherwise have been
payable to the Executive up to the end of the month specified as the month of
termination in the termination notice. If the Executive gives notice pursuant to
the first sentence of Section 7.1 (i) above but specifies a termination date in
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excess of ninety (90) days from the date of such notice, the Company shall have
the right (but not the obligation) to accelerate the termination date to any
date prior to the date specified in the notice that is in excess of ninety (90)
days from the date of the notice, and the Company shall have the right (but not
the obligation) to relieve the Executive, in whole or in part, of the
Executive's duties under this Agreement, or direct the Executive to no longer
perform such duties, or direct that the Executive should no longer report to
work, or any combination of the foregoing; provided, however, that in any such
event the Executive shall be entitled to receive the Base Salary, as would
otherwise have been payable to the Executive up to the end of the month of the
termination date properly selected by the Company. If the Executive gives notice
pursuant to the first sentence of Section 7.1 (i), upon receiving the payments
provided for under this Section 7.1, all rights of the Executive under this
Agreement (other than rights already accrued or the Executive's rights under
Section 3.8) shall terminate.
7.2 Termination for "Good Cause." (i) Except as otherwise
provided in this Agreement, the Company may terminate the employment of the
Executive hereunder only for "good cause," which shall mean the termination of
employment of Employee by the Board because of Employee's personal dishonesty,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties (including failure to travel to the
Company's headquarters to the extent necessary to complete his duties), willful
violation of any material law, rule or regulation resulting in the Company's
detriment or reflecting upon the Company's integrity (other than traffic
infractions or similar minor offenses) or a material breach by the Employee of
the terms of this Agreement and failure to cure such breach within thirty (30)
days after receipt of written notice from the Company specifying the nature of
such breach or to pay compensation to the Company deemed reasonable by the
Company if the breach cannot be cured. For purposes of this Agreement,
Employee's termination of employment shall not be considered to be a Termination
for Cause unless and until there shall have been delivered to the Employee a
copy of the resolution, duly adopted by the affirmative vote of not less than
seventy-five percent (75%) of the entire membership of the Board at a meeting
called and held for that purpose after reasonable notice to Employee and an
opportunity for him, together with his counsel, to be heard, finding that, in
the good faith opinion of the Board, Employee is guilty of misconduct of the
type described in this Section, and specifying the particulars thereof in detail
which determination shall be subject to a complete and de novo review as to the
reasonableness and good faith.
(ii) If the employment of the Executive is terminated for good
cause under Section 7.2(i) of this Agreement, the Company shall pay to the
Executive any Base Salary earned prior to the effective date of termination but
not yet paid and any cash bonus compensation earned pursuant to the provisions
of this Agreement or any incentive compensation plan then in effect but not paid
to the Executive prior to the effective date of such termination. Under such
circumstances, such payments shall be in full and complete discharge of any and
all liabilities or obligations of the Company to the Executive hereunder, and
the Executive shall be entitled to no further benefits under this Agreement
(other than rights already accrued or the Executive's rights under Section 3.8).
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(iii) Termination of the employment of the Executive other
than as expressly specified above in Section 7.2(i) for good cause, shall be
deemed to be a termination of employment "Without Good Cause."
7.3 Termination Without Good Cause. (i) Notwithstanding any
other provision of this Agreement, the Company shall have the right to terminate
the Executive's employment Without Good Cause pursuant to the provisions of this
Section 7.3. If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified by the Company being referred to herein as the "Accelerated
Termination Date"), the Executive, shall receive a lump sum cash payment equal
to a sum of (1) the number of years (or fractions thereof) remaining in the then
unexpired term of this Agreement or two, whichever is greater, multiplied by (A)
the Base Salary, times the number of years plus (B) an amount of cash equal to
the Target Bonus payable to the Executive under Section 3.2 of this Agreement or
the minimum amount of any similar bonus or incentive plans or programs then in
effect if greater than the Target Bonus in respect of the fiscal year during
which the Executive's termination Without Good Cause occurs plus (C) any other
cash or other bonus compensation earned prior to the date of such termination
pursuant to the terms of all incentive compensation plans then in effect other
than any such plan relating to annual incentive cash bonuses or any similar
bonus or incentive plans or programs then in effect; and (2) the additional
payments necessary to discharge certain tax liabilities (the "Gross Ups"), as
the term is defined in Section 11 of this Agreement, provided that,
notwithstanding such termination of employment, the Executive's covenants set
forth in Section 9 are intended to and shall remain in full force and effect and
provided further that in the event of such termination, the Company shall have
the right (but not the obligation) to relieve the Executive, in whole or in
part, of the Executive's duties under this Agreement, or direct the Executive to
no longer perform such duties, or direct that the Executive no longer be
required to report to work, or any combination of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 7.3 shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
7.4 Termination by Executive For Good Reason. (i) The
Executive shall be entitled to terminate his employment hereunder for Good
Reason within one-year of the occurrence of an event constituting Good Reason.
For purposes of this Agreement, "Good Reason" shall mean the occurrence of any
of the following circumstances without the Executive's consent: (1) assignment
of the Executive to any duties substantially inconsistent with his position or
duties contemplated by this Agreement or a substantial reduction of his duties
contemplated by this Agreement; (2) the removal of any titles of the Executive
specified in Section 4 of this Agreement; (3) the failure of the Company to
include the Executive as a nominee for the Board of Directors of the Company in
its proxy for any meeting of the shareholders of the Company where directors are
elected (other than a meeting where the Executive's director's position is not
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up for election as a result of a classified board or otherwise; (4) the failure
of the Executive to be reelected to the Board of Directors of the Company; (5)
any breach of the Company's obligation under this Agreement or any failure by
the Company to carry out any of its material obligations hereunder, and the
failure to cure such breach or failure within seven days after written notice of
such breach or failure has been delivered to the Company by the Executive; (6) a
Change of Control (as hereinafter defined); or (7) the relocation of the
Executive or his office, facilities, personnel, or equipment; provided however,
it shall not constitute "Good Reason" if the Executive or his office,
facilities, personnel, or equipment are relocated to any future location of the
Company's corporate headquarters and the relocated corporate headquarters is in
a metropolitan area with a population of at least 1,000,000 people.
