EXHIBIT
10.22.2


 


DRAFT


 


CERTAIN
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE

SYMBOL “[***]” HAS BEEN INSERTED IN PLACE OF THE PORTIONS SO

OMITTED.


 


AMENDMENT NO. 2

to the

Airline Services Agreement

By and Among

Pinnacle Airlines Corp., Pinnacle Airlines, Inc. and

Northwest Airlines, Inc.


 


This Amendment No. 2 (the “Amendment”) to the Airline Services
Agreement by and among Pinnacle Airlines Corp., Pinnacle Airlines, Inc. and
Northwest Airlines, Inc., dated January 14, 2003 and made effective as of
January 1, 2003, as amended by Amendment No. 1, dated September 11, 2003 (the
“ASA”) is made and entered into as of                    ,
2003.


 


WITNESSETH:


 


WHEREAS, Pinnacle Airlines Corp., Pinnacle Airlines, Inc. and Northwest
Airlines, Inc. desire to amend certain provisions of the ASA in the manner set
forth in this Amendment.


 


NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Pinnacle Airlines Corp., Pinnacle Airlines, Inc. and
Northwest Airlines, Inc. enter into this Amendment and agree as follows:


 


1.                                       Amendment
of Section 1.01.  Section 1.01 of
the ASA is amended as of the Revision Date as follows:


 


(a) The definition of “Market Margin Rate” in Section
1.01 of the ASA is amended to read as follows:


 


“Market Margin Rate” or “MMR” means the
weighted (by revenue) average full year operating margin of the five largest
(by revenue) publicly traded U.S. domestic regional airlines operating
primarily regional jet aircraft; provided, however, that if the result of this
calculation is greater than 12 percent, the MMR shall be 12 percent , and if
the result is less than 8 percent, the MMR shall be 8 percent.  The MMR shall be initially calculated with
respect to calendar year 2008


 

















 


and it shall be re-calculated with respect to each
fifth year thereafter so long as this Agreement remains in effect.


 


(b) The following definition of “Revision Date” shall
be inserted in Section 1.01 of the ASA after the definition of “Revenue
Threshold”:


 


“Revision Date” shall have the meaning
ascribed to such term in Section 5 of Amendment No. 2 to the ASA.


 


2.                                       Amendment
of Section 2.15.  Section 2.15 of
the ASA is amended in its entirety as of the Revision Date to read as follows:


 


2.15  Other Operations.  Pinnacle Corp. and/or an Affiliate of
Pinnacle Corp. (other than Pinnacle which shall not acquire aircraft and/or
operate air transportation services in its own name or on behalf of or in
cooperation with an airline other than Northwest) may acquire aircraft and
operate air transportation services in its own name or on behalf of or in
cooperation with an airline other than Northwest, subject to Section 2.14,
Section 6.01(b), Section 6.02(a) and the following conditions:


 


(a)                                  During
the term of this Agreement, no officers, employees, facilities,  Equipment or other assets of Pinnacle shall
be used in connection with such activity without Northwest’s prior written
approval except as follows:  (i)
officers of Pinnacle may engage in planning and coordination with respect to
such activities to the extent that such planning and coordination does not have
an adverse impact on Pinnacle’s performance of Regional Airline Services
hereunder, and (ii) the following operational and corporate functions of
Pinnacle may also be used to support such activity to the extent such use does
not have an adverse impact on Pinnacle’s performance on Regional Airline
Services hereunder:  (x) information
services personnel, equipment and other infrastructure to the extent such use
does not violate the Information Technology Services Agreement between Pinnacle
and Northwest, dated January 14, 2003, as amended; (y) systems operation
control (“SOC”) management personnel (excluding dispatchers) and
infrastructure, including but not limited to, facilities and computer systems;
(z) corporate functions specifically defined as those traditionally performed
by the tax, treasury, internal audit, purchasing, and corporate education
(excluding pilot training performed via simulators) departments; provided,
however, that prior to the commencement of operations by Pinnacle Corp. and/or
an Affiliate of Pinnacle Corp. in cooperation with an airline other than
Northwest, the parties shall negotiate in good faith an adjustment to the Fixed
Cost Payment resulting from the operating cost efficiencies shared between
Pinnacle and the newly commenced operation by Pinnacle Corp. and/or an
Affiliate of Pinnacle Corp.


 


2

















 


(b)                                 The
aircraft operated by Pinnacle Corp. or an Affiliate of Pinnacle Corp. pursuant
to this Section 2.15 (i) shall not have more seats than the greater of
forty-four (44) seats and the highest number of seats that a jet aircraft may
have and still have one fewer seat than an aircraft defined as a “regional jet”
under Northwest’s collective bargaining agreement with its pilots, and (ii)
shall not otherwise cause Northwest to be in violation of its collective
bargaining agreement with its pilots.


 


3.                                       Amendment
of Article V; Transition Year Settlement.


 


(a)                                  Article
V of the ASA is amended in its entirety as of the Revision Date to read as set
forth in Article V attached hereto in Exhibit I.


 


(b)                                 Article
V of the ASA as it existed prior to the Revision Date shall be applicable to
the settlement of amounts due for the time period from January 1, 2003 to the
last day of the month prior to the Revision Date.


 


(c)                                  Notwithstanding
Sections 3(a) and 3(b) above, with respect to the calendar year that
encompasses the Revision Date, (i) for purposes of calculating the Annual
Margin Adjustment Payment, pursuant to Section 5.09 of the ASA, the “Transition
Floor and Ceiling” will be used in lieu of the floors and ceilings in the table
in Section 5.09(b), and (ii) for purposes of calculating any payments owed by
Pinnacle under Sections 5.05(e) and 5.13 of the ASA, the “Transition Margin”
will be used in lieu of the margin multiplier in the formula set forth in
Section 5.08, where


 


“Transition Floor and Ceiling” means the
weighted average (based on revenue received from Northwest) of the applicable
floor and ceiling pursuant to Section 5.09 in effect for each month of the
calendar year that encompasses the Revision Date.


 


“Transition Margin” means the weighted
average (based on revenue received from Northwest) of the applicable margin
multiplier in the formula set forth in Section 5.08, as in effect for each
month of the calendar year that encompasses the Revision Date.


