EXHIBIT 10.1
CONFIDENTIAL TREATMENT
REQUESTED PURSUANT TO RULE 24b-2
Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934.  The omitted materials have been filed separately with the Securities and
Exchange Commission.

 
 
 
 
AIRLINE SERVICES AGREEMENT
 
BETWEEN
 
MIDWEST AIRLINES, INC. AND
 
REPUBLIC AIRLINE, INC.
 
AND, IN A LIMITED CAPACITY,
 
MIDWEST AIR GROUP, INC.
 
AND REPUBLIC AIRWAYS HOLDINGS INC.
 
 

 
 

 
 
 
 
DATED AS OF SEPTEMBER 3, 2008
 

 
 
 

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AIRLINE SERVICES AGREEMENT
 
This Airline Services Agreement (this “Agreement”), dated as of September 3,
2008 (the “Effective Date”), is between Midwest Airlines, Inc., a Wisconsin
corporation (“Midwest”), Republic Airline, Inc., an Indiana corporation (“RAI”),
and Midwest Air Group, Inc., a Wisconsin corporation, solely with respect to
Section 10.20 herein, and, Republic Airways Holdings Inc., a Delaware
corporation, solely with respect to Section 10.19 herein.
 
WHEREAS, Midwest wishes to purchase block hour time from RAI and RAI wishes to
sell the same to Midwest on the terms and conditions contained herein;
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and obligations hereinafter contained, the parties agree to:
 
ARTICLE I
DEFINITIONS
 
Capitalized terms used in this Agreement (including, unless otherwise defined
therein, in the Schedules, Appendices and Exhibits to this Agreement) shall have
the meanings set forth in Exhibit A hereto.
 

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ARTICLE II
AIRLINE SERVICES, SCHEDULES AND FARES
 
Section 2.01 Capacity Purchase.  Midwest agrees to purchase the capacity of each
Covered Aircraft for the period beginning on the date such aircraft is presented
for service by RAI under this Agreement and ending on the last day of the Term,
or as such date may be extended pursuant to Section 10.17 hereof, in each case
unless such aircraft is earlier withdrawn pursuant to Article VIII, all under
the terms and conditions set forth herein and for the consideration described in
Article III.  Subject to the terms and conditions of this Agreement and except
as provided in Section 2.10(d), RAI shall provide all of the capacity of the
Covered Aircraft solely to Midwest and use the Covered Aircraft solely to
operate the Scheduled Flights.  The Covered Aircraft may not be used by RAI for
any other purpose without the express prior written consent of Midwest.
 
(a) Fares, Rules and Seat Inventory.  Midwest shall establish and publish all
fares and related tariff rules for all seats on the Covered Aircraft.  RAI shall
not publish any fares, tariffs, or related information for the Covered
Aircraft.  In addition, Midwest shall have complete control over all seat
inventory and revenue management decisions for the Covered Aircraft, including
overbooking levels, discount seat levels and allocation of seats among various
fare buckets.
 
(b) Flight Schedules.  Midwest shall, in its sole discretion, establish and
publish all schedules for the Covered Aircraft (such scheduled flights, together
with Charter Flights and ferry flights required to accommodate such scheduled
flights and Charter Flights or otherwise made at Midwest’s request, referred to
herein as “Scheduled Flights”), including determining the city-pairs served,
frequencies, utilization and timing of scheduled arrivals and departures, and
shall, in its sole discretion, make all determinations regarding the
establishment and scheduling of any Charter Flights arranged by Midwest;
provided that such schedules shall be subject to Reasonable Operating
Constraints.  RAI shall remain in sole operational control of the Covered
Aircraft at all times.  Subject to the notice requirement set forth in Section
4.08 regarding international service, Midwest will provide RAI with a
preliminary schedule in a Standard Schedule Input Message (“SSIM”) file format
45 days prior to the first day of the month to which the preliminary schedule
relates.  RAI will review the proposed schedule and provide feedback to Midwest
no later than 14 days following receipt of the preliminary schedule by
RAI.  Midwest will send RAI a Final Monthly Schedule, together with operational
assumptions for the month (the “Operational Assumptions”), including without
limitation the weighted average number of Covered Aircraft, estimated
passengers, revenue passenger miles, departures, block hours, and flights hours,
based on the Final Monthly Schedule, no later than two Business Days following
receipt of RAI’s comments to the preliminary schedule.  Following delivery of
the Final Monthly Schedule, however, Midwest may make such adjustments to the
proposed Final Monthly Schedule as it deems appropriate (subject to Reasonable
Operating Constraints).
 
(c) Start Up Dates.  The Covered Aircraft shall be placed into service under the
terms and conditions of this Agreement on such dates as are provided on Exhibit
B.
 
(d) Spare Aircraft.  The Spare Aircraft constituting a Covered Aircraft shall be
used by RAI solely as an operational and maintenance spare to replace Covered
Aircraft that are out of service due to scheduled maintenance or to cover for
other irregular operations, provided that, RAI may use the Spare Aircraft to
cover flights for any other airline subject to the following conditions:
 
(1)           The Spare Aircraft will be in a neutral livery as set forth in
Exhibit C to this Agreement and configured in accordance with the Midwest
specifications set forth in Exhibit C.
 
(2)           The Spare Aircraft will be pooled with other neutral spare
aircraft operated by RAI for other air carriers who have also contributed
neutral spare aircraft (such other carriers, including Midwest, to be referred
to as the “Pool Participants”) and will be available for use by RAI to cover
flying for Pool Participants due to irregular operations, aircraft damage, or
maintenance events incurred by Pool Participants.  Similarly, Midwest shall have
access to other neutral spares contributed by Pool Participants such that
Midwest, at all times, shall have access to the same number of total aircraft as
the Covered Aircraft.  RAI shall give Midwest notice of its intent to use the
Spare Aircraft as early as operationally possible.  If necessary, Midwest will
apprise RAI of its operational situation related to re-deployment of the Spare
Aircraft.  Notwithstanding the above, Midwest acknowledges and agrees that RAI
will at all times retain operational control of the Spare Aircraft.
 
(3)           Regardless of RAI’s use of the Spare Aircraft to cover flights of
Pool Participants, the Spare Aircraft will be considered a Covered Aircraft for
purposes of calculating Fixed Costs.  Midwest will not be obligated to pay or
reimburse RAI for any Variable Costs or Pass-Thru Costs relating to (i) the
ferrying of the Spare Aircraft to and from locations necessary to cover flying
for other Pool Participants, or (ii) the covered flying itself.  Midwest shall
pay the Variable Costs and Pass-Thru Costs in respect of Scheduled Flights
operated by spare aircraft contributed by Pool Participants.  Fixed Costs,
Variable Costs and Pass-Thru Costs as used in this paragraph are as described on
Exhibit D.
 
(4)           Midwest will be responsible for the payment of Variable Costs and
Pass-Thru Costs relating to (i) the ferrying of the neutral spare aircraft to
and from the location necessary to cover for Scheduled Flights, and (ii) the
covered Scheduled Flights, provided further, Midwest will not be responsible
under Section 2.01 (d)(5)(i) if the neutral aircraft is being ferried to cover
for flights canceled or delayed due to aircraft damage caused by RAI, its
agents, contractors or employees.
 
Upon the request of Midwest, RAI shall consult with Midwest and use reasonable
good faith efforts with respect to the use of Covered Aircraft to replace
Midwest mainline aircraft in the event of maintenance or flight disruptions to
such service.
 
Section 2.02 Flight-Related Revenue.  RAI acknowledges and agrees that all
revenues resulting from the sale and issuance of passenger tickets associated
with the operation of the Covered Aircraft and all other sources of revenue
associated with the operation of the Covered Aircraft, including without
limitation fees related to ticket changes, unaccompanied minors, excess baggage
and nonrevenue pass travel, revenues relating to the transportation of cargo or
mail, and revenues associated with food, beverage, passenger entertainment,
duty-free services, and guaranteed or incentive payments from airport, local or
municipal authorities in connection with scheduling flights to such airport or
locality, are the sole property of and shall be retained by Midwest (or, if
received by RAI, shall be promptly accounted for and remitted to Midwest).
 
Section 2.03 Pass Travel.  RAI operational personnel traveling to provide
critical repair services, management personnel traveling on business, and dead
heading RAI crews will be entitled to travel on flights operated by RAI or
Midwest as “must ride” passengers.  Commuting RAI crew members and all other RAI
employees will be entitled to travel on Midwest and Midwest Connect flights at a
priority category one level below the lowest category for Midwest employees and
subject to the fare policies applicable to individuals traveling at that
priority level.  To the extent permitted by existing arrangements, Midwest
employees will be entitled to (x) travel on Scheduled Flights operated by RAI
under the category of travel and fare policies to which they are entitled to
travel on Midwest flights, and (y) will be entitled to travel on all other RAI
operated flights at a category one level below the lowest category for RAI
employees.
 
Section 2.04 Conversion of Covered Aircraft.  RAI will be responsible for all
costs and expenses of preparing each Covered Aircraft for its being placed into
service hereunder in accordance with the specifications and cabin configurations
as required by Exhibit C; provided that Midwest will be responsible for any
costs and expenses incurred in connection with any cabin re-configuration
requested by Midwest.
 

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ARTICLE III
RAI COMPENSATION
 
Section 3.01 Base and Incentive Compensation.  For and in consideration of the
aircraft and services to be provided by RAI hereunder, Midwest shall pay RAI the
base and incentive compensation as provided in Exhibit D hereto, subject to the
terms and conditions set forth in this Article III.
 
Section 3.02 Periodic Adjustment of Base Compensation.  The rates under this
Agreement set forth in Appendix 1  to Exhibit D hereto shall remain in effect
throughout the Term of this Agreement, provided, the rates on Appendix 1 to
Exhibit D hereto will be adjusted from time to time as described in Exhibit D,
and, provided further, that the rates on Appendix 1 to Exhibit D designated as
“Subject to Escalation” will remain in effect through December 31, 2008, and
thereafter shall be adjusted on each January 1, beginning with January 1, 2009,
as follows:  the new rates, applicable beginning on such January 1, shall equal
the rates in effect on the immediately preceding December 31 multiplied by ([*]
+ (Annual Change in PPI)), where PPI = the annual Producer Price Index,
Commodities, Finished Goods (not seasonally adjusted), Series ID:  WPUSOP3000 as
published by the Bureau of Labor Statistics for January of the applicable year,
provided further, annual adjustments will not decrease from the prior year and
will not increase more than [*] over the prior year.  Adjustments will be
calculated as soon as the PPI for the prior year is published by the Bureau of
Labor Statistics and the adjusted rates will be applied retroactively to the 1st
day of the calendar year and paid as part of the next monthly payment.
 
Section 3.03 RAI Expenses.  Except as provided otherwise in Section 3.04, RAI
shall pay in accordance with commercially reasonable practices all expenses
incurred in connection with RAI’s provision of Regional Airline Services,
including expenses provided by Section 2.04 other than those expenses for which
RAI is responsible at the time a Covered Aircraft is placed into service
hereunder.
 
Section 3.04 Midwest Expenses
 
(a) Certain Expenses.  Midwest shall incur directly those expenses relating to
the Regional Airlines Services that are described in Paragraph 6 of Exhibit D.
 
(b) Design Changes.  Midwest shall be responsible for any reasonable
out-of-pocket expenses relating to interior and exterior design changes to the
Covered Aircraft and other product-related changes required by Midwest,
including facility-related design changes and the cost of changes in aircraft
livery, in each case that occur outside of the Covered Aircraft specifications,
livery and other requirements of Exhibit C to this Agreement or as otherwise
specified in this Agreement.
 
Section 3.05 Audit Rights; Financial Information.  RAI shall make available for
inspection by Midwest and its outside auditors and advisors, within a reasonable
period of time after Midwest makes a written request therefor, all of RAI’s
books and records (including all financial and accounting records and operations
reports, and records of other subsidiaries or affiliates of RAI, if any) as
necessary to audit any reimbursement of Pass-Thru Costs or other expenses set
forth in Paragraph 6 of Exhibit D hereto.  In connection with such audit,
Midwest and its outside auditors and advisors shall be entitled to make copies
and notes of such information as they deem necessary and to discuss such records
with RAI’s Chief Financial Officer or such other employees or agents of RAI
knowledgeable about such records.  Upon the reasonable written request of
Midwest or its outside auditors or advisors, RAI will cooperate with Midwest and
its outside auditors and advisors to permit Midwest and its outside auditors and
advisors access to RAI Holding’s outside auditors for purposes of reviewing such
records.  In addition, RAI shall deliver or cause to be delivered to Midwest (I)
as soon as available, but in any event within 90 days after the end of each
fiscal year, a copy of the consolidated balance sheet of RAI Holdings, as at the
end of such year, and the related consolidated statements of income and retained
earnings and of cash flows of RAI Holdings for such year, setting forth in each
case in comparative form the figures for the previous year, reported on by an
independent certified public accountants of nationally recognized standing; and
(II) as soon as available, but in any event not later than 45 days after the end
of each of the first three quarterly periods of each fiscal year, the unaudited
consolidated balance sheet of RAI Holdings, as at the end of such quarter, and
the related unaudited consolidated statements of income and retained earnings
and of cash flows of RAI Holdings for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, certified by a responsible officer of
RAI Holdings, as being fairly stated in all material respects (subject to normal
year-end audit adjustments); provided, that no party shall be required to
deliver financial statements pursuant to this sentence if such party is a
reporting issuer pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, and such financial statements are timely filed with the
Securities and Exchange Commission pursuant thereto.  All financial statements
delivered hereunder shall be complete and correct in all material respects and
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
 
Section 3.06 Billing and Payment; Reconciliation.
 
(a) Billing and Payment.  No later than ten calendar days prior to the beginning
of the month covered by a Final Monthly Schedule and the Operational Assumptions
for a given month pursuant to Section 2.01(b), RAI shall present a reasonably
detailed written invoice for amounts due under this Agreement in respect of the
Base Compensation for the Scheduled Flights during the month to which such Final
Monthly Schedule and Operational Assumptions pertain, calculated in accordance
with Paragraph 2 of Exhibit D.  Midwest shall pay RAI the amount due under such
invoice (the “Invoiced Amount”), subject to Midwest’s right to dispute any
calculations set forth on such invoice that do not comply with the terms of this
Agreement, net of amounts owed by RAI to Midwest, as follows:
 
(i) Thirty-four percent (34%) of the Invoiced Amount on the later of the first
Business Day of the covered month or the third Business Day following receipt by
Midwest of the invoice, by electronic transfer of funds to a bank account
designated by RAI;
 
(ii) Thirty-three percent (33%) of the Invoiced Amount on the 10th calendar day
of the covered month, or the next Business Day thereafter, by electronic
transfer of funds to a bank account designated by RAI; and
 
(iii) Thirty-three percent (33%) of the Invoiced Amount on the 20th calendar day
of the covered month, or the next Business Day thereafter, by electronic
transfer of funds to a bank account designated by RAI.
 
(b) Reconciliation.  Not later than 30 days following the end of each month, RAI
and Midwest shall reconcile actual amounts due in respect of such month for the
Fixed Cost and Variable Cost elements set forth in Appendix 1 to Exhibit D with
the estimated amounts included in the Invoiced Amount for such elements for such
month in accordance with the terms and conditions set forth in Exhibit D.  On or
before the 15th day following the end of such reconciliation period (or if such
day is not a Business Day, the next Business Day), such reconciled amounts for
such month to the extent applicable:  (i) shall be paid by Midwest to RAI,
together with any payment to be made by Midwest pursuant to Section 3.06(a)(iii)
above, or (ii) shall be paid by RAI to Midwest or set off by Midwest against any
other amounts owing to RAI under this Agreement.
 
