Document:

exv10w6

 

Exhibit 10.6

UNIVERSAL TECHNICAL INSTITUTE, INC.

2003 STOCK INCENTIVE PLAN

(as amended December 16, 2005)

ARTICLE 1

PURPOSE

     1.1 GENERAL. The purpose of the Universal Technical Institute, Inc. 2003 Stock
Incentive Plan (the “Plan”) is to promote the success and enhance the value of Universal Technical
Institute, Inc. (the “Company”) by linking the personal interests of its Board members, employees,
officers, and executives of, and consultants and advisors to, the Company to those of Company
shareholders and by providing such individuals with an incentive for outstanding performance to
generate superior returns to shareholders of the Company. The Plan is also intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the services of Board
members, employees, officers, and executives of, and consultants and advisors to, the Company upon
whose judgment, interest, and special effort the successful conduct of the Company’s operation is
largely dependent.

ARTICLE 2

EFFECTIVE DATE

     2.1 EFFECTIVE DATE. The Plan is effective as of the date the Plan is approved by the
Board (the “Effective Date”). The Plan must be approved by the Company’s shareholders within 12
months after the Effective Date. The Plan will be considered approved by the Company’s
shareholders if it receives the affirmative vote of the holders of a majority of the shares of
Company’s stock present or represented and entitled to vote at a meeting duly held in accordance
with the Company’s Bylaws or by written consent of a majority of the Company’s shareholders in lieu
of a meeting. Any Awards granted under the Plan prior to shareholder approval are effective when
made (unless the Committee specifies otherwise at the time of grant), but no Award may be exercised
or settled and no restrictions relating to any Award may lapse before the Plan is approved by the
Company’s shareholders. If the Company’s shareholders do not approve the Plan within 12 months
after the Effective Date, any Award previously made is automatically canceled without any further
act.

ARTICLE 3

DEFINITIONS

     3.1 DEFINITIONS. When a word or phrase appears in this Plan with the initial letter
capitalized, and the word or phrase does not begin a sentence, the word or phrase will be given the
meaning in this Section or in Sections 1.1 or 2.1 unless otherwise indicated. The following words
and phrases will have the following meanings:

          (a) “Award” means any Option, Stock Appreciation Right, Restricted Stock Award,
Performance Share Award, Performance-Based Award, or IPO Award granted to a Participant under the
Plan.

          (b) “Award Agreement” means any written agreement, contract, or other instrument or
document evidencing an Award.

 

 

          (c) “Board” means the Board of Directors of the Company.

          (d) “Cause” means (except as otherwise provided in an Award Agreement) any of the
following: (i) Participant’s conviction of, or plea of guilty or nolo contendere to, a felony or
a crime involving embezzlement, conversion of property or moral turpitude; (ii) a finding by a
majority of the Board of Directors of Participant’s fraud, embezzlement or conversion of the
Company’s property; (iii) Participant’s conviction of, or plea of guilty or nolo contendere to, a
crime involving the acquisition, use or expenditure of federal, state or local government funds or
the unlawful use, possession or sale of illegal substances; (iv) an administrative or judicial
determination that Participant committed fraud or any other violation of law involving federal,
state or local government funds; (v) a finding by a majority of the Board of Directors of
Participant’s knowing breach of any of Participant’s fiduciary duties to the Company or the
Company’s stockholders or making of a misrepresentation or omission which breach, misrepresentation
or omission would reasonably be expected to materially adversely affect the business, properties,
assets, condition (financial or other) or prospects of the Company; (vi) Participant’s alcohol or
substance abuse, which materially interferes with Participant’s ability to discharge the duties,
responsibilities and obligations to or for the Company; provided, that Participant has been
given notice and 30 days from such notice fails to cure such abuse; and (vii) Participant’s
personal (as opposed to the Company’s) material and knowing failure, to observe or comply with
applicable laws whether as an officer, stockholder or otherwise, in any material respect or in any
manner which would reasonably be expected to have a material adverse effect in respect of the
Company’s ongoing business, operations, conditions, other business relationship or properties.

          Any rights the Company or any of its Subsidiaries has to determine the existence of events
giving rise to Cause are in addition to the rights the Company or any of its Subsidiaries may have
under any other agreement with the Participant or at law or in equity. If, after a Participant’s
termination of employment or services, the Company discovers that the Participant’s employment or
services could have been terminated for Cause, the Participant’s employment or services will, in
the Board’s sole discretion, be deemed to have been terminated for Cause retroactively to the date
the events giving rise to Cause occurred.

          (e) “Change of Control” means: (i) any sale, lease, exchange, or other transfer (in
one transaction or series of related transactions) of all or substantially all the Company’s assets
to any person or group of related persons under Section 13(d) of the Exchange Act (“Group”); (ii)
the Company’s shareholders approve and complete any plan or proposal for the liquidation or
dissolution of the Company; (iii) any person or Group becomes the beneficial owner, directly or
indirectly, of shares representing more than 50% of the aggregate voting power of the issued and
outstanding stock entitled to vote in the election of directors of the Company (“Voting Stock”) and
such person or Group has the power and authority to vote such shares; (iv) any person or Group
acquires sufficient shares of Voting Stock to elect a majority of the members of the Board; or (v)
the completion of a merger or consolidation of the Company with another entity in which holders of
the Stock immediately before the completion of the transaction hold, directly or indirectly,
immediately after the transaction, 50% or less of the common equity interest in the surviving
corporation in the transaction. Notwithstanding the foregoing, in no event will a Change of
Control be deemed to have occurred as a result of an initial public offering of the Stock.

          (f) “Code” means the Internal Revenue Code of 1986, as amended.

          (g) “Committee” means the committee of the Board described in Article 4.

2

 

          (h) “Covered Employee” means an Employee who is a “covered employee” within the
meaning of Section 162(m) of the Code.

          (i) “Disability” means (unless otherwise defined in an employment agreement between
the Company or any of its Subsidiaries and the Participant or in the Participant’s Award Agreement)
any illness or other physical or mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the Company or Subsidiary, or any
medically determinable illness or other physical or mental condition resulting from a bodily
injury, disease or mental disorder, which in the Committee’s sole judgment is permanent and
continuous in nature. The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Participant’s condition.

          (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (k) “Fair Market Value” means, as of any given date, the fair market value of Stock on
a particular date determined by such methods or procedures established by the Committee. Unless
otherwise determined by the Committee the Fair Market Value of Stock as of any date is the closing
price for the Stock as reported on the New York Stock Exchange (or on any national securities
exchange on which the Stock is then listed) for that date or, if no closing price is reported for
that date, the closing price on the next preceding date for which a closing price was reported.
For purposes of IPO Awards and Awards effective as of the effective date of the Company’s initial
public offering, fair market value of Stock shall be the price at which the Company’s Stock is
offered to the public in its initial public offering.

          (l) “Good Reason” means when used with reference to a voluntary termination by
Participant of Participant’s employment or service with the Company, shall mean (i) a material
reduction in Participant’s authority, perquisites, position or responsibilities (other than such a
reduction which affects all of the Company’s senior executives on a substantially equal or
proportionate basis), or (ii) a requirement that Participant relocate greater than 50 miles from
Participant’s primary work location.

          (m) “Incentive Stock Option” means an Option that is intended to meet the requirements
of Section 422 of the Code or any successor provision.

          (n) “IPO Award” means the Option granted to each eligible Participant pursuant to
Article 12.

          (o) “Non-Employee Director” means a member of the Board who qualifies as a
“Non-Employee Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor
provision.

          (p) “Non-Qualified Stock Option” means an Option that is not intended to be an
Incentive Stock Option.

          (q) “Option” means a right granted to a Participant under Article 7 or Article 12 of
the Plan to purchase Stock at a specified price during specified time periods. An Option may be
either an Incentive Stock Option or a Non-Qualified Stock Option.

3

 

          (r) “Participant” means a person who, as a Board member, employee, officer, or
executive of, or consultant or advisor providing services to, the Company or any Subsidiary, has
been granted an Award under the Plan.

          (s) “Performance-Based Awards” means the Performance Share Awards and Restricted
Stock Awards granted to select Covered Employees pursuant to Articles 9 and 10, and are subject to
the terms and conditions in Article 11. All Performance-Based Awards are intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.