 


4.                                       Amendment
of Section 3.08.  Section 3.08 of
the ASA is amended in its entirety as of the Revision Date to read as follows:


 


Section 3.08                            Related
Transfer Arrangements


 


(a)                                  All
leases and subleases of ground support equipment, simulators, tooling and spare
parts inventory agreements and vendor and/or maintenance agreements with
respect to the Equipment (collectively “Support Agreements”) entered into by
Pinnacle after the Effective Date shall be assignable to Northwest without the
consent of the other party to such Support Agreement on termination of this
Agreement.  Pinnacle shall, at


 


3

















 


Northwest’s option, assign such Support Agreements as
Northwest shall designate to Northwest on termination of this Agreement.  Pinnacle shall use its best efforts to
obtain the consent of the other party to any such Support Agreements in effect
as of the Effective Date and, subject to obtaining such consents, if necessary,
shall, at Northwest’s option, assign such Support Agreements as Northwest shall
designate to Northwest on termination of this Agreement.  On termination of this Agreement and during
the Option Term, Northwest shall have the option to purchase from Pinnacle all
ground support equipment, simulators, tooling and spare parts inventory then
owned by Pinnacle which are used with or related to the Equipment for an amount
equal to such assets’ then fair market value or depreciated book value,
whichever is less.  In the event
Northwest invokes its Equipment removal rights under Section 3.02 above, on the
Equipment removal date and for a period of thirty (30) days thereafter,
Northwest shall have the option to purchase from Pinnacle all ground support
equipment, simulators, tooling and spare parts inventory then owned by Pinnacle
which are used with or related to the returning Equipment for an amount equal
to such assets’ then fair market value or depreciated book value, whichever is
less.  Upon request from Northwest,
Pinnacle shall make available to Northwest at no cost (i) the Maintenance Program
and Maintenance Manual (as defined in the Lease) for the Equipment, and (ii)
all other documentation required in order to operate and maintain the
Equipment, and Pinnacle agrees that Northwest may provide such Maintenance
Program, Maintenance Manual and other documentation to one or more other
carriers operating (or anticipated to operate) Canadair Regional Jet aircraft
on behalf of Northwest.


 


(b)                                 Support
Agreement Continuation Option. 
Notwithstanding Section 3.08(a) above, in the event Pinnacle exercises
its fleet continuation option in Section 3.02(a)(iv) above, Pinnacle may
continue in effect the Support Agreements reasonably required to support the
retained Aircraft and Spare Engines until the earlier of the expiration date
for the Support Agreement and December 31, 2017.  In such circumstances, (i) Pinnacle shall, at Northwest’s option,
assign such retained Support Agreements as Northwest shall designate to
Northwest on December 31, 2017, and (ii) on December 31, 2017 and for a period
of thirty (30) days thereafter, Northwest shall have the option to purchase
from Pinnacle all ground support equipment, simulators, tooling and spare parts
inventory then owned by Pinnacle which are used with or related to the Aircraft
and/or Spare Engines for an amount equal to such assets’ then fair market value
or depreciated book value, whichever is less.


 


5.                                       Revision
Date.  The amendments provided for
in this Amendment shall be effective as of the first day of the first month
following the month in which the sale of the stock of Pinnacle Airlines Corp.
occurs pursuant to the Registration Statement on Form S-1 (Registration No.
333-83354) (the “Revision Date”).


 


4

















 


6.                                       Miscellaneous.  This Amendment may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which counterparts when executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.  This Amendment and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the internal laws of the State of Minnesota, notwithstanding the
choice of law provisions thereof.  Except
as specifically amended, the ASA remains in full force and effect and is
reaffirmed by each of the parties hereto. 
From and after the date hereof all references in the ASA to the
“Agreement” shall be deemed to be references to the Agreement as amended by
this Amendment.


 


IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as
of the date and year first set forth above.


 


	
  PINNACLE AIRLINES, INC.

  	
  NORTHWEST AIRLINES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Name:

  
	
   

  	
   

  
	
  Title:

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  PINNACLE AIRLINES CORP.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  



 


5

















 


Exhibit I


 


ARTICLE
V


 


REVENUES,
PAYMENTS AND SETOFF


 


Section
5.01                            Revenues.  Pinnacle acknowledges and agrees that all
revenues resulting from the sale and issuance of passenger tickets and cargo
air waybills associated with the operation of the Aircraft and all other
sources of revenue associated with the operation of the Aircraft are the sole
property of Northwest, including without limitation ticket change fees and
other fees or charges which are applicable pursuant to Northwest’s tariffs,
unaccompanied minor fees, beverage services, excess baggage fees and nonrevenue
pass travel charges.


 


Section
5.02                            Payments
to Pinnacle .


 


(a)  Reports.  Pinnacle shall provide to Northwest periodic
reports with respect to the number of actual, completed Block Hours and Cycles
of regional jet service flown by Pinnacle (each in respect of Scheduled
Flights, Charter Flights and Non-Scheduled Flights) in accordance with the
following schedule in each calendar month during the term of this Agreement:


 


	
  Day of
  Month Report Due

  	
   

  	
  Period
  Covered by Report

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  22

  	
   

  	
  1st – 15th of Month

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Complete Previous Month

  	
   

  



 


Pinnacle shall also provide Northwest periodic reports with respect to
its Available CRJ Days, CRJ deliveries, and its expenses with respect to
Section 5.05 and Section 5.06 in accordance with the following schedule in each
calendar month during the term of this Agreement:


 


	
  Day of
  Month Report Due

  	
   

  	
  Period
  Covered by Report

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Complete Previous Month

  	
   

  



 


(b)  Payment
Schedule.  Northwest shall remit to
Pinnacle by wire transfer of immediately available funds by the close of
business on the 30th day of each calendar month (or the next banking day if the
30th is a bank holiday), as a provisional payment, Pinnacle’s Block Hour
Payment, Cycle Payment, IOP Payment and any payments due pursuant to Section
5.05 below for the period covered by the Block Hour Report and Cycle Report
furnished by Pinnacle on the 22nd day of the month and the payment due in
respect of Equipment Rental Expense pursuant to Section 5.06 below.


 


6

















 


Northwest shall remit to Pinnacle by wire transfer of immediately
available funds by the close of business on the 15th day of each month (or the
next banking day if the 15th is a bank holiday), as a final payment, Pinnacle’s
Block Hour Payment, Cycle Payment, IOP Payment, Fixed Cost Payment, Monthly
Margin Payment, any payments due pursuant to Section 5.05 or Section
5.06 below for the preceding month and any payments due with respect to
Charter Flights, less the amount of the provisional payment made on the 30th
day of the preceding month.