(c) Reimbursed Costs.  From time to time it is anticipated that RAI may incur
certain costs and expenses in connection will the provision of Regional Airline
Services under this Agreement for which RAI will be reimbursed by
Midwest.  These costs and expenses are indicated as “Pass-Thru Costs” on
Appendix 1 to Exhibit D.  RAI will pay all Pass-Thru Costs in advance, and will
submit to Midwest an invoice together with all supporting documentation for all
Pass-Thru Costs incurred.  Midwest will reimburse RAI for all uncontested
Pass-Thru Costs within five Business Days following receipt of the invoice and
supporting documentation by electronic transfer of funds to a bank account
designated by RAI.  RAI will provide any additional supporting information and
documentation to Midwest for any Pass-Thru Costs contested by Midwest at RAI’s
earliest convenience.  Any disputed Pass-Thru Costs not resolved within 30 days
of receipt of the invoice by Midwest will be resolved in accordance with Section
10.08 of this Agreement.
 
* Confidential

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ARTICLE IV
RAI OPERATIONS AND AGREEMENTS WITH MIDWEST
 
Section 4.01 Crews, Etc.  RAI shall be responsible for providing all crews
(flight and cabin) and maintenance personnel necessary to operate the Scheduled
Flights and for all aspects (personnel and other) of dispatch control.  Flight
crews will be domiciled in any location deemed suitable by RAI to satisfy RAI’s
staffing requirements.  RAI pilots will wear neutral uniforms with RAI logo
items.  RAI flight attendants will wear neutral uniforms with accessories
displaying approved Midwest Marks and designs.  RAI flight attendants will
obtain Midwest branded accessories through Midwest or its approved vendor
(subject to the vendor’s approval), and will be responsible for all costs and
expenses, including shipping, relating to their orders.
 
Section 4.02 Governmental Regulations.  RAI has and shall maintain all
certifications, permits, licenses, certificates, exemptions, approvals, plans,
and insurance required by governmental authorities, including, without
limitation, FAA, DOT and TSA, to enable RAI to perform the services required by
this Agreement.  All flight operations, dispatch operations and all other
operations and services undertaken by RAI pursuant to this Agreement shall be
conducted, operated and provided by RAI in compliance with all U.S. and foreign
governmental laws, regulations and requirements, including, without limitation,
those relating to airport security, the use and transportation of hazardous
materials and dangerous goods, crew qualifications, crew training and crew
hours, the carriage of persons with disabilities and without any violation of
U.S. or foreign laws, regulations or governmental prohibitions.  All Covered
Aircraft shall be operated and maintained by RAI in compliance with all laws,
regulations and governmental requirements, RAI’s own operations manuals and
maintenance manuals and procedures, and all applicable equipment manufacturers’
manuals and instructions.
 
Section 4.03 Quality of Service.  At all times, RAI shall provide Regional
Airline Services with appropriate standards of care, but in no event lower than
such standards held by Midwest as of the date of this Agreement, including,
without limitation, maintaining each Covered Aircraft in clean condition (in
accordance with industry standards) and acceptable (by industry standards) for
scheduled passenger service.  Midwest procedures, performance standards and
means of measurement thereof concerning the provision of air passenger and air
cargo services shall be applicable to all Regional Airline Services provided by
RAI.  RAI shall achieve at least the comparable quality of airline service as
provided by Midwest, subject to limitations imposed by the type of aircraft used
by RAI and its route network.  RAI shall comply with all airline customer
service commitments and policies of Midwest as of the date hereof, including
without limitation the employee conduct, appearance and training policies in
place as of the date hereof, and shall handle customer-related services in a
professional, businesslike and courteous manner.  In connection therewith, RAI
shall maintain aircraft adequate staffing levels, to achieve a level of
operations that routinely meet or exceed the Midwest Performance Levels as set
forth in Appendix 2 to Exhibit D.  RAI shall provide Midwest with timely
communication regarding the status of all Scheduled Flights.  At either party’s
request, RAI and Midwest will meet to discuss and review RAI’s customer service
and handling procedures and policies and its employees’ conduct, appearance and
training standards and policies.  Midwest shall give RAI not less than 15 days
prior written notice of any non-safety-related breach of this Section 4.03 prior
to exercising any remedy regarding such breach.
 
Section 4.04 Incidents or Accidents.  RAI shall promptly notify Midwest of all
irregularities involving a Scheduled Flight or Covered Aircraft operated by RAI,
including, without limitation, aircraft accidents and incidents, which result in
any damage to persons and/or property or may otherwise result in a complaint or
claim by passengers or an investigation by a governmental agency or
authority.  RAI shall furnish to Midwest as much detail as practicable
concerning such irregularities and shall cooperate with Midwest at RAI’s own
expense in any appropriate investigation.
 
Section 4.05 Emergency Response.  RAI shall adopt Midwest’s Emergency Response
Plan for aircraft accidents or incidents.  In the event of an accident or
incident involving a Covered Aircraft or Scheduled Flight, Midwest will have the
right to manage the emergency response efforts on behalf of RAI with full
cooperation from RAI and if such right is exercised, RAI acknowledges and agrees
that Midwest representatives will conduct all public communications, and that
RAI will make no public statements, regarding such accident or incident.
 
Section 4.06 Safety Matters.  In the event of a reasonable safety concern,
Midwest shall have the right, at its own cost, to inspect, review, and observe
RAI’s operations of Scheduled Flights.  Notwithstanding the conduct or absence
of any such review, RAI is and shall remain solely responsible for the safe
operation of its aircraft and the safe provision of Regional Airline Services,
including all Scheduled Flights, and nothing in this Section 4.06 or otherwise
in this Agreement is intended or shall be interpreted to make Midwest
responsible for such safety matters.
 
Section 4.07 Codeshare Terms.  RAI agrees to operate all Scheduled Flights using
the Midwest flight code and flight numbers assigned by Midwest, or such other
flight codes and flight numbers as may be assigned by Midwest (to accommodate,
for example, a Midwest alliance partner), and otherwise under the codeshare
terms set forth in Exhibit E.
 
Section 4.08 Slots and Route Authorities.  Should Midwest schedule Covered
Aircraft on international routes, Midwest will provide RAI notice of such intent
no fewer than 150 days in advance of the intended start date.  To the extent
permitted under applicable laws and regulations, Midwest will obtain the
necessary slots, route authorities or other approvals required for such service
at its own cost and expense, provided such items may be held and controlled by
Midwest.  If it is required that RAI, as the operator of the Scheduled Flights,
obtain the authorities and approvals, or if Midwest is prohibited from holding
such authorities and approvals in its own name, RAI will use its commercially
reasonable efforts to obtain all necessary licenses, permits, route authorities
or slots and complete all necessary filings and registrations, and Midwest shall
reimburse RAI for its reasonable costs and expenses, in order to obtain and
initiate such service.  During the Term, RAI will operate Scheduled Flights on
these routes solely on behalf of Midwest.
 
Section 4.09 Use of Midwest Marks.  Midwest hereby grants to RAI the
non-exclusive and non-transferable rights to use the Midwest Marks as provided
in, and RAI shall use the Midwest Marks, in accordance with the terms and
conditions of Exhibit C.
 
Section 4.10 Use of RAI Marks.  RAI hereby grants to Midwest the non-exclusive
and non-transferable rights to use the RAI Marks as provided in, and Midwest
shall use the RAI Marks, in accordance with the terms and conditions of Exhibit
F.
 
Section 4.11 Station and Onboard Services.
 
(a) Station Services.  It is contemplated that Midwest or its designated agents
will provide all airport passenger and aircraft ground handling at all airports
served by Scheduled Flights.  RAI and Midwest will negotiate separate handling
or catering agreements at those airports where Midwest elects, in its sole
discretion, to select RAI as its handling agent pursuant to separately
negotiated agreements.
 
(b) Onboard Services.  Midwest will determine, in its sole discretion, and at
its sole cost, meal/beverage service parameters and scheduling for Scheduled
Flights.  Midwest has right to conduct onboard service audits on Scheduled
Flights to ensure service standards are being met.  RAI flight attendants
providing Regional Airline Services will be trained on meal and beverage service
procedures, including liquor, sale of meals on board, duty-free sales and cash
handling and operation of Midwest’s cashless credit card devices, and will
collect all on-board revenue for liquor and duty-free sales.  RAI will provide
sufficient galley service ship’s equipment to operate onboard services, such as
ovens, coffee makers and trash bins.  Midwest will provide all, at its sole
expense, liveried catering items, such as cups and napkins, and all food, liquor
and other beverage items.
 
Section 4.12 Negative Operational Covenant.  During the term of this Agreement,
RAI will not enter into any contracts or agreements of any kind or type that
would prohibit or restrict RAI’s ability to operate the Covered Aircraft on any
city pair, segment or route requested by Midwest pursuant to the terms of this
Agreement.
 

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ARTICLE V
CERTAIN RIGHTS AND OBLIGATIONS OF MIDWEST
 
Section 5.01 Use of Covered Aircraft.  RAI agrees that, except as described by
Section 2.01(d), the Covered Aircraft may be used only to provide Regional
Airline Services.
 
Section 5.02 Midwest Obligations.  Midwest shall provide to RAI, at no cost to
RAI, the following support services (either directly or by contracting with
third party vendors or by contracting with RAI pursuant to a separately
negotiated handling agreement):
 
(a) all airport passenger service and aircraft ground handling at all airports
served, including without limitation:
 
(i)  
all ticket counter and gate check-in services;

 
(ii)  
all passenger enplaning and deplaning services, including sky cap and wheelchair
services;

 
(iii)  
aircraft loading and unloading services, including airside busing;

 
(iv)  
passenger ticketing;

 
(v)  
jet bridges and air stairs, including maintenance and cleaning;

 
(vi)  
janitorial services;

 
(vii)  
deicing services;

 
(viii)  
aircraft towing and push back; and

 
(ix)  
airport security services.

 
(b) all Midwest logo items, such as drink cups, napkins, pillows, blankets and
inflight magazines;
 
(c) lavatory service and light aircraft cleaning (“turn cleaning”) at General
Mitchell International Airport (MKE), heavy interior cleaning at all aircraft
overnight locations that are not RAI maintenance locations, and, upon the
written request of RAI, at other cities served by the Covered Aircraft;
 
(d) denied boarding amenities and travel voucher compensation certificates
consistent with Midwest mainline customer service programs;
 
(e) customer reaccommodations due to schedule disruption;
 
(f) interface and all technological support necessary to ensure accurate and
reliable dynamic transfer of operational data from Midwest to RAI’s system
operational control center in Indianapolis, Indiana, a data interface of RAI’s
ACARS to Midwest’s reservation systems, and of RAI’s system control with
Midwest’s flight information data;
 
(g) capital expenditures for aircraft ground handling;
 
(h) advertising and sales programs;
 
(i) operations space at General Mitchell International Airport (MKE) (the
“Milwaukee Operations Space”), including gates, holdrooms, and airport concourse
space for offices, break rooms, parts storage, crew lounges, and flight
operations, all as agreed to by the parties; and
 
(j) overnight hangar space for two Covered Aircraft at General Mitchell
International Airport (MKE).
 
Section 5.03 Change of Control.  Upon the occurrence of a Change of Control of
either party without the prior written consent of the other party, the
non-consenting party shall have the right to terminate this Agreement on 90 days
prior written notice, such notice to be delivered not later than 90 days after
the non-consenting party becomes aware of such Change of Control (which
termination shall not be effective if the circumstances giving rise to such
Change of Control shall no longer exist on the 30th day after the written notice
of termination is delivered).  The foregoing sentence shall not be applicable in
the event of a Change of Control in which RAI takes, obtains or assumes
“control” (as such term is used in the definition of “Change of Control”) of
Midwest.
 
Section 5.04 Transfer of Assets.  Neither Midwest nor RAI will enter into an
agreement (or series of agreements) to sell, assign transfer or convey
substantially all of its assets to any Person unless, as part of such agreement,
such Person agrees to assume any and all of the seller’s rights, duties and
obligations arising under this Agreement and the non-selling party consents in
writing in advance to such sale, assignment, transfer or conveyance.
 

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ARTICLE VI
INSURANCE
 
Section 6.01 Minimum Insurance Coverages.  During the Term, in addition to any
insurance required to be maintained by RAI pursuant to the terms of any aircraft
lease, or by any applicable governmental or airport authority, RAI shall
maintain, or cause to be maintained, in full force and effect policies of
insurance with insurers of recognized reputation and responsibility, in each
case to the extent available on a commercially reasonable basis, as follows:
 
(a) Comprehensive airline liability insurance, including bodily injury and
personal injury, third party property damage, passenger liability (including
passengers’ baggage and personal effects), cargo and mail legal liability, for a
combined single limit of not less than [*] per occurrence (or whatever higher
amount RAI may carry from time to time), limited in the case of personal injury
to [*] per occurrence and in the aggregate (except with respect to passengers to
whom the full policy limit applies), and War Risk liability insurance as per
London form AVN.52E or current equivalent, or as provided by the Federal
Aviation Administration program, with a combined single limit no less than [*]
per occurrence (or whatever higher amount RAI may carry from time to time);
 
(b) All Risk Hull Insurance on aircraft performing services hereunder, insured
on an agreed value basis with standard market deductibles, including hull war
coverage as per London form LSW 555 or equivalent, or as provided by the Federal
Aviation Administration program.
 
(c) Workers’ compensation as required by the appropriate jurisdiction and
employer’s liability with a limit of not less than [*] combined single limit;
and
 
(d) Other property and liability insurance coverages of the types and in the
amounts that would be considered reasonably prudent for a business organization
of RAI’s size and nature, under the insurance market conditions in effect at the
time of placement, but in any event of the type and the amount that Midwest may
reasonably require to prevent or minimize a disruption in the provision of
Regional Airline Services resulting from a casualty or liability incident
related to RAI’s operations.  All coverages described in this Section 6.01 shall
be placed with deductibles reasonably prudent for a business organization of
RAI’s size and nature, under the insurance market conditions in effect at the
time of placement.
 
Section 6.02 Endorsements.  RAI shall cause the policies described in Section
6.01 to be duly and properly endorsed by RAI’s insurance underwriters with
respect to RAI’s flights and operations as follows:
 
(a) with respect to liability coverage to provide that Midwest, and its
directors, officers, agents, employees and other authorized representatives
shall be endorsed as additional insured parties;
 
(b) To provide that the underwriters shall waive subrogation rights against
Midwest, its directors, officers, agents, employees and other authorized
representatives;
 
(c) with respect to liability coverage, to provide that insurance shall be
primary to and without right of contribution from any other insurance which may
be available to the additional insureds;
 
(d) To include a breach of warranty provision in favor of the additional
insureds;
 
(e) To accept and insure RAI’s hold harmless and indemnity undertakings set
forth in this Agreement, but only to the extent of the coverage afforded by the
policy or policies;
 
(f) with respect to liability coverages to provide that the inclusion of more
than one corporation, person, organization, firm or entity as Insured under the
policies shall not in any way affect the rights of any such corporation, person,
organization, firm or entity either as respects any claim, demand, suit, or
judgment made, brought or recovered by or in favor of any other Insured, or by
or in favor of any employee of such other Insured.  The policy shall protect
each corporation, person, organization, firm or entity in the same manner as
though a separate policy had been issued to each.  Nothing herein shall operate
to increase the liability of the insurers as set forth in the policies beyond
the amount for which the insurers would have been liable if only one person or
interest had been included as an insured.
 
(g) To provide that such policies shall not be canceled, terminated or
materially altered, changed or amended until 30 days (but seven days or such
lesser period as may be available in respect of hull, war and allied perils)
after written notice shall have been sent to Midwest.
 
Section 6.03 Evidence of Insurance Coverage.  At the commencement of this
Agreement, and thereafter at Midwest’s request, RAI shall furnish to Midwest
evidence reasonably satisfactory to Midwest of such insurance coverage and
endorsements, including certificates certifying that such insurance and
endorsements are in full force and effect.  Initially, this evidence shall be a
certificate of insurance.  If RAI fails to acquire or maintain insurance as
herein, provided, Midwest may at its option secure such insurance on RAI’s
behalf at RAI’s expense.
 