(ii) For purposes of this Agreement, a "Change in Control"
shall mean the first to occur of:
(1) a change in control of the Company of a
nature that is required, pursuant to the
Securities Exchange Act of 1934 (the "1934
Act"), to be reported in response to Item
1(a) of a Current Report on Form 8-K or Item
6(e) of Schedule 14A under the 1934 Act (in
each case under this Agreement, references
to provisions of the 1934 Act and the rules
and regulations promulgated thereunder being
understood to refer to such law, rules and
regulations as the same are in effect on
April 1, 1998); or
(2) the acquisition of "Beneficial Ownership"
(as defined in Rule 13d-3 under the 1934
Act) of the Company's securities comprising
25% or more of the combined voting power of
the Company's outstanding securities by any
"person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the
rules and regulations promulgated
thereunder, but not including any trustee or
fiduciary acting in that capacity for an
employee benefit plan sponsored by the
Company) and such person's "affiliates" and
"associates" (as those terms are defined
under the 1934 Act), but excluding any
ownership by the Executive and his
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as
defined below) to constitute at least a
majority of all directors of the Company
(for these purposes, "Incumbent Directors"
means individuals who were the directors of
the Company on March 13, 1998, and, after
his or her election, any individual becoming
a director subsequent to March 13, 1998,
whose election, or nomination for election
by the Company's stockholders, is approved
by a vote of at least two-thirds of the
directors then comprising the Incumbent
Directors, except that no individual shall
be considered an Incumbent Director who is
not recommended by management and whose
initial assumption of office as a director
is in connection with an actual or
threatened "election contest" relating to
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the "election of directors" of the Company,
as such terms are used in Rule 14a-11 of
Regulation 14A under the 1934 Act); or
(4) the closing of a sale of all or
substantially all of the assets of the
Company;
(5) the Company's adoption of a plan of
dissolution or liquidation; or
(6) the closing of a merger or consolidation
involving the Company in which the Company
is not the surviving corporation or if,
immediately following such merger or
consolidation, less than seventy-five
percent (75%) of the surviving corporation's
outstanding voting stock is held or is
anticipated to be held by persons who are
stockholders of the Company immediately
prior to such merger or consolidation.
(iii) If an event constituting Good Reason occurs, the
Executive shall have the right, exercisable for a period of one year thereafter
by delivering a written statement to that effect to the Company, to immediately
terminate this Agreement and upon such a determination the Executive shall have
the right to receive and the Company shall be obligated to pay to Executive in
cash a lump sum payment in an amount equal to the sum of (1) three times (A) the
Base Salary then in effect, plus (B) the Target Bonus payable to the Executive
under Section 3.2 of this Agreement or the minimum amount of any similar bonus
or incentive plans or programs then in effect if greater than the Target Bonus
in respect of the fiscal year during which the Executive exercises his rights to
terminate his employment under this Section 7.4(ii) and plus (C) any other cash
or other bonus compensation earned prior to the date of such termination
pursuant to the terms of all incentive compensation plans then in effect other
than any such plan relating to annual incentive cash bonuses or any similar
bonus or incentive plans or programs then in effect; and (2) the Gross Up (the
sum of the foregoing amounts other than the Gross Up being referred to as the
"Good Reason Termination Payment"). If the Executive fails to exercise his
rights under this Section 7.4(iii) within one year following an event
constituting Good Reason, such rights shall expire and be of no further force or
effect.
7.5 Intentions Regarding Certain Stock and Benefit Plans.
Except as otherwise provided herein, upon any termination of the Executive"s
employment Without Good Cause or upon the exercise by the Executive of his
rights to terminate his employment for Good Reason, it is the intention of the
parties that any and all vesting or performance requirements or conditions
affecting any outstanding restricted stock, performance stock, stock option,
stock appreciation right, bonus, award, right, grant or any other incentive
compensation under the Mesa Air Group Employee Stock Option Plan or any other
similar incentive plan, under this Agreement, or otherwise received, shall be
deemed to be fully satisfied and any risk of forfeiture with respect thereto
shall be deemed to have lapsed.
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7.6 Certain Rights Mutually Exclusive. The provisions of
Section 7.3 and Section 7.4 are mutually exclusive, provided, however, that if
within one year following commencement of an 7.4 payout there shall be a Change
in Control as defined in Section 7.4(ii), then the Executive shall be entitled
to the amount payable to the Executive under Section 7.4(iii) reduced by the
amount that the Executive has received under Section 7.3 up to the date of the
Change in Control. The triggering of the lump sum payment requirement of Section
7.4 shall cause the provisions of Section 7.3 to become inoperative.
8. DISCLOSURE
The Executive agrees that during and after the term of the
Executive's employment by the Company, the Executive will disclose and disclose
only to the Company all ideas, methods, plans, developments or improvements
known by him which relate directly or indirectly to the business of the Company,
whether acquired by the Executive before or during the Executive's employment by
the Company. Nothing in this Section 8 shall be construed as requiring any such
communication where the idea, plan, method or development is lawfully protected
from disclosure as a trade secret of a third party or by any other lawful
prohibition against such communication.
9. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence
any and all information the Executive assimilates or to which the Executive has
access during the Executive's employment by the Company and which has not been
publicly disclosed and is not a matter of common knowledge in the fields of work
of the Company, including but not limited to information regarding the Company's
trade secrets, business plans, marketing plans or programs, any non-public
financial information, including forecasts, statistics relating to routes and
markets, contracts, customers, compensation arrangements and business
opportunities (collectively, the "Confidential Information"). The Executive
agrees that both during and after the term of the Executive's employment by the
Company, the Executive will not, without the prior written consent of the
Company, disclose any Confidential information to any third person, partnership,
joint venture, company, corporation or other organization. The foregoing
covenants shall not be breached to the extent that any such confidential
information becomes a matter of general knowledge other than through a breach by
a person with an obligation to the Company to maintain such confidentiality (and
the Executive knows that such person had an obligation to keep such information
confidential), including but not limited to the Executive's obligations to the
Company under this Section 9.
10. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an
insufficient remedy to the Company if the Executive violates the terms of
Sections 8 or 9 of this Agreement and that the Company would suffer irreparable
damage as a result of such violation. Accordingly, it is agreed that the Company
shall be entitled, upon application to a court of competent jurisdiction, to
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obtain injunctive relief to enforce the provisions of such Sections, which
injunctive relief shall be in addition to any other rights or remedies available
to the Company.
11. PAYMENT OF EXCISE TAXES
11.1 Payment of Excise Taxes. If the Executive is to receive
any (1) Good Reason Termination Payment under Section 7.4 of this Agreement, (2)
any benefit or payment under Section 6 as a result of or following the death or
Permanent Disability of the Executive, (3) any benefit or payment under Section
7.3 as a result of or following any termination of employment hereunder Without
Good Cause, (4) any benefit or payment under the Plans as a result of a Change
of Control, following the death or Permanent Disability of the Executive or
following the termination of employment hereunder Without Good Cause (such
sections being referred to as the "Covered Sections" and the benefits and
payments to be received thereunder being referred to as the "Covered Payments"),
the Executive shall be entitled to receive the amount described below to the
extent applicable: If any Covered Payment(s) under any of the Covered Sections
or by the Company under another plan or agreement (collectively, the "Payments")
are subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986 (as amended from time to time, the "Code"), or any successor or
similar provision of the Code (the "Excise Tax"), the Company shall pay the
Executive an additional cash amount (the "Gross Up") such that the net amount
retained by the Executive after deduction of any Excise Tax on the Payments and
the federal income tax and Excise Tax on any amounts paid under this Section 11
shall be equal to the Payments. The Gross-Up shall not include the amount of
state or federal income tax owed by the Executive on the amount of the Payments
excluding any state or federal income tax on the Gross-Up.
11.2 Certain Adjustment Payments. For purposes of determining
the Gross Up, the Executive shall be deemed to pay the federal income tax at the
highest marginal rate of taxation (currently 39.6%) in the calendar year in
which the payment to which the Gross Up applies is to be made. The determination
of whether such Excise Tax is payable and the amount thereof shall be made upon
the opinion of tax counsel selected by the Company and reasonably acceptable to
the Executive. The Gross Up, if any, that is due as a result of such
determination shall be paid to the Executive in cash in a lump sum within thirty
(30) days of such computation. If such opinion is not finally accepted by the
Internal Revenue Service upon audit or otherwise, then appropriate adjustments
shall be computed (without interest but with Gross Up, if applicable) by such
tax counsel based upon the final amount of the Excise Tax so determined; any
additional amount due the Executive as a result of such adjustment shall be paid
to the Executive by his or her Company in cash in a lump sum within thirty (30)
days of such computation, or any amount due the Executive's Company as a result
of such adjustment shall be paid to the Company by the Executive in cash in a
lump sum within thirty (30) days of such computation.
11.3 Preparation of Business Plan. Executive shall use his
commercially reasonable efforts to prepare and deliver a business plan to the
Board of Directors of the Company within 30 days of the time the Executive
becomes the Chief Executive Officer of the Company. Such business plan will
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address the following issues, along with such other issues that the Executive
may include in his discretion:
(1) the disposal of up to 77 excess aircraft;
(2) a new long-term agreement with America West;
(3) improvement of operational performance of the Company;
(4) reduction of the infrastructure of the Company
commensurate with the reduction in the Company's
operations; and
(5) reduction of "unit" costs that would allow the
Company to make reasonable profits in most markets in
which the Company operates.
12. MISCELLANEOUS
12.1 Waiver of Breach. The waiver by either party to this
Agreement of a breach of any of the provisions of this Agreement by the other
party shall not be construed as a waiver of any subsequent breach by such other
party.
12.2 Compliance With Other Agreements. The Executive
represents and warrants that the execution of this Agreement by him and the
Executive's performance of the Executive's obligations hereunder will not
conflict with, result in the breach of any provision of or the termination of or
constitute a default under any Agreement to which the Executive is a party or by
which the Executive is or may be bound.
12.3 Binding Effect: Assignment. The rights and obligations
of the Company under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company. This Agreement is a
personal employment contract and the rights, obligations and interests of the
Executive hereunder may not be sold, assigned, transferred, pledged or
hypothecated.
12.4 Entire Agreement. This Agreement contains the entire
agreement and supersedes all prior agreements and understandings, oral or
written, with respect to the subject matter hereof. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought
12.5 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
12.6 No Duty to Mitigate. The Executive shall be under no
duty to mitigate any loss of income as result of the termination of his
employment hereunder and any payments due the Executive upon termination of
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employment shall not be reduced in respect of any other employment compensation
received by the Executive following such termination.