 


For purposes of this Section 5.02, the above-referenced payments
to Pinnacle shall be calculated as follows for any applicable period:


 


(i)                                     the
Block Hour Payment will be equal to the then applicable Block Hour Rate
multiplied by the number of actual, completed Block Hours reported in
Pinnacle’s Block Hour Report for such period for Scheduled Flights,
Non-Scheduled Flights and Charter Flights, plus


 


(ii)                                  the
Cycle Payment will be equal to the then applicable Cycle Rate multiplied by the
number of actual, completed Cycles reported in Pinnacle’s Cycle Report for such
period for Scheduled Flights and Non-Scheduled Flights, plus


 


(iii)                               the
IOP Payment, if any, will be determined in accordance with Section 5.03(c)
below, plus


 


(iv)                              any
payments due pursuant to Section 5.05 below, plus


 


(v)                                 with
respect to the payment to be made on the 15th day of each month, Pinnacle’s
Fixed Cost Payment determined in accordance with Section 5.04 below and
any payments due pursuant to Section 5.06 below, plus


 


(vi)                              with
respect to the payment to be made on the 15th day of each month, the Monthly
Margin Payment determined in accordance with Section 5.08 or Section
5.11 below, as applicable.


 


Adjustments arising from Northwest’s audit of the Block Hour Report,
Cycle Report, Available CRJ Days Report, 
CRJ Deliveries Report, Section 5.05 Report, or Section 5.06 Report may
be made within ninety (90) days following the end of each month.  Any reference to the 30th day of
a month in this Section 5 will be deemed to mean the last day of February with
respect to that month.


 


Section
5.03                            Block
Hour and Cycle Rates; IOP Program Adjustment


 


(a)  Block Hour Rate.  The Block Hour Rate for the time period
through December 31, 2005 shall be calculated by multiplying the Base
Block Hour Rate as follows for the applicable period by (1 + CPPIB):


 


7

















 


	
  Period

  	
   

  	
  Base Block
  Hour

  Rate

  CRJ-200/440

  	
   

  
	
  Effective Date –
  12/31/03

  	
   

  	
  [***]

  	
   

  
	
  01/01/04 -
  12/31/04

  	
   

  	
  [***]

  	
   

  
	
  01/01/05 -
  12/31/05

  	
   

  	
  [***]

  	
   

  



 


(b) Cycle Rate.  For each year in the Annual Operating Plan
prepared in accordance with Section 2.12, the departures for the year will be
categorized into the six categories set forth in the table below.  The Cycle Rate for the CRJ200/440 Aircraft
for the time period through December 31, 2005 shall be calculated by multiplying
the Base Cycle Rates as set forth below by (1+CPPIB), and then calculating the
weighted average of the resulting rates for the applicable period:


 


Base
Cycle Rates — CRJ 200/400


 


 


	
   

  	
   

  	
  Effective
  Date –

  12/31/03

  	
   

  	
  01/01/04-

  12/31/04

  	
   

  	
  01/01/05-

  12/31/05

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DTW

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  MSP

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  MEM

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  NW Cities

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  CS Cities

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  PS Cities

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  



 


NW Cities means Northwest Service Cities.


 


CS Cities means Contracted Service Cities


 


PS Cities means Pinnacle Service Cities


 


Example:  If
Pinnacle’s 2004 Annual Operating Plan includes 40,000 annual departures in DTW,
35,000 annual departures in MSP, 25,000 annual departures in MEM, 50,000 annual
departures in NW Cities, 30,000 annual departures in CS Cities and 20,000
annual departures in PS Cities, and if the PPI for December 2003 is 141.5 and
the PPI for December 2002 is 137.4 (CPPIB= (141.5/137.4) – 1 = 3.0%), the Cycle
Rate for 2004 shall be calculated as follows:


 


Cycle Rate = {1.03*[([***]*40,000)+( [***]*35,000)+(
[***]*25,000)+( [***]*50,000)+( [***]*30,000)+( [***]*20,000)] }/ 200,000 =
[***]


 


(c)  IOP
Program Incident Adjustment.  If
during any month during the term of this Agreement Pinnacle cancels one or more
Scheduled Flights in connection with one or more IOP Program Incidents,
Northwest shall pay to Pinnacle an amount determined in accordance with the
following formula:


 


P=((IBH)*(BHR)*( [***])) + ((ICYC)*(CYCR)*( [***]))


 


8

















 


where,


 


P is the IOP Payment to be made to Pinnacle,


IBH is the number of scheduled Block Hours cancelled
in connection with the IOP Program Incident(s), calculated by the following
formula:


IBH=Pinnacle scheduled Block Hours in Hub cancelled *
(((% points of Pinnacle’s Scheduled Flights in Hub cancelled)-(% points of
Northwest scheduled flights in Hub cancelled))/(% points of Pinnacle’s
Scheduled Flights in Hub cancelled)),


BHR is the then applicable Block Hour Rate in which
such IOP Program Incident(s) occurred,


ICYC is the number of scheduled Cycles cancelled in
connection with the IOP Program Incident(s), calculated by the following
formula:


ICYC=Pinnacle’s scheduled Cycles in Hub cancelled *
(((% points of Pinnacle’s Scheduled Flights in Hub cancelled)-(% points of
Northwest scheduled flights in Hub cancelled))/(% points of Pinnacle’s
Scheduled Flights in Hub cancelled))), and


CYCR is the then applicable Cycle Rate in which such
IOP Program Incident(s) occurred.


 


Section
5.04                            Fixed
Costs.  Pinnacle’s Fixed Cost
Payment arising from operation of the Aircraft shall be calculated on a monthly
basis as follows:


 


Fixed Cost Payment = 
[***]


 


where,


 


[***]


 


[***]


 


[***]


 


[***]


 


[***]


 


Section
5.05                            Fuel.


 


(a)                                  Fuel
Administration.  As soon as
practicable, Northwest will provide to Pinnacle the following fuel-related
administrative services:  (i)
negotiation of fuel supply, fuel storage and into-plane service contracts for
the Aircraft, (ii) payment of all into-plane and fuel invoices in respect of
the Aircraft, (iii) monthly reconciliations (by the 15th of the following
month) with respect to fuel boarded, inventory and purchases, and (iv) monthly
reports with respect to fuel boarded by station, flight and Aircraft.


 


9

















 


(b)                                 In
the event Northwest is unable to execute the administrative functions as
outlined in Section 5.05  (a)  (ii) and (iii), above,
and until such time that it can, the following procedures will apply:


 


(i)                                     Current
reporting mechanisms in place as of the Effective Date of this Agreement will
continue with Pinnacle reporting to Northwest by the 15th day of the following
month, the actual gallons boarded and the fuel price paid (including into-plane
fees and taxes).


