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Exhibit 10.35
EMPLOYMENT AGREEMENT
BY AND BETWEEN
JONATHAN G. ORNSTEIN
AND
MESA AIR GROUP, INC.
DATED AS OF JANUARY 1, 2009
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") made and entered into
this 31st day of December, 2008, effective as of January 1,
2009, by and between Mesa Air Group, Inc., a Nevada corporation
(the "Company"), and Jonathan G. Ornstein ("Executive").
RECITALS
The Company and Executive were parties to an employment
agreement dated as of March 31, 2004, as amended. The parties have
agreed to enter into this Agreement, which supersedes the existing
agreement.
ARTICLE I
DUTIES AND TERM
1.1 EMPLOYMENT. In consideration of their mutual covenants and
other good and valuable consideration, the receipt, adequacy and
sufficiency of which are acknowledged, the Company agrees to hire
Executive, and Executive agrees to remain in the employ of the
Company, upon the terms provided in this Agreement.
1.2 POSITION AND RESPONSIBILITIES.
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(a) Executive shall serve as the Chairman of the Board of
Directors and Chief Executive Officer of the Company. Executive
agrees to perform services, not inconsistent with his position, as
are from time to time assigned to him by the Board of Directors of
the Company.
(b) During the period of his employment under this Agreement,
Executive shall devote substantially all of his business time,
attention, skill and efforts to the faithful performance of his
duties under this Agreement, but Executive shall have the right to
engage in personal business and to participate in charitable and
civic activities, during normal business hours and otherwise, as
long as such business and activities do not unreasonably interfere
with Executive's duties to the Company.
1.3 TERM. The term of Executive's employment under this
Agreement commenced on March 31, 2004, and shall continue, unless
sooner terminated, through March 30, 2012 (the "Expiration
Date").
1.4 LOCATION. During the period of
his employment under this Agreement, Executive shall not be
required, except with his prior written consent (which may be
withheld in his discretion), to relocate his principal place of
employment outside Maricopa County, Arizona. Required travel on the
Company's business shall not be deemed a relocation so long as
Executive is not required to provide his services under this
Agreement outside of Maricopa County, Arizona, for more than 50% of
his working days during any consecutive six-month
period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during
his employment under this Agreement, including, without limitation,
services as a director, officer or member of any committee of the
Board of the Company or of the board of directors of any subsidiary
of the Company, the Company shall compensate Executive as set forth
in this Article II and as provided in Article IV.
2.1 BASE SALARY. The Company shall pay to Executive an annual
base salary of not less than the amount indicated below during the
12-month period beginning on March 31 of the years indicated below
(the "Base Salary"):
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Year
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Base Salary
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2004
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$ 300,000
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2005
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$ 375,000
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2006
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$ 450,000
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Executive's Base Salary shall be paid every other
week in equal installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board, and
the Board or such committee may, in its discretion, increase the
Base Salary. Subject to the consent of Executive (which consent
shall not be unreasonably withheld), the Company may reduce the
Base Salary under circumstances in which the Company has suffered
severe financial losses and has imposed cuts in salary of other
officers on an across the board basis, but any such reduction may
not be at a greater percentage than the reduction imposed on any
other officer (an "Across the Board Reduction").
2.2 BONUS PAYMENTS. During the period of Executive's employment
under this Agreement, Executive shall be entitled to the bonus
payments specified on Exhibit A. Any bonus payable to Executive
under the plan described in Exhibit A is referred to as an
"Incentive Bonus." Any Incentive Bonuses will be paid on a
quarterly basis, not later than 45 days after the end of each
fiscal quarter (or 90 days after the end of any fiscal year), based
on the Company's financial statements in its Form 10-Q or Form
10-K, as the case may be; payments made with respect to any fiscal
quarter other than the last fiscal quarter of a fiscal year of the
Company will be made on an estimated basis (based on annualized
results), and the parties will account to one another and make
appropriate payment adjustments promptly after the financial
statements for any fiscal year become available but no later than
90 days after the end of the fiscal year. The Company in its
discretion may pay bonuses to Executive in addition to the
Incentive Bonuses set forth in Exhibit A.
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2.3 STOCK OPTIONS. As of April 1st
of each year during the term of this Agreement (or the next
business day if April 1st of any year is not a business day), the
Company shall issue options to purchase not fewer than 150,000
shares of common stock of the Company (adjusted appropriately for
any stock dividend, stock split, spin-off, reorganization, or
similar transaction), under the 2001 Key Officer Stock Option
Plan.
2.4 RESTRICTED STOCK.
The Company previously granted to the Executive an award of
238,156 Restricted Stock Units pursuant to a Restricted Stock
Agreement between the Company and the Executive.
