Document:

Exhibit 10.22

 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO RULE 24B-2 AND ARE SUBJECT TO A CONFIDENTIAL TREATMENT REQUEST. COPIES OF THIS EXHIBIT CONTAINING THE OMITTED INFORMATION HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.  THE OMITTED PORTIONS OF THIS DOCUMENT ARE MARKED WITH A [***]

 

AMENDED AND RESTATED

 

CAPACITY PURCHASE AGREEMENT

 

BETWEEN

 

UNITED AIRLINES, INC.

 

AND

 

EXPRESSJET AIRLINES, INC.

 

ORIGINALLY DATED AS OF NOVEMBER 12, 2010

 

EFFECTIVE AS AMENDED AND RESTATED AS OF JULY 1, 2014

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Parties
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
Recitals
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
CAPACITY PURCHASE, SCHEDULES AND FARES
    	
1
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Capacity Purchase
    	
1
    
	
Section 2.02
    	
Flight-Related Revenues
    	
5
    
	
Section 2.03
    	
Pass Travel
    	
5
    
	
Section 2.04
    	
Requests for Proposal
    	
5
    
	
Section 2.05
    	
Early Replacement of Certain Covered Aircraft
    	
5
    
	
Section 2.06
    	
Intentionally Omitted
    	
7
    
	
Section 2.07
    	
Other Withdrawal of Aircraft
    	
7
    
	
Section 2.08
    	
Commodity Events
    	
10
    
	
Section 2.09
    	
Return Conditions; Storage; Return Protocol
    	
13
    
	
Section 2.10
    	
Separate Withdrawal Rights
    	
16
    
	
Section 2.11
    	
Intentionally Omitted
    	
16
    
	
Section 2.12
    	
Additional Replacement Rights of United
    	
16
    
	
Section 2.13
    	
Extension Rights of United
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
CONTRACTOR COMPENSATION
    	
17
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Base and Incentive Compensation
    	
17
    
	
Section 3.02
    	
Periodic Adjustment of Base and Incentive Compensation and   Commodity Prices
    	
17
    
	
Section 3.03
    	
Contractor Expenses
    	
18
    
	
Section 3.04
    	
United Expenses
    	
18
    
	
Section 3.05
    	
Audit Rights; Financial Information
    	
18
    
	
Section 3.06
    	
Billing and Payment; Reconciliation
    	
19
    
	
Section 3.07
    	
Synergy Savings
    	
21
    
	
Section 3.08
    	
One-Time Payment for Short Schedule Change Notice in CLE
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED
    	
22
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Crews, Etc.
    	
22
    
	
Section 4.02
    	
Governmental Regulations
    	
22
    
	
Section 4.03
    	
Quality of Service
    	
23
    
	
Section 4.04
    	
Incidents or Accidents
    	
24
    
	
Section 4.05
    	
Emergency Response
    	
24
    
	
Section 4.06
    	
Safety Matters
    	
24
    
	
Section 4.07
    	
Master Facility and Ground Handling Agreement
    	
24
    
	
Section 4.08
    	
Codeshare Terms
    	
24
    
	
Section 4.09
    	
Administrative Support and Information Services
    	
25
    
	
Section 4.10
    	
Fuel Procurement and Fuel Services
    	
25
    

 

i

 

	
Section 4.11
    	
Slots and Route Authorities
    	
25
    
	
Section 4.12
    	
Use of United Marks
    	
26
    
	
Section 4.13
    	
Use of Contractor Marks
    	
26
    
	
Section 4.14
    	
Catering Standards
    	
26
    
	
Section 4.15
    	
Ticket Handling Terms
    	
26
    
	
Section 4.16
    	
Fuel Efficiency and Revenue Programs
    	
26
    
	
Section 4.17
    	
Reasonable Operating Constraints and Conditions
    	
26
    
	
Section 4.18
    	
Covered Aircraft Subleases
    	
26
    
	
Section 4.19
    	
Unauthorized Payments
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
CERTAIN RIGHTS OF UNITED
    	
29
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Use of Covered Aircraft
    	
29
    
	
Section 5.02
    	
Change of Control
    	
30
    
	
Section 5.03
    	
Limitation on Transfers of Interest
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
INSURANCE
    	
30
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Minimum Insurance Coverages
    	
30
    
	
Section 6.02
    	
Endorsements
    	
31
    
	
Section 6.03
    	
Evidence of Insurance Coverage
    	
31
    
	
Section 6.04
    	
Insurance Through Combined Placement
    	
31
    
	
Section 6.05
    	
Insurance Through Other Than Combined Placement
    	
32
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
INDEMNIFICATION
    	
32
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Contractor Indemnification of United
    	
32
    
	
Section 7.02
    	
United Indemnification of Contractor
    	
33
    
	
Section 7.03
    	
Indemnification Claims
    	
33
    
	
Section 7.04
    	
Employer’s Liability; Independent Contractors; Waiver of   Control
    	
34
    
	
Section 7.05
    	
Survival
    	
35
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
TERM, TERMINATION AND DISPOSITION OF AIRCRAFT
    	
35
    
	
 
    	
 
    	
 
    
	
Section 8.01
    	
Term
    	
35
    
	
Section 8.02
    	
Early Termination
    	
35
    
	
Section 8.03
    	
Disposition of Aircraft during Wind-Down Period
    	
37
    
	
Section 8.04
    	
Adjustments for Uncured Event of Default
    	
40
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
REPRESENTATIONS, WARRANTIES AND COVENANTS
    	
42
    
	
 
    	
 
    	
 
    
	
Section 9.01
    	
Representations and Warranties of Contractor
    	
42
    
	
Section 9.02
    	
Representations and Warranties of United
    	
42
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
MISCELLANEOUS
    	
43
    
	
 
    	
 
    	
 
    
	
Section 10.01
    	
Conversion of Covered Aircraft Livery
    	
43
    
	
Section 10.02
    	
Notices
    	
44
    
	
Section 10.03
    	
Binding Effect; Assignment
    	
45
    
	
Section 10.04
    	
Amendment and Modification
    	
45
    
	
Section 10.05
    	
Waiver
    	
46
    
	
Section 10.06
    	
Interpretation
    	
46
    

 

ii

 

	
Section 10.07
    	
Confidentiality
    	
46
    
	
Section 10.08
    	
Survival
    	
47
    
	
Section 10.09
    	
Counterparts
    	
47
    
	
Section 10.10
    	
Severability
    	
47
    
	
Section 10.11
    	
Equitable Remedies; Limitation on Damages
    	
47
    
	
Section 10.12
    	
Relationship of Parties
    	
48
    
	
Section 10.13
    	
Entire Agreement; No Third-Party Beneficiaries
    	
48
    
	
Section 10.14
    	
Governing Law
    	
48
    
	
Section 10.15
    	
Guaranty
    	
48
    
	
Section 10.16
    	
Right of Set-Off
    	
49
    
	
Section 10.17
    	
Cooperation with Respect to Reporting
    	
49
    
	
Section 10.18
    	
Amendment of Certain Contracts
    	
49
    
	
Section 10.19
    	
Additional Provisions Relating to Labor Strike
    	
49
    
	
Section 10.20
    	
Customer Satisfaction Goal
    	
50
    
	
Section 10.21
    	
Additional Agreements Relating to ORD
    	
50
    
	
Section 10.22
    	
Effective Amendment
    	
50
    
	
 
    	
 
    	
 
    
	
SCHEDULE   1:
    	
Covered   Aircraft
    	
 
    
	
SCHEDULE   1A:
    	
Replacement   Schedule Applicable in an Event of Default
    	
 
    
	
SCHEDULE   2:
    	
Transition   Aircraft and Spare Engines
    	
 
    
	
SCHEDULE   3:
    	
Compensation   for Capacity Purchase
    	
 
    
	
 
    	
 
    	
 
    
	
EXHIBIT A:
    	
Definitions
    	
 
    
	
EXHIBIT B:
    	
Form of   Amended and Restated Covered Aircraft Sublease
    	
 
    
	
EXHIBIT C:
    	
Second   Amended and Restated Master Facility and Ground Handling Agreement
    	
 
    
	
EXHIBIT D:
    	
Terms   of Codeshare Arrangements
    	
 
    
	
EXHIBIT E:
    	
Non-Revenue   Pass Travel Privileges
    	
 
    
	
EXHIBIT F:
    	
Fuel   Services
    	
 
    
	
EXHIBIT G:
    	
Use   of United Marks and Other Identification
    	
 
    
	
EXHIBIT H:
    	
Use   of Contractor Marks
    	
 
    
	
EXHIBIT I:
    	
Catering   Standards
    	
 
    
	
EXHIBIT J:
    	
Reasonable   Operating Constraints and Conditions
    	
 
    
	
EXHIBIT K:
    	
Ticket   Handling Terms
    	
 
    
	
EXHIBIT L:
    	
Fuel   Efficiency Program
    	
 
    
	
EXHIBIT M:
    	
Form of   Guaranty
    	
 
    
	
EXHIBIT N:
    	
Amended   and Restated Administrative Support and Information Services Provisioning   Agreement
    	
 
    
	
EXHIBIT O:
    	
Charter   Flight Operations
    	
 
    
	
EXHIBIT P:
    	
Form of   Storage Sublease
    	
 
    

 

iii

 

 

AMENDED AND RESTATED CAPACITY PURCHASE AGREEMENT

 

This Amended and Restated Capacity Purchase Agreement (this “Agreement”), dated as of November 7, 2014, to be effective as of July 1, 2014, is between United Airlines, Inc., a Delaware corporation (together with its successors and permitted assigns, “United”), formerly known as Continental Airlines, Inc., a Delaware corporation (“Continental”) and ExpressJet Airlines, Inc., a Utah corporation (“ExpressJet”), as successor by merger of ExpressJet Airlines, Inc., a Delaware corporation (“Delaware Express”).

 

WHEREAS, Delaware Express and Continental were parties to that certain Capacity Purchase Agreement, dated as of November 12, 2010 (as amended heretofore, the “Existing CPA”);

 

WHEREAS, Contractor and United desire to make certain changes to the terms and conditions in the Existing CPA;

 

WHEREAS, the Existing CPA is hereby amended and restated in its entirety; and

 

WHEREAS, the parties have previously entered into, or, will subsequent to the delivery of this Agreement, enter into, the Ancillary Agreements (as defined herein), including aircraft leases, in each case intending that such Ancillary Agreements be considered, and they are, an integral part of this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and obligations hereinafter contained, the parties agree as follows:

 

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
 CAPACITY PURCHASE, SCHEDULES AND FARES

 

Section 2.01                             Capacity Purchase.United agrees to purchase the capacity of each Covered Aircraft for the period beginning on the date such aircraft becomes a Covered Aircraft under this Agreement and ending on the earlier of (i) the sublease or lease expiration date, as applicable, for such aircraft on Schedule 1 and (ii) the date on which such aircraft is withdrawn pursuant to a Wind-Down Schedule or otherwise withdrawn from this Agreement, as such date may be extended, shortened or otherwise modified pursuant to the terms of this Agreement, 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, Contractor shall provide all of the capacity of the Covered Aircraft solely to United and use the Covered Aircraft solely to operate the Scheduled Flights.

 

 

(a)                                 Fares, Rules and Seat Inventory.  United shall establish and publish all fares and related tariff rules for all seats on the Covered Aircraft.  Contractor shall not publish any fares, tariffs, or related information for the Covered Aircraft.  In addition, subject to the terms and conditions of the Non-Revenue Pass Travel Privileges attached hereto as Exhibit E, United shall have complete control over all seat inventory and 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.

 

(i)                                     Subject to the terms and conditions of this Agreement, including, but not limited to, Sections 2.01(b)(ii), 2.01(b)(iii) and 8.04, United shall, in its sole discretion, establish and publish all schedules for the Covered Aircraft (such scheduled flights, together with Charter Flights, flights otherwise made at United’s request, Maintenance Flights and any flights using Spare Aircraft, referred to herein collectively 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 flights other than Scheduled Flights; provided, that such schedules shall be subject to Reasonable Operating Constraints and Conditions, it being understood for the avoidance of doubt, however, that, in anticipation of the removal of aircraft from the capacity purchase provisions of this Agreement, aircraft shall be removed from scheduled service in compliance with the provisions of Annex B to each of the Covered Aircraft Subleases (the form of which is attached hereto as Exhibit B); and provided further that Contractor shall operate all Charter Flights in accordance with the provisions set forth on Exhibit O.  United shall also be entitled, in its sole discretion and at any time prior to takeoff, to direct Contractor to delay or cancel a Scheduled Flight, including without limitation for delays and cancellations that are ATC or weather related, and Contractor shall take all necessary action to give effect to any such direction.  Not later than the fourth Wednesday of each calendar month, United shall provide Contractor with a planned flight schedule for the Covered Aircraft (other than Spare Aircraft), taking into account Reasonable Operating Constraints and Conditions, for each of the next four months (the “Proposed Schedule”).  On the fourth Friday of each calendar month, Contractor and United shall meet to review the Proposed Schedule.  At such meeting, United shall review and consider any changes to the Proposed Schedule suggested by Contractor.  Not later than five Business Days prior to the beginning of each calendar month, or, if later, the day after such meeting, United will deliver to Contractor the Final Monthly Schedule.  Following such monthly meetings, delivery of the Final Monthly Schedule and consideration by United of such changes to the Proposed Schedule as suggested by Contractor, however, United may make such adjustments to the proposed Final Monthly Schedule as it deems appropriate (subject to Reasonable Operating Constraints and Conditions).

 

(ii)                                  Subject to Section 8.04, United agrees to (i) discontinue all flight operations of Covered Aircraft (which, for the avoidance of doubt, exclude spoke flight operations from a United Hub Airport or spoke location) at *** by ***, and (ii) use commercially reasonable efforts to discontinue all flight operations of Covered Aircraft (which, for the avoidance of doubt, exclude spoke flight operations from a United Hub Airport or spoke location) (y) at *** by *** and (z) at *** by ***; provided that, if both (I) United delivers to Contractor an irrevocable notice of withdrawal with respect to ten (10) or more aircraft on or

 

2

before the date that is sixty (60) days prior to *** and (II) Contractor fails to comply in all material respects with Section 2.09 of this Agreement and Annex B to the Covered Aircraft Sublease with respect to such Covered Aircraft to be so withdrawn from the capacity purchase provisions of this Agreement, then, in addition to (and not in limitation of any of) United’s other rights under this Agreement, United shall in no circumstance be deemed to be in breach of the foregoing clause (i) until thirty (30) days after Contractor has so complied; provided further, that, solely with respect to ***, if both (I) United delivers to Contractor an irrevocable notice of withdrawal with respect to *** or more aircraft on or before the date that is sixty (60) days prior to *** and (II) Contractor fails to comply in all material respects with Section 2.09 of this Agreement and Annex B to the Covered Aircraft Sublease with respect to such Covered Aircraft to be so withdrawn from the capacity purchase provisions of this Agreement, then, in addition to (and not in limitation of any of) United’s other rights under this Agreement, United shall in no circumstance be deemed to be in breach of the foregoing clause (ii) until thirty (30) days after Contractor has so complied; provided further, that, if both (I) United is unable to comply with the preceding clauses (y) or (z) and (II) Contractor has complied in all material respects with Section 2.09 of this Agreement and Annex B to the Covered Aircraft Sublease with respect to Covered Aircraft to be withdrawn from the capacity purchase provisions of this Agreement by ***, with respect to ***, or ***, with respect to ***, as the case may be, then United and Contractor shall cooperate in good faith to increase the “per block hour” rate set forth on Schedule 3 (any such modified “per block hour rate”, a “Modified Block Hour Rate”) in respect of only the Covered Aircraft for which flight operations have not been so discontinued at *** and/or *** (excluding, for the avoidance of doubt, spoke flight operations to *** or *** from a United Hub Airport or spoke location), as the case may be (any such aircraft, “Continuing Aircraft”), by an amount which reimburses Contractor for the incremental costs that Contractor would have reasonably avoided if such flight operations had been discontinued as provided in the preceding clauses (y) and/or (z), as the case may be; provided further, that, in respect of each Continuing Aircraft, the effectiveness of any such Modified Block Hour Rate shall commence as of either (a) in the case of United’s inability to discontinue operations as contemplated in clause (y), *** or (b) in the case of United’s inability to discontinue operations as contemplated in clause (z), *** and, in each case, shall continue until each such Continuing Aircraft is no longer subject to flight operations in *** or ***, as the case may be (which, for the avoidance of doubt, excludes spoke flight operations from a United Hub Airport or spoke location); provided further, for the avoidance of doubt, that United agrees that it shall not specify dates for such withdrawal of any aircraft to the extent that such designation would cause Contractor to be required to remove from the capacity purchase provisions of this Agreement more than *** aircraft during any calendar month in calendar year ***.

 

(iii)                               Notwithstanding the foregoing, effective as of the date first set forth above, in respect of any scheduled period, if United submits any Proposed Schedule which provides for average daily scheduled utilization measured in the aggregate for the Covered Aircraft fleet (excluding Spare Aircraft) available to schedule (“Average Utilization”) greater than either (x) for the calendar months of January, February, April, May, September, October, November and December, *** hours per aircraft per day or (y) for the calendar months of March, June, July and August, *** hours per aircraft per day (such utilization levels, in the prior clauses (x) and (y), as applicable, the “Maximum Utilization Levels”), then Contractor shall have the option, upon delivering to United written notice greater than 100 calendar days prior to the commencement of such applicable scheduled period, to request for any reason a schedule

 

3

 

reduction to reduce the Average Utilization to the applicable Maximum Utilization Level or to a greater level as specified by Contractor (a “Schedule Reduction Request”).  Upon receipt of a Schedule Reduction Request, United shall amend the Proposed Schedule initially delivered by United to Contractor to reduce the Average Utilization reflected in such Proposed Schedule to the applicable Maximum Utilization Level or to a greater level as specified by Contractor and such reduction shall thereafter be reflected in the applicable Final Monthly Schedule (a “Schedule Reduction”); provided that any flights canceled due to any such Schedule Reduction shall not be deemed Controllable Cancellations and shall be deemed Uncontrollable Cancellations; provided further that, if the Schedule Reduction Request is not timely submitted in accordance with the requirements of this Section 2.01(b)(iii), then such flights included in the Schedule Reduction Request, if canceled, shall be deemed Controllable Cancellations for all purposes under this Agreement except as otherwise provided in this Agreement.

 

(c)                                  Maintenance Flights.  Notwithstanding anything to the contrary contained in this Section 2.01, Contractor shall be entitled to use the Covered Aircraft (i) for the purpose of flying maintenance flights as required to facilitate the proper maintenance of the Covered Aircraft and (ii) for a reasonable number of ferry flights to accommodate Scheduled Flights, in each case, consistent with past practice (all such flights referred to as “Maintenance Flights”).

 

(d)                                 Spare Aircraft.  Notwithstanding anything to the contrary contained in this Section 2.01 but subject to the provisions below in this Section 2.01(d), Contractor shall maintain the number of spare regional jet aircraft equal to the quotient obtained by dividing (x) the sum of the number of Covered Aircraft subject to scheduling for such month (excluding, in all events, aircraft not available due to maintenance requirements), by (y) ***, and rounding the quotient to the nearest whole number.  The spare regional jet aircraft shall be constituted from Covered Aircraft (the “Spare Aircraft”).  For the avoidance of doubt, Covered Aircraft scheduled for the sole purpose of increasing simplicity through network optimization and reduction in the number of United Hub Airports at which hub flying occurs and funding daytime maintenance shall be disregarded for the purpose of the foregoing two sentences of this Section 2.01(d).  Contractor shall be entitled to use the Spare Aircraft in Contractor’s reasonable discretion to replace another aircraft in the operation of a flight scheduled in the Final Monthly Schedule.  In addition, subject to applicable Reasonable Operating Constraints and Conditions, Contractor shall use Spare Aircraft to operate flights as directed by United (unless such Spare Aircraft was, prior to such direction by United, already scheduled as contemplated by the immediately preceding sentence), including flights originally scheduled to be operated by other United service providers.  As contemplated by the return procedures provided in each Covered Aircraft Sublease (including in Paragraph F of Annex B thereto), Contractor acknowledges that Contractor may have excess spare engines that could be used as a Short Term Replacement Engine, as such term is defined in Annex B in Exhibit B hereto (such excess spare engines, the “Sublessee Excess Spare Engines”), and to support the return of aircraft hereunder, Contractor will make such Sublessee Excess Spare Engines available as Short Term Replacement Engines.  To ensure that Contractor has Sublessee Excess Spare Engines, until ***, Contractor shall retain and devote up to *** Contractor-owned serviceable spare engines (the “*** Spares”) which shall be over and above the number of spare engines that are required under the Engine Maintenance Agreement (after consideration of the number of Covered Aircraft then operating hereunder) to support the return of aircraft hereunder.   Prior to the use of such Sublessee Excess Spare Engines, the parties will determine a mutually acceptable rate to be paid by United to Contractor

 

4

 

for the use of such engine; provided that with respect to the *** Spares such rate shall be the per-hour and per-cycle maintenance costs for such engines under the Engine Maintenance Agreement or, if any such engine is not covered by the Engine Maintenance Agreement, Contractor’s reasonable per-hour and per-cycle maintenance costs for such engine.

 

(e)                                  Maintenance Bases.  With respect to Rest Over-Night (RON) maintenance, United shall meet and confer with Contractor to discuss scheduling the Covered Aircraft to operate in a reduced number of maintenance bases (compared to the number of maintenance bases in existence as September 1, 2014).  With respect to daytime maintenance, each of Contractor and United shall use commercially reasonable efforts to develop a daytime maintenance program by ***.

 

Section 2.02                             Flight-Related Revenues.  Contractor 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 (a) revenues relating to the transportation of cargo or mail by Covered Aircraft, (b) revenues associated with food, beverage, duty-free services and other onboard and related products provided in connection with the operation of Covered Aircraft, (c) guaranteed or incentive payments from airport, state, local or municipal authorities in connection with scheduling flights of Covered Aircraft to such airport or locality (including without limitation incentive payments and grants paid or payable to United or Contractor in connection with or determined by any job growth deemed to result from any Scheduled Flights) and (d) revenues relating to Charter Flights (collectively, “Flight Related Revenue”) are the sole property of and shall be retained by United or, if received by Contractor or any of its Affiliates, shall be promptly remitted to United.  The parties agree that Flight Related Revenue shall not include manufacturer rebates or other incentives attributable to the acquisition by Contractor of a Covered Aircraft.  Contractor agrees that it shall reasonably cooperate with United so as to permit United to receive all Flight Related Revenue (and United agrees to promptly reimburse Contractor for the reasonable out-of-pocket expenses incurred by Contractor in connection therewith).  Contractor’s and its Affiliates’ obligations to remit funds under this Section 2.02 shall only apply to the extent Contractor or its Affiliates actually receives Flight Related Revenue.

 

Section 2.03                             Pass Travel.  All pass travel and other non-revenue travel on any Scheduled Flight or other flight operated by United shall be administered in accordance with the Non-Revenue Pass Travel Privileges policy attached hereto as Exhibit E.

 

Section 2.04                             Requests for Proposal.  With respect to any “request for proposal” or “RFP” issued by United to multiple operators of regional jet aircraft for the provision of regional airlines services prior to the end of the Term, United agrees to include Contractor in the parties to which such RFP is delivered.

 

Section 2.05                             Early Replacement of Certain Covered Aircraft.  United shall be entitled to withdraw and replace up to *** Covered Aircraft from this Agreement, in accordance with and subject to the limitations, terms and conditions contained in this Section 2.05.

 

5

 

(a)                                 For each Covered Aircraft withdrawn from this Agreement pursuant to this Section 2.05, Contractor and/or one of its Affiliates (selected by Contractor) will use its commercially reasonable efforts to procure and provide an aircraft of the type selected by United (a “Replacement Aircraft”), which must be of a type that (i) on the date of the notice of replacement provided pursuant to Section 2.05(b) below, is operated or contracted to be operated by Contractor or its Affiliates and (ii) after taking into account the procurement of such Replacement Aircraft pursuant to this Section 2.05(a), Contractor and its Affiliates shall be operating at least *** aircraft of such aircraft type as of the date of such replacement, and enter into a separate capacity purchase agreement or amend an existing capacity purchase agreement with United on or prior to the Replacement Date (as defined below) pursuant to which such Replacement Aircraft shall be utilized on a capacity purchase basis.  The separate or amended agreement shall contain block hour rates and other economic terms applicable to such Replacement Aircraft that are consistent with those contained in the most recent Capacity Purchase Arrangement entered into by Contractor or any of its Affiliates with respect to such aircraft type (excluding any Affiliate CPA and the United Agreement); provided, that such rates and other economic terms shall be adjusted to reflect the lower of then-applicable market aircraft acquisition costs or Contractor’s actual costs for the acquisition of such Replacement Aircraft (“Similar Economic Term Transaction”), the rates and economic terms of which shall be set forth in a certificate delivered to United signed by an authorized officer of Contractor; provided, in all events, that the term of such separate or amended agreement (x) with respect to each Replacement Aircraft that is a new aircraft shall be for a period no less than *** years, and (y) with respect to each other Replacement Aircraft shall be for a period not less than the remaining term under this Agreement of the Covered Aircraft being replaced by such Replacement Aircraft; and provided further, that unless otherwise agreed by the parties, such separate agreement shall be in a form substantially similar to the terms and conditions set forth herein and in the Ancillary Agreements (other than as provided in this Section 2.05); provided, however, unless otherwise agreed by the parties, such separate agreement shall not contain provisions substantially similar to Sections 6.04, 6.05 or 10.01 of this Agreement and, in any provision substantially similar to Section 6.01(a), all references to $*** million shall be $*** million with respect to any aircraft with more than 50 passenger seats.  Contractor acknowledges that any failure by Contractor to timely provide the certification required pursuant to Section 2.05(b), procure and provide a Replacement Aircraft or enter into a separate capacity purchase agreement or amend an existing capacity purchase agreement as contemplated above with United on or prior to the Replacement Date shall not prevent United from exercising its right to withdraw Covered Aircraft from this Agreement pursuant to this Section 2.05.

 

(b)                                 To effect a replacement under Section 2.05(a), at any time and from time to time, United shall give Contractor not less than *** months’ written notice of replacement of any Covered Aircraft (or, in the case of a Replacement Aircraft of a type for which Contractor or such Affiliate is already certificated, such lesser period as available aircraft or aircraft delivery positions may allow, as determined by United in its reasonable discretion); provided, absent the consent of Contractor in its sole discretion, that United shall not be entitled to replace more than *** Covered Aircraft in any given month.  Such notice shall be irrevocable (except as provided below) and shall specify a replacement date (the “Replacement Date”) for each such Covered Aircraft to be replaced and the type and number of Covered Aircraft to be replaced.  Within 90 days of its receipt of such notice from United, Contractor may, at its option, provide United with a certificate signed by an authorized officer of Contractor stating that Contractor believes in good

 

6

 

faith that it will be able to procure and provide a Replacement Aircraft and enter into a separate capacity purchase agreement or amend an existing capacity purchase agreement as contemplated above with United on or prior to the Replacement Date.  Such certificate shall further identify whether or not such Replacement Aircraft shall be a new aircraft and set forth the rates and other economic terms based on the Similar Economic Term Transaction.  If Contractor so certifies to United, then United and Contractor shall each use their respective reasonable commercial efforts to enter into a separate capacity purchase agreement or amend an existing capacity purchase agreement as contemplated above within the following 30 days.  If Contractor does not timely provide such certification, or does not procure and provide a Replacement Aircraft on or prior to the Replacement Date, or if United and Contractor do not enter into a separate capacity purchase agreement or amend an existing capacity purchase agreement as contemplated above within such 30-day period notwithstanding United’s use of its reasonable commercial efforts, then United shall have the option to cancel the withdrawal of the Covered Aircraft to be replaced or to withdraw such aircraft without entering into arrangements for a Replacement Aircraft.  United shall have complete discretion to select the particular Covered Aircraft and the particular Engines to be withdrawn on any Replacement Date pursuant to this Section 2.05.  Promptly after receipt of such notice (but in any event within 20 days thereafter), Contractor shall deliver to United a reasonably detailed current summary and forecast of the maintenance and repair status and condition of each Covered Aircraft and Engine and a list detailing the location of each Engine (by aircraft or, if appropriate, maintenance facility).  Within 75 days after receipt of such summary, United shall select the individual aircraft and Engines to be replaced, and shall provide written notice to Contractor of its selection.  United shall bear the cost of any engine swaps necessary to accommodate its Engine selections, and shall agree to such Engine swaps under the applicable Covered Aircraft Subleases.

 

(c)                                  Upon the Replacement Date, the applicable Covered Aircraft to be replaced shall cease being a Covered Aircraft, and Contractor shall immediately deliver possession of such aircraft to United or its designee and the term of the Covered Aircraft Sublease for such aircraft and the Engines shall, upon such delivery, terminate in accordance with the terms of such Covered Aircraft Sublease, except as otherwise provided in Section 2.09(c).  In addition, the provisions of Section 2.09 shall apply to such Covered Aircraft.

 

(d)                                 If any Affiliate CPAs or other Capacity Purchase Arrangements between United and Contractor or its Affiliates are in effect at the time when any rights under this Section 2.05 are exercised by any party, and such agreements contain correlative provisions to this Section 2.05, then all numerical limits relating to the number of aircraft (whether aggregate or monthly) shall apply to this Agreement and to all such other agreements in the aggregate. Notwithstanding anything to the contrary contained in this Section 2.05, United’s right to withdraw aircraft under this Section 2.05 and its corresponding provisions in any Affiliate CPA or other Capacity Purchase Arrangement between United and Contractor or its Affiliate shall apply only to aircraft leased or subleased by United to Contractor or such Affiliate.