 


(ii)                                  Current
payment mechanisms in place as of the Effective Date of this Agreement will
continue with the exception that the applicable monthly Margin Payment (per Section
5.08 or Section 5.11) will only be paid on the actual fuel boarded
multiplied by the lesser of the actual fuel price, including into-plane fees
and taxes, and $.78/gallon (the “Fuel Price”). 
In addition, no adjustment will be made to bring Pinnacle’s fuel expense
up to $.78/gallon.  The reimbursement
will be through the Section 5.02 wire transfer occurring on the 15th day
of the following month.


 


(c)                                  Fuel
Payment.  On and after the date on
which Northwest executes the administrative functions outlined in Section
5.05(a) (ii) and (iii) above, Northwest will charge Pinnacle on a pre-pay basis
the last week of each month for fuel to be boarded for the 1st -15th of the
succeeding month.  Pinnacle will pay for
that fuel through a set-off of the amount due from the Section 5.02 wire
transfer on the 15th of the month for which the prepay is occurring.  Northwest will reimburse Pinnacle for this
pre-pay amount through the Section 5.02 wire transfer on the 30th of the
month.  Likewise, Northwest will charge
Pinnacle on a pre-pay basis the second week of the month for fuel to be boarded
for the 16th-end of month.  Pinnacle
will pay for that fuel through a set-off of the Section 5.02 wire
transfer on the 30th of the month for which the prepay is occurring.  By the 15th of the following month,
Northwest will reconcile the pre-paid fuel expense for the preceding month with
the actual expense (at a price not to exceed the Fuel Price), and charge or
credit Pinnacle with the difference, including reimbursement for the second
half pre-pay.  This reimbursement and
month end adjustment for the preceding month will be handled via the Section
5.02 wire transfer occurring the 15th day of the following month through
additional payment or set-off.


 


The pre-pay will be based on using half of Pinnacle’s
prior month actual boarded volume at the Fuel Price.


 


Pinnacle shall have the right to audit on a semi-annual basis the
determination of the number of gallons of aircraft fuel boarded and shall
report any disputes to Northwest.  Any
dispute not reported to Northwest within thirty (30) days of the conclusion of
such audit shall be deemed waived.


 


Northwest’s fuel department shall have the right to
audit on a monthly basis the determination of the number of gallons of aircraft
fuel boarded and fuel price paid and shall report any disputes to
Pinnacle.  Any dispute not reported to
Pinnacle within thirty (30) days of the conclusion of such audit shall be
deemed waived.


 


10

















 


(d)                                 Pinnacle
Reporting Procedures.  Pinnacle will
provide to Northwest the following fuel administrative service assistance:  (i) timely Fuel Management System
(“FMS”) data entry by Pinnacle at Pinnacle Service Cities including month-end
reconciling to the fixed base operator (“FBO”) by the end of the second
business day, (ii) FMS coverage by Pinnacle when regular FMS person is on
vacation, leave, etc., (iii) Pinnacle will train new Pinnacle employees on
FMS due to turnover, vacation, etc., (iv) problems at FBO regarding supply
of fuel slips and bill of lading receipts will be addressed by Pinnacle
personnel first before involving the Northwest Fuel Department.


 


(e)                                  Fuel
Burn Review Procedures - CRJ. 
Northwest and Pinnacle agree to review the fuel burn performance of the
CRJ Aircraft for compliance with the performance measure (burn rate ceiling)
set below.  Either party may initiate
the audit of the actual fuel burn against the set measure.  The performance measure includes both
scheduled and non-scheduled fuel usage/expense.  The ceiling is the Northwest budgeted scheduled fuel burn per
scheduled Block Hour [***] for non-scheduled usage.  For example, the 2002 performance measure (ceiling) was equal to
the Northwest scheduled fuel burn rate of [***] gallons per scheduled Block
Hour [***] which sets the ceiling at [***].


 


In the event that the CRJ Aircraft’s actual fuel burn
for the period of review is above the ceiling the parties will work together in
good faith to explain the variance relative to the ceiling and to resolve the
cause of the variance.  If it is
determined that actual fuel burn was above the ceiling for reasons within the
control of Pinnacle, Pinnacle will pay a Fuel Burn Penalty Payment to Northwest
and such payment shall be made in accordance with Section 5.07.  The Fuel Burn Penalty Payment shall be
calculated as follows:


 


Fuel Burn Penalty Payment = [(total fuel
expense/actual fuel price) / scheduled Block Hours - performance ceiling] *
completed scheduled Block Hours * actual fuel price (not to exceed $.78 per
gallon) + Margin applicable to the fuel expense reimbursement pursuant to Section
5.08 or 5.11.


 


Section
5.06                            Direct
Expenses.  Northwest will
reimburse Pinnacle for the following expenses at the Direct Cost to
Pinnacle.  Reimbursement for these
expenses paid or accrued by Pinnacle in the prior month, (other than the
Equipment Rental Expense) will be included in the wire transfer to Pinnacle on
the 15th of each subsequent month pursuant to Section 5.02(b)
above.  The reimbursement of Equipment
Rental Expense pursuant to Section 5.06(a) attributable to a month will occur
as part of the provisional payment on the 30th of such month
pursuant to Section 5.02(b).  Pinnacle
will be responsible for providing Northwest with a copy of all third party
invoices and evidence of payment needed to determine the expense amount and the
timeliness of payment.


 


(a)  Equipment
Rental Expense – less any performance guarantee payments or credits that
Pinnacle receives from the manufacturers.


 


11

















 


(b)  Aviation
Insurance - Aircraft hull insurance and aviation liability insurance, including
war risk liability and hull war risk insurance, subject to the following:


 


Pinnacle’s aviation liability insurance (including war
risk liability) expense shall be the lesser of the expense based on the actual
rates or $[***] per Pinnacle Revenue Passenger.  Pinnacle’s hull insurance (including hull war risk insurance)
expense shall be the lesser of the expense based on the actual rates or $[***]
per dollar ($) of Pinnacle Fleet Value. 
The margin payment pursuant to Section 5.08 or 5.11 shall be based on
the foregoing amounts.  If Pinnacle’s
actual aviation insurance expense exceeds the amounts above, the incremental
insurance expense above the foregoing limits will be reimbursed by
Northwest.  In the event that Pinnacle
obtains aviation insurance coverage as part of Northwest’s aviation insurance
placement, the rates used to determine Pinnacle’s share of the aviation
insurance expenses shall be the same as the rates used to determine Northwest’s
expense for such insurance.