*Confidential

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ARTICLE VII
INDEMNIFICATION
 
Section 7.01 RAI Indemnification of Midwest.  RAI shall be liable for and hereby
agrees to fully defend, release, discharge, indemnify and hold harmless Midwest,
its directors, officers, employees and agents from and against any and all
claims, demands, damages, liabilities, suits, judgments, actions, causes of
action, losses, costs and expenses of any kind, character or nature whatsoever,
including attorneys’ fees, costs and expenses in connection therewith and
expenses of investigation and litigation thereof, which may be suffered by,
accrued against, charged to, or recoverable from Midwest or its directors,
officers, employees or agents, including but not limited to, any such losses,
costs and expenses involving (i) death or injury (including claims of emotional
distress and other non-physical injury by passengers) to any person including
any of RAI’s or Midwest’s directors, officers, employees or agents, (ii) loss
of, damage to, or destruction of property (including real, tangible and
intangible property, and specifically including regulatory property such as
route authorities, slots and other landing rights), including any loss of use of
such property, and (iii) damages due to delays in any manner, in each case
arising out of, connected with, or attributable to (x) any act or omission by
RAI or any of its directors, officers, employees or agents relating to the
provision of Regional Airline Services, (y) the performance, improper
performance, or non-performance of any and all obligations to be undertaken by
RAI or any of its directors, officers, employees or agents pursuant to this
Agreement, or (z) the operation, non-operation, or improper operation of the
Covered Aircraft or RAI’s equipment or facilities at any location, in each case
excluding only claims, demands, damages, liabilities, suits, judgments, actions,
causes of action, losses, costs and expenses to the extent resulting from the
gross negligence or willful misconduct of Midwest or its directors, officers,
agents or employees (other than gross negligence or willful misconduct imputed
to such indemnified person by reason of its interest in a Covered
Aircraft).  RAI will use commercially reasonable efforts to cause and assure
that RAI will at all times be and remain in custody and control of all aircraft,
equipment, and facilities of, or operated by, RAI, and Midwest and its
directors, officers, employees and agents shall not, for any reason, be deemed
to be in custody or control, or a bailee, of such aircraft, equipment or
facilities.
 
Section 7.02 Midwest Indemnification of RAI.  Midwest shall be liable for and
hereby agrees fully to defend, release, discharge, indemnify, and hold harmless
RAI, its directors, officers, employees, and agents from and against any and all
claims, demands, damages, liabilities, suits, judgments, actions, causes of
action, losses, costs and expenses of any kind, character or nature whatsoever,
including attorneys’ fees, costs and expenses in connection therewith and
expenses of investigation and litigation thereof, which may be suffered by,
accrued against, charged to, or recoverable from RAI, or its directors,
officers, employees or agents, including but not limited to, any such losses,
costs and expenses involving (i) death or injury (including claims of emotional
distress and other non-physical injury by passengers) to any person including
any of RAI’s or Midwest’s directors, officers, employees or agents, (ii) loss
of, damage to, or destruction of property (including real, tangible and
intangible property, and specifically including regulatory property such as
route authorities, slots and other landing rights), including any loss of use of
such property, and (iii) damages due to delays in any manner, in each case
arising out of, connected with, or attributable to, (x) the performance,
improper performance, or nonperformance of any and all obligations to be
undertaken by Midwest or any of its directors, officers, employees or agents
pursuant to this Agreement, (y) the operation, non-operation or improper
operation of Midwest’s aircraft, equipment or facilities (excluding, for the
avoidance of doubt, Covered Aircraft and any equipment or facilities leased or
subleased by Midwest to RAI) at any location, in each case excluding only
claims, demands, damages, liabilities, suits judgments, actions, causes of
action, losses, costs and expenses to the extent resulting from the negligence
or willful misconduct of RAI or its directors, officers, agents or employees.
 
Section 7.03 Indemnification Claims.  A party entitled to indemnification (the
“Indemnified Party”) from another party under the terms of this Agreement (the
“Indemnifying Party”) shall provide the Indemnifying Party with prompt written
notice (an “Indemnity Notice”) of any third party claim which the Indemnified
Party believes gives rise to a claim for indemnity against the Indemnifying
Party hereunder.  The Indemnifying Party shall be entitled, if it accepts
financial responsibility for the third party claim, to control the defense of or
to settle any such third party claim at its own expense and by its own counsel;
provided that the Indemnified Party’s prior written consent (which may not be
unreasonably withheld or delayed) must be obtained prior to settling any such
third party claim.  The Indemnified Party shall provide the Indemnifying Party
with such information as the Indemnifying Party shall reasonably request to
defend any such third party claim and shall otherwise cooperate with the
Indemnifying Party in the defense of any such third party claim.  Except as set
forth in this Section 7.03, the Indemnified Party shall not enter into any
settlement or other compromise or consent to a judgment with respect to a third
party claim as to which the Indemnifying Party has an indemnity obligation
hereunder without the prior written consent of the Indemnifying Party (which may
not be unreasonably withheld or delayed), and the entering into of any
settlement or compromise or the consent to any judgment in violation of the
foregoing shall constitute a waiver by the Indemnified Party of its right to
indemnity hereunder to the extent the Indemnifying Party was prejudiced
thereby.  Any Indemnifying Party shall be subrogated to the rights of the
Indemnified Party to the extent that the Indemnifying Party pays for any loss,
damage or expense suffered by the Indemnified Party hereunder.  If the
Indemnifying Party does not accept financial responsibility for the third party
claim or fails to defend against the third party claim that is the subject of an
Indemnity Notice within 30 days of receiving such notice (or sooner if the
nature of the third party claim so requires), or otherwise contests its
obligation to indemnify the Indemnified Party in connection therewith, the
Indemnified Party may, upon providing written notice to the Indemnifying Party,
pay, compromise or defend such third party claim without the prior consent of
the (otherwise) Indemnifying Party.  In the latter event, the Indemnified Party,
by proceeding to defend itself or settle the matter, does not waive any of its
rights hereunder to later seek reimbursement from the Indemnifying Party.
 
Section 7.04 Employer’s Liability; Independent Contractors; Waiver of Control
 
(a) Employer’s Liability and Workers’ Compensation.  Each party hereto assumes
full responsibility for its employer’s and workers’ compensation liability to
its respective officers, directors, employees or agents on account of injury or
death resulting from or sustained in the performance of their respective service
under this Agreement.  Each party, with respect to its own employees, accepts
full and exclusive liability for the payment of workers’ compensation and
employer’s liability insurance premiums with respect to such employees, and for
the payment of all taxes, contributions or other payments for unemployment
compensation or old age or retirement benefits, pensions or annuities now or
hereafter imposed upon employers by the government of the United States or any
other governmental body, including state, local or foreign, with respect to such
employees measured by the wages, salaries, compensation or other remuneration
paid to such employees, or otherwise.
 
(b) Employees, etc., of RAI.  The employees, agents, and independent contractors
of RAI engaged in performing any of the services RAI is to perform pursuant to
this Agreement are employees, agents, and independent contractors of RAI for all
purposes, and under no circumstances will be deemed to be employees, agents or
independent contractors of Midwest.  In its performance under this Agreement,
RAI will act, for all purposes, as an independent contractor and not as an agent
for Midwest.  Notwithstanding the fact that RAI has agreed to follow certain
procedures, instructions and standards of service of Midwest pursuant to this
Agreement, Midwest will have no supervisory power or control over any employees,
agents or independent contractors engaged by RAI in connection with its
performance hereunder, and all complaints or requested changes in procedures
made by Midwest will, in all events, be transmitted by Midwest to RAI’s
designated representative.  Nothing contained in this Agreement is intended to
limit or condition RAI’s control over its operations or the conduct of its
business as an air carrier.
 
(c) Employees, etc., of Midwest.  The employees, agents, and independent
contractors of Midwest engaged in performing any of the services Midwest is to
perform pursuant to this Agreement are employees, agents, and independent
contractors of Midwest for all purposes, and under no circumstances will be
deemed to be employees, agents, or independent contractors of RAI.  RAI will
have no supervision or control over any such Midwest employees, agents and
independent contractors and any complaint or requested change in procedure made
by RAI will be transmitted by RAI to Midwest’s designated representative.  In
its performance under this Agreement, Midwest will act, for all purposes, as an
independent contractor and not as an agent for RAI.
 
(d) RAI Flights.  The fact that RAI’s operations are conducted under Midwest’s
Marks and listed under the YX designator code will not affect their status as
flights operated by RAI for purposes of this Agreement or any other agreement
between the parties, and RAI and Midwest agree to advise all third parties,
including passengers, of this fact.
 
Section 7.05 Survival.  The provisions of this Article VII shall survive the
termination of this Agreement for a period of seven years.
 

--------------------------------------------------------------------------------

ARTICLE VIII
TERM, TERMINATION AND DISPOSITION OF AIRCRAFT
 
Section 8.01 Term.  The Term of this Agreement shall commence on and shall be
effective as of the Effective Date and, unless earlier terminated for Cause or
breach or pursuant to Section 8.02(d) or extended as provided herein, shall
continue until September 30, 2018, as such date may be extended pursuant to
Section 10.17 hereof (the “Term”).
 
Section 8.02 Early Termination
 
(a) By Midwest for Cause.  Midwest shall have the right to terminate this
Agreement upon written notice following the occurrence of any event that
constitutes Cause.  Any termination pursuant to this Section 8.02(a) shall
supersede any other termination pursuant to any other provision of this
Agreement (even if such other right of termination shall already have been
exercised).  The notice of termination provided by Midwest pursuant to this
Section 8.02(a) shall designate a Termination Date (which may be any date
between the date of the notice and a date no more than 120 days of the date of
the notice) and will also indicate whether or not Midwest intends to submit a
Wind-Down Schedule pursuant to Section 8.03(a), and the termination date set
forth in the notice provided by Midwest will be the Termination Date for
purposes of this Agreement (and such Termination Date pursuant to this Section
8.02(a) shall supersede any other Termination Date that may have been previously
established pursuant to another termination).  In the event that Midwest shall
not have delivered written notice of termination pursuant to this Section
8.02(a) within 45 days after Midwest receives written notice from RAI of the
occurrence of any event that constitutes Cause by RAI, then Midwest shall be
conclusively deemed to have waived any right to terminate this Agreement based
upon such event; provided that such waiver shall not apply to any subsequent or
continuing event that constitutes Cause.
 
(b) By Midwest for Breach.  Midwest may terminate this Agreement, upon two
Business Days’ prior written notice, upon the occurrence of (A) a material
breach of this Agreement by RAI as described in clause (i) below, which breach
shall not have been cured within such two Business Day period, or (B) a breach
by RAI of its covenant contained in Section 5.04.  Midwest may also terminate
this Agreement upon the occurrence of any other material breach of this
Agreement by RAI, which breach shall not have been cured within 60 days after
written notice of such breach is delivered by Midwest to RAI (which 60-day
notice period may run concurrently with the 15-day notice period, if any,
provided pursuant to Section 4.03 for non-safety-related breaches).  Any
termination notice provided by Midwest pursuant to this Section 8.02(b) shall
specify a Termination Date that will be no more than 90 days from the date of
such notice.  The parties hereto agree that, without limiting the circumstances
or events that may constitute a material breach, (A) each of the following shall
constitute a material breach of this Agreement by RAI:  (i) a reasonable and
good faith determination by Midwest, using recognized standards of safety, that
there is a material safety concern with the operation of any Scheduled Flights,
or (ii) the grounding of the Covered Aircraft by regulatory or court order or
other governmental action and (B) any cancellation or disruption of flights
resulting from employees of RAI honoring any work stoppage resulting from a
strike or other labor action involving employees of Midwest shall not constitute
a material breach of this Agreement.  In the event that Midwest shall not have
delivered written notice of termination pursuant to this Section 8.02(b) within
45 days after Midwest receives written notice from RAI of any material breach of
this Agreement by RAI, then Midwest shall be conclusively deemed to have waived
any right to terminate this Agreement based upon such breach; provided that such
waiver shall not apply to any subsequent or continuing breach.
 
(c) By RAI for Breach.  RAI may terminate this Agreement upon (i) five Business
Days prior written notice upon (A) any failure by Midwest to make any payment or
payments under this Agreement and/or any payments due under any Operating Lease
(as defined in part (d) below) aggregating in excess of [*], including without
limitation, any payments which become due during any Wind-Down Period, but
specifically excluding any amounts which are the subject of a good faith dispute
between the parties, which failure shall not have been cured within five
Business Days after written notice of such failure is delivered by RAI to
Midwest, or (B) a breach by Midwest of its covenant contained in Section 5.04,
(ii) the occurrence of any other failure by Midwest to make any payment or
payments under this Agreement aggregating in excess of [*], including without
limitation, any payments which become due during any Wind-Down Period, but
specifically excluding any amounts which are the subject of a good faith dispute
between the parties, which failure shall not have been cured within 20 days
after written notice of such breach is delivered by RAI to Midwest, or (iii) the
occurrence of any other material breach of this Agreement by Midwest, including
without limitation, any breach during any Wind-Down Period, which breach shall
not have been cured within 60 days after written notice of such breach is
received by Midwest.  In the event that RAI shall not have delivered written
notice of termination pursuant to this Section 8.02(c) within 45 days after RAI
receives written notice from Midwest of any material breach of this Agreement by
Midwest, then RAI shall be conclusively deemed to have waived any right to
terminate this Agreement based upon such breach; provided that such waiver shall
not apply to any subsequent or continuing breach.
 
(d) Early Termination Option.  Midwest anticipates obtaining the necessary
approvals and consents to operate E170 aircraft on its own operating
certificate.  At such time as Midwest is successful in obtaining such
certification, or at such time that Midwest is reasonably certain such
certification is forthcoming, so long as Midwest is not in default of its
obligations under Sections 3.01, 3.04, 3.06, 5.03 and 5.04, Midwest may elect to
operate the Covered Aircraft pursuant to a long term operating lease (the
“Operating Lease”) and the related agreements in the forms attached hereto as
Exhibit H commencing on the Transfer Date (as described below) and continuing
for a term equal to the remaining term of this Agreement with respect to such
aircraft (assuming no early termination right were exercised).
 
(i) In connection with the transition of the Covered Aircraft as set forth
above, Midwest may at its option (the “Early Termination Option”) terminate this
Agreement upon 180 days prior written notice to RAI if such notice is given on
or before June 1, 2010.  The notice of termination provided by Midwest pursuant
to this Section 8.02(d) will provide notice of the month in which each Covered
Aircraft will be removed from the terms and conditions of this Agreement and
leased by Midwest pursuant to an Operating Lease.  In addition, Midwest will
provide notice to RAI of the date (a “Transfer Date”) during the applicable
month on which each Covered Aircraft will be removed from the terms and
conditions of this Agreement and leased by Midwest pursuant to an Operating
Lease no fewer than 60 days prior to the date such removal will
occur.  Notwithstanding the foregoing, (x) no more than two Covered Aircraft
shall be removed from the terms of this Agreement and be made subject to
Operating Leases during any month; and (y) all Covered Aircraft shall be removed
from the terms of this Agreement and made subject to Operating Leases within a
continuous 6 month period commencing on the first Transfer Date.
 
(ii) RAI will provide full cooperation and support to Midwest in connection with
its efforts to obtain the certification reference above, including, without
limitation, providing access to all relevant maintenance programs, task cards,
manuals, materials, training programs and manuals and materials for ground,
flight, inflight and maintenance operations, checklists and dispatch training
and performance data.  RAI will use reasonable good faith efforts to provide
Midwest with the use of an EMB 170 aircraft (which shall not be a Covered
Aircraft) for training purposes on terms and conditions reasonably acceptable to
Midwest and RAI; provided that payments due by Midwest in consideration for such
use shall be at the rates as provided in Appendix 1 to Exhibit D.
 
(iii) In connection with the execution and delivery of each Operating Lease, RAI
shall use reasonable good faith efforts to provide Midwest with spares and
maintenance support (including engine maintenance support) for the aircraft
subject to such Operating Lease, including access to RAI’s total care package;
provided that, RAI shall be under no obligation to provide any such support, and
any such obligations agreed to by RAI shall be evidenced by a written agreement
between RAI and Midwest.
 
(iv) RAI and Midwest shall each bear their own costs and expenses in respect of
each Operating Lease; provided that Midwest shall pay all FAA counsel fees in
connection with the execution and delivery of each Operating Lease.
 
(v) Prior to the first Transfer Date, Midwest shall execute and deliver an
Operating Lease for each Covered Aircraft.
 