 

Section 2.06                             Intentionally Omitted.

 

Section 2.07                             Other Withdrawal of Aircraft.

 

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(a)                                 At any time from time to time, United shall be entitled to withdraw any Covered Aircraft from the capacity purchase provisions of this Agreement by providing 120 calendar days written notice to Contractor of the withdrawal of such Covered Aircraft from this Agreement, which notice shall be irrevocable and shall specify the total number of Covered Aircraft to be withdrawn pursuant to such notice and a desired withdrawal schedule, specifying, for each particular aircraft, the date of withdrawal.  Notwithstanding United’s right to withdraw aircraft from the capacity purchase provisions of this Agreement pursuant to the foregoing sentence, United agrees that it shall not specify dates for such withdrawal of any such aircraft to the extent that such designation would cause Contractor to be required to remove from the capacity purchase provisions of this Agreement more than (i) *** aircraft during any calendar month in calendar year ***, or (ii) *** aircraft during any calendar month in calendar years ***, in each case taking into account scheduled sublease expiration dates as provided in Schedule 1 hereto, this Section 2.07(a), Section 2.07(g) and the Replacement Wind-Down Schedule.   For the avoidance of doubt, it is acknowledged that nothing herein shall limit United’s right to withdraw aircraft from the capacity purchase provisions of this Agreement arising under Section 2.05, Section 2.07(b), Section 2.07(g), Section 2.08, Section 2.09(a) or Article VIII.

 

(b)                                 In the event of a Labor Strike, or during any 30-day cooling-off period under the Railway Labor Act applicable to Contractor and one of its collective bargaining units or within 30 days after the end of any such period, or at such other times as United and Contractor shall agree from time to time, United shall be entitled to withdraw Covered Aircraft from the capacity purchase provisions of this Agreement in accordance with and subject to the limitations, terms and conditions contained in this Section 2.07(b) and Sections 2.07(c) through (e), by providing written notice of the withdrawal of Covered Aircraft from this Agreement, which notice shall be revocable and shall specify the total number of Covered Aircraft to be withdrawn pursuant to such notice and a desired withdrawal schedule, specifying, for each particular aircraft, the date of withdrawal.  If such notice is delivered during the 30-day cooling off period referenced above or within 30 days after the end of such cooling off period (provided that a Labor Strike has not been initiated during such period), then the withdrawal schedule in such notice shall be subject to Reasonable Operating Constraints and Conditions.  For each Covered Aircraft withdrawn pursuant to this Section 2.07(b), such aircraft shall be operated by an Affiliate of Contractor and become subject to an Affiliate CPA if (i) United and Contractor mutually agree that such Affiliate of Contractor is capable of performing its obligations under such Affiliate CPA immediately upon the execution of such Affiliate CPA, (ii) at the time of such withdrawal, neither Contractor nor, if any Affiliate CPA is then in effect, each Affiliate of Contractor that is a party to an Affiliate CPA shall be, and Contractor and, if applicable, each such Affiliate shall certify to United that it is not, in material default under, or in material breach of, this Agreement or any Ancillary Agreement or, if applicable, such Affiliate CPA, (iii) such withdrawn aircraft shall become subject to the Affiliate CPA on the day following the date of its withdrawal from this Agreement, and (iv) such operation by an Affiliate is not prohibited by any collective bargaining agreements or similar arrangements then in effect between Contractor and any labor union.  If any of the conditions set forth in clauses (i) through (iv) above is not satisfied, United shall be entitled to withdraw Covered Aircraft pursuant to this Section 2.07(b) without entering into an Affiliate CPA.  Subject to United identifying the Covered Aircraft and particular Engines to be withdrawn pursuant to Section 2.07(c) below, the withdrawal schedule may begin immediately upon its delivery, and shall not provide for the withdrawal of more than *** Covered Aircraft per month (subject, in the case of any notice delivered during the 30-day

 

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cooling off period or the subsequent 30-day period referenced above (provided that a Labor Strike has not been initiated during such period), to Reasonable Operating Constraints and Conditions).

 

(c)                                  Taking into account the aircraft type specified in the notice of withdrawal, United shall have complete discretion to select the particular Covered Aircraft and the particular Engines to be withdrawn during any particular month pursuant to this Section 2.07; provided, that if the Covered Aircraft are to be withdrawn pursuant to Section 2.07(a) or (b), then (i) United shall use reasonable efforts to avoid Engine swaps prior to such withdrawal, (ii) Contractor shall carry out such Engine swaps as are requested prior to such withdrawal and facilitate such Engine swaps as are requested following such withdrawal, and (iii) United shall bear the direct costs of Engine swaps requested following such withdrawal.  Not more than 2 days after its receipt or delivery of any withdrawal notice pursuant to this Section 2.07, Contractor shall deliver to United a reasonably detailed current summary and forecast of the maintenance and repair status and condition of each Covered Aircraft and Engine and a list detailing the location of each Engine (by aircraft or, if appropriate, maintenance facility).  Within 10 days after receipt of such summary, United shall select the individual aircraft and Engines to be replaced, and shall provide written notice to Contractor of its selection.  United shall bear the cost of any engine swaps necessary to accommodate its engine selections.  Notwithstanding the provisions of this Section 2.07, United’s rights to withdraw any or all aircraft pursuant to this Section 2.07 shall be superseded by any rights of either United or Contractor arising under Article VIII (including without limitation any withdrawal rights, and any Wind-Down Schedule provided pursuant to Article VIII shall be controlling).  In addition, the provisions of Section 2.09 shall apply to the withdrawal of any Covered Aircraft pursuant to this Section 2.07; provided, however, that Contractor and United agree (because such lease shall be reinstated if such aircraft are deemed Covered Aircraft pursuant to Section 2.07(e)) not to file with the FAA or the international registry a termination of the applicable Covered Aircraft Sublease in the case of a withdrawal of a Covered Aircraft under this Section 2.07 until the earlier of (1) the 30th calendar day after such withdrawal or (2) the date such aircraft becomes subject to a Capacity Purchase Arrangement with any third party.

 

(d)                                 In connection with the foregoing, Contractor agrees that each of its Affiliates that operate ERJ Aircraft shall adopt Contractor’s maintenance program as soon as reasonably practicable.

 

(e)                                  Upon the resolution of any Labor Strike or expiration of any 30-day cooling-off period under the Railway Labor Act, 50% (rounded downward to the nearest whole number) of any Covered Aircraft (i) that have been withdrawn by United pursuant to Section 2.07(b) and (ii) that have not otherwise become subject to a Capacity Purchase Arrangement with Contractor or any third party as of the date of such resolution or expiration (each, an “Available Labor Strike Withdrawn Aircraft”), consisting of those Available Labor Strike Withdrawn Aircraft with the longest remaining term under the applicable Covered Aircraft Sublease, shall immediately become a Covered Aircraft under this Agreement (and not subject to any Termination Date or Wind-Down Schedule provided as a result of United’s exercise of rights described in Section 2.07(b)) and the Covered Aircraft Sublease shall be reinstated without further act.  United, at its option, may elect to ground all or a portion of the remaining Available Labor Strike Withdrawn Aircraft by providing Contractor written notice of such election within

 

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30 days following the resolution of the applicable Labor Strike or expiration of the applicable 30-day cooling-off period.  Such notice shall identify the individual Available Labor Strike Withdrawn Aircraft to remain withdrawn.  Any remaining Available Labor Strike Withdrawn Aircraft that are not so designated within such 30 days shall immediately become a Covered Aircraft under this Agreement (and any Termination Date or Wind-Down Schedule provided for in a withdrawal notice delivered pursuant to Section 2.07(b) shall be null and void) and the Covered Aircraft Sublease shall be reinstated without further act.

 

(f)                                   Intentionally Omitted.

 

(g)                                  The parties agree to the early withdrawal from this Agreement of Covered Aircraft Numbers ***, as identified in Schedule 1 hereto, as provided in footnote 2 to Schedule 1; provided that United retains the right to swap any or all such aircraft with any other Covered Aircraft of the ERJ-145XR aircraft type and its Engines on a one-for-one basis and withdraw such ERJ-145XR aircraft and its Engines instead; and provided further that:

 

(i)                                     United shall provide Contractor the specific withdrawal date for such Covered Aircraft by providing no less than (x) with respect to the number of aircraft to be so withdrawn, one hundred twenty (120) days irrevocable written notice prior to such withdrawal date and (y) with respect to the tail and engine numbers of the aircraft and Engines to be withdrawn, ninety (90) days written notice prior to such withdrawal date;

 

(ii)                                  Contractor shall return to United any aircraft withdrawn pursuant to this Section 2.07(g) in accordance with the return conditions set forth in the applicable Covered Aircraft Sublease for such aircraft and the requirements of this Agreement, including, but not limited to, Section 2.09;

 

(iii)                               United shall not specify dates for withdrawal of any such aircraft to the extent that such designation would cause Contractor to be required to remove from the capacity purchase provisions of this Agreement more than, collectively, *** Covered Aircraft in any calendar month in calendar year ***, taking into account scheduled sublease expiration dates as provided in Schedule 1 hereto, Section 2.07(a), this Section 2.07(g) and the Replacement Wind-Down Schedule; provided that, for the avoidance of doubt, it is acknowledged that nothing herein shall limit United’s right to withdraw aircraft from the capacity purchase provisions of this Agreement arising under Section 2.05, Section 2.07(a), Section 2.07(b), Section 2.08, Section 2.09(a) or Article VIII; and

 

(iv)                              in connection with any such swap, the terms of the applicable Covered Aircraft Subleases will be amended, if necessary, to accommodate the foregoing swap.

 

Section 2.08                             Commodity Events.

 

(a)                                 If a Commodity Withdrawal Event shall occur, then at any time during the sixty days following any such event (the “Commodity Withdrawal Period”), United shall be entitled to withdraw Covered Aircraft from the capacity purchase provisions of this Agreement

 

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in accordance with and subject to the limitations, terms and conditions contained in this Section 2.08.

 

(b)                                 At any time and from time to time during a Commodity Withdrawal Period, United may give Contractor written notice of the occurrence of such Commodity Withdrawal Event and of United’s election to exercise its right under Section 2.08(a) to withdraw Covered Aircraft from this Agreement, which notice shall specify the total number of Covered Aircraft to be withdrawn pursuant to such notice and a withdrawal schedule, specifying the aircraft type and the date of withdrawal; provided, that the first withdrawal shall not be scheduled for any date prior to the 30th day after the date of such notice; and provided further, that the withdrawal schedules for all Commodity Withdrawal Events shall not provide for the withdrawal of more than 25 Covered Aircraft per month in the aggregate.  Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement on the date of return set forth in any such notice that is in compliance with the provisions of this Section 2.08.

 

(c)                                  Taking into account the aircraft type specified in the notice of withdrawal, United shall have complete discretion to select the particular Covered Aircraft and particular Engines to be withdrawn during any particular month pursuant to this Section 2.08.  Promptly after its receipt or delivery of any withdrawal notice pursuant to this Section 2.08 (but in any event within three Business Days thereafter), Contractor shall deliver to United a reasonably detailed current summary and forecast of the maintenance and repair status and condition of each Covered Aircraft and Engine.  Within three Business Days of receipt of such summary, United shall select the individual aircraft and Engines to be replaced, and shall provide written notice to Contractor of its selection.  United shall bear the cost of any engine swaps necessary to accommodate its Engine selections, and shall agree to such Engine swaps under the applicable Covered Aircraft Subleases.

 

(d)                                 In connection with any withdrawal pursuant to this Section 2.08, United shall be responsible for the direct severance and crew training expenses (if any) incurred by Contractor (using commercially reasonable efforts to mitigate such costs) and reasonably documented in connection with such withdrawal of such aircraft.  In addition, the provisions of Section 2.09 shall apply to the withdrawal of any Covered Aircraft pursuant to this Section 2.08.

 

(e)                                  Once a Covered Aircraft has been withdrawn pursuant to this Section 2.08, United may not operate such aircraft, or cause such aircraft to be operated, within United’s regional airline service without returning such aircraft to the capacity purchase provisions of this Agreement pursuant to Section 2.08(g).

 

(f)                                   If a Commodity Replacement Event shall occur, then at any time during the sixty days following any such event (the “Commodity Replacement Period”), Contractor shall be entitled to require United to return to the capacity purchase provisions of this Agreement (and to execute a Covered Aircraft Sublease with respect to) each Covered Aircraft withdrawn from the capacity purchase provisions of this Agreement pursuant to any First Commodity Withdrawal Event (if the Commodity Replacement Event is a First Commodity Replacement Event) or any Second Commodity Withdrawal Event (for any Commodity Replacement Event) in accordance with and subject to the limitations, terms and conditions contained in this Section 2.08; provided, that such Covered Aircraft to be returned is not, at the time of such

 

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return, a Disposed Aircraft (in which case Contractor shall not be entitled to require the return of such aircraft, and references in Section 2.08(g) to Covered Aircraft shall not include Disposed Aircraft).

 

(g)                                  At any time and from time to time during a Commodity Replacement Period, Contractor may give United written notice of the occurrence of such Commodity Replacement Event and of Contractor’s election to exercise its right under Section 2.08(f) to return Covered Aircraft to this Agreement.  At any time and from time to time, United may give Contractor written notice of United’s election to exercise its right to return to this Agreement Covered Aircraft withdrawn pursuant to Section 2.08(a).  Any notice delivered pursuant to this Section 2.08(g) shall specify the total number of Covered Aircraft to be returned pursuant to such notice and a return schedule specifying the date of return; provided, that the first return shall not be scheduled for any date prior to the 60th day after the date of such notice; and provided further, that the return schedules pursuant to all notices delivered pursuant to this Section 2.08(g) shall not provide for the return of more than 10 Covered Aircraft per month, or more than 2 Covered Aircraft per day, in each case in the aggregate (with preference given to schedules set forth in earlier notices).  Covered Aircraft shall be returned to the capacity purchase provisions of this Agreement, and each of United and Contractor shall enter into a Covered Aircraft Sublease with respect to such aircraft, on the date of return set forth in any such notice that is in compliance with the provisions of this Section 2.08.  Notwithstanding anything in this Section 2.08 to the contrary, (x) if any Covered Aircraft is scheduled to be withdrawn pursuant to a Commodity Withdrawal Event on any date subsequent to the 60th day after Contractor delivers written notice to United of a Commodity Replacement Event occurring subsequent to such Commodity Withdrawal Event, then such withdrawal shall automatically deemed to be canceled, and no return in respect of such aircraft shall be necessary, and (y) if any Covered Aircraft is scheduled to be returned pursuant to a Commodity Replacement Event on any date subsequent to the 30th day after United delivers written notice to Contractor of a Commodity Withdrawal Event occurring subsequent to such Commodity Replacement Event, then such return shall automatically deemed to be canceled, and no withdrawal in respect of such aircraft shall be necessary.  In connection with any return pursuant to this Section 2.08(g), United shall be responsible for the following direct expenses (if any) incurred by Contractor or its Affiliate (using commercially reasonable efforts to mitigate such costs) and reasonably documented in connection with such return: initial crew training costs and aircraft repositioning costs.

 

(h)                                 If at any time the aggregate number of Covered Aircraft withdrawn pursuant to Section 2.08(b) exceeds (x) the aggregate number of Covered Aircraft returned pursuant to Section 2.08(g) plus (y) the aggregate number of Additional Aircraft previously included in United’s regional airline service and operated by Contractor or its Affiliates pursuant to this Section 2.08(h) (such excess number of aircraft, as adjusted pursuant to the last sentence of this Section 2.08(h), constituting a “Commodity Aircraft Deficit”), then, at least 18 months (or such lesser period as available aircraft or aircraft delivery positions may allow, as determined by United in its reasonable discretion) prior to the entry of any Additional Aircraft into United’s regional airline service on or before the earlier of the eleventh anniversary of the Original Execution Date and the occurrence of a Termination Date pursuant to Section 8.02, United agrees to give Contractor written notice of its intention to use Additional Aircraft (up to the number of aircraft constituting a Commodity Aircraft Deficit), and to offer Contractor and its Affiliates the opportunity to bid on such Additional Aircraft.  The obligation to award Additional

 

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Aircraft to Contractor (or, at the election of Contractor, its Affiliates) arising pursuant to this Section 2.08 shall apply only to the extent of any Commodity Aircraft Deficit.  The Commodity Aircraft Deficit shall be reduced by one aircraft for each Additional Aircraft that does not become subject to a separate capacity purchase agreement (and accompanying ancillary agreements) or any amendments to an existing capacity purchase agreement (and accompanying ancillary agreements) between United and Contractor or its Affiliate as a result of Contractor’s or its Affiliate’s failure to agree to terms and conditions that are as beneficial to United as the terms and conditions contained in a bona fide bid of any third party to which United in good faith would intend to award the Additional Aircraft (and in fact does award such aircraft pursuant to such bona fide bid) (or, if no bona fide bid has been received, then those terms and conditions contained in the most recent Similar Economic Term Transaction as set forth in a certificate delivered to United signed by an authorized officer of Contractor), after providing Contractor with a certificate signed by an authorized officer of United setting forth the material terms of such bid (specifically including all terms material and beneficial to Contractor) and providing Contractor not less than 20 days to review and match such bid and agree to such terms and conditions as contemplated under this Section 2.08(h) (it being understood that any failure of Contractor or its Affiliates to provide or enter into an agreement with respect to a Replacement Aircraft pursuant to Section 2.05 shall not constitute a failure for purposes of this Section 2.08(h)).

 

(i)                                     The aggregate number of Covered Aircraft withdrawn pursuant to Section 2.08(b) in respect of all First Commodity Withdrawal Events, net of the aggregate number of Covered Aircraft returned pursuant to this Section 2.08(g), shall not be more than 50 in the aggregate.  The aggregate number of Covered Aircraft withdrawn pursuant to Section 2.08(b) in respect of all Commodity Withdrawal Events, net of the aggregate number of Covered Aircraft returned pursuant to this Section 2.08(g), shall not be more than 100 in the aggregate.  If any Affiliate CPAs or other Capacity Purchase Arrangement between United and Contractor or its Affiliates are in effect pursuant to this Article II at the time when any rights under this Section 2.08 are exercised by any party, and such agreements contain correlative provisions to this Section 2.08, then all numerical limits relating to the number of aircraft (whether aggregate or monthly) shall apply to this Agreement and to all such other agreements in the aggregate.  Notwithstanding anything to the contrary contained in this Section 2.08, United’s right to withdraw aircraft under this Section 2.08 and its corresponding provisions in any Affiliate CPA or other Capacity Purchase Arrangement between United and Contractor or its Affiliate in effect pursuant to this Article II shall only apply to aircraft leased or subleased by United to Contractor or such Affiliate.

 

Section 2.09                             Return Conditions; Storage; Return Protocol.

 

(a)                                 Upon the date for withdrawal from the capacity purchase provisions of this Agreement of a Covered Aircraft subject to a Covered Aircraft Sublease pursuant to Sections 2.05, 2.07, 2.08, 2.12, 8.03(a), 8.03(b), 8.03(c) or 8.03(d), such aircraft shall cease being a Covered Aircraft, Contractor shall immediately deliver possession of such aircraft to United or its designee, or, in the case of Section 2.07, to the applicable Affiliate of Contractor.  Upon such delivery of possession, if all conditions set forth in the applicable Covered Aircraft Sublease and annexes thereto, including any return conditions, have been satisfied in accordance with its terms, then the Covered Aircraft Sublease for such aircraft shall terminate as of such date

 

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in accordance with the terms of such Covered Aircraft Sublease (regardless of the underlying term of such Covered Aircraft Sublease); provided that so long as the applicable Covered Aircraft is not being withdrawn from this Agreement pursuant to Section 8.02(c), the Covered Aircraft Sublease may remain in effect as provided in Section 2.09(c) or, to the extent provided by Section 2.09(b), the Covered Aircraft Sublease may be replaced with a Storage Sublease; provided further, that, if the withdrawal is pursuant to Section 8.03(d), then the Covered Aircraft Sublease for Covered Aircraft with a sublease expiration date of December 31, 2017, or any later date if the Term of this Agreement with respect to any such Covered Aircraft has been extended pursuant to Section 2.13 hereof, in each case as provided in Schedule 1, shall be replaced with a Storage Sublease as provided by Section 2.09(b) below (or the Covered Aircraft Sublease may otherwise remain in effect as provided in Section 2.09(c)), it being understood for the avoidance of doubt that the foregoing shall not in any way limit either United’s ability (as Sublessor) to deliver a Deferment Notice or Contractor’s duties (as Sublessee) to comply with applicable Deferred Obligations, in each case as contemplated in Annex B to Exhibit B hereto.  Without limiting the rights or obligations of the parties hereto under this Agreement, United shall be entitled to to remove any aircraft from the capacity purchase provisions of this Agreement to facilitate the Transition of such aircraft to a Transition Operator by providing Contractor at least 120 days’ prior notice.  Upon receiving such notice, Contractor shall, at Contractor’s sole cost and expense, (x) maintain the ability to comply with the return conditions set forth in Section 2.09 hereof and Annex B to Exhibit B hereto, and (y) Contractor shall so comply, in each case, with respect to the removal from the capacity purchase provisions of this Agreement of at least *** aircraft during any calendar month with respect to any calendar month in calendar years *** and ***.  In the case of an applicable transfer pursuant to Section 2.07, the obligations of Contractor shall be assumed by the applicable Affiliate of Contractor (and such Covered Aircraft Sublease shall thereafter constitute an ancillary agreement for purposes of the applicable Affiliate CPA). Other than in the case of a transfer described in Section 2.07(b), upon satisfaction of the foregoing return conditions and those specified in the applicable Covered Aircraft Sublease (or, in the event of a termination pursuant to Section 8.02(b)(x), promptly after the end of any grounding that would prevent a ferrying of the aircraft), Contractor shall ferry the applicable Covered Aircraft at United’s expense to a location within the continental United States selected by United.  Promptly after the delivery of any termination notice under this Agreement by any party hereto to another party, but in no event more than five days after such delivery (and immediately in connection with a termination pursuant to Section 8.02(a)) or 180 days prior to the end of the Term, Contractor shall deliver to United a reasonably detailed current summary and forecast of the maintenance and repair status and condition of each aircraft and each Engine, and a list detailing the location of each such engine (by aircraft or, if appropriate, maintenance facility).  In addition, Contractor shall update such summary from time to time promptly upon United’s request.

 

(b)                                 So long as this Agreement has not been terminated pursuant to Section 8.02(c), with respect to (i) any aircraft being returned to United by Contractor, (ii) any Parked Aircraft or (iii) any Other Subleased Aircraft, such aircraft shall remain, or be placed, as the case may be, on Contractor’s operator’s certificate until the expiration of the head lease covering the aircraft and, at United’s request and cost, Contractor shall (A) enter into a Storage Sublease with respect to such aircraft for such duration as may be necessary to permit such aircraft to remain on Contractor’s operator’s certificate until the expiration of the head lease covering the aircraft, (B) perform such maintenance on such aircraft, consistent with

 

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Contractor’s maintenance program, as and when requested by United, including maintenance for destorage and servicing such aircraft to prepare it for returning to passenger service, and (C) at the direction of United, use commercially reasonable efforts to make arrangements for the storage of any aircraft upon its return to United by Contractor, together with the Engines relating thereto, at a location selected by United, and for its continued maintenance in accordance with Contractor’s maintenance program (including, without limitation, the Flight Hour Agreements and all other maintenance cost per hour agreements and arrangements).  Subject to Section 4.18(c) and the terms of the Storage Sublease, no rent shall be payable under any Storage Sublease.  Contractor shall reasonably assist United with the return of the aircraft to head lessor on or around the scheduled expiration date of the head lease, and, provided that Contractor satisfies all conditions set forth in the applicable Covered Aircraft Sublease and/or Storage Sublease, including any return conditions, the cost of such assistance shall be borne by United.  At United’s option, Contractor will provide United (or its designee) with all manuals and other detailed information relating to Contractor’s maintenance program, for use by United (or such designee) until United (or such designee) has successfully transitioned maintenance on all aircraft returned to United pursuant to this Section 2.09, or any Parked Aircraft or Other Subleased Aircraft, to the maintenance program of United (or such designee), and Contractor shall provide reasonable assistance to United (or such designee) during such transition period in connection with Contractor’s maintenance program and the transition to such other maintenance program.

 

(c)                                  In lieu of terminating any Covered Aircraft Sublease and replacing such Covered Aircraft Sublease with a Storage Sublease pursuant to Section 2.09(a), at the request of United, such Covered Aircraft Sublease shall remain in effect for such duration as may be necessary to permit the aircraft covered thereby to remain on Contractor’s operator’s certificate until the expiration of the head lease covering the aircraft; provided that Contractor shall have no further rights or obligations under such Covered Aircraft Sublease other than (i) placing the aircraft in return condition as if such aircraft were being returned to United under the Covered Aircraft Sublease as of the applicable date of withdrawal and assisting United with the return of such aircraft to the head lessor as provided in the penultimate sentence of Section 2.09(b), (ii) complying with Section 18.12 of such Covered Aircraft Sublease and (iii) those that survive the termination of such Covered Aircraft Sublease pursuant to its terms.  Notwithstanding anything to the contrary in this Agreement, a Covered Aircraft Sublease that remains in effect at the election of United pursuant to this Section 2.09(c) shall be deemed (A) to have been terminated in accordance with its terms solely for the purposes of Section 4.18(d) and (B) to have become a Storage Sublease for the purposes of this Agreement.

 

(d)                                 Notwithstanding the foregoing, in no event shall Contractor’s obligation under this Section 2.09 (i) require Contractor to use Contractor’s facilities (or the facilities of any Affiliate of Contractor) for any storage pursuant to this Section 2.09 or (ii) require Contractor to enter into any lease (or other similar agreement) of any facility for such storage.

 

(e)                                  Return Protocol.  In order to facilitate the timely removal of aircraft from the capacity purchase provisions of this Agreement and, if applicable, the transition by United of any such aircraft to another operator providing regional airline services to United (any such transition, a “Transition” and any such operator, a “Transition Operator”), United and Contractor agree to the following provisions:

 

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(i)                                     If, in connection with any removal of a Covered Aircraft pursuant to this Article II, United shall notify Contractor in writing of United’s desire to conduct a Transition, then upon receipt of any such notice, Contractor hereby agrees to use commercially reasonable efforts to cooperate with United and any Transition Operator to facilitate such Transition, including but not limited to:

 

(A)                               Upon United’s request, making available for purchase by United or Transition Operator of any surplus spare parts for such Covered Aircraft and offering to United or Transition Operator a reasonable purchase price for such surplus spare parts (which in no event shall exceed the fair market value of such surplus spare parts);

 

(B)                               Providing reasonable accommodations and access to the Transition Operator with respect to such aircraft, including but not limited to allowing the Transition Operator to inspect such aircraft and the records of such aircraft;

 

(C)                               If Contractor’s assistance is requested, assisting United and the Transition Operator in any necessary licensing of maintenance programs, manuals and other documents; provided, in no event shall Contractor be obligated to incur any third-party costs associated with such assistance; and

 

(D)                               If Contractor’s assistance is requested, assisting United and the Transition Operator in connection with any necessary assignment of third-party maintenance agreements applicable to the Covered Aircraft; provided, in no event shall Contractor be obligated to incur any third-party costs associated with such assistance.

 

Section 2.10                             Separate Withdrawal Rights.  Each withdrawal right contained in this Article II, as well as those contained in Section 4.18 and Article VIII, shall constitute a separate and distinct right, and shall not limit or supersede any other right (including any other withdrawal right) contained in this Agreement.

 

Section 2.11                             Intentionally Omitted.

 

Section 2.12                             Additional Replacement Rights of United.   Covered Aircraft Numbers ***, as identified on Schedule 1 hereto, together with any Engines on such aircraft (the “Replaceable Aircraft”) shall be withdrawn pursuant to one or more irrevocable Wind-Down Schedule(s) provided by United to Contractor 60 days prior to the commencement of the removal of the Replaceable Aircraft identified on such schedule (the “Replacement Wind-Down Schedule”); provided that such Replacement Wind-Down Schedule(s) shall not provide for an average per-aircraft term of Replaceable Aircraft (calculated only in respect of Replaceable Aircraft) which exceeds ***; provided, further, that such Replacement Wind-Down Schedule shall not specify dates for withdrawal of any such aircraft to the extent that such designation would cause Contractor to be required to remove from the capacity purchase provisions of this Agreement more than, collectively, *** Covered Aircraft in any calendar month in calendar year ***, taking into account scheduled sublease expiration dates as provided in Schedule 1 hereto,

 

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Section 2.07(a),  Section 2.07(g) and the Replacement Wind-Down Schedule; and provided further, that United retains the right to swap any or all such aircraft with any other Covered Aircraft of the ERJ-145XR aircraft type and its Engines on a one-for-one basis and withdraw such ERJ-145XR aircraft and its Engines instead.  In connection with the delivery of the Replacement Wind-Down Schedule, United shall provide Contractor with the identification of any swapped aircraft.  The parties acknowledge and agree that this Section 2.12 is not intended to constitute, and shall not constitute, a limitation on the rights of United set forth in Section 2.05.  In connection with any such swap, the term of the applicable Covered Aircraft Subleases will be amended, if necessary, to accommodate the foregoing swap.