12.7 Nevada Law. This Agreement shall be construed pursuant
to and governed by the substantive laws of the State of Nevada (except that any
provision of Nevada law shall not apply if the law of a state or jurisdiction
other than Nevada would otherwise apply).
12.8 Severability. Any provision of this Agreement which is
determined by a court of competent jurisdiction to be prohibited, unenforceable
or not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or non-
authorization without invalidating the remaining provisions hereof or affecting
the validity, enforceability or legality of such provision in any other
jurisdiction. In any such case, such determination shall not affect any other
provision of this Agreement, and the remaining provisions of this Agreement
shall remain in full force and effect. If any provision or term of this
Agreement is susceptible to two or more constructions or interpretations, one or
more of which would render the provision or term void or unenforceable, the
parties agree that a construction or interpretation which renders the term or
provision valid shall be favored.
12.9 Deduction for Tax Purposes. The Company's obligations to
make payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
12.10 Enforcement. If, within 10 days after demand to comply
with the obligations of one of the parties to this Agreement served in writing
on the other, compliance or reasonable assurance of compliance is not
forthcoming, and the party demanding compliance engages the services of an
attorney to enforce rights under this Agreement, the prevailing party in any
action shall be entitled to recover all reasonable costs and expenses of
enforcement (including reasonable attorneys' fees and reasonable expenses during
investigation, before and at trial and in appellate proceedings). In addition,
each of the parties agrees to indemnify the other in respect of any and all
claims, losses, costs, liabilities and expenses, including reasonable fees and
reasonable disbursements of counsel (during investigation prior to initiation of
litigation and at trial and in appellate proceedings if litigation ensues),
directly or indirectly resulting from or arising out of a breach by the other
party of their respective obligations hereunder. The parties' costs of enforcing
this Agreement shall include prejudgment interest. Additionally, if any party
incurs any out-of-pocket expenses in connection with the enforcement of this
Agreement, all such amounts shall accrue interest at 10% per annum (or such
lower rate as may be required to avoid any limit imposed by applicable law)
commencing 30 days after any such expenses are incurred.
12.11 Notices. All notices which are required or may be given
under this Agreement shall be in writing and shall be deemed to have been duly
given when received if personally delivered; when transmitted if transmitted by
telecopy or similar electronic transmission method; one working day after it is
sent, if sent by recognized expedited delivery service; and three days after it
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is sent, if mailed, first class mail, certified mail, return receipt requested,
with postage prepaid. In each case notice shall be sent to:
To the Company: c/o Mesa Airlines, Inc.
2325 E. 30th Street
Farmington, New Mexico 87401
Attn: Gary Risley
Telecopy: (505) 326-4485
To the Executive at the Executive's address herein first above
written, or to such other address as either party may specify by written notice
to the other.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
MESA AIR GROUP, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
_____________________________________
Jonathan G. Ornstein
15
EXHIBIT 10.89
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated as of January 5, 1998, is by
and between MESA AIR GROUP, INC., a Nevada corporation, (the "Company") and
_______________, an individual residing in Farmington, New Mexico ("Employee").
RECITALS:
A. Employee is the ____________________ of the Company and
has served as an executive officer of the Company and also serves as ___________
__________________;
B. The Board of Directors of the Company considers a sound
and vital management to be essential and desires to have the continuing benefit
of Employee's knowledge, experience and service; and
C. Employee desires to be employed by the Company and
the Company desires to retain Employee in his present capacity on the terms
and conditions set forth herein.
AGREEMENTS:
The parties hereto, in consideration of the covenants and
agreements set forth herein and other good and valuable consideration, agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meaning
indicated thereof:
1.1 Board means the Board of Directors of the
Company or any successor.
1.2 Company means Mesa Air Group, Inc. or any
successor entity.
1.3 Compensation means the total amount included in
Employee's gross income for federal income tax purposes in connection
with his employment hereunder for payments or benefits received under
the provisions of Sections 2.3.1 and 2.3.3 hereof.
<PAGE>
1.4 Effective Date means January 5, 1998.
1.5 Good Reason means the occurrence of any of the
following events to which Employee has not expressly agreed to in
writing:
(a) The assignment to Employee of duties
inconsistent with Employee's position, duties,
responsibilities and status with the Company on the Effective
Date or the failure to re-elect Employee to his present
positions;
(b) A material reduction in Employee's
Compensation, as defined herein, as in effect on the Effective
Date or any renewal date of this Agreement, whichever occurs
later;
(c) Employee's relocation, without his
consent, to any city other than the principal location at
which Employee performed Employee's duties on the Effective
Date, except for required travel by Employee on the Company's
business to an extent substantially consistent with Employee's
business travel obligations on the Effective Date; provided,
however, that, if the Board determines to relocate the
Company's principal executive offices, the Company shall pay
all of Employee's reasonable moving and other relocation
expenses including, but not limited to, financial assistance
in connection with the sale of Employee's personal residence
in Farmington, New Mexico and the purchase of a new personal
residence in the relocation city, and the Board shall make
such adjustments in Employee's salary as is reasonably
necessary to reflect the increased costs of living in the new
location, then Employee shall be obligated to perform his
services generally at such new location and such relocation
shall not constitute "Good Reason" hereunder;
(d) The failure of the Company to obtain
the assumption of this Agreement by any successor to
substantially all of the assets or business of the Company;
(e) Any material breach by the Company of
any provision of this Agreement which is not corrected by the
Company or, if the breach cannot be corrected, as to which the
Company fails to pay to Employee reasonable compensation for
such breach, within sixty (60) days following receipt by the
Company of written notice from Employee specifying the nature
of such breach; or
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(f) A good faith determination by Employee
that Employee is unable to carry out the duties,
responsibilities, authorities or powers attendant to
Employee's position by reason of the conditions surrounding
Employee's employment, which conditions did not exist on the
Effective Date of this Agreement.
