Document:

EXHIBIT 10.22

 

CERTAIN PORTIONS OF
THIS EXHIBIT HAVE BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE SYMBOL

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

 

AIRLINE SERVICES
AGREEMENT

 

by and among

 

PINNACLE AIRLINES
CORP.,

 

PINNACLE AIRLINES,
INC.

 

and

 

NORTHWEST AIRLINES,
INC.

 

Dated
January 14, 2003

 

Effective as of
January 1, 2003

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I    DEFINITIONS

  
	
   

  
	
   

  	
  Section 1.01    Definitions

  
	
   

  	
   

  
	
  ARTICLE II    PROVISION OF
  REGIONAL AIRLINE SERVICES

  
	
   

  	
   

  
	
   

  	
  Section 2.01    Operation of
  Scheduled Flights

  
	
   

  	
  Section 2.02    Use of
  Designator, NW Identification and Related Matters

  
	
   

  	
  Section 2.03    Use of Other
  Designators

  
	
   

  	
  Section 2.04    Personnel
  and Dispatch Control

  
	
   

  	
  Section 2.05    Inventory
  Management

  
	
   

  	
  Section 2.06    Passenger
  Fares

  
	
   

  	
  Section 2.07    DOT Certification

  
	
   

  	
  Section 2.08    Compliance
  With Governmental Regulations

  
	
   

  	
  Section 2.09    Quality of
  Service

  
	
   

  	
  Section 2.10    Service
  Standards

  
	
   

  	
  Section 2.11    Service
  Recovery

  
	
   

  	
  Section 2.12    Annual
  Operating Plan

  
	
   

  	
  Section 2.13    Inflight
  Food, Beverages and Supplies

  
	
   

  	
  Section 2.14    Exclusivity
  Arrangements

  
	
   

  	
  Section 2.15    Other
  Operations

  
	
   

  	
   

  
	
  ARTICLE III
     EQUIPMENT

  
	
   

  	
   

  
	
   

  	
  Section 3.01    Use of the
  Equipment

  
	
   

  	
  Section 3.02    Fleet Size
  and Related Matters

  
	
   

  	
  Section 3.03    Lease of the
  Equipment

  
	
   

  	
  Section 3.04    Terms of the
  Leases

  
	
   

  	
  Section 3.05    Manufacturer
  Benefits Agreement

  
	
   

  	
  Section 3.06    Equipment
  Maintenance, Servicing and Cleaning

  
	
   

  	
  Section 3.07    Third Party
  Guarantees and Warranties

  
	
   

  	
  Section 3.08    Related
  Transfer Arrangements

  
	
   

  	
  Section 3.09    Equipment
  Financing Coordination

  
	
   

  	
  Section 3.10    Spare Parts
  Inventory; Application of Credits

  
	
   

  	
   

  
	
  ARTICLE IV    ANCILLARY
  ARRANGEMENTS

  
	
   

  	
   

  
	
   

  	
  Section 4.01    Coordination
  with Pinnacle

  
	
   

  	
  Section 4.02    Ground
  Handling

  
	
   

  	
  Section 4.03    Facilities

  
	
   

  	
  Section 4.04    Data
  Communications

  
	
   

  	
  Section 4.05    Security

  

 

 

	
   

  	
  Section 4.06    Reservation
  Services

  
	
   

  	
  Section 4.07    Ticketing
  Services and Ticketing Procedures

  
	
   

  	
  Section 4.08    Baggage
  Handling Services

  
	
   

  	
  Section 4.09    Air Cargo
  Handling Services

  
	
   

  	
  Section 4.10    Use of COMAT

  
	
   

  	
  Section 4.11    Slots and
  Route Authorities

  
	
   

  	
  Section 4.12    Emergency
  Response and Family Assistance

  
	
   

  	
   

  
	
  ARTICLE V    REVENUES,
  PAYMENTS AND SETOFF

  
	
   

  	
   

  
	
   

  	
  Section 5.01    Revenues

  
	
   

  	
  Section 5.02    Payments to
  Pinnacle

  
	
   

  	
  Section 5.03    Initial
  Block Hour and Cycle Rates; IOP Program Adjustment

  
	
   

  	
  Section 5.04    Fixed Costs

  
	
   

  	
  Section 5.05    Fuel

  
	
   

  	
  Section 5.06    Direct
  Expenses

  
	
   

  	
  Section 5.07    Billing

  
	
   

  	
  Section 5.08    Monthly
  Margin Calculation and Payment

  
	
   

  	
  Section 5.09    Annual
  Margin Adjustment Payment

  
	
   

  	
  Section 5.10    Rate
  Adjustments

  
	
   

  	
  Section 5.11    Revised
  Monthly Margin Calculation and Payment

  
	
   

  	
  Section 5.12    Revised
  Annual Margin Adjustment Payment

  
	
   

  	
  Section 5.13   
  Non-Scheduled Flight Refund

  
	
   

  	
  Section 5.14    Performance
  Goals and Penalties

  
	
   

  	
  Section 5.15    Pinnacle
  Change of Control

  
	
   

  	
  Section 5.16    Credit Card
  Chargebacks

  
	
   

  	
  Section 5.17    Returned
  Checks

  
	
   

  	
  Section 5.18    Most Favored
  Nations

  
	
   

  	
   

  
	
  ARTICLE VI    REPORTING
  OBLIGATIONS, AUDITING, INSPECTIONS AND CONFIDENTIALITY/PUBLICITY

  
	
   

  	
   

  
	
   

  	
  Section 6.01    Reporting
  Obligations

  
	
   

  	
  Section 6.02    Audits

  
	
   

  	
  Section 6.03    Inspections

  
	
   

  	
  Section 6.04   
  Confidentiality/Publicity

  
	
   

  	
   

  
	
  ARTICLE VII
     NORTHWEST IDENTIFICATION

  
	
   

  	
   

  
	
   

  	
  Section 7.01   
  Identification License

  
	
   

  	
  Section 7.02    Designator
  License

  
	
   

  	
  Section 7.03    New
  Identifications

  
	
   

  	
  Section 7.04    Use of
  Identification

  
	
   

  	
  Section 7.05    Quality
  Control

  
	
   

  	
  Section 7.06    Reservation
  of Rights

  
	
   

  	
  Section 7.07    Ownership

  
	
   

  	
  Section 7.08    Termination

  

 

 

	
   

  	
  Section 7.09    Bankruptcy

  
	
   

  	
   

  
	
  ARTICLE VIII
     TAXES AND FEES

  
	
   

  	
   

  
	
   

  	
  Section 8.01    Taxes and
  Fees

  
	
   

  	
  Section 8.02    Ticket Taxes
  and Fees

  
	
   

  	
  Section 8.03    Property
  Tax, Fuel Tax, and Sales and Use Tax Compliance

  
	
   

  	
  Section 8.04    Refunds of
  Tax

  
	
   

  	
   

  
	
  ARTICLE IX    LIABILITY,
  INDEMNIFICATION AND INSURANCE

  
	
   

  	
   

  
	
   

  	
  Section 9.01    Independent
  Contractor

  
	
   

  	
  Section 9.02   
  Indemnification

  
	
   

  	
  Section 9.03    Insurance

  
	
   

  	
   

  
	
  ARTICLE X    TERM AND
  TERMINATION

  
	
   

  	
   

  
	
   

  	
  Section 10.01    Term

  
	
   

  	
  Section 10.02    Termination
  by Either Party

  
	
   

  	
  Section 10.03    Termination
  by Northwest

  
	
   

  	
   

  
	
  ARTICLE XI    MISCELLANEOUS

  
	
   

  	
   

  
	
   

  	
  Section 11.01    Limitation
  on Performance

  
	
   

  	
  Section 11.02    Mutual
  Cooperation

  
	
   

  	
  Section 11.03   
  Representations and Warranties

  
	
   

  	
  Section 11.04    Assignment

  
	
   

  	
  Section 11.05    Governing
  Law

  
	
   

  	
  Section 11.06    Interline
  and Other Agreements

  
	
   

  	
  Section 11.07    Notices

  
	
   

  	
  Section 11.08    Parties

  
	
   

  	
  Section 11.09   
  Counterparts

  
	
   

  	
  Section 11.10   
  Severability

  
	
   

  	
  Section 11.11    Captions,
  Section Headings and Table of Contents

  
	
   

  	
  Section 11.12   
  Availability of Equitable Remedies; Procedures

  
	
   

  	
  Section 11.13    Exhibits

  
	
   

  	
  Section 11.14    Integration
  and Entire Agreement

  
	
   

  	
  Section 11.15   
  Relationship of Parties

  
	
   

  	
  Section 11.16    Termination
  of 2002 ASA

  

 

 

EXHIBITS

 

	
   

  	
  Exhibit
  A-1

  	
  Aircraft Lease Form

  
	
   

  	
  Exhibit
  A-2

  	
  Engine Lease Form

  
	
   

  	
  Exhibit B

  	
  Hub City Facility Charges

  
	
   

  	
  Exhibit C

  	
  Predicted Employee Bonuses and Incentives

  
	
   

  	
  Exhibit D

  	
  Parity Pay Agreement

  
	
   

  	
  Exhibit E

  	
  Pass Travel Privileges

  

 

 

AIRLINE
SERVICES AGREEMENT

 

THIS
AIRLINE SERVICES AGREEMENT (the “Agreement”) is dated
the 14th day of January, 2003 and made effective as of the 1st day
of January, 2003 by and among PINNACLE AIRLINES CORP., a Delaware corporation
(“Pinnacle Corp.”), PINNACLE AIRLINES, INC., a Georgia corporation and a
wholly-owned subsidiary of Pinnacle Corp. (“Pinnacle”), and NORTHWEST AIRLINES,
INC., a Minnesota corporation (“Northwest”).

 

WITNESSETH:

 

WHEREAS,
Pinnacle Corp., Pinnacle and Northwest desire to make certain arrangements
between them which will enable Pinnacle to provide Northwest with commercial
regional jet air transportation services;

 

WHEREAS,
Pinnacle and Northwest are parties to an Airline Services Agreement dated as of
March 1, 2002 (the “2002 ASA”), and Pinnacle Corp., Pinnacle and Northwest
desire to terminate the 2002 ASA as of December 31, 2002 and to enter into
this Agreement effective as of January 1, 2003;

 

WHEREAS,
Pinnacle will become the wholly-owned subsidiary of Pinnacle Corp. pursuant to
the transactions contemplated by the Omnibus Agreement to be entered into by
Pinnacle Corp., Northwest, Northwest Airlines Corporation and Aon Fiduciary
Counselors, Inc. on January 15, 2003 (the “Omnibus Agreement”) and
Pinnacle Corp. will become a party to this Agreement concurrently with such
transactions;

 

WHEREAS,
Pinnacle Corp., Pinnacle and Northwest are each willing to perform in the
manner and upon the conditions and terms hereinafter set forth;

 

NOW,
THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Northwest, Pinnacle Corp. and Pinnacle do hereby agree as
follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01     Definitions.  For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:

 

(1)                                  the
terms as defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular;

 

(2)                                  all
accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles; and

 

1

 

(3)                                  the
words “herein”, “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Article, or other
subdivision.

 

“ACARS”
means the Aircraft Communications Addressing and Reporting System which
provides communications between the Aircraft and Pinnacle with respect to
operational matters.

 

“Affiliate”
means, as applied to a Person, any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person.  For purposes of this definition “control”
(including, with correlative meanings, the terms “controlling”, “controlled by”
and “under common control with”), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.  Solely for purposes of this Agreement, after
the Initial Contribution (as defined in the Omnibus Agreement), Pinnacle Corp.
and Pinnacle will not be Affiliates of Northwest.

 

“Air
Cargo” means air freight, United States mail and
small package services appropriate for the Aircraft.

 

“Air
Cargo Handling Services” means the Air Cargo
handling services to be performed pursuant to Section 4.09.

 

“Aircraft”
means, (i) the fifty-one (51) CRJ-200/440 Canadair Regional Jet aircraft in
Pinnacle’s fleet as of the Effective Date, (ii) the forty-four  (44) additional CRJ-200 or CRJ-440 Canadair
Regional Jet aircraft when and as such aircraft are added to Pinnacle’s fleet
pursuant to Section 3.02; and (iii) up to two hundred  and nine (209) additional CRJ-200/440
Canadair Regional Jet aircraft when, as and if such aircraft are added to
Pinnacle’s fleet pursuant to Section 3.02.  Any Aircraft removed from Pinnacle’s fleet
cease to be “Aircraft” hereunder upon the date of such removal.

 

“Aircraft
Rental Expense” means the Basic Rent charged in
the Leases between Northwest and Pinnacle which shall be [***] per Aircraft per
month for the CRJ-200/440 Canadair Regional Jet Aircraft and the Basic Rent
paid by Pinnacle pursuant to the Leases between Pinnacle and third parties with
respect to the Saab 340 Aircraft.

 

“Airlink
Carrier” means an airline operating regional jet
and/or turboprop air transportation services as a Northwest Airlink carrier
pursuant to an airline services agreement between such airline and Northwest.

 

“Airline
Assets” means those assets used, as of the date of
determination, in the relevant Person’s operation as an air carrier.

 

“Annual
Operating Plan” shall have the meaning ascribed to
such term in Section 2.12.

 

“Available  CRJ Day” or “ ACD”
means  a CRJ-200 or CRJ-440 Aircraft
each day after such Aircraft has been placed in service by Pinnacle and remains
in service for 

 

2

 

Northwest (including
non-scheduled Aircraft).  A CRJ aircraft
placed in service by Pinnacle on January 1st would have 31
Available CRJ Days in January.

 

“Available
CRJ Days Report” means the report of Available CRJ
Days to be prepared by Pinnacle pursuant to Section 5.02(a).

 

 “Baggage Handling Services”
means the baggage handling services to be performed pursuant to Section 4.08.

 

“Base
Block Hour Rate” shall have the meaning ascribed
to such term in Section 5.03.

 

“Base
Cycle Rate” shall have the meaning ascribed to
such term in Section 5.03.

 

“Basic
Rent” shall have the meaning ascribed to such term
in the Leases.

 

“Beneficial
Ownership” has the meaning given such term as
defined as of the date hereof in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as amended.

 

“Block
Hour” means the period of time (in minutes)
beginning when an Aircraft first moves from the ramp blocks in connection with
a Scheduled Flight, a Non-Scheduled Flight or a Charter Flight and ending when
the Aircraft next comes to a stop at the ramp at any station or other point of
termination as recorded by ACARS or another mutually agreed system, divided by
sixty (60).

 

“Block
Hour Payment” means the payment for Block Hours to
be made pursuant to Section 5.02(b).

 

“Block
Hour Rate” shall have the meaning ascribed to such
term in Section 5.03.

 

“Block
Hour Report” means the report to be prepared by
Pinnacle pursuant to Section 5.02(a).

 

“Bombardier
Agreement” means the Aircraft Heavy Maintenance Service
Agreement between Bombardier Services Corporation and Northwest Airlines, Inc.,
dated February 1, 2002, as amended or extended by Northwest; provided,
however, any material expansion of the scope of services to be performed under
the Bombardier Agreement shall be subject to the reasonable approval of
Pinnacle.

 

“Capital
Stock” of any Person means any and all shares,
interests, rights to purchase, options, warrants, participation or other
equivalents of or interests in (however designated) the equity of such Person,
including any preferred stock.

 

“Charter
Flights” means revenue passenger flights using the
Aircraft (other than Scheduled Flights); provided, however, that the
operational arrangements and the compensation to be received by Pinnacle in
respect of such Charter Flights are subject to the same procedures and
remuneration as a Scheduled Flight hereunder, unless otherwise mutually agreed
by Northwest and Pinnacle.  To the
extent that inflight catering (food and beverage) exceeds that 

 

3

 

normally provided for on a Scheduled Flight,
the incremental cost and coordination of the catering will be the sole
responsibility of Northwest.

 

“COMAT”
means company material, including but not limited to priority aircraft
maintenance parts.

 

“Contracted
Service Cities” means those Service Cities at
which Pinnacle  contracts with a third
party for performance of substantially all Ground Handling Functions and for
required facilities, excluding Hub Cities.

 

“CPPI”
means the percent increase, if any, in the PPI for finished goods published by
the United States Department of Labor, Bureau of Labor Statistics, which
increase occurred during the immediately preceding calendar year, defined as
(PPI at end of prior calendar year/PPI at end of two years prior)-1, but in no
event in excess of five percent (5%) and in no event less than zero.  For example, when calculating the block hour
rate for 2007 in Section 5.10 (b), CPPI is calculated as follows:
(December 2006 PPI / December 2005 PPI) – 1.

 

“CPPIB”
means the percent increase, if any, in the PPI for finished goods published by
the United States Department of Labor, Bureau of Labor Statistics, defined as
(PPI at end of prior calendar year/PPI at end of 2002)-1, but in no event will
the compound annual growth rate be in excess of five percent (5%) or less than
zero.  For example, when calculating the
block hour rate for 2005 in Section 5.03 (a) CPPIB is calculated as
follows: (December 2004 PPI / December 2002 PPI) – 1.

 

“CRJ
Deliveries Report” means the report of deliveries
of CRJ Aircraft to Pinnacle to be prepared by Pinnacle pursuant to Section 5.02(a).

 

“Cycle”
means an actual takeoff at an origin city and landing at a destination city of
an Aircraft in connection with a Scheduled Flight, a Non-Scheduled Flight or a
Charter Flight.

 

“Cycle
Payment” means the payment for Cycles to be made
pursuant to Section 5.02(b).

 

“Cycle
Rate” shall have the meaning ascribed to such term
in Section 5.03.

 

“Cycle
Report” means the report to be prepared by
Pinnacle pursuant to Section 5.02(a).

 

“Data
Communication Equipment” shall have the meaning
ascribed to such term in Section 4.04.

 

“Default”
means the occurrence of an event set forth in Section 10.02 or Section 10.03,
and the expiration of any cure period provided therein without cure or other
remedial action having occurred, permitting termination of this Agreement.

 

“Designator”
means “NW” or such other designator code selected by Northwest from time to
time in its sole discretion to identify Northwest’s own flights.

 

4

 

“Direct
Costs” means Northwest’s or Pinnacle’s, as
applicable, actual cost for goods and services without any surcharge for
administrative or general overhead expenses.

 

“DOT”
means the United States Department of Transportation or any successor to its
functions with respect to the regulation of air transportation.

 

“DOT
Certification” means any and all certifications
and approvals by the DOT, the FAA and other regulatory agencies required for
Pinnacle to operate the Aircraft and to perform pursuant to the terms of this
Agreement and all Governmental Regulations.

 

“Effective
Date” means the date specified in Section 10.01
of this Agreement.

 

“Equipment”
means the Aircraft and Spare Engines.

 

“Equipment
Rental Expense” means the Aircraft Rental Expense
and the Spare Engine Rental Expense.

 

“FAA”
means the Federal Aviation Administration or any successor organization.

 

“Facility
Leases” shall have the meaning ascribed to such
term in Section 4.03(g).

 

“Fixed
Cost Payment” means the payment for fixed costs to
be made pursuant to Section 5.02(b).

 

“Fleet
Value” means the total value of the Aircraft in
Pinnacle’s fleet used in calculating the premium for Pinnacle’s hull insurance
(including war risk).

 

“Fuel
Burn Penalty Payment” shall have the meaning
ascribed to such term in Section 5.05(e).

 

“Fuel
Price” shall have the meaning ascribed to such
term in Section 5.05(b).

 

“GAAP”
means generally accepted accounting practice and principles at the time
prevailing in the United States for companies engaged in businesses similar to
that of Pinnacle, consistently applied.

 

“GE
Agreements” means the Engine Service Agreement
between Northwest Airlines, Inc. and GE Engine Services, Inc., dated
July 17, 2001, as amended or extended by Northwest, and the General Terms
Agreement between General Electric Company and Northwest Airlines, Inc. for
CF34-3B1 Turbofan Engines and Support, dated July 11, 2001, as amended or
extended by Northwest; provided, however, any material expansion of the scope
of services to be performed under the GE Agreements shall be subject to the
reasonable approval of Pinnacle.

 

“Governmental
Regulations” means the rules and regulations
prescribed by an airport authority at a Service City or by any local, state or
federal unit of government having 

 

5

 

authority and jurisdiction to regulate the
business and affairs of an air carrier having DOT Certification, including
without limitation, the DOT and the FAA.

 

“Ground
Handling Functions” shall have the meaning
ascribed to such term in Section 4.02.

 

“Holding
Company” means, as applied to a Person, any other
Person of whom such person is, directly or indirectly, a Subsidiary.

 

“Hub
Cities” means Memphis, Tennessee (“MEM”),
Minneapolis/St. Paul, Minnesota (“MSP”), Detroit, Michigan (“DTW”) and any
other city in the United States where Northwest, together with its subsidiaries
and Airlink Carriers operating under Northwest’s Designator, operate an average
of more than fifty (50) departures per day during any Northwest
Schedule Period.

 

“Identification”
means a trade name, trademark, service mark, graphic, logo, distinctive color
scheme or other trade dress, domain name and/or other identification or
indication of source or origin.

 

“IOP
Payment” means the payment for IOP Program
Incidents to be made pursuant to Section 5.02(b).

 

“IOP
Program Incident” shall mean Northwest’s request
that Pinnacle cancel one or more Scheduled Flights as a result of Northwest’s
initiation of its Irregular Operating Procedures Program.

 

“Lease”
means (i) the leases, subleases and/or sub-subleases entered into or to be
entered into pursuant to Section 3.03 in respect of the CRJ-200/440
Aircraft substantially in the form of Exhibit A-1,  (ii) the leases, subleases and/or sub-subleases entered into or
to be entered into pursuant to Section 3.03 in respect of Spare
Engines substantially in the form of Exhibit A-2, and (iii) the leases and/or
subleases with respect to the Saab 340 Aircraft.