 

Section 2.13                             Extension Rights of United.  Effective as of January 1, 2018 and subject to the Head Lease Expiration Dates set forth on Schedule 1, at any time and from time to time, and at its sole option, United may extend the Term of this Agreement with respect to any or all Covered Aircraft with a sublease expiration date as set forth on Schedule 1 of December 31, 2017 by providing Contractor with 180 days’ prior irrevocable written notice prior to the scheduled expiration of the Term identifying the Covered Aircraft to be extended (which shall extend the provisions of this Agreement with respect to such Covered Aircraft to such later exit date) (any such extension, an “Extension” and any such Covered Aircraft subject to an Extension, an “Extension Aircraft”); provided, that (x) Extensions shall be made only in increments of twelve (12) months and (y) no Extension notice may be delivered after June 30, 2018; provided further, that United shall not be permitted to exercise more than *** Extensions; provided further, that, in the event of an Extension, the “per block hour” rates set forth on Schedule 2 as of the date hereof in respect of each Extension Aircraft shall be increased (I) by $*** for the period commencing January 1, 2018 and ending on December 31, 2018 and (II) by an additional $*** for the period commencing January 1, 2019 and ending on December 31, 2019.

 

ARTICLE III
 CONTRACTOR COMPENSATION

 

Section 3.01                             Base and Incentive Compensation.  For and in consideration of the transportation services, facilities and other services to be provided by Contractor hereunder, United shall pay Contractor the base and incentive compensation as provided in Paragraph A of Schedule 3 hereto, subject to the terms and conditions set forth in this Article III.

 

Section 3.02                             Periodic Adjustment of Base and Incentive Compensation and Commodity Prices.

 

(a)                                 Subject to Section 8.04, the rates under this Agreement set forth in Appendix 1 and Appendix 6 to Schedule 3 hereto and the Controllable Completion Factor Incentive Rate set forth in Appendix 2 to Schedule 3 hereto shall remain in effect until ***, and shall be adjusted on the first day of the immediately following month and each anniversary of such date (each, an “Adjustment Date”), as follows: the new rates, applicable beginning on such Adjustment Date, shall equal the rates in effect on the date immediately preceding such Adjustment Date multiplied by ***.

 

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(b)                                 The Commodity Price references in the definitions of First Commodity Replacement Event, First Commodity Withdrawal Event, Second Commodity Replacement Event and Second Commodity Withdrawal Event shall remain in effect through the last day of the month in which the first anniversary of this Agreement falls, and shall be adjusted on each Adjustment Date, as follows: the new Commodity Price, applicable beginning on such Adjustment Date, shall equal the Commodity Price for such definition in effect on the date immediately preceding such Adjustment Date multiplied by the Annual Commodity CPI Change.

 

Section 3.03                             Contractor Expenses.  Except as provided otherwise in Section 3.04, Contractor shall pay in accordance with commercially reasonable practices all expenses or costs incurred in connection with Contractor’s provision of Regional Airline Services.  For the avoidance of doubt, Contractor agrees that, in connection with its provision of Regional Airline Services to United hereunder and the provision of the other services contemplated to be performed by Contractor under the Ancillary Agreements, it shall use commercially reasonable efforts to minimize costs incurred by it if such costs would be reimbursable by United to Contractor in accordance with the terms of this Agreement or any Ancillary Agreement (it being understood that the payment of any amount owed pursuant to Appendix 1 to Schedule 3 shall not constitute “costs that are reimbursable by United” for purposes of the foregoing sentence).  Further, with respect to any service or item at substantially similar quality or service level and the cost of which United is required to reimburse Contractor hereunder or under any Ancillary Agreement, if (x) United can provide or arrange to provide such service or item at a lower cost than the reimbursement cost that United would otherwise be charged, and (y) the provision of or arrangement to provide such service or item by Contractor would not materially adversely affect Contractor under any contracts or agreements, then Contractor shall allow United to provide or arrange to provide such service or item in order to permit United to lower its costs; provided, however, that United shall bear the costs of any termination, cancellation or similar fee payable by Contractor in connection therewith.  Subject to the foregoing, including the conditions set forth in clauses (x) and (y), United may elect to contract directly with third parties for the replacement of Engine LLP associated only with Engines, the cost of which United shall be responsible for in accordance with Schedule 3.

 

Section 3.04                             United Expenses.

 

(a)                                 Certain Expenses.  United shall incur directly those expenses relating to the Regional Airlines Services that are described in Paragraph B(1) of Schedule 3 (“United Expenses”).  United shall pay all United Expenses in accordance with commercially reasonable practices.

 

(b)                                 Design Changes.  United shall be responsible for any reasonable out-of-pocket expenses incurred by Contractor relating to interior and exterior design changes to the Covered Aircraft and other product-related changes required by United, including facility-related design changes and the cost of changes in uniforms and other livery, in each case that occur outside of Contractor’s normal aircraft and facility refurbishment program.

 

Section 3.05                             Audit Rights; Financial Information.  Contractor shall make available for inspection by United and its outside auditors and advisors during normal business hours, within a reasonable period of time after United makes a written request therefor, all of Contractor’s books

 

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and records relating to the Covered Aircraft or Charter Aircraft and this Agreement or any Ancillary Agreement, in each case for the preceding 24-month period and, with respect to books and records related to an ongoing good faith dispute arising during such 24-month period (or, with regard to any Reconciled Expenses or any dispute involving Reconciled Expenses, the 24-month period following the date such Reconciled Expenses (or documentation thereof) were presented to United by Contractor or a third party), for any additional period until the final resolution of such dispute (each such period, an “Audit Period”) as necessary to audit (a) any reimbursement of expenses set forth on Appendix 3 of Schedule 3 hereto and/or incentive or rebate, (b) any agreement or arrangement upon which the block hour rates and other terms of a separate capacity purchase agreement are based pursuant to Section 2.05(a) or 2.08(h), or (c) any calculations pursuant to Section 3.07 (all such books and records collectively, “CPA Records”).  In connection with such audit, United and its outside auditors and advisors shall be entitled to make copies and notes of such CPA Records as they deem necessary and to discuss such CPA Records with Contractor’s Chief Financial Officer or such other employees or agents of Contractor knowledgeable about such records.  Notwithstanding the foregoing, Contractor shall not be required to provide United or its outside auditors and advisors access to (x) any agreement or arrangement upon which the block hour rates and other terms of a separate capacity purchase agreement are based pursuant to Section 2.05(a) or 2.08(h) or (y) any CPA Records in connection with an audit of the matters described in clauses (c) or (d) of this Section 3.05, in each case to the extent that Contractor is prohibited from doing so by any confidentiality agreement; provided, that Contractor shall (i) upon the request of United, use its commercially reasonable efforts to allow, at United’s cost, an independent third party selected by United to review such CPA Records and provide United with a summary setting forth (A) in connection with an audit of the matters described in clause (b) of this Section 3.05, the block hour rates and other economic terms of the Similar Economic Term Transaction, and, if applicable, acquisition costs and (B) in connection with an audit of the matters described in clauses (c) or (d) of this Section 3.05, a summary of any costs, expenses or revenues used to calculate amounts pursuant to Section 3.07, and (ii) to the extent that Contractor, after using its commercially reasonable efforts, is unable to comply with the preceding clause (i), Contractor shall provide United with a certificate signed by an authorized officer of Contractor setting forth (A) in connection with an audit of the matters described in clause (b) of this Section 3.05, the block hour rates and other economic terms of the Similar Economic Term Transaction, and, if applicable, acquisition costs and (B) in connection with an audit of the matters described in clauses (c) or (d) of this Section 3.05, a summary of any costs, expenses or revenues used to calculate amounts pursuant to Section 3.07.  Following the termination of each respective Audit Period, United’s right to audit the CPA Records for such Audit Period shall terminate.

 

Section 3.06                             Billing and Payment; Reconciliation.

 

(a)                                 Billing and Payment.  Within two Business Days after Contractor receives the Final Monthly Schedule from United pursuant to Section 2.01(b), Contractor 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 pertains.  United shall pay Contractor the amount due under such invoice (the “Invoiced Amount”), subject to United’s right to dispute any calculations set forth on such invoice that do not comply with the terms of this Agreement or any Ancillary Agreement, net of amounts due

 

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and owing by Contractor to United under this Agreement or any Ancillary Agreement, as follows:

 

(i)                                     One-quarter of the balance of the Invoiced Amount shall be due and payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the first day of the month (or if such day is not a Business Day, the next Business Day) to which such invoice relates;

 

(ii)                                  One-quarter of the balance of the Invoiced Amount shall be due and payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 8th day of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates;

 

(iii)                               One-quarter of the balance of the Invoiced Amount shall be due and payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 15th day of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates; and

 

(iv)                              One-quarter of the balance of the Invoiced Amount shall be due and payable by United to Contractor, by electronic transfer of funds to a bank account designated by Contractor, available on or before the 22nd day of the month (or if such day is not a Business Day, the next Business Day) to which the invoice relates.

 

(b)                                 Reconciliation.  Not later than 14 days following the end of each month, Contractor and United shall reconcile actual amounts due in respect of such month with the estimated amounts included in the Invoiced Amount for such items for such month in accordance with the terms and conditions set forth in Schedule 3 (including incentive compensation, if any, for such month and payments in respect of United-directed cancellations for such month, if any, in each case determined as provided in Schedule 3).  On or before the 15th day following the end of such month (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 United to Contractor, together with the payment to be made by United pursuant to Section 3.06(a)(iii) above for the applicable month, or (ii) shall be paid by Contractor to United or set off by United against any other amounts owing to Contractor under this Agreement or any Ancillary Agreement.  Further reconciliations shall be made on or prior to the 22nd day following the end of such month (or if such day is not a Business Day, the next Business Day) to the extent necessary as a result of United’s review of financial information provided by Contractor in respect of such month.  Such further reconciled amounts for such month to the extent applicable (x) shall be paid by United to Contractor, together with any other payment to be made by United pursuant to Section 3.06(a)(iv) above for the applicable month, or (y) shall be paid by Contractor to United or set off by United against any other amounts owing to Contractor under this Agreement or any Ancillary Agreement.

 

(c)                                  Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, neither United nor Contractor shall have any obligation to make any payment required under this Agreement or any Ancillary Agreement that is subject to a good faith dispute or any right to set off any amount that has been disputed in good faith by the other

 

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party; provided, that within five Business Days following the resolution of any such dispute in accordance with the terms of this Agreement, United or Contractor, as applicable, shall make any payments required by such resolution.  All payments made by Contractor or United as provided in this Agreement or any Ancillary Agreement shall be deemed final and not subject to further review, audit or reconciliation after the later to occur of (I) the date that is *** months after the date of the applicable payment and (II) the date of final resolution of any good faith dispute regarding the applicable payment arising during the *** months following the date of the applicable payment.

 

Section 3.07                             Synergy Savings.  Immediately following the Original Execution Date, Contractor and United will jointly determine the reasonably anticipated annually recurring pre-tax cost savings expected with respect to Regional Airline Service attributable to the SkyWest Merger (the “Savings”).  The Savings shall be calculated on a “run-rate” basis (i.e. the calculation is not intended to capture non-recurring costs or savings), assuming that all such Savings have been fully realized and that all commercially reasonable steps or circumstances necessary to implement, create or realize such Savings shall have been taken or occurred, regardless of whether or when such steps or circumstances are actually taken or occur.  For purposes of these calculations, the amount of Savings reasonably anticipated to be necessary for Contractor to achieve a GAAP net income of $*** million (“CPA Target Income”) shall be referred to as the “Target Savings.”  In connection with making such a determination, Contractor will provide United with information pursuant to Section 3.05.  After determining such Savings, if Contractor and United reasonably determine that the Base Compensation, together with anticipated Savings, are projected to result in Parent achieving the CPA Target Income or more annually on a “run-rate” basis, based on the number of Covered Aircraft as of the Original Execution Date, then Contractor and United agree that the Base Compensation rate “for each Covered Aircraft for each month in the Term” set forth in Appendix 1 to Schedule 3 hereto will be adjusted to provide United with an aggregate annual reduction in Base Compensation, in an amount equal to (i) if the excess of the Savings over the Target Savings is equal to or less than $*** million, the amount of such excess or (ii) if the excess of the Savings over the Target Savings is greater than $*** million, the sum of $*** million plus ***% of such excess over $*** million. The foregoing rate reduction will begin immediately after the first anniversary of the Original Execution Date and will end, with respect to any Covered Aircraft, on the date such Covered Aircraft becomes a Rate Reset Aircraft.  This rate reduction shall be without regard to whether the amount of such GAAP net income is actually realized subsequent to the time at which such anticipated Savings are originally estimated, and there shall be no subsequent readjustment to the rate of Base Compensation as a result of any discrepancy between the amount of GAAP net income actually realized by Contractor and the GAAP net income anticipated in connection with the determination of the Savings. For the avoidance of doubt, the rate reduction contemplated herein shall be on a one-time basis only and no further reduction in the Base Compensation shall occur following the reduction, if any, occurring as of the first anniversary of the Original Execution Date attributable to the Savings as provided herein.

 

Section 3.08                             One-Time Payment for Short Schedule Change Notice in ***.  On a one-time basis, United shall pay to Contractor $*** to resolve the short schedule change notice which occurred in *** with respect to *** (the “*** Issue”), which amount shall be deemed to satisfy in full, and, upon payment by United to Contractor, shall constitute a waiver by Contractor and Parent of, and a final settlement among United, Contractor and Parent with respect to, all claims

 

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against United and its successors, assigns, employees, agents, directors and affiliates relating to the *** Issue (such payment, the “One-Time Payment”), it being understood that United’s payment to Contractor of the One-Time Payment shall in no circumstance be interpreted to establish any precedent, course of dealing or course of conduct among United, Contractor and/or Parent.

 

ARTICLE IV
 CONTRACTOR OPERATIONS AND AGREEMENTS WITH UNITED

 

Section 4.01                             Crews, Etc.

 

(a)                                 Contractor shall be responsible for providing all crews (flight and cabin, maintenance personnel, gate agents and other ground personnel), necessary to operate the Scheduled Flights and for all aspects (personnel and other) of dispatch control, in each case except as such persons are provided by United pursuant to the Master Facility and Ground Handling Agreement.  With respect to ground handling services, Contractor agrees that it will not subcontract the performance of any such services to any party that is not an Affiliate of Contractor without United’s prior approval; provided that any party utilized to perform similar services at the applicable airport by United for flights operated by United shall be deemed approved by United for use by Contractor in performing such services for Scheduled Flights.

 

(b)                                 Contractor agrees to give United pilots who remain on United’s relevant seniority list preferential interview status for any pilot openings that may occur at Contractor, unless such status is in conflict with Contractor’s commitments concerning employees of other carriers in effect as of the date hereof. Any furloughed United pilot hired by Contractor shall be required to comply with all standard terms and conditions of employment applicable to employees of Contractor, but will not be required by Contractor to resign his or her seniority position with United as a condition for applying or being employed by Contractor.

 

(c)                                  United shall confer with Parent prior to offering any flow through agreement to pilots of Parent’s subsidiaries.

 

Section 4.02                             Governmental Regulations.  Contractor 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 Contractor to perform the services required by this Agreement.  All flight operations, dispatch operations and all other operations and services undertaken by Contractor pursuant to this Agreement shall be conducted, operated and provided by Contractor 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.  Without limiting Contractor’s obligations under any Covered Aircraft Sublease, all Covered Aircraft shall be operated and maintained by Contractor in compliance with all laws, regulations and governmental requirements, Contractor’s own operations manuals and maintenance manuals and procedures, and all applicable equipment manufacturers’ manuals and instructions.  United shall control the use and substitution of any and all slots, operating authorizations and similar or

 

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successor authority issued by the FAA or any airport operator for the operation of each flight under this Agreement to enable United to manage the priority of each such flight among all flights in United’s network system.  In connection with any capital improvements to any Covered Aircraft required by an airworthiness directive, Contractor (taken together with its Affiliates) shall not discriminate against such Covered Aircraft with regard to efforts to satisfy the requirements of the airworthiness directives including the method and date of compliance, and shall use its reasonable commercial efforts to satisfy such requirements, including any efforts used or applied by Contractor or its Affiliates with regard to any similar aircraft type owned or operated by Contractor or its Affiliates.  In connection with any grounding of any of the Covered Aircraft, Contractor shall not discriminate against such Covered Aircraft with regard to efforts to satisfy the applicable requirements to lift such grounding order, and shall use its reasonable commercial efforts to satisfy such requirements, including any efforts used or applied by Contractor or its Affiliates with regard to any similar aircraft type owned or operated by Contractor or its Affiliates.  Without limiting the foregoing, Contractor and its subcontractors performing services for United on behalf of Contractor hereunder shall abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a).

 

Section 4.03                             Quality of Service.  At all times, Contractor shall provide Regional Airline Services with appropriate standards of care, but in no event lower than such standards utilized by Contractor in 2009.  United 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 Contractor; provided that all such procedures and means of measurement shall be no more stringent than those used by United with respect to the performance of all other operators of regional jet aircraft for United.  Contractor shall achieve at least the comparable quality of airline service as provided by United, subject to limitations imposed by the type of aircraft used by Contractor and its route network.  Contractor shall comply with all airline customer service commitments and policies of United as of the Effective Date, including without limitation the “CustomerFirst” commitments, and employee conduct, appearance and training policies in place as of the Effective Date, and shall handle customer-related services in a professional, businesslike and courteous manner.  In connection therewith, Contractor shall maintain aircraft cleaning cycles and policies, and shall maintain adequate staffing levels, to ensure at least a comparable level of customer service and operational efficiency that United achieves, including without limitation in respect of customer complaint response, ticketing and boarding timing, oversales, baggage services and handling of irregular operations.  In addition, at the request of United, Contractor shall comply with all such airline customer service commitments, policies and standards of care of United as adopted, amended or supplemented after the Effective Date.  Contractor shall ensure that all Covered Aircraft are equipped with an ARINC aircraft communications addressing and reporting system (or such other system as is designated by United), the cost of which will be borne by United. Contractor shall make such interior and exterior design and product-related changes as may be required by United from time to time, including both those for which the cost is borne by United pursuant to Section 3.04(b), and those that occur within Contractor’s normal aircraft and facility refurbishment program.  Contractor shall provide United with timely communication regarding the status of all Scheduled Flights, and shall perform closeout procedures, in both cases, at service levels at least as high as those of United at comparably-sized airports.  Contractor shall maintain the capability of performing ACARS-based automated weight and balance procedures for each Scheduled Flight, and shall accurately and timely perform such procedures.  Contractor

 

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shall maintain and utilize Contractor’s passenger and bag weight program approved by the FAA and existing on the Effective Date (unless and until otherwise directed by the FAA).  Contractor shall ensure that all Scheduled Flights are capable of operating in Category 2 conditions.  Contractor will use United’s standard procedures for processing and adjudicating all claims for which Contractor is responsible in an effort to avoid such matters becoming the subject of claims, litigation or an investigation by a governmental agency or authority.  At either party’s request, Contractor and United will meet to discuss and review Contractor’s customer service and handling procedures and policies and its employees’ conduct, appearance and training standards and policies.  United shall give Contractor written notice of any non-safety-related alleged breach of this Section 4.03, identifying with reasonable specificity such alleged breach, not less than 15 days prior to exercising any remedy regarding such alleged breach.

 

Section 4.04                             Incidents or Accidents.  Contractor shall promptly notify United of all irregularities involving a Scheduled Flight or Covered Aircraft operated by Contractor (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.  Contractor shall furnish to United as much detail as practicable concerning such irregularities and shall cooperate with United at Contractor’s own expense in any appropriate investigation.

 

Section 4.05                             Emergency Response.  Contractor shall follow United’s Emergency Response Plan for aircraft accidents or incidents and shall be responsible for United’s direct costs resulting from Contractor’s participation in such plan.  In the event of an accident or incident involving a Covered Aircraft or Scheduled Flight, United will have the right, but not the obligation, to manage the emergency response efforts on behalf of Contractor with full cooperation from Contractor.

 

Section 4.06                             Safety Matters.  At any time, United shall have the right, but not the obligation, at its own cost, to inspect, review, and observe Contractor’s operations of Scheduled Flights.  Notwithstanding the conduct or absence of any such review, Contractor 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 United responsible for such safety matters.  Contractor shall maintain its membership in the IATA Operational Safety Audit registry and shall not be suspended from such registry.

 

Section 4.07                             Master Facility and Ground Handling Agreement.  Contractor and United have entered into a Second Amended and Restated Master Facility and Ground Handling Agreement in the form attached hereto as Exhibit C.  The parties agree that, in the event of a conflict between the provisions of Article VII hereof and the indemnification provisions of the Second Amended and Restated Master Facility and Ground Handling Agreement, the latter shall control.

 

Section 4.08                             Codeshare Terms.  Contractor agrees to operate all Scheduled Flights using the United flight code and flight numbers assigned by United, or such other flight codes and flight numbers as may be assigned by United (to accommodate, for example, a United alliance partner), and otherwise under the codeshare terms set forth in Exhibit D.

 

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Section 4.09                             Administrative Support and Information Services.  In connection with Regional Airline Services provided pursuant to this Agreement, United and Contractor shall provide the administrative and information services set forth on Exhibit N, for so long as provided therein.

 

Section 4.10                             Fuel Procurement and Fuel Services.

 

(a)                                 The parties will cooperate in identifying (i) Fuel savings opportunities, (ii) providers of Fuel and (iii) providers of Fuel Services.  Contractor shall enter into agreements with any such providers as shall be directed by United.  Contractor shall use its best efforts to document Fuel Services agreements using substantially the form attached hereto as Exhibit F (which form may be replaced, amended, or otherwise modified by United from time to time).  Contractor shall provide any data or analysis of its fuel procurement and Fuel Services as reasonably requested by United.

 

(b)                                 Notwithstanding the foregoing, United, by or through its subsidiaries, agents, or affiliates, shall have the option (but shall not have any obligation) in its sole discretion (i) to procure or arrange for the procurement of Fuel and/or (ii) procure or arrange for the procurement of Fuel Services for or on behalf of Contractor.

 

(c)                                  If United elects to procure, or arrange for the procurement of, Fuel for or on behalf of Contractor pursuant to clause (i) of Section 4.10(b) above, then the costs of such procurement, or such arranging for procurement, as applicable (in each case including without limitation the cost of procuring the Fuel, including any administration fees, taxes or other charges of any supplier of Fuel and/or charges for Fuel Services, as applicable) shall be incurred directly by United pursuant to Paragraph B(1)(j) of Schedule 3.  If United does not so elect, then Contractor shall procure, or arrange for the procurement of Fuel, and such costs shall be incurred directly by Contractor and reconciled pursuant Paragraph B(5)(a)(xiv) of Schedule 3.

 

(d)                                 If United elects to procure, or arrange for the procurement of, Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.10(b) above, then the costs of such procurement, or such arranging for procurement, as applicable shall be incurred directly by United pursuant to Paragraph B(1)(j) of Schedule 3.  If United does not so elect, then Contractor shall procure, or arrange for the procurement of Fuel Services, and such costs shall be incurred directly by Contractor and reconciled pursuant to Paragraph B(5)(a)(xiv) of Schedule 3.

 

Section 4.11                             Slots and Route Authorities.  At the request of United made during the Term or upon termination of this Agreement, Contractor shall use its commercially reasonable efforts to transfer to United or its designee, to the extent permitted by law, any airport takeoff or landing slots, route authorities or other similar regulatory or airport authorizations previously transferred to Contractor by United for use in connection with Scheduled Flights, or held or acquired by Contractor and used for Scheduled Flights, in consideration of the payment to Contractor of the net book value on Contractor’s books, if any, of such slot, authority or authorization.  Contractor’s obligations pursuant to the immediately preceding sentence shall survive the termination of this Agreement for so long as any transfer requested pursuant to this Section 4.11 shall not have been completed.  Contractor hereby agrees that all of Contractor’s contacts or communications with any applicable regulatory authority concerning any airport takeoff or landing slots, route authorities or other similar regulatory authorizations used for Scheduled Flights will be coordinated through United.  If any airport takeoff or landing slot,

 

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route authority or other similar regulatory authorization transferred to Contractor by United for use in connection with Scheduled Flights, or held or acquired by Contractor and used for Scheduled Flights is withdrawn or otherwise forfeited as a result of Controllable Cancellations or any other reason within Contractor’s reasonable control, then Contractor agrees to pay to United promptly upon demand an amount equal to the fair market value of such withdrawn or forfeited slot, authority or authorization.

 

Section 4.12                             Use of United Marks.  United hereby grants to Contractor the non-exclusive and non-transferable rights to use the United Marks and other Identification as provided in, and Contractor shall use the United Marks and other Identification in accordance with the terms and conditions of, Exhibit G.  In addition, upon notice to Contractor, United may also grant to Contractor, and Contractor shall be deemed to accept, a non-exclusive and non-transferable right and license to adopt and use, the trademarks of any Affiliate of United (“Affiliate Marks”), subject to terms and conditions consistent with the terms set forth on Exhibit G, and Contractor hereby agrees and acknowledges that the Affiliate identified in such notice, rather than United, is the owner of such Affiliate Marks and such Affiliate may enforce the terms of such license.

 

Section 4.13                             Use of Contractor Marks.  Contractor hereby grants to United the non-exclusive and non-transferable rights to use the Contractor Marks as provided in, and United shall use the Contractor Marks in accordance with the terms and conditions of, Exhibit H.

 

Section 4.14                             Catering Standards.  United and Contractor shall comply with the catering requirements set forth on Exhibit I hereto.   The parties agree that, in the event of a conflict between the provisions of Exhibit I and the Contractor Ground Handling Agreement, the provisions of Exhibit I shall control.

 

Section 4.15                             Ticket Handling Terms.  United and Contractor shall comply with the ticket handling requirements set forth in Exhibit K hereto.  The parties agree that, in the event of a conflict between the provisions of Exhibit K and the Contractor Ground Handling Agreement, the provisions of Exhibit K shall control.

 

Section 4.16                             Fuel Efficiency and Revenue Programs.  Contractor shall use commercially reasonable efforts to promptly adopt and adhere to a Fuel efficiency program as described on Exhibit L hereto.  Contractor shall implement any incentive program that United requests to be implemented and for which United agrees in writing to pay the Incentive Program Costs.

 

Section 4.17                             Reasonable Operating Constraints and Conditions.  Contractor and United shall comply with the operating parameters and requirements set forth on Exhibit J hereto.

 

Section 4.18                             Covered Aircraft Subleases.

 

(a)                                 As soon as practicable after the execution and delivery of this Agreement for each Covered Aircraft then subject to the terms hereof, and contemporaneous with the entry of any other aircraft into service as a Covered Aircraft hereunder (other than aircraft that Contractor acquires from other than United), United and Contractor shall enter into a Covered

 

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Aircraft Sublease for each Covered Aircraft in the form attached hereto as Exhibit B.  Until Contractor and United enter into a Covered Aircraft Sublease, the currently applicable lease or sublease for a Covered Aircraft shall be deemed amended to conform to the form of Covered Aircraft Sublease attached hereto as Exhibit B together with such changes thereto as necessary to conform to the applicable head lease, including without limitation the identity of the owner trustee, owner participant, financing parties, amount of basic rent and stipulated loss value; provided, that any such conforming changes shall not increase the obligations of Contractor under such Covered Aircraft Sublease as otherwise provided in the form of agreement attached hereto as Exhibit B.  In connection with the entry into each Covered Aircraft Sublease for a Covered Aircraft, United shall use commercially reasonable efforts to assign to Contractor the warranties of the aircraft and engine manufacturers available to United with respect to such Covered Aircraft.  If United is unable to assign the foregoing warranties and is not otherwise able to provide for an agreement directly between Contractor and the applicable manufacturer providing for warranty coverage of such Covered Aircraft, then United shall act on behalf of Contractor in dealing with the applicable manufacturer to enable Contractor to obtain the benefit of such warranties as if United had been able to make such assignment.  United further covenants and agrees not to accelerate the “Head Lease Expiration Date” as provided on Schedule 1 hereto with respect to any aircraft being operated by Contractor pursuant to this Agreement as of the time of determination without the prior written consent of Contractor if such acceleration would result in the Head Lease Expiration Date occurring prior to the end of the Term or  the sublease expiration date for such Covered Aircraft as set forth in Schedule 1.

 

(b)           Basic Rent payable under each Covered Aircraft Sublease shall be entirely abated unless and until (A) such Covered Aircraft has been withdrawn from this Agreement and no longer constitutes a Covered Aircraft, or (B) the occurrence of a Labor Strike, in which case such Basic Rent shall be payable until (x) such aircraft, and all other items required to be returned pursuant to such Covered Aircraft Sublease and this Agreement pertaining to such Covered Aircraft, shall have been returned to United in accordance with the terms of such Covered Aircraft Sublease and this Agreement, or (y) such Labor Strike shall have ended, as the case may be.  In addition, in connection with the return of aircraft to United pursuant to Sections 2.08, 8.02(b)(x) or 8.02(c)(i), or in connection with the repossession of a Covered Aircraft by a lessor, lender or other financing party under a head lease for or mortgage of such aircraft (other than a repossession resulting from a breach of the Covered Aircraft Sublease by Contractor), Basic Rent shall continue to be entirely abated for the following period:

 

(i)            for the return of aircraft pursuant to Section 8.02(b)(x), with respect to any such aircraft, (A) the duration (if any) of the grounding applicable to such aircraft (but only if such grounding is a complete grounding, as opposed to a grounding for passenger service only), plus (B) such period as is reasonably necessary for Contractor to return such aircraft in compliance with the provisions of the applicable Covered Aircraft Sublease, but in any event for not more than a period of four weeks after the later of the applicable Termination Date or the end of the Wind Down Period for such aircraft, if any, for the first *** such Covered Aircraft being returned, eight weeks after such date for the next *** such Covered Aircraft being returned, *** weeks after such date for the next *** such Covered Aircraft being returned, and *** weeks after such date for the remaining such Covered Aircraft being returned (such periods to run concurrently); and

 

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(ii)           for the return of aircraft pursuant to Sections 2.08 or 8.02(c)(i) or in connection with the repossession of a Covered Aircraft by a lessor, lender or other financing party under a head lease for or mortgage of such aircraft (other than a repossession resulting from a breach of the Covered Aircraft Sublease by Contractor), such period as is reasonably necessary for Contractor to return such aircraft in compliance with the provisions of the applicable Covered Aircraft Sublease, but in any event for not more than a period of *** weeks after the applicable Termination Date for the first *** such Covered Aircraft being returned, *** weeks after such date for the next such *** Covered Aircraft being returned, *** weeks after such date for the next such *** Covered Aircraft being returned, and *** weeks after such date for the remaining such Covered Aircraft being returned (such periods to run concurrently);

 

provided, that Basic Rent shall in each case cease to be abated with respect to any aircraft to be returned on the day following the day, if any, on which United waives any unsatisfied return conditions with respect to such aircraft.  In addition, the provisions of Section 2.09 shall apply to the Covered Aircraft subject to a Covered Aircraft Sublease being returned to United.