1.6 Major Subsidiary means a subsidiary of the
Company generating greater than 30% of the Company's consolidated
annual gross revenues.
1.7 Termination For Cause means the termination of
employment of Employee by the Board because of Employee's personal
dishonesty, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful
violation of any material law, rule or regulation resulting in the
Company's detriment or reflecting upon the Company's integrity (other
than traffic infractions or similar minor offenses) or a material
breach by the Employee of the terms of this Agreement and failure to
cure such breach within thirty (30) days after receipt of written
notice from the Company specifying the nature of such breach or to pay
compensation to the Company deemed reasonable by the Company if the
breach cannot be cured. For purposes of this Agreement, Employee's
termination of employment shall not be considered to be a Termination
for Cause unless and until there shall have been delivered to the
Employee a copy of a resolution, duly adopted by the affirmative vote
of not less than seventy-five percent (75%) of the entire membership of
the Board at a meeting called and held for that purpose after
reasonable notice to Employee and an opportunity for him, together with
his counsel, to be heard, finding that, in the good faith opinion of
the Board, Employee is guilty of misconduct of the type described in
this Section 1.7, and specifying the particulars thereof in detail
which determination shall be subject to a complete and de novo review
as to reasonableness and good faith.
1.8 Total and Permanent Disability means an injury
or illness of the Employee that prevents the performance of customary
duties and which is expected to be of long continued and indefinite
duration and that has caused Employee's absence from service for at
least one hundred eighty (180) days.
2. EMPLOYMENT. The Company hereby retains and employs
Employee to serve in the capacity of __________________ of the Company and in
the capacities in which Employee is serving with any subsidiary of the Company
on the Effective Date. Employee accepts such employment on the terms and
conditions set forth herein.
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2.1 Term. The term of this Agreement shall commence
on the Effective Date and shall end, unless previously terminated in
accordance with the provisions of Section 3 hereof, at the close of
business on the day after the first anniversary date upon which the new
Chief Executive Officer who is replacing Larry Risley assumes the
duties of that position, or April 30, 1999, whichever is earlier.
2.2 Duties and Responsibilities. Employee's position
shall be _____________________ of the Company. Employee shall serve in
such other executive capacities and have such additional titles and
authorities with respect to the Company and its subsidiaries as the
Board may from time to time reasonably prescribe. Employee shall devote
substantially his entire work time, attention, and energies to the
business of the Company and its subsidiaries. Employee may serve as a
director or member of any other corporation or entity so long as any
such service does not cause any conflict of interest with the Company.
The provisions of this paragraph 2.2 shall not apply if Employee's
employment has been terminated pursuant to Section 3, following.
2.3. Compensation.
2.3.1 Base Salary. Subject to the further
provisions of this Agreement, the Company agrees to pay to
Employee the base salary in effect on the Effective Date,
payable no less frequently than on a monthly basis, with such
increases as shall be made from time to time in accordance
with the Company's regular salary administrative practices as
applied to Company officers. The base salary of Employee shall
not be decreased at any time during the term of this Agreement
from the amount in effect from time to time.
2.3.2 Bonuses. Subject to the further
provision of this Agreement, during the term of this
Agreement, Employee shall be entitled to participate in the
Company's Management Incentive Program ("MIP") as in effect on
the Effective Date, providing for management bonuses based
upon performance of the Company. In such event, Employee shall
be entitled to participate in such amended or substitute plan
or plans in an equitable manner with the other senior
executives of the Company. Nothing in this subsection shall be
deemed to limit the ability of the Employee to be paid and
receive additional bonuses from the Company, based solely upon
Employee's performance, without regard to the payment of
bonuses to any other officer or officers of the Company.
4
<PAGE>
2.3.3 Fringe Benefits. Employee shall be
entitled to participate in any fringe benefits which are now
or may hereafter become applicable to the Company's senior
executives, and any other benefits which are commensurate with
the duties and responsibilities to be performed by the
Employee under this Agreement; including, but not limited to,
airline travel benefits, automobile or other transportation
allowances; reimbursement for reasonable business expenses
accounted for in accordance with applicable governmental
regulations; life, long-term disability and accident insurance
plans; employee saving and investment plans; stock option or
purchase plans; and medical, dental and hospitalization
insurance plans; without any material reduction in such fringe
benefits as in effect on the Effective Date hereof.
2.3.4 Participation in Retirement and
Benefit Plans. The Employee shall be entitled to participate
in any retirement, pension, thrift or other retirement or
employee plan that the Company has adopted or may adopt for
the benefit of its senior executives.
3. TERMINATION. Employee's employment under this
Agreement shall terminate upon the occurrence of any one of the following
events:
3.1 Total and Permanent Disability. In the event
Employee suffers Total and Permanent Disability, the Company may
terminate Employee's employment. Upon termination by reason of Total
and Permanent Disability, the company shall pay to Employee such
benefits as may be provided to officers of the Company under any
Company provided disability insurance or similar policy or under any
Company adopted disability plan and in the absence of any such policy
or plan shall continue to pay to Employee for a period of not less than
six (6) months the Compensation then in effect as of the effective date
of Employee's termination. Employee agrees, in the event of any dispute
under this Section as to the existence of Total and Permanent
Disability, to submit to a physical examination by a licensed physician
selected by the Company, the cost of such examination to be paid by the
Company, and the decision as to Employee's disability shall be
conclusive and binding upon the Company and Employee. Nothing contained
herein shall be construed to affect Employee's rights under any
disability insurance or similar policy, whether maintained by the
Company, Employee or another party.