 

“Maintenance
Facilities” shall have the meaning ascribed to
such term in Section 4.03(c).

 

“Maintenance
Program” shall have the meaning ascribed to such
term in the Leases.

 

“Major
Carrier” means an air carrier (other than Pinnacle
and its successors and any Subsidiary thereof or Northwest Airlines, Inc. and
its successors and any Subsidiary thereof), the annual passenger revenues of
which (including its Subsidiaries’ predecessor entities) 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).

 

“Margin”
means the operating margin determined in accordance with Sections  5.09 and 5.12.

 

6

 

“Margin
Adjustment Payment” means the payment to be made
pursuant to Sections 5.09 and 5.12.

 

“Margin
Payment” means the payment to be made pursuant to Sections
5.08  and 5.11.

 

“Market
Margin Rate” or “MMR” means the weighted (by
revenue) average full year operating margin of the five largest (by revenue)
publicly traded U.S. domestic regional airlines operating primarily regional
jet aircraft; provided, however, that if the result of this calculation is
greater than 14 percent, the MMR shall be 14 percent, and if the result is less
than 10 percent, the MMR shall be 10 percent. 
The MMR shall be initially calculated with respect to calendar year 2008
and it shall be re-calculated with respect to each fifth year thereafter so
long as this Agreement remains in effect.

 

“Mesaba”
means Mesaba Aviation, Inc., a Minnesota corporation, and/or Mesaba Holdings,
Inc., a Minnesota corporation, and their respective successors and/or assigns.

 

“Non-Scheduled
Flights” means all flights using the Aircraft
which are not Scheduled Flights or Charter Flights.

 

“Northwest
Schedule Period” means the planned duration
of various time periods for which Northwest’s flight schedule is for sale
in computer reservation systems.

 

“Northwest
Service Cities” means those Service Cities at
which Northwest employees perform substantially all Ground Handling Functions
and Northwest provides required facilities.

 

“Northwest
Tickets” shall have the meaning ascribed to such
term in Section 4.07(a).

 

“Note”
means the promissory note dated January 14, 2003 issued by Pinnacle to NWA
Inc. in the principal amount of 
$200,000,000.00.

 

“NW
Identification” means any Identification
specifically selected by Northwest from time to time in its sole discretion for
use by Pinnacle in connection with the Regional Airline Services (including
without limitation “Northwest Airlink” or any similar name).

 

“Omnibus
Agreement” shall have the meaning ascribed to such
term in the preamble of this Agreement.

 

“Option
Term” means (i) a period of six (6) months
following the date of termination if this Agreement is terminated by Northwest
pursuant to Section 10.02 or Section 10.03; or (ii) a
period of thirty (30) days following the date of termination if this Agreement
is terminated by Northwest pursuant to Section 10.01.

 

“Performance
Criteria” shall have the meaning ascribed to such
term in Section 5.14(a).

 

7

 

“Performance
Period” means each six (6) month period ending on
a June 30 or December 31 occurring during the term of this Agreement.

 

“Person”
means an individual, partnership, corporation, business trust, joint stock
company, limited liability company, unincorporated association, joint venture
or other entity of whatever nature.

 

“Pinnacle
Affected Company” means (a) Pinnacle and its
successor, (b) any Holding Company of Pinnacle, or (c) any Subsidiary of
Pinnacle or its successor or of any Holding Company of Pinnacle, that in each
such case owns, directly or indirectly, all or substantially all of the Airline
Assets of Pinnacle or its successor, such Holding Companies of Pinnacle and
such Subsidiaries, taken as a whole.

 

“Pinnacle
Change of Control” means:

 

(i)                                     the acquisition by
any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended) of Beneficial
Ownership of 20% or more of the Capital Stock or Voting Power of a Pinnacle
Affected Company; provided, however, that a Pinnacle Change of Control will not
be deemed to have occurred: (A) if the holder of Pinnacle Corp.’s Series A
Preferred Stock has taken any action pursuant to Pinnacle Corp’s certificate of
incorporation to permit an acquisition contemplated by this clause (i); (B) if
the Northwest Airlines Pension Plan for Pilot Employees, the Northwest Airlines
Pension Plan for Contract Employees and/or the Northwest Airlines Pension Plan
for Salaried Employees, individually or in the aggregate, has or have
Beneficial Ownership of 20% or more of the Capital Stock or Voting Power of a
Pinnacle Affected Company as a result of contributions of stock of a Pinnacle
Affected Company to plans by Northwest; or (C) as a result of a transfer of
shares of a Pinnacle Affected Company in accordance with the Omnibus Agreement
or as a result of any other transaction involving a Pinnacle Affected Company
in accordance with the Omnibus Agreement; or

 

(ii)                                  the direct or
indirect acquisition by a Major Carrier, any of its Affiliates or any
combination thereof of Beneficial Ownership of 10% or more of the Capital Stock
or Voting Power of a Pinnacle Affected Company.

 

“Pinnacle
Identification” means any Identification selected
by Pinnacle from time to time for use in connection with the business of
Pinnacle and/or Pinnacle Corp.

 

“Pinnacle
Service Cities” means those Service Cities at
which Pinnacle employees perform substantially all Ground Handling Functions
and Pinnacle provides required facilities.

 

“PPI”
means Producer Price Index for finished goods published by the United States
Department of Labor, Bureau of Labor Statistics, and, if no longer published,
any comparable successor index selected by Northwest.

 

“QECs”
mean quick engine change kits.

 

8

 

“Regional
Airline Services” means the provisioning by
Pinnacle to Northwest of Scheduled Flights and Charter Flights using the
Aircraft in accordance with this Agreement.

 

“Renewal
Term” shall have the meaning ascribed to such term
in Section 10.01.

 

“Revenue
Passenger” means a revenue passenger flown on a
Scheduled Flight or a Charter Flight.

 

“Revenue
Threshold” means five hundred million dollars
($500,000,000), as such amount may be increased based on the amount by which,
for any date of determination, the most recently published Consumer Price Index
for all-urban consumers published by the Department of Labor (the “CPI”) has
increased to such date above the CPI for calendar year 2001.  For purposes hereof, the CPI for calendar
year 2001 is the monthly average of the CPI for the 12 months ending on
December 31, 2001.

 

“Saab 340 Aircraft”
means the eleven (11) turboprop aircraft leased by Pinnacle as of the Effective
Date.

 

“Saab Lease”  means the leases and/or subleases in respect
of the Saab 340 Aircraft as of the Effective Date.

 

 “Scheduled Flights”
means revenue passenger flights (other than Charter Flights) using the Aircraft
which, regardless of frequency, are held out to the public and published in the
customary and applicable schedule distribution systems, such as the
Official Airline Guide, or published by Northwest in its own system
timetables.  In addition, Scheduled
Flights shall include all regularly scheduled flights which are not revenue
passenger flights as determined by Northwest in its sole discretion.

 

“Section 5.05
Report” means the report of Section 5.05
expenses to be prepared by Pinnacle pursuant to Section 5.02(a).

 

“Section 5.06
Report” means the report of Section 5.06
expenses to be prepared by Pinnacle pursuant to Section 5.02(a).

 

“Service
Cities” means those cities identified from time to
time by Northwest to which Pinnacle shall provide Regional Airline Services.

 

“Spare
Engine Rental Expense” means the Basic Rent
charged in the Leases between Northwest and Pinnacle for the Spare Engines.

 

“Spare
Engines” means (i) the four (4) General Electric
CF34-3B1 spare engines (including QECs where applicable in accordance with the
respective Spare Engine Lease) in Pinnacle’s fleet as of the Effective Date,
(ii) the four (4) additional CF34-3B1 spare engines (including QECs where
applicable in accordance with the respective Spare Engine Lease) when and as
such spare engines are added to Pinnacle’s fleet pursuant to Section 3.02;
and (iii) additional CF34-3B1 spare engines (including QECs where applicable in
accordance with the respective Spare Engine Lease) when, as and if such spare
engines are added to Pinnacle’s fleet 

 

9

 

pursuant to Section 3.02.  Any Spare Engine removed from Pinnacle’s
fleet ceases to be a “Spare Engine” hereunder upon the date of such removal.

 

“Subsidiary”
of any Person means any corporation, association, partnership, joint venture,
limited liability company or other business entity of which more than 40% of
the total Voting Power thereof or the Capital Stock thereof is at the time
Beneficially Owned or controlled, directly or indirectly by (1) such Person,
(2) such Person and one or more Subsidiaries of such Person, or (3) one or more
Subsidiaries of such Person.

 

“Support
Agreements” shall have the meaning ascribed to
such term in Section 3.08.

 

“Termination
Date” means the date on which this Agreement
terminates pursuant to Article X.

 

“Ticket
Taxes and Fees” means any taxes pursuant to
Sections 4261 or 4271 of the U.S. Internal Revenue Code of 1986, as amended or
succeeded, on any amounts paid by customers for transportation of persons or
packages by air, and any passenger facility charges, airport improvement fees,
security fees or charges, stamp taxes, excise taxes, value-added taxes (in the
nature of a sales or use tax), gross receipts taxes (in the nature of a sales
or use tax), U.S. APHIS user fees, U.S. Customs user fees, U.S. Immigration
user fees, and any other taxes and/or user fees imposed by any domestic or foreign
governmental entity, airport or taxing authority on a per-passenger basis on
any amounts paid by customers for transportation of persons or packages by air.

 

“Ticketing
Services” means the ticketing services to be
performed pursuant to Section 4.07.

 

“Total
Operating Cost” means all expenses directly
associated with the provision of Regional Airline Services under this
Agreement, including but not limited to those generally recognized as overhead,
determined in accordance with GAAP.  For
the avoidance of doubt, Total Operating Cost does not include net interest
expense, principal and interest payments under the Note and those items that
are classified as extraordinary on the audited financial statements.

 

“Total
Operating Income” means Total Operating Revenue
minus Total Operating Cost.

 

“Total
Operating Revenue” means the amounts Pinnacle
receives from Northwest pursuant to Section 5.02 or Section 5.14
(including penalties accounted for as a reduction to revenue) of this
Agreement, plus any revenues Pinnacle receives as a result of performing ground
handling services for Mesaba or other airlines (as and if approved by
Northwest), plus any payments Pinnacle receives from a governmental entity
intended to reimburse Pinnacle for lost revenue, an inability to cover incurred
operating expenses, or as a reimbursement or offset to incurred expenses.

 

“Traffic
Referral” shall have the meaning ascribed to such
term in Section 4.07(e).

 

10

 

“Traffic
Manifest” shall have the meaning ascribed to such
term in Section 4.09(a).

 

“Voting
Power” means, as of the date of determination, the
voting power in the general election of directors, managers or trustees, as
applicable.

 

“2002
ASA” shall have the meaning ascribed to such term
in the preamble of this Agreement.

 

ARTICLE II

 

PROVISION OF REGIONAL
AIRLINE SERVICES

 

Section 2.01
    Operation of Scheduled
Flights.  Subject to the
terms and conditions of this Agreement, Pinnacle shall use the Aircraft to
operate Scheduled Flights and Charter Flights as shall be designated by
Northwest from time to time in Northwest’s sole discretion.  All schedules and aircraft routing for such
Scheduled Flights and all utilization of the Aircraft shall be determined by
Northwest from time to time, in its sole discretion, subject to the reasonable
operating constraints of Pinnacle taking into consideration reasonable
maintenance, crew training and Aircraft rotation requirements.  Scheduled block times shall be set in
accordance with Northwest’s standards unless otherwise mutually agreed by
Northwest and Pinnacle.  Minimum turn
times shall be mutually agreed to by Pinnacle and Northwest and set in
conformity with standard industry practices and Aircraft type.

 

Section 2.02
    Use of Designator, NW
Identification and Related Matters.  Subject to the applicable provisions of Article VII below,
Pinnacle shall operate the Scheduled Flights and Charter Flights provided under
this Agreement using the Designator. 
The Scheduled Flights and Charter Flights shall be identified by
Pinnacle solely with flight numbers assigned by Northwest.  Subject to the applicable provisions of
Article VII below, Pinnacle shall use only the NW Identification for the
Aircraft (except as otherwise required by Governmental Regulations), and for
all facilities (including Maintenance Facilities), signage, equipment, uniforms
and advertising, promotional and business materials in any form or media that
are used in connection with the Regional Airline Services; provided, however, all
Pinnacle uniforms (including the use of the NW Identification thereon) shall be
determined by Northwest, provided that such uniforms shall at all times be
consistent with Northwest’s existing uniform standards.  Pinnacle shall not use the Pinnacle Identification
for the Aircraft (except as required by Governmental Regulation), facilities
(including Maintenance Facilities), signage, equipment, uniforms or
advertising, promotional or business materials in any form or media that are
used in connection with the Regional Airline Services; provided, however,
nothing in the foregoing prohibition shall preclude Pinnacle from using the
Pinnacle Identification for general corporate purposes, investor relations, on
crew wings and employee service pins, and for purposes that are not covered by
the foregoing prohibition and do not involve interaction with customers or
passengers.

 

Section 2.03
    Use of Other
Designators.  Pinnacle
shall not use on the Aircraft the airline designator, Identification, or any
other identifying feature of a foreign or United States 

 

11

 

airline other than Northwest, without the express prior written consent
of Northwest, or unless Northwest directs Pinnacle to use such other
designator, Identification, or identifying feature.

 

Section 2.04
    Personnel and Dispatch
Control.  Pinnacle shall
be responsible for providing all crews (flight and cabin) to operate the
Scheduled Flights and any Charter Flights and for all aspects (personnel and
other) of dispatch control, including but not limited to load control.

 

Section 2.05
    Inventory Management.  Northwest shall have  complete control over all inventory
management functions for all Scheduled Flights and Charter Flights operated
pursuant to this Agreement, including, without limitation, overbooking levels,
discount seat levels, and allocation of seats among the various fare
buckets.   In performing Pinnacle’s
inventory management, Northwest shall conform in all material respects to its
own procedures and standards, taking into account the type of Aircraft operated
by Pinnacle.

 

Section 2.06
    Passenger Fares.  Northwest shall be the sole authority for
filing tariffs for Scheduled Flights operated pursuant to this Agreement, and
Northwest shall establish all passenger fares for Scheduled Flights and Charter
Flights operated pursuant to this Agreement. 
All charges for filing of fares or tariffs for Scheduled Flights
operated pursuant to this Agreement shall be paid by Northwest.

 

Section 2.07     DOT Certification.  Pinnacle has and shall maintain DOT
Certification and all other permits, licenses, certificates and insurance
required by governmental authorities and Article IX hereof to enable
Pinnacle to perform the services required by this Agreement.

 

Section 2.08
    Compliance With
Governmental Regulations. 
All flight operations, dispatch operations and flights and all other
operations undertaken by Pinnacle pursuant to this Agreement shall be conducted
and operated by Pinnacle in strict compliance with all Governmental
Regulations, including, without limitation, those relating to airport security,
the use and transportation of hazardous materials, flight crew and mechanic
qualifications and licensing requirements, crew training and hours.  All Equipment shall be operated and
maintained by Pinnacle in strict compliance with all Governmental Regulations,
Pinnacle’s own operations manuals and maintenance manuals and procedures, and
all applicable equipment manufacturer’s instructions.  At all times, Pinnacle shall operate with the highest standards
of care.

 

Section 2.09
    Quality of Service.  Northwest policies, procedures, performance
standards (including but not limited to Northwest’s “Customers First” customer
service plan) and means of measurement thereof concerning the provision of air
passenger and air cargo services shall be applicable to all services provided
by Pinnacle under this Agreement. 
Pinnacle shall achieve at least the same quality of airline service
provided by Northwest, subject to limitations imposed by the type of Aircraft
used by Pinnacle, its route network, the availability of equipment and
facilities at the Service Cities and the performance by Northwest of its
obligations under this Agreement. 
Pinnacle shall maintain adequate staffing levels to ensure at least the
same level of customer 

 

12

 

service and operational efficiency that Northwest achieves; Pinnacle
shall cooperate with Northwest in any way necessary or desirable to provide
such comparable level of customer service in connection with the operation of
Regional Airline Services; and Pinnacle shall maintain new hire and recurrent
training programs for all job descriptions which are reasonably acceptable to
Northwest.

 

Section 2.10
    Service Standards.  Without limiting Section 2.09,
Pinnacle shall achieve the following specific performance standards.

 

(a)                                  Minimum
Completion Factor.  Pinnacle shall
achieve not less than a [***] completion factor for all Scheduled Flights which
are scheduled to be operated by Pinnacle during each Performance Period.  Scheduled Flights which are cancelled at
Northwest’s request (as determined by Northwest’s System Operations Control
(“SOC”) operations reporting group) will not be included in calculating
Pinnacle’s completion factor, and station overflys due to no passenger load
will not be considered a cancellation.

 

(b)                                 Minimum On-Time
Reliability.  Pinnacle shall achieve
a [***] on-time arrival [***] factor and a [***] on-time departure [***] factor
for all Scheduled Flights which are scheduled to be operated by Pinnacle during
each Performance Period.  Scheduled
Flights which are delayed at Northwest’s request will not be included in
calculating Pinnacle’s on-time arrival and on-time departure factors.

 

(c)                                  Mishandled
Luggage Factor.  The number of
incidents of mishandled luggage by Pinnacle shall not exceed [***] enplaned
revenue passengers during any Performance Period.  The number of incidences of mishandled luggage shall be determined
by Northwest by dividing (i) the total number of Pinnacle-caused claims at
Pinnacle Service Cities, Northwest Service Cities, Contracted Service Cities
and the Hub Cities during the applicable Performance Period, by (ii) the
total number of enplaned revenue passengers during such Performance Period as
reported by Northwest.  Notwithstanding
the foregoing, the parties agree that incidents of mishandled luggage where (i)
DTW is the responsible station, and (ii) such incidents are not due to
Pinnacle’s actions, will not be included in the mishandled luggage factor
unless and until Pinnacle performs luggage handling for its Scheduled Flights
at DTW.  In the event incidents of
mishandled luggage at DTW are excluded from the mishandled luggage factor
pursuant to the preceding sentence, the number of enplaned revenue passengers
at DTW during the corresponding time period will also be excluded from the
mishandled luggage factor, and no penalties will be applicable as to such
passengers.  The parties further agree
that mishandled luggage at MSP will not be included in the mishandled luggage
factor in the event Mesaba fails to perform luggage handling in accordance with
the standards set forth in the handling agreement between Pinnacle and Mesaba
and Northwest is unable to make sufficient space available at MSP to allow
Pinnacle to perform luggage handling for its Scheduled Flights or make other
mutually satisfactory luggage handling arrangements.  In the event incidents of mishandled luggage at MSP are excluded
from the mishandled luggage factor pursuant to the preceding sentence, the
number of enplaned revenue passengers at MSP during the corresponding time
period will also be excluded from the mishandled luggage factor, and no
penalties will be applicable as to such passengers.

 

(d)                                 Customer Complaints
Factor.  The number of customer
complaints received by Northwest in respect of Regional Airline Services shall
not exceed [***] enplaned revenue passengers during any Performance
Period.  The number of customer complaints
shall 

 

13

 

be determined
by Northwest by dividing (i) the total number of Pinnacle -caused
complaints during the applicable Performance Period, by (ii) the total
number of enplaned revenue passengers during such Performance Period as
reported by Northwest.

 

Section 2.11
    Service Recovery

 

(a)                                  Passenger
Amenities.  Pinnacle agrees to
provide passenger amenities, including, without limitation, denied boarding
compensation, which Northwest provides under Rule 245 of the Domestic General
Rules No. 1 issued by Airline Tariff Publishing Co. and ATA Resolution No.
120.20 or pursuant to any similar contractual arrangement now existing or
hereafter in effect or applicable to Northwest.  In any Pinnacle Service City, Contracted Service City or Hub
City, Pinnacle agrees (i) to handle oversold Scheduled Flights and the payment
of denied boarding compensation in accordance with Northwest’s standard
policies and procedures, (ii) to pay the full cost of providing passenger
amenities (either directly to the affected passengers or to Northwest as
reimbursement for the amounts paid by Northwest to such passengers) with the
exception of denied boarding compensation resulting from inventory oversales or
other actions of Northwest, and (iii) to report all denied boarding data to
Northwest via both the standard Northwest Ticket Agent Report (“TAR”) and the
standard Northwest Yield Management Flight Close-Out Denied Boarding Mask
(“MASK”).  In any Pinnacle Service City,
Contracted Service City or Hub City, for denied boarding compensation resulting
from inventory oversales or the actions of Northwest, Pinnacle will pay the
appropriate amount of denied boarding compensation to the affected passengers
and will invoice Northwest for such amount pursuant to Section 5.07
below.  Any such invoice will include
sufficient detail and supporting documentation to allow Northwest to verify the
invoiced amount.  Notwithstanding the
foregoing, Pinnacle shall be responsible for any discrepancy between the TAR
and the MASK, and Northwest will invoice Pinnacle for any amounts due based on
reconciliation of those two reports.  In
Northwest Service Cities, Northwest will provide all passenger amenities, including
but not limited to baggage delivery, at its sole cost.

 

(b)                                 Destination by
other Means.  If Pinnacle transports
a revenue passenger to his or her destination by another means (bus, train,
taxi, etc.) due to a flight cancellation, Northwest shall reimburse Pinnacle
for the actual transportation costs incurred to transport the passenger by such
other means; provided, however, that if the flight cancellation is necessitated
by acts of Pinnacle (e.g., crew curfews, maintenance-related delays, etc.),
Pinnacle will pay the costs incurred to transport the passenger by such other
means.  Pinnacle shall use its best
efforts to minimize the transportation of passengers by other means and the
costs associated therewith.