          (t) “Performance Criteria” means the criteria that the Committee selects for purposes
of establishing the Performance Goal or Performance Goals for a Participant for a Performance
Period. The Performance Criteria used to establish Performance Goals are limited to: pre- or
after-tax net earnings, sales growth, operating earnings, operating cash flow, return on net
assets, return on stockholders’ equity, return on assets, return on capital, Stock price growth,
stockholder returns, gross or net profit margin, earnings per share, price per share of Stock, and
market share, any of which may be measured either in absolute terms or as compared to any
incremental increase or as compared to results of a peer group. The Committee will, within the
time prescribed by Section 162(m) of the Code, objectively define the manner of calculating the
Performance Criteria it selects to use for such Performance Period for such Participant.

          (u) “Performance Goals” means, for a Performance Period, the written goals established
by the Committee for the Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance Goals may be
expressed in terms of overall Company performance or the performance of a division, business unit,
Subsidiary, or an individual. The Committee, in its discretion, may, within the time prescribed by
Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such
Performance Period to prevent the dilution or enlargement of the rights of Participants (i) in the
event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event,
or development, or (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring
events affecting the Company, or the financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations, accounting principles, or business
conditions.

          (v) “Performance Period” means the one or more periods of time, which may be of
varying and overlapping durations, selected by the Committee, over which the attainment of one or
more Performance Goals will be measured for purposes of determining a Participant’s right to, and
the payment of, a Performance-Based Award.

          (w) “Performance Share” means a right granted to a Participant under Article 9, to
receive cash, Stock, or other Awards, the payment of which is contingent on achieving certain
Performance Goals established by the Committee.

          (x) “Plan” means the Universal Technical Institute, Inc. 2003 Stock Incentive Plan, as
amended.

          (y) “Restricted Stock Award” means Stock granted to a Participant under Article 10
that is subject to certain restrictions and to risk of forfeiture.

          (z) “Stock” means the common stock of the Company and such other securities of the
Company that may be substituted for Stock pursuant to Article 14.

4

 

          (aa) “Stock Appreciation Right” or “SAR” means a right granted to a
Participant under Article 8 to receive a cash, Stock, or other Awards, , all as determined pursuant
to Article 8.

          (bb) “Subsidiary” means any corporation or other entity of which the Company owns,
directly or indirectly, a majority of the outstanding voting stock or voting power.

ARTICLE 4

ADMINISTRATION

     4.1 COMMITTEE. The Plan will be administered by the Board or a Committee appointed
by, and which serves at the discretion of, the Board. If the Board appoints a Committee, the
Committee will consist of at least two individuals, each of whom qualifies as (i) a Non-Employee
Director, and (ii) an “outside director” under Code Section 162(m) and the regulations issued
thereunder. Reference to the Committee in this Plan will refer to the Board if the Board does not
appoint a Committee.

     4.2 ACTION BY THE COMMITTEE. A majority of the Committee will constitute a quorum.
The acts of a majority of the members present at any meeting at which a quorum is present, and acts
approved in writing by a majority of the Committee in lieu of a meeting, will be deemed the acts of
the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other employee of the
Company or any Subsidiary, the Company’s independent certified public accountants, any executive
compensation consultant or other professional retained by the Company to assist in the Plan’s
administration.

     4.3 AUTHORITY OF COMMITTEE. Subject to any specific designation in the Plan, the
Committee has the exclusive power, authority and discretion to:

          (a) Designate Participants to receive Awards;

          (b) Determine the type of Awards granted to each Participant;

          (c) Determine the number of Awards granted and the number of shares of Stock to which an Award
will relate;

          (d) Except as otherwise provided in the Plan, determine the terms and conditions of any Award
granted under the Plan including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Award, any schedule for lapse of forfeiture
restrictions or restrictions on the exercisability of an Award, and accelerations or waivers
thereof, based in each case on such considerations as the Committee in its sole discretion
determines; provided, however, that the Committee will not have the authority to accelerate the
vesting or waive the forfeiture of any Performance-Based Awards;

          (e) Amend, modify, or terminate any outstanding Award, with the Participant’s consent unless
the Committee has the authority to amend, modify, or terminate an Award without the Participant’s
consent under any other provision of the Plan;

5

 

          (f) Determine whether, to what extent, and under what circumstances an Award may be settled
in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property,
or an Award may be canceled, forfeited, or surrendered;

          (g) Prescribe the form of each Award Agreement, which need not be identical for each
Participant;

          (h) Decide all other matters that must be determined in connection with an Award;

          (i) Establish, adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;

          (j) Interpret the terms of, and any matter arising under, the Plan or any Award Agreement; and

          (k) Make all other decisions and determinations that may be required under the Plan or as the
Committee deems necessary or advisable to administer the Plan.

     4.4 DECISIONS BINDING. The Committee’s interpretation of the Plan, any Awards granted
under the Plan, any Award Agreement and all decisions and determinations by the Committee with
respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

     5.1 NUMBER OF SHARES. Subject to adjustment provided in Section 14.1, the aggregate
number of shares of Stock reserved and available for grant under the Plan will be 4,430,972.

     5.2 LAPSED AWARDS. To the extent that an Award terminates, expires, or lapses for any
reason, any shares of Stock subject to the Award will again be available to the Committee to grant
Awards under the Plan.

     5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.

     5.4 LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding any provision
in the Plan to the contrary, and subject to the adjustment in Section 14.1, the maximum number of
shares of Stock with respect to one or more Awards that may be granted to any one Participant
during any fiscal year of the Company is 1,000,000.

6

 

ARTICLE 6

ELIGIBILITY AND PARTICIPATION

     6.1 ELIGIBILITY.

          (a) GENERAL. Persons eligible to participate in this Plan include all Board members,
employees, officers, and executives of, and consultants and advisors to, the Company or a
Subsidiary, as determined by the Committee.

          (b) FOREIGN PARTICIPANTS. To assure the viability of Awards granted to Participants
employed in foreign countries, the Committee is authorized to provide for any special terms it
considers necessary or appropriate to accommodate differences in local law, tax policy, or custom.
Moreover, the Committee may approve any supplements to, or amendments, restatements, or alternative
versions of the Plan as it considers necessary or appropriate for such purposes without affecting
the terms of the Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements, or alternative versions may increase the share limitations
contained in Section 5.1 of the Plan.

     6.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may,
from time to time, select from among all eligible individuals, those to whom Awards will be granted
and will determine the nature and amount of each Award. No individual will have any right to be
granted an Award under this Plan.

ARTICLE 7

STOCK OPTIONS

     7.1 GENERAL. The Committee is authorized to grant Options to Participants on the
following terms and conditions:

          (a) EXERCISE PRICE. The exercise price per share of Stock under an Option will be
determined by the Committee and set forth in the Award Agreement. The Committee may, in its
discretion, grant Options (other than Options that are intended to be Incentive Stock Options or
Options that are intended to qualify as “performance-based compensation” under Code Section 162(m))
with an exercise price of less than Fair Market Value on the date of grant.

          (b) TIME AND CONDITIONS OF EXERCISE. The Committee will determine the time or times
at which an Option may be exercised in whole or in part. The Committee will also determine the
performance or other conditions, if any, that must be satisfied before all or part of an Option may
be exercised. Unless otherwise provided in an Award Agreement, an Option will lapse immediately if
a Participant’s employment or services are terminated for Cause.

          (c) PAYMENT. The Committee will determine the methods by which the exercise price of
an Option may be paid, the form of payment, including, without limitation, cash, promissory note,
shares of Stock (through actual tender or by attestation), or other property (including
broker-assisted “cashless exercise” arrangements), and the methods by which shares of Stock will be
delivered or deemed to be delivered to Participants.

7

 

          (d) EVIDENCE OF GRANT. All Options will be evidenced by a written Award Agreement,
which Agreement will include such provisions as determined by the Committee.

     7.2 INCENTIVE STOCK OPTIONS. Incentive Stock Options will be granted only to
employees and the terms of any Incentive Stock Options granted under the Plan must comply with the
following additional rules:

          (a) EXERCISE PRICE. The per share exercise price for any Incentive Stock Option may
not be less than the Fair Market Value as of the date of the grant.

          (b) EXERCISE. No Incentive Stock Option may be exercisable for more than ten years
after the date of its grant.

          (c) LAPSE OF OPTION. An Incentive Stock Option will lapse under the following
circumstances.