(vi) Prior to the commencement of the Operating Lease for the Spare Aircraft,
RAI shall paint the Spare Aircraft in Midwest’s livery.
 
(e) Survival During Wind-Down Period.  Notwithstanding the Termination Date
indicated in any notice of termination provided by either party pursuant to this
Agreement, upon any termination hereunder where a party has elected to provide a
Wind-Down Schedule (or in connection with an early termination pursuant to
Section 8.02(d)), the Term shall continue, and this Agreement shall survive in
full force and effect, beyond the Termination Date until the end of the
Wind-Down Period (or the last Transfer Date pursuant to Section 8.02(d)), if
any, and the rights and obligations of the parties under this Agreement,
including without limitation remedies available upon the occurrence of events
constituting Cause or material breach, shall continue with respect to the
Covered Aircraft until the final Covered Aircraft is withdrawn from this
Agreement.
 
*Confidential

--------------------------------------------------------------------------------

Section 8.03 Disposition of Aircraft during Wind-Down Period
 
(a) Termination by Midwest for Cause.  If this Agreement is terminated pursuant
to Section 8.02(a), the Covered Aircraft shall be completely withdrawn from the
capacity purchase provisions of this Agreement as of the Termination Date and
shall cease to be Covered Aircraft as of such date, unless the notice of
termination provided by Midwest under Section 8.02(a) indicates that Midwest
intends to submit a Wind-Down Schedule.  In such event within 120 days of
sending the notice of termination pursuant to Section 8.02(a), Midwest will
provide an irrevocable Wind-Down Schedule according to which the Covered
Aircraft will be withdrawn from the capacity purchase provisions of this
Agreement.  The Wind-Down Schedule will provide for the withdrawal of the
Covered Aircraft no sooner than the Termination Date and no later than 24 months
from the Termination Date.  The provisions of this Section 8.03(a) shall
supersede any Wind-Down Schedule delivered pursuant to any other provision of
this Agreement.
 
(b) Termination by Midwest for Breach or Change of Control.  If this Agreement
is terminated by Midwest under Section 8.02(b), Section 5.03, or Section 5.04,
then the Covered Aircraft shall be withdrawn from the capacity purchase
provisions of this Agreement in accordance with the following terms and
conditions:
 
(i) Within 180 days of delivery of any notice of termination, Midwest shall
deliver to RAI an irrevocable written Wind-Down Schedule, providing for the
withdrawal of such Covered Aircraft from the capacity purchase provisions of
this Agreement, delineating the number of each aircraft to be withdrawn by
month, which will not be more than [*] Covered Aircraft per month.
 
(ii) The Wind-Down Schedule may not provide for the withdrawal of any Covered
Aircraft beyond any date more than 24 months after the Termination Date.
 
(c) Termination by RAI for Breach.  If this Agreement is terminated by RAI under
Section 8.02(c) or Section 5.03, then the Covered Aircraft shall be withdrawn
from the capacity purchase provisions of this Agreement in accordance with the
following terms and conditions:  The notice of termination delivered by RAI to
Midwest pursuant to Section 8.02(c)(i) shall be irrevocable and shall contain a
Termination Date that is no more than 60 days after the date of such notice;
provided that such termination notice shall be void and of no further effect
automatically upon the payment by Midwest prior to such Termination Date of all
unpaid amounts giving rise to the default under Section 8.02(c)(i).  As of the
Termination Date set forth in a notice of termination delivered pursuant to
Section 8.02(c)(i), all of the Covered Aircraft shall automatically be withdrawn
from the capacity purchase provisions of this Agreement and shall cease to be
Covered Aircraft as of such date.  The notice of termination delivered by RAI to
Midwest pursuant to Section 8.02(c)(ii) shall be irrevocable and shall contain a
Termination Date that is at least 10 and not more than 360 days after the date
of such notice.  The notice of termination delivered by RAI to Midwest pursuant
to Section 8.02(c)(iii) or Section 5.03 shall be irrevocable and shall contain a
Termination Date that is no fewer than 180 days after the date of such
notice.  Prior to the earlier of (i) two Business Days prior to the Termination
Date, and (ii) the 90th day after receipt of such termination notice pursuant to
Section 8.02(c)(ii), 8.02(c)(iii), or 5.03, RAI shall deliver to Midwest a
Wind-Down Schedule beginning on such Termination Date; provided that no
Wind-Down Period shall occur following a termination pursuant to Section
8.02(c)(ii) if Midwest shall not have cured the payment default giving rise to
such termination prior to or simultaneously with its delivery of the Wind-Down
Schedule to RAI.  The Wind-Down Schedule may not provide for the withdrawal of
any Covered Aircraft beyond any date more than 12 months after the Termination
Date nor provide for the removal of more than [*] Covered Aircraft per calendar
month.
 
(d) Termination at End of Term.  If the Agreement is terminated at the end of
the Term or any extension thereof (other than pursuant to Section 8.02), Midwest
shall deliver to RAI a Wind-Down Schedule no fewer than 180 days prior to the
end of the Term or any extension thereof.  Such Wind-Down Schedule may not
provide for the withdrawal of any Covered Aircraft beyond any date more than 18
months after the end of the Term or extension period nor provide for the removal
of more than [*]Covered Aircraft per calendar month
 
(e) Other Remedies for Labor Strike and Other Circumstances.  In the event of
(i) the occurrence of a Labor Strike that shall have continued for at least
three consecutive days or (ii) the mandatory grounding of the Covered Aircraft
by the FAA, then for so long as such Labor Strike or grounding shall continue
and thereafter until the Controllable Completion Factor Percentage of Scheduled
Flights (calculated on a daily basis) on any day of the week equals or exceeds
the Controllable Completion Factor Percentage Target Threshold of Scheduled
Flights, Midwest shall not be required to pay any of the Fixed Cost elements set
forth on Appendix 1 to Exhibit D.  The rights set forth in this Section 8.03(e)
are in addition to, and not in limitation of, any other right of Midwest arising
hereunder.
 
(f) Punitive Damages.  No party to this Agreement or any of its affiliates shall
be liable to any other party hereto or any of its affiliates for claims for
punitive, special or exemplary damages, arising out of or relating to this
Agreement or the transactions contemplated hereby, regardless of whether a claim
is based on contract, tort (including negligence), strict liability, violation
of any applicable deceptive trade practices act or similar law or any other
legal or equitable principle, and each party releases the others and their
respective affiliates from liability for any such damages.  No party shall be
entitled to rescission of this Agreement as a result of breach of any other
party’s representations, warranties, covenants or agreements, or for any other
matter;  provided, that nothing in this Section 8.03(f) shall restrict the right
of any party to exercise any right to terminate this Agreement pursuant to the
terms hereof.
 
*Confidential

--------------------------------------------------------------------------------

 
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND LIQUIDATED DAMAGES
 
Section 9.01 Representations and Warranties of RAI.  RAI represents, warrants
and covenants to Midwest as of the date hereof as follows:
 

(a) Organization and Qualification.  RAI is a duly organized and validly
existing corporation under the laws of the State of Indiana.  RAI has the
corporate power and authority to own, operate and use its assets and to provide
the Regional Airline Services.  RAI is duly qualified to do business as a
foreign corporation under the laws of each jurisdiction that requires such
qualification, except where the failure to possess such qualification would not
have a material adverse effect on RAI or its ability to conduct its business, to
provide Regional Airline Services, and otherwise to perform its obligations
hereunder.
 
(b) Authority Relative to this Agreement.  RAI has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof.  The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of RAI.  This Agreement has been duly and validly
executed and delivered by RAI and is, assuming due execution and delivery
thereof by Midwest and that Midwest has legal power and right to enter into this
Agreement, a valid and binding obligation of RAI, enforceable against RAI in
accordance with its terms, except as enforcement hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors’ rights
generally and legal principles of general applicability governing the
availability of equitable remedies (whether considered in a proceeding in equity
or at law or otherwise under applicable law).
 
(c) Conflicts.  Neither the execution or delivery of this Agreement nor the
performance by RAI of the transactions contemplated hereby will (i) violate,
conflict with, or constitute a default under any of the terms of RAI’s
certificate of incorporation, by-laws, or any provision of, or result in the
acceleration of any obligation under, any material contract, sales commitment,
license, purchase order, security agreement, mortgage, note, deed, lien, lease
or other agreement to which RAI is a party or by which it or any of its
properties or assets may be bound, (ii) result in the creation or imposition of
any lien, charge or encumbrance in favor of any third person or entity, (iii)
violate any law, statute, judgment, decree, order, rule or regulation of any
governmental authority or body, or (iv) constitute any event which, after notice
or lapse of time or both, would result in such violation, conflict, default,
acceleration or creation or imposition of liens, charges or encumbrances.
 
(d) No Default.  RAI is not (i) in violation of its charter or by-laws, (ii) in
breach or default in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a breach or default, in
the due performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject, or (iii) in violation of any law, ordinance,
governmental rule, regulation or court decree to which it or its property or
assets may be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit necessary
to the ownership of its property or to the conduct of its business, where such
violation, breach, default or failure would have a material adverse effect on
RAI or on its ability to provide Regional Airlines Services and otherwise
perform its obligations hereunder.  To the knowledge of RAI, no third party to
any indenture, mortgage, deed of trust, loan agreement, lease or other agreement
or instrument that is material to RAI to which RAI is a party or by which any of
them are bound or to which any of their properties are subject, is in default in
any material respect under any such agreement.
 
(e) Broker.  RAI has not retained or agreed to pay any broker or finder with
respect to this Agreement and the transactions contemplated hereby.
 
(f) Financial Statements.  The financial statements (including the related notes
and supporting schedules) of RAI Holdings delivered (or, if filed with the
Securities and Exchange Commission, made available) to Midwest immediately prior
to the date hereof fairly present in all material respects the consolidated
financial position of RAI Holdings and its results of operations as of the dates
and for the periods specified therein.  Since the date of the latest of such
financial statements, there has been no material adverse change nor any
development or event involving a prospective material adverse change with
respect to RAI Holdings.  Such financial statements have been prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved, except to the extent
disclosed therein.
 
(g) Insurance.  RAI is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts and with such
deductibles as are customary in the businesses in which they are engaged.  RAI
has not received notice of cancellation or non-renewal of such insurance.  All
such insurance is outstanding and duly in force on the date hereof.  RAI has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on RAI.
 
(h) No Proceedings.  There are no legal or governmental proceedings pending, or
investigations commenced of which RAI has received notice, in each case to which
RAI is a party or of which any property or assets of RAI is the subject which,
if determined adversely to RAI, would individually or in the aggregate have a
material adverse effect on RAI or on RAI’s ability to provide Regional Airlines
Services and otherwise perform its obligations hereunder; and to the best
knowledge of RAI, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
 
(i) No Labor Dispute.  No labor dispute with the employees of RAI exists or, to
the knowledge of RAI, is imminent which would reasonably be expected to have a
material adverse effect on RAI or on its ability to provide Regional Airlines
Services and otherwise perform their respective obligations hereunder.
 
(j) Permits.  RAI possesses all material certificates, authorizations and
permits issued by FAA and other applicable federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, to provide
Regional Airlines Services and otherwise to perform their respective obligations
hereunder, and RAI has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a material adverse effect on RAI or
on its ability to conduct its businesses, to provide Regional Airlines Services
and otherwise to perform its obligations hereunder.
 

--------------------------------------------------------------------------------

Section 9.02 Representations and Warranties of Midwest.  Midwest represents and
warrants to RAI as of the date hereof as follows:
 
(a) Organization and Qualification.  Midwest is a duly incorporated and validly
existing corporation in good standing under the laws of the State of Wisconsin.
 
(b) Authority Relative to this Agreement.  Midwest has the corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof.  The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Midwest.  This Agreement has been duly and
validly executed and delivered by Midwest and is, assuming due execution and
delivery thereof by RAI and that RAI has legal power and right to enter into
this Agreement, a valid and binding obligation of Midwest, enforceable against
Midwest in accordance with its terms, except as enforcement hereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors’ rights generally and legal principles of general applicability
governing the availability of equitable remedies (whether considered in a
proceeding in equity or at law or otherwise under applicable law).
 
(c) Conflicts; Defaults.  Neither the execution or delivery of this Agreement
nor the performance by Midwest of the transactions contemplated hereby will (i)
violate, conflict with, or constitute a default under any of the terms of
Midwest’s certificate of incorporation, by-laws, or any provision of, or result
in the acceleration of any obligation under, any material contract, sales
commitment, license, purchase order, security agreement, mortgage, note, deed,
lien, lease or other agreement to which Midwest is a party or by which it or its
properties or assets may be bound, (ii) result in the creation or imposition of
any lien, charge or encumbrance in favor of any third person or entity, (iii)
violate any law, statute, judgment, decree, order, rule or regulation of any
governmental authority or body, or (iv) constitute any event which, after notice
or lapse of time or both, would result in such violation, conflict, default,
acceleration or creation or imposition of liens, charges or encumbrances.
 
(d) Broker.  Midwest has not retained or agreed to pay any broker or finder with
respect to this Agreement and the transactions contemplated hereby.
 
(e) No Proceedings.  There are no legal or governmental proceedings pending, or
investigations commenced of which Midwest has received notice, in each case to
which Midwest is a party or of which any property or assets of Midwest is the
subject which, if determined adversely to Midwest, would individually or in the
aggregate have a material adverse effect on Midwest or on its ability to perform
its obligations hereunder; and to the best knowledge of Midwest, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
 
(f) Financial Statements.  The financial statements (including the related notes
and supporting schedules) of Midwest Holdings delivered (or, if filed with the
Securities and Exchange Commission, made available) to RAI immediately prior to
the date hereof fairly present in all material respects the consolidated
financial position of Midwest Holdings.  Since the date of the latest of such
financial statements, there has been no material adverse change nor any
development or event involving a prospective material adverse change with
respect to Midwest Holdings.  Such financial statements have been prepared in
accordance with generally accepted accounting principles in the United States
consistently applied throughout the periods involved, except to the extent
disclosed therein.
 
Section 9.03 Liquidated Damages.  Midwest agrees that if the Agreement is
terminated during the first 18 months of the Term (other than a termination by
Midwest pursuant to Section 8.02(a), 8.02(b) or 8.02(d)), Midwest shall pay to
RAI liquidated damages as follows: (i) if such termination occurs on or prior to
the [*] day following the date of this Agreement, Midwest shall pay liquidated
damages in the amount of [*]; (ii) if such termination occurs on or after the
[*]day following the date of this Agreement but on or before the [*] day
following the date of this Agreement, Midwest shall pay liquidated damages in
the amount of [*]; and (iii) if such termination occurs on or after the [*] day
following the date of this Agreement but on or before the date that is 18 months
following the date of this Agreement, Midwest shall pay liquidated damages in
the amount of [*].  The parties agree that the damages to be suffered by RAI in
connection with any such termination shall be difficult to calculate, and that
the foregoing liquidated damages are a good faith estimate of such damages, and
that such liquidated damages are not intended to be a penalty.  The parties
further agree that the foregoing liquidated damages shall be RAI’s sole and
exclusive remedies against Midwest for any damages suffered solely as a result
of any such termination; provided that, the foregoing is not intended to limit
or preclude RAI from making any claim for amounts otherwise due from Midwest as
of the date of such termination and unpaid hereunder.
 
*Confidential

--------------------------------------------------------------------------------

 
ARTICLE X
MISCELLANEOUS
 
Section 10.01 Transition Arrangements
 
(a) Scheduling.  Subsequent to the execution of this Agreement, and prior to the
inservice date of the first Covered Aircraft, RAI and Midwest shall work
together to facilitate the initial monthly scheduling of Scheduled Flights.
 
(b) Other Setup Arrangements.  Subsequent to the execution of this Agreement,
and prior to the inservice date of the first Covered Aircraft, RAI and Midwest
shall work together to facilitate all other relevant aspects of the commencement
of RAI’s provision of Regional Airlines Services, including without limitation
the provision of passenger-related and technology-related services.
 