2.5 ADDITIONAL BENEFITS.
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(a) GENERAL BENEFITS. During the term of this Agreement,
Executive shall be entitled (i) to participate in all employee
benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit sharing, supplemental pension
and other retirement plans, insurance, hospitalization, medical and
group disability benefits, travel or accident insurance plans) and
(ii) to receive fringe benefits, such as dues and fees of
professional organizations and associations, in each case under (i)
and (ii) to the extent that such programs, plans, arrangements, and
benefits are from time to time available to the Company's executive
personnel (the programs and benefits in (i) and (ii) are referred
to as "General Benefits"). During the period of his employment
under this Agreement, the Company shall continue to provide the
General Benefits to Executive at a level which shall in no event be
less, in any material respect, than the General Benefits made
available to Executive by the Company as of the date of this
Agreement. Subject to the consent of Executive (which consent shall
not be unreasonably withheld), the Company may reduce the General
Benefits under circumstances in which the Company has suffered
severe financial losses and has imposed reductions in coverage of
the General Benefits of other officers on an across the board
basis, but any such reduction may not be disproportionately greater
than the reduction imposed on any other officer.
(b) DEATH BENEFIT. The Company shall maintain term life
insurance on the life of Executive such that the aggregate death
benefit under existing and new policies held by the Company totals
$5,000,000. Such insurance shall be obtained under one or more
policies from insurers reasonably acceptable to Executive. As long
as Executive is employed by the Company, (i) the Company shall pay
the premiums on the policy (or policies) and shall maintain the
policy (or policies) in full force and effect, and (ii) Executive
shall have the exclusive right to designate the beneficiary under
such policy (or policies). The Company shall assign the policy (or
policies) to Executive, without any cost to Executive, effective
immediately after Executive ceases to be an employee of the
Company, regardless of the reason for Executive's termination of
employment. The Company shall not pledge or otherwise encumber the
policy (or policies) at any time.
(c) DISABILITY BENEFITS. The Company shall provide Executive
with the following disability benefits:
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services required under this
Agreement, Executive shall receive the Base Salary payable under
Section 2.1 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 Executive's Total Disability (as defined below),
which Total Disability continues during the payment periods
specified in this Section, the Company shall pay to Executive, on a
monthly basis, for the period specified below, an amount (the
"Disability Payment") equal to (A) one-twelfth of the sum of (1)
Executive's Base Salary in effect immediately prior to the time
such Total Disability occurs, plus (2) an amount equal to the
greater of (x) the Threshold Bonus or (y) one half of the sum of
(i) the bonuses (whether Incentive Bonuses or other bonuses) that
have been paid to Executive with respect to the two fiscal years
immediately preceding the fiscal year in which the Total Disability
occurs, and (ii) the bonuses (whether Incentive Bonuses or other
bonuses) that have been accrued with respect to the two fiscal
years immediately preceding the fiscal year in which the Total
Disability occurs but have not been paid (or if Executive has been
employed by the Company for less than two full fiscal years at the
time of such Total Disability, then an amount equal to the sum of
such paid and accrued bonuses with respect to the fiscal year
immediately preceding the fiscal year in which the Total Disability
occurs), which payments shall be due in full regardless of any
compensation paid to Executive as a result of his employment by any
other person after the date that Total Disability occurs, (B)
reduced by the amount of any monthly payments under any policy of
disability income insurance paid for by the Company (including the
policy described in Section 2.5(c)(ii)) which payments are received
during the time when any Disability Payment is being made to
Executive following Executive's Total Disability. The Company shall
pay the Disability Payment to Executive in equivalent installments,
at the same time or times as would have been the case for payment
of Base Salary if Executive had not become Totally Disabled and had
remained employed by the Company, and such payments shall continue
until the later of the expiration of the term of this Agreement and
48 months, except that the Company's obligation to make such
payments shall cease upon the death of Executive. Upon Executive's
Total Disability, except as provided in this Agreement, all rights
of Executive under this Agreement shall terminate.