               (1) The Incentive Stock Option will lapse ten years from the date it is granted, unless it
lapses earlier under the Award Agreement.

               (2) Unless otherwise provided in the Award Agreement, an Incentive Stock Option will lapse
upon a Participant’s termination of employment for Cause or for any other reason (other than the
death or Disability).

               (3) If the Participant terminates employment because of Disability or death before the Option
lapses pursuant to paragraph (1) or (2) above, the Incentive Stock Option will lapse, unless it is
sooner exercised, on the earlier of (i) the date on which the Option would have lapsed had the
Participant not become Disabled or lived and had remain employed; or (ii) 12 months after the date
of the Participant’s termination of employment because of Disability or death. Upon the
Participant’s Disability or death, any Incentive Stock Option exercisable at the Participant’s
Disability or death may be exercised by the Participant’s legal representative, by the person or
persons entitled to do so under the Participant’s last will and testament, or, if the Participant
fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the
person or persons entitled to receive the Incentive Stock Option under the applicable laws of
descent and distribution.

          (d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value (determined as of
the grant date) of all shares of Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed $100,000.00 or such other
limitation as imposed by Section 422(d) of the Code, or any successor provision. To the extent
that Incentive Stock Options are first exercisable by a Participant in excess of such limitation,
the excess will be considered Non-Qualified Stock Options.

          (e) TEN PERCENT OWNERS. An Incentive Stock Option will be granted to any individual
who, at the date of grant, owns stock possessing more than ten percent of the total combined voting
power of all classes of Stock only if such Option is granted at a price that is not less than 110%
of Fair Market Value on the grant date and the Option is exercisable for no more than five years
from the grant date.

8

 

          (f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive Stock Option may
be made pursuant to this Plan after the tenth anniversary of the Effective Date.

          (g) RIGHT TO EXERCISE. An Incentive Stock Option may be exercised only by the
Participant during his or her lifetime.

ARTICLE 8

STOCK APPRECIATION RIGHTS

     8.1 GRANT OF SARs. The Committee is authorized to grant SARs to Participants on the
following terms and conditions:

          (a) RIGHT TO PAYMENT. Upon the exercise of a SAR, the Participant to whom it is
granted has the right to receive the excess, if any, of:

               (1) The Fair Market Value of a share of Stock on the date of exercise; over

               (2) The grant price of the SAR as determined by the Committee, which will not be less than the
Fair Market Value of a share of Stock on the date of grant in the case of any SAR related to any
Incentive Stock Option.

          (b) OTHER TERMS. All SARs grants will be evidenced by an Award Agreement. The terms,
methods of exercise, methods of settlement, form of consideration payable in settlement, and any
other terms and conditions of any SAR will be determined by the Committee at the time of the grant
of the Award and as set forth in the Award Agreement.

ARTICLE 9

PERFORMANCE SHARES

     9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant Performance
Shares to Participants on such terms and conditions as determined by the Committee. The Committee
has the discretion to determine the number of Performance Shares granted to each Participant and
such other terms and conditions of such grant, all as set forth in the Award Agreement.

     9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant rights,
valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom
the Performance Shares are granted, in whole or in part, as the Committee will establishes at grant
or thereafter. Subject to the terms of the Plan, the Committee will set performance goals and
other terms or conditions to payment of the Performance Shares in its discretion which, depending
on the extent to which they are met, will determine the number and value of Performance Shares that
will be paid to the Participant.

     9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock, or other property,
and have such other terms and conditions as determined by the Committee and as set forth in the
Award Agreement.

9

 

ARTICLE 10

RESTRICTED STOCK AWARDS

     10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards of
Restricted Stock to Participants in such amounts and subject to such terms and conditions as
determined by the Committee, all as set forth in the Award Agreement.

     10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock will be subject to such restrictions
on transferability and other restrictions as the Committee may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on
the Restricted Stock). These restrictions may lapse separately or in combination at such times,
under such circumstances, in such installments, or otherwise, as the Committee determines at the
time of the grant of the Award or thereafter.

     10.3 FORFEITURE. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of employment or service during the applicable
restriction period, Restricted Stock that is at that time subject to restrictions will be
forfeited, provided, however, that the Committee may provide in any Restricted Stock Award
Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in
whole or in part in the event of terminations resulting from specified causes, and the Committee
may in other cases waive in whole or in part restrictions or forfeiture conditions relating to
Restricted Stock.

     10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the Plan may
be evidenced as determined by the Committee. If certificates representing shares of Restricted
Stock are registered in the name of the Participant, the certificates must bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock,
and the Company may, at its discretion, retain physical possession of the certificate until such
time as all applicable restrictions lapse.

ARTICLE 11

PERFORMANCE-BASED AWARDS

     11.1 PURPOSE. The purpose of this Article 11 is to provide the Committee the ability
to qualify the Performance Share Awards under Article 9 and the Restricted Stock Awards under
Article 10 as “performance-based compensation” under Section 162(m) of the Code. If the Committee,
in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions
of this Article 11 will control over any contrary provision contained in Articles 9 or 10.

     11.2 APPLICABILITY. This Article 11 will apply only to those Covered Employees
selected by the Committee to receive Performance-Based Awards. The Committee may, in its
discretion, grant Restricted Stock Awards or Performance Share Awards to Covered Employees that do
not satisfy the requirements of this Article 11. The designation of a Covered Employee as a
Participant for a Performance Period does not entitle the Participant to receive an Award for the
period. Moreover, designation of a Covered Employee as a Participant for a particular Performance
Period will not require designation of such Covered Employee as a Participant in any subsequent
Performance Period and designation of one Covered Employee as a Participant will not require

10

 

designation of any other Covered Employees as a Participant in such period or in any other
Performance Period.

     11.3 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS. With regard to a
particular Performance Period, the Committee will have full discretion to select the length of such
Performance Period, the type of Performance-Based Awards to be issued, the kind and/or level of the
Performance Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary or any
division or business unit or to the individual.

     11.4 PAYMENT OF PERFORMANCE AWARDS. Unless otherwise provided in the Award Agreement,
a Participant must be employed by the Company or a Subsidiary on the last day of the Performance
Period to be eligible for a Performance Award for such Performance Period. Furthermore, a
Participant will be eligible to receive payment under a Performance-Based Award for a Performance
Period only if the Performance Goals for such period are achieved. In determining the actual size
of an individual Performance-Based Award, the Committee may reduce or eliminate the amount of the
Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion,
such reduction or elimination is appropriate.

     11.5 MAXIMUM AWARD PAYABLE. The maximum Performance-Based Award payable to any one
Participant under the Plan for a Performance Period is 1,000,000 shares of Stock, or if the
Performance-Based Award is paid in cash, the maximum Performance-Based Award is determined by
multiplying 1,000,000 by the Fair Market Value of the Stock as of the date the Performance-Based
Award is granted.

ARTICLE 12

IPO AWARDS

     12.1 IPO AWARDS. IPO Awards will be awarded to Participants selected by the Committee
and will be subject to the following terms and conditions:

          (a) EFFECTIVE DATE OF AWARDS. The effective date of the IPO Awards will be the date
of the Company’s initial public offering of Stock.

          (b) EXERCISE PRICE FOR AWARDS. Notwithstanding anything in the Plan to the contrary,
the exercise price per share of Stock under the IPO Awards will be the price at which the Company’s
Stock is offered to the public in its initial public offering of Stock (“IPO Price”).

          (c) AMOUNT OF THE IPO AWARDS. Each Participant selected to receive an IPO Award and
who became an employee by the Company on or after October 21, 2001, will be entitled to receive an
Option to purchase 50 shares of Stock. Each Participant selected to receive an IPO Award and who
became an employee by the Company before October 21, 2001, will be entitled to receive an Option to
purchase 100 shares of Stock. Such Option will be designated as a Non-Qualified Stock Option.

          (d) TIME AND CONDITIONS OF EXERCISE. The IPO Awards will become fully exercisable on
the first anniversary of the date of grant. Unless otherwise provided in the Award Agreement, the
IPO Award will lapse upon a Participant’s termination of employment or

11

 

service with the Company or a Subsidiary for any reason, and will include such other
provisions as may be specified by the Committee.