Section 10.02 Notices.  All notices made pursuant to this Agreement shall be in
writing and shall be deemed given upon (a) a transmitter’s confirmation of a
receipt of a facsimile transmission (but only if followed by confirmed delivery
by a standard overnight courier the following Business Day or if delivered by
hand the following Business Day), or (b) confirmed delivery by a standard
overnight courier or delivered by hand, to the parties at the following
addresses:
 
if to Midwest:
 
[*]
 
 
With copies to:

 
[*]
 
and
 
[*]
 
if to RAI:
 
[*]
 
 
With copy to:

 
[*]
 
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 10.02.
 
Section 10.03 Binding Effect; Assignment.  This Agreement and all of the
provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.  Except with respect to a merger or other consolidation of either party
with another Person (and without limiting Midwest’s and RAI’s respective rights
pursuant to Section 5.03 hereof), neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto without
the prior written consent of the other parties.
 
Section 10.04 Amendment and Modification.  This Agreement may not be amended or
modified in any respect except by a written agreement signed by the parties
hereto that specifically states that it is intended to amend or modify this
Agreement.
 
Section 10.05 Waiver.  The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted that specifically states that it is intended to waive
such term.  Unless otherwise expressly provided in this Agreement, no delay or
omission on the part of any party in exercising any right or privilege under
this Agreement shall operate as a waiver thereof, nor shall any waiver on the
part of any party of any right or privilege under this Agreement operate as a
waiver of any other right or privilege under this Agreement nor shall any single
or partial exercise of any right or privilege preclude any other or further
exercise thereof or the exercise of any other right or privilege under this
Agreement.  No failure by any party to take any action or assert any right or
privilege hereunder shall be deemed to be a waiver of such right or privilege in
the event of the continuation or repetition of the circumstances giving rise to
such right unless expressly waived in writing by each party against whom the
existence of such waiver is asserted.
 
Section 10.06 Interpretation.  The table of contents and the section and other
headings and subheadings contained in this Agreement and in the exhibits and
schedules hereto are solely for the purpose of reference, are not part of the
agreement of the parties hereto, and shall not in any way affect the meaning or
interpretation of this Agreement or any exhibit or schedule hereto.  All
references to days or months shall be deemed references to calendar days or
months.  All references to “$” shall be deemed references to United States
dollars.  Unless the context otherwise requires, any reference to an “Article,”
a “Section,” an “Exhibit,” or a “Schedule” shall be deemed to refer to a section
of this Agreement or an exhibit or schedule to this Agreement, as
applicable.  The words “hereof,” “herein” and “hereunder” and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.  Whenever the words “include,”
“includes” or “including” are used in this Agreement, unless otherwise
specifically provided, they shall be deemed to be followed by the words “without
limitation.”  This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing the document to be drafted.
 
Section 10.07 Confidentiality.  Except as required by law or stock exchange or
other regulation or in any proceeding to enforce the provisions of this
Agreement, or as otherwise provided below, each party hereby agrees not to
publicize or disclose to any third party (x) the terms or conditions of this
Agreement, or any exhibit, schedule or appendix hereto or thereto, or any
information, data, schedules, route information, fare schedules and rules shared
between the parties during the course of performance under this Agreement,
without the prior written consent of the other parties thereto, or (y) any
confidential information or data, both oral and written, received from the
other, whether pursuant to or in connection with this Agreement, and designated
as such by the other without the prior written consent of the party providing
such confidential information or data (except that a party may disclose such
information to its third party consultants, advisors and representatives, in
each case who are themselves bound to keep such information confidential).  Each
of party hereby agrees not to use any such confidential information or data of
the other party other than in connection with performing their respective
obligations or enforcing their respective rights under this Agreement, or as
otherwise expressly permitted or contemplated by this Agreement.  If either
party is served with a subpoena or other process requiring the production or
disclosure of any of such agreements or information, then the party receiving
such subpoena or other process, before complying with such subpoena or other
process, shall, unless expressly requested not to do so by a government agency
issuing the subpoena or other process, immediately notify the other parties
hereto of same and permit said other parties a reasonable period of time to
intervene and contest disclosure or production.  Upon termination of this
Agreement, each party must return to each other any confidential information or
data received from the other and designated as such by the party providing such
confidential information or data which is still in the recipient’s possession or
control.  Without limiting the foregoing, no party shall be prevented from
disclosing the following terms of this Agreement:  the number of aircraft
subject hereto, the periods for which such aircraft are subject hereto, and any
termination provisions contained herein.  The provisions of this Section 10.07
shall survive the termination of this Agreement for a period of ten years.
 
*Confidential

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Section 10.08 Arbitration
 
(a) Agreement to Arbitrate.  Subject to the equitable remedies provided under
Section 10.11, any and all claims, demands, causes of action, disputes,
controversies and other matters in question (all of which are referred to herein
as “Claims”) arising out of or relating to this Agreement, shall be resolved by
binding arbitration pursuant to the procedures set forth by the International
Institute for Conflict Prevention and Resolution (the “CPR”).  Each of the
parties agrees that arbitration under this Section 10.08 is the exclusive method
for resolving any Claim and that it will not commence an action or proceeding
based on a Claim hereunder, except to enforce the arbitrators’ decisions as
provided in this Section 10.08, to compel any other party to participate in
arbitration under this Section 10.08.  The governing law for any such action or
proceeding shall be the law set forth in Section 10.08(f).
 
(b) Initiation of Arbitration.  If any Claim has not been resolved by mutual
agreement on or before the 15th day following the first notice of the Claim to
or from a disputing party, then the arbitration may be initiated by one party by
providing to the other party a written notice of arbitration specifying the
Claim or Claims to be arbitrated.  If a party refuses to honor its obligations
to arbitrate under this provision, the other party may compel arbitration in
either federal or state court in New York, New York and seek recovery of its
attorneys’ fees and court costs incurred if the arbitration is ordered to
proceed.
 
(c) Place of Arbitration.  The arbitration proceeding shall be conducted in New
York, New York, or some other location mutually agreed upon by the parties.
 
(d) Selection of Arbitrators.  The arbitration panel (the “Panel”) shall consist
of three arbitrators who are qualified to hear the type of Claim at issue.  They
may be selected by agreement of the Parties within thirty days of the notice
initiating the arbitration procedure, or from the date of any order compelling
such arbitration to proceed.  If the Parties fail to agree upon the designation
of any or all the Panel, then the Parties shall request the assistance of the
CPR.  The Panel shall make all of its decisions by majority vote.  Evident
partiality on the part of an arbitrator exists only where the circumstances are
such that a reasonable person would have to conclude there in fact existed
actual bias, and a mere appearance or impression of bias will not constitute
evident partiality or otherwise disqualify an arbitrator.  The decision of the
Panel will be binding and non-appealable, except as permitted under the Federal
Arbitration Act.
 
(e) Choice of Law as to Procedural Matters.  The enforcement of this agreement
to arbitrate, and all procedural aspects of the proceeding pursuant to this
agreement to arbitrate, including but not limited to, the issues subject to
arbitration (i.e., arbitrability), the scope of the arbitrable issues, and the
rules governing the conduct of the arbitration, unless otherwise agreed by the
Parties, shall be governed by and construed pursuant to the Federal Arbitration
Act.
 
(f) Choice of Law as to Substantive Claims.  In deciding the substance of the
parties’ Claims, the arbitrators shall apply the substantive laws of the State
of New York (excluding New York choice-of-law principles that might call for the
application of the law of another jurisdiction).
 
(g) Procedure.  It is contemplated that the arbitration proceeding will be
self-administered by the parties and conducted in accordance with procedures
jointly determined by the Panel and the Parties; provided, however, that if
either or both Parties believes the process will be enhanced if it is
administered by the CPR, then either or both Parties shall have the right to
cause the process to become administered by the CPR and, thereafter, the
arbitration shall be conducted, where applicable or appropriate, pursuant to the
administration of the CPR.  In determining the extent of discovery, the number
and length of depositions, and all other pre-hearing matters, the Panel shall
endeavor to the extent possible to streamline the proceedings and minimize the
time and cost of the proceedings.
 
(h) Final Hearing.  The final hearing shall be conducted within 120 days of the
selection of the entire Panel.  The final hearing shall not exceed ten business
days, with each party to be granted one-half of the allocated time to present
its case to the arbitrators, unless otherwise agreed by the Parties.
 
(i) Damages.  Only actual damages may be awarded.  It is expressly agreed that
the Panel shall have no authority to award treble, exemplary or punitive damages
of any type under any circumstances regardless of whether such damages may be
available under the applicable law.
 
(j) Decision of the Arbitration.  The Panel shall render its final decision and
award in writing within 20 days of the completion of the final hearing
completely resolving all of the Claims that are the subject of the arbitration
proceeding.  The Panel shall certify in its decision that no part of its award
includes any amount for treble, exemplary or punitive damages.  The Panel’s
decision and award shall be final and non-appealable to the maximum extent
permitted by law.  Any and all of the Panel’s orders and decisions will be
enforceable in, and judgment upon any award rendered in the arbitration
proceeding may be confirmed and entered by, any federal or state court in New
York, New York having jurisdiction.
 
(k) Confidentiality.  All proceedings conducted hereunder and the decision and
award of the Panel shall be kept confidential by the Panel and, except as
required by law or stock exchange regulation or in any proceeding to enforce any
decision or award by the Panel, by the Parties.
 
Section 10.09 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  The Agreement may be
executed by facsimile signature.
 
Section 10.10 Severability.  Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.  Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 

--------------------------------------------------------------------------------

Section 10.11 Equitable Remedies; Certain Liquidated Damages
 
(a) Equitable Remedies.  Each party acknowledges and agrees that, under certain
circumstances, the breach by a party of a term or provision of this Agreement
will materially and irreparably harm the other party, that money damages will
accordingly not be an adequate remedy for such breach and that the
non-defaulting party, in its sole discretion and in addition to its rights under
this Agreement and any other remedies it may have at law or in equity, may apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any breach of the provisions of this Agreement.
 
(b) Certain Liquidated Damages.  RAI will update from time to time Exhibit B to
reflect the exact in-service week and in-service day that each of the TBD
aircraft appearing on Exhibit B is known, with notification to Midwest as to
such week being no later than [*]days in advance of the in-service week and the
notification as to such date being no later than [*] days in advance of the
in-service date.  RAI will deliver such amended Exhibit B to Midwest as soon as
possible.  If RAI shall fail to provide the Covered Aircraft on the applicable
in-service day reflected on the amended Exhibit B (such Covered Aircraft being
referred to herein as the “Delayed Aircraft”), RAI will pay to Midwest within
[*]days following such failure liquidated damages in an amount equal to [*] per
each day between the in-service date reflected on the amended Exhibit B (the
“Anticipated Service Date”) and the actual in-service date (or the date of any
election by Midwest to remove the aircraft, as provided below), provided that,
in the event such inservice delay is due to circumstances beyond the control of
RAI and RAI provides prior notice (the “Delay Notice”) of such delay, such
liquidated damages shall not in any event exceed (x) [*] if the Delay Notice is
provided to Midwest no fewer than [*] days prior to the Anticipated Service Date
for the Delayed Aircraft, or (y) if such notice is delivered fewer than 180 days
prior to the Anticipated Service Date for the Delayed Aircraft, (i) [*] plus
(ii) [*] times the difference between [*]minus the number of days between the
date of such notice and the Anticipated Service Date for the Delayed Aircraft,
and provided further, if the revised delivery date for the Delayed Aircraft
indicated in the Delay Notice, or the final delivery date due to subsequent
delays, is more than [*] days beyond the Anticipated Service Date, Midwest will
have the right, to be exercised within five Business Days of receipt of such
notice, to elect to remove the Delayed Aircraft from the terms of this
Agreement.  Should Midwest elect to remove the Delayed Aircraft from the terms
of this Agreement pursuant to this Section 10.11(b), the liquidated damages
described [*] will be calculated based on the number of days between the
Anticipated Service Date and the date of Midwest’s election to remove such
aircraft from this Agreement, if any.
 
The parties agree that the damages to be suffered by Midwest in connection with
RAI’s failure to deliver an aircraft on an Anticipated Service Date shall be
difficult to calculate, and that the foregoing liquidated damages are a good
faith estimate of such damages, and that such liquidated damages are not
intended to be a penalty.  The parties further agree that the foregoing
liquidated damages shall be Midwest’s sole and exclusive remedies against RAI
for any damages suffered solely as a result of RAI’s failure to deliver an
aircraft on an Anticipated Service Date as described above.
 
(c) Other Limitations on Seeking Damages.  Neither the right of any party to
terminate this Agreement, nor the exercise of such right, shall constitute a
limitation on such party’s right to seek damages or such other legal redress to
which such party may otherwise be entitled;  provided  that, absent the
occurrence of another breach of this Agreement by RAI, Midwest shall not be
entitled to seek damages solely for the occurrence of (i) an event of Cause of
the type described in clause (iii) or clause (iv) of the definition thereof,
(ii) a material breach of the type described in clause (ii) of Section 8.02(b),
or (iii) a termination pursuant to Section 5.03 or Section 5.04.
 
Section 10.12 Relationship of Parties.  Nothing in this Agreement shall be
interpreted or construed as establishing between the parties a partnership,
joint venture or other similar arrangement.
 
Section 10.13 Entire Agreement; No Third Party Beneficiaries.  This Agreement
(including the exhibits and schedules hereto) are intended by the parties as a
complete statement of the entire agreement and understanding of the parties with
respect to the subject matter hereof and all matters between the parties related
to the subject matter herein or therein set forth.  This Agreement is made
among, and for the benefit of, the parties hereto, and the parties do not intend
to create any third-party beneficiaries hereby, and no other Person shall have
any rights arising under, or interests in or to, this Agreement.
 
Section 10.14 Governing Law.  Except with respect to matters referenced in
Section 10.08(e) (which shall be governed by and construed pursuant to the
Federal Arbitration Act), this Agreement shall be governed by and construed in
accordance with the laws of the State of New York (excluding New York
choice-of-law principles that might call for the application of the law of
another jurisdiction) as to all matters, including matters of validity,
construction, effect, performance and remedies.  Except as otherwise provided in
Section 10.08(e), any action arising out of this Agreement or the rights and
duties of the parties arising hereunder may be brought, if at all, only in the
state or federal courts located in the City and County of New York, New York.
 
Section 10.15 Right of Set-Off.  If any party hereto shall be in default
hereunder to any other party, then in any such case the non-defaulting party
shall be entitled to set off from any payment owed by such non-defaulting party
to the defaulting party hereunder any amount owed by the defaulting party to the
non-defaulting party thereunder;  provided  that contemporaneously with any such
set-off, the non-defaulting party shall give written notice of such action to
the defaulting party; provided further that the failure to give such notice
shall not affect the validity of the set-off.  It is specifically agreed that
(i) for purposes of the set-off by any non-defaulting party, mutuality shall be
deemed to exist among the parties; (ii) reciprocity among the parties exists
with respect to their relative rights and obligations in respect of any such
set-off; and (iii) the right of set-off is given as additional security to
induce the parties to enter into the transactions contemplated hereby.  Upon
completion of any such set-off, the obligation of the defaulting party to the
non-defaulting party shall be extinguished to the extent of the amount so
set-off.  Each party hereto further waives any right to assert as a defense to
any attempted set-off the requirements of liquidation or mutuality.  This
set-off provision shall be without prejudice, and in addition, to any right of
set-off, combination of accounts, lien or other right to which any
non-defaulting party is at any time otherwise entitled (either by operation of
law, contract or otherwise), including without limitation pursuant to Section
3.06(b)(ii) hereof.
 
Section 10.16 Cooperation with Respect to Reporting.  Each of the parties hereto
agrees to use its commercially reasonable efforts to cooperate with each other
party in providing necessary data, to the extent in the possession of the first
party, required by such other party in order to meet any reporting requirements
to, or otherwise in connection with any filing with or provision of information
to be made to, any regulatory agency or other governmental authority.
 
Section 10.17 Extension of Term.  Midwest may extend the Term of this Agreement
for up to two extension periods by delivering to RAI written notice on such
extension no less than 365 days prior to the end of the then existing Term.  Any
extension shall be for no less than three years.
 