 


(c)  Engine
maintenance – The CRJ 200/440 engine maintenance performed pursuant to the GE
Agreements less any warranty payments or credits that Pinnacle receives,
including but not limited to those from GE, plus the cost of materials and
components used in connection with unscheduled off-wing maintenance performed
by Pinnacle (not including maintenance or replacement of line replaceable units
or QEC items).  Pinnacle shall provide
to Northwest, upon reasonable request, documentation detailing the unscheduled
event and cost of each of the components. 
If Northwest and Pinnacle agree at any time to have such engine work
performed elsewhere, the reimbursement amount will be adjusted to take into
account the new arrangement. 
Notwithstanding the foregoing, Northwest will not reimburse Pinnacle for
engine maintenance performed pursuant to the GE Agreements which is
accomplished unreasonably in advance of the time such maintenance is required
in accordance with the Maintenance Program or which is accomplished for the
sole purpose of satisfying return conditions under the Lease.


 


(d)  Airframe
maintenance – The CRJ 200/440 airframe maintenance performed pursuant to
Bombardier Agreement less any warranty payments or credits that Pinnacle
receives, including but not limited to those from Bombardier.  If Northwest and Pinnacle agree at any time
to have the maintenance work performed elsewhere, the reimbursement amount will
be adjusted to take into account the new arrangement.  Notwithstanding the foregoing, Northwest will not reimburse
Pinnacle for airframe maintenance performed pursuant to the Bombardier
Agreement which is accomplished unreasonably in advance of the time such
maintenance is required in accordance with the Maintenance Program or which is
accomplished for the sole purpose of satisfying return conditions under the
Lease.


 


(e)  Deicing
services and glycol - subject to the provisions of Section 4.02 and reimbursed
accordingly:


 


12

















 


(i)                                     Deicing
services and glycol at Pinnacle Service Cities, Contracted Service Cities and
Hub Cities where a contracted agent is performing the service.


 


(ii)                                  Glycol
at Pinnacle Service Cities, Contracted Service Cities and Hub Cities where
Pinnacle performs the deicing function.


 


(f) 
Maintenance Facilities, subject to the provisions of Section 4.03 (c).


 


(g)  CRJ
200/440 auxiliary power unit (APU) maintenance expense, CRJ 200/440 avionics
maintenance expense and CRJ 200/440 landing gear overhaul expense less any
warranty payments or credits that Pinnacle receives with respect to any of the
foregoing expenses.


 


(h)  Hub City
facility charges pursuant to Exhibit B.


 


(i)  Airport security-related
equipment maintenance expenses and personnel expenses incurred by Pinnacle
pursuant to Section 4.05 less any government reimbursement for such
expenses.


 


(j)  Landing
fees incurred for Pinnacle operations in DTW.


 


(k)  Ground
handling charges at Northwest Service Cities pursuant to Section 4.02.


 


(l)  Property
taxes, subject to the provisions of Section 8.03 less the amounts of any
refunds, subject to the provisions of Section 8.04.


 


Notwithstanding the foregoing, Northwest will not reimburse Pinnacle
for any late payment charges, penalties and/or fees which Pinnacle incurs in
connection with payment of the expenses listed above.


 


Section
5.07                            Billing.  Northwest and Pinnacle shall bill each other
on a monthly basis in respect of amounts owed to each other under this
Agreement not contemplated under Section 5.02.  If such billed items are not paid by the party within sixty (60)
days of the statement date, the aggregate amount of undisputed items may be
offset against or included in the next scheduled wire transfer pursuant to Section
5.02(b).  Disputed amounts must be
paid when the dispute is resolved, provided that such amount may be set off
against or included in the next scheduled wire transfer pursuant to Section
5.02(b) if the formerly disputed amount is not paid within seven (7) days
of resolution.  Northwest may also
offset against the next scheduled wire transfer pursuant to Section 5.02(b)
the amount of any payment (including those under any Lease or the Note) with
respect to which Pinnacle shall have defaulted and shall have failed to cure
before the expiration of any applicable grace period.


 


Section
5.08                            Monthly
Margin Calculation and Payment. 
The monthly Margin Payment for the time period through December 31, 2007
shall be calculated as follows:


 


13

















 


Monthly Margin Payment = (payments due to Pinnacle
pursuant to Sections 5.03, 5.04, 5.05 and  5.06) *
(.10 / .90)


 


Section
5.09                            Annual
Margin Adjustment Payment.  For
the time period through December 31, 2007, the parties will calculate
Pinnacle’s Margin in accordance with Section 5.09(a) and, if required
pursuant to Section 5.09(b) below, one party will make a Margin
Adjustment Payment to the other party.


 


(a)  Calculation
of the Total Operating Cost and the Margin.  Not later than ninety (90) days following the end of 2003, 2004,
2005, 2006 and 2007, Pinnacle shall deliver to Northwest its audited financial
statements including the calculation of its operating margin for Regional
Airline Services provided under this Agreement for the prior year (the
“Margin”) by dividing (x) Pinnacle’s Total Operating Income for Regional
Airline Services for such year by (y) Pinnacle’s Total Operating Revenue for
Regional Airline Services for such year, subject to the following:


 


In calculating the Margin, the amount of any penalties
(accounted for as a reduction to revenue) pursuant to Section 5.05,  Section
5.13 and/or Section 5.14 below and any Saab 340 Aircraft rental
revenue will not be included in Pinnacle’s Total Operating Revenue, and the
following expenses will not be included in Pinnacle’s Total Operating Cost:


 


(1)  Increment above predicted employee bonuses
and incentives as set forth in Exhibit C hereto.  Predicted bonus and incentive levels are the amounts used in
calculating the Block Hour, Cycle and Fixed Cost Rates for 2003, 2004, 2005,
2006 and 2007, respectively.


 


(2)  Increment above market pay rates for
Pinnacle’s employees per the Parity Pay Agreement in Exhibit D.


 


(3)  The amount of any penalties pursuant to Section
5.14 (if not accounted for as a reduction to revenue).


 


(4)  The amount of any depreciation expense
associated with capital expenditures in excess of $250,000 which are designated
by Northwest as Section 5.09(a)(4) items because Northwest has determined that
such capital expenditures are not necessary after taking into consideration the
Annual Operating Plan and Pinnacle’s obligations under this Agreement, within
seventy-five (75) days after receiving written notice from Pinnacle of such
capital expenditure pursuant to Section 6.01(a)(iv) below.


 


(5)  The amount of any Fuel Burn Penalty Payment
pursuant to Section 5.05(d) (if not accounted for as a reduction to
revenue).