          (e) PAYMENT. The Committee will determine the methods by which the exercise price of
the IPO Awards may be paid, the form of payment, including, without limitation, cash, promissory
note, shares of Stock (through actual tender or by attestation), or other property (including
broker-assisted “cashless exercise” arrangements), and the methods by which shares of Stock will be
delivered or deemed to be delivered to Participants.

          (f) EVIDENCE OF GRANT. All IPO Awards will be evidenced by an Award Agreement.

ARTICLE 13

PROVISIONS APPLICABLE TO AWARDS

     13.1 STAND-ALONE AND TANDEM AWARDS. Awards granted under the Plan may, in the
discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other
Award granted under the Plan. Awards granted in addition to or in tandem with other Awards may be
granted either at the same time as or at a different time from the grant of such other Awards.

     13.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange or buy out
any previously granted Award for a payment in cash, Stock, or another Award, based on the terms and
conditions the Committee determines and communicates to the Participant at the time the offer is
made.

     13.3 TERM OF AWARD. The term of each Award will be for the period as determined by
the Committee, provided that in no event will the term of any Incentive Stock Option or a Stock
Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years
from the date of its grant.

     13.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any applicable
law or Award Agreement, payments or transfers to be made by the Company or a Subsidiary on the
grant or exercise of an Award may be made in such forms as the Committee determines at or after the
time of grant, including without limitation, cash, promissory note, Stock, other Awards, or other
property, or any combination, and may be made in a single payment or transfer, in installments, or
on a deferred basis, in each case determined in accordance with rules adopted by, and at the
discretion of, the Committee.

     13.5 LIMITS ON TRANSFER. No right or interest of a Participant in any Award may be
pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a
Subsidiary, or will be subject to any lien, obligation, or liability of such Participant to any
other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee,
no Award will be assignable or transferable by a Participant other than by will or the laws of
descent and distribution.

     13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of the Participant and
to receive any distribution with respect to any Award upon the Participant’s death.

12

 

A beneficiary, legal guardian, legal representative, or other person claiming any rights under
the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to
the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If the Participant is
married, a designation of a person other than the Participant’s spouse as his beneficiary with
respect to more than 50% of the Participant’s interest in the Award will not be effective without
the written consent of the Participant’s spouse. If no beneficiary has been designated or survives
the Participant, payment will be made to the person entitled thereto under the Participant’s will
or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may
be changed or revoked by a Participant at any time provided the change or revocation is filed with
the Committee.

     13.7 STOCK CERTIFICATES. Notwithstanding anything herein to the contrary, the Company
will not be required to issue or deliver any certificates evidencing shares of Stock pursuant to
the exercise of any Awards, unless and until the Board has determined, with advice of counsel, that
the issuance and delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of any exchange on
which the shares of Stock are listed or traded. All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or
advisable to comply with Federal, state, or foreign jurisdiction, securities or other laws, rules
and regulations and the rules of any national securities exchange or automated quotation system on
which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock
certificate to reference restrictions applicable to the Stock. In addition to the terms and
conditions provided herein, the Board may require that a Participant make such reasonable
covenants, agreements, and representations as the Board, in its discretion, deems advisable in
order to comply with any such laws, regulations, or requirements.

     13.8 ACCELERATION UPON A CHANGE OF CONTROL. If a Change of Control occurs and, within
one year after the Change of Control, a Participant’s employment or service with the Company is
terminated without Cause or, a Participant terminates employment or services with the Company for
Good Reason, all outstanding Options, Stock Appreciation Rights, and other Awards will become fully
exercisable and all restrictions on outstanding Awards will lapse. To the extent that this
provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section
7.2(d), the excess Options will be deemed to be Non-Qualified Stock Options. Upon, or in
anticipation of, such an event, the Committee may cause every Award outstanding hereunder to
terminate at a specific time in the future and will give each Participant the right to exercise
Awards during a period of time as the Committee, in its sole and absolute discretion, will
determine.

ARTICLE 14

CHANGES IN CAPITAL STRUCTURE

     14.1 GENERAL.

          (a) SHARES AVAILABLE FOR GRANT. If there is any change in the number of shares of
Stock outstanding by reason of any stock dividend or split, recapitalization, merger,
consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate
number of shares of Stock with respect to which the Committee may grant Awards will be
appropriately adjusted by the Committee. If there is any change in the number of

13

 

shares of Stock outstanding by reason of any other event or transaction, the Committee may,
but need not, make such adjustments in the number and class of shares of Stock with respect to
which Awards may be granted as the Committee may deem appropriate.

          (b) OUTSTANDING AWARDS – INCREASE OR DECREASE IN ISSUED SHARES WITHOUT CONSIDERATION.
Subject to any required action by the shareholders of the Company, if there is any increase or
decrease in the number of issued shares of Stock resulting from a subdivision or consolidation of
shares of Stock or the payment of a stock dividend (but only on the shares of Stock), or any other
increase or decrease in the number of such shares effected without receipt or payment of
consideration by the Company, the Committee will proportionally adjust the number of shares of
Stock subject to each outstanding Award and the exercise price per share of Stock of each such
Award.

          (c) OUTSTANDING AWARDS – CERTAIN MERGERS. Subject to any required action by the
shareholders of the Company, if the Company is the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which the holders of shares of Stock
receive securities of another corporation), each Award outstanding on the date of such merger or
consolidation will pertain to and apply to the securities which a holder of the number of shares of
Stock subject to such Award would have received in such merger or consolidation.

          (d) OUTSTANDING AWARDS – OTHER CHANGES. If any other change in the capitalization of
the Company or corporate change other than those specifically referred to in Article 14, the
Committee may, in its absolute discretion, make such adjustments in the number and class of shares
subject to Awards outstanding on the date on which such change occurs and in the per share exercise
price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of
rights.

          (e) NO OTHER RIGHTS. Except as expressly provided in the Plan, no Participant will
have any rights by reason of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of stock of any class or
any dissolution, liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, will affect, and no adjustment
by reason thereof will be made with respect to, the number of shares of Stock subject to an Award
or the exercise price of any Award.

ARTICLE 15

AMENDMENT, MODIFICATION, AND TERMINATION

     15.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the Board, at any
time and from time to time, the Committee may terminate, amend or modify the Plan; provided,
however, that to the extent necessary and desirable to comply with any applicable law, regulation,
or stock exchange rule, the Company will obtain shareholder approval of any Plan amendment in such
a manner and to such a degree as required.

     15.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the Plan, including
without limitation, the provisions of Article 14, no termination, amendment, or

14

 

modification of the Plan will adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant.

ARTICLE 16

GENERAL PROVISIONS

     16.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person will have any
claim to be granted any Award under the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons uniformly.

     16.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the rights of a
stockholder of the Company unless and until shares of Stock are in fact issued to such person in
connection with such Award.

     16.3 WITHHOLDING. The Company or any Subsidiary has the authority and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local taxes (including the Participant’s FICA obligation) required by
law to be withheld with respect to any taxable event arising as a result of this Plan. With the
Committee’s consent, a Participant may elect to have the Company withhold from those shares of
Stock that would otherwise be received upon the exercise of any Option, a number of shares having a
Fair Market Value equal to the minimum statutory amount necessary to satisfy the Company’s
applicable federal, state, local and foreign income and employment tax withholding obligations.

     16.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award Agreement
will interfere with or limit in any way the right of the Company or any Subsidiary to terminate any
Participant’s employment or services at any time, nor confer upon any Participant any right to
continue in the employ or service of the Company or any Subsidiary.

     16.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for
incentive compensation. With respect to any payments not yet made to a Participant pursuant to an
Award, nothing contained in the Plan or any Award Agreement will give the Participant any rights
that are greater than those of a general creditor of the Company or any Subsidiary.

     16.6 INDEMNIFICATION. To the extent allowable under applicable law, each member of
the Committee or the Board will be indemnified and held harmless by the Company from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in
such action, suit, or proceeding against him or her provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification is in
addition to any other rights of indemnification to which such persons may be entitled under the
Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

15

 

     16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan will be taken into
account in determining any benefits under any pension, retirement, savings, profit sharing, group
insurance, welfare or other benefit plan of the Company or any Subsidiary.

     16.8 EXPENSES. The Company and its Subsidiaries will pay the expenses of
administering the Plan.

     16.9 TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are for
convenience of reference only, and if there is any conflict, the text of the Plan, rather than such
titles or headings, will control.