(ii) In order to provide a ready source of funds with which to
pay the benefits provided for in clause (i) above, if Executive
becomes disabled (determined in accordance with the policy
described below) during the term of this Agreement and such
disability extends beyond 180 days, then Executive shall be paid
the benefits provided for under the disability insurance policy
issued by UNUM Life Insurance Company (Policy #LAR 442810), which
the Company agrees to maintain in full force and effect during the
term of this Agreement. The Company promptly (and in any event not
later than 60 days after this Agreement is executed) shall have
endeavored to cause such policy to be amended to the extent
necessary to cause Executive to be eligible for disability payments
for a minimum of four years from the date of such disability (that
is, providing for 3-1/2 years of coverage, taking into account the
180-day coverage provided by the Company directly under Section
2.5(c)(i)), to remove any exclusion for pre-existing conditions
(including any treatment or operation or complications arising from
the foregoing), and to increase the amount payable to a minimum of
$58,000 per month. To the extent the
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(d) RELOCATION EXPENSES. During the term of this Agreement, if
Executive's principal place of employment is relocated outside
Maricopa County, Arizona (with Executive's consent, in accordance
with Section 1.4), the Company shall reimburse Executive for all
usual relocation expenses incurred by Executive and his household
in moving to the new location, including, without limitation,
moving expenses and rental payments for temporary living quarters
in the area of relocation for a period not to exceed six months,
real estate brokerage commissions incurred by Executive in the sale
of his then existing principal residence, and loan financing
charges and closing costs incurred in connection with the
acquisition and financing of a new residence.
(e) REIMBURSEMENT OF BUSINESS EXPENSES. During the term of this
Agreement, the Company shall, in accordance with standard Company
policies, pay, or reimburse Executive for, all reasonable travel
and other expenses incurred by Executive in performing his
obligations under this Agreement. In addition, during the term of
this Agreement, the Company shall provide to Executive a
supplemental allowance, in the amount of $3,000 per month to be
used by Executive in his discretion for investigation of business
opportunities and strategic allegiances for the Company and for
client and customer development. The amount of the yearly allowance
that is not used each year ($36,000) shall be forfeited and shall
not carry over to be used in any subsequent year.
(f) VACATIONS. During the term of this Agreement, 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 as
applies to other executive officers of the Company. In no event
shall Executive be entitled to fewer than four weeks' annual
vacation. Unused vacation days may be carried over from one year to
the next in the maximum amount of four weeks' annual vacation; that
is, to the extent that vacation days to which Executive is entitled
remain unused, such unused vacation days will cumulate and be
useable in any subsequent year, but no more than four weeks' of
annual vacation in the aggregate can be carried over from one year
to the next. Any vacation days which remain unused at the end of a
calendar year that are in excess of such four weeks' annual
vacation shall expire and shall thereafter no longer be useable by
Executive, but the Company shall compensate Executive for any such
unused vacation days in accordance with the formula set forth in
Section 4.1(b), by payment in January of the next year. Similarly,
any unused paid holidays may be carried over from one year to the
next but not in excess of an aggregate of five days of paid
holidays may be carried over from one year to the next; to the
extent any paid holidays remain unused at the end of a calendar
year that are in excess of such five paid holidays, such paid
holidays shall expire and shall thereafter no longer be useable by
Executive, but the Company shall compensate Executive for any such
unused paid holidays in accordance with the formula set forth in
Section 4.1(b), by payment in January of the next year. Accrued but
unpaid vacation and holidays as of December 31, 2008, will be paid
in January 2009.
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(g) DIRECTOR FEES. During the term
of this Agreement, Executive shall not be entitled to be paid any
fees for attendance at meetings of the Board of Directors or any
committee of the Board of Directors (or the board or committee of
the board of any subsidiary).
(h) AIRLINE PASSES. During the term of this Agreement and for
any period during which the Consulting Agreement is in effect, the
Company shall use reasonable efforts to obtain for the benefit of
Executive and Executive's immediate family (Executive's spouse,
Executive's children, and the spouse and children of any of
Executive's children), the right to fly on a complimentary basis on
the aircraft of other airlines, on a positive space basis. Such
efforts shall include negotiating in good faith with other carriers
for such rights and offering reciprocal rights to the executives
(and their immediate family members) of such other carriers. The
Company shall provide to Executive and Executive's immediate
family, during the life of each such individual, the right to fly
on a complimentary basis on any aircraft operated by the Company or
any affiliate at any time on a positive space basis; the Company
shall use its best efforts to cause any successor or subsequent
successor to the business or assets of the Company to grant such
rights as to all routes operated by such successor (or subsequent
successor) and any of its affiliates.
(i) USE OF COMPANY AIRCRAFT. During the term of this Agreement,
the Company shall provide to Executive, for Executive's personal
use or business use (or a combination of such uses), at no cost to
Executive, the use of any Company owned or operated aircraft
selected by Executive (together with pilots, fuel, landing fees,
and other related costs and personnel associated with such use),
for up to 100 flight hours per calendar year. The selection of
aircraft and the scheduling of the use of such aircraft shall be
subject to reasonable requirements of the Company concerning
availability of such aircraft and personnel to operate such
aircraft.