3.2 Death. In the event of the death of Employee
this Agreement shall terminate and, all obligations of the Company
hereunder shall be extinguished as of the date of Employee's death.
Nothing contained herein shall be construed to affect any rights of
Employee's estate under any life insurance or similar policy, whether
owned by the Company, the Employee or any third party.
5
<PAGE>
3.3 Termination For Cause. The Company may effect a
Termination For Cause of Employee. The Company shall have no further
obligation to pay Compensation hereunder after the date of Termination
For Cause.
3.4 Termination by Employee With or Without Good
Reason. During the term of this Agreement, Employee may terminate his
employment hereunder at any time, without Good Reason, upon thirty (30)
days written notice to the Company. Employee may also terminate his
employment hereunder at any time without notice within one hundred
eighty (180) days following the occurrence of an event constituting
Good Reason.
3.5 Benefits on Termination by Employee for Good
Reason or by the Company Without Cause. If Employee elects to terminate
his employment during the term of this Agreement within one hundred
eighty (180) days following the occurrence of an event constituting
Good Reason hereunder, or if, in violation of the terms of this
Agreement, the Company terminates Employee's employment other than as
provided in Section 3.1, 3.2 or 3.3 hereof, Employee shall be entitled
to receive severance pay commencing with the next regularly scheduled
pay period of the Company or as follows:
(i) The bi-weekly sum equal to ninety (90)
percent of Employee's base salary divided by 26, payable for a
period of twelve (12) months.
(ii) The bi-weekly sum equal to ten (10)
percent of Employee's base salary divided by 26 to be paid for
the twelve (12) month period immediately following the twelve
(12) month period described in Section 3.5(i).
(iii) Employee shall continue to receive the
fringe benefits set forth in Section 2.3.3, except as limited
in the following sentence of this subparagraph 3.5(iii), for
the twenty-four (24) month period during which Employee
receives the severance pay set forth in 3.5(i) and (ii),
above. After Employee's termination as set forth in this
Section 3, Employee shall not have the use of a Company
automobile or other transportation allowance and shall not be
granted any additional options under any Company stock option
or purchase plans.
6
<PAGE>
(iv) In the event of termination, other than
a Termination For Cause, Employee shall continue to be
considered to be an employee for purposes of the Company's
option plan, and all other fringe benefits, for so long as
payments are scheduled to be paid to Employee under this
Agreement. Employee shall not be entitled to participate in
any bonuses as described in Section 2.3.3 which were not
earned prior to Employee's termination under this Section 3.
3.6 Benefits Not Exclusive. Any amounts paid to
Employee under the provisions of this Section 3 shall not affect
Employee's rights to payments, including payments on an accelerated
basis, under any deferred compensation plan maintained by the Company.
Any amendment to any such plan that would diminish Employee's rights or
deprive Employee of an immediate payment on termination of employment
as defined in such plan, shall be ineffective with respect to Employee,
unless Employee specifically consents, in writing, to such amendment.
4. RETENTION BONUS. If upon the termination date of
this Agreement Employee is still employed by the Company and none of the
termination provisions of Section 3 "Termination" have been invoked, Employee
shall receive a retention bonus equal to Employee's annual base salary. This
bonus shall be in addition to any other bonuses or benefit to be paid as part
of Employee's compensation.
5. CONFIDENTIALITY.
5.1 Confidential Information. Employee acknowledges
that he has and will have access to trade secrets and confidential
business information of the Company and its affiliates and subsidiaries
throughout the term of this Agreement and that any such trade secret or
confidential information, regardless of whether Employee alone or with
others developed any such trade secret or confidential information,
shall be and shall remain the property of the Company or its affiliates
or subsidiaries. During the term of this Agreement and after
termination of employment, Employee shall not, either voluntarily or
involuntarily, on either his own account, as a member of a firm, or on
behalf of another employer or otherwise, directly or indirectly use or
reveal to any person, partnership, corporation or association any trade
secret or confidential information of the Company or any of its
subsidiaries or affiliates. Such trade secrets shall include, but shall
not be limited to, business plans, marketing plans or programs, any
non-public financial information, including but not limited to,
financial information, forecasts and statistics relating to routes and
markets, contracts, customer lists, compensation arrangements and
business opportunities. The term "trade secrets" shall not include
7
<PAGE>
information generally available to the public or a governmental agency
except information provided to the U.S. Securities and Exchange
Commission or other governmental agencies on a confidential basis.
Employee will not make available to any person, partnership,
corporation or association, or retain after termination of employment,
any Employer policy manuals, printed materials or computer disc
containing information related to the Company or to any subsidiary or
affiliate of the Company.
5.2 Injunctive Relief. Employee acknowledges that
the restrictions contained in this Section 5 are a reasonable and
necessary protection of the immediate interests of the Company and its
affiliates and subsidiaries and that any violation of these
restrictions would cause substantial injury to the Company. In the
event of a breach or threatened breach by Employee of these
restrictions, the Company shall be entitled to apply to any court of
competent jurisdiction for an injunction restraining Employee from such
breach or threatened breach; provided, however, that the right to apply
for an injunction shall not be construed as prohibiting the Company
from pursuing any other available remedies for such breach or
threatened breach.
6. BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Employee, the Company and their
respective heirs, executors, administrators, successors and assigns; provided,
however, that Employee may not assign his rights hereunder without the prior
written consent of the Company and may not assign his obligations hereunder. The
Company may assign either its rights or obligations hereunder to any of its
subsidiaries or affiliated corporation or to any successor to substantially all
of the assets or business of the Company.