     16.10 FRACTIONAL SHARES. No fractional shares of stock will be issued and the
Committee will determine, in its discretion, whether cash will be given in lieu of fractional
shares or whether such fractional shares will be eliminated by rounding up or down as appropriate.

     16.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on the relevant
date, obligated to file reports under Section 16 of the Exchange Act, transactions under this Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so
comply, it will be void to the extent permitted by law and voidable as deemed advisable by the
Committee.

     16.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment
of awards in Stock or otherwise will be subject to all applicable laws, rules, and regulations, and
to such approvals by government agencies as may be required. The Company will be under no
obligation to register under the Securities Act of 1933, as amended, any of the shares of Stock
paid under the Plan. If the shares paid under the Plan may in certain circumstances be exempt from
registration under the Securities Act of 1933, as amended, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of any such exemption.

     16.13 GOVERNING LAW. The Plan and all Award Agreements will be construed in
accordance with and governed by the laws of the State of Arizona.

     16.14 NO AUTHORITY TO REPRICE. Other than in connection with a change in the
Company’s capital structure (as described in Article 14 of this Plan), neither the Committee nor
the Board shall have the authority to reprice any outstanding Option or SAR without the prior
approval of the Company’s shareholders. “Repricing” means any of the following or any other action
that has the same effect: (i) lowering the exercise price of an Option or the grant price of a SAR
after it is granted; (ii) any other action that is treated as a repricing under generally accepted
accounting principles; or (iii) canceling an Option at a time when its exercise price exceeds the
fair market value of the underlying stock, in exchange for another Option, a Restricted Stock Award
or other equity, unless the cancellation and exchange occurs in connection with a change in the
Company’s capital structure (as described in Article 14 of this Plan).

16exv10w37

 

Exhibit 10.37

EMPLOYMENT AGREEMENT

BY AND BETWEEN

GEORGE MURNANE III

AND

MESA AIR GROUP, INC.

DATED AS OF DECEMBER 31, 2005

EMPLOYMENT
AGREEMENT (this “Agreement”) made and entered into on May 4, 2006, by and between Mesa
Air Group, Inc., a Nevada corporation (the “Company”), and George Murnane III (“Executive”), and is
effective as of December 31, 2005.

RECITALS

The Company and Executive are parties to an employment agreement dated as of December 6, 2001. 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.

                  (a) Executive shall serve as the Executive Vice President and Chief Financial
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 Chief Executive Officer, President or 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 shall commence on
December 31, 2005, and shall continue, unless sooner terminated, through December 30, 2010 (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.

- 1 -

 

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 IV.

          2.1 BASE SALARY. The Company shall pay to Executive an annual base salary of not
less than $250,000 during the term of this Agreement (the “Base Salary”). 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.

                  (a) Reserved.

                  (b) 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. The
Company in its discretion may pay bonuses to Executive in addition to the Incentive Bonuses set
forth in Exhibit A.

          2.3 STOCK OPTIONS.

                  (a) As of January 1st of each year (commencing in 2006) during the term of this
Agreement (or the next business day if January 1st of any year is not a business day), the Company
shall issue options to purchase not fewer than 60,000 shares of common stock of the Company
(adjusted appropriately for any stock dividend, stock split, spin-off, reorganization, or similar
transaction), under the 2005 Employee Stock Incentive Plan.

          2.4 RESTRICTED STOCK.

Reserved.

          2.5 ADDITIONAL BENEFITS.

                  (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)

- 2 -

 

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 promptly (and in any event not later than 60
days after this Agreement is executed) obtain term life insurance on the life of Executive such
that the aggregate death benefit under existing and new policies totals $2,000,000; 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:

                     (i) During any period of disability, illness or incapacity during the term
of this Agreement which renders Executive at least temporarily unable to perform the
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 or if Executive ceases to be Totally Disabled.

- 3 -

 

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 (1) 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 to be issued by UNUM Life Insurance Company, 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 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)), and to increase the
amount payable to a minimum of $33,333 per month. To the extent the Company is unable to
cause such policy to be so amended, then the Company shall be obligated to provide such
payments to Executive directly. Such coverage shall apply regardless of whether such
four-year period extends beyond the term of this Agreement.

                  (d) RELOCATION EXPENSES. During the term of this Agreement, if Executive’s principal
place of employment is relocated outside Maricopa County, Arizona, 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.

                  (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 fiscal 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). 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 fiscal 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).

                  (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).

- 4 -

 

                  (h) AIRLINE PASSES. During the term of this Agreement, the Company shall use its
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 (subject only to reasonable and customary
rules regarding availability), 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) Reserved.

                  (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 $10,000
for calendar year 2005, and $5,000 for each calendar year thereafter during the term of this
Agreement. 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 is 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, as a result of or following any termination of employment under this Agreement is
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 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.

          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
35%) 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.

          2.8 DEFERRED COMPENSATION AGREEMENT. Upon execution of this Agreement by the parties
and on December 31 of each year thereafter during the term of this Agreement, the Company shall
contribute an amount equal to $50,000 to an account for the benefit of Executive under the Deferred
Compensation Plan in the form of the attached Exhibit C. Notwithstanding Article 3.1 of the
Deferred

- 5 -

 

Compensation Plan, Executive shall not become 100% vested under the Deferred Compensation Plan
until the earlier of (i) December 30, 2010 or (ii) such time as the Executive’s employment is
terminated either (a) for reason of his death or Total Disability, (b) by the Executive for Good
Reason, (c) by the Company without Cause or (d) if there is a Change of Control. Executive shall
make the election, within 30 days of the execution of this Agreement, specifically the form and
timing of distribution of any Company contributions to the Deferred Compensation Plan under this
Section 2.8

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:

                  (a) for Good Reason;

                  (b) at any time without Good Reason.

          3.3 BY COMPANY. The Company shall be entitled to terminate Executive’s employment
under this Agreement by giving Notice of Termination to Executive:

                  (a) in the event of Executive’s Total Disability;

                  (b) for Cause; and

                  (c) at any time without Cause.

ARTICLE IV

COMPENSATION UPON TERMINATION OF EMPLOYMENT

If Executive’s employment under this Agreement is terminated prior to December 30, 2010, then
except for any other rights or benefits specifically provided for in this Agreement following his
period of employment, the Company shall be obligated to provide compensation and benefits to
Executive 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:

                  (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”);

- 6 -

 

                  (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) pay Executive (or his estate) any payment under the Deferred Compensation Plan
which has accrued but has not been paid to the account provided for in such plan;

                  (g) pay Executive the amounts due under Section 2.5;

                  (h) permit Executive (or his estate) to convert any 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

                  (i) permit Executive (or his estate) to exercise all vested unexercised stock
options (including stock options which by their terms become exercisable upon death or disability)
and warrants outstanding at the termination date in accordance with the terms of the plans and
agreements pursuant to which such options or warrants were issued.

          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 terminates his
employment with the Company prior to December 31, 2010, other than (x) upon Executive’s death or
Total Disability or (y) for Good Reason, the Company shall:

                  (a) pay Executive the Accrued Base Salary;

                  (b) pay Executive the Accrued Vacation Payment;

                  (c) reimburse Executive for the Accrued Reimbursable Expenses;

                  (d) provide Executive the Accrued Benefits, together with any benefits required to
be paid or provided under applicable law;

                  (e) pay Executive any accrued Incentive Bonus or other bonus with respect to a prior
fiscal quarter which has accrued but has not been paid;

                  (f) pay Executive any payment under the Deferred Compensation Plan which has accrued
but has not been paid to the account provided for in such plan;

                  (g) permit Executive to convert any 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; additionally, any unvested Restricted Stock Units shall continue to vest in
accordance with such Agreement; and

                  (h) permit Executive to exercise all vested unexercised stock options and warrants
outstanding at the termination date in accordance the terms of the plans and agreements pursuant to
which such options and warrants were issued.