 

(c)           No periodic rent shall be payable under any Storage Sublease; provided that, with respect to any Deferred Obligations (as defined in the applicable Covered Aircraft Sublease), if Contractor (for all purposes of this proviso, as Sublessee in such Storage Aircraft Lease and the applicable Covered Aircraft Sublease) does not perform one or more of such Deferred Obligations, then United (for all purposes of this proviso, as Sublessor in such Storage Sublease and the applicable Covered Aircraft Sublease) shall be entitled to seek damages arising under this Agreement and/or the Covered Aircraft Sublease (but not under the Storage Sublease), including without limitation Basic Rent (but excluding Basic Rent for any period for which the Deferred Obligations have been deferred), against Contractor in an amount and type equivalent to the damages (arising under this Agreement and/or the Covered Aircraft Sublease) it would have been entitled to seek against Contractor had such obligations arisen under, and such non-performance occurred with respect to, the Covered Aircraft Sublease rather than the Storage Sublease.

 

(d)           Neither Contractor nor any of Contractor’s Affiliates shall lease, sublease or otherwise obtain the use of any aircraft formerly subject to a Covered Aircraft Sublease for the six months following the termination of such sublease, unless Contractor has received prior written notice from United that United is not attempting to lease, sublease or otherwise obtain or retain the use of such aircraft (which notice, if true, shall be given by United upon Contractor’s request).

 

(e)           Notwithstanding anything else contained herein to the contrary, if and when a Covered Aircraft Sublease terminates in accordance with its terms, then the aircraft subject to such sublease shall no longer constitute a Covered Aircraft effective on the date on which the term of such Covered Aircraft Sublease ends, regardless of whether the event giving rise to such sublease termination also constitutes an independent termination or withdrawal event hereunder.  Any withdrawal occurring upon such a termination of a Covered Aircraft Sublease shall be separate and distinct from, and shall not limit or supersede, any other withdrawal rights of United contained in this Agreement.

 

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Section 4.19          Unauthorized Payments.

 

(a)           In connection with any performance under this Agreement, neither Contractor, nor any officer, employee, or agent of Contractor, will make any payment, or offer, promise, give or authorize any payment, of any money or other article of value, to any official, employee, or representative of United or any government official or representative, or to any person or entity doing business with United, in order either to obtain business under this Agreement or to retain United’s business under this Agreement, or to direct United’s business under this Agreement to a third party, or to influence any act or decision of any employee or representative of United as pertaining to this Agreement or any government official or representative to perform or to fail to perform his or her duties, in each case, under this Agreement, or to enlist the aid of any third party to do any of the foregoing. The parties agree that (i) payments by Contractor to former employees of United in the ordinary course of Contractor’s business, together with matters relating to contractual relationships between United and any former employee of United employed by Contractor and (ii) incidental expenses incurred for business meetings, meals and other minor business related expenses shall not, in each case, violate this paragraph (clause (i) and (ii), “Permitted Actions”).

 

(b)           In connection with any performance under this Agreement, neither Contractor, nor any officer, employee, or agent of Contractor, will solicit or receive any amount of cash or negotiable paper, or any item, service or favor of value (a “gift”) from United.  Contractor will refuse to accept all such gifts and, if received, will return such gifts to the donor.  In all such cases Contractor will notify United promptly of such gift or offer thereof.  If United deems it necessary, Contractor will turn over such gifts to United for further handling.  The parties agree that Permitted Actions shall not violate this paragraph.

 

(c)           In connection with any performance under this Agreement, Contractor will at all times comply fully with all of the terms and provisions of the Foreign Corrupt Practices Act and any related or successor statute, regulation, or governmental directive regarding payments to foreign nationals or other persons or entities.

 

(d)           Contractor hereby certifies and represents that no inducements of monetary or other value were offered or given to any United officer, employee or agent, except as is stated in writing to the United official designated to sign this Agreement or except as otherwise stated in this Agreement, prior to execution of this Agreement. Contractor further certifies and represents no official, employee or agent of Contractor shall receive or has received any inducement of monetary or other value from any vendor or contractor of United or has a significant ownership or other interest in a vendor or contractor of United which is or could be perceived by a reasonable person as a conflict of interest, except as is stated in writing to the United official designated to sign this Agreement, prior to execution.   The parties agree that Permitted Actions shall not violate this paragraph.

 

ARTICLE V

CERTAIN RIGHTS OF UNITED

 

Section 5.01          Use of Covered Aircraft.  Contractor agrees that, except as otherwise directed or approved in writing by United in its sole discretion, the Covered Aircraft may be used

 

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only to provide Regional Airline Services.  Without the written consent of United, the Covered Aircraft may not be used by Contractor for any other purpose, including without limitation flying for any other airline or on Contractor’s own behalf.

 

Section 5.02          Change of Control.  Upon the occurrence of a Change of Control, at any time during the Term, to which Change of Control United shall not have consented in writing in advance, the provisions of Section 8.02(b) shall apply.

 

Section 5.03          Limitation on Transfers of Interest.  Upon the occurrence of any offer, issuance, delivery, distribution, assignment, pledge, grant, sale or other transfer of the capital stock or other equity interest of Contractor as a result of which Contractor is no longer a direct, wholly-owned subsidiary of Guarantor (any such event, a “Prohibited Transfer”), then the provisions of Section 8.02(b) shall apply.  Notwithstanding the foregoing, a “Prohibited Transfer” shall not include any liquidation or merger of Contractor so long as the successor to Contractor is Parent.

 

ARTICLE VI
 INSURANCE

 

Section 6.01          Minimum Insurance Coverages.  During the Term, in addition to any insurance required to be maintained by Contractor pursuant to the terms of any aircraft lease (including any Covered Aircraft Sublease or Storage Sublease), or by any applicable governmental or airport authority, Contractor 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 aircraft hull and liability insurance, including aircraft third party, passenger liability (including passengers’ baggage and personal effects), cargo and mail legal liability, and all-risk ground and flight physical damage, with a combined single limit of not less than the greater of (i) $*** million per occurrence and (ii) the highest single limit per occurrence of any aircraft hull and liability insurance maintained by Contractor under any other Capacity Purchase Arrangement, and a minimum limit in respect of personal injury (per clause AVN 60 or its equivalent) of $*** million per occurrence and in the aggregate, and war risk hull and liability insurance as provided by the FAA program or by commercial providers of such insurance with a combined single limit no less than the greater of (i) $*** million per occurrence and (ii) the highest single limit per occurrence of any war risk hull and liability insurance maintained by Contractor under any other Capacity Purchase Arrangement; provided that the parties agree to increase or decrease the foregoing limit set forth in clause (i) above from time to time as necessary to match market conditions;

 

(b)           Workers’ compensation as required by the appropriate jurisdiction and employer’s liability with a limit of not less than $*** million combined single limit; and

 

(c)           Other property and liability insurance coverages of the types and in the amounts that would be considered reasonably prudent for a business organization of Contractor’s size and nature, under the insurance market conditions in effect at the time of placement.  All coverages described in this Section 6.01 shall be placed with deductibles reasonably prudent for

 

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a business organization of Contractor’s size and nature, under the insurance market conditions in effect at the time of placement.

 

Section 6.02          Endorsements.  Unless Contractor and United are participating in a combined policy placement, Contractor shall cause the policies described in Section 6.01 to be duly and properly endorsed by Contractor’s insurance underwriters with respect to Contractor’s flights and operations as follows:

 

(a)           To provide that the underwriters shall waive subrogation rights against United, its directors, officers, agents, employees and other authorized representatives, except for their gross negligence or willful misconduct;

 

(b)           To provide that United, its directors, officers, agents, employees and other authorized representatives shall be endorsed as additional insured parties, except for their gross negligence or willful misconduct;

 

(c)           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 Contractor’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; and

 

(f)            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 United.

 

Section 6.03          Evidence of Insurance Coverage.  At the commencement of this Agreement, and thereafter at United’s request, Contractor shall furnish to United evidence reasonably satisfactory to United of such insurance coverage and endorsements (other than any insurance coverage obtained pursuant to Section 6.04), including certificates certifying that such insurance and endorsements are in full force and effect.  Initially, this evidence shall be a certificate of insurance.  If Contractor fails to acquire or maintain insurance as herein provided, United may at its option secure such insurance on Contractor’s behalf at Contractor’s expense.

 

Section 6.04          Insurance Through Combined Placement.

 

(a)           Combined Placement.  Subject to Section 6.05, United and Contractor shall continue to seek to obtain bids from insurance providers with respect to Aviation Insurance, based on United’s and Contractor’s combined exposures, until such time, if ever, as United determines that it no longer desires to seek or maintain such combined placement.  If United makes such a determination, it shall provide Contractor written notice at least 120 days prior to the date for renewal of any existing insurance policy that covers both Contractor and United.

 

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(b)           Allocation of Costs.  The parties hereto shall allocate the costs of combined placements as provided in Paragraph B(6) of Schedule 3.

 

(c)           Adjustment for Major Loss.  If there is a Major Loss under a combined placement insurance policy, United and Contractor will adjust the premium amounts paid by each party in accordance with the provisions set forth in Paragraph B(6) of Schedule 3.

 

Section 6.05          Insurance Through Other Than Combined Placement.  Contractor shall have the right, in its sole discretion, to elect not to participate in a combined placement with United for a particular insurance policy; provided that United will not bear any increased insurance costs resulting from Contractor’s election not to participate in such a combined placement.  In no event shall an Affiliate of Contractor be obligated to enter into a combined placement of insurance with United.

 

ARTICLE VII
 INDEMNIFICATION

 

Section 7.01          Contractor Indemnification of United.  Contractor shall be liable for and hereby agrees to fully defend, release, discharge, indemnify and hold harmless United, 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 reasonable 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 United 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 Contractor’s or United’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 (w) any act or omission by Contractor or any of its directors, officers, employees or agents relating to the provision of Regional Airline Services, (x) the performance, improper performance, or non-performance of any and all obligations to be undertaken by Contractor or any of its directors, officers, employees or agents pursuant to this Agreement or any Ancillary Agreement, or (y) the operation, non-operation, or improper operation of the Covered Aircraft, Storage Aircraft or Other Subleased Aircraft or Contractor’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 (A) to the extent resulting from the negligence or willful misconduct of United or its directors, officers, agents or employees (other than negligence or willful misconduct imputed to such indemnified person by reason of its interest in a Covered Aircraft, Storage Aircraft or Other Subleased Aircraft or a Covered Aircraft Sublease or Storage Sublease), (B) for which United is obligated to indemnify or otherwise reimburse Contractor pursuant to this Agreement or any Ancillary Agreement or (C) directly caused by a breach by United of this Agreement or any Ancillary Agreement.  Contractor will use commercially reasonable efforts to cause and assure that Contractor will at all times be and remain in custody and control of all aircraft, equipment, and facilities of, or operated by, Contractor, and United and its directors, officers,

 

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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, until such time (if any) that such aircraft, equipment or facilities, pursuant to the terms of this Agreement and the Ancillary Agreements, are required or intended to be, and are, in the actual possession of United or any of the above listed parties and no longer in the control of Contractor.

 

Section 7.02          United Indemnification of Contractor.  United shall be liable for and hereby agrees to fully defend, release, discharge, indemnify, and hold harmless Contractor, 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 reasonable 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 Contractor, 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 Contractor’s or United’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 non-performance of any and all obligations to be undertaken by United or any of its directors, officers, employees or agents pursuant to this Agreement, any Ancillary Agreement or any head lease or other financing agreement relating to any Covered Aircraft, United Aircraft or Charter Aircraft, or (y) the operation, non-operation or improper operation of United’s aircraft, equipment or facilities (excluding, for the avoidance of doubt, Covered Aircraft and any equipment or facilities leased or subleased by United to Contractor) at any location, in each case excluding only claims, demands, damages, liabilities, suits judgments, actions, causes of action, losses, costs and expenses (A) to the extent resulting from the negligence or willful misconduct of Contractor or its directors, officers, agents or employees, or (B) for which Contractor is obligated to indemnify or otherwise reimburse United pursuant to this Agreement or any Ancillary Agreement or (C) directly caused by a breach by Contractor of this Agreement or any Ancillary Agreement.  United will use commercially reasonable efforts to cause and assure that United will at all times be and remain in custody and control of any aircraft, equipment and facilities of, or operated by, United, and Contractor and its directors, officers, employees and agents shall not, for any reason, be deemed to be in the custody or control, or a bailee, of such aircraft, equipment or facilities, until such time (if any) that such aircraft, equipment or facilities, pursuant to the terms of this Agreement and the Ancillary Agreements, are required or intended to be, and are, in the actual possession of Contractor or any of the above listed parties and no longer in the control of United.

 

Section 7.03          Indemnification Claims.  A party (the “Indemnified Party”) that may be entitled to indemnification 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 may give rise to a claim for indemnity against the Indemnifying Party hereunder.  Notwithstanding the foregoing, the failure of an Indemnified Party to promptly provide an Indemnity Notice shall not constitute a waiver by the Indemnified Party of any right to indemnification or otherwise relieve

 

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such Indemnifying Party from any liability hereunder unless and only to the extent that the Indemnifying Party is materially prejudiced as a result thereof, and in any event shall not relieve such Indemnifying Party from any liability which it may have otherwise than on account of this Article VII.  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 promptly 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 Contractor.  The employees, agents, and independent contractors of Contractor engaged in performing any of the services Contractor is to perform pursuant to this Agreement are employees, agents, and independent contractors of Contractor for all purposes, and under no circumstances will be deemed to be employees, agents or independent

 

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contractors of United.  In its performance under this Agreement, Contractor will act, for all purposes, as an independent contractor and not as an agent for United.  Notwithstanding the fact that Contractor has agreed to follow certain procedures, instructions and standards of service of United pursuant to this Agreement, United will have no supervisory power or control over any employees, agents or independent contractors engaged by Contractor in connection with its performance hereunder, and all complaints or requested changes in procedures made by United will, in all events, be transmitted by United to Contractor’s designated representative.  Nothing contained in this Agreement is intended to limit or condition Contractor’s control over its operations or the conduct of its business as an air carrier.

 

(c)           Employees, etc., of United.  The employees, agents, and independent contractors of United engaged in performing any of the services United is to perform pursuant to this Agreement are employees, agents, and independent contractors of United for all purposes, and under no circumstances will be deemed to be employees, agents, or independent contractors of Contractor.  Contractor will have no supervision or control over any such United employees, agents and independent contractors and any complaint or requested change in procedure made by Contractor will be transmitted by Contractor to United’s designated representative.  In its performance under this Agreement, United will act, for all purposes, as an independent contractor and not as an agent for Contractor.

 

(d)           Contractor Flights.  The fact that Contractor’s operations are conducted under United’s Marks and listed under the UA designator code will not affect their status as flights operated by Contractor for purposes of this Agreement or any other agreement between the parties, and Contractor and United 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 Original Execution Date and, unless earlier terminated or extended as provided herein, shall continue until December 31, 2017 (the “Term”).

 

Section 8.02          Early Termination.

 

(a)           By United for Cause.  United shall have the right to terminate this Agreement, immediately upon written notice (but without any prior 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), and the date of such notification of termination for Cause shall 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 United shall not have delivered written notice of termination pursuant to this

 

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Section 8.02(a) within four months after the later of (x) United receives written notice from Contractor of the occurrence of any event that constitutes Cause and (y) such event is no longer continuing, then United 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 United for Breach.  United may terminate this Agreement, by providing written notice to Contractor (with or without any prior notice), upon the occurrence of a material breach of this Agreement by Contractor as described in clause (ii) below.  United may terminate this Agreement, by providing written notice to Contractor, upon the occurrence of any other material breach of this Agreement by Contractor, which breach shall not have been cured within 60 days (or 15 days in the case of clause (x) below) after written notice of such breach is delivered by United to Contractor (which 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 such written notice delivered pursuant to the foregoing sentences shall specify the Termination Date (subject to the provisions of this Article VIII).  The parties hereto agree that, without limiting the circumstances or events that may constitute a material breach, each of the following shall constitute a material breach of this Agreement by Contractor: (i) the occurrence of a System Flight Disruption, (ii) a reasonable and good faith determination by United, using recognized standards of safety, that there is a material safety concern with the operation of any Scheduled Flights, (iii) the grounding of any Contractor Fleet by regulatory or court order or other governmental action, other than a non-carrier specific grounding, (iv) a Controllable Cancellation Factor for any two consecutive calendar months of ***% or below, (v) a Controllable On-Time Departure Rate for any two consecutive calendar months of ***% or below, (vi) concurrent material defaults by Contractor under ten or more Covered Aircraft Subleases or a material default under any other Ancillary Agreement that, in either case, materially adversely affects Contractor’s performance of its obligations under this Agreement or any Ancillary Agreement and is not cured during any applicable cure period, (vii) a material default by Contractor under any Flight Hour Agreement that adversely affects the maintenance of any Covered Aircraft, Charter Aircraft or United Aircraft, any material maintenance reserve provided for under such agreement, or the maintenance costs under such agreement, which default is not cured during any applicable cure period, (viii) a Change of Control shall occur to which United shall not have consented in writing in advance, (ix) a Prohibited Transfer shall occur or (x) the non-carrier specific grounding of any Contractor Fleet by regulatory or court order or other governmental action.  In the event that United shall not have delivered written notice of termination pursuant to this Section 8.02(b) within four months after the later of (A) the date upon which United receives written notice from Contractor of any material breach of this Agreement by Contractor and (B) such event is no longer continuing, then United 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.  Notwithstanding the foregoing, the termination right attributable to an event described in clause (x) above shall be limited to the termination of this Agreement as it relates solely to the particular Contractor Fleet subject to such grounding.

 

(c)           By Contractor for Breach.  Contractor may terminate this Agreement, by providing written notice to United, upon (i) United’s failure to make any payment of $*** or more due to Contractor under Article III or Section 10.01 of this Agreement, including without

 

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limitation, payments which become due during any Wind-Down Period, which payment is not subject to any ongoing good faith dispute and which failure shall not have been cured within five Business Days after receipt of written notice from Contractor of such failure, or (ii) upon the occurrence of any other material breach of this Agreement by United, which breach shall not have been cured within 60 days after written notice of such material breach is delivered by Contractor to United.  Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII). In the event that Contractor shall not have delivered written notice of termination pursuant to this Section 8.02(c) within four months after the later of (x) the date upon which Contractor receives written notice from United of any material breach under this Agreement by United and (y) such material breach is no longer continuing, then Contractor 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)           By United for Breach of Affiliate CPA.  United may terminate this Agreement, by providing written notice to Contractor (with or without prior notice) upon the early termination by United of any Affiliate CPA or other Capacity Purchase Arrangement between United and Contractor; provided, that the foregoing termination right in this Section 8.02(d) shall not apply in the event the Affiliate CPA or Capacity Purchase Arrangement is terminated solely as a result of events or actions similar to those described in clauses (i), (ii) or (iii) of the definition of Cause herein.  Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII).

 

(e)           By Contractor for Breach by United of Affiliate CPA.  Contractor may terminate this Agreement by providing written notice to United (with or without prior notice) upon the early termination by Contractor of any Affiliate CPA or other Capacity Purchase Arrangement between United and Contractor as a result of any uncured default by United thereunder.  Such written notice of termination shall specify the Termination Date (subject to the provisions of this Article VIII).

 

(f)            Survival During Wind-Down Period.  Upon any termination hereunder, 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, 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 each Covered Aircraft until it is withdrawn from this Agreement and otherwise until the later of the Termination Date and the end of the Wind-Down Period, if any.

 

Section 8.03          Disposition of Aircraft during Wind-Down Period.

 

(a)           Termination by United for Cause.  If this Agreement is terminated pursuant to Section 8.02(a), then the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions.  Within 90 days of delivery of any notice of termination, United shall deliver to Contractor a revocable 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 type to be withdrawn by month.  United may amend or modify such Wind-Down Schedule in its

 

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sole discretion by providing two weeks written notice to Contractor of such amendment or modification.  The Wind-Down Schedule may begin immediately upon its delivery, and may not provide for the withdrawal of any Covered Aircraft beyond the earlier of (i) the date 60 months after the date of delivery of the Wind-Down Schedule, and (ii) the date on which the head lease applicable to the Covered Aircraft terminates.  The provisions of this Section 8.03(a) shall supersede any Wind Down Schedule delivered pursuant to any other provision of this Agreement in accordance with a Wind-Down Schedule to be delivered by United to Contractor on the Termination Date.

 

(b)           Termination by United for Breach, Change of Control or Transfer of Interest.  If this Agreement is terminated by United under Section 8.02(b) or 8.02(d), then the Covered Aircraft (or in the event of a termination under Section 8.02(b)(x), only the Covered Aircraft that are included within the grounded Contractor Fleets) 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 United to Contractor pursuant to Section 8.02(b) or 8.02(d) shall contain a Termination Date that is determined in the discretion of United provided that it does not conflict with the provisions of this Section 8.03(b) governing the Wind-Down Schedule.  Within 90 days of delivery of any notice of termination, United shall deliver to Contractor an irrevocable written Wind-Down Schedule, providing for the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement, and delineating the number of each aircraft type to be withdrawn by month.  The Wind-Down Schedule may not commence until the Termination Date and may not provide for the withdrawal of any Covered Aircraft beyond the earlier of (i) the date 60 months after the date of delivery of the Wind-Down Schedule, and (ii) the date on which the head lease applicable to the Covered Aircraft terminates.

 

(c)           Termination by Contractor for Breach.  If this Agreement is terminated by Contractor under Section 8.02(c) or 8.02(e), then the Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement in accordance with the following terms and conditions:

 

(i)            The notice of termination delivered by Contractor to United pursuant to Section 8.02(c)(i) shall be irrevocable by Contractor and shall contain a Termination Date that is not 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 United prior to the 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 and this Agreement shall terminate.

 

(ii)           The notice of termination delivered by Contractor to United pursuant to Section 8.02(c)(ii) or Section 8.02(e) shall be irrevocable by Contractor and shall contain a Termination Date that is at least 180 days after the date of such notice.  Prior to the 90th day after receipt of such termination notice, United shall deliver to Contractor a Wind-Down Schedule beginning on such Termination Date.  The Wind-Down Schedule may not provide for the withdrawal of more than 15 Covered Aircraft per

 

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month (excluding the withdrawal of any Covered Aircraft upon the termination of the head lease related to such Covered Aircraft), and may not provide for the withdrawal of any Covered Aircraft on any date more than 60 months after the Termination Date.

 

(d)           Termination at End of Term.  If the Agreement is terminated at the end of the Term (other than pursuant to Section 8.02), then each Covered Aircraft shall immediately be withdrawn from the capacity purchase provisions of this Agreement.

 

(e)           Return Conditions.  Upon the date for withdrawal from the capacity purchase provisions of this Agreement of a Covered Aircraft as provided in Sections 8.03(a), 8.03(b), 8.03(c) or 8.03(d), the provisions of Section 2.09 shall apply.

 

(f)            Fleet Hour Program Balances.  In connection with the return of any aircraft by Contractor to United, Contractor shall use its commercially reasonable efforts to facilitate the participation by United or its designee in any Flight Hour Agreement or any other similar program for components relating to Covered Aircraft.  Any reserve balances held by a flight hour contractor in respect of any such Engines or components of Covered Aircraft shall be deemed to be held for United’s account, and Contractor shall execute an assignment, if any, required by United or such flight hour contractor in connection therewith.

 

(g)           Other Remedies for Labor Strike and Other Circumstances.  In the event of (i) the occurrence of a Labor Strike or (ii) the mandatory grounding of any of the Contractor Fleets by the FAA due to any action or inaction of Contractor, then for so long as such Labor Strike or grounding shall continue and thereafter until the number of Scheduled Flights that are Controllable On-Time Departures (including giving effect to any delays resulting from a Labor Strike or grounding) on any day of the week equals or exceeds the number of Scheduled Flights that were Controllable On-Time Departures on the same day of the week prior to such Labor Strike or grounding, United shall not be required to pay any of the amounts set forth on Appendix 1 to Schedule 3 as being required “for each Covered Aircraft for each month in the Term.”  The rights set forth in this Section 8.03(g) are in addition to, and not in limitation of, any other right of United arising hereunder.

 

(h)           Material Breach by United.  Upon a payment breach of this Agreement described in Section 8.02(c)(i) by United, which breach shall not have been cured within 30 days after written notice delivered by Contractor to United, then for the period from such 30th day until such breach is cured or the Agreement is otherwise terminated, in addition to, and not in limitation of, any recourse or remedy available to Contractor at law or in equity, Contractor shall be entitled to obtain the payments due to it hereunder directly from Airline Clearing House, Inc. for the duration of such default.

 

(i)            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 incidental, indirect, consequential, punitive, special or exemplary damages, including lost revenues, lost profits or lost prospective economic advantage, 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

 

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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(i) shall restrict the right of any party to exercise any right to terminate this Agreement pursuant to the terms hereof.

 

(j)            Automatic Withdrawal Schedule.  If, at any time upon or following the termination of this Agreement by United under Section 8.02(a), 8.02(b) or 8.02(d), or any termination of this Agreement at the end of the Term, and prior to the delivery of a notice or Wind-Down Schedule to be delivered pursuant to Section 8.03(a), (b) or (d), United is enjoined or stayed from delivering any such notice or Wind-Down Schedule, then, without any further action required by any party hereto, the Wind-Down Schedule in effect in connection with such termination shall be deemed to be as follows: five Covered Aircraft shall be withdrawn from the capacity purchase provisions of this Agreement at 12:01 a.m., central time, on each Monday, beginning on the first Monday following the Termination Date or the end of the Term, as the case may be, and continuing until all such aircraft are withdrawn, and the Covered Aircraft shall be withdrawn in order of Covered Aircraft Sublease termination dates, with the Covered Aircraft with the latest scheduled termination date withdrawn first, and the Covered Aircraft with the soonest scheduled termination date withdrawn last; provided that each Covered Aircraft whose head lease termination date occurs prior to the date on which such aircraft would otherwise be withdrawn pursuant to the foregoing shall instead be withdrawn on such head lease termination date.

 

Section 8.04          Adjustments for Uncured Event of Default.  United and Contractor acknowledge and agree that, if (x) any circumstance exists which provides United a right of termination pursuant to Section 8.02(a), 8.02(b) (but only as to material defaults described in clauses (i) through (x) of such Section 8.02(b)) or 8.02(d) of this Agreement (any such circumstance, an “Event of Default”) and (y) United has provided Contractor written notice of such Event of Default (“a Default Notice”), then, for the period commencing on Contractor’s receipt of the Default Notice and continuing until such Event of Default no longer exists (the “Default Modification Period”) or any longer period as provided below, the following provisions shall apply (it being understood that, if United has been enjoined from providing a Default Notice, then the Default Modification Period shall commence on the earliest date on which United could have delivered a Default Notice had United not been so enjoined):

 

(a)           Section 2.01(b)(ii) shall be disregarded in their entirety.

 

(b)           Section 3.02(a) shall be disregarded in its entirety, and shall be replaced by the following:

 

“(a)         The rates under this Agreement set forth in Appendix 1 and Appendix 6 to Schedule 3 hereto and the Controllable Completion Factor Incentive Rate set forth in Appendix 2 to Schedule 3 hereto shall, in the case of Appendix 1 and Appendix 6 to Schedule 3, be replaced during the Default Modification Period with the rates set forth on Appendix 1A and Appendix 6A to Schedule 3, and all such rates shall be adjusted on the first day of the immediately following month after the Default Notice and

 

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each December 1 after the Default Notice and continuing until such Event of Default no longer exists (each, an “Adjustment Date”), as follows: the new rates, applicable beginning on such Adjustment Date, shall equal the rates  set forth in Appendix 1A and Appendix 6A, as applicable, multiplied by the higher of (x) *** and (y) the lower of (i) the Annual CPI Change and (ii) ***.”

