Exhibit 10.40


CONFIDENTIAL
TREATMENT


REQUESTED
PURSUANT TO RULE 406


 


LETTER
AGREEMENT DCT-015/2004


 


This Letter of Agreement DCT-015/2004 (“Agreement”) dated March 19,
2004, is an agreement between Republic Airline, Inc. (“Buyer”) with its
principal place of business at 2500 S. High School Road, Indianapolis,
Indiana  46241, United States, and
EMBRAER - EMPRESA BRASILEIRA DE AERONAUTICA S.A. (“Embraer”), with its
principal place of business at Sao Jose dos Campos, Sao Paulo, Brazil, relating
to the Purchase Agreement DCT-014/2004 dated March 19, 2004 (the “Purchase
Agreement”) for the purchase by Buyer of up to fifty (50) new ERJ 170 - 100 LR
aircraft (the “Aircraft”).


 


This Agreement constitutes an amendment and
modification of the Purchase Agreement, and it sets forth additional agreements
of the Parties with respect to the matters set forth in the Purchase Agreement.
All terms defined in the Purchase Agreement shall have the same meaning when
used herein, and in case of any conflict between this Agreement and the
Purchase Agreement, this Agreement shall govern.


 


NOW, THEREFORE, for good and valuable
consideration, receipt of which is hereby acknowledged, Embraer and Buyer agree
as follows:


 


1.               PARTS ADDITIONAL SUPPORT


 


[*]


 


(ii)           Spare Parts Credit:  Embraer will provide a spare parts
(except for engines, engine related parts and APU), ground support equipment
and test equipment credit of [*].  This spare parts credit shall be made
available to Buyer upon [*].  If for any reason the Purchase Agreement is
terminated in relation to any Aircraft, then [*]
Buyer shall pay [*]. The spare
parts credit with respect to an Aircraft shall only be made available to Buyer
in the event there is [*].  If any such credit is not so made available
to Buyer because [*] such credit
shall be made available [*].  Any portion of such credit which remains
unused [*] shall be deemed to have
been waived by Buyer, and no further compensation shall be due from Embraer to
Buyer for such spare parts credit(s). 
Such spare parts credit(s) shall be applied against [*].


 


CERTAIN PORTIONS OF
THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER RULE 406 OF THE SECURITIES ACT OF 1933. 
THE OMITTED MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.


 












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(iii)    [*]


 


(iv)          [*]: Embraer shall [*] rent tooling and test equipment for non-routine
maintenance tasks at a daily rate of 1/365 of the tooling or test equipment
purchase price. In case Embraer [*].


 


(v)            Spare Parts Special
Programs: Embraer shall
make available to Buyer a spare parts support program that shall include the
following elements:


 


A Fleet Hour Program - POOL, for
repairable spares candidate to this program.


A Consignment Program for other
repairable spares and expendable parts.


A Rental Program for tools,
ground support equipment and insurance items.


 


The terms and conditions for making such
programs available to Buyer shall be further detailed by Embraer upon Buyer’s
request and are subject to Buyer and Embraer entering into a specific spares
support agreement to be negotiated in good faith by the Parties on or before
the first Firm Aircraft actual delivery date.


[*]


[*]


3.               ADDITIONAL CUSTOMER SUPPORT
SERVICES


 


3.1             Start-up team:


 


With respect to the Aircraft,
Embraer shall provide a start-up team to
take place at the initial line operation and proving runs of the first
Aircraft, composed of the following individuals:


 


[*]
pilots for [*] days to [*]


[*]
for [*] days


[*]
for [*] days


[*]
days


 


The purpose of these specialists
is to advise and assist with Buyer’s start-up operations and operator’s
certification proving runs, making Buyer’s pilots and mechanics familiar with
the operation and maintenance of the Aircraft. The start-up team is in addition
to the pilot and mechanic training, and to the Technical Representative. During
Buyer’s EMBRAER 170 Aircraft proving runs, Embraer shall provide technical
assistance to Buyer through the start-up team defined above. This support shall
be conditioned on Buyer giving Embraer notice at least [*] before the start of such proving runs.


 












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Embraer pilot and mechanic shall
not shall not be authorized to perform any direct flight or maintenance
services on Buyer’s Aircraft. In the event Buyer requests a team member to
perform any services which would directly affect the Aircraft and Embraer
issues its prior written consent to such services, Buyer shall cover such
Embraer personnel under its insurance policy in accordance with terms and
conditions contained in Schedule “2”
to this Letter Agreement.


 


Buyer shall bear all expenses
related to the transportation, board & lodging of the Embraer personnel in
the event such personnel is required to render the services provided for herein
in any place other than Buyer’s main maintenance base, otherwise all costs of
travel and accommodation for such personnel shall be borne by Embraer.


 


At no charge to Embraer, Buyer
shall provide Embraer pilots with transportation means between Buyer’s main
maintenance base and any airport where such pilots will render the services, so
that the pilots can report to Buyer’s operation facilities or leave the airport
in a timely manner according to the schedule of the flights they are engaged
in.


 


3.2           Aerochain:


 


AEROchain (www.aerochain.com) is
an electronic marketplace that provides value-added after-sales services and
extended supply chain collaboration, at no additional charge used on the
aerospace community. The AEROchain Technical Services section incorporates the
features formerly included in the Embraer CIS (Customer Integration System).
Access to Aerochain Technical Services section (former CIS) shall be [*] provided, however, that [*].