- 7 -

 

          4.3 UPON EXPIRATION OF THIS AGREEMENT. In order to induce the Executive to continue
his employment with the Company throughout the term of this Agreement and until the Expiration Date
of this Agreement, upon the Expiration Date, the Company shall:

                  (a) pay Executive the Accrued Base Salary;

                  (b) pay Executive the Accrued Vacation Payment;

                  (c) reimburse Executive the Accrued Reimbursable Expenses;

                  (d) provide Executive the Accrued Benefits, together with any benefits required to
be paid or provided under applicable law;

                  (e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal
quarter which has accrued but has not been paid;

                  (f) pay Executive any payment under the Deferred Compensation Plan which has accrued
but has not been paid to the account provided for in such plan;

                  (g) maintain in full force and effect, for Executive’s and his eligible
beneficiaries’ continued benefit, all of the General Benefits, for a period of 36 months following
the Expiration Date of this Agreement, except to the extent that, as to any such General Benefit,
Executive receives the substantial equivalent of such General Benefit as a result of his employment
with another employer after the Expiration Date. If Executive’s continued participation in any
General Benefit is not permitted under the terms of the plan, program or arrangement under which
the General Benefit was provided to Executive by the Company, the Company shall arrange to provide
Executive with the General Benefit substantially similar to the General Benefit which Executive
would have been entitled to receive under such plan, program or arrangement;

                  (h) permit Executive to convert any vested Restricted Stock Units outstanding at the
Expiration Date in accordance with the terms of the Restricted Stock Agreement described in Section
2.4 hereof; and

                  (i) Executive shall have the right to exercise all vested unexercised stock options
and warrants outstanding at the Expiration Date in accordance with the terms of the plans and
agreements pursuant to which such options and warrants were issued.

          4.4 UPON TERMINATION BY THE EXECUTIVE FOR GOOD REASON. If Executive’s employment is
terminated by the Executive for Good Reason, the Company shall:

                  (a) pay Executive the Accrued Base Salary;

                  (b) pay Executive the Accrued Vacation Payment;

                  (c) reimburse Executive the Accrued Reimbursable Expenses;

                  (d) provide Executive the Accrued Benefits, together with any benefits required to
be paid or provided under applicable law;

                  (e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal
quarter which has accrued but has not been paid;

- 8 -

 

                  (f) pay Executive any payment under the Deferred Compensation Plan which has accrued
but has not been paid to the account provided for in such plan and pay directly to Executive on
December 30 of each year after such termination through December 30, 2010, the amount that would
have been payable to the account established under such plan if this Agreement had not been
terminated;

                  (g) pay Executive, within thirty (30) days following the termination date, an amount
equal to three multiplied by the sum of (1) Executive’s Base Salary in effect immediately prior to
the time such termination occurs, plus (2) an amount equal to the greater of (x) the Threshold
Bonus and (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 termination 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 termination 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 termination, 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 termination occurs), which payment shall be due
in full regardless of any compensation paid to Executive as a result of his employment by any other
person after the termination date; and

                  (h) maintain in full force and effect, for Executive’s and his eligible
beneficiaries’ continued benefit, all of the General Benefits, for a period of 36 months following
the termination date of his employment under this Agreement, except to the extent that, as to any
such General Benefit, Executive receives the substantial equivalent of such General Benefit as a
result of his employment with another employer after the termination date. If Executive’s continued
participation in any General Benefit is not permitted under the terms of the plan, program or
arrangement under which the General Benefit was provided to Executive by the Company, the Company
shall arrange to provide Executive with the General Benefit substantially similar to the General
Benefit which Executive would have been entitled to receive under such plan, program or
arrangement;

                  (i) permit Executive to convert all vested and unvested 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

                  (j) Executive shall have the right to exercise all unexercised (vested and unvested)
stock options and warrants outstanding at the termination date in accordance with the terms of the
plans and agreements pursuant to which such options and warrants were issued.

          4.5 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR IF THERE IS A CHANGE OF
CONTROL. If Executive’s employment is terminated by the Company without Cause or if there is a
Change of Control, the Company shall:

                  (a) pay Executive the Accrued Base Salary;

                  (b) pay Executive the Accrued Vacation Payment;

                  (c) reimburse Executive the Accrued Reimbursable Expenses;

                  (d) provide Executive the Accrued Benefits, together with any benefits required to
be paid or provided under applicable law;

                  (e) pay Executive any Incentive Bonus or other bonus with respect to a prior fiscal
quarter which has accrued but has not been paid;

                  (f) pay Executive any payment under the Deferred Compensation Plan which has accrued
but has not been paid to the account provided for in such plan, and pay directly to Executive on

- 9 -

 

December 30 of each year after such termination or Change of Control through December 30,
2009, the amount that would have been payable to the account established under such plan if this
Agreement had not been terminated or there had not been a Change of Control;

                  (g) pay Executive, within thirty (30) days of the termination date or Change of
Control, an amount equal to six multiplied by the sum of (1) Executive’s Base Salary in effect
immediately prior to the time such termination or Change of control occurs, plus (2) an amount
equal to the greater of (x) the Threshold Bonus and (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 termination or Change of
control 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
termination or Change of control 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 termination or Change of
control, 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 termination or Change of control
occurs), which payment shall be due in full regardless of any compensation paid to Executive as a
result of his employment by any other person after the termination date or Change of control; and

                  (h) maintain in full force and effect, for Executive’s and his eligible
beneficiaries’ continued benefit, all of the General Benefits, for a period of 36 months following
the Change of control or termination date of his employment under this Agreement, except to the
extent that, as to any such General Benefit, Executive receives the substantial equivalent of such
General Benefit as a result of his employment with another employer after the termination date or
Change of control. If Executive’s continued participation in any General Benefit is not permitted
under the terms of the plan, program or arrangement under which the General Benefit was provided to
Executive by the Company, the Company shall arrange to provide Executive with the General Benefit
substantially similar to the General Benefit which Executive would have been entitled to receive
under such plan, program or arrangement;

                  (i) permit Executive to convert all vested and unvested Restricted Stock Units
outstanding at the termination date or Change in Control date in accordance with the terms of the
Restricted Stock Agreement described in Section 2.4 hereof; and.

                  (j) Executive shall have the right to exercise all unexercised (vested or unvested)
stock options and warrants outstanding at the termination or Change of Control date in accordance
with the terms of the plans and agreements pursuant to which such options and warrants were issued.

          4.6 Reserved.

          4.7 CALL.

                  (a) Upon any termination of employment under Section 4.1, Section 4.3, Section 4.4
or Section 4.5, the Company shall have the right to redeem any stock option, whether vested or
unvested, that is held by Executive as of the date of such termination and that is designated by
the Company in a notice to Executive (a “Call Election”), at a price equal to 100% of the
Black-Scholes Value of such stock option.

                  (b) The Black-Scholes Value for any option shall be determined using the
Black-Scholes formula but in any event shall be not less than the Market Price for the common stock
on the date the Call Election is made (the “Calculation Date”), less the exercise price under the
stock option. The Black-Scholes Value shall be calculated by an independent major investment
banking firm selected by the Company, subject to the approval of Executive; if Executive does not
approve the firm selected by the Company, then the Black-Scholes Value shall be the average of the
amount calculated by the firm selected by Executive and a major investment banking firm selected by
the Company. The Black-Scholes Value shall be calculated as of the Calculation Date, and any
unvested options for this purpose shall be treated as

- 10 -

 

if fully vested. The Company shall bear the cost of the firm or firms that conduct the
Black-Scholes valuation. In determining the Black-Scholes Value of any option, the following rules
will apply:

                     (i) The time to maturity of any option will be equal to the period beginning
on the Calculation Date and ending on the final expiration date of the option (the “Option
Life”), without regard to any analysis of the effect, or likelihood of occurrence, of any
event that might cause the expiration date to occur sooner.

                     (ii) The “risk free rate” as to any option will be determined as of the
Calculation Date, by the U.S. Treasury YTM, with a maturity approximately equal to the
Option Life, as stated by the Federal Reserve.

                     (iii) The volatility factor will be based on an historical sampling of daily
stock prices over a period of not less than 24 months from the valuation date, and not more
than 120 months from the valuation date, whichever period yields the highest value.

                     (iv) No illiquidity or other discount will be applied to the value
determined by application of the Black-Scholes formula, whether by reason of the fact that
the options are not publicly traded or otherwise.

                  (c) Unless Executive consents, the Company shall not exercise a Call Election to the
extent that the Company would be unable, without violating the provisions of the General
Corporation Law of Nevada or the fraudulent conveyance laws of any state, to pay any amount due to
Executive under Section 4.7(a); if Executive consents to the exercise of a Call Election by the
Company under such circumstances, then, to the extent that the Company is unable, without violating
the provisions of the General Corporation Law of Nevada, to pay any amount due Executive under
Section 4.7(a), the Company’s obligation to make such payment shall be deferred, but only until the
legal restriction lapses, at which time the payment shall be due, and in any event, all amounts
that otherwise would have been payable but for such restriction shall bear interest at the rate
provided for in Section 6.11, from the date such payments would have been payable (but for such
legal restriction) until the date they actually are made.