(j) PROFESSIONAL SERVICES. During the term of this Agreement,
the Company shall reimburse Executive for his out-of-pocket costs
incurred in connection with the retention of professionals by
Executive to provide Executive with income tax, estate planning,
and investment advisory services. The maximum amount of
reimbursable expenses for such purposes shall be $5,000 for each
calendar year during the term of this Agreement. The amount that is
not used each calendar year shall be forfeited and shall not carry
over to be used in any subsequent year. The Company shall reimburse
Executive for such costs promptly after Executive submits an
invoice to Company. In order to preserve Executive's rights to
confidentiality, Executive may satisfy the requirement of
submitting an invoice by providing the Company with a copy of the
facing page of the invoice showing the fees and expenses for the
services rendered and the general nature of the services rendered
but without any detail concerning the substance of the services
rendered.
(k) EXECUTIVE SECURITY. During the term of this Agreement, the
Company shall provide to Executive such security services as are
reasonably necessary for the protection of the life and property of
Executive and Executive's immediate family members.
2.6 PAYMENT OF EXCISE TAXES. If any payment received by
Executive under this Agreement or under the Consulting Agreement
provided for in Section 4.3(i), as a result of or following any
termination of employment under this Agreement, is subject to the
excise tax
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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 Executive an additional cash
amount (the "Gross Up") such that the net after-tax amount received
by Executive under this Agreement is the same as if the Excise Tax
had not applied to any payments made under this Agreement. The
Company shall pay such amounts promptly after the calculation
referred to in Section 2.7 has been made, subject, however, to the
six month delay of payment described in Section 6.10, but no later
than December 31 of the year following the year in which the
Executive remits the related taxes.
2.7 CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the
Gross Up, 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 of the Excise Tax shall be made upon the opinion of
a national accounting firm selected by Executive and reasonably
acceptable to the Company. If such opinion is not finally accepted
by the Internal Revenue Service upon audit or otherwise, then
appropriate adjustments shall be computed (with interest at the
rate required to be paid by Executive under the Code and with Gross
Up, if applicable) by such tax counsel based upon the final amount
of the Excise Tax so determined, and (a) any additional amount due
Executive as a result of such adjustment shall be paid to Executive
by the Company in cash in a lump sum within 30 days after such
computation, or (b) any amount due the Company as a result of such
adjustment shall be paid to the Company by Executive in cash in a
lump sum within 30 days after such computation. The Gross Up
payment shall be subject to the six month delay of payment
described in Section 6.10, but shall be made by December 31 of the
year following the year in which the Executive remits the related
taxes.
2.8 DEFERRED COMPENSATION AGREEMENT. On March 31 of each year
during the term of this Agreement, the Company shall contribute an
amount equal to the Base Salary then in effect to an account for
the benefit of Executive under the Deferred Compensation Plan in
the form of the attached Exhibit C.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 DEATH OR RETIREMENT OF EXECUTIVE. Executive's employment
under this Agreement shall automatically terminate upon the death
or Retirement of Executive.
3.2 BY EXECUTIVE. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination to
the Company:
3.3 BY COMPANY. The Company shall be entitled to terminate
Executive's employment under this Agreement by giving Notice of
Termination to Executive:
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ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment under this Agreement is terminated
prior to March 30, 2012, then except for any other rights or
benefits specifically provided for in this Agreement, the Company
shall be obligated to provide compensation and benefits to
Executive following his period of employment only as follows:
4.1 UPON TERMINATION FOR DEATH OR TOTAL DISABILITY. If
Executive's employment under this Agreement is terminated by reason
of his death or Total Disability, the Company shall:
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(a) pay Executive (or his estate) any Base Salary which has
accrued but not been paid as of the termination date (the "Accrued
Base Salary");
(b) pay Executive (or his estate) for unused vacation days and
paid holidays accrued as of the termination date in an amount equal
to his Base Salary multiplied by a fraction the numerator of which
is the number of accrued unused vacation days and paid holidays,
and the denominator of which is 260 (the "Accrued Vacation
Payment");
(c) reimburse Executive (or his estate) for expenses incurred by
him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable
Expenses");
(d) provide to Executive (or his estate) any accrued and vested
benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued
Benefits"), together with any benefits required to be paid or
provided in the event of Executive's death or disability under
applicable law;
(e) pay Executive (or his estate) any Incentive Bonus or other
bonus with respect to a prior fiscal quarter which has accrued but
has not been paid;
(f) contribute to the Deferred Compensation Plan any amount that
has been accrued but not yet paid to the account provided for in
such plan;
(g) permit Executive (or his estate) to convert all vested
Restricted Stock Units outstanding at the termination date in
accordance with the terms of the Restricted Stock Agreement
described in Section 2.4 hereof; and
(h) permit Executive (or his estate) to exercise all vested
unexercised stock options (including stock options which by their
terms become exercisable upon death or
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4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE
WITHOUT GOOD REASON. If Executive's employment is terminated by the
Company for Cause, or if Executive termin
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