 


(6)  The amount of any asset write-downs
(excluding normal depreciation) or extraordinary charges as defined by GAAP.


 


14

















 


(7)  Rental expense associated with the Saab 340
Aircraft not flown by Pinnacle.


 


(8)  The amount of any fines or penalties paid by
Pinnacle to any governmental entity.


 


(9)  The CRJ 200/440 Aircraft and Spare Engine
return costs including termination costs incurred by Pinnacle pursuant to
Section 3.02(b) above.


 


(10)                            The
amount of any late payment charges, penalties and/or fees incurred by Pinnacle.


 


(11)                            The
amount of any payment from Pinnacle to Northwest pursuant to Section 5.13 (if
not accounted for as a reduction to revenue).


 


The Margin shall be expressed as a decimal rounded to
the fourth place.  The calculation of
the Margin shall be derived from Pinnacle’s reported financial statements for
such year and shall be determined in accordance with GAAP.


 


(b)  Annual
Margin Adjustment Payment.  With
respect to each calendar year through and including 2007, the Margin will be
subject to the floors and ceilings in the following table:


 


	
  Period:

  	
   

  	
  Revision
  Date – 2005

  	
   

  	
  2006 &
  2007

  	
   

  
	
  Ceiling:

  	
   

  	
  11

  	
  %

  	
  12

  	
  %

  
	
  Floor:

  	
   

  	
  9

  	
  %

  	
  8

  	
  %

  



 


With respect to each calendar year through and including 2007, if the
Margin is less than the applicable Floor, Pinnacle shall receive from Northwest
an amount determined as follows:


 


Ppin = [Total Operating Cost/(1 - Floor)] – Rev


 


where


 


Ppin is the amount payable to Pinnacle,

Rev is Total Operating Revenue for Regional Airline Services for the applicable
calendar year excluding the items listed in Section 5.09 (a),


 


Floor is the applicable floor from the above table,
and


 


Total Operating Cost excludes Items 1-11 in Section
5.09(a) above.


 


15

















 


With respect to each calendar year through and including 2007, if the
Margin is greater than the applicable Ceiling, Northwest shall receive from
Pinnacle an amount determined as follows:


 


Pnw = Rev - [Total Operating Cost/(1 - Ceiling)]


 


where,


 


Pnw is the amount payable to Northwest,

Rev is Total Operating Revenue for Regional Airline Services for the applicable
calendar year excluding the items listed in Section 5.09 (a),


 


Ceiling is the applicable ceiling from the above
table, and


 


Total Operating Cost excludes items 1-11 in Section
5.09(a) above.


 


An amount payable pursuant to this Section 5.09 (b) is a “Margin
Adjustment Payment.”  Northwest shall
add in or setoff, as appropriate, any Margin Adjustment Payment in the next
wire transfer due to Pinnacle.


 


(c)  Audit
of Total Operating Cost and the Margin. 
Northwest shall have the right to audit the calculation of the Total
Operating Cost, the Margin and the Margin Adjustment Payment, and shall report
any disputes to Pinnacle.  Any dispute
not reported to Pinnacle in writing within ninety (90) days of the receipt of
the audited financial statements and Margin calculation by Northwest shall be
deemed waived.  The payment in respect
of any dispute shall be handled as a disputed amount in accordance with Section
5.07.


 


Section
5.10                            Rate
Adjustments.  For the calendar
year 2006, the Block Hour, Cycle, and Fixed Cost Rates will be adjusted as
described below.


 


(a)  One
Time Adjustment Factor.  Effective
for the twelve-month period beginning on January 1, 2006 (i) the Block Hour
Rate used for the 2005 calendar year will be multiplied by a One Time
Adjustment Factor (OTAF) and multiplied by (1 + CPPI), and (ii) the Cycle Rate
shall be calculated by multiplying the Base Cycle Rates for 2005 by (1 +
CPPIB)* (OTAF), and then calculating the weighted average of the resulting
rates.  These adjusted rates will be
used for the twelve-month period beginning January 1, 2006.  The OTAF will be calculated as follows:


 


(1)                                  Determine
Pinnacle’s actual operating expenses for the twelve-month period ending
December 31, 2005, excluding [***].


 


(2)                                  Determine
the actual payment made to Pinnacle for the twelve month period ending December
31, 2005, excluding [***].


 


(3)                                  Divide
the result of step (1) by the result of step (2).


 


16

















 


(b)  Inflation
Adjustment.  Effective for 2007, (i)
the Block Hour Rate used for 2006 will be multiplied by (1+CPPI), and (ii) the
Cycle Rate shall be calculated by multiplying the Base Cycle Rates for 2005 by
(1 + CPPIB)* (OTAF), and then calculating the weighted average of the resulting
rates, to establish the 2007 rates.


 


(c)  Fixed
Cost Payment Adjustment.  Effective
for 2006 and 2007, the Fixed Cost Payment formula will be multiplied by the
OTAF.


 


(d)  Effective
for 2008 the payment rates and mechanisms set forth in Sections 5.02
through 5.06 will be re-set through good faith negotiations utilizing a
payment methodology consistent with the methodology utilized through 2007;
provided, however, that any increment above market pay rates for Pinnacle’s
employees, per the Parity Pay Agreement in Exhibit D, will not be considered in
re-setting such rates.  The rates for
2009, 2010, 2011 and 2012 will be determined by multiplying the prior year’s
rates by (1+CPPI).


 


(e)  So long as
this Agreement remains in effect, the payment rates and mechanisms set forth in
Sections 5.02 through 5.06 will be re-set every fifth year
through good faith negotiations, commencing with the rates effective for 2013,
utilizing a payment methodology consistent with the methodology utilized during
the prior five (5) year period; provided, however, that any increment above
market pay rates for Pinnacle’s employees, per the Parity Pay Agreement in
Exhibit D, will not be considered in re-setting such rates.  The rates for the years between each
adjustment year will be determined by multiplying the prior year’s rates by (1
+ CPPI).


 


(f)  In the
event the parties are unable to reach agreement on new payment rates and
mechanisms through good faith negotiations, the rates will be set utilizing the
following procedure:  (i) the parties
shall attempt to agree upon an impartial industry expert to act as sole
arbitrator, provided that if the parties are unable to agree upon an expert to
so act, each party shall appoint an expert, and the two experts so appointed
shall appoint a third expert; (ii) each party shall submit a set of proposed
rates to the arbitrator(s); and (iii) the arbitrator(s) shall choose a set of
rates from those submitted without modifying either.