 

(c)           At United’s election at its sole discretion, with respect to aircraft that have not been withdrawn from the capacity purchase provisions of this Agreement (regardless of whether any notice of withdrawal has been submitted in respect of such aircraft), Schedule 1 shall be disregarded in its entirety, and shall be replaced by a new Schedule 1A, it being understood that such Schedule 1A shall not (i) not modify any scheduled sublease expiration date occurring in the month in which the Default Notice is received or in the following calendar month, (ii) provide for the re-entry into Regional Airline Services of (x) aircraft subject to a Storage Sublease at the time of the Default Notice, and/or (y) aircraft removed from service pursuant to Annex B to a Covered Aircraft Sublease but not yet returned to United in compliance with the provisions thereof, (iii) provide for the withdrawal of any aircraft on a date later than the latest date for withdrawal set forth on the version of Schedule 1 in effect on the date immediately prior to the execution date of this Agreement or (iv) accelerate the requirement of Contractor, as Sublessee, to comply with the provisions of Annex B to any Covered Aircraft Sublease.  For the avoidance of doubt, in respect of an Event of Default, if Contractor has cured the applicable Event of Default such that it no longer exists (the date of any such cure, the “Cure Date”), then the Schedule 1A in effect during the Default Modification Period shall immediately be replaced by the Schedule 1 in effect immediately prior to such Event of Default (the “Original Schedule”); provided that the Original Schedule shall not apply with respect to aircraft for which the Original Schedule provided for removal from the capacity purchase provisions of this Agreement either (a) during the Default Modification Period or (b) within 90 days following the Cure Date (such aircraft referenced in the foregoing clauses (a) and (b), “Excepted Aircraft”); provided further that, at United’s election, the Excepted Aircraft shall be removed from the capacity purchase provisions of this Agreement as soon as Contractor can reasonably comply with the applicable return conditions set forth in Annex B to each of the applicable Covered Aircraft Subleases.

 

(d)           Paragraph A(3) of Schedule 3 shall be disregarded in its entirety.

 

(e)           The second and third provisos in Paragraph C of Appendix 4 to Schedule 3 shall be disregarded in their entirety.

 

(f)            Appendix 7 to Schedule 3 shall be disregarded in its entirety.

 

(g)           Solely with respect to the allocation of expenses (to be borne by either United, as Sublessor, or Contractor, as Sublessee) relating to repairs required as a result of borescope inspections, Annex B to Exhibit B attached to this Agreement and to each Covered Aircraft Sublease shall be deemed to have been amended, mutatis mutandis, with no further action of the parties, so that such expenses shall be allocated as provided by Annex B to Exhibit B to the Existing CPA, it being understood, for the avoidance of doubt, that such amended version of Annex B shall in no circumstance include the fourth sentence of Paragraph F in the form of Annex B to Exhibit B attached to this Agreement.

 

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ARTICLE IX
 REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 9.01          Representations and Warranties of Contractor.  Contractor represents, warrants and covenants to United as of the Effective Date as follows:

 

(a)           Organization and Qualification.  Contractor is a duly organized and validly existing corporation in good standing under the laws of its state of incorporation and has the corporate power and authority to own, operate and use its assets and to provide the Regional Airline Services.  Contractor is duly qualified to do business as a foreign corporation under the laws of each jurisdiction that requires such qualification except where failure to be so qualified would not have a material adverse effect on the business or assets of Contractor.

 

(b)           Authority Relative to this Agreement.  Contractor 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 Contractor.  This Agreement has been duly and validly executed and delivered by Contractor and is, assuming due execution and delivery thereof by United and that United has legal power and right to enter into this Agreement, a valid and binding obligation of Contractor, enforceable against Contractor 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)           Broker.  Except for the fees and expenses payable to Raymond James Financial Inc. (which amounts shall be paid by Contractor), no broker, investment banker, or other person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Contractor.

 

(d)           Permits.  Contractor possesses all material certificates, authorizations and permits issued by FAA and other applicable federal, state or foreign regulatory authorities necessary to conduct its business, to provide Regional Airlines Services and otherwise to perform its obligations hereunder, and Contractor 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 Contractor or on its ability to conduct its business, to provide Regional Airlines Services and otherwise to perform its obligations hereunder.

 

Section 9.02          Representations and Warranties of United.  United represents and warrants to Contractor as of the Effective Date as follows:

 

(a)           Organization and Qualification.  United is a duly incorporated and validly existing corporation in good standing under the laws of the State of Delaware.

 

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(b)           Authority Relative to this Agreement.  United 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 United.  This Agreement has been duly and validly executed and delivered by United and is, assuming due execution and delivery thereof by Contractor and that Contractor has legal power and right to enter into this Agreement, a valid and binding obligation of United, enforceable against United 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 United of the transactions contemplated hereby will (i) violate, conflict with, or constitute a default under any of the terms of United’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 United 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.  No broker, investment banker, or other person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of United.

 

(e)           No Proceedings.  There are no legal or governmental proceedings pending, or investigations commenced of which United has received notice, in each case to which United is a party or of which any property or assets of United is the subject which, if determined adversely to United, would individually or in the aggregate have a material adverse effect on United or on its ability to perform its obligations hereunder; and to the best knowledge of United, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.

 

(f)            No Default Under this Agreement.  To the knowledge of United, there is not occurring any continuing event that would constitute a default by Contractor under this Agreement following the Effective Date.

 

ARTICLE X
 MISCELLANEOUS

 

Section 10.01       Conversion of Covered Aircraft Livery.  For each aircraft currently subject to a sublease or lease between United and Contractor, at such time (if ever) as such aircraft enters

 

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service as a Covered Aircraft, if such aircraft is not already prepared in the livery required by Paragraph 8 of Exhibit G and otherwise appropriately configured, then United shall be responsible for Contractor’s reasonable out-of-pocket costs of preparing each Covered Aircraft in such livery and appropriate configuration prior to its being placed into service hereunder, up to $*** for each such Covered Aircraft.

 

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 United:

 

United Airlines, Inc.
 Willis Tower
 233 S. Wacker Drive
 Chicago, IL  60606
 Attention:  Senior Vice President —United Express
 Facsimile No.: (872) 825-0030

 

and to:

 

United Airlines, Inc.
 Willis Tower
 233 S. Wacker Drive
 Chicago, IL  60606
 Attention: Vice President — Fleet
 Facsimile No.: (872) 825-8113

 

and to:

 

United Airlines, Inc.
 Willis Tower
 233 S. Wacker Drive
 Chicago, IL  60606
 Attention: Vice President — Procurement
 Facsimile No.: (872) 825-0308

 

with a copy to:

 

United Airlines, Inc.
 Willis Tower
 233 S. Wacker Drive
 Chicago, IL  60606
 Attention:  Vice President and Deputy General Counsel
 Facsimile No.: (872) 825-0081

 

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if to Contractor:

 

ExpressJet Airlines, Inc.
 100 Hartsfield Centre Parkway, Suite 700
 Atlanta, Georgia 30354
 Attn: Chief Operating Officer
 Facsimile No.:                             

 

with a copy to:

 

SkyWest, Inc.
 444 River Road
 St. George, UT  84790
 Attn:  Chief Financial Officer
 Facsimile No:  (435) 634 3305
 Telephone No: (435) 634-3200

 

if to Parent or any other Guarantor:

 

SkyWest, Inc.
 444 River Road
 St. George, UT  84790
 Attn:  President and COO
 Facsimile No:  (435) 634 3305
 Telephone No:  (435) (634-3200)

 

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 or the transfer of all or substantially all of the assets of either party to another Person (in which event the surviving Person or the Person acquiring the assets shall be deemed a successor and permitted assign) (and without limiting United’s rights pursuant to Section 5.02 or 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.  In connection with any assignment of this Agreement by Contractor or merger, consolidation or other similar transaction that results in a successor to Contractor, Contractor shall bear the cost of any payments or fees associated with such assignment, merger, consolidation or other similar transaction, including without limitation, any fees paid to secure route authorities, operating certificates, permits and any similar costs for Contractor’s assignee, but excluding any costs incurred by United in connection with providing notice to head lessors of such assignment, merger, consolidation or other similar transaction.

 

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.

 

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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 (but not Business Days) or months shall be deemed references to calendar days or months.  All references to “$” shall be deemed references to United States dollars and, unless otherwise specified, shall be deemed references to then-current United States dollar amounts and are not intended to be adjusted for inflation or otherwise.  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.”  All references in this Agreement to the past practices of “Contractor,” including the practices of “Contractor” during any historical period (whether under this Agreement or the Existing CPA), shall be deemed to refer to the performance or practices of the entity that operated substantially all of the Covered Aircraft during such historical period.  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 to this Agreement hereby agrees not to publicize or disclose to any third party the terms or conditions of this Agreement or any of the Ancillary Agreements, or any exhibit, schedule or appendix hereto or thereto, or any CPA Records, without the prior written consent of the other parties thereto (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).  Except as required by law or stock exchange or other regulation or in any proceeding to enforce the provisions of this Agreement or any of the Ancillary Agreements, or as otherwise provided below, each party hereby agrees not to disclose to any third party any confidential information or data, both oral and written, received from the other,

 

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whether pursuant to or in connection with this Agreement or any of the Ancillary Agreements, 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 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 any of the Ancillary Agreements, or as otherwise expressly permitted or contemplated by this Agreement or any of the Ancillary Agreements.  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 immediately notify the other parties hereto of the 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 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.

 

Section 10.08       Survival.  The obligations of the parties under Section 2.02, Section 2.08, Section 2.09, Article III, Article IV, Article VII, Section 8.03(f), Section 8.03(i), Section 10.02, Section 10.07, Section 10.08, Section 10.11, Section 10.12, Section 10.13, Section 10.14, Section 10.15, Section 10.16, Exhibit G, Exhibit H and Exhibit M (to the extent of any surviving obligations of Contractor) shall survive the expiration or termination of this Agreement.

 

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; Limitation on 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.

 

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(b)           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 to which such party may otherwise be entitled; provided, that absent the occurrence of another breach of this Agreement by Contractor and without limiting the effect of the provisions of Sections 2.07 and 4.18, United shall not be entitled to seek damages solely for the occurrence of (i) an event of Cause of the type described in clause (iii) of the definition thereof, (ii) a material breach of the type described in clauses (viii) or (x) of Section 8.02(b), or (iii) any other breach of this Agreement directly attributable to the matters described in clauses (i) or (ii) above.

 

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) and the Ancillary Agreements 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.  Specifically, this Agreement and each Ancillary Agreement shall constitute a single, integrated agreement.  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.  This Agreement is subject to, and will be governed by and interpreted in accordance with, the laws of the State of New York, excluding conflicts of laws principles, and of the United States of America.  Any action or proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may only be brought in the United States District Court for the Southern District of New York (or, if such court does not accept jurisdiction, such action or proceeding may only be brought in any New York state court sitting in the County of New York, New York) and each of the parties hereto irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives, to the fullest extent permitted by law, any objection to venue laid therein.  Notwithstanding the preceding sentence, process in any action or proceeding referred to therein may be served by appropriate means on the other party outside of the Southern District of New York (or the County of New York, New York, as applicable).  Each party further agrees to waive any right to a trial by jury.  Because a breach of the provisions of this Agreement could not adequately be compensated by money damages, any party shall be entitled to an injunction restraining such breach or threatened breach and to specific performance of any provision of this Agreement and, in either case, no bond or other security shall be required in connection therewith, and the parties hereby consent to the issuance of such injunction and to the ordering of specific performance.

 

Section 10.15       Guaranty.  Contemporaneous with the execution and delivery of this Agreement, Guarantor shall execute a guaranty in favor of United in the form of Exhibit M.

 

48

 

Section 10.16       Right of Set-Off.  Subject to Section 3.06(c), if any party hereto shall be in default hereunder or under any Ancillary Agreement to any other party hereto, 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 due and owing by the defaulting party to the non defaulting party thereunder and not subject to dispute in good faith; provided, that contemporaneously with any such set off, the non-defaulting party shall, unless legally enjoined or otherwise stayed from doing so, 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 between United and Contractor; (ii) reciprocity between United and Contractor 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 and by the Ancillary Agreements.  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 10.17       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 10.18       Amendment of Certain Contracts.  Without United’s express prior written consent, (and such consent shall not be unreasonably withheld) Contractor shall not amend, supplement, grant a waiver or extension under, or otherwise modify or enter into a replacement contract for, the Embraer Contract or any Flight Hour Agreement.  In addition, Contractor shall use its reasonable commercial efforts to assist United in the negotiation of any Flight Hour Agreement or any amendment thereto.

 

Section 10.19       Additional Provisions Relating to Labor Strike.

 

(a)           Contractor shall use commercially reasonable efforts to prevent a Labor Strike.  However, in the event of any Labor Strike (or during or after any cooling off period prior to such Labor Strike), then Contractor shall use commercially reasonable efforts to seek a third party airline to operate, should a Labor Strike occur, either CRJ-200 aircraft or ERJ-145 aircraft in place of the Covered Aircraft operated by Contractor under this Agreement immediately prior to such Labor Strike (“Third Party Replacement Aircraft”), subject to United’s consent in United’s sole but good faith discretion (a “Third Party Consent”).  If (v) a Labor Strike occurs, and (w) a third party operates Third Party Replacement Aircraft in Regional Airline Services sufficient to cover all the flying performed by the Covered Aircraft immediately prior to such Labor Strike without material interruption in the provision of Regional Airline Services and without material deviation from the provisions and standards set forth in this Agreement, then,

 

49

 

absent the occurrence of another breach of this Agreement by Contractor and without limiting the effect of the provisions of Sections 2.07 and 4.18, United shall not be entitled to seek damages solely for the occurrence of an event of Cause of the type described in clause (iii) of the definition thereof in respect of such Labor Strike.  However, if (x) a Labor Strike occurs, and (y) either (I) a third party cannot or does not operate Third Party Replacement Aircraft in Regional Airline Services sufficient to cover all the flying performed by the Covered Aircraft immediately prior to such Labor Strike without material interruption in the provision of Regional Airline Services and without material deviation from the provisions and standards set forth in this Agreement or (II) United does not provide a Third Party Consent, then, in respect of such Labor Strike, United shall be entitled to all remedies (including any direct damages) available under this Agreement notwithstanding anything to the contrary in Section 10.11(b); provided that Contractor and Guarantor shall not be liable, collectively, for any damages or payment obligations relating to this Agreement and the Ancillary Agreements directly attributable to any such Labor Strike exceeding the greater of (aa) $*** and (bb) (A) the product of (I) $*** and (II) the number of Covered Aircraft at the relevant time of application (which shall be the beginning of the cooling off period less any aircraft naturally expiring during such period), minus (B) an amount equal to the product of (III) the number of Third Party Replacement Aircraft that provide Regional Airline Services in lieu of Contractor providing such Regional Airline Services without material interruption and without material deviation from the provisions and standards set forth in this Agreement and (IV) $***.

 

(b)           In addition to and without limiting United’s rights in Section 10.19(a), upon the occurrence of any Labor Strike or any cooling off period prior to a Labor Strike, in each case, notwithstanding anything to the contrary in this Agreement, United shall have the right to suspend indefinitely any or all space available standby business and personal use travel privileges provided hereunder, effective immediately upon delivery of written notice to Contractor or Parent; provided that, if both (x) United suspends any such travel privileges pursuant to this Section 10.19(b) and (y) as a result thereof, Contractor can demonstrate to United’s reasonable satisfaction that a Scheduled Flight that was to occur during either such a cooling off period or after the cessation of the Labor Strike was cancelled directly as a result of such suspension, then such cancelled flight shall be considered an Uncontrollable Cancellation under this Agreement.

 

Section 10.20       Customer Satisfaction Goal.  Contractor acknowledges and agrees that a Customer Satisfaction goal based on United’s flight survey responses shall be added to this Agreement effective as of June 30, 2015, the final methodology of which is subject to further discussion and the mutual agreement of United and Contractor.

 

Section 10.21       Additional Agreements Relating to ***.

 

(a)           Contractor shall become a signatory carrier at *** through the execution of the *** Airport Amended and Restated Airport Use Agreement and Terminal Facilities Lease (the “ULA”). With respect to any costs and expenses incurred by Contractor under the terms of the ULA as a result of becoming a signatory carrier at *** as provided herein with no space lease obligation, Contractor shall pass such costs and expenses through to United for reimbursement by United.

 

50

 

(b)           As and when directed in writing by United, Contractor shall vote as directed in writing by United, on any matters submitted to carriers for a vote if such matters concern, or may result in, any costs, direct or indirect, to be paid for and/or reimbursed by United at ***; provided, however, that the foregoing in this clause (b) shall not apply if both (x) any such matter would result in a direct increase in rates and charges, or a new rate or charge, as imposed by the airport for Contractor, during the Term and (y) either (I) such increase or new rate or charge is not paid for and/or reimbursed by United as required under a written agreement, or (II) United does not otherwise agree at such time to pay for or reimburse such rate or charge when due.

 

Section 10.22       Effective Amendment. The parties acknowledge and agree that, immediately upon the execution of this Agreement and without any further action of any of the parties, each of the Ancillary Agreements (other than pursuant to Exhibits B, M and P, each of which the parties shall execute separately in the applicable form of such respective Ancillary Agreement attached to this Agreement as of the Effective Date) shall be deemed to have been executed by each of United and Contractor in the applicable form of each such respective Ancillary Agreement attached to this Agreement as of the Effective Date.

 

51

 

IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Capacity Purchase Agreement to be duly executed and delivered as of November 7, 2014.

 

	
 
    	
UNITED   AIRLINES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXPRESSJET   AIRLINES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED CAPACITY PURCHASE AGREEMENT

 

 

SCHEDULE 1
 Covered Aircraft

 

***

 

SCHEDULE 1 - 1

 

 

SCHEDULE 1A

 

Replacement Schedule Applicable in an Event of Default

 

[UNITED TO PROVIDE AS APPLICABLE]

 

SCHEDULE 1A - 1

 

 

SCHEDULE 2
 Transition Aircraft and Spare Engines

 

***

 

SCHEDULE 2 - 1

 

 

SCHEDULE 3(1)
 Compensation for Capacity Purchase

 

A.            Base and Incentive Compensation.

 

1.                                      Base Compensation. United will pay to Contractor, in respect of block hours, departures and each month of the Term for each Covered Aircraft, an amount calculated for each of the foregoing measurements and aggregated, as follows for each calendar month:

 

a.                                      ***% of the number of block hours set forth on the Final Monthly Schedule for such month, multiplied by the “for each block hour” rate as set forth in Appendix 1 hereto; plus

 

b.                                      the weighted average number of Covered Aircraft during such month, multiplied by the rate “for each Covered Aircraft for each month in the Term” as set forth in Appendix 1 hereto; plus

 

c.                                       ***% of the number of departures set forth on the Final Monthly Schedule for such month, multiplied by the “for each departure” rate as set forth in Appendix 1 hereto.

 

For purposes of this Paragraph 1, the weighted average number of Covered Aircraft during any month shall be calculated by determining, for each Covered Aircraft, the number of days during such month during which such aircraft was a Covered Aircraft, and then aggregating such number of days for all Covered Aircraft, and then dividing such aggregate number of days by the number of days in such month.  For the avoidance of doubt, for the purposes of this Agreement, an aircraft shall be included in the foregoing calculation only for the period beginning on the date on which such aircraft actually enters service as a Covered Aircraft and ending on the date on which such aircraft is withdrawn from the capacity purchase provisions of this Agreement and is no longer a Covered Aircraft hereunder (including without limitation any withdrawal pursuant to Article II and Article VIII of this Agreement).  In addition, United will pay Contractor an allocation for Reconciled Expenses set forth in Appendix 3, and as reconciled and further described in Paragraph B(5)(a) below:

 

d.                                      for Reconciled Expenses constituting payments described in clauses (i), (ii), (v), (viii), (ix), (xi) and (xii) of Paragraph B(5)(a) of this Schedule 3, Base Compensation shall include the amount set forth for such Reconciled Expenses on Appendix 3; and

 

e.                                       for Reconciled Expenses described in clauses (iii), (iv), (vi), (vii), (x), (xiii) and (xiv) of Paragraph B(5)(a) of this Schedule 3, Base

 

(1)  For the avoidance of doubt, the parties acknowledge and agree that, in the event of an Event of Default, during the Default Modification Period, all references in the Agreement to Schedule 1 shall be deemed to be references to such schedule as replaced or modified pursuant to the terms and conditions of Section 8.04 of the Agreement.

 

SCHEDULE 3 - 1

 

 

Compensation shall include an allocation based on the statistical drivers set forth for such Reconciled Expenses on Appendix 3 and calculated in accordance with Paragraph B(5)(b).

 

The aggregate Base Compensation shall be invoiced as provided in Section 3.06(a).

 

2.                                      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 United to Contractor) or a rebate (represented by a payment by Contractor to United), in each case in respect of on-time performance, as determined pursuant to paragraph 1 of Appendix 4 to this Schedule 3.

 

b.                                      Fuel Efficiency Bonus.  The reconciliation shall include, when and as applicable, a bonus (represented by a payment by United to Contractor) as determined pursuant to paragraph 2 of Appendix 4 to this Schedule 3.

 

The aggregate Incentive Compensation shall be invoiced as provided in Section 3.06(b).

 

3.                                      United-Directed Cancellations.  Subject to Section 8.04, effective as of July 1, 2014 and for each calendar month thereafter, if United, following delivery of a Final Monthly Schedule, directs the cancellation of flights (each, a “United Cancelled Flight” and collectively, the “United Cancelled Flights”) and that flight cancellation is coded in United’s systems as a United initiated cancel then United shall pay Contractor in accordance with the rates set forth for on Appendix 7 to Schedule 3 for each United Cancelled Flight, as if each such United Cancelled Flight had been operated as contemplated in the Final Monthly Schedule as the sole compensation for such flight. Any Scheduled Flight canceled at United’s direction shall be coded in accordance with United’s standard practices as an Uncontrollable Cancellation. All payments will be based upon the scheduled block hours and departures for such Scheduled Flight cancellations directed by United. No payments will be made for Reconciled Expenses with the statistical categories of “departures” or “block hours”. The United directed cancellations will not affect payments relating to the rate “For each Covered Aircraft for each month in the term” or for other Reconciled Expenses.  For avoidance of doubt, the foregoing payment shall be paid for all United Cancelled Flights even if the Base Compensation Rates for the applicable Covered Aircraft subject to such cancellation as set forth in Appendix 1 to this Schedule 3 do not provide for a “departure” payment with respect to the applicable Covered Aircraft.

 

SCHEDULE 3 - 2

 

B.                                    Expenses and Reconciliation.

 

1.                                      With respect to Scheduled Flights, in consideration of the provision by Contractor of Regional Airline Services and its compliance with the other terms and conditions of this Agreement, the following expenses listed within Paragraph (B)(1) of this Schedule 3 shall be incurred directly by United:

 

a.                                      passenger and cargo revenue-related expenses, including but not limited to commissions, ticket and airway bill taxes and fees related to the transportation of passengers or cargo, food, beverage costs and catering, charges for fare or tariff filings, sales and advertising costs, computer reservation system fees, credit card fees, interline fees, revenue taxes, GDS fees, airport collateral materials, reservation costs, revenue accounting costs, including costs associated with ticket sales reporting and unreported sales, usage, maintenance and replacement costs related to equipment relevant to onboard sales and payment transaction processes as outlined in United’s policies and procedures in quantities consistent with standards used by United, MileagePlus participation costs and United Currencies;

 

b.                                      glycol, de-icing and snow removal costs at United Airports;

 

c.                                       denied boarding amenities and related travel certificates in respect of delayed or cancelled flights distributed in a manner consistent with United’s policies and procedures (regardless of whether attributable to Contractor’s operations in the normal course of business);

 

d.                                      passenger-related interrupted trip costs (including hotel, meal and calling cards vouchers) and baggage handling claims, baggage repairs, baggage delivery costs and oversales distributed or made in a manner consistent with United’s policies and procedures (regardless of whether attributable to Contractor’s operations in the normal course of business);

 

e.                                       as provided by and in consideration of Contractor’s compliance with its obligations under the Fuel Purchasing Agreement, Fuel, Fuel taxes and Fuel into plane charges, including administration fees, if any;

 

f.                                        rent for Terminal Facilities at United Airports;

 

g.                                       ground handling costs at United Airports, for which costs United is responsible pursuant to the United Ground Handling Agreement;

 

h.                                      technology services related to all passenger services processes;

 

i.                                          TSA fees or charges and any other passenger security fees or charges for security at all United Airports, but without limiting the parties respective obligations relating to regulatory and other fines pursuant to Article VII; and

 

SCHEDULE 3 - 3

 

j.                                         if United elects to procure, or arrange for the procurement of, aircraft fuel and/or Fuel Services, as the case may be, pursuant to Section 4.10(b), and in consideration of Contractor’s compliance with its obligations under such Section 4.10, (I) the cost of such fuel procurement, including any administration fees, taxes or other charges of any fuel supplier, and/or (II) charges for such Fuel Services, as applicable.

 

2.                                      Flight Reconciliation.

 

a.                                      With respect to Scheduled Flights, for any calendar month in which Contractor’s actual block hours flown exceeds the block hours invoiced pursuant to Paragraph A(1)(a) for such calendar month, then the reconciliation for such period shall include a payment by United to Contractor in an amount equal to the product of (i) the difference between the actual block hours flown for Scheduled Flights and such invoiced block hours, multiplied by (ii) the “for each block hour” rate as set forth in Appendix 1 hereto.

 

b.                                      With respect to Scheduled Flights, for any calendar month for which the block hours invoiced pursuant to Paragraph A(1)(a) exceeds Contractor’s actual block hours flown in such calendar month, then the reconciliation for such period shall include a payment by Contractor to United in an amount equal to the product of (i) the difference between such invoiced block hours and the actual block hours flown for Scheduled Flights, multiplied by (ii) the “for each block hour” rate as set forth in Appendix 1 hereto.

 

c.                                       To the extent consistent with past practice under the capacity purchase agreement between Contractor and United in place immediately prior to the date of this Agreement, Contractor’s “actual block hours flown” shall include block hours operated for all completed Scheduled Flights, including those resulting from any unscheduled stop required prior to the completion of a Scheduled Flight, however, “actual block hours flown” shall not include any block hours resulting from or attributable to ground returns or air returns.

 

d.                                      With respect to Scheduled Flights, for any calendar month in which the number of departures actually flown by Contractor for Scheduled Flights in such calendar month exceeds the number of departures for which United is invoiced by Contractor for Scheduled Flights for such calendar month pursuant to Paragraph A(1)(c), then the reconciliation for such calendar month shall include a payment by United to Contractor in an amount equal to the product of (i) the difference between the number of departures actually flown by Contractor for Scheduled Flights in such calendar month and the number of departures for which United is invoiced by Contractor for Scheduled Flights in such calendar month and (ii) the

 

SCHEDULE 3 - 4

 

“for each departure” rate set forth in Appendix 1 hereto for the applicable Covered Aircraft.

 

e.                                       With respect to Scheduled Flights, for any calendar month in which the number of departures for which United is invoiced by Contractor for Scheduled Flights in such calendar month pursuant to Paragraph A(1)(c) exceeds the number of departures actually flown by Contractor for Scheduled Flights in such calendar month, then the reconciliation for such calendar month shall include a payment by Contractor to United in an amount equal to the product of (i) the difference between the number of departures for which United is invoiced by Contractor for Scheduled Flights for such calendar month and the number of departures actually flown by Contractor for Scheduled Flights in such calendar month and (ii) the “for each departure” rate as set forth in Appendix 1 hereto for the applicable Covered Aircraft.

 

3.                                      Flight Cancellation Reconciliation/Controllable Completion Bonus and Rebate.

 

a.                                      United and Contractor have developed a monthly incentive program (the “Controllable Completion Incentive Program”) under which Contractor shall either earn monthly incentive payments or pay United rebates for such month, all as more fully set forth below:

 

i.                  Under the Controllable Completion Incentive Program, an operating performance goal for Contractor’s operation of Scheduled Flights shall be set with respect to Controllable Completion Factor (the “Controllable Completion Operating Goal”).  The Controllable Completion Operating Goal and adjustments used to create this goal will be calculated using two (2) decimal points.  The Controllable Completion Operating Goal for the first period shall be effective as of July 1, 2014 and shall continue through and including the next December 31, and shall be reestablished for each succeeding calendar year, using the applicable predetermined methodology as set forth below:

 

a.              If the level of performance with respect to Controllable Completion Factor achieved by United’s domestic mainline operations for the most recent calendar year completed prior to the beginning of such period Domestic Mainline Operations Performance Level (the “Domestic Mainline Operations Performance Level”) is greater than the United Express Best Practice Operating Performance (as defined below), then Controllable Completion Operating Goal for the upcoming period shall be equal to United’s aggregate Controllable Completion Factor for its domestic mainline operations for the measured period, adjusted downward by *** percentage points.  “United Express Best Practice Operating Performance” means the simple arithmetic average of twelve levels of performance, representing

 

SCHEDULE 3 - 5

 

the highest level of performance with regard to such measure achieved for each calendar month during the most recent calendar year completed prior to the beginning of such period (determined separately for each such month), by any contractor of regional airline services under the “United Express” brand; it being understood that the highest level of performance may be achieved by different contractors or service providers in different months, and pursuant to this Agreement or other agreements with United.

 

b.              If the United Express Best Practice Operating Performance (measured for the prior calendar year) is greater than the Domestic Mainline Operations Performance Level (measured for the prior calendar year), then the Controllable Completion Operating Goal for the upcoming period shall be equal to the Controllable Completion Factor constituting part of the United Express Best Practice Operating Performance (measured for the prior year), adjusted downward by *** percentage points.

 

ii.               Performance Levels.  The Controllable Completion Operating Goal shall be used to determine four performance levels, “A,” “B,” “C” and “D” (each a “Performance Level”) as follows:

 

a.              Effective July 1, 2014 and continuing until December 31, 2014, Performance Levels shall be as follows:

 

i.                  “A” Performance Level = ***

 

ii.               “B” Performance Level = ***

 

iii.            “C” Performance Level = ***

 

iv.           “D” Performance Level = ***

 

b.              Effective as of January 1, 2015 and continuing thereafter, the Performance Levels shall be as follows:

 

i.                  “A” Performance Level = Above Controllable Completion Operating Goal + *** points

 

ii.               “B” Performance Level = Controllable Completion Operating Goal

 

iii.            “C” Performance Level = Controllable Completion Operating Goal — *** points

 

iv.           “D” Performance Level = Below “C” Performance Level

 

SCHEDULE 3 - 6

 

iii.            For each calendar month during the Term during which Scheduled Flights shall have been flown, Contractor’s level of performance under this Agreement with respect to the Controllable Completion Operating Goal (“Contractor’s Performance”) shall be measured against the Performance Levels, and a “Contractor Grade” shall be determined with respect to the Controllable Completion Operating Goal.