Section 10.18 Life Limited Parts.  Midwest and RAI shall each cooperate with one
another in order to manage and minimize engine life limited parts (“LLP”)
expenses for Covered Aircraft.  To that end, RAI shall provide annual
projections of LLP requirements and supplemental notice of specific engine
maintenance events which require LLP replacement as they are scheduled.  Midwest
may, at its option and with RAI’s consent (which consent shall not be
unreasonably withheld) provide or arrange the provision of used serviceable LLPs
that otherwise meet RAI’s specifications and reasonable minimum cycle-remaining
requirements, to be incorporated into a Covered Aircraft.  In connection with
the withdrawal of any Covered Aircraft from the capacity purchase provisions of
this Agreement (whether at the end of such aircraft’s scheduled term or
otherwise), Midwest shall pay RAI for the pro-rata cost (based on useful life
and using the then-current catalogue price for LLPs) of all LLPs consumed for
all Scheduled Flights by such Covered Aircraft under this Agreement, and RAI
shall pay Midwest for the pro-rata cost (based on useful life and using the
then-current catalogue price for LLPs) of all LLPs provided by Midwest and
incorporated into such Covered Aircraft pursuant to the previous sentence and
not consumed for any Scheduled Flights under this Agreement.
 
*Confidential

--------------------------------------------------------------------------------

Section 10.19 RAI Holdings Guarantee.
 
(a) RAI Holdings does hereby unconditionally and irrevocably guaranty to
Midwest, as a primary obligor and not merely as surety, (i) the due, punctual,
and full payment (when due, by acceleration or otherwise) of each amount which
RAI is or may become obligated to pay under this Agreement, (ii) the full and
punctual performance and observance by RAI of each term, provision, condition,
agreement and covenant for which it is liable contained in this Agreement, and
(iii) the accuracy of each of the representations and warranties of RAI set
forth in this Agreement.  RAI Holdings hereby expressly waives notice,
promptness, presentment and diligence as to the obligations guaranteed hereby
and acceptance of this guarantee or any requirement that Midwest proceed first
against RAI or any security for or any other guarantor of any of the obligations
guaranteed hereunder (and without having to join any other person in any such
action).  RAI Holdings agrees that it shall not be required to consent to, or
receive any notice of, any amendment or modification of, or waiver, consent or
extension with respect to, this Agreement or any payments or performance
obligations required of RAI herein.
 
(b) This guarantee by RAI Holdings is a guarantee of payment and performance and
not merely a guaranty of collection, and RAI Holding’s liabilities and
obligations under this guarantee are and shall at all times continue to be
absolute, irrevocable and unconditional in all respects in accordance with the
terms of this Section 10.19, and shall at all times be valid and enforceable
without set off, deduction, or counterclaim irrespective of any other agreements
or circumstances of any nature whatsoever which might otherwise constitute a
defense to this guarantee or the obligations of RAI Holdings hereunder.
 
(c) The guarantee by RAI Holdings in this Section 10.19 shall continue to be
effective, or be reinstated, as the case may be, if at any time payment by RAI
or RAI Holdings of all or any part of any sum payable pursuant to this Agreement
or this guarantee is rescinded or otherwise must be returned by Midwest upon
RAI’s insolvency, bankruptcy or reorganization, all as though such payment had
not been made.  Until all of the obligations guaranteed hereunder shall have
been paid and performed in full, RAI Holdings shall have no right of subrogation
or any other right to enforce any remedy which Midwest now has or may hereafter
have against RAI.
 
(d) RAI Holdings hereby represents and warrants (i) that it has the necessary
power and authority to execute and deliver this Agreement, (ii) all required
consents, approvals and authorizations have been obtained with respect to the
execution and delivery of this Agreement by RAI Holdings, and (iii) that this
Agreement has been duly executed and delivered by RAI Holdings and is
enforceable against RAI Holdings in accordance with its terms, provided, the
representations and warranties set forth in clauses (i) through (iii) above are
solely as to the extent necessary to provide the guarantee set forth in this
Section 10.19, and, provided further, that such representations and warranties
are qualified to the extent enforceability may be effected by the laws of
bankruptcy and equity.
 
Section 10.20 Midwest Holdings Guarantee.
 
(a) Midwest Holdings does hereby unconditionally and irrevocably guaranty to
RAI, as a primary obligor and not merely as surety, (i) the due, punctual, and
full payment (when due, by acceleration or otherwise) of each amount which
Midwest is or may become obligated to pay under this Agreement, (ii) the full
and punctual performance and observance by Midwest of each term, provision,
condition, agreement and covenant for which it is liable contained in this
Agreement, and (iii) the accuracy of each of the representations and warranties
of Midwest set forth in this Agreement.  Midwest Holdings hereby expressly
waives notice, promptness, presentment and diligence as to the obligations
guaranteed hereby and acceptance of this guarantee or any requirement that RAI
proceed first against Midwest or any security for or any other guarantor of any
of the obligations guaranteed hereunder (and without having to join any other
person in any such action).  Midwest Holdings agrees that it shall not be
required to consent to, or receive any notice of, any amendment or modification
of, or waiver, consent or extension with respect to, this Agreement or any
payments or performance obligations required of Midwest herein.
 
(b) This guarantee by Midwest Holdings is a guarantee of payment and performance
and not merely a guaranty of collection, and Midwest Holding’s liabilities and
obligations under this guarantee are and shall at all times continue to be
absolute, irrevocable and unconditional in all respects in accordance with the
terms of this Section 10.20, and shall at all times be valid and enforceable
without set off, deduction, or counterclaim irrespective of any other agreements
or circumstances of any nature whatsoever which might otherwise constitute a
defense to this guarantee or the obligations of Midwest Holdings hereunder.
 
(c) The guarantee by Midwest Holdings in this Section 10.20 shall continue to be
effective, or be reinstated, as the case may be, if at any time payment by
Midwest or Midwest Holdings of all or any part of any sum payable pursuant to
this Agreement or this guarantee is rescinded or otherwise must be returned by
RAI upon Midwest’s insolvency, bankruptcy or reorganization, all as though such
payment had not been made.  Until all of the obligations guaranteed hereunder
shall have been paid and performed in full, Midwest Holdings shall have no right
of subrogation or any other right to enforce any remedy which RAI now has or may
hereafter have against Midwest.
 
(d) Midwest Holdings hereby represents and warrants (i) that it has the
necessary power and authority to execute and deliver this Agreement, (ii) all
required consents, approvals and authorizations have been obtained with respect
to the execution and delivery of this Agreement by Midwest Holdings, and (iii)
that this Agreement has been duly executed and delivered by Midwest Holdings and
is enforceable against Midwest Holdings in accordance with its terms, provided,
the representations and warranties set forth in clauses (i) through (iii) above
are solely as to the extent necessary to provide the guarantee set forth in this
Section 10.19, and, provided further, that such representations and warranties
are qualified to the extent enforceability may be effected by the laws of
bankruptcy and equity.
 

                                                    
 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this Airline Services
Agreement to be duly executed and delivered as of the date and year first
written above.
 
 

MIDWEST AIRLINES, INC.       REPUBLIC AIRLINE INC.            
/s/ Curtis E. Sawyer
   
/s/ Bryan Bedford
 
Name: Curtis E. Sawyer
   
Name: Bryan Bedford 
 
Title: Senior Vice President 
   
Title: President
 

 
 
 
 
 

 
The parties signing below do so solely with respect to their respective
obligations under Section 10.19 and Section 10.20 of this Agreement.
 
 

MIDWEST AIR GROUP, INC.          REPUBLIC AIRWAYS HOLDINGS INC.            
/s/ Curtis E. Sawyer
   
/s/ Bryan Bedford
 
Name: Curtis E. Sawyer
   
Name: Bryan Bedford 
 
Title: Senior Vice President
   
Title: President
 

 
 
 
 
 

 

                                                              
 
 

--------------------------------------------------------------------------------

 

Exhibits
 
Exhibit A – Definitions
Exhibit B – Covered Aircraft & Inservice Schedule
Exhibit C – Aircraft Specification, Livery and Use of Midwest Marks
Exhibit D – Compensation
Exhibit E – Terms of Codeshare Arrangements
Exhibit F – Use of RAI Marks
Exhibit G – Reasonable Operating Constraints
Exhibit H – Form of Aircraft Lease Agreement and Related Agreements

                                                        
 
 

--------------------------------------------------------------------------------

 

EXHIBIT A
 

 
Definitions
 
ACARS – means the Aircraft Communications Addressing and Reporting System which
provides communications between the Covered Aircraft and RAI with respect to
operational matters.
 
Agreement – means the Airline Services Agreement, dated as of September 3, 2008,
among Midwest and RAI, as amended from time to time pursuant to Section 10.04
hereof.
 
Base Compensation – is defined in Paragraph A.1 of Exhibit D.
 
Business Day – means each Monday, Tuesday, Wednesday, Thursday and Friday unless
such day shall be a day when financial institutions in New York, New York or
Milwaukee, Wisconsin are authorized by law to close or the general offices of
Midwest or RAI are closed due to weather or other natural forces.
 
Cause – means (i) the suspension for three consecutive days or longer or the
revocation of RAI’s authority to operate as a scheduled airline, (ii) the
ceasing of RAI’s operations as a scheduled airline, other than as a result of a
Labor Strike or the mandatory grounding of the Covered Aircraft by the FAA, and
other than any temporary cessation for not more than 14 consecutive days, (iii)
the occurrence of a Labor Strike that shall have continued for 10 consecutive
days or longer, (iv) beginning after the month in which the 12th aircraft is
placed in service, RAI operating at or below the Default Threshold for
Controllable arrivals within [*] minutes or the Default Threshold for
Controllable Completion Factor Percentage, each as described in Appendix 2 to
Exhibit D, for any two consecutive calendar months, or (v) a willful or
intentional material breach of this Agreement by RAI that substantially deprives
Midwest of the benefits of this Agreement, which breach shall have continued for
45 days after notice thereof is delivered by Midwest to RAI.
 
Change of Control – means, with respect to any Person, the merger of such Person
with, or the acquisition of direct or indirect control of such Person by,
another air carrier, or a corporation directly or indirectly owning or
controlling or directly or indirectly owned or controlled by another air carrier
(a “Holding Company”), or a corporation directly or indirectly owned or
controlled by such Holding Company, unless (1) such Person is the acquiring or
surviving entity in such merger or acquisition, or (2) the ultimate beneficial
ownership of the surviving entity immediately following such transaction is
substantially similar (i.e., at least 60% common ownership) to the beneficial
ownership of such Person immediately prior to such transaction.
 
Charter Flights – means any flight by a Covered Aircraft for charter operations
arranged by Midwest that is not reflected in the Final Monthly Schedule.
 
Covered Aircraft – means all of the aircraft listed on Exhibit B (as amended
from time to time pursuant to the provisions of this Agreement) and presented
for service by RAI, as adjusted from time to time for withdrawals pursuant to
Article VIII and for extensions pursuant to Section 10.17.  Upon becoming
subject to an Operating Lease, an aircraft shall cease to be a Covered
 
* Confidential

--------------------------------------------------------------------------------

Aircraft for all purposes hereof.
 
DOT – means the United States Department of Transportation.
 
Effective Date – is as set forth in the preamble to this Agreement.
 
Enplanement – means one passenger for such passenger’s entire one-way flight
itinerary, regardless of how many Scheduled Flights or flight segments comprise
such itinerary.
 
FAA – means the United States Federal Aviation Administration.
 
Final Monthly Schedule – means the final schedule of Scheduled Flights for the
next calendar month delivered by Midwest to RAI pursuant to Section 2.01(b).
 
Labor Strike – means a labor dispute, as such term is defined in 29 U.S.C.
Section 113(c) involving RAI and some or all of its employees, which dispute
results in a union-authorized strike resulting in a work stoppage.
 
LLP – is defined in Section 10.18.
 
Midwest – means Midwest Airlines, Inc., a Wisconsin corporation, and its
successors and permitted assigns.
 
Midwest Marks – is defined in Exhibit C.
 
Midwest Holdings – means Midwest Air Group, Inc., a Wisconsin corporation.
 
Performance Period – means each 6 month period ending on a June 30th or December
31th occurring during the term of this Agreement.
 
Person – means an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity.
 
RAI – means Republic Airlines, Inc., an Indiana corporation, and its successors
and permitted assigns.
 
RAI Holdings – means Republic Airways Holdings Inc., a Delaware corporation.
 
RAI Marks – is defined in Exhibit F.
 
Reasonable Operating Constraints – means the operating constraints on Scheduled
Flights set forth on Exhibit G.
 
Reconciled Expenses – are those Variable Cost elements subject to reconciliation
as described in Exhibit D.
 
Regional Airline Services – means the provisioning by RAI to Midwest of
Scheduled Flights and related ferrying using the Covered Aircraft or neutral
spare aircraft in accordance with this Agreement.
 
Scheduled Flight – means a flight as determined by Midwest pursuant to Section
2.01(b)
 
Spare Aircraft – means any designated as such by Midwest that will not be part
of the Scheduled Flights and is intended to be used in place of Aircraft that
are removed from Scheduled Flights due to mechanical issues or heavy check
requirements, and may be used to cover flights for RAI or other carriers;
provided that, “Spare Aircraft” shall also mean a neutral spare aircraft
operated by RAI for another carrier which, as a result of operational needs, is
required on a temporary basis to Scheduled Flights under the Agreement, all in
accordance and subject to the limitations set forth in Section 2.01(d) of this
Agreement.
 
Subsidiary – means, as to any Person, (a) any corporation more than 50% of whose
stock of any class or classes having by the terms thereof ordinary voting power
to elect a majority of the directors of such corporation (irrespective of
whether or not at the time, any class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time owned by such Person directly or indirectly through Subsidiaries and
(b) any partnership, association, joint venture, limited liability company,
joint stock company or any other form of business or professional entity, in
which such Person directly or indirectly through Subsidiaries has more than 50%
equity interest at any time.
 
Term – has the meaning set forth in Section 8.01, as earlier terminated pursuant
to Section 8.02, if applicable, and any Wind-Down Period.
 
Termination Date – means the date of early termination of this Agreement, as
provided in a notice delivered from one party to the others pursuant to Section
8.02, or, if no such early termination shall have occurred, the date of the end
of the Term.
 
TSA – means the United States Transportation Security Administration.
 
Wind-Down Period – means the period after the Termination Date and until the
time when the last Covered Aircraft has been withdrawn from the capacity
purchase provisions of this Agreement.
 
Wind-Down Schedule – means the schedule, determined as provided in Article VIII
of this Agreement, for Covered Aircraft to be withdrawn from the capacity
purchase provisions of this Agreement.

                                                               
 
 

--------------------------------------------------------------------------------

 

EXHIBIT B
 
Covered Aircraft & In-Service Schedule
 

 
Number
Aircraft                    Type
U.S. Registration Number
Scheduled In-  Service Day*
1.
EMB 170
 
[*]
2.
EMB 170
 
[*]
3.
EMB 170
 
[*]
4.
EMB 170
 
[*]
5.
EMB 170
 
[*]
6.
EMB 170
 
[*]
7.*
EMB 170
 
[*]
8.
EMB 170
 
[*]
9.
EMB 170
 
[*]
10.
EMB 170
 
[*]
11.**
EMB 170
 
[*]
12.**
EMB 170
 
[*]

 
 
*Aircraft number 7 shall be the Spare Aircraft

 
 
**RAI shall exercise reasonable good faith efforts to delivery Aircraft numbers
11 and 12 by November 1, 2008
 
 
* Confidential

                                                         
 
 

--------------------------------------------------------------------------------

 

EXHIBIT C
 
Aircraft Specification, Livery and Use of Midwest Marks
 
1.  
Aircraft Specification.  The specifications of the Covered Aircraft will be as
set forth in Schedule 1 of this Exhibit C.

 
2.  
Grant.  Midwest hereby grants to RAI, and RAI accepts, a non-exclusive,
personal, non-transferable, royalty-free right and license to adopt and use the
Midwest Marks in connection with the rendering by RAI of Regional Airline
Services, subject to the conditions and restrictions set forth herein.