7. MODIFICATION, WAIVER OR AMENDMENT. The provisions of
this Agreement may not be modified, amended or waived except by a written
instrument executed by the Company and Employee. The waiver of any provision
of this Agreement by either party shall not constitute a waiver of any
subsequent occurrences or transactions unless the waiver, by its terms,
constitutes a continuing waiver.
8. ARBITRATION. If the Employee so elects, any dispute
or controversy arising under or in connection with this Agreement shall be
settled by arbitration in accordance with the rules of the American
Arbitration Association. Judgment may be entered on the arbitrator's award
in any court having jurisdiction over this Agreement. The fees and
expenses of the arbitration proceeding (including reasonable attorneys' fees)
and any costs and expenses (including reasonable attorneys' fees) of any further
action to enforce this Agreement shall be paid by the Company.
8
<PAGE>
9. NO MITIGATIOn. Any compensation earned by Employee
from another employer or from employment not in violation of the provisions
of Section 2.2 or Section 5 hereof, shall not reduce any payment to which
Employee is entitled under the terms of this Agreement.
10. MISCELLANEOUS.
10.1 Entire Agreement. This Agreement rescinds
and supersedes any other agreement and contains the entire
understanding between the parties relative to the employment
of Employee, there being no terms, conditions, warranties, or
representations other than those contained or referred to herein, and
no amendment hereto shall be valid unless made in writing and signed by
both of the parties hereto.
10.2 Governing Law. This Agreement shall be
interpreted and construed in accordance with the laws of the State of
Nevada.
10.3 Severability. In the event that any provisions
herein shall be legally unenforceable, the remaining provisions
nevertheless shall be carried into effect.
10.4 Attorneys' Fees. In the event of any
litigation between the parties hereto arising out of the terms,
conditions and obligations expressed in this Agreement, the prevailing
party in such litigation shall be entitled to recover reasonable
attorneys' fees incurred in connection therewith.
10.5 Notices. All notices required or permitted
to be given hereunder shall be deemed given if in writing and delivered
personally or sent by telex, telegram, telecopy, or forwarded by
prepaid registered or certified mail (return receipt requested) to the
party or parties at the following addresses (are at such other
addresses as shall be specified by like notices), and any notice,
however given, shall be effective when received:
To Employee: _____________________
_____________________
_____________________
9
<PAGE>
To the Company: Mesa Air Group, Inc.
2325 East 30th Street
Farmington, New Mexico 87401
Attention: CEO
10.6 Waiver. The waiver by any party of a breach of
any provision of this Agreement by the other shall not operate or be
construed as a waiver of any subsequent breach of the same provision or
any other provision of this Agreement.
10.7 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
10.8 Headings. The subject headings to the sections
in this Agreement are included for purposes of convenience only and
shall not affect the construction or interpretation of any of its
provisions.
10.9 Survivorship. Except as provided in the
provisions of Sections 3.1, 3.4, 3.5, 3.6, 5.1, 5.2, 8 and 9 shall
continue and shall survive the termination of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on January 5, 1998, and effective as of the date first hereinabove written.
MESA AIR GROUP, INC.
By:______________________________
Its:_____________________________
EMPLOYEE
_________________________________
__________________
10
EXHIBIT 10.90
[On Letterhead of Mesa Air Group, Inc.]
February 4, 1998
Mr. Larry L. Risley
Mesa Air Group, Inc.
2325 East 30th Street
Farmington, New Mexico 87401
Dear Larry:
In your letter dated December 4, 1997 you advised the Board of
your decision to retire as Chief Executive Officer of Mesa Air Group, Inc. (the
"Company") on the earlier of April 30, 1998 or the appointment of a new Chief
Executive Officer. At yesterday's meeting of the Board, you resigned as Chairman
of the Board. In view of your many years of faithful service to Mesa, the Board
of Directors has agreed to provide you the compensation package described
herein.
Effective as of the date of your resignation as Chief
Executive Officer, the Company shall employ you as Manager of Special Projects.
As Manager of Special Projects, you will have no minimum hourly requirement, nor
will you be required to devote substantially all your time and attention to
matters concerning the Company. Instead, you will be retained from time to time
by the Board of Directors to advise and assist it in strategic acquisitions of
assets, businesses, and mergers and acquisitions of other airline companies. The
term of your employment hereunder as Manager of Special Projects shall be for a
period of five years, terminating on the date of the fifth anniversary of your
retirement as Chief Executive Officer. The Company shall pay you on a bimonthly
basis, either by check or by direct deposit, at the rate of $275,000 per year.
In addition, the monthly premium for health insurance for you and your wife will
be paid by the Company during the term of this Letter Agreement. Such coverage
shall automatically terminate immediately upon your employment with any other
entity which provides health insurance coverage. You shall not, however, be
eligible for any vacation pay or other fringe benefits or to participate in the
Company's cash bonus or Employee Stock Option Plans. As a result of you
remaining in the employ of the Company, all options previously granted to you
shall vest as scheduled and may be exercised through the date of the fifth
anniversary of your retirement as Chief Executive Officer in the year 2003,
unless earlier terminated as a result of events described in the Employee Stock
Option Plan itself.
As Manager of Special Projects, it is not contemplated that
you will office at the Company's headquarters or corporate office. In the event
you purchase Four Corners Aviation from the Company, we anticipate that you
would maintain an office at Four Corners. In the event you do not purchase Four
<PAGE>
Page 2
February 4, 1998
Corners, the Company will provide you, as additional compensation, an annual
office expense allowance of $9,000 during the term of this Letter Agreement to
assist in maintaining an office for your use.