 

iv.           Following the determination of each Contractor Grade for each month, any applicable bonus payment or rebate payment shall be determined as follows, and such bonus or rebate for the applicable month shall be incorporated into the reconciliation process set forth in B.2 of this Schedule 3 (any payment owed to Contractor by United associated with such determination, a “CCF Bonus” and any payment owed to United by Contractor associated with such determination, a “CCF Rebate”):

 

	
Contractor Grade
    	
 
    	
CCF Bonus or CCF Rebate
    	
 
    	
Amount to be Paid
    
	
A
    	
 
    	
CCF Bonus
    	
 
    	
(Controllable   Completion Factor Incentive Rate) * (Number of cancellations associated with   lowest end of the range for the “A” Performance Level minus Number   of Controllable Cancellations in such Month)
    
	
B
    	
 
    	
None
    	
 
    	
N/A
    
	
C
    	
 
    	
CCF Rebate
    	
 
    	
(Controllable   Completion Factor Incentive Rate) * (***) * (Number of Controllable   Cancellations in such Month minus Number   of cancellations associated with the lowest end of the range for the “B”   Performance Level)
    
	
D
    	
 
    	
CCF Rebate
    	
 
    	
(Controllable   Completion Factor Incentive Rate) * (Number of Controllable Cancellations in   such
    

 

SCHEDULE 3 - 7

 

	
 
    	
 
    	
 
    	
 
    	
Month   minus Number of cancellations   associated with the lowest end of the range for the “B” Performance Level)
    

 

b.                                      For all purposes of this Agreement, the following provisions shall apply:

 

i.                  After presentation of the Final Monthly Schedule pursuant to Section 2.01(b) of the Agreement, if United makes any changes to such schedule (whether through a schedule modification or other communication) that result in a cancellation of a Scheduled Flight, then such cancellation shall constitute an Uncontrollable Cancellation.

 

ii.               If any proposed Scheduled Flight on a planned flight schedule involves a flight to a new airport which will be a Contractor Airport, and Contractor experiences a delay in preparing the required facilities and making all necessary arrangements to complete a flight to such airport, which delay either (i) is caused by the Environmental Protection Agency, airport or any other governmental authority, or (ii) occurs after Contractor received less than 90 days’ advance notice of such Scheduled Flight to a new airport and used its commercially reasonable efforts to prepare the required facilities and make all necessary arrangements (all in accordance with the Master Facility and Ground Handling Agreement), and in either case such Scheduled Flight is cancelled, then such cancellation shall constitute an Uncontrollable Cancellation; it being understood that any airport to which Contractor flies on the Effective Date or has previously flown pursuant to this Agreement shall not constitute a “new airport.”

 

c.                                       [Reserved].

 

d.                                      Without limiting Contractor’s right to submit a Schedule Reduction Request, any cancellation due to Contractor’s inability to operate a Scheduled Flight due to Contractor’s inability to hire pilots, or any pilot or other labor group shortage, including, without limitation, as a result of a Labor Strike, shall be considered a Controllable Cancellation; provided that, only if Contractor and SkyWest Airlines are taking commercially reasonable efforts to resolve such shortage, the foregoing shall not apply and such cancellation shall be deemed an Uncontrollable Cancellation to the extent that, and only for such Scheduled Flights for which, Contractor reasonably demonstrates to United that the inability to hire pilots, or any such pilot or other labor group shortage, is due to market conditions proportionately affecting all of the operations of Contractor and SkyWest Airlines.

 

SCHEDULE 3 - 8

 

e.                                       Without limiting Contractor’s right to submit a Schedule Reduction Request, any cancellation due to Contractor’s inability to operate a Scheduled Flight due to pilot attrition, shall be considered a Controllable Cancellation; provided that, only if Contractor and SkyWest Airlines are taking commercially reasonable efforts to resolve such shortage, the foregoing shall not apply and such cancellation shall be deemed an Uncontrollable Cancellation to the extent that, and only for such Scheduled Flights for which, Contractor reasonably demonstrates to United that the attrition is substantially caused by increased hiring by United of Contractor’s and SkyWest Airlines’ pilots (i.e. over a historical hiring percentage of all Contractor’s and SkyWest Airlines’ pilots).

 

f.                                        Contractor hereby agrees that each cancellation of a Scheduled Flight shall be designated as either a Controllable Cancellation or an Uncontrollable Cancellation on a basis consistent with United’s historical experience and practice with operators of its regional jets.  The parties shall reconcile any differences in the designation of Scheduled Flights on a monthly basis in connection with the general financial reconciliation for such month.

 

4.                                      Compensation for Lower Block Hours Scheduled per Covered Aircraft.  If, for any calendar quarter, (A) the product of (x) the number of days in such calendar quarter, multiplied by (y) *** hours per day, multiplied by (z) the weighted average number of Covered Aircraft, available each day for such calendar quarter (determined as provided below) exceeds (B) the number of scheduled block hours for all Scheduled Flights during such calendar quarter, then within 60 days after the end of such calendar quarter United shall pay to Contractor an amount equal to the product of such excess number of hours multiplied by the appropriate rate, determined as set forth in the immediately succeeding sentence; provided, that no payment shall be made for any calendar quarter in which (x) a Labor Strike shall have occurred or (y) United reduced the number of scheduled block hours in connection with or in response to Contractor’s failure to remain in material compliance with its obligations arising under this Agreement or any Ancillary Agreement, or otherwise as a result of a material event outside of United’s reasonable control (including without limitation grounding of Covered Aircraft, the imposition of flight caps or other material regulatory action involving Covered Aircraft and/or airports serviced or to be serviced by Covered Aircraft).  The appropriate rate to be used for purposes of payment calculation as set forth above shall be determined by using the rate set forth on Appendix 6 to Schedule 3 for the applicable quarter (I) under the column corresponding to the number of consecutive quarters in which the amount described in clause (A) above exceeds the amount described in clause (B) above, and (II) in the row corresponding to the “Scheduled Utilization”, which shall be calculated by taking the block hours referenced in clause (B) above divided by the product of (x) the weighted average number of Covered Aircraft available each day for such calendar quarter (determined as provided below) multiplied by (y) the number of days during such quarter.  For example, if the amount described in clause (A) above exceeds the amount described in clause (B) above for three consecutive quarters and the

 

SCHEDULE 3 - 9

 

Scheduled Utilization was *** for the third such quarter, then the rate for such third quarter pursuant to this Paragraph B(4) would be $*** for each block hour that the amount described in clause (A) above exceeds the amount described in clause (B) above.  The weighted average number of Covered Aircraft available each day for such calendar quarter shall be calculated by determining, for each Covered Aircraft other than Spare Aircraft, the number of days during such calendar quarter during which such aircraft was a Covered Aircraft and available for scheduling, and then aggregating such number of days for all Covered Aircraft other than Spare Aircraft, and then dividing such aggregate number of days by the number of days in such calendar quarter.

 

5.                                      Reconciled Expenses.

 

a.                                      The following expenses incurred in connection with Scheduled Flights shall be reconciled monthly (except as specifically set forth below) to actual costs (“Reconciled Expenses”):

 

(i) rent paid by Contractor for Terminal Facilities at Contractor Airports (it being understood, for the avoidance of doubt, that the term “rent” as used herein shall not be deemed to include indemnity or similar payments, irrespective of its definition under any applicable lease, except to the extent such indemnity or similar payment is attributable to the fault or neglect of United);

 

(ii) property taxes (but excluding all other taxes including without limitation income, profits, withholding, employment, social security, disability, occupation, severance, excise ad valorem, sales, use and franchise taxes);

 

(iii) Aviation Insurance premiums, and deductibles payable by United pursuant to Paragraph B(6)(f) below or otherwise payable under Aviation Insurance not part of a combined placement pursuant to Section 6.04; provided, that if United and Contractor are not participating in a combined placement pursuant to Section 6.04, then United shall not pay to Contractor (A) in respect of premiums payable pursuant to this clause (iii), any amount that is in excess of the amount payable pursuant to Paragraph B(6)(a) or Paragraph B(6)(b) below, as applicable or (B) in respect of deductibles payable pursuant to this clause (iii), any amount that is in excess of maximum amount reimbursable by United pursuant to Paragraph B(6)(f) below immediately prior to Contractor ceasing to participate in such combined placement;

 

(iv) landing fees other than deposits or similar payments (irrespective of the definition of “landing fees” in any applicable airport agreement);

 

(v) glycol and de-icing costs at Contractor Airports;

 

SCHEDULE 3 - 10

 

(vi) air navigation fees paid to NavCanada (or any Canadian successor thereto) and Servicios a la Navegacion en el Espacio Aereo Mexicano (SENEAM) (or any Mexican successor thereto), in each case in respect of Scheduled Flights, it being understood that any fees paid to secure route authorities (other than in connection with the initiation of routes not previously flown by Contractor), operating certificates, permits and any related costs will not be considered air navigation fees;

 

(vii) the amount of TSA fees or charges and any other passenger security fees or charges for security at all Contractor Airports, other than such fees and charges for which United is or would be entitled to indemnification under Article VII;

 

(viii) Incentive Program Costs;

 

(ix) costs of operating ARINC aircraft communications addressing and reporting systems;

 

(x) landing gear overhaul and Landing Gear LLP costs;

 

(xi) replacement costs for Engine LLPs that reach their life limit;

 

(xii) replacement costs for Spare Engine LLPs that reach their life limit, subject to the limitations set forth in Paragraph (B)(7);

 

(xiii) payments made by Contractor for “power-by-the-hour” services under the Engine Maintenance Agreement, or alternate arrangement agreed to by Contractor and United, such agreement not to be unreasonably withheld, conditioned or delayed; and

 

(xiv) as provided by and in consideration of Contractor’s compliance with its obligations under Section 4.10, (A) if United shall not have elected to procure fuel pursuant to clause (i) of Section 4.10(b), the cost of such fuel procurement, including any administration fees, taxes or other charges of any fuel supplier, and (B) if United shall not have elected to procure Fuel Services for or on behalf of Contractor pursuant to clause (ii) of Section 4.10(b), charges for Fuel Services;

 

The Base Compensation includes allocations of the Reconciled Expenses as set forth in Appendix 3 and with respect to certain Reconciled Expenses, as further provided in Paragraph B(5)(b) below.  If in any month the Contractor’s actual Reconciled Expenses exceed the amount of Reconciled Expenses included in the Base Compensation in accordance with Appendix 3 and with respect to certain Reconciled Expenses as further provided in Paragraph B(5)(b) below for such month, United shall pay to Contractor an amount equal to such difference.  If in any month the amount of Reconciled Expenses included in the Base Compensation in accordance with Appendix 3 and with respect to certain Reconciled 

 

SCHEDULE 3 - 11

 

Expenses as further provided in Paragraph B(5)(b) below for such month exceeds the Contractor’s actual Reconciled Expenses, Contractor shall pay to United an amount equal to such difference.

 

b.                                      The allocations included in Base Compensation for Reconciled Expenses of the type set forth in Paragraph A(1)(e) for any particular month shall be calculated as provided below:

 

I.                                        The amount of Aviation Insurance costs referred to in clause (iii) of Paragraph B(5)(a) and the amount of TSA fees or charges and any other passenger security fees or charges at all Contractor Airports for security referred to in clause (vii) of Paragraph B(5)(a) included in the Base Compensation for any particular month will be equal to the product of (1) the insurance rate and TSA rates set forth on Appendix 3 multiplied by (2) the Forecasted Passengers for such month.

 

II.                                   The amount of landing fees referred to in clause (iv) of Paragraph B(5)(a) and the amount of Canada and Mexico air navigation fees referred to in clause (vi) of Paragraph B(5)(a) included in the Base Compensation for any particular month will be equal to the aggregate sum of the following products: (1) the landing fee rate and the Canadian and Mexican air navigation rates set forth in Appendix 3, multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule, multiplied by (3) 98%.

 

III.                              The amount of landing gear overhaul and Landing Gear LLP costs referred to in clause (x) of Paragraph B(5)(a) included in the Base Compensation for any particular month will be equal to the aggregate sum of the following products: (1) the landing gear overhaul and Landing Gear LLP cost rate set forth in Appendix 3, multiplied by (2) the weighted average number of Covered Aircraft during such month.

 

IV.                               The amount of Engine power-by-the-hour costs referred to in clause (xiii) of Paragraph B(5)(a) included in the Base Compensation for any particular month will be equal to the aggregate sum of the following products: (1) the Engine power-by-the-hour costs rate set forth in Appendix 3, multiplied by (2) the number of scheduled block hours set forth in the Final Monthly Schedule, multiplied by (3) ***%.

 

V.                                    The amount of Fuel Services charges referred to in clause (xiv) of Paragraph B(5)(a), if any, will be equal to the aggregate sum of the following products: (1) the rate set forth in Appendix 3 for Fuel

 

SCHEDULE 3 - 12

 

Services, multiplied by (2) the number of scheduled departures set forth in the Final Monthly Schedule, multiplied by (3) ***%.

 

VI.                               The amount of Fuel to be procured by Contractor pursuant to clause (xiv) of Paragraph B(5)(a), if any, as reasonably determined by United, multiplied by the average per gallon cost of such Fuel used by Contractor in the immediately preceding month the cost of which was incurred directory and/or reimbursed hereunder by United, as the case may be, multiplied by ***%.

 

6.                                      Insurance Costs

 

a.                                      If Contractor elects not to participate in a combined placement for a particular Aviation Insurance policy, Contractor shall not be reimbursed or otherwise compensated (through adjustments to block hour rates, reconciliation amounts or otherwise) for any Excess Insurance Costs with respect to such policy or for any costs of such policy that are in excess of the Average Peer Group Rate.

 

b.                                      If Contractor does not participate in a combined placement for a particular Aviation Insurance policy for any reason other than its election not to participate, United shall pay to Contractor an amount equal to the Excess Insurance Costs with respect to such policy, but only up to an aggregate policy cost equal to the Average Peer Group Rates.  Contractor shall not be reimbursed or otherwise compensated (through adjustments to block hour rates or otherwise) to the extent that its insurance costs exceed the Average Peer Group Rates.

 

c.                                       Subject to Paragraph B(6)(d) and Paragraph B(6)(e) below, Contractor will pay to United its proportionate share of all combined-placement Aviation Insurance premiums not later than the date that United is required under the terms of the applicable policy to pay the policy premiums.  The cost allocation for such combined placements shall be as follows:

 

I.                                        Hull Coverage Rate. To be determined each year; a dollar amount equal to the combined placement program’s composite whole rate as set forth in the current group policy, multiplied by Contractor’s average fleet value for the policy period, as determined by recognized standard industry methods of valuation consistent with prior practice.

 

II.                                   Liability Rates. To be determined each year; an amount equal to the combined placement program’s composite liability rate as set forth in the current group policy, multiplied by revenue passenger miles, as determined by recognized standard industry methods consistent with prior practice.

 

SCHEDULE 3 - 13

 

III.                              War Risk Rate. To be determined each year; an amount equal to the combined placement program’s composite liability war risk rate as set forth in the current group policy, multiplied by revenue passenger miles and onboard passengers, as determined by recognized standard industry methods consistent with prior practice and an amount equal to the combined placement program’s composite hull war risk rate as set forth in the current group policy, multiplied by Contractor’s average fleet value for the policy period, as determined by recognized standard industry methods of valuation consistent with prior practice.

 

d.                                      In the fiscal quarter subsequent to the next combined policy Aviation Insurance renewal following a Major Loss caused by United (or, if such a Major Loss occurs so close to the combined policy insurance renewal date that the effects are not reflected in the next combined policy Aviation Insurance renewal premium amount, then in the fiscal quarter subsequent to the renewal in which the effects are first included), United and Contractor agree to determine and allocate the amount of increase in the combined policy Aviation Insurance premiums, if any, to be attributed to such Major Loss (as opposed to a general increase in the premiums) as follows:

 

I.                                        The parties will compare the combined policy premium increase to premium increases experienced by the five Major Carriers closest to United in aggregate revenue passenger miles at the time of such determination, excluding any Major Carrier that experienced a Major Loss within the previous three years.

 

II.                                   The average annual increase in insurance costs for such Major Carriers shall be calculated by (i) subtracting the expiring rates of each such Major Carrier from its new rates, (ii) adding the total of such differences and (iii) dividing the total by the number of Major Carriers whose rates were included in the calculation.

 

III.                              The amount that the increase in the combined premiums for United and Contractor exceeds the average annual increase in insurance costs calculated pursuant to clause (II) above shall be deemed to be the portion of the increase for such year due to such Major Loss (the “United Premium Surcharge Amount”).

 

IV.                               The portion of the United Premium Surcharge Amount payable by United shall be 100% of the United Premium Surcharge Amount for the first year following the beginning of such fiscal quarter, 50% of the United Premium Surcharge Amount for the second year following the beginning of such fiscal quarter, 25% of the United Premium Surcharge Amount for the third year following the beginning of such fiscal quarter, and $0 thereafter.

 

SCHEDULE 3 - 14

 

V.                                    The portion of the United Premium Surcharge Amount payable pursuant to clause (IV) above shall be borne solely by United and that amount shall be deducted from the aggregate premium amounts included in all cost-sharing calculations between United and Contractor.

 

e.                                       In the fiscal quarter subsequent to the next combined policy Aviation Insurance renewal following a Major Loss caused by Contractor (or, if such a Major Loss occurs so close to the combined policy insurance renewal date that the effects are not reflected in the next combined policy Aviation Insurance renewal premium amount, then in the fiscal quarter subsequent to the renewal in which the effects are first included), United and Contractor agree to determine and allocate the amount of increase in the combined policy Aviation Insurance premiums, if any, to be attributed to such Major Loss (as opposed to a general increase in the premiums) as follows:

 

I.                                        The parties will compare the combined policy premium increase to premium increases experienced by the five Major Carriers closest to those of United in aggregate revenue passenger miles at the time of such determination, excluding any Major Carrier that experienced a Major Loss within the previous three years.

 

II.                                   The average annual increase in insurance costs for such regional airlines shall be calculated by (i) subtracting the expiring rates of each such regional airline from its new rates, (ii) adding the total of such differences and (iii) dividing the total by the number of such regional airlines whose rates were included in the calculation.

 

III.                              The parties will also calculate the maximum permitted increase in annual premiums which would be permitted if the policy coverage was limited to the insurance limits required to be maintained by Contractor (the “Contractor Premium Surcharge Limit”).

 

IV.                               The amount that the Contractor Premium Surcharge Limit exceeds the average annual increase in insurance costs calculated pursuant to clause (II) above shall be deemed to be the portion of the increase for such year due to such Major Loss (the “Contractor Premium Surcharge Amount”).

 

V.                                    The amount that the increase in the combined premiums for United and Contractor exceeds the sum of (x) the average annual increase in insurance costs calculated pursuant to clause (II) above and (y) the Contractor Premium Surcharge Amount shall be deemed to be the portion of the increase for such year due to such Major Loss (the “Contractor Premium Surcharge Overflow Amount”).

 

VI.                               The portion of the Contractor Premium Surcharge Amount payable by Contractor shall be 100% of the Contractor Premium Surcharge

 

SCHEDULE 3 - 15

 

Amount for the first year following the beginning of such fiscal quarter, 50% of the Contractor Premium Surcharge Amount for the second year following the beginning of such fiscal quarter, 25% of the Contractor Premium Surcharge Amount for the third year following the beginning of such fiscal quarter, and $0 thereafter.

 

VII.                          The portion of the Contractor Premium Surcharge Overflow Amount payable by Contractor shall be 100% of the Contractor Premium Surcharge Overflow Amount for the first year following the beginning of such fiscal quarter, 50% of the Contractor Premium Surcharge Overflow Amount for the second year following the beginning of such fiscal quarter, 25% of the Contractor Premium Surcharge Overflow Amount for the third year following the beginning of such fiscal quarter, and $0 thereafter.

 

VIII.                     The portion of the Contractor Premium Surcharge Amount payable pursuant to clause (VI) above shall be borne solely by Contractor and that amount shall be deducted from the aggregate premium amounts included in all cost-sharing calculations between United and Contractor.

 

IX.                               The portion of the Contractor Premium Surcharge Overflow Amount payable pursuant to clause (VII) shall be borne solely by United and that amount shall be deducted from the aggregate premium amounts included in all cost-sharing calculations between United and Contractor.

 

f.                                        Contractor shall be reimbursed in full for the aggregate dollar amount of all Aviation Insurance deductibles paid with respect to Regional Airline Services in any calendar year in respect of Aviation Insurance policies placed pursuant to Section 6.04, up to, for any Aviation Insurance policy, the historical annual average of the aggregate dollar amount of such deductibles paid by Contractor for claims made under such policy during the last five full calendar years for which such calculations are available as of such date of determination.

 

7.                                      Spare Engine LLPs

 

a.                                      Intentionally omitted.

 

b.                                      At United’s request, Contractor shall cooperate with United to allow the replacement costs attributable to Spare Engine LLPs associated with the Spare Engines to be included in a cost-per-cycle arrangement (a “Spare Engine Cost-Per-Cycle Arrangement”).  During the effectiveness of any Spare Engine Cost-Per-Cycle Arrangement, United shall not be liable for any replacement costs attributable to Spare Engine LLPs other than pursuant to such Spare Engine Cost-Per-Cyle Arrangement.  The Spare Engines to be included in any Spare Engine Cost-Per-Cycle Arrangement shall consist of equal portions of the Spare Engines with the highest Average Remaining Cycle Life and lowest Average Remaining Cycle Life (or, in the event of an odd number of Spare Engines, as equal as possible with one more Spare Engine with the lowest Average Remaining Cycle 

 

SCHEDULE 3 - 16

 

Life).  The “Average Remaining Cycle Life” for a Spare Engine shall be the sum of the remaining cycle life for each Spare Engine LLP installed on such Spare Engine divided by the total number of Spare Engine LLPs installed on such Spare Engine.

 

c.                                       Intentionally omitted.

 

d.                                      Intentionally omitted.

 

8.                                      No Reconciliation for Fines, Etc.  Notwithstanding anything to the contrary contained in this Paragraph B, United shall not be required to incur any cost or make any reconciliation payment pursuant to this Paragraph B 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 Contractor as a result of any violation by Contractor of any law, statute, judgment, decree, order, rule or regulation of any governmental or airport authority.  United shall be liable for any costs, expenses or losses (including fines, penalties and any costs and expenses associated with any related investigation or defense) incurred by Contractor as a result of any violation by United or its agents of any law, statute, judgment, decree, order, rule or regulation of any governmental or airport authority.

 

9.                                      With respect to all ERJ-135 aircraft, if Contractor incurs maintenance costs relating to non-pass-through maintenance expenses in connection with repairs on components (other than landing gear and engines), the auxiliary power unit or the airframe of such Aircraft and the benefit of such repair extends beyond the “Sublease Expiration Date” set forth in Schedule 1 (or, such earlier date as such Covered Aircraft is withdrawn from the capacity purchase provisions of this Agreement at the election of United), then upon the expiration of the sublease for, and the return by Contractor to United in accordance with this Agreement of, such Aircraft (or, if earlier, the withdrawal of such Covered Aircraft from the capacity purchase provisions of this Agreement), United will reimburse Contractor an amount equal to the “remaining useful benefit of such maintenance” (it being understood that all maintenance costs with respect to such Aircraft relating to landing gear and engines that are not otherwise reimbursed as Reconciled Expenses shall be paid for directly by United or shall otherwise be deemed Reconciled Expenses for all purposes of the Agreement).

 

The “remaining useful benefit of such maintenance” shall be determined by multiplying the maintenance expense incurred by Contractor in connection with such repair (less any reimbursement provided by United to Contractor as a Reconciled Expense related to such repair) by a fraction, the numerator of which is the reasonably anticipated useful life of such component, auxiliary power unit or airframe (as applicable) in hours/cycles (as applicable) following such maintenance event minus the number of hours/cycles (as applicable) used by Contractor since such maintenance event until such Aircraft is returned to United by Contractor (or, if earlier, the withdrawal of such Covered Aircraft from the

 

SCHEDULE 3 - 17

 

capacity purchase provisions of this Agreement) and the denominator is the reasonably anticipated useful life of such component, auxiliary power unit or airframe (as applicable) in hours/cycles (as applicable) following such maintenance event.

 

10.                               Intentionally omitted.

 

11.                               Intentionally omitted.

 

12.                               Intentionally omitted.

 

13.                               Covered Aircraft Numbers *** (with corresponding Covered Aircraft Tail Numbers of ***). With respect to each of the Covered Aircraft Numbers ***, if Contractor incurs C-Check maintenance costs after the Amendment Effective Date, then upon the expiration of the sublease for, and the return by Contractor to United in accordance with this Agreement of, such Aircraft, United will reimburse Contractor for any reasonable actual third party costs associated with C-Check green time remaining on the airframe on a pro-rata basis for any remaining flight hours or cycles, whichever is the more limiting on remaining green time, provided that United has not already compensated Contractor for such time or cycles.

 

SCHEDULE 3 - 18

 

Schedule 3 Appendices

 

	
Appendix   1(2)
    	
 
    	
Base   Compensation Rates
    
	
Appendix   1A
    	
 
    	
Base   Compensation Rates During the Default Modification Period
    
	
Appendix   2
    	
 
    	
Controllable   Completion Factor Incentives Rate
    
	
Appendix   3
    	
 
    	
Reconciliation   of Expenses
    
	
Appendix   4
    	
 
    	
On   Time Incentive Bonuses/Rebates
    
	
Appendix   5
    	
 
    	
Insurance   Rates
    
	
Appendix   6(3)
    	
 
    	
Low   Block Hour Utilization Rates
    
	
Appendix   6A
    	
 
    	
Low   Block Hour Utilization Rates During the Default Modification Period
    
	
Appendix   7
    	
 
    	
Payments   for Scheduled Flight Cancellations Directed by United
    

 

(2)  For the avoidance of doubt, the parties acknowledge and agree that, in the event of an Event of Default, during the Default Modification Period, all references in the Agreement to Schedule 1 shall be deemed to be references to such schedule as replaced or modified pursuant to the terms and conditions of Section 8.04 of the Agreement.

(3)  For the avoidance of doubt, the parties acknowledge and agree that, in the event of an Event of Default, during the Default Modification Period, all references in the Agreement to Schedule 1 shall be deemed to be references to such schedule as replaced or modified pursuant to the terms and conditions of Section 8.04 of the Agreement.

 

SCHEDULE 3 - 19

 

Appendix 1 to Schedule 3(4)

 

Base Compensation Rates

 

For Schedule 1 Covered Aircraft Numbers ***, Base Compensation Rates are payable in accordance with the following chart:

 

	
Covered
   Aircraft
   Numbers
    	
 
    	
 
    	
 
    	
From and Including July 1 2014
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
“Supplemental” for each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
“Supplemental” for each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
“Supplemental” for each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
“Supplemental” for each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each departure
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
“Supplemental” for each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    

 

These Base Compensation Rates shall be adjusted to the extent provided pursuant to the terms of Section 3.02 of this Agreement.

 

(4)  For the avoidance of doubt, the parties acknowledge and agree that, in the event of an Event of Default, during the Default Modification Period, all references in the Agreement to Schedule 1 shall be deemed to be references to such schedule as replaced or modified pursuant to the terms and conditions of Section 8.04 of the Agreement.

 

APPENDIX 1 TO SCHEDULE 3 - 1

 

Appendix 1A to Schedule 3

 

Base Compensation Rates Applicable During the Default Modification Period

 

During the Default Modiciation Period, for Schedule 1 Covered Aircraft Numbers ***, Base Compensation Rates are payable in accordance with the following chart:

 

	
Covered
   Aircraft
   Numbers
    	
 
    	
 
    	
 
    	
From and Including July 1 2014
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each departure
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    
	
***
    	
 
    	
For each block hour
    	
 
    	
***
    
	
 
    	
 
    	
For each Covered Aircraft for each month in   the term
    	
 
    	
***
    

 

These Base Compensation Rates shall be adjusted to the extent provided pursuant to the terms of Section 3.02 of this Agreement.

 

APPENDIX 1A TO SCHEDULE 3

 

Appendix 2 to Schedule 3

 

Controllable Completion Factor Rate

 

“Controllable Completion Factor Incentive Rate” shall be $***, as adjusted pursuant to Section 3.02 of this Agreement.