                  (d) All payments due by the Company in connection with any Call Election are payable
within 10 business days after the Call Election is made.

                  (e) Any stock option redeemed by the Company under Section 4.7(a) shall be
cancelled.

ARTICLE V

RESTRICTIVE COVENANTS

          5.1 CONFIDENTIAL INFORMATION AND MATERIALS. Executive agrees that during the course
of his employment with the Company, he has obtained and shall likely obtain in the future
“Confidential Information.” “Confidential Information” is information concerning the Company which
the Company attempts to keep confidential, has not been publicly disclosed by the Company, is not a
matter of common knowledge in the airline industry, and was not known by Executive prior to his
employment by the Company, including, but not limited to, certain information relating to the
business plans, trade practices, finances, accounting methods, methods of operations, trade
secrets, marketing plans or programs, forecasts, statistics relating to routes and markets,
contracts, customers, compensation arrangements, and business opportunities. Executive agrees that
the Confidential Information is proprietary to the Company.

          5.2 GENERAL KNOWLEDGE. The general skills and experience gained by Executive during
Executive’s employment or engagement by the Company, and information publicly available without
breach of any duty owed by any person to the Company or generally known within the airline

- 11 -

 

industry, is not considered Confidential Information. Executive is not restricted from working
with a person or entity which has independently developed information or materials similar to the
Confidential Information, but in such a circumstance, Executive agrees not to disclose the fact
that any similarity exists between the Confidential Information and the independently developed
information and materials, and Executive understands that such similarity does not excuse Executive
from the non-disclosure and other obligations in this Agreement.

          5.3 EXECUTIVE OBLIGATIONS AS TO CONFIDENTIAL INFORMATION AND MATERIALS. During
Executive’s employment or engagement by the Company, Executive shall have access to the
Confidential Information and shall occupy a position of trust and confidence with respect to the
Confidential Information and the Company’s affairs and business. Executive agrees to take the
following steps to preserve the confidential and proprietary nature of the Confidential
Information:

                  (a) NON-DISCLOSURE. During Executive’s Employment or engagement by the Company and
for a period of two years after the termination of Executive’s Employment or engagement by the
Company for any reason, Executive shall not use, disclose or otherwise permit any person or entity
access to any of the Confidential Information other than as required in the performance of
Executive’s duties with the Company and other than is required to be disclosed by law or by any
court, administrative agency, or arbitration panel.

                  (b) PREVENT DISCLOSURE. During and for a period of two years after Executive’s
Employment or engagement by the Company, except as provided in Section 5.3(a), Executive shall take
all reasonable precautions to prevent disclosure of the Confidential Information to unauthorized
persons or entities, other than is required to be disclosed by law or by any court, administrative
agency, or arbitration panel.

                  (c) RETURN ALL MATERIALS. Upon termination of Executive’s employment or engagement
by the Company for any reason whatsoever, or earlier if requested by the Company, Executive shall
deliver to the Company all tangible materials relating to, but not limited to, the Confidential
Information and any other information regarding the Company, including any documentation, records,
listings, notes, data, sketches, drawings, memoranda, models, accounts, reference materials,
samples, machine-readable media and equipment which in any way relate to the Confidential
Information and shall not retain any copies of any of the above materials.

ARTICLE VI

MISCELLANEOUS

          6.1 DEFINITIONS. For purposes of this Agreement, the following terms shall have the
following meanings:

                  (a) “Across the Board Reduction” — as defined in Section 2.1;

                  (b) “Accrued Base Salary” — as defined in Section 4.1(a);

                  (c) “Accrued Benefits” — as defined in Section 4.1(d);

                  (d) “Accrued Reimbursable Expenses” — as defined in u;

                  (e) “Accrued Vacation Payment” — as defined in Section 4.1(b);

                  (f) “Base Salary” — as defined in Section 2.1;

                  (g) “Board” — shall mean the Board of Directors of the Company;

- 12 -

 

                  (h) “Cause” shall mean the occurrence of any of the following:

                     (i) Executive’s willful misconduct with respect to the Company’s business
which results in a material detriment to the Company;

                     (ii) Executive is convicted of, or enters a plea of nolo contendere with
respect to, a felony offense; or

                     (iii) the continued failure or refusal by Executive, other than by reason of
Executive’s disability, to perform the duties required of him by this Agreement, which
failure or refusal is material and is not cured within 45 days following receipt by
Executive of written notice from the Board specifying the factors or events constituting
such failure or refusal, except that, as to any failure or refusal that is curable but
cannot reasonably be cured within such 45-day period, no Cause shall be deemed to have
occurred unless Executive fails to take reasonable steps to cure such failure or refusal
within such 45-day period, and furthermore, no failure of Executive to satisfy any goals,
forecasts, or other financial or business criteria established by the Company, standing
alone, shall constitute Cause.

                  (i) “Change of Control” shall mean and shall be deemed to have occurred if:

                     (i) After the date of this Agreement, any “person” (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or any successor provision), or any other persons who the Board of
Directors determines in good faith is acting as a group, becomes the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act or any successor provision)
directly or indirectly of securities of the Company representing 30% or more of the
combined voting power of the Company’s then outstanding securities ordinarily having the
right to vote at an election of directors;

                     (ii) Individuals who, as of the date of this Agreement, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least 60% of the members of
the Board, except that any person who becomes a member of the Board subsequent to the date
of this Agreement whose election, or nomination for election by the Company’s stockholders
was approved by a vote of at least 60% of the members then comprising the Incumbent Board
(other than an election or nomination of an individual whose initial assumption of office
is in connection with an actual or threatened election contest relating to the election of
directors of the Company) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or

                     (iii) Consummation of

	 	(A)	 	a reorganization, merger,
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company, in each case,
with or to a corporation or other person or entity

	 	(1)	 	of
which persons who were the holders of each class of
the Company’s capital stock immediately prior to
such transaction do not receive voting securities,
as a result of their ownership of such capital
stock immediately prior to such transaction, that
constitute both

	 	(x)	 	more than 51% of each class of capital
stock and

- 13 -

 

	 	(y)	 	more than 51% of the combined voting
power of the outstanding voting securities
entitled to vote generally in the election of
directors of the reorganized, merged,
consolidated or purchasing corporation (or in
the case of a non-corporate person or entity,
functionally equivalent voting power), or

	 	(2)	 	80% of
the members of the Board of which corporation (or
functional equivalent in the case of a
non-corporate person or entity) were not members of
the Incumbent Board at the time of the execution of
the initial agreement providing for such
reorganization, merger, consolidation or sale;

	 	(B)	 	the sale or other
disposition of any material route system operated by the
Company or any subsidiary (regardless of how such sale or
disposition is effected); for this purpose a route system is
“material” if the gross revenues attributable to such route
system exceed or would exceed 50% of the Company’s gross
revenues on a consolidated basis or if the gross profits
reasonably attributable to such route system exceed or would
exceed 50% of the gross profits of the Company on a
consolidated basis, either

     (x) for the fiscal year of the Company immediately prior to
the sale or disposition or

     (y) based on reasonable projections, for the fiscal year in
which the sale or disposition occurs; or

	 	(C)	 	a liquidation or
dissolution of the Company.

                  (j) “Confidential Information” — as defined in Section 5.1;

                  (k) “Continued Benefits” — as defined in Section 4.3(g);

                  (l) “Expiration Date” — as defined in Section 1.3;

                  (m) “Good Reason” shall mean the occurrence of any of the following:

                     (i) Any change by the Company in Executive’s title, or any significant
diminishment in Executive’s function, duties or responsibilities from those associated with
his functions, duties or responsibilities as of December 31, 2005;

                     (ii) Any material breach of this Agreement or any other agreement between
the Company and Executive (and for purposes of this Agreement, any default by the Company
to make any payment or to provide any fringe benefit shall be considered material) which
remains uncured for a period of 10 days after Executive gives the Company notice of such
breach specifying in reasonable detail the event(s) constituting such breach;

                     (iii) Except with Executive’s prior written consent, relocation of
Executive’s principal place of employment to a location greater than 50 miles from Phoenix,
Arizona, or requiring Executive to travel on the Company’s business more than is required
by Section 1.4; or

- 14 -

 

                     (iv) Other than an Across the Board Reduction, any reduction by the Company
in Executive’s Base Salary, bonus opportunity or benefits to which Executive is entitled
under this Agreement.