Upon your retirement yesterday as Chairman of the Board, the
Board appointed you as Chairman Emeritus of the Board of Directors. You shall
continue to serve as Chairman Emeritus of the Board so long as you shall serve
as a member of the Board of Directors of the Company. The directors of the
Company, by their approval of the resolution authorizing this Letter Agreement,
hereby agree to continue to vote to nominate you as a member of the Board of
Directors and to use their best efforts to cause your election as a member of
the Board of Directors through the fiscal year ended September 30, 2003.
Although you will no longer have the right to participate in future grants
pursuant to the Employee Stock Option Plan, as a member of the Board of
Directors, you will participate in ongoing director option grants on the same
basis as other members of the Board. Also, in conjunction with your service on
the Board, you and Mrs. Risley will receive positive space travel benefits on
the Company's airline and those of its subsidiaries and affiliates. If you are
not elected to the Board at any time in the future, the Company will grant you
lifetime passes for positive space travel for you and Mrs. Risley.
With respect to your request to purchase Four Corners
Aviation, the Board will propose to you a sale of Four Corners Aviation at a
price determined by an independent appraisal firm. The Board of Directors is
presently interviewing independent appraisers to conduct and complete such an
appraisal. Once the appraisal is completed, the Board will inform you of the
sales price and enter into negotiations with you if you are still interested at
that time.
In exchange for your agreement to enter into a covenant not to
compete and maintain confidential information and trade secrets, the Board has
agreed to make your employment hereunder non-terminable through the fifth
anniversary of your retirement as Chief Executive Officer of Mesa in the year
2003. As a result, regardless of the number of hours you assist the Board per
year and other issues related to the scope or performance of your work, the
Board agrees that it will not terminate this Letter Agreement, and the Company
shall pay you as set forth above through the date of the fifth anniversary of
your employment under this Letter Agreement. You will have the right to receive
pay for the five (5) year period and all options previously granted will remain
exercisable through the five year period.
You shall not engage in any business or perform any service,
directly or indirectly, or have any interest, whether as a proprietor, partner,
employee, investor, principal, agent consultant, director or officer, in any
<PAGE>
Page 3
February 4, 1998
enterprise, within those areas of the United States where the Company or any of
its affiliates or subsidiaries operates, which is in competition with the
business of the Company or any of its affiliates or subsidiaries, regardless of
the type of aircraft operated, (i) during the term of your employment hereunder,
or (ii) within one (1) year after the termination of your employment. You may,
however, purchase less than two percent (2%) of the outstanding shares of any
company whose shares are traded on a national exchange and which, at the time of
purchase, is not engaged in competition with the Company or any of its
affiliates or subsidiaries.
If any court shall determine that the duration or geographical
limit of any of the foregoing restrictions are unenforceable, it is the
intention of the parties that the foregoing restrictions shall not be terminated
but shall be deemed amended to the extent required to render them valid and
enforceable.
You acknowledge that you have and will have access to trade
secrets and confidential business information of the Company and its affiliates
and subsidiaries and that any such trade secret or confidential information,
regardless of whether you alone or with others developed any such trade secret
or confidential information, shall be and shall remain the property of the
Company or its affiliates or subsidiaries. During the term of this Letter
Agreement and after termination of employment, you shall not, either voluntarily
or involuntarily, on either his own account, as a member of a firm, or on behalf
of another employer or otherwise, directly or indirectly use or reveal to any
person, partnership, corporation or association any trade secret or confidential
information of the Company or any of its subsidiaries or affiliates. Such trade
secrets shall include, but shall not be limited to, business plans, marketing
plans or programs, any non-public financial information, including but not
limited to, financial information, forecasts and statistics relating to routes
and markets, contracts, customer lists, compensation arrangements and business
opportunities. The term "trade secrets" shall not include information generally
available to the public or a governmental agency except information provided to
the U.S. Securities and Exchange Commission or other governmental agencies on a
confidential basis. You agree that your will not make available to any person,
partnership, corporation or association, or retain after termination of
employment, any policy manuals, printed materials or computer disc containing
information related to the Company or to any subsidiary or affiliate of the
Company.
<PAGE>
Page 4
February 4, 1998
You acknowledge that the restrictions related to the covenants
above are a reasonable and necessary protection of the immediate interests of
the Company and its affiliates and subsidiaries and that any violation of these
restrictions would cause substantial injury to the Company. In the event of a
breach or threatened breach, the Company shall be entitled to apply to any court
of competent jurisdiction for an injunction restraining you from such breach or
threatened breach; provided, however, that the right to apply for an injunction
shall not be construed as prohibiting the Company from pursuing any other
available remedies for such breach or threatened breach.
This Letter Agreement shall be governed by Nevada law. At the
option of the Company, any controversy or claim arising out of or relating to
this Letter Agreement, or the breach thereof, shall be settled by arbitration in
Farmington, New Mexico, in accordance with the Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator or
arbitrators may be entered in any court having jurisdiction thereof. You agree
that upon a breach or violation of the covenant not to compete and
confidentiality provisions, in addition to all other remedies, the Company shall
be entitled as a matter of right to injunctive relief in any court of competent
jurisdiction.
If the foregoing is in accordance with your understanding of
our agreement, would you please so indicate in the space provided therefor
below, whereupon this Letter Agreement shall become a binding agreement between
you and the Company.
MESA AIR GROUP, INC.
By: /s/ Paul R. Madden
----------------------
Chairman of the Board
Accepted and agreed to this 16th day of
February, 1998.
/s/ Larry L. Risley
- -------------------------
Larry L. Risley
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