 


Section
5.11                            Revised
Monthly Margin Calculation and Payment.  Effective January 1, 2008, the monthly Margin Payment shall be
calculated as follows:


 


Monthly Margin Payment = (payments due to Pinnacle
pursuant to Sections 5.03, 5.04, 5.05 and 5.06 (all
adjusted pursuant to Section 5.10)) * MMR / (1-MMR)


 


Where, MMR is the Market Margin Rate.


 


Section
5.12                            Revised
Annual Margin Adjustment Payment. 
Effective for 2008 and each calendar year thereafter, the parties will
calculate Pinnacle’s Margin in accordance with Section 5.12(a) and, if
required pursuant to Section 5.12(b) below, one party will make a Margin
Adjustment Payment to the other party.


 


17

















 


(a)  Calculation
of the Total Operating Cost and the Margin.  Not later than ninety (90) days following the end of 2008 and
each subsequent calendar year during the term of this Agreement, Pinnacle shall
deliver to Northwest its audited financial statements including the calculation
of its operating margin for Regional Airline Services provided under this
Agreement for the prior year (the “Margin”) by dividing (x) Pinnacle’s Total
Operating Income for Regional Airline Services for such year by (y) Pinnacle’s
Total Operating Revenue for Regional Airline Services for such year, subject to
the following:


 


In calculating the Margin, the amount of any penalties
(accounted for as a reduction to revenue) pursuant to Section 5.05, Section
5.13 and/or Section 5.14 below and any Saab 340 Aircraft rental
revenue will not be included in Pinnacle’s Total Operating Revenue, and the
following expenses will not be included in Pinnacle’s Total Operating Cost:


 


(1)  Increment above predicted employee bonuses
and incentives as set forth in Exhibit C hereto.  Predicted bonus and incentive levels are the amounts used in
calculating the Block Hour, Cycle and Fixed cost rates for 2007, grown each
year by multiplying by (1 + CPPI).


 


(2)  The amount of any penalties pursuant to Section
5.14 (if not accounted for as a reduction to revenue).


 


(3)  The amount of any depreciation expense
associated with capital expenditures in excess of $250,000 which are designated
by Northwest as Section 5.13(a)(3) items because Northwest has determined that
such capital expenditures are not necessary after taking into consideration the
Annual Operating Plan and Pinnacle’s obligations under this Agreement, within
seventy-five (75) days after receiving written notice from Pinnacle of such
capital expenditure pursuant to Section 6.01(a)(iv) below.


 


(4)  The amount of any Fuel Burn Penalty Payment
pursuant to Section 5.05(d) (if not accounted for as a reduction to
revenue).


 


(5)  The amount of any asset write-downs
(excluding normal depreciation) or extraordinary charges as defined by GAAP.


 


(6)  Rental expense associated with the Saab 340
Aircraft not flown by Pinnacle.


 


(7)  The amount of any fines or penalties paid by
Pinnacle to any governmental entity.


 


(8)  The CRJ 200/440 Aircraft and Spare Engine
return costs including termination costs incurred by Pinnacle pursuant to
Section 3.02 (b) above.


 


(9)  The amount of any late payment charges,
penalties and/or fees incurred by Pinnacle.


 


18

















 


(10)  The amount of any payment from Pinnacle to
Northwest pursuant to Section 5.13 (if not accounted for as a reduction
to revenue).


 


The Margin shall be expressed as a decimal rounded to
the fourth place.  The calculation of
the Margin shall be derived from Pinnacle’s reported financial statements for
such year and shall be determined in accordance with GAAP.


 


(b)                                 Annual
Adjustment to Margin Payment.


 


With respect to each calendar year effective 2008, if
the Margin is greater than MMR but less than or equal to (MMR + 0.05),
Northwest shall receive from Pinnacle an amount determined as follows:


 


Pnw = (Rev - [Total Operating Cost/(1 - MMR)]) / 2


 


where,


 


Pnw is the amount payable to Northwest,


 


Rev is Total Operating Revenue for Regional Airline
Services for the applicable calendar year excluding the items listed in Section
5.12 (a), and


 


Total Operating Cost excludes items 1-10 in Section
5.12(a) above.


 


With respect to each calendar year effective 2008, if
the Margin is greater than (MMR + 0.05), Northwest shall receive from Pinnacle
an amount determined as follows:


 


Pnw = (Rev - [Total Operating Cost/(0.975 - MMR)])


 


where,


 


Pnw is the amount payable to Northwest,


 


Rev is Total Operating Revenue for Regional Airline
Services for the applicable calendar year excluding the items listed in Section
5.12 (a), and


 


Total Operating Cost excludes items 1-10 in Section
5.12(a) above.


 


An amount payable pursuant to this Section 5.12(b)
is a “Margin Adjustment Payment.” 
Northwest shall add in or setoff, as appropriate, any Margin Adjustment
Payment in the next wire transfer due to Pinnacle.


 


19

















 


(c)  Audit
of Total Operating Cost and the Margin. 
Northwest shall have the right to audit the calculation of the Total
Operating Cost, the Margin and the Margin Adjustment Payment, and shall report
any disputes to Pinnacle.  Any dispute
not reported to Pinnacle in writing within ninety (90) days of the receipt of
the audited financial statements and Margin calculation by Northwest shall be
deemed waived.  The payment in respect
of any dispute shall be handled as a disputed amount in accordance with Section
5.07.


 


Section 5.13                            Non-Scheduled
Flight Refund.


 


With respect to each calendar year during the term of
this Agreement, Northwest shall within thirty (30) days from the receipt of the
final Block Hour and Cycle Report received pursuant to Section 5.02 for the
immediately preceding year, calculate and notify Pinnacle of the ratio of
actual Block Hours for Non-Scheduled Flights to actual Block Hours for
Scheduled Flights and the ratio of actual Cycles for Non-Scheduled Flights to
actual Cycles for Scheduled Flights.  In
the event that either ratio exceeds [***], Pinnacle shall remit to Northwest
(through a set-off of the next amount due from the Section 5.02 wire
transfer) an amount equal to the following:


 


Refund Calculation:


 


Actual Block Hours and/or Cycles for Non-Scheduled
Flights in excess of [***] of the actual Block Hours and Cycles for Scheduled
Flights, respectively, multiplied by the Block Hour Rate and Cycle Rate,
respectively, in effect for the immediately preceding year pursuant to Section
5.03 and as adjusted pursuant to Section 5.10, plus the amount of any Margin
Payments previously paid by Northwest to Pinnacle in connection with such
excess Block Hours and/or Cycles; provided, however, that no refund will be
paid to Northwest with respect to Non-Scheduled Flights which are Aircraft
delivery flights.