                  (n) “Incentive Bonus” — as defined in Section 2.2;

                  (o) “Market Price” means the officially quoted closing price of the common stock of
the Company, as reported by the principal exchange on which the common stock of the Company is
traded for the date in question. If there are no transactions on such date, the Market Price shall
be determined as of the immediately preceding date on which there were transactions. If no such
prices are reported on such exchange, then Market Price shall mean the average of the high and low
sale prices for the common stock of the Company (or if no sales prices are reported, the average of
the high and low bid prices) as reported by a quotation system of general circulation to brokers
and dealers. If the common stock of the Company is not traded on any exchange or in the
over-the-counter market, the Market Price of the common stock of the Company on any date shall be
determined in good faith by the parties.

                  (p) “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision of this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Executive’s employment under
the provision so indicated. Each Notice of Termination shall be delivered at least 30 days prior to
the effective date of termination;

                  (q) “Prime Rate” means the prime rate announced by The Wall Street Journal from time
to time.

                  (r) “Retirement” shall mean normal retirement at age 65;

                  (s) “Threshold Bonus” shall mean a cash bonus equal to $80,000 (which is based on
the “Threshold” level of bonus under “Bonus Level Fiscal 2006” as set forth in Exhibit A).

                  (t) “Total Disability” or “Totally Disabled” shall mean Executive’s failure
substantially to perform his duties under this Agreement on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days during any
twelve-month period as a result of incapacity due to physical or mental illness, or the occurrence
or existence of a condition that would permanently render Executive unable to substantially perform
his duties under this Agreement on a full-time basis. If there is a dispute as to whether Executive
is or was physically or mentally unable to perform his duties under this Agreement, such dispute
shall be submitted for resolution to a licensed physician selected by Executive but subject to the
reasonable approval of the Company. If such a dispute arises, Executive shall submit to such
examinations and shall provide such information as such physician may request, and the
determination of the physician as to Executive’s physical or mental condition shall be binding and
conclusive.

          6.2 KEY MAN INSURANCE. In addition to the insurance policy described in Section
2.5(c), the Company shall have the right, in its sole discretion, to purchase “key man” insurance
on the life of Executive. The Company shall be the owner and beneficiary of any such policy. If the
Company elects to purchase such a policy, Executive shall take such physical examinations and
supply such information as may be reasonably requested by the insurer.

          6.3 SUCCESSORS, BINDING AGREEMENT. This Agreement shall be binding upon and run to
the benefit of the Company, its successors and assigns, and shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, beneficiaries, designees, executors,
administrators, heirs, distributees, devisees and legatees.

- 15 -

 

          6.4 MODIFICATION; NO WAIVER. This Agreement may not be modified or amended except by
an instrument in writing signed by the parties to this Agreement. No term or condition of this
Agreement shall be deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument by the party charged
with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated in such waiver, and each such waiver shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or condition for the future or
as to any other term or condition.

          6.5 SEVERABILITY. The covenants and agreements contained in this Agreement are
separate and severable and the invalidity or unenforceability of any one or more of such covenants
or agreements, if not material to the employment arrangement that is the basis for this Agreement,
shall not affect the validity or enforceability of any other covenant or agreement contained in
this Agreement. If, in any judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained in this Agreement because the duration thereof is too long, or
the scope thereof is too broad, it is expressly agreed between the parties to this Agreement that
such duration or scope shall be deemed reduced to the extent necessary to permit the enforcement of
such covenants or agreements.

          6.6 NOTICES. All the notices and other communications required or permitted under
this Agreement shall be in writing and shall be delivered personally or sent by registered or
certified mail, return receipt requested, to the parties to this Agreement at the following
addresses:

If to the Company, to it at:

Mesa Air Group, Inc.

410 North 44th Street, Suite 700

Phoenix, AZ 85008

Attn: Chair of Board of Directors

If Executive, to him at:

5909 East Sanna Street

Paradise Valley, AZ 85253

Notices shall be deemed to have been given and received upon personal delivery or three business
days after having been deposited, if sent by registered or certified mail.

          6.7 ASSIGNMENT. This Agreement and any rights under this Agreement shall not be
assignable by either party without the prior written consent of the other party except as otherwise
specifically provided for in this Agreement.

          6.8 ENTIRE UNDERSTANDING. This Agreement (together with the Exhibits incorporated as
a part of this Agreement) constitutes the entire understanding between the parties to this
Agreement and no agreement, representation, warranty or covenant has been made by either party
except as expressly set forth in this Agreement.

          6.9 EXECUTIVE’S REPRESENTATIONS. Executive represents and warrants that neither the
execution and delivery of this Agreement nor the performance of his duties under this Agreement
violates the provisions of any other agreement to which he is a party or by which he is bound.

          6.10 INTEREST ON PAST DUE AMOUNTS; ATTORNEYS FEES. All amounts under this Agreement
that are not paid when due shall bear interest at the rate of 4% per annum above the Prime Rate,
from the date such payments were due until paid. In addition, any party who breaches this Agreement
shall be obligated to pay the reasonable attorneys fees and costs incurred by the other party in
seeking to enforce the terms of this Agreement.

- 16 -

 

          6.11 GOVERNING LAW. This Agreement shall be construed in accordance with and
governed for all purposes by the laws of the State of Arizona applicable to contracts executed and
wholly performed within such state.

[SIGNATURE PAGES FOLLOW]

- 17 -

 

     This Employment Agreement is entered into as of the date written above.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	MESA AIR GROUP, INC. (Company)	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	By: 	 	 /s/ Michael Lotz
	 	 	 	 	   	 	 
	 

	 	Name:	 	MICHAEL LOTZ
	 	 	 	 	   
	 

	 	Title:	 	President
	 	 	 	 	   
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	                /s/ George Murnane	 
	 	 	   	 	 
	 	 	George Murnane III (Executive)	 	 

- 18 -

 

EXHIBIT A

MINIMUM INCENTIVE BONUS

INCENTIVE BONUS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	BONUS LEVEL	 	 	% CHANGE	 	QUARTERLY	 	ANNUAL
	FISCAL 2006(1)	 	 	IN EPS (2)	 	AMOUNT (3)	 	AMOUNT (4)
	MINIMUM
		 	POSITIVE	 	$	10,000	 	 	$	40,000	 
	THRESHOLD
		 	 	5	%	 	$	20,000	 	 	$	80,000	 
	TARGET
		 	 	10	%	 	$	30,000	 	 	$	120,000	 
	MAXIMUM
		 	 	15	%	 	$	45,000	 	 	$	180,000	 

 

NOTE 1 — FOR EACH FISCAL YEAR ONLY THE % CHANGE IN EPS WILL BE REVIEWED. THE % CHANGE IN EPS WILL
NOT BE GREATER THAN THE INITIAL YEAR.

NOTE 2 — EPS IS DEFINED AS GROSS PROFIT/LOSS BEFORE TAXES AND ONE-TIME NON-RECURRING ITEMS DIVIDED
BY BASIC OUTSTANDING SHARES. THESE PERCENTAGES WILL CHANGE ANNUALLY BUT NOT BE GREATER THAN THE
INITIAL YEAR.

NOTE 3 — THE QUARTERLY AMOUNT WILL BE PAID FOR EACH OF THE FIRST THREE FISCAL QUARTERS BASED ON THE
10Q FINANCIAL REPORTS FILED WITH THE SEC. THE ANNUAL AMOUNT WILL BE PAID FOR THE FOURTH QUARTER
LESS ANY AMOUNTS PAID FOR THE FIRST THREE QUARTERS BASED ON THE 10K FINANCIAL REPORTS FILED WITH
THE SEC. THESE AMOUNTS WILL NOT BE DECREASED OVER THE TERM OF THE AGREEMENT.

NOTE 4 — THESE AMOUNTS WILL NOT BE DECREASED OVER THE TERM OF THE AGREEMENT.

i

- 19 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00103-of-00352.parquet"}]]