 

Section 2.12
    Annual Operating Plan.  At least 90 days prior to January 1 of
each year during the term of this Agreement, Pinnacle and Northwest shall
confer and prepare an operating plan for the succeeding calendar year, which
plan shall include (i) Northwest’s forecast with respect to the
schedule and routing for all Scheduled Flights for such year, (ii)
Northwest’s forecast of the Service Cities to which Pinnacle shall operate
Regional Airline Services, (iii) Northwest’s forecast of specific dates for the
commencement of service to new Service Cities, if any, (iv) Northwest’s forecast
of the number of Aircraft to be added to or removed from Pinnacle’s fleet
(subject to Section 3.02), and (v) such other matters as Northwest
and Pinnacle shall determine (as amended in accordance with this Section 2.12,
the “Annual Operating Plan”).  Northwest
and Pinnacle shall meet and confer on a quarterly basis (or more frequently if 

 

14

 

requested by either Northwest or Pinnacle) to review the implementation
of the Annual Operating Plan and to discuss any changes to the Annual Operating
Plan.  In the event Northwest elects to
alter the Annual Operating Plan during the course of a year, Northwest shall
use its reasonable best efforts to provide at least sixty (60) days prior
notice to Pinnacle.  Notwithstanding the
foregoing provisions of Section 2.12, Northwest shall promptly
notify Pinnacle of any determination by Northwest to increase or decrease
Pinnacle’s fleet size, and, except as provided in Section 3.02(a)(ii)
and Section 3.02 (a)(iii) below, Northwest shall give Pinnacle no
less than ninety (90) days prior notice. 
Northwest agrees that any substantial increases in Pinnacle’s fleet size
pursuant to the preceding sentence are subject to Pinnacle’s reasonable
operating constraints.

 

Section 2.13     Inflight Food, Beverages and Supplies.  Unless otherwise mutually agreed, Pinnacle
will provide Aircraft catering services, food and beverages for passengers and
crews on Scheduled Flights in accordance with Northwest’s specifications and
directions and at Pinnacle’s sole cost. 
Pinnacle shall be solely responsible for maintaining all licenses
necessary for the serving of inflight food and beverages on Scheduled
Flights.  Northwest shall furnish
Pinnacle, at Northwest’s sole cost, adequate supplies of its customary inflight
supplies including, but not limited to, the Northwest inflight magazine, cups,
napkins, pillows, blankets, trash bags, sick sacks, lavatory supplies,
creamers, swizzle sticks and sugar in a form similar or identical to that used
by Northwest.  Notwithstanding anything
to the contrary in this Agreement, Northwest may, at its option, require
Pinnacle upon ninety (90) days prior written notice to utilize Northwest or a
Northwest-designated contract agent to provide catering services, food and
beverages for passengers and crews on Scheduled Flights, provided that (i) the
Block Hour Rates set forth in Section 5.03 below are adjusted as
necessary to eliminate the costs of catering services, food and beverages that
were included in establishing the Block Hour Rates, and the Direct Costs to
Pinnacle of the new arrangement will be reimbursed pursuant to
Section 5.06 below, and (ii) the service standards applicable to any such
Northwest-designated contract agent are either reasonably satisfactory to
Pinnacle or no less stringent than the standards applicable to Northwest’s own
operations.

 

Section 2.14
    Exclusivity
Arrangements.  During the
term of this Agreement, neither Pinnacle Corp., Pinnacle, nor any Affiliate of
Pinnacle Corp. shall operate any flights to or from the Hub Cities using its
own airline code or the airline code, logo, or any other identifying feature of
a foreign or United States airline (other than Northwest) without the express
prior written consent of Northwest. 
Nothing in this Agreement shall preclude Northwest from (i) entering
into code share, alliance or other commercial cooperation arrangements with any
other airline, or (ii) entering into similar or other arrangements with other
carriers for the provisioning of regional airline services using Canadair
Regional Jets, turboprop aircraft or any other aircraft to or from the Hub
Cities, the same Service Cities or elsewhere.

 

Section 2.15
    Other Operations.  Pinnacle Corp. and/or an Affiliate of
Pinnacle Corp. may acquire aircraft and operate air transportation services in
its own name or on behalf of or in cooperation with an airline other than
Northwest, subject to Section 2.14, Section 6.01(b), Section 6.02(a)
and the following conditions:

 

15

 

(a)                                  Pinnacle
Corp. and/or its Affiliates shall not engage in any such activity until the
earlier of the date on which Pinnacle has ninety-five CRJ-200/440 Aircraft in
its fleet and January 1, 2005;

 

(b)                                 During
the term of this Agreement, no officers, employees, facilities,  Equipment or other assets of Pinnacle shall
be used in connection with such activity without Northwest’s prior written
approval; provided, however, that on or after January 1 , 2004 , officers
of Pinnacle may engage in planning and coordination with respect to such
activities to the extent that such planning and coordination does not have an
adverse impact on Pinnacle’s performance of Regional Airline Services
hereunder;

 

(c)                                  This
Agreement shall be amended in accordance with Section 5.18 (“Most
Favored Nations”) below; and

 

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

 

ARTICLE III

 

EQUIPMENT

 

Section 3.01
    Use of the Equipment.  Pinnacle agrees (a) that the Equipment shall
be used only to provide and/or support the Regional Airline Services
contemplated by this Agreement, (b) that the Equipment shall not be used by
Pinnacle for any other purpose without the prior written consent of Northwest,
and (c) that Pinnacle shall not acquire, lease or operate any aircraft or spare
engines other than the Aircraft and Spare Engines.

 

Section 3.02
    Fleet Size and Related
Matters.

 

(a)                                  Determination of
Fleet Size.  As of the Effective
Date, Pinnacle’s fleet consisted of 
fifty-one (51) CRJ-200/440 Canadair Regional Jet aircraft and four (4)
Spare Engines.

 

(i)                                     Equipment
Additions.  Northwest and Pinnacle
agree that (A) subject to Bombardier (x) continuing to provide or cause to be
provided to Northwest financing for the Equipment on a basis no less favorable
to Northwest than the terms of such financing as in effect as of the Effective
Date and (y) delivering Canadair Regional Jet Aircraft to Northwest as
scheduled as of the Effective Date, an additional forty-four (44) CRJ-200/440
Canadair Regional Jet Aircraft and four (4) Spare Engines shall be added to
Pinnacle’s fleet on or before December 31, 2004, provided that at
Northwest’s option one of such Spare Engines may be added to Pinnacle’s fleet
after December 31, 2004 and on or before June 30, 2005, and (B)
Northwest shall have the right to cause from time to 

 

16

 

time up to an additional two hundred nine (209) CRJ-200/440 Canadair
Regional Jet Aircraft and twenty-six (26) Spare Engines to be added to
Pinnacle’s fleet.

 

(ii)                                  Equipment Removal
Rights.  Northwest and Pinnacle
agree that (A) Northwest shall have the right from time to time to cause
Pinnacle to assign the Saab Leases to Northwest (or its designee) or to
sublease to Northwest (or its designee) any or all of the Saab 340 Aircraft;
and (B) from and after that time when Pinnacle has more than  ninety-five (95) CRJ-200/440 Aircraft,
Northwest shall have the right upon at least ninety (90) days prior written
notice to require the removal of CRJ-200/440 Aircraft and related Spare Engines
selected by Northwest from Pinnacle’s fleet provided that at no time shall the
number of such Aircraft and Spare Engines removed pursuant to this Section 3.02(a)(ii)(B)
cause the number of Aircraft in Pinnacle’s fleet to be less than ninety-five
(95) or cause the number of Spare Engines in Pinnacle’s fleet to be less
than  eight (8).

 

(iii)                               Additional Equipment
Removal Rights.  Notwithstanding Section 3.02(a)(ii)(B),
in the event of (A) a labor action or other event giving rise to Northwest’s
right to terminate this Agreement pursuant to Section 10.03(e) and
(B) Northwest has not yet exercised its termination rights, (1) Northwest shall
have the right to terminate Leases for, and take immediate possession of, up to
forty-five (45) CRJ 200/440 Aircraft and related Spare Engines selected by
Northwest, and (2) if the labor action or other event continues beyond 45 days
Northwest shall have the right to select and terminate Leases for, and take
immediate possession of, up to that number of CRJ 200/440 Aircraft in excess of
fifty (50) and the related Spare Engines.

 

(iv)                              Fleet Continuation
Option.  In the event Northwest
terminates this Agreement on December 31, 2012 pursuant to Section 10.01
below, Pinnacle shall have the option to retain ninety-five (95) Aircraft and
eight (8) Spare Engines in its fleet until December 31, 2017; provided,
however, that in order to exercise this option Pinnacle must provide Northwest
written notice on or before December 31, 2011 of its intent to exercise
the option, and further provided that if the number of Aircraft and Spare
Engines in Pinnacle’s fleet as of December 31, 2012 is less than
ninety-five (95) Aircraft and eight (8) Spare Engines, this option shall only
be applicable as to the number of Aircraft and Spare Engines in Pinnacle’s
fleet as of December 31, 2012.  In
the event Pinnacle exercises this option, (A) Northwest and Pinnacle shall
enter into new Leases for the retained Aircraft which shall be substantially in
the form of Exhibit A-1, provided that Northwest may require Pinnacle to
establish maintenance reserves in accordance with the terms set forth in the
form of Lease attached and that the Aircraft Rental Expense for each such
Aircraft shall be the greater of fair market rental or [***] per Aircraft per
month, (B) Northwest and Pinnacle shall enter into new Leases for the retained
Spare Engines which shall be substantially in the form of Exhibit A-2, provided
that Northwest may require Pinnacle to establish maintenance reserves in
accordance with the terms set forth in the form of Lease attached and the Spare
Engine Rental Expense for each such Spare Engine shall be the greater of the
fair market rental or the then-existing Spare Engine Rental Expense for such
Spare Engine, and (C) the retained Aircraft shall be re-painted as soon as
possible after the Termination Date at Pinnacle’s sole expense to 

 

17

 

remove all NW
Identification from the Aircraft, including but not limited to re-painting the
red tails of the Aircraft.

 

(v)                                 Unscheduled
Aircraft.  Subject to Pinnacle’s
approval, which shall not be unreasonably withheld, Northwest shall determine
the appropriate level of unscheduled Aircraft to be included in Pinnacle’s
fleet from time to time.

 

(vi)                              Spare Engine
Requirements.  Subject to
Section 3.02(a)(i) above, Northwest and Pinnacle shall mutually determine
the appropriate quantity of Spare Engines to be included in Pinnacle’s fleet
from time to time.

 

(b)                                 Induction and
Termination Costs.  All one-time
expenses which are associated with inducting Equipment shall be paid one
hundred percent (100%) by Pinnacle.  All
return costs and expenses associated with the return of Equipment shall be paid
one hundred percent (100%) by Pinnacle without reimbursement by Northwest;
provided, however, in the event Northwest exercises its Equipment removal
rights pursuant to Section 3.02(a)(ii)(B) above, Pinnacle shall not
be required to meet the return conditions in the Leases for the Aircraft and
Spare Engines that are thus removed from Pinnacle’s fleet unless Northwest intends
to return such Equipment to the lessor under the Leases.

 

(c)                                  Aircraft
Re-certification.  Northwest may, at
its sole option, direct Pinnacle to take such actions as are necessary to cause
44-seat Aircraft to be re-certificated as 50-seat Aircraft or to take such
actions as are necessary to cause 50-seat Aircraft to be re-certificated as
44-seat Aircraft and all Direct Costs which are associated with such Aircraft
re-certifications shall be paid one hundred percent (100%) by Northwest.  Any such Aircraft re-certifications will be
accomplished within a mutually agreed time frame, but in any event within sixty
(60) days unless otherwise directed by Northwest.

 

Section 3.03
    Lease of the Equipment.  As of the Effective Date, Pinnacle and
Northwest (and/or an Affiliate of Northwest) have entered into Leases with
respect to the fifty-one (51) CRJ-200/440 Aircraft and four (4) Spare Engines
in Pinnacle’s fleet and agree to enter into (or, as to Northwest, Northwest
agrees to cause such affiliate as Northwest may designate to enter into) a
Lease with respect to each additional CRJ-200/440 Aircraft and each additional
Spare Engine added to Pinnacle’s fleet when and as Northwest takes delivery of
such additional Equipment if Northwest has determined to use such Equipment for
Regional Airline Services pursuant to this Agreement.

 

Section 3.04
    Terms of the Leases.  Each Lease for the CRJ-200/440 Aircraft and
the Spare Engines shall be substantially in the forms of Exhibit A-1 and
Exhibit A-2, respectively, and, subject to Section 3.02 (a)(iv) above,
shall include the following terms:

 

(a)                                  the
term of each Lease shall be for a period ending on the Termination Date;
provided, however, no Lease shall be for a term longer than the term of the
related head lease, if any;

 

(b)                                 the
rent for Aircraft shall equal the Aircraft Rental Expense and shall be payable
monthly in advance;

 

18

 

(c)                                  the rent for Spare
Engines shall equal the Spare Engine Rental Expense and shall be payable
monthly in advance; and

 

(d)                                 the
Leases shall include such terms as are necessary to conform provisions of the
Leases to the head lease and to any ancillary documents actually entered into
by Northwest or its affiliate in connection with such Equipment (to the extent
Northwest requests conformation).

 

Section 3.05
    Manufacturer Benefits
Agreement.  Northwest and
Pinnacle have concurrently entered into a Manufacturer Benefits Agreement.

 

Section 3.06
    Equipment Maintenance,
Servicing and Cleaning. 
Pinnacle shall be responsible for all aspects of the maintenance in
accordance with the Maintenance Program (including any maintenance or
modifications required by FAA airworthiness directives and all routine and non-routine
maintenance), servicing and cleaning (including painting of aircraft exteriors
and replacement of worn interior items) of the Equipment (except for ground
handling as specified in Section 4.02); provided, however, that
with respect to the Canadair Regional Jet Aircraft and Spare Engines, Pinnacle
shall utilize General Electric for all major shop-level engine maintenance and
shall utilize Bombardier for heavy airframe maintenance in accordance with the
GE Agreements and the Bombardier Agreement. 
In the event Pinnacle is or becomes a party to such Agreements, Pinnacle
shall not execute any amendment or side letter to any of those Agreements
without Northwest’s prior written consent. In the event spare engine and/or
spare parts pooling agreements are established for Airlink Carriers, Pinnacle
will participate in such agreements so long as such agreements reasonably
address Pinnacle’s inventory needs, logistics requirements and configuration
concerns.  In the event Northwest enters
into agreements for auxiliary power unit (APU) maintenance, avionics
maintenance and/or landing gear overhauls with respect to the Aircraft,
Pinnacle shall utilize the vendors in such agreements for such services;
provided, however, Pinnacle’s utilization of such vendors shall be subject to
(i) termination of Pinnacle’s existing vendor contracts, if any, and
Northwest’s payment of any early termination penalties imposed pursuant to
Pinnacle’s contracts and (ii) reasonably satisfactory arrangements in respect
of Pinnacle’s operational requirements.

 

Section 3.07     Third Party Guarantees and Warranties.  Pinnacle shall administer, track and pursue
warranty and guaranty claims under the purchase, support and service agreements
for the Equipment, so as to minimize operating costs for the Equipment.  Such efforts shall include establishment of
all systems and procedures necessary to track and submit warranty and guaranty
claims, including providing reports and information required to be provided
under the purchase, support or services agreement.  Pinnacle shall not operate or maintain the Equipment in a manner
that could result in any warranty or guaranty being terminated or voided,
without the prior written consent of Northwest.

 

Section 3.08
    Related Transfer
Arrangements.

 

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

 

19

 

termination of this Agreement. 
Pinnacle shall, at Northwest’s option, assign such Support Agreements as
Northwest shall designate to Northwest on termination of this Agreement.  Pinnacle shall use its best efforts to
obtain the consent of the other party to any such Support Agreements in effect
as of the Effective Date and, subject to obtaining such consents, if necessary,
shall, at Northwest’s option, assign such Support Agreements as Northwest shall
designate to Northwest on termination of this Agreement.  On termination of this Agreement and during
the Option Term, Northwest shall have the option to purchase from Pinnacle all
ground support equipment, tooling and spare parts inventory then owned by
Pinnacle which are used with or related to the Equipment for an amount equal to
such assets’ then fair market value or depreciated book value, whichever is
less.  In the event Northwest invokes
its Equipment removal rights hereunder, on the Equipment removal date and for a
period of thirty (30) days thereafter, Northwest shall have the option to
purchase from Pinnacle all ground support equipment, tooling and spare parts
inventory then owned by Pinnacle which are used with or related to the
returning Equipment for an amount equal to such assets’ then fair market value
or depreciated book value, whichever is less.

 

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

 

Section 3.09
    Equipment Financing
Coordination.

 

Pinnacle shall coordinate and cooperate with
Northwest with respect to Equipment sale, purchase and lease transactions.  Such coordination and cooperation shall
include, but is not limited to, cooperating with Northwest in structuring the
closing of Equipment sale, purchase or lease transactions in a manner that will
minimize the imposition of any local, city, county, state, provincial, federal
or foreign taxes or other governmental transfer charges related to such
transactions, providing Northwest with financial information (audited and
unaudited) that Northwest may then provide to third parties, assisting in
raising capital through the sale of either debt and/or equity in connection
with the financing or leasing of the Equipment where and as requested by
Northwest (including but not limited to participating in meeting with the
manufacturer, potential investors and sources of financing or lease equity to
discuss Pinnacle’s financial and operational performance and outlook), and full
cooperation in meeting appropriate return conditions of the Equipment upon
expiration of the Equipment’s Lease.

 

Section 3.10
    Spare Parts Inventory;
Application of Credits. 
Northwest may, at its option, purchase spare parts inventory items
designated by Northwest from Bombardier or other third parties and either sell
such parts to Pinnacle at Northwest’s Direct Cost or lease such parts to
Pinnacle.  Terms of the spare parts
lease agreement, including but not 

 

20

 

limited to, administration of inventory, scope of inventory purchase
and lease conditions, will be mutually agreed. 
Northwest may, at its option, require Pinnacle to purchase spare parts
or inventory from Bombardier or other designated third parties.  In addition, Northwest may, at its option,
require Pinnacle to purchase from Northwest, manufacturer, supplier or servicer
credits obtained from third parties at the face value of the credits.  However, in no event shall Pinnacle be
required to purchase credits from Northwest that Pinnacle cannot utilize within
180 days of the date of purchase from Northwest.

 

ARTICLE IV

 

ANCILLARY
ARRANGEMENTS

 

Section 4.01
    Coordination with
Pinnacle.

 

(a)                                  Schedules and
Timetables.  Northwest shall file
and maintain schedules with all applicable schedule distribution systems
for all Scheduled Flights, and such schedules shall be filed and maintained by
Northwest together with the schedules for its flights.  Northwest shall include and list all
Scheduled Flights providing Regional Airline Services in the
schedule publication program of Northwest.  Northwest shall, at its expense and sole discretion, furnish to
Pinnacle an adequate supply of current printed Northwest timetables and
contracts of carriage consistent with Governmental Regulations and Northwest’s
timetable publication program. 
Northwest shall include Scheduled Flights operated by Pinnacle in all
appropriate flight information systems on which Northwest flights are listed.

 

(b)                                 Travel Privileges.  Northwest and Pinnacle shall each be
entitled to make available for their respective employees and members of their
respective Boards of Directors, the travel privileges set forth on Exhibit E
attached hereto in accordance with the terms and conditions set forth therein.

 

(c)                                  United States
Weather Bureau Information.  Upon
request of Pinnacle or its flight crews, Northwest shall at its sole cost
furnish Pinnacle such United States Weather Bureau information or data as may
be available to Northwest pursuant to a separate written agreement; provided,
however, that neither Northwest nor its employees will be responsible or liable
for the accuracy thereof.  So long as
Northwest shall maintain its communications link with the National Weather
Service, Northwest shall provide the necessary communications to permit
Pinnacle to continue providing weather data to the National Weather Service.  Northwest shall provide any available
National Weather Service data through computer link-up to Pinnacle.

 

(d)                                 Information
Systems.  Northwest and Pinnacle
have concurrently entered into a separate written agreement with respect to the
information systems support Northwest will provide to Pinnacle.

 

Section 4.02
    Ground Handling

 

Passenger and Ramp Handling.  At 
Northwest Service Cities, Northwest shall  provide the following functions: (a) all gate check-in
activities, (b) all passenger enplaning/deplaning services, including but
not limited to sky cap and wheel chair services, 

 

21

 

(c) aircraft loading/unloading services,
including but not limited to airside busing, (d) passenger ticketing,
(e) aircraft cleaning, including but not limited to overnight cleaning,
(f) jetbridge maintenance, (g) janitorial services, and (h) deicing
services (collectively, the “Ground Handling Functions”) at the rate of [***]
per turn (cycle).  At Pinnacle Service
Cities, Pinnacle shall provide the Ground Handling Functions.  At a Contracted Service City, Pinnacle shall
provide the Ground Handling Functions utilizing a contract agent.  At DTW, MSP and any other Hub City,
excluding MEM, Pinnacle shall use its own personnel and equipment or a contract
agent to perform the Ground Handling Functions, except for (i) passenger
ticketing, (ii) airside busing, sky cap and wheel chair services,
(iii) jetbridge maintenance (iv) janitorial services, and (v) DTW
deicing services, all of which services Northwest shall provide [***]. In the
event Pinnacle utilizes a contract agent to perform substantially all of the
Ground Handling Functions at DTW the rate for such contracted services shall
not exceed [***] per turn (cycle), excluding commissary charges.  Any charge for such services in excess of
[***] per turn shall [***] Northwest. In the event Pinnacle utilizes a contract
agent to perform substantially all of the Ground Handling Functions at MSP the
rate for such contracted services shall not exceed [***] per turn (cycle),
including commissary charges.  Any
charge for such services in excess of [***] per turn shall [***]. At MEM,
Pinnacle shall use its own personnel and equipment or a contract agent to
perform the Ground Handling Functions, except for (i) passenger ticketing,
and (ii) airside busing, sky cap and wheel chair services, all of which
services Northwest shall provide [***].