 
3.  
Ownership of the Midwest Marks.

 
a. Midwest shall at all times remain the owner of the Midwest Marks and any
registrations thereof and RAI’s use of any Midwest Marks shall clearly identify
Midwest as the owner of such marks (to the extent practical) to protect
Midwest’s interest therein.  All use by RAI of the Midwest Marks shall inure to
the benefit of Midwest.  Nothing in this Agreement shall give RAI any right,
title, or interest in the Midwest Marks other than right to use the Midwest
Marks in accordance with the terms of this Agreement.
 
b. RAI acknowledges that Midwest is the owner of the Midwest Marks and hereby
agrees to take no action that would be contrary to Midwest’s ownership of the
Midwest Marks and agrees to cooperate with all of Midwest’s reasonable request
to take any and all actions necessary to protect and preserve Midwest’s
ownership of the Midwest Marks.
 
4.  
Use of the Midwest Marks.

 
a. RAI shall use the Midwest Marks only as authorized herein by Midwest and in
accordance with such standards of quality as Midwest may establish.
 
b. RAI shall use the Midwest Marks on all Covered Aircraft and all facilities,
equipment and printed materials used in connection with the Regional Airline
Services.
 
c. RAI shall not use the Midwest Marks for any purpose other than as set forth
in this Exhibit C, and specifically shall have no right to use the Midwest Marks
on or in any aircraft other than Covered Aircraft or in connection with any
other operations of RAI.
 
d. Midwest shall have exclusive control over the use and display of the Midwest
Marks, and may change the Midwest Marks at any time and from time to time, in
which case RAI shall as soon as practicable make such changes as are requested
by Midwest to incorporate the new Midwest Marks; provided that Midwest shall
either pay directly the reasonable costs of making such changes or shall
promptly reimburse RAI for its reasonable expenses incurred in making such
changes.
 
e. Nothing shall abridge Midwest’s right to use and/or to license the Midwest
Marks, and Midwest reserves the right to the continued use of all the Midwest
Marks, to license such other uses of the Midwest Marks and to enter into such
agreements with other carriers providing for arrangements similar to those with
RAI as Midwest may desire.  No term or provision of this Agreement shall be
construed to preclude the use of the Midwest Marks by other persons or for
similar or other uses not covered by this Agreement.
 
5.  
Midwest-Controlled Litigation.  Midwest at its sole expense shall take all steps
that in its opinion and sole discretion are necessary and desirable to protect
the Midwest Marks against any infringement or dilution.  RAI agrees to cooperate
fully with Midwest in the defense and protection of the Midwest Marks as
reasonably requested by Midwest.  RAI shall report to Midwest any infringement
or imitation of, or challenge to, the Midwest Mark, immediately upon becoming
aware of same.  RAI shall not be entitled to bring, or compel Midwest to bring,
an action or other legal proceedings on account of any infringements,
imitations, or challenges to any element of the Midwest Marks without the
written agreement of Midwest.  Midwest shall not be liable for any loss, cost,
damage or expense suffered or incurred by RAI because of the failure or
inability to take or consent to the taking of any action on account of any such
infringements, imitations or challenges or because of the failure of any such
action or proceeding.  If Midwest shall commence any action or legal proceeding
on account of such infringements, imitations or challenges, RAI agrees to
provide all reasonable assistance requested by Midwest in preparing for and
prosecuting the same.

 
6.  
Revocation of License.  Midwest shall have the right to cancel the license
provided herein in whole or in part at any time and for any reason, in which
event all terminated rights to use the Midwest Marks provided RAI herein shall
revert to Midwest and the Midwest Marks shall not be used by RAI in connection
with any operations of RAI.  The following provisions shall apply to the
termination of the license provided herein:  in the case of a termination of the
license to use the Midwest Marks, RAI shall cease all use of the Midwest Marks
with respect to each Covered Aircraft within 30 days of such aircraft being
withdrawn from the capacity purchase provisions of the Agreement, and shall
cease all use of the Midwest Marks in all other respects within 30 days of last
Covered Aircraft being withdrawn from this Agreement.  Within such specified
period, RAI shall cease all use of such other Midwest Marks, and shall change
its facilities, equipment, uniforms and supplies to avoid any customer confusion
or the appearance that RAI is continuing to have an operating relationship with
Midwest, and RAI shall not thereafter make use of any word, words, term, design,
name or mark confusingly similar to the Midwest Marks or take actions that
otherwise may infringe the Midwest Marks.

 
7.  
Assignment.  The non-exclusive license granted by Midwest to RAI is personal to
RAI and may not be assigned, sub-licensed or transferred by RAI in any manner
without the written consent of a duly authorized representative of Midwest.

 
8.  
Midwest Marks.  The Midwest Marks are as set forth in Schedule 2 to this Exhibit
C and also include the Aircraft Livery, the Midwest flight code and other trade
names, trademarks, service marks, graphics, logos, employee uniform designs,
distinctive color schemes and other identification selected by Midwest in its
sole discretion for the Regional Airline Services to be provided by RAI, whether
or not such identification is copyrightable or otherwise protected or
protectable under federal law.

 
9.  
Aircraft Livery.  The Covered Aircraft will be painted in accordance with the
designs shown on Schedule 3 to this Exhibit C at RAI’s sole cost and expense.

 
10.  
Survival.  The provisions of this Exhibit C shall survive the termination of
this Agreement for a period of six years.

 
Attachments to Exhibit C
 
Schedule 1 – Aircraft Specifications
 
Schedule 2 – Midwest Marks
 
Schedule 3 – Aircraft Livery
 

                                                                   
 
 

--------------------------------------------------------------------------------

 

SCHEDULE 1 TO EXHIBIT C
 
Aircraft Specifications
 

                                                            
 
 

--------------------------------------------------------------------------------

 

SCHEDULE 2 TO EXHIBIT C
 

 
Midwest Marks
 
To be provided to RAI prior to the commencement of the Term
 

                                                        
 
 

--------------------------------------------------------------------------------

 

SCHEDULE 3 TO EXHIBIT C
 

 
Aircraft Livery
 
For Covered Aircraft (other than the Spare Aircraft):

to be provided by Midwest promptly following execution of the Agreement

                                                              
 
 

--------------------------------------------------------------------------------

 

EXHIBIT D
 

 
Compensation
 
Base and Incentive Compensation.
 
1.
Base Compensation.  Midwest will pay to RAI, in respect of the Covered Aircraft,
the rates set for on Appendix 1 to this Exhibit D for each calendar month,
times, the applicable Unit of Measure, times, in each case where the rate
category is indicated.  Rates indicated as “Subject to Escalation on Appendix 1
to this Exhibit D will be adjusted in accordance with Section 3.02 of this
Agreement.

 
2.
Pre-Bill Invoiced Amount.  The Invoiced Amount calculated in accordance with
Section 3.06 (a) of the Agreement will be calculated by using the data from the
Final Monthly Schedule and the Operational Assumptions for any given month as
follows:

 
a.           the Invoiced Amount for each of the Fixed Cost cost elements will
be calculated by multiplying (i) the Rate, times (ii) the Unit of Measure (as
set forth in the Final Monthly Schedule and the Operational Assumptions for the
month).  The Rate for each Fixed Cost element will not change during the Term
except for the annual adjustment pursuant to Section 3.02 of the Agreement for
those elements noted as “Subject to Escalation”; plus
 
b.           the Invoiced Amount for each of the Variable Cost elements will be
calculated by multiplying (i) the Rate, times (ii) the Unit of Measure (as set
forth in the Final Monthly Schedule and the Operational Assumptions for the
month), times (iii) the Completion Factor Target Threshold percentage as in
effect at the time of calculation, where “Blk Hrs” are the block hours estimated
to be flown by the Covered Aircraft for the month, “W/A A/C” is the weighted
average number of Covered Aircraft for the month, “Departures” is the number of
departures estimated to be made by the Covered Aircraft during the month, “Flt
Hrs” are the flight hours estimated to be flown by the Covered Aircraft for the
month, “Pax” is the number of passengers estimated to be transported by the
Covered Aircraft during the month, and “1000 RPMS” is the estimated revenue
passenger miles flown by the Covered Aircraft during the month divided by
1,000.  The Rate for each Variable Cost element will not change during the Term
except for (i) the annual adjustment pursuant to Section 3.02 of the Agreement
for those elements noted as “Subject to Escalation, and (ii) those elements
noted as subject to “Periodic Adjustment” will be adjusted based on the actual
costs of the related insurance premiums paid by RAI, taking into account any
increases or reductions in those premiums due to end of the coverage year
calculations based on RAI’s operational statistics.
 
3.
Reconciled Costs.  The Fixed Cost elements calculated by using the “W/A A/C”
Unit of Measure, and the Variable Cost elements will be reconciled pursuant to
Section 3.06 (b) of the Agreement by calculating the difference between the
Invoiced Amount for such elements and the amount due for such elements based on
the Rate for each Variable Cost element times the actual Unit of Measure for the
month.

 
4.
Pass-Thru Costs.  Midwest will reimburse RAI for each Pass-Thru Cost element in
accordance with Section 3.06 (c) of the Agreement.  Pass-Thru Costs are actual
costs incurred and are not subject to Escalation or Periodic Adjustment.

 
5.
Incentive Compensation.  With respect to each calendar month, incentive
compensation shall be calculated as follows:

 
a.           On-Time Bonus/Rebate.  The reconciliation for any calendar month
shall include, as applicable, a bonus (represented by a payment by Midwest to
RAI) or a rebate or offset (represented by a payment by RAI to Midwest), in each
case in respect of on-time performance, as determined pursuant to Appendix 2  to
this Exhibit D .
 
b.           Completion Factor Bonus/Rebate.  The reconciliation for any
calendar month shall include, as applicable, a bonus (represented by a payment
by Midwest to RAI) or a rebate or offset (represented by a payment by RAI to
Midwest), in each case in respect of RAI’s completion factor for the month, as
determined pursuant to Appendix 2 to this Exhibit D.
 
c.           Other Bonuses/Rebates.  The reconciliation for any calendar month
shall include, as applicable, a bonus (represented by a payment by Midwest to
RAI) or a rebate or offset (represented by a payment by RAI to Midwest), in each
case in respect of each of RAI’s customer complaints factor, care check score
and customer experience pulse for the month, as determined pursuant to Appendix
2 to this Exhibit D.
 

--------------------------------------------------------------------------------

6.
Midwest Expenses.  With respect to Scheduled Flights, in consideration of the
provision by RAI of Regional Airline Services and its compliance with the other
terms and conditions of this Agreement, the following expenses shall be incurred
directly Midwest, provided that, should RAI incur any such expenses, RAI will be
reimbursed for such expenses in accordance with Section 3.06 (c) of the
Agreement:

 
 
(a)
Covered Aircraft fuel, including into plane charges, taxes and administrative
fees;

 
 
(b)
Landing fees;

 
 
(c)
Passenger catering;

 
 
(d)
Travel agency and OAL related CRS booking fees;

 
 
(e)
Revenue taxes and PFCs;

 
 
(f)
Credit card processing fees;

 
 
(g)
Deicing services at all cities;

 
 
(h)
All customer inconvenience charges;

 
 
(i)
TSA fees or charges and any other passenger security fees;

 
 
(j)
NAV Canada fees; and

 
 
(k)
Any future ATC or enroute navigation fees charged in the United States of
America; and

 
 
(l)
Station expenses;

 
 
(m)
Staged overnight hotel and per diem expense; and

 
 
(n)
Rates and charges relating to the Milwaukee Operations Space as defined in
Section 5.02(i).

 
7.
No Reconciliation for Fines, Etc.  Notwithstanding anything to the contrary
contained in this Exhibit D or the Agreement, Midwest shall not be required to
incur any cost or make any reconciliation payment to RAI to the extent that such
cost or reconciliation payment is attributable to any costs, expenses or losses
(including fines, penalties and any costs and expenses associated with any
related investigation or defense) incurred by RAI as a result of any violation
by RAI of any law, statute, judgment, decree, order, rule or regulation of any
governmental or airport authority, provided that, Midwest shall be liable for
all any costs, expenses or losses (including fines, penalties and any costs and
expenses associated with any related investigation or defense) incurred by RAI
as a result of any violation by Midwest or its agents of any law, statute,
judgment, decree, order, rule or regulation of any governmental or airport
authority.

 
Exhibit D Appendices
 
Appendix 1                                Base Compensation Rates
 
Appendix 2                                Incentive Bonuses/Rebates
 

                                                        
 
 

--------------------------------------------------------------------------------

 

Appendix 1 to Exhibit D
 
Base Compensation Rates
 

 
COST
SUBJECT
UNIT OF
 
PERIODIC
 
ELEMENT
TO ESCALATION
MEASURE
RATE1
ADJUSTMENT
FIXED COSTS:
           
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
           
VARIABLE COSTS:
           
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
           
PASS-THRU COSTS:
           
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]

 
Costs and Rates applicable to training flights operated per Section 8.02(d)(ii).
 

 
COST
SUBJECT
UNIT OF
 
PERIODIC
 
ELEMENT
TO ESCALATION
MEASURE
RATE1
ADJUSTMENT
FIXED COSTS:
           
[*]
[*]
[*]
[*]
[*]
           
VARIABLE COSTS:
           
[*]
[*]
[*]
[*]
[*]
 
[*]
[*]
[*]
[*]
[*]

 
[*]
 

--------------------------------------------------------------------------------

 
1  Costs expressed in January 2008 economics
 

* Confidential
                                                             
 
 

--------------------------------------------------------------------------------

 

 
Appendix 2 to Exhibit D
 
Incentive Bonuses/Rebates
 
1. Service Standards
 
(a) Minimum Completion Factor.  RAI shall achieve a completion factor (the
“Completion Factor”) for all Scheduled Flights which are scheduled to be
operated by RAI during each Performance Period which is no less than [*]
standard deviations worse than Midwest Actual Performance (as such term is
defined in Section 3 of this Appendix 2) for the Completion Factor for the same
Performance Period.  Scheduled Flights which are cancelled (i) at Midwest’s
request (as determined by Midwest’s System Operations Control operations
reporting group), or (ii) because of any action or inaction on the part of
Midwest, will not be included in calculating the Completion Factor, and station
overflys due to no passenger load will not be considered a cancellation.
 
(b) Minimum On Time Reliability.  RAI shall achieve an on time arrival factor
(the “On-Time Factor”) for all Scheduled Flights which are scheduled to be
operated by RAI during each Performance Period which is no less than [*]standard
deviations worse than Midwest Actual Performance for the same Performance
Period.  Scheduled Flights that are delayed (i) at Midwest’s request, or (ii)
because of any action or inaction on the part of Midwest, will not be included
in calculating the On Time Factor.
 
(c)           Customer Complaints Factor.  The number of customer complaints
(the “Customer Complaints Factor”) received by Midwest in respect of Regional
Airline Services during any Performance Period shall be no greater than [*]
standard deviations worse than Midwest Actual Performance for the number of
customer complaints for the same Performance Period.  The number of customer
complaints shall be determined by Midwest by dividing (i) the total number of
RAI-caused complaints during the applicable Performance Period, by (ii) the
total number of enplaned revenue passengers during such Performance Period as
reported by Midwest.
 
(d)           Care Check Score.  RAI shall achieve a score on the Care Check
(the “Care Check Factor”) during each Performance Period which is no less than
[*] standard deviations worse than Midwest Actual Performance for the Care Check
Factor for the same Performance Period.
 
(e)           Customer Experience Pulse.  RAI shall achieve a score on the
Customer Experience Pulse (the “Customer Experience Pulse Factor”) during each
Performance Period which is no less than [*] standard deviations worse than
Midwest Actual Performance for the Customer Experience Pulse Factor for the same
Performance Period.
 