 


3.3           Technical and Engineering Support:


 


Embraer shall provide remote
technical and engineering support services, twenty-four (24) hours a day and
seven (7) days a week, for airframe and systems. This service may be accessed
by phone, fax and e-mail at the main facilities of Embraer.


This remote technical support is
intended to assist Buyer to identify and investigate the causes of in-services
issues, and during AOG situations, as well to support daily operations, as
required. This support is provided [*]
to Buyer, up to [*].


 


4.             CONVERSION


 


a)   General


 


Buyer shall have the flexibility
to request the conversion of any Option Aircraft  into the EMBRAER 175, the EMBRAER 190, or the EMBRAER 195 jet
aircraft (collectively, the “Conversion Aircraft”),
provided [*].


[*]


 


[*]


 












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5.             ADDITIONAL ASSISTANCE AND
SUPPORT


 


Terms and conditions of certain additional assistance and support are
provided in Schedules “4” and “5”.


 


6.             MISCELLANEOUS


 


All terms and conditions of the
Purchase Agreement that have not been specifically altered or modified
hereunder shall remain in full force and effect.


 


7.             SURVIVAL


 


In the case of a termination of
this Agreement or the Purchase Agreement with respect to one or more Aircraft, [*].


 


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IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers and to be effective as
of the day and year first above written.


 


 


	
  EMBRAER
  – EMPRESA BRASILEIRA

  DE AERONAUTICA S.A.

  	
   

  	
  REPUBLIC AIRLINE, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Frederico Fleury Curado

  	
   

  	
   

  	
  By:

  	
  /s/ Bryan Bedford
  

  	
   

  
	
  Name:  Frederico Fleury Curado

  	
   

  	
  Name: Bryan Bedford

  
	
  Title:

  	
  Executive Vice President

  Civil Aircraft

  	
   

  	
  Title: Chairman and CEO
  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Flavio Rimoli
  

  	
   

  	
   

  	
   

  
	
  Name:  Flavio Rimoli

  	
   

  	
   

  
	
  Title:

  	
  Sr. Vice President

  Airline Market  

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness:

  	
   

  	
   

  	
   

  	
  Witness:

  	
  /s/ Robert H. Cooper

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name: Robert H. Cooper  

  
																



 


 


SCHEDULES


[*]


 


“2”          INSURANCE SPECIAL CLAUSE


 


[*]


 


“4”          ADDITIONAL ASSISTANCE


 


“5”          MUTUAL SUPPORT


 












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SCHEDULE “1” – [*]


 


[*]


 












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SCHEDULE “2” – INSURANCE SPECIAL CLAUSE


 


Buyer shall include the following
endorsements in its Hull and Comprehensive Airline Liability insurance
policies:


 


1.   Hull All
Risks Policy, including War, Hi-jacking and Other Perils.


 


“It
is hereby understood and agreed that Insurers agree to waive rights of
subrogation against Embraer with regard to the insured Aircraft.


 


This
endorsement shall not operate to prejudice Insurer’s rights of recourse against
Embraer - Empresa Brasileira de Aeronáutica S.A. as manufacturer, repairer,
supplier or servicing agent where such right of recourse would have existed had
this endorsement not been effected under this Policy.”


 


2.   Comprehensive
Airline Liability Policy, based on the AVN53 - Additional Insured Endorsement


 


“It is hereby understood and agreed that
Embraer - Empresa Brasileira de Aeronáutica S.A. including any business entity
owned by or subsidiaries to Embraer, and all partners, executive officers,
employees and stock holders, are added as Additional Insureds only with respect
to the operation of the Aircraft by the Named Insured.


 


This
endorsement does not provide coverage for any Additional Insured with respect
to claims arising out of its legal liability as manufacturer, repairer,
supplier or servicing agent and shall not operate to prejudice Insurer’s right
of recourse against any Additional Insured as manufacturer, repairer, supplier
or servicing agent.”


 


3.   Notwithstanding anything to the contrary as
specified in the Policy or any endorsement thereof, the coverages stated in
paragraphs 1 and 2 above, shall not be cancelled or modified by the Insurer,
without 48 hours advance written notice to Embraer to such effect.


 


This Endorsement attaches to and forms part
of Policy No.
                            ,
and is effective from the          day
of             ,
200  .


 

















 


SCHEDULE “3” – [*]


 


[*]


 












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SCHEDULE “4” – ADDITIONAL ASSISTANCE


 


[*]


 












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SCHEDULE “5” – MUTUAL SUPPORT


 


This schedule sets forth additional
agreements of the Parties with respect to the matters set forth in the Purchase
Agreement DCT–014/2004) dated as of March 19, 2004 (including the Letter
Agreement DCT–015/2004) between Embraer and Buyer (the “Agreement”).  All terms defined in the Agreement shall
have the same meaning when used herein, and in case of any conflict between
this [*] and the Agreement, this [*] shall govern.


 


Embraer will use [*] to [*] debt [*]


 


	
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  Republic Airline, Inc., [*]. 
  Notwithstanding anything to the contrary [*].

  
	
   

  	
   

  	
   

  
	
  Net Aircraft
  Purchase Price:

  	
   

  	
  The escalated Aircraft
  Purchase Price as defined in the Agreement, [*].

  
	
   

  	
   

  	
   

  
	
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