 

Notwithstanding anything to the contrary in this Agreement, Northwest
may, at its option, require Pinnacle upon ninety (90) days prior written notice
to utilize Northwest, a Northwest-designated contract agent, or Pinnacle’s own
personnel and equipment to perform the Ground Handling Functions at any or all
of the Hub Cities, Contracted Service Cities and Pinnacle Service Cities,
provided that (i) in the event Northwest enters into a ground handling
agreement with a contracted agent in a Contracted Service City, Northwest shall
charge Pinnacle [***] per turn (cycle) (ii) the city classification pursuant to
Section 5.03(b) will be revised to the extent necessary, and (iii) the
service standards applicable to any Northwest-designated contract agent will be
either reasonably satisfactory to Pinnacle or no less stringent than the
standards applicable to Northwest’s own operations.  Furthermore, in the event a city is converted from a Contracted
Service City to a Pinnacle Service City, the Northwest passenger ticket counter
(passenger ticketing function pursuant to Section 4.02 (d)) at such
Service City may only be staffed by one company designated by Northwest.

 

Section 4.03
    Facilities.

 

(a)                                  Hub Cities.  Pinnacle will sublease from Northwest
airport facilities at the Hub Cities as set forth in mutually agreeable
sublease agreements.  The applicable Hub
City facility charges are set forth in Exhibit B.  In the event Pinnacle requires additional facilities at any of
the Hub Cities caused by the expansion of Regional Airline Services, Northwest
shall use its reasonable efforts to obtain such facilities and provide them to
Pinnacle at no additional charge to Pinnacle. 
Northwest and Pinnacle agree that Northwest may relocate Pinnacle to
comparable facilities at the Hub Cities, provided that Northwest pays
Pinnacle’s reasonable relocation expenses.

 

22

 

(b)                                 Service Cities.  At Northwest Service Cities, Northwest shall
provide Pinnacle with the Ground Handling Functions pursuant to Section 4.02
hereof utilizing Northwest’s owned and/or leased premises and equipment (including
jetbridges) located thereon.  Northwest
shall cooperate with Pinnacle’s efforts to become a signatory carrier at such
airports; provided, however, that if Pinnacle becomes a signatory carrier at
any such airport Pinnacle shall vote as directed by Northwest on any matters
submitted to the signatory carriers for a vote.  At Pinnacle Service Cities, Pinnacle shall be solely responsible
for all of its facilities and equipment requirements, excluding jetbridges, which
shall be the responsibility of Northwest; provided, however, if Northwest owns
and/or leases facilities at a Pinnacle Service City and elects to provide
Ground Handling Functions to Pinnacle pursuant to Section 4.02, Northwest
shall provide such services utilizing Northwest’s owned and/or leased premises
and equipment (including jetbridges) located thereon. At a Contracted Service
City, Pinnacle shall be solely responsible for all of its facilities and
equipment requirements, excluding jetbridges, which shall be the responsibility
of Northwest.  In the event Northwest
exercises its right, pursuant to Section 4.02, to have a
Northwest-designated contract agent perform the Ground Handling Functions in a
Contracted Service City, Northwest shall be solely responsible for all
facilities and equipment requirements. Northwest will determine in its sole
discretion whether a jetbridge will be used at all Service Cities.

 

(c)                                  Maintenance
Facilities.  Except as provided in
Section 3.06 and Section 4.03(h), maintenance facilities used to
perform maintenance on the Equipment (“Maintenance Facilities”) pursuant to
lease or ownership arrangements entered into after the Effective Date, shall be
at such locations and pursuant to terms mutually agreeable to both
parties.  In the event Northwest
provides the Maintenance Facility to Pinnacle, it will do so according to the
terms of a mutually agreeable lease or sublease.  Northwest shall reimburse Pinnacle on a monthly basis in
accordance with Sections 5.06 and 5.07 for such Maintenance
Facilities expenses incurred by Pinnacle. 
The cost to Pinnacle for Maintenance Facilities leased or owned by
Pinnacle as of the Effective Date or thereafter, will be reimbursed in
accordance with Sections 5.06 and 5.07.

 

(d)                                 Landing Fees.  Pinnacle shall be responsible for landing fees
at all airports to which it provides Regional Airline Services pursuant to this
Agreement and at all airports to which a Scheduled Flight, Non-Scheduled Flight
or Charter Flight is diverted.

 

(e)                                  Signage.  Subject to Governmental Regulations,
Pinnacle shall display at all ticketing and check-in locations such signage or
other forms of advertisement to identify and promote Northwest’s service as
Northwest may specify and as approved by the relevant airport authority.  All signage utilizing the NW Identification
shall be provided by Northwest at its sole cost, shall be the property of
Northwest and shall be subject to the applicable provisions of Article VII
below.  Pinnacle shall not use the
Pinnacle Identification on any signage or other forms of advertisement used to
identify or promote the Regional Airlines Services (except as otherwise
required by Governmental Regulations).

 

(f)                                    Related Transfer
Arrangements.  All leases and
subleases of facilities used in connection with Regional Airline Services, including
Maintenance Facilities for the Equipment (collectively, “Facilities Leases”)
entered into by Pinnacle after the Effective Date shall be assignable to
Northwest without the consent of the other party to such Facility Lease on
termination of this Agreement, the withdrawal of Scheduled Flights from such
airport or upon 

 

23

 

written notice
from Northwest to Pinnacle, provided that if the consent of the facility lessor
is required by contract or Governmental Regulations, Pinnacle will use its best
efforts to obtain such consent at the time the Facility Lease is entered into
and to incorporate such consent in the terms of the Facility Lease.  Pinnacle shall, at Northwest’s option,
assign such Facilities Leases as Northwest shall designate to Northwest on
termination of this Agreement, the withdrawal of Scheduled Flights from such
airport or upon receipt of written notice from Northwest. Pinnacle shall use
its best efforts to obtain the consent of the other party to such Facilities
Leases in effect as of the Effective Date and, subject to obtaining such
consents, if necessary, shall, at Northwest’s option, assign such Facilities
Leases as Northwest shall designate to Northwest on termination of this
Agreement, the withdrawal of Scheduled Flights from such airport or upon
receipt of written notice from Northwest. 
On termination of this Agreement and during the Option Term, Northwest
shall have the option to purchase from Pinnacle all facilities used in
connection with Regional Airline Services, including Maintenance Facilities for
the Equipment, then owned by Pinnacle for an amount equal to such assets’ then
fair market value or depreciated book value, whichever is less.  On the assignment of a Facility Lease to Northwest
or on the withdrawal of Scheduled Flights from an airport and for a period of
thirty (30) days thereafter, Northwest shall have the option to purchase from
Pinnacle all facilities used in connection with Regional Airline Services at
such airport, including Maintenance Facilities for the Equipment, then owned by
Pinnacle for an amount equal to such assets’ then fair market value or
depreciated book value, whichever is less.

 

(g)                                 Maintenance
Facilities Continuation Option. 
Notwithstanding Section 4.03(f) above, in the event Pinnacle
exercises its fleet continuation option in Section 3.02(a)(iv) above,
Pinnacle may continue in effect all leases and subleases of Maintenance
Facilities reasonably required to support the retained Aircraft and Spare Engines
until the earlier of the expiration date for such agreement and
December 31, 2017.  In such
circumstances, (i) Pinnacle shall, at Northwest’s option, assign such retained
leases and subleases of Maintenance Facilities as Northwest shall designate to
Northwest on December 31, 2017, and (ii) on December 31, 2017 and for
a period of thirty (30) days thereafter, Northwest shall have the option to
purchase from Pinnacle all Maintenance Facilities for the retained Aircraft and
Spare Engines then owned by Pinnacle for an amount equal to such assets’ then
fair market value or depreciated book value, whichever is less.

 

(h)         Facilities Lease Option.  Notwithstanding anything to the contrary in
this Agreement, Northwest may, at its option, elect to hold the leasehold
interest in any facilities to be used by Pinnacle at any new or existing
Service City, and in the event Northwest exercises this option (i) Northwest
shall enter into a Facilities Lease with the lessor of such facilities, (ii)
Pinnacle shall utilize such facilities pursuant to a sub-lease or facilities
use agreement with Northwest, (iii) the rent/facilities charges payable by
Pinnacle in such sub-lease or facilities use agreement shall be the same as
Northwest’s Direct Cost under the Facilities Lease for the facilities used by
Pinnacle, (iv) the sub-lease or facilities use agreement shall terminate when
Pinnacle ceases to operate Regional Airline Services at the airport, and (v)
Northwest shall lease facilities which are reasonably suitable for Pinnacle’s
operational needs and, with respect to new Service Cities, Northwest shall
complete the leasing arrangements in a manner that will allow Pinnacle adequate
time to prepare to commence Regional Airline Services at the Service City in
accordance with the Annual Operating Plan or as otherwise scheduled by
Northwest.

 

24

 

Section 4.04
    Data Communications.
Northwest shall provide to Pinnacle at all Service Cities and Hub Cities [***]
data circuit lines, any required data networking equipment, the use of computer
reservation terminals, printers and modems, including hardware, software and
maintenance support for such equipment (the “Data Communication
Equipment”).  Such Data Communication
Equipment shall be of the same type and quality as that used by Northwest in
its airline operations.  In connection
with the commencement of Regional Airline Services at a new Service City,
Northwest will provide Pinnacle with Northwest’s standard Data Communications
Equipment [***].  Northwest and Pinnacle
shall enter into a separate written agreement with respect to the information
technology services to be provided by Northwest to Pinnacle in connection with
the Regional Airline Services operated under this Agreement.

 

Section 4.05
    Security.  Northwest will provide for Pinnacle’s use
the security equipment in place, as of the Effective Date, at all Service Cites
and the Hub Cities.  Northwest agrees to
provide, at Northwest’s sole expense, for Pinnacle’s use at all new Pinnacle
Service Cities and Contracted Service Cities the same type of security
equipment.  Any additional security
equipment required due to future Governmental Regulations shall be provided by
Pinnacle at its sole expense at Pinnacle Service Cities and Contracted Service
Cities, and shall be provided by Northwest at its sole expense at Hub Cities
and Northwest  Service Cities.  At all Northwest Service Cities and the Hub
Cities, Northwest is solely responsible for Pinnacle’s allocated share of all
maintenance expenses associated with all security equipment and Pinnacle’s
allocated share of all personnel expenses (including overtime) associated with
the operation of the equipment and all airport security-related functions,
including, without limitation, passenger screening and activities related to
security directives imposed by Governmental Regulations.  At Pinnacle Service Cities and Contracted
Service Cities, Pinnacle is solely responsible for all or its allocated share
of all maintenance expenses associated with all security equipment and all or
its allocated share of all personnel expenses (including overtime) associated
with the operation of the equipment and all airport security related functions,
including, without limitation, passenger screening and activities related to
security directives imposed by Governmental Regulations.  Notwithstanding the foregoing, the parties
acknowledge and agree that as of the Effective Date the U.S. government is in
the process of taking over airport security, and the parties will negotiate in
good faith regarding any changes to this Agreement that may be necessary as a
result.

 

Section 4.06
    Reservation Services.  During the term of this Agreement, Northwest
shall handle, at its sole expense, reservations for all passenger air
transportation on Scheduled Flights operated pursuant to this Agreement.  Reservations shall be handled in the same
manner and subject to the same standards utilized by Northwest for its own
reservations.  All reservations shall be
made in the name of Northwest unless otherwise required by Governmental
Regulations.  Northwest shall be sole
owner of any customer or passenger data relating to the Scheduled Flights and
related reservation services.

 

Section 4.07
    Ticketing Services and
Ticketing Procedures.

 

(a)                                  Ticketing
Services.  At all of its ticketing
locations, Northwest shall, at its sole expense, sell, issue and exchange
tickets for passenger air transportation on all Scheduled Flights to be
operated pursuant to this Agreement utilizing Northwest ticket stock and all
related accounting forms printed with the Northwest logo, name and format
(“Northwest Tickets”).  

 

25

 

Northwest hereby appoints Pinnacle as its
agent, and Pinnacle hereby agrees to act as Northwest’s agent, at all Pinnacle
ticketing locations in connection with the sale and issuance of all passenger
tickets by Pinnacle and with the same duties owed to Northwest in that capacity
as is customary in the industry between airlines.  At all of its ticketing locations, Pinnacle shall sell, issue and
exchange Northwest Tickets for passenger air transportation on all Scheduled
Flights to be operated pursuant to this Agreement and to be provided by and
over the routes of Northwest (collectively, “Ticketing Services”).  Nothing in this Section 4.07(a)
shall be deemed to alter or conflict with the provisions of Section 9.01
hereof.  Air carriers and other agencies
other than Northwest may also issue tickets for travel to be performed by
Pinnacle.

 

(b)                                 Booking and
Ticketing Procedures.  The
procedures followed and standards applied by Pinnacle in booking flights and
performing the Ticketing Services shall conform in all material respects to
Northwest’s own tariffs, procedures and standards applicable to the booking of
Northwest flights and the issuance of Northwest Tickets and to the collection
and remittance of the proceeds of such sales. 
Pinnacle employees booking flights and performing Ticketing Services shall
adhere to Northwest’s procedures and standards as shall be provided to Pinnacle
in writing.  In accordance with Section 8.02
below, Pinnacle shall be responsible for collecting and shall pay to Northwest
any Ticket Taxes and Fees required to be collected under applicable law on
Tickets sold by Pinnacle utilizing Northwest ticket stock.

 

(c)                                  Frequent Flyer
Program.  Pinnacle agrees to accept
Northwest frequent flyer tickets and to provide transportation services
pursuant to such tickets at no charge to Northwest.  All travel under the frequent flyer program solely on Pinnacle
shall entitle a passenger to such credit as shall be equivalent to the credit
offered on Northwest for comparable mileage segments.  Northwest will provide such credit to members of its frequent
flyer program who travel on Pinnacle at no charge to Pinnacle.

 

(d)                                 Supplies.  Northwest shall, at its sole expense,
provide an adequate supply of ticket office forms and specialized supplies
(such as baggage tags, but excluding normal office supplies such as paper,
stationery, envelopes, memo pads and the like) bearing the NW Identification
for use by Pinnacle subject to the applicable provisions of Article VII
below.

 

(e)                                  Ticketing
Costs.  All travel agency
commissions attributable to Scheduled Flights shall be Northwest’s expense.  Northwest shall pay all computer reservation
system fees attributable to passengers on Scheduled Flights.  In the event Governmental Regulations
preclude the payment of these fees by Northwest and Pinnacle then pays them,
Northwest shall immediately begin paying Pinnacle a “Traffic Referral”
commission on a semi-monthly basis in an amount equal to such fees formerly
paid by Northwest for Pinnacle.  Such
commission shall be retroactive to the date on which such fees were no longer
lawfully paid by Northwest and shall be included in the semi-monthly payments
to be made by Northwest pursuant to Section 5.02.

 

Section 4.08
    Baggage Handling
Services.  “Baggage
Handling Services” shall consist of the following:

 

26

 

(a)                                  At
all Northwest Service Cities and Hub Cities, Pinnacle and Northwest shall
exchange and transfer baggage in accordance with procedures to be mutually
agreed upon and generally utilized by the parties.

 

(b)                                 The procedures
utilized in performing such Baggage Handling Services shall conform in all
respects to Northwest’s own standards and procedures as adapted to Pinnacle’s
Aircraft and operations.

 

(c)                                  For
purposes of baggage claims, Pinnacle will be treated as if it were a party to
standard industry ticketing and baggage agreements with Northwest and other air
carriers.  Pinnacle will make available
at the request of any passenger excess valuation insurance, if any, offered by
Northwest to the extent such insurance covers Pinnacle’s flights and Northwest’s
flights.

 

Section 4.09
    Air Cargo Handling
Services.  “Air Cargo
Handling Services” shall consist of the following:

 

(a)                                  At
each location at which Northwest operates Ticketing Services, Northwest shall
at no charge to Pinnacle accept Air Cargo for shipment on flights to be
operated by and over the routes of Pinnacle or Northwest. Northwest shall issue
air waybills covering Air Cargo and shall prepare a “Transfer Manifest” for
each Pinnacle flight on which there shall be an Air Cargo shipment which
transfer manifest shall set forth all Air Cargo to be carried on the flight.

 

(b)                                 Northwest
hereby appoints Pinnacle as its agent, and Pinnacle hereby agrees to act as
Northwest’s agent, at all Pinnacle ticketing locations in connection with the
sale and issuance of all air waybills by Pinnacle and with the same duties owed
to Northwest in that capacity as is customary in the industry between
airlines.  Pinnacle agrees to observe
all Northwest procedures and standards applicable to the issuance of air waybills
and to the collection and remittance of the proceeds of such sales.  Pinnacle employees performing such duties
shall adhere to Northwest’s procedures and standards as shall be provided to
Pinnacle in writing.  In accordance with
Section 8.02 below, Pinnacle shall be responsible for collecting
and shall pay to Northwest any Ticket Taxes and Fees required to be collected
under applicable law on air waybills sold by Pinnacle utilizing Northwest air
waybills.  Nothing in this Section 4.09(b)
shall be deemed to alter or conflict with the provisions of Section 9.01
hereof.  Air carriers other than
Northwest may also issue air waybills for cargo transportation to be performed
by Pinnacle.

 

(c)                                  Pinnacle
shall provide Air Cargo handling services at Pinnacle’s ticketing locations for
and on behalf of Northwest for Air Cargo carried solely on Pinnacle or on both
a Pinnacle flight and a Northwest flight. 
Such handling services shall be performed in accordance with Northwest’s
procedures and standards as provided to Pinnacle in writing, including but not
limited to (1) accepting all Air Cargo that Northwest accepts, such as pets/AVI
(other live animals), human remains, Priority Service (SPC) freight and
perishables, unless otherwise mutually agreed, and (2) keeping facilities open
at least one and one-half (1.5) hours before and one (1) hour after each
Scheduled Flight for customers to deliver and pick up Air Cargo.

 

27

 

(d)                                 For
Air Cargo carried solely on Pinnacle or on both an Pinnacle flight and a
Northwest flight, Pinnacle and Northwest shall charge rates in accordance with
Northwest’s applicable rates and tariffs; such revenues shall be paid 100% to
and retained by Northwest.

 

(e)                                  For purposes of Air
Cargo claims, Pinnacle will be treated as if it were a party to standard
industry ticketing and baggage agreements with Northwest and other air
carriers.

 

(f)                                    Northwest shall, at
its sole expense, supply Pinnacle with all necessary Air Cargo forms and
supplies in an agreed upon form with the NW Identification, subject to the
applicable provisions of Article VII below.  Northwest and Pinnacle shall utilize such forms and supplies when
accepting Air Cargo for transport on Pinnacle’s flights.

 

Section 4.10
    Use of COMAT.  Northwest and Pinnacle shall each provide to
the other, at no cost to the other and on a non-discriminatory basis, access to
its respective COMAT system for the movement and acquisition of priority
aircraft maintenance parts and other company material.  Northwest’s failure to deliver timely a
maintenance component via COMAT, whether timely or at all, shall not cause an
affected Scheduled Flight to be excluded in calculating Pinnacle’s on-time
performance and completion factors.  All
access shall be consistent with Northwest’s and Pinnacle’s respective published
COMAT procedures and policies, as amended from time to time.  Northwest shall provide to Pinnacle at no
cost and on a non-discriminatory basis, access to Northwest’s VIP express cargo
service to the extent necessary for Aircraft out of service recovery.

 

Section 4.11
    Slots and Route
Authorities.  During the
term of this Agreement (including any Renewal Terms) or upon the expiration or
termination of this Agreement, Northwest may, in its sole discretion, require
Pinnacle to transfer to Northwest or its designee at no charge any airport
takeoff or landing slots, route authorities or other regulatory authorities as
Northwest shall designate which have been or are being used for Regional
Airlines Services under this Agreement.

 

Section 4.12
    Emergency Response and
Family Assistance. 
Northwest and Pinnacle shall enter into a separate written agreement
with respect to emergency response and family assistance services to be
provided to Pinnacle by Northwest at no charge in connection with the Regional
Airlines Services operated under this Agreement.

 

ARTICLE V

 

REVENUES, PAYMENTS
AND SETOFF

 

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

 

28

 

Section 5.02
    Payments to Pinnacle.

 

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

 

	
  Day of Month Report Due

  	
   

  	
  Period Covered by Report

  
	
   

  	
   

  	
   

  
	
  22

  	
   

  	
  1st – 15th of
  Month

  
	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Complete Previous Month

  

 

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

 

	
  Day of Month Report Due

  	
   

  	
  Period
  Covered by Report

  
	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Complete Previous Month

  

 

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

 

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

 

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

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

Section 5.03
    Block Hour and Cycle
Rates; IOP Program Adjustment

 

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

 

	
  Period

  	
   

  	
  Base Block
  Hour

  Rate

  CRJ-200/440

  
	
  Effective Date – 12/31/03

  	
   

  	
  [***]

  
	
  01/01/04 - 12/31/04

  	
   

  	
  [***]

  
	
  01/01/05 - 12/31/05

  	
   

  	
  [***]

  

 

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

 

30

 

Base Cycle
Rates - - CRJ 200/400

 

	
   

  	
   

  	
  Effective

  Date –

  12/31/03

  	
   

  	
  01/01/04-

  12/31/04

  	
   

  	
  01/01/05-

  12/31/05

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DTW

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  MSP

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  MEM

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  NW Cities

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  CS Cities

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  PS Cities

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

NW Cities
means Northwest Service Cities.