* Confidential

--------------------------------------------------------------------------------

           (f)           Calculations.  The parties agree that the performance
standard targets described in this Section 1, shall be calculated for each
Performance Period during the term of this Agreement and shall be equal to the
actual average results of Midwest for each of the performance standards for such
Performance Period (“Midwest Actual Performance”).The Midwest Actual Performance
for each performance standard set forth in this Section 1 and related standard
deviations shall be calculated and delivered by Midwest in accordance with the
provisions of Section 3, below.  The performance standards set forth in
paragraphs (a) through (e) of this Section 1 shall be calculated on a monthly
basis beginning in the month of placement into service of the initial Covered
Aircraft pursuant to Section 2.01(c) of the Agreement.  The Completion Factor
and the On-Time Factor, shall first be calculated for default purposes for the
Performance Period which begins on January 1, 2010 and ends on June 30, 2010.
 
2. Bonus/Penalty Payment Calculations.
 
RAI shall be subject to certain target performance levels and incentives or
penalties as described in this Section 2 (“Performance Criteria”).  The
performance of RAI during each Performance Period will be measured against each
of the Performance Criteria. Any incentive or penalty associated with
achievement against the Performance Criteria shall be made in the next scheduled
payment pursuant to Section 3.06 of the Agreement, either as an increment to the
amount otherwise due and payable or as an offset thereto, as the case may
be.  Achievement of each criterion is independent of the others.  The applicable
Performance Criteria and associated targets, incentives and penalties shall be
based on the weighted average results (with a [*] weighting given to the
Completion Factor, a [*] weighting given to the On Time Factor and a [*]
weighting given to each of the other Factors) of Midwest for each Performance
Period and calculated as follows:
 
Completion Factor:
 

 
Penalty
Target
Incentive
Performance Level
more than [*] standard deviation worse than Midwest Actual Performance
Midwest Actual Performance
more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight
[*]
[*]
[*]

 
On Time Factor:
 

 
Penalty
Target
Incentive
Performance Level
more than [*] standard deviation worse than Midwest Actual Performance
Midwest Actual Performance
more than [*] standard deviation better than Midwest Actual Performance
 
Incentive/Penalty per flight
[*]
[*]
[*]

 
Customer Complaints Factor:
 

 
Penalty
Target
Incentive
Performance Level
more than [*] standard deviation worse than Midwest Actual Performance
Midwest Actual Performance
more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight
[*]
[*]
[*]

 
Care Check Factor:
 

 
Penalty
Target
Incentive
Performance Level
more than [*] standard deviation worse than Midwest Actual Performance
Midwest Actual Performance
more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight
[*]
[*]
[*]

 
Customer Experience Pulse Factor:
 

 
Penalty
Target
Incentive
Performance Level
more than [*] standard deviation worse than Midwest Actual Performance
Midwest Actual Performance
more than [*] standard deviation better than Midwest Actual Performance
Incentive/Penalty per flight
[*]
[*]
[*]

 
* Confidential

--------------------------------------------------------------------------------

3. Calculations.  The parties agree that the Performance Criteria targets
described in Section 2, above, shall be calculated for each Performance Period
during the term of this Agreement and shall be equal to the weighted average
results (with a [*] weighting given to the Completion Factor, a [*]weighting
given to the On Time Factor and a [*] weighting given to each of the other
Factors) of Midwest for each of the Performance Criteria for such Performance
Period (“Midwest Actual Performance”).  After Midwest Actual Performance for a
Performance Period has been calculated for each of the Performance Criteria,
Midwest shall calculate standard deviations for each Midwest Actual Performance
result for purposes of this Section 3 and Section 5, below, based on the rolling
six (6) month averages for the twenty-four (24) month period ending on the last
month of the applicable Performance Period.  Within two (2) months after the end
of each Performance Period, Midwest shall provide RAI with its calculations of
(i) Midwest Actual Performance for each of the Performance Criteria for such
Performance Period, and (ii) the standard deviations of each such Midwest Actual
Performance result required by this Section 3 and Section 5, below.
 
4. Reconciliation of Performance Standards.  Within thirty (30) days after the
end of each Performance Period, (i) RAI shall determine the total number of
actual flights operated by it during such Performance Period and, (ii) RAI shall
calculate its Completion Factor and On-Time Factor for such Performance
Period.  Within thirty (30) days after Midwest provides RAI with the
calculations of Midwest Actual Performance and related standard deviations
pursuant to Section 3, above, for such Performance Period, Midwest shall prepare
and deliver to RAI (x) a reconciliation of RAI’s actual performance to the
targeted performance with respect to each of the Performance Criteria, and (y) a
written calculation of the resulting penalty and/or incentive payments payable
by or to RAI for such Performance Period.  Midwest and RAI will have the right
to audit the determinations and calculations prepared by the other pursuant to
this Section 4 and shall report any discrepancies to the other.  Any discrepancy
not reported in writing within one hundred fifty (150) days of the end of any
Performance Period shall be deemed waived.  The payment in respect of any
discrepancy shall be handled as a disputed amount to be resolved in accordance
with Section 10.08 of the Agreement.
 
5. Additional Performance Criteria.  During the term of this Agreement, Midwest
may propose other performance criteria for RAI’s operations pursuant to this
Agreement.  The parties agree that they will meet upon the introduction of
additional performance levels for Midwest’s operations to develop similar
performance targets for RAI, taking into account the differences in operations
between the two companies, and shall use their best commercially reasonable
efforts to develop a system of performance levels and incentives/penalties for
RAI’s performance with respect thereto in a manner consistent with the
performance standards agreed to herein.
 
* Confidential
                                                        
 
 

--------------------------------------------------------------------------------

 

EXHIBIT E
 

 
Terms of Codeshare Arrangements
 
1.           RAI’s use of YX code.  During the Term of the Agreement, Midwest
shall place its designator code, “YX”, on all Scheduled Flights operated by
RAI.  Midwest may suspend the display of its code on flights operated by RAI if
RAI is in breach of any of its safety-related obligations, or material breach of
any of its operational obligations, under the Agreement during the period that
such breach continues.  All RAI operated flights that display the YX code are
referred to herein as “YX Flights”.
 
2.           RAI’s display of YX code.
 
(a)           All YX Flights will be included in the schedule, availability and
fare displays of all computerized reservations systems in which Midwest and RAI
participate, the Official Airline Guide (to the extent agreed upon) and
Midwest’s and RAI’s internal reservation systems, under the YX code, to the
extent possible.  Midwest and RAI will take the appropriate measures necessary
to ensure the display of the schedules of all YX Flights in accordance with the
preceding sentence.
 
(b)           Midwest and RAI will disclose and identify the YX Flights to the
public as actually being a flight of and operated by RAI, in at least the
following ways:
 
(i)           a symbol or a flight number range will be used in timetables and
computer reservation systems indicating that YX Flights are actually operated by
RAI;
 
(ii)           to the extent reasonable, messages on airport flight information
displays will identify RAI as the operator of flights shown as YX Flights;
 
(iii)           Midwest and RAI advertising concerning YX Flights and Midwest
and RAI reservationists will disclose RAI as the operator of each YX Flight; and
 
(iv)           in any other manner prescribed by law or DOT regulation.
 
3.           Terms and Conditions of Carriage.  In all cases the contract of
carriage between a passenger and a carrier will be that of the carrier whose
code is designated on the ticket.  Midwest and RAI shall each cooperate with the
other in the exchange of information necessary to conform each carrier’s
contract of carriage to reflect service offered by the other carrier.
 
4.           Notification of Irregular Operations.  RAI shall promptly notify
Midwest System Operations Control via both positive phone contact and email of
all irregularities involving a YX Flight which result in any material damage to
persons or property as soon as such information is
 
available and shall furnish to Midwest as much detail as practicable.  For
purposes of this section, notification shall be made as follows:
 
5300 South Howell Avenue
 
Milwaukee, WI 53207
 
Phone: 414-294-6224 (recorded line) or 6225 (not recorded)
 
Email: soc_mgr@midwestairlines.com
 
5.           Code Sharing License.
 
(a)           Grant of License.  Subject to the terms and conditions of the
Agreement, Midwest hereby grants to RAI a nonexclusive, nontransferable,
revocable license to use the YX designator code on all of its flights operated
as a YX Flight.
 
(b)           Control of YX Flights.  Subject to the terms and conditions of the
Agreement, RAI shall have sole responsibility for and control over, and Midwest
shall have no responsibility for, control over or obligations or duties with
respect to, each and every aspect of RAI’s operation of YX Flights.
 
6.           Display of other Codes.  During the Term of the Agreement, Midwest
shall have the exclusive right to determine which other airlines (“Alliance
Airlines”), if any, may place their two letter designator codes on flights
operated by RAI with Covered Aircraft and to enter into agreements with such
Alliance Airlines with respect thereto.  RAI will cooperate with Midwest and any
Alliance Airlines in the formation of a code share relationship between RAI and
the Alliance Airlines and enter into reasonably acceptable agreements and make
the necessary governmental filings, as requested by Midwest, with respect
thereto.
 

                                                        
 
 

--------------------------------------------------------------------------------

 

EXHIBIT F
 

 
Use of RAI Marks
 
1.           Grant.  RAI hereby grants to Midwest, and Midwest accepts, a
non-exclusive, personal, non-transferable, royalty-free right and license to
adopt and use the RAI Marks (as defined below) in connection with Midwest’s
entering into this Agreement, subject to the conditions and restrictions set
forth herein.
 
2.           Ownership of the RAI Marks.
 
a.           RAI shall at all times remain the owner of the RAI Marks and any
registrations thereof and Midwest’s use of any RAI Marks shall clearly identify
RAI as the owner of such marks (to the extent practical) to protect RAI’s
interest therein.  All use by Midwest of the RAI Marks shall inure to the
benefit of RAI.  Nothing in this Agreement shall give Midwest any right, title,
or interest in the RAI Marks other than right to use the RAI Marks in accordance
with the terms of this Agreement
 
b.           Midwest acknowledges RAI’s ownership of the RAI Marks and further
acknowledges the validity of the RAI Marks.  Midwest agrees that it will not do
anything that in any way infringes or abridges RAI’s rights in the RAI Marks or
directly or indirectly challenges the validity of the RAI Marks.
 
3.           Use of the RAI Marks.
 
a.           Midwest shall use the RAI Marks only as authorized herein by RAI
and in accordance with such standards of quality as RAI may establish.
 
b.           Midwest shall use the RAI Marks as necessary or appropriate in
Midwest’s sole discretion in connection with the Regional Airline Services,
including without limitation the sale or disposition by Midwest of the seat
inventory of the Scheduled Flights.
 
c.           Midwest shall not use the RAI Marks for any purpose other than as
set forth in this Exhibit F, and specifically shall have no right to use the RAI
Marks in connection with any other operations of Midwest.
 
d.           RAI may change the RAI Marks at any time and from time to time
(including by adding or deleting marks from the list specified in this Exhibit
F), in which case Midwest shall as soon as practicable make such changes as are
requested by RAI to utilize the new RAI Marks; provided that RAI shall either
pay directly the reasonable costs of making such changes to the RAI Marks or
shall promptly reimburse Midwest for its reasonable expenses incurred in making
such changes.
 
e.           Nothing shall abridge RAI’s right to use and/or to license the RAI
Marks, and RAI reserves the right to the continued use of all the RAI Marks, to
license such other uses of the RAI Marks and to enter into such agreements with
other carriers providing for arrangements similar to those with Midwest as RAI
may desire.  No term or provision of this Agreement shall be construed to
preclude the use of the RAI Marks by other persons or for other similar uses not
covered by this Agreement.
 
4.           RAI-Controlled Litigation.  RAI at its sole expense shall take all
steps that in its opinion and sole discretion are necessary and desirable to
protect the RAI Marks against any infringement or dilution.  Midwest agrees to
cooperate fully with RAI in the defense and protection of the RAI Marks as
reasonably requested by RAI.  Midwest shall report to RAI any infringement or
imitation of, or challenge to, the RAI Marks, immediately upon becoming aware of
same.  Midwest shall not be entitled to bring, or compel RAI to bring, an action
or other legal proceedings on account of any infringements, imitations, or
challenges to any element of the RAI Marks without the written agreement of
RAI.  RAI shall not be liable for any loss, cost, damage or expense suffered or
incurred by Midwest because of the failure or inability to take or consent to
the taking of any action on account of any such infringements, imitations,
challenges or because of the failure of any such action or proceeding.  If RAI
shall commence any action or legal proceeding on account of such infringements,
imitations or challenges, Midwest agrees to provide all reasonable assistance
requested by RAI in preparing for and prosecuting the same.
 
5.           Revocation of License.  RAI shall have the right to cancel the
license provided herein in whole or in part at any time and for any reason, in
which event all terminated rights to use the RAI Marks provided Midwest herein
shall revert to RAI and the RAI Marks shall not be used by Midwest in connection
with any operations of Midwest.  Midwest shall cease all use of the RAI Marks in
all respects upon the last Covered Aircraft being withdrawn from this
Agreement.  Midwest shall not thereafter make use of any word, words, term,
design, name or mark confusingly similar to the RAI Marks or take actions that
otherwise may infringe the RAI Marks.
 
6.           Assignment.  The non-exclusive license granted by RAI to Midwest is
personal to Midwest and may not be assigned, sub-licensed or transferred by
Midwest in any manner without the written consent of a duly authorized
representative of RAI.
 
7.           RAI Marks.  The RAI Marks shall be as provided to Midwest prior to
the commencement of the Term.
 
8.           Survival.  The provisions of this Exhibit F shall survive the
termination of this Agreement for a period of six years.
 

                                                               
 
 

--------------------------------------------------------------------------------

 

EXHIBIT G
 

 
Reasonable Operating Constraints
 
The schedules for the Covered Aircraft shall meet all of the following quarterly
average requirements:
 
1.           Minimum & Maximum Scheduling Parameters:
 

 
Minimum
Maximum
Scheduled Block Hours per Aircraft per day
[*]
[*]
Scheduled Cycles per Aircraft per day
[*]
[*]
     

Note:  the above minimum and maximum schedule parameters apply only to those
Covered Aircraft in scheduled service, not to the Spare Aircraft.
 
2.           Aircraft Maintenance and Crew Requirements.
 
Midwest agrees to take into consideration RAI’s operational requirements for
overnight maintenance and crew productivity (including, where feasible, mid-day
flights into RAI crew base cities for crew exchanges) and legality.
 
Midwest shall use its best efforts to produce a Final Monthly Schedule in
cooperation with RAI that meets the following location and minimum hour
requirements for overnight aircraft:
 
(i)           a minimum of two scheduled Covered Aircraft will RON each
weeknight and Sunday night, at least 6.5 hours nightly, in either IND, CMH or
PIT, for normal maintenance; and
 
(ii)           at least two scheduled Covered Aircraft per week (based on a
Saturday to Sunday pulldown) will be scheduled to provide at least 14 hours of
available maintenance time (block to block) in either IND, CMH  or PIT.
 
3.           Reserved.
 
4.           Crew Overnights.
 
The schedule may allow for single overnights, multiple overnights, staged, and
continuous duty overnights of crews in outstations, provided, should Midwest
schedule continuous duty overnights or staged crews, incremental hotel and per
diem costs related to such continuous duty overnights or staged crews will be
billed by RAI to Midwest in arrears as Pass Thru costs.  Midwest reserves the
right to review RAI’s crew schedules to ensure efficient and economic crew
scheduling and agrees to negotiate economic settlement with RAI for schedule
changes that materially affect crew utilization or line maintenance
requirements.
 
5.           Charter Flights Sold by Midwest.
 
Midwest may schedule, price and sell Charter Flights using the Covered Aircraft,
provided RAI receives 45 days’ advance notice of the tentative dates and times
of such Charter Flights and the final dates are built into the Final Monthly
Schedule.  Midwest may also request RAI to consider ad hoc Charter Flights that
do not otherwise appear in the Final Monthly Schedule.  Midwest agrees to
compensate RAI for any additional operating costs of the Charter Flights,
including but not limited to aircraft ferry costs and unproductive crew time, as
such costs are provided to Midwest at the time Midwest provides notice to RAI of
the Charter Flights, or sufficiently in advance of Midwest’s bid for the Charter
Flight to allow such costs to be passed through to the charterer.
 
 
* Confidential

                                                         
 
 

--------------------------------------------------------------------------------

 

EXHIBIT H
 
Form of Aircraft Lease Agreement and Related Agreements
 

 

                                                               
 
 

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