 

APPENDIX 2 TO SCHEDULE 3

 

Appendix 3 to Schedule 3

 

	
Reconciled
    	
 
    	
Schedule 3
    	
 
    	
Statistical
    	
 
    	
 
    
	
Expense
    	
 
    	
Reference
    	
 
    	
Driver
    	
 
    	
Rate
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Terminal   Facility Rent at Contractor Airports
    	
 
    	
Sched3.B.5(a)(i)
    	
 
    	
Fixed
    	
 
    	
***
    
	
Property   Taxes
    	
 
    	
Sched3.B.5(a)(ii)
    	
 
    	
Fixed
    	
 
    	
***
    
	
Aviation   Insurance
    	
 
    	
Sched3.B.5(a)(iii)
    	
 
    	
Passengers
    	
 
    	
***
    
	
Landing   Fees
    	
 
    	
Sched3.B.5(a)(iv)
    	
 
    	
Departures
    	
 
    	
***
    
	
Glycol   and De-icing at Contractor Airports
    	
 
    	
Sched3.B.5(a)(v)
    	
 
    	
Fixed
    	
 
    	
***
    
	
Canadian   and Mexican Air Navigation
    	
 
    	
Sched3.B.5(a)(vi)
    	
 
    	
Departures
    	
 
    	
***
    
	
TSA   Fees or Charges and any Other Passenger Security Fees or Charges for Security   at all Contractor Airports
    	
 
    	
Sched   3.B.5(a)(vii)
    	
 
    	
Passengers
    	
 
    	
***
    
	
Incentive   Programs
    	
 
    	
Sched   3.B.5(a)(viii)
    	
 
    	
Fixed
    	
 
    	
$
    	
*
    
	
ARINC   System Costs
    	
 
    	
Sched   3.B.5(a)(ix)
    	
 
    	
Fixed
    	
 
    	
***
    
	
Landing   Gear Overhaul and Landing Gear LLP Costs
    	
 
    	
Sched   3.B.5(a)(x)
    	
 
    	
Aircraft
    	
 
    	
***
    
	
Engine   LLP Costs
    	
 
    	
Sched   3.B.5(a)(xi)
    	
 
    	
Fixed
    	
 
    	
***
    
	
Spare   Engine LLP Costs
    	
 
    	
Sched.   3.B.5(a)(xii)
    	
 
    	
Fixed
    	
 
    	
***
    
	
Engine   Power-by-the-Hour Costs
    	
 
    	
Sched   3.B.5(a)(xiii)
    	
 
    	
Block   Hours
    	
 
    	
***
    
	
Fuel   Services
    	
 
    	
Sched   3.B.5(a)(xiv)
    	
 
    	
Departures
    	
 
    	
**
    
	
Fuel
    	
 
    	
Sched   3.B.5(a)(xiv)
    	
 
    	
Prior   Month
    	
 
    	
***
    

 

*                                         To be based upon the terms of any Incentive Program entered into pursuant to Section 4.16 of this Agreement.

**                                  The rate shall be determined annually by the parties and may be confirmed by e-mail exchange or other writing by the parties and may otherwise be adjusted from time to time, upon mutual agreement of the parties (and confirmed by e-mail exchange or other writing), to reflect a closer approximation of the actual reconciled amounts.

***                           See Schedule 3 at Paragraph B(5)(b)(VI).

 

The rates in this Appendix 3 shall be adjusted from time to time with the mutual agreement of the parties to reflect the actual rates charged to Contractor.

 

APPENDIX 3 TO SCHEDULE 3

 

Appendix 4 to Schedule 3

 

On-Time Incentive Bonuses/Rebates

 

1.              On Time Bonus/Rebate:  For purposes of Paragraph A(2), the bonus or rebate, as the case may be, for on-time performance shall be determined as follows:

 

Contractor’s on-time Scheduled Flight departures to or from each of EWR, CLE, IAH, ORD, and DEN shall be measured monthly.  For the purposes of this Appendix 4, a Scheduled Flight departure is an “on time” departure only if such Scheduled Flight actually departed the gate not later than the scheduled departure time.

 

A.            “Excused Departures” are cancelled flights and those Scheduled Flight departures that were prevented from departing on time solely because of weather, ATC, late arriving equipment delays, or departures delayed upon United’s request or any combination thereof as determined by United in accordance with its systems operations control center delay coding protocol.

 

As of January 1, 2012, numerical delay codes for weather, ATC, late arriving equipment or United’s request were ***. As of June 1, 2012, delay codes for weather, ATC, late arriving equipment or United’s request are ***.

 

B.            If Contractor’s actual percentage of Scheduled Flight on-time departures for any such calendar month to or from any of EWR, CLE, IAH, ORD, or DEN (expressed as a percentage of all of Contractor’s Scheduled Flight departures for any such calendar month to or from such airport, that are not Excused Departures) is above the Monthly Historical Percentage set forth below for such airport, then the reconciliation payment for such month shall include a payment by United to Contractor equal to $*** multiplied by the number of Contractor’s actual Scheduled Flight departures (excluding Excused Departures) for such month at such airport, multiplied by the excess of Contractor’s actual percentage of Scheduled Flight on-time departures above such Monthly Historical Percentage.  If Contractor’s actual percentage of Scheduled Flight on-time departures for any such calendar month to or from any of EWR, CLE, IAH, ORD, or DEN (expressed as a percentage of all of Contractor’s Scheduled Flight departures for any such calendar month to or from any of EWR, CLE, IAH, ORD, or DEN respectively, that are not Excused Departures) is below the Monthly Historical Percentage set forth below for such airport, then the reconciliation payment for such month shall include a payment by Contractor to United equal to $*** multiplied by the number of Contractor’s actual Scheduled Flight departures (excluding Excused Departures) for such month at such airport, multiplied by the excess of such Monthly Historical Percentage above Contractor’s actual percentage of Scheduled Flight on-time departures.

 

C.            For purposes of this Appendix 4, the “Monthly Historical Percentage” for any of EWR, CLE, IAH, ORD, or DEN for-any month shall equal the average of the actual number of Scheduled Flight on-time departures during the respective calendar month during each of the last five full calendar years prior to the month in question (expressed as percentages of Contractor’s Scheduled Flight departures for any such calendar month to or from any

 

APPENDIX 4 TO SCHEDULE 3 - 1

 

of EWR, CLE, IAH, ORD, or DEN, respectively, that are not Excused Departures); provided, that for the purposes of calculating the Monthly Historical Percentage, for any month of any prior year during which Contractor did not have operations hereunder at such airport, the performance data for such month shall include data for all regional aircraft flights that month that were operated with aircraft comparably-sized to aircraft operated by Contractor for United and were operated to or from such airport as United Express, to the extent that such historical performance data is available and that United in good faith deems reliable and accurate is available (it being acknowledged, for the avoidance of doubt, that if Contractor had operations hereunder to or from such airport during any month, then only Contractor’s performance data to or from such airport that month shall be taken into account for purposes of calculating the Monthly Historical Percentage); provided further, that, subject to Section 8.04, for the purpose of the foregoing calculation, (x) for the period commencing on July 1, 2014 and ending on December 31, 2015, the Monthly Historical Percentages set forth below shall be reduced by by *** percentage points and (y) on and after January 1, 2016, the Monthly Historical Percentages set forth below shall be reduced by *** percentage point; provided further, that, subject to Section 8.04, if United alters its system-wide practices in a manner that materially reduces the periods between connecting flights in its domestic operations, then United agrees to meet and confer in good faith with Contractor to discuss any appropriate adjustments to the foregoing calculation of Monthly Historical Percentages.  Should the processes currently utilized by the air traffic control system in the United States to manage commercial aircraft change in any material way, Contractor and United agree, if requested in writing by either party, to meet and confer within the next thirty (30) days, in good faith to adjust the targets.  Additionally, should United’s hub flight schedule or ground handling performance materially change from historical performance levels, if requested in writing by either party, Contractor and United agree to meet and confer in good faith to adjust the targets.  In either case, should the parties be unable, despite their good faith efforts, to reach an agreement on adjustments to the prospective targets to take into account the effect of such material change, all the on-time incentive provisions (both bonus and rebate) set forth in this Appendix 4 will cease to be of any force or effect from and after the end of such thirty (30) day-period.

 

D.            References to “Scheduled Flights” in this Appendix 4 shall not include Charter Flights, extra sections, unscheduled flights, Maintenance Flights, ferry flights, or other non-revenue flights.

 

2.              Fuel Efficiency Bonus: At United’s expense, Contractor agrees to implement a Fuel efficiency program modeled on United’s Fuel program as set forth in Exhibit L following the mutual agreement of Contractor and United with respect to the matters set forth in the last sentence of this paragraph.  Contractor acknowledges that such program is the property of United, shall be deemed confidential by Contractor and, for Contractor but not for United, shall be subject to the provisions of Section 10.07 of the Agreement. If Contractor achieves the applicable target Fuel efficiency under such program, then United shall pay Contractor a Fuel efficiency bonus equal to (a) ***% of the annual Fuel savings attributable to the Fuel efficiency program, less (b) any expenses incurred or reimbursable by United under the terms of the program for its development, implementation or management by Contractor.  The program shall specify a measurement

 

APPENDIX 4 TO SCHEDULE 3 - 2

 

period and a Fuel savings measurement mechanism, including target adjustments for stage length, load factor and flight hour to block hour ratio.

 

APPENDIX 4 TO SCHEDULE 3 - 3

 

Appendix 5 to Schedule 3

 

Insurance Rates

 

	
Insurance Type
    	
 
    	
Rate
    	
 
    	
Driver Units
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Hull   Insurance
    	
 
    	
$
    	
***
    	
 
    	
per   $100 value
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Liability   Insurance
    	
 
    	
$
    	
***
    	
 
    	
per   1000 RPMs
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
War   Risk Insurance
    	
 
    	
$
    	
***
    	
 
    	
per   1000 RPMs and
    
	
 
    	
 
    	
$
    	
***
    	
 
    	
per   Passenger
    

 

APPENDIX 5 TO SCHEDULE 3

 

Appendix 6 to Schedule 3(5)

 

***

 

(5)  For the avoidance of doubt, the parties acknowledge and agree that, in the event of an Event of Default, during the Default Modification Period, all references in the Agreement to Schedule 1 shall be deemed to be references to such schedule as replaced or modified pursuant to the terms and conditions of Section 8.04 of the Agreement.

 

APPENDIX 6 TO SCHEDULE 3

 

Appendix 6A to Schedule 3

 

***

 

APPENDIX 6A TO SCHEDULE 3

 

Appendix 7 to Schedule 3

 

Payments for Scheduled Flight Cancellations Directed by United

 

	
Payment Category
    	
 
    	
Rate
    
	
per block hour
    	
 
    	
$
    	
***
    
	
per departure
    	
 
    	
$
    	
***
    

 

APPENDIX 7 TO SCHEDULE 3

 

EXHIBIT A
 Definitions

 

13D Person — is defined in clause (iii) of “Change of Control” in this Exhibit A.

 

Additional Aircraft — means (x) any aircraft which United replaces, or continues to operate within United’s regional airline service, and for which the Covered Aircraft Sublease terminates on or prior to the end of the Term (other than a termination of such Covered Aircraft Sublease resulting directly from a breach of the applicable Covered Aircraft Sublease by Contractor or pursuant to Section 8.02(a), 8.02(b) or 8.02(d)) and (y) regional aircraft which United begins to use in United’s regional airline service (other than an aircraft that was previously withdrawn pursuant to Section 2.07(b).

 

Adjustment Date — is defined in Section 3.02.

 

Administrative Support and Information Services Provisioning Agreement — means that certain Amended and Restated Administrative Support and Information Services Provisioning Agreement, dated as of November 7, 2014, among United and Contractor and certain of its Affiliates, in the form attached hereto as Exhibit N (or as otherwise agreed or amended).

 

Affiliate — means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.  With respect to any natural person, the term “Affiliate” shall additionally mean (1) the spouse or children (including those by adoption) and siblings of such Person; and any trust whose primary beneficiary is such Person, such Person’s spouse, such Person’s siblings and/or one or more of such Person’s lineal descendants, (2) the legal representative or guardian of such Person or of any such immediate family member in the event such Person or any such immediate family member becomes mentally incompetent and (3) any Person controlled by or under the common control with any one or more of such Person and the Persons described in clauses (1) or (2) preceding.

 

Affiliate CPA — means a capacity purchase agreement and accompanying ancillary agreements entered into pursuant to Section 2.07, in each case between United and an Affiliate of Contractor that is in the business of providing passenger air service, with terms and conditions identical to the terms of this Agreement and the Ancillary Agreements; provided, that the identity of the parties, the aircraft and the engines shall be revised appropriately; provided further, that the Capacity Purchase Arrangement shall contain (i) representations and warranties by such Affiliate regarding conflicts and defaults coextensive with the representations in Sections 4(g) and 4(h) of the Guaranty, but without any qualification as to knowledge, (ii) provisions in the Guaranty reflecting the then-existing partial ownership (if applicable) of such Affiliate by Guarantor (but otherwise containing the restrictive provisions set forth in Section 5 of the Guaranty as to

 

EXHIBIT  A - 1

 

Guarantor’s then-existing partial ownership) and (iii) cross default provisions similar to Sections 8.02(d) and 8.02(e) but relating to this Agreement, and, unless otherwise agreed by the parties, shall exclude provisions similar to Sections 6.04, 6.05 and 10.01 of this Agreement and, in any provision substantially similar to Section 6.01(a), all references to $*** million shall be $*** million with respect to any aircraft with more than 50  passenger seats.

 

Affiliate Marks — is defined in Section 4.12.

 

Agreement — means this Amended and Restated Capacity Purchase Agreement, originally dated as of the Original Execution Date and effective as amended and restated as of the Effective Date, among United and Contractor, as amended from time to time pursuant to Section 10.04 hereof.

 

Ancillary Agreements — means each of the agreements entered into by United and Contractor substantially in the form of Exhibits B, C, E, F, M, N and P hereto, together with all amendments, exhibits, schedules and annexes thereto (including any ground handling agreements entered into pursuant to Exhibit C), and any other aircraft lease between United and Contractor.

 

Annual Commodity CPI Change — means, for any Adjustment Date, the fraction (expressed as a number rounded to four decimal places) as determined on the 15th day of the immediately preceding month (or the first Business Day thereafter on which relevant Commodity CPI figures are publicly available) equal to the quotient obtained by dividing the simple average of the sum of the Commodity CPI for each of the last twelve months ending with the penultimate month preceding such Adjustment Date by the simple average of the sum of the Commodity CPI for each of the last twelve months ending with such penultimate month of the preceding year.  (As an example, and for illustrative purposes only, the Annual Commodity CPI Change for April 1, 2007 would be equal to 206.827 (the simple average of the sum of the Commodity CPI for the last twelve months ending February 2007) divided by 201.583 (the simple average of the sum of the Commodity CPI for the last twelve months ending February 2006), or 1.0260.)

 

Annual CPI Change — means, for any Adjustment Date, the fraction (expressed as a number rounded to four decimal places) as determined on the 15th day of the immediately preceding month (or the first Business Day thereafter on which relevant CPI figures are publicly available) equal to the quotient obtained by dividing the simple average of the sum of the CPI for each of the last twelve months ending with the penultimate month preceding such Adjustment Date by the simple average of the sum of the CPI for each of the last twelve months ending with such penultimate month of the preceding year.  (As an example, and for illustrative purposes only, the Annual CPI Change for April 1, 2007 would be equal to 202.335 (the simple average of the sum of the CPI for the last twelve months ending February 2007) divided by 196.500 (the simple average of the sum of the CPI for the last twelve months ending February 2006), or 1.0297.)

 

Audit Period — is defined in Section 3.05.

 

EXHIBIT  A - 2

 

Available Labor Strike Withdrawn Aircraft — is defined in Section 2.07(e).

 

Average Peer Group Rates — means, with respect to any insurance coverage and as of any date of determination, (x) the insurance rates set forth on Appendix 5 to Schedule 3, multiplied by (y) the average percentage increase or decrease, as appropriate, from January 1, 2010 to such date of determination, in the cost of such insurance coverage for the five regional airlines with annual revenue passenger miles closest to those of Contractor, as determined by available information obtained from public sources or reputable insurance brokers, excluding (i) any such regional airline that experienced a major loss within the previous three years, and (ii) any regional airline whose insurance rates are included with its major airline partner(s).

 

Average Remaining Cycle Life — is defined in Paragraph B(7)(b) of Schedule 3.

 

Average Utilization — is defined in Section 2.01(b)(iii).

 

Aviation Insurance — means any airline hull, war risk, or passenger liability insurance.

 

Base Compensation — is defined in Paragraph A(1) of Schedule 3.

 

Basic Rent — is defined, with respect to any Covered Aircraft, in the Covered Aircraft Sublease for such Covered Aircraft.

 

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 Houston, Texas are authorized by law to close.

 

Capacity Purchase Arrangement — means any capacity purchase agreement or other arrangement whereby one party operates aircraft on behalf of a second party that (i) exercises control over the scheduling of flights for such aircraft and (ii) bears a majority of the financial risk with respect to passenger load on flights for such aircraft.  For the avoidance of doubt, a pro-rate arrangement shall not constitute a “Capacity Purchase Arrangement” for the purposes of this Agreement.

 

Category 2 Conditions — has the meaning contained in Contractor’s flight operations manual as of the Original Execution Date.

 

Cause — means the following, each of which shall constitute a breach of this Agreement: (i) the suspension or revocation of Contractor’s authority to operate as a scheduled airline, (ii) the ceasing of Contractor’s operations as a scheduled airline, other than (A) as a result of a Labor Strike or a non-carrier specific grounding of any of the Contractor Fleets by regulatory or court order or other governmental action or (B) any other temporary cessation for not more than 14 consecutive days, (iii) the occurrence of a Labor Strike that shall have continued for 15 days or (iv) a willful or intentional material breach of this Agreement by Contractor or any Guarantor that substantially deprives United of the benefits of this Agreement, which breach shall have continued for 45 days after written notice thereof is delivered by United to Contractor.

 

EXHIBIT  A - 3

 

Change of Control — means:

 

(i)                                     Parent consolidates with, or merges with or into, a Prohibited Person or conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to a Prohibited Person, or a Prohibited Person consolidates with, or merges with or into, Parent in any such event pursuant to a transaction in which the voting securities of Parent are converted into or exchanged for cash or securities of a Prohibited Person, except where the holders of voting securities of Parent immediately prior to such transaction own not less than a majority of the voting securities of the surviving or transferee corporation immediately after such transaction, in each case other than any such transaction between Parent on the one hand, and United and/or any of its Subsidiaries on the other;

 

(ii)                                  the direct or indirect acquisition by a Prohibited Person or any Person directly or indirectly controlling a Prohibited Person of beneficial ownership of 15% or more of the capital stock or voting power of Parent;

 

(iii)                               the direct or indirect acquisition by any “person” or “group” (as such terms are used in Section 13(d) of the Securities Exchange Act of 1934) not described in clause (ii) above, of beneficial ownership of more than 25% of the capital stock or voting power of Parent, other than (A) United or its Subsidiaries or (B) any “person” or “group” that is a Person who has a Schedule 13D on file with the Securities and Exchange Commission pursuant to the requirements of Rule 13d-1 under the Securities Exchange Act of 1934 (the “Exchange Act”) with respect to its holdings of Parent’s voting securities (a “13D Person”), so long as (1) such 13D Person is principally engaged in the business of managing investment funds for unaffiliated securities investors and, as part of such 13D Person’s duties as agent for fully managed accounts, holds or exercises voting or dispositive power over Parent’s voting securities, (2) such 13D Person was a Person who had a Schedule 13G on file with the Securities and Exchange Commission pursuant to the requirements of Rule 13d-1 under the Exchange Act with respect to its holdings of Parent’s voting securities, and became a 13D Person pursuant to Rule 13d-1(f)(1), and (3) such 13D Person acquires and continues to have beneficial ownership of Parent’s voting securities pursuant to trading activities undertaken in the ordinary course of such 13D Person’s business and not with the purpose nor the effect, either alone or in concert with any 13D Person, of exercising the power to direct or cause the direction of the management and policies of Parent or of otherwise changing or influencing the control of Parent, nor in connection with or as a participant in any transaction having such purpose or effect, including any transaction subject to Rule 13d-3(b) of the Exchange Act; provided, that a “Change of Control” shall not occur pursuant to this clause (iii) if such “person” or “group” reduces its ownership of the capital stock or voting power of Parent, as the case may be, to less than 25% within 30 days of the acquisition of ownership of at least 25% of such capital stock or voting power;

 

(iv)                              the liquidation or dissolution of Parent in connection with which Contractor ceases operations as an air carrier;

 

EXHIBIT  A - 4

 

(v)                                 the sale, transfer or other disposition of all or substantially all of the airline assets of Parent or Contractor on a consolidated basis directly or indirectly to a Prohibited Person or its Affiliate, whether in a single transaction or a series of related transactions; or

 

(vi)                              the execution by Parent or Contractor of bona fide definitive agreements, the consummation of the transactions contemplated by which would result in a transaction described in the immediately preceding clauses.

 

Charter Flight - means any flight by a Covered Aircraft for charter operations at the direction of United that may or may not be not reflected in the Final Monthly Schedule.

 

*** Issue — is defined in Section 3.08.

 

Commodity Aircraft Deficit — is defined in Section 2.08(h).

 

Commodity CPI — means (i) the Consumer Price Index for All Urban Consumers — U.S. City Average, All Items less food and energy, Not Seasonally Adjusted Base Period: 1982-84 = 100, as published by the Bureau of Labor Statistics, United States Department of Labor, or (at any time when the Bureau of Labor Statistics is no longer publishing such Index) as published by any other agency or instrumentality of the United States of America, or (ii) at any time after the index described in clause (i) shall have been discontinued, any reasonably comparable replacement index or other computation published by the Bureau of Labor Statistics or any other agency or instrumentality of the United States of America.  If any such index shall be revised in any material respect (such as to change the base year used for computation purposes), then all relevant determinations under this Agreement shall be made in accordance with the relevant conversion factor or other formula published by the Bureau of Labor Statistics or any other agency or instrumentality of the United States of America, or (if no such conversion factor or other formula shall have been so published) in accordance with the relevant conversion factor or other formula published for that purpose by any nationally recognized publisher of such statistical information.

 

Commodity Price — means, for any Business Day, the spot price per barrel of West Texas Intermediate light sweet crude oil for delivery in Cushing, Oklahoma, stated in U.S. Dollars, as published under the heading “Spot Crude Price Assessments: U.S.:WTI” in the issue of Platt’s Oilgram that reports prices effective on such date; provided that if no such price is published on a particular Business Day, then the price for such date shall be the price most recently published prior to such date, and if the above publication ceases to be published during the term hereof, its successor publication shall be used or, if there is no successor, then a comparable published index shall be substituted in replacement thereof.

 

Commodity Replacement Event — means a First Commodity Replacement Event or a Second Commodity Replacement Event.

 

Commodity Replacement Period — is defined in Section 2.08(f).

 

EXHIBIT  A - 5

 

Commodity Withdrawal Event — means a First Commodity Withdrawal Event or a Second Commodity Withdrawal Event.

 

Commodity Withdrawal Period — is defined in Section 2.08(a).

 

Continental — has the meaning set forth in the preamble.

 

Continuing Aircraft — is defined in Section 2.01(b)(ii).

 

Contractor — means ExpressJet and its successors and permitted assigns.

 

Contractor Airport — means (i) any airport at which Contractor provides or arranges for the provision of ground handling services pursuant to the Contractor Ground Handling Agreement, and (ii) any other airport into or out of which Contractor operates any Scheduled Flight and which is not a United Airport.

 

Contractor Fleet — means all or any of the following fleets of Covered Aircraft: (i) ERJ Aircraft if such aircraft constitutes one or more Covered Aircraft, (ii) any other type of regional jet aircraft (whether manufactured by Embraer or another manufacturer) if such aircraft constitutes one or more Covered Aircraft, and (iii) any portion of such group of aircraft consisting of one or more models (for example, ERJ-135s and ERJ-145s, or ERJ-145LRs and ERJ-145XRs), or any subgroup of such aircraft as determined from time to time by regulatory or court order or other governmental action (for example, all such aircraft manufactured within specific time frames), in each case, if such aircraft constitutes one or more Covered Aircraft.

 

Contractor Ground Handling Agreement — means that certain IATA Standard Ground Handling Agreement (April 1993 version) between United and Contractor, together with Annex A thereto (Ground Handling Services, April 1993 version) and Annex B thereto substantially in the form of Exhibit D to the Master Facility and Ground Handling Agreement (or as otherwise agreed or amended) providing for the provision by or on behalf of Contractor to United of ground handling services at the airports specified therein.

 

Contractor Marks — is defined in Exhibit H.

 

Contractor Premium Surcharge Amount — is defined in Paragraph B(6)(e)(IV) of Schedule 3.

 

Contractor Premium Surcharge Limit — is defined in Paragraph B(6)(e)(III) of Schedule 3.

 

Contractor Premium Surcharge Overflow Amount — is defined in Paragraph B(6)(e)(V) of Schedule 3.

 

Contractor Services — is defined in the Master Facility and Ground Handling Agreement.

 

Controllable Completion Factor Incentive Rate — is defined in Appendix 2 to Schedule 3.

 

EXHIBIT  A - 6

 

Controllable Cancellation — means a cancellation of a Scheduled Flight that is not an Uncontrollable Cancellation.

 

Controllable Cancellation Factor — means, for any period of determination, the percentage of Scheduled Flights completed during such period, excluding Uncontrollable Cancellations.

 

Controllable On-Time Departure — means a flight departing within 15 minutes of scheduled departure time, as determined solely by ACARS, excluding (i) cancelled flights, (ii) flights impacted by ATC or weather-related delays, (iii) flights impacted by Labor Strike, (iv) unscheduled, extra section or diversion departures, or (v) departures delayed upon United’s request and not otherwise impacted by weather or ATC.

 

Controllable On-Time Departure Rate — means, for any period of determination, the percentage of Scheduled Flights that are Controllable On-Time Departures.

 

Covered Aircraft — means all of the aircraft listed on Schedule 1 (as amended from time to time pursuant to the provisions of this Agreement) and presented for service by Contractor, as adjusted from time to time for additions and withdrawals pursuant to Article II, Section 4.18, and Article VIII (it being understood by the parties hereto that Schedule 1 shall be revised from time to time to reflect any such additions and withdrawals).

 

Covered Aircraft Sublease — means the Amended and Restated Covered Aircraft Sublease (or a lease) substantially in the form of the Exhibit B (or as otherwise agreed or amended) between United and Contractor, pursuant to which Contractor subleases (or leases) a Covered Aircraft from United.

 

CPA Records — is defined in Section 3.05.

 

CPA Target Income — is defined in Section 3.07.

 

CPI — means (i) the Consumer Price Index for All Urban Consumers — U.S. City Average, All Items, Not Seasonally Adjusted Base Period: 1982-84 = 100, as published by the Bureau of Labor Statistics, United States Department of Labor, or (at any time when the Bureau of Labor Statistics is no longer publishing such Index) as published by any other agency or instrumentality of the United States of America, or (ii) at any time after the index described in clause (i) shall have been discontinued, any reasonably comparable replacement index or other computation published by the Bureau of Labor Statistics or any other agency or instrumentality of the United States of America.  If any such index shall be revised in any material respect (such as to change the base year used for computation purposes), then all relevant determinations under this Agreement shall be made in accordance with the relevant conversion factor or other formula published by the Bureau of Labor Statistics or any other agency or instrumentality of the United States of America, or (if no such conversion factor or other formula shall have been so published) in accordance with the relevant conversion factor or other formula published for that purpose by any nationally recognized publisher of such statistical information.

 

EXHIBIT  A - 7

 

Cure Date — is defined in Section 8.04(c).

 

Default Modification Date — is defined in Section 8.04.

 

Default Notice — is defined in Section 8.04.

 

Disposed Aircraft — means any aircraft withdrawn from the capacity purchase provisions of this Agreement pursuant to Section 2.08 which, subsequent to such withdrawal, either (a) has been returned (or is subject to a binding commitment to be returned in connection with such withdrawal) to the head lessor, security trustee or any financing party under an applicable head lease, mortgage or security agreement, whether in connection with the end of the term of such lease, or otherwise, (b) has been sold, assigned, leased or otherwise transferred (or is subject to a binding commitment for sale, assignment, lease or transfer in connection with such withdrawal) by United to a third party, or (c) is the subject of an impairment or restructuring charge by United.

 

DOT — means the United States Department of Transportation.

 

Effective Date — means July 1, 2014.

 

Embraer — means Empresa Brasileira de Aeronautica S.A., a Brazilian corporation with its principal place of business in Sao Paulo, Brazil.

 

Embraer Contract — means, collectively, Purchase Agreement No. GPJ-003/96 between Embraer and XJT Holdings, Inc., dated August 5, 1996, Letter of Agreement No. GPJ-004/96 between Embraer and XJT Holdings, Inc., dated August 5, 1996, Letter of Agreement No. PCJ-004A/96 among Embraer, United and XJT Holdings, Inc., dated August 31, 1996, Purchase Agreement No. DCT-054/98, between Embraer and XJT Holdings, Inc., dated December 23, 1998, Letter of Agreement No. DCT-059/2000 between Embraer and XJT Holdings, Inc., dated October 27, 2000, Letter of Agreement No. DCT-055/98 between Embraer and XJT Holdings, Inc., dated December 23, 1998, Letter of Agreement No. DCT-058/2000 between Embraer and XJT Holdings, Inc., dated October 27, 2000, and EMB-135 Financing Letter of Agreement among United, Embraer and XJT Holdings, Inc., dated March 23, 2000, in each case including such amendments and supplements as were incorporated by reference in XJT Holding Inc.’s registration statement on Form S-1 (Registration No. 333-64808) as Exhibits 10.12 — 10.19 thereto.

 

Engine — means any jet aircraft engine that constitutes an “Engine,” as such term is defined in a Covered Aircraft Sublease for a jet aircraft, under such Covered Aircraft Sublease.

 

Engine LLP — means Engine life-limited parts as defined in the Engine Maintenance Agreement, excluding any Spare Engine LLP.

 

Engine Maintenance Agreement — means the contract entered into between Contractor and Rolls Royce Corporation, dated as of September 28, 2004 for the maintenance of the Engines, as amended and supplemented or replaced from time to time.

 

EXHIBIT  A - 8

 

ERJ Aircraft — means any Embraer ERJ-135 or ERJ-145 aircraft.

 

Event of Default — is defined in Section 8.04.