 

CS Cities
means Contracted Service Cities

 

PS Cities
means Pinnacle Service Cities

 

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

 

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

 

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

 

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

 

where,

 

P is the IOP Payment to be made to Pinnacle,

 

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

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

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

 

31

 

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

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

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

 

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

 

Fixed Cost
Payment [***]

 

where,

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Section 5.05   Fuel.

 

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

 

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

 

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

 

(ii)                                  Current payment
mechanisms in place as of the Effective Date of this Agreement will continue
with the exception that the applicable monthly Margin Payment (per Section 5.08
or Section 5.11) will only be paid on the actual fuel boarded multiplied
by the lesser of the actual fuel price, including into-plane fees and taxes,
and $.78/gallon 

 

32

 

(the “Fuel Price”).  In
addition, no adjustment will be made to bring Pinnacle’s fuel expense up to
$.78/gallon.  The reimbursement will be
through the Section 5.02 wire transfer occurring on the 15th day of
the following month.

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Fuel Burn Review
Procedures - CRJ.  Northwest and
Pinnacle agree to review the fuel burn performance of the CRJ Aircraft for
compliance with the performance measure (burn rate ceiling) set below.  Either party may initiate the audit of the
actual fuel burn against the set measure. 
The performance measure includes both scheduled and non-scheduled fuel
usage/expense.  The ceiling is the
Northwest budgeted scheduled fuel burn per scheduled 

 

33

 

Block Hour [***]for non-scheduled usage.  For example, the 2002 performance measure
(ceiling) was equal to the Northwest scheduled fuel burn rate of [***] gallons
per scheduled Block Hour [***], which sets the ceiling at [***].

 

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

 

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

 

Section 5.06   Direct
Expenses.  Northwest will
reimburse Pinnacle for the following expenses at the Direct Cost to
Pinnacle.  Reimbursement for these
expenses paid or accrued by Pinnacle in the prior month will be included in the
wire transfer to Pinnacle on the 15th of each month pursuant to Section 5.02(b)
above.  Pinnacle will be responsible for
providing Northwest with a copy of all third party invoices and evidence of
payment needed to determine the expense amount and the timeliness of payment.

 

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

 

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

 

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

 

(c)  Engine maintenance – The
CRJ 200/440 engine maintenance performed pursuant to the GE Agreements less any
warranty payments or credits that Pinnacle receives, including but not limited
to those from GE, plus the cost of materials and components used in connection
with unscheduled off-wing maintenance performed by Pinnacle (not including
maintenance or replacement of line replaceable units or QEC items).  Pinnacle shall provide to Northwest, upon
reasonable request, documentation detailing the unscheduled event and cost of
each of the components.  If Northwest
and Pinnacle agree at any time to have such engine work 

 

34

 

performed elsewhere, the reimbursement amount
will be adjusted to take into account the new arrangement.  Notwithstanding the foregoing, Northwest
will not reimburse Pinnacle for engine maintenance performed pursuant to the GE
Agreements which is accomplished unreasonably in advance of the time such
maintenance is required in accordance with the Maintenance Program or which is
accomplished for the sole purpose of satisfying return conditions under the
Lease.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

35

 

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

 

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

 

Monthly Margin Payment = (payments due to
Pinnacle pursuant to Sections 5.03, 5.04, 5.05 and  5.06)
* (.14 / .86)

 

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

 

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

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  Period:

  	
   

  	
  Effective Date – 2005

  	
   

  	
  2006 & 2007

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ceiling:

  	
   

  	
  15

  	
  %

  	
  16

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Floor:

  	
   

  	
  13

  	
  %

  	
  12

  	
  %

  

 

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

 

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

 

37

 

where

 

Ppin is the
amount payable to Pinnacle,

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

 

Floor is the
applicable floor from the above table, and

 

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

 

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

 

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

 

where,

 

Pnw is the
amount payable to Northwest,

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

 

Ceiling is the
applicable ceiling from the above table, and

 

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

 

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

 

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

 

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

 

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

 

38

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Where, MMR is
the Market Margin Rate.

 

39

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

40

 

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

 

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

 

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

 

(b)                                 Annual Adjustment
to Margin Payment.

 

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

 

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

 

where,

 

Pnw is the amount payable to Northwest,

 

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

 

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

 

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

 

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

 

where,

 

Pnw is the amount payable to Northwest,

 

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

 

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

 

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

 

(c)  Audit of Total Operating
Cost and the Margin.  Northwest
shall have the right to audit the calculation of the Total Operating Cost, the
Margin and the Margin Adjustment 

 

41

 

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

 

Section 5.13   Non-Scheduled
Flight Refund.

 

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

 

Refund Calculation:

 

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

 

Section 5.14  Performance
Levels and Penalties.

 

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

 

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

 

	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  
	
  Performance Level

  	
   

  	
  [***]

  	
   

  	
  [***]

  [***]

  	
   

  	
  [***]

  
	
  Penalty per enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

42

 

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

 

Departure [***]

 

	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  
	
  Performance Level

  	
   

  	
  [***]

  	
   

  	
  [***]

  [***]

  	
   

  	
  [***]

  
	
  Penalty per enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

Arrival [***]

 

	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  
	
  Performance Level

  	
   

  	
  [***]

  	
   

  	
  [***]

  [***]

  	
   

  	
  [***]

  
	
  Penalty per enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

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

 

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

 

	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  
	
  Performance Level (incidents per [***]
  enplaned revenue passengers)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
  Penalty per enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  $.15

  	
   

  	
  [***]

  

 

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

 

43

 

	
   

  	
   

  	
  Additional

  Penalty

  	
   

  	
  Penalty

  	
   

  	
  Neutral

  
	
  Performance Level (incidents per [***] enplaned revenue passengers)

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
  Penalty per enplaned revenue passenger

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  

 

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

 

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

 

(c)  Additional Performance
Criteria.  During the term of this
Agreement, Northwest may propose other performance criteria for Pinnacle’s
operations pursuant to this Agreement. 
The parties agree that they will meet upon the introduction of
additional performance levels for Northwest’s operations, to develop similar
performance targets for Pinnacle, taking into account the differences in
operations between the two companies, and shall use their best commercially
reasonable efforts to develop a system of performance levels and penalties for
Pinnacle’s performance with respect thereto in a manner consistent with the
performance standards agreed to herein.

 

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

 

Section 5.16   Credit
Card Chargebacks.

 

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

 

(b) 
With respect to all credit card charge forms returned to Pinnacle by
Northwest, Northwest will furnish Pinnacle with a complete written explanation
of the reason 

 

44

 

therefore accompanied by relevant
documentation received from the credit card issuer or credit card holder.

 

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

 

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

 

Section 5.17   Returned
Checks.

 

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

 

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

 

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

 

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

 

Section 5.18   Most
Favored Nations.  If a
Pinnacle Affected Company enters into an agreement with a Major Carrier to
provide regional airline services on terms and conditions that are in the
aggregate less favorable to the Pinnacle Affected Company than the terms and
conditions of this Agreement are to Pinnacle, Northwest and Pinnacle will amend
this Agreement (effective as of the date of the agreement with the Major
Carrier) to conform the terms and conditions of this Agreement to the terms and
conditions of the agreement with the Major Carrier.

 

45

 

 

ARTICLE VI

 

REPORTING OBLIGATIONS,

AUDITING, INSPECTIONS AND CONFIDENTIALITY/PUBLICITY

 

Section 6.01     Reporting
Obligations

 

(a)                                  Certain Notices to
Northwest.  Pinnacle shall give prompt
written notice to Northwest of (i) any litigation involving an uninsured claim
of more than $1,000,000 against Pinnacle, (ii) any proceeding before any governmental
agency which, if adversely determined, would materially and adversely affect
Pinnacle’s financial condition, affairs, operations or prospects, including but
not limited to any significant FAA enforcement or civil penalty action, (iii)
any other matter which would materially and adversely affect the financial
condition, affairs, operations or prospects of Pinnacle or its ability to
perform its obligations under this Agreement, and (iv) any proposed
extraordinary capital expenditures and all capital expenditures in excess of
$250,000.  Pinnacle shall also provide
Northwest the reports specified in Section 2.11(a) above and shall
report to Northwest not later than the last day of each month its completion
factor and on-time factor for the prior month.

 

(b)                                 Financial
and Reporting Covenants.  Pinnacle
Corp., Pinnacle and all Affiliates of Pinnacle Corp. shall provide to Northwest
promptly following the filing or providing thereof copies of all financial
statements, reports, notices and proxy statements filed with or provided to the
Securities and Exchange Commission or the United States Department of
Transportation.  Pinnacle Corp. and
Pinnacle shall also promptly provide to Northwest notice of and adequate
information regarding any material weaknesses or reportable conditions noted in
any management letters received by either Company from its independent auditors
and the company’s responses thereto. 
Pinnacle Corp., Pinnacle and all Affiliates of Pinnacle Corp. shall also
provide Northwest with monthly financial statements, annual expense budgets and
periodic business plans and related projections.

 

(c)                                  Certain Notices to
Pinnacle.  Northwest shall report to
Pinnacle not later than the last day of each month the number of incidences of
mishandled luggage and the number of customer complaints for the previous month
related to the Regional Airline Services provided hereunder.  Upon the reasonable prior written request by
Pinnacle, Northwest shall make available its books and records related to
incidences of mishandled luggage and customer complaints in connection with the
Regional Airline Services provided hereunder.

 

Section 6.02     Audits

 

(a)                                  Compliance
Audits.  Upon the reasonable prior
written request by Northwest, Pinnacle Corp. and Pinnacle shall make available
their respective books and the books of all of their Subsidiaries and
Affiliates, including but not limited to general ledger backup (monthly) for
financial statements and records for operations with respect to this Agreement
for inspection by Northwest. Northwest shall also be entitled to make copies
and notes of such information as it deems necessary and to discuss such records
and the finances and accounts of Pinnacle Corp. and Pinnacle with each
Company’s Chief Financial Officer or other employee or agent of Pinnacle Corp.
or Pinnacle knowledgeable about such records.

 

46

 

(b)                                 Inventory
Audits.  At Northwest’s request, during
the term of this Agreement Pinnacle and Northwest shall conduct an annual
inventory audit of all spare parts, tooling and ground support equipment owned
by Northwest and leased to Pinnacle or owned by Northwest and supplied to
Pinnacle.  Such audit shall not be
requested more than one time per calendar year.  In conducting such audit, the parties shall tabulate the quantity
and type of all spare parts and ground support equipment including recognition
of spare parts and ground support equipment which were scrapped in the
preceding year(s). Such audit, when completed and agreed to by both parties,
shall be final.

 

Section 6.03     Inspections.  Northwest shall be entitled to conduct
on-site observations of Pinnacle’s in-flight service, flight, maintenance,
technical operations, gate-check in service, ground operations, Aircraft
cleaning and any and all other services and operations performed under this
Agreement to monitor Pinnacle’s operations in the same manner as similar
functions are evaluated at Northwest. 
The purpose of such inspections shall be to determine Pinnacle’s compliance
with applicable Governmental Regulations, state and local laws, equipment
manufacturer’s instructions and the standards established by this
Agreement.  Pinnacle’s operation will be
evaluated according to the same standard as Northwest taking into account the
differences in size and operational capabilities between the two airlines.  Such inspections may be announced or
unannounced, but under no circumstances shall they interfere with the operation
of Pinnacle’s business.  Northwest shall
report the findings of any such inspection to Pinnacle in writing.  Pinnacle shall provide a timely written
response detailing a plan of corrective action to remedy any deficiencies noted
in an inspection.  If any deficiency
comes to the attention of Pinnacle through audits or any other means, Pinnacle
shall take immediate corrective action.

 

Section 6.04     Confidentiality/Publicity.  Each of Northwest and Pinnacle agrees that,
except as otherwise required by Governmental Regulations or any other
applicable law, it shall not disclose to others and shall keep confidential the
terms of this Agreement and any confidential, non-public information concerning
the other that it obtains as a result of or pursuant to this Agreement.  Pinnacle shall not issue any press release
or public announcement relating to  new
Scheduled Flights, the cessation of Scheduled Flights in any Service City,
schedule changes, customer initiatives, marketing programs or promotions,
without Northwest’s prior written approval of the press release or public
announcement.  In any such press release
or public announcement, Pinnacle shall identify itself as a Northwest Airlink
carrier.

 

ARTICLE VII

 

NORTHWEST IDENTIFICATION

 

Section 7.01     Identification
License.  Northwest
hereby grants to Pinnacle a non-exclusive, non-transferable, non-sublicensable
license to use the NW Identification in connection with its operation of the
Regional Airline Services as authorized hereunder.

 

Section 7.02     Designator
License.  Northwest
hereby grants to Pinnacle a non-exclusive, non-transferable, non-sublicensable
license to use the Designator in connection with its operation of the Scheduled
Flights as authorized hereunder.

 

47

 

Section 7.03     New
Identifications.  From
time to time in its sole discretion, Northwest may change any NW
Identifications and/or Designators upon notice to Pinnacle.  After receipt of such notice, Pinnacle shall,
as soon as practicable, but no later than thirty (30) days thereafter, commence
use solely of the new NW Identifications and/or Designators and cease all use
of any superseded ones.  Northwest shall
reimburse Pinnacle for the reasonable out-of-pocket expenses incurred by
Pinnacle in making such changes.

 

Section 7.04     Use
of Identification. 
Northwest shall have exclusive control over the use and display of all
NW Identifications and Designators, and Pinnacle shall comply with all policies
and guidelines of Northwest in this regard.  
Pinnacle shall use the NW Identifications and Designators in good faith,
in a dignified manner and in compliance with good trademark practice.  Pinnacle shall use the NW Identifications
and Designators exactly as prescribed by Northwest, and shall not use (i) any
stylization, abbreviation or variation thereof or (ii) the NW Identifications
and Designators in connection or combination with any other Identification, in
each case, without Northwest’s prior written consent, which may be withheld in
its sole discretion.

 

Section 7.05     Quality
Control.  Pinnacle shall
use the NW Identifications and Designators only in connection with products and
services that comply with the high standards of quality associated with
Northwest. At Northwest’s request, Pinnacle shall submit representative samples
to Northwest of all uses by Pinnacle of the NW Identifications and Designators
pursuant to this Agreement, including Sections 2.02, 4.03(f), 4.07(d)
and 4.09(e).  Pinnacle shall
receive the prior written approval of Northwest for any new uses of the NW
Identifications and Designators, including on any advertising and promotional
materials.  Once such approval is
received, Pinnacle need not resubmit such materials for approval unless they
contain non-trivial modifications.

 

Section 7.06
    Reservation of Rights. 
All rights not expressly granted to Pinnacle hereunder are expressly
reserved by Northwest, including without limitation the right to use or license
others to use any NW Identifications or Designators.  Pinnacle shall not use the NW Identification or Designator except
as expressly authorized herein, and has no right to use any other
Identification of Northwest other than the specific NW Identification in the
exact form prescribed by Northwest from time to time.

 

Section 7.07     Ownership.  Pinnacle hereby acknowledges that, as
between the parties, Northwest is the sole owner of the names “Northwest” and
“Northwest Airlink,” the initials “NW,” and any Designators or NW
Identifications related thereto or otherwise licensed to Pinnacle hereunder.  Pinnacle agrees not to directly or
indirectly question attack, contest or impugn the validity and/or Northwest’s
rights in the Designators and NW Identifications, including without limitation
by attempting to register title to or any intellectual property rights in same
or by participating in any action or proceeding adverse to Northwest in this
regard.  Pinnacle agrees to cooperate
fully with Northwest in all actions to enforce, police and defend Northwest’s
rights in the Designators and NW Identifications, subject to reimbursement for
its out-of-pocket expenses.

 

Section 7.08     Termination.  Should this Agreement expire or terminate
for any reason, the licenses in Sections 7.01 and 7.02 shall
immediately terminate (although Sections

 

48

 

7.07
and 7.08 shall survive), and Pinnacle shall promptly, but in any event
within ninety (90) days (one hundred twenty (120) days with respect to any
distinctive color scheme), take all such actions as may be necessary to change
its facilities, equipment, uniforms, supplies and other materials to cease all
use of any Designators and NW Identifications and to avoid any customer
confusion or the suggestion or appearance that Pinnacle continues to have an
operating relationship with Northwest.

 

Section 7.09     Bankruptcy.  The parties intend that the identity of
Pinnacle as the licensee hereunder is a material condition to Northwest’s
granting of the licenses in 7.01 and 7.02, and that this Agreement should be
construed overall as a contract for the personal services of Pinnacle.  Therefore, in the event Pinnacle becomes
subject to a bankruptcy proceeding, the parties intend that this Agreement
shall not be assumed and/or assigned by Pinnacle or its representative without
Northwest’s consent.

 

ARTICLE VIII

 

TAXES AND FEES

 

Section 8.01     Taxes
and Fees.

 

(a)                                  Pinnacle shall be
liable for and pay the amount of any taxes (other than Ticket Taxes and Fees
which are addressed separately in Section 8.02 below), duties, license
fees, assessments, and other charges, together with any interest and penalties
thereon, levied, assessed, or imposed by any federal, foreign, state or local
taxing or airport authority related or attributable to (i) the property owned
or used by Pinnacle, and (ii) the performance of Regional Airline Services
pursuant to this Agreement.

 

(b)                                 Excluded from the
coverage of Section 8.01(a) are any taxes based on the net income
of Northwest.

 

Section 8.02     Ticket
Taxes and Fees.

 

(a)                                  For
all sales by Pinnacle using Northwest ticket stock or air waybills, Pinnacle
shall be responsible for (1) collecting all Ticket Taxes and Fees, and (2)
remitting such Ticket Taxes and Fees to Northwest at the same time as the
revenues to which the Ticket Taxes and Fees relate are received by Northwest.  Northwest then shall be responsible for
remitting to the appropriate governmental entities and taxing authorities
Ticket Taxes and Fees remitted by Pinnacle to Northwest.

 

(b)                                 Pinnacle
shall indemnify, defend, and hold harmless Northwest and its current or former
officers, directors, employees, agents, and its affiliates (the “NW
Indemnitees”) from and against all assessments or payments for Ticket Taxes and
Fees related to all sales by Pinnacle using Northwest ticket stock or air
waybills, and any interest and/or penalties related thereto.  This indemnification specifically includes,
but is not limited to, assessments or payments under Sections 4261, 4263, 4271,
4291, 6662, 6672, 6861 or 7275 of the Internal Revenue Code of 1986, as
amended, and any successor provisions. 
Pinnacle further agrees as

 

49

 

part of this
indemnification to reimburse the NW Indemnitees for any reasonable
out-of-pocket expenses, including attorneys’ fees and expenses, the NW
Indemnitees have incurred in connection with any such assessment or
payment.  The obligations of Pinnacle
under this Section 8.02(b) shall remain in effect and shall survive
without limitation the termination of this Agreement.

 

Section 8.03     Property
Tax, Fuel Tax, and Sales and Use Tax Compliance.

 

(a)                                  On
the date thirty (30) days after Northwest hires an appropriate individual to
prepare Pinnacle property tax returns (the “Commencement Date”), Northwest
shall become responsible for administering Pinnacle’s property taxes, both real
property and personal property. 
Northwest shall be responsible for notifying Pinnacle in writing of the
Commencement Date.  As of the Commencement
Date, Northwest shall prepare all property tax returns once the appropriate
information is gathered by Pinnacle and Northwest.  Northwest shall prepare the property tax returns with the same
care, diligence, and expertise used in filing the property tax returns of
Northwest. As of the Commencement Date, Northwest also shall be responsible for
(1) the review of Pinnacle’s property tax assessment notices and accompanying
workpapers, and the resolution of any disputes regarding such notices; (2) the
review of Pinnacle’s property tax bills; (3) the preparation and filing of any
property tax refund claims; and (4) the management of any audits of Pinnacle’s
property taxes.  Northwest and Pinnacle
shall cooperate to ensure that Pinnacle’s property tax returns, refund claims,
and property tax bills are reviewed and signed by the properly authorized
individual(s).  Depending on who signs
the property tax returns or refund claims, Northwest and Pinnacle shall
cooperate to ensure the timely filing of such property tax returns and refund
claims.

 

(b)                                 With
respect to fuel taxes, Northwest and Pinnacle shall cooperate to ensure that
Pinnacle is filing appropriate fuel tax returns and refund claims to minimize
Pinnacle’s taxes.  Northwest shall
determine which entity, Northwest or Pinnacle, shall be responsible for
preparing and filing appropriate fuel tax returns and refund claims.  Unless Northwest determines otherwise and
notifies Pinnacle in writing, Pinnacle shall be responsible for all Pinnacle
fuel tax filings and payments. Upon the request of Northwest, Northwest shall
be entitled to review any actual or proposed Pinnacle fuel tax filings.  Pinnacle shall notify Northwest of the
commencement of any fuel tax audit. Prior to resolving any fuel tax audit,
Pinnacle shall receive approval from Northwest to resolve any such audit.

 

(c)                                  With
respect to sales and use taxes, Northwest and Pinnacle shall cooperate to
ensure that Pinnacle is filing appropriate sales and use tax returns and refund
claims to minimize Pinnacle’s taxes. 
Northwest shall determine which entity, Northwest or Pinnacle, shall be
responsible for preparing and filing appropriate sales and use tax returns and
refund claims.  Unless Northwest
determines otherwise and notifies Pinnacle in writing, Pinnacle shall be
responsible for all Pinnacle sales and use tax filings and payments.  Upon the request of Northwest, Northwest
shall be entitled to review any actual or proposed Pinnacle sales and use tax
filings. Pinnacle shall notify Northwest of the commencement of any sales or
use tax audit. Prior to resolving any sales or use tax audit, Pinnacle shall
receive approval from Northwest to resolve any such audit.

