exhibit10_1.htm


     

     

    
       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

     


    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


      

    


    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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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

      

      
        
        

        
          

        

      

      
        
        

      

    

    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

      

      
        
        

        
          

        

      

      
        
        

      

    

    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