 

Excepted Aircraft — is defined in Section 8.04(c).

 

Excess Insurance Costs — means, in respect of any insurance policy obtained by Contractor, the cost of such insurance coverage, if any, in excess of the amount such insurance coverage would have cost if Contractor and United had participated in a combined placement pursuant to Section 6.04.

 

Exchange Act — is defined in clause (iii) of “Change of Control” in this Exhibit A.

 

Excused Departure — is defined in Appendix 4 to Schedule 3.

 

Existing CPA — is defined in the first whereas clause to this Agreement.

 

ExpressJet — is defined in the preamble.

 

Extension — is defined in Section 2.13.

 

Extension Aircraft — is defined in Section 2.13.

 

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 United to Contractor pursuant to Section 2.01(b).

 

First Commodity Replacement Event — means any date, from time to time, after United shall have exercised its right under Section 2.08(a) and on which, for the 90 days immediately preceding such date, the average Commodity Price shall have been $*** per barrel or lower; provided, that the measurement period for any First Commodity Replacement Event may not overlap with the measurement period for any Commodity Withdrawal Event for which a notice is delivered by United pursuant to Section 2.08(b) (and thus may not begin until the day after the date of any Commodity Withdrawal Event, if any, that may otherwise have occurred during such 90-day period).

 

First Commodity Withdrawal Event — means any date, from time to time, on which, for the 90 days immediately preceding such date, the average Commodity Price shall have been $*** per barrel or higher; provided, that the measurement period for any First Commodity Withdrawal Event may not overlap with the measurement period for any Commodity Replacement Event for which a notice is delivered pursuant by Contractor to Section 2.08(g) (and thus may not begin until the day after the date of any Commodity Replacement Event, if any, that may otherwise have occurred during such 90-day period).

 

Flight Cancellation Reconciliation — is defined in Paragraph B(3) of Schedule 3.

 

EXHIBIT  A - 9

 

Flight Hour Agreements — means, collectively, (i) the Engine Maintenance Agreement, (ii) that certain agreement relating to Avionics between Contractor and Honeywell, (iii) that certain agreement relating to Starter Control System between Contractor and Honeywell, (iv) that certain agreement relating to Lighting between Contractor and Honeywell, (v) that certain agreement relating to PRSOV between Contractor and Honeywell, (vi) that certain agreement relating to AHRS between Contractor and Honeywell, (vii) that certain agreement relating to Sensors between Contractor and Goodrich, (viii) that certain agreement relating to Access between Contractor and Goodrich, (ix) that certain agreement relating to ECS between Contractor and Hamilton Sundstrand, (x) that certain agreement relating to Wheels and Brakes between Contractor and Goodrich, (xi) that certain agreement relating to Tires between Contractor and Goodyear, (xii) that certain agreement relating to APU between Contractor and Hamilton Sundstrand, in each case in effect as of the Original Execution Date, and (xiii) any replacement of any of the foregoing which has been approved by United pursuant to Section 10.18.

 

Flight Related Revenue — is defined in Section 2.02.

 

Forecasted Passengers — means, for any month, the forecasted Revenue Onboards derived from the Final Monthly Schedule for the previous month.

 

Fuel — means any fuel customarily used as aviation fuel.

 

Fuel Services — means the act of putting Fuel product into an aircraft and taking Fuel product out of an aircraft, and any other incidental tasks as are customarily required from time to time in connection therewith; provided that the cost of aircraft Fuel shall not be included as a cost of Fuel Services.

 

Guarantor — means Parent.

 

Guaranty — means that certain Guaranty Agreement, dated as of November 7, 2014, between Guarantor and United in the form of Exhibit M attached to this Agreement.

 

Identification — means the United Marks, the aircraft livery set forth on Exhibit G, the United flight code and other trade names, trademarks, service marks, graphics, logos, employee uniform designs, distinctive color schemes and other identification selected by United in its sole discretion for the Regional Airline Services to be provided by Contractor, whether or not such identification is copyrightable or otherwise protected or protectable under federal law.

 

Incentive Program Costs — means the out-of-pocket costs or expenses arising directly from the implementation of any incentive program implemented pursuant to Section 4.16, excluding overhead and general operating expenses, including, without limitation, salaries.

 

Indemnified Party — is defined in Section 7.03.

 

Indemnifying Party — is defined in Section 7.03.

 

EXHIBIT  A - 10

 

 

Indemnity Notice — is defined in Section 7.03.

 

Invoiced Amount — is defined in Section 3.06(a).

 

Labor Strike — means a labor dispute, as such term is defined in 29 U.S.C. Section 113(c) involving Contractor and some or all of its employees, which dispute results in a union-authorized strike resulting in a work stoppage.

 

Landing Gear LLP — means life-limited parts for landing gear as defined in Contractor’s maintenance program.

 

Maintenance Flight — is defined in Section 2.01(c).

 

Major Carrier — means an air carrier (other than United and its successors and any Subsidiary thereof), the consolidated annual revenues of which for the most recently completed fiscal year for which audited financial statements are available are in excess of the Revenue Threshold as of the date of determination (or the U.S. dollar equivalent thereof).

 

Major Loss — means an aviation-related accident or incident that results in the combined policy insurance providers establishing a reserve in an amount greater than the aggregate combined base premium amount for the year in which such accident or incident occurs, net of contribution from or subrogation against any third parties.

 

Master Facility and Ground Handling Agreement — means that certain Second Amended and Restated Master Facility and Ground Handling Agreement, dated November 7, 2014, between United and Contractor, in the form attached hereto as Exhibit C (or as otherwise agreed or amended).

 

Maximum Utilization Level — is defined in Section 2.01(b)(iii).

 

Modified Block Hour Rate — is defined in Section 2.01(b)(ii).

 

Monthly Historical Percentage — is defined in Appendix 4 to Schedule 3.

 

Non-Revenue Pass Travel Privileges — means (i) business-related positive space travel privileges and (ii) standby business and personal use travel privileges.

 

One-Time Payment — is defined in Section 3.08.

 

Original Execution Date — means November 12, 2010.

 

Original Schedule — is defined in Section 8.04(c).

 

Other Subleased Aircraft — means all aircraft (i) identified in Section D of Schedule 2 or (ii) listed on Schedule 1 or Schedule 2 (other than Covered Aircraft) that are subleased by United from time to time.

 

EXHIBIT A - 11

 

Parent — means SkyWest, Inc., a Utah corporation, and its successors and permitted assigns.

 

Parked Aircraft — means all aircraft identified in Section C of Schedule 2, as adjusted from time to time if and when any such aircraft become Covered Aircraft or Other Subleased Aircraft.

 

Permitted Actions — is defined in Section 4.19(a).

 

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.

 

Prohibited Person — means (i) an air carrier (other than United and its successors and any Subsidiary thereof or Parent or any Guarantor), the consolidated annual revenues of which for the most recently completed fiscal year for which audited financial statements are available are in excess of the Revenue Threshold as of the date of determination (or the U.S. dollar equivalent thereof), and (ii) any executive officer, as of the Effective Date or any date of determination, of an air carrier (other than United and its successors and any Subsidiary thereof), the consolidated annual revenues of which for the most recently completed fiscal year for which audited financial statements are available are in excess of the Revenue Threshold as of the date of determination and any entity in which such current executive officer is an officer or 10% shareholder.

 

Prohibited Transfer — is defined in Section 5.03.

 

Proposed Schedule — is defined in Section 2.01(b).

 

Reasonable Operating Constraints and Conditions — means the operating constraints and conditions for Scheduled Flights set forth on Exhibit J.

 

Reconciled Expenses — is defined in Paragraph B(5)(a) of Schedule 3.

 

Regional Airline Services — means the provisioning by Contractor to United of Scheduled Flights and related ferrying using the Covered Aircraft in accordance with this Agreement.

 

Replaceable Aircraft — is defined in Section 2.12.

 

Replacement Aircraft — is defined in Section 2.05(a).

 

Replacement Date — is defined in Section 2.05(b).

 

Replaced Wind-Down Schedule — is defined in Section 2.12.

 

Required Maintenance Records — is defined in Section 2.09(e)(ii).

 

EXHIBIT A - 12

 

Return Aircraft Sublease — means the sublease (or lease) in effect immediately prior to the Original Execution Date between United and Contractor, pursuant to which Contractor subleases (or leases) a United Aircraft or a Charter Aircraft from United.

 

Revenue Onboard — means one revenue-generating passenger on one flight segment, regardless of whether such flight segment is all or part of such passenger’s entire one-way flight itinerary.

 

Revenue Threshold — means *** as such amount may be increased based on the amount by which, for any date of determination, the most recently published CPI has increased to such date above the CPI for calendar year 2000.  For purposes hereof, the CPI for calendar year 2000 is the monthly average of the CPI for the twelve months ending on December 31, 2000.

 

Savings — is defined in Section 3.07.

 

Schedule Reduction Request — is defined in Section 2.01(b)(iii).

 

Scheduled ASMs — means, for any period of calculation, the available seat miles for all Scheduled Flights during such period of calculation.

 

Scheduled Flight — is defined in Section 2.01(b).

 

Second Commodity Replacement Event — means any date, from time to time, after United shall have exercised its right under Section 2.08(a) and on which, for the 90 days immediately preceding such date, the average Commodity Price shall have been $*** per barrel or lower; provided, that the measurement period for any Second Commodity Replacement Event may not overlap with the measurement period for any Commodity Withdrawal Event for which a notice is delivered by United pursuant to Section 2.08(b) (and thus may not begin until the day after the date of any Commodity Withdrawal Event, if any, that may otherwise have occurred during such 90-day period).

 

Second Commodity Withdrawal Event — means any date, from time to time, on which, for the 90 days immediately preceding such date, the average Commodity Price shall have been $*** per barrel or higher; provided, that the measurement period for any Second Commodity Withdrawal Event may not overlap with the measurement period for any Commodity Replacement Event for which a notice is delivered by Contractor pursuant to Section 2.08(g) (and thus may not begin until the day after the date of any Commodity Replacement Event, if any, that may otherwise have occurred during such 90-day period).

 

Similar Economic Term Transaction — is defined in Section 2.05(a).

 

*** Spares — is defined in Section 2.01(d).

 

SkyWest Airlines — means SkyWest Airlines, Inc., a Utah corporation.

 

SkyWest Merger — means the legal merger contemplated by the Agreement and Plan of Merger, dated as of August 3, 2010, by and among Parent, Express Delaware Merger Co.,

 

EXHIBIT A - 13

 

an indirect, wholly-owned subsidiary of Parent, and ExpressJet Holdings, Inc., the parent of Contractor.

 

Spare Aircraft — means any Covered Aircraft that is designated by Contractor as spare aircraft pursuant to Section 2.01(d), which may be used by Contractor to replace another aircraft in the operation of a Scheduled Flight that otherwise would be cancelled or as otherwise provided in Section 2.01(d).

 

Spare Engine — means all of the engines listed on Section E of Schedule 2; provided, that any engine that (i) ceases to be used from time to time in support of Covered Aircraft or (ii) becomes subject to an arrangement pursuant to which it is expected to be used in support of aircraft other than Covered Aircraft, Charter Aircraft or United Aircraft shall cease to be a Spare Engine (it being understood by the parties hereto that Section E of Schedule 2 shall be revised from time to time to remove engines that are no longer Spare Engines and to include engines that are in replacement as agreed by United and Contractor).

 

Spare Engine Cost-Per-Cycle Arrangement — is defined in Paragraph B(7)(b) of Schedule 3.

 

Spare Engine LLP — means engine life-limited parts as defined in the Engine Maintenance Agreement and installed on Spare Engines.

 

Storage Sublease — means the Storage Sublease (or a lease) substantially in the form of the Exhibit P(6) (or as otherwise agreed or amended) between United and Contractor, pursuant to which Contractor subleases (or leases) a Parked Aircraft, Other Subleased Aircraft or other aircraft from United pursuant to the terms of this Agreement.  Storage Sublease shall also include any deemed Storage Sublease as provided in Section 2.09(c).

 

Sublessee Excess Spare Engines — is defined in Section 2.01(d).

 

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.

 

System Flight Disruption — means the failure by Contractor to complete at least ***% of the aggregate Scheduled ASMs in any three consecutive calendar months, or at least ***% of the aggregate Scheduled ASMs in any consecutive 45-day period, in each case

 

(6)  Form of Storage Sublease to be agreed upon by Contractor and United prior to the Effective Date with both parties acting reasonably and in good faith

 

EXHIBIT A - 14

 

excluding the effect of Uncontrollable Cancellations; provided, that if the average number of block hours flown per Covered Aircraft during such period is more than the average number of block hours flown per Covered Aircraft during the three consecutive calendar months (or 45 days, as applicable) immediately preceding the period first measured, then the calculation for purposes of this definition shall disregard that number of Scheduled ASMs for such period as is necessary to reduce the average number of block hours flown per Covered Aircraft during such period to the average number of block hours flown per Covered Aircraft during prior three consecutive calendar month period (or 45 days, as applicable); provided further, that a System Flight Disruption shall be deemed to continue until the next occurrence of a single calendar month in which Contractor completes at least ***% of the aggregate Scheduled ASMs; and provided further, that completions and cancellations of Scheduled Flights on any day during which a Labor Strike is continuing shall not be taken into account in the foregoing calculations.

 

Target Savings — is defined in Section 3.07.

 

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.

 

Terminal Facilities — means “Terminal Facilities” as such term is defined in the Master Facility and Ground Handling Agreement.

 

Termination Date — means the date of early termination of this Agreement, as provided in a notice delivered from one party to the other pursuant to Section 8.02, or, if no such early termination shall have occurred, the date of the end of the Term.

 

Third Party Consent — is defined in Section 10.19(a).

 

Third Party Replacement Aircraft — is defined in Section 10.19(a).

 

Transition — is defined in Section 2.09(e).

 

Transition Operator — is defined in Section 2.09(e).

 

TSA — means the United States Transportation Security Administration.

 

UA Spare Flight — is defined in Section 2.01(d).

 

Uncontrollable Cancellation — means a cancellation of a Scheduled Flight that is (A) solely weather-related or air traffic control-related, in each case as coded on Contractor’s operations reports in accordance with United’s standard coding policies and pursuant to Paragraph B(3)(f) of Schedule 3, it being understood and agreed that if United’s operations are subject to the same circumstance giving rise to the cancellation and United does not cancel flights as a result (except where such circumstances apply differently to Contractor’s aircraft type and United’s aircraft type), such cancellation shall be a Controllable Cancellation, (B) flights cancelled due to aircraft damage caused by United or its agents, (C) the result of a non-carrier specific grounding of any Contractor Fleet by regulatory or court order or other governmental action, (D) cancellations on any

 

EXHIBIT A - 15

 

day during which a Labor Strike is continuing (except when such cancellations are deemed Controllable Cancellations pursuant to Paragraph (B)(3)(d) of Schedule 3), (E) cancellations due to extraordinary events beyond Contractor’s reasonable control, it being understood and agreed that if United’s operations are subject to the same circumstance giving rise to the cancellation and United does not cancel flights as a result, such cancellation shall be a Controllable Cancellation or (F) cancellations that are identified as Uncontrollable Cancellations pursuant to the terms of this Agreement.

 

ULA — is defined in Section 10.21(a).

 

United — has the meaning set forth in the preamble.

 

United Airport — means any airport at which United provides or arranges for the provision of ground handling services pursuant to the United Ground Handling Agreement.

 

United Currencies — means inflight currency coupons issued by United that may only be purchased at any United eService Center and may only be redeemed for alcoholic beverages or headsets on any United or Contractor flight.

 

United Expenses — is defined in Section 3.04(a).

 

United Ground Handling Agreement — means that certain IATA Standard Ground Handling Agreement (April 1993 version) between United and Contractor, together with Annex A thereto (Ground Handling Services, April 1993 version) and Annex B thereto substantially in the form of Exhibit C to the Master Facility and Ground Handling Agreement (or as otherwise agreed or amended) providing for the provision by or on behalf of United to Contractor of ground handling services at the airports specified therein.

 

United Hub Airport — means (i) George Bush Intercontinental Airport in Houston, Texas (IAH), Hopkins International Airport in Cleveland, Ohio (CLE) and Liberty International Airport in Newark, New Jersey (EWR), and (ii) as of any date of determination, any other airport at which Contractor operates an average of more than *** Scheduled Flights per day during the *** days prior to such date of determination.

 

United Marks — is defined in Exhibit G.

 

United Merger — means the legal merger contemplated by the Agreement and Plan of Merger, dated as of May 2, 2010, by and among UAL Corporation, Continental and JT Merger Sub Inc.

 

United Premium Surcharge Amount — is defined in Paragraph B(6)(d)(III) of Schedule 3.

 

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.

 

EXHIBIT A - 16

 

Wind-Down Schedule — means the schedule for Covered Aircraft to be withdrawn from the capacity purchase provisions of this Agreement, delineating the number of each aircraft type to be withdrawn by month.

 

EXHIBIT A - 17EX-10.01

 Exhibit 10.01 

2015 MANAGEMENT BONUS PLAN 
 The President
and CEO, all executives who report to the President and CEO of Meru Networks, Inc. (the “Company”), and certain other executives who do not otherwise receive variable compensation will be eligible to participate in this cash
bonus plan and who have been notified of their eligibility by the Committee (as defined below) (this “Plan”). 
  

	A.	ANNUAL CASH BONUS PLAN 

 The cash bonus available will be calculated annually based on a
percentage of an executive’s base salary upon the Company’s achievement of revenue targets and non-GAAP EBITA targets, as described below, as well as, for executives other than the CEO, CFO, Senior
Vice President of Worldwide Sales and Field Operations (“SVP Sales”) and Vice President of SME Cloud (“VP Cloud”), individual performance against objectives (collectively, the “Annual Cash
Bonus”). Following the end of each quarter, the Revenue Bonus will be calculated and paid based on the Company’s achievement of quarterly revenue targets (or in some circumstances year-to-date target achievement), with such payment not to exceed 100% of the executive’s targeted year-to-date revenue bonus, subject to the terms described below and irrespective of whether the non-GAAP EBITA targets were met. Following the end of the year, the annual cash bonus available is calculated and paid based upon the Company’s achievement of annual revenue targets and non-GAAP EBITA compared to the annual target objectives (without duplication of amounts previously paid for revenue achievement). The Revenue Bonus element of the Annual Cash Bonus will be awarded based on revenue
performance irrespective of whether the Minimum Non-GAAP EBITA threshold has been met (subtracting amounts previously paid for the quarterly revenue achievement), and the
Non-GAAP EBITA bonus will be awarded irrespective of whether the revenue target is achieved. In addition, except for the Company’s CEO, CFO, and SVP Sales, a portion of the Annual Cash Bonus will be
awarded based upon executive’s performance against certain objectives as reasonably determined by the Company’s CEO, and approved by the Company’s Compensation Committee (the “Committee”). The executive may
earn more or less than his or her target bonus based on achievement of the performance goals; provided, however that the total bonus amount1 shall not exceed 150% of the executive’s targeted
bonus value . 
 The following table provides the percentage of the executive’s base salary that is such executive’s targeted annual bonus value.

  

					
	 Executive Officer
	  	Percentage
of Annual
Salary	 
		
	 President and Chief Executive Officer (CEO)
	  	 	100	% 
	 Chief Financial Officer (CFO)
	  	 	50	% 
	 Senior Vice President Sales
	  	 	118	% 
	 Senior Vice Presidents (includes GM’s and General Counsel)
	  	 	45	% 
	 Vice Presidents (Exec Level)
	  	 	40	% 
	 Vice President, SME Cloud2
	  	 	88	% 

  

	1 	The total bonus amount equals the aggregate of the Revenue Bonus (as defined below), the Non-GAAP EBITA Bonus (as defined below), and for executives other than the CEO, CFO, SVP
Sales and VP Cloud, the MBO Bonus (as defined below). For the executives eligible to be paid an MBO Bonus, the MBO Bonus is capped at 100% of the target bonus amount for the MBO Bonus portion of the Annual Cash Bonus. 

	2 	The VP Cloud shall be eligible to receive an Annual Cash Bonus based on Cloud milestones and bookings for the Company’s new Cloud business bookings. For the first half of 2015, 80% of the VP Cloud’s bonus
shall be determined based on milestones and 20% shall be determined based on Cloud business bookings. For the second half of 2015, 20% of the VP Cloud’s bonus shall be determined based on Cloud milestones and 80% shall be determined based on
Cloud business bookings. Determination and achievement of the specific milestones and bookings shall be determined by the CEO. 

	I.	Revenue Bonus 

 60% of the overall target bonus award for the CEO and CFO, 80% of the overall target
bonus award for the SVP Sales, and 50% of the overall target bonus award to the other executives (other than the VP Cloud2), is tied to achievement of the revenue target as described in the
Company’s operating plan as approved by the board of directors (the “Revenue Bonus”). 
 In order for any amounts to be payable
under the Revenue Bonus, the revenue target must be met at a level of at least 94.44% of the target. For achievement between 94.44% and 100.00% of the revenue target, the Revenue Bonus will start at a payout of 50% of the target Revenue Bonus amount
and will increase on a straight-line basis according to the percentage of achievement up to 100% of the target Revenue Bonus amount for each respective
executive.3 The executives are also eligible to receive an increased Revenue Bonus if the Company’s revenue exceeds the revenue target as follows: (a) for achievement above 100.00% and
up to 111.11% of the revenue target, the Revenue Bonus will start at a payout of 100% of the target Revenue Bonus amount and will increase on a straight-line basis according to the percentage of achievement up to 125% of the target Revenue Bonus
amount for each respective executive; and (b) for achievement above 111.11% and up to 122.22% of the revenue target, the Revenue Bonus will start at a payout of 125% of the target Revenue Bonus amount and will increase on a straight-line basis
according to the percentage of achievement up to 150% of the target Revenue Bonus amount for each respective executive.4 

A pro rata portion of the annual Revenue Bonus, if any is achieved, shall be paid quarterly following each of the Company’s quarterly earnings
announcements based on the year-to-date achievement of the quarterly revenue plan. If the year-to-date revenue threshold is not met for particular quarter(s), but in a subsequent quarter the cumulative year-to-date threshold is achieved, then the pro rata annual Revenue Bonus payment shall be made based upon the year-to-date
percentage of attainment. Notwithstanding the foregoing, (a) the target quarterly revenue payment for the first quarter shall be 15%, (b) the target quarterly revenue payment for the second quarter shall be 20%, (c) the target
quarterly revenue payment for the third quarter shall be 30%, (d) the target quarterly revenue payment for the fourth quarter shall be 35%; and (e) the cumulative quarterly revenue payments shall not exceed 100% of the executive’s
targeted year-to-date Revenue Bonus (less any Revenue Bonus already paid).5 Following the Company’s earnings
announcement covering the full year 2015, the executives may receive a Revenue Bonus based on the criteria set forth above less the amount of any Revenue Bonus payments made pursuant to this paragraph. 

 

	3 	For example, in the event that the annual revenue is achieved at 94.44% of target level, the Revenue Bonuses will be paid at 50% of the target Revenue Bonus amount such that the Revenue Bonus for the Company’s
Chief Financial Officer would equal 50% multiplied by 60% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary. 

	4 	For example, in the event that the Company’s actual revenue is 111.11% of the annual revenue target, the Revenue Bonus will be paid at 125% of the target Revenue Bonus amount such that the Revenue Bonus paid to the
Company’s Chief Financial Officer would equal 125% multiplied by 60% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary. 

	5 	For example, in the first quarter if the quarterly revenue goal is achieved at 111.11%, the Company’s Chief Financial Officer will receive a quarterly payment for the Revenue Bonus equal to 15% multiplied by 60%
multiplied by 50% multiplied by the Chief Financial Officer’s annual salary. 

  
 2 

	II.	Non-GAAP EBITA Bonus 

 40% of the overall target bonus award for
the CEO and CFO, 20% of the overall target bonus award for the SVP Sales, and 30% of the overall target bonus award for each other executive (other than the VP Cloud2) is tied to non-GAAP EBITA6 (the “Non-GAAP EBITA Bonus”). 

In order for the Non-GAAP EBITA Bonus to be paid, the Company must achieve the minimum
Non-GAAP EBITA target as approved by the Committee (the “Minimum Non-GAAP EBITA Amount”)7.
Upon achievement of the Minimum Non-GAAP EBITA, the amount of the Non-GAAP EBITA Bonus will be calculated on a straight line basis starting at 50% of the target Non-GAAP EBITA Bonus upon achievement of the Minimum Non-GAAP EBITA Amount and up to 100% of the target Non-GAAP EBITA Bonus upon
achievement of 100.0% the Non-GAAP EBITA target under the Company’s annual operating plan (the “Target Non-GAAP EBITA Amount”).8 
 The executives are also eligible to receive an increased Non-GAAP EBITA Bonus if the Company’s
Non-GAAP EBITA exceeds the Target Non-GAAP EBITA Amount as follows: (a) for achievement above 100.0% of the Target Non-GAAP EBITA Amount and up to Non-GAAP EBITA
$4.5 million greater than the Target Non-GAAP EBITA, the Non-GAAP EBITA Bonus will start at a payout of 100% of the target Non-GAAP EBITA Bonus and will increase on a straight-line basis according to the
percentage of achievement up to 125% of the target Non-GAAP EBITA Bonus for each respective executive; and (b) for achievement above Non-GAAP EBITA $4.5 million greater than the Target Non-GAAP EBITA and
up to Non-GAAP EBITA $9.0 million greater than the Target Non-GAAP EBITA, the Non-GAAP EBITA Bonus will start at a payout of 125% of the target Non-GAAP EBITA Bonus and
will increase on a straight-line basis according to the percentage of achievement up to 150% of the target Non-GAAP EBITA Bonus for each respective
executive.9 
  

	III.	Management Objective Bonus 

 20% of the overall target bonus award for eligible executives other than the
CEO, CFO, SVP Sales and VP Cloud2 shall be tied to performance by the executive against management objectives as reasonably determined in writing by the Company’s CEO and reported to the
Chair of the Committee (each an “MBO Bonus”). The Company’s CEO shall determine achievement against the specific objectives, with such achievement to be approved by the Company’s Compensation Committee, and with
such achievement not to exceed 100% for this portion of the Annual Cash Bonus.10 

 

	6 	For purposes of this 2015 Management Bonus Plan, Non-GAAP EBITA is calculated based on all cash payments for Company bonuses. 

	7 	The Minimum Non-GAAP EBITA Amount shall equal $1.05 million less than the Target Non-GAAP EBITA Amount. 

	8 	For example, in the event that Non-GAAP EBITA is achieved at the midway point between the Minimum Non-GAAP EBITA Amount and the Target
Non-GAAP EBITA Amount, the Non-GAAP EBITA Bonus will be paid at 75% of the target Non-GAAP EBITA Bonus amount, such that the Non-GAAP EBITA Bonus paid to the Company’s Chief Financial Officer for would
equal 75% multiplied by 40% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary. 

	9 	For example, in the event that the Company’s actual Non-GAAP EBITA is $5.3 million greater than the Target Non-GAAP EBITA Amount, the Non-GAAP EBITA Bonus will be paid at 125% of the target Non-GAAP EBITA Bonus, such that the Non-GAAP EBITA Bonus paid to the Company’s Chief Financial Officer would equal
125% multiplied by 40% multiplied by 50% multiplied by the Chief Financial Officer’s annual salary. 

	10 	For example, in the event that the Management Objectives are reached at a level of 75%, the Management Objective Bonus paid to the Company’s General Counsel would equal 75% multiplied by 20% multiplied by 45%
multiplied by the General Counsel’s annual salary. 

  
 3 

	B.	GENERAL 

 The Committee will be responsible for the general administration and interpretation of
this Plan and for carrying out its provisions, including the authority to construe and interpret the terms of this Plan, determine the manner and time of payment of any Annual Cash Bonuses, prescribe any necessary procedures for distribution of
Annual Cash Bonuses and adopt rules, regulations and to take such actions as it deems necessary or desirable for the proper administration of this Plan. The Committee, in its sole discretion and on such terms and conditions as it may provide, may
delegate all or part of its authority and powers under the Plan to one or more directors and/or officers of the Company. 
 Any rule or decision by the
Committee or its delegate(s) that is not inconsistent with the provisions of this Plan shall be conclusive and binding on all persons, and shall be given the maximum deference permitted by law. 

The Committee may amend, modify, suspend or terminate this Plan, in whole or in part, at any time, including the adoption of amendments deemed necessary or
desirable to correct any defect or to supply omitted data or to reconcile any inconsistency in this Plan or in any Annual Cash Bonus awarded hereunder. Moreover, the Committee may pay up to 100% of any bonus described under this Plan in fully vested
restricted stock units (“RSUs”)11. The closing price of the Company’s Common Stock on the second day after the Company’s earnings announcement following each
quarter or for the full year, as applicable, shall be used to determine the number of RSUs to be awarded. 
 Notwithstanding any other provision hereof or
any other agreement between the Company and any participant, the Company may, in its sole discretion, implement any recoupment or clawback policies or make any changes to any of the Company’s existing recoupment or clawback policies, as the
Company deems necessary or advisable in order to comply with applicable law or regulatory guidance (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules of
the SEC or a stock exchange or similar body implemented pursuant thereto that is applicable to the Company), and any Annual Cash Bonuses (including, for avoidance of doubt, any quarterly portion) awarded under this Plan is subject to the terms and
conditions of any such recoupment or clawback policies (as as may be adopted, amended or restated from time to time). 
  

	11 	In the event bonuses are paid in RSUs, whether in whole or in part, the determination of Non-GAAP EBITA will be adjusted to reflect the effect of payment of such bonus amount in the form of RSUs as opposed to cash.

  
 4

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