 

50

 

(d)                                 To
the extent requested by Northwest, Pinnacle shall cooperate with Northwest to
minimize Pinnacle’s property, fuel, excise, sales, use, value-added, or similar
transactional taxes.  Pinnacle shall in
good faith and using reasonable best efforts supply Northwest with such
information and documents reasonably requested by Northwest to minimize
Pinnacle’s property, fuel, excise, sales, use, value-added, or similar
transactional taxes.  Unless Northwest
determines otherwise, Pinnacle shall use its reasonable best efforts to seek
any and all applicable refunds or credits of excise, sales, use, value-added,
or similar transactional taxes paid by Pinnacle.

 

Section 8.04     Refunds
of Tax.  To the extent
Northwest prepares and/or is responsible for pursuing any refunds or refund
claims related to Pinnacle’s fuel, excise, sales, use, value-added or similar
transactional taxes, Northwest shall be entitled to retain one hundred percent
(100%) of the amount of any such refund, credit or other benefit.  To the extent Pinnacle prepares or is
responsible for pursuing any such refunds or refund claims, Pinnacle shall
retain thirty percent (30%) of the amount of any such refund, credit or other
benefit (inclusive of interest) it receives, and the remaining seventy percent
(70%) (inclusive of interest) shall be paid to Northwest within ten (10) days
of its receipt or recognition of benefit by Pinnacle.  Any refunds, credits or other benefits received related to
Pinnacle’s property taxes will be retained by Pinnacle and will act to reduce
Pinnacle’s direct expenses pursuant to Section 5.06(l).

 

ARTICLE IX

 

LIABILITY, INDEMNIFICATION AND INSURANCE

 

Section 9.01     Independent
Contractor.

 

(a)                                  Except
for the limited purpose described in Section 5.01 hereof, Pinnacle
shall act as an independent contractor. 
The employees, agents and/or independent contractors of Pinnacle engaged
in performing any of the services Pinnacle is obligated to perform pursuant to
this Agreement shall be employees, agents and independent contractors of
Pinnacle for all purposes and under no circumstances shall employees, agents or
independent contractors of Pinnacle be deemed to be employees, agents or
independent contractors of Northwest. 
Except for the limited purpose described in Section 5.01
hereof, in its performance of obligations under this Agreement, Pinnacle shall
act, for all purposes, as an independent contractor and not as an agent for
Northwest.  Northwest shall have no
supervisory power or control over any employees, agents or independent
contractors engaged by Pinnacle in connection with Pinnacle’s performance of
its obligations hereunder, and all complaints or requested changes in procedure
shall, in all events, be transmitted by Northwest to a designated
representative of Pinnacle.  Nothing
contained in this Agreement is intended to limit or condition Pinnacle’s
control over its operation or the conduct of its business as an air carrier,
and Pinnacle assumes all risks of financial losses which may result from the
operation of the air services to be provided by Pinnacle hereunder.

 

(b)                                 Northwest
shall act as an independent contractor. The employees, agents and/or
independent contractors of Northwest engaged in performing any of the services
Northwest is to perform pursuant to this Agreement shall be employees, agents

 

51

 

and independent contractors of
Northwest for all purposes and under no circumstances shall employees, agents
and independent contractors of Northwest be deemed to be employees, agents or
independent contractors of Pinnacle.  In
performing its obligations under this Agreement, Northwest shall act, for all
purposes, as an independent contractor and not as an agent for Pinnacle.  Pinnacle shall have no supervisory power or
control over any employees, agents or independent contractors engaged by
Northwest in connection with the performance of its obligations hereunder, and
all complaints or requested changes in procedure shall, in all events, be
transmitted by Pinnacle to a designated representative of Northwest.  Nothing contained in this Agreement is
intended to limit or condition Northwest’s control over its operation or the
conduct of its business as an air carrier.

 

Section 9.02     Indemnification.

 

(a)                                  Each
party assumes full responsibility for any and all liability to its own
officers, employees or agents on account of injury or death resulting from or
sustained in the performance of their respective services under this
Agreement.  Each party shall indemnify,
defend, protect, save and hold harmless the other party, its officers,
employees, and agents from and against any and all liabilities, claims,
demands, suits, judgments, damages and losses (including the costs, fees and
expenses in connection therewith and incident thereto) brought against the
other party, its officers, employees or agents by or on behalf of any other
person, by reason of damage to or destruction of property of any such person,
or injury to or death of such person, caused by or arising out of any act or
omission by the indemnifying party occurring while this Agreement is in
effect.  Notwithstanding the foregoing,
neither party shall be liable for indemnifying the other for claims of third
parties if caused by the gross negligence or willful misconduct of the
other.  Each party shall give the other
party prompt and timely notice if it has actual knowledge of any claim made or
suit instituted against the other party which in any way results in
indemnification hereunder, and the other party shall have the right to
compromise or participate in the defense of such claim or suit to the extent of
its own interest.

 

(b)                                 Northwest
shall indemnify Pinnacle against any physical loss of or damage to the Aircraft
caused by Northwest’s negligent operation of ground support equipment or other
acts or omissions of Northwest in performing Ground Handling Functions pursuant
to Section 4.02 above; provided, however, that Northwest’s
liability shall be limited to any such loss or damage to the Aircraft not
exceeding the amount of the deductible with respect to such Aircraft under
Pinnacle’s hull risk insurance policy, except that loss or damage in respect of
any incident below $3,000 shall not be indemnified.  For the avoidance of doubt, Northwest shall not be liable to
Pinnacle for any consequential loss or damage arising from physical loss of or
damage to the Aircraft, and Pinnacle shall not make any claim against Northwest
and shall indemnify it against any liability in respect of any and all such
consequential loss or damage howsoever arising.

 

(c)                                  The
obligations of Pinnacle and Northwest under the indemnity and insurance
provisions contained herein shall remain in effect and shall survive without
limitation the termination of this Agreement with respect to any occurrence or
claims arising during the term of or in connection with this Agreement.

 

52

 

Section 9.03     Insurance.

 

(a)                                  Pinnacle
agrees, at its sole expense, to maintain in full force and effect the following
insurance coverage with respect to Regional Airline Services:

 

(1)                                  Workers’
compensation and occupational disease insurance, subject to the laws of the
states wherein this Agreement is being performed.  Such coverage shall include employers liability insurance with a
minimum limit of $1,000,000 per incident.

 

(2)                                  Comprehensive
aviation bodily injury and property damage liability insurance with limits of
not less than $1 billion combined single limit per occurrence (or such other
minimum amount as may be reasonably requested by Northwest from time to time in
the event Pinnacle no longer obtains airline liability insurance coverage as
part of the Northwest’s aviation insurance placement), including, but not
limited to, aircraft liability, passenger legal liability, premises and
property damage liability, hangar keepers liability and baggage and cargo
liability.  Such insurance shall include
personal injury and contractual liability, and shall also include war risk and
allied perils, hijack and confiscation coverage with a limit of not less than
$1 billion per incident.

 

(3)                                  All
risk hull insurance on the Aircraft, including hull war risk coverage as
required by Northwest.

 

(b)                                 Prior
to the commencement of Regional Airline Services under this Agreement and at
least annually thereafter, certificates of insurance in a form satisfactory to
Northwest shall be delivered to Northwest evidencing compliance with the
insurance terms of this Agreement.  All
of the above policies shall have deductible amounts as established by
Northwest, and, in any event, all of the above insurance shall be written
through an insurance company or companies reasonably satisfactory to Northwest,
and the certificates of insurance shall be of a type that unconditionally
obligates the insurer to notify Northwest in writing at least thirty (30) days
(or such lesser period as may be available for war peril coverage) in advance of
the effective date in the event of any material change in or cancellation of
such insurance.  The policies of
insurance required by paragraphs (2) and (3) of Section 9.03(a)
shall provide coverage for events which occur during the policy period, are
continuing in nature and not on a claims made basis, and shall include
endorsements that provide:

 

(1)                                  That
the Underwriters acknowledge that the indemnification and hold harmless
provisions of this Agreement are insured under Pinnacle’s blanket contractual
liability coverage.

 

(2)                                  That
Northwest, its officers, agents and employees are named as additional insureds
thereunder.

 

(3)                                  That
the insurance is primary with respect to the matters within such coverage,
irrespective of any insurance carried by Northwest.

 

(4)                                  That
with respect to the interest of Northwest, the insurance shall not be
invalidated by any breach of warranty by Pinnacle.

 

53

 

(5)                                  That
provide a severability of interest/cross liability endorsement.

 

(6)                                  That
the insurer shall waive its subrogation rights against Northwest, its officers,
agents and employees.

 

(7)                                  That
any waiver of rights of subrogation against other parties by Pinnacle will not
affect the coverage provided with respect to Northwest.

 

The parties
acknowledge and agree that endorsements (2) through (7) above are only
applicable in the event Pinnacle obtains liability insurance coverage that is
not part of Northwest’s aviation insurance placement.

 

(c)                                  In
the event the U.S. Government reimburses Pinnacle or its Affiliates for excess
insurance costs incurred as a result of the September 11, 2001 terrorist
attacks or other such occurrences, Pinnacle will promptly remit such
reimbursement, including the applicable Margin Payment, if any, to Northwest in
immediately available funds.

 

ARTICLE X

 

TERM AND TERMINATION

 

Section 10.01     Term.  This Agreement shall commence on and shall
be effective as of January 1, 2003 (the “Effective Date”) and, unless
earlier terminated as provided herein, shall continue in effect until
December 31, 2012 and shall thereafter automatically be extended for
successive five (5) year renewal periods (each a “Renewal Term”) unless  Northwest gives not less than two years’
advance notice of non-renewal prior to December 31, 2012 or the
commencement of any Renewal Term, in which case the Agreement will terminate on
December 31, 2012 or the last day of the then applicable Renewal Term, as
the case may be.

 

Section 10.02     Termination
by Either Party.

 

(a)                                  In
the event that Pinnacle Corp., Pinnacle or Northwest (i) makes a general
assignment for the benefit of creditors or becomes insolvent, (ii) files a
voluntary petition in bankruptcy, (iii) petitions for or acquiesces in the
appointment of any receiver, trustee or similar officer to liquidate or
conserve its business or any substantial part of its assets, (iv) commences
under the laws of any competent jurisdiction any proceeding involving its
insolvency, bankruptcy, reorganization, readjustment of debt, dissolution, liquidation
or any other similar proceeding for the relief of financially distressed
debtors, (v) becomes the object of any proceeding or action of the type
described in (iii) or (iv) above and such proceeding or action remains
undismissed or unstayed for a period of at least thirty (30) days, or (vi) is
divested of a substantial part of its assets for a period of at least thirty
(30) days, then Pinnacle Corp. or Pinnacle (in the event the foregoing occurs
with respect to Northwest) or Northwest (in the event the foregoing occurs with
respect to Pinnacle Corp. or Pinnacle) may by written notice terminate this
Agreement immediately.

 

(b)                                 Except
as otherwise provided in Section 10.03, in the event of a breach of
a nonmonetary provision of this Agreement by either party remaining uncured for
more than

 

54

 

thirty (30) days after receipt
of written notification of such default by the nondefaulting party, or in the
case of a breach requiring more than thirty (30) days notice to cure, the
defaulting party does not begin and pursue with due diligence a method of cure
within thirty (30) days after receipt of written notification specifying in
reasonable detail the nature of such default from the nondefaulting party, then
the nondefaulting party may terminate this Agreement at its sole option.

 

(c)                                  In
the event of a breach of a monetary provision of this Agreement by either party
and such default remaining uncured for more than thirty (30) days after receipt
of written notification specifying in reasonable detail the nature of such
default from the nondefaulting party, then the nondefaulting party may
terminate this Agreement at its sole option.

 

Section 10.03     Termination
by Northwest. 
Notwithstanding the provisions of Section 10.02(b),
Northwest shall have the right to terminate this Agreement immediately and at
its sole option if:

 

(a)                                  Pinnacle
shall default in the payment of any amount due under any Lease and such default
shall continue for more than the period of grace, if any, specified therein and
shall not have been waived.

 

(b)                                 Pinnacle
shall default with respect to any other terms of any Lease, such default shall
continue for more than the period of grace, if any, specified therein and shall
not have been waived.

 

(c)                                  Pinnacle
shall fail to comply with the provisions of Section 9.03 and, as a
result thereof, the insurance required thereunder is not in effect.

 

(d)                                 Pinnacle
shall fail to comply with the provisions of Section 6.03.

 

(e)                                  More
than fifty percent (50%) of the Aircraft do not operate any Scheduled Flights
for more than seven (7) consecutive days or twenty-five percent (25%) of the
Aircraft do not operate any Scheduled Flights for more than twenty-one (21)
consecutive days, other than as a result of (1) an FAA order which grounds all
commercial flights of all air carriers or grounds a specific Aircraft type of
all air carriers, (2) a scheduling action by Northwest, or (3) Northwest’s
inability to perform its obligations under this Agreement as a result of a
strike by Northwest employees.

 

(f)                                    Pinnacle’s
FAA or DOT Certification is for any reason suspended or revoked or otherwise
not in full force and effect so as to permit Pinnacle to perform the Regional
Airline Services required under this Agreement.

 

(g)                                 A
Pinnacle Change of Control shall have occurred.

 

(h)                                 Pinnacle
or a Pinnacle Affected Company shall commence operating an aircraft type which
causes Northwest to be in violation of its collective bargaining agreement with
its pilots or a Pinnacle Affected Company operates an aircraft with more seats
than the greater of (i) forty-four (44) seats, and (ii) the highest number of
seats that a jet aircraft may have

 

55

 

and still have one fewer seat
than an aircraft defined as a “regional jet” under Northwest’s collective
bargaining agreement with its pilots.

 

(i)                                     The
person elected to replace Philip H. Trenary as Chief Executive Officer of
Pinnacle and Pinnacle Corp. and any successor Chief Executive Officer of
Pinnacle and Pinnacle Corp. shall not be reasonably acceptable to Northwest.

 

(j)                                     Pinnacle
shall default in the payment of any amount due under the Note and such default
shall continue for more than the period of grace, if any, specified therein and
shall not have been waived.

 

(k)                                  Pinnacle
shall default with respect to the material terms of any other agreement between
Pinnacle and Northwest, and such default shall continue for more than the
period of grace, if any, specified therein and shall not have been waived.

 

ARTICLE XI

 

MISCELLANEOUS

 

Section 11.01     Limitation
on Performance.  The
obligation of either Northwest or Pinnacle to perform under the terms of this
Agreement shall be limited or modified by, and neither carrier shall be deemed
to be in default hereunder as a result of any of the following causes:

 

(a)                                  Acts
of God or the public enemy, civil war, insurrections or riots; fires, floods,
explosions, embargoes, earthquakes or serious accidents, epidemics, or
quarantine restrictions; any act of government, governmental priorities,
allocations, orders or Governmental Regulations affecting materials or
facilities, inability after due and timely diligence to procure materials,
accessories, equipment or parts; or due to any other cause to the extent it is
beyond that carrier’s practical control or not occasioned by that carrier’s
fault or negligence.

 

(b)                                 Cessation,
slow-down or interruption of work, or any other labor disturbance involving
Northwest.

 

Section 11.02
    Mutual Cooperation.  Northwest and Pinnacle shall use their
reasonable best efforts to cooperate with each other in performing their
respective obligations under this Agreement.

 

Section 11.03     Representations
and Warranties.  Except
as expressly set forth herein, neither Northwest nor Pinnacle shall make any
representations or warranties, expressed or implied, under or in connection
with this Agreement.

 

Section 11.04     Assignment.  This Agreement may not be assigned by any
party without the prior written consent of the other parties.

 

56

 

Section 11.05     Governing
Law.  This Agreement
shall be governed in accordance with the laws of the State of Minnesota,
notwithstanding the choice of law provisions thereof.

 

Section 11.06     Interline
and Other Agreements. 
Northwest agrees, to the extent it has the right to do so, to permit
Pinnacle to avail itself of all its rights, privileges and amenities pursuant
to its interline agreements and all industry trade or other agreements between
Northwest and any other air carriers. Northwest shall take all action and
execute such documents as may be necessary to enable Pinnacle to avail itself
of the maximum benefits afforded by such agreements.  Subject to Northwest’s prior written approval, Pinnacle may enter
interline agreements with air carriers other than those air carriers covered by
the two preceding sentences.

 

Section 11.07     Notices.  All notices given hereunder shall be given
in writing and shall be delivered in person or deposited in the United States
mail, certified or registered mail, return receipt requested, with adequate
postage prepaid, or given by Pinnacle courier, telex, facsimile, or other
expedient written means, addressed as follows:

 

If to Northwest:                                                                                    Northwest
Airlines, Inc.

Department A6100

2700 Lone Oak Parkway

Eagan, Minnesota 55121

Attn: Vice President – Market Planning

Facsimile No: (612) 727-7113

 

With copies to:                                                                                      Northwest
Airlines, Inc.

Department A1180

2700 Lone Oak Parkway

Eagan, Minnesota 55121

Attn: General Counsel

Facsimile No: (612)726-7123

 

Northwest Airlines, Inc.

Department A6030

2700 Lone Oak Parkway

Eagan, Minnesota 55121

Attn: Director of Airlink Planning

Facsimile No: (612) 727-7110

 

If to Pinnacle :                                                                                            Pinnacle
Airlines, Inc.

1689 Nonconnah Parkway

Suit 111

Memphis, Tennessee 38132

Attn: President

Facsimile No: 901-348-4103

 

57

 

or to such other address as the
respective parties hereto shall designate by notice in writing to the other
party.  Notices shall be deemed received
and given on the date of delivery or the date of refusal of delivery as shown
by the return receipt.

 

Section 11.08     Parties.  Except as provided to the contrary herein,
this Agreement, and the rights and obligations created hereunder, shall be
binding upon and inure to the benefit of the respective parties hereto and
their respective successors and permitted assigns.

 

Section 11.09     Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one agreement.

 

Section 11.10     Severability.  If any term of this Agreement shall be
judicially determined to be illegal, invalid or unenforceable at law or in
equity, it shall be deemed to be void and of no force and effect to the extent
necessary to bring such term within the provisions of any such applicable law
or laws, and such terms as so modified and the balance of the terms of this
Agreement shall remain enforceable.

 

Section 11.11     Captions,
Section Headings and Table of Contents.  Captions, section headings and the
Table of Contents used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.

 

Section 11.12     Availability
of Equitable Remedies; Procedures.

 

(a)                                  In
the event of a breach by either party of any provision of this Agreement, the
nonbreaching party may give notice thereof to the breaching party, which notice
shall specify in reasonable detail the nature of the breach and shall demand
that the breaching party either cure the breach or refrain from conduct
constituting the breach (herein the “conduct”), as may be applicable.  If (i) the breaching party has not cured the
breach or refrained from the conduct, as may be applicable, within ten (10)
days following receipt of the notice from the nonbreaching party, or (ii) the
breaching party does not begin within ten (10) days following receipt of the
notice to pursue with reasonable diligence a method of cure or begin to take
steps toward ceasing the conduct where the breach or conduct is such that it
requires more than ten (10) days to cure or to cease, as may be applicable,
then the nonbreaching party may seek to compel performance by the breaching
party in accordance with the provisions of paragraph (b) below.  If, upon receiving a notice contemplated by
this paragraph (a), a breaching party believes that a breach has not occurred
or that the conduct specified in the notice does not constitute a breach of the
provisions of this Agreement, but the breaching party nonetheless cures the
alleged breach or refrains from the conduct within ten (10) days following
receipt of such notice, such party may thereafter proceed in accordance with
the provisions of paragraph (b) below to seek a determination of whether a
breach occurred or whether the specified conduct constituted a breach of the
provisions of this Agreement.

 

(b)                                 Because
a breach of the provisions of this Agreement could not adequately be
compensated by money damages, any party shall be entitled, following
notification in accordance with the provisions of paragraph (a) above, to an
injunction restraining such breach or threatened breach and to specific
performance of any provision of this Agreement and, in

 

58

 

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.  Further, in the event any
party refrains from the conduct of any activity alleged in a notice received
pursuant to paragraph (a) above to constitute a breach of the provisions of
this Agreement, such party may thereafter proceed promptly to bring an action
in the District Court, County of Hennepin, State of Minnesota, for an expedited
judicial determination as to whether the conduct specified constitutes a breach
of the provisions of this Agreement and, upon a determination that the conduct
does not constitute a breach, such party may promptly thereafter recommence
such conduct.

 

Section 11.13     Exhibits.  The Exhibits attached hereto are intended to
be an integral part of this Agreement and are incorporated into the Agreement
by reference for all purposes.

 

Section 11.14     Integration
and Entire Agreement. 
This Agreement (including the Exhibits) and the ancillary documents
entered into in connection therewith 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 and therein set forth. 
This Agreement may only be amended or modified by a written agreement
between Pinnacle, on the one hand, and Northwest, on the other, which specifically
references this Agreement and expressly provides for such amendment.

 

Section 11.15     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 11.16    
Termination of 2002 ASA. 
The parties agree that the 2002 ASA is terminated as of
December 31, 2002; provided, however, the following
provisions of the 2002 ASA shall survive such termination for purposes of
determining any amounts due and owing between the parties for performance under
the 2002 ASA through December 31, 2002 and any related rights and
obligations of the parties under the 2002 ASA: 
Article V, Article VI, Article VIII,
Article IX, and Article XI.  The parties further agree that Section 7.08 of the 2002 ASA
shall not apply with respect to termination of the 2002 ASA pursuant to this Section 11.16.