 


Section 5.14                            Performance
Levels and Penalties.


 


(a)  Pinnacle
shall be subject to certain performance levels and penalties as described in
this Section 5.14(a) (“Performance Criteria”) which shall be deducted
from the Block Hour Payment.  If
Pinnacle does not achieve the performance criterion, then a penalty shall be
charged against amounts owing to Pinnacle. Any penalty charge incurred by
failing to meet Performance Criteria shall be made in the wire transfer due on
the 30th day of the second month following the end of the Performance Period in
question pursuant to Section 5.02(b). 
The applicable performance levels and penalties are as follows:


 


(i)                                     Completion
Factor (calculated in accordance with Section 2.10 (a)):


 




	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  	
   

  
	
  Performance
  Level

  	
   

  	
  [***]

  	
   

  	
  [***]

  [***]

  	
   

  	
  [***]

  	
   

  
	
  Penalty per
  enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  






 


20

















 


(ii)                                  On-Time
Factors (calculated in accordance with Section 2.10(b)):


 


Departure [***]


 




	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  	
   

  
	
  Performance
  Level

  	
   

  	
  [***]

  	
   

  	
  [***]

  [***]

  	
   

  	
  [***]

  	
   

  
	
  Penalty per
  enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  






 


Arrival [***]


 




	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  	
   

  
	
  Performance
  Level

  	
   

  	
  [***]

  	
   

  	
  [***]

  [***]

  	
   

  	
  [***]

  	
   

  
	
  Penalty per
  enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  






 


In conjunction with Pinnacle’s on-time arrival performance, Pinnacle’s
target block time performance [***]shall not exceed [***].  If Pinnacle’s actual block time performance
[***] exceeds [***], Pinnacle’s actual arrival performance [***] will be
adjusted downward by [***] percentage point per [***] percentage point in
excess of [***]


 


(iii)                               Luggage Mishandled
(calculated in accordance with Section 2.10 (c)):


 




	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  	
   

  
	
  Performance
  Level (incidents per 1,000 enplaned revenue passengers)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Penalty per
  enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  






 


(iv)                              Customer
complaints (calculated in accordance with Section 2.10 (d)):


 




	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  	
   

  
	
  Performance
  Level (incidents per 1,000 enplaned revenue passengers)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Penalty per
  enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  






 


21

















 


The parties will review the penalty levels for customer complaints
after the first year this Agreement is in effect and make such adjustments as
are mutually agreed.


 


(b)  Reconciliation
of Performance Standards.  For each
Performance Period, (i) Northwest shall determine the total number of enplaned
revenue passengers on Scheduled Flights operated by Pinnacle, (ii) Pinnacle
shall prepare a reconciliation of its actual performance to the targeted
performance with respect to its completion factor and its on-time factor and
(iii) Northwest shall prepare a reconciliation of Pinnacle’s actual performance
to targeted performance with respect to Pinnacle’s incidences of mishandled
luggage and its number of customer complaints. Such reconciliations will be
completed and delivered to the other within thirty (30) days after the end of
each Performance Period.  Northwest and
Pinnacle will have the right to audit the reconciliation prepared by the other
and shall report any discrepancies to the other.  Any discrepancy not reported in writing within sixty (60) days of
the end of any Performance Period shall be deemed waived.  The payment of in respect of any discrepancy
shall be handled as a disputed amount in accordance with Section 5.07.


 


(c)  Additional
Performance Criteria.  During the
term of this Agreement, Northwest may propose other performance criteria for
Pinnacle’s operations pursuant to this Agreement.  The parties agree that they will meet upon the introduction of
additional performance levels for Northwest’s operations, to develop similar
performance targets for Pinnacle, 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 penalties for
Pinnacle’s performance with respect thereto in a manner consistent with the
performance standards agreed to herein.


 


Section
5.15                            Pinnacle
Change of Control.  In the event
a Pinnacle Change of Control shall have occurred, Sections 5.08, 5.09,
5.11 and 5.12 shall be terminated effective immediately.


 


Section
5.16                            Credit
Card Chargebacks.


 


(a)  Pinnacle
shall be billed for credit card chargebacks resulting from Pinnacle’s
noncompliance with Northwest’s credit card acceptance procedures.  Northwest shall apply the same card
acceptance procedures and standards to Pinnacle as applied to Northwest by
Northwest’s credit card contractors. 
Northwest will inform Pinnacle in writing regarding any material changes
in Northwest’s agreements with its credit card contractors to the extent such
changes will impact the procedures and standards to be applied by Pinnacle.


 


(b)  With
respect to all credit card charge forms returned to Pinnacle by Northwest,
Northwest will furnish Pinnacle with a complete written explanation of the
reason therefore accompanied by relevant documentation received from the credit
card issuer or credit card holder.


 


(c)  Upon
receipt of a chargeback, Pinnacle shall have a reasonable period of time, but
not to exceed 30 days, to review the validity of the chargeback notice.  If the


 


22

















 


chargeback is valid (within the scope of the circumstances for the
chargeback), Pinnacle shall remit to Northwest within 30 days a gross amount
equal to such credit card charge form. 
If, in Pinnacle’s good faith opinion, the chargeback is not valid,
Pinnacle will so notify Northwest and provide Northwest with a complete written
explanation of the transaction together with any necessary supporting
documentation within the 30-day period.


 


(d)  All
revisions to Northwest’s credit card acceptance procedures must be in writing
and must be submitted to Pinnacle at least 30 days in advance of the effective
date of such procedures or such shorter notification period as Northwest may
utilize in notifying its own personnel.


 


Section
5.17                            Returned
Checks.


 


(a)  Pinnacle
shall be billed pursuant to Section 5.07 above for all returned checks
resulting from Pinnacle’s non-compliance with Northwest’s check acceptance
procedures.


 


(b)  Northwest
will furnish Pinnacle with a complete written explanation of the reason
therefore, accompanied with the relevant documentation.


 


(c)  Pinnacle
shall refund Northwest the full amount of the dishonored check within 30
days.  If, in Pinnacle’s reasonable
opinion, the charge is not valid, Pinnacle will so notify Northwest and provide
Northwest with a complete written explanation of the transaction together with
any necessary supporting documentation within the 30-day period.


 


(d)  All
revisions to Northwest’s check acceptance procedures will be in writing and
will be submitted to Pinnacle at least 30 days in advance of the effective date
of such procedures or such shorter notification period as Northwest may utilize
in notifying its own personnel.


 


23