 

59

 

IN WITNESS WHEREOF, Northwest and Pinnacle
have executed this Agreement on January 14, 2003 and Pinnacle Corp. has
executed this Agreement on January 15, 2003.  

 

	
  PINNACLE
  AIRLINES, INC.

  	
  NORTHWEST
  AIRLINES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Curtis
  E. Sawyer

  	
   

  	
  By:

  	
  /s/ James J.
  Cron

  	
   

  
	
   

  	
  Vice
  President and CFO

  	
   

  	
  Vice
  President, Market

  
	
   

  	
   

  	
  Planning and
  Airlink

  
	
   

  	
   

  
	
  PINNACLE
  AIRLINES CORP.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Curtis
  E. Sawyer

  	
   

  	
   

  
	
   

  	
  Vice
  President and CFO

  	
   

  
											

 

60

 

EXHIBIT
A-1

 

AIRCRAFT LEASE FORM

 

Please refer to Exhibit 10.2 to Pinnacle Corp.’s
Registration Statement on Form S-1 (File No. 333-83354).

 

 

EXHIBIT
A-2

 

ENGINE LEASE FORM

 

Please refer to Exhibit 10.3 to Pinnacle Corp.’s Registration Statement
on Form S-1 (File No. 333-83354).

 

 

EXHIBIT
B

 

HUB
CITY FACILITY
CHARGES

 

Rental rates chargeable to
Pinnacle for the sub-leased space at the Hub Cities shall be as follows:

 

MSP – [***]
per month

 

DTW – [***]
per month

 

MEM – [***]
per month

 

 

EXHIBIT
C

PREDICTED EMPLOYEE
BONUSES AND INCENTIVES

 

	
   

  	
   

  	
  2003

  	
   

  	
  2004

  	
   

  	
  2005

  	
   

  	
  Subsequent

  Years

  	
   

  
	
  Employee
  Bonuses & Incentives

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  

 

 

EXHIBIT
D

 

PARITY
PAY AGREEMENT

 

Parity
Pay Agreement

 

The parties agree that labor
costs resulting from pay rates in excess of Parity Pay Rates for the pilot,
flight attendant, customer service/reservations agent, ramp service, and
mechanic workgroups will be excluded from Total Operating Cost when calculating
the Margin pursuant to Section 5.10(a) and 5.13(a).

 

The parties agree that labor
costs resulting from any significant work rule and/or Premium changes, in lieu
of above Parity Pay Rates will be excluded from Total Operating Cost when
calculating the Margin pursuant to Section 5.10(a) and 5.13(a).

 

The parties agree that labor
costs resulting from benefits which are in excess of industry parity for the
pilot, flight attendant, customer service/reservations agent, ramp service, and
mechanic workgroups will be excluded from Total Operating Cost when calculating
the Margin pursuant to Section 5.10(a) and 5.13(a).

 

The following definitions are
used throughout this parity pay agreement:

 

“Comparison
Airlines” shall have the meaning throughout
Exhibit D as the five largest (by revenue) publicly traded U.S. domestic
regional airlines operating primarily regional jet aircraft.

 

“Premiums”
shall mean separate line, longevity, shift, license, skill or other premiums.

 

“RAA” shall
mean the Regional Airline Association, Washington, D.C.

 

Definitions provided in the
sections below are applicable only to the section in which such terms
appear.

 

Pilot
and Flight Attendant Employees

 

A. 
Procedures

 

Pinnacle’s Pay Rates for the
pilot and flight attendant workgroups plus hourly impact of any Bonus Rate are
compared to Parity Pay Rates.

 

If Pay Rates exceed Parity Pay
Rates in any classification, the labor cost for that classification will be
multiplied by the overage percentage and such product will be deducted from
Total Operating Cost for purposes of calculating the Margin.

 

Significant work rule and
Premiums changes are evaluated on a case by case basis.

 

B. 
Definitions

 

“Pay
Rates” shall be the top of scale hourly rates of
pay excluding Premiums.

 

 

“Bonus
Rate” shall be the average bonus payment divided
by the timeframe covered (based on 2,080 hours per year).

 

“Parity
Pay Rates” shall be the simple average of the Pay
Rates at the Comparison Airlines within a classification.  In the event that a comparison airline
reduces or eliminates its Premiums and simultaneously increases its basic
hourly rates, the portion of the basic hourly rate equal to the Premiums shall
be excluded in determining Parity Pay Rates.

 

Customer
Service/Reservations Agent, Ramp Service and Mechanic Employees

 

A.  Procedures

 

Pinnacle’s actual Pay for customer service/reservations agent, ramp
service, and mechanic workgroups is compared to projected Parity Pay.

 

If Pay exceeds Parity Pay in any classification, the difference will be
deducted from Total Operating Cost for purposes of calculating the Margin.

 

Significant work rule and Premiums changes are evaluated on a
case-by-case basis.

 

B.  Definitions

 

“Pay”
is the sum of all customer service/reservation, agent, ramp service and
mechanic employees pay, including any bonus payments, within a classification
(i.e. customer service agents) and shall exclude Premiums and any overtime premium.

 

“Parity
Pay” shall be the sum of all customer
service/reservation, agent, ramp service and mechanic employees Pay
re-calculated using the Parity Pay Scale in place of actual Pay rates.

 

“Parity
Pay Scale” shall be constructed by taking the
average pay rates for Pay steps for all levels new hire to year 10 (top step)
of the Comparison Airlines as reported by the RAA.

 

Benefits - All
Employees

 

A.  Procedures

 

Pinnacle’s actual Benefits for all above employee groups are compared
to the average Benefits of the same or similar classifications of the
Comparison Airlines as reported by the RAA.

 

B.  Definitions

 

“Benefits”
include but are not limited to pension, 401(k), health and dental insurance,
life and disability insurance, and other post retirement benefits.  Benefits are evaluated on an individual
basis (i.e. Pinnacle’s pilot pension is compared to the average pilot pension
at the Comparison Airlines as reported by the RAA).

 

 

Data Requirements

 

In order to assess compliance with the Parity Pay Agreement, Pinnacle
agrees to provide Northwest with data including but not limited to the
following:

 

•                  Total labor
costs by workgroup or classification (e.g. pilot)

 

•                  Pay scales to
the extent they exist for all Pinnacle’s workgroups.

 

•                  Pay scales for the
Comparison Airlines as reported by the RAA for requested workgroups.

 

•                  Individual
employees’ information including workgroup, longevity or hire date, bonus
payments received, hourly rate(s) of pay, hours paid at hourly rate(s) of pay,
projected hours paid at each pay step (1 – 10) if not currently paid based on a
defined pay scale, for requested workgroups.

 

61

 

EXHIBIT
E

 

PASS TRAVEL PRIVILEGES

 

I.                                         Overview

 

It is understood and agreed
that Northwest has purchased and therefore controls all seat inventory on
Northwest coded flights operated by Pinnacle Airlines subject to the Airline
Services Agreement entered into by Northwest and Pinnacle Airlines.  Northwest, in its sole discretion, shall set
all prices and control all seat inventory on Pinnacle flights operated under
the Northwest code.

 

Seats on Northwest coded
flights operated by Pinnacle have an intrinsic value to Northwest and by
definition persons occupying perishable seats, either on a positive space or
space available basis, have revenue opportunity costs (displacement, dilution,
etc.) to Northwest.  Northwest will
therefore establish the policies for utilizing its valuable and perishable
product inventory.  Northwest shall have
the right, in its sole discretion, to establish pass travel policies for all
persons on all Northwest Flights, including those operated by Pinnacle
Airlines.

 

II.                                     Definitions

 

“Northwest Flights” shall mean
all flights operated by Northwest or Pinnacle Airlines under the Northwest
designator code.  If and to the extent
Northwest enters into an agreement with any regional carrier other than
Pinnacle Airlines that provides for pass travel on the terms set forth herein,
the term “Northwest Flights” shall include the flights operated by such carrier
under the Northwest designator code.

 

“Pinnacle Business Travel”
shall mean employee travel that is required to run Pinnacle Airlines’
operations, perform employee job functions, meet with Pinnacle Airlines
vendors, attend company/industry meetings/training, or conduct company
business.

 

By definition,
business travel to conduct company business would require a meeting with
another person (internal or external) and the vast majority of the trip’s
duration should be related to the business objective.  If a pleasure trip is taken in conjunction with a business trip,
the pleasure portion must be flown space available.  Examples:

1.                                       Extend
business trip for personal reasons before/after.

Example:
Business trip from city A to city B. 
After meeting is complete, employee extends trip by 2 days in city B for
personal reasons.  Return flight from
city B is leisure space available at the employee’s normal boarding priority.

2.                                       Round
Robin.  Business trip from city A to
B.  After business is complete, employee
travels from city B to city C for personal reasons, then returns to city A.

•                                          Flights
from B to C and C to A are leisure space available.

 

62

 

Things that
would not quality as “Business” would be

•                                          Emergency
travel, funeral travel, etc.

•                                          Familarization
trips to visit cities where no business is conducted

•                                          Employee
recognition/rewards

•                                          Any
travel related to personal reasons

•                                          Any
travel by any person who is not an employee, such as a spouse or family member

 

In enforcing
Northwest’s business travel policies, Pinnacle Airlines must exercise good
faith in determining what is valid company business and in doing so must comply
with Northwest’s business travel definition and policies, as such definitions
and policies may be changed from time to time by Northwest in its sole
discretion.

 

“Leisure Travel” shall mean any
travel that does not qualify as Pinnacle business travel.

 

III.                                 Travel
Privileges of Pinnacle Airlines Employees on Northwest Flights

 

1.               Travel Authority Cards.

Northwest
shall have the sole authority to issue travel authority cards for travel on
Northwest Flights (which by definition includes Northwest coded flights
operated by Pinnacle Airlines). 
Pinnacle Airlines will not be entitled to issue travel authority cards
on Northwest Flights; however, it may submit a request for the issuance of
travel authority cards for travel on Northwest to the Northwest Pass Bureau and
Northwest, in its sole discretion, shall determine whether or not to grant any
such request.

 

2.               Requests for Travel Passes on Behalf
of Any Person Other Than Employees/retirees/family members of employees of
Pinnacle Airlines.

 

Any request
for pass travel on Northwest Flights for any person other than employees,
retirees or family members of employees of Pinnacle Airlines (for example,
employees of airlines other than Pinnacle Airlines) may be submitted to the
Northwest Pass Bureau for approval and Northwest, in its sole discretion, shall
determine whether or not to grant any such request.

 

3.               Ticket Donations.

Northwest
agrees to provide Pinnacle Airlines with [***] positive space (inventory
controlled) tickets per year for charitable donations to be made at Pinnacle
Airline’s discretion.

 

4.               Collateral
(i.e., free tickets, upgrades, Worldclub passes, elite memberships,  etc.).

Northwest
agrees to provide Pinnacle Airlines with [***] per year of collateral to be
used for Pinnacle Airline’s business purposes (i.e., for sales, marketing,
service recovery, etc.).  Northwest shall
determine from time to time the types of collateral to be made available to
Pinnacle Airlines and the unit cost for each type of collateral product.  The list of collateral products and the unit
costs thereof as of the date hereof are set forth on Attachment A
attached hereto.  Ordering will be
handled via Northwest’s GMS process.

 

 

5.               Business
Travel by Pinnacle Employees on Northwest Flights.

A.           Officers
and Board of Directors of Pinnacle Airlines:

Northwest
agrees to issue to the President and CEO of Pinnacle Airlines an F1 positive
space travel card that is valid for travel on Northwest Flights by the
President and CEO and his or her spouse and eligible dependent children so long
as such officer is employed by Pinnacle Airlines.  This card will be valid for business or leisure travel.

 

Pursuant to
his prior employment agreement, Northwest will issue to Curt Sawyer, Vice
President & Chief Financial Officer of Pinnacle Airlines a Y1 positive
space travel card that is valid for travel on Northwest Flights by Mr. Sawyer
and his spouse and eligible dependent children so long as Mr. Sawyer is
employed by Pinnacle Airlines.   This
card will be valid for business or leisure travel.

 

Northwest will
issue to other officers of Pinnacle Airlines (up to a maximum of 8 individuals)
travel privileges on Northwest Flights consistent with the travel privileges to
which managing directors of Northwest are entitled from time to time.  Currently such privileges are as follows:

 

Business Travel:                                         B1/F2 travel
card.

 

Leisure Travel:                                [***] B1 trip events
per year.

 

Members of the
Board of Directors of Pinnacle Airlines who are not employees will be entitled
to receive a Y1 positive space travel card that is valid for travel by such
Board member and his or her spouse and eligible dependent children on Northwest
Flights operated by Pinnacle.  The card
will be valid for Pinnacle business purposes and for leisure travel only.  The card will not be valid for business
travel on behalf of any person, company or entity other than Pinnacle Airlines.

 

B.             Other
Management (Exempt) Employees of Pinnacle Airlines.

1)              Pinnacle
Airlines may designate up to [***] management (exempt) employees who will be
eligible for B1 (coach positive space, capacity controlled) business travel on
Northwest Flights.  Pinnacle Airlines
shall submit the list of such employees to Northwest annually and Northwest
may, in its sole discretion, approve or disapprove any employee whose name
appears on such list for such travel privileges.

2)              All
other management (exempt) employees of Pinnacle Airlines who are not entitled
to the travel privileges described in B.1) above may travel on Northwest
Flights with boarding priority 2W, and, to the extent Pinnacle Airlines desires
that any such employee travel on a Northwest Flight for Pinnacle business
purposes with higher priority, Pinnacle Airlines may submit its request for
positive space travel to the Northwest Pass Bureau for approval. Northwest, in
its sole discretion, shall determine whether or not to grant any such request.

 

C.             Non-Management
(Non-Exempt) and Contract Employees of Pinnacle Airlines.

 

 

Non-management
(non-exempt) and contract employees of Pinnacle Airlines must request approval
from the Northwest Pass Bureau for any travel on Northwest Flights for Pinnacle
Airlines business purposes. Northwest, in its sole discretion, shall determine
whether or not to grant any such request. 
Any such approved travel for Pinnacle Airlines business purposes by such
employees shall be on a space available basis.

 

D.            Pinnacle
Airlines Operational Travel Requirements.

1)              Deadhead
travel and travel for pilot or flight attendant FAA-mandated training.  Pinnacle Airlines may book travel on
Northwest Flights with boarding priority of B1 for pilot and flight attendant
deadhead and FAA-mandated travel.  The
purpose of such travel must be supported by crew scheduling, crew bid reports,
training schedules or other records of Pinnacle Airlines’ operations.  Such records must be maintained for not less
than one (1) year and made available for audit by Northwest upon request.

•                  Any deadhead
booking must contain the following restriction:

“No
origin/dest or date changes allowed, per Revenue Management.”

 

Any booking
without the above stated restriction will be subject to a $100 fee.

 

•                  Any Y1 booking
must be pre-approved by Northwest.  Any
Y1 booking made without Northwest’s pre-approval will be subject to a $400
one-way fee.

•                  Y1 exceptions
should be requested from Northwest Day-of-Departure (DoD) desk.

Under no
circumstance may positive space bookings be used to transport Pinnacle Airlines
flight crews to or from their home (i.e., commuting) or for other
non-operational purposes.

 

2)  Aircraft on Ground (AOG).

 

In the event
Pinnacle Airlines’ operations require the transportation of Pinnacle Airlines’
mechanics or other required personnel due to AOG, Pinnacle shall request
approval from the Northwest DoD desk for such travel at boarding priority B1,
or if necessary, Y1.  Northwest, in its
sole discretion, shall determine whether or not to grant any such request.

 

6.               Travel
by Interview Candidates, Consultants or Vendors of Pinnacle Airlines.

Pinnacle
Airlines will be entitled to purchase travel on Northwest Flights for
consultants, vendors and interview candidates of Pinnacle Airlines to attend
meetings at Pinnacle Airlines locations for Pinnacle Airlines business purposes
only on the terms and conditions set forth in the Northwest Pricing Bulletin
BN138, attached hereto as Attachment 2. 
This Pricing Bulletin is subject to change by Northwest on an annual
basis.

 

7.               Leisure
Travel by Employees of Pinnacle Airlines.

It is
understood that Northwest maintains complete control over the grant of all
travel privileges on all Northwest Flights, including non-revenue space
available boarding priority.  Northwest
shall be entitled to all fees and charges collected for pass travel and

 

 

Pinnacle
Airlines shall not under any circumstances impose any fees, charges or
surcharges on any pass travel on Northwest Flights operated by Pinnacle
Airlines other than those set forth herein or specifically authorized by
Northwest.  Pinnacle Airlines shall be
responsible for the payment to Northwest of pass travel fees and charges
relating to travel by employees of Pinnacle Airlines or their family members,
registered domestic partners or companions, and all amounts collected by
Pinnacle Airlines from its employees shall be collected on behalf of Northwest
and payable to Northwest on a monthly basis as provided in Section III.9.

 

Travel by Pinnacle Airlines Employees on
Northwest Flights Operated by Pinnacle Airlines:

 

Pinnacle
Airlines shall administer pass travel policies on Northwest Flights operated by
Pinnacle in a manner that is wholly consistent with Northwest’s policies as
they currently exist and may in the future be changed by Northwest in its sole
discretion and shall communicate clearly such policies to its employees.  Pinnacle Airlines shall be responsible for
enforcing such pass policies with respect to travel by its employees on
Northwest Flights and shall notify Northwest in the event of any violations.

 

Pinnacle
Airlines agrees to conform its existing pass travel policies and programs to
those of Northwest as soon as reasonably practicable after the date of the
Agreement.  Such conforming changes include
but are not limited to the following:

 

1)        The
boarding priority for Pinnacle employees on Northwest Flights will be as
follows:  

 

	
  Pinnacle

  Employee Category

  	
   

  	
  Flights Operated By

  	
   

  
	
   

  	
  Northwest

  	
   

  	
  Pinnacle

  	
   

  
	
  Management (exempt)

  	
   

  	
  5W

  Seniority date

  	
   

  	
  5

  Seniority date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Non-management (non-exempt) and contract

  	
   

  	
  5W

  Seniority date

  	
   

  	
  5

  Seniority date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Parents

  	
   

  	
  6W

  Seniority date

  	
   

  	
  6P

  Seniority date

  	
   

  

 

Pinnacle
Airlines shall under no circumstances grant travel privileges on any Northwest
Flights at a boarding priority that deviates from that stated above.

 

2)        Fees
for travel by Employees and Parents of Employees.  Northwest’s current pass travel policies provide for the
following fees for pass travel by employees and parents of employees:

Management
(exempt): No service charge. 
International taxes apply.

 

 

Non-management
(non-exempt) and contract employees shall be subject to the following fees: 

 

	
   

  	
   

  	
  Services Fees

  	
   

  	
  International

  Taxes

  	
   

  
	
   

  	
   

  	
  Domestic

  	
   

  	
  International

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Coach

  	
   

  	
  First

  	
   

  	
  Coach

  	
   

  	
  First

  	
   

  	
   

  	
   

  
	
  Employee less than 5 years service

  	
   

  	
  [***]

  OW

  	
   

  	
  [***]

  OW

  	
   

  	
  See
  Attachment 3

  	
   

  	
  See
  Attachment 3

  	
   

  	
  As
  applicable

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Employee > 5 years service

  	
   

  	
  None

  	
   

  	
  [***]

  	
   

  	
  None

  	
   

  	
  See
  Attachment 3

  	
   

  	
  As
  applicable

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Parent

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  See
  Attachment 3

  	
   

  	
  See
  Attachment 3

  	
   

  	
  As
  applicable

  	
   

  

 

 

•                  All pass travel
fees and charges shall be subject to change at Northwest’s discretion, provided
that fees and charges applicable to employees of Pinnacle Airlines shall be no
higher than those applicable to comparable employees of Northwest

 

•                  Pass travel fees
shall apply to all Northwest Flights (including Pinnacle Airlines employees
flying on Northwest Flights operated by Pinnacle Airlines).

 

 

4)              Companion/Buddy
Travel Program.

 

a)              Pinnacle
Airlines must terminate its existing companion/buddy pass travel program.

 

b)             Pinnacle
Airlines must terminate all pass travel by any persons who are not employees of
Pinnacle Airlines or family members of Pinnacle Airlines employees (including
without limitation employees of airlines other than Pinnacle Airlines or
Northwest) on Northwest Flights operated by Pinnacle Airlines unless such
travel is specifically permitted hereunder or an authorized officer of
Northwest approves such pass travel in writing.  Northwest shall provide Pinnacle Airlines with a list of officers
of Northwest who are authorized to approve pass travel not provided for herein.

 

 

Pinnacle
Airlines will be entitled to establish a new companion/buddy program for
Pinnacle Airlines employees for travel on Northwest Flights operated by
Pinnacle Airlines as follows:

 

 

•                  Each employee of
Pinnacle Airlines will receive 16 one-way trips each calendar year on Northwest
Flights operated by Pinnacle. 
Companion/Buddy travel passes may not be used on Northwest Flights
operated by Northwest.

•                  The companion of
the Pinnacle Airlines employee must travel with the employee.

•                  Fees:  The fees payable by Pinnacle Airlines
employees for companion/buddy travel on Northwest Flights operated by Pinnacle
Airlines shall be consistent with the fees payable by Northwest employees for
companion travel on Northwest Flights operated by Northwest.

•                  Boarding
priority:

 

	
   

  	
   

  	
  Flights Operated By

  	
   

  
	
   

  	
   

  	
  Northwest

  	
   

  	
  Pinnacle

  	
   

  
	
  Boarding Priority

  	
   

  	
  N/A

  	
   

  	
  5B

  	
   

  

 

5)              Registered
Domestic Partners.    Registered
domestic partners of Pinnacle Airlines employees will be entitled to pass
privileges on Northwest Flights in accordance with Northwest’s registered
domestic partner program.

 

8.                                       Booking/Ticketing:

 

Pinnacle Airlines agrees to use
its best efforts to establish a link between its employee database system and
that of Northwest to facilitate the automated booking of travel by Pinnacle
Airlines employees.  Until such link is
established, Pinnacle Airlines and Northwest shall cooperate to exchange such
data and reports as are deemed necessary to facilitate pass travel in
accordance with the provisions hereof. 
Northwest and Pinnacle Airlines shall each bear their own costs and
expenses associated with establishing such links.

 

Once the linking of Pinnacle
Airlines’ and Northwest’s employee database systems are implemented, Pinnacle
Airlines employees will be permitted to book positive space and space available
travel in accordance with the provisions hereof using Northwest automated
systems (RADAR, IVR) and via Northwest Reservations, as needed.

 

All travel must be by
electronic tickets only, when eligible. 
Travel shall be by Northwest travel cards or easy write forms for
non-eligible e-ticket destinations.  The
use of trip passes, Pinnacle Airlines ticket stock, or other such documents for
travel on Northwest Flights operated by Pinnacle shall be strictly prohibited.

 

9.                                       Payment
of Fees

 

Northwest shall invoice
Pinnacle Airlines on a monthly basis for all travel pass fees and charges
applicable to travel by employees of Pinnacle Airlines, family members,
companions and registered domestic partners of such employees, and for travel
by Pinnacle Airlines vendors,

 

 

interview candidates, etc.
hereunder on any Northwest Flight. 
Pinnacle Airlines shall pay to Northwest all invoiced amounts within 30
days after the date of the invoice. Pinnacle Airlines may elect not to collect
from its own employees the pass travel fees and charges applicable to travel by
Northwest employees so long as it pays such fees and charges to Northwest on
behalf of its employees pursuant to the foregoing.  Any amounts collected by Pinnacle Airlines for pass travel on
Northwest Flights operated by Pinnacle Airlines shall be collected on behalf of
and for the benefit of Northwest and remitted in accordance with the
foregoing.  Pinnacle Airlines shall have
no right or interest in and to such amounts.

 

10.                                 Revocation/Termination/Modification/Amendment
of Pass Privileges.  All pass travel
benefits described herein are deemed to be privileges and are subject to
revocation by Northwest in the event of a failure to comply with the provisions
hereof and the terms and conditions of Northwest’s pass travel policies, as the
same may be changed from time to time by Northwest in its sole discretion.  Notwithstanding the foregoing, Northwest
agrees that any changes in Northwest’s pass travel policies during the term of
the Airline Services Agreement between Northwest and Pinnacle Airlines shall
not (i) reduce the amount of tickets or collateral described in Sections 3 and
4 hereof, respectively, (ii) reduce the relative boarding priority to which
Pinnacle Airlines employees are entitled to travel on Northwest Flights
pursuant to Sections 5 and 7 hereof, or (iii) increase the fees and charges
payable by Pinnacle Airlines employees for pass travel benefits on Northwest
Flights above those amounts payable by comparable employees of Northwest for
the same benefits.

 

11.                                 Audit

 

Northwest shall be entitled to
audit all records of Pinnacle Airlines to verify compliance with the provisions
hereof. 

 

IV.                                Travel
Privileges of Persons Other than Pinnacle Airlines Employees on Northwest
Flights

 

Northwest shall have the right,
in is sole discretion, to establish pass travel policies for all persons on all
Northwest Flights, including those operated by Pinnacle Airlines.  Pinnacle shall administer travel and
accommodate passengers on Northwest Flights operated by Pinnacle consistent
with all such policies established by Northwest.

 

It is understood and agreed
that leisure travel benefits for Northwest employees will include boarding
priority equal to Pinnacle employees on Northwest Flights operated by Pinnacle
Airlines, based on seniority.  Northwest
employees traveling with companions/buddies will board with priority 5B.  Northwest’s employee travel fee structure
will apply to all leisure travel by Northwest employees on Northwest Flights
operated by Pinnacle Airlines and Pinnacle Airlines shall under no circumstances
charge any additional fees, surcharges or other amounts to Northwest or
Northwest employees traveling on Northwest Flights operated by Pinnacle
Airlines.

 

 

Attachment A

 

2003 Ad Hoc Collateral Products

 

	
   

  	
   

  	
  2003 Value

  	
   

  
	
  Upgrades:

  	
   

  	
   

  	
   

  
	
  North America Standby
  Full Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  North America Standby Any
  Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  North America Confirmed
  Full Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  North America Confirmed
  Any Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hawaii Standby Full Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Hawaii Standby Any Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Hawaii Confirmed Full
  Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Hawaii Confirmed Any Fare

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Europe Full Fare One
  Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Europe Any Fare One Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Africa/India/Middle East
  Full Fare One Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Africa/India/Middle East
  Any Fare One Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Transpacific Full Fare
  Standard

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Transpacific Any Fare
  Standard

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Transpacific Full Fare
  Premium

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Transpacific Any Fare
  Premium

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Asia Beach Full Fare
  Upgrade

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Asia Beach Any Fare
  Upgrade

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Inter Asia Full Fare
  Upgrade

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Inter Asia Any Fare
  Upgrade

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Complimentary
  Travel Certificates:

  	
   

  	
   

  	
   

  
	
  Domestic First Class – A
  class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Domestic Coach Class - W
  class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hawaii First Class - A
  class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Hawaii Coach Class - W
  class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Europe WorldBusiness
  Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Europe Coach Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Africa/India/Middle East
  WorldBusiness Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Africa/India/Middle East
  Coach Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Transpacific
  WorldBusiness Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Transpacific Coach Class

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bonus
  Commission:

  	
   

  	
   

  	
   

  
	
  10% Certificate

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  5% Certificate

  	
   

  	
  $

  	
  [***]

  	
   

  

 

 

	
  Travel
  Credit Voucher:

  	
   

  	
   

  	
   

  
	
  $50 TCV

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  $100 TCV

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  $200 TCV

  	
   

  	
  $

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WorldProducts:

  	
   

  	
   

  	
   

  
	
  WorldClub One Pass

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  WorldClub Initiation Fee
  waived

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  WorldClub Complimentary
  Membership (Intl)

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  500 Mile Bonus
  Certificate

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  Beverage/Headset Coupons

  	
   

  	
  $

  	
  [***]

  	
   

  

 

 

Attachment 2

 

 

BN138, REVISION 1 / 9E VENDOR TRAVEL

 

PROGRAM
DESCRIPTION

Roundtrip confirmed space
airfare for the travel of consultants, contractors and interview candidates of
Pinnacle Airlines.  Travel permitted
within the US48, between the US48 and Canada/Mexico and between Canada and
Mexico.

 

TRAVEL PERIOD

 

	
  First date to ticket program:

  	
   

  	
  01Aug02

  
	
  Last date to ticket program:

  	
   

  	
  31Jul03

  
	
  Travel commencing on or after:

  	
   

  	
  01Aug02

  
	
  Travel commencing on or before:

  	
   

  	
  01Sep03

  
	
  Travel complete by:

  	
   

  	
  01Sep03

  

 

BOOKING REQUIREMENTS

 

•                  Booking class:
W/K/H/B/Y.

•                  Itineraries may
be booked by Pinnacle but must be ticketed within the 24hour ticketing
guidelines outlined below by the Northwest Airlines Convention Delegates
Desk.  The COD desk can be reached
between the hours of 7:30am and 7:30pm CST, Monday through Friday at
1-800-328-1111. For emergency travel occurring outside of these hours, NWA
reservations at 1-800-225-2525 will transfer authorized 9E travel arranger to
the domestic rate desk for handling.

 

TICKETING INFORMATION AND RESTRICTIONS

 

FARE BASIS CODES

•                  Fare basis
*9EVEN.

Where *
represents applicable booking class

 

TICKET DESIGNATOR

BN138

 

FLIGHT APPLICATION

•                  All
Travel must be via Northwest Airlines/Mesaba Aviation/Pinnacle Airlines.

•                  Offline
re-route not permitted

•                  All
travel must be via the routes of NW in which NW publishes coach class fares

 

 

RESERVATIONS AND TICKETING

•                  Tickets
must be validated on NW 012 ticket stock.

•                  Tickets
must be issued within 1 days of booking.

•                  [***]
advance purchase.

•                  If
booking is made within 24hrs of departure, it must be ticketed immediately.

•                  Tickets
must be issued electronically.

 

MINIMUM STAY

[***]

 

MAXIMUM STAY

•                  [***] Day(s)

 

STOPOVERS

•                  Stopovers are not permitted.

 

COMBINATIONS

•                  These fares are
combinable with themselves.  Example: An
outbound flight booked in W class may be combined with a return flight booked
in H class.  In this case, the passenger
would be charged half of the W fare plus half of the H fare.

 

BLACKOUTS

No Blackout Dates

 

CHANGES AND CANCELLATION

•                  Tickets are non-refundable.  However, the value of wholly unused tickets
may be applied toward future Pinnacle Airlines BN138 bookings, minus all
applicable administration fees, provided that the originally scheduled flight
has not yet departed.  Once the flight
has departed, exchanges are no longer allowed and the ticket has no value.

Exception:  Y/B/H class tickets maintain value (minimum
base fare of [***]) toward the purchase of another BN138 booking up to
one year from original ticket issuance date provided Pinnacle advises unused
ticket number when requesting the reissue. All administrate fees apply when
ticket is reissued

•                  Once ticketed, changes to itinerary are
allowed for a [***] administration fee per ticket
re-issuance plus

•                  any difference in fare if original booking
class no longer available.  If lower
class is available, difference in fare can be used toward administrative fees,
but any further residual value remains non-refundable

•                  Once ticketed, name changes are permitted
for a [***] fee. Tickets must be reissued at time
of change

•                  Same day standby permitted for travel
between originally ticketed origin/destination

 

ENDORSEMENT BOX

•                  NW only/ Non-Refundable/ Non-Endorseable/
Non-Reroutable/Change Fee [***]

 

FORM OF PAYMENT

•                  Tickets must be purchased at time of
ticketing by Pinnacle Airlines on a corporate account/credit card.

 

OTHER
CONDITIONS

 

NAME CHANGES

•                  Permitted for [***]
fee

 

 

WORLDPERKS MILEAGE

•                  Not permitted

 

MISCELLANEOUS INFORMATION

•                  Upgrades not permitted

•                  Passengers are not eligible to receive
denied boarding compensation.

 

FARES

Roundtrip flat rate fares in
USD.  All applicable taxes, security
fees, pfcs, segment fees, departure taxes, etc. must be charged in addition to
listed fare amounts.

 

The Currency Used is USD.

 

	
  Booking Class

  	
   

  	
  OW/RT

  	
   

  	
  N. America

  	
   

  
	
  W

  	
   

  	
  RT

  	
   

  	
  [***]

  	
   

  
	
  K

  	
   

  	
  RT

  	
   

  	
  [***]

  	
   

  
	
  H

  	
   

  	
  RT

  	
   

  	
  [***]

  	
   

  
	
  B

  	
   

  	
  RT

  	
   

  	
  [***]

  	
   

  
	
  Y

  	
   

  	
  RT

  	
   

  	
  [***]

  	
   

  

 

OPERATOR/AGENCY

•                  AUDITORS
COUPON:  Applicable flat rate fare,
taxes, fees and surcharges must appear on the auditor’s coupon.

•                  The ticket must
be issued with the Pricing Bulletin Number, BN138.

 

	
  APPROVED:

  	
   

  	
   

  	
  DATE:  08/11/2002

  
	
   

  	
  (Signature on file with pricing)

  	
   

  
	
   

  	
  Courtney Clixby

  	
   

  

 

ACCOUNTING

•                  All applicable
taxes/fees/surcharges must be collected and shown in the Fare Calculations and
Tax boxes.

 

DISTRIBUTION

Courtney Clixby –  Domestic Revenue Management

Sharon Mickelson – Domestic
Revenue Management

Mary Kay Caschetta – Domestic
Revenue Management

Jane Joyce – NW Reservations

Dave Huseth – Marketing Group
Controller

Patti Ruth – NW Pass Bureau

–  Pinnacle Airlines

 

 

Attachment 3

 

International

Service Fees

 

	
  Travel

  	
   

  	
  Coach

  	
   

  	
  WBC

  	
   

  	
  First

  	
   

  	
  International

  Taxes

  	
   

  
	
  Employee >= 5 YOS

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Employee < 5YOS

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  48US to Pacific

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pacific to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US to Europe

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Europe to US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US to GCM

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  GCM to US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  US to CUN

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  CUN to US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  48US to HNL

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  HNL to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  48US to ANC

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  ANC to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  48US to Canada

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  Canada to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  Parents

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  	
  [***]

  	
   

  
	
  48US to Pacific

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pacific to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US to Europe

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Europe to US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US to GCM

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  GCM to US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  US to CUN

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  CUN to US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  48US to HNL

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  HNL to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  48US to ANC

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  ANC to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  48US to Canada

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
   

  	
   

  
	
  Canada to 48US

  	
   

  	
  $

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  [***]EXHIBIT 10.22.1

 

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE

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

OMITTED.

 

AMENDMENT NO. 1

to the

Airline Services Agreement

By and Among

Pinnacle Airlines Corp., Pinnacle Airlines,
Inc. and

Northwest Airlines, Inc.

 

 

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

 

WITNESSETH:

 

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

 

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

 

1.                                       Section 1.01 of
the ASA is amended effective September 11, 2003 as follows:

 

A.  The definition of “Aircraft” is amended in
its entirety to read as follows:

 

“Aircraft” means, (i) the fifty-one
(51) CRJ-200/440 Canadair Regional Jet aircraft in Pinnacle’s fleet as of the
Effective Date, (ii) the eighteen (18) CRJ-200/440 Canadair Regional Jet
aircraft that have been added to Pinnacle’s fleet pursuant to Section 3.02
between the Effective Date and September 11, 2003; (iii) the sixty (60)
additional CRJ-200 or CRJ-440 Canadair Regional Jet aircraft when and as such
aircraft are added to Pinnacle’s fleet pursuant to Section 3.02; and
(iv) up to one hundred seventy-five (175) additional CRJ-200/440 Canadair
Regional Jet aircraft when, as and if such aircraft are added to Pinnacle’s
fleet pursuant to Section 3.02. 
Any Aircraft removed from Pinnacle’s fleet cease to be “Aircraft”
hereunder upon the date of such removal.

 

B.             The definition
of “Spare Engines” is amended in its entirety to read as follows:

 

 

“Spare Engines” means (i) the four
(4) General Electric CF34-3B1 spare engines (including QECs where applicable in
accordance with the respective Spare Engine Lease) in Pinnacle’s fleet as of
the Effective Date, (ii) the one (1) General Electric CF34-3B1 spare engine
that has been added to Pinnacle’s fleet pursuant to Section 3.02 between the
Effective Date and September 11, 2003; (iii) the five (5) additional CF34-3B1
spare engines (including QECs where applicable in accordance with the
respective Spare Engine Lease) when and as such spare engines are added to
Pinnacle’s fleet pursuant to Section 3.02; and (iv) additional CF34-3B1
spare engines (including QECs where applicable in accordance with the
respective Spare Engine Lease) when, as and if such spare engines are added to
Pinnacle’s fleet pursuant to Section 3.02.  Any Spare Engine removed from Pinnacle’s fleet ceases to be a
“Spare Engine” hereunder upon the date of such removal.

 

2.             Section 3.02(a) of
the ASA is amended in its entirety effective September 11, 2003 to read as
follows:

 

(a)  Determination of Fleet Size.  As of the Effective Date, Pinnacle’s fleet
consisted of  fifty-one (51) CRJ-200/440
Canadair Regional Jet aircraft and four (4) Spare Engines, and as of September
11, 2003, Pinnacle’s fleet consisted of sixty-nine (69) CRJ-200/440 Canadair
Regional Jet aircraft and five (5) Spare Engines.

 

(i)                                     Equipment
Additions.  Northwest
and Pinnacle agree that (A) subject to Bombardier (x) continuing to provide or
cause to be provided to Northwest financing for the Equipment on a basis no
less favorable to Northwest than the terms of such financing as in effect as of
the Effective Date and (y) delivering Canadair Regional Jet Aircraft to
Northwest as scheduled as of the Effective Date, an additional sixty (60)
CRJ-200/440 Canadair Regional Jet Aircraft and five (5) Spare Engines shall be
added to Pinnacle’s fleet on or before December 31, 2005, provided that at
Northwest’s option one of such Spare Engines may be added to Pinnacle’s fleet
after December 31, 2005 and on or before June 30, 2006, and (B) Northwest shall
have the right to cause from time to time up to an additional one hundred
seventy-five (175) CRJ-200/440 Canadair Regional Jet Aircraft and twenty-four
(24) Spare Engines to be added to Pinnacle’s fleet.

 

(ii)                                  Equipment
Removal Rights.  Northwest
and Pinnacle agree that (A) Northwest shall have the right from time to time to
cause Pinnacle to assign the Saab Leases to Northwest (or its designee) or to
sublease to Northwest (or its designee) any or all of the Saab 340 Aircraft;
and (B) from and after that time when Pinnacle has more than one hundred
twenty-nine (129) CRJ-200/440 Aircraft, Northwest shall have the right upon at
least ninety (90) days prior written notice to require the removal of
CRJ-200/440 Aircraft and related Spare Engines selected by Northwest from
Pinnacle’s fleet provided that at no time shall the number of such Aircraft and
Spare Engines removed pursuant to this Section 3.02(a)(ii)(B) cause the
number of Aircraft in Pinnacle’s fleet to be less than one hundred twenty-nine

 

2

 

(129) or cause the number of
Spare Engines in Pinnacle’s fleet to be less than ten (10).

 

(iii)                               Additional
Equipment Removal Rights. 
Notwithstanding Section 3.02(a)(ii)(B), in the event of (A) a
labor action or other event giving rise to Northwest’s right to terminate this
Agreement pursuant to Section 10.03(e) and (B) Northwest has not yet
exercised its termination rights, (1) Northwest shall have the right to
terminate Leases for, and take immediate possession of, up to seventy-nine (79)
CRJ 200/440 Aircraft and related Spare Engines selected by Northwest, and (2)
if the labor action or other event continues beyond 45 days Northwest shall
have the right to select and terminate Leases for, and take immediate
possession of, up to that number of CRJ 200/440 Aircraft in excess of fifty
(50) and the related Spare Engines.

 

(iv)                              Fleet
Continuation Option.  In the
event Northwest terminates this Agreement on December 31, 2012 pursuant to Section
10.01 below, Pinnacle shall have the option to retain one hundred
twenty-nine (129) Aircraft and ten (10) Spare Engines in its fleet until December
31, 2017; provided, however, that in order to exercise this option Pinnacle
must provide Northwest written notice on or before December 31, 2011 of its
intent to exercise the option, and further provided that if the number of
Aircraft and Spare Engines in Pinnacle’s fleet as of December 31, 2012 is less
than one hundred twenty-nine  (129)
Aircraft and ten (10) Spare Engines, this option shall only be applicable as to
the number of Aircraft and Spare Engines in Pinnacle’s fleet as of December 31,
2012.  In the event Pinnacle exercises
this option, (A) Northwest and Pinnacle shall enter into new Leases for the
retained Aircraft which shall be substantially in the form of Exhibit A-1,
provided that Northwest may require Pinnacle to establish maintenance reserves
in accordance with the terms set forth in the form of Lease attached and that
the Aircraft Rental Expense for each such Aircraft shall be the greater of fair
market rental or [***] per Aircraft per month, (B) Northwest and Pinnacle shall
enter into new Leases for the retained Spare Engines which shall be
substantially in the form of Exhibit A-2, provided that Northwest may require
Pinnacle to establish maintenance reserves in accordance with the terms set
forth in the form of Lease attached and the Spare Engine Rental Expense for
each such Spare Engine shall be the greater of the fair market rental or the
then-existing Spare Engine Rental Expense for such Spare Engine, and (C) the
retained Aircraft shall be re-painted as soon as possible after the Termination
Date at Pinnacle’s sole expense to remove all NW Identification from the
Aircraft, including but not limited to re-painting the red tails of the
Aircraft.

 

(v)                                 Unscheduled
Aircraft.  Subject to
Pinnacle’s approval, which shall not be unreasonably withheld, Northwest shall
determine the

 

3

 

appropriate
level of unscheduled Aircraft to be included in Pinnacle’s fleet from time to
time.

 

(vi)                              Spare Engine
Requirements.  Subject to
Section 3.02(a)(i) above, Northwest and Pinnacle shall mutually determine the
appropriate quantity of Spare Engines to be included in Pinnacle’s fleet from
time to time.

 

3.                                       Section 2.15(a)
of the ASA is amended in its entirety effective September 11, 2003 to read as
follows:

 

(a)  Pinnacle Corp. and/or its Affiliates shall
not engage in any such activity until January 1, 2005;

 

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

 

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

 

	
  PINNACLE AIRLINES, INC.

  	
  NORTHWEST AIRLINES, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Curtis E. Sawyer

  	
   

  	
   

  	
    By:

  	
  /s/ J. Timothy Griffin

  	
   

  
	
   

  	
  Vice President and CFO

  	
   

  	
  Executive Vice President,

  
	
   

  	
   

  	
  Marketing and Distribution

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PINNACLE AIRLINES CORP.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Curtis E. Sawyer

  	
   

  	
   

  	
   

  
	
   

  	
  Vice President and CFO

  	
   

  	
   

  
	
   

  	
   

  	
   

  